Four Situations When Supplemental Health Insurance Makes Sense (When You’re Not Retired)

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There is likely no subject less exciting or more aggravating than health insurance. The entire experience is frustrating for most people: Navigating plans is confusing, everything seems really expensive, and when you make claims you often get blank denials that explain nothing and give you few options for appeal or further information. All that being said, most people assume that once they choose a plan through their employer, they’re at least protected from disaster for the foreseeable future.

But that might not be the case. When we talk about supplemental insurance, it’s usually in the context of Medicare due to the well-known gaps in that coverage. But even if you have really good insurance through an employer or organization, you might need to pay for supplemental insurance to make sure you’re fully protected. The challenge? Figuring out if you actually need it.

Supplemental insurance is something you buy on top of your main coverage, and it’s designed to cover stuff your overall policy misses. It’s not meant to be primary coverage. There are numerous kinds of supplemental insurance. For example, if you traveled to a foreign country and bought travel health insurance, that’s a form of supplemental insurance. You can buy specific supplemental plans that cover you for accidents, critical illness (including specific policies for a cancer diagnosis), hospital costs, vision and dental, and disability.

You pay a premium for your supplemental insurance and have a set schedule of benefits just like your other insurance, but supplemental plans usually pay either a flat amount or a percentage of your costs directly to you. So, for example, if you have a hospital indemnity plan and you get socked with a huge bill after a week in the hospital that your main insurance only partially covers, supplemental insurance would kick in and send you a lump sum check to help defray those costs.

Supplemental health insurance is an extra cost, of course, so the main question you need to answer is whether you actually need it. Paying twice for the same coverage doesn’t make sense, and neither does paying for coverage you’ll never use. But there are four scenarios when it’s pretty clear you need supplemental insurance.

If you have a high deductible

The average deductible with an employer health insurance plan keeps creeping up toward $2,000, and the out-of-pocket maximum (the most you’ll pay, including deductibles and co-pays, during the term of your policy, in addition to your premium) is capped by law at $9,450 for individuals and $18,900 for families—though the average out-of-pocket in 2023 was $4,346. So as a fun experiment, compare those numbers to your savings account. If there’s a significant gap, that means you wouldn’t be able to pay for a big medical expense without resorting to loans, home equity, or credit cards.

If that describes your situation, supplemental health insurance might be a good idea, because it can cover at least a portion of those expenses and reduce your exposure. If nothing else, it can give you more breathing room if you wind up paying for an expensive surgery or hospital stay.

If you’re at high risk for health problems or injury

Another reason you might want to pay for supplemental insurance is if you have a higher risk than most people for incurring large healthcare expenses:

• Family history. If you have a high prevalence of serious illnesses like cancer, or you’ve undergone genetic testing and you have a high risk for developing some form of cancer, paying for supplemental insurance might make sense, since there’s a good chance you’ll need to pay for expensive treatments at some point.

• Dangerous job. If you work in an industry that has a very high rate of serious injury, like construction or logging, you might need more coverage to inoculate you against frequent medical bills.

If you use a lot of healthcare

If you typically use a lot of healthcare resources, due to health conditions or family situations, and you don’t anticipate that changing any time soon, supplemental insurance can make sense. While you might hit your deductibles and out-of-pocket maximums fairly quickly, your policy might not offer enough coverage for your needs.

This is especially true if there’s a risk that you might become unable to work. Your main insurance might cover most or even all of your expenses, but could you handle losing your income for a period of time? If you’re unable to work, you might also need to pay for additional expenses, like childcare, help around the house, or in-home care, and supplemental insurance might be the difference between financial survival and ruin.

If your coverage has gaps

Finally, supplemental insurance might plug the gaps in traditional insurance coverage—like dental and vision insurance, which are (weirdly) treated as separate from health insurance, and are often frustratingly bare-bones in terms of what they cover. Who hasn’t gone to the eye doctor only to discover that their basic vision insurance barely covers the examination and offers nothing at all for those expensive glasses and contact lenses? Or discovered that their dental insurance has such a high deductible it never actually pays for anything aside from bi-annual cleanings?

If your vision and dental insurance aren’t helping much, a supplemental plan can be beneficial, especially if you anticipate a lot of use in the coming year (e.g., if you’ve been putting off dental work because your insurance is crap and won’t cover anything).

Supplemental health insurance isn’t always necessary, but it’s worth crunching the numbers to see if it might benefit you—especially if you fall into one of these four categories.