What Is Voluntary Term Life Insurance?

Voluntary term life insurance is an optional benefit offered by employers that provides a cash benefit to a beneficiary upon the death of the insured. This type of insurance is a form of group term life insurance and is often less expensive than individual life insurance policies sold in the retail market. Voluntary life insurance plans have additional benefits and riders, including the option to purchase insurance above the guaranteed issue amount and coverage portability.

Types of Voluntary Life Insurance Policies

Voluntary term life insurance is often paid with pre-tax dollars, and if paid with after-tax dollars, it may be tax-deductible. However, the coverage is limited by an employer to either 1x-2x the amount of an employee’s annual compensation, or a cap between $50,000 – $250,000 in coverage.

Voluntary life insurance is often available to employees immediately or soon after hire. For employees who opt out, coverage may next be available during open enrollment or after a qualifying life event. Selecting the right type of voluntary life insurance requires examining current and anticipated needs and is dependent on each person’s circumstances and goals. Comparing an employer’s offering with the plans of other firms can also ensure the best life insurance policies currently available.