What Is Supplemental Life Insurance 

What Is Supplemental Life Insurance

Supplemental life insurance is a form of additional coverage that you can get added on to an existing life insurance policy. You can obtain supplemental life insurance either through your employer or on the private market. A life insurance policy offered through your employer is usually easy to obtain and either very low-cost or completely free. However, sometimes the life insurance plan purchased through your employer will not be sufficient to cover your costs in the event of serious injury or death. Supplemental life insurance helps make up where your main life insurance plan is lacking and can help ensure that your family is provided for should something happen to you.

Group Life Insurance

Group insurance is cheaper when purchased as a benefit package, as insurance companies often provide discounts form bulk insurance plans. Insurance companies take a smaller risk when insuring a large number of people and can pass the savings on to the policyholders. Group insurance is a type of life insurance with no medical exam required, and is the most commonly chosen option for those who are offered the plan through their employer. Many people, however, fail to look further to see if the plan would even be sufficient in the event they needed to use it. Life insurance purchased through an employer is often non-portable. Non-portable life insurance cannot be transferred if you take a different job or if you retire.

Reasons for Term Life Insurance

If you are debt-free and do not have any dependents, your beneficiary will probably be okay without any additional insurance coverage. Your plan should be able to cover funeral costs and attend to any leftover financial needs you have such as credit card payments or medical bills. However, if you have a mortgage and people depending on you to provide for their needs, you might benefit from the additional stability offered by supplemental life insurance. Life insurance provides for the following primary expenses in the event of death:

  • Mortgage payments
  • Final expenses
  • Lost income
  • Children's education

What is Supplemental Life Insurance Good For?

Supplemental insurance picks up the slack where regular term life insurance could leave you hanging. For example, burial insurance will ensure that the policy will pay out in time for you to use it to cover funeral costs while accidental death and dismemberment insurance will pay out for loss of life or limb.

Some employers offer supplemental life insurance along with their term life insurance plans. These employers will often provide ancillary benefits depending on the occupation of their employees. In some cases, you employer will allow you to purchase supplemental insurance through the group plan for your spouse or significant other. If this is the case, your partner will be subject to same limits as those existing in your plan.

Accidental Death and Dismemberment (AD & D)

Accidental death and dismemberment supplemental policies will only allow your beneficiary to claim the death benefit if your death was caused by an accident. However, some of these policies will also permit a pay out if you are seriously injured in an accident that does not cause death. Examples include loss of eyesight or hearing. You could also consider a long-term disability insurance policy as well, which would provide for your family in a similar fashion.

Burial Insurance

Certain supplemental life insurance policies only cover the costs of an expected death. These policies are to be used to cover the burial costs and funeral expenses and generally provide $5,000 to $10,000 of coverage. Burial insurance tends to pay out faster than a term life insurance policy. This faster payout can come in handy if your family is required to handle burial costs immediately and is an extra step towards easing the financial burden.


Private Supplemental Life Insurance

Supplemental life insurance can also be purchased on the open market in the same way you purchase private term life insurance. As with any other type of insurance, you should look around to see who has the best deal before settling on one carrier in particular. Both burial insurance and AD & D insurance can be purchased on the private market as riders on your original term insurance policy when you make your initial purchase.

Unlike group insurance policies provided by an employer, private supplemental life insurance is portable. You can keep the coverage for as long as you pay the premiums regardless of whether you relocate or change jobs.

In some instances, private supplemental life insurance can be less expensive than group insurance through an employer. If you are young and healthy, life insurance will be relatively inexpensive no matter which route you take. Before signing up with an employer's plan, take a look around to make sure you can't get a better deal somewhere else. When looking for an insurance agent, consider using a referral service like TermLifeInsuranceUSA.com. A referral service uses data modeling and predictive analytics to help determine the right company for your specific needs and can help you avoid unnecessary delays in finding what you are looking for.

Even if private coverage is more expensive, its portability may be worth it. If you decide to keep your group policy and change jobs later in life, you will be a greater risk to the company and will need to pay a higher premium. Portable life insurance will last you for the duration of the term life insurance policy you purchased and will remain active as long as you keep up with the payments.

How Supplemental Life Insurance Could Help You

Supplemental insurance is designed to complement your existing plan, not replace it. Have the extra coverage provides a buffer against the 'what ifs' in life. When purchasing insurance of any kind, you will want to look at all your policies combined and add up the coverage to determine your total amount. One way to determine how much insurance you should purchase is to multiply your annual salary by 17. This resulting amount of coverage will allow your beneficiary to replace your income for the course of his or her life if the money is properly invested. Here is an example:

Salary Life Insurance Amount
$40,000 $680,000
$75,000 $1,275,000
$100,000 $1,700,000

Another method is to multiple your salary by five or 10. While this amount will not replace your salary should something happen to you, it will allow your beneficiary to pay off any debt that you owe, cover any funeral expenses and have some time to grieve and heal without worrying about their financial situation.

Make an Informed Decision

As with any decision involving your hard-earned money, take your time. Be sure to read the fine print and to weigh the differences between the group insurance policy offered by your employer and private supplemental insurance you can purchase on your own. If you chose to go with the private market, consider accelerated burial insurance or AD & D as a rider to the existing policy. This option may be cheaper than purchasing the benefits separately. No matter whether you choose to stick with your group insurance policy or strike out on your own and purchase private insurance, having the additional support of supplemental insurance can go a long way toward ensuring a stable future for you and your loved ones.

Disclaimer: TermLifeInsuranceUSA.com is not a licensed insurance agency or broker. The content of this website is for informational and comparative purposes only and is not intended to take the place of professional advice from a licensed insurance agent. TermLifeInsuranceUSA.com recommends that all consumers consult with a licensed insurance agent before purchasing any insurance policy.

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