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What is Supplemental Life Insurance?

Jan 10, 2022 4 min read David Rodeck

Key takeaways

  • Supplemental life insurance is extra coverage you can buy at work or through an organization.
  • It can cost less than individual insurance, and you may not have to answer health questions.
  • You could lose your coverage if you leave your job.


Life insurance provides income to your survivors in case you pass away. It could cover burial costs, help your spouse pay off the mortgage, or pay for your child’s college education, for instance. You can have multiple life insurance policies as long as you qualify for each policy.

Employers, unions and other membership organizations sometimes offer life insurance as a benefit. They may provide a small amount of coverage for free—along with the chance to buy extra, “supplemental” life insurance on top of that. Should you buy supplemental life insurance? Here’s what you need to know.



What is supplemental life insurance?

Supplemental life insurance is extra coverage you can buy at work or through an organization. It can cost less than individual insurance, and you may not have to answer health questions to qualify for the coverage or determine how much you pay for premiums. However, you could lose your coverage if you leave your job. Unlike employer health insurance, which you can pay to extend through a program called COBRA, supplemental life insurance does not provide this option.

While buying individual life insurance outside of your employee benefits may cost more than buying through an employer, it may also offer coverage that you keep when you leave your job.


How does supplemental life insurance work?

With supplemental life insurance, the employer or association decides how much free coverage employees or members get, and how much more they can buy. The amounts are usually in multiples of salary. For example, you might get coverage equal to one year’s salary for free. Then you could choose to pay for up to five times your salary in supplemental life insurance.

You can sign up during your annual benefits enrollment period (or when you experience a life event such as a new baby or a spouse’s job loss). In most cases, you won’t have to take a medical exam or even answer health questions. And your premium payments typically come directly from your paycheck, which can take the sting out of the cost. If you should die while covered, your beneficiaries will receive the policy amount, just like with any life insurance.


Supplemental Life Insurance Coverage Options

Supplemental life insurance typically falls into one of three categories:

  • Term.

    This is temporary life insurance that lasts for a stated period, e.g., 10 or 20 years. It's less expensive to buy, and the younger you are, the less it costs. But group term premiums typically rise over time because once the policy expires, to continue coverage you'd need to renew (buy another policy) when you're older—at a higher price.
  • Permanent.

    This coverage doesn't expire—it continues as long as you keep paying your premiums. The most common permanent policies are whole and universal life. With whole life insurance, premium payments start out higher than term, but they don’t increase over time; with universal life, you can pay more or less depending on your budget (provided you cover a minimum amount that usually rises each year). Note that if you can pay more early on, you can build the universal policy’s cash value—and use that value to cover the policy’s higher costs in the future.
  • Spouse/child.

    Your plan may also allow you to buy coverage at the lower group rate for your spouse and/or children.

Your actual choices will depend on what your employer or organization selected. That includes whether the policy is term or permanent (and what type), how much coverage you can buy, and whether extra coverage requires a health questionnaire or exam.


Supplemental Life Insurance Advantages

A key benefit of supplemental life insurance is that you may be able to get it without taking a medical exam.

For example, a group plan may allow you to buy up to $200,000 in coverage without health questions, and require "medical underwriting" only for larger amounts. This means you could qualify even with health issues—something that could be a hurdle with individual coverage.

Also, group life insurance is often cheaper than the same coverage would cost individually. Even if your employer doesn't pay for some of it, you might find a better deal on supplemental life than if you bought on your own. (That's not guaranteed, though, so you should price-shop before you buy.)


What are the drawbacks of supplemental life insurance?

One downside to supplemental life is that you don't have much control over your coverage. Your employer decides what policies are available and how much you can buy. With standalone coverage, you can customize the policy to meet your specific needs.

And what if you leave the job or organization? With many supplemental life policies, your coverage simply ends. To stay insured at the same level, you'd have to buy individual coverage when you're older and it may be harder to qualify.

True, some supplemental policies are “portable”—you’d have the right to buy a policy through the group when you leave. Even so, the cost will be determined at that time, so you could more pay than if you’d bought your own coverage earlier.


Is supplemental life insurance right for you?

Supplemental life works best as an addition to, not a replacement for, individual coverage. You can get extra insurance through a group plan—possibly at a discount—without having to worry about losing all your coverage if you leave the group.

That's why you might want to use different kinds of policies for different needs. For example, consider earmarking individual insurance to cover critical expenses (like your mortgage or children's college funds) and using supplemental coverage for "nice-to-haves" (like a future inheritance for your grandkids). A life insurance calculator can help you identify your goals and find the right balance.


What you can do next

Ask your benefits administrator for details on your supplemental life insurance program—especially what happens if you leave your job or organization. Then talk to a qualified life insurance agent (like your local Prudential professional) to compare your options.

Author details

David Rodeck is a freelance writer specializing in making insurance, investing and retirement planning understandable.


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