What is Servicemembers Group Life Insurance?

Servicemembers Group Life Insurance, or SGLI benefits, are life insurance policies made available to basically all members of the U.S. military.

While you were probably introduced to your SGLI benefits at some point, this acronym is likely low on your recall list.

But SGLI is an important benefit, especially if you have a family. And you should know about it whether you’re a service member or married to one.

Here’s our complete guide about what SGLI is and how you can maximize your benefits.

Let’s get started with the basics.

What to Consider About Life Insurance and the Military?

Jobs in the military are different from 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.

These are several reasons why:

• 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 workforce 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 also help provide for college.

Establish a legacy: A large life policy can pay out considerable benefits which can assist your entire family for the rest of their lives.

How Does SGLI Work?

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 and includes certain policy limitations.

Bulk purchasing makes the policies cheaper than if an individual purchased a policy on their own; think of going to Costco or Sam’s Club and buying in bulk, which lowers the per-unit cost..

But, with group 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, so it will expire at the end of a set term—not necessarily at the end of your life.

You’ll also be held to a maximum coverage amount of $400,000.

The benefit is automatically provided, with premiums then automatically deducted from the service member’s base pay.

The specific amount deducted depends on the policy’s current rate structure.

Who is Eligible for SGLI?

U.S. military service members are automatically enrolled into SGLI.

The following service members are considered eligible:

• Active duty service members of the 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

Are There Additional SGLI Benefits?

The $400,000 in automatic coverage is SGLI’s base plan.

There are two extra features which provide additional benefits:

• SGLI Disability Extension
• Traumatic Injury Protection Program

SGLI Disability Extension

These are benefits for service members 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 continued coverage. The VA offers more details on their Disability Extension reference page.

Something to note, however, is that SGLI Disability Extension benefits are not automatic. Service members will need to apply for the extension.

While this extension might not be needed now, you and your spouse should keep it  in mind in case it’s needed in the future.

Traumatic Injury Protection Program

Known as TSGLI, this benefit is automatically provided to all service members already covered by SGLI.

Each month, $1 is deducted from your base pay.

The resulting benefits of TSGLI provide short-term financial assistance for service members if they’re injured.

Both combat and off-duty injuries are covered.

This program is available for all active duty, reservist, National Guard, one-day muster duty, and funeral honors duty service members.

Requirements for service members who wish to use TSGLI include the following:

1. Must already be enrolled in SGLI when the traumatic injury occurs
2. The loss of use must be the direct result of a traumatic injury
3. The injury must occur before midnight of your separation day
4. The loss of use must occur within two years (730 days) of date of injury
5. 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 service members 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.

Keep in mind that private insurance companies typically do not offer disability coverage for active duty military.

Is SGLI Your Best Option?

SGLI has many benefits.

The coverage is automatic and available to basically every service member. Additionally, this coverage is specifically designed for military members.

Finding help geared toward 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:

1. The amount of coverage you’ll receive
2. How much premiums cost
3. The type of coverage you’ll receive
4. Your options for coverage after you leave the service

For most service members, 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 toward 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 to be able to sustain their current standard of living while also accounting for inflation.

But 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 with 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.

What Other Options Do You Have?

Service members have three other options regarding their SGLI coverage: 

1. Convert SGLI to a Veterans Group Life Insurance (VGLI) term policy after separation, with the option to renew every five years
2. Convert SGLI to a private whole life policy
3. Drop SGLI completely for a private term policy

Let’s look at these options in more detail.

How Do You Transition from 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 service members 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 service members 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, performed when you originally gained SGLI coverage, then you can expect your premiums to increase under VGLI.

You’ll also have to renew your VGLI coverage every five years.

After Separation, Should You Choose VGLI or Private Term Insurance?

Like SGLI, VGLI is easy for service members 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 service member 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 three decades.

Her premiums won’t increase until the policy term ends at  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.

What Should You Know About Conversion to a Private Whole Life Policy?

Converting your SGLI into a private whole life policy has advantages and disadvantages.

On one hand, conversion is usually pretty simple. There are many private insurers willing to 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 main advantage of conversion to whole life is that it’s 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.

There are two general rules to keep in mind regarding private whole  life insurance:

• Coverage would be available as long as you want, but…
• Permanent whole life policies are more expensive than term policies

If you have an existing SGLI policy for $200,000, for example, you will have considerably lower premiums than with a whole life policy in the same amount.

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 as much as your $200,000 SGLI premiums.

In order to convert your SGLI into private coverage, here’s what you need to do:

1. Act relatively quickly: After your date of separation from the military, you only have 120 days before your SGLI expires. You need to either apply for VGLI or private coverage, or else you’ll be without life insurance entirely.
2. 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.
3. Keep your paperwork: When converting your  policy, you’ll likely need 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).

What Should You Know About Purchasing a New Private Policy?

If you need more benefits than SGLI provides, you can either purchase a supplemental policy from a private insurer or simply replace SGLI entirely with a larger 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.

It would be in your best interest to look at the total cost of having both a SGLI and supplemental policy, versus just one large policy from a private insurer.

This is because there are price breaks (at $500,000, for example) 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.

What Type of Policy Do You Really Need?

Just because you can find a large private 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:

1. How many children do you have and what are their ages?
2. Does your spouse have the time and capability to earn income on their own?
3. What’s your age and 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.