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What is Supplemental Life Insurance?

By Sean Smith·October 20, 2022·5 Minute Read

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One of the benefits of life insurance is that it can be a financial emergency blanket of sorts. For example, suppose you were to pass away insured — your life insurance policy can help provide a layer of financial protection for the people you love, allowing them to grieve without immediately worrying about bills and debt.

Your death benefit is the payout your beneficiaries receive should you pass away insured and the death claim is approved. When you have life insurance through a group plan, typically provided by an employer or an organization you are a member of, the amount of coverage you have is determined by the organization providing the benefit. For some people, this coverage amount falls short of their life insurance needs.

If you have life insurance through your employer or an organization, you might want to consider these questions: Is the amount of coverage you have enough to support your dependents to continue on without you and the income you provide? Is your death benefit enough to help your beneficiary cover the cost of your final expenses? If the answer to either question is no, you might want to consider supplemental life insurance.

How Does Supplemental Life Insurance Work?

Supplemental life insurance is typically offered through employers or an organization such as a union, and they may refer to it as voluntary life insurance or employee-paid insurance.

In general terms, it is additional coverage you can purchase to supplement your existing group life insurance policy. Typically, you can buy supplemental life insurance without any underwriting.

It’s a good idea to review your life insurance policy if it is provided by an employer or organization. Employer-provided life insurance is usually free, but the coverage amount may not match your life insurance needs. That’s where supplemental life insurance could help.

Let’s recap: what is supplemental life insurance? It is additional coverage you can purchase at your own expense to supplement the basic life insurance coverage you receive as an employee benefit or through a membership organization. 

Is Supplemental Life Insurance Worth It?

Purchasing supplemental life insurance coverage can be a smart move for some people because it typically has low premiums and is easy to get. However, the value it brings depends on your health, age, and insurance goals, amongst other factors. 

When looking into supplemental life insurance, one thing to consider is the policy’s premium. Supplemental life insurance rates are typically not locked in, meaning they can increase with your age.

Another thing to consider - the amount of supplemental coverage you can buy is determined by your employer (or organization), so it still may not be enough to meet your needs.

Who Would Benefit from Supplemental Life Insurance?

Can you relate to any of these scenarios below? If so, you might want to consider purchasing supplemental life insurance if it is available to you.  

How Much Life Insurance Should You Get?

Knowing your loved ones have a life insurance cushion to land on if you pass away can help you breathe a little easier. As to how much life insurance you need to feel confident about your coverage, only you can make that determination.

But if you are looking for a life insurance coverage formula to help calculate your coverage needs, consider this: some financial experts suggest buying a life insurance policy with a death benefit that is six to twenty times your annual income

Expert formulas aside, the amount of coverage you purchase will likely depend on your financial situation and the needs of the people who rely on you. Take a seat (and a deep breath). First, make a list of expenses that would need to be covered if you were to pass away suddenly. Next, consider the amount of income you provide and what would happen, financially speaking, if you were no longer around. 

If you are the main income earner and have student debt, college-bound children, or a mortgage, you may need more life insurance coverage than someone with no kids and a paid-off house.

Once you do the math, you can then identify any coverage gaps you may have. If your current policy doesn’t cover your life insurance needs, it might be a good time to look into purchasing some additional coverage.

Are There Alternatives to Supplemental Life Insurance?

Employer-provided life insurance and any supplemental coverage you purchase through an employer or organization are typically not portable, meaning if you leave your job or the organization providing the life insurance, you may lose it.

Supplemental life insurance is not the only option for those looking to beef up their coverage — you could consider purchasing an individual life insurance policy.

There are two forms of life insurance to choose from: permanent life insurance and term life insurance. 

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Permanent Life Insurance

Permanent life insurance can provide lifetime coverage as long as you pay your premiums. Whole life and universal life are both types of permanent life insurance. Many permanent life insurance policies feature living benefits and can build cash value over time. If you have life insurance with cash value, you may be able to use the cash value to pay your premiums, purchase additional coverage, or take out a life insurance loan. Because of these features, most permanent life insurance policies are more expensive than term life insurance policies with the same death benefit.

Term Life Insurance 

Term life insurance covers your life for a length of time called a term. Though it varies from company to company, most term life insurance policies can be purchased in term lengths of anywhere from ten to thirty years, and with coverage available up into the millions for those who qualify.

Apply for Term Life Insurance Online in Minutes

Term life insurance starts at just $11 per month with Bestow.. Upon approval, you can buy a policy with a term of ten to thirty years and coverage up to $1.5 million.

Bestow’s application is quick, easy, and 100% online. There is no medical exam, and most applicants get an instant decision. Once you are approved, you can buy an individual policy that very same day. Start with a nearly instant free quote to see how budget-friendly term life insurance can be. 

Key Takeaways

  • Supplemental life insurance can help bridge the gap between your coverage needs and the amount of coverage your employer-sponsored life insurance provides.
  • If offered, you can typically buy supplemental life insurance through your employer.
  • If you want additional portable coverage, you might consider applying for an individual permanent or term life insurance policy.