Military Life Insurance Misunderstood
Military life insurance is no doubt a low-cost option for families. The biggest misconception is that servicemembers and their spouses do not need any other life insurance coverage!
Many families are under the impression their benefit through the government is good enough. This concept hurts their family financially should they lose a servicemember or spouse. Additionally, it leaves them unprepared for transitioning out of the military! Over the years, I have talked to countless veterans and veteran’s spouses whom wish they locked in coverage beforehand.
As military families, we often think many of the benefits we receive “covers everything!” The more seasoned you are as a military family you realize that there are some instances to look into outside options. The thing is, many of your fellow families are doing this. It’s just not something they find interesting enough to talk about…like that awesome deal at the exchange!
As part of prudent financial planning, families should check to see whether or not they are “completely covered” by sgli.
Military life insurance is not an understood topic within the military community. My clients are constantly saying “thank goodness you understand this stuff!” Despite all the financial training the military offers it does not always cover life insurance in the proper fashion.
This leaves military families with lots of questions about whether or not they should have additional coverage and where to turn. They often ignore this topic until it’s time to get out of the military which is a HUGE mistake!
The point I want to drive home(hence all the bold, italic and underlined phrases) is that there are significant disadvantages for families who don’t carry supplemental coverage!
Now that I have your attention, let’s get down to an overview of what us families get for life insurance coverage from our employer…the military.
Overview of Military Life Insurance
Military life insurance benefits comes in three forms:
- SGLI for Servicemembers
- FSGLI Spouses & Children
- VGLI Veterans & Retirees
Benefits are administered through department of veterans affairs and underwritten by Prudential. The VA handles all policy service and claim needs. In the event an insured person dies, the military will assign a Casualty Assistance Officer. These officer’s help survivors navigate their claim process and receive support at the unit level. Servicemembers are not always eligible for life insurance products on the private market. The reason may be due to their high-risk occupation or territory of deployment. This is where taking full time sgli coverage is necessary. Even if Servicemembers or spouses get a plan on their own, they should keep the SGLI and FSGLI benefits in place. The SGLI and the FSGLI are inexpensive enough to do so. The two disadvantages of these benefits are:
- They are not always enough coverage to protect a family. Especially if they lose a spouse!
- Continuing coverage after military service is not flexible or competitively priced.
Military Specific Needs Calculation
How much life insurance do military families need? A general rule of thumb for consumers is 7-10 times a person’s annual, gross income.
This is an easy way of calculating coverage needs.
To get a more accurate number, you can use a life insurance needs calculator.
The calculation covers:
- Income Replacement
- Debt Payoff
- College Costs
- Funeral Expenses
- Current Assets
- Current Coverage
There are a few considerations military families need to keep in mind when using a life insurance calculator.
- Servicemembers have death benefits besides to SGLI
- Many military spouses are stay at home parents
- Servicemembers may not get out after losing a spouse
- Spouses can’t always go back to work for competitive pay
- Military family-owned businesses continue to rise
- College benefits are available through the GI Bill
- Extended family members are not always able to help
It’s almost impossible to come up with the exact amount of life insurance you’ll need. You don’t know when or if you will die prematurely. Plus, your finances and lifestyles changes overtime. Although, there are some tips for using a life insurance calculator.
Servicemembers Group Life Insurance (SGLI)
Military members can take increments of $50,000 up to $400,000. It is an elective life insurance benefit.
They can decline the SGLI at any time. Service members sometimes think it isn’t worth the money. Sometimes they drop this benefit and believe they can invest the savings.
No matter how tempting it is to save money, I don’t recommend canceling the SGLI. The cost is a mere $29 a month for the full benefit. This also includes coverage for traumatic injury protection.
The SGLI coverage can be converted into a whole life policy with participating companies at separation. Servicemembers do receive FREE coverage for a two year period.
This gives them time to evaluate their options. They can take part in the veterans benefit as long as they apply within the required time frame.
Like civilian employer-provided life insurance, the military offers coverage for spouses. This SGLI family spouse benefit also covers children.
This is a life insurance benefit that is connected to the Servicemember’s SGLI. If they drop the plan, then the sgli spouse coverage goes away.
The formal acronym for this plan is the fsgli.
Spouses can get a maximum of $100,000 in coverage for a low cost! Spouses cannot have more coverage than the Servicemember.
Military spouses are significantly underinsured with this benefit alone.
The formal benefit name is the Family Servicemember Group Life Insurance(FSGLI). Although, many spouses aren’t familiar with the title. They know there is some benefit connected to their military affiliation.
The FSGLI covers $10,000 for dependent children as well.
As valuable as the plan is to family members, most spouses are very under-insured with this plan.
Veterans Group Life Insurance (VGLI)
Prior military members can take part in the veterans group life insurance vgli program one year and 120 days after they exit the service.
The coverage available is no more than the amount of SGLI that was in the place upon separation. If veterans or retirees apply within the first 240 days, there are no health requirements. Applying after the 240 mark, they have an extra eight months. But, approval is subject to a health review.
Military retirees sometimes compare life policies against the Survivor Benefit Plan(SBP). Many consider life insurance to be the less expensive route. However, the SBP is not comparable in benefits to life insurance. It is a more comprehensive benefit.
Retiring Servicemembers and their spouses should attend the briefings about the SBP to decide whether to opt-in.
Servicemembers who wish to decline the SBP benefit must get approval from their spouse.
The VGLI is an excellent benefit for prior military members who are otherwise uninsurable or would get a higher priced policy on their own. Otherwise, it is not competitive, and veterans should check around to see what else they can get.
In most cases, they can get a better policy and price.
War Clauses & Hazardous Occupations
Military families are concerned about buying life insurance in case there is a war clause. While such clauses do exist, they are much less common than they we’re before.
It’s important to be aware if a life insurance policy has a war clause. Just keep in mind that it’s not a default simply for being a service member on active duty.
Life insurance companies look at a person’s risk factors. It’s no secret many military personnel have hazardous occupations. It’s also common for them to deploy to dangerous territories. The majority of companies will not consider a military member who has orders for deployment. The ones that do, will review whether or not the area is high risk.
While military occupations that are hazardous can make getting life insurance difficult, there are a few companies that can help. Be sure to check around for the best deal and availability.
Deployments & Overseas PCS Considerations
Military life is full of surprises! It’s rare families can predict what their future holds. That is why life insurance should never be put off to the last minute!
Getting life insurance coverage before or during a deployment or overseas pcs limits your options. Very few carriers will offer a policy if you are going to be living abroad. Even if it is temporary.
Relocating for such an extended period without the proper life insurance in place is a bad idea. Especially if you have children or plan on starting a family. You will have to wait until you return to the states to secure coverage.
Best Military Life Insurance Options
By now, you can see why it’s a good idea to supplement your benefits with affordable life insurance. This will ensure your family doesn’t have gaps in coverage and is protected from financial catastrophe.
Where should you go to find the best plan? Military families certainly don’t have a shortage of options. It’s good to shop around. Be sure to pick a company that is familiar with military life. This will help the application process go much smoother.
Choose a company that will offer you and your family members an affordable price. In order to find out your should avoid trusting online estimates and work with a company agent. Preferably one that has experience with underwriting.
All life insurance companies will rate you on your specific health and lifestyle factors. Too many times consumers are offered a different price after they apply. In some cases they are declined for coverage. Working with an independent agent can prevent these things from happening.
Lastly, it’s crucial to choose a company that has a strong financial rating. There are a few organizations for military families that aren’t actual insurance companies. This isn’t necessarily a bad thing. Just know their financial status may be sub par compared to an insurance company.