What Is Voluntary Life Insurance? – Forbes Advisor

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Working full time for an employer usually brings you a raft of benefits, one of which might be life insurance. Employers often offer eligible employees a guaranteed-issue group life insurance policy as a free employee benefit. Voluntary life insurance allows you to buy supplemental coverage on top of that.

With a voluntary life insurance policy, you have the option to purchase additional life insurance and keep it for as long as you remain employed with the company. Your cost for it is deducted from your paycheck.

Membership organizations and labor unions also sometimes offer voluntary life insurance.

Types of Voluntary Life Insurance

Voluntary life insurance policies may be available as either term life or whole life insurance.

Voluntary term life insurance

Term life insurance coverage lasts for a specified level term period, such as a decade. Once the term ends, you may have the option to renew. Term life is usually less expensive than whole life insurance.

Voluntary permanent life insurance

Whole life insurance and universal life coverage remains in place throughout the policyholder’s life. These policy types can build cash value that you can tap into when necessary.

Voluntary accidental death and dismemberment (AD&D)

AD&D insurance covers deaths due to accidental causes, such as a fall. It also provides compensation for specific injuries, such as loss of a limb. Employers often offer voluntary AD&D at low rates. If you need an extra layer of life insurance, you’re better off buying additional, regular group life insurance or your own individual life insurance policy.

Advantages of Voluntary Life Insurance

Here are some reasons you might consider buying voluntary life insurance:

  • Premiums are usually deducted from your paycheck using pre-tax dollars.
  • Some employers allow employees to add life insurance for a spouse or children to the life insurance policy, at an additional cost.
  • It’s easy to sign up during open enrollment time at your employer.

Disadvantages of Voluntary Life Insurance

These policies also come with a few drawbacks:

  • You typically do not have to undergo a life insurance medical exam to qualify for your employer’s basic group life insurance. That means you’ll be eligible for coverage even if you have a pre-existing health condition. But if you want extra, voluntary life insurance, the insurer might ask for a “Statement of Health” or “Medical Evidence of Insurability,” with questions about your overall health. Based on your answers, the insurer could approve the coverage or might then ask for Attending Physician’s Statement or a life insurance medical exam.
  • Although some voluntary life insurance policies are portable, many end as soon as you leave your job.
  • Voluntary life insurance policies tend to be standardized to appeal to a wide range of employees. You won’t find bells and whistles such as life insurance riders.
  • You may need to work a minimum number of hours to be eligible for voluntary life insurance. For example, the employer may offer coverage only to full-time employees.

Is Voluntary Life Insurance Right for You?

A voluntary life insurance policy can make sense for many people—especially those seeking convenient, additional coverage on top of an employer-provided base life insurance plan.

Signing up for this type of coverage is easy. A medical exam is not necessary in many cases, and often you simply need to opt in when choosing your employee benefits.

Even if you have voluntary life insurance, it may not be enough to cover your total life insurance needs. Consider employer-based life insurance as a supplement, and buy your own individual life insurance policy, which will be yours no matter what job you go to.

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