Many people obtain life insurance through their employer. But what happens if your employer is the military? The good news is you have benefits from them, too.
Servicemembers group life insurance, or SGLI benefits, are life insurance policies made available to basically all members of the U.S. military.
You’ve probably been introduced to your SGLI benefits at some point, but don’t worry if the information isn’t fresh in your mind. After all, the military is certainly known for its acronyms, and let’s be honest, the one for life insurance was probably low on your list to recall. But SGLI is an important benefit, especially if you have a family.
Here’s our complete guide about what the SGLI is and how you can maximize your benefits. This is information you need to know whether you’re a servicemember or married to one. Let’s get started with the basics:
Details of the Servicemembers Group Life Insurance Offering
In essence, SGLI isn’t very different from any other group policy provided by an employer. The Department of Veterans Affairs purchases a group term policy, meaning it’s bought for a large number of people with certain limitations.
Bulk purchasing makes the policies cheaper than if an individual purchased a policy their own; think of going to Costco or Sam’s and buying in bulk, where the cost of each unit purchased is much more affordable in the long run. But, with life insurance, this creates a few limitations you may not have with private insurance.
The servicemembers group life insurance benefit is a term life insurance policy. You’ll be held to a maximum coverage of $400,000. The benefit is automatically provided, with premiums then automatically deducted from the servicemember’s base pay. The specific amount deducted depends on the current rate structure.
Who is Eligible for SGLI?
U.S. military servicemembers are automatically enrolled into SGLI. The following servicemembers are considered eligible:
- Active duty servicemembers of Army, Navy, Air Force, Marines and Coast Guard
- National Oceanic and Atmospheric Administration (NOAA) commissioned members
- U.S. Public Health Service (USPHS) commissioned members
- Reserve Officers Training Corps members, cadets and midshipman engaged in authorized training
- National Guard and members of the Ready Reserve who are scheduled for 12 or more periods of inactive training per year.
- U.S. military academy cadets and midshipman
- Individual Ready Reserve who have volunteered for a mobilization category
Additional SGLI Benefits
The $400,000 automatic coverage is the base plan. There are two extra features which also provide additional benefits.
SGLI Disability Extension
These are benefits for servicemembers who are completely disabled when they leave the service. This extension allows for two years of additional SGLI coverage. There’s no cost for this additional coverage. After two years, you can then apply for additional coverage. The VA offers more details on their Disability Extension reference page.
Something to note, however, is the SGLI Disability benefits are not automatic. Servicemembers will need to apply for the extension. While this extension might not be needed now, you and your spouse should keep this extension in mind in case it’s needed in the future.
Traumatic Injury Protection Program
Known as the TSGLI, this benefit is automatically provide to all servicemembers already covered by the SGLI. Each month, $1 is deducted from base pay. In turn, the resulting benefits of the TSGLI provide short-term financial assistance for servicemembers if they’re injured. Both combat and off-duty injuries are covered.
Like SGLI, TSGLI is also automatically applied. This program is available for all active duty members, reservists, National Guard members, one-day muster duty and funeral honors duty. Requirements for servicemembers who wish to use TSGLI are the following:
- Must already be enrolled in SGLI when the traumatic injury occurs
- The loss must be direct result of a traumatic injury
- The injury must occur before midnight of your separation day
- The schedule loss must occur with two years (730 days) of date of injury
- The injury must be survivable for no less than seven days
This is a relatively new program. As a result, benefits are applied retroactively to servicemembers who were injured between October 7, 2001 and November 30, 2005. The geographic location where the injury occurred doesn’t matter. This is a result of the Veteran’s Benefit Improvement Act of 2010, which eliminated the requirement saying injuries must have occurred during Operation Enduring Freedom or Operation Iraqi Freedom.
Private insurance companies typically do not offer disability coverage for active duty military.
Life Insurance and the Military: Some Basic Training
Jobs in the military are different than jobs in the civilian world. Military work carries an increased risk of injury, disease and even death. You want to make sure your family’s financial health is protected should you die or otherwise become unable to provide income.
Protecting your family’s financial future is an important job. If you’re active duty military, you’ll likely want at least some type of life insurance. There are several reasons.
