Imagine you just got yourself a term life insurance policy, or that you’re covered under your employer’s insurance plan, but somehow you need additional coverage because your financial liability is too much. Insurance companies offer you lots of different options if that is the case; like having add-ons or supplemental coverages that you can choose according to your own needs.
Let’s get into details of what supplemental life insurance is and how a spouse can be attached to the policy.
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What does Supplemental Life Insurance mean?
Having additional coverage on an existing insurance policy is called supplemental life insurance. There are two ways of applying for a supplemental life insurance policy:
- Through an employer
Many insurance policies are given to workers under the employer’s insurance program where the cost of coverage is covered by the employer. So if employees need coverage, they can tap the employer’s program they’re covered under and get insurance.
In such a case if employees feel that they need additional coverage to the existing policy they can ask the employer for supplemental life insurance- these are low amount of coverages and often free of cost.
You can also look for supplemental life insurance by applying for privately- go to the insurance company and tell them you need additional coverage for yourself or anyone else who is attached to the policy. They will give you a suitable plan with a proper coverage amount, and with lower premiums too.
Types of Supplemental Life Insurance
Here are the most common types of supplemental life insurance options that people like to add on their existing life insurance policies.
Accidental Death and Dismemberment (AD&D): This type of insurance pays out if the employee has a sudden accidental death, or is paralyzed or disabled due to the accident.
Accidental Death and Personal Loss Insurance: If the insured person is in coma for more than 30 days due to an accident caused at work, or is paralyzed or has suffered loss of speech or hearing as a result of a workplace incident, accidental death and personal loss insurance provides coverage by giving a set monthly amount to the beneficiaries. While deciding the policy, the amount is fixed and is given to the beneficiaries on a monthly basis.
Spousal/Domestic Partner Insurance: Just like an add-on to your existing life insurance policy, a spousal/domestic partner insurance gives coverage to your spouse which is a percentage of what coverage you’re getting.
Burial Insurance: This is a very basic kind of supplemental insurance with a low coverage amount of up to $5,000-$10,000 to pay for funeral and burial expenses of the policyholder. Burial costs are very high in the country so many people get this supplemental insurance to pay for those.
Health Specific Insurance: If the policyholder dies due to a specific health condition like cancer or stroke, the benefit could be used to pay off pending hospital bills or funeral charges. This type of insurance is a good idea if a terminal illness runs in your family, because this way you can get ahead of unfortunate circumstances.
What is Spouse/Domestic Partner Life Insurance?
Purchasing supplemental life insurance for your spouse or domestic partner is doable, and sometimes you can also ask your employer to provide it. The coverage amount is low, up to $150,000 with premiums paid by the employer.
You may need an additional option of coverage if you feel that your spouse isn’t protected under any other source of life insurance. This way a supplemental spouse life insurance will cover your spouse as well.
Experts say that it is better to go for a private supplemental life insurance because of portability. As long as the premiums are being paid, the policy will remain in force. Usually when an employee is covered under their employer’s plan, the policy is lapsed when they change jobs. So if the spouse wants to avoid this risk, opting for a privately managed plan is probably the best option.
Voluntary Spouse Life Insurance
Usually, the coverage amount for supplemental spouse life insurance is 50% less than the originally insured person.
Your dependent’s benefit amount cannot exceed 100% of your own benefit amount. For example, if your salary is $30,000 and you elect one-half times your salary in voluntary term life for yourself, you must elect $15,000 or less for your spouse.
Here is a breakdown of premiums according to the age of the spouse/domestic partner.
$1,000 of coverage
|70 and over||$1.057|
What is Supplemental Child Life Insurance?
Supplemental child life insurance provides financial protection if a child dies. This coverage can be used for burial costs, funeral costs and other expenses too.
This type of additional coverage is also given to plans and existing policies, but it isn’t always advisable to buy coverage for children. However, people still find this option feasible because as the child grows older, premium costs also grow higher.
Is Supplemental Life Insurance Worth It?
Now that you know what it is and how it works, the next step is to determine whether it is really worth the cost or not. There is no direct answer to this question because it fairly depends on several factors such as what is the current amount of coverage, why do you need additional coverage, do you have guaranteed expenses planned in the future etc.
The cost factor is one major reason for people to opt or drop this option.
This table gives an overview of the cost part with each coverage amount of supplemental life insurance plans.
|Coverage Option||Coverage Amount||2020 Monthly Rate|
|$5,000 per child||$1.02|
|$10,000 per child||$1.94|
|$20,000 per child||$3.69|
|Spouse/partner and dependent
|$10,000 spouse/partner; $5,000 per child||$4.51|
|$20,000 spouse/partner; $10,000 per child||$8.60|
|$40,000 spouse/partner; $20,000 per child||$16.40|
Note: Sample rates have been extracted online, courtesy of Iowa University.
Supplemental life insurance is an additional type of coverage that you may want for your spouse/domestic partner or your child. If they aren’t covered under any other way of policy, you could ask your employer to provide them with supplemental life insurance coverage. Of course the coverage amount will be a lot less than what you have.
A supplemental life insurance policy is a good option for spouses especially under an employer’s plan because this way the policyholder doesn’t have to worry about the cost of coverage and paying premiums as it is covered by the employer himself. The spouse gets permanent coverage until the employee stays with the company.
Regular payment of premiums each month will ensure that the policy stays in force and the policyholder receives the coverage amount when the time comes.