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I recently came across the term "voluntary long-term disability insurance." I certainly know what disability insurance is, but I've never heard the word "voluntary" attached to it. Wondering if this means it's a different type of disability insurance, I googled around and found the term is actually fairly common and gets applied to other types of insurance as well. Here is an example.

However, I've been unable to find an explanation of this term, what's voluntary about it, and what it means exactly. So my question is:

What is voluntary disability insurance and is it different from disability insurance? And if there is no difference, why is that word sometimes applied?

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In my experience, "voluntary" is only used when talking about insurance gained through an employer (in other words, employer sponsored).

"Voluntary" usually indicates that insurance is on top of the basic plan, and the employer does not contribute to the premium. This is in contrast to health insurance where the employer usually pays a certain percentage of the premium. However, the insurance company might offer a slight discount compared to if the insurance was payed for directly by the individual.

For example, my last employer offered a basic life insurance policy for 1.5x my annual salary, free of charge. On top of that I could elect "voluntary" additional coverage for myself (up to 10x my salary) or my spouse/children (a set dollar amount), but I would pay the entire premium for the additional coverage.

N.B. - Even if you assume that the voluntary insurance is discounted, it pays to shop around. My current employer offers additional life insurance coverage, but the cost is about 2x as much as it would be if I were to buy it from the same company that I get my car insurance from.

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"Voluntary" generally refers to an employer group benefit that is made available to some or all employees and the employee can optionally participate in the plan.

The link you included refers to "voluntary group insurance" you can't buy that as an individual. An employer or some sort of trade association group can buy it and you can participate if you are eligible under the group contract with the insurer.

Typically the benefit of these programs to the employee beyond pricing is simplified or no underwriting. These sorts of benefits are available to eligible employees who are actively at work without much, if any, scrutiny of the health of each particular employee.

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In the Untied States the term "voluntary long-term disability insurance" is talking about a disability policy (short or long term) that the employee has a choice to either purchase the policy, or to skip the coverage.

On thing about disability insurance in the United Sates is that if the employer pays for the policy, then the employee has to pay taxes on the benefit; but if the employee pays the premium then the benefits are tax free. Knowing the tax implications is important when determining if the coverage is needed. You may even find a company that will give you a choice of having the company pay for it, or you pay for it; but the percent of base pay covered will be different.

  • A lot of employers off the choice to pay the tax due on the premium paid for your LTD coverage. – quid Oct 10 at 23:41

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