Supplemental insurance is extra insurance that covers specific things not covered by standard coverage, like major medical. It is a separate policy with separate benefits.
A Medicare supplement may be a readily familiar example, as it is one of the most common types. Medicare doesn’t cover prescription drugs, at home care, nursing homes, or long term care. Thus, many seniors buy additional insurance that does cover one or more of those items without competing directly with Medicare, thus sidestepping the issues of coinsurance.
Coinsurance means that something is covered by two policies, but the maximum coverage is equal to the best coverage of one of the policies. In contrast, supplemental coverage specifically covers something additional that isn’t already covered at all.
There are a wide variety of plans in this space. In addition to plans designed to augment Medicare, there are also hospital indemnity plans, accident plans, dental plans, supplemental disability plans, cancer plans, vision plans and additional life insurance coverage. Some of these pay cash benefits that can be used to cover out of pocket expenses in addition to helping pay the medical expenses per se.
Hospital indemnity plans help cover the cost of hospitalization. Accident plans only pay out if there is a covered accident for which medical care was sought. Disability plans require a person to be both unable to work and still under a physician’s care. Vision plans may help cover getting a new pair of glasses periodically, but also may provide benefits in the event of having a medical condition that impacts the eyes in specific and threatens one’s eyesight. Cancer coverage pays out for a diagnosis of a covered cancer and medical care related to it.
Accident coverage often appeals to families with dependent children. It helps offset unexpected expenses since children almost inevitably get hurt at some point. Vision and dental policies fill in gaps for most major medical plans.
Supplemental insurance is something extra that some people choose to purchase in order to help fill in the gaps left by standard coverage. It can help make sure all bases are covered.