Understanding life insurance for veterans
Life insurance is a valuable tool to ensure your family’s financial future in the event that something happens to you. Having the right policy in place is important for everyone. It can be even more important for people in high-risk jobs, like active military service members. Before we get into the options for life insurance for service members, let’s cover some basics.
Life insurance is a contract in which you make regular payments, called premiums, and an insurance company pays your chosen entities a tax-free lump sum when you pass. It sounds pretty simple, but there are a lot of opportunities to customize coverage, and that can become confusing. Retired service members have even more options. Here are some terms and ideas you should become familiar with before you make a decision.
Term life insurance
Term life insurance is designed to cover a certain number of years and then end. Its main purpose is covering lost income and protecting a family’s lifestyle in the short term should something happen to a family breadwinner. When you are young, term life insurance is relatively inexpensive. That’s because you are likely to outlive your coverage, so chances are that no death benefit will be paid to your beneficiaries. As you age, premiums for term life will go up, and at a certain point they will become unaffordable. Most VA-sponsored life insurance is term life. While you can continue to renew your policy up to a certain age, it may eventually cost more than you can afford.
Whole life insurance
Whole life insurance, on the other hand, will last for life. Your premiums will never change, and, as long as you continue to pay them, the life insurance benefit is guaranteed.1 Whole life might initially cost you more than term life, but it could end up being cheaper over the long run if you lock in a good rate while you are young. You can compare the biggest differences between term life and whole life here.
Do veterans get free life insurance?
Unfortunately, no. While the VA supplements some of the costs associated with life insurance policies for veterans, veterans must pay for life insurance coverage whether they get a plan through the VA, through a nonprofit organization such as Military Benefit Association (MBA), or from a private insurance company.
How much coverage do you need?
While everyone’s situation is different and this question can be answered only by you and your family, many people benefit from consulting an agent to help determine the optimal amount. Carefully consider what your loved ones might need if something happened to you now or later in life. If you have a spouse or dependents who rely on your income, try to ensure that they can replace that income for a number of years. Also, take into account mortgage payments and other debts that could impact your family financially.
Choosing a beneficiary
With all life insurance policies, whether they are VA-sponsored or private, you will need to select one or more beneficiaries. Your beneficiaries are the people who will receive the life insurance benefit when you pass. You can split the death benefit up however you like between as many parties as you like. Your beneficiary doesn’t necessarily have to be a family member. Other common beneficiaries are trusts, charities, and estates.
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Government-provided veteran life insurance policies
The U.S. Department of Veterans Affairs has insurance products that cover active military service members, veterans, and their families. These options have expanded coverage for veterans with medical conditions and disabilities, whether they happened during active service or after. So, even if you are unable to qualify for individual private insurance, you may still be able to purchase coverage. We’ve summarized some general information about them but you should learn more about your VA-provided life insurance options here.
Group life insurance for active members
For most of those on active duty, coverage with low-cost Servicemembers’ Group Life Insurance (SGLI) is automatic. The monthly premium for SGLI is usually significantly lower than it would be for the same private term life insurance coverage, and you’ll have the option to increase your benefit up to $500,000. After you leave the service, your SGLI coverage will need to be converted to another product for you to maintain coverage.2
Term life insurance for retired military
After your separation from the military, you can convert your SGLI into Veterans’ Group Life Insurance (VGLI)—lifetime renewable term coverage. You start with the same coverage you had through SGLI, and, if you desire, you can increase it every five years by $25,000, up to the maximum of $500,000. In order to guarantee your previous benefits, you must submit your application within one year and 120 days of your separation from the military. If you do so later than that, you may have to pass a medical exam, and coverage amounts may be recalculated.2
Life insurance for disabled veterans
Service-Disabled Veterans’ Insurance (S-DVI) is a program specifically for veterans who have been given a VA rating for a new service-connected disability in the past two years (even if the rating is 0%). This covers all related health issues, including post-traumatic stress disorder (PTSD). While this program stopped taking new applications after December 31, 2022, if you already have S-DVI, you can keep it.
On January 1, 2023, the VA began accepting applications for a new program called Veterans Affairs Life Insurance (VALife) for veterans with service-connected disabilities. You can apply online or through your local VA office.2
Additional Veterans Affairs options
Most active and retired service members will use one of the above options, but there are others that cover specific cases.
- Family Servicemembers’ Group Life Insurance (FSGLI)
- Veterans’ Mortgage Life Insurance (VMLI)
When should a veteran consider personal life insurance?
If you qualify for the VA-sponsored policies for veterans, you should consider them first. There are a number of reasons, however, that you may want to go with a private company for some of your insurance coverage or to supplement it. Here are some of the benefits of private life insurance for veterans to consider:
Lifelong protection with a permanent whole life policy
The only whole life insurance offered by the VA is up to $40,000 for disabled veterans through VALife at this time. So for lifelong protection, most veterans will need a private individual policy. This doesn’t have to take the place of a VA-sponsored term policy. Often, it’s smart to add a whole life policy in addition to the term life coverage you have as a former servicemember. A New York Life agent will be happy to help you explore custom solutions that supplement your VA-sponsored insurance with permanent insurance.
Additional coverage for your family
The maximum life insurance benefit you can get with VA-sponsored programs is $500,000. This is designed to help replace income for a few years should something happen to you. Many families will want more coverage than this and look to private insurance companies to add a second policy.
A premium of a whole life policy that will never increase
While VA-sponsored term life insurance for veterans tends to have lower initial premiums, those premiums can change. As you get older, insuring you becomes riskier, and your costs will go up. Once you are over age 60, the increases can be steep. With a private whole life policy, you can lock in a benefit at a premium that will never increase. It may cost you more per month now, but it could save you money down the road. Of course, a whole life insurance is a long term commitment, unlike a term insurance.
The security of growing cash value
Cash value is another benefit of whole life policies that you can’t get with term policies. The longer you hold a permanent policy, like whole life, the more cash value it will accrue. You can access this amount while you are still alive, which gives you some flexibility in planning for retirement.3
Related: Should you cash in life insurance?
At New York Life, we thank you for your service. Our agents offer a no-hassle consultation to help identify your life insurance and retirement needs. Let us help ensure that you and your family have the financial security you deserve.
