What is Supplemental Health Insurance and How Does it Work?
Supplemental insurance can help you pay for costs not covered by regular health insurance.
Find Cheap Health Insurance in Your Area
Supplemental health insurance offers extra coverage to help you pay for the part of your medical bill you're responsible for paying. This extra health coverage pays out directly to you either as a lump sum or through regular payments.
That means you're not limited to using your supplemental coverage for medical costs. For example, you can also use it to buy groceries or pay your mortgage, rent or utilities.
What is supplemental insurance?
Supplemental insurance is any coverage you have in addition to your regular health insurance.
It's important to remember you're still responsible for certain medical costs with a normal health insurance policy. These include your:
You'll have to pay these costs up to your plan's annual limit, called an out-of-pocket maximum. In 2025, health insurance plans can't have an out-of-pocket maximum above $9,200 for an individual or $18,400 for a family plan, although many plans have lower caps.
If you'd struggle to cover your out-of-pocket maximum, you might benefit from a supplemental health policy. Supplemental policies can also help you replace lost income if you're not able to work because of a serious injury or illness.
That's because many types of supplemental health insurance policies give you money directly. You can use this money however you like. So supplemental health insurance might make sense if you need extra cash to meet your bills, buy groceries, cover your mortgage or get a hotel room.
Supplemental health coverage vs. regular medical insurance
Supplemental health plans don't have to offer the same level of coverage as regular medical insurance.
Normal health insurance plans have to offer a minimum level of coverage because of Affordable Care Act (ACA) rules. ACA plans also can't cap your coverage or deny you based on a pre-existing condition. Supplemental plans don't have to follow these rules.
It's important to understand what your plan does and doesn't cover before you buy.
Medicare supplement vs. supplemental health insurance
Medicare supplemental plans, also called Medigap, are a separate category of supplemental plans. These plans help pay for things traditional Medicare doesn't fully cover.
You cannot buy a Medigap plan if you have Medicare Advantage.
Types of supplemental insurance
You can choose from different types of supplemental health insurance depending on your needs.
The best supplemental health insurance plan for you will depend on your main coverage and unique needs. For example, if you have to pay thousands of dollars before your regular health coverage starts because of your high-deductible health plan, you should consider a fixed indemnity policy that will help you pay for some or all of those upfront costs.
What supplemental health plan is best for you?
- Fixed indemnity is best for people with high-deductible health plans.
- Hospital insurance is best for people with ongoing health conditions.
- Accident insurance is best for people who have a high risk of injury, such as firefighters or rock climbers.
- Critical illness insurance is best for older individuals and people with a high risk of specific illnesses.
- Long-term care insurance is best for people in their 50s and 60s.
- Disability insurance is best if you have a dangerous job or you're the main or sole breadwinner for your family.
Carefully review what you need before you buy supplemental coverage. Remember, supplemental health insurance is optional. Depending on your needs, you may need more than one type of supplemental coverage, or you may be best off without it entirely.
Fixed indemnity
People who have high deductible health plans (HDHPs) or plans with low coverage levels like catastrophic health insurance should consider fixed indemnity insurance.
This type of supplemental insurance gives you a fixed amount of money, called an indemnity, to help pay for a specific illness or injury treatment. With this type of plan, you can use the benefits however you want.
An indemnity plan won't offer enough coverage to pay for all your medical care. In other words, you should never rely on one as your main source of health insurance. Instead, think of it as a useful add-on to your regular coverage.
Hospital insurance
People with ongoing health issues or a family history of genetic diseases should consider hospital indemnity insurance.
Hospital indemnity insurance typically pays out a set amount of money to help you cover costs that come with hospital stays. Depending on your policy, payments may come as a lump sum or in daily or weekly installments.
You can use hospital insurance to cover the costs you are still responsible for with your primary medical insurance, such as your deductible, copays and coinsurance.
Accident insurance
Accident insurance might make sense if you work in a high-risk profession or you regularly engage in dangerous activities, such as rock climbing or base jumping.
This type of insurance helps pay for medical care and other costs after an accident. It typically covers emergency room and hospital stays, medical exams and other costs related to accidents not covered by your regular insurance.
Like fixed indemnity plans, accident insurance pays you directly making it possible to use the money for other costs after an accident, such as lodging or transportation. Accident insurance often covers broken and sprained limbs, burns, cuts, paralysis and other injuries.
Critical illness insurance
People at high risk for conditions such as heart disease, stroke and cancer may benefit from critical illness insurance.
These plans help pay the costs associated with serious illnesses such as cancer and heart disease. You'll get a lump sum payment for diagnoses specifically listed in the policies.
Remember, some policies only protect you against a single type of disease. So if you bought cancer insurance, you can file a claim only if you're diagnosed with a type of cancer.
Long-term care insurance
You should consider buying long-term care insurance if you're in your 50s or 60s.
