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Everything You Need to Know About Optional Life Insurance

By: Benefits by Design | Tuesday February 23, 2021

No doubt you have a general understanding of the principle of 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. But how do you know if you should take it? And when?

Download: The Path of Choosing Life Insurance Infographic

What is Optional Life Insurance?

Optional Life Insurance (Optional Life) provides additional protection and insurance to employees and eligible dependents by increasing the amounts paid as part of existing Life or Dependent Life Insurance policies.

You will be required to submit medical evidence for all amounts of Optional Life and can apply for amounts up to the overall Life Insurance maximum.

The Overall Life Insurance Maximum

An individual can apply for a combination of Life and Optional Life up to the overall Life Insurance maximum. This maximum is usually based on the size of the employer. For example, our own overall Life Insurance maximum through Empire Life is broken down as follows:

Number of EmployeesMaximum Life Coverage

2$600,000
3 – 9$750,000
10 – 14$850,000
15 – 19$900,000
20 – 49$1,000,000

The chart continues into group sizes of 200+, but we think you get the idea. As an example: if your workplace has ten employees, you may qualify for a combined Life and Optional Life Insurance maximum of $850,000.

How do I apply for Optional Life?

To apply for Optional Life, speak with your Advisor or Plan Administrator. They can provide you with the required forms and guide you through the process. You’ll need to apply for the optional coverage through your Insurer. As part of this application process, you will need to supply medical evidence, which can be used to determine eligibility.

If all goes well, your Insurer will add Optional Life to your policy, and you’ll see the appropriate deductions removed from your paycheck.

Can my Dependents apply for Optional Life?

Optional Life is available to your spouse as well, usually up to a separate maximum that may differ based on your Insurer. Generally speaking, dependent children are not eligible for Optional Life, but may be covered under Dependent Life Insurance.

Is Optional Life Worth It?

The answer to this question will depend on your individual situation. 

Life Insurance is a good benefit for just about anyone to have. However, there are some demographics and life stages where increasing Life Insurance payments through Optional Life makes a lot of sense.

For example, a single individual living alone may not see the need to increase their Life Insurance policy beyond enough to cover funeral services. However, a married person with three kids who rely on them to provide an income may want to consider Optional Life. 

If they were to die, that would leave their family without a source of income, and suddenly paying for car payments, mortgages, child care, utilities, and other living expenses become challenging.

This was the case for Beth and her husband, our (admittedly fictional, but no less helpful) couple who used Optional Life to better protect their family.

Learn more about Beth’s Life Insurance and the changes they made by downloading the infographic!

Download the Optional Life Insurance Infographic
Optional Life Insurance Infographic, detailing the life path Beth and her husband are on and how Life Insurance fits into their plan for their family.

The Path of Choosing Optional Life Insurance

Let’s look at Life and Optional Life Insurance in action with an example.

Meet Beth! 

Beth is a 23-year old girl, fresh out of college, who has just started working at a small tech startup. As part of her total compensation package, Beth is offered group benefits, including a Life Insurance policy for $50,000 should the worst happen. 

Beth is young, healthy, and single, so she doesn’t think twice about the policy beyond being glad to have it “just in case”. At the moment, there’s no one relying on her to provide an income, other than herself, so she names her mother as her beneficiary and doesn’t think about her policy too much.

Flash Forward Ten Years

Beth is now 33 years old and still working at the tech startup. She’s worked hard and gotten several promotions and the company itself has grown sizably. 

Alongside the company’s growth, Beth’s family has grown, too. In the last ten years, she’s gotten married and given birth to two children. She and her husband have also purchased a new home an hour outside of the city and each have a car so that they can get to work. 

Despite some lingering student loan debts, a mortgage, two car payments, child care costs, and other living expenses, Beth and her family are living comfortably. However, it’s clear to Beth and her husband that the family’s lifestyle couldn’t be supported by just one income and they begin to talk about Life Insurance options for the both of them.

That’s when Beth remembers her $50,000 Life Insurance policy through her employer.

Optional Life Insurance

Although $50,000 seemed like plenty when Beth was younger, she and her husband now know that it’s not enough to cover expenses and protect her family financially should the worst happen. She speaks with her Plan Administrator, who reminds her about the possibility of Optional Life Insurance to increase her coverage.

Beth is informed that she can apply for a combined maximum of Life Insurance and Optional Life Insurance, which is based on her company’s size. Beth submits medical evidence as part of her application and is approved for Optional Life Insurance of $750,000, for a total of $800,000 when her original Life Insurance policy is included.

Beth and her husband determine that this amount would cover the family’s existing debts and allow them to maintain their standard of living in the event that Beth was no longer able to provide for the family.

Although they hope never to use it, they’re secure in the knowledge that their family would be financially protected in the direst of circumstances.