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What is voluntary life insurance? Do I need it?



What is voluntary life insurance?

Many employers offer their employees optional life insurance plans. Voluntary life insurance is an additional cover in addition to group life insurance.

Because it’s available to all employees regardless of health, you pay group premiums for voluntary life insurance. Group rates are only reasonable if you have health issues or other risk factors that would make private insurance more expensive. Additionally, voluntary life insurance offers limited benefits, so it’s not the best option for everyone.

Voluntary Life Insurance vs Basic Group Life Insurance: Are They Different?

Although both are types of life insurance offered through your employer, basic group life insurance and voluntary life plans have many differences.

Group vs. Voluntary Life Insurance:

  • Group life insurance is usually an amount equal to your annual salary.
  • Voluntary life insurance is optional buy-out protection. You can buy 3-5 times your salary without proving insurability and up to 8 times if you are in good health.
  • Your employer pays for group life insurance premiums.
  • Voluntary life insurance premiums are group premiums for which you are responsible.
  • Both group and voluntary life cover cease if you leave your job.

How does voluntary life insurance work?

Employees can purchase voluntary life insurance coverage during their open enrollment period.

Many companies offer employees two levels of voluntary life insurance: guaranteed issue and simplified issue.

You can buy guaranteed issue without answering any medical questions. Coverage amounts range from 3-5 times your annual salary but cannot exceed a set maximum.

You can also buy simplified question but must show proof of insurability. You must answer a short medical questionnaire to prove that you are in good health. Coverage amounts range from 8-1

0 times your annual salary but cannot exceed a set maximum.

Three types of voluntary life insurance;  voluntary life, voluntary whole life, voluntary accidental death & dismemberment

Types of voluntary life insurance

Employers offer buy-in voluntary coverage, which is usually voluntary life insurance. Voluntary whole life insurance is less common.

Voluntary life

Voluntary life insurance is basic financial protection for your beneficiaries. Term life insurance is not designed to last a lifetime, just a specific period. Your beneficiaries will receive a death benefit check if you die during the semester.

Every year during open enrollment, you need to re-register for coverage. Voluntary life insurance premiums are based on age group rates per $1,000 of coverage. If you move to a new age group, your rates will increase from the previous year.

Voluntary for life

Some employers will offer permanent life insurance such as optional whole life or universal life. These policies are designed to last your lifetime and accumulate cash value.

Permanent voluntary life insurance will be much more expensive than term life insurance. However, due to the permanent nature of voluntary whole life and universal life insurance policies, you are likely to be able to keep the policy if you change jobs.

Voluntary Accident and Dismemberment (AD&D)

Many employers provide a small portion of accident and dismemberment insurance along with your basic group life insurance. However, employees often have the option to purchase additional voluntary AD&D insurance as well.

AD&D insurance has two components:

  • It pays off if you survive an accident and end up with serious injuries
  • It gives your beneficiaries additional benefits in addition to your group life insurance benefits if you die in an accident

Accidental death and dismemberment insurance is cheap as it only pays in case of serious injury or death. AD&D insurance should complement traditional life insurance. It shouldn’t be your only insurance plan.

Use our term life insurance calculator to quickly and easily determine how much life insurance you really need.


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