Pay & Benefits

Here’s why you need to think about military life insurance

The service member planned carefully for his young son’s future.

He visited a military attorney for advice on the best way to designate his military life insurance policy, and was advised not to name his young son as beneficiary, but to set up other legal mechanisms for his son. The service member and his wife were estranged.

So the service member discussed his wishes for his son with his parents, and named them as beneficiaries of his Servicemember’s Group Life Insurance policy.

After the service member died, his parents followed their son’s wishes. They’ve ensured their grandson’s future, according to the grandmother, by consulting with legal and financial experts to set up a legal mechanism for the life insurance money for their grandson.

Most service members qualify for the SGLI program, and are automatically signed up through their service branch for the maximum of $400,000 coverage. Service members can reduce or opt out entirely from the program, although that is generally not advised. The coverage is available in increments of $50,000, and the maximum $400,000 coverage costs $26 per month, taken out of the service member’s paycheck.

That coverage includes $1 for traumatic SGLI protection, which pays varying amounts for short-term financial support to help eligible service members recover from a severe injury.

While this service member knew what he wanted for his son, not everyone puts the time and effort into decisions about their Servicemembers’ Group Life Insurance, and the impact they want the money to have on those they leave behind. Life insurance isn’t something too many people want to think about, because it’s tied to their own mortality.

Service members need to think about their life insurance in another way, too, said Bonnie Carroll, president and founder of Tragedy Assistance Program for Survivors, known as TAPS.

“SGLI is a commercial insurance product. It’s purchased. They pay premiums,” she said. “They assign beneficiaries. It’s something that they should manage as part of their financial portfolio. The money is coming out of their paycheck.”

TAPS provides resources, peer support and assistance for spouses, fiancés, children, parents, siblings and other family members, as well as friends and colleagues of those who died while serving in the military, regardless of the circumstances.

And over the 25 years since TAPS began its work, the organization has seen many cases where those left behind suffered financial distress because of decisions service members made about where the money would go after their death. In some cases those decisions about beneficiaries were made long before the death, and were not updated with marriage, divorce, birth or other events.

“I could give you a thousand examples of where it’s just been a mess, because people don’t pay attention, or it causes division in families,” Carroll said.

“Service members need to recognize this is something they’re buying, it’s something they have to pay attention to and assign to the person who is in their life,” she said.

“Granted, none of us wants to accept the fact that we’re going to die, but it can happen to any of us at any time. But it’s heartbreaking when we see the amount of chaos the assignment of these service-member-driven benefits and insurance policies can cause.”

There have been times when the service member neglected to change earlier beneficiary designations, and $400,000 of life insurance money went to estranged parents — instead of the spouse who was left behind to take care of the children. Or a fiancee was left without previous financial support, such as help with college tuition. There have been cases when someone was left with payments on a vehicle that caused financial distress.

According to the Department of Veterans Affairs, there have been cases where insurance proceeds have been paid to ex-spouses when the insured person was remarried but failed to update their beneficiary designation. And there are cases where outdated designations cause delays in payment of claims, as officials try to find beneficiaries for whom they don’t have current contact information.

The military services educate service members about the importance of keeping their SGLI information up to date, and emphasize this before deployments. Carroll noted that the relatively new SGLI Online Enrollment System, SOES, makes it easier now for service members to manage their SGLI coverage, and to make sure their information is up to date, including their designations for who gets the insurance money.

The SOES is being used by the Army, Navy, Air Force, Marine Corps and Coast Guard, and eliminates the paper-based process for members when they’re making changes to their SGLI. Service members can check their current information, change their life insurance coverage and beneficiary information at any time online without completing a paper form or making a trip to their personnel office. Service members can sign in to the program at www.dmdc.osd.mil/milconnect.

Being thoughtful about every aspect of life insurance is “just being a responsible steward of your finances,” Carroll said. “Think about the person in your life who will be financially responsible for things that are important to you — raising your children, taking care of your personal effects, or settling your estate and debts."

“The ones who are closest to you are the ones you’re giving the resources to do that for you.”

How much life insurance do you need to buy?

When you’re making these decisions about life insurance — who gets the money, and how much money — everyone’s situation is different because of personal and financial differences. Will your children or spouse need money for college? Consider your current debts, such as mortgage, vehicle payments, credit card bills, student loans and personal loans. What other savings, investments and assets do you have? Spouses and children of service members who die on active duty receive certain monthly benefits from the government, such as VA Dependency and Indemnity Compensation, Social Security survivor benefits, Survivor Benefit Plan income. Will your family need the life insurance money to supplement the household income?

Some service members choose to buy extra life insurance in addition to SGLI, for various needs. This can also be helpful for service members to buy extra life insurance at an earlier age, when it is less expensive — and easier to purchase than later in life when some health issues might arise. SGLI coverage ends when the service member leaves the military, although it can be converted to the Veterans’ Group Life Insurance program. VGLI is generally more expensive than some other insurance programs, although everyone leaving the military with SGLI coverage qualifies for VGLI, and no health exam is required if the service member applies within 240 days of separation.

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Comparing insurance plans

Service members should shop carefully when buying extra life insurance. For example, some insurance companies have war clauses, which could mean that if a service member dies as a result of serving in war, the company wouldn’t make the insurance payout. SGLI doesn’t have a war clause, and our chart in this edition lists 12 insurance plans offered by other organizations and companies that don’t have war clauses.

There are a number of life insurance needs calculators available to help you determine insurance needs. Two of those were developed by two nonprofit organizations:

American Armed Forces Mutual Aid Association: https://www.aafmaa.com/learning-hub/life-insurance/tools/calculate-your-insurance-needs

Navy Mutual: https://www.navymutual.org/planning-tools/financial-calculators/life-insurance-calculator/

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