Active-duty service members and veterans, we need to have an honest conversation about life insurance.
When we serve on active duty, we have access to a life insurance policy through the federal government called Servicemembers’ Group Life Insurance, commonly known as SGLI.
For many years, SGLI provided service members with up to $400,000 in coverage. A few years ago, while I was still serving on active duty, the maximum coverage amount increased. Today, eligible service members can receive up to $500,000 in SGLI coverage.
The current cost for that maximum $500,000 benefit is $25 per month, plus an additional $1 per month for Traumatic Injury Protection, known as TSGLI.
That means a service member can currently receive $500,000 in life insurance coverage for a total deduction of approximately $26 per month.
That is an incredibly valuable benefit.
Protection for Our Military Families
While serving, we may also have access to Family Servicemembers’ Group Life Insurance, commonly known as FSGLI.
Under FSGLI, an eligible spouse may receive up to $100,000 in supplemental life insurance coverage.
The price of that coverage is based on the spouse’s age. It is not one flat price for every military spouse.
For example, the current monthly cost for $100,000 of spousal coverage ranges from approximately $4 per month for a spouse under age 35 to $40 per month for a spouse age 60 or older.
Eligible dependent children enrolled through the military benefits system are also generally provided with $10,000 in automatic life insurance coverage at no additional cost.
Think about what that means while we are serving.
We have:
Up to $500,000 covering the service member
Up to $100,000 covering the spouse
$10,000 covering each eligible dependent child
These are important benefits that help protect our military families while we are in uniform.
But what happens when we transition?
What Happens to SGLI After Military Service?
Whether we serve four years, 10 years, 20 years, or 30 years, eventually our military service ends.
When we transition from active-duty service into veteran status, we have an opportunity to replace our SGLI coverage with Veterans’ Group Life Insurance, commonly known as VGLI.
VGLI can provide us with the same amount of coverage we carried under SGLI when we separated from service, up to the current maximum of $500,000.
That can make VGLI an extremely valuable option for a transitioning service member, especially someone who has medical conditions or service-connected disabilities.
Veterans generally have one year and 120 days after leaving the military to apply for VGLI. When they apply during the first 240 days after separation, they generally do not have to answer health questions or prove that they are in good health.
That guaranteed-access period is one of the strongest features of VGLI.
However, we also need to understand what does not transfer.
What VGLI Does Not Provide
VGLI provides life insurance coverage for the veteran.
It does not provide the same family coverage structure that may have been available while the service member was on active duty.
Once we transition into VGLI, we do not have the ability to add that same FSGLI supplemental policy of up to $100,000 for our spouse through the veteran’s VGLI policy.
VGLI also does not continue the automatic $10,000 dependent-child coverage that was available under FSGLI.
The veteran may be able to continue their own coverage, but the spouse and children will need a separate protection plan.
That is something every transitioning family needs to understand before leaving military service.
Do not look only at the veteran’s life insurance.
Ask what will happen to the spouse’s coverage.
Ask what will happen to the children’s coverage.
Ask whether the entire family protection plan will still be in place after transition.
The Cost of VGLI Increases With Age
The next important fact is that the price of VGLI does not remain level throughout the veteran’s lifetime.
VGLI premiums are based on the veteran’s age and the amount of coverage carried.
The premium generally increases as the veteran enters each new five-year age bracket:
Let’s use $500,000 of VGLI coverage as an example.
For a veteran between ages 40 and 44, the current premium is approximately $70 per month.
That may appear to be an affordable price for $500,000 in coverage.
However, the premium continues increasing with age.
At ages 45 through 49, the premium is approximately $95 per month.
At ages 50 through 54, it increases to approximately $145 per month.
At ages 55 through 59, it increases to approximately $250 per month.
At ages 60 through 64, it increases to approximately $425 per month.
At ages 65 through 69, it increases to approximately $690 per month.
By ages 70 through 74, the current premium for $500,000 in VGLI coverage is approximately $1,075 per month.
That is the number veterans need to understand.
What Happens When the Premium Reaches $1,075 a Month?
Military retired pay varies depending on rank, years of service, retirement system, and when the service member retired.
However, let’s consider a hypothetical retired service member receiving approximately $2,200 per month in military retired pay.
At age 70, a $1,075 monthly VGLI premium would consume nearly half of that veteran’s gross military pension.
That does not include taxes.
It does not include Survivor Benefit Plan premiums.
It does not include TRICARE costs.
It does not include housing, food, utilities, medical expenses, or any of the other costs that come with retirement.
The veteran could eventually face a difficult decision:
Do I keep paying more than $1,000 per month to maintain this coverage?
Do I reduce the amount of coverage?
Or do I cancel the policy because I can no longer afford it?
Unfortunately, some of our brothers and sisters may eventually reduce or cancel their coverage because the increasing premiums no longer fit their retirement budget.
When that happens, their families could be left with significantly less protection—or no life insurance protection at all.
Paying for Coverage That May Eventually Become Unaffordable
VGLI is term life insurance.
It does not accumulate cash value.
The veteran is paying for the death-benefit protection provided while the policy remains active and the premiums are paid.
That means a veteran could pay into VGLI for many years and later cancel it because the increasing premium has become unaffordable.
When the policy ends, the veteran does not receive all of those premium payments back.
There is no accumulated cash value that automatically comes back to the veteran.
This does not mean VGLI is a bad policy.
VGLI may be one of the most valuable options available for a veteran who has serious health issues, cannot qualify for private coverage, or needs immediate protection during the transition from military to civilian life.
However, veterans need to understand how the program works over the long term.
Is VGLI a Bridge or a Lifetime Solution?
The question is not whether VGLI is good or bad.
The better questions are:
How long does your family need the coverage?
How much coverage will your family need 10, 20, or 30 years from now?
What will the VGLI premium cost as you get older?
Will that premium remain affordable during retirement?
What separate protection does your spouse need?
What protection do your children need?
Can you medically qualify for another policy?
Would another type of civilian life insurance provide more stable premiums?
These are conversations that should take place before the veteran reaches the point where coverage becomes unaffordable or health changes limit the available alternatives.
It is not about pushing every veteran away from VGLI.
It is about having a quick, honest conversation with our brothers and sisters and showing them the information.
Once veterans understand the coverage, the family benefits that are lost during transition, the five-year premium increases, and the long-term cost, they can make the best decision for themselves and their families.
For some veterans, VGLI may be the best available option.
The important thing is to make an educated decision—not an automatic decision.
Our service members were trained to prepare for every mission.
Protecting our families after military service should be no different.
It is about giving you the information to make the best decision for your family.
Educational disclaimer: This content is provided for general educational purposes only and is not individualized insurance, legal, tax, or financial advice. Government insurance programs, premiums, and eligibility requirements may change. Veterans and service members should review current VA information and compare their available options before changing or replacing any existing life insurance coverage.–
Jason Haglund
951-523-8600 Business phone number
Owner Mission Ready Financial
Marketing Director at GFI.
Licensed Financial Professional
License number #4406888