SGLI-The Most Common Questions Answered

SGLI- aka Service Members Group Life Insurance

Military SGLI life insurance is a benefit underwritten by Prudential formally known as the Service Members Group Life Insurance. In this post, we are going to review the most common questions military personnel and their families ask about this benefit.

Who is eligible for the SGLI?

Here are the eligibility requirements shown on the VA Program Page.

To be eligible for this program you have to be one considered one of the following:

  • Active duty member of the Army, Navy, Air Force, Marines, or Coast Guard

  • Commissioned member of the National Oceanic and Atmospheric Administration (NOAA) or the U.S. Public Health Service (USPHS)

  • Cadet or midshipman of the U.S. military academies

  • Member, cadet, or midshipman of the Reserve Officers Training Corps (ROTC) engaged in authorized training and practice cruises

  • Member of the Ready Reserve or National Guard and are scheduled to perform at least 12 periods of inactive training per year

  • Service member who volunteers for a mobilization category in the Individual Ready Reserve (IRR)

How do you apply?

There is no need to apply for coverage or take a medical exam. Coverage is automatic upon a service member’s entrance into the military. It’s recommended they designate a beneficiary as soon as possible. Although not recommended, service members do have the option to opt out.

SGLI rates & coverage

Lots of service members want to know how much does the it cost. The cost of insurance is currently 7 cents per $1,000. The coverage offered in increments of $50,000. The maximum coverage election is $400,000.

It’s deducted straight from base pay. Contrary to popular belief, premiums do not increase while service members are deployed.

sgli rates as of july 2014

Disability Provisions

A valuable feature of this benefit is the Traumatic Injury Protection Program (TSGLI) coverage. It is automatic and provides payment between $25,000 and $100,000 for service member’s traumatic injury. The cost for this feature is $1.00 and is included in the cost for the life insurance benefit as shown on the rate chart above.

In addition, service members who are considered totally disabled at the time of separation can apply for an extension of the military life insurance benefit.  Eligible members receive two years of coverage at no cost. After the two year period coverage is automatically provided by VGLI(Veteran Benefit)subject to program rates.

Please see the official VA program pages for qualified losses.

Additional military death benefits provided by the service

Upon the unfortunate circumstance that an active duty military member passes away, the military does have a few other benefits that are separate from this plan. One being the $100,000 death gratuity benefit paid to their survivors as soon as possible. Additionally, a service member may have death indemnity compensation(DIC) benefits.

The DIC benefits vary by length of service, status, and rank. Please check with your unit’s benefits coordinator for verification of these benefits. It is important to keep track of what benefits accumulate over time so that you can deduct them from your life insurance needs assessment. Experts recommend reviewing you needs about every one to two years or upon life events such as getting married or divorced, having a child, becoming a home owner and preparing for retirement.

Supplemental & Alternative Options

It is not recommended for service members to discontinue this benefit. That being said, there a few other private companies that can provide similar life insurance coverage. Some of the most common military friendly organizations include:

  • United Services Automobile Association (USAA)
  • Military Benefit Association (MBA)
  • Military Officers Association of American(MOAA)
  • Army and Air Force Mutual Aid Association (AAFMAA)
  • Uniformed Services Benefit Association (USBA)
  • Armed Services Mutual Benefit Association (ASMBA)
  • Navy Mutual Aid Association (NMAA)

Most military families over look using private life companies for their military life insurance.  A big misconception is that all private life insurance companies have a war exclusion. Although this exclusion was common during the first two world wars, most carriers started dropping them after the Korean & Vietnam War.

The majority of private life insurance companies along with the above listed organizations will underwrite a service member by their occupation in the military. That means they may take their job into account when determining a service members eligibility and premium they will offer.

Most companies will approve military personnel and some do consider their occupation during their underwriting. It is important to ask whether or not a war exclusion is provided. A good company will provide accurate information up front.

Do keep in mind that insurance companies do not issue sample copies of policy language. In order to get the full contract you will need to apply and become a policy holder. Most all states offer a FREE look period which is usually 30 days long. This gives you the opportunity to review the policy and discontinue for a refund if you cancel within the FREE look period.

Find out how much does supplemental military insurance cost?

Do service members need additional life insurance?

One of the down sides to this benefit is that you cannot purchase any more than $400,000. It is a temporary life insurance plan and does have program limitations.

Many service members are aware they need additional coverage to provide for their family in the long term. Inflation plays a major role when reviewing life insurance needs. While $400,000 sure seems like a lot of money, it often falls short when families calculate their needs.

Most service members are also aware of the fact that the veteran life insurance benefit is not a competitively priced program. Shopping for life insurance is often an item on military retirement checklists. It’s better to have supplemental coverage in place well before retirement so that you can sustain your life insurance portfolio at affordable pricing.

The two main reasons to secure supplemental life insurance on top of this plan are as follows:

  1. To make certain that your family will not suffer financial hardship if you pass away prematurely.
  2. To make certain that you will have affordable life insurance coverage upon separation from the service.

Coverage for spouses & children

The military provides a life insurance benefit to dependent spouses and children of an eligible service member. Please see my Family Member page for more information regarding the coverage family members can obtain as an extension of this benefit.

How is the benefit paid to survivors?

The payout to survivors in the event of a service members death can be paid either in a lump sum or in 36 payments of equal shares. This is pre-determined by the service member’s certification. Life insurance proceeds are paid to the beneficiary tax free.

A service member can list a primary as well as contingent(back up) beneficiary. Furthermore they have the option to name any person or legal entity. If the service member wishes to designate a business or charity they can. It’s also possible to list their estate or a trust. A trust is set up by an attorney that designates a trustee to handle the funds according to the specification.

