How Does Voluntary Term Life Insurance Work

How Does Voluntary Term Life Insurance Work?

Voluntary term life insurance is a popular choice for many employees offered by their employers as a benefit. If you are unfamiliar with this type of life insurance policy or are considering enrolling, it’s important to understand how it works. Unlike traditional life insurance policies, voluntary term life insurance policies allow employees to choose the amount of coverage they want and pay the premiums themselves through payroll deductions. In this article, we’ll explore the key features of voluntary term life insurance, including portability, the absence of medical exams, tax-free benefits, and more. Keep reading to learn more about how voluntary term life insurance can benefit you and your loved ones.

Table of Contents


What Does Voluntary Term Life Insurance Cover?

Voluntary life insurance, also known as group life insurance, is typically offered by employers to help provide their employees with peace of mind. The coverage and benefits of voluntary life insurance depend on the type of policy selected, which can be either voluntary whole life insurance or voluntary term life insurance.

Voluntary Whole Life Insurance vs. Voluntary Term Life Insurance

The main difference between these two types of insurance is the length of coverage and the cash value component. Voluntary whole life insurance lasts the entire life of the employee and includes a tax-free savings account that accumulates over time. On the other hand, voluntary term life insurance lasts for a specific amount of time, like 10, 20, or 30 years, and does not have a cash value component.

Benefits of Voluntary Life Insurance

The main benefit of voluntary life insurance is the guaranteed payment to the beneficiary when the insured employee passes away, also known as the death benefit. The payout amount depends on the policy selected, but it is usually less expensive to obtain coverage through an employer than through an individual life insurance plan. Other benefits of voluntary life insurance include:

  • Portability, allowing employees to continue carrying their coverage even if they leave their employer (depending on the company’s guidelines)
  • Ability to scale the amount of the death benefit up (if the employer allows it)
  • Optional riders or add-ons available, such as the ability to accelerate benefits or supplemental life insurance for dependents
  • Generally not taxable if the guaranteed payment is less than $50,000


If you are considering voluntary life insurance, it’s important to understand the benefits and limitations of each type of policy. While voluntary whole life insurance may offer more long-term benefits, voluntary term life insurance may be a more affordable option for some employees. If your employer does not offer voluntary life insurance or the plans offered do not provide the benefits you need, individual term or whole insurance may be a better choice.

PoliciesStates Available
Term & Whole LifeArkansas, Idaho, Oklahoma & Virginia
Group Whole LifeArkansas, Idaho
Group Term LifeArkansas, Idaho & Oklahoma

This is a brief product overview only. Coverage may not be available in all states. For complete details and limitations of the coverage, please contact your local Aflac agent.

Is Voluntary Term Life Insurance Worth It?

Voluntary life insurance policies provide additional coverage on top of an employer-provided base life insurance plan. These policies may be available as either term life or whole life insurance. Term life insurance coverage lasts for a specified level term period, such as a decade, and is usually less expensive than whole life insurance. Whole life insurance and universal life coverage remain in place throughout the policyholder’s life and can build cash value that you can tap into when necessary. Accidental Death & Dismemberment (AD&D) insurance covers deaths due to accidental causes and specific injuries and is often offered at low rates by employers.

Reasons to consider voluntary life insuranceDrawbacks of voluntary life insurance
Provides additional coverage on top of employer-provided life insuranceMay not be enough to cover total life insurance needs
Easy to sign up for without a medical examMay not be the most cost-effective option
May be a convenient option for those seeking additional coveragePolicy may end when employment ends

While voluntary life insurance policies can be a good option for those seeking additional coverage, they may not be the most cost-effective option and may not provide enough coverage for your total life insurance needs. Additionally, the policy may end when employment ends. It’s best to consider employer-based life insurance as a supplement and buy your own individual life insurance policy to ensure that you have coverage no matter where you work. Comparing policies with multiple insurers can help you find the best coverage for your needs.

Is It Advisable To Obtain Voluntary Life Insurance Through My Workplace?

Many employers offer life insurance as a workplace perk and subsidize some or all of the benefits. These employer-provided life insurance policies are sometimes referred to as “basic group life.”

Advantages of Group Life InsuranceDisadvantages of Group Life Insurance
ConvenienceCoverage is tied to your job
PriceLimited choice
AcceptanceLow coverage amounts
Premiums aren’t fixed

Coverage amounts are typically capped at low amounts, such as one to two times your annual salary. Since employers usually cover premiums and you won’t be declined for coverage, there’s no reason not to sign up for group life insurance.

Many people opt to buy more insurance, known as supplemental life insurance, through their workplace plans. The amount of coverage available varies among companies, but typically maxes out at around $500,000. The higher coverage amounts mean you may have to fill out a health questionnaire to qualify. The results are used to calculate your rates and eligibility for coverage.

