Life in the military is all about the unexpected. You, and your family, never know what each day may bring. As many service members and their families quickly become aware of, there is often very little you can plan on in the military.
There is at least one important exception, however. Service members can plan on their veterans group life insurance, also known as VGLI.
The VGLI provides life insurance benefits for service members as they leave the military and enter the civilian workforce. Unsure about all the details? We have a complete guide below designed for both service members and their spouses.
Your Guide to Veteran Group Life Insurance (VGLI) Benefits, and More
For some people, the VGLI provides enough coverage for their needs. Many other service members supplement their VGLI with additional coverage from a private company. Still, others choose to forgo VGLI entirely and purchase all of their life insurance through a private company after they separate from the military.
Not sure which route will work best for you? No problem. We’ve also listed all the pros and cons of each option.
Understanding VGLI and SGLI
The service members group life insurance program, or SGLI, provides life insurance benefits for a variety of active duty service members. Also known as the SGLI, this is a group term policy purchased from a commercial life insurance company provided by the Department of Veterans Affairs.
SGLI offers up to $400,000 of coverage to the following groups:
- Active members of the Army, Navy, Air Force, Marines and Coast Guard
- ROTC members, cadets and midshipmen
- U.S. military academy cadets and midshipmen
- Ready Reserve and National Guard members scheduled with 12 periods of inactive training each year
- Individual Ready Reserve members who volunteer for a mobilization category
The SGLI benefits are automatically awarded to service members. Policy premiums are automatically deducted from base pay. The specific amount varies and is based on current market rates.
In addition, there are two major categories of additional benefits within the VGLI benefit platform which SGLI doesn’t have.
1. Service-Disabled Veterans Insurance
This is a life insurance policy available for veterans who are disabled as a result of their service. The maximum life insurance benefits available are $10,000. This policy can be either term or permanent.
Veterans who are completely disabled have additional options. Supplemental S-DVI plans are available provided certain eligibility requirements are met. For additional info, you can view more on the VA’s S-DVI page.
2. Veterans Mortgage Life Insurance
This plan is designed to help pay off your mortgage balance in the event of a premature death. This way, your family would be able to remain in your current home. The ability of survivors to make mortgage payments could be hampered by the loss of income, and by the additional burden of final expenses and burial costs. Benefits are equal to the mortgage balance with a maximum of $200,000.
With a limit of $200,000, your entire mortgage might not be covered. In this case, you might want to look into additional private coverage using one of many private life insurance companies.
VGLI and Military Service Separation
Once your time in the military is over, you’re still covered by SGLI for 120 days. You have 240 days after your date of separation to apply for VGLI. This gives you plenty of flexibility. If you know for sure you want to continue your benefits under VGLI, you can apply immediately after separation. If you want to take more time to research your options, you have 240 days to do so.
Within the 240 days, applying to VGLI does not require a second medical exam. You can still apply for VGLI after 240 days, but you’ll first need to undergo another exam.
SGLI to VGLI Conversion Timeline
- 120 to 240 days after separation or retirement: You’ll still be covered by SGLI
- 240 to 485 days: You can still convert to VGLI but your SGLI will no longer be in effect during the application process
- 486+ days: This is the deadline. You’ll no longer be able to convert SGLI to VGLI
As your date of separation approaches, take stock of your overall health. Try to control any health issues which you’re able to. For instance, many insurance providers only consider you a non-smoker after 36 months of being smoke-free.
Another issue you want to watch is your weight. Get your weight and cholesterol down to healthy levels.
The better your health, the lower your insurance rates will be. This provides you with more options for both amounts and durations, as well as carrier choices. For instance, if you want to wait more than 240 days, you can still apply for VGLI. The required medical exam won’t have a big impact on your rates if you’re in good health. This also applies to rates associated with additional policies you might be interested in.
Additional Info on Your Separation
The date your separation from service begins varies depending on your service member status:
- Active Duty Military: Date of military separation or retirement (DD-214)
- National Guard / National Reserve: Date of military separation or retirement (NGB-22 or separation orders)
- TDRL Temporary Disability Retired List: Date when listed
- Individual Ready Reserve: Date assigned
Is VGLI Always the Best Option?
VGLI is an easy, reliable way to establish a life insurance policy which will help safeguard your family’s financial future. Converting the SGLI policy to the VGLI is usually pretty straight-forward. The rates are low, and the benefits, up to $400,000, can make a substantial, positive difference for survivors and beneficiaries alike.
VGLI is a short-term renewable policy. Every five years, the premiums will increase. The amount of the increase will depend on your age. Always keep this in mind, where you may need to count on level premiums for 10 years, 20 years, or more.
Of course, there are limits to the amount of VGLI coverage. You’re only eligible for coverage up to the amount of SGLI you previously had. You can decrease the amount, however. Reduction must be in $10,000 increments. If you need more, you’ll need a separate provider.
After converting your SGLI to VGLI, you’re then able to increase coverage, though. This must be done in $25,000 increments. You can only purchase more coverage every five years. You’re limited to coverage of $400,000, which is the maximum amount of the SGLI. You can only purchase coverage increases until the age of 60.
