A supplementary contract is a contractual agreement between a life insurance company and a policyholder or beneficiary. Supplementary contracts serve the purpose of setting up the terms for how an insurance company will pay out a life insurance policy. There are a number of different ways in which a life insurance policy can be paid out. So these contracts identify the particular payout method and hold each party to the terms of the agreement.
Many people choose to receive their life insurance policy payouts in installments. In such cases, the installment amounts can be agreed to in a supplementary contract. For example, a beneficiary may decide that he wants to be paid out $1,000 a month by the life insurance company. The insurance company could then set up a supplementary contract with the beneficiary reflecting this payout method. Then the insurance company would be obligated to pay out the money until the entire policy has been paid out.