How Does Optional Life Insurance Work?

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Optional Life Insurance (Optional Life) provides additional protection and insurance to employees and eligible dependents by increasing the amounts paid as part of existing Life or Dependent Life Insurance policies. To apply for Optional Life, speak with your Advisor or Plan Administrator. They can provide you with the required forms and guide you through the process. You’ll need to apply for the optional coverage through your Insurer and submit medical evidence to determine eligibility.

Group Size Overall Life Insurance Maximum
2-9 $850,000
10-19 $1,500,000
20-49 $3,000,000
50-99 $5,000,000
100-199 $10,000,000

An individual can apply for a combination of Life and Optional Life up to the overall Life Insurance maximum. The maximum is based on the size of the employer. For example, if your workplace has ten employees, you may qualify for a combined Life and Optional Life Insurance maximum of $850,000. Optional Life is available to your spouse as well, usually up to a separate maximum that may differ based on your Insurer. Dependent children are not eligible for Optional Life, but may be covered under Dependent Life Insurance.

Life Insurance is a good benefit for just about anyone to have. However, demographics and life stages where increasing Life Insurance payments through Optional Life makes sense. For example, a single individual living alone may not see the need to increase their Life Insurance policy beyond enough to cover funeral services. However, a married person with three kids who rely on them to provide an income may want to consider Optional Life.

Let’s look at Life and Optional Life Insurance in action with an example. Beth is a 23-year old girl, who has just started working at a small tech startup. As part of her total compensation package, Beth is offered group benefits, including a Life Insurance policy for $50,000. She is informed that she can apply for a combined maximum of Life Insurance and Optional Life Insurance which is based on her company’s size. Beth submits medical evidence as part of her application and is approved for Optional Life Insurance of $750,000, for a total of $800,000 when her original Life Insurance policy is included.

Although they hope never to use it, Beth and her husband are secure in the knowledge that their family would be financially protected in the direst of circumstances.

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Article Sources
  1. MIT Human Resources. Optional Life Insurance
  2. University of Michigan. Life Insurance: What It Is, How It Works, And How To Buy A ...
  3. Texas Employees Retirement System. Federal Employees' Group Life Insurance
  4. Texas Employees Retirement System. Types Of Life Insurance Policies
  5. University of Washington. Life Insurance Basics