Voluntary life insurance

Voluntary life insurance is optional term or permanent insurance coverage offered by employers in addition to a subsidized group life policy.

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Andrew HurstSenior Editor & Licensed Auto Insurance ExpertAndrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

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Antonio Ruiz-CamachoAntonio Ruiz-CamachoAssociate Content DirectorAntonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.
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Kristi Sullivan, CFP®Kristi Sullivan, CFP®Certified Financial PlannerKristi Sullivan, CFP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, she was a regional consultant at Fidelity Investments for nine years.

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Many employers offer subsidized life insurance, known as group life insurance, to employees as an optional workplace benefit. Group coverage costs little to nothing for employees, but coverage limits of $50,000 or one to two times your salary usually apply.

Voluntary life insurance, also known as supplemental life insurance, is an employee benefit that allows you to buy more group life insurance for an added premium.

Voluntary insurance comes with restrictions, so it’s best for people who have had difficulty qualifying for an individual life insurance policy.

Learn more about group life insurance

Life insurance terms you should know
  • Beneficiaries: The people you name on your life insurance policy to receive the lump sum of money — also known as the death benefit — when you die.

  • Cash value: The portion of a permanent life insurance policy’s monetary value that grows tax-deferred over the life of the policy.

  • Death benefit: The amount of money the life insurance company will pay your beneficiaries when you die.

  • Face amount: The dollar amount, or death benefit, your beneficiaries receive if you die while your life insurance policy is active.

  • Insured: The person who is covered by the insurance policy.

  • Policy: The legal document that includes the terms and conditions of your life insurance contract.

  • Policyholder: The person who owns an insurance policy. Usually, this is the same person as the insured.

  • Permanent life insurance: A type of life insurance that lasts for the rest of your life and usually includes a cash value account.

  • Premium: The amount you pay your insurance company to keep your coverage active. Premiums are typically paid monthly or annually.

  • Riders: Add-ons to a life insurance policy that provide more robust coverage, sometimes for an extra cost.

  • Term life insurance: A life insurance policy that lasts for a set number of years before it expires. If you die before the term is up, your beneficiaries receive a death benefit.

  • Underwriting: The process where an insurance company evaluates the risk of insuring you and determines your final rate.

What is voluntary life insurance?

Voluntary life insurance is a type of employer-sponsored group life insurance that allows you to buy additional coverage to supplement your base group insurance plan.

Employees can buy or change their voluntary life insurance when they’re hired, during annual open enrollment, or due to a qualifying life event, such as:

  • Birth or adoption of a child

  • Coverage loss

  • Death in the family

  • Divorce

  • Marriage

Most employers don’t cover premiums for voluntary life insurance even if they pay your group insurance premiums. Premiums are deducted from your pay.

Policies are usually guaranteed issue, meaning you won’t be denied for health reasons, but only up to a certain coverage amount. Your employer’s benefits administrator can answer any questions you may have about how voluntary insurance plans work at your company.

The different types of voluntary life insurance

Voluntary life insurance is typically term life insurance, though some companies may offer a permanent life insurance option. 

  • Voluntary term life insurance provides coverage for a set period, often 10 to 30 years. It’s less likely that you’ll be able to keep your policy if you leave your employer. 

  • Voluntary permanent life insurance protection lasts for life and comes with a cash value component that gains interest over time. These policies are more likely to be portable if you change jobs, but premiums can be significantly more expensive than term life. 

Depending on the insurance company that administers your voluntary plan, you may be able to add riders to customize your voluntary coverage.

Learn more about the differences between term and permanent life insurance

Who should get voluntary life insurance?

Most people should buy private life insurance instead of voluntary life insurance to supplement their group policy.

Unless you have medical conditions or, a risky occupation, or dangerous hobbies that make it difficult to get life insurance independently, a private plan usually offers more coverage and can’t be canceled when you change jobs.

Learn more about the different types of life insurance

Ready to shop for life insurance?

Term life insurance vs. voluntary life insurance

If your group insurance is covered by your employer, it makes sense to opt in. However, Policygenius experts recommend buying life insurance coverage equal to at least 10 to 15 times your salary, more than a basic group life insurance policy provides.

If you have children or a spouse, you may need even more insurance to cover your financial obligations.

Learn more about how much life insurance you need

Voluntary life insurance differs from term life insurance in a few key areas:

  • Death benefit: The maximum death benefit on voluntary life insurance is often less than 10 to 15 times your salary. Private term life insurance death benefits have much higher limits, so you can get the full amount of protection you need.

  • Health questions: Every term life insurer will review your medical records before you’re approved for a policy, even if you choose an accelerated underwriting plan. Voluntary insurance only requires some health information for coverage above a certain threshold. 

  • Portability: As long as you pay your premiums, term life insurance stays with you until it expires, you die, or you cancel the policy. Voluntary coverage is usually forfeited — or made portable at a much higher premium — if you leave your employer.

If you want maximum flexibility to get all of the financial protection your family needs, an individual life insurance policy is the best option.

Learn more about the life insurance underwriting process

Voluntary life insurance vs. AD&D insurance

Your employer may offer both voluntary life insurance and accidental death and dismemberment (AD&D) insurance. AD&D only pays a small benefit to your loved ones in cases of death or injury incurred during an accident.

Any kind of life insurance, including voluntary, pays for most causes of death but won’t pay a benefit if you’re injured in an accident. 

If you want financial protection from accidental injury and death, you should own both life and AD&D insurance. Like group life insurance, a group AD&D policy may be cheaper, but won’t stay with you if you leave your job.

How much does voluntary life insurance cost?

The cost of voluntary life insurance varies based on:

  • How much coverage you want

  • Your age

  • Whether your employer subsidizes any premiums

Insurance companies usually categorize employees and assign group insurance premiums by age. The older you are, the higher your rates will be. Your benefits administrator should be able to help you calculate your premiums.

Ready to shop for life insurance?

Author

Andrew Hurst is a senior editor and a licensed auto insurance expert at Policygenius. His work has also been featured in The New York Times, The Wall Street Journal, Forbes, USA Today, NPR, Mic, Insurance Business Magazine, ValuePenguin, and Property Casualty 360.

Editor

Antonio helps lead our life insurance and disability insurance editorial team at Policygenius. Previously, he was a senior director of content at Bankrate and CreditCards.com, as well as a principal writer covering personal finance at CNET.

Expert reviewer

Kristi Sullivan, CFP®, is a certified financial planner and a member of the Financial Review Council at Policygenius. Previously, she was a regional consultant at Fidelity Investments for nine years.

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