While group life insurance is a “work perk,” it might not be sufficient for your needs. These are the downsides:

  • Coverage is tied to your job
  • Limited choice
  • Low coverage amounts
  • Premiums aren’t fixed

If your employer pays for your coverage, the premiums for coverage over $50,000 may be subject to income tax. The first $50,000 worth of coverage is tax-free.

The first thing to do is to take advantage of any free basic group life insurance offered. Next, compare the cost of supplemental life insurance available through your work to what you can find on your own. If you can get a comparable deal on your own, it may be worth buying an individual policy to complement the group life insurance you’re getting through the workplace.

If you’re older or have a medical condition that prevents you from getting competitively priced coverage on the open market, supplemental group life may be a good fit. Just remember the limitations, especially if you don’t expect to stay at the employer for a long time. Plus, you also have the option to apply for no-medical exam life insurance — which doesn’t require a physical — on your own.

What Is The Difference Between Voluntary Life Insurance And Ad&D?

When it comes to life insurance, it’s essential to understand the differences between the various types of policies available. Accidental death and dismemberment (AD&D) insurance is a subset of life insurance, but it only pays out if the insured dies or suffers certain injuries due to a covered accident.

How AD&D Insurance Works

AD&D insurance can be purchased as a standalone policy or as a rider added to a standard life insurance policy. The policy will specify the accidents and injuries that are covered, which may include the loss of a limb, paralysis, or blindness, among others. AD&D policies typically do not cover death or injury resulting from high-risk activities.

In contrast, voluntary life insurance policies, also known as accidental death benefit (ADB) policies, only pay out in the event of a fatal accident. They do not cover dismemberment or non-fatal injuries.

Comparing AD&D and Voluntary Life Insurance

AD&D InsuranceVoluntary Life Insurance
Covers accidental death, dismemberment, and certain injuriesCovers accidental death only
Can be purchased as a standalone policy or added as a rider to a life insurance policyIs typically purchased as a standalone policy
May not cover death or injury resulting from high-risk activitiesMay not cover death or injury resulting from high-risk activities
May be easier to qualify for than standard life insuranceMay require a medical exam for approval

Which Policy Is Right for You?

If you’re concerned about accidents, adding an AD&D rider to a standard life insurance policy may be the best option. This will increase your death benefit if you die from a covered accident and may also pay out a certain amount if you suffer a qualifying accidental injury.

However, if you’re not eligible for standard life insurance, an AD&D policy may be a better option than no coverage at all. AD&D policies are typically easier to qualify for and may not require a medical exam.

Ultimately, your decision will depend on your individual needs and circumstances. Be sure to compare rates and coverage options from multiple insurers to find the policy that’s right for you.

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

Type of PolicyDescription
Voluntary Whole LifeProtects the entire life of the insured and accumulates cash value according to underlying investments. Premiums are generally higher than for voluntary term life.
Voluntary Term LifeOffers protection for a limited period, such as five, 10, or 20 years. Premiums are less expensive than voluntary whole life and are level during the policy term but can increase upon renewal.

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.

How Much Coverage Should I Get For Voluntary Life Insurance?

Life insurance is a type of insurance agreement in which an insurance company agrees to pay a specified amount after the death of an insured party, as long as the premiums are paid and up to date. This amount is called a death benefit. There are two types of life insurance policies: whole and term. Whole life policies are a type of permanent life insurance, meaning you’re covered for life as long as your premiums are paid. Term life insurance, on the other hand, covers you for a set term.

When it comes to voluntary life insurance, the amount of coverage you need depends on several factors. Here are some of the most important considerations for choosing a minimum amount of life insurance:

Outstanding debtsLife insurance can be used to pay off outstanding debts, including student loans, car loans, mortgages, credit cards, and personal loans. If you have any of these debts, then your policy should include enough coverage to pay them off in full.
Income replacementOne of the biggest purposes of life insurance is to replace income. If you are the sole provider for your dependents and bring in $40,000 a year, for example, you will need a policy payout that is large enough to replace your annual income, plus a little extra to guard against inflation.
Child education expensesIf you have children, you may want to consider the cost of their education in your life insurance coverage. The DIME (debt, income, mortgage, education) approach suggests a minimal amount of coverage that will cover family expenses, including education expenses, in the event of an untimely death.

Most insurance companies recommend purchasing at least 10 times your annual income in coverage, although your personal number may be higher or lower. If you’re married, then both you and your spouse may need life insurance coverage, even if only one of you is primarily responsible for your household income. As a rule, you should only insure people whose death would mean a financial loss to you.

Life insurance can be a helpful financial tool to have, but buying a policy doesn’t make sense for everyone. If you don’t have dependents or enough assets to cover your debts and expenses related to death, then you may not need life insurance. However, if you’re the primary provider for your dependents or have a significant amount of debt that outweighs your assets, then insurance can help ensure your loved ones are well taken care of if something happens to you.

When it comes to purchasing life insurance, educating yourself is essential to making the right choice about whether you need life insurance and, if so, what level of coverage. Use one of the common methods to calculate the coverage you’ll need before meeting with an agent or broker to avoid getting stuck with inadequate coverage or expensive coverage that you don’t need.

