What's the difference between basic life and optional life insurance?
Asked by: Rosella Bahringer | Last update: June 16, 2025Score: 4.9/5 (49 votes)
What is the difference between basic life insurance and optional life insurance?
Life Insurance is a lump sum payment provided to a beneficiary after an insured plan member's death. Optional Life Insurance allows you to increase the amount a beneficiary would receive.
What does optional life insurance mean?
Employees who are eligible for Basic Life Insurance may also purchase Optional Life Insurance coverage. Optional Life Insurance coverage can be one, two, three, four, five, six or seven times an employee's base salary up to $300,000. This amount is in addition to the Basic Life Insurance coverage amount of $50,000.
Should I get basic and voluntary life insurance?
Voluntary life insurance is a great benefit, and if it is available, you should take advantage of it. However, depending on your family's long-term goals, you will likely also want to consider a personal policy. A personal policy will offer more options and higher coverage amounts to ensure your family's future.
Is it worth getting optional life insurance?
Even if you don't have a family dependent on you, there are many reasons why you should consider taking out an optional life insurance policy. Several unexpected costs arise after death such as funeral expenses and burial costs, medical expenses, and other costs that normally rise into the tens of thousands of dollars.
What Is Optional Employee Life Insurance? - InsuranceGuide360.com
Is basic life insurance good?
Many employers offer basic life insurance as part of their benefits package. With little to no cost to you, it's a relatively straightforward way to secure some coverage for you and your family. However, while it's generally affordable and may not require a medical exam, it may not be enough for your needs.
Can you borrow from optional life insurance?
Yes, you can borrow against your life insurance policy if the plan you choose has cash value. Cash value is a portion of your life insurance payment put into a savings-like account that grows tax-free over time.
Can you cash out basic life insurance?
Can you cash out a life insurance policy before death? If you have a permanent life insurance policy that has accumulated cash value, then yes, you can take cash out before your death.
At what point is life insurance not worth it?
The point of life insurance is to replace your income when you die. If you don't have anyone who'll need that income when you die, then you don't need life insurance. Or if you're doing so well financially that you're self-insured, you're still good to go without it.
Can you take money out of voluntary life insurance?
You can withdraw money from a permanent life insurance policy, but not a term life insurance policy. If you're in need of quick cash, there may be better alternatives to explore that won't put your loved ones' financial health at risk once you're gone.
Can you opt out of basic life insurance?
You may opt out of coverage under the group basic life insurance plan at any time.
What is optional insurance coverage?
Additional car insurance coverage that is optional and not a mandatory part of your insurance policy. They are simply optional protections for your vehicle to avoid out of pocket expenses and be safer when driving on the road. It is not considered a common type of car insurance.
What is optional vs voluntary life insurance?
Both kinds of coverage are offered through the workplace. Basic employee life insurance only provides a specific amount of coverage, but it is paid for by the employer at no cost to you; voluntary life insurance is optional coverage that you pay for.
What does optional life cover?
Optional Life insurance can help protect your family's finances if something happens to you. This coverage can help provide financial support and stability to your family if you pass away. Optional Life insurance can help make things easier for the people you care about.
How does basic life insurance pay out?
Depending on the insurer, a life insurance payout can typically be distributed in three ways: in the form of a lump sum, via a life insurance annuity, or through a retained asset account. Check with the insurer to see which life insurance payout options they offer.
Is basic insurance full coverage?
Liability coverage is for injuries and damage to others when you're at fault. Full coverage often refers to liability and other state-required coverages plus damage to your car (comprehensive and collision), but it is not an actual insurance coverage.
At what age should you drop life insurance?
At What Age Is Life Insurance No Longer Needed? Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they have retired, their kids have grown up, and they've paid off their mortgage and other debts.
What's better, whole life or term life insurance?
Choosing between term and whole life insurance comes down to how long you want coverage and how much you can afford. Term life is more affordable but lasts only for a set period of time. On the other hand, whole life insurance tends to have higher premiums but never expires.
What happens to life insurance if you never use it?
If you outlive your term (let's hope this is the case), then typically one of two things happens: The policy will simply end, and you'll no longer owe payments or be covered, or. The insurer might allow you to keep your coverage by converting all or a portion of the policy into permanent life insurance.
Can you use basic life insurance while alive?
Permanent life insurance policies will allow you to access the cash portion of your account while you're alive. Term life insurance, meanwhile, does not have a cash element for policyholders to access. So, if you're planning on using your life insurance as a backup cash resource you'll want to avoid term policies.
What is the cash value of a $10,000 life insurance policy?
Say, for example, that you purchase an insurance policy with a face value of $10,000. Once the policy matures, the cash value of the policy should equal $10,000.
Can you borrow from a basic life insurance policy?
Which Types of Life Insurance Policies Can You Borrow Against? You can borrow from permanent life insurance policies that build cash value. These would typically include whole life and universal life (UL) policies. You cannot borrow against a term policy since there is no cash value associated with it.
What is basic life vs optional life insurance?
Basic life and basic AD&D is employer paid. Optional Life and optional AD&D is employee paid. In addition to purchasing optional life and AD&D for themselves, employees may also choose to purchase optional life and AD&D for their eligible dependents.
How long does it take to build cash value on life insurance?
How fast does cash value build in life insurance? Most permanent life insurance policies begin to accrue cash value in 2 to 5 years. However, it can take decades to see significant cash value accumulation. Consult a licensed insurance agent to understand the policy's cash value projections before applying.
How soon after getting life insurance can I borrow money?
When your policy has enough cash value (minimums vary by insurer), you can use it as collateral to request a loan from your insurance company. Keep in mind that if you have a newer policy it may take several years before it has accrued enough value for you to borrow against.