What Is Voluntary Life Insurance & How Does It Work In Apr 2024?

I've prepared this guide to help you understand how voluntary life insurance works in 2022.

What Is Voluntary Life Insurance? 

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.

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.

Basic Life Insurance Vs. 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. 

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 clicking here or on any of the above buttons.