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Life Insurance

What Is Voluntary Life Insurance & How Does It Work?

Voluntary life insurance can be a valuable employee benefit for many worker. Coverage is generally low-cost and there are no medical exam required. 

What Is Voluntary Life Insurance? 

Voluntary life insurance is an employee benefit option offered by many employers to their employees. The employee pays the monthly premium to the insurance company offering the policy. In exchange, they the employee's beneficiaries will receive a death benefit should the employee die while the policy is in force. 

Many companie also offer the opportunity for the employee to purchase policie for their spouse and children if desired. 

Due to the employer's sponsorship of the policy, the premiums are generally lower than employees would find for a similar policy if they purchased it privately. 

How Does Voluntary Life Insurance Work? 

Voluntary life insurance is generally guaranteed issue up to some limit on the death benefit. Guaranteed issue means that there is no medical exam required; applicants won't be refused based upon any sort of medical condition. This can be a great benefit for employees who might otherwise be unable to purchase life insurance privately due to a medical condition or other reason. 

Policies vary and will have different conditions and terms based upon what the employer negotiates with the insurance and based upon the insurance company offering the policies. A key feature that employees will want to be aware of is whether or not the coverage is portable should they leave their employer. Again, this will vary from group plan to group plan, if this is an issue for the employee, they should be sure to understand this aspect of the coverage when deciding whether or not to enroll in the coverage. 

Note that many employers offer a basic level of life insurance coverage for employees free of charge. This is often an amount that is one time their salary. If the amount of the death benefit is over $50,000, then the amount that covers the death benefit in excess of $50,000 is taxable to the employee under IRS rules. If the employee needs a death benefit in excess of the amount offered free of charge by the employer, that's when they will need to opt into that additional coverage through the open enrollment process, and, of course, pay the cost of that additional death benefit. 

Types of Voluntary Life Insurance 

Voluntary life insurance come in two form, whole life and term life. 

Voluntary term insurance offers coverage with no buildup of cash value inside of the policy as with permanent insurance like whole life. Term insurance is pure insurance, this is also the case when purchased as voluntary life as part of a group plan through your employer.The term policy will typically offer a death benefits with a level premium. 

Policie vary, but typically the premium will remain level for a set period like five, 10, 15 years or some other period. The employee may need to re-enroll in this coverage each year during the employer's open enrollment period for employee benefits. 

Voluntary whole life insurance is the less common than term insurance. Some employers will offer permanent insurance coverage such as whole or universal life coverage as an option. Permanent insurance policie offered as voluntary life option will have higher premiums than term options. The premium are typically level for the life of the policy, and they build cash value. Due to the nature of permanent insurance you may not have any issues moving the coverage should you change employers, though you will want to understand this aspect of the policy before purchasing permanent insurance coverage. 

Voluntary Life Insurance vs. Standard Term Life Insurance 

Standard term life insurance is a policy that is purchased privately from an insurance company. With the coverage in terms of paying a premium for a death benefit is similar in many ways to voluntary term life coverage offered by an employer, there are some differences. 

Medical Questionnaire

Purchasing a term policy, or most other types of life insurance, via an insurance company on your own will almost always entail completing a medical questionnaire. This may just consist of completing a form, or it might mean giving the insurance company permission to contact your physician and allow them access to your medical records. The insurance company may still allow you to purchase the policy you are seeking, but adverse medical information could impact the premiums and other features of the policy you are eventually offered. Or the company could deny coverage altogether. 

Voluntary term life via your employer is guaranteed issue and will not require you to provide any sort of medical information, at least for the basic levels of death benefit that are offered in the employer's plan. This can be a huge feature for employee with certain medical condition that may prohibit them from purchasing private coverage. 

Size of the Death Benefit 

When looking to buy a term policy from an insurer outside of your group's plan, you will have your choice of death benefits within the parameters of what the company might offer and their underwriting standards. This is typically a fairly wide range. 

With term policies offered under a voluntary life benefit, you will be limited to the death benefit levels offered. In the event you wish to purchase a larger death benefit, the insurance provider may allow this option, but you will generally need to go through the medical underwriting process. 

Continuation of the Policy 

If you purchase a term policy privately, the policy will remain in force for the stated term of the death benefit with a level premium as long as you continue to pay the premiums on the policy. This might be 10 years, 20 years, 30 years or some other period. Changing job will have no impact on the policy status. 

Voluntary life term policie may or not have a conversion privilege when you leave the company. There will be a cost and premiums might be higher. You might also be required to change to another type of policy such as some sort of permanent insurance.  

Key Takeaways 

Voluntary life insurance can be a valuable employees benefit. For those with medical issues it might be the best and most cost-effective means to obtain life insurance. Even for those with other policies purchased privately, voluntary life can be an inexpensive supplement to other life insurance coverage. 

As with any financial purchase, employee are wise to understand all policy rules and restrictions, as well as the cost before they enroll for voluntary life insurance.

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One of Australia's biggest bank is facing 87 criminal charges for allegedly hawking life insurance through unsolicited phone calls

  • allegations it hawked life insurance product with unsolicited phone calls.
  • Each charge carrie a maximum penalty of AU$21,250, meaning Commonwealth Bank could face fines of up to AU$1,848,750 if all charges are proven in court.
  • In a statement released on its websites, Commonwealth Bank says that it self-reported the matter, and declined to comment further.
  • Visit Business Insider's homepage for more stories.
  • The life insurance arm of one of Australia's biggest banks — Commonwealth Bank — is facing 87 counts of unlawfully selling products through unsolicited phone calls, according to the Australian Securities and Investments Commission (ASIC).
In a statement posted to its websites, ASIC allegess that CommInsure, a wholly owned subsidiary of the Commonwealth Bank at the time, made unsolicited phone calls to bank customers selling a life insurance product named Simple Life.

These call, ASIC alleges, took place between October and December 2014 through telemarketing firm Aegon Insights Australia. According to ASIC, Aegon was provided with customers contact details from the Commonwealth Bank's database.

Read more: Spies, suicide, and a class over a bulldozed house — here's what we know about the scandal rocking Credit Suisse

Each of the 87 charges carries a maximum penalty of AU$21,250, meaning Commonwealth Bank could face fines of up to AU$1,848,750 (US$1.2 million) if all charges are proven in court.

In a statement posted to its website and provided to the Australian Securities Exchange (ASX), the Commonwealth Bank says that it self-reported the matter.

The alleged contraventions relate to telephon sales of Simple Life insurance product by CMLA in the period October 7, 2014, to December 16, 2014, a practice that ceased at the end of 2014, the statements reads.
Read more: The Commonwealth Bank new app is here — but it wants a lot of your data (and eventually your face too)

"These matter had been the subject of an investigation by the Australian Securities and Investments Commission. CMLA reported breaches of anti-hawking provisions to ASIC."

ASIC says it will not provide further comment on the charge, as it is "a criminal matter before the Court."

The case is listed to be heard at the Downing Centres Local Court in Sydney on November 19.

Commonwealth Banks sold CommInsure to the Hong Kong-listed AIA Group for AU$3.8 billion back in 2017.

"CBA and CommInsure are considering the matters and CBA does not intend to comment further at this time," the bank said in the statement.


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