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Navigating through life insurance options can sometimes feel like navigating a maze. LIfe insurance shoppers often ask if supplemental life insurance is worth it. The answer is typically, no. Although it may initially seem beneficial, it typically lacks the value and adaptability of term life insurance.

Should You Buy Supplemental Life Insurance from Your Employer?

Though the convenience of buying supplemental life insurance through your employer might be appealing, it's generally not the best choice. More flexible and cost-effective alternatives, such as term life insurance, are often available that can better meet your specific needs and circumstances.

What is Supplemental Life Insurance?

Supplemental life insurance is an additional policy that you can purchase to complement your existing life insurance coverage, usually offered through your employer. It provides an added layer of protection, but as we'll see, it comes with its own set of limitations.

Why Supplemental Life Insurance Often Falls Short

Supplemental life insurance may fall short of term life insurance for several reasons:



Supplemental policies typically come with heftier premiums for an equivalent amount of coverage compared to a standalone term life insurance policy. The cost difference can be especially striking for those in good health. While it can be cheaper than a standard term policy in some case, it comes with all the other drawbacks.



Supplemental life insurance often lacks the flexibility inherent in term life policies. For instance, you might not be able to keep your policy if you change jobs.


Low Coverage Amounts

Supplemental life insurance often provides relatively low coverage amounts, which might not adequately meet your family's financial needs in the event of your passing.


False Security

Supplemental life insurance, being tied to a primary policy, can create a sense of false security, potentially leading to an underestimation of coverage needs.

Why Choose a Typical Term Life Policy?

Term life insurance offers a host of advantages over supplemental life insurance, such as:



Term life insurance provides considerable coverage at a fraction of the cost of permanent life insurance, making it possible to secure adequate coverage without exceeding your budget.



Term life insurance provides the freedom to choose your coverage amount and beneficiaries. It also lets you keep your policy, irrespective of job transitions.


Laddering Option

You're not limited to just one term life insurance policy. You can hold multiple policies simultaneously, allowing you to adjust your coverage in line with evolving financial obligations.

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When Might Supplemental Life Insurance Be Worth It?

Despite its limitations, there are circumstances where supplemental life insurance might be beneficial:

  1. Zero-Cost Benefit: If your workplace provides supplemental life insurance at no cost to you, accepting this coverage could be wise. However, you should consider supplementing it with term life insurance for more comprehensive coverage.
  2. Inability to Increase Coverage: If your age or health conditions preclude you from increasing your coverage through term life policies, supplemental life insurance can provide the extra protection you need, although typically at a higher cost.

Other Types of Supplemental Life Insurance

Apart from employer-offered supplemental life insurance, there are several other types of supplemental insurance policies available. Each comes with its unique set of characteristics and potential drawbacks:

  1. Supplemental Spouse Life Insurance: This policy provides additional coverage for the policyholder's spouse. However, it often carries higher premiums than an individual term life policy for the spouse. This is particularly true if the spouse is in good health.
  2. Supplemental Burial Insurance: Also known as final expense insurance, this policy covers funeral and burial costs. However, the premiums can be high and the coverage limited, especially considering the overall financial needs of the family after the policyholder's death. A regular term life policy generally offers more coverage and value for the same or lower premium. Also, planning for these costs earlier in life can ensure you have money set aside to pay for final expenses rather than paying for a policy. A policy can make sense in limited circumstances when you are later in life and don’t have money set aside. See our ranking of the best burial and final expense policies.
  3. Supplemental Child Insurance: This policy provides a payout if the insured child passes away. However, the financial need for such insurance is often low, as children typically don't contribute to family income. It's generally more cost-effective to ensure that the parents have adequate life insurance coverage.
  4. Supplemental Accidental Death and Dismemberment Insurance: This policy pays out if the policyholder dies or is seriously injured in an accident. While it may seem beneficial, the chances of such specific incidents are relatively low. A comprehensive life and disability insurance policy usually offers broader coverage at a more reasonable price.

Each of these supplemental insurance products plays to our emotions and sounds tempting in their own way. They seem to promise protection for every conceivable scenario. But in reality, they often provide less value than a well-structured term life insurance policy. The aim should be to secure sufficient life insurance coverage to meet the financial needs of your dependents, rather than to insure against every possible risk. Understanding this distinction is crucial when navigating the landscape of life insurance options.

The Bottom Line

When considering supplemental life insurance, it's crucial to weigh its merits against those of term life insurance, which often provides greater coverage and adaptability. Each individual's situation is unique, demanding careful consideration of financial needs and future goals. Consulting with a financial advisor or insurance professional can provide valuable insights and guidance.

About Mark Fitzpatrick

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Mark Fitzpatrick is a senior content director at MoneyGeek with over five years of experience analyzing the insurance market, conducting original research and creating content that can be personalized for every buyer. He has been quoted on insurance topics in several publications, including CNBC, NBC News and Mashable.

Mark earned a master’s degree in Economics and International Relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his economics and insurance knowledge to bring transparency around financial topics and help others feel confident in their money moves.