Many employers offer voluntary life insurance in addition to the normal life insurance coverage provided by the company. This policy provides a death benefit equal to your annual pay for your beneficiaries.
You will pay recurring premiums for voluntary life insurance, maybe at lower group rates through your company than you would pay on your own.
The portability of optional life insurance is another advantage. Depending on your employer’s policies, you may be allowed to keep your coverage after leaving the organization.
Voluntary life insurance may be an economical choice for a basic level of life insurance coverage if you’re seeking for one. However, this sort of coverage is not always sufficient to meet your needs, and you may require extra coverage.
If you are in the market for life insurance, you should begin by obtaining a free online quotation so that you know precisely what to expect.
Is optional life insurance sufficient?
Here are several situations in which a voluntary life insurance policy may not provide adequate protection for your dependents and loved ones after your death.
It may not be sufficient to cover spouses or relatives.
One of the fundamental functions of life insurance is to provide a financial safety net for your dependents in the event of your death. Unfortunately, the death benefit from a voluntary life insurance policy may not be sufficient to cover your lost income. Meeting living expenditures and life ambitions, such as the education of your children, could be difficult.
Even a death benefit equal to one year’s income may only provide brief respite for your beneficiaries, depending on the circumstances. Susana Zinn, an independent life insurance agent, recommends a personal life insurance policy with a face value of around 10 times the annual salary. “In my experience, voluntary life insurance is not enough and should be complemented with a personal policy, especially if the insured has dependents and a mortgage.”
Start immediately if you believe you need to supplement your existing volunteer life insurance. Get a free price quote right now.
It may not be sufficient to cover delinquent mortgage payments.
If you have a co-borrower or cosigner on your mortgage loan, they may be financially responsible for the loan upon your death. Or if you want to leave the property to someone else, that person would need to take over the mortgage. However, the death benefit from a voluntary life insurance policy may be insufficient to pay off the remaining balance or to pay the monthly mortgage payment over the life of the loan.
According to the Bureau of Labor Statistics, the median income in the United States in 2022 was approximately $55,000 per year. You have voluntary life insurance through your employer with a death benefit equal to one year’s pay, or $55,000. That benefit amount won’t be enough to pay off your mortgage balance if it exceeds $55,000. And unless you have a low mortgage balance, it’s unlikely the benefit would cover your mortgage payments for the remainder of your loan term.
If your voluntary life insurance benefit isn’t enough to help your dependents remain in your home, consider adding a term life insurance policy or other coverage based on your needs and goals.
It may not be enough to cover outstanding debt
The average American owes $96,371 in consumer debt from mortgages, other loans and credit cards, according to a 2021 consumer debt study by Experian. In most cases, your estate will repay your debt, but any cosigners or joint account holders could also be responsible for repaying the debt. Also, your spouse may be responsible for debt repayment if you live in a community property state.
Check your death benefit on your voluntary life insurance to ensure it’s enough to cover all your outstanding debts. If your outstanding debt is more than the benefit, you may need additional coverage to fill in the gaps and ensure your spouse or joint account holders aren’t burdened with debt after you pass.
Mike Raines, owner of Raines Insurance Group, recommends reviewing your debt and goals to determine how much insurance coverage you may need. “You’d have to really sit down and do a needs analysis based on what your outstanding debts are, if you’ve got children, a mortgage, where you want to send your school and so forth,” says Raines. An agent may be able to help you determine a coverage amount sufficient to meet your needs. Review the table below to easily compare some top life insurance providers now.
The bottom line
Voluntary life insurance is affordable, but the death benefit is not always enough.
Voluntary life insurance can be beneficial if you’re simply looking for additional coverage to your employer’s base life insurance plan. And even though you must pay a monthly premium, the cost is typically lower than you’d find on the open market. The affordability of volunteer life insurance may be worth it for seniors and workers with health issues that may require a more extensive policy.
“They’re a great option for a lot of people that employers offer. It’s easy to sign up for, it’s typically inexpensive, they payroll-deduct it right out of your check, and there’s no underwriting,” says Raines. “It’s really a neat little benefit; it’s just typically not enough. You need your own personal coverage.”
In that case, additional whole or term life insurance may provide enough financial protection for your loved ones. Review your income, debts, and financial goals to help determine how much coverage you need to protect your beneficiaries. You can get a free online price quote today so you know exactly what it would cost.
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