What is supplemental life insurance?
If you work for a company that offers employee benefits, you may have heard of supplemental life insurance. It is intended for employees who need more life insurance coverage than that provided by the basic policy. Here, we’ll take a look at the meaning of supplemental life insurance and focus on the different types of supplemental life insurance, as well as other options like term life insurance.
What is supplemental life insurance?
Supplemental employee life insurance is additional protection that you can add to the life insurance offered by your employer. Companies often offer group term life insurance at little or no cost to employees, but you may find that the benefit is not enough to protect your loved ones in the event of death. This is where supplemental life insurance comes in.
Supplemental life insurance comes in many shapes and sizes. Here are some of the more common types of supplemental life insurance:
Accidental death and dismemberment (MAD)
An AD&D policy pays if the insured dies in an accident, loses a limb or loses a major function such as speech, sight or hearing. In the event of the death of the insured, the beneficiary or beneficiaries generally receive a lump sum. If the insured is injured, the amount the insurance pays depends on the type of injury. For example, the insured may receive 50% of the face amount of the insurance policy for the loss of a hand or a foot. They may receive 100% if they experience a greater loss, such as losing an arm or losing their sight. If the insured is paralyzed, he can get 100% of the policy.
If the insured dies in a transit accident, the insurance company can double or triple the amount of basic coverage.
AD&D only covers death and injury due to accidents. For example, if the insured has a heart attack and dies, their beneficiaries do not receive AD&D payment.
There are usually limits on the amount of additional life insurance coverage and AD&D coverage a person can purchase, although the amount varies by insurance company.
Since AD&D coverage is limited to accidents, the rates tend to be lower than with a traditional term life insurance policy.
Joint supplementary life insurance
Sometimes an employer provides life insurance coverage for the spouses or domestic partners of employees in addition to the employee’s policy. Employees may also have the option of purchasing an additional policy for their spouse that offers more coverage.
Supplementary life insurance for children
Supplementary Life Insurance for Children provides basic life insurance coverage in the event of the death of an employee’s child. This blanket can be used for any purpose, including burial costs.
Complementary funeral insurance
Since the average funeral costs average between $ 7,000 and $ 12,000 in the United States, some people choose to purchase a supplemental insurance policy designed specifically to cover funeral expenses.
Is Supplemental Life Insurance Worth It?
There is no clear answer, but supplemental life insurance coverage through an employer can be problematic. This is because a person is rarely sure how long they will work for a specific employer, and most additional policies are not transferable – the employee cannot take the policy with them when they leave the job. business. If the employee wishes to maintain life insurance coverage, they will need to purchase a new policy.
Supplemental insurance also tends to be more expensive than term life insurance policies purchased on the open market. Plus, most insurance companies offer the same types of additional policies. Not only are premiums likely to cost less, but they are portable.
How Much Supplemental Life Insurance Should You Buy?
It depends entirely on individual needs. If a worker is nearing retirement, has a lot of money saved and invested, and has very little debt, it may not be necessary to have an additional policy. However, if an employee isn’t sure how their family would pay for the funeral if they were to die, it may be worth pricing an additional burial policy. If the employee is on the road a lot or spends half of their time traveling coast to coast, it may be worth considering an additional AD&D policy.
Supplementary life insurance through your employer
Before purchasing supplemental life insurance through an employer, it is essential to compare premiums to those of insurance companies in the open market.
According to the Department of Labor Statistics, Americans change jobs every four years on average. If an employee cannot take a policy with them, optional life insurance and additional coverage must be re-purchased. And, since the policyholder is now older than when they bought the first policy, a new policy will likely cost more.
However, this is not always the case. For example, an older worker with multiple health issues may find that a supplemental policy through an employer is less expensive, especially if there are questions about insurability. If this is the case, it is worth comparing the lower price of the policy offered by the employer at the risk of leaving the policy behind if he leaves the company.
Private complementary life insurance
It is also possible to take out supplementary life insurance from a private insurance company. Let’s say someone is self-employed and has life insurance from a private company. They get married, have a child, and decide they need more coverage. They can purchase one or more additional policies.
Or maybe someone was offered additional coverage through their employer, but shopped and then added additional insurance from a private carrier instead. In many cases, policies purchased on the open market are less expensive than policies purchased through an employer.
How does supplementary life insurance work?
Extended life insurance works much the same way as other types of insurance like auto, home or health insurance. The policyholder pays a premium — monthly, quarterly or annually – for the coverage. When that person dies, the insurance company writes a check to the beneficiary (ies) equal to the amount of coverage purchased.
How much does supplementary insurance cost?
Prices vary depending on the employer and the insurance company. Each organization assesses factors such as the life expectancy of the group it plans to cover and estimates the cost of claims.
While prices differ by organization, we wanted to get a rough idea of ââhow much an employee can expect to pay for additional coverage through an employer. As an example, we looked at how much government employees in Alameda County, California pay. This table indicates the cost of an additional policy covering the employee and his spouse or domestic partner. Premiums are deducted from paychecks twice a month.