Navigating the landscape of life insurance options can be overwhelming, especially for veterans seeking coverage that meets their unique needs. Veterans’ Group Life Insurance (VGLI) is one option that promises to extend the benefits of Servicemembers’ Group Life Insurance (SGLI) after military service, but is VGLI truly worth it? In this article, we’ll explore the pros and cons of VGLI to help you make an informed decision about whether this coverage aligns with your financial goals and needs.
What is VGLI?
Veterans’ Group Life Insurance (VGLI) is a life insurance program that allows veterans to convert their Servicemembers’ Group Life Insurance (SGLI) coverage to renewable term life insurance after they leave military service. This program provides a way for veterans to maintain life insurance coverage without undergoing a medical exam, provided they apply within a specified period after separation from the military. VGLI is administered by the Office of Servicemembers’ Group Life Insurance (OSGLI), which is a division of the Prudential Insurance Company of America, under the oversight of the Department of Veterans Affairs (VA).
VGLI was established as part of the Veterans’ Insurance Act of 1974, which aimed to provide continued life insurance protection to veterans transitioning back to civilian life. Before VGLI, veterans often found it difficult to obtain life insurance due to health issues or the high cost of individual policies. By offering a renewable term life insurance policy that can be maintained for life, VGLI is a valuable option for veterans seeking to secure financial protection for their families.
Who is Eligible for VGLI?
Most veterans who apply for VGLI within the appropriate time frame are eligible for coverage, including:
- Service Members with SGLI Coverage: Those who had Servicemembers’ Group Life Insurance (SGLI) while in the military can convert their coverage to VGLI upon separation from service.
- Retired Reservists: Members of the Reserves or National Guard who are entitled to an immediate annuity or have completed 20 years of service creditable for retirement and retain SGLI coverage.
- Members Released from Active Duty: Individuals who have been released from active duty within the last year and 120 days are eligible to apply for VGLI.
- Members Released from the Reserves or National Guard: Those who were covered by SGLI while serving and have been released from the Reserves or National Guard within the last year and 120 days.
- Fully Disabled Individuals: Veterans who are fully disabled at the time of separation from service and who apply within the appropriate time frames.
- Members on the Temporary Disability Retired List (TDRL): Service members who are placed on the TDRL due to a disability that may not be permanent.
VGLI Coverage and Premium Details
Understanding the specifics of VGLI coverage limits and how premium costs are determined is crucial for veterans considering this life insurance option. Let’s explore how VGLI works so you can make an informed coverage decision.
Coverage Amounts
VGLI offers flexible coverage amounts that allow veterans to choose a level of protection that best suits their needs. Coverage ranges from a minimum of $10,000 to a maximum of $500,000. Veterans can select their coverage in increments of $10,000 and adjust it over time to align with changes in their life circumstances, such as marriage, home purchases, or the birth of children.
Premium Structure
VGLI premiums are calculated based on the age of the insured veteran, with rates increasing in five-year age bands. As veterans age, the risk associated with providing life insurance coverage rises, leading to higher premium costs. This means that every five years, as veterans enter a new age group, their VGLI premiums will increase. While this structure allows younger veterans to benefit from relatively low premiums initially, it also means that the cost of maintaining VGLI coverage can become significantly higher over time. Furthermore, as you get older it generally becomes more difficult to secure a new life insurance policy. So, if you stick with just VGLI, you could eventually end up in a tight spot down the road where your only choices are to pay very high premiums for relatively low coverage through VGLI or discontinue your VGLI policy and have no life insurance at all. Veterans need to consider these rising premiums when planning their long-term financial strategies, as the increasing cost may impact affordability and long-term security.
What Are the Application Deadlines for VGLI?
To be eligible for VGLI, veterans must apply for coverage within the following timeframes:
- Within 240 Days of Separation: Veterans who apply for VGLI within 240 days (approximately 4 months) after their separation from active duty, the Reserves, or the National Guard are not required to provide proof of good health.
- After 240 Days but Before 1 Year and 120 Days: Veterans can still apply for VGLI within one year and 120 days (approximately 16 months) after separation. However, applications submitted after the first 240 days of separation require proof of good health. This involves answering health-related questions and potentially undergoing a medical exam to determine eligibility.
The Pros of VGLI
When considering life insurance options, VGLI offers several compelling advantages that make it a favorable choice for many former service members, including:
- Guaranteed Acceptance: Veterans are guaranteed acceptance without health questions if they apply within 240 days of discharge.
- Lifelong Coverage: VGLI offers continuous, lifelong coverage for veterans as long as premiums are paid.
- No Medical Exam: Veterans who apply for VGLI within 240 days of separation are eligible for VGLI, meaning they can get coverage regardless of any health issues.
- No Membership Fees: While some private insurance companies require policyholders to pay membership fees, VGLI does not charge additional fees.
The Cons of VGLI
While VGLI has its benefits, it’s important to consider the potential drawbacks before making a decision. Some cons of VGLI are:
- No Permanent Policy Options: Although VGLI policies are renewable, they are not permanent like universal life insurance. This means the premium can increase at the end of each term.
- Low Coverage Amounts: VGLI’s maximum coverage amount is $500,000, which may not be sufficient for some veterans.
- Higher Premiums for Older Applicants: VGLI premiums increase with age, making policies less affordable for older veterans.
