Sometimes, the coverage provided by your life insurance might not be sufficient. You can supplement your existing life insurance policy by getting extra coverage. But should you supplement your existing life insurance policy? Sometimes the existing policy money may not be sufficient for your beneficiaries to meet the expenses after you are gone especially when the dependents are large in number and the financial commitments are high. At times your dependents may have to sell the family property to settle a loan or use of the proceeds from your life insurance policy leaving them with virtually nothing. You can overcome this problem by supplementing your existing life insurance. By supplementing your existing life insurance policy, you can give extra financial security to your family. You can also buy supplemental life insurance if your employer provides you with a group term life insurance as part of your pay package.
Supplemental life insurance is also known as additional insurance. The extra coverage you can get with a supplemental insurance policy can be few or multiple times more than your existing policy. It basically depends on the amount of your existing policy. The additional coverage cannot extend beyond a prescribed limit which again varies from policy to policy. You can choose the amount of covered with the prescribed limit. You have the flexibility of changing the amount of coverage. If you want to insure for a very high amount you must provide authenticated evidence and documentary proofs to establish that you are able to pay such an amount. This proof is referred as evidence of insurability. Supplemental life insurance is easy to obtain. Since you already have life insurance, it will not be a problem for you to get supplemental life insurance suited to your requirements. The main objective of a supplemental life insurance policy is to provide extra protection. Supplemental life insurance is a term based insurance policy available to provide additional coverage to you when you need it most, say, when you have younger children, or are in other transitional areas of life.
If you have whole life insurance, you can use supplemental life insurance for retirement planning. The benefits of using supplemental life insurance for retirement planning are:
- Provides a generally income tax-free death benefit.
- Can be tailored to meet individual needs.
- Can be structured to avoid early withdrawal penalties.
- Can be pledged as collateral for a loan.
- Government-defined annual contribution limits do not exist.
