What Is Supplemental Health Insurance?

What You Need to Know

Supplemental health insurance can help with the medical costs that your regular health insurance plan may not cover — such as expensive events, like accidents, or preventive care, like dental cleanings and eyeglasses.

Supplemental health plans are designed to complement major medical policies rather than replace them. 

Before buying supplemental health insurance, you’ll want to consider what the plan covers, how much the plan costs and if you expect to use the benefits.

What Is Supplemental Health Insurance?

The average American pays more than $1,000 in out-of-pocket costs for healthcare each year.¹ With costs on the rise, many people choose to buy a supplemental health insurance policy as a complement to their regular comprehensive health insurance plan. 

Insurers offer a wide variety of supplemental insurance options. Some of the most common types include accident, hospital, critical illness, dental and vision.²  

Supplemental plans can help you pay for medical expenses that your regular policy may not cover, such as deductibles and copayments. You can also buy supplemental plans to cover vision care and dental expenses. Some supplemental plans will reimburse you for food, travel, medicine and lost income due to an accident or injury. 

What Does Supplemental Health Insurance Cover?

Supplemental plans come in many varieties.³ Here’s a look at some of the care that might fall under supplemental insurance coverage:

• Serious illness. Critical illness insurance policies typically pay benefits for events such as heart attack, cancer, organ transplant, coma, renal failure or stroke.
• Accidents. Accident insurance policies vary but may cover injuries like car accidents, trips and falls, or travel accidents. They may also provide benefits in case of paralysis or loss of a limb or eyesight.
• Hospital stays. Policies that cover critical medical procedures pay a lump sum for hospital stays and may offer set benefit payouts for things like emergency room services, ICU treatments, ambulance services, X-rays and lab tests.
• Dental visits. Dental plans typically cover most of the costs of preventive dental care, such as routine annual exams and cleanings. Often, they also cover a percentage of the costs of basic procedures — such as fillings — as well as major ones, such as periodontal treatments, root canals and crowns.⁴
• Orthodontics. Certain types of dental insurance will cover part of the cost of braces, although this may be limited to children under the age of 18.
• Eye exams. Typically, vision insurance will cover a significant portion of costs for exams, eyeglasses, corrective lenses and contacts.⁵ A vision policy may also offer discounts on laser vision correction procedures, such as LASIK.⁶

How Does Supplemental Health Insurance Work?

Most supplemental plans work like other health insurance plans — you receive care and you (or your healthcare provider) submit a claim for reimbursement. Like traditional health insurance, supplemental health insurance typically requires you or your employer to pay a monthly or annual premium. Depending on the plan, you may also need to pay deductibles, coinsurance and copays for certain services. Sometimes, your primary insurance will cover part of a healthcare cost and your supplemental plan will cover the rest.

At the same time, supplemental plans are not a substitute for comprehensive health coverage.⁷ They provide limited benefits for specific preventive treatments or health conditions, often up to a predetermined amount. In some cases, supplemental policies will pay you a fixed lump sum directly. You’ll sometimes hear these policies described as benefit plans rather than insurance plans, as they often are only set up to cover certain costs.⁸

Who Should Consider Buying Supplemental Health Insurance?

If you are looking into purchasing supplemental health insurance, you’ll want to consider several factors:

• Plans offered by your employer. If you have health insurance through work, look at what supplemental plans are offered. Some employers may even pay part of your premiums.
• Services that aren’t covered. Check your primary insurance or short-term plan’s explanation of benefits. Are there services that you anticipate needing that aren’t covered? 
• Your deductible. A family enrolled in a high-deductible health plan (HDHP) may be required to pay up to $14,000 before the plan begins paying its share.⁹ If you’re enrolled in an HDHP, supplemental insurance may protect your savings and help you budget. This is sometimes called gap insurance. (Note that this is distinct from Medicare supplemental insurance, also known as Medigap, for those enrolled in Medicare.)
• Your risk tolerance. As with many insurance decisions, your comfort with risk, as well as factors like age, income and number of dependents, may come into play when weighing different options. You may decide that a particular supplemental policy isn’t worth it, or you may look at it as valuable peace of mind.

When buying supplemental insurance, check to see what the plan covers. Read the policy documents carefully and make sure you understand the limitations and exclusions (what the plan won’t cover) and how it will work with the benefits of your primary insurance.¹⁰

What Are Common Types of Supplemental Health Insurance?

Here is a look at some of the most common types of supplemental health insurance. 

