Voluntary benefits insurance is an employee benefits plan that employees can opt into. This differs from standard employee benefits, which employees must participate in. Voluntary benefits insurance covers personal expenses as part of an employee benefits package.
Employers can offer voluntary benefits when they want to incentivize specific behavior or give their employees something above and beyond their basic employment agreement. Voluntary benefits insurance is not required by law, but it’s something many companies choose to offer.
There are several different types of voluntary benefits. Each one has other pros and cons for the employee—employees who understand the various offerings and make informed decisions better see their voluntary benefits plan results. Read on to learn more about different types of voluntary benefits and which might be right for you.
How do voluntary benefits work?
Voluntary benefits are an essential part of a comprehensive employee benefits program. These benefits can help you attract and retain employees, and they also can provide valuable financial protection for your employees.
Voluntary benefits are offered by an employer voluntarily. Employees can enroll in these plans and pay the total cost of their coverage or elect to waive enrollment and not receive coverage at all. Employees may also choose between different types of coverage, such as health insurance or life insurance.
Voluntary benefits are often offered by companies that already provide other group benefits, such as health insurance or life insurance. Voluntary benefits can help employers attract and retain employees who want access to additional financial protection or specific products that other group benefit plans don’t cover. By offering voluntary products, employers can appeal to employees who may have different needs or preferences regarding their employee benefits packages.
Examples of Voluntary Benefits
Voluntary benefits are those that an employer can offer its employees but are not required to provide. The most common voluntary benefits include:
Short- and Long-Term Disability Insurance
Short-term disability insurance is often offered as a voluntary benefit by employers. In contrast, long-term disability insurance is generally provided only to people who have been with a company for a certain period. Short-term disability insurance pays out a percentage of your salary if you’re unable to work due to illness or injury for a limited amount of time — usually anywhere from six months to two years after being disabled. Long-term disability insurance provides replacement income if you become disabled and can’t work again in your life for any reason other than death or retirement.
Life insurance is a significant voluntary benefit that employers can offer to employees. This type of insurance helps employees and their families protect against the loss of income due to the death of a wage earner. Individuals often purchase life insurance policies, but employers sometimes purchase group policies that cover their employees and families.
Dental and vision insurance
Dental and vision insurance, also known as voluntary benefits, is another way that employers can help their employees save money on healthcare costs. These types of insurance provide coverage for dental procedures, eyeglasses, or contacts if you lose your health insurance or don’t have a dental plan through your employer. In some cases, these plans are offered as part of an employee’s benefits package when they start working at a new job. If the employee doesn’t want dental or vision coverage, he can decline it without any penalty or charge; however, if he does like it, he must pay for it out-of-pocket unless his employer provides a subsidy or contribution toward those costs.
Hospital indemnity and critical illness
Hospital indemnity insurance is a form of health insurance that covers the cost of a hospital stay. It generally provides coverage for inpatient hospital care and some outpatient services such as home health care and hospice care. Critical illness insurance provides a lump-sum payment to help cover out-of-pocket expenses associated with a covered critical illness diagnosis.
Similarities between individual insurance and voluntary benefits insurance
There are many similarities between individual insurance and voluntary benefits insurance. Here are a few:
Both insurance types are customizable
Both individual insurance and voluntary benefits insurance are customizable. The main difference is that voluntary benefits insurance is an employer-sponsored plan and can be customized to meet the employer’s needs. On the other hand, individual health insurance plans are not employer-sponsored and therefore cannot be customized for specific employers.
Both insurance types can cover dependents.
Both types of insurance can cover dependents. Dependent coverage is one of the most important aspects of any health insurance plan because it protects you from financial hardship if you or your spouse becomes ill or injured. Dependent coverage may also include children up to age 26 and, in some cases, elderly parents who do not live in the same household as their adult child but still need medical care.
Both insurance types can cover a variety of areas.
Both individual and voluntary benefits insurance are broad in scope, covering many situations and circumstances. Individual policies may be more comprehensive and provide more coverage, such as mental health services, than voluntary benefits policies. However, both types of insurance typically cover medical expenses, prescription drugs, dental care, vision care, and other health-related costs.