Is supplemental life insurance worth the cost? Maybe, but private insurance might be better.
Imagine you just landed a great new job. You’re really pumped for the first day of work. You put on your brand new suit, pick up your swanky briefcase, and head to the office…only to sit in onboarding meetings for the whole first day.
These meetings can be boring, and they can take forever if your new employer is large and onboards many employees at once. Typically, they go over things like employment expectations and requirements. But they’ll also usually walk you through the employer’s various benefits package options.
Many times, you’re left with lots of choices at the end of onboarding, including:
- Which health insurance plan to choose.
- How much to contribute to your 401(k).
- Whether or not to use an FSA or HSA.
- Whether or not to purchase supplemental life insurance.
We’ve talked elsewhere on Dough Roller about the first three options. But now, let’s focus on the fourth option: Whether or not to purchase supplemental life insurance.
You might be thinking, “What is supplemental life insurance?” We’re here with answers. First, let’s discuss what this type of insurance is, and then we’ll talk about whether or not it’s worth the cost.
What is Supplemental Life Insurance?
Supplemental life insurance is, as you might guess, a form of additional life insurance. It’s not meant to take the place of a good term life insurance policy. But it will give your family additional coverage should the worst happen to you.
You can get supplemental life insurance two ways: through your employer, or privately.
Employer-provided supplemental life insurance
Some employers offer both term life insurance coverage and supplemental life insurance. Term life insurance through your employer generally works like regular term life insurance. It may be cheaper, though, since it’s a group policy. The company takes on less risk when insuring a larger group of people, and this can translate into savings for you.
In 2014, about 94 percent of U.S. companies surveyed offered their employees life insurance coverage of some sort. Employers generally offer these ancillary benefits based on what their employees need most.
Supplemental life insurance is similar to a group term life insurance policy, but is typically more limited. The limits will depend on your particular policy. Here are some common terms to look for:
- Accidental Death and Dismemberment: Some supplemental policies are specifically for accidental death and dismemberment (AD&D). This means they will only cover you if your death is caused by an accident. Some of these policies, though, will also pay out if you’re in a serious accident but don’t pass away. For instance, if you lose your eyesight, hearing, or a limb due to a covered accident.
- Burial Insurance: Some supplemental policies are strictly to cover the costs of burial and funeral services in the event of your untimely death. These policies typically offer between $5,000 and $10,000 of coverage.
- Non-Portable: Any life insurance policy you purchase through your employer may be non-portable. That means that you can’t take it with you when you move on to a different employer or retire. We’ll talk more shortly about why this can be such a big problem for many consumers.
- Spouse or Domestic Partner Insurance: Sometimes employers will allow you to purchase supplemental life insurance for your spouse or domestic partner. This policy might complement your own term life insurance policy. The limits on policy amounts may be lower, and these policies may be subject to some of the same limits described above.
Your employer’s terms will vary, depending on the plan they’ve chosen. So you’ll want to examine the fine print for these limitations before you decide to purchase a policy.
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