What Is Supplemental Health Insurance? What Agents Need to Know
If you’re planning to get your health insurance license or a combination life and health (L&H) license, you need to know about supplemental health insurance, since you may be selling it at some point or discussing plans with customers.
Below we explore supplemental health insurance—what it is, what it covers, and who needs it. We also explain what kind of license you may need to sell or discuss supplemental health insurance plans and how to enroll in an insurance exam prep course.
What is supplemental health insurance?
Supplemental health insurance, also known as “gap insurance,” is a type of health insurance coverage people can purchase in addition to their primary health insurance plan.
It’s designed to help cover expenses that aren’t fully covered by a person’s main health plan. This might include deductibles, coinsurance, copayments, and certain services, such as cancer treatments.
Supplemental health insurance plans can vary widely and may provide benefits for specific medical expenses like dental care, vision care, prescription drugs, hospital stays, critical illness, or accidents.
These policies are usually offered as riders (add-ons) but can also be standalone plans. They’re designed to provide extra financial protection and peace of mind in case of unexpected healthcare costs.
Who needs supplemental insurance?
Supplemental health insurance plans can be especially helpful for people who anticipate certain medical costs that may not be covered adequately by their primary health insurance plan.
Individuals often purchase supplemental health insurance through their employer. The employee’s share of the premium cost (if any) is deducted directly from the employee’s paycheck, often before taxes.
But not everyone gets supplemental insurance this way. A person may also call an insurance company or agency directly to purchase a plan.
Looking for the BEST Property course available to pass your insurance license exam?
Different types of supplemental insurance
There are several types of supplemental insurance. As a licensed insurance agent, you may play the important role of finding the best plan for customers and/or helping them enroll in a plan.
Here are some of the most common types of supplemental insurance:
Accident insurance
These insurance plans help cover medical costs after an accident. Many accident plans also offer a payout in case of the insured person’s death.
Most plans offer a lump-sum payment, which can be used to cover both medical bills and indirect expenses related to the accident—such as childcare and transportation costs. Like all insurance plans, accident insurance is subject to coverage limitations.
Hospital indemnity
Also known as hospital insurance, hospital indemnity plans typically cover longer stays at the hospital and hospital-related expenses, like inpatient rehabilitation services.
Depending on the plan, hospital indemnity coverage may cover a variety of situations, including general hospital stays, surgery, emergency room visits, and stays in the intensive care unit. Most hospital indemnity plans pay out a lump sum directly to the insured person upon approval of a claim.
Critical illness insurance
Similar to accident insurance plans, critical illness insurance helps pay for out-of-pocket medical expenses for covered illnesses. This might include big-ticket expenses, like cancer treatments, stroke care, heart surgery, and organ transplants.
Critical illness policies typically pay a lump sum, which the insured person can use at their discretion.
Disability insurance
Another common type of supplemental insurance is disability insurance, which provides financial support if a person is unable to work due to disability, usually for a period of 3-12 months. Depending on the policy, disability insurance may also cover paid family and medical leave.
Many employers offer disability plans, but most people purchase individual (non-employer) plans directly from the insurance company, according to the Bureau of Labor Statistics.
Cancer insurance
Supplemental cancer insurance is designed to cover cancer treatments and related expenses that a standard health insurance policy may not cover.
Like many other supplemental insurance plans, cancer insurance policies typically issue a cash payment to the insured person rather than paying the healthcare provider, hospital, or treatment center directly.
Cancer insurance plans are not subject to the same rules under the Affordable Care Act as major medical plans, so they typically do not cover preexisting conditions.
Medicare supplement insurance
Also known as “Medigap” plans, Medicare supplement insurance is for people on Original Medicare. These plans are designed to cover out-of-pocket costs not covered by Medicare, such as copayments, coinsurance, and deductibles.
People enrolled in Medicare Advantage plans cannot purchase Medicare supplement insurance. It’s illegal for insurance agents to sell Medigap insurance to a person with a Medicare Advantage plan unless the person is switching back to Original Medicare.
Which type of license do you need to sell supplemental insurance?
In most states, selling health-related insurance products like disability and hospital indemnity requires a health insurance license (sometimes called an Accident & Health license).
In some cases, disability insurance may be considered a form of life insurance, especially if a plan offers income protection in case of disability. Depending on your state’s regulations, you may need a life insurance license to sell these disability plans. For this reason, may people opt to get a combined Life & Health insurance license (sometimes called Life, Accident, & Health).
If you plan to sell supplemental insurance products with investment components, such as variable annuities or variable life insurance policies, you may need a separate license you will need a separate financial securities license in addition to your insurance license.
Contact your state’s insurance department to find out the specific license requirements in your state. They can provide you with detailed information on the licensing process, including pre-licensing education and exam requirements.
Get Ready for Your Insurance Exam with America’s Professor
Whether you’re just exploring your options in the insurance industry or you have a specific career path in mind, America’s Professor is here to help you with the critical first step: studying for your insurance license exam. We provide top-quality pre-licensing education to help you prepare for your state insurance exam.
Our professor offers real-world examples and entertaining stories to help you make sense of complex insurance topics. When you sign up for a course through America’s Professor, you’ll get instant access to streaming lectures followed by a hard-copy textbook in the mail.
We provide all the information you’ll need to pass your exam on the first try. Sign up for a course today and be on your way to a lucrative career in the insurance industry!