what is supplemental life insurance?
Supplemental insurance: what is it?
Supplemental insurance includes all types of insurance in addition to health insurance. Coverage includes dental, life, cancer, accident, and critical illness. Insurance benefits can keep you healthy as well as protect your finances.
If you’re concerned about the cost of care and how it impacts your health, finances and future, you’re not alone.
Why should I purchase life insurance?
Can you imagine how your family’s financial condition would change if the unexpected happened to you? Can they maintain their standard of living? What about college tuition? Do you pay household bills? What would happen to the mortgage or to the rent?
Although money may be tight right now, you shouldn’t cut corners when it comes to one of the most important and affordable options for protecting your family’s financial health.
Why would I need to upgrade my life insurance policy?
It’s crucial to review your life insurance needs regularly to ensure your policy keeps pace with your life changes. Events such as marriage, divorce, the birth or adoption of a child, a decrease in income or the start or completion of college, or large investments such as a new home can all affect the level of coverage you need.
Depending on the changes that have occurred, you may have to reconsider your coverage needs. Be sure to check the beneficiary designation on your policy to make any necessary updates and to ensure your policy benefits are distributed as you wish.
Do you need supplemental coverage?
Health insurance may not cover all expenses
Supplemental insurance can help you pay for out-of-pocket medical expenses, such as copays and deductibles, in the event of a serious illness or accident.
A household’s expenses don’t cease because of an injury or illness
A supplement policy will pay you directly (except as otherwise provided) to help with everyday expenses like utility bills, groceries, and child care.
Affordable than you might think
With premiums less than a family outing to the movies, these policies can provide convenience when the unexpected happens.
An additional life insurance policy adds coverage to an existing policy. Examples of additional insurance are:
- Additional coverage you purchase on top of your basic policy.
- Life insurance for your spouse or children.
- You will be covered if you are seriously injured or killed in an accident.
Supplemental life insurance is typically provided by your employer. It may also be called employee-paid or voluntary life insurance. Private insurers also offer policies.
It can be useful to have additional life insurance, particularly if your health makes it difficult for you to get enough coverage elsewhere. Compare prices and policies before making a decision. The benefits may not always outweigh the costs.
Supplemental life insurance: why should you buy it?
As many people have free life insurance through their employers, it’s natural to wonder why you’d want to pay for more coverage. Here are a few examples of when supplemental life insurance can be helpful:
You don’t have enough life insurance to support those who rely on your income.
Additional coverage is needed for specific costs, such as burial fees.
No matter where you work, you need a portable life insurance policy.
Your basic plan does not cover a specific type of insurance, such as supplemental life insurance for your spouse.
What is the right amount of supplemental life insurance to buy?
Two questions will help you determine how much life insurance you need:
- What financial burden would your death place on others?
- Would your current life insurance policy cover those costs?
Industry experts recommend you have between 5 and 20 times your annual income in life insurance. However, no one rule of thumb can account for your unique situation.
Whether or not you need supplemental life insurance depends on the costs you’re responsible for. Here are some scenarios in which you may require more coverage.
- Having a child or caring for an aging parent increases the number of people who depend on your income.
- Buying a house requires additional mortgage coverage.
- Suppose you get married and want to protect your spouse from unforeseen costs if you die.
- You are the primary provider of income for the family since your spouse is no longer working.
- You require more coverage as your income increases.
- You need coverage for college costs for your child.
Supplemental life insurance through work
A supplemental life insurance policy can be purchased in addition to the basic coverage offered by your employer.
Basic life insurance policies are typically free and cover one to two times your annual salary. Employers pay the premiums.
Supplemental life insurance policies usually have higher coverage limits, but you typically pay the premiums.
Supplemental life insurance is typically only available to full-time employees or those who work a minimum number of hours. In most cases, you must have a valid basic life insurance policy in order to qualify for supplemental coverage.
Supplemental life insurance through work types
Typically, supplemental life insurance through work is group term life insurance, and coverage depends on your employment status. You may, however, be able to convert your group life insurance into a personal policy and take it with you when you leave, depending on the policy’s “portability.”
The four main types of supplemental life insurance offered by employers are:
- In addition to your own policy, employee life insurance provides additional coverage.
- Supplemental spouse life insurance provides coverage for your spouse. In many cases, this type of policy will also cover your domestic partner.
- Supplemental child life insurance covers dependent children.
- You can purchase additional accidental death and dismemberment insurance in addition to your basic policy. AD&D insurance pays out if you die in an accident or are seriously injured.
You are often required to buy a supplemental policy for yourself before being eligible for a supplemental spouse or child life insurance.
What kind of coverage can i get at work?
Employee life insurance policies offer greater coverage than basic plans, up to a certain limit. Most maximums range from $250,000 to $500,000, but can reach several million dollars. Some managers and executives have access to more money than regular employees.
Limits are generally lower for a spouse or child. The typical maximum for a child is $10,000 to $40,000. The typical maximum for a spouse is $45,000 to $500,000.
In contrast to many term or whole life insurance policies issued by private insurers, supplemental life insurance through your employer may allow you to increase or decrease coverage amounts during certain periods, such as open enrollment.
You should be aware that when you reach a certain age with a supplemental life insurance plan through your employer, your death benefit may automatically decline. To match the lower death benefit, you pay only a percentage of the premiums.