What is voluntary life insurance? – Forbes Advisor

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Working full-time for an employer usually brings you many benefits, one of which may 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 purchase additional 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 by the company. Your expenses for it are deducted from your salary.

Membership organizations and unions also sometimes offer voluntary life insurance.

Types of voluntary insurance Life

Voluntary life insurance policies can be available as term life or whole life insurance.

Voluntary term life insurance

Term life insurance coverage lasts for a specific period of time, such as a decade. After the term expires, you may be able to renew it. Term life is usually less expensive than whole life insurance.

Voluntary permanent life insurance

Whole life insurance and universal life insurance remain in effect for the lifetime of the policy holder. These types of policies can build cash value that you can use when needed.

Voluntary Accidental Death and Dismemberment (AD&D)

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

Advantages of voluntary Life insurance

Here are some reasons why 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 for an additional fee.
  • It’s easy to sign up during your employer’s open enrollment hours.

Disadvantages of voluntary life insurance

These policies also come with a few drawbacks:

  • You usually don’t need to have a life insurance medical exam to qualify for your employer’s basic group life insurance. This means you will be entitled to cover even if you have a pre-existing health condition. But if you want additional, voluntary life insurance, the insurer may ask for a ‘Declaration of Health’ or ‘Medical Evidence of Insurability’, with questions about your overall health. Based on your answers, the insurer may approve coverage or may then request a medical opinion or medical examination for life insurance.
  • Although some voluntary life insurance policies are portable, many end as soon as you leave your job.
  • Voluntary life insurance policies are usually standardized to appeal to a wide range of employees. You won’t find bells and whistles like life insurance.
  • You may need to work a minimum number of hours to be eligible for voluntary life insurance. For example, an 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 looking for convenient, supplemental coverage in addition to an employer-provided basic life insurance plan.

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

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

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