What Is Supplemental Health Insurance?

Definition

Supplemental health insurance is a plan that covers costs above and beyond what standard health policies will pay. It may provide extra coverage. It may even pay for costs not covered by a traditional health plan, such as coinsurance, copays, and deductibles.

Mother and daughter at the pediatric office
Photo: Marko Geber / Getty Images

Key Takeaways

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

How Does Supplemental Health Insurance Work?

Having supplemental health insurance in place can help you pay for healthcare costs that aren't always covered by traditional health plans. Some cover certain events, such as hospital stays or disability. Others cover certain health conditions like cancer.  It all depends on the type of supplemental health plan you choose.

Supplemental health plans may pay benefits to either the insured person or to the health care provider. The amount that's paid and how it's paid out will depend on the plan. These are a few types of supplemental health policies.

Critical Illness or Disease-Specific Insurance 

This type of plan often provides a cash benefit paid to you if you need treatment for a certain disease such as cancer. You can spend the cash any way you choose if it doesn't go to your care provider. Getting your benefit has nothing to do with how much your plan pays for your medical costs.

Accidental Death and Dismemberment Insurance

This type of plan will reimburse you for medical costs that result from accidents.

Note

Benefits are paid to your beneficiaries if the event causes your death.

The premiums are often low and no medical exam is required. Accidents can include both automobile collisions and accidents in your home. You may be able to collect a portion of the death benefit if you lose limbs, fingers, toes, or your vision due to an accident that's covered.

Hospital Indemnity Insurance

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

Note

Most supplemental health plans aren't sold through the Health Insurance Marketplace, but many employers offer them. You can also purchase them directly from insurance companies.

Do I Need Supplemental Health Insurance?

Whether you need this type of health plan depends on your risk factors. You should also think about the cost of the premiums, how much insurance you want to carry, and what you want to be insured for. You may decide that a dental plan is worth buying if you think that your children will need it to cover orthodontic care in the coming years.

You might think about a supplemental plan if you know that you couldn't afford the costs of long-term care, or the loss of income if you were diagnosed with something like cancer. Long-term care or critical illness plans may be worth thinking about in these cases. 

Your savings should play a key role in your decision to purchase a supplemental health plan. Would you have enough money to cover your deductible, copays, and coinsurance if you were in the hospital for a few weeks or even more? Do you have money that you can access because you've been saving to an HSA or FSA? Buying a supplemental health plan might not be worth it if you do.

Frequently Asked Questions (FAQs)

When can I change my Medicare supplemental insurance plan?

You typically cannot change your Medicare supplemental insurance (Medigap) unless you're within your 6-month open enrollment period that begins the first month you have Medicare Part B. Once acquiring coverage, you have a 30-day "free look period" to switch plans. After that, only special circumstances like moving to a new state will give you the right to switch policies.

What percentage of Medicare patients have supplemental insurance?

Roughly 84% of Medicare patients (Parts A and B) had some type of supplemental insurance coverage in 2019. This figure includes Medigap patients as well as those who supplemented Medicare with other types of coverage like employer-sponsored plans.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. National Cancer Institute. “Definition of Supplemental Health Insurance.”

  2. Colonial Life. “Critical Illness Insurance Coverage and Policies.”

  3. The Hartford. “Voluntary Accidental Death & Dismemberment Insurance.”

  4. MetLife. "Hospital Indemnity Insurance."

  5. Medicare.gov. "When Can I Buy Medigap?"

  6. Medicare.gov. "Switching Medigap Policies."

  7. Department of Health and Human Services. "Medicare Beneficiary Enrollment Trends and Demographic Characteristics," Page 3.

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