Policy Types

Supplemental Life Insurance through Your Workplace

This article discusses supplemental life insurance when it's a part of your employee benefits package. Find out what type of policy you have, the limit, and how your death benefit is determined.

What is Supplemental Life Insurance?

As part of your employee benefits package, your employers may offer a variety of ancillary or supplemental insurance coverages and can include dental and vision, disability, as well as life insurance. In fact, a consumer study conducted by the Life Insurance and Market Research Association (LIMRA) during Life Insurance Awareness Month 2015, found that half of U.S. workers have additional or supplemental life insurance benefits available to them through their employer, yet only about 50 percent choose to participate. That's a pretty big number, especially when these types of benefits are typically offered to employees at little or no charge. So why aren't more people taking advantage of their supplementary life insurance? The fact is, as many as 14 percent of full-time employees aren't even aware that these types of benefits are being made available to them!1

Supplemental life insurance can be a good way to take advantage of some additional protection for your family. However, before you rely exclusively on what you have through work, there are a few things you need to know.

What you need to know about Supplemental Life Insurance

If you have an employer sponsored life insurance policy, it's important to find out exactly what type of policy you have, the limit, as well as how your death benefit is determined. Here's why…

It may not be enough coverage.

The 2015 LIMRA study also revealed that sixty-five percent of employees who have group life coverage believe they need more life insurance beyond what their employer provides. Why? Because many life insurance policies that are offered through employer sponsored plans are typically only one or two times your annual salary. For example, if you earn $50,000 a year, your employer may offer you a $100,000 policy at no cost. However, if you have a young family, you may require something closer to the $500,000 mark to get the coverage that you need. For many Americans, this limit may not be nearly enough to meet the financial needs of their loved ones if they were to unexpectedly die.

It's a limited accidental death and dismemberment (AD&D) insurance policy.

In many instances, the supplemental life insurance that your employer offers you is in reality an AD&D insurance policy, and shouldn't be confused with a standard life insurance policy. While an AD&D policy provides benefits to your beneficiaries when you die, the caveat is that your death must be caused by an accident. Although AD&D benefits will vary among insurers, most will also payout benefits if you were to lose a limb, your eyesight, or hearing as a direct result of a covered accident.

It's a burial insurance policy.

You may find that your workplace supplemental life insurance is a type of burial insurance policy. Typically, these policies have a very low benefits associated with them and could be anywhere between $5,000 and $10,000 - depending on what your employer offers. The purpose of these policies is to provide your family with enough money to cover your final expenses when you die.

It's probably not portable.

Do you plan on staying with the same employer for the rest of your life? While that may be your preference, it may not be the reality. In fact, according to the According to the U.S. Bureau of Labor Statistics, a person in 2014 stayed with their employer an average of only 4.6 years. Whether you are let go or you leave your job voluntarily, the supplementary life insurance that you have may terminate. That means you may need to reapply for new coverage (either at your new job or independently from a life company or broker) based on your current age and health status. This may not seem like a significant problem, but certain health conditions could make it difficult to find an affordable policy, or even make it impossible to qualify for coverage.

Generally speaking, most employer-sponsored supplemental life insurance policies are not portable - meaning that you won't be able to take it with you when you leave your job. If you do have coverage through work, find out if you have the option to pay an additional premium to port some or all of your benefits. If you don't, you may want to consider buying a policy outside of what you have at work.

Getting the right coverage

Any life insurance is better than none at all. So if the supplementary life insurance offered through your employer sponsored group plan is affordable, then it may very well be worth the low price. However, it's important that you take the time to evaluate whether or not what you are being offered is going to be enough coverage, and more importantly, that it's the type of coverage that is going to meet your needs - now, and in the future.

If you're lucky, some supplementary life insurance policies will allow you to purchase additional coverage above your basic policy for an additional premium, so be sure and check with your human resource department or benefit specialist to determine what your options are. In some instances, what you have is what you're stuck with.

In many ways, relying on supplemental life insurance alone isn't ideal. A better option might be to purchase a life insurance policy independent of what your employer offers. Here are a few reasons why:

  • You get a policy that you can take with you no matter where you go
  • If you select a permanent policy you'll have your policy for as long as you live (as long as required premium payments are made)
  • You select the death benefit - NOT your employer
  • You can choose from a variety of policy types so that you're only paying for coverage that meets your individual needs
  • You may have the option to enhance your coverage with a variety of policy riders

Securing additional life insurance outside of the supplemental life insurance that your employer offers may not be as hard you think. In fact, at Protective Life, you can get a free online quote in just four easy steps - with no obligation to buy. And, if you'd like to read more helpful articles on life insurance, be sure to check out the Protective Life Learning Center.


1. 2015 Life Insurance Awareness Month Group Life Fact Sheet

2. http://www.bls.gov/news.release/tenure.nr0.htm

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Supplemental Life Insurance

Supplemental life insurance can be a good way to get additional life insurance through your employer's group benefit plan. However, it's important to take the time to fully understand what type of supplemental life insurance policy you have at work, so that you can make an informed decision about whether or not you should buy a life insurance policy independent of what you may have through your employer. For more information, visit the Protective Life Learning Center.

All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

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