What Are Ancillary Benefits and Why Do They Matter?

Ancillary benefits are supplemental forms of insurance coverage offered alongside a standard health insurance plan. They often include dental, vision, or life insurance coverage, although exact benefits vary by employer. These benefits can be employer-paid, employee-paid, or funded through shared contributions, depending on the specific structure you choose. 

Offering ancillary benefits helps your organization build a more comprehensive and attractive benefits package. It also shows you care about your employees’ personal and financial well-being, which can help you attract high-level talent. 

In this article, we’ll discuss how ancillary benefits work, common types, and how to choose the right ones for your team. 

What Are the Most Common Types of Ancillary Benefits? 

There are several different examples of ancillary benefits. Here are the most common options to consider for your employee benefits package. 

Dental and Vision Insurance

Dental and vision insurance are common ancillary benefits that aren’t usually covered by traditional health insurance. Dental insurance covers preventive cleanings and X-rays. It also helps with procedures like fillings, extractions, and root canals. Some policies also provide coverage for oral surgery and restorative work. 

Vision insurance covers regular eye exams, prescription eyeglasses, and contact lenses. Some policies cover LASIK or other corrective laser procedures. 

Life and Disability Insurance

Life and disability insurance offer financial security for your employees and their families if an emergency happens. Life insurance provides a financial payout to beneficiaries when an employee passes away. This money can help cover funeral costs, replace lost income, and pay off any remaining debt. 

Some employers also offer disability insurance, which replaces part of an employee’s income if they become disabled and can’t work. It can be short or long term, and employers can choose to offer one or both types. 

Short-term disability insurance provides coverage if employees are temporarily disabled as a result of an injury, illness, or surgery. It allows them to focus on recovery without worrying about lost income. 

Long-term disability insurance helps employees who face severe or permanent conditions that prevent them from returning to work for an extended period. This can happen if an employee is diagnosed with cancer or permanently injured. 

Supplemental Health Insurance

Supplemental health insurance provides coverage for expenses that may not be covered under a major medical insurance policy. The following benefits pay a lump sum to the employee when a covered situation occurs:

• Accident insurance: For a qualifying accidental injury

• Critical illness insurance: For a qualifying serious illness 

• Hospital indemnity insurance: For a qualifying hospital stay

Unlike traditional health insurance, these payouts go directly to the policyholder, giving employees more control over how to use the funds.

What Are the Advantages of Ancillary Benefits?

With ancillary coverage, employees get access to services that support their health and well-being without taking on high out-of-pocket costs. It also gives them more control over their coverage. They can choose options that match their needs. Some may prioritize disability coverage, while others rely on dental or vision coverage.

Ancillary benefits can also strengthen an employer’s hiring strategy. A broader benefits package can make an organization more competitive, especially when candidates prioritize specific types of coverage. Employees who feel supported by their ancillary benefits may also be more likely to stay with the organization long-term. 

Ancillary Benefits vs. Voluntary Benefits: What’s the Difference?

Employers often offer different types of add-on coverage. Ancillary and voluntary describe two separate aspects of how that coverage works.

• Ancillary benefits: Supplemental coverage that organizations can add to their health insurance, such as dental, vision, life, or disability

• Voluntary benefits: Optional plans employees can choose to enroll in and typically have employee-paid premiums

Some ancillary benefits are also voluntary benefits. Vision insurance is a common example. It’s an ancillary benefit that many employers include in their benefits package. But employees decide whether to opt in and pay the premiums. 

How Can Employers Choose the Right Ancillary Benefits?

The right mix of ancillary benefits depends on several factors, including your team’s current and future needs and budget. To choose the best coverage for your employee benefits package, consider the following: 

• Assess your employees’ needs and preferences: Review your current workforce demographics and current benefit usage to understand what your team needs. If many employees are starting families or planning for retirement, they may appreciate life insurance options. You can also ask your employees directly about the benefits they’d most like to see. 

• Identify gaps in your existing benefits: Review your existing benefits to see where ancillary coverage would add meaningful support. 

• Confirm budget fit: Evaluate the total cost of offering each benefit and determine what your organization can sustainably support.

• Compare coverage and details: Evaluate what each ancillary policy includes and how it aligns with your employees’ needs and your organization’s goals. 

• Consider administrative requirements: Be realistic about how much work it will take to administer each benefit successfully. Consider how it will affect your HR operations. If you have a small team, you may need support to reliably administer enrollment, communication, and payroll deductions. 

Support Your Team’s Benefits Needs With Justworks

Ancillary benefits can give your employees the financial support and peace of mind to do their best work. But adding new coverage to your benefits package can come with extra administrative work for your team. That’s where Justworks PEO comes in. 

With Justworks PEO, your small business can access a range of benefit options through established carriers. The platform also connects teams to well-being resources that support preventive care and everyday health needs. Employers can manage additional coverage and financial benefits in one system, which keeps administration simple and organized.

For example, Acterra partnered with Justworks to find quality medical, dental, and vision benefits and make them accessible to employees. Justworks also provides ongoing HR support, helping Acterra with everything from payroll and time tracking to compliance. 

Explore Justworks’ benefits options to see if they’re right for your business, or sign up today to get started with comprehensive HR support. 

FAQ

Can Part-Time Employees Receive Ancillary Benefits?

Yes, employers can decide to offer ancillary benefits to part-time staff or just limit them to full-time employees. 

Can Employees Change Their Ancillary Benefits Outside Open Enrollment?

In most cases, employees can’t change their ancillary benefits outside open enrollment. However, exceptions apply for qualifying life events, such as marriage, divorce, or having a child.

Are Ancillary Benefits Taxable?

Tax treatment depends on how the premiums are paid and the type of benefit. Disability payouts are usually taxable when premiums are paid with pre-tax dollars, while many other ancillary benefit payouts funded with after-tax premiums are not.