Are you a career military family? Are you concerned about your veteran's life insurance death benefits? You're not alone. Many families are unsure of what to do when it comes to life insurance policies and death benefits.
In this blog post, we'll explore some ways that you can improve your veteran's life insurance death benefits.
Conversations around life insurance coverage revolve around money.
- How much money will you need to live on?
- How much will you need to save?
- How much income will your savings generate?
- Will you have enough?
- How much life insurance death benefit is available?
How to use Life Insurance Plans for the Unknown and the Unexpected
Money is important. Money is essential. But in this post, I am not going to talk about money as money, I’m going to talk about money through the lens of something more important than money: taking care of yourself and your loved ones.
Losing the family breadwinner can quickly eat through a family’s savings and destroy the possibility of being able to stop working in your sixties or seventies if you aren’t prepared to deal with these challenges.
It can also destroy the possibility of being able to leave a legacy.
Essentially, we’re talking here about dealing with the unknown and the unexpected, and when it comes to dealing with the unknown and the unexpected, we’re talking about insurance.
In the event of an insured person's unexpected, untimely death, long-term care insurance, and life insurance benefits are meant to assist loved ones financially. Long-term care insurance is intended to cover the cost of caring for yourself or a loved one who can no longer take care of themselves.
How does a Life Insurance Company Work?
Modern American retirement life insurance companies are businesses, which means that they exist to make a profit.
Every time they have to pay out on a policy, typically hundreds of thousands of dollars at a time, this represents a loss to them. For that reason, insurance companies don’t just cover anyone and everyone; you have to “qualify” for life insurance.
To get coverage, you need to be in reasonably good health and have as few risk factors as possible (like smoking), because the more likely you are to die within the term of your term life insurance policy or before a permanent life insurance policy is fully funded, the more likely it is that your policy is going to represent a loss to your insurance company.
This is why when you go to buy life insurance, the older you are, and the more health problems you have, the higher your premiums are going to be and the lower the death benefit that the insurance company will offer you.
Young, healthy people, who are statistically less likely to die any time within two or three decades after purchasing a policy, can qualify for a higher death benefit at a lower premium because chances are, that death benefit will never be paid or, in the case of permanent life, the policy will have already been fully funded by years of premium payments.
Best Life Insurance for Military Retirees
For military members, when we talk about life insurance for veterans, we are usually talking about the Survivor Benefit Plan (SBP) and Service Members Group Life Insurance (SGLI)/Veterans Group Life Insurance (VGLI).
The SBP is a form of life insurance available to military retirees that operate as an annuity. We discuss this in greater detail in many other articles on this website.
Replacing Servicemembers Group Life Insurance
SGLI is the government-sponsored term life coverage provided for military personnel during the period of active duty service. The cost of SGLI is very low. It is $300/year for everyone, and there is no qualification required if coverage is accepted within 240 days of service.
Veterans Life Insurance
(VGLI) is administered by the Veterans Administration or Veterans Affairs. It is the assumed option to replace SGLI when the service member retires from the military. But it is completely your choice.
Much like the whole life insurance products described above, you are not rewarded with lower rates or a higher benefit for being in good health. The death benefit for SGLI/VGLI is a flat $400,000 for everyone and SGLI/VGLI and what most think are the only other solutions (SBP, term life insurance (SGLI/VGLI), whole life, and long-term care insurance).
Qualify to Protect Your Family Members
When the topic of life insurance comes up during active duty service, it is usually about the SGLI, and the response is typically, “I’m good for insurance. I don’t have a family yet, and SGLI will take care of it for me when I do.” This creates a tremendous risk of never being able to qualify for a privatized option in the future, should some medical issue come up during service.
It is in everyone’s financial best interest to qualify for private insurance when they are young and healthy and not wait until they are in their thirties and forties and leaving service with a number of medical issues.
SGLI ends with active duty, so using it as a safety blanket backfires time and again when transitioning service members are not able to qualify for any other life insurance options and have no choice but to take VGLI.
This is a shocking oversight with a costly outcome.
Disabled Veterans Can Qualify!
In order to qualify for the Spouse Benefit Plan and decide if SBP is worth it, it is necessary to go through the application and underwriting process. Don’t let this concern you, even if you have a disability rating, use tobacco, are a pilot or Special Forces, have a pre-existing health condition, or use cannabis, none of the things are automatically going to disqualify you.
With regards to the disability rating, many retiring service members receive disability ratings from the VA for issues that are relatively minor and of no concern at all to life insurance underwriters.
There are many disabilities that are quite serious with regards to their effect on your daily life that don’t necessarily impact your potential lifespan, so it is worth the time to go through the underwriting process to see whether or not your disability will prevent you from qualifying.
It's also possible to acquire a policy in a variety of circumstances. The insurance company is making a decision about how much of a death benefit to give you during the underwriting process based on the likelihood that they will have to pay out this death benefit.
Because, unlike simply using a term life insurance policy, which offers you only the death benefit, the Spouse Benefit Plan is about much more than just the death benefit; it's about having a secure and-growing place to store your money so that you can prepare for the unknowns and surprises in your future without risking losing it due to market volatility
If you wait to find out if you qualify, there is a risk that something could pop up medically or you could be involved in some accident that might change your health circumstances.
The qualification involves a simple medical exam and an application. When the results come back, and you know the Spouse Benefit Plan is an option for you, then you take the time you need to do your research, and talk to us about your options, before making a commitment.
Going through the qualification process DOES NOT commit you to buy the policy. Finding out that you are qualified DOES NOT commit you to buy the policy either.
Although it can be difficult to think about, planning for the death of a loved one is an important step in protecting your family. US VetWealth has years of experience helping military families protect their finances and we want to help you too. Schedule a free consultation with one of our agents today and let us walk you through the process of finding the best life insurance policy for your needs.