Does SGLI Protect My Family?

An airman sits under the wing of a C-17 Globemaster III with his family, April 26, 2018, at Altus Air Force Base, Okla. (U.S. Air Force Photo by Airman Dylan Murakami)
An airman sits under the wing of a C-17 Globemaster III with his family, April 26, 2018, at Altus Air Force Base, Okla. (U.S. Air Force Photo by Airman Dylan Murakami)

Servicemembers Group Life Insurance (SGLI) is part of a service member's employee benefit package. But it has limitations and like any group life insurance plan, it should not be relied upon to be the sole financial protection for your family.

Compared to most if not all, other employer group term insurance plans, SGLI has a very generous maximum death benefit of $400,000. When added to the recently increased Service Death Gratuity of $100,000, active-duty service members have $500,000 of life insurance coverage.

The standard group insurance for civilian employees is less than half that coverage. However, as significant as $500,000 sounds, it is probably not enough protection for a surviving spouse with one or more children in today's economic environment. The true purpose of life insurance is to provide a stream of income for your survivors; income that you would have provided had you lived. The rising costs of housing, health care, and college education are all things that need to be protected and don't neglect the effects of inflation.

That $500,000 coverage is only provided for you, the service member. What about your spouse? SGLI provides very minimal spouse protection. The $100,000 maximum coverage for your spouse is inadequate to meet the needs of most families.

Child care will become a priority for the surviving service member and $100,000 will simply not provide the quality and quantity of care needed. Many young couples have dual incomes and the loss of your spouse's income can have a devastating impact on your family's quality of life. The bottom line is that most military families have inadequate spouse coverage.

The other major limitation of SGLI is that it is temporary coverage. Like all employer group insurance, it terminates when you leave your employer. Again, SGLI is very generous in providing you with coverage for free for 120 days after you leave active duty, but then it is gone. You do have an opportunity to convert over to Veterans Group Life Insurance (VGLI) when you separate or retire from active duty.

However, if you are healthy, you will find the VGLI premiums to be very expensive and they increase every five years. There is no government option for replacing the Service Death Gratuity. Therefore, you are faced with losing $500,000 in financial protection for your family when you leave the service. Do not expect your new employer to replace it. To replace it with an individual life insurance plan, you will need to show proof of insurability. That means a medical questionnaire and a physical exam. Make sure you are insurable. The process takes time so start early.

SGLI is not enough protection for a young growing family and it will terminate when you leave the service; long before you need it. For most non-tobacco using service members, it costs you more per month than you should be paying. You would be well served to purchase individual coverage while you are young and healthy and can obtain the best rates. You will then own an insurance plan that will provide you with the increased coverage that you need and a plan that you will be able to take with you when you leave the service.

And remember, do not expect a civilian employer to even come close in replacing your active duty survivor benefits -- It is your job for you to protect your family.

SGLI, VGLI May Not Be Enough

SGLI may not be enough to cover your family's needs. Explore life insurance options with our free tool that compares rates and matches you to the coverage your family needs.

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