What Is Voluntary Employee Life?
- Find out what voluntary employee life is. Learn how this type of life insurance varies from other policies so that you can choose the right coverage for your needs.
Life insurance can help ensure that your family is protected from financial loss when you die. You can obtain life insurance on your own through a licensed agent, but your employer may also provide plans through a voluntary employee life benefit. This type of insurance offers many benefits and may be ideal for you, depending on your age, overall health and other factors.
What Is Voluntary Employee Life?
Voluntary employee life is a type of life insurance offered through an employer's benefits program. To qualify for a plan, you usually must work for that employee. Some companies may only offer voluntary employee life once you have been with the company for a minimum number of months or years or require you to work full-time to qualify for coverage.
Like basic life insurance, voluntary employee life insurance requires payment of a monthly premium. If you pass away, the policy pays a lump sum called a death benefit to the beneficiaries that you name. Depending on your company's rules, you may be able to obtain voluntary life insurance for your spouse and children through your employer's program.
Who Pays for Voluntary Employee Life Insurance?
Sometimes, employers pay the premium for employee life insurance. They may cover the cost of a policy that pays a death benefit equivalent to one or more years of your salary or offer policies with the same death benefit to all employees. You normally don't have to enroll in a plan to get coverage to obtain the offered death benefit under these circumstances. A plan is automatically given to you when you meet the eligibility requirements for the program. If you need a larger death benefit, you would then enroll in a voluntary life insurance plan during your company's open enrollment period.
Your employer may choose not to pay for voluntary life insurance. In this case, enrollment in a plan is strictly voluntary. During the open enrollment period, you select a death benefit from the available options and then pay the monthly premium. Normally, the cost of the premium is deducted from your paycheck.
Even if your employer pays for your life insurance, they are unlikely to cover additional insurance for your family. You're generally responsible for paying the premium on employee life insurance for your spouse and children.
What Are the Types of Voluntary Employee Life Insurance?
Employers can offer two types of life insurance: term and whole.
Most employee plans are term life insurance. This type of insurance gives you coverage for a set period, such as five or 15 years. Normally, term life insurance allows you to receive a higher death benefit for a lower monthly premium.
If your employer offers term life, you may need to re-enroll when your initial plan ends. Your premium could increase when you renew.
Whole life insurance provides coverage throughout your life. You don't have to renew the policy, and the premiums typically remain the same over time. As you or your employer pays premiums, the whole life insurance policy builds up a cash value.
What Is the Difference Between Basic Life and Voluntary Employee Life Insurance?
Basic life and voluntary employee life generally work in the same way but do have some differences.
Effect of Medical History
When you buy basic life insurance, you must usually fill out a medical questionnaire or undergo a medical exam. Alternatively, the insurance company may require you to give your physician permission to share your medical history. You can be denied coverage or charged a higher premium rate if you have or are at risk of developing certain medical conditions.
Employee life insurance doesn't take your medical history into consideration. You're not required to disclose your health information or undergo an exam to get basic coverage. As long as you meet your employer's eligibility requirements, you're guaranteed acceptance and your premium won't be affected by any preexisting medical conditions.
In some cases, you may need to provide a medical history to get a larger death benefit on an employee life insurance policy.
Number of Options Available
When purchasing life insurance on your own, you have many options to choose from. You can select your preferred insurer and pick from many types of plans. In addition, you can opt for a policy that has the exact death benefit that's right for you.
With voluntary employee life insurance, you're limited to the insurer that your employer selects. You'll likely have only one plan and a small number of death benefits to choose from.
Impact of Employment Status
Voluntary employee term life insurance may end if you leave your employer. Some plans do allow you to convert your policy into basic life insurance if you change jobs or are laid-off or terminated. You may need to pay a fee for the service, and the cost of your premium may increase.
Because whole life insurance lasts a lifetime, you're less likely to lose coverage if you change jobs. The details of your employer's life insurance plan can tell you how changes in employment status affect coverage.
Is Voluntary Life Insurance Good?
Voluntary life insurance is a good choice for many people. Some benefits of voluntary life insurance are:
- Premiums are often lower for voluntary employee life insurance than for basic policies that pay a similar death benefit.
- Signing up for a plan through your employer is usually an easy process.
- Guaranteed acceptance. If you have a health condition, voluntary life insurance allows you to get coverage that you may not qualify for or would have to pay much more for on your own.
Voluntary life insurance does have some disadvantages, such as:
- Less flexibility. You may end up underinsured through a voluntary employee program due to limitations on death benefit size and plan type.
- Potential to lose coverage. Depending on your company's rules, you may forfeit your policy if you leave or lose your job.
To determine whether employee life insurance is right for you, consider:
- Your age
- Your medical history
- How much life insurance you need
- How difficult it would be for you to get insurance on your own
- If you have any additional life insurance coverage through a basic plan
- How likely you are to remain with your current employer