Veterans Group Life Insurance (VGLI) provides life insurance benefits for service members as they leave the military and enter the civilian workforce or retirement.
While life in the military is all about the unexpected, service members and their families can count on military-provided group life insurance.
When a service member transitions to civilian life, they can opt to convert their original group plan to VGLI.
Unsure about all the details and how it works?
We have a complete guide below designed for both service members and their spouses.
Table of Contents
- What are Your Options When it Comes to VGLI?
- What is the Difference Between VGLI and SGLI?
- What Should You Know About VGLI and Military Service Separation?
- When Does Your Separation Begin?
- Is VGLI Always the Best Option?
- What are the Pros and Cons of the VGLI Benefits Limit?
- What are Your Options Beyond VGLI?
- When Should You Purchase Life Insurance?
- Should I Choose VGLI or a Private Plan?
For some people, 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?
We cover all the pros and cons of each option.
The Servicemembers Group Life Insurance program, or SGLI, provides life insurance benefits for a variety of active duty service members.
SGLI is a group term policy purchased from a commercial life insurance company, which is provided to service members by the Department of Veterans Affairs.
The plan 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 for 12 periods of inactive training each year
- Individual Ready Reserve members who volunteer for a mobilization category
SGLI benefits are automatically awarded to service members. Policy premiums are automatically deducted from your base pay.
The specific cost varies and is based on current market rates.
SGLI can be continued after separation under the VGLI plan.
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.
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 your premature death.
The ability of survivors to make mortgage payments could be hampered by the loss of your income, and by the additional burden of final expenses and burial costs.
With this coverage, your family would be able to remain in your current home.
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 may want to look into additional coverage using one of many private life insurance companies.
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
|Days after Separation/Retirement
|120 – 240
|Still covered by SGLI
|241 – 485
|VGLI conversion available (SGLI no longer in effect during application process)
|Deadline to convert
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 wait more than 240 days to 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.
The date your separation from service begins varies depending on your service member status.
Take a look below to find out when your separation will begin:
- 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)
- Temporary Disability Retired List (TDRL): Date when listed
- Individual Ready Reserve: Date assigned
VGLI is an easy, reliable way to establish a life insurance policy which will help safeguard your family’s financial future.
Converting your SGLI policy to VGLI is usually pretty straightforward.
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, which means every five years, the premiums will increase.
The amount of the increase will depend on your age.
Of course, there are limits to the amount of VGLI coverage you can get in the first place.
You’re only eligible for coverage up to the amount of SGLI you previously had, but after conversion you can increase or decrease your coverage.
Reductions must be made in $10,000 increments. Increases must be in $25,000 increments.
You can only purchase more coverage every five years. And you can only purchase coverage increases until the age of 60.
You’re also limited to coverage of $400,000, which is the maximum amount you could have had through SGLI.
If you need more coverage, you’ll need a separate provider.
You may be asking yourself if the maximum $400,000 VGLI benefit is enough to protect your family in the event of your death.
While $400,000 is a sizable amount of money, it might not be enough to cover your family’s needs entirely.
Consider how much it might cost to replace your income for 7-10 years, 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 financial security until they’re at least 18, typically where they can begin working and supporting themselves. Some people also want to 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 toward seniors.
Not too many people continue their VGLI policy into their senior years.
The policy is designed more toward providing a financial safety net for the families of younger, active duty military members, since it’s an extension of SGLI.
If you wish to obtain coverage beyond the benefits provided by either SGLI or VGLI, you’ll need to purchase a policy from a private company.
Here are a few options:
- Whole life
- Term life
- Universal life
First, many private insurers will allow you to convert VGLI into a whole life plan. Whole life coverage is a type of permanent life insurance policy, where cash value is built over time.
In a way, this type of policy is similar to a savings plan, only it’s offered by an 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.
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.
The major benefit of a whole life policy is it will last longer than a term policy. One of the major drawbacks is cost. Term policies are cheaper and more flexible, yet they end.
For many people, term life makes more financial sense than switching to a whole life plan.
The longer the term you purchase, the better the price you’ll likely find.
You can also choose coverage for just a certain time window, using universal life insurance plans which act as a sort of hybrid.
If you’re interested in private coverage, pay attention to the deadlines for converting your SGLI plan to VGLI.
Converting SGLI to VGLI is relatively quick, and can buy you time while searching for private coverage.
Purchasing and implementing a private policy, however, can take much longer. Typically weeks or even months are required for approval, especially if a medical exam is required.
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 entirely.
The best course of action if you’re choosing private insurance is to purchase a policy at the youngest age possible.
This is likely when you’ll be at your healthiest, so costs will be kept down.
And private insurance rates are locked in, so they won’t increase during their term.
If you develop a medical condition while covered by SGLI, your rates might not increase as you transition to VGLI.
And while VGLI coverage is easy to obtain, requiring no medical exam, your VGLI premiums will increase over time, becoming more expensive as you age.
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.
One way or another, you’ll want to provide for your family in the event you die or become disabled and cannot contribute income.
SGLI is easy and does provide at least some type of coverage while you’re on active duty.
VGLI is also a solid plan, requiring no medical exam, which is attractive to most consumers. And with additional plans for disability and mortgage, you can prepare for a variety of potential pitfalls.
There are plenty of valid reasons to prefer private insurance, however.
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 private plan (over 10 years), you can secure low rates and no longer need to worry about the increase in cost every five years with VGLI.
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 a college education.
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 time to consider whether the VGLI plan will provide the type of coverage you want.
For many, VGLI is used as a temporary solution while they search for private term insurance.
Others are satisfied with only 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 VGLI, you can make an informed decision which will provide peace of mind both now and for the future.