Active duty service members enjoy very low term life premiums through SGLI, and once out of the service, the Veterans’ Group Life Insurance program (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 medical exams, 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. Manage your account online and if you’re unsure how much insurance you need. VGLI offers assistance with an online calculator.
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 factor determining VGLI premiums is age. The result is that a $400,000 policy costing only $32 monthly for someone age 29 or younger increases significantly every five years. By age 75, that premium reaches a staggering $1,840 per month. To add to the price issue, VGLI recently raised premium rates overall by 5 cents per $1,000 of coverage.
Additionally, veterans should be aware that VGLI only offers term life insurance. This means the policy has a death benefit only, without building any cash value as an investment.
Is there a better choice?
You may still be able to reduce your costs. Here are a few options to consider:
- If you start shopping around while you’re still young and in good health, you may be able to find other types of life insurance, such as a whole life policy, with low rates you can lock in for an extended period. A number of insurers also allow you to lock in rates with term life insurance for periods of up to 30 years, but this coverage won’t build any cash value.
- 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 military insurers. AAFMAA and USAA both offer life insurance to healthy older veterans.
The bottom line
When it comes to veterans’ life insurance, one size doesn’t fit all. Those in good health who are willing to undergo a physical exam and/or some lab screenings may do better by shopping around. If, on the other hand, you’re facing health challenges, VGLI may still be your best option for maintaining lifetime coverage.
Military family image via Shutterstock.