Many companies offer employee insurance as an optional benefit.
And since they cover at least part of the premiums, it costs next to nothing.
But does it offer the same benefits as individual insurance?
Is it worth it?
Who can benefit the most from it?
Find the answers to these and other questions below.
What Is Voluntary Life Insurance?
Voluntary life coverage is employer-sponsored group life insurance.
While it isn’t mandatory, it can be very beneficial. It provides affordable and convenient financial protection for you and your family.
Plus, it’s much easier to qualify for it.
This makes it a good option for employees who can’t get individual coverage.
What’s more, it’s a great way to supplement your existing coverage.
That said, your choice will be limited. The employer will determine the maximum coverage, when you can enroll, and the type of insurance you get.
Sure, you can add certain riders and addendums for an extra price. But in that case, you might be better off getting individual coverage.
Let’s examine the differences between these options.
Individual vs. Employee Life Insurance
Individual and voluntary life insurance are very similar.
In both cases, the insurance company pays out a sum of money to your family in the event of your death.
The main difference is that in one case, the individual purchases a policy and pays the premiums.
In the other case, a company provides group insurance to all its employees.
Typically, the employer covers part of or the entire premiums. This reduces the cost for individual members.
That said, employer-sponsored insurance provides less coverage than individual plans.
But this option offers less flexibility.
So, experts usually recommend purchasing individual insurance and using employee coverage as an added benefit.
Types of Voluntary Life Insurance
Life insurance gives financial security for your family in the event of your death.
The specifics depend on the type of policy your organization provides.
Voluntary Whole Life Insurance
Whole life insurance provides protection for your entire lifespan.
Usually, it comes with a higher death benefit than term life policies. The benefit of this type of insurance is that you accumulate cash value over time.
You can use it to withdraw money from it, increase the death benefit, or borrow a loan against it.
You may not be able to choose the most suitable type of whole life plan for you, though.
Employer-sponsored insurance is less flexible than individual coverage in that sense.
Voluntary Term Life Insurance
It’s more common for employers to offer term life insurance.
This type of policy provides coverage for a specific period of time. The insurance company pays out a death benefit to your family in case of an accident.
It has lower premiums than whole life insurance.
The downside is that you don’t accumulate cash value.
Voluntary AD&D
Voluntary AD&D is a type of insurance that pays out a certain amount of money in the event of accidental death or dismemberment.
Like other types of life insurance, you or your close ones receive an amount of money if something happens to you.
The difference is that it covers only accidental death and non-fatal injuries.
Typically, employers allow you to get voluntary life coverage and add ad&d as a rider.
Voluntary Dependent Life Insurance
Voluntary dependent life insurance allows you to get coverage for your spouse or children through your employer.
This means you will receive the death benefit if something happens to the dependent.
Your organization may also offer health insurance for you and your family.
In that case, you’ll be the main subscriber to the plan, and your family members will be the dependents.
This is even more valuable than group life insurance—especially if you can’t qualify for more affordable health insurance elsewhere.
But let’s get back to what voluntary life insurance is.
Special Considerations
So far, we’ve covered the main pros and cons of employer-sponsored life insurance and what types of coverage you can get.
But there are a few key factors we haven’t discussed yet that may influence your decision.
Enrollment
Usually, the employer will notify you of this option when you’re hired.
You will have to decide whether to enroll shortly after that.
If you miss that opportunity, you can purchase voluntary insurance during the annual open enrollment.
You’ll get another chance after certain qualifying events—for example, getting married.
No Medical Exam
If you have some medical condition or something else that makes it difficult to qualify for individual coverage, voluntary employee life insurance is a great option.
Employer-sponsored life insurance comes with a guaranteed-issue amount. This is the coverage you can purchase without a medical exam.
Coverage
The amount of coverage you can get with employee life insurance depends on the policy.
Most organizations limit voluntary life plans to one or two times the amount of your annual earnings.
They may also set a cap at between $50,000 and $250,000 in coverage.
Portability
If you quit your job, you may be able to convert your employer-sponsored insurance to an individual policy.
The good news is that you can usually do this without a medical exam.
That said, your premiums will increase significantly.
Unfortunately, some employer-sponsored policies don't offer that option. Make sure you check the terms and conditions of your insurance.
Wrap Up
What is voluntary life insurance?
That’s simply group insurance offered through your employer as part of a benefits plan.
It is affordable and convenient, and you even need a medical exam. Plus, you might be able to cover your spouse, children, and other dependents under your plan.
Does it sound too good to be true?
Well, there are a few downsides.
So, read our detailed guide above to learn how to take maximum advantage of this benefit.
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With an eye for research, Aleksandra is determined to always get to the bottom of things. If there’s a glitch in the system, she’ll find it and make sure you know about it.
