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Life Insurance for Military Families

April 6, 2015
Insurance, Life Insurance
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Life insurance protects your family against financial hardship in the event of your death — and if you have a high-risk occupation, like being a member of the armed forces, you are likely someone who needs life insurance. But the U.S. military’s million and a half active-duty members often have difficulty finding life insurance policies through private carriers.

However, military programs provide coverage if you’re serving your country, and if you shop through the right sources, finding additional, affordable coverage is possible. Here’s how.

Life insurance through the military

Military families are a step ahead of the average American when it comes to life insurance. If you’re on active duty, you’re automatically enrolled in Servicemembers’ Group Life Insurance (SGLI) for $400,000 worth of coverage, unless you opt out or reduce your benefits. You can also sign up for additional services — including policies for your spouse and children and traumatic injury benefits — for an extra premium.

Although SGLI’s maximum death benefit is lower than what you may be able to buy on the private market, there are some important upsides, like the cost. The $400,000 of coverage costs only $28 per month, and it’s automatically deducted from your paycheck. Disabled veterans can also apply for an extension once they leave the military, and those with a terminal illness may be able to access up to half of their benefit before they die through the program’s accelerated benefit option.

Exclusions pose a challenge

SGLI policies provide great protection for members of the military, but there are reasons to look for other coverage. Your family may need a higher benefit amount, or prefer to supplement SGLI with whole life or term life insurance.

“Owning their own policy outside of work [is] vital to their financial security,” says Bill White, product vice president at USAA Life Insurance Co. “Work could go away, so that life insurance could go away.”

It’s better to find a supplemental life insurance policy sooner than later. “You’re a healthy person. That’s why they allow you to serve,” White says. But aging, as well as service-related injuries, could make you uninsurable after you’re discharged.

Finding the right insurer can be difficult on the private market, however. Many companies specifically exclude wartime deaths.

“A well-qualified, trustworthy insurance agent should recommend a policy without the wartime death exclusion,” White says. That’s why “it’s really important to check the fine print.”

Apart from that, your life insurance needs as a member of the military are similar to those of civilians. Start by considering how much income you need to replace, as well as your mortgage debt and your children’s future educational expenses.

You might also want to consider your spouse’s income, says Mark Estep, manager of operations, training and media at Navy Federal Financial Group.

“Should something happen to the [family member on] active duty, what’s the game plan?” he says. If a mother is killed in action, “is [her husband] going to want to keep doing his job? Or should he stay home and cover the kids for five years?”

Other providers of military life insurance

“We do recommend that [members of the military] accept and keep their SGLI coverage,” White says. “We think it’s fantastic.”

And for some, the $400,000 benefit might be enough, Estep says.

But if you have a young family or other, larger financial obligations, he suggests a life insurance policy from the Navy Mutual Aid Association or the Military Benefit Association. USAA is another good source for life insurance.

“If they’re talking to any insurance salesperson, and that person does not start with SGLI, or doesn’t touch on Navy Mutual Aid, or any companies that can help them get less expensive coverage, they’re talking to the wrong person,” Estep says.

Alice Holbrook is a staff writer covering insurance and investing for NerdWallet. Follow her on Google+.

Image via iStock.