Supplemental Life Insurance

Read our Advertiser Disclosure.
Contributor, Benzinga
December 10, 2021

Looking for the best rate and coverage for life insurance? Consider Sproutt.

You know you need life insurance, but the insurance market offers several different kinds of life insurance. At the end of the day, you want enough coverage to protect your family should something happen to you. When a basic life insurance policy does not give you enough coverage, a supplemental life insurance policy may provide a solution. 

Keep reading to learn more about this type of coverage, who it's best for and the best time to purchase a policy. 

What is Supplemental Life Insurance?

A supplemental life insurance policy, also known as voluntary supplemental life insurance, is a type of extra coverage you can add to your whole or term life policy, often in addition to an employer-offered group life insurance plan (though this type of protection can also be purchased through a private insurer.)

This type of plan is meant to fill any gaps left by your current coverage. For example, if you're unsure that the death benefit of your existing policy will take care of all of your debts and leave those depending on you living comfortably after you pass, you may be a good candidate for supplemental life insurance.

Is Supplemental Life Insurance Worth It?

Who is supplemental life insurance best for? It can be a solution for a number of people facing certain types of situations, including but not limited to:

  • Those whose current employer-sponsored or private life insurance coverage may not be enough to provide sufficient financial assistance to their family after a loss of income due to death
  • Those suffering from chronic illnesses
  • Those who are permanently disabled
  • Those who work in high risk occupations or who have high risk lifestyles

There are several reasons you may consider this type of coverage, but as its core, its a solution if you don’t want to leave your family with financial burden after you pass. If you find you don’t have enough life insurance to cover all your debts and final expenses, supplemental life insurance makes sense. 

Once you've determined that you may benefit from having a supplemental policy, it's time to figure out how much you can afford to pay towards this type of coverage. From there, check out the options offered by your employer life insurance group plan or the provider you have existing coverage with.

How to Buy Additional Coverage

Supplemental life policies may be purchased from your employer to add to your existing coverage or through private insurers. For employer plans, rules can vary, so check with your company’s benefits administrator for eligibility requirements. This particular type of coverage is generally inexpensive and can give you the added protection you require. 

Employer plans may not require a medical exam, and if you’ve had trouble getting approved for life insurance in the past, supplemental life insurance is a good option as it allows you to forgo the medical exam required by most private insurers. You can simply add it to your life insurance through your employer. That being said, some no medical exam supplemental policies may be limited in their benefits, so be sure to compare plans from private insurers.

What Can Supplemental Life Insurance Pay for?

A supplemental life insurance policy can help your family cover unexpected expenses after you die, pay off debts you owe or help the family obtain financial security. 

No matter our efforts to prepare, losing an income can throw a family into financial devastation on top of an already emotionally devastating loss. The Life Insurance Barometer by LIMRA, a life insurance study, shows that 42% of families would face financial hardship within 6 months of losing a family breadwinner’s income.

You don’t want your family to face financial burdens after your death. Depending on your life circumstances, many financial experts recommend you have anywhere from 7 to 10 times your yearly income.

Here are a few things a supplemental life insurance policy could help pay for.

  • College tuition
  • A vacation home
  • Cars
  • College savings accounts
  • Potential retirement income
  • Debts from a business
  • Burial costs and other final expenses

Supplemental Life Insurance Add-ons

Some supplemental life insurance policies offer important add-ons that may be of interest to those already looking into this type of protection.

Accelerated Death Benefit

This allows employees suffering from a terminal illness to withdraw the cash benefit early to pay for medical expenses. This make supplemental coverage a great choice for those who may not be able to get the right type of coverage at an affordable price because of their health.

Waiver of Premium Benefits

This can be used by employees who have become permanently disabled. Depending on the plan, age restrictions may apply. Generally, employees are required to be under 60 and must be disabled for 180 days or more to qualify for the waiver of premium benefit.

Supplemental Life and AD&D Insurance

Accidental death or dismemberment may be a benefit included in a supplemental life insurance policy. This important additional coverage pays benefits for unintentional death or dismemberment of the policyholder. The additional coverage includes the loss or loss of use of body parts (arms, legs and other body parts) or bodily functions (loss of use of limbs, sight or hearing).

