Many Americans rely on their employers for life insurance. According to LIMRA’s 2022 Insurance Barometer Study, around 23% of all insured people have group life insurance through their workplaces. But is it enough?

Typically, employers offer coverage equal to an employee’s annual salary. However, you may need more coverage if you have any outstanding debts, ongoing expenses, or dependents. Supplemental life insurance helps bridge that gap. If you have a life insurance policy from your job but need additional coverage, read on to learn whether supplemental life insurance might fit your needs.

How does supplemental life insurance work?

“Supplemental life insurance” can mean any policy you purchase to expand your existing life insurance coverage. However, it usually refers to additional policies people buy through workplaces or organizations after receiving basic group life insurance. This type of coverage is also called “voluntary life insurance” because you can opt in or out. If you opt-in, premiums usually come directly from payroll.

You can apply during the annual benefits enrollment period or after major life events, like a job change or having a child. Your employer determines the application process, but it’s usually minimal. You won’t typically have to undergo a health examination or answer many health questions.

What is the difference between life insurance through a private insurer and supplemental life insurance?

Supplemental life insurance policies from an employer and life insurance policies purchased from a private company each offer your loved ones financial protection if you pass away. Understanding their differences can help you make the best life insurance decision for yourself and your family.

These two policies differ in the following key areas:

• Portability: Supplemental life insurance policies typically end when you leave your employer. With a policy from a private insurer, your coverage stays with you, even if you switch jobs.
• Medical exams: Supplemental life insurance rarely requires a medical exam, while private life insurance often does. However, some private insurers offer no-exam life insurance options.
• Ability to change coverage: You can change your supplemental life insurance policy annually during your organization’s open enrollment period. While you can typically reduce your private life insurance without too much trouble, qualifying for increased coverage could require a new medical exam.

What types of supplemental coverage can you get?

Insurers offer a wide range of supplemental life insurance policies for different circumstances. It’s important to note that not every workplace provides every type of insurance policy. So if you want to tailor your supplemental coverage to your specific needs, you may want to consider a private insurance provider.

Some common types of supplemental life insurance include the following:

• Supplemental employee life insurance: You may need to take out supplemental employee life insurance before qualifying for other supplemental policies. A supplemental employee life policy provides additional life insurance based on your coverage needs.
• Accidental death: Accidental death insurance offers you and your loved ones support in the aftermath of a terrible accident, like a plane or car crash, that leads to your death. Some employers offer accidental death and dismemberment (AD&D) insurance that would benefit you and your family if you’re in an accident that leads to disability or severe injury.
• Spouse life insurance: Supplemental spouse life insurance offers coverage for your spouse or domestic partner.
• Child life insurance: Supplemental child life insurance offers additional protection for children, stepchildren, and other eligible dependents.

How much supplemental life insurance do you need?

To determine how much supplemental life insurance coverage you need, consider the people who depend on your income. How would their finances change without your paycheck? Make sure you factor in ongoing expenses, like a mortgage or car payment, too.

If you have children, consider their current and future needs. Without you, could your family afford childcare? What about tuition costs? If anyone depends on you indefinitely, like an aging parent, try to factor in their needs as well.

In addition to replacing your income, your life insurance policy could also help with any debts you may leave behind, especially if loved ones might inherit them. Your death benefit should also cover the cost of your funeral and other end-of-life expenses.

How much does supplemental life insurance cost?

While employers usually offer basic life insurance to employees at no cost, policyholders pay premiums for employee supplemental life insurance. The cost of supplemental life insurance depends on your company. Insurance providers calculate group rates based on data from the group as a whole, so it can vary a lot between employers. Premiums can also increase as you age.

Sometimes, you can save money by purchasing supplemental life insurance from a private insurer instead of through your employer. If you’re unsure which option would cost less, you can start by getting a quote online or speaking with a licensed insurance agent.

What are the benefits and drawbacks of supplemental life insurance? 

Whether supplemental life insurance could fit your needs depends on your unique financial circumstances, your family, and your long-term career plan. Consider some of the advantages and disadvantages.

If you’re concerned about undergoing a medical exam or a lengthy application process to get life insurance coverage, you might want to stick with supplemental life insurance through your employer. Typically, you don’t have to provide medical information unless you’re applying for extensive coverage, and the application should be pretty straightforward. You may also get a good deal on coverage through your employer.

If you’d prefer to customize your coverage amount and policy, employer-provided supplemental life insurance may not fit your needs. Since your employer has ultimate control over coverage caps and the types of plans available, you may not find the right combination to suit your specific needs. If you plan to change jobs in the foreseeable future, it may also be wise to consider an alternative to supplemental employee life insurance. Coverage through a private insurer is yours as long as you pay premiums, regardless of your employment situation.

What happens to voluntary life insurance when you leave a job?

In many cases, voluntary life insurance you purchase through your workplace disappears once you leave your job. You can, however, “port” some supplemental life insurance policies from an employer, which means you can keep your coverage as long as you pay premiums.

Alternatively, you can sometimes convert your supplemental life insurance from an employer into an individual plan and keep your coverage without a medical exam. Your premiums, though, may increase substantially.

Purchasing supplemental coverage from a private insurer like Fidelity Life ensures you stay covered no matter what changes happen in your career.

Do you have to buy supplemental life insurance through an employer?

No. You can also supplement your life insurance coverage with a supplemental policy from a private insurer. If you buy a policy directly from an insurance company, you can keep your coverage no matter where your career takes you. You also have a lot more flexibility and control over your policy.

Whether you have basic life insurance coverage from work or no life insurance at all, Fidelity Life can offer you peace of mind in knowing your loved ones are protected. Speak with a licensed insurance agent to learn more, or go online for a quote.