What Veterans and their Spouses Need to Know about Life Insurance
Submitted by Veronica Baxter
Before separating from military service, there are some decisions you need to make regarding the financial future of your family. An individual life insurance policy may figure into those plans.
Government-sponsored Ways to Protect Your Family Financially
Military Pension
Prior to separating, you will have the option to provide that your spouse receive a portion of your military pension when you die. This is at significant cost, so be sure to weigh the benefits of provided for your surviving spouse against the loss of retirement income to pay for that.
If you are a war-time veteran, your surviving spouse and unmarried surviving children may be eligible for a modest Survivors Pension, also called a Death Pension.
Serviceman’s Group Life Insurance (SGLI)
This low-cost group term life insurance policy is available to active duty, active duty/inactive duty for training, and National Guardsman and Reservists. Upon separation from the military you have the opportunity to convert this policy to a either Veterans’ Group Life Insurance (VGLI) or to an individual plan. Again, veterans should weigh the cost of converting this insurance with the potential benefit.
To convert the SGLI policy to VGLI, a veteran must take action within one year and 120 of discharge. If the veteran submits an application to convert within 240 days of discharge the insurer will not require any proof of insurability or take a medical exam.
Dependency and Indemnity Compensation (DIC)
Veterans’ survivors can receive thousands of dollars in tax-free payments if certain criteria is met:
- Service member dies during service;
- Veteran dies due to a service-connected disability;
- Veteran’s death unrelated to service but VA rated him or her totally disabled from a service connected disability.
Service-Disabled Veterans Insurance (S-DVI)
Any veteran who is rated disabled qualifies for a Serivice-Disabled Veterans Insurance (S-DVI) that provides life insurance coverage up to $10,000. Totally disabled veterans can have premiums waived and apply for an additional $30,000 in life insurance coverage, for which they must pay premiums.
Private Individual Life Insurance
For many veterans, private individual life insurance bridges the gap between what is available to their surviving spouse and children through the government, and what their surviving family needs to survive financially. Even if you and your family qualify for all available government financial assistance programs listed above, those benefits may still leave your family short.
For those who do not qualify for many of these benefits, for example, the surviving spouses who married veterans after they separated from the military, or for the surviving spouses of those who did not opt to convert their Serviceman’s Group Life Insurance to an individual plan, or for the surviving spouse of a veteran who was not disabled prior to death, a private individual life insurance policy may be the only remaining way a veterant can provide for his or her spouse.
AD&D Insurance
Accidental Death and Dismemberment Insurance is a type of life insurance policy that pays benefits to the insured should he or she become accidentally injured, and death benefits to the insured’s named beneficiaries should the insured die accidentally or from injuries sustained in an accident.
AD&D insurance can be a stand-alone policy, in which case it is generally less expensive than traditional life insurance. AD&D insurance can also be a rider on an existing life insurance policy.
AD&D insurance can be valuable if a veteran later becomes disabled or dies due to injuries sustained in a non-service-related accident.
Burial Insurance or PreNeed Funeral Insurance
For veterans who do not qualify for whatever reason for government burial benefits, other types of insurance can cover funeral costs. These policies vary greatly among different insurance companies, but in general, the benefit is quite low, ranging from $5,000 to $25,000.
Burial insurance pays the benefit directly to the beneficiary and any amount left over after funeral and burial costs are paid may be used to pay other expenses, such as outstanding medical bills, etc.
PreNeed Funeral Insurance pays the benefit directly to the funeral service provider of the insured’s choice.
Converting SGLI to USAA Term LIfe Insurance
For members of the military and veterans, USAA offers terms from 10 to 30 years and can replace some or all of the life insurance coverage a veteran had under SGLI. USAA also offers a term life event option rider which permits veterans to increase coverage by up to $100,000 if he or she gets married, buys a house, or has a baby.
Converting SGLI to AAFMAA Term Life Insurance
Veterans who are members of AAFMAA are eligible for up to $800,000 in term life insurance coverage. Term options available to veterans depend upon the age of the veteran and how long he or she needs life insurance coverage.
In conclusion, there are private sector insurance options that can make up for the gap in what amount funds your lifestyle now, and what amount will be available to your surviving family once you die. Consult an insurance agent in your area to explore your options, and get the peace of mind that comes with providing for your family’s financial future.
