Most types of insurance are optional. It’s something that is often a good thing to have, but it’s not something you have to have.
So when you hear the term “optional life insurance”, what does that mean? Does it mean there is a type of life insurance you have to have?
There are a lot of different terms and types of life insurance. This can make understanding it all very confusing. There’s term, variable, universal, whole life insurance policies and variations of each. So what is optional life insurance and how does it fit into all this? Let’s find out.
What Is Optional Life Insurance?
Before we get into exactly what this type of policy is, we have to start with term life insurance. Term life insurance is one of the 2 main types of life insurance policies alongside permanent life insurance.
As we have covered in other articles, a term life insurance policy is one that only lasts for a specific period. How long it lasts depends on what kind of term you sign up for. But typically it’s 10, 20 or 30 years.
Most employers who offer life insurance plans offer modest term life insurance plans. Normally these term life insurance plans offered by employers have a relatively small benefit that they pay out. This usually averages around $10,000.
And this is where optional life insurance policies come in. This type of policy, which is also known as optional term life insurance, is a type of extension you can add to your current term life insurance policy.
Optional term life insurance policies offer additional coverage that you can purchase through your employer. This additional coverage is beyond the basic term life insurance coverage that you get through an employee benefit plan.
In this type of extended coverage, your employer will pay for your premiums for basic coverage. However, you will pay for the premiums of the additional coverage that you buy in an optional life insurance plan.
How Does an Optional Term Policy Work?
But how does this extended coverage work? Here are some key pieces of information about this type of insurance coverage to help you decide if it’s a good option for you…
- The most common type of these policies that people get is coverage for a spouse and/or children.
- Some optional life term insurance coverage allows an employee to buy an enhanced death benefit.
- One benefit of buying this type of policy is that you do not have to undergo a medical exam nor do you have to answer any personal questions.
- This optional coverage is usually only possible if you enroll during the open enrollment period.
- You may be able to keep your coverage even if you leave your current employer.
- The additional coverage that optional term life insurance offers are not all that expensive, making them attractive to potential buyers. The reason why employers offer this type of life insurance coverage is to attract potential employees and to retain current employers as well.
- Employers can also deduct up to $50,000 in group life insurance coverage. However, this special tax deduction on group coverage is specific to the premiums the company pays towards the employees life insurance plan.
