The majority of American workers — 53% in 2024 — have life insurance through their workplace, according to . However, as the cost of living rises, most workplace life insurance policies fail to keep pace. The median basic workplace coverage is just $20,000 or one times a worker's salary, which likely isn't enough to provide for your family if you pass away, the survey notes.

"A basic group life policy from your employer, usually one to two times your salary, just isn't enough in today's world," says Michael Foguth, founder of Foguth Financial Group. "If you have a mortgage, kids, or even significant debt, supplemental life insurance can be a game-changer."

And even if you have significantly more coverage, it likely isn't keeping up with the cost of living. Unfortunately, far too many people are just relying on their employer's plan.

That's where supplemental coverage comes in. Supplemental life insurance, referring to a policy you buy to supplement your basic workplace policy, creates an additional safety net so your family won't have to rely solely on your basic workplace life insurance. The importance of this type of protection grows as your financial obligations evolve.

We spoke with two life insurance experts to find out when you should consider supplemental life insurance and how to figure out how much coverage is appropriate for your situation.

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When should you boost your supplemental life insurance, according to experts?

To better understand when it may (or may not be) appropriate to increase your supplemental life insurance coverage, it first helps to understand the various types of supplemental policies available.

Supplemental life insurance policies come in a few different forms. First, many employers offer supplemental life insurance in addition to their basic plan. You can also purchase a private policy directly through an insurance company.

Both options have some advantages. A group policy, such as one you'd get through your employer, typically doesn't require a medical exam and may come at a cheaper price tag. However, if you lose your job, your insurance goes with it. And you may find that it's more expensive or more difficult to get a different policy later on.

Private plans have the disadvantage of being more expensive and more difficult to qualify for — health histories and medical exams are often required. However, once you lock in your policy, you'll have coverage for your entire term, even if you lose your job.

You can also choose between term and whole life insurance. Term life insurance is the most affordable and provides a set death benefit for a specific number of years. Whole life insurance, meanwhile, covers you for your whole life as long as you continue to make payments and usually has a cash-value component in addition to the death benefit. However, these plans are more expensive.

"Term insurance is usually the best choice for most people: it's affordable and provides substantial coverage during your high-need years," says Foguth. "Permanent insurance has its place, but only if you've already maxed out other financial priorities."

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Depending on your situation, supplemental coverage may or may not be the right choice for you. You'll probably want to consider supplemental life insurance if your basic workplace policy has a low death benefit, especially if your family financially depends on you and your income.

Certain life milestones could be a sign it's time to reconsider your life insurance coverage and boost your supplemental coverage.

"We find that younger families in particular need supplemental life insurance," says Matt Hylland, a financial planner and investment advisor with Arnold and Mote Wealth Management. "For one reason, workplace group life insurance is usually based on a multiple of your salary, and younger workers may not yet be at peak salary, where two or three times their current salary is enough insurance."

"Also, younger families, particularly those with young children, have decades of expenses and goals that insurance needs to help cover. As you age, your insurance need typically decreases, but your 30s and 40s are typically the peak years for insurance needs."

When you go through any major life events use that as an opportunity to reevaluate your coverage.

How to calculate your life insurance needs

There are a few different rules of thumb that experts tout for determining your life insurance needs. For example, some recommend multiplying your income by a certain amount, such as 10 times. Others base it on your age and how close you are to retirement. While these methods can be a good starting point, they don't take into account your unique financial situation and needs. 

Rather than relying on a basic rule of thumb, consider what purposes your life insurance would serve. Would it provide income for your family? Help pay off your household debt? Send your kids to college? Take all of that into account to decide how much coverage makes sense for you.

For example, you may need to substitute your income at least until your kids head off to college. If you make $75,000 per year and your youngest graduates from high school in ten years, that's $750,000 in coverage. Then, you may choose to add in your family's total debt obligations, including your mortgage, auto loans, credit cards and anything else. Finally, if your goal is to pay for your children's college educations, consider enough coverage to do that.

It's also important to consider what insurance term you need. According to Hylland, it's important to match your life insurance policy with your family's needs. For example, you might choose a policy that's set to end once your kids have moved out of the home or you've paid off your mortgage.

"We also generally say to be conservative and purchase insurance with a slightly longer term than you need," says Hylland. "For example, if your kids will be graduated from college in 15 years, perhaps go with a 20-year term policy. You can always surrender or cancel a term policy if you do not need it, but it will be costly to get insurance later in life if you find that you need additional years of coverage."

It's worth noting that, in some cases, a supplemental policy through your employer still may not be enough. It's important to run the numbers for yourself to make sure you have enough coverage, even if that means purchasing private insurance in addition to your workplace plan.

The bottom line

Almost anyone can benefit from some sort of life insurance, and it's usually non-negotiable for anyone with a family to support. Unfortunately, a basic workplace life insurance plan doesn't usually provide enough coverage. 

Make sure to review your life insurance coverage regularly, especially as open enrollment rolls around. It's important to weigh all of your options when you're shopping for policies, including deciding between a term or permanent policy and a workplace or private policy.