October 14

Avoid VGLI Costs (VGLI Premiums Go Up Every 5 Years!)

happy veterans not paying cost of vgli

Retiring military personnel and spouses who wish to continue their VGLI coverage can avoid get priced out of insurance coverage by fully understanding how VGLI rates work while they are younger and in better health.

Families should remember that VGLI premiums not only go up every five years but, according to a 2011 letter from the VA, "Premiums must be paid in full for the entire contract term." About half of VGLI policyholders drop their insurance and let it lapse, according to the VA.

There is a simple way of avoiding these new costs: simply continue your existing VGLI policy into retirement rather than dropping coverage and then signing up for an individual plan that may or may not be less expensive. You will pay premiums on your current policy

In this video you will learn how to use the VGLI Prudential Premium (cost of VGLI) calculator. Looking at a VGLI rate chart will help you estimate the future payment for coverage after military service. Make sure to look at your ages in increments of five years to see the full cost of VGLI premiums.  


Beware Unknown Cost of VGLI to Many Veterans

Do you know how much a Veterans Group Life Insurance (VGLI) policy actually will cost you 5, 10, or 20 years after you leave the military? Did you know how drastically the cost of VGLI will skyrocket!? Just look at the VGLI rate charts!

Furthermore, did you realize that cost of VGLI was administered by the Prudential Insurance company and your premiums are a profit to them? The VA is really a middleman to facilitate the program, thus making it inefficient for those who are healthy and could qualify on the free-market. 

When you transition out of the military, the Prudential VGLI is considered to be the replacement for the SGLI from when we were active duty. Most active duty service members have never heard of this and falsely make the assumption, or ever worse are led to believe it if roughly the same type of coverage that you get from SGLI.

Nothing could be further from the truth! These aren't "sweet deals" as you are led to believe.


What do I do with my Servicemembers Group Life Insurance?


SGLI to VGLI Advantages

Those who can't qualify for private life insurance are allowed into the VGLI without qualification of a medical examination if the veteran responds to the VGLI conversion notice within 240 days. There are also no penalties for the bad health of the insured in this time frame but would apply if coverage is requested from Veterans affairs at a later date.


VGLI drawbacks

A significant disadvantage of VGLI is that your coverage must be linked to your existing level of SGLI coverage. The VGLI price is affordable for younger veterans, but the cost will increase in subsequent as the Veteran gets older.

The rate of older veterans can often be fairly high, the table shows. 'VGLI provides only term life insurance.


Veterans Group Life Insurance Coverage is a Commercial Policy

Vgli premium rates are costly, paid as a monthly premium to a private insurer, and don't reflect standard premium insurance rates that reward you for your good health. In fact, they lump EVERYONE into the same plan paying the same premiums regardless of health.

Military benefits, modern financial expert guide and founder of US VetWealth, Scott R. Tucker explains how to calculate what taking the VGLI will cost as you near retirement. The cost of VGLI will begin to charge higher rates exponentially more as you reach age 60.

Make sure you know if you will be able to afford that or look for a better option. You can check out a VGLI rate chart and figure out exactly what they are going to charge you when you get closer to retirement. 

If you want to see what VGLI premiums will like like for your own situation after Military Retirement, then you can visit the VGLI Prudential cost calculator


vgli cost graph


What You Probably Don't Know about VGLI Costs

Service Members Group Life Insurance (SGLI) is the government-sponsored life insurance provided during active duty military service. SGLI coverage ends with active duty.

After service, the standard option for Veterans Life Insurance death benefit coverage is VGLI, which is administered by the Veterans Administration and is offered to veterans as a replacement for SGLI.

There is no qualification required if coverage is accepted within 240 days of service, which makes it a good option for the service member with a life-threatening disability who is thus unable to qualify for privatized life insurance. 

