The transition from military service to civilian life can be complex. However, one consideration remains constant throughout this process: the need to make sure you and your family are protected. While service members are in the military, they are protected with Servicemembers’ Group Life Insurance (SGLI).
Once service members leave the military, SGLI coverage ends, leaving individuals to decide how to continue life insurance protection with a new policy. Fortunately, several options exist for converting your SGLI after leaving the military.
Servicemembers' Group Life Insurance (SGLI) Coverage
Servicemembers’ Group Life Insurance (SGLI) is a program through the Department of Veterans Affairs that offers a relatively high coverage amount (maximum coverage = $500,000) to active duty service members at a very low monthly premium. Active duty servicemembers are automatically enrolled unless they decline coverage and are given the maximum coverage amount unless they request a lesser amount.
Because SGLI is only for active duty service members, you will lose this benefit shortly after your military retirement, but you have up to one year and 120 days to “convert” your SGLI policy into a Veterans’ Group Life Insurance (VGLI) policy with the same amount of coverage. Upon our retirement, you should receive a VGLI conversion notice that will explain some of this, but you can learn more about SGLI and VGLI on the VA’s website or in our blog.
When You Might Want to Convert From SGLI
Transitioning from active duty military service marks a pivotal moment, often accompanied by many new changes and responsibilities. As you navigate this transition, evaluating new life insurance options becomes essential. You may want to convert from SGLI under the following circumstances:
Separation from Military Service: One key trigger for conversion is when you separate from the military. It is crucial to apply for conversion within one year and 120 days of separation. Failure to convert within this timeframe may result in the loss of eligibility for specific conversion options, potentially leaving you without coverage when you need it most.
Avoiding Coverage Gaps: Convert before your SGLI coverage expires to avoid potential gaps in life insurance protection. As SGLI coverage terminates upon separation from the military, converting to a different life insurance policy ensures continuous coverage without interruptions.
Changing Life Circumstances: Consider conversion when your life circumstances change, such as getting married, having children, or experiencing other significant life events. These milestones often come with increased financial responsibilities and a greater need for coverage. Converting from SGLI allows you to adjust your policy to accommodate these changes.
Health Considerations: If your health has changed since obtaining SGLI, converting to Veterans’ Group Life Insurance (VGLI) or a commercial policy can be advantageous.
Planning for the Future: Consider conversion if you plan to maintain life insurance coverage beyond your military service.
Understanding SGLI to VGLI Conversions
SGLI is a low-cost group life insurance policy that provides crucial life insurance coverage to military members during active service. People with SGLI pay the same premiums regardless of factors like health and age. Servicemembers are automatically enrolled in SGLI unless they opt out, which means you could have SGLI coverage and not even know it. SGLI coverage ends after leaving active duty service, which is why it’s important to think about conversion.
Veterans' Group Life Insurance (VGLI)
Conversion options like Veterans’ Group Life Insurance (VGLI) are important to avoid leaving your loved ones without financial protection. VGLI serves as a continuation of SGLI after service, offering veterans a way to convert SGLI coverage to renewable term insurance.
VGLI is a term life insurance policy with a lump-sum death benefit but no additional financial advantages. It is a beneficial choice for those who want life insurance for a specific period and don’t need their policy to offer other financial benefits.
Eligibility for VGLI Coverage
Specific eligibility criteria must be met to convert SGLI to VGLI. To be eligible for Veterans’ Group Life Insurance (VGLI), service members must be individuals within one year and 120 days of being released from an active duty period of 31 or more days, returning or being released from the National Guard or Ready Reserves, being assigned to the Individual Ready Reserves or Inactive National Guard (including the Public Health Service Inactive Reserve Corps), or being placed on the Temporary Disability Retirement List.
Alternatively, if the individual was a member of the National Guard or Reserves with part-time SGLI and experienced an injury or disability while on duty that rendered the service member ineligible for standard premium rates, they are eligible to convert.
Obtaining VGLI Coverage
Converting from SGLI to VGLI is straightforward. Service members must apply within the enrollment time limit of 240 days for guaranteed acceptance or one year and 120 days with evidence of good health. To apply, they must complete the VGLI application form via the Office of Servicemembers’ Group Life Insurance (OSGLI) and submit it to the Department of Veterans Affairs (VA). They may also need to provide documentation confirming their separation from the military.
