Voluntary life insurance: what is it? Types, Definition, and Example
Voluntary life insurance: what is it?
A financial protection plan known as voluntary life insurance pays out cash benefits to a beneficiary in the event that the insured passes away. It is an elective benefit that employers provide. In return for the insurer’s promise to pay upon the insured’s death, the employee pays a monthly premium.
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In general, employer-sponsored voluntary life insurance policies have lower premiums than retail-sold individual life insurance policies.
Comprehending Voluntary Life Insurance
Numerous insurers provide optional life insurance policies with extra riders and advantages. A plan could, for instance, provide the choice to buy insurance over the guaranteed issue amount. Policyholders may be asked to provide documentation proving they satisfy basic health criteria, depending on the size of the increase.
Another is coverage portability, which refers to a policyholder’s ability to keep their life insurance policy once their job is terminated. Guidelines for transferring a policy vary per employer. But it usually happens 30 to 60 days after termination, and documentation needs to be filled out.
The third choice is to accelerate benefits, which means that if the covered person is deemed terminally ill, the death benefit will be paid while they are still alive. Additionally, life insurance for dependents, as defined by the insurance provider, spouses, and domestic partners may be purchased.
Finally, the possibility to deduct premiums from compensation is an incalculable advantage provided by the majority of businesses. Employees find payroll deductions easy, and they make it possible to pay premiums quickly and easily.
Particular Points to Remember
Some insurers also provide optional riders, such premium waivers and riders for accidental death and dismemberment, in addition to these benefits. The majority of the time, riders are executed at issue and at an extra cost.
Employees frequently have access to voluntary life insurance right away or shortly after being hired.
If an employee chooses to opt out, coverage could reappear during open enrollment or following a qualified life event, such marriage, a child’s birth or adoption, or a divorce. Depending on each person’s situation and objectives, choosing the appropriate voluntary life insurance form necessitates assessing present and future demands.
Voluntary Life Insurance Types
Employers provide two different kinds of voluntary life insurance policies: voluntary whole life and voluntary term life.
Group term life insurance is another name for the latter. Face numbers, such $20,000, $50,000, or $100,000, can be expressed as stated values or as multiples of an employee’s pay.
Whole life insurance that is voluntary
The insured person’s entire life is protected by voluntary whole life insurance. A spouse or dependent’s full life is also covered by the insurance if whole life coverage is selected for them. The amounts available for employees are usually greater than those for spouses and dependents.
Term life insurance that is voluntary
A policy that provides protection for a certain amount of time, such 10, 20, or 30 years, is known as voluntary term life insurance. Voluntary term insurance does not include variable investment or the development of cash value. Premiums are therefore less costly than its full life counterparts. During the policy’s duration, premiums are fixed, but they may go higher when it is renewed.
An Illustration of Supplementary Voluntary Term Life Insurance
As an addition to their whole life insurance, some participants opt for voluntary term life. Jordan, for instance, has a $50,000 whole life insurance coverage and is married with kids. Their life insurance is found to be inadequate following a financial needs analysis. While their children are still minors, Jordan should keep at least $300,000 in life insurance, according to the life insurance broker.
Jordan chooses to add optional term life insurance from their company, which has affordable premiums, to their current coverage until their children are of legal age.
What Is Voluntary Dependent Life Insurance?
This employee benefit can cover a spouse, children, and any other eligible dependents, depending upon the rules laid out in the plan. In the event that a dependent dies, the employee would receive the death benefit.