Voluntary life insurance — also known as supplemental life insurance — is a type of coverage you can purchase through an employer group plan. Depending on your employer, you may have the option to choose from multiple types of coverage for you and your loved ones.
Though often cheaper than an individual policy, voluntary life insurance may have limited coverage, and your policy will typically only be in force for as long as you remain with your employer.1
Understanding how a voluntary policy works can help you determine if it’s the right life insurance coverage for you. Here’s what you need to know.
Many employers offer basic life insurance coverage as an employee benefit, with a death benefit equal to one year of your salary. In some cases, employers may also offer voluntary life insurance, which is an optional coverage you can pay for that supplements your basic policy.
Voluntary life insurance tends to be more affordable than a stand-alone policy because you qualify for a group rate. It can also be a convenient way to buy coverage because you generally don’t have to complete a medical exam, and your employer will simply deduct your premiums from your paycheck.2
In some cases, you may also be able to purchase coverage for your spouse or a dependent child. Because you’re eligible through your employment, you and your loved ones may lose your coverage if you leave the company.
If your employer offers life insurance as an employee benefit, you can typically enroll through the human resources department when starting the job or when you gain eligibility after a waiting period.
How much coverage you can get depends on your salary. For example, if you have an annual salary of $100,000, you may be able to buy $100,000, $200,000, or $300,000 worth of coverage. If you pass away, your loved ones will receive that death benefit through the insurer your employer partners with to offer the policy.
Supplemental life insurance is typically a guaranteed issue policy, which means that you don’t need to take a medical exam — though some insurers may require a health questionnaire. Once the policy is active, you’ll pay premiums through payroll deductions.
Depending on what your employer offers, you may be able to choose between a few different types of coverage beyond your basic life coverage, including term life, whole life, and accidental death and dismemberment insurance.
Some employers may also offer extra coverage for your spouse or dependents. Here’s how the options differ.
Term life insurance offers temporary coverage for a set period of time — often 10, 20, or 30 years. If you pass away during your policy’s term, your beneficiary will receive a payout.3
Benefits of voluntary term life insurance include:
Flexible terms
Less expensive than a term policy not sponsored by your employer
More coverage at a lower rate compared to whole life
With whole life insurance, you get lifetime coverage plus a cash value account that accrues savings over time. You may be able to access those funds through a policy loan or by withdrawing from the policy.3
Due to the lifetime death benefit, whole life policies are generally more expensive than term. You may consider this type of coverage if you have health conditions that make it difficult to receive approval for a personal policy.
With AD&D insurance, your beneficiary will receive a death benefit only if you pass away due to a covered accident. But it may also cover certain non-death accidents, such as losing a limb or your eyesight.
You may be able to get AD&D coverage as a separate voluntary life insurance policy or as an add-on to your policy. Because it offers less coverage than a standard life insurance policy, it tends to be cheaper.
Your employer may also allow you to purchase coverage for your spouse, children, and other eligible dependents. Keep in mind, though, that you usually need to buy voluntary life insurance for yourself to qualify to add coverage for dependents. It may be worth it if you want the extra peace of mind — especially if you don’t have a lot of savings.
Voluntary life insurance is usually less expensive than a standard life insurance policy because you’re benefiting from group rates. In some cases, employers may also subsidize the cost of coverage.4
Your voluntary life insurance rates will likely vary depending on your age, gender, the amount of coverage you want, and the insurance company your employer chooses as a partner.
The following table shows the average premium for a standard life insurance policy with a $500,000 death benefit. You’ll likely pay less per month for the same level of coverage on a voluntary life insurance plan.
Voluntary life insurance policies usually aren’t portable, which means that you can’t continue coverage after you leave your employer. But you can speak to your human resources department to inquire about any exceptions to that rule.
That said, if a policy is portable, your premiums may change to the higher rate for a personal policy because you no longer qualify for the group rate.
If you’re thinking about buying voluntary life insurance protection, it’s important to understand the advantages and disadvantages before you enroll. Here’s what to keep in mind.
Voluntary life insurance is a type of group life insurance in the sense that you can qualify for group rates. But voluntary life insurance and basic group life insurance have some differences to be aware of. Learn more below.
If your employer offers voluntary life insurance as an employee benefit, the following information can help you make your coverage decision.
It depends. Voluntary life insurance may be a good idea if you want lower premiums or have a medical condition that makes it difficult to receive approval for a personal life insurance policy. But a lack of portability could be a drawback for people who want to minimize their risks.
Your employer typically covers basic group life insurance in full as an employee benefit, while voluntary life insurance is coverage you can purchase beyond the basic death benefit. Additionally, your employer typically sets the basic coverage, but you can decide between different death benefit options with voluntary insurance.
If you have a voluntary whole life insurance policy, you may be able to tap some of your cash value in the form of a policy loan or by canceling the policy. Keep in mind, though, that it can take several years for a whole life policy to generate meaningful savings.
Voluntary life insurance covers you in the event that you pass away, though there may be some limitations surrounding the cause of death. If you purchase voluntary AD&D coverage, the insurer will only cover you if you die as a result of a covered accident or suffer a covered non-death injury.
If you’re young and have no dependents, life insurance bought through your employer may be sufficient for your needs. But if you have a family and want more coverage, voluntary coverage may not be enough to meet the needs of your loved ones.
If your voluntary coverage isn’t portable, you may also want a personal policy to avoid the risk of losing insurance before leaving your employer.
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