Is voluntary life insurance enough?

Voluntary life insurance is an optional benefit many employers offer on top of their company's standard life insurance coverage. This coverage offers a death benefit for your beneficiaries, often equal to your annual salary.

With voluntary life insurance, you'll pay regular premiums, potentially at lower group rates through your employer than you would pay for on your own.

Another benefit of voluntary life insurance is its portability. Depending on your employer's guidelines, you may be able to keep your policy even if 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 isn't always enough to cover your needs, and additional coverage may be necessary.

If you're in the market for life insurance then start by getting a free online price quote so you know exactly what to expect.

Is voluntary life insurance enough?

Here are a few scenarios where a voluntary life insurance policy may provide insufficient protection for your loved ones and dependents after you die.

It may not be enough to cover spouses 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 you used to provide. Meeting living expenses and life goals, such as your children's education, could be challenging.

Depending on your situation, even a death benefit equal to one year's salary may only provide temporary relief for your beneficiaries. "The recommendation for a personal life insurance policy is around 10 times annual income," says independent life insurance agent Susana Zinn. "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."

If you think you need to supplement your existing voluntary life insurance then start today. Get a free price estimate here now. 

It 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 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.

Let's say you earn $55,000 per year, roughly the median income in the United States, according to Bureau of Labor Statistics data in 2022. 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.