Congratulations! You may have recently started a new job and are reviewing your company’s benefits package. You’ve selected the other insurance options — health, vision, and dental — and you’ve come to the part about life insurance. Whether or not your company offers an employer-provided life insurance policy as part of your employee benefits, you may have the option to select a voluntary life insurance policy. So what is voluntary life insurance?
Life insurance is a type of insurance that can provide a cash benefit to the beneficiary if the insured were to pass away within the terms of their policy. Voluntary life insurance is a benefit offered by employers — an employee can opt in and pay a monthly premium (often pulled directly from their paycheck) in exchange for a benefit being paid out to their elected beneficiaries after the death of the policyholder.
Types of Voluntary Life Insurance
The two most common types of voluntary life insurance are whole life insurance and term life insurance. Some people assume that voluntary life insurance is a type of life insurance, like “voluntary life insurance vs whole life insurance vs term life insurance,” but that’s not the case! “Voluntary” only means that you can choose to elect a benefit because you would pay the premium yourself, rather than an employer-provided life insurance policy. Let’s dig in even deeper:
Voluntary Whole Life Insurance
Unlike voluntary term life insurance, voluntary whole life insurance protects the…wait for it…whole life of the person insured. (It’s a bit more complicated than that, but it’s a quick way to differentiate between the two types.)
- Lifelong insurance coverage with a payout to beneficiaries if you pass away (as long as you keep paying the premiums).
- A “cash value” component means that the policy has a value prior to the time you pass away. The insurance company specifies how the cash value accumulates over time and the details are included in your policy.
- As the cash value of the policy grows over time, you can borrow against that cash value for unexpected life expenses. You can even surrender the policy for the entire cash value, but keep in mind this means that there will no longer be a payment to your beneficiaries.
- In most cases voluntary whole life policies can often stay with you if you were to leave your job (but you should reach out to your human resources department to confirm the specifics of your company policies).
- May be the best fit for… those that want life-long coverage and a cash value.
Voluntary Term Life Insurance
Voluntary term life insurance provides some measure of financial protection for your loved ones for a limited time — the length of the term selected for the policy.
- Policies can be selected based on the length of the term (often between 5 and 30 years, depending on what is available through your employer).
- There is no cash value in term policies, which makes term life premiums much lower in cost than whole life.
- Term life coverage provides some financial protection to beneficiaries if you were to pass away within the length of your term.
- As with most other company benefits, voluntary term life insurance policies often end if you leave your place of employment for any reason. (Reach out to your company’s HR team for the specifics of your company plan.)
- May be the best fit for… families who don’t currently carry a life insurance policy or want to add additional coverage to supplement their employer-provided plan.
Is It Worth Getting Voluntary Life Insurance?
At this point, you may find that your leading question has changed from “what is voluntary life insurance?” to “should I get voluntary life insurance?” Each family has its own financial priorities, budgets, and obligations, so you’ll want to consider the benefits and drawbacks of each type of insurance to find the best fit for your family’s budget and needs.
Benefits:
- Choosing a voluntary life insurance policy through your employer often feels simpler and more convenient than having to shop for policies on your own.
- Most voluntary life insurance requires no medical exam, adding to the ease of getting coverage.
- Employer-offered insurance can often offer lower monthly premiums than those you would find shopping for policies on your own.
Drawbacks:
- An employer generally only offers a single voluntary life insurance plan, so you aren’t able to shop around and choose the best fit for your family’s needs.
- Voluntary life insurance may offer lower coverage amounts than you could purchase on your own.
- Generally, if you were to separate from your job, your voluntary term life coverage may not be portable and you may lose this coverage along with your other benefits. (Voluntary whole life plans can often be retained, but you will want to speak with your human resources department to find out the specific offerings of your company plans.)
Another option?
While selecting a voluntary life insurance policy through an employer may feel like the most convenient way to get some life insurance coverage for your family, there are other options!
If you’re interested in other kinds of life insurance, you can reach out for expert help from a company like eFinancial. Their friendly, knowledgeable agents know just the right questions to ask to help steer you towards the right types of insurance for your needs.
Key Takeaways
- Voluntary life insurance is an easy way to get some life insurance coverage for your family.
- Term life and whole life are the two types of voluntary life insurance, and each has its benefits, depending on your family’s financial situation.
- No-medical exam term life insurance is a great option to consider if you want more coverage and term options and if you want a policy that is not tied to your employer.
