Supplemental life insurance is an optional coverage you can acquire with a whole life policy sponsored by a company or group. Employers and organizations offer this at a low cost to employees or members as an add-on to group life coverage, and individuals can buy supplemental policies directly as well. Depending on the policy, you could purchase this extra coverage for your spouse, partner, and dependents.
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Supplemental life insurance, also called voluntary life insurance, is insurance you can get in addition to a group life policy with a job or through an organization.
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While employers often pay for a group life insurance policy, the employee usually pays for supplemental life insurance.
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Insurance companies also sell private supplemental policies for people who want more income protection.
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A medical exam might not be necessary to qualify for coverage under a group supplemental life insurance plan.
Insurance industry experts have estimated that 1 in 4 households would face financial difficulties within one month if the primary wage earner died. Supplemental life insurance may be a convenient solution for the unexpected.
What is supplemental life insurance?
Supplemental or voluntary life insurance supplements a basic life policy provided by an employer. Since the basic policy might carry a small death benefit, the employer can make extra coverage available for employees willing to buy it. This insurance may be easier to obtain than a private policy.
How does supplemental life insurance work?
Employers may offer supplemental life insurance for employees who prefer coverage above what is offered in the company’s group life policy. You typically must select this option during your employer’s annual benefits enrollment period. You may also be able to obtain or change a policy if you’ve experienced significant life events such as marriage, widowhood, divorce, or having a child.
Group plans usually cost less than individual policies. The cost will increase as you get older, as with private insurance.
Your employer’s insurance might allow you to convert your policy to an individual one. Conversions don’t usually call for a medical exam, making this a suitable option for people who can’t get an affordable rate on their own due to health issues.
Types of supplemental life insurance
Besides employers, private insurance companies offer supplemental life insurance that can augment coverage for spouses, partners, and dependents. Your options depend on the type and amount of coverage available through your job or other entity. Some insurers require a medical exam.
You can purchase types including:
- Term. Temporary coverage that can last up to 30 years.
- Whole. Permanent coverage with guaranteed or flexible premiums and a cash value component.
- Accidental death and dismemberment (AD&D) coverage. Grants money to survivors if you die or get maimed in an accident.
- Burial insurance. Covers end-of-life expenses such as medical bills or funeral costs.
- Family coverage. The option to buy insurance for a spouse or dependents at the group rate.
- Policies price range starts at as low as $3.65 per month.
- Partnership with well-established providers.
- Get a 30-day money-back guarantee.
Is supplemental life insurance enough for me?
Supplemental life insurance might not be enough to meet your survivors’ financial needs should you pass away. This coverage is designed to be a supplement, not your primary income protection vehicle.
Calculating life insurance needs
Death benefits with an organization’s group life insurance typically may equal one or two times your yearly salary. More than likely, this will not be sufficient.
You can use a variety of methods to estimate how much life insurance you should carry. These include:
- Income times 5, 10, or 17
- Income times 10 plus $100,000 per child for college
- DIME (Debt, Income, Mortgage, Education)
How much supplemental life insurance you need depends on:
- Children and relatives you want to provide for
- Current and anticipated financial obligations (mortgage, education)
- Size of inheritance you want to leave behind
- Projected final expenses (funeral, burial)
An online insurance calculator can help you estimate how much life insurance you need.
Is it worth getting supplemental life insurance?
If you pay for supplemental coverage, it should make sense for your situation. Younger people with no serious health conditions can likely find cheaper rates. Otherwise, this might be the most feasible means to secure more coverage for you and your loved ones.
If you have few debts or people depending on your income, your job’s main life policy could provide all your loved ones need to handle your final and outstanding expenses. Consult a financial adviser to determine if supplemental coverage fits your budget, needs, and goals.
Insufficient or no life insurance significantly threatens financial security, especially for individuals with dependents and financial responsibilities. A supplemental life insurance policy can be a low-cost way to help shield loved ones from economic uncertainty and strain.
Be aware of your financial condition to protect your family, assets, and peace of mind. Supplemental life insurance isn’t for everyone, but it just might make a difference for your loved ones should you pass.
FAQ
Can I keep a supplemental policy if I leave my job?
If your supplemental life insurance policy is tied to your employer, the coverage might end when you leave the job. Your organization may allow you to continue buying the insurance, though. Purchasing a policy directly through a life insurance company or agency can ensure that your income protection stays intact regardless of employment status.
Should I get supplemental life insurance from my job or on my own?
Job-sponsored insurance might be more convenient and cheaper to get for some people. However, you would have to wait for the enrollment period to apply. Further, you might lose the coverage if you leave the employer. On the other hand, private insurers can offer more coverage options, such as higher limits. Your age and health might affect your eligibility and cost.
How do I pay for supplemental life insurance?
You pay for supplemental life insurance out of pocket through a job, union, or private insurance company. If your employer provides it, they can automatically deduct the premium from your paycheck. Employer-sponsored insurance plans often lower premiums because the company can negotiate group rates.
- Penn Human Resources. Supplemental Life Insurance.
- Lifehappens. Life Insurance Offers Sense of Security.
- LIMRA. 2023 Insurance Barometer Study.
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