What is supplemental life insurance?

If you have a family, then you know that they are your number one priority. You would do anything to ensure they are cared for, including protecting them financially. One way to do this is by purchasing supplemental life insurance. 

Supplemental life insurance policies are a great way to protect your loved ones financially in the event of death. These policies provide extra coverage in addition to the amount of life insurance you have through your primary policy. 

This article will explore key considerations when buying supplemental life insurance, including whether you can buy it through work or an insurance company. We’ll also discuss how much coverage you should get. 

What is a supplemental life insurance policy?

Supplemental life insurance is an additional life insurance policy that you can purchase to supplement your coverage. 

For instance, if you have a term life insurance policy with a death benefit of $500,000, you could purchase a supplemental life insurance policy with a death benefit of $250,000. Your beneficiaries would receive a total death benefit of $750,000 from both policies combined if you died. 

One of the main benefits of supplemental life insurance is that it can help cover expenses that your regular life insurance policy may not cover. 

For example, if you have a mortgage, credit card debt, or other loans, your regular life insurance policy may not cover the full amount. Supplemental life insurance can help in this situation — it can provide the extra coverage you need to ensure your loved ones are taken care of financially if something happens to you. 

Another benefit of supplemental life insurance is that it can help cover expenses that arise in the event of your death, such as funeral costs. 

The average cost of a funeral can range from $6,971 to $7,848, according to The National Funeral Directors Association (NFDA). It can be a huge financial burden for your loved ones if they are unprepared. 

By purchasing supplemental life insurance, you can ease the burden and provide them with financial peace of mind.

How Supplemental Life Insurance Works

If you die while you have a supplemental life insurance policy, the death benefit from that policy will be tax-free to your beneficiaries. 

They can use the money however they see fit. For example, they could pay off debts or final expenses or invest it and use the income to help cover living expenses. 

Your life insurance quotes are always free.

 Secured with SHA-256 Encryption

Can I buy supplemental life insurance through work?

In many cases, it is possible to buy supplemental life insurance through your employer. Most employer-sponsored life insurance provides a basic level of coverage, but this may not be enough to meet your needs. 

You can buy a supplemental life insurance policy through your employer if you want additional protection. These policies are often more affordable than buying a separate policy. 

They may also come with additional benefits, such as accelerated death benefits or conversion rights. However, it’s important to read the fine print before buying a policy, as there may be restrictions on how to use it. 

For example, some policies only pay out a death benefit if you die while working for the company. If you leave your job, you may no longer be able to keep the policy or may have to pay higher premiums.

Basic vs. Supplemental Life Insurance

The main difference between basic and supplemental employee life insurance is the amount of coverage provided. Your employer typically offers basic life insurance as part of an employee benefits package. 

It offers a death benefit equal to one or two times your annual salary. 

While this may be enough for some, it often doesn’t provide adequate coverage for others. Supplemental life insurance can offer additional protection.

Types of Supplemental Life Your Employer May Offer

Your employer may offer a range of supplemental life insurance options, including:

• Supplemental employee life insurance. Also known as “group term life insurance,” this type of coverage provides a set death benefit, which does not increase over time.
• Supplemental accidental death and dismemberment insurance. This coverage typically provides additional benefits in the event of an accident, such as loss of limb or sight.
• Spouse and child life insurance. Supplemental spouse life insurance coverage can help provide financial support to your spouse if something happens to you. Child life insurance covers the costs of raising and educating your children.
• Term life insurance. This type of coverage lasts a specified period. It may be an affordable option if you only need coverage while you’re still working or until your debts are paid off. Find out the best term life insurance companies or learn more about term life insurance quotes.

Different employers and life insurance companies offer a variety of coverage options. Speak with your company about what types of supplemental life insurance are available to you.

Read more: Life Insurance vs. Accidental Death & Dismemberment (AD&D) Insurance: Which Is Better for You

Advantages and Disadvantages of Buying Supplemental Life Insurance Through Your Employer

There are many benefits to buying supplemental life insurance coverage through your employer. Some of these include:

• Affordability. Many employers offer affordable group rates, which can be significantly cheaper than purchasing an individual policy.
• Ease of purchase. It is often easy to buy supplemental life insurance through your employer. You can enroll online or through an automated phone system.
• Convenience. Many employers offer a range of supplemental life insurance options that you can customize to suit your needs. This makes it easier to find the right coverage for your situation.

However, there are also some drawbacks to buying life insurance through your employer. For example:

• Limited options. While many employers offer a range of supplemental life insurance options, you may not be able to purchase the coverage you need.
• Restrictions. Some employers only offer supplemental life insurance to full-time or part-time employees, and others may have other restrictions or stipulations on the policy. 

Additionally, your policy may only be valid while you are employed. If you leave your job or retire, you may no longer be able to keep your policy or may have to pay much higher premiums. Find out more about the problem with employer-provided life insurance.

Can I buy supplemental life insurance from an insurance company?

Yes, you can buy supplemental life insurance from an insurance company. However, it is good to note that not all insurance companies offer this type of coverage. 

If you’re interested in purchasing supplemental life insurance, you need to shop around to find an affordable life insurance company that offers the coverage you need.

