Supplemental life insurance: How does it work?
Supplemental life insurance is a life insurance policy that you can buy in addition to your basic life insurance to bolster your policy’s monetary benefits. You’d normally purchase this extra coverage if you thought your basic life insurance policy wouldn’t supply enough money for your beneficiaries. You can typically buy optional supplemental life insurance through your employer or through an insurance company.
Your basic life insurance may offer benefits of only one to two times the amount of your yearly salary. However, some insurance experts recommend that benefits from all your life insurance coverage should total seven to 10 times your annual income.
A common type of supplemental life insurance is called yearly renewable term life insurance, meaning you renew the coverage each year. By contrast, a basic life insurance policy may cover a period of 10, 20, or 30 years.[1]
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Supplemental life insurance beneficiary
Life insurance, including supplemental policies, offers financial protection for your beneficiaries after you die.[1] While you’re not required to do so, you can name beneficiaries for your life insurance coverage to ensure that the money — known as a death benefit — goes to the people you intended to receive it, such as your spouse or children.
Your beneficiaries can then put that money toward a number of things, such as funeral expenses, debt payoff, mortgage payments, or college tuition. Or your beneficiaries may simply stash the money in the bank for their retirement. You can even name a charity as a life insurance beneficiary.[2]
The death benefit for a life insurance policy is typically paid in a lump sum.[3] So, if you own a life insurance policy with a face value of $100,000, your beneficiaries generally would receive a death benefit of $100,000 following your death, as long as the policy remains in good standing.
Among the factors that may influence the face value of a life insurance policy are your age, income, and number of dependents.
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