About this video
Sal explains supplemental insurance: extra insurance above and beyond what you already have, usually covering a specific worry. Examples are mortgage payoff life insurance and auto loan payoff car insurance, which covers the gap when a car's cash value is less than the loan. Insurers price these to make money, so check whether you're already covered before buying.
You'll be able to
- explain what supplemental insurance is.
- describe mortgage payoff life insurance and auto loan payoff car insurance.
- decide whether supplemental insurance is needed given existing coverage.
Key words
- supplemental insurance
- Extra insurance on top of insurance you already have, usually for a specific worry.
- mortgage payoff life insurance
- Life insurance meant specifically to pay off your mortgage if you die.
- cash value
- What your car is worth now, which insurers typically pay if it's stolen or totaled.
- auto loan payoff car insurance
- Insurance that covers what you still owe on a car loan beyond the car's cash value.
- comprehensive car insurance
- Car insurance that covers accidents plus things like theft or a tree falling on the car.
Transcript
- So let's talk a little bit about supplemental insurance. Now, it is what the words describe it as, it is a supplement, to usually some other existing insurance. It's insurance above and beyond things that you might already have. So there's a lot of examples of supplemental insurance, but they they usually try to cover specific things that you might worry about.
For example, there might be mortgage payoff life insurance. One of the main reasons why, for example, I have life insurance, is if something were to happen to me, I want my family to still be able to live in our house, and to be able to pay off our mortgage, and not worry about where that income's coming in, so I've gotten enough life insurance to do that.
But the insurance companies know that sometimes people worry specifically about that situation. And so people might get that very specific type of life insurance, mortgage payoff life insurance, which you could view as a supplement to traditional life insurance.
Now, if you've got enough life insurance, you should be able to pay your mortgage, and then, hopefully, do other things that your family needs to support them. But this might be a supplement that you look at. But whenever you look at any form of insurance, realize that the insurance company has done the statistics, and they're gonna make money off of it.
Now that doesn't mean that you shouldn't do it. Oftentimes it will protect you in a lot of ways, so it is worth doing it, but you should think about whether you need to do it, or whether it's already covered by another insurance you have. Another example is car insurance.
You might have comprehensive car insurance already, where if the car not only gets in an accident, but if it's stolen, if a tree falls on it, the insurance company will pay you the cash value of the car. And so if you wanted, you could go and get another used car just like that.
Now some people, if you're not paying off your debt fast enough on your car loan, the cash value of your car might be less than the amount that you owe back on your car. Now that's, in general, not a good situation, if you're paying back your car loan slower than your car is actually losing value, not a great situation to be in.
But a lot of folks wouldn't want to get money from an insurance company for, say, a car got totaled, and it still can't even pay back the total loan available on the car. So they have things like auto loan payoff car insurance, which you could view as a supplement to traditional insurance.
But once again, it's not a great situation to be in, and in theory, even if the insurance company is paying you the cash value, you could go and get an equivalent used car. And even though you owe more money than that, you're kind of in the same situation you were before the accident, or whatever scenario you were in.
But the general principle, supplemental is above and beyond. Maybe you have insurance, dental insurance, or life insurance, or some other type of insurance from your employer, and you just think, "Hey, I would like more insurance, they're not giving me enough."
Well, that could be a good reason to get supplemental insurance as well.
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