There are many reasons to consider supplemental health insurance benefits at work. But before you decide if it makes sense for you — and which type to get at open enrollment or when you start a job — you should know about the main types of supplemental insurance and how they work to help protect your financial well-being in the event of an illness or injury.
Key takeaways
Supplemental health insurance pays benefits directly to you when you experience a covered illness, injury, or hospitalization, helping with out-of-pocket and everyday expenses that regular health insurance may not cover.
The main types are accident insurance for injuries, critical illness insurance for major diagnoses like cancer or stroke, and hospital indemnity insurance for costs related to hospital stays.
Employer-sponsored supplemental insurance is often affordable and easy to enroll in and pay for, with automatic deductions.
Claims typically paid quickly after proof of treatment or diagnosis is submitted.
The best type of supplemental insurance for you depends on your personal risks and concerns, such as family health history or whether your children participate in sports.
Because these plans are relatively cost-effective, many people choose more than one type of supplemental insurance to create broader financial protection.
What is supplemental health insurance?
Supplemental health insurance is designed to compliment your primary health insurance plan by providing added coverage that pays for things not covered by your main policy. While traditional health insurance plans typically cover medical expenses and pay healthcare providers directly, supplemental coverage provides extra financial protection to help offset out-of-pocket costs and other expenses.
Unlike standard health insurance, which pays healthcare providers directly for medical services, supplemental plans generally pay you directly, giving you the flexibility to use the funds as needed.
How supplemental insurance works
There are different types of supplemental insurance plans, and many employers offer them as "voluntary" (i.e., employee-paid) benefits to help provide added financial stability to their workers. These plans may provide you with a fixed benefit payment or a lump-sum payment — money that goes directly to you, not the health care provider — when you experience a covered illness or injury, or get a covered treatment or service. The payout can be used for a variety of medical or related expenses, regardless of any other insurance coverage you may have. Benefit amounts vary by plan, severity of the diagnosis, and other factors, and the claims process is typically straightforward: you can usually file online and upload proof of diagnosis or a service received. Soon after, the benefit payment is paid directly to you, and you can use the money to help cover out-of-pocket care costs and other injury or illness-related expenses.
Three main types of supplemental health insurance
Accident insurance
Accident insurance is a type of insurance policy that provides lump sum benefits for accidental injuries requiring treatment, urgent care, or hospitalization, including common injuries such as burns or fractures. Plans vary but may pay a lump sum benefit for diagnosis, treatment, and recovery services, provide financial protection for both medical costs and additional indirect expenses, such as family care and transportation. Payments are made directly to you based on covered injuries and services, regardless of whether a health insurance plan also covers treatment costs.
Some accident plans may also provide an optional wellness benefit and an additional benefit of up to 20% for covered children injured while participating in an organized sport.1
Critical illness insurance
Critical illness insurance provides support for major illnesses by paying a lump sum benefit based on the diagnosis of covered chronic and debilitating conditions such as stroke, heart attack, cancer, Alzheimer's disease, and Parkinson's disease. This lump sum payout can be used for medical care and other related expenses, helping to ease financial burdens during difficult times. Some plans may go beyond coverage for traditionally serious health events and pay optional benefit payments for things like family planning treatments, mental health support, health screenings, and other expenses.
Hospital indemnity insurance
Hospital expenses can add up very quickly. According to Healthcare.gov, the average price of a three-day hospital stay is approximately $30,000 — and even with traditional health insurance, you may be responsible for deductibles and co-pays.2 During or after a hospitalization, there can also be a variety of extra expenses as you adjust to any changes in your daily life.
Hospital indemnity insurance can provide needed financial help at a stressful time by paying a lump sum benefit payment directly to you based on admission and days hospitalized. Some plans also offer a health screening benefit. And just like other types of supplemental insurance plans, you can use the money you get to help cover your care costs and other expenses.
Supplemental insurance cost considerations
Supplemental insurance costs vary depending on the type of plan, conditions covered, and benefits offered. While you may be able to purchase some types of supplemental insurance plans directly from an insurance company as an individual, plans offered by your employer may have better rates than an individual plan. Benefits through work are also convenient to get and pay for via payroll deductions.
Supplemental health insurance can be especially valuable for those with a high deductible on their primary health insurance, as it helps offset out-of-pocket expenses.
Which supplemental insurance plan is worth getting?
It's stressful when unexpected bills appear because of illness, injury, or a medical issue. You want to be able to focus on healing, not finances. But if your employer offers different types of supplemental insurance, how do you choose? The answer depends largely on your concerns about potential health issues. For example, if you have a history of cancer in your family, you might want to opt for critical illness or cancer insurance. Or, if your child is active in sports that could cause harm or injury, accident insurance could be especially appealing. But it doesn't have to be an either/or choice. With generally affordable rates, many people may opt for multiple kinds of supplemental health insurance for a more complete financial health. And, these plans can be especially valuable for those with a high deductible on their primary health insurance, because supplemental health insurance can help offset out-of-pocket expenses.
How to get supplemental health insurance
A growing number of companies offer supplemental health insurance as a voluntary workplace benefit that’s available for sign-up during open enrollment periods. Ask your supervisor or HR department whether any plans are part of your employee benefits. If not, you can purchase coverage directly from an insurance company. And if you'd like more information about deciding which employee benefits are right for you, here's a guide that can help.
Why many employers offer Guardian supplemental insurance benefits
The financial support that supplemental insurance plans provide may help make all the difference to employees and their families. Whether it’s withstanding a sudden medical emergency or staying afloat during a covered treatment for a serious diagnosis, Guardian’s supplemental insurance options help offer employers a cost-effective way to support their employees’ well-being.
Frequently asked questions about supplemental health insurance
According to recent research from Guardian, just 51% of workers believe that their medical plan is enough to cover a major medical event.3 Even if you are in good health and have good health coverage, you could still incur co-pays, deductibles, and out-of-pocket costs if you suffer a covered accidental injury like a severe burn, broken bone, or have to visit an emergency room. Supplemental health insurance, along with other coverages like accident insurance, can help you pay for both medical and non-medical expenses related to a covered illness or injury without dipping into savings or incurring more credit card debt. Ultimately, the decision to consider supplemental insurance depends on how comfortable you are — or are not — with the idea of dealing with that kind of added financial burden during a time of stress.
Because supplemental insurance does not qualify for protections offered by the Affordable Care Act, there may be limits imposed on the benefits you receive. The insurer may choose to deny a claim based on your medical history or pre-existing conditions or place certain caps on benefits resulting in reduced benefits.
