Understanding Life Insurance for the Servicemen and Women of the Military
When someone joins the military, life insurance is often a significant consideration. Particularly for servicemen and women who have families, ensuring those families are taken care of is essential.
Life insurance is important for single servicemen and women, too, who might leave behind debts and expenses that their family members would have to manage and pay. If you're in the military and are wondering about life insurance, here's what you should know.
What Is Life Insurance & Why Does It Matter?
Life insurance is an insurance policy that provides financial coverage when the policyholder dies. The policyholder typically pays monthly premiums. In the event of the policyholder's death, whomever the policyholder named as a beneficiary receives payment that can help them with things like:
- Daily and monthly expenses
- Funeral and end-of-life costs
- Compensation they're now missing from the policyholder's job
Life insurance is an essential form of protection for families, especially for policyholders who have partners/spouses and/or kids. Life insurance coverage ensures dependents get the financial support they need when an earner in a family passes on.
Life Insurance & the Military
The American armed forces offers a life insurance policy called Servicemembers Group Life Insurance (SGLI). Service members are automatically signed up for coverage, but they can choose the level of coverage or deny the coverage altogether if they'd rather pursue life insurance from other sources, like an life insurance broker like AIG Direct.
Reasons to Get Life Insurance Outside of SGLI
There are various reasons why SGLI may not be enough life insurance coverage or may not be the best life insurance coverage for service members.
One is coverage. For some families, the $400,000 coverage amount provided by SGLI may not be enough. Those families may choose to look elsewhere to supplement their coverage needs with additional life insurance.
Another reason why SGLI insurance may not be a fit is that it's a form of term life insurance. Term life insurance does not provide coverage unless the policyholder passes on. It is only in effect for a certain term, so the policyholder's dependents do not get life insurance coverage once the term is over.
With a permanent life insurance policy, the policyholder gets life-long protection with the policy. As premiums are paid, cash value builds up. The cash value can be borrowed against to pay for expenses encountered while the policyholder is still alive, like sending a kid off to college or paying a medical bill. Service members may want a permanent life insurance policy in addition to or instead of the SGLI term life insurance policy.
In some cases, service members may be able to secure lower-cost life insurance than what SGLI offers, as well. For service members with lower life insurance needs but who still want protection for their loved ones, getting a policy through an independent broker may make the most sense.
What Happens to SGLI After Service Ends?
One pitfall to keep in mind with SGLI is what happens when service ends. After a service member leaves the service, they still have SGLI coverage for 120 days after leaving, cost-free. To continue life insurance coverage, the service member must then either convert SGLI coverage to term Veterans Group Life Insurance (VGLI) or to a permanent insurance plan with a participating commercial insurance company.
If you don't want to risk being stuck with one of these options, it can pay to find a plan that works for you now. If you leave service and don't choose to continue your coverage with VGLI or a participating company option, you'll have to look for new coverage. That could result in higher premiums or coverage denial.
Generally, the younger you are and the better health you're in, the lower the life insurance premiums you can lock in. That's why it pays to compare early on before you're stuck with a plan you don't like or higher premiums.
Get Options with AIG Direct
If you serve in the military or are about to serve in the military and have you questions about life insurance, AIG Direct is here to help. We can provide you with life insurance options and help you compare SGLI to plans that may make more sense for you and your family. Contact AIG Direct to speak with a representative.