What is Supplemental Life Insurance?

What is Supplemental Life Insurance – Overview

Life insurance protects your family once you are gone! It provides financial freedom and helps you live worry-free. In today’s scenario, employers protect their employees’ families by offering them life insurance policies.

The premiums are paid from their salaries, and employers also contribute a portion of their premiums. When it comes to buying life insurance, there is an optional product called supplemental life insurance. This article explains everything you need to know about supplemental life insurance.

What is Supplemental Life Insurance?

Supplemental life insurance is an optional coverage that you can add to your basic life insurance to receive more life coverage benefits once you pass away.

Employers often offer supplemental life insurance as part of their benefits package to allow employees to increase their life insurance coverage beyond the basic amount provided by the employer. However, even if your employer offers it, you must choose the right supplemental life insurance.

It is crucial as it can cover the funeral and other expenses after your death. Your family members don’t need to pay for such expenses as you already planned for them and have reliable supplemental life insurance coverage.

The amount of supplemental life insurance you can purchase often does not directly depend on your annual income. Still, it is determined by the policy options provided by the employer or the insurance company, with coverage limits varying widely.

If you work in a company where your employer offers this policy, you should not hesitate to take it. It will ultimately give you the maximum benefits.

Is It Worth Buying Supplemental Life Insurance?

As noted above, employers provide supplemental life insurance to their employees as group life insurance. Before you opt for this policy, you must understand the difference between basic and supplemental life insurance.

Basic employer-provided life insurance typically offers coverage that may equal one or two times your annual salary, but this can vary based on the employer’s policy. Most people have this policy as it covers almost all the expenses of your family members once you pass away.

However, some people want even more benefits to bear the cost of their funeral and other tasks soon after death. They can get supplemental life insurance for such expenses.

Group life insurance policies offered by employers to their employees have many advantages. Here are some of the advantages of supplemental life insurance.

Advantages of Supplemental Life Insurance

What Is Supplemental Life Insurance

What Is Supplemental Life Insurance – Advantages of Supplemental Life Insurance

No Qualification Required

Employer-offered supplemental life insurance often features simplified or no underwriting, making it easier to qualify than individual policies. Since you already are a healthy person, there will be no requirements for body check-ups and other tasks before your policy gets approved.

Lower Premiums

Supplemental life insurance premiums can vary and may be higher than basic life insurance due to the additional coverage, though group rates through employers can offer savings compared to individual rates. Moreover, group supplemental life insurance policies even lower the total premium costs. Most companies offer additional discounts on group policies, which will decrease the number of premiums for the policyholders.

Easy Deductions

The premiums for the supplemental life insurance are deducted from your salary. You need not pay the premiums or worry about the due dates. The premium amount will be deducted from your bank account automatically.

How Much Supplemental Life Insurance Do I Need?

Financial experts often recommend having life insurance coverage that is 5 to 10 times your annual income, though specific needs vary based on individual circumstances. If your yearly income is $50,000, cover your life with $500,000 of life insurance.

Besides basic life insurance, some people want additional family benefits after passing away. If we talk about supplemental life insurance, your employer gives you up to $50,000 life insurance as supplemental life insurance. The amount of the supplemental life coverage will be given to the deceased’s family, i.e., for one time.

Moreover, if you want to provide more benefits after your death, you can go for an even bigger amount that needs more premiums from your side. You can activate an auto-debit system that deducts the premiums from your bank salary.

You can get even a $200,000 death benefit under supplemental life insurance. If interested in increasing your supplemental life insurance coverage, consult with your employer’s HR department or the insurance provider to understand your options and associated premium costs.

It depends on your family’s basic requirements. If basic life insurance doesn’t provide proper coverage, consider higher-premium supplemental life insurance, which can give your family more benefits after your death.

What else can I get other than Supplemental Life Insurance

Supplemental life insurance provided through employers may have certain limitations or conditions, such as coverage amounts and portability upon leaving the job. However, you can choose the private insurance provider from whom you can get your preferred supplemental life insurance coverage.

You have two options for buying additional life insurance for your family.

Option 1: Go for a Separate Policy

To get maximum benefits from the additional life insurance, you must go with a private company and get a separate life insurance policy. If you change your employer, the policy stays with you in the future, and your family can get the said amount after your death from that policy.

Option 2: Add Riders to Your Policy

Adding riders to your insurance policy, which are amendments that provide additional benefits or adjust the policy’s terms, can enhance coverage. Note that a ‘rider’ is not a beneficiary but a policy feature; beneficiaries are the individuals you designate to receive the death benefit. Do not forget to add riders to your policy, as they are the real beneficiaries of the policy.

When you add a rider, there’s no need to get supplemental life insurance. You can still choose to get supplemental life insurance when needed.

The Bottom Line:

If you are satisfied with your life insurance policy’s basic life insurance coverage, then there’s no need to take supplemental life insurance. If the employer offers supplemental life insurance as group life insurance, you should go for it as the premiums are lower and the benefits of such policies are higher. Calculate your expenses, premiums, and income before adding supplemental life insurance.

See Also

How Much Life Insurance Do I Need

Is Life Insurance Taxable

Life Expectancy After ICD Implant

No Medical Exam Life Insurance for Seniors

Medical Insurance for College Students

Current Version
March 13, 2024
Updated By
Andrea Morales G.

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