Difference Between Voluntary Life Insurance And Group Term Life Insurance

Imagine yourself on a train going through stations that are related to different milestones in your life, such as your first job, building a family, and retirement planning. Consider life insurance to be like the protective shelter following you at different stages of life to ensure that it has got you no matter what junction you may suddenly step down. Much like the train, with its different compartments, life insurance, too, comes in different forms, each with different benefits.

In this article, we are going to compare two of the more popular options for your review: Group Term Life Insurance Vs Voluntary Life Insurance.

Before we get into the core of the subject, i.e. Group Term Life Insurance vs. Voluntary Life Insurance, let’s decode each one of them-

What Is Voluntary Life Insurance?

Voluntary Life Insurance is a benefit option given by employers to their employees for purchasing additional coverage above the basic group life insurance policy provided. Like all life insurance, this policy pays a specified amount to the beneficiary if the person insured dies during the policy term.

This type of insurance works much like supplemental safety insurance, allowing a little more flexibility with the amounts of coverage. Similar to how passengers in a train may travel by economy, business, or first class, with this insurance, employees can choose the level of coverage they desire, usually in multiples of salary. The more the coverage, the greater is the premium, and ofcourse, better benefits!

Most Voluntary Life Insurance policies have a few limitations, usually regarding the maximum available coverage and what riders might be available based on the plan of the employer. With these limitations also comes a point that the coverage might vary with the employer.

What Is A Group Term Life Insurance?

Group Term Life Insurance means a life insurance policy which provides coverage to a group of people, like a bank giving to its account holders or employer to its employees under a benefits package. This policy is issued for one year and can be renewed year after year by the administrator.

The administrator could generally be an employer in an employer-employee group. It is the responsibility of the employer to administer the policy, i.e. to add, or remove the employees from the coverage, and also manage claims with the insurer.

The employer pays for all the employees working for him and provides flat or graded coverage. For instance, the sum assured could be a flat ₹5 lakh for all employees, or all employees could be insured for ₹5 lakhs, ₹7 lakhs, or ₹10 lakhs, depending on grade or designation.

In many cases, it is also linked to salary— say, thrice the annual CTC. In case an employee dies while the plan is still in force, their family receives a death benefit.

Difference Between Voluntary Life Insurance And Group Term Life Insurance

• Group Term Life Insurance is usually provided at no cost to the employee by the employer. In contrast, Voluntary Life Insurance is an optional benefit that an employee can purchase at a lower cost.

• Voluntary Life Insurance provides various levels of coverage in comparison with that of the Group Term Life Insurance, which is designed with only one class of coverage.

• Group Term Life Insurance coverage typically ends after an employee's termination. In contrast, Voluntary Life Insurance may be portable. That is, employees can retain their coverage even when they have left the company as per the policy terms.

• Group Term Life Insurance is automatically available to all eligible employees. Voluntary Life Insurance has to be chosen and may include medical underwriting, especially at higher coverage levels.

• Group Term Life Insurance is almost always provided free to the employee; the employer pays all premiums. In contrast, Voluntary Life Insurance requires the employee to pay premiums, typically deducted directly from their paycheck.

• Voluntary Life Insurance has better flexibility—for instance, specifying the amount of desired coverage and the ability to insure one’s family members. In Group Term Life Insurance, this is generally a one-size-fits-all deal with very few options to customise it.

Which One Is Better?

The choice between Group Term Life Insurance and Voluntary Life Insurance must be based on your personal circumstances. Group Term is excellent if one is looking for simple, no-cost coverage. If extra coverage is required or one wants flexibility, Voluntary Life Insurance may be the way to go. Further deliberation in this regard by the employee should be by an examination of their financial needs, family situation, and long-term goals before they can take any such decision.

Conclusion

To wrap up, the outcome of Group Term Life Insurance vs Voluntary Life Insurance depends greatly on your individual journey and the amount of protection you wish to buy into. Group Term Life Insurance is your basic ticket; it gets you on board, offering basic coverage at no cost.

In contrast, Voluntary Life Insurance is the premium pass for extending your protection and designing benefits for you and your family, making sure that you are always covered in case your circumstances change.

Financial needs, family situation, and long-term plans will count when deciding which of the two insurances is right for you. Both have their own merits and hence, an understanding of their differences will certainly help you decide which one to take up in concordance with your objective. Remember that obtaining the right life insurance will surely give you peace of mind, knowing your family is protected every step of the way.