Supplemental Life Insurance: What Is It And How Much?

Supplemental life insurance is usually offered when you get a new job. It provides exactly what it sounds like, supplemental life insurance if you need it. Life changes constantly. You might have a new kid or a sickness that you want to insure for. That's what supplemental life insurance is for.

You can also get supplemental life insurance on top of regular term life insurance directly from your life insurance provider. Life insurance is a personal decision. But you can properly estimate how much life insurance you need to take care of your loved ones.

This article will go through in more detail what supplemental life insurance is and why you may need it.

What Is Supplemental Life Insurance

Supplemental life insurance is an additional life insurance policy designed to boost your existing life insurance coverage. At work, you might automatically get 1X or 2X of your base salary as life insurance for free. With supplemental life insurance, you can boost that coverage amount usually to 5X your base salary.

You can also get private supplemental life insurance straight from a life insurance company, without the involvement of your employer. The best way to get supplemental life insurance is to search online with a life insurance marketplace. The best on today is PolicyGenius, where you can get multiple quotes all in one place for free.

Supplemental life insurance is likely going to be cheaper through your employer. Your employer is on a group life insurance policy, which means it gets a discount due to its size. Further, since the policy is already established with your employer, if you have any medical conditions, use nicotine products, or are older, you will get a better rate than a private insurer since the insurance company doesn't check. It already has made assumptions about the employer demographic.

Besides, you can only get so much life insurance with your employer. If you are young and healthy or need much more supplemental coverage, you should look at supplemental life insurance outside your employer.

Determining The Need For Supplemental Life Insurance

If you have kids and long-term debt such as a mortgage, then it's a good idea to have life insurance. I always like to have the amount of life insurance equal to my existing debt obligation + 10% as a safety buffer. This way, I can rest easy knowing that whatever happens to me, my wife and two kids will be taken care of.

However, as life changes, so do your life insurance needs. Instead of me taking out a whole new policy, which is now much more expensive since I'm over 40 and have sleep apnea, I can get a supplemental insurance policy if I were to have another child or buy another property with a mortgage.

Another good reason for getting supplemental life insurance is as a burial and funeral expenses rider. It usually takes some weeks before your family receives the death benefit. Burial insurance is usually faster and might be a great choice if you are worried about your family managing to cover those expenses.

If you are worried about funeral expenses, higher-than-expected childcare expenses, are planning on taking on a lot of debt to buy more property, or are expecting a new family member, getting supplemental life insurance is a good idea.

Don't Over-insure Your Life

Although it's better to be slightly over-insured than under-insured, you don't want to get supplemental life insurance if you are already insured + a 10% buffer.

It's better if you save and invest the money instead. Your whole goal should be to accumulate enough wealth so that you can easily self-insure. That point is when you can generate enough passive income to provide for your desired lifestyle.

Supplemental life insurance premiums are usually very low, so it's worth at least getting some free quotes online. However, spending more on something you don't need is also not optimal.

Spousal Supplemental Life Insurance Is Important

One of the things married couples may found is that their life insurance policies are different, even though they share the same assets.

For example, my wife used to only have a $500,000 term life insurance policy while I have a $1 million term life insurance policy. Given we are equals and both want to provide the best life possible for our children, we decided she should raise hers to match. She used PoicyGenius to get more life insurance for less money. And now we both have $1 million policies.

After all, if either one of us dies, the living spouses still needs to pay the same amount for the mortgage, property taxes, tuition, etc. It's not like she only pays half the amount.

Calculate all of your expenses and see whether spousal supplemental life insurance offers enough coverage.

Employer Offered Private Supplemental Insurance

Whenever you can get an employer offered benefits, it's generally a good idea because your employer is subsidizing the cost for you. It's a benefit!

For example, the average health care premium is over $21,000 a year nowadays. Thankfully, the employer subsidizes about 70% of that cost.

As two early retirees, we pay roughly $28,000 a year in health care premiums for a family of four! That's absurd, but that's the price to pay for freedom.

One of the great things about private supplemental life insurance is that you get to keep it, no matter where you work. That's not the same for a group health insurance plan sponsored by your employer.

Most employer-offered supplemental life insurance policies are not yours but the employers’. This means that your employer and not you is the policyholder, and it expires once you change jobs or retire.

Your best bet is to take advantage of group life insurance and also get supplemental life insurance through one of the largest life insurance providers.

Supplemental Life Insurance Is Like Rent

As with any other term life insurance, there is no option to cash it out. Only whole life insurance policies have a cash value. But whole life insurance policies are much more expensive than term life insurance policies. I only recommend whole life insurance policies if your estate tax's value is higher than the current estate tax exemption amount.

Once your term is finished, all the premiums you’ve paid stay with the insurance company. The insurance company has provided you the insurance you wanted and that's that. If you want to benefit from the insurance company, you can consider buying their stock as well.

Policy Limitations For Supplemental Life Insurance

Always read your life insurance contract thoroughly and ask questions if you don't know all the answers before signing your contract. Here are some policy limitations to be aware of:

Accidental Death & Dismemberment

Accidental Death and Dismemberment (AD&D) only covers deaths that are caused by accident. You need to ask your life insurance carrier what is the DEFINITION of accident.

There may also be limitations to benefits if you get into an accident and lose a limb or any other serious injury, like loss of eyesight or hearing.

Burial Expense Insurance

This policy will only cover the expenses of burial and funeral. Most of these policies will only cover these expenses in the case of an untimely death. The coverage is usually $5,000 to $10,000.


If a supplemental insurance policy is purchased from your employer, you probably won't be able to transfer it to another employer after changing jobs.

Supplemental Life Insurance Is A Great Option

The one certainty in life is uncertainty. Supplemental life insurance allows you to increase your life insurance coverage whenever you have more liability and dependents.

Getting supplemental life insurance is an act of kindness. You want to be able to rest easy every night when you go to bed and rest easy every time you go away for business.

Go through your employer first to try and get a supplemental life insurance discount. Then go through an online marketplace like PolicyGenius to get quotes from private insurance companies if you need more.

As we've all learned with the COVID-19 pandemic in 2020, you just never know when you'll need life insurance. By the time you need life insurance, it may be too late.

The most efficient way to get competitive life insurance quotes is to check online with PolicyGenius, the #1 life insurance marketplace where qualified lenders compete for your business. It's much easier to apply on PolicyGenius than go to each carrier one-by-one to get a quote. I've know the founders for years and they have truly build a fantastic resource for individuals and small business owners. Further, applying is free!