- Funeral expenses. A small policy can provide money for burial, a funeral service and more. Otherwise your family members might be stuck with your funeral bills.
- Temporary financial relief. If your spouse is able to work, a medium-sized policy will allow them to re-enter the work force at their own pace.
- Childcare. If you have small children, a life insurance policy can provide financial assistance until they reach adulthood. Additional life policies can help provide for college.
- Establish a legacy. A large life policy can payout large benefits which can assist your entire family for their entire lives.
What Type of Policy Do You Really Need?
Just because you can find a large insurance policy doesn’t necessarily mean it’s your best option. You want to consider your specific situation, and what is most suitable for you and your family both now and down the road. Here are a few considerations to discuss with your spouse or dependents:
- How many children do you have and what are their ages?
- Does your spouse have the time and capabilities to earn income on their own?
- How old are you and what’s your current health status?
If your family is young and your spouse won’t be able to support your children in the long term without you, you’ll want a substantial policy. If you have no children, and your spouse will be able to work, you might be better served by lower premiums and a more modest life policy.
Get what you need. Nothing more, nothing less.
Is the SGLI Your Best Option?
SGLI has many benefits. The coverage is automatic and available to basically every servicemember. Additionally, this coverage is specifically designed for military members. Finding help geared towards your specific situation is relatively easy, because the policy issuers are used to dealing with military personnel.
When considering the benefits of SGLI, here are the four key points you’ll need to know:
- The amount of coverage you’ll receive
- How much premiums cost
- The type of coverage you’ll receive
- Your options for coverage after you leave the service
For most servicemembers, SGLI actually isn’t the best option. Here’s why…
There’s a $400,000 limit. This is a substantial amount of money, but it might not be enough to meet your needs. If you have several young children, $400,000 is unlikely to provide enough financial support to benefit them the entire time they’re growing towards adulthood.
Here’s a general rule of thumb for how to determine the level of benefits you’ll need. Take your current annual salary and multiply it by 7. Then multiply your annual salary by 12. The two numbers you end up with serve as a general range for benefits you’ll need, at a minimum. This amount will allow your family able to sustain their current standard of living while also accounting for inflation.
This is just to replace income, and wouldn’t be enough if you have children 6 years of age and under (assuming you want to provide them financial assistance to the age of 18).
Young children, a mortgage, if you have one, any personal debts and college aspirations will all typically require benefits which exceed $400,000. If you need more benefits, you can either purchase a supplemental policy from a private insurer or simply replace your SGLI with a private policy entirely.
It would be in your best interest to look at the total cost of having both an SGLI policy and a supplemental, versus just one large policy from a private insurer. This is because there are price breaks, like at $500,000, where the cost per thousand gets lower. This means a private policy for $500,000 could actually be comparable or even cheaper than a $400,000 SGLI policy.
SGLI to VGLI
Your SGLI coverage can stay with you after you’re no longer serving. After your date of separation, you have the option to convert your SGLI coverage into VGLI coverage, which stands for veterans group life insurance. This is a policy designed to help servicemembers transition their life insurance plan into the civilian world.
After your separation from the military, you have 120 days to apply for VGLI coverage. This is available for all servicemembers who have SGLI benefits. After 120 days, you can still apply for VGLI, but you’ll have to take a medical exam. If your health has deteriorated since the first exam when you originally gained SGLI coverage, then you can expect your premiums to increase under VGLI.
After Separation: VGLI or Private Insurance?
Like SGLI, VGLI is easy for servicemembers to obtain. VGLI also provides fairly substantial benefits with relatively low premiums. But VGLI isn’t usually considered a great choice for long term coverage.
First of all, VGLI premiums will increase every five years. This is because the premiums are based on your age. The older you are, the more you’ll have to pay.
Private term life insurance is often a better deal. Private terms are offered in 5, 10, 15, 20 and even 30 year time periods. Some companies even offer durations in between, so you can save even more and still get exactly what you require. You can “lock in” a great deal for low premiums even if you develop health problems later in life.
Here’s an example.
A servicemember separates from the Army at the age of 25. She’s in good health with no pre-existing conditions.
