Is the FSGLI cost worth the benefit?
Let’s explore the FSGLI cost and the provided benefit to military spouses under the Service Members Group Life Insurance program. Many military spouses are not 100% familiar with how this plan works. As a military spouse and life insurance professional, I’d like to use this article as a way to compare the benefits against this cost. You may be surprised to find that this program, while in most cases is affordable, often has disadvantages compared to alternative options.
The spouse SGLI program is a benefit provided to military families as a group option. Group life insurance is coverage provided by a person’s employer. In this case the U.S. Military is the employer whom has an arrangement with Prudential to provide low cost life insurance to military personnel and their family members. The program is administered by the Veterans Association.
FSGLI Cost Disadvantages
These are my biggest pet peeves about the FSGLI group life insurance plan:
- Low maximum coverage limit
- Limited beneficiary choices
- Poor continuation privileges
These are not necessarily uncommon with group life insurance options. That being said many are unaware of such limitations with their military spouse life insurance coverage. This is particularly an issue due to the fact most military spouses do not recognize the need to have a life insurance plan outside of this benefit. Without looking at the whole picture and planning ahead spouses can be left paying more than they should have on their life insurance.
It’s my goal to ensure military spouses are informed about what features they are missing in this plan.
You can elect to buy family SGLI in increments of $10,000. The premiums are based on how much coverage is selected and the age of the spouse. The FSGLI cost will go up as a spouse gets older. Children are covered at no cost unless they are over 18 with certain requirements.
Here is a table from the VA website showing the age banded costs.
As you can see a spouse under the age of 35 can obtain $100,000 worth of life insurance coverage for $5.00 a month. That is pretty competitive compared to individual plans on the private market. However, we need to consider the fact that the military spouse life insurance coverage can only be taken into the civilian world as a whole life policy. This is permanent plan that is often the most expensive in monthly costs as compared to term life insurance. A few other considerations are that life insurance prices go up as you get older and that people tend to develop health issues as they age.
I say this because military spouses do not know for certain when their service member will separate from the military. While they may intend to retire at 20 years they can change their mind or develop a disability that requires them to exit sooner.
Military spouses should think ahead in case they need to continue their $100, 000 in life insurance. If this is their only form of life insurance coverage, then they need to be aware that if they develop an uninsurable health condition and need to keep the benefit, their only option is to convert it into a whole life plan with a participating company.
FSGLI Cost Analysis
The best way to protect a military spouse’s portability for life insurance coverage is to buy a plan outside of the military while they are young and healthy. One might ask “should they still pay for the FSGLI?” This is really a personal choice. The thing about the family SGLI cost is that it always comes out lower than the costs for a comparable plan outside of the military even though the FSGLI costs do increase with age. This is largely due to the fact the most military spouses marry service members between the ages of 18-35. Now I know this is not always the case but there’s lots of “what ifs” that come into making a case for whether or not the FSGLI cost is worth it.
We have to consider the following factors:
- The age someone becomes a military spouse
- Their health situation when they get married
- Their risk of developing a health condition later
- Whether or not they will need the plan later
- Whether or not the service member has SGLI
- How much SGLI the service member has in place
The FSGLI premiums are indeed lower than an outside plans. However they aren’t meant to be a full life insurance plan. The beneficiary is always the service member. Conversion options aren’t that great. Spouses run the risk of paying a lot more over the long run depending on their health situation and coverage needs when they are no longer a military spouse.
That being said, it’s somewhat silly not to pay for it. If you are really tight on cash or not fond of the idea of paying for more than one plan, you can omit it from your life insurance portfolio and save a little. In the private market there are level plans that can be purchased for 10, 15, 20 and 30 years.
The most important question military spouses should be asking is “how much life insurance do I need?”. Military spouses should think about the financial situation their family will be in if they pass away prematurely. How does their income(part time or full) contribute to their household? Who will take care of the children? Ignoring these questions exposes their families to the risk of financial catastrophe.
Finding quality life insurance coverage is more affordable than many consumers think. Start shopping in order to protect your family! You can request an online quote or call me today!