When you retire from the military, your life insurance choices change. While on active duty, you get $500,000 of Servicemembers’ Group Life Insurance (SGLI). But, once you retire, SGLI benefits stop. Veterans’ Group Life Insurance (VGLI) then offers to keep your coverage going, but at a higher cost and with some limits.
Fortunately, there are other options for life insurance after military service. You can choose VGLI, private commercial policies, or programs from organizations like the Military Benefit Association (MBA). This article will dive into these options to help you decide what’s best for you.
Veterans’ Group Life Insurance (VGLI)
VGLI is a common choice for military retirees who want to keep their life insurance after leaving the service. Here’s what you need to know about it.
How VGLI Benefits Work
VGLI lets you keep the same coverage amount you had with SGLI, from $10,000 to $500,000. But, the premium for VGLI is higher, and there are some limits. For example, you can only get coverage up to the amount you had with SGLI. So, if you had $100,000 in SGLI, that’s the most you can get with VGLI.
You can increase your coverage by $25,000 every five years until you reach $500,000. But, this stops at age 60. Also, spouses and dependent children can’t get coverage with VGLI, unlike SGLI.
VGLI Application Window
VGLI has a specific time to apply. You must apply for coverage within one year and 120 days (about 16 months) after you retire. But, it’s best to apply within 240 days (about eight months) of retirement. This is the guaranteed acceptance period.
During this time, you’re accepted into the program without needing to show you’re healthy or undergo a medical exam. This is key if you have health issues or injuries that might make it hard to qualify for other life insurance policies.
If you miss the guaranteed acceptance period, you can apply for VGLI up to 16 months after retirement. But, you’ll need to show you’re healthy, and approval isn’t guaranteed.
VGLI Premiums and Cost
VGLI premiums are annual renewable term life insurance. This means you pay annually, and rates can go up every five years. For example, a 40-year-old retiree with $500,000 in coverage pays $80/month. When they turn 45, the premium jumps to $105/month, and it keeps going up with age, reaching about $1,800/month at 80.
One good thing about VGLI is that smokers pay the same as non-smokers in the same age group. While this helps smokers, it means non-smokers might pay more than they would with a private policy.
When is VGLI a Good Choice?
VGLI can be a good choice for certain retirees, in these situations:
- Health Issues: If you have health problems, VGLI offers guaranteed acceptance during the 240-day period. This can be helpful.
- Smokers: VGLI rates are the same for smokers and non-smokers, so smokers can get lower premiums than with a commercial policy.
- Permanent Coverage Conversion: If you want to turn your term policy into permanent life insurance, VGLI offers a conversion option. This could provide long-term coverage and build cash value.
Alternative Life Insurance Options for Retirees
VGLI is popular, but other options might fit your needs better. This includes more affordable coverage or higher limits. Here are some alternatives to consider:
Commercial Life Insurance Policies
Private commercial life insurance policies are great for healthy retirees. They offer more flexibility and lower rates than VGLI. You can choose the coverage amount, duration, and type that suits you best. Non-smokers and those in good health often find lower premiums here.
Some common commercial life insurance options include:
- Term Life Insurance: It’s the most affordable option. It covers you for a set term, like 10, 20, or 30 years. Term life premiums stay the same for the policy’s duration.
- Whole Life Insurance: This policy covers you for life and grows a cash value over time. It’s pricier than term life but offers permanent coverage.
- Universal Life Insurance: It’s a flexible policy that combines a death benefit with investments. Premiums are flexible, and the cash value grows based on your investments.
Military Benefit Association (MBA) Life Insurance
The Military Benefit Association (MBA) offers life insurance for current and former military. They have policies like Term 90 Plus and Level Term 10 or 20-Year Insurance. These offer more benefits than VGLI.
- Term 90 Plus: This policy covers up to $1,000,000 with rates starting at $2.75/month for $50,000. It’s available for military retirees and their spouses. Coverage can extend until age 90.
- Level Term 10 or 20-Year Insurance: For fixed premiums, MBA offers level-term life insurance. It locks in rates for 10 or 20 years. Coverage can reach up to $600,000 for retirees, with steady premiums.
When is MBA Life Insurance a Good Choice?
MBA life insurance might be better than VGLI in certain situations:
- You want higher coverage: MBA offers up to $1,000,000 in coverage, double VGLI’s limit.
- You are healthy: Non-smokers and healthy individuals often get better rates with MBA than VGLI.
- You want flexibility: MBA allows coverage at any time, even before retirement. You can keep your policy after leaving the military.
Comparing VGLI and MBA Life Insurance
Here’s a quick comparison to help you decide:
| Feature | VGLI | MBA Life Insurance |
|---|---|---|
| Maximum Coverage | Up to $500,000 | Up to $1,000,000 |
| Premiums | Higher premiums for healthy members | Generally lower premiums for healthy members |
| Health Requirements | Guaranteed acceptance in the first 240 days | Health questions may be required |
| Spouse Coverage | Not available | Available for spouses |
| Children’s Coverage | Not available | Available for eligible children |
| Term Length | Yearly renewable | Fixed terms (10 or 20 years) |
Other Considerations for Retired Military Personnel
When choosing a life insurance policy, consider these factors:
- How much coverage do you need? Your coverage should cover debts, future college costs, and funeral expenses. Aim for 7-10 times your annual salary.
- Do you need permanent coverage? If you want coverage for life, consider whole or universal life insurance over VGLI or term life.
- Are you concerned about future health issues? If you’re worried about health problems, whole or universal life insurance might offer peace of mind.
Frequently Asked Questions
Does military life insurance continue after retirement?
No, SGLI ends at retirement. But, you can apply for VGLI within one year and 120 days to keep coverage.
What insurance do you get when you retire from the military?
Retirement brings VGLI to keep your coverage level. You also have private policies and programs like MBA life insurance.
Can I get life insurance after the VGLI deadline?
Yes, you can apply after the VGLI deadline. But, you might need a medical exam and answer health questions. Coverage isn’t guaranteed.
Conclusion
Retirement from the military offers many life insurance options. While VGLI is simple and guaranteed, it might not fit everyone. If you’re healthy, commercial or MBA life insurance could be cheaper and offer more coverage. Always think about your family’s financial needs and long-term goals when choosing.
