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Supplemental Life Insurance

Supplemental life insurance helps you top up the insurance you get through your employer. While group life insurance that you get as part of your employee benefits has the advantage of being cheap or free, it may not be enough for you. So that’s when you will want to consider supplemental life insurance.

Find out now: How much life insurance do I need?

Is the insurance I get from my employer enough?

Getting life insurance coverage as part of your benefits package is a great thing. Like health insurance, life insurance is cheaper when purchased as part of a group. There’s strength in numbers! Company-sponsored life insurance has another big advantage: it doesn’t require a medical exam. That makes it a very popular default option for workers who are lucky enough to have it. The thing is, many people who get life insurance from their employer stop there and don’t add to their coverage. This could be fine, or it could be a ‘Big Financial Mistake.’

Let’s assume that you have life insurance through work. If you have no debt and no dependents, you can probably relax. Your employer-based coverage will likely be enough to cover your final expenses and help your loved ones tie up any loose financial ends like medical bills or credit card payments if something happens to you.

But if you have a mortgage and dependents, you might need to think about supplemental life insurance. Buying a supplemental life insurance policy will take your life insurance coverage from so-so to just right. If you’re in the C-Suite, you probably have a generous life insurance policy through your job, but if you’re lower down the career ladder your policy might be pretty bare bones.

When might I need more life insurance?

SmartAsset can help you figure out how much life insurance you need. Then, it’s up to you to check whether your employer-sponsored coverage meets your needs. Go ahead, we’ll wait. Remember the primary functions of life insurance: cover final expenses, pay off your mortgage, replace your lost income and pay for your children’s education. If you’re a single parent or the only working spouse in a two-parent family, don’t skimp on the life insurance. Likewise, if you have lots of dependents you want to provide for, you may need more life insurance than your company policy can provide.

If the coverage you get from your job isn’t enough for your family’s needs,  you have two options. You can either ask the insurance company that provides your employee policy about purchasing additional coverage through them, or you can buy supplemental life insurance on the open market.

Before you go with option number one and ask your company’s insurance provider about adding to your coverage, consider how much longer you’re likely to be at your job. If layoffs are looming or if you’re looking around for other opportunities, it’s a good idea to avoid adding to your employee policy.

Even if you’re planning on staying at your job for many years, sticking with the same insurance company might not be your best bet. Research the company to make sure it’s solvent and gets good reviews. Then, ask how much it would cost to bump up your coverage. Compare that estimate to quotes from other companies before committing yourself.

Find out now: How much will life insurance cost me?

If you don’t want to add to your employee insurance with the same company, shop around for a supplemental life insurance policy that can bridge the gap between the coverage you already have and the coverage you really need. This option might well be cheaper than adding to your company plan. Be prepared to take a medical exam, though.

Bottom line

Supplemental life insurance is designed to supplement, not replace, so don’t surrender your company life insurance. It is free, after all. If you decide to work with a life insurance agent or broker, make sure you explain to him or her that you already have baseline coverage through your job. You shouldn’t have to pay an arm and a leg for supplemental life insurance.

Buying supplemental life insurance is protection against “what ifs.” What if you lose your job and there’s a gap in coverage before you can purchase a new life insurance policy? What would your family do if something happened to you during that gap? What if your health declines, and by the time you get around to shopping for supplemental life insurance you can’t find an affordable policy? Considering these possibilities and what they would mean for your family’s financial future doesn’t make you paranoid, it makes you responsible.

If you’re young and healthy, take advantage of that fact to lock in low insurance premiums while you can. If you change jobs in ten years, you won’t have access to the same low premiums you could get today. Term life insurance is generally an affordable way to provide security for your dependents. Why wait to get the coverage you need?

Photo credit: flickr

Amelia Josephson Amelia Josephson is a staff writer covering financial literacy topics at SmartAsset. She holds degrees from Columbia and Oxford. Originally from Alaska, Amelia now calls Brooklyn home.


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