Life Insurance for Active Military, Veterans and their Families

By on May 6, 2014

Before any active military servicemember is called to duty, they are given an order of operations delineating the succession of command, directions for tasks and back-up instructions should something in the mission go wrong. Similarly, life insurance sets this order for your family should something happen to you in the line of duty.

Do you have financial resources to cover everyday expenses and financial goals (such as a mortgage or college tuition for children) should a family member die? How can you best protect yourself and your family? Will your spouse, children, or parents be financially prepared to support your family alone? Where will the money come from? Life insurance provides financial support to your family should you, the policyholder and wage earner, pass away.

If you do not have life insurance and sustain an injury while you’re deployed, the financial and emotional cost can be staggering. When you join the military, the government automatically provides coverage and deducts premiums from your pay for a basic form of life insurance, however, you can elect to decline or support this coverage by choosing a policy through a commercial life insurance company.

Speak with a trusted insurance broker and your mentor so you understand what your current policy covers and to determine if you have enough coverage to support your family. Before you are deployed, review your government sponsored policies and make plans now for additional coverage or private coverage as you transition into civilian life.

Making Sense of Government-Sponsored Life Insurance Policies

Servicemembers’ Group Life Insurance (SGLI)

Each servicemember entering a period of active duty or reserve status is automatically covered for the maximum $400,000 death benefit. Premiums, which currently run $27 per month for the maximum coverage, are automatically deducted from your pay. All service members covered by SGLI also receive Traumatic Injury Protection coverage for an additional $1 per month that pays benefits from $25,000 to $100,000, depending on the severity of the covered injury.

You might think that the maximum SGLI policy amount of $400,000 combined with another $100,000 in death gratuity is a lot of money, but it may not be enough. $500,000 has to cover an entire paycheck for years to come, however, it does not account for income lost when a spouse has to take time off of work to care for children or the home after a loss; nor does it cover lost housing allowances, retirement income and other benefits your spouse will need to acquire.

How Much Life Insurance Coverage Do You Need?
A good rule of thumb for servicemembers who have families to support is to own a policy which covers 10 to 20 times your income. Your income includes your base pay AND housing allowances, additional special pays (i.e. flight pay, jump pay, foreign language proficiency pay), and health care coverage. If you are young, lean toward 20 times since your dependants may need help for many years; if you are nearing retirement you may not need to replace as much income.

Family Servicemembers’ Group Life Insurance

If your spouse is also a wage earner, do not forget to purchase insurance for them. Military personnel are eligible to purchase Family SGLI that covers spouse and children up to a maximum coverage amount of $100,000. The rates are uniform and affordable for the maximum coverage should your spouse pass away while you are on active duty.

Veterans Life Insurance

What about veterans? Many vets fear that medical issues would disqualify them from getting a personal policy, fortunately the Department of Veterans Affairs offers two SGLI conversion programs that don’t require medical screening:

  1. Convert your SGLI policy to a renewable term insurance policy known as Veterans’ Group Life Insurance.
  2. Convert your SGLI policy to a permanent life insurance policy, such as Whole Life or Variable Life, offered by a private individual insurance provider participating in the program.

The main advantage of the conversion programs is that neither requires health checks or questions, provided the conversion occurs within 120 days of separation from the military. Granted, if you are healthy, insurance under these programs will likely be more expensive than buying a policy of your own, but at least you have options.

Additional or Private Life Insurance Coverage for Military Personnel

If the SGLI $400,000 doesn’t meet your needs, you may want to buy additional life insurance from an outside carrier*. Here are a two reasons to buy additional or separate life insurance from a private carrier:

  • Sufficient protection – Considering all the potential needs of your surviving family members, $500,000 may not be enough. An extra policy could help cover your debts, fund college for your children or allow your family to maintain their desired standard of living.
  • Coverage in transition – If you buy a policy when you’re healthy, you still have it if you get sick or hurt, or if you leave the military.
*Keep in mind that it is important to select a life insurance policy that does not include an act of war exclusion which will not pay out if you die as a result of an act of war. This means you may not want to get the lowest-cost policy on the market.

If you want a permanent insurance policy, as opposed to a term insurance policy like SGLI, you will have to go to an outside insurance company and ask a trusted agent to show you a whole life insurance or universal life insurance policy. These policies have higher premiums, at least in the short run, but they have a key long-term advantage: They are designed to pay out a death benefit no matter how old you are when you die.

Permanent Life Insurance Options

  • Universal Life Insurance: Death benefit coverage for life combined with a cash-value investment component. The investment vehicle allows you to save even more money for retirement without being taxed until withdrawal. There are three types of universal life policies:
    • Indexed Universal Life: Cash-value savings vehicle has potential to grow with high interest rates based on investments in well performing market indices.
    • Variable Universal Life: Savings element has flexibility in investment choices and flexibility with premium payment schedules.
    • Standard Universal Life: Savings earns a fixed rate of interest.
  • Whole Life: A specific amount of death benefit coverage for life with a fixed-rate cash-value savings component on a tax deferred basis.

So while you get nothing back from a term policy if you don’t die during the term (except for a few “return of premium” policies that have higher premiums), money in a permanent insurance policy will come back to your family, eventually, provided you pay your premiums. These policies can build up cash value, which can be a useful form of tax-advantaged savings, retirement income, a down payment on a home or a tool to reach any number of financial goals.

However, permanent coverage is not for everyone. It works best for families that are able to put extra money aside on a regular basis. It’s best to speak with your insurance agent, and at least one other trusted financial advisor about whether you need permanent coverage, and whether it makes sense in your case.

In the end, we all hope to look back one day on the money we spent on life insurance as a positive investment which maintained our financial safety net and peace of mind. Unfortunately, the unpredictable can happen and it will affect our families for years to come. Take steps to ensure that if it happens to you sooner rather than later, your family will have the financial support they need to carry on.

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About Scott Ho

FSN insurance and retirement journalist - Planning for your retirement or understanding your insurance needs can be confusing and difficulty. Scott knows these tasks can seem daunting. He offers his experience to make choosing insurance coverage and planning for your golden years a successful endeavor. Connect with Scott at !

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