would you want to know what voluntary life insurance? My experience leads me to say that voluntary life insurance is an optional benefit offered by companies that, should an insured employee pass away, pays a death benefit to a beneficiary.
As an employee benefit, several companies provide basic group life insurance. You could also buy extra voluntary life insurance, an optional policy to augment group life insurance.
Knowing the workings of optional life insurance will enable you to decide whether additional coverage is worth the expense. But that is not all; I will get more into the topic as you continue.
ALSO READ – Universal Policy Life Insurance
Now, let’s get started.
What Is Voluntary Life Insurance
Designed to provide a financial safety net, voluntary life insurance pays a selected beneficiary should the insured die. Usually, companies present it as an employee perk.
Usually withdrawn from their paychecks, employees pay a monthly premium; should the employee die, the insurer pays the benefit amount.
These rules are almost the same as the individual plans that insurance companies offer. However, as companies fund employee optional life insurance plans, they are generally more reasonably priced.
How Does Voluntary Life Insurance Work
Paying a death benefit to your beneficiaries should you die away while the policy is in effect helps voluntary life insurance to function.
If life insurance is optional, then follow its operation.
1. Money. Although you pay for voluntary life insurance because you are paying group rates, it is generally far less expensive than a private, individual life insurance policy.
2. Coverage. Usually, optional life insurance coverage amounts are many times your wage. Coverage might be less than those of an individual policy.
Should the company decide to provide life insurance riders—such as expedited death benefit riders or child life insurance riders—those will be available for you to buy as an add-on.
3. Qualification. Like weekly hours worked, there are sometimes employer-defined qualifying criteria.
Generally speaking, you may purchase optional life insurance during the open enrollment period of the firm in which you choose work benefits and upon your hiring at a new position.
4. payment. Pre-tax deductions from your salary cover the expense of extra coverage. If the death benefit of your optional life insurance is less than $50,000, your premiums normally are not taxed.
5. portable nature. Once you quit working for your company, you might be eligible to maintain your optional life insurance coverage.
If so, your rate can vary, and you would be in charge of directly paying the payment to the insurance carrier.
The employer determines whether or not a life insurance policy you obtain via employment is transferable.
6. VAT. Voluntary life insurance provides your beneficiaries a tax-free death payment should you die while the policy is in effect.
ALSO READ – Type Life Insurance
What Are The Types Of Voluntary Life Insurance
Usually, you have either term or whole voluntary life insurance to select. Yet another insurance choice some companies might provide is accidental death and dismemberment.
These are the variations among the several forms of voluntary life insurance.
1. Term Life Insurance
Voluntary term life insurance covers a certain period, say 10, 20, or 30 years. Coverage stops after the term finishes unless the policy is renewed.
2. Full Life Insurance:
One sort of perpetual insurance is voluntary whole life insurance, in which the policy does not expire, provided payments are paid.
A part of the premium is deposited into a cash value account that increases value gradually. The policyholder can borrow against or withdraw from the cash value at any moment.
3. inadvertent death and dismemberment:
This coverage provides just a death benefit in specific conditions or non-fatal mishaps.
While some companies give coverage as a rider, others provide accidental death and dismemberment as a distinct insurance policy.
It may be less costly than other forms of life insurance as it addresses fewer causes of mortality.
ALSO READ – Difference Between Whole Life & Term Life Insurance
Do I Need Voluntary Life Insurance
If your company’s group life insurance isn’t sufficient to meet your beneficiaries’ demands and you don’t have any other policies, you might want voluntary life insurance.
Your death benefit, for example, might have to be big enough to cover home payments, daily costs, and children’s schooling.
If your medical background makes it impossible to obtain reasonably priced individual life insurance, another option is voluntary life insurance.
Guaranteed issue plans enable you to be covered without completing a medical exam or health questionnaire. In some situations, coverage might start right away.
ALSO READ – Long-Term Care Insurance vs. Hybrid Life Insurance
Who Should Purchase Voluntary Life Insurance
Voluntary life insurance is usually ideal as a complement or for those without a strong need for life insurance, as coverage limits are minimal.
If your company provides a voluntary life plan and basic life insurance, consider boosting your coverage if you can afford it.
You should give optional life insurance some thought for the following:
1. Should basic life insurance be inadequate:
Adding optional life insurance would assist your beneficiary in paying your funeral expenditures should you pass away, while the minimum life insurance your company provides is insufficient.
2. Should you be single,
Many times, single people without children discover they don’t need much life insurance. Basic life coverage voluntary life insurance might be sufficient to pay for other minor debts and last costs.
3. If you do not have a mortgage,
Those who have a mortgage sometimes get term life insurance so the beneficiary may pay the house off and free their loved ones from mortgage payments upon their death.
If you do not have a mortgage, though, optional life insurance might be all you need.
4. If your budget is tight:
Since there is no medical exam, those on a budget might discover that voluntary life insurance is more reasonably priced than conventional life insurance policies.
Your health is not as much of a consideration, particularly if you are in bad condition and would not be eligible for individual coverage.
ALSO READ – Is Accident And Health Insurance The Same As Life Insurance
What Are The Benefits Of Voluntary Life Insurance
Should you die while insured, voluntary life insurance pays your beneficiaries tax-free. Many people have this insurance to pay for expenses, including:
- Daily expenditures for living.
- Rent payments or mortgage payments
- Living expenditures for an elderly surviving partner
- Your burial costs and funeral expenditures
- Children’s education
Generally speaking, coverage is offered without a medical evaluation.
Your company’s policy will determine whether or not you may buy extra coverage for your dependents—spouse, children, or other relative.
If your insurance provides a portability option, it might be worth any additional expenses should you foresee or need to move employment.
ALSO READ – What Is Cigna Health And Life Insurance
What Are The Pros And Cons Of Voluntary Life Insurance
If you wish for life insurance, voluntary life insurance is not the sole choice. One should weigh some advantages and disadvantages before diving into the group strategy.
The relevance of every will rely on your particular circumstances. First, let us consider the benefits of optional life insurance; then examine the drawbacks.
Pros:
Improved pricing: With an employer involved, optional life insurance usually lets you lock in at a cheaper price.
Whether your company pays a portion of the premium or receives a discount for the group rate, you might be able to obtain a better bargain than you would be shopping on your own.
Many group life insurance policies usually do not ask for a medical exam for a minimum level of coverage.
Locking in a volunteer life insurance policy might be the best option if you have struggled to qualify for an individual life insurance policy.
Potential for completely paid premiums: Sometimes, the company pays the whole premium up to a specific level of coverage.
While this isn’t always a choice, it might greatly strengthen the financial situation of your family.
Con:
Many times, unless you are ready to commit to a medical test, optional life insurance policies have limited coverage limitations.
Not always portable: Should you quit your company, your life insurance coverage might stop.
While some insurance firms let you translate this coverage into a permanent fix, not all will. Before you commit, find out if a voluntary life insurance policy is portable.
Often, voluntary life insurance has a lower premium. You may probably run against insurance coverage restrictions, nevertheless.
See the human resources department if you have queries regarding the policy your company provides.
ALSO READ – Jobs With Health And Life Insurance License
Final Thought
Now that we have established what voluntary life insurance is, If your company provides it, you might wish to give it some thought; you want more coverage and a simple payment method.
Just be sure to find out whether leaving your employment results in the ending of coverage.
If it does, you might want to think about purchasing extra life insurance on your own to cover you should you leave your work or accept a job at another firm.