What Is Voluntary Life Insurance & How Does It Work In 2021?

 By Sa El Published: January 10, 2021

There are several types of life insurance and trying to understand each of them can be time consuming.

One of these policies is voluntary life insurance.

But what is voluntary life insurance? Is it the right option for you? 

voluntary life insurance

I've prepared this short guide to help you understand how voluntary life insurance works in 2020.

In This Article



What Is Voluntary Life Insurance? 

Like any other life insurance program, voluntary life insurance doles out a payment or death benefit to the beneficiary in your plan upon your death.

Voluntary life insurance is a form of group life insurance, in which an employer takes out a supplemental life insurance policy on behalf of their employees to provide them with additional coverage.

You may only apply for voluntary life insurance through your company’s specific open enrollment period, so check with your employer shortly before or after getting hired with any questions.

Payment options vary, but in some cases, you will pay the full amount of the voluntary life insurance.

In other cases, you and your employer will work out an agreement in which you pay a portion, and the company pays the rest.

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Understand How Voluntary Life Insurance Works

The name implies that the insurance is voluntary. Therefore, can you drop voluntary life insurance at any time?

That partly depends on whether you get temporary voluntary life insurance—also known as term life—or permanent life insurance.

But it also depends on whether your employer’s plan offers a conversion provision, which allows you to convert your group voluntary life insurance policy to an individual one.

Similarly, portability allows you to take the insurance with you when you leave the company.

However, in general, you can cancel voluntary life insurance during their company’s open enrollment period.

If you’re trying to cancel voluntary life insurance outside of the open enrollment period, you’ll want to contact the insurance company.

Check with your company’s human resources department for any further questions. 

Types of Voluntary Life Insurance

Overall, the different types of voluntary life insurance include the following:

Voluntary term life - This affordable plan covers a set amount of time and works best when purchased at a younger age.

Voluntary permanent life (aka whole life) - Whole life insurance offers higher premiums than term life, but the premiums also don't increase, which can be good if you're looking for long-term life insurance coverage.

As part of their voluntary life insurance policies, some companies will offer what’s called guarantee issue.

If you meet certain criteria, such as signing up during your company’s enrollment period and actively working at the time of application, you can qualify for guarantee issue.

It provides life insurance automatically—up to a certain amount of coverage—without requiring you to take a medical exam or answer health-related questions to receive coverage.

Guarantee issue can be a lifesaver for individuals who are worried that they may be denied coverage due to underlying medical conditions.

However, if you need coverage above the guarantee issue, you will need to submit to a medical questionnaire and a potential physical exam.

Your spouse and dependent children may also receive partial coverage through guarantee issue.

This form of coverage for your dependents is known as dependent group life insurance, which may help with funeral costs and other related expenses if your spouse or child unexpectedly dies.

Finally, many voluntary life insurance policies will contain provisions for accidental death and dismemberment, also known as Voluntary AD&D.

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Basic Life Insurance Vs. Voluntary Life Insurance

In the insurance business, basic life insurance usually refers to term life insurance.

Term life insurance is the most common life insurance policy and lasts for a fixed amount of years.

In the case of basic life insurance, the employer pays all the costs. 

what is voluntary life insurance

However, basic life insurance programs usually cap coverage at $25,000 or $50,000.

That's why some employees choose to purchase a voluntary life insurance supplement to get higher coverage and greater protection throughout their lifetime. 

Should You Get Voluntary Life Insurance?

Regarding voluntary life insurance Dave Ramsey generally disapproves. 

Ramsey states that employer life insurance premiums increase each year and that there are many circumstances—such as being diagnosed with a medical condition and leaving the company—that could make it difficult to get new insurance.

It's true that you may not want life insurance tied to your employer. What if you decide the company is no longer a good fit, and you want to leave, potentially losing your coverage?

In the twenty-first century, it's becoming less likely that you'll stay with an employer until retirement.

Plus, you may want to have the greater flexibility that comes with shopping around for your own plan.

However, if you foresee that you'll be working for your employer in the long run, it may be worth considering voluntary life insurance, if only for convenience.

Your employer will usually let you decide the amount of coverage that you need.

Additionally, some employers allow continuation of coverage or portability measures that let you keep the life insurance policy when you leave the company.

Plus, if you qualify for the guarantee issue, you can bypass some of the usual headaches that people with pre-existing medical conditions deal with.

If you have a spouse or young child, you may want to get dependent life insurance through your employer. 

THE SIMPLY INSURANCE WAY

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Agents not required.

Get quotes and sign up online without talking to an agent. But, we are here if you need us. 

Unbiased, expert advice.

Get unbiased insurance education from licensed experts and also avoid dodgy sales calls.

Coverage in minutes.

You can get life insurance coverage within minutes of getting your quotes and applying.

How Much Voluntary Life Insurance Do I Need?

By this point, you’re probably wondering, “How much voluntary life insurance should I have? 

Especially since maximum coverage amounts for voluntary life insurance vary wildly among employers and insurance companies.

For example, under The Hartford’s voluntary life insurance plan, the guarantee issue ranges between $100,000 and $250,000 (in increments of $25,000), with a guarantee issue maximum of $50,000 for your spouse and $10,000 for your dependent child. 

But if you work for The Scripps Research Institute, with a spouse, you can seek up to $500,000 (in increments of $10,000) during the open enrollment period. However, the guarantee issue is only up to $50,000.

So, the question you’ll want to ask is whether the guarantee issue will suffice, or if you foresee any additional expenses down the road (such as unexpected health issues) that may warrant going above the guarantee issue.

Taking Action

You may still be debating between group voluntary life insurance through your employer and individual life insurance plans that you purchase on your own.

In my opinion, unless there is a medical reason stopping you from getting covered, you should never go without a personal (individual) life insurance policy for yourself.  

If you need life insurance, you can get immediate quotes and coverage by clicking here or on any of the above buttons. 


Sa El

About the author

Sa El is the Co-Founder of Simply Insurance and a licensed Insurance Agent with over 13 years of experience in the industry.  He specializes in Life & Health Insurance and is certified in Long Term Care Insurance in the state of Georgia. a licensed real estate agent in the state of Georgia (License #382602), an entrepreneur, insurance educator, and freelance writer.


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