This benefit is only paid when an accidental death or dismemberment occurs and does not pay benefits when the insured dies of natural causes, cancer or any other form of death that is not an accident.

Who Gets Supplemental Insurance Policy Payouts?

The beneficiary of your supplemental policy is no different from your regular insurance. You can make them the same person, or you can choose a different person and give instructions in your will that explain where the money should go.

If you have a supplemental policy through your employer, you can add or change a beneficiary by completing a hard-copy or online beneficiary designation form provided by your human resources (HR) department.

Best Life Insurance Providers

Before you can buy supplemental coverage, you must have an underlying life insurance policy. Life insurance comes in two basic forms, term-life and whole-life and with several variations including variable and universal life insurance. Whole-life policies cover individuals for their entire lives while term-life policies cover a specific term, generally 10-, 20- or 30-year policy terms.

Things to keep in mind when deciding on the right type of life insurance for your family: 

  • Most whole-life insurance policies build cash value, which can be borrowed against to cover financial needs or help pay for policy premiums.
  • Term-life policies are generally less expensive and more affordable for families on a budget. Many term-life policies offer the option to convert to a whole-life policy at the end of the policy term.

We’ve assembled a list of the best life insurance providers to help you shop and compare life insurance options.

  • Bestow Life Insurance
    More Details
    Age Requirements
    18-59
    Overall Rating
    Read Review
    securely through Bestow Life Insurance's website
    More Details

    *excludes New York

  • Northwestern Mutual
    More Details
    Age Requirements
    18 - 100
    Overall Rating
    More Details
  • Transamerica (AEGON)
    More Details
    Age Requirements
    18 - 80
    Overall Rating
    More Details
  • Ladder Life Insurance
    More Details
    Age Requirements
    20 - 60
    Overall Rating
    Read Review
    securely through Ladder Life Insurance's website
    More Details

    Ladder Insurance Services, LLC (Cal. license # 0K22568; Ark. license # 3000140372) offers term life insurance policies: (i) in New York, on behalf of Allianz Life Insurance Company of New York, New York, NY (policy form # MN-26); and (ii) in all other states and the District of Columbia on behalf of Allianz Life Insurance Company of North America, Minneapolis, MN (policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to issue life insurance in the state of New York. Insurance policy prices, coverages, features, terms, benefits, exclusions, limitations and available discounts vary among these insurers and are subject to qualifications. Each insurer is solely responsible for any claims and has financial responsibility for its own products.

Developing Your Life Insurance Strategy

Don’t wait until you are approaching retirement to start building your life insurance strategy. Life insurance rates are cheapest when you are in your 20s and enjoying good health. Understanding the basics of life insurance and all your options will help you develop the best strategy to protect your family’s financial well-being.

Now that you have a better idea of how this type of coverage works and who it's for, you need to make sure that you have all the coverage you require. Check out Benzinga for more information or especially when you are ready to purchase a policy.

Frequently Asked Questions

Questions & Answers

Q
When should you get supplemental life insurance?
A

You should get supplemental life insurance when you realize your family’s financial needs may outsize your current policy’s benefits after you pass. There’s no need to cancel your current life insurance policy and buy another one when you can get a supplemental plan to add an extra layer of protection to cover your family’s financial needs after you die. 

You should also consider purchasing a supplemental policy if you need extra coverage for a spouse or child. The most cost effective time time to buy supplemental coverage is when you are in your 20s and coverage is at its cheapest.

Q
What is the difference between basic and supplemental life insurance?
A

Basic life insurance is an all-encompassing policy that is meant to offer a big payout when you pass away. Supplemental life insurance is supposed to give you a little bit more coverage when you have more financial obligations to cover or when you want to leave extra money for your family’s day-to-day living expenses after the financial obligations are taken care of so that your family can live comfortably.

Q
What happens to my supplemental life insurance if I quit my job?
A

Depending on your plan, some life insurance companies let you “port” your coverage, meaning if you leave your employer you can take the policy with you. The policy stays in force as long as you continue to pay the premium. Essentially, the policy is portable.

A supplemental policy through your employer may not be portable but many supplemental plans purchased through a private insurer allow you to take your policy from job to job.

Methodology

Benzinga crafted a specific methodology to rank life insurance. To see a comprehensive breakdown of our methodology, please visit our Life Insurance Methodology page.