If the worst happened and you didn’t make it home one day, life insurance could help your grieving family by replacing your income for a while.
As a military member, the VA, as well as organizations like USAA, can help you get life insurance coverage. But what if you’re not active any longer?
In either case, you still need to know how insurance works, how much to buy, and how to stay covered after your retirement from active duty.
The Best Life Insurance Is The Right Life Insurance
Despite its confusing complexities, life insurance has one guiding mission: To replace your income if you died unexpectedly, leaving behind financial dependents.
While your life cannot be measured with a dollar figure, you can measure your income and assess your financial needs now and in the future.
This measurement will help you find the right-sized life insurance policy, which could strengthen your family’s ability to rebuild a new life as they mourned your loss.
Life insurance gives your family access to this coverage, known as a death benefit, in exchange for the premiums you pay to keep the policy active.
Should You Get Insurance on Your Spouse?
Even if your spouse doesn’t earn income, he or she may want life insurance coverage, too.
Here’s why: A non-enlisted spouse provides valuable services you would otherwise need to pay for. Services like childcare, home management, meal preparation, transportation, shopping; as any stay-at-home-parent knows, the list goes on and on.
Life insurance coverage on your spouse could help your family stay on track financially and maintain your ability to earn income if your spouse died unexpectedly.
Types of Life Insurance
The life insurance industry has grown more sophisticated over the past few decades, and so have the types of policies available. Modern policies can include investment components, for example.
Ultimately, though, you can divide life insurance policies into two categories: term life and whole life.
- Term Life Policies: These policies last a specific amount of time, known as a term, and then expire. Because they expire in 10, 15, 20, or 30 years, term policies can usually offer more coverage at a lower cost to you.
- Whole Life Policies: Whole life policies can last the rest of your life, and they include complexities such as an investment component or an added cash value that grows as time passes. Because of their permanence and their more complex features, whole policies tend to cost significantly more, and may not be a fit for military members.
Whole life policies include several variations: universal life, indexed universal life, and variable universal life.
If you’re looking for coverage while you’re on duty, you probably won’t need to worry too much about these more complex coverages.
However, if you need a more complicated policy that could tie in with your overall financial plan for the future while also providing a death benefit if required, you should speak with a financial advisor or an independent life insurance agent.
Pros & Cons of Term Life
Term life coverage pros:
Term life coverage cons:
- Temporary coverage
Pros & Cons of Whole Life
Whole life coverage pros:
- Accruing value
Whole life coverage cons:
How Much Life Insurance Should You Buy?
When you’re ready to secure life insurance coverage, you’ll need to decide how much coverage to buy.
The size of your policy determines the size of the death benefit your family could claim if you died, and it will help set the amount you’ll pay in premiums.
A lot of financial advisors recommend having coverage equaling at least 7 to 10 years of your annual pay. If you earn $50,000 a year, you’d need $350,000 to $500,000 in coverage based on this guideline.
This number provides just a starting point, though. Your life insurance should address your family’s specific needs:
- Housing: If you just got a new mortgage, for example, you may want enough coverage to pay off the balance so your family wouldn’t have to move. If your home is paid off, you may not need as much coverage.
- Other Debts: Someone who would leave behind a lot of debt — auto loans, private student loans, or credit card debt, for example — should consider getting enough life insurance coverage to pay off these outstanding balances.
- Education: Does your son or daughter plan to attend a private high school? What about college tuition savings? You may want to consider this when choosing a life insurance coverage amount.
- Savings: If you’ve been able to save a significant amount of money, you may need less life insurance than someone with no savings.
How Much Life Insurance for a Spouse?
Your spouse’s life also can’t be measured with a dollar figure, so you’ll need to consider how his or her death would change your financial picture.
If you’d have to hire live-in help, build this cost into your spouse’s coverage. Likewise, if you’d have to move or change jobs as you adjusted to the loss of your spouse, you should consider these costs as you build the safety net life insurance can offer.
