Today we’re going to cover a commonly confused term in the insurance industry, and that term is supplemental.
A major mistake many people make, brokers and employers alike, is that when they see the word ‘supplemental’, their minds automatically jump to voluntary insurance. But these two terms aren’t interchangeable.
All voluntary insurance is supplemental insurance, but not all supplemental is voluntary. Just like how all penguins are animals, but not all animals are penguins. Or how all pumpkin pie is dessert, but not all dessert is pumpkin pie. That would make for very boring zoos and dessert tables.
You see, supplemental insurance is the overarching descriptor: a category of insurance. But inside that category lies different types.
It may sound confusing, but just return to the pumpkin pie example, and you’ll see it more clearly. Dessert is a category of food. Pumpkin pie exists within that overarching group. It is not synonymous with the word dessert. Your mind does not think that dessert = pumpkin pie. It is also not the only type of dessert. There are cookies and cake, too!
Now let’s look at two types of supplemental insurance.
Voluntary is one type of supplemental insurance. Here are some distinguishing characteristics:
- Employees opt into
- Employee or employer funded
- Event-driven coverage that requires specified event (or disease) for coverage to kick in
- No tax savings
Expense reimbursed is another type of supplemental insurance. Get to know expense reimbursed:
- Employer funded
- Can carve out by employee class as defined by the employer
- Not subject to event-driven qualifications
Just like pumpkin pie isn’t the only dessert, voluntary isn’t the only type of supplemental insurance. The mistake that many make is assuming that supplemental is limited to voluntary insurance. That’s cutting out another major type of supplemental insurance: expense reimbursed. Don’t make this mistake and miss out on everything else supplemental has to offer!