Growing up, I knew a bigger-than-life man with a beautiful family who died as the result of a tragic accident while two of his three children, including a close friend of mine, were still in elementary and middle school. To this day, it hurts to think about it. But that's the nature of death, isn't it? It's tough on the survivors. Typing that paragraph, and reflecting on the situation that ensued, still makes me sad, decades later.
So what about you? If you die unexpectedly, how would your survivors get by? Would the financial strain compound the emotional one?
In the military, you've got Servicemembers' Group Life Insurance and, possibly, the Department of Defense Death Gratuity to help ease the financial stress on your loved ones. That valuable set of benefits could mean up to $600,000 for your family if you pass away. Unfortunately, when you leave the military, you leave these important benefits behind as well. In most cases, 120 days after you step into the civilian world, your SGLI coverage stops, leaving you with no life insurance unless you've made other arrangements. In general, you have some ways to handle this gap in coverage:
Option 1: Buy Your Own Policy
One option for replacing SGLI is to purchase a term policy or permanent policy on your own, outside of Department of Veterans Affairs-related programs. Because individual policies may require medical underwriting, they generally have lower premiums than insurance obtained by converting your SGLI to a VA-related term or permanent policy. They're also portable, which means you own them regardless of who you work for in the future. If you live a healthy lifestyle and qualify to get one of these policies at standard or better rates, this can be an attractive approach to replacing your SGLI.
Option 2: Accept Employer-Offered Group Term Insurance
Another way to replace your SGLI aside from the VA is by getting group term insurance from a civilian employer. While typically a low-cost option, this approach comes with at least two major drawbacks. First, your insurance will once again be tied to your employer. Second, this type of insurance usually comes in multiples of your annual income, meaning you may be limited to coverage that's only one or two times the amount you earn. For example, if you earn $75,000, your maximum amount of life insurance might be twice that amount, $150,000. So depending on your salary, you might not be able to get the level of coverage you need.
Option 3: Purchase a Policy Through the VA
If a non-VA-related policy isn't an option because you don't meet the medical requirements, the VA has two SGLI conversion programs that don't require medical screening. One program offers conversion to a renewable term insurance policy (Veterans' Group Life Insurance), and the other offers conversion to a permanent insurance policy, such as whole life or universal life offered by traditional insurance providers participating in the program.
While potentially more expensive than policies not connected to the VA, the main draw of the conversion programs is that neither requires health checks nor questions, provided the conversion occurs within 120 days of separation from the military.
The Imperative
In the end, we all hope to one day look back on the money we spent on life insurance and realize we didn't need to. But one of the sad realities of life is that at some unpredictable point, it ends. So as you prepare to take off the uniform -- and here's the must-do -- take the steps necessary to ensure that if it happens to you sooner rather than later, your family won't be caught short.
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