What Is Supplemental Life Insurance?

Recent research from the Life Insurance and Market Research Association shows that about 30% of people with life insurance coverage only carry employer-sponsored life insurance. The most common type of employer-paid life insurance is group term life insurance, which offers coverage up to a set limit, such as $50,000 or two times your salary, depending on the plan. According to experts, this is hardly enough. More specifically, experts suggest that your death benefits should be 10 to 15 times your salary. This is where supplemental life insurance coverage comes in handy. Here’s everything you need to know about this topic.

What is Supplemental Life Insurance?

Otherwise known as voluntary supplemental life insurance or voluntary life insurance, supplemental life insurance is a type of life insurance policy that you can use to bridge the life insurance coverage gaps left by an employee-provided group terms life insurance policy. Most employers offer supplemental life insurance coverage as an optional feature on a standard basic group life insurance policy as a way of increasing employees’ death benefits.

Type and Amount of Supplemental Life Insurance Coverage

As mentioned above, supplemental life insurance is essentially an employee benefit. For this reason, the amount and type of supplemental life insurance coverage typically varies from one employer to another. For example, some employers offer a choice between whole life and additional term insurance coverage, while others allow employees to add riders to their group life insurance policy. Still, for other employers, voluntary life insurance may refer to supplemental accidental death and dismemberment (AD&D) or burial coverage.

Supplemental Life Insurance – Coverage Limits

Similar to your employer-provided group life insurance coverage, most supplemental policies have coverage limits. Beyond these limits, which typically vary from one employer to another, your insurer may require you to provide more information, including your health and financial records. To adjust your policy, you do not necessarily need to use a private insurer, which can be a complex process. Instead, you can increase or decrease your coverage during open enrollment. It is also worth noting that if your policy is portable, you may be able to take it with your when you change employers or even lose your job, which is something you cannot do with most basic group life insurance policies.

Cost of Supplemental Life Insurance

In general, the cost of a standard supplemental life insurance policy depends on various factors including, among others, your age and your employer’s contribution, if any. To determine your rates and premiums, many group insurance companies will not put you through underwriting. Instead, they will use age ranges. Similar to other life insurance policies, younger policyholders enjoy lower rates compared to older policyholders. In addition to your age, insurers also base your premiums on your overall health. More specifically, if you decide to skip the insurer’s risk and health evaluation, expect to pay higher premiums. To put it another way, a voluntary life insurance policy for a guaranteed issue typically tends to be more expensive than an underwritten private policy. On the tax front, your beneficiaries may have to pay tax if the death benefit from your group life insurance exceeds $50,000. Additionally, if you purchase a supplemental life insurance policy for a dependent or a spouse with a face value of $2,000 or more, the entire pay out could be subject to tax.

Alternatives to Supplemental Life Insurance

While employer-sponsored group insurance policies may work for some people, they may not work for others. Fortunately, there are other ways to get voluntary life insurance coverage without necessarily going through your employer. Some of the common alternatives to employer-paid life insurance plans include:

• Permanent or private term life insurance — Granted, the process of getting this type of coverage is typically more complex compared to the process of joining an employer-sponsored life insurance plan. However, if you want additional coverage than your employer offers, then getting your own permanent or term life insurance coverage is arguably the next best option. It is worth noting that while both whole life and term insurance coverages may require your health data, you can choose no-exam insurance or accelerated underwriting option, allowing you to skip the medical exam part. Take note that a private policy is a portable policy, meaning you can take it with you when you lose your job or change employers. Additionally, a private policy is typically less expensive than a supplemental policy, and its premiums remain stable throughout its policy period.

• Life insurance riders — Insurance riders are policy features that allow you to adjust your coverage. Put differently, you can use riders to increase coverage for an existing life insurance policy either for yourself or for your loved one. For example, you can use riders to increase your coverage for child coverage or long-term care, albeit in small amounts. Take note that some insurers charge for riders while others do not, meaning it depends on your life insurance policy.

• Standalone private policies — If you’re looking for a specific type of supplemental life insurance coverage, such as an AD&D policy, then a standalone private policy is a good options. Depending on your health status, a standalone private policy can be less expensive than your employer-sponsored group life insurance policy.


Almost all employer-sponsored health insurance policies have huge coverage gaps. To cover those gaps, employers offer supplemental life insurance as part of employee benefit.

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