Are you concerned that your employer’s group life insurance plan may not provide enough financial security for your family? If so, supplemental life insurance might be the solution you’ve been looking for. Whether you’re looking to fill coverage gaps or increase your coverage amount, supplemental life insurance can give you the peace of mind you need.
How Does Supplemental Life Insurance Work?
Group life insurance offered by employers is a great benefit, but it often falls short when it comes to providing adequate coverage. Typically, these policies only offer death benefits equivalent to a year or two of salary and may not cover your spouse. This is where supplemental life insurance comes into play.
Supplemental life insurance is not a specific type of policy, but rather insurance purchased to supplement your employer’s group life insurance. It adds additional benefits or increases the coverage amount of your existing policy. You can purchase it through your employer or directly from an insurance company or even an online broker.
Types of Supplemental Life Insurance
When it comes to supplemental life insurance, there are various options available to suit your needs.
Permanent Life Insurance Policies
Permanent life insurance policies provide coverage for your entire life. Along with a death benefit for your beneficiaries, these policies also include a cash-value feature that grows over time. You can access this cash value through loans or withdrawals.
There are different types of permanent life insurance policies, such as whole life, universal life, indexed universal life, and variable universal life. Each has its own method of growing the cash value.
Term Life Insurance Policies
Term life insurance policies provide coverage for a set number of years, typically 10, 20, or 30. You choose the term length, coverage amount, and beneficiaries. Unlike permanent life insurance, term life insurance does not have a cash-value component, making it more affordable and easier to understand.
Group Life Insurance Coverage Riders
Your employer may offer optional riders and supplements to enhance your group life insurance coverage. These can include higher death benefit amounts, coverage for your spouse or children, accidental death and dismemberment coverage, and more.
How to Decide if You Need Supplemental Life Insurance
If your employer’s group life insurance coverage isn’t sufficient for your family’s needs, consider buying supplemental life insurance. Here are some factors to consider:
You Need a Higher Death Benefit
If the death benefit offered by your employer is limited to one or two times your annual salary, it may not be enough to provide financial security for your loved ones. Consider purchasing supplemental life insurance to increase your coverage.
You Want to Cover Your Spouse or Partner
Group life insurance typically only covers the employee. If you want to extend coverage to your spouse, partner, or children, supplemental life insurance is essential.
You Want Additional Coverages
Group plans usually offer only basic life insurance coverage. If you’re looking for additional protection, such as coverage for accidents or dismemberment, supplemental life insurance can provide the extra benefits you need.
You Want Portable Coverage
Group life insurance is often tied to your employment and may not be portable if you leave your job. Supplemental life insurance offers portability, ensuring that you have coverage regardless of your employment status.
How Much Supplemental Life Insurance Do You Need?
Determining the right amount of supplemental life insurance depends on your specific circumstances. A simple rule of thumb is the 10X formula: multiply your income by 10 and add at least $100,000 per child to cover college expenses. This will give you a rough estimate of the coverage you need.
To assess your coverage gap, subtract your existing group life insurance coverage from the total amount calculated using the 10X formula. This will help you determine how much supplemental insurance you require.
If you’re considering purchasing supplemental life insurance, ask yourself the following questions:
Does the supplemental life insurance offered by your employer meet your coverage needs?
Ensure that your employer’s supplemental life insurance provides the coverage amount, types of coverage, and eligible beneficiaries that you require.
How much does your employer’s supplemental life insurance cost?
While your employer may offer group life insurance at no cost, supplemental coverage usually comes with a price tag. Understand the cost before making a decision.
Would you be better served by buying a policy on the open market?
Compare the offerings of different life insurance companies to find a policy that aligns with your needs. You may even find more affordable options outside of your employer’s offerings.
Everyday Life makes shopping for life insurance easy. As an online broker, they provide policy options from multiple life insurance companies, allowing you to find the best coverage for your family’s needs.
How Much Does Supplemental Life Insurance Cost?
The cost of supplemental life insurance varies depending on several factors, including policy type, coverage amount, age, and health. The cost can also differ between insurance companies.
According to a recent study, the average monthly cost for a $1 million death benefit policy for a nonsmoking 40-year-old with average health is as follows:
- Term Life Insurance: $25
- Whole Life Insurance: $225
These figures serve as a general guideline, but the actual cost may vary based on individual circumstances. Be sure to check with your employer regarding the cost of their supplemental life insurance options.
TIME Stamp: Supplemental Life Insurance Fills the Gaps
Your employer’s group life insurance plan is undoubtedly valuable, but it may not fully protect your loved ones. Supplemental life insurance serves as a vital tool to enhance your coverage and meet the unique needs of your family.
Frequently Asked Questions (FAQs)
What is supplemental employee life insurance?
Supplemental employee life insurance boosts coverage and fills any gaps in your employer’s group life insurance plan.
What is supplemental spouse life insurance?
Supplemental spouse life insurance extends your group life insurance coverage to your spouse or domestic partner, ensuring they receive the benefits.
Can you borrow from supplemental life insurance?
If your life insurance policy has a cash-value component, such as a whole life policy, you may be able to borrow against it.
Can you buy supplemental life insurance from an insurance company?
Yes, in addition to employer-offered coverage, you can purchase supplemental life insurance directly from an insurance company. This option is beneficial if your employer’s coverage does not meet your needs or lacks portability.