What is the difference between voluntary life insurance and standard term life?
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Asked November 11, 2013
Voluntary life insurance is a low-cost type of term life insurance offered through employers. Depending on your circumstances, voluntary life insurance may have lower premiums than term life insurance. Before you purchase a voluntary life insurance policy, take a few minutes to look at the advantages and disadvantages between the two policies.
Voluntary life insurance is typically offered in multiples of your salary with the company rather than in arbitrary amounts that you can choose from. For example, if your salary is $40K, you can buy voluntary life insurance in increments of 40, 80, or 120 thousand dollars. If you need coverage outside of those choices, you may have to go with a traditional term life policy. Generally, voluntary life insurance is cheaper for amounts under $50K, while term life policies are more affordable for higher values.
Make sure that your voluntary life insurance policy is portable. A common problem with voluntary life insurance is that the policy does not travel with the insured when they change jobs. Another common problem is that conversion fees are prohibitive. If you may be changing jobs in the near future, it may be a good idea to look at what the conversion costs will be for your policy. Unless you are positive that you will be with you current employer for many years, it would be in your best interest to compare the costs carefully before you sign on the dotted line.
One advantage of voluntary life insurance is that the premiums come out of your paycheck. This eliminates the need to remember to send the bill in, or having to budget the coverage during unusually tight financial periods. The disadvantage here is that you do not have many options for billing, where a term life policy includes options for monthly, quarterly, and annually.
Answered November 11, 2013 by Anonymous