Group Life Insurance vs. Your Own Policy
When a civilian buys a personal life insurance policy, he or she typically completes a thorough underwriting process which helps the insurer determine the applicant’s eligibility for coverage.
In a nutshell, it works like this: An applicant who poses a higher risk of dying sooner will pay more for coverage or may even be ineligible for coverage. People who present the lowest risk can get excellent life insurance rates.
Insurers determine this risk by asking questions about an applicant’s lifestyle, profession, health history, and family health history. An applicant’s age, tobacco status, and current health condition help underwriters assess this risk. Applicants often undergo health exams, too.
Group policies — like the policies military members and veterans can get through the VA or USAA — work differently. Assembling policies in a group insulates the insurer from the risk associated with individual plans.
Military members can get group coverage through:
- SGLI (Servicemembers Group Life Insurance): Provides group coverage at great rates for active-duty military members and some trainees and military academy students.
- VGLI (Veterans Group Life Insurance): Provides group coverage for veterans.
- FSGLI (Family Servicemembers Group Life Insurance): Allows SGLI enrollees to extend coverage to their family members. In most cases, the service member pays the premiums.
Pros and Cons of Group Life Insurance
Group life insurance through SGLI or VGLI has some significant advantages but also some disadvantages.
Pros of group coverage:
- Great rates, even if you have a health condition that could limit your ability to get an affordable personal policy.
- Additional coverage for your spouse or family members.
Cons of group coverage:
- Coverage caps which may not provide enough protection for higher-earning officers.
- Loss of SGLI coverage at discharge, though you can convert to a VGLI policy.
USAA, an insurance association created by and for military members, can also help you convert an SGLI policy to the coverage you can keep after your discharge.
Military Life Insurance Options
We’ve already discussed SGLI which extends coverage to active duty military members.
Here are some more details if you’re thinking about enrolling:
Who is Eligible for SGLI?
You can enroll in SGLI coverage as high as $400,000 if you are on active duty with the Army, Air Force, Coast Guard, Marines, or Navy.
Cadets, midshipmen or other U.S. military academy members can also qualify; ROTC trainees participating in authorized training missions can get coverage.
The VA’s qualifications for SGLI eligibility change from time to time, so be sure to check the VA’s site if you’re not sure whether you qualify.
What About Family Members?
SGLI can also extend a smaller amount of coverage to your spouse or other family members through Family SGLI or FSGLI.
Premiums will be paid by the service member and not the spouse. Premium amounts increase every five years, and coverage remains in place only while you’re eligible for SGLI coverage.
Does SGLI Provide Enough Coverage?
For some enlistees and officers, SGLI can provide enough military life insurance coverage. But everyone should assess his or her specific life insurance needs to answer this question.
If you’re a higher earner, SGLI’s cap of $400,000 in coverage may not be enough to sustain your family’s current lifestyle and future needs while they recover from losing you.
Higher earners may want to supplement their SGLI coverage with a personal policy. Getting a personal policy usually requires taking a medical exam. You’ll also want to make sure you don’t buy coverage unless it pays the death benefit even if you die in an act of war.
What Happens When I Leave the Military?
Like any group policy associated with an employer, you will become ineligible for SGLI when you leave the military.
You can convert to a VGLI policy whose death benefit and premiums will depend on your level of SGLI coverage. Your VGLI benefit and premium will change periodically as you age.
A personal policy will continue regardless of your military status and will be governed only by the terms of your policy.
A 30-year term policy, for example, will expire after 30 years. A whole life policy can last the rest of your life.
Bottom Line: All Life Insurance is Personal
Whether you stick with group insurance through SGLI and its associated programs or buy your policy, your coverage should meet your specific needs.
If you’re buying a personal policy, compare quotes online, but also look for quality coverage. Insurance rating agencies can help you assess an insurance company’s financial health.
If group coverage can provide the coverage you need, check with the VA about SGLI’s terms and conditions to be sure you’re doing everything you can to protect your family’s financial future in an uncertain world.