Like group life insurance offered by most employers, voluntary life insurance pays cash to your beneficiaries upon your death. You can choose to buy an individual plan from a health care or financial services provider; if you're employed, it may be cheaper to sign up for voluntary insurance through your workplace. Your payments, or premiums, come out of your paycheck at regular intervals set by your employer. Premiums vary depending on your age and the amount of insurance you purchased. Voluntary life insurance also includes term and whole life policies, along with several other features.
Voluntary Term Life Insurance
Review the differences between term and whole life voluntary insurance. Voluntary term life protects you and your family, but only for a certain period, such as 10 or 20 years. If you're under age 50 and are in good health, your payments may be inexpensive. Most of these plans do not increase their premiums during the coverage period, and they don't build cash value through investments. The full value of the voluntary term policy goes to your beneficiaries upon your death.
Voluntary Whole Life
A voluntary whole life policy, by contrast, protects you and your family throughout your lifetime, even after you stop paying the premiums at a certain age. Unlike term life, voluntary whole life insurance builds cash value through investments such as mutual funds, so it's handy if you want to add this to your estate planning. Voluntary whole life may be expensive, because you may pay investment fees along with your premiums. With a voluntary whole life policy, you can withdraw the extra cash or borrow money against it as a loan, but you risk decreasing the policy's overall value. If you don't have to withdraw any money from the policy, your family benefits from the proceeds, plus interest, after your death.
Standard Features of Voluntary Life Insurance
Whether you choose term life or whole life voluntary insurance, you guarantee coverage for yourself and your family. Added features such as dependent life insurance help you cover the death of a family member such as a spouse or child. Voluntary life insurance also covers you or a loved one in case of critical illness or total disability. Another common feature known as AD&D, or accidental death and dismemberment, also comes as part of the voluntary life insurance package. If you change jobs, some employers allow you to carry your insurance to your new workplace or convert it into an individual plan without penalty.
How Voluntary Life Insurance Compares to Basic Life Insurance
Both voluntary and basic group life insurance provide maximum financial protection to your family when you die. While voluntary life insurance acts as an optional supplementary or backup plan, basic life insurance often comes automatically as part of your employer's health care benefits package when you apply for enrollment. This automatic insurance is usually free if you get it from your employer, while premiums for your medical, dental and vision are deducted from your paycheck. In the event of your death, basic life insurance usually pays a year's worth of your salary to your beneficiaries, and voluntary life pays out the cash value based on the plan you selected.
- Smart Money: Whole Life Insurance or Term?
- Humana: Specialty Benefits
- Principal Financial Group: Voluntary Life Insurance
- Aetna: Basic Life Insurance for Members
- LIMRA. "2020 Insurance Barometer Study Reveals a Significant Decline in Life Insurance Ownership Over the Past Decade." Accessed Sept. 15, 2020.
- Life Happens. "2019 Insurance Barometer Study: Nearly Half of Americans More Likely to Buy Simplified Underwritten Life Insurance." Accessed Sept. 15, 2020.
- Insurance Information Institute. "Facts + Statistics: Life insurance." Accessed Sept. 15, 2020.
Writer and copy editor Deneatra Harmon has several years of experience in publishing. Her credits include the "Daily Local News" and many different online publications. Harmon has a Bachelor of Arts in English from the University of Delaware.