Some policies you may encounter include:

• Accidental death and dismemberment (AD&D) coverage 
• Term or permanent life insurance for a partner or dependent
• Burial insurance for end-of-life expenses
• Short and long-term disability insurance

The advantages and disadvantages of buying supplemental life insurance through an insurance company include the following:

Advantages

Buying supplemental insurance through an insurance company can offer the following benefits:

Cost Savings 

You can save money in the long run when you purchase a supplemental life insurance policy through an insurance company. Generally, this is because insurance companies have access to more competitive rates than most employers offer. 

Furthermore, you may get discounts based on your age and health status that you would not be able to get if you purchased a policy through your employer. 

Flexibility 

Another advantage of buying supplemental life insurance from an insurance company is that you have more flexibility when choosing a plan. You can choose the amount of coverage that best fits your needs, as well as the type of policy that works best for your situation. 

For example, some policies offer term life while others offer permanent or whole life options. This flexibility allows you to tailor the coverage to your needs and budget. 

Portability  

When you buy supplemental life insurance from an insurer, it is portable. If you change jobs or move out of state, your policy will still be valid and transferable with no interruption in coverage. 

However, if you purchased a policy through your employer, it typically can’t be transferable. It could be canceled without warning if your job suddenly changes or ends. 

Disadvantages 

One potential downside of buying supplemental life insurance from an insurance company is that your application and policy may be subject to more scrutiny. 

For example, the insurer may ask you for more detailed information about your medical history and lifestyle than your employer might, which can be a source of stress or anxiety.

In addition, it may take longer to get approved for coverage, and you may be required to pay higher rates.

How much supplemental life insurance should you buy?

There is no one-size-fits-all formula for deciding how much supplemental life insurance you need. The amount of coverage you purchase will depend on a variety of factors, including:

• Debts. If you have large debts, such as a mortgage or student loans, buying additional life insurance to cover these costs can be a good idea.
• Your dependents. If you have children or other dependents, you must ensure they are cared for if you pass away.
• Your current income. You should also consider how much you earn each month and your other sources of income and savings.
• Higher education. You may want to purchase additional coverage if you plan on paying for your child’s higher education expenses.
• Other expenses. Other factors that may impact the supplemental life insurance you need include your retirement savings, lifestyle, or other major purchases you intend to make.

You can also use an online insurance calculator or speak with a qualified financial advisor to help you determine how much coverage you should purchase. 

Ultimately, managing your risk and securing the future of your loved ones should be your top priority when deciding on the right amount of supplemental life insurance.

Your life insurance quotes are always free.

 Secured with SHA-256 Encryption

Factors to Consider Before Buying Supplemental Life Insurance

Here are a few factors to consider when deciding whether or not to purchase supplemental life insurance:

• Your current coverage. If you already have life insurance, it is important to assess how much coverage you currently have and determine whether or not additional coverage is necessary.
• Portability. Another important factor to consider before purchasing supplemental life insurance is whether or not the policy would be portable if you left your job or moved out of state.
• Your budget. Consider your current income, financial obligations, and future goals and expenses. Doing so will help you determine how much coverage you can afford.

There may be other options available that can offer the same level of protection without the need for supplemental life insurance. These could include laddering life insurance policies or adding riders to your existing life insurance policy. Find out what insurance riders are.

Case Studies: Illustrating the Importance of Supplemental Life Insurance

Case Study 1: The Mortgage Protection

John, a 35-year-old married man with two children, had a primary life insurance policy with a death benefit of $500,000. However, his mortgage was substantial, and his regular life insurance coverage wouldn’t be enough to pay off the remaining balance if something happened to him.

To ensure his family’s financial stability, John decided to purchase a supplemental life insurance policy with a death benefit of $250,000, specifically earmarked to cover the mortgage. This additional coverage provided him peace of mind, knowing that his loved ones wouldn’t face the burden of mortgage payments if he passed away unexpectedly.

Case Study 2: Funeral Expenses Covered

Samantha, a 40-year-old single woman, had a basic life insurance policy through her employer, but it only offered a death benefit equal to her annual salary. She wanted to make sure her funeral costs and other final expenses wouldn’t burden her family.

Samantha decided to purchase supplemental life insurance with a death benefit of $15,000, specifically designated to cover funeral expenses. This additional coverage relieved her family from the financial strain of arranging a proper funeral, allowing them to focus on grieving and healing.

Case Study 3: Protection for Business Partners

Mike and Sarah were business partners who co-owned a successful company. They recognized the importance of protecting their business and families in case of their untimely death. They both had primary life insurance policies, but they decided to purchase supplemental life insurance policies as well.

These policies provided an extra layer of protection by ensuring that the surviving partner could buy out the deceased partner’s share of the business. With supplemental life insurance in place, Mike and Sarah could ensure the business’s continuity and provide financial security for their families.

The Final Word on Supplemental Life Insurance

Supplemental insurance can provide additional coverage beyond your regular life insurance policy. You can purchase a supplemental life insurance policy through work or an independent insurance company. 

Both options have pros and cons, and it’s important to weigh them before deciding. Additionally, you’ll want to consider how much coverage you need when deciding on a policy.

Your life insurance quotes are always free.

 Secured with SHA-256 Encryption