Benefit packages offered by employers come in all shapes and sizes. If you are really lucky, your company offers a wide variety of coverages for you to choose from and voluntary life insurance may be one of them. Regardless of your situation, if voluntary life insurance is an option, you may be asking why exactly do you want to purchase it?
Here are the top 5 perks and our top 5 reasons that you should purchase voluntary life insurance:
1) No EOI - If you were to purchase an individual life insurance policy, they always require something called an EOI or “evidence of insurability.” This always includes a health questionnaire and often a doctor’s visit as well to prove that you are in good health. Health issues often increase the cost of this coverage if it doesn’t disqualify you altogether. The vast majority of group voluntary life insurance plans provide coverage up to a guaranteed issue amount without requiring you to provide any kind of EOI. That’s a huge perk to purchasing insurance through your group policy.
2) Guaranteed Issue - This builds on #1 but is important on it’s own. As mentioned above, by purchasing life insurance through a company policy, you escape the EOI up to a guaranteed issue amount. This is a maximum amount of coverage that you can purchase with no questions asked. A common policy that we provide at Filice through Unum allows for an employee to enroll in up to $80k. That means that if you’ve had cancer, have been or are a smoker, or have any other kind of health conditions, you can still get up to $80,000 of relatively inexpensive life insurance. Additionally, if you purchase the minimum amount of $10,000 when you are initially eligible, you can always increase up the guaranteed issue amount at next year’s annual enrollment without having to answer any medical questions. You will not have that option anywhere on the individual market.
3) Portability & Conversion - This is another huge perk of the voluntary option. If you enroll in one of these plans, most of them are portable/convertible. This means that if you leave the company for any reason (fired, quit, layoff, etc) you are able to continue on the plan. You can contact the carrier and choose to pay the bill directly and continue on the plan. Generally speaking, if you don’t have an illness/injury that affects your material life expectancy you can port coverage at your current rate (more on rates in a minute). If you do have an illness/injury that affects your material life expectancy you can convert your life insurance to a Permanent Whole Life policy. Premiums will be based on your age at time of conversion.
4) Low Cost - You have the benefit of essentially choosing your own plan (how much coverage you want for you and your dependents) while still being on a group plan. Why is this great? Because you get two cost benefits from this. 1) You get group rates which tend to be lower than individual rates. And of course if you have a pre-existing condition, you get the group rate which is definitely significantly lower than what you’d get on an individual policy. 2) You can pick how much of that group coverage you want, which means you have full control of how much you want to pay. Depending on your age and how much coverage you want, you can choose how much you want to pay for and increase/decrease that amount later during open enrollment each year if you choose to.
5) If Something Were to Happen - I would argue that this is the most important reason of all. Why do you need life insurance? Because as much as we’d like to think we’re indestructible, we will all die someday and that day may come sooner than you’d expect. Buying life insurance isn’t something you do for yourself. It’s for your family. I once had someone come speak with me after an open enrollment meeting and he told me that life insurance saved his life. Not his own coverage, but his fiance’s. Although she was young, she passed away suddenly and as hard as that was, it would have been much harder without the coverage she had purchased. Because of that, he didn’t have to stress about the cost of a funeral (the US average cost of a funeral is $7k-10k), he didn’t have to worry about his mortgage/rent, car payments, or other bills that are usually very normal things to deal with. Instead, he was able to take the money from her life insurance and use it to keep those daily stresses at bay so that he could mourn her passing.
Let me say it again - The life insurance isn’t for you. It’s for those that you leave behind so that they can focus on healing from the pain of your passing. It helps to ease the financial stress that can often overwhelm someone who already has enough grief to deal with.