What Is Supplemental Term Life Insurance?

Supplemental term life insurance can help ease the financial burdens for your survivors.

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Supplemental term life insurance is a popular option for many people, especially those with families or large financial liabilities. Term life insurance is frequently purchased through an employer, with coverage available in multiples of the employee's annual salary. If this amount proves insufficient, supplemental term life insurance can fill in gaps in insurance coverage.

Term Life Insurance

Term life insurance provides coverage for a set period of time -- the "term" of the purchase. The coverage is good only as long as the term itself. It is sold either through an employer or via a private insurance firm. Because the insurance is only provided for a set period of time, the premiums are relatively inexpensive when compared to whole or universal life insurance. The amount of insurance that is required varies based on the circumstances of the purchaser. Those with large families or with large financial burdens, such as a mortgage and college expenses, should have larger policies to allow their beneficiaries to pay off those debts when they die.

Whole Life Insurance

Whole life insurance provides coverage for the lifetime of the insured individual. In most cases, the premiums paid for a whole life insurance policy build cash value, allowing the insured individual to cash out part of the policy if necessary. Due to the more comprehensive coverage provided by whole life insurance, the premiums are much higher, making it less feasible for many individuals. For those seeking a balanced coverage option for their life insurance needs, a common solution is to buy a small whole life policy and a larger term life policy, with the idea being that by the time the term life policy expires, the financial burdens will have been mitigated.

Benefits of Supplemental Insurance

Although many employers offer term life insurance as a benefit to their employees, the amount of coverage that is provided by the employer is often limited. As a result, those who would require larger amounts of coverage frequently look into supplementing their employer-provided coverage. Purchasing supplemental insurance through your employer can bypass the health exam requirement that many private insurers require. Additionally, by purchasing only the amount you need to supplement the coverage you already have, you can decrease the amount you pay in premiums.

Limitations to Supplemental Term Life Insurance

Supplemental term life insurance is not intended to replace other life insurance options, because the amount of the supplemental insurance is not equivalent to the amount you require altogether. Furthermore, if you purchase supplemental term life insurance through your employer, you might lose your coverage if you lose your job or change jobs. If you purchase supplemental term life insurance through a private insurer, the insurance will carry over when you change jobs, but you might need to adjust the amount as your primary life insurance provider and amount changes.

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