Service members who do not list any beneficiaries are required to mark “By Law” in place of a beneficiary. Essentially what this will do is have the proceeds paid to the service members next of kin as determined by their resident state probate laws.

Survivors have the option of leaving the life insurance proceeds in an interest bearing account in their name managed by the VA indefinitely. There are beneficiary counseling services available to survivors to help them make good decisions during this time of tragedy.

Since this benefit is considered a group life insurance plan offered by a service member’s employer(the military) the cost is low. This plan should remain in effect as a part of a military member’s life insurance portfolio while they are in the service.

What type of life insurance policy is the SGLI?

The benefit is a group term policy set up by the Department of Veterans Affairs (VA) from a commercial life insurance company. Group policies are generally provided at a lower cost than most individual policies found on the private market. However, it is important to consider that your rates are always subject to change if the program itself changes. The current program rates are from July 01, 2014.

Accelerated Death Benefit Option

Most all life insurance plans come with a feature called the accelerate death benefit. This is a provision that allows an insured member who is terminally ill collect up to 50% of the face value of their plan. Terminally ill according to this plan provision is 9 months or less to live and must be written from a valid physician. If the service member elects to take less than 50%, they must claim the benefit in $5,000 increments.

While this may be the desire of a terminally ill service member, it is important to note that their is interest charge on this election. The amount of interest charges will be determined by a program actuary who will calculate the amount of interest lost by the exercise of this benefit.

The proceeds redeemed from this benefit are not considered income for federal tax reporting.

In cases where a terminally ill service member survives their diagnosis and wishes to continue coverage through the veteran program are only eligible for a reduced benefit.

What does SGLI not cover?

There are a lot of misconceptions about what this plan will not cover. Life insurance for active duty sometimes has underwriting challenges with private market plans.  Since this is a group plan specifically designed for military members by Prudential it does not have exclusions found in common life plans.  Check out these common Myths and Rumors.

There are circumstances where the benefit will be forfeited. See the below statement provided by the Veteran Affairs.

The coverage provided by the program will be forfeited only when an insured member is found guilty of mutiny, treason, spying, or desertion, or refuses, because of conscientious objections, to perform service in the Armed Forces of the United States, or refuses to wear the uniform of such force. No insurance shall be payable for death inflicted as a lawful punishment for crime or for military or naval offense except when inflicted by an enemy of the United States.

The benefit does provide a payout to listed beneficiaries even if the service member passes away from suicide, combat death or as a result of an off duty death.

There are 4 life insurance options for military after the service

  1. Take the higher priced, veterans group life insurance – which is a five-year renewable term policy.
  2. Convert it into a commercial policy with a participating company – this has to be a whole life policy.
  3. Shop for a brand new term policy with a commercial company – this is subject to age and health.
  4. My favorite option – rely on existing supplemental policy purchased well before separation.

Veteran Benefit

When members leave the service they will be eligible to convert their SGLI to VGLI . They’ll need to follow the proper time frame to take the veteran benefit. Service members have 120 days from separation to apply without having to submit evidence of good health. They can actually apply for this benefit up to 1 year after separation but can be denied due to poor health if their application is submitted after the 120 days. Service members cannot apply for more than they had under the SGLI. The veterans benefit while a great option if a service member cannot obtain coverage elsewhere it’s not a competitively priced plan.

Conversion Option

The other option is by converting the benefit into an individual policy with participating companies. This must be done within 120 days from the separation date. The down side of this option is that it can only be converted into whole life policy. This is often the most expensive type of life insurance on the market. The conversion policy also is offered at standard verses preferred rates. If a service member is healthy, this is not the best deal for them.

New Plan Purchase

There are several affordable options for military members to purchase life insurance upon or after separation. While shopping for a new plan, service members may be asked to have their mental and physical health reviewed. Often times service members are denied coverage due to uninsureable health conditions. Ideally, these plans should be purchased well before service members even consider exiting the service to ensure they can continue affordable life insurance protection.

Existing Coverage

If a service member has taken steps to secure supplemental military life insurance prior to leaving the service they can simply let can simply let their military plan expire. This eliminates the stress of having to shop for a new plan that sometimes comes with the risk of being turned down.

Updating your benefit

Service members are required to review their life insurance election and certification when they get to a new assignment. Although certain life events like getting married, divorced or having a child can spark the need to update your beneficiary. It’s not a bad idea to periodically review your beneficiary information as sometimes people move. It’s important to have accurate contact information for your loved ones listed as your beneficiary.

Service branches are working on implementing SOES(Online Enrollment System) to allow service members to make changes online. Currently Navy and Air Force service members have access to this system. In order to access SOES service members must visit milConnect.  Army will follow in October 2017. Marine Corps in December 2017. Coast Guard, National Oceanic and Atmospheric Administration in February or March 2018. These services can use the SGLV 8286, Servicemembers’ Group Life Insurance Election and Certificate to make updates to their benefit.

Keep in mind spouses are required to be notified when a service member elects to cancel or change this benefit. As a life insurance professional, I would recommend to not cancel this coverage while serving in the military. Ultimately this benefit is a very affordable group life insurance plan that comes with valuable extras.

See the program handbook put together by the VA.

Conclusion

Should the SGLI be the only life insurance plan a service member has while in the military?

It’s my recommendation service members purchase additional coverage as a supplement to this plan. Many are surprised just how affordable supplemental policies are for their family. Service members don’t always know when they will leave the military. Planning ahead helps service members save money on their life insurance in the long term. The biggest benefit to buying additional life insurance, is that survivors are protected from bearing the financial stress of losing a loved one. The right amount of life insurance coverage shows your family your cared enough to plan for the worst even though it was hard to think about.

For an individual assessment based on your situation, you can request a quote or call me today!

 

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