The Pros and Cons of the VGLI Benefits Limit
Is $400,000 enough to protect your family? This is the maximum amount of coverage allowed for the SGLI and the VGLI. While $400,000 is a sizable amount of money, it might not be enough to protect your family entirely.
Consider how much it might cost to replace your income for 7-10 years for your spouse, or until your youngest child reaches the age of 18. This will give you a general idea of the amount of policy benefits you’ll need. But this is only a rough estimate.
You’ll also need to consider additional factors:
- The size of your family
- The age of each family member
- The work capabilities of each family member
- Other liquid assets
- Accrued medical or end of life costs
If you have young children, your family will need more financial resources than a single adult spouse would. With young children, you’ll want to provide enough financial security until they’re at least 18, typically, where they can begin work, school or support themselves. Some people want to also provide for a college education. For many families, $400,000 isn’t really enough to establish a legacy, either.
Life insurance benefits should also be enough to cover funeral expenses, pay off debts and deal with any other financial obligations you’ve left behind. While the benefits from a VGLI policy will cover funeral expenses and moderate debts, there might not be much left over. Plus, the premiums will rise on a regular basis.
You’ll also likely find more comprehensive private plans tailored towards seniors. Not too many people continue their VGLI policy into their senior years. The policy is designed more towards providing a financial safety net for the families of younger, active duty military members.
Conversion Options with VGLI
If you wish to obtain coverage beyond the benefits provided with either the SGLI or VGLI, you’ll need to purchase a policy from a private company. There are a few options here.
First, many private insurers will allow you to convert the VGLI into a whole life plan. Whole life coverage is a permanent life insurance policy. Cash value is built over time. In a way, this type of policy is similar to a savings plan, only offered by the insurance company.
The cash accrues within the policy. Compared to an actual investment product, these policies have a relatively modest interest rate. You can remove cash from the policy, but doing so incurs an interest penalty. Basically, while there is some cash built over time with this policy, a whole life policy isn’t really meant to be used as an investment vehicle.
The major benefit of a whole life policy is that it will last longer than a term policy. One of the major drawbacks is cost, though. Term policies are cheaper and more flexible, yet they end. You can choose coverage for just a certain time window, too, using universal life insurance plans which act as a sort of hybrid.
For complete financial planning, you’ll likely want more investment options than simply a whole life policy. Don’t let the cash accrual be a major factor in your decision to choose a whole life plan. Only choose a whole life plan if the costs and benefits make sense for your individual needs.
For many people, term life or even simply staying with the VGLI makes more financial sense than switching to a whole life plan.
If you’re interested in a private plan, pay attention to your deadlines. Converting the SGLI to the VGLI is relatively quick. Purchasing and implementing a private policy can take much longer, however. Typically weeks or even months are required for approval, especially if a medical test is required.
You’ll want to be aware of the expiration date for converting your SGLI to your VGLI. Ideally, you’ll have private coverage already in place before your SGLI expires. Of course, this is only the case if you wish to forego VGLI coverage.
When to Purchase
Life in the military carries certain risks civilian jobs do not. You likely will want some type of life insurance. The best course of action is to purchase insurance at the youngest age possible. This is likely when you’ll be at your healthiest, so costs will be kept down.
The VGLI coverage is easy to obtain, requiring no medical exam. If you develop a medical condition during your service while being covered by SGLI, your rates might not increase as you transition to VGLI.
However, your VGLI premiums will increase over time. They will become more expensive as you age. This is why many people find a term life policy to be a better value. You can lock in low rates for five years, 10 years or another period. The longer term you purchase, the better price you’ll likely find.
Should I Choose VGLI or a Private Plan?
While the vast majority of military service members remain safe and healthy throughout their career, accidents and injuries do occur. Additionally, illnesses can strike without warning, regardless of what your specific job functions are. You’ll want to provide for your family in the event you die or become disabled and are unable to contribute income.
The SGLI is easy and does provide at least some type of coverage. With additional plans for disability and mortgage, you can prepare for a variety of potential pitfalls. The VGLI is also a solid plan, requiring no medical exam, which is attractive to most consumers.
There are plenty of valid reasons to prefer private insurance, however. Benefits can be higher than the SGLI limit of $400,000. Additional options can be tailored to your specific needs, including premium, duration, and even health. If you’re willing to commit to a longer term of over 10 years, you can also secure low rates and no longer need to worry about the increase in cost every 5 years.
You’ll want to carefully determine your needs. This is done by considering your family’s financial concerns for the future as well as your current financial picture. At minimum, you want a policy which will cover your funeral expenses and debts. This prevents your family from having to pay expenses directly related to your death.
But larger policies are also available and worth consideration. Benefits can be large enough to provide for your children’s care until they enter adulthood. Additional benefits can be used to pay off a mortgage or provide for college educations.
If you’re on active duty in the military, take some time to assess your SGLI benefits. Some people may find this provides all the coverage they need, while others will want to supplement their plan with private insurance.
Likewise, when separating from the military, take some time to consider whether the VGLI plan will provide the type of coverage you want. For many, the VGLI is used a temporary solution while they search for private term insurance. Others are satisfied with the VGLI coverage.
Military life is busy but you want to find time to consider all your life insurance options. The right policy will protect your family’s financial future. By understanding the pros and cons of the VGLI, you can make an informed decision which will provide peace of mind both now and for the future.