If you’re starting a new job or entering open enrollment time at your company, you might have the option to buy voluntary life insurance coverage. But what is voluntary life insurance and is it worth the investment? We break down the facts here.
What is voluntary term life insurance?
Life insurance is often one of the perks an employer provides, along with other benefits like medical, dental, and 401(k). There are typically two kinds of life insurance available through your work:
- Company-paid basic life insurance. Basic life insurance, as referenced here, is a small life insurance policy that your employer covers, which is typically free to you.
- Voluntary life insurance. Voluntary life insurance is additional life insurance that you may be able to buy through your employer for yourself. Sometimes, you also have the option to buy coverage for your spouse and your kids.
Voluntary life insurance sales are on the rise, increasing 4.5% to reach $8.8 billion in 2019. You can only buy voluntary life insurance through an employer-provided benefits plan, and you might need to meet certain criteria through your employer to qualify, like working a certain number of hours per week. Voluntary insurance is typically term life insurance, meaning that it lasts for a set period of time.
One of the benefits of voluntary life insurance is that policies are easy to qualify for, and they usually don’t require a medical exam. Since your employer sponsors the plan, voluntary life insurance premiums are typically inexpensive, and you can often pay for them with pre-tax dollars through your payroll.
These plans do come with disadvantages, though. One potential drawback is that the policy might or might not be portable, meaning that you can’t necessarily take it with you if you leave your employer. Voluntary life insurance is also limited to levels offered, which typically come in increments of $10,000 and can range up to several times your salary.
Voluntary life insurance vs. individual life insurance
Wondering about the differences when it comes to voluntary life insurance vs individual coverage? Since it’s inexpensive, tax-advantaged, and easy to qualify, it often makes sense to buy voluntary term life insurance if you have the option. But keep in mind that it might not be enough to cover your needs, especially since it might not come with you if you switch jobs.
An individual term life policy with an insurance company you choose allows you to choose the right coverage amount for you and your family, stays with you through job changes, and has more options for customization, including coverage amount and adding riders.
| Voluntary | Individual | |
| Coverage amount | Limited to levels offered | Choose your own amount; Fidelity Life offers coverage from $50,000 to $2 million |
| Medical requirements | No exam | Exam may be required; Fidelity Life offers options to defer or even waive an exam |
| Pay with pre-tax dollars? | Yes | No |
| Portable | Might not come with you if you switch jobs | Guaranteed protection for the full term |
When is voluntary life insurance right for you?
Reach out to our agents to learn more about term life and how to calculate a voluntary life insurance premium vs. individual life premium. We’re here to help.
At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.
