Supplemental Life Insurance: What It Is and Why You Need It. Life insurance is one of the most important financial tools you can have to protect your loved ones in the event of your untimely death.
Supplemental Life Insurance: What It Is and Why You Need It
It provides a lump-sum payout to your beneficiaries that can be used to cover expenses like funeral costs, outstanding debts, and living expenses. But what happens if the coverage provided by your employer’s group life insurance policy isn’t enough to cover your needs? That’s where supplemental life insurance comes in. In this article, we’ll discuss what supplemental life insurance is, how it works, and why you might need it.
What is Supplemental Life Insurance?
Supplemental life insurance is a type of life insurance policy that you can purchase in addition to the coverage provided by your employer’s group life insurance policy. It’s also sometimes called “voluntary” or “employee-paid” life insurance, because you pay the premiums yourself rather than having them deducted from your paycheck.
Supplemental life insurance policies can provide coverage in multiples of your salary, typically up to a certain cap. For example, your employer’s group life insurance policy might provide coverage equal to one times your salary, but you could purchase a supplemental life insurance policy that provides an additional two times your salary, for a total of three times your salary in coverage.
How Does Supplemental Life Insurance Work?
Supplemental life insurance policies work much like traditional life insurance policies. You pay premiums in exchange for a death benefit that is paid out to your beneficiaries if you die while the policy is in force. The death benefit is typically paid out tax-free, and can be used by your beneficiaries for any purpose they choose.
The main difference between supplemental life insurance and traditional life insurance is that with supplemental life insurance, you’re purchasing the policy yourself rather than having it provided to you by your employer. This means that you can customize the policy to meet your specific needs, and you can take the policy with you if you leave your job.
Why Might You Need Supplemental Life Insurance?
There are several reasons why you might need supplemental life insurance. Here are a few:
- Your Employer’s Group Life Insurance Policy Doesn’t Provide Enough Coverage
Many employers offer group life insurance policies as part of their benefits packages. These policies typically provide coverage equal to one or two times your salary, up to a certain cap. While this may be enough for some people, it may not be enough to cover all of your financial obligations in the event of your death. If you have a large family or significant debts, you may want to consider purchasing a supplemental life insurance policy to provide additional coverage.
- You Want to Customize Your Coverage
With a supplemental life insurance policy, you can customize your coverage to meet your specific needs. For example, you can choose the amount of coverage you want, and you can select additional riders (add-ons) to your policy, such as accidental death and dismemberment coverage, that may not be available through your employer’s group policy.
- You Want to Take Your Policy With You
When you purchase a supplemental life insurance policy, you own the policy. This means that you can take it with you if you leave your job, unlike group life insurance policies that are tied to your employment. This can provide you with peace of mind knowing that you’ll still have coverage even if you switch jobs.
- You Want to Lock in Lower Premiums
Supplemental life insurance policies typically have lower premiums than traditional life insurance policies, especially if you purchase the policy when you’re young and healthy. By purchasing a policy now, you can lock in lower premiums for the life of the policy.
- You Want to Provide for Your Loved Ones
Finally, one of the main reasons to purchase any life insurance policy is to provide for your loved ones in the event of your death. Supplemental life insurance can provide additional coverage to ensure that your beneficiaries are taken care of financially. This can be especially important if you have dependents who rely on your income to cover living expenses like housing, food, and healthcare.
Supplemental life insurance can be a valuable tool to provide additional coverage and peace of mind to you and your loved ones. By purchasing a policy that meets your specific needs, you can ensure that your beneficiaries will be taken care of financially in the event of your untimely death. Whether you’re looking to supplement your employer’s group life insurance policy or purchase your own policy, it’s important to work with a reputable insurance agent to find the best policy for you. Remember, life insurance is not just about protecting yourself, but also about protecting the ones you love.