Critical Illness Insurance 

Typically, critical illness insurance pays out a fixed amount of money if the insured experiences a major health problem, such as a stroke, heart attack, organ failure or cancer. While premiums can be relatively inexpensive, these policies are often very specific as to the health conditions that are eligible for a payout.¹¹ 

Also known as catastrophic illness insurance, this insurance usually pays out as a lump sum that can range from $1,000 to $100,000, depending on the policy. You can then use the money to cover costs related to the illness, including medical costs not covered in your regular policy as well as things like childcare, travel, groceries, and mortgage payments or rent.

Accident Insurance

Accident insurance, also known as supplemental accident insurance or personal accident insurance, pays benefits if you experience an accident or injury. Policies will usually exempt injuries sustained due to negligence, acts of God and natural disasters, or during activities deemed risky.¹²

You can purchase accident policies bundled with other insurance policies or separately. Travel companies also offer specific, short-term accident policies, such as an accident policy when you rent a car.

Accidental Death and Supplemental Accident Plans 

Accidental death and dismemberment (AD&D) insurance pays your family if you die in a covered accident or pays you if you lose a limb or your hearing, sight or speech. Insurers, who categorize AD&D as a type of life insurance, sometimes package these plans with supplemental accident insurance that also covers less severe injuries.

Typically, AD&D policies pay your beneficiaries a lump sum if you die in an accident or pay you a specific cash amount if you suffer dismemberment. The payment amount and what’s covered varies depending upon the type of policy.¹³

Hospital Indemnity Insurance 

Hospital indemnity insurance pays out a fixed, predetermined sum for certain services specified in the plan. A policy may pay you $1,000 for every day you are in the hospital for a surgery, for example. These plans supplement major medical policies to help cover additional expenses like deductibles or other expenses.¹⁴

Depending on the type of policy, hospital indemnity plans may also pay benefits for ambulance travel, long-term care and certain types of lab diagnostics related to a hospital stay. Typically, you can use the funds for whatever you want, from medical costs to everyday household bills.

Adult Dental and Vision Coverage

Many regular healthcare plans don’t cover dental or eye care expenses. To cover some of these costs, insurers offer dental and vision plans as standalone policies or sometimes combine them into one plan package. You may hear these plans described as a type of supplemental coverage, or your insurer may refer to them simply as dental or vision plans, separate from other types of supplemental insurance.

According to the ADA, one in three U.S. adults doesn’t have dental coverage.¹⁵ Yet routine preventive dental care, such as regular check-ups and cleanings, can save you a significant amount of money in the long run.¹⁶  

Supplemental dental insurance usually covers most preventive-care costs — including cleanings, periodic oral evaluations, x-rays and sealants — and a portion of other procedures, such as fillings, root canals and crowns. Some supplemental plans can be added to existing dental coverage to provide benefits for procedures like crowns or fillings.

Vision insurance offers benefits that help cover the cost of exams, eyeglasses and contacts.¹⁷ And routine eye exams can provide early detection of serious diseases.¹⁸ When comparing plans, look carefully at the details to see what’s covered, especially if you wear contact lenses or regularly need new glasses.

Children’s Dental and Vision Coverage 

In many ways, children’s dental and vision plans are similar to those for adults. However, children’s dental plans are more likely to include coverage for sealants and fluoride treatments as well as braces and other types of orthodontic care.¹⁹

How Do You Enroll in Supplemental Health Insurance?

Policies available for purchase vary from state to state.²⁰ However, you can usually enroll in a supplemental health insurance plan via one of these methods:

• Your employer. The department of human resources at work can tell you if your employer offers supplemental policies or helps cover part of the premium.
• Individual purchase. You can purchase most types of supplemental policies directly from insurers by contacting an insurance agent or broker, or searching for plans online. You can enroll in many types of policies at any time of year, although waiting periods for certain covered services may apply.
• Associations. Membership organizations like AARP or AAA or professional organizations in your industry may offer supplemental health insurance options.
• Health Insurance Marketplace. Plans in the Marketplace may offer dental coverage.²¹ Enrollment may be limited to certain times of the year.
• Medicare and Medicaid. If you have insurance through Medicare or Medicaid, certain types of plans in some states may offer dental or vision coverage.²²

How Much Does Supplemental Health Insurance Cost?

As with costs for other insurance policies, the cost of supplemental insurance depends highly on factors like your age, occupation, pre-existing health conditions and location. Premiums also vary depending on the extent of coverage, limitations and lifetime maximums. In a recent search across different plans, individual coverage for dental and vision insurance ranged from $10-$80 per month. Other types of supplemental insurance ranged from $10-$150 per month or more.

Next Steps 

A supplemental plan may be a wise investment for people with major medical coverage looking to add another layer of financial security. Before purchasing any policy, do your research to make sure you understand the plan and what it covers and that you can afford it. 

You’ll want to ensure that a plan complements your existing coverage to provide the best care possible while giving you peace of mind.