Voluntary Life Insurance | Bankrate

If you need life insurance but have been turned down for a private policy or want to enhance your basic group life coverage, voluntary life insurance may be a good option for you. Offered through your workplace, it’s designed to make the process easier, with minimal hassle and affordable group rates.

Maybe you’ve thought about how your family would manage the mortgage, everyday expenses or future plans if something happened to you. Or perhaps you’re looking for a way to supplement your current coverage without taking on extra stress. Whatever your reason, understanding how voluntary life insurance works — and whether it fits your situation — can give you peace of mind. The Bankrate insurance team is here to help sift through the details so you can better decide what’s right for you and your loved ones.

What is voluntary life insurance?

Voluntary life insurance is like an extra layer of protection that your employer might offer beyond the basic group life insurance you get at work. It’s a way to add more coverage, but unlike your basic group policy, the cost usually is paid by you, not your employer. The good news? Because it’s part of a group plan, the rates are often lower than what you’d pay for a standalone policy.

But, as with anything, there’s a little fine print to consider. Depending on how much coverage you’re after, you might need to go through medical underwriting — which can be as simple as answering health questions or even taking a medical exam to qualify. But there’s another wrinkle; this coverage is tied to your job. If you decide to move on, your policy doesn’t automatically come with you unless it’s “portable.” Even then, portability often means higher premiums, especially as you age. These plans tend to increase their rates every five years or so.

For many people, voluntary life insurance can be a budget-friendly way to bolster their coverage, especially if they don’t have much life insurance in place. That said, whether it’s the right choice for you depends on taking a closer look at its quirks and figuring out how well it fits into your overall financial plan.

Who needs voluntary life insurance?

Voluntary life insurance can be a great fit for some people, especially if you’ve hit roadblocks with traditional life insurance. If you’ve been denied coverage because of pre-existing health issues like diabetes, cancer or heart problems, this could be your way in. Unlike many private policies, voluntary life insurance often skips the detailed medical exams or health underwriting, so it’s more accessible, even if you’ve been turned down elsewhere.

If you already have private life insurance, adding a voluntary policy can give you an extra cushion of security. It’s a straightforward way to boost your coverage without going through the hassle of shopping for another private policy.

But before you jump in, there are a few things to think about:

• Portability problems: Most voluntary life policies are tied to your job, which means if you leave, the coverage doesn’t usually follow you. If your plan does offer portability, be prepared for higher premiums once it transitions to a private policy.
• Employer control: Your employer calls the shots here, so they could reduce or even cancel the benefit entirely. That could leave you without coverage when you need it most.
• Active employment requirements: Many policies require you to be actively working to maintain your coverage. If you’re out on medical leave or facing a long recovery, your policy could lapse.

That said, voluntary life insurance can still be a convenient way to shore up your financial safety net. Just keep in mind that if your loved ones rely on you for financial support, it’s smart to have a private policy in addition to what your employer offers. That way, you’re covered no matter what — whether you switch jobs or face unexpected health changes.

How much voluntary life insurance do you need?

When deciding how much life insurance to carry, it usually comes down to one thing; making sure your loved ones are financially secure if something happens to you. Think about the essentials — your mortgage, everyday expenses and those big future plans, like sending your kids to college or paying for childcare or eldercare. The goal is to create a financial cushion that gives your family peace of mind, no matter what.

Most workplace plans let you customize your coverage in $10,000 increments or base it on a multiple of your salary. That said, group life insurance often has lower coverage limits than private plans. This is where voluntary (or supplemental) life insurance steps in. It bridges the gap, offering higher limits at group rates that are often more affordable than standalone policies.

Here’s a straightforward way to assess what you might need:

• Debts: Think about your mortgage, car loans, credit cards — any lingering balances that would need to be covered.
• Living expenses: Factor in the day-to-day stuff like groceries, utility bills and transportation.
• Future goals: Big-ticket items like your children’s education, long-term childcare or even ongoing support for aging parents or a family member with special needs. You might also consider costs for extracurricular activities, relocation or spousal career adjustments to help maintain stability.
• Final expenses: Don’t forget to include medical bills, funeral costs and other end-of-life expenses.

By adding up these areas, you’ll hopefully get a clearer picture of how much coverage makes sense for your situation. And if you’re still scratching your head, consider chatting with an insurance professional. They can help you tailor a policy that feels just right — balancing what you need with what fits your budget.

How much does voluntary life insurance cost?

Voluntary life insurance is like hitting the easy button of coverage — it’s affordable, straightforward and built to fit into your financial routine without much fuss. For those with pre-existing health conditions, it can be a win-win with access to additional protection without the usual hurdles. Plus, because the premiums are based on group rates through your employer, voluntary life insurance can be easier on your wallet than private policies or guaranteed issue policies.

That said, the actual cost can vary depending on your employer’s offerings and how much coverage you select. While it’s often a budget-friendly option for those with medical issues, it’s worth noting that traditional term life insurance might be a better fit for those in good health. Private policies often come with even lower premiums and the perk of portability, meaning your coverage stays with you no matter where life or your job takes you.

One of the biggest perks of voluntary life insurance is its simplicity. Premiums are typically automatically deducted from your paycheck, so there’s no extra bill to track or due dates to remember. It’s somewhat of a “set it and forget it” approach to coverage (we still advise regular policy reviews), giving you peace of mind without adding extra stress to your routine.

How to get voluntary life insurance

In order to obtain voluntary life insurance, you must first be employed by a company that offers this benefit or be a member of an affiliated organization, such as a credit union.

Enrollment

If your employer offers voluntary life insurance, you can typically enroll in this program as soon as you are hired or soon after that, such as after a period of 90 days. In some cases, you will need to renew this benefit during your company’s open benefits enrollment period.

You may be able to purchase additional coverage for yourself or a family member, in which case you would likely have to fill out additional paperwork, agree to additional fees and may even be subject to a medical exam or questionnaire. During your enrollment period, you might get the option to decide whether or not you want additional life insurance riders on your policy, as well.

Portability

If you leave your job, your voluntary life insurance might be portable (transferable), but it depends on the terms your employer set up. You could have the option to convert your term policy into a permanent one, like whole life, universal life or variable universal life, that sticks with you no matter where you work. If you’re thinking about switching jobs, it could be a good idea to check with your HR department to get the details on whether your policy can go with you and if you can convert it.

Frequently asked questions

• What is the best life insurance company?
  

  The best life insurance company depends on your individual preferences, personal situation and policy needs. Choosing the right option for you can be daunting, so you may want to talk with an independent insurance agent about your needs. A life insurance agent can help point you to the top companies that offer the policy types you want.

• How can I find out if my life insurance is portable?
  

  Your employer should be able to tell you whether you have the option to take your life insurance policy with you after you leave. Contacting your HR department or your life insurance company representative is likely the best way to find out specifics.

• Can you drop voluntary life insurance at any time?
  

  You may be able to drop voluntary life insurance at any time, but it is best to speak with your employer or the human resources department to make sure. Some life insurers allow you to drop voluntary benefits at any time, while others only allow changes during open enrollment for benefits, which typically happens once per year.

• Does voluntary life insurance cover accidental death?
  

  Yes, voluntary life insurance covers accidental death. However, accidental death and dismemberment (AD&D) insurance might also be an available benefit through your employer. This type of policy may provide additional coverage if the insured dies an accidental death or loses a body part, such as an arm, leg or eye. Some voluntary life insurance policies offer an AD&D rider, which may be cheaper than a separate AD&D policy.