What is voluntary life insurance?

Voluntary life insurance is an optional benefit offered by many employers that provides a limited amount of life insurance protection. In most cases this coverage must be purchased, and the cost will be deducted from your paycheck on a monthly basis. While this coverage is certainly helpful, it may not be enough to cover all of your family’s needs and will likely expire if you leave your job.

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Understanding voluntary employee life insurance

Voluntary life insurance is a supplemental benefit that is generally offered by your employer. Since this protection is completely optional, you have the right to accept or decline coverage, and will probably be asked to make this decision during your annual benefits enrollment period. If you choose to take advantage of this coverage, it’s important to know that the amount of protection you can get is often limited and the cost is typically deducted from your paycheck. Even so, voluntary life insurance can be a good start if you have loved ones who depend on your income and would have a hard time making ends meet if you passed away.

Unfortunately, switching jobs is a reality of today’s employment market, and that can make voluntary life insurance unreliable in the long run. If you leave your job for any reason, you’re likely to lose the voluntary coverage you have through that employer. While it’s a great benefit, many financial advisors recommend adding a personal life insurance policy to ensure your family’s protection at all times.  

How much does voluntary life insurance cover?

Voluntary life insurance is often based on a certain number of years of your salary. Plans differ, but three years is common. So, for example, if your salary is $75,000, the benefit that would be paid to your family would be $225,000. That would help your family replace your income in the short term, but in order to provide additional coverage, you would need an individual policy. 

Does voluntary life insurance cost less than normal life insurance?

Yes. It usually costs less than a standard term or whole life policy, because your employer subsidizes the plan, picking up some of the tab. The trade-off is that you will likely not be able to keep the plan if you leave your job.

Does voluntary life insurance require a medical exam?

Most of the time, voluntary life insurance is guaranteed issue up to a certain benefit limit. That means it doesn’t require a medical exam, but it may require a health questionnaire. Your company’s plan may be different. A human resources representative will be able to help you with any necessary qualifying steps. 

What is voluntary AD&D (Accidental Death and Dismemberment)?

There is some overlap between voluntary life insurance and AD&D insurance, but they are not the same. AD&D covers death by certain circumstances only, while life insurance will pay to a beneficiary no matter what happens. AD&D also covers some non-death accidents, like losing a limb. Sometimes it’s available as a separate policy through your employer, or it may be an add-on, called a “rider,” to your voluntary life insurance plan. 

Do I lose my voluntary life insurance if I leave my job?

Unfortunately, the answer is usually yes. Some companies may allow you to continue contributing to a group life insurance plan for a specified time after you leave your job, but most coverage will simply end. This is one of the reasons that it’s smart to have an individual life insurance plan as well. Ask an HR representative at your company whether you can continue your plan after your employment ends. 

It’s often called “supplemental” life insurance

That’s because it’s not designed to be the only form of financial protection you carry. Since most plans cover only a few years of your salary, you have to ask yourself, “Is that going to be enough to sustain my family in the long run?” It will be a direct replacement of your salary for the next couple of years, which could give them time to plan accordingly. But if your goal is to allow them to maintain the same lifestyle long term, voluntary life issuance is probably not enough. That’s where a personal insurance plan can come in and make all the difference. 

Benefits of personal term and whole life insurance

Voluntary life insurance is a great benefit, and if it is available, you should take advantage of it. However, depending on your family’s long-term goals, you will likely also want to consider a personal policy. A personal policy will offer more options and higher coverage amounts to ensure your family’s future. 

Coverage guaranteed to last

With personal life insurance, you will never have to worry about your plan ending for reasons outside of your control. As long as you continue to pay the premiums, your policy will remain in effect. Term life policies cover a set number of years, often up to 20, and whole life policies are permanent. They offer unrivaled insurance protection.

More flexibility and options

Most of the time, voluntary life insurance plans have very limited options, because they are covering a large group of individuals. With personal life insurance, you can customize your plan in a variety of ways to meet your specific needs. Optional add-ons, called “riders” (generally available for an additional charge) allow you to take advantage of dozens of options to achieve your desired outcome. You can, for example, create a policy that also covers your spouse, or a policy that grows cash value faster. 

The ability to grow cash value

Permanent insurance plans like whole life grow cash value over time that you can use during your lifetime, should you need it. That can help with emergency medical costs, paying off a high interest loan, or even paying a grandchild’s college tuition. Most voluntary life insurance policies do not offer this flexibility. 

If you have questions about your voluntary life insurance or AD&D policy, or if you would like to explore adding a personal life insurance policy, our agents can help you go over all of your needs and formulate a plan to help you protect your family’s financial future.


Want to learn more about life insurance?

A New York Life financial professional can help determine what’s right for you.