« Back

March 15, 2020

Employer-Provided Life Insurance vs. Voluntary Benefits and Individual Life Insurance

individual and group life insurance options

When it comes to purchasing life insurance, there are multiple coverage options available.

These options include Employer-Provided Life Insurance, Voluntary Benefits, and Individual Life Insurance.

Learning about the different plans offered is important in making sure you and your loved ones get the coverage most suitable for your needs.

Employer-Provided Life Insurance

One type of life insurance available is employer-provided life insurance – and it’s just like it sounds. Also known as group life insurance, it is insurance often offered through an employer, typically part of an overall benefits package.2 The insurance company charges the employer a discounted group rate for this insurance, which allows the company to offer workers this coverage for free or for far less than they’d pay individually.

Most Americans get their life insurance through their employers – with 108 million people having group life insurance coverage, compared to 102 million having individual coverage.2

Pros and Cons of Employer-Provided Life Insurance

There are both pros and cons to having Employer-Provided Life Insurance. The benefits can include:2

  • Offering coverage at little to no cost
  • No medical exam questions or medical exam typically required

While this type of plan offers some major advantages, which can help you save time and money, it can have its disadvantages as well. For example, it could possibly getting taken away if you switch jobs, since it’s linked to your employer.2

Hence, it’s important to weigh your options and determine what’s currently offered and any additional coverage you may need. Then, you can decide whether this is the best type of coverage for you and your loved ones.

Voluntary Benefits

There are advantages and disadvantages to portable and convertible policies. For example, if you decide to make your policy portable, the premiums may be less expensive than if you decided to convert it. In other words, if you decide to convert your policy to a whole life insurance policy, the premiums may be more expensive. However, with portable policies the premium may fluctuate, whereas convertible policies maintain the same premium over time.

Another type of coverage available is Voluntary Life Insurance Benefits. It’s a type of coverage that provides a cash benefit to a beneficiary upon the death of the insured.3 Sometimes, it will be offered as an optional benefit by employers. Many insurers provide voluntary life insurance policies with additional benefits and riders.

Examples of benefits may include the following:3

  • The option to purchase insurance above guaranteed issue amount
  • Coverage portability
  • Accelerating benefits
  • Optional riders

Types of Voluntary Insurance

When it comes to Voluntary Life Insurance, there are two main types offered – Voluntary Whole Life and Voluntary Term Life.

Voluntary Whole Life will help protect them for their entire lives, provided premiums are paid. Additionally, if whole life coverage is elected for a spouse or dependent, this type of policy will help protect their entire lives, too. The only main difference is that a dependent or spouse might receive a lesser amount than the employee.3

On the other hand, Voluntary Term Life is a policy that only offers protection for a limited amount of time. Typically, it will be offered in increments of 5, 10, or 20 years

Unlike Voluntary Whole Life, Voluntary Term Life doesn’t focus on building cash value and variable investing. Therefore, premiums are typically less expensive than their whole life equivalents. Premiums usually remain level during the policy term but have the ability to increase after renewal.3

Individual Life Insurance

The final type of coverage offered is Individual Life Insurance.

There are two major types of insurance offered – Term Life Insurance and Whole Life Insurance.

Term Life Insurance

Term Life Insurance is the simplest form of life insurance. It will only pay benefits to the beneficiaries if the death occurs during the term of the policy. Typically, these policies range from 1 to 30 years, and may have no other benefit provisions.1

The two basic types of Term Life Insurance offered are Level Term and Decreasing Term.

Whole Life Insurance

The other type of life insurance offered is Whole Life Insurance, also known as Permanent Life Insurance.

While Term Life Insurance only offers coverage for a specific period of time, Whole Life Insurance will cover you indefinitely, provided premiums are paid. In other words, it will pay your beneficiary the death benefit whenever you die, and has no specific period of time attached to it.1

There are three major types of Whole Life Insurance, which include Traditional Whole Life, Universal Life, and Variable Universal Life, with variations within each type.2

Choosing the Best Option

Now that you’ve learned about multiple coverage plans available, the next step is assessing your options.

Review the type of coverage you’ll need, and from there contact your insurance company or a licensed insurance agent to determine the plan that will best protect you and your loved ones.

  1. iii.org, What Are the Principal Types of Life Insurance?, 2020
  2. insurance.com, Group Life Insurance: What You Need to Know, 2020
  3. investopedia.com, Voluntary Life Insurance, 2020

Categories: Insurance, Group Life

« Back