What is supplemental life insurance, and should you buy it through work?

Chances are, you’ve come across the phrase “supplemental life insurance” during your employer’s open enrollment, or when you first joined a new company. It sounds simple enough, in terms of what the words mean. But it’s a little more complicated than that, which is why we’re here to help you figure out exactly what supplemental life insurance is, what the difference between supplemental life insurance and basic life insurance is, and most importantly, whether you need it.

So let’s start here: What is supplemental life insurance? Supplemental life insurance is the coverage you can purchase through your work in addition to the group life insurance they might already offer as a benefit. A supplemental policy is usually paid for out of your paycheck. While group life insurance is part of your benefits package from your employer and therefore is usually a free benefit or has affordable premiums, that’s not always true of supplemental life insurance.

You may ask, then, Do I need supplemental life insurance? Whether supplemental life insurance is a good value will depend on the product and your personal age, health and the amount of coverage you’re seeking.

To help you navigate the supplemental coverage option, we’ve outlined a few key questions you should ask yourself, and provided answers that will help guide you toward making the right choice for your life insurance needs.

Do you get employer-provided life insurance?

Any consideration of whether to buy a life insurance policy should begin with first revisiting what amount of coverage you already have as part of your employee benefits. According to the Department of Labor, a vast majority of workers have access to a life insurance plan through their employer. If that majority includes you, review what coverage amount is currently offered to you. (If you are unemployed, work as a contractor or freelancer, or take part in the gig economy, however, chances are you do not have any employer-provided life insurance policy.)

As we’ve noted before, however, employer-sponsored life insurance coverage is often insufficient, particularly if you have children or own a home. Employer-provided coverage is a nice benefit, to be sure — it’s typically free, or nearly so — but your needs might require additional life insurance coverage. Group life insurance usually covers one to two times your annual salary, enough to pay for, say, the cost of a funeral and other sudden expenses, but likely not enough to complete payments on a mortgage and send your kids to college and… well, you get the idea. That’s where employee supplemental life insurance comes in. It’s essentially additional coverage you purchase through your employer, at an additional cost that is deducted from your paycheck.

Have you compared life insurance rates?

Getting supplemental coverage might cost you more than it would to purchase a life insurance policy in the open market. How much more? That will depend on a range of factors, including your age, health, coverage amount and more. (More on that in a minute.) It will also depend on what kind of coverage you get, and it’s important to note here that a lot of employer-offered supplemental life insurance plans are limited in some way.

You may, for example, see something called accidental death and dismemberment (AD&D) insurance, which is pretty much what it sounds like. If you die or are hurt in an accident during the coverage term, your loved ones will be paid a death benefit. If you die from other causes (including natural ones), however, you’re not covered under accidental death insurance. Another offering might be a burial insurance (or final expense insurance) policy, which will pay for your funeral costs — not a small amount — but nothing else.

Compare these types of policies to term life insurance, which offers both more coverage (in terms of dollars) and therefore, potentially more flexibility. For example, if you buy, a $500,000 policy, that can be used toward funeral expenses (often in the $7,000 to $10,000 range ), plus child care, education, housing costs, and making up for lost income in countless other ways. And you might be able to get coverage for less than what you spend per month on coffee. (We know it’s a cliche, but it’s true.)

With that in mind, if you’re considering buying supplemental life insurance, it’s important to compare these quotes with other products on the open market. Most digital life insurance providers will let you easily get free quotes for coverage. We’ll jump-start the research for you here:

How’s your health?

Depending on the type of policy, supplemental life insurance policies can be a good choice for people who might have difficulty getting individual policy coverage outside of work. Let’s say you’re older, you’re a smoker, you’re out of shape, or you have high-risk hobbies (like flying planes or hang gliding). With individual policy coverage that you buy outside of work, a life insurance company will consider all those factors and price your coverage accordingly.

If you’re younger and healthier, you will likely get the best rates with a term life insurance policy. Let’s say you’re in your 30s and in excellent health: you want the insurance company to price your coverage based on your health. So if that’s you, make sure whatever policy you purchase (supplemental or not) is priced based on your age and health. And remember: always price compare.

Do you need portable coverage (and what is that, anyway?)

One more thing about supplemental life insurance: If you decide to purchase it, be sure to check whether you can take the policy with you if you leave or lose your job.

If you want life insurance in place for a particular amount of time (until your children are grown, perhaps; or until your mortgage is paid off), irrespective of your employment situation, it’s something to consider. If you buy your own term life insurance policy aside from a supplemental insurance policy, it goes where you go, and keeps protecting your family even if you change employers (and continue to pay the premiums).

So, should I buy a group supplemental life insurance policy?

To put it simply, supplemental life insurance premiums may be higher than what you’d pay for the same coverage on the open market. So make sure you shop around online before buying a policy.

Some kind of life insurance coverage is better than nothing, but any prudent shopper wants to make sure they get the best value for their dollar. If you’re young and healthy, term life insurance should be an affordable way to help financially protect your loved ones. To find out how affordable, get a quote for coverage at Haven Life.