Any individual who wishes to obtain medical insurance but does not have adequate money may take advantage of voluntary life insurance. It is an optional benefit offered by the employer to the employees. With the employer standing in the gap, the cost of purchasing such insurance reduces. You may want to know how this can happen.
This article contains everything you need to know about voluntary life insurance and why you should not let the offer pass you. Enjoy a great read.
What Is Voluntary Life Insurance?
Voluntary life insurance is employee benefits insurance that an employer offers. In this type of insurance, the employee pays the premium, while their beneficiaries receive the benefit, should the employee die while the voluntary insurance is in force.
However, since the employer sponsors the insurance for several employees, the premium to be paid will be lower than when the employees purchase the insurance individually in a marketplace. Many workers can benefit from this type of insurance since the coverage is generally low and does not require any medical exam.
In addition, you can use the opportunity to purchase an insurance policy for your spouse. Although not every insurance company offers this option, many of them do.
How Does Voluntary Life Insurance Work?
Voluntary life insurance pays benefits of a limited amount on death benefits. It does not require a medical exam, meaning that you are qualified for this type of insurance no matter your health status. This can be an excellent benefit for you as an employee, especially if you may not purchase private insurance due to some medical condition. With your employer’s influence, the monthly premium in exchange for the insurance cover is relatively lower than the individual life insurance sold in the retail market.
Moreover, this type of insurance has different policy packages and not necessarily that you and your fellow employee must purchase at the same price, regardless of your financial capability. Hence, policies vary, depending on the condition and how your employer negotiates with the insurance company.
However, an essential condition you must find out is whether the insurance package is portable. That is, whether you can still be covered under the policy should you leave the company or place of work to another place. Therefore, you must seek to understand the conditions upon which you buy your voluntary life insurance cover.
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Options offered by Voluntary Life Insurance
There are added benefits and riders that come with voluntary life insurance. A rider means an insurance policy provision capable of adding benefits to the policy or changing the terms of the insurance cover as time goes on.
The benefits could be in the form of the following:
- Options to upgrade the voluntary life insurance plan
- Portability of the coverage. That is, the option to continue with the insurance policy even when one changes the employer
- Accelerated benefits
- Options to purchase plan for one’s spouse or other family members
- Options to remove premium directly from one’s salary.
Types Of Voluntary Life Insurance
Voluntary life insurance comes under two types of life insurance: whole life and term life insurance.
1. Voluntary Term Life Insurance
Term life insurance is pure insurance and can be purchased as voluntary life insurance as part of group insurance through your employer. With a certain amount as a premium, term life insurance offers a death benefit. Likewise, the premium you pay will remain at the same level for an extended period. You may have to renew the plan upon the expiration of the policy you purchased.
2. Voluntary Whole Life Insurance
Voluntary whole life insurance is not as common as term life insurance. Whole life insurance is a sort of permanent insurance. However, permanent life insurance offered as voluntary insurance will come with a higher premium than term options. But the beautiful thing is that, while the premium is higher, it typically builds up cash as you progress.
As a result of the nature of this voluntary insurance, you may not have issues with the package, assuming you change your employer. But then, there is no harm in finding out the condition upon which you are purchasing your voluntary life insurance.
Who Needs Voluntary Life Insurance?
Just about anyone can benefit from voluntary life insurance. However, your financial needs will, to a large extent, determine if you need voluntary life insurance. Also, your medical history may decide if you qualify for voluntary life insurance or not. If you have a less-than-perfect life and risky family history, you may not be eligible for a life insurance policy in a retail marketplace. But with voluntary life insurance, working for your employer qualifies you. So, you can protect your family’s financial future by purchasing voluntary life insurance.
On the contrary, if you have optimal health and low-risk history, you may benefit more if you purchase your life insurance in the marketplace. This is because the risk of those with low and high stakes are put together, and the premium will be the same, regardless of your condition.
But that does not mean that voluntary life insurance is not good. As a parent, this can be a way to safeguard your kids’ financial future. This is because voluntary life insurance is usually offered at a flat rate to everyone, no matter the number of children you have. Be sure to review the conditions before committing yourself to any package.
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How To Obtain Voluntary Life Insurance
It is effortless to get a voluntary life insurance policy. The biggest hurdle is to get an employer who offers such a policy. If your employer does not offer that, you can do nothing about it. Therefore, you can factor in this during your job search. The steps below will help in determining if you need voluntary life insurance:
- Get hired: The first hurdle is to find a job that offers voluntary life insurance in its package. The simplest way to find out if your would-be employer provides such a policy is by asking them during the interview process. You may suggest it to your would-be employer if they do not have the package.
- Review your options: You are likely to be offered the employee benefits handbook when you are hired. Since your employer has a policy, you may be outright eligible for the policy or after a stipulated amount of time. If you do not understand certain conditions, set up a meeting with your HR manager to get them to answer your questions.
- Sign up: The company will give you a deadline to sign up for any benefits through the company. Make sure you submit a request before the deadline. If you miss the deadline, it means you will have to wait for the next enrollment period to be able to sign up. This typically takes one year too. If your employer upgrades the benefits plans, you have every right to know as that would also determine your decision.
What Makes Up A Life Insurance
Life insurance contracts have three essential structures:
1. Death benefit
The death benefit is the value of the insurance you have been paying premiums for. Upon your death, your beneficiary gets to enjoy this benefit. The insurance company will calculate the cash payout due for the insurance before paying the value to your beneficiary.
Purchasing life insurance or any insurance stipulates an amount of money you will pay every month to the insurance company. This money can be deducted from your salary or bank account. But before you pay the premium, the amount you will pay will be determined by the type of insurance cover you purchase and the terms you purchased it.
In essence, the premium you will pay will be a percentage of the amount of the insurance policy you purchased. The premium will be calculated using statistical concepts of the insurance, called actuarial science, to determine the risk involved.
3. Cash value
This is the amount or face value of the insurance coverage you purchased. It acts as a savings account that you pay your premium for. That is, the reason you are contributing your premium is for your beneficiary to receive the cash value upon your death.
FAQs On Voluntary Life Insurance
Eligible employees are given the opportunity to enroll in the Voluntary Life Insurance program once a year during Open Enrollment, which is typically held in October and November. You may not enroll in the Voluntary Life Insurance program at any other time of the year.
During Open Enrollment you or your spouse (under age 70) may apply in any $10,000 amount up to $500,000 each.
Yes. You may keep this family term life insurance if you ever leave TSRI by simply completing a portability application within 31 days of your termination date.
The rates are age-rated and published each year during Open Enrollment.
Voluntary life insurance comes with its benefits. It is good you purchase it if your pocket strength is not high. Also, if you have a medical condition, this may be a way to transfer the major risk to the insurance company, while saving for your dependents.
- coverage.com – What is voluntary life insurance?
- scripps.edu – Voluntary Life Insurance
- corporatefinanceinstitute.com – What is Voluntary Life Insurance?
- thestreet.com – What Is Voluntary Life Insurance and How Does It Work?