Seventy percent of 65-year-olds will need long-term care at some point in their life. Because of the high cost of long-term care, most elderly Americans should consider long-term care insurance.
Most long-term care policies will cover home care or a stay in a nursing home, assisted living facility or adult day care center.
Long-term care insurance helps protect you from costs caused by long-term diseases and conditions such as Parkinson’s and Alzheimer’s. People who have these diseases will often need to stay in an assisted living facility, where they can get help with daily tasks.
Regular health insurance and Medicare will not pay for most long-term care costs. Medicaid may cover some long-term care costs, but you have to meet strict eligibility requirements.
Disability insurance
Breadwinners and those who work in high-risk jobs should consider getting disability insurance.
This type of insurance pays a portion of your income if you are unable to work because of a serious injury or illness. With disability insurance, benefits are paid directly to you. Disability insurance is a good option for workers who have children or a dangerous job.
The major difference between short- and long-term disability insurance is how long payments last. Short-term disability insurance usually covers a portion of your income for three to six months . In contrast, long-term disability insurance typically lasts for five to 20 years. Either policy can cover the same disability.
Short-term disability insurance | Long-term disability insurance | |
|---|---|---|
| Typical payout period | Three to six months | Five to 15 years |
| Average coverage | 50% to 70% of income | 40% to 70% of income |
| Average cost | 1% to 3% of income | 1% to 3% of income |
Cost of supplemental insurance
Supplemental policies typically cost less than regular insurance because they offer less coverage.
The cost of supplemental plans varies dramatically. The cost you pay depends on the policy and personal factors, such as your age, health status, gender, where you live and whether you smoke.
How much you pay over the long run may shift, too. Some plans raise rates each year while others maintain a steady monthly rate over the life of the policy.
Keep in mind, age impacts how much you'll pay for most policy types. Typically, older people will pay more than younger people for the same amount of coverage.
Vision, dental and orthodontics insurance
Vision, dental and orthodontics insurance are also considered supplemental health policies.
Vision and dental insurance differ from other types of supplemental health insurance because they cover services and procedures that regular health insurance plans don't pay for. These plans are typically inexpensive, and you can usually buy coverage through your employer.
If you don't have insurance through your workplace, consider buying coverage through your state's health marketplace or HealthCare.gov. Many ACA plans let you bundle dental coverage for an extra fee, or you can buy a stand-alone dental plan along with your regular health plan.
ACA plans typically have to offer vision coverage for children under the age of 19. But this requirement doesn't extend to adult plans. To buy a stand-alone vision policy, you'll have to shop online or go through a broker.
Frequently asked questions
What is supplemental health insurance?
Supplemental health insurance adds extra coverage to your regular health insurance. Many types of supplemental coverage will pay out directly to you.
Who should buy supplemental health insurance?
You should consider supplemental health insurance if you would struggle to pay all of the costs associated with a medical emergency, including your deductible, copays and coinsurance up to your plan's annual limit. It's also important to factor in lost income if you're not able to work for an extended period of time.
You should also consider whether you need dental or vision coverage if it's not offered by your regular health insurance.
Is supplemental insurance a good idea?
Supplemental insurance is a good idea if it fits your individual needs. For example, a middle-aged person should probably have long-term care insurance and a breadwinner should have disability insurance, but these coverage options might not make sense for a college student.
Sources
Information related to vision and dental coverage availability through ACA health exchanges came from HealthCare.gov. Cost data for long-term care services came from the National Council on Aging (NCOA). Other long-term care statistics were taken from the Administration for Community Living (ACL).
Talon Abernathy
Senior Writer
Talon Abernathy is a ValuePenguin Senior Writer who specializes in health insurance, Medicare and Medicaid. He's also contributed to other insurance verticals including home, renters, auto, motorcycle and flood insurance.
Talon came to ValuePenguin in 2023. Since his arrival, he's helped to expand the site's health insurance-related content offerings. He enjoys helping readers understand the ins and outs of America's all too complicated health insurance landscape.
Before coming to ValuePenguin, Talon worked as a freelance writer. His prior work has touched on a broad range of personal finance-related topics including credit-building strategies, small business incorporation tactics and creative ways to save for retirement.
Insurance tip
In many parts of the country, you can qualify for a free Silver health insurance plan if you meet certain income requirements. Government subsidies in the form of premium tax credits and cost-sharing reductions may mean you'll pay nothing for coverage.
Expertise
- Health insurance
- Medicare and Medicaid
- Flood insurance
- Homeowners insurance
- Renters insurance
- Auto and motorcycle insurance
Referenced by
- The Miami Herald
- Money.com
- MSN
- Nasdaq
- The Sacramento Bee
- Yahoo! Finance
Education
- BA, University of Washington
- Certificate in Copyediting, UC San Diego
Editorial note: The content of this article is based on the author's opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
