There are some words and phrases you just can't help being suspicious of. "You'll never really need it," is a good one, and so is "One size fits all." Unfortunately, they both can be applied to your insurance coverage. Regardless of whether it comes as a group plan or an individual policy, sometimes you will need it, and sometimes the basic package won't be enough. That's why there's supplemental insurance.
Life Insurance Basics
The fundamental principle of life insurance is sharing risks and costs. It's like the office lottery pool: You wouldn't blow $100 on tickets for yourself, but you'll pony up your $5 for a share in the possible payout. With life insurance, everybody in the group kicks in a premium, and those premiums pay a benefit to the heirs when someone in the group dies. With group plans, the risk is spread even farther. The odds against the whole group dying in the same year are astronomical, and that can make the insurance cost per person very low.
Supplemental Life for Groups
Most group plans offer a modest death benefit as part of the standard package, sometimes as little as one or two years' salary. That's not going to get your loved ones very far, so there's typically an option to buy more coverage as a supplement to the basic plan. Usually you'll add that coverage in increments of $5,000 to $25,000, depending how the policy is structured. There are two limits on your supplemental coverage. Most companies will allow you to purchase a certain dollar amount, often $250,000, without medical underwriting. The second limit is a hard cap on the total available coverage, often $500,000.
Supplemental Life for Personal Policies
With your own life insurance policies, the situation is different. After all, you bought the policy specifically to meet your needs, so supplemental coverage might seem unnecessary at first blush. That would be true, if life was more predictable. In the real world, your needs will change over time. That's why most policies can add supplemental coverage in the form of term insurance riders. These can be for a set period, to provide extra coverage until the kids go to college or your student loan is paid off. They also can be set to increase or decrease over time, to compensate for rising costs or a declining loan balance.
Many group and individual life policies offer the option of accidental death and dismemberment coverage, or AD&D, as a supplement. The death benefit is usually equal to your life insurance. Dismemberment can either work on a defined schedule per injury or pay half the death benefit for one loss and the full benefit for two. Premiums for AD&D are minimal, but so is the likelihood of a payout. To qualify, the death or injury must be the direct result of an accident. The odds of that are relatively low, so AD&D is primarily a benefit to those with hazardous workplaces or hobbies.
Fred Decker is a trained chef and certified food-safety trainer. Decker wrote for the Saint John, New Brunswick Telegraph-Journal, and has been published in Canada's Hospitality and Foodservice magazine. He's held positions selling computers, insurance and mutual funds, and was educated at Memorial University of Newfoundland and the Northern Alberta Institute of Technology.