There are several components to understanding life insurance for active military members. There’s SGLI, VGLI, conversion options and other components you need to understand so that you can make the best decision for you and your family.But unless you've looked at everything carefuly it can be confusing to understand.
In this blog post, I’m going to make sense of it all. I’ll explain how Servicemembers Group Life Insurance (SGLI) works. Your options to convert SGLI to Veterans’ Group Life Insurance (VGLI) when you retire, as well as options for coverage for individual term life policies that you might want to consider. I’ll cover the pros and cons of all options and give you the information you need to make an educated decision on life insurance coverage while in active duty.
SGLI is group life insured offered to servicemembers - both active duty, ready reserves, and the National Guard.
I recommend that you take advantage of SGLI. However if you need more than $400,00 in life insurance coverage, I also recommend buying an individual term life insurance policy, which I will discuss options for further in this blog post.
When you retire from the military you have the option to convert your SBLI coverage to a term or permanent life insurance policy with the VGLI (Veterens’ Group Life Insurance). Here is where I believe the good deal of the SGLI becomes a not such a great deal anymore.
If you want to convert your SGLI to a term life policy with the VGLI you do get some benefits. Just like with the SGLI there is no medical exam required. In addition smokers get the same rates as non smokers, which is not typical with life insurance. However unlike the SGLI the rate isn’t the same regardless of age. What’s worse is that you can’t lock in your rate - it increases every 5 years as you age. The result is that if you are 40 years old the price might seem reasonable, but by the time you reach 55 the price may not be affordable.
For example at age 40 VGLI is $68 per month for $400,000 policy. Sounds reasonable right? At age 45 the price increases to $88 per month, and at age 50 the price goes up to $144 per month. By 55 years old VGLI increases to $268 per month, and $432 per month by age 60. By the time you reach age 70, you will pay $900 per month for life insurance! That’s insane and not cost effective.
The solution is that you are better off buying a 20 or 30 year term policy, which allows you to lock in the price for the entire period. For example, a healthy 40 year old would pay $47 per month for a $400,000 30 year term policy. Much better than the price of VGLI. The only time I would recommend VGLI is if you aren’t healthy and you can’t get approved for an individual term life policy.
If you are in the military and need more coverage than SGLI offers, or want to lock in on a rate for a policy so that you don’t have to go with VGLI when you retire there are a few options. Only a few life insurance companies insure active military personnel - such as USAA, MetLife, and Prudential. Let’s compare rates among all 3.
A 45 year old male in active duty, looking for a $500,000 life insurance policy for a 20 year term at Preferred Plus Non Tobacco rates would pay:
At ChooseTerm.com we represent both MetLife and Prudential. Our experience has been that you typically will get better rates with MetLife and Prudential because USAA has strict underwriting guidelines and it isn't that easy to qualify for their best rates. Our experience has also been that USAA takes longer to get people approved than Prudential and MetLife.
You can qualify for life insurance as an active duty servicemember even if you have deployment papers. As long as you sign the application while you are in the U.S you are eligible to apply for coverage. If you participate in high risk activities in the army like parachuting, you may be subject to additional fees.
If you are looking for a term life insurance policy and are active duty or retired military personnel we can help. We can help you find the best term life insurance rates.