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Insurance

Need Extra Coverage? Discover Supplemental Life Insurance!

What is Supplemental Life Insurance?

Supplemental life insurance fills the gaps in coverage that your basic employer-provided group life insurance policy might have. While group life insurance is a fantastic benefit, it usually doesn’t provide enough coverage if you have significant financial obligations. For example, if John Smith earns $50,000 a year and has a basic group policy covering twice his annual salary, that’s a $100,000 payout. But with a mortgage and two kids heading to college, John might find this coverage lacking. That’s where supplemental insurance kicks in.

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How Much Supplemental Insurance Do You Need?

Determining ample coverage involves a bit of math:

  • Income Replacement: Aim for a policy that covers ten to fifteen times your annual salary. For someone earning $100,000, a $1 million to $1.5 million policy might be appropriate.
  • Dependents: Add around $100,000 per dependent to your policy. Yet, this figure could be higher—raising children and financing their education can be more expensive.
  • Debt: Factor in any outstanding debts you have to ensure they can be paid off without burdening your heirs.
  • End-of-Life Expenses: Also account for funeral costs and other end-of-life expenses, usually between $8,000 to $15,000.

Examples to Consider

Imagine Sarah, a marketing manager earning a yearly salary of $80,000, with two children and a $250,000 mortgage. She might consider supplemental insurance of $1.2 million which factors in 15 times her income, plus $200,000 for her children, and coverage to clear her mortgage.

Key Considerations for Supplemental Life Insurance

  • Affordability: Ensure that the premiums for your supplemental insurance are affordable.
  • Assets: If you have significant assets, they can be liquidated to support your heirs, potentially reducing your need for high insurance coverage.
  • Personal Health: Those with medical issues or risky habits may face higher premiums but still find supplemental insurance valuable due to easier qualification.
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Why a Private Insurer Might Be Better

While it’s convenient to get supplemental insurance through your job, it’s often pricier with less flexibility. Here are a few reasons why:

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  • Cost: You might pay more for the convenience of getting coverage through your employer.
  • Portability: If you leave your job, you may lose your insurance or pay more for conversion to an individual policy.

So, shopping around for a policy with a private insurer is often a smarter financial move.

The Bottom Line

Supplemental life insurance is an excellent way to ensure your loved ones are financially secure. While employer options are convenient, they may not always provide the best value. Take the time to compare prices and policies from private insurers. By thoroughly understanding your needs and exploring your options, you can save money and select a policy that truly protects your family’s future.

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