What Is Life Insurance and Do You Need It?
Life insurance is basically a policy that pays your family money if you die. If you are the major wage earner and you die, your loved ones will be left with no money coming in and potentially lots of bills. A life insurance policy will help your family survive financially until they can find another source of income.
Experts generally recommend that a life insurance policy have a value of 10 times your salary.
If you don't have a family to support, you generally don't need a life insurance policy unless you want to leave money to your parents or non-relatives or provide for your burial.
There are two main types of life insurance: term and whole.
Term life insurance has lower premiums, which can change as you get older. However, if you cancel the policy, you get none of your payments back.
Whole life insurance has higher premiums, which usually remain the same for life. But if you cancel your policy, generally you get most of the premiums back with interest.
There are many different iterations on these two basic types of insurance, so look to see which may meet your specific needs better.
What Is VGLI?
VGLI is a term life insurance policy available to those who had full-time Servicemembers Group Life Insurance (SGLI) while they were in the service. VGLI is offered by the Department of Veterans Affairs but administered by Prudential Life Insurance.
Within 45 to 60 days following your separation from service, you should receive an application form for VGLI. You normally have one year and 120 days from your date of separation from service to apply for VGLI. After this, you are no longer eligible. There are exceptions to the time limits in certain cases.
If you apply for coverage within 240 days of your date of separation, you will not need to answer health questions. This is a big deal because most private life insurance companies require either a medical questionnaire or a physical exam before you can buy a policy, and many military-related health conditions will disqualify you for a private life insurance policy.
Note: these time limits have temporarily been extended by 90 days. Through Dec. 11, 2021, you will have 330 days after discharge to apply without a physical exam and one year and 210 days to apply with a physical exam.
You can buy as much coverage under VGLI as you had under SGLI. Once enrolled in VGLI, you will have the opportunity to increase your coverage by $25,000 on your one-year anniversary and once every five years thereafter, up to the legislated maximum of $400,000.
VGLI for a 30- to 34-year-old costs $40 monthly for $400,000 in coverage.
How Does VGLI Compare to Private Insurance?
If you shop around, you may be able to get a better insurance policy through a private insurer. Be careful though: You may also get a much worse deal. Your best bet is to stick with a trusted company, bundle it with your other insurance, or use a military-friendly company such as USAA, Navy Federal, Navy Mutual Aid, etc.
You can also convert your VGLI into a private insurance policy at any time.
Most private insurers will require a medical questionnaire or a physical exam, depending on your age, and some limit the amount of payout depending on the cause of death. Private insurers offer policies for as much or as little as you want, and many will double the payout if you die in an accident.
Some offer payouts if you lose an arm or a leg, become incapacitated, or need long-term care etc. While VGLI pays out the full amount at the time of death, many private insurers offer other options like half up-front and the remainder over a set period, paying out a steady monthly payment, etc.
If you are unsure or confused, the best thing to do is to purchase a VGLI policy if you need it after leaving the service. You can then take your time to do research to see which policy is best for your individual situation. You can cancel VGLI at any time or you can purchase a private insurance policy in addition to your VGLI coverage.
SGLI and VGLI May Not Be Enough
SGLI and VGLI may not be enough to cover your family's needs. Explore life insurance options with our free tool, which compares rates and matches you to the coverage your family needs.