Supplemental Insurance 101

How Supplemental Insurance Can Help You

Supplemental Insurance 101
November 25, 2013

Supplemental insurance is an additional form of insurance that is designed to cover expenses that standard insurance available in your state may not include. This form of insurance often covers expenses for health care that other forms of insurance such as Medicare, Medicaid or a company healthcare policy may not cover. Standard health insurance policies often include high deductibles and coinsurance amounts that may present a financial challenge for a family attempting to pay them out of pocket. Supplemental insurance can help a family not only cover deductibles and coinsurance, but also add extra benefits including a private room or a private nurse, improved meals or even childcare expenses.

Types of Supplemental Insurance

Supplemental insurance can also involve accidental death policies, critical illness insurance or even extra coverage for being confined to a hospital, known as hospital indemnity insurance. The principle behind supplemental insurance is that it covers the gap left by your standard insurance policy coverage, so that any health crisis has a minimal impact on your finances. Not everybody needs supplemental insurance, but there are many situations where supplemental insurance provides significant benefits.

Other popular forms of supplemental insurance include:

  • Supplemental disability income protection insurance that goes beyond worker disability insurance from the state. This form of insurance can cover short- or long-term disabilities that prevent you from earning an income by taking care of your living expenses for a defined period.
  • Some credit card companies offer supplemental insurance for covering payments if you lose your employment, suffer from an illness that prevents you from earning a living, or take unpaid family leave.
  • Payment protection insurance offers coverage for paying credit card loans, mortgage payments, or other forms of debt if you become unable to work, lose your job, or otherwise lose the ability to pay your debts.

Who Should Buy Supplemental Insurance?

In order to benefit by supplemental insurance, a family must have some gaps in their current insurance coverage that would cost them an amount of money they could not easily pay, or put them in a challenging situation from missing work or from being unable to meet their financial obligations if they were ill or confined to the hospital. Those who are over the age of 65 and qualify for Medicare coverage are able to bypass any form of supplemental insurance by getting what is known as a Medigap policy, or signing up for a Medicare advantage plan. Either of these forms of coverage will generally cost less and be superior to supplemental insurance.

If you are under the age of 65, then supplemental insurance such as critical illness insurance will take care of a serious illness like cancer that can create enormous financial burdens. Supplemental insurance can handle all of the deductibles, the expensive critical care specialists, even experimental treatments, and possibly childcare and all of your standard living expenses while you are undergoing treatment. In a situation with a critical illness, where your standard insurance does not offer the same level of benefits that the supplemental insurance offers, it is a sound financial move to take on a supplemental insurance policy.

Special Types of Supplemental Insurance

Accidental death or accidental death and dismemberment policies pay a cash benefit if a person who names you as a beneficiary dies in some form of an accident. If the person does not die, but suffers a debilitating accident, then he or she normally receives the benefit payment or payment stream. This form of supplemental insurance is well-suited for those who are dependent upon a breadwinner for support.

There are also certain activities where your standard health or life insurance policies may not cover you. For example, if you are injured while scuba diving or piloting a small airplane, then supplemental insurance from the Divers Alert Network or the Aircraft Owners and Pilots Association can provide the life-saving financial resources for specialized treatment, or pay a death benefit. Check with an insurance professional to learn more about the types of supplemental insurance you may need.

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