Who Should Consider VGLI?
Deciding on the right life insurance option can be a critical decision for veterans and their families. Although VGLI has some drawbacks, it can be an excellent choice for certain individuals based on their specific needs and circumstances, including:
Veterans With Medical Issues
VGLI is particularly beneficial for veterans with medical issues due to its guaranteed acceptance feature within 240 days of leaving the military. During this period, veterans can convert their existing SGLI coverage to VGLI without providing proof of good health or undergoing a medical exam. By offering guaranteed acceptance, VGLI provides peace of mind for veterans who might otherwise face challenges obtaining life insurance due to pre-existing medical conditions.
Veterans Who Smoke
VGLI can be particularly advantageous for smokers because its premiums are based solely on age and coverage amount, not on smoking status or health conditions. In contrast, private life insurance companies often charge significantly higher premiums for smokers due to the increased health risks associated with smoking. This can result in substantial cost savings for smokers who choose VGLI over private insurance, making it a more affordable option for maintaining life insurance coverage.
Veterans Who Want the Option to Convert to a Permanent Life Insurance Policy
Another significant benefit of VGLI is the option to convert the term coverage to a permanent policy with private life insurance companies like AmFi. This allows veterans to secure permanent life insurance without having to prove insurability or undergo a medical exam, regardless of their health status at the time of conversion. This feature provides peace of mind and long-term financial security, ensuring that coverage remains in place for the veteran’s entire life.
Veterans Who Don’t Want Permanent Coverage
VGLI is a renewable term policy, meaning it is renewed annually and provides coverage for a specified period rather than for life. This can be a favorable option for veterans who need life insurance for a shorter duration, such as those looking to cover specific financial obligations like a mortgage or educational expenses for their children. The annual renewal feature offers flexibility, allowing policyholders to adjust their coverage as their needs change over time. For those not seeking permanent life insurance, VGLI provides an affordable and adaptable solution to meet their temporary life insurance needs.
Who Should Consider Looking Elsewhere for Life Insurance?
While VGLI offers numerous benefits, it may not be the best choice for everyone. Certain individuals may find other insurance options more suitable based on their unique circumstances and financial goals, such as:
Veterans Who Left the Service More than 16 Months Ago
Veterans are not eligible for VGLI if more than 16 months (one year and 120 days) have passed since their separation from service. Additionally, applications submitted after the first 240 days of separation require veterans to undergo a medical review and prove their insurability. With American Fidelity Life Insurance, veterans won’t be required to submit proof of health regardless of when they leave the service.
Veterans With no Medical Conditions or Who Do Not Smoke
Healthier veterans may find more competitive rates with private insurers than VGLI. Many private life insurance companies offer lower premiums to individuals in good health, reflecting the reduced risk they pose. By shopping around and comparing different policies, healthier veterans have the opportunity to secure substantial cost savings and benefit from tailored plans that suit their specific needs and financial situations.
Veterans Who Need More than $500,000 in Protection
VGLI offers a maximum coverage limit of $500,000, which may not be sufficient for veterans with substantial financial obligations or those seeking more comprehensive protection for their families. For veterans needing higher coverage amounts, exploring alternatives with private insurers is advisable. Many private companies provide policies with higher coverage limits and the flexibility to tailor plans according to individual financial needs.
Veterans Who Want to Accumulate Cash Value
VGLI is a term policy that does not offer investment components or cash accumulation. However, whole and universal life insurance policies offered by private insurers can. These types of policies not only offer a death benefit but also allow policyholders to build savings that can be borrowed against or withdrawn, offering greater financial flexibility and long-term investment potential. By exploring these alternatives, veterans can secure both protection and financial growth opportunities.
Comparing VGLI to Private Life Insurance
Choosing the right life insurance plan involves evaluating various options to determine which best meets your needs. VGLI and private life insurance both offer distinct advantages and limitations in aspects such as eligibility, coverage options, premium costs, and additional benefits. We’ve compared them below to help you make an informed decision.
| VGLI vs. Private Life Insurance | ||
| Feature | VGLI | Private Life Insurance |
| Eligibility | Veterans are eligible within the first 1 year and 120 days of separation | Both veterans and the general public are eligible at any time |
| Proof of Good Health | Only required if an application is submitted after the first 240 days of separation | May be required by some insurers; AmFi does not require policyholders to provide proof of good health |
| Maximum Coverage | $10,000 – $500,000 | Varies by insurer; can exceed $1 million |
| Policy Type | Renewable term | Term or permanent |
| Cash Value | No | Yes, depending on the policy |
| Flexibility | Minimal flexibility | Highly flexible and customizable |
Conclusion
Deciding whether Veterans’ Group Life Insurance (VGLI) is worth it depends on your individual circumstances and needs. VGLI offers significant benefits, such as guaranteed acceptance within 240 days of separation, making it an excellent choice for veterans with medical issues or those seeking straightforward, renewable term insurance. However, its rising premiums and lack of cash value accumulation may not be ideal for everyone. Ultimately, assessing your financial goals and comparing the specifics of VGLI with alternative life insurance policies will help you determine the best path to securing your family’s financial future.
Interested in converting your VGLI or SGLI policy? Contact AmFi today to discuss your options and find the right life insurance policy for you.
