Ask the Life Insurance Expert

What is optional term life insurance?

Optional term life insurance is additional coverage you can purchase through your employer that is over and above the basic life insurance coverage you get through an employee benefits plan. Your employer typically pays the premium for the basic coverage, and you pay the full premium for any optional term life you buy.

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Term life covers you for a certain number of years and does not have any cash value. You can't withdraw money or take out a loan from the policy's cash value the way you can with permanent life insurance, such as whole life.

The opportunity to purchase optional term life has advantages. You can buy the coverage at group rates, and you typically don't have to answer medical questions or undergo a medical exam as long as you sign up during the enrollment period. You may be able to continue the group optional term life even after you leave your job, and you may be able to convert the coverage to a permanent individual policy.

Purchasing optional term life is convenient because you don't have to sort through a bunch of choices. But don't let mere convenience sway you. It's still a good idea to review and get life insurance quotes for other alternatives. You might be able to get a better rate for individual life insurance by applying for insurance on your own and providing medical information, especially if you're young and healthy.

Just because the coverage is offered through your employer doesn't mean it meets all your needs. Read the policy, and evaluate the life insurance company just as you would if you were buying life insurance through a broker.

Talk to a life insurance agent to plan how much coverage you need and can afford and to determine which products are best suited to meeting your financial goals.

For more, see "The basics of term life insurance."

Last updated: Jan. 22, 2012
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