What Is Supplemental Term Life Insurance?

Group insurance spreads risk across a large number of people.
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Working with other people has a number of benefits, aside from water-cooler gossip and those matching shirts for the office bowling team. Group insurance plans are one of the more noteworthy benefits. Company health coverage is a big draw for many employees, but a good group plan can also provide useful amounts of disability coverage and life insurance. However, depending on your needs and your company's plan, you might need to purchase supplemental term life insurance.

Group Life Insurance

Group life insurance can vary widely in the amount of coverage it provides, depending on the size of the group and who's footing the bill. When your employer pays the premiums, especially in smaller companies, budget constraints and small group size can limit coverage to as little as $5,000 per life. Other plans might offer death benefits based on one or more years' salary. Regardless of the base amount, if your needs are higher than the death benefit, you might need supplemental term life insurance.

Supplemental Term Life

Supplemental term life is coverage you can add onto your basic group policy. It's usually offered in increments of $10,000 or $25,000, up to a specified amount. Most policies allow the employee to purchase some additional coverage without providing evidence of insurability, which can be a benefit if you're a substandard risk for conventional insurance. Additional amounts are usually available if you can pass a physical examination. This supplemental coverage can increase your group policy to meet your long-term life insurance needs, or you can use it for transient protection against loans or other short-term liabilities.

Pros and Cons

The premiums for group life coverage are based on the size and overall demographics of the group. If you're a poor insurance risk, or if you're older than the average of the group, the premiums can be attractive. However, if you're in good health and younger than the group, private life insurance can be cheaper. A bigger issue is that your employer owns the group policy, so coverage and terms can change without your consent, and you may lose the coverage if you leave the job. For your long-term peace of mind, it's often better to purchase a private life insurance policy that you control, and use the group plan as your supplemental coverage.

Term Riders

Choosing private coverage doesn't mean you give up the ability to add extra term life insurance to meet transient needs. Both term and permanent insurance policies usually provide the option of additional coverage for a specified period, treating it as an option or "rider" on your base policy. These are typically cheaper than purchasing a second policy, since you already paid the policy fees when you bought the original coverage. These riders can be useful for covering financial obligations such as student loans or a mortgage.

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