For many individuals, one of the definite perks of full-time employment is term life insurance. Particularly for individuals whose employment acts as a primary form of financial support for dependents, life insurance will help ensure that any unfortunate accident or situation that causes you to lose your life will not inflict further financial damage on those you have cared for.
Depending upon the number of dependents you have and your specific needs, you may discover that the term life insurance policy offered by your employer does not provide the scope of coverage you desire. In a situation such as this, supplemental term life insurance may act as a powerful complement to your existing policy. Simply put, supplemental life insurance is an additional life insurance policy that can either be purchased through your employer or a private company.
Supplemental term life insurance acts as an additional layer of financial security for individuals seeking to expand their insurance coverage and ensure that their beneficiaries receive the necessary financial support in the event of an unexpected tragedy.
Understanding Life Insurance Basics
When a customer purchases insurance, they will typically have two options presented to them. A term life insurance policy provides complete coverage throughout the duration of the policy, a period of time which is discussed and fixed prior to the initiation of the policy. Individuals with term life insurance will pay their monthly premiums until their policy expires, at which point they will be required to purchase a new policy if they wish to continue with this level of coverage.
In the event that you are receiving a term life insurance policy from your employer, the chances are good that you will be eligible to receive a policy equivalent to twice your annual salary at no cost. For example, if your current annual salary is $50,000, you will be eligible to receive a term life insurance policy valued at $100,000 at no expense to you.
Unlike term life insurance policies, whole life insurance plans allow customers to purchase complete protection for the duration of their life. In many scenarios, a whole life plan will allow customers to slowly accrue value in the policy and cash it out as needed. That being said, the scope of protection offered by a whole life policy makes them significantly more expensive than term life insurance plans. For many individuals, the cost of a whole life insurance policy is simply too much of a strain on their finances.
Exploring Employee Supplemental Life Insurance
In many situations, employees offered term life insurance policies will find that the coverage they are given at no expense is simply not enough to provide adequate protection. This is particularly true in situations where individuals have young children that are dependent upon the income brought in through the policy holder.
Supplemental term life insurance acts as an "add-on" to an existing policy, allowing policy holders to expand the scope of their insurance payout in the event of a tragic accident or death. When purchasing supplemental term life insurance, it is important to carefully assess how the supplemental insurance is labelled, as it may be designed for a specific purpose that does or doesn't match your needs.
For example, supplemental life insurance packages offered by an employer may be specifically intended for "accidental death and dismemberment," which means that those named as beneficiaries in the policy will only receive funds if the policy holder is killed or grievously injured to the point that they must lose a limb, their hearing or their sight. Another popular form of supplement life insurance is known as "burial insurance." With this particular policy, distributed funds can only be used to cover the expenses affiliated with the funeral and burial of the policy holder. If a policy holder has a burial insurance policy but wishes the funds to be used for a different purpose, they will not be able to do so.
Supplemental Life Costs and Portability
In the event that a policy holder decides to purchase a supplemental life insurance policy through their employer, it is quite important to note that this particular add-on cannot be transported to a new place of employment in the event that the policy holder leaves their current place of work. With that in mind, individuals should carefully assess their own long-term employment plans to determine whether or not an employee-sponsored supplemental life insurance policy does indeed fulfill their needs.
Private Insurer Opportunities
Generally speaking, most individuals stay with an employer for close to five years before they begin to seek out new professional opportunities. Given the fact that supplemental life insurance doesn't transfer from employer to employer, it may not be in your best financial interest to purchase this particular insurance package through your current employer, particularly if you have already begun to consider alternative employment options.
In situations such as this, where volatility or uncertainty within the workplace may lead you to think twice before purchasing employer supplement term life insurance, a private insurance company may be your best alternative.
Advantages of Private Insurers
The perks of private supplemental term life insurance are clear. In a situation where an individual does opt to change their job, their supplemental life insurance will remain in effect. In addition, it may be possible to fine-tune supplemental insurance coverage in a way that was not possible through employer insurance. This does not mean to imply that employer-sponsored insurance is in any way inferior, but rather that insurance purchased through a private company may offer a higher degree of control and customization for the buyer of the policy.
Proceeding With Supplemental Life Policies
As always, there is no clearly defined "correct" answer when it comes to purchasing supplemental insurance. Individuals who are still employed with a company offering supplemental term life insurance may benefit from first consulting with representatives from their employer to determine what offerings are available. Even if you are planning on seeking out a new job, the supplemental insurance offered by your company may act as an excellent short-term solution until you finalize your transition.
Taking the time to establish a clear and accurate budget for your life insurance is also critical. Knowing how much you can afford to invest in a supplemental life insurance policy will ensure that you don't overspend and stress various other elements of your financial health in the process. Supplemental term life insurance is, of course, an excellent benefit to have, but it should not come at the expense of other vital amenities.
Given the large number of companies offering private insurance today, it is in your best interest to thoroughly research available offerings and find the ideal policy for you and your beneficiaries. Only through such efforts will you ensure that your decision regarding supplemental term life insurance is as informed and educated as possible.
Ryan Cockerham is a nationally recognized author specializing in all things business and finance. His work has served the business, nonprofit and political community. Ryan's work has been featured on PocketSense, Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.