Supplemental life insurance can help make sure you're getting the coverage you need — here's how it works

Life insurance can help financially protect your family from the loss of your income should you pass away. But even if you already have life insurance through your employer (often known as a group life insurance policy), the coverage offered as a part of your benefits may not be enough to fully shield your dependents from your loss.   

Many employers' group life insurance coverage has a death benefit (the amount paid to your beneficiaries if you die) that equals one to two times your annual salary. However, the common rule of thumb for life insurance is that the typical person needs about 10 times their income. 

That's where supplemental life insurance can come in. These policies help add an extra layer of protection to your existing life insurance from your employer and provide peace of mind to those wanting to bulk up their coverage, oftentimes without having to take a medical exam. 

CNBC Select breaks down all you need to know about supplemental life insurance.  

Supplemental life insurance is extra coverage designed to supplement small, basic life insurance policies from an employer and provide extra financial protection. Employers typically offer supplemental life insurance as an optional benefit for employees, who then have to pay the premiums themselves. 

If you decide to get supplemental life insurance through your employer, your choices will depend on what your employer offers, including how much coverage you're allowed to buy, what type of coverage is available, and whether a medical exam is required.  

But even if you have life insurance at work, you can shop for an individual life insurance policy outside of that for more coverage. CNBC Select ranks Northwestern Mutual Life Insurance as our top insurance pick overall for its variety of life insurance products, along with State Farm, our top pick for customer satisfaction. 

You can get supplemental life insurance through your employer (in addition to your basic coverage). Prices and policies vary for each employer and organization. Insurance companies, for example, typically determine prices for each employer's group by evaluating each request's demographics, life expectancy, past claims and policy design.     

As you look at your employer or organization's coverage, some of the life insurance options you may see include: 

• Term life insurance: This type of insurance provides coverage over a set period of time chosen when you buy the policy, generally 10, 20, or 30 years. If you die within that time frame, a death benefit will be paid to your beneficiaries or the people you name who survive you. If you outlive the term, the policy has no value.   
• Permanent life insurance: Permanent life insurance covers you for your entire life and offers a guaranteed payout for your family. Whole life insurance and universal life insurance are two common types of permanent life insurance. However, premiums for this type of coverage tend to be more expensive than with term life insurance. 
• Coverage for your family: You may also buy coverage at the lower group rate for your spouse and/or children. 

The advantages of supplemental life insurance may seem enticing but that doesn't necessarily mean it's right for you. Here are some things to consider before purchasing: 

• How much coverage do you already have?  If you already have an individual life insurance policy that meets your needs, buying more from your workplace may not make sense.  
• Can you get a better rate elsewhere? If you're young and healthy, getting life insurance from work might not make sense — you'd likely qualify for other coverage. However, getting supplemental life insurance through work might make more sense if you have health complications or are older.
• Is your coverage portable?  It's important to note that in most cases, you can only count on your employer-paid life insurance for as long as you stay at your company. Some supplemental insurance policies are portable, and others aren't. Ask your employer's HR department for the specifics of your plan.

Pro: You may be able to skip the medical exam and still get coverage

You may be able to get supplemental life insurance without taking a medical exam, especially if you get it through your employer. That's because group insurance policies rely less on medical underwriting, which can help people with pre-existing conditions like diabetes or high blood pressure get supplemental coverage. Check with your HR department to see if a medical exam is required for your workplace's supplemental life insurance policy.  

Con: Little control over your coverage  

Because your employer decides what policies are available and how much you can purchase, there's little room to customize the policy to your needs. That's where standalone, individual coverage can help. 
 
Pro: May be able to extend coverage for your family 

Supplemental life insurance often offers the option to extend coverage to a spouse or a child.

Con: You can lose your coverage if you leave your job  

If you leave your job or organization, you may also lose your coverage. Some supplemental policies are portable and allow you to take your coverage when you leave a job. However, it depends on your employer's specific policies and terms — get to know the options offered by your organization and whether your supplemental insurance coverage would be portable before you sign up.  

Although some employers offer no-cost life insurance benefits to employees, most policies don't provide sufficient coverage. Supplemental life insurance coverage could help you get approved for a policy if you have health issues or want to skip the medical exam. However, prices can vary between group insurance and individual insurance, so compare your company's supplemental life insurance options to individual insurance policy offers to ensure you get the best policy available.

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