Off Duty

Single, no dependents: Do you need life insurance?

A  young, single Marine said in a conversation recently that she had dropped her Servicemembers' Group Life Insurance coverage. She didn't need it, she said.

This service member is responsible with her money and is in good shape financially, with no debt. Currently, no one is financially dependent upon her who would need support if something happened to her.

Is that all she needs to think about?

Decisions about purchasing life insurance are personal, and everyone's situation is different. But a perennial question for many singles is, "Do I need life insurance?"

Service members are automatically enrolled in the maximum SGLI coverage of $400,000, unless they opt out of coverage or opt for a lesser amount of coverage. The coverage for the maximum amount costs $29 a month. The overwhelming majority of service members carry SGLI coverage.

Just because you're young and single doesn't mean you don't need life insurance, said Bruce McClary, a spokesman for the National Foundation for Credit Counseling.

"Your circumstances could change at any time," he said. And, "you may want things taken care of for people left behind, such as covering your final expenses."

Someone may have to travel to your location to clean out your residence and deal with your belongings, for example. "That will be painful for them, but you also don't want that to be a financial burden on your family," said Mike Meese, a retired Army brigadier general who is chief operating officer of the American Armed Forces Mutual Aid Association, a nonprofit organization that has provided life insurance products for 137 years to service members, retirees and certain veterans.

But there are other things to consider before dropping or reducing SGLI coverage, said Meese and others.

You may not have a family now, but if you drop or reduce your SGLI coverage, you won't automatically be able to purchase SGLI coverage, or increase it, in the future. Are you willing to predict that you'll never get married or have children? And if your health changes, you could have trouble getting SGLI — or coverage from civilian insurers.

"While a young, single service member may not see an immediate need for SGLI coverage, if the member later gets married or has children, or if their financial situation changes, they run the risk of not qualifying for coverage when they do need it," said  Steve Westerfeld, a spokesman for the Veterans Affairs Department, which administers the SGLI program. "At a minimum, members should have a plan to pay for their burial expenses, which SGLI can cover."

After declining or reducing SGLI coverage, to get coverage or increase coverage in the future, a service member must answer health questions on the application and meet good health requirements. The service member may have to provide additional medical documentation after answering health questions.

"Even if a member was healthy when [he or she] declined SGLI, the member may incur injuries or develop health issues that keep them from meeting good health requirements and result in their request for coverage being denied," Westerfeld said.

A service member who declines coverage will also lose the free 120 days of SGLI coverage following separation from service, and the ability to convert their coverage during that time to a permanent plan of insurance with a private insurer — without a health review. SGLI is term insurance, which is often used by people to cover a specific term in which they have the greatest need to replace their income if they died. The term of SGLI is the period of military service, and 120 days beyond.

Permanent insurance — such as whole life, universal life, variable life and variable-universal life — generally is more expensive because it covers a longer time. It pays a death benefit whether you die tomorrow or live to be 110.

Associated coverages can be affected, too, if a service member declines SGLI coverage:

  • Loss of the automatic Traumatic SGLI coverage. This provides a payment of between $25,000 and $100,000 to service members who are insured under SGLI and incur certain physical losses because of traumatic injuries — regardless of whether it happens on duty or off duty. TSGLI is automatic with any amount of SGLI coverage. The monthly SGLI premium includes a $1 TSGLI premium.
  • Loss of access to coverage for spouses and dependent children. Life insurance coverage of $10,000 per child is provided at no extra cost. Service members insured by SGLI can also purchase Family SGLI coverage of up to $100,000 for their spouse; the spouse coverage can’t exceed the amount of coverage of the service member. If the military member has declined or reduced SGLI coverage and wants to get or increase coverage for the spouse, the member will have to apply for SGLI coverage, and if approved, have to go through the same process for the spouse. A spouse who is not in good health may not be able to get coverage.
  • Loss of access to coverage under the Veterans Group Life Insurance program when leaving the military. Although that insurance may be more expensive than other insurance options in the private sector, especially as premiums increase with age, service members can get this coverage within 240 days of leaving the military without having to show they’re in good health. Troops who become ill or get injured while in service may not be able to get coverage in the private sector, and VGLI may be their only option for life insurance.

When it comes to SGLI, most financial planners and insurance providers outside the military advise that it's a good deal.

"For the military, it's a great program," said Jack McVeigh, a retired Navy commander who is vice president of membership for Navy Mutual Aid Association, another longtime nonprofit insurance provider. Once you're in SGLI, you're in it for your entire military career, regardless of whether there are any changes to your health, he noted. The cost of SGLI — $29 per month for the maximum $400,000 of coverage — is inexpensive, he said.

McClary said the National Foundation for Credit Counseling advises keeping life insurance premiums to no more than 4 percent to 6 percent of your overall budget. SGLI premiums are the same for all service members, regardless of rank, and even for an E-1, the $29-per-month premium is less than 2 percent of the monthly basic pay.

"I wouldn't go out and spend a lot of money on life insurance if you don't have financial obligations," said JJ Montanaro, a certified financial planner with USAA. "But the SGLI cost doesn't throw your budget out of whack."

He noted the situation of a young, single sailor whose mother had co-signed education loans for him before he entered the military. In situations like that, where someone else would be on the hook for debts after the service member's death, it's important to have life insurance in place to repay those debts, he said.

"It's also backed by the full faith and credit of the United States government," Navy Mutual's McVeigh said. "The government thinks it's so important, that if you opt out and are married, your spouse has to sign an acknowledgement that he or she knows you've decided to drop your insurance."

"Insurance is a hedge against something bad happening. People in the military have a greater risk of losing their lives or having a traumatic injury. I would recommend they hedge those bets," McVeigh said.

Karen Jowers covers military families, quality of life, and consumer issues for Military Times. She can be reached at kjowers@militarytimes.com.

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