What Are Voluntary Benefits?
Voluntary benefits — also called supplemental or ancillary benefits — are insurance products offered through an employer but paid entirely (or partially) by employees through payroll deductions. Because employees pay with pre-tax dollars and access group rates, they get coverage at a significantly lower cost than they could obtain on their own. The employer, meanwhile, enhances their benefits package at little to no additional cost.
Common voluntary benefits include dental insurance, vision insurance, life insurance, short-term and long-term disability, accident insurance, critical illness insurance, and hospital indemnity insurance.
Why Voluntary Benefits Matter for Employers
In a competitive labor market, a comprehensive benefits package is one of the most powerful tools for attracting and retaining talent. Research from LIMRA found that 51% of employees say benefits are a key reason they stay with their current employer. Yet many small and mid-sized businesses assume they cannot afford a full benefits package.
Voluntary benefits help address this challenge. By offering supplemental plans through payroll deduction at group rates, employers can provide a richer benefits menu while managing their compensation costs. Employees perceive the value of a comprehensive benefits package at approximately three times the equivalent cash value — meaning a $2,000 benefits package is often valued more highly than a $2,000 raise.
The Eight Core Voluntary Benefit Types
1. Dental Insurance
Dental coverage is the most requested voluntary benefit. Group dental plans typically cover three tiers of care: preventive (cleanings, X-rays, exams — usually 100% covered), basic restorative (fillings, extractions — typically 80% covered), and major restorative (crowns, root canals, dentures — typically 50% covered). Orthodontia coverage is available as an add-on.
2. Vision Insurance
Vision plans cover annual eye exams, prescription glasses, and contact lenses. Despite being one of the lowest-cost benefits to offer, vision insurance consistently ranks among the highest in employee perceived value — largely because employees use it every year.
3. Group Life Insurance
Basic group life insurance — typically 1–2 times annual salary — is often employer-paid and serves as a foundational benefit. Supplemental life insurance, which employees can purchase in larger amounts, is typically voluntary. Accidental Death and Dismemberment (AD&D) coverage is frequently bundled with life insurance.
4. Short-Term Disability (STD)
Short-term disability replaces 60–70% of an employee's weekly earnings when they are unable to work due to illness or injury. Benefit periods typically range from 13 to 26 weeks. STD is particularly valued by employees who are pregnant or planning to start a family, as it covers maternity leave.
5. Long-Term Disability (LTD)
Long-term disability picks up where short-term disability leaves off, providing income replacement for extended disabilities that last months or years. Benefits typically continue until age 65 and replace 60–67% of pre-disability income. LTD is one of the most financially impactful benefits an employer can offer.
6. Accident Insurance
Accident insurance pays cash benefits directly to employees for covered accidental injuries — emergency room visits, fractures, dislocations, burns, and more. Because the cash is paid directly to the employee (not the provider), it can be used for any purpose, including covering deductibles, copays, or living expenses during recovery.
7. Critical Illness Insurance
Critical illness insurance pays a lump-sum cash benefit upon diagnosis of a covered condition such as cancer, heart attack, stroke, or kidney failure. The cash can be used for any purpose — medical bills, mortgage payments, travel for treatment, or daily living expenses. This benefit is particularly valuable for employees with high-deductible health plans.
8. Hospital Indemnity Insurance
Hospital indemnity plans pay daily cash benefits for hospital stays, ICU confinement, surgeries, and newborn care. Like accident and critical illness insurance, the cash is paid directly to the employee and can be used for any purpose. Hospital indemnity is an excellent complement to high-deductible health plans.
How to Implement Voluntary Benefits
Implementing voluntary benefits requires a Section 125 Cafeteria Plan, which allows employees to pay premiums with pre-tax dollars. This saves both the employer (reduced payroll taxes) and the employee (reduced taxable income). Most businesses offering any voluntary benefits should have a Section 125 plan in place.
The enrollment process is straightforward: employees review their options during open enrollment, make their selections, and premiums are automatically deducted from each paycheck. The employer simply remits the collected premiums to the carrier.
How MedHealth Can Help
At MedHealth Insurance Agency, we help Massachusetts businesses build complete benefits packages that include both core health insurance and supplemental voluntary benefits. We work with leading carriers to offer a full suite of ancillary benefits tailored to your team's needs.
Our service is completely free to your business. Contact us today to schedule a free benefits review and discover how you can offer more to your employees without spending more.