Because your coverage is automatic, it's easy not to think too much about life insurance while on active duty in the military. In fact, the military ensures that all service members are covered from day one -- with $400,000 of Servicemembers' Group Life Insurance Coverage (SGLI) and up to $100,000 in Traumatic Injury Protection (TSGLI) -- for only $25 a month.
If $400,000 seems like a lot of money, you're right. It is often more than enough coverage for young, single service members. When you start doing the math, though, for married military personnel and those with children, a mortgage, debt, or future education costs, $400,000 may not be enough.
You may need life insurance beyond what SGLI can provide if:
- You have a spouse and/or children who depend on your income.
- You have other family members (e.g., older parents) whom you support financially.
- You have a mortgage.
- You send your children to a private school or college.
- You plan to leave an estate to your family after your death.
How Much Supplemental Coverage Should You Purchase?
When thinking about how much life insurance you need, think about how much money your family would need to maintain their standard of living without your income. Not only will there be the immediate cash needs of funeral and final expenses, but your family members also may assume your debt. Those payments still need to be made in your absence. Long term, you want to provide a large enough death benefit to replace your income and ensure any future expenses, like education, are covered (if you have children).
Note that survivors of service members are entitled to monthly survivor benefits through Dependency and Indemnity Compensation (DIC), the Survivor Benefit Plan (SBP) and Social Security. Therefore, a family's additional life insurance needs (beyond SGLI) should be based on monthly expenses minus monthly survivor benefit entitlements.
When Should You Purchase Supplemental Coverage?
It's in your best interest to purchase individual life insurance coverage when you are young and healthy, because that is when life insurance is the most affordable. For example, if you buy a policy with level premiums when you are 30 years old, your rates will be much lower than if you wait until you are 40 years old to purchase the policy.
Furthermore, if you were to develop any illnesses or disabilities later in life and not have any preexisting life insurance coverage, you may find that you cannot medically qualify for insurance at all, which leaves your family unprotected after SGLI or FSGLI (Family Servicemembers' Group Life Insurance) coverage ends. Developing a plan for post-military life insurance well before the end of your military career provides many reasonably priced options.
If you convert your SGLI to Veterans' Group Life Insurance (VGLI) within 240 days of leaving the service, you will not be required to undergo a medical exam. However, if you wish to obtain coverage through private insurance companies, time restrictions may vary.
There are perks that come with owning an insurance plan with a private company. You can often make changes to your coverage, including the amount of coverage, and retain eligibility for other products or extend eligibility to your family members. You may even be able to convert your policy to another form of insurance (e.g., term insurance to permanent insurance).
Are There Any Special Circumstances?
If you are deploying soon or already have deployed, though many companies offer life insurance plans, not all will feature an absence of military service restrictions, which could make it hard to find coverage.
If you plan to buy a home, get married, or have children (or all of the above), congratulations. With such significant lifestyle changes -- and the associated financial implications -- it may be time to purchase additional life insurance.
Check out term life plans with high coverage amounts and compare them to get the best price. You also can secure your children's financial futures through a permanent insurance option that builds tax-deferred cash value over time.
If you are separating from the military, you should know that neither SGLI nor monthly survivor benefits through the Department of Veterans Affairs and SBP will follow you when you leave the service. However, upon leaving the service, you will retain SGLI for 120 days (for free), after which your coverage expires.
During this time -- and for an additional year afterward -- you can convert your SGLI coverage to VGLI coverage. However, you will need to complete a medical exam to qualify if applying after 240 days of retiring.
VGLI can become quite expensive as you age. For example, you would pay $132 per month for $400,000 of coverage between 50 and 54 years old, but that premium becomes $588 a month once you turn 65. Private insurance companies may provide more affordable term coverage over time.
What About Military Spouses?
SGLI does offer the option of covering a military spouse. FSGLI provides up to $100,000 in coverage and charges an additional monthly premium ranging from 45 cents to $45, depending on your spouse's age and the chosen amount of coverage. It also provides $10,000 for each dependent child, free of charge.
Life insurance policies for employed military spouses should cover the loss of their income if they were to pass away suddenly. A death benefit for a stay-at-home parent would need to cover all future child-care expenses and any other household expenses that would arise without their presence. The $100,000 coverage provided by FSGLI may not cover all of those costs. As with SGLI, when a service member separates from the military, their spouse and children will lose their FSGLI coverage. Having a supplemental life insurance plan in place ahead of time ensures a seamless transition.
Get the Coverage Your Family Needs
FSGLI, TSGLI, VGLI, SGLI ... the long list of acronyms and bare minimums may not be enough to cover your family's needs. Explore life insurance options with our free tool, which compares rates and matches you to the coverage you want.