The Meaning of Voluntary Life Insurance, Along with Some Examples
The workplace is typically the source of voluntary life insurance, which is also known as additional life insurance. Both terms refer to an optional form of life insurance coverage. A predetermined death benefit is paid out to the covered individual's beneficiaries under a voluntary life insurance policy, just like it is under any other type of life insurance policy. Since the employer is serving as the sponsor for the insurance, the employee is typically offered voluntary life insurance in addition to a standard life insurance policy at a rate that is lower than the rate that retail insurance plans charge because the employer is offering the insurance. Most people pay for premiums by having money taken out of their paychecks on a regular basis. You need to be aware of what to anticipate from voluntary life insurance before you can decide whether or not you should purchase it.What exactly does it mean to have a voluntary life insurance policy?
As an employee benefit, you can get supplemental life insurance on top of the basic life insurance your employer gives you. This gives you more coverage for your life insurance needs. This protection is often made available at a price that is more affordable than if you were to purchase it individually. This is due to the fact that workers are able to make use of the group rates that are made available to them through their employer's plan. Some voluntary life insurance is guaranteed issue, which means the insured does not have to provide evidence of insurability (no medical exam or underwriting required) in order to qualify for a policy up to a definite demise benefit amount. This is in addition to the fact that the cost of this type of insurance is significantly lower. This indicates that employer-sponsored voluntary life insurance can provide the necessary coverage to anyone who wouldn't otherwise qualify for a policy due to a medical condition or dangerous hobby. Since these factors are taken into consideration, the coverage can be tailored to meet the needs of the individual. If you choose not to enroll in health insurance through your employer when you are first eligible, you run the risk of having your application for coverage rejected later on when you decide you want to take part in the plan.How does one go about obtaining Voluntary Life Insurance?
Although voluntary whole life insurance policies are less popular, additional term coverage and optional whole life insurance can both be included in voluntary life insurance policies. The most prevalent type of voluntary life insurance, however, is voluntary term life insurance. When you quit your job, your insurance coverage might also be transferable (meaning you can take it with you). Be aware that whole life insurance or similar permanent policy might last throughout your entire lifetime, whereas a term life policy is only designed to last until the given term expires. Term life policies are only designed to last until the specified term expires. If you choose a voluntary whole life insurance policy or a voluntary term life insurance policy, your premiums will be regularly taken out of your paycheck. The following are some of the benefits of purchasing life insurance on your own: A guaranteed issue benefit amount may be provided by an employer, but in addition, the employer may provide coverage choices that are in excess of the guaranteed issue benefit amount (that are not guaranteed issue). If you want more coverage than the amount that is considered a "guaranteed issue," you should expect that your application for a policy will be subject to some kind of medical review or underwriting.Riders
You may have the ability to attach one or more riders to your policy, which gives you additional benefits such as spousal and/or dependent life insurance, as well as accidental death and dismemberment coverage. Depending on the specifics of your policy, you may be able to do this. Adding riders often means that the base rate of the policy has to go up.Portability
It is important to be aware of whether or not the optional life insurance you have purchased is transferable. If it is, this indicates that you can maintain coverage even if your employment is terminated. You should check the details of your insurance to see if it can be taken with you, and you should also be aware that your rates may go up now that you are no longer working for the company that gave you the discount. There are a lot of supplemental life insurance policies that are offered by employers that cannot be taken with you.What Kinds of Things Are Covered by Voluntary Life Insurance?
If the covered party passes away while the insurance policy is still in force, the beneficiaries of the voluntary life insurance policy will get the predetermined death benefit. Even while supplemental life insurance can offer increased coverage in comparison to the standard life insurance policy provided by your company, it is possible that this coverage will not meet all of your requirements. If you require a higher level of protection, you will need to complement the coverage provided by your optional insurance with additional protection that you acquire separately. In most cases, the coverage amounts for spouse and dependent insurance are going to be lower than what you, the employee, are qualified to receive.Should I Consider Purchasing Voluntary Life Insurance?
If you don't otherwise qualify for life insurance (or if it's very expensive) owing to, for example, a medical condition or a high-risk sport, voluntary life insurance can be an ideal alternative for you to consider. This type of insurance is entirely optional. You might not be able to get the coverage you need anywhere else, but you might be able to get it if you combine the base plan your employer gives you with voluntary insurance up to the guaranteed issue amount. If you feel that you require more coverage than what is provided by your company, you can supplement that coverage with a policy that you buy on your own. Even if you are content with the level of coverage provided by an employer's plan, you might still want to consider purchasing a private supplemental life insurance policy outside of your place of employment. This is especially true if you can't take your work-related policy with you if your premiums would go up if you quit, or if you need permanent life insurance.Key Takeaways
Voluntary life insurance, also called supplemental life insurance, is an employee benefit that is completely up to the employee. It adds to the basic life insurance that the company provides. There is a chance that employees will be able to buy more coverage for accidental death and dismemberment, as well as coverage for dependents and a spouse. Your additional life insurance won't be portable. If that's the case, your coverage might end when you leave your job. Even though voluntary life insurance can cover people who might not be able to get life insurance on their own, it might not be enough for everyone.