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Understanding Voluntary Life Insurance

How Does Voluntary Life Insurance Work?

Many employers offer basic group life insurance as an employee benefit. Additionally, you may have the option to purchase voluntary life insurance, which supplements the basic coverage. This type of insurance is also known as supplemental life insurance and is typically paid for through payroll deductions.

Voluntary life insurance provides a death benefit to the named beneficiary if the insured passes away while the policy is active. The coverage amount is often based on a multiple of the employee’s salary, subject to a maximum limit. Some policies are portable, allowing you to keep the coverage even if you change employers, though you may be responsible for the full premium.

Types of Voluntary Life Insurance

There are several types of voluntary life insurance available:

Term Life Insurance

Term life insurance provides coverage for a specific period, such as 10, 20, or 30 years. The coverage ends when the term expires unless the policy is renewed.

Whole Life Insurance

Whole life insurance is a type of permanent insurance that remains active as long as premiums are paid. It includes a cash value component that accumulates over time, which the policyholder can borrow against or withdraw from.

Accidental Death & Dismemberment

This coverage offers a death benefit in specific circumstances or non-death accidents. It may be offered as a separate policy or as a rider to another policy. It generally covers fewer causes of death, making it less expensive.

Pros and Cons of Voluntary Life Insurance

Pros

• Accessible coverage without a medical exam.
• Premiums are deducted from your paycheck, simplifying payments.
• Typically more affordable due to group rates.
• Coverage may be available for your spouse and dependents.

Cons

• Limited coverage amounts.
• Coverage is tied to employment and may be lost if you leave your job.
• Limited options based on what your employer offers.

How Much Does Voluntary Life Insurance Cost?

The cost of voluntary life insurance is generally less than a standard life insurance policy but more than the free basic group life insurance offered by employers. The cost varies based on factors such as your age, the amount of coverage, and the type of insurance.

Do I Need Voluntary Life Insurance?

Voluntary life insurance may be necessary if your employer’s group life insurance isn’t sufficient to cover your beneficiaries’ needs. It can also be a good option if you have difficulty accessing affordable individual life insurance due to medical history. Guaranteed issue plans allow you to get coverage without a medical exam or health questionnaire.

The Bottom Line

Voluntary life insurance can be a valuable option if your employer offers it and you need additional coverage. Ensure you understand whether your coverage ends if you leave your job. If it does, consider purchasing additional life insurance independently to maintain coverage.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage requirements.

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