Is Optional Life Insurance Worth It?

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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. An individual can apply for a combination of Life and Optional Life up to the overall Life Insurance maximum, which is usually based on the size of the employer.

Group Size Overall Life Insurance Maximum
2-9 $850,000
10-24 $1,000,000
25-99 $2,000,000
100-199 $5,000,000

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 supply medical evidence, which can be used to determine eligibility. 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.

Whether Optional Life Insurance is worth it depends on your individual situation. Life Insurance is a good benefit for just about anyone to have, but there are some demographics and life stages where increasing Life Insurance payments through Optional Life makes a lot of 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 dependents who rely on them to provide an income may want to consider Optional Life.

As an example, let’s look at Beth’s story. 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. At the moment, there’s no one relying on her to provide an income, so she names her mother as her beneficiary and doesn’t think about her policy too much.

However, ten years later, Beth is married with two children and a mortgage. Although $50,000 seemed like plenty when Beth was younger, she and her husband now know that it’s not enough to cover expenses and protect her family financially should the worst happen. She speaks with her Plan Administrator, who reminds her about the possibility of Optional Life Insurance to increase her coverage. Beth 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. This amount would cover the family’s existing debts and allow them to maintain their standard of living in the event that Beth was no longer able to provide for the family.

Overall, Optional Life Insurance can be a valuable option for those who need additional coverage beyond their existing Life Insurance policy. Speak with your Advisor or Plan Administrator to determine if it’s right for you.

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