What Is The Difference Between Term Life Insurance And Voluntary Term Life Insurance?

Many companies and organizations make group life insurance available to employees as a workplace benefit. Generally speaking, there are two forms of workplace group life insurance; either one or both may be offered to employees. Let’s take a closer look at term life insurance and voluntary term life insurance.

Term Life InsuranceVoluntary Term Life Insurance
A term life insurance policy provides coverage for a specific number of years. It is sometimes called “pure life insurance” because, unlike whole life insurance, there’s no cash value component to the policy.Voluntary term life insurance coverage is typically offered on a year-by-year basis, so you can choose to renew, change, or cancel each year (i.e., during open enrollment). Your rates will go up with time – either annually or every few years as you enter a new age bracket.
Voluntary term life insurance can be used to complement voluntary permanent life insurance coverage. While the cost for a given level of benefit is higher than term at first, your rates never increase, letting you lock in pricing for a smaller, life-long policy that is portable and can cover final expenses and other needs after children are no longer dependent on your support.

If you have a family, you probably want enough to replace the income you would have provided and cover the extra costs they’ll face in your absence. Voluntary term life insurance may not provide enough protection for all your needs, so it’s important to evaluate your options and consider the amount of coverage you need.

Other examples of voluntary employee benefits include disability insurance, critical illness insurance, pet insurance, ID theft protection, and legal services.

What Is Voluntary Spouse Life Insurance?

Voluntary life insurance is a type of insurance that an employee can purchase through their employer. It is not mandatory and is an optional benefit. This insurance is usually cheaper than other types of life insurance, and the enrollment process is straightforward. There are two types of voluntary life insurance: term and permanent. A term policy covers the insured for a set period, while a permanent policy provides coverage for the entire life of the insured.

Voluntary Spouse Life Insurance

Voluntary spouse life insurance is a financial protection plan that provides a cash benefit to the spousal beneficiary of the policyholder upon their death. The employee pays for this plan monthly, and in exchange for this, there will be money given to their spouse if they die. This benefit is usually cheaper than going out and purchasing individual life insurance, but the coverage does not follow the employee if they leave the company.

When employers offer voluntary life insurance as a benefit, it can be divided into two categories: voluntary whole life insurance and voluntary term life insurance. Voluntary whole life insurance covers the entire life of the insured, while voluntary term life insurance provides coverage for a set number of years, usually ranging from 10 to 40 years.

Compare Policies

It is essential to compare different policies when considering voluntary life insurance to find one that meets your needs. Many insurers offer voluntary life insurance plans with additional benefits and riders, such as the option to purchase additional coverage or portability in case of termination or a layoff.

The amount of voluntary life insurance should be based on the policyholder’s needs, such as income replacement, debts, and other expenses. A good rule of thumb is to get a policy that is 10-12 times your annual salary. Voluntary life insurance can provide financial protection for family members or business associates in the event of death or disability.


Voluntary life insurance is an optional benefit that can provide financial protection and peace of mind for the policyholder and their family. It is essential to compare policies and consider the coverage amount, cost, and other factors when deciding whether to enroll in this type of insurance.

Low premiumsDoes not follow the employee if they leave the company
Straightforward enrollmentNot mandatory
Customizable coverage

What Is Voluntary Life Insurance And Ad&D?

Voluntary group accidental death and dismemberment (AD&D) insurance is an additional coverage option for employees who wish to increase their financial protection in the event of an accident leading to death or dismemberment. This coverage can be added to an existing employee benefits package. It is a low-cost way to add value and meet employee demand for additional coverage. Employers can easily administer this benefit as part of their comprehensive employee benefits program.

Adding AD&D coverage is crucial considering that accidents are the third leading cause of death in the United States. According to a report by the Federal Reserve Board Division of Consumer and Community Affairs, more than 39% of Americans cannot afford a $400 emergency expense without borrowing money or using a credit card.

Voluntary group AD&D insurance provides additional financial protection to the insured’s family if their death or dismemberment was due to a covered accident, whether it occurred at work or elsewhere. This coverage can be added in different ways, such as a rider to a term life policy or as an additional AD&D benefit.

Business Travel Accident Coverage

Business travel accident coverage provides a lump-sum payment if an employee dies or is injured from a covered accident while traveling for business. This coverage can also be added to a benefit package, giving employees additional financial protection when traveling for work.


Voluntary group AD&D insurance is an affordable way to increase financial protection for employees and their families. It is a valuable addition to any employer’s comprehensive benefits program. To learn more about voluntary group AD&D insurance and tailor a plan that suits your needs, please consult with your financial professional.

Insurance ProductsIssuersHeadquarters
Life InsuranceMinnesota Life Insurance Company or Securian Life Insurance CompanySaint Paul, MN
Property and Casualty InsuranceSecurian Casualty CompanyNew York
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