Veterans’ Group Life Insurance (VGLI) is the renewable group term life policy that is offered to members of the military upon leaving service. Like all things dealing with spending money, it pays to do your homework before making financial decisions.
Why pay more?
While on active duty, military personnel are provided with SGLI (Serviceman’s’ Group Life Insurance). Most service members take the maximum currently available; however, the options range in $50,000 increments up to a maximum of $400,000. SGLI premiums are now $.065 per $1,000 of insurance, regardless of the member’s age. The $26 monthly cost for $400,000 is automatically deducted from the military twice-monthly paycheck.
When a military member separates or retires from service, he or she cannot keep the SGLI coverage. SGLI automatically terminates 120 days after leaving service. Several options are open to converting the coverage. The first is the VGLI.
Can be bought regardless of health status
VGLI is a guaranteed issue renewable group term life insurance policy that can be purchased independently of health status only if bought within 120 days after leaving active military service. If you have serious health issues, this may be your only chance to maintain life insurance coverage.
You can be insured for up to $400,000, but not more than whatever your coverage was under SGLI. If you are married, the coverage provided for your spouse and children under SGLI cannot be converted to VGLI.
You can also convert your SGLI during the first 120 days to a selected list of commercial insurance companies; however, the conversion can only be made to whole life insurance. Term or universal life policies are not an option.
You can still opt for VGLI for one year after the initial 120 period ends, but your health history will now become an issue. If you are in good health, you need to comparison shop. As your age increases, the cost of VGLI becomes quite expensive. VGLI premiums increase every five years, beginning at age 30.
Increased risk? Premiums also increase.
Insurance companies will always charge higher premiums if they must accept all applicants, regardless of health. VGLI is no exception. They cost more to offset their increased risk. If you are healthy, you can always save money by allowing a life insurance company to verify that fact by having you take a paramedical exam.
One of the most inexpensive term life insurance sources for veterans is a military association. Most have been around for over 50 years, are non-profit, and cater primarily to active duty military and veterans. They offer numerous benefits, including group term life insurance programs, which can save over time as much as 50% of the cost of VGLI.
This can equate to tens of thousands of dollars over a lifetime. Military associations can also provide coverage for your wife and children. Even if you have been out of service for years and are currently in your 40’s, 50’s, or 60’s, it’s not too late to access benefits with a military association.