Pros & Cons of Supplemental Insurance Policies
Supplemental insurance is insurance that covers expenses your regular policy doesn't cover, but it is not a substitute for your regular insurance. Supplemental insurance can add coverage to many types of insurance policies, including disability, health, liability and auto insurance. It may cover excess liability, additional health costs, living expenses, the costs of disability and other costs not covered by your basic policy. Supplemental insurance can help you remain financially stable in the event of a severe illness, injury or other catastrophe, but it can also be an unnecessary financial burden.
The primary disadvantage of supplemental insurance is that it adds additional expenses to your monthly budget. Supplemental insurance is typically less expensive than traditional insurance, but if you're already paying expensive premiums, the additional expense can be burdensome. This additional cost can be worthwhile if you need the extra coverage -- for example, supplemental health insurance for a severe or chronic illness can save you from having to pay what your primary policy doesn't. Examine your budget to determine if you can afford the additional cost of supplement insurance, and weigh your potential risks before deciding if you need it.
Some forms of primary insurance are job or location-dependent. Insurance provided by your employer, for example, won't generally travel with you to a new job. Medicare benefits are split between the federal government and your state, so your Medicare coverage may change if you move to another state. But you own your supplemental insurance, and it's not dependent on your location or job, which means it travels with you even if you move to another state or change jobs. With some supplemental insurance plans, however, you'll need to exhaust your primary insurance plan before your supplemental coverage kicks in.
Supplemental policies can cover a wide variety of expenses. For example, supplemental disability coverage might provide pet care if you are disabled. Supplemental health insurance might cover the unreimbursed costs of time off from work if you are ill. Excess liability coverage will cover attorney's fees if you are sued, and excess auto or health insurance could cover housecleaning if you are injured in a car accident. Not all policies cover all of these expenses, but purchasers can choose policies that provide coverage for their specific predictable needs.
Like traditional insurance policies, supplemental policies have coverage limits, and you'll typically need to exhaust your primary policy before supplemental coverage takes over. Your health insurance, for example, might not cover some expenses, or it might have exclusions based upon your perceived risk or pre-existing medical conditions. An umbrella liability policy, for example, might not cover certain risks taken by your business.
Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.