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September 15, 2020

What is Voluntary Supplemental Life Insurance?

voluntary supplemental life insurance

When you hear about group life insurance, it’s likely you’ll hear about voluntary supplemental life insurance as well. You may be wondering, what is the difference between the two? What should I know about voluntary supplemental life insurance?

Group Life Insurance

If you want to know about voluntary supplemental life insurance, first you need to know a little about group life insurance.

Group life insurance is offered by a group or an employer. The group/employer works with an insurer to insure a group of people/employees. You can choose your beneficiary, and if you pass away while the life insurance policy is in force, your beneficiary will receive a predetermined benefit amount.

The master policy is often issued to the employer, and the employees are issued certificates of coverage under the master policy.

Basic Group Life Insurance

The amount of life insurance an employer offers their employees, often at no cost to the employee (though sometimes employees pay a portion of the premium), is known as basic group life insurance. Amounts vary but are often dependent on an employee’s salary. This type of insurance is mostly offered as term life insurance.

Because this type of insurance is frequently offered with no premiums required, it may make financial sense for employees to opt in for this type of life insurance. Take into account that there may be tax implications if your employer-provided group life insurance policy coverage exceeds $50,000 (whether it is carried directly or indirectly by your employer).1

Voluntary Supplemental Life Insurance

Any amount of additional group life insurance coverage (beyond the basic group life insurance amount) you choose to purchase through your employer is known as voluntary supplemental life insurance. Again, this extra coverage is voluntary.

Premiums are usually deducted from your paycheck.

Should I Buy Voluntary Supplemental Life Insurance?

Whether choosing to buy voluntary supplemental life insurance is right for you depends on a variety of factors.

If you have difficulty getting approved for an individual policy, voluntary supplemental life insurance may be a good option. If you want to purchase a large amount of coverage, the insurer may require you to answer medical questions and/or take a medical exam.

Financial needs, family needs, and health factors vary considerably among individuals. It is a good idea to speak with your benefits supervisor, financial advisor, or a licensed insurance agent to see if voluntary supplemental life insurance is a good opportunity for you.

If you have any questions regarding voluntary supplemental life insurance, contact your benefits supervisor, financial advisor, or a licensed insurance agent.

  1. IRS, Group-Term Life Insurance, 2020

Categories: Insurance, Group Life

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