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The Right Life Insurance for the Military

Servicemember holding a penny.

Confused about life insurance -- whether you need it, what kind, how much and the like? So are a lot of people in the military.  While the military provides you with Servicemembers' Group Life Insurance (SGLI) coverage, that may not be enough for some people. To make those decisions easier, we've boiled it down to the basics.

1. Do you need it?

That's the easy part. If you're not responsible for anyone or anything, you probably don't need life insurance. If you're single, with no kids, and a lot of people aren't counting on your income, you probably don't need life insurance.  Remember, the military already provides you with a maximum of $400,000 of life insurance.  But if you're married, have children, or take care of aging parents, SGLI coverage is most likely not enough.  It's probably a good idea to get additional life insurance, as well.

2. Can I get it?

Members of the military have difficult and often dangerous jobs.  Some military professions, such as like fighter pilots and paratroopers, are unable to receive life insurance simply because some companies feel their line of work is too risky.  A good bet is to find an insurance company that understands the military, and will provide you coverage regardless of your military career.

3. Is there a "war clause?"

A little known fact about life insurance policies ? some don't pay if you die as a result of war. For members of the military, this is a significant issue.  When looking for a life insurance policy, make sure that if you die as a result of combat duty, your family will receive the benefits of that policy.  None of the life insurance policies at USAA contain a war clause.

 4. How much insurance do you need?

There's no magic formula but you can start by figuring out what you want life insurance to do for you. Do you simply want a policy to cover your funeral, debts, and unpaid medical bills? Or are you worried about providing enough college money for your children or retirement savings for your spouse if you die suddenly? Some experts say you should buy a policy that's seven to 10 times your income. But that's not the answer for everyone.
 "Getting the right amount and type of insurance depends on your specific situation," says Rob Schaffer, executive director of Product Management for USAA Life Insurance Co. "You need to ask yourself some key questions to decide what fits your budget and your circumstances. This is where talking to an insurance company or financial adviser can help."

5. What kind do you need?  How long do you need it?

Consider the kind of insurance you want: term or permanent life insurance. Buying term insurance is like renting a house, but the lease on the insurance policy can be used only for a specific term -- 10 years, 20 years, or whatever you choose. Permanent insurance, on the other hand, generally has a higher premium than term, but lasts for a lifetime. The policy also builds cash value that you can borrow against or withdraw if you have an unexpected need for it.
 Once you decide between term and permanent life insurance, you have one more step -- sign up. Both types of life insurance have several options. Make sure you research the information, consult with a financial adviser, and choose carefully. But whatever you do, don't delay. The cost goes up with age.

6. Life (insurance) after the military

Planning to separate from the military? It's a good idea to start shopping around at least two months ahead for life insurance. Your SGLI policy won't be valid once you leave the military.  It can take up to six weeks to get a life insurance policy, so don't cancel your SGLI until your new policy has been issued and the first premium paid.

Coverage for you

One option is to convert your SGLI to a five-year renewable term policy with Veteran's Group Life Insurance (VGLI), which will provide up to $400,000 in coverage. If you're in poor health, this can be a good value. But if you're healthy, you might find a more affordable option with a commercial life insurance company.

Coverage for your spouse

Your spouse is an important part of your family's financial security even if he or she doesn't earn an income. Think of it this way: What would it cost to replace the childcare, meal preparation, and other household tasks your spouse does? If you had the $100,000 of coverage for your spouse under SGLI, you will not be able to convert it to VGLI once you separate from the military.  The good news is: purchasing a relatively inexpensive life insurance policy can offset the expenses associated with losing a spouse.

Coverage for your kids

In most families, life insurance for your children is only needed to cover funeral expenses if a child dies suddenly.  Active duty military receive free coverage for children under SGLI.  To replace this coverage once you leave the service, you can add a child rider to your life insurance policy. Normally, you can convert this coverage to permanent life insurance for your children when they become adults.

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