For most retiring service members, considering the cost of VGLI has some definite disadvantages:

  • The VGLI death benefit is capped at $400,000. This is a relatively small amount when you consider that many veterans and their families have lifestyles in the $100,000 a year range.
  • The lack of a health qualification requirement is not an advantage to a veteran who is still young and in good health, who likely can qualify for a higher death benefit at a lower premium rate on the private market.
  • Like SGLI, VGLI costs are the same fixed cost for everybody. However, the base cost of VGLI (which starts at $800/year) is much more expensive than SGLI (which is a flat $300/year for the active duty service member).
  • Not only is the base VGLI costs significantly higher than SGLI, the cost of VGLI goes up every five years. You can calculate exactly how much you will be paying into VGLI as you get older by referring to the cost table provided by the government.
  • When the insured gets into their sixties and seventies, when the probability of actually dying does go up, the costs are so astronomical that it's unrealistic to expect that any veteran who's living off their pension will be able to keep up with these costs. For more on this, watch this video.
VGLI costs

SBP & VGLI Costs Example – E7 Retired Pay

As a point of comparison, the current cost for a healthy 70-year-old to get $1,000,000 20-year term life insurance policy is $1800/month. Expensive? Absolutely, but still a way better deal than VGLI costs, which offers a maximum death benefit of only $400,000 for $920/month.

VGLI and the Survivor Benefit Plan (SBP) are rarely discussed in the same conversation. This is a huge problem in regards to making the best decision about Military Life Insurance. The SBP is a form of life insurance that is designed to provide a basic level of support in the event a retired veteran predeceases their spouse.

It is offered without qualification to all retiring veterans. Rather than paying out a lump sum to the beneficiary like most life insurance policies, the SBP pays a portion of the deceased veteran's retirement pay each month, for the remainder of the surviving spouse's life.

When VGLI and the SBP are not discussed at the same time, decisions about whether or not to accept them both are made largely in isolation from each other, causing fragmentation in what should be a single conversation about the best wealth-planning strategy for securing each individual veteran family's financial future.

Finally, retirees going through their disability screenings as part of the retirement process are told to make sure that they convert their SGLI to VGLI. At the same time most are being told that they have some level of disability, they are also sold that there are no underwriting requirements for VGLI.

The underlying implication of this is that the retiree should elect to pay VGLI premiums because he or she may not qualify for other life insurance for military options, which is simply not true for many veterans.

Many career service members accept VGLI, thinking that it is a better option for them than going through the underwriting process to purchase insurance on the private market. The great irony of this is that while it is administered by the VA, VGLI is actually run by a third-party contracted insurer (Prudential), who is profiting off of the government's SGLI and VGLI programs.

Although you probably won't hear about it at your retirement briefings, there are other options available to provide financial security to veteran families.

Here at US VetWealth, we have designed an alternative to the SBP and VGLI coverage. Our solution offers equity growth (as interest is credited based on the S&P 500 performance, not the federal bond rate) and a lot more liquidity that the retiree can access while you're still alive.

It offers a safeguard against negative market returns, and allows its owner to both comfortably fund their retirement and do what the SBP can't possibly do, allow you to leave a legacy behind you when you die. We call it your Survivor Liberty Plan.


We Help You Avoid High VGLI Premiums

This completely new approach using modern life insurance can provide the death benefit protection of a term policy like VGLI while also producing an annuity stream much like the SBP; to be more accurate, it can provide an annuity stream much like the pension, because the payouts are higher, and you can use it while the veteran is still alive.

Further, after 30 years, the costs are significantly lower than an SBP, and the ROI is significantly higher than on a term insurance or whole life policy. It also costs less than the fees involved in typical TSP, 401k, mutual finds, or other retirement plans that come along with money managers all taking a cut of the investment, regardless of the plan's performance.

If this interests you, then click here to learn more about the Spouse Benefit Plan.

We’d love to talk about what matters to you.

Name:
Email:
Ask Your Question Here:
0 of 750


About the author 

Scott R. Tucker

Scott R. Tucker is an author, speaker and the founder of US VetWealth, a lifestyle and financial consulting brand that helps service members go from paychecks and government benefits to wealth and liberty. He likes to say, "I Help The 1% Who Serve Our Country Become The 1% Who Influence It." A West Point graduate, serial world traveler, military financial expert, and entrepreneur, Scott brings valuable experience and insight to those who have sacrificed so much in service to our country.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Use this Bottom Section to Promote Your Offer

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim