Voluntary life is group term life that employees buy for themselves through payroll deduction, at group rates, usually on top of a basic employer-paid benefit. The business pays nothing beyond administration. Employees typically get a guaranteed issue amount with no health questions if they enroll when first eligible, can add spouse and child coverage, and can often keep the coverage when they leave. When employees pay the full cost, it generally creates no imputed income.
We are licensed insurance brokers, not CPAs or attorneys. Treat the tax and legal points on this page as general education, and confirm them with your own CPA or attorney before acting.
On this page
How it works
- The employer sponsors the plan through a group carrier, usually alongside basic group life.
- Employees choose an amount, often in increments of $10,000 up to a maximum, or a multiple of salary.
- Premiums come out of payroll after tax, priced in age bands for the group.
- Coverage up to the guaranteed issue amount needs no health questions at initial enrollment. Amounts above that, and later enrollments, need evidence of insurability (a health questionnaire).
Why employers add it
- No cost beyond setting up payroll deductions.
- Real value for employees who cannot qualify for individual coverage, since the guaranteed issue amount does not depend on health.
- Family coverage that individual policies make harder: a spouse amount and small child benefits in one enrollment.
- Portability: many plans let employees keep their coverage at group-based rates after leaving, and nearly all allow conversion to an individual policy.
Voluntary group vs individual term
| Voluntary group life | Individual term | |
|---|---|---|
| Health questions | None up to the guaranteed issue amount at enrollment | Full underwriting (sometimes accelerated) |
| Price | Age-banded group rates that rise every few years | Locked for the term (10 to 30 years) for healthy applicants |
| Best for | Employees with health issues, families wanting easy spouse and child coverage | Healthy people who want the lowest locked-in price |
| If you leave the job | Port or convert, often at higher rates | Unaffected |
Healthy employees in their 30s often get a better long-term deal with individual term. Employees with health conditions often get their best coverage through voluntary life. Offering both is a genuine benefit.
Tax notes
When employees pay the full cost with after-tax dollars, the coverage is generally not treated as carried by the employer, so no imputed income results. The exception is the straddle rule: if the plan's rates are such that at least one employee pays less than the IRS Table I cost and at least one pays more, the employer is treated as carrying the plan, and coverage above $50,000 can create imputed income for the employees paying less. Carriers and payroll providers watch for this; see imputed income on group term life.
Participation and setup
Carriers want enough employees to enroll to spread the risk, so small groups sometimes face minimum participation or higher thresholds for guaranteed issue. Bundling voluntary life with basic group life and your health plan makes approval easier. Our group life cost guide covers how small-group pricing works.
Frequently asked questions
Does voluntary life insurance cost the employer anything?
Generally no, beyond the time to set up payroll deductions and handle enrollment. Employees pay the premiums.
Can employees keep voluntary life when they leave?
Many plans offer portability, which lets the employee keep group term coverage by paying the carrier directly, and almost all offer conversion to an individual policy without health questions. Deadlines are short, often 31 days.
Is voluntary life insurance worth it?
For employees who cannot easily qualify for individual coverage, or who want simple spouse and child coverage, often yes. Healthy employees may find individual term cheaper over the long run because the price is locked.
Start your life insurance request
Tell us what the coverage is for and who it would cover. For most requests we ask for each person's date of birth and sex so Erik can prepare for the call. We do not ask health or tobacco questions in this initial request. This is a request for help, not an insurance application or a promise of coverage.
Written by Erik Moran
Erik co-owns Moran Insurance Group with Amanda Moran and handles the agency's life insurance cases, from key person and buy-sell coverage to trust-owned policies. He works alongside clients' CPAs and attorneys, who make the tax and legal calls. More about Erik.
Sources
Moran Insurance Group is a licensed insurance agency. Our brokers are not CPAs, attorneys or tax advisors, and nothing on this page is tax, legal or investment advice. Tax figures and rules reflect our understanding as of October 2026 and can change. Coverage is subject to carrier underwriting and state availability. Confirm anything tax or legal with a licensed CPA or attorney before you act on it.