Melissa Morris has a BS and MS in exercise science and a doctorate in educational leadership. She is an ACSM certified exercise physiologist and an ISSN certified sports nutritionist. She teaches nutrition and applied kinesiology at the University of Tampa. She has been featured on Yahoo, HuffPost, Eat This, Bulletproof, Vitacost, LIVESTRONG, Toast Fried, The Trusty Spotter, Best Comp...

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insu...

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Reviewed by Rachael Brennan
Licensed Insurance Agent Rachael Brennan

UPDATED: Apr 24, 2022

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Here's the Scoop

  • Supplemental life insurance is a type of insurance that offers an extra layer of coverage to an existing policy
  • Many employers offer supplemental life insurance as a benefit to their employees since it helps with their financial well-being
  • The benefits of supplemental life insurance are simple to comprehend, but it isn’t always the best option for everyone, which is why there are certain factors to consider

Supplemental life insurance can apply to any type of supplemental life insurance policy. However, the term is most commonly used to describe additional life insurance coverage obtained as a voluntary insurance benefit at work (i.e., employee-paid). Employer benefits are a significant source of life insurance protection — and for many people, it is their only one.

In this article, we’ll cover everything you need to know about supplemental life insurance and its benefits. 

What is supplemental life insurance?

Supplemental life insurance, also known as group life insurance, is a type of insurance that offers an extra layer of coverage to an existing policy. Many employers offer supplemental life insurance as a benefit to their employees since it aids in their financial well-being. However, there is a distinction to be made between basic and supplemental life insurance.

The following are examples of supplemental insurance:

  • Coverage that you purchase in addition to your standard insurance
  • Life insurance for your spouse or child
  • Coverage that pays out if you’re seriously hurt or killed in an accident

Supplemental life insurance, often known as employee-paid or voluntary life insurance, is typically purchased from your company. Private insurers can also provide policies.

Supplemental life insurance can be a valuable addition, especially if your health conditions make it difficult to receive sufficient coverage elsewhere. Always make sure to compare policies and rates. In some circumstances, the advantages may outweigh the costs.

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What is basic life insurance?

Basic life insurance is one of the most popular benefits companies offer to their employees. While there are several options available on the market, the most common options require the employees to pay little or nothing at all.

Supplemental Life Insurance vs. Basic Life Insurance

If your workplace provides supplemental life insurance, you can purchase it in addition to the standard coverage:

  • Basic life insurance. Policies are typically free and cover one or two times your annual salary. Your employer pays the rates.
  • Supplemental life insurance. Policies have higher coverage limits, but you typically pay the rates. Policies are generally only available to full-time employees or those who work a certain number of hours. To be eligible for additional coverage, most companies demand that you have a valid basic life insurance policy.

Keep reading to learn more about these differences and why you may need supplemental life insurance.

What are the benefits of supplemental life insurance?

While basic coverage may be sufficient for certain employees, others may require supplementary coverage. As a result, many employers provide workers with the option of purchasing supplemental life insurance voluntarily.

When opposed to individual life insurance policies, group life insurance plans offer a variety of advantages because companies buy for numerous employees at once. Here are a few of those advantages:

  • Lower rates. Group life rates are typically lower than those for a comparable individual policy.
  • Simple qualification. There’s usually no need for a medical exam, and it’s easy to apply for because your employer already has your personal data.
  • Easy payroll deduction. It’s automatically taken out of your pay.

Depending on your unique circumstances, you’ll need to decide if individual life insurance, group life insurance, or both are the right choice for you.

Who should buy supplemental life insurance?

As mentioned before, although the benefits of supplemental life insurance are simple to understand, it isn’t always the best option for everyone. It’s best to do some research before signing up for supplemental life at work. Important information can be found on your company’s employee website, in your benefits brochures, or by speaking with an HR manager.

Here is some extra information on some things to keep an eye out for.

Where To Buy

Purchasing additional life insurance through your workplace has both advantages and disadvantages. You may prefer the convenience of signing up through your employer and paying rates directly from your paycheck.

If you have a pre-existing medical condition, it may be wise to take advantage of work-provided supplemental coverage. On the other hand, if you’re young and healthy, you might be able to use that to negotiate a lower rate on your own.

Alternative Options

In addition to the typical term options, some workplaces provide supplemental whole life insurance coverage. Your age and health, however, may prevent you from being eligible. Instead of purchasing a single supplemental policy, consider laddering your life insurance policies, which means getting multiple term life policies of varying periods.

If you want certain features rather than greater coverage, you may be able to add life insurance riders to your current policy, such as accelerated death benefits. These allow you to accept a partial payout from your policy if you become terminally ill. 

Existing Coverage

​Before choosing supplemental coverage, review your current insurance. At no additional expense to you, your basic policy may already cover AD&D, spouse, or dependent life insurance. If you don’t already know what you have, find that out.

Portability

Although basic life insurance through employment is often free, if you leave your job, you may lose your coverage. But, you’ll be insured no matter where your profession takes you if you buy your own supplemental life insurance policy or one that permits you to take it with you. 

Enough Coverage

If you have 1x–2x your salary in employer-provided coverage, it may be plenty for your needs, especially if you don’t have any dependents. If you have young children or other dependents, or if you have a mortgage or other bills, that quantity may not be sufficient. Supplemental insurance may be able to cover the gap in some or all cases. 

Type of Supplemental Coverage

There are various supplemental plan offers, including yearly renewable term life insurance, voluntary permanent life insurance, additional coverage for a spouse, domestic partner, or child, and accidental death and dismemberment (AD&D) insurance.

Make sure to take a look at what your employer offers and which type of supplemental coverage would suit your situation the best. 

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How much does supplemental life insurance cost?

Supplemental employee life insurance prices vary depending on the following:

  • The type of coverage provided (term, permanent, or AD&D)
  • Your age
  • Where you live
  • The size of the group
  • The benefit amount

It is also important to note that group life insurance obtained through your company is often less expensive than supplemental insurance purchased separately. 

While group life insurance is typically less expensive than individual life insurance, the coverage provided may be insufficient. When you need $1 million in life insurance, you might only receive coverage for a year’s income. In this case, individual supplemental term and permanent life insurance policies may allow higher coverage amounts than employer-based plans.

However, your age and health may determine how much coverage you can get. To get the coverage level you need, it may also be a good idea to combine group life insurance with an individual life insurance policy. In this case, individual supplemental term and permanent life insurance policies may allow higher coverage amounts than employer-based plans. Keep in mind that your age and health may determine how much coverage you can get.

Supplemental life insurance is not supplied at the same price to every business or organization. The insurance company calculates pricing for each “group” by analyzing each request’s demographics, life expectancy, previous claims, and policy design. Pricing is based on expected claims, expenses, and profit margins for each group.

Supplemental Life Insurance

In a typical supplemental life insurance policy, a single contract covers a group of people. The policy is owned by your employer. Your beneficiaries will get a life insurance payout if you die while covered by your employer’s insurance. Depending on the employer’s policies, the compensation could be one year’s income or more, or a flat-fee sum.

Before signing up for supplemental life insurance, make sure to do research on what your employer offers and which type of supplemental coverage would benefit your situation the most.