Life Insurance

4 Things to Know About Supplemental Life Insurance

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Many people choose to purchase group life insurance through their employer. It's convenient to enroll and usually very affordable, with guaranteed acceptance. Sometimes, an employer may cover all or part of the policy premium.

However, one of the downsides to group life insurance is that the coverage can be limited. If you want more protection, a good option is to purchase supplemental life insurance. This may be through a private carrier like those that Ethos works with, and it may become your primary life insurance plan because you'll still have it if you change jobs. Also, the payout may be much higher than a plan acquired through a job.

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What is supplemental life insurance?

Supplemental life insurance is essentially a second life insurance policy purchased through your employer or a private insurance company. It gives you more coverage beyond what your basic policy offers.

Here's a simple example of how supplemental life coverage works.

Imagine you have $50,000 in coverage – the maximum -- from your group term life policy. You could purchase a supplemental term life policy with $400,000 in coverage to get more. That would give you a total of $450,000 in coverage between both policies, which your beneficiary would receive if you passed away during the term.

Benefits of supplemental life insurance

If you have free or low-cost life insurance through your employer, you may be hesitant to pay more for supplemental life insurance. However, there are many benefits to having supplemental life coverage.

First, life insurance from your employer is typically limited. For example, you may only be able to purchase a policy with up to $50,000 in coverage. When you purchase supplemental life insurance, you're able to get more coverage for your family.

In addition, group life insurance is typically sold as term life insurance. That means your coverage will eventually expire unless you pass away during the term. If you want life insurance that lasts for your lifetime, you'd need to buy a supplemental whole life insurance policy. Ethos offers whole life policies to those aged 66-85, and term life policies for people up to age 65.

4 things to know before buying supplemental life insurance

Having life insurance is valuable, whether you're a single person, a senior, or you have a family. However, there are a few things you should keep in mind before you decide to purchase a supplemental life policy.

1. The maximum coverage limits are (usually) higher with private plans

One of the downsides of employer-sponsored life insurance is that the coverage limits tend to be lower. That's why the policies are inexpensive or, in some cases, free. While that's good news for your wallet, it can leave major gaps in your coverage.

You can get a policy with a much higher coverage limit when purchasing supplemental life insurance. For example, if you purchase term life insurance through Ethos as your supplemental policy, you can get up to $2 million in coverage.

Supplemental life insurance coverage through your employer usually maxes out at around $500,000, but it depends on the insurance carrier.

2. Private supplemental insurance is portable

One of the most common misconceptions about group life insurance is that you can take the coverage with you when you switch jobs. However, you typically lose the policy when you terminate your employment.

When you buy private supplemental life insurance, you get the benefits of portability, meaning your policy remains in effect when you switch jobs. Supplemental insurance also ensures continuous coverage when you're between jobs.

Another perk of having portable supplemental life insurance is that you never have to worry about your premium changing. For instance, if you get supplemental coverage through an employer and you switch jobs a few years later, your new policy could end up being more expensive.

3. Medical exams often aren't required

A medical exam may not be required when you purchase supplemental life insurance, either through your employer or a private company. For example, Ethos policies require a short health questionnaire, but do not require a medical exam. One of the most significant benefits of supplemental life coverage is that your policy is guaranteed, regardless of your medical history.

If you have a limited amount of coverage from your employer-sponsored life insurance policy, you can buy supplemental life insurance without taking a medical exam. And if you get supplemental term life or whole life insurance through Ethos, you can often get same-day coverage.

4. Private supplemental life insurance coverage may be more expensive

The last important thing to know about supplemental life insurance is that private coverage may be more expensive than getting a supplemental policy through your employer.

Often, companies offer low-cost supplemental plans through their preferred life insurance carrier as an employee benefit. However, you may be limited in the types of policies you can get and the amount of coverage available.

While employer-sponsored supplemental coverage may be cheaper, you'll typically get a much better value when purchasing private, supplemental insurance. Not to mention, you can choose your own insurance company, get more flexible policy limits, and shop around for the cheapest rate.

Should you get supplemental life insurance?

Ultimately, supplemental life insurance isn't necessary for everyone. However, if you find that your group life insurance policy doesn't offer sufficient financial protection for your loved ones, investing in a private supplemental life insurance policy is a good idea.

Although Ethos doesn't sell supplemental life insurance policies, you can purchase a term life insurance or whole life insurance policy to get additional coverage on top of what your group life insurance plan provides.

Visit our website to learn how Ethos works and check your price for life insurance online. You can also review our life insurance basics resource to understand more about what each policy covers, what factors impact your rate, and how much coverage is right for you.

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