Voluntary life insurance is an optional benefit that many employers offer above their company standards. This coverage provides a death benefit for you Often equal to your annual salary.
With voluntary life insurance, you will pay regular premiums, potentially at a lower group rate than you would pay on your own through your employer.
Another advantage of voluntary life insurance is its portability. Depending on your employer’s guidelines, you may be able to keep your policy even after you leave the company.
If you’re looking for an affordable option for a base level of life insurance coverage, voluntary life insurance may fit the bill. However, this type of coverage is not always sufficient to meet your needs, and additional coverage may be required.
If you’re in the market for life insurance, start by getting a free online price quote so you know exactly what to expect.
Is voluntary life insurance enough?
Here are a few situations where a voluntary life insurance policy may provide insufficient protection for your loved ones and dependents after your death.
It may not be enough to cover spouse or family members
One of the primary purposes of life insurance is to provide a financial safety net for those who depend on you when you pass. Unfortunately, the death benefit from a voluntary life insurance policy may not cover the lost income used to pay you. Living expenses and meeting life goals, such as your children’s education, can be challenging.
Depending on your situation, even a death benefit equal to one year’s salary may provide only temporary relief for your beneficiaries. “The recommendation for an individual life insurance policy is about 10 times annual income,” says independent life insurance agent Susanna Jean. “In my experience, voluntary life insurance is not enough and should be supplemented with a personal policy, especially if the insured has dependents and a mortgage.”
If you think you need to supplement your existing voluntary life insurance, get started today. Get a free price estimate here now.
This may not be enough to cover outstanding 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 let the property to someone else, then that person has to take the mortgage. However, the death benefit from a voluntary life insurance policy may be insufficient to pay off the remaining balance or monthly mortgage payments over the life of the loan.
Let’s say you earn $55,000 per year, roughly the median income in the United States, according to Bureau of Labor Statistics Data for 2022. You have voluntary life insurance through your employer with death equal to one year’s salary 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, you’re less likely to cover your mortgage payments for the rest of your loan term.
If your voluntary life insurance benefits aren’t enough to support your dependents in your home, consider adding one.Policy or other coverage based on your needs and goals.
This may not be enough to cover the outstanding loan
The average American owes $96,371 in consumer debt from mortgages, other loans and credit cards. 2021 Consumer Credit Survey by Experian. In most cases, your estate will pay your debt, but any cosigners or joint account holders may also be responsible for paying the debt. Also, your spouse may be responsible for paying the debt if you live in a community property state.
Check your death benefit on your voluntary life insurance to make sure it’s enough to cover all your outstanding debts. If your outstanding debt exceeds the benefit, you may need additional coverage to fill the gap and ensure your spouse or joint account holders are not burdened with debt after you pass.
Mike Raines, owner of Raines Insurance Group, recommends reviewing your credit and setting goalsYou may need it. “You really have to sit down and do a needs analysis based on your outstanding debt, if you have children, a mortgage, where you want to go to school and so on,” says Raines. An agent may be able to help you determine enough coverage to meet your needs. Now review the table below to easily compare some top life insurance providers.
Voluntary life insurance is affordable, but the death benefit is not always sufficient.
Voluntary life insurance can be beneficial if you are simply looking for additional coverage to your employer’s base life insurance plan. And although you must pay a monthly premium, the cost is usually lower than what you would find on the open market. Volunteers can afford life insuranceand workers with health problems that may require a more comprehensive policy.
“They’re a great option for a lot of people that employers offer. It’s easy to sign up for, it’s usually inexpensive, they take paychecks right out of your paycheck, and there’s no underwriting,” says Raines. “It’s a really neat little benefit; it’s usually not enough. You need your own personal coverage.”
In that case extraCan provide enough financial security for your loved ones. Review your income, debt and financial goals to determine how much coverage you need to protect your beneficiaries. You can get a free online price quote today so you know how much it will cost.