Active-duty service members enjoy very low term life insurance premiums through Servicemembers’ Group Life Insurance, or SGLI, and once out of the service, the Veterans’ Group Life Insurance program, or VGLI, kicks in. VGLI allows you to keep your term insurance for life as long as you pay the premiums.
So what’s the catch? While this looks like a great opportunity initially, as you get older, VGLI may no longer be your best option. Learn about the pros and cons of VGLI and some alternatives to consider.
As long as you’re an eligible veteran, you can’t be turned down for VGLI. There are no health questions, lab tests or life insurance medical exams, if you enroll within 240 days of leaving your role in the military.
You also aren't penalized for your health, and neither physical nor mental health issues affect premiums. It doesn’t matter if you use tobacco products or are overweight. The death benefit from this coverage never decreases unless you request it, and the policy remains in force as long as premiums are paid.
VGLI has no membership or enrollment fees, operating like many group life insurance programs offered by private employers.
A major drawback to VGLI is that your coverage is tied to the amount of SGLI coverage you previously had in place. While you can increase your coverage beyond your original SGLI coverage, you can do it only by at most $25,000 every five years.
While guaranteed acceptance is convenient, it comes at a cost. VGLI rates are affordable for younger veterans, but maintaining this coverage becomes quite expensive in later years. This is because the only factors determining VGLI premiums are coverage amount and age. As shown below, rates for older veterans can be relatively high.
VGLI also offers only term life insurance. This means the policy has a death benefit but does not build any cash value as an investment. VGLI isn't always on offer. You'll have one year and 120 days to apply for VGLI once you leave the military, but the window closes after that.
Finally, VGLI has a relatively low death benefit cap. This might not be a problem for you, but you should be aware that you'll need to find additional coverage if you need a death benefit over $400,000.
VGLI rates are determined by your age and the value of the death benefit you select. You can get coverage in $10,000 increments from $10,000 to $400,000. The lowest prices are offered to applicants under 30, with rates increasing every five years until you're 80, when they top out. You can still keep your coverage after that point, but your price stops increasing based on age.
Prices increase based on value. So $100,000 of coverage is 10 times as expensive as $10,000 of coverage. The table below shows a selection of available rates, effective as of April 1, 2021.
Sample monthly VGLI rates
40 - 44
60 - 64
80 and over
Source: Department of Veterans Affairs
Is there a better choice?
You may still be able to reduce your costs. Here are a few options to consider:
You could keep your VGLI coverage while it's affordable and then switch to a different term life provider when VGLI becomes too expensive. This can be a useful approach if you're healthy and young.
A number of insurers also allow you to fix rates with term life insurance for periods of up to 40 years. If you need more coverage than VGLI provides, term policies are usually the cheapest non-group life policies available.
You’ve also got the option of converting your VGLI policy to an individual permanent life policy with a participating insurance company at standard premium rates, without proof of good health.
Don’t forget to explore other private insurers even if you're not planning to convert an SGLI or VGLI policy. Our list of best life insurance companies is a great place to start.