Home General Insurance Supplemental life insurance can assist ensure you have adequate coverage – here’s...

Supplemental life insurance can assist ensure you have adequate coverage – here’s how it works


Supplemental life insurance adds another layer of protection to your existing policy.

If you die, life insurance can assist in financially safeguarding your family from the loss of your income. However, even if you currently have life insurance via your workplace (also known as a group life insurance policy), the coverage provided as part of your benefits may not be sufficient to properly protect your dependents in the event of your death. The death benefit (the amount paid to your beneficiaries if you die) for many companies’ group life insurance policies is one to two times your yearly pay. However, the general rule of thumb for life insurance is that the average individual need 10 times their annual salary.


Supplemental life insurance can help in this situation. These plans supplement your existing life insurance from your employer and give peace of mind to people looking to increase their coverage, often without having to complete a medical exam.

What exactly is supplementary life insurance?
Supplemental life insurance is additional coverage intended to enhance modest, basic life insurance policies provided by an employer and give further financial protection. Supplemental life insurance is often offered as an optional benefit to employees, who must then pay the premiums themselves.


If you elect to acquire additional life insurance via your company, your options will be limited by what your employer provides, such as how much coverage you’re permitted to purchase, what types of policies are available, and if a medical exam is necessary.

Even if you have life insurance via your employer, you may supplement it with an individual life insurance policy. CNBC Select chooses Northwestern Mutual Life Insurance as our top overall insurance selection for its wide range of life insurance products, alongside State Farm as our top pick for customer satisfaction.
What is the purpose of additional life insurance?


In addition to your baseline coverage, you can obtain extra life insurance via your workplace. Prices and policies differ depending on the company and organization. Insurance firms, for example, often set costs for each employer’s group based on demographics, life expectancy, prior claims, and policy design.

When reviewing your employer’s or organization’s plan, you may see the following life insurance options:

Term life insurance: This form of insurance offers coverage for a defined amount of time determined when the policy is purchased, often 10, 20, or 30 years. If you die within that time limit, your beneficiaries or the persons you name who survive will get a death benefit. The policy is worthless if you outlast the term.

Permanent life insurance covers you for the rest of your life and provides a guaranteed payout to your family. Permanent life insurance comes in two varieties: whole life insurance and universal life insurance. However, the rates for this sort of coverage are often higher than those for term life insurance.

Coverage for your family: You may also get coverage for your spouse and/or children at the discounted group cost.

How to Determine Whether You Need Supplemental Life Insurance

The benefits of extra life insurance may appear appealing, but that doesn’t guarantee it’s ideal for you. Here are some things to think about before making a purchase:

How much insurance do you currently have? If you currently have an individual life insurance policy that matches your needs, purchasing additional coverage via your employer may not make sense.

Can you find a better deal elsewhere? If you’re young and healthy, purchasing life insurance via your employer may not make sense because you’re already covered elsewhere. However, extra life insurance via your employer may make more sense if you have health issues or are older.

Is your insurance portable? It’s crucial to realize that in most circumstances, you can only rely on your employer-paid life insurance for as long as you work for them. Some supplemental insurance plans can be moved, while others cannot. Inquire with your employer’s human resources department about the terms of your plan.

What are the benefits and drawbacks of additional life insurance?

Pro: You may be able to avoid the medical exam while still receiving coverage.

You may be able to obtain extra life insurance without having to take a medical exam if you obtain it via your workplace. Because group insurance policies depend less on medical underwriting, those with pre-existing diseases such as diabetes or high blood pressure can obtain supplemental coverage. Consult your human resources department to check if a medical exam is necessary for your company’s supplemental life insurance policy.

Con: You have little control over your coverage.

Because your company determines which insurance is available and how much you may buy, there is little ability to tailor the policy to your specific needs. This is when standalone, individual coverage comes in handy.

Advantage: You may be able to extend coverage to your family.

Supplemental life insurance frequently includes the option of extending coverage to a spouse or kid.

Con: If you quit your employment, you may lose your coverage.

You may lose your coverage if you leave your work or company. Some supplementary insurance is transferrable, which means you can keep your coverage even if you change jobs. However, it is dependent on your employer’s unique policies and terms – before you join up, learn about the alternatives available to you and if your supplementary insurance coverage is transferable.