Voluntary Life Insurance

Voluntary Life Insurance

Key takeaways
* Voluntary life insurance is an optional, employer-offered benefit that pays a cash death benefit to a named beneficiary.
* Premiums are typically paid by payroll deduction and are often less expensive than individual policies because they’re sold through a group plan.
* Coverage may be available at hire, during open enrollment, or after a qualifying life event; portability and riders vary by plan.

What it is

Voluntary life insurance lets employees buy life insurance through their employer’s group policy. The employer sponsors the plan; employees pay premiums (usually via payroll deduction) and name beneficiaries who receive a death benefit if the insured dies while covered.

How it works

• Group underwriting: Because coverage is issued under a group policy, many employees can enroll without individual medical underwriting up to the plan’s “guaranteed issue” amount. Higher amounts may require evidence of insurability.
• Premiums: Group pricing and payroll deductions make premiums generally cheaper and easier to manage than retail individual policies.
• Enrollment windows: Coverage is often available on hire, during open enrollment, or after qualifying life events (marriage, birth/adoption, divorce).
• Portability: Some plans allow you to convert or continue coverage after leaving the employer, typically within a limited window (commonly 30–60 days) and with required paperwork.
• Accelerated benefits: Many plans allow early payment of some or all of the death benefit if the insured is terminally ill.
• Riders: Optional add-ons may include waiver of premium, accidental death and dismemberment (AD&D), and others—usually for an extra fee.

Types of voluntary life insurance

There are two primary types offered through employers:

Voluntary term life
* Provides coverage for a specified period (e.g., 10, 20, or 30 years).
* No cash-value accumulation; generally the least expensive option.
* Face amounts often offered as multiples of salary or fixed amounts (e.g., $20,000, $50,000).
* Premiums are level during the term but can rise on renewal or if converted later.

Voluntary whole life (permanent)
* Provides lifetime protection and builds cash value.
* Cash-value growth may be fixed or tied to underlying investments, depending on the plan.
* Typically more expensive than term coverage; spouse/dependent amounts are usually smaller than employee elections.

Dependent coverage

Employers often offer voluntary dependent life insurance for spouses, domestic partners, and children. If a covered dependent dies, the employee receives the death benefit. Coverage availability and limits depend on the employer’s plan.

Group status and limits

Voluntary life is sold under a group policy held by the employer. Because of group pricing and simplified underwriting, premiums are typically lower than comparable individual policies. Employers commonly cap coverage at a multiple of salary (e.g., 1x–2x) or set maximum dollar limits (often $50,000–$250,000).

Example

An employee with a small whole-life policy may use voluntary term life at work to supplement protection for a temporary need (for example, to provide additional coverage until children reach adulthood). Voluntary term can be an affordable way to increase total death benefit for a specific period.

Choosing coverage

• Assess your financial needs: debts, mortgage, income replacement, education costs, final expenses.
• Compare the employer plan’s features, limits, and cost to individual-market options, especially if you need large or permanent coverage.
• Understand tax and portability rules in your plan: whether premiums are pre‑tax or after‑tax, and whether benefits remain taxable in certain situations.

Conclusion

Voluntary life insurance is a convenient, often cost-effective way for employees to obtain additional life coverage through their workplace. Review plan terms, coverage limits, available riders, and portability options to determine whether the employer-offered product meets your long-term needs or should be supplemented with an individual policy.