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What Is Optional Life Insurance? The Pros, Cons, and When to Get It

Updated: Nov 22, 2023

Life insurance is considered a crucial financial safety net for families and individuals. However, navigating the world of life insurance is usually a daunting task, especially when faced with terms like “optional” life insurance (likely leaving you with more questions than answers).

So, let’s try to answer a few of those questions. And honestly, if you don’t want to read through, give us a call. We’ll get those questions answered for you.

What is Optional Life Insurance?

This coverage is usually offered by your employer and can be added to your benefits package at an additional cost. You may choose to purchase optional life insurance to supplement your existing life insurance coverage or to provide additional financial protection for your families.

Optional life insurance is a type of life insurance coverage that is not automatically included in an employee benefits package. Instead, you make the voluntary choice to purchase additional coverage, either for yourself or your dependents.

Pros of Optional Life Insurance

1. Affordable Rates: One of the main advantages of optional life insurance is that it often comes with more affordable rates than individual life insurance policies. This is because employers can negotiate group rates for their employees, making optional life insurance a cost-effective option for many people.

2. Convenient: Optional life insurance premiums can be deducted directly from your paycheque, making it easy to manage your payments without worrying about missing a deadline.

3. No Medical Exam: In some cases, optional life insurance policies offered by employers do not require a medical exam. This can be advantageous for those with pre-existing health conditions who may struggle to find affordable coverage through traditional life insurance policies.

4. Customization: Optional life insurance policies often allow for a certain level of customization, such as choosing a higher amount of coverage.

Cons of Optional Life Insurance

1. Limited Coverage: Optional life insurance policies may provide a different level of coverage than individual life insurance policies. Therefore, you might need to purchase additional life insurance outside your employer's offerings to ensure sufficient coverage.

2. Portability: If you leave your job, you may be unable to take your optional life insurance policy. While some policies can convert to individual policies, this can result in higher premiums.

3. Lack of Guaranteed Renewability: Optional life insurance policies may not come with guaranteed renewability, meaning your coverage could be terminated at any time by your employer or the insurance company.

4. Dependent on Employment: If you lose your job, your optional life insurance coverage may also be terminated, leaving you without coverage during a potentially vulnerable time.

When Should You Get Optional Life Insurance?

While it is always a good idea to take advantage of basic life insurance with your employer, when exactly is optional life insurance the best option?

This kind of insurance can be a valuable addition to your financial plan, particularly if you have dependents or significant financial responsibilities. Consider getting optional life insurance if:

1. You want to supplement your existing life insurance coverage. If you already have a basic life insurance policy through your employer or an individual policy, optional life insurance can provide additional financial protection for your family.

2. Your employer offers attractive group rates. If your employer's optional life insurance rates are significantly more affordable than individual life insurance rates, it may be worth taking advantage of this opportunity.

3. You need coverage without a medical exam. If you cannot get individual life insurance due to a pre-existing health condition, optional life insurance without a medical exam may be a viable alternative.

However, if you anticipate making a career change in the near future, you may want to take a raincheque on the optional life insurance. Your employer coverage will most likely be canceled once you switch jobs, so you should consider getting a permanent policy before you leave your company.

So, What is the Best Option?

Optional life insurance can be a helpful component of your overall financial plan, providing additional protection for your family at an affordable cost. However, it's essential to weigh the pros and cons and consider your specific needs before purchasing.

If you need a higher level of insurance coverage, but aren’t sure whether or not to get optional life insurance, give us a call to ensure that you make the best decision for your unique situation.

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