If she chooses to enroll in VGLI, then her premiums will go up every five years regardless of any changes in her health. If she chooses private insurance, however, she’ll be able to purchase a longer term without having to deal with rate changes. For instance, if she purchases a 30 year term, she’ll pay a level premium for the entire duration of the policy. This is true even if she develops any type of health issue during those two decades.
Her premiums won’t increase all the way to age 55.
If you decide that private insurance is a better option, you’ll want to purchase a policy before you cancel your VGLI benefits. Private insurance can take weeks or even months to be approved, depending on any health complications you have. You don’t want to leave yourself without life coverage for any significant period of time.
Private Term Life Insurance
Servicemembers have three options regarding their SGLI. They are:
- Conversion to the VGLI term policy, with the option to renew every five years
- Conversion to a commercial whole life policy
- Drop SGLI and VGLI completely for a private term policy
We’ve covered the pros and cons for VGLI conversion above. Let’s take a look at the other two.
Converting your SGLI into a commercial whole life policy has advantages and disadvantages. On one hand, conversion is usually pretty simple. There are many private insurers willing convert your SGLI into a whole life policy.
But, it can also be considered a negative. A whole life policy is a permanent life insurance policy. This is usually very expensive per thousand, especially compared to term policies or if you’re older.
Another drawback to converting your SGLI to a whole life policy is you likely won’t be able to keep any supplemental policy benefits. This includes any riders for Accidental Death and Dismemberment as well as a waiver of premium which would offset costs during a period of disability.
If the private insurer you select offers these riders, you can purchase them, but you won’t be able to carry them over from your SGLI policy. They will also cost extra.
The Advantages and Disadvantages of Conversion to a Commercial Policy
The main advantage of conversion to whole life is this is a way to maintain life insurance coverage even if you have pre-existing health conditions. In most cases, existing health issues will result in higher premiums. But, it can be reduced if you’re converting into certain types of policies, such as veterans group life and commercial policies.
There are two general rules to keep in mind regarding permanent commercial life insurance:
- Coverage would be available as long as you want, but…
- Permanent whole life policies are more expensive than term
If you have an existing SGLI policy for $200,000, for example, you will have considerably lower premiums than a whole life policy. You might have to reduce overall coverage in order to keep premiums at the same level you were used to. Converting just $50,000 may cost just as much as your $200,000 SGLI premiums.
In order to convert your SGLI into private cover, here’s what you need to do:
- Act relatively quickly. After your date of separation from the military, you only have 120 before your SGLI expires. You need to either apply to VGLI or for commercial coverage or else you’ll be without life insurance entirely.
- Shop around. You’ll be amazed at the difference in price and coverage which can be found among different companies. Don’t simply settle on the first policy you find. Also, ask family and friends if they have a policy they’re satisfied with and where they got it.
- Keep your paperwork. When purchasing a new policy, you’ll likely want a copy of your separation documents. This will be either Form DD-214, NGB-22 or written Reservist Orders and a copy of your last Leave and Earning Statement (LES).
The Advantages and Disadvantages of Purchasing a Brand New Commercial Policy
You can supplement your SGLI with additional private coverage. You can also simply replace SGLI coverage with a private policy. Some reasons you might want to do this include:
- Constant coverage. If you buy a policy when you’re young and in good health, that policy will be there for you as you age and if you develop any health problems. This applies even if you leave the military.
- Additional financial protection. The SGLI limit of $400,000 can be enhanced with private coverage. Larger payouts can help handle debts, college funds and more.
SGLI is an important benefit for you and your family, especially while you’re on active duty. The coverage is automatic, and $400,000 will also provide short term financial assistance to your spouse and/or dependents.
If you have a large family, or want your life insurance policy to provide long-term benefits, then SGLI might not be sufficient on its own. Fortunately, you can easily supplement your SGLI coverage with private, commercial insurance. You can even replace SGLI with commercial coverage entirely as you separate from the military.
This is what we do, and we’ll happily do the research for you.
Life insurance isn’t something people think about often, especially if they’re young and healthy. But life insurance is an important tool which can provide for your family if you’re ever injured or killed. The more you know about how SGLI works, the better you’re able to make an informed decision about the type of coverage you need.
Let us known if there’s any way we can help and thank you for your service.