What Is Supplemental Health Insurance?

Supplemental Health Insurance Explained in Less Than 4 Minutes

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Table of Contents
Table of Contents

Supplemental health insurance helps to pay for healthcare costs that aren't typically covered by traditional health insurance. Some cover specific situations, like hospital or disability insurance, while others cover specific health conditions like cancer.

Learn more about these policies and how they work.

Definition and Examples of Supplemental Health Insurance

Supplemental health insurance is an insurance plan that covers costs above and beyond standard health insurance policies. It may provide additional insurance coverage or pay for costs not covered by a traditional health insurance plan, including coinsurance, copays, and deductibles. It all depends on the type of supplemental health insurance plan.

Examples of supplemental health insurance include:

  • Dental insurance
  • Critical illness insurance
  • Vision insurance plans
  • Disability insurance
  • Supplemental travel insurance for health care coverage when you are outside your health insurance network
  • Long-term care insurance
  • Medicare supplement plans
  • Cancer policies
  • Accidental death and dismemberment insurance
  • Hospital indemnity insurance

How Does Supplemental Health Insurance Work?

Supplemental insurance may pay benefits to the insured person or to the health care provider. The amount paid and how it's paid out depend on the supplemental health insurance plan. Here are a few examples of supplemental health insurance policies and how they work.

Critical Illness or Disease-Specific Insurance 

This type of insurance provides a cash benefit paid directly to you if you require treatment for a specific disease such as cancer. You can typically spend the cash any way you choose, and getting your benefit has nothing to do with how much your insurance pays for your medical costs.

Accidental Death and Dismemberment Insurance

This type of insurance typically reimburses you for medical costs resulting from accidents. Benefits are paid to your beneficiaries if you die.

Premiums are usually low, and no medical exam is required. Accidents include automobile collisions and accidents in your home. Additionally, if you lose limbs, fingers, toes, or your vision due to a covered accident, you may be able to collect a percentage of the death benefit.

Hospital Indemnity Insurance

This type of insurance provides a daily, weekly, or monthly cash benefit if you are hospitalized. There is often a minimum hospital stay before benefits are paid. The cash benefit is paid directly to you and is in addition to any other insurance you may have.

Private insurers sell supplemental health plans. Most aren't sold through the Health Insurance Marketplace, but many employers offer them, or you can purchase them directly from insurance companies.

Do I Need Supplemental Health Insurance?

Whether you need supplemental health insurance depends on your risk factors, the premiums, how much insurance you want, and what you want to be insured for.

For example, if you know that your children will need insurance to cover orthodontic care in the coming years, you may decide that a dental insurance plan is worthwhile.

Another example would be if you know that you couldn't afford the costs of long-term care or the loss of income if you were diagnosed with cancer. In those cases, long-term care or critical illness insurance may be worth considering. 

Your savings should play an important role in your decision to purchase a supplemental health insurance policy. If you were in the hospital for a few weeks or more, would you have enough to cover your deductible, copays, and coinsurance? Do you have money that you can access through an HSA or FSA? If you do, buying supplemental health coverage might not be worthwhile.

Key Takeaways

  • Supplemental health insurance is a health insurance plan that covers costs above and beyond traditional health insurance policies.
  • Examples of supplemental health insurance include dental insurance, critical illness insurance, and hospital indemnity insurance. 
  • Whether a supplemental health insurance plan is right for you depends on your health, the costs of the plan, and the benefits of the policy you're considering. Many of these plans are inexpensive, so if you're on the fence, it may be worth buying a policy.