Life insurance enables people to provide their loved ones with income in case of their death, which can help pay for funeral costs, mortgage payments, college tuition and other costs. For many people, life insurance plays a vital role in feelings of financial security.
Employers may sometimes offer supplemental life insurance on top of a traditional life insurance plan, which can help people protect their loved ones if traditional life insurance is insufficient. If you’re considering purchasing supplemental life insurance, understand its benefits to determine whether it’s worth it.
What Is Supplemental Life Insurance?
This insurance is additional life insurance coverage people can add to the traditional policy they have through an employer or another organization. Supplemental life insurance comes in three main categories:
- Term: Term supplemental life insurance lasts for a set period of years, like 10 or 20. This insurance is usually less expensive than permanent supplemental life insurance and typically costs less if the person is younger.
- Permanent: Permanent supplemental life insurance doesn’t have an expiration date. Instead, as long as individuals keep paying their insurance premiums, they’ll continue receiving coverage. The two kinds of permanent supplemental life insurance are whole, where premiums do not increase over time, and universal life insurance, where your premiums can vary month to month as long as you pay the minimum.
- Spouse or child: Supplemental partner life insurance is the same type of coverage but for a person’s spouse or domestic partner. This insurance can be an add-on to the employee’s supplemental life insurance policy or a plan that provides greater coverage. A supplemental child life insurance plan covers costs in case an individual’s child passes away, which can help cover funeral costs.
How Does Supplemental Life Insurance Work?
Supplemental life insurance works by providing an individual’s family members with additional funds on top of an existing life insurance policy. Employers or organizations decide how much life insurance they will offer for free and how much more can be purchased. For example, an employee may receive up to one year’s salary of free life insurance and have the option to buy an amount equal to five years’ salary. Upon the policyholder’s death, the policy’s beneficiaries receive the amount of the policy.
Employees may be able to enroll in a supplemental life insurance plan during their open enrollment period. Often, employees can elect to have premium payments withheld from their paychecks.
Since most types of supplemental life insurance are provided by an employer, the coverage won’t follow someone if they leave that job. However, many private insurers also offer supplemental life insurance policies that are portable, giving people the ability to carry their coverage through multiple jobs.
Benefits of Supplemental Life Insurance
Supplemental life insurance can provide extra coverage for a person’s family to pay for their funeral expenses, a child’s college tuition or a mortgage. Some additional benefits of supplemental life insurance include:
No Medical Exam Requirement
One of the most significant benefits of supplemental life coverage is that people may not be required to answer health questions or take a medical exam. If a person purchases supplemental life insurance through a private insurer, they may be required to complete a health screening to determine their monthly premiums or whether they qualify for coverage. However, it’s a common life insurance myth that you need perfect health to qualify — it depends on the policy.
Cheaper Than Individual Life Insurance
Supplemental life coverage is often more affordable than the same coverage in an individual insurance plan. However, the price of supplemental life insurance depends on the employer or organization. Rates vary based on the insured group’s expenses, expected claims and other factors.
Who Needs Supplemental Insurance?
Supplemental life insurance could be beneficial in several situations. This coverage is helpful for:
1. People Who Have a Large Family
Someone with several dependents or a family with high expenses might be a good candidate for supplemental life insurance. If employer-sponsored life insurance doesn’t provide enough coverage for an employee’s family’s needs, supplemental life insurance can help them ensure expenses are paid in case of their death.
2. Those Who Need Portable Life Insurance
In 2022, the median length of time people stayed at a single company was a little over four years. If someone leaves their job, their employer-sponsored supplemental life insurance likely won’t come with them. Buying supplemental life insurance through a private insurer allows them to maintain the coverage wherever they work.
3. People Who Want Specific Coverage
Employer-sponsored life insurance plans only cover costs up to a specific limit. These plans also may only cover the employee. Supplemental life insurance might be the solution if a person wants this coverage for their spouse or additional coverage for costs like burial expenses that their traditional life insurance plan doesn’t provide.
Do I Need Supplemental Life Insurance?
Whether or not supplemental life insurance could benefit you and your family depends on your individual needs and financial goals. Some people may have a larger family or one with more expenses, which makes an employer’s traditional life insurance policy insufficient. Others may be able to cover all of their financial needs if the working family member dies.
Employer-sponsored supplemental life insurance could be the best option if you don’t want to take a medical exam. However, supplemental life insurance through an employer could have a few limitations, like if the policy is only accidental death and dismemberment (AD&D) coverage. With AD&D insurance, the insurance only pays out if the insured loses a limb, dies in an accident or loses their sight or hearing because of an accident. The coverage might also be lower for an injury than for death.
Rates for AD&D supplemental life insurance policies tend to be cheaper than other forms of coverage. However, this life insurance doesn’t pay the policy’s beneficiaries unless the employer dies or is injured because of an accident rather than a health issue like a heart attack. Another potential problem is that sometimes employer-sponsored supplemental life insurance specifies that the policy can only be used to pay burial and funeral expenses.
These drawbacks could make private supplemental life insurance a better choice for your needs. Private supplemental life insurance might require a medical exam, but a major advantage is that individuals can select the coverage amount they want. This insurance is also portable, meaning you can take it with you even if you leave your current job.
Carefully research your life insurance options before deciding on any insurance policy. Thoroughly examining your options ensures you can select the best available option that suits your needs.
Get the Life Insurance Coverage You Need Through Strock Insurance
Having adequate life insurance ensures your loved ones are provided for well into the future after you’re gone. Before selecting supplemental life insurance through your employer, compare the costs and benefits of choosing a policy from a local insurance provider.
At Strock Insurance, our more than 30 years as the leading independently owned insurance provider in Central Pennsylvania has enabled us to provide the best coverage at competitive prices. We’re proud to offer life insurance from Progressive Insurance and Erie Insurance to customers throughout the region. To learn more about our life insurance offerings, contact us using our online form or request a personalized quote today.