Proof of Good Health and Medical Exams
Service members have a 120-day window after separation from the military to convert their coverage from SGLI to VGLI without proof of insurability. This means that within this timeframe, veterans can get VGLI coverage based solely on their SGLI coverage amount without needing to provide evidence of good health.
One significant advantage of converting from SGLI to VGLI is the exemption from providing proof of good health during the initial 120-day conversion period. This means veterans don’t have to undergo medical examinations or provide detailed health information, making the conversion process easier and faster.
VGLI Exemptions and Limitations
It is important to note that while VGLI provides a continuation of life insurance coverage similar to SGLI, certain supplementary benefits, like Waiver of Premium for Disability or Accidental Death and Dismemberment, do not transfer during conversion. Veterans should be aware of these exclusions and consider additional insurance options if they require specific supplementary benefits beyond basic life coverage.
Private Insurance Conversions
In addition to VGLI, you do have some other life insurance options available to you when your SGLI expires after active duty.
Private insurance refers to life insurance policies provided by commercial insurance companies. These policies may include various types of insurance like term life, whole life, and universal life insurance. Whole life insurance is typically eligible for SGLI conversion. However, conversion from SGLI to a private life policy works a bit differently than SGLI to VGLI conversion.
The total conversion window remains the same: one year and 120 days. However, the window of time for converting SGLI to policies with private insurers without the need to submit evidence of good health is only 120 days, rather than the 240 days for VGLI conversion. Also, in contrast to VGLI conversions, an SGLI to private insurance conversion would not necessarily allow you to keep the same amount of coverage.
When converting from SGLI to private insurance, choosing an approved insurance provider (of which American Fidelity is one) is essential. Veterans should research and compare different insurance companies to find the one that offers the best coverage options for their needs at competitive rates.
It is also important to note that conversion policies must be permanent policies, like a whole-life policy, rather than a term or investment-based policy. Permanent policies offer lifelong coverage and often include features such as cash value accumulation, which can provide additional financial benefits.
Family Servicemembers' Group Life Insurance (FSGLI)
Spouses of military members may also have conversion opportunities. Family SGLI (FSGLI) covers children and spouses of active duty Air Force, Navy, Army, Coast Guard, National Guard, and Ready Reserve members.
Children and spouses of individuals in diverse military programs, such as ROTC in training, Individual Ready Reserve volunteers, NOAA and Public Health Service commissioned members, military academy cadets midshipmen, and inactive military personnel with up to 12 training periods annually, may also be eligible.
Spouses insured with FSGLI can convert to an individual commercial policy of insurance within 120 days after the date of the service member’s separation from the military, the date of the service member and current spouse’s divorce, or the date of the service member’s choice to end Spousal SGLI coverage or their SGLI coverage.
Convert VGLI Coverage to a Private Life Insurance Policy
While VGLI is a convenient option for transitioning from SGLI, there are instances where opting for commercial coverage may be preferable. Commercial policies are often more flexible and customizable, so veterans can use their coverage to meet their specific needs. The most significant advantage, however, is what happens in the long-term.
VGLI premium rates may be cheap early on, but VGLI premiums increase over time as you age. And by that time, it might be too late for you to be eligible for a commercial policy. Starting with a permanent life commercial policy at an earlier age, meanwhile, allows you to take advantage of the living benefits like cash accumulation over an extended period of time and not run into the problem of premiums that escalate with age.
Term Life Insurance vs Permanent Life Insurance Benefits
Term life insurance benefits are limited to just a death benefit that is paid out when the insured person dies. In contrast to SGLI, the premiums for term life insurance, whether it’s term life through private insurers or through VGLI, will depend on age and coverage amount. Oftentimes, a term life policy can be renewed once the initial term expires, but the monthly premium at that point would increase in correspondence with the increase in the insured’s age.
Permanent life insurance, meanwhile, offers living benefits, such as a cash accumulation component that will grow with each monthly premium payment and accrue interest over time. Furthermore, permanent life insurance coverage lasts for the insured’s entire lifetime, with a monthly premium that will not increase with age.
How Much Life Insurance Do You Need?
While most active duty service members are used to having the full $500,000 of coverage from SGLI, you might not need that much coverage once you retire from the military. How much life insurance you need will depend on your and your family’s unique circumstances, financial responsibilities, and goals.
However, it’s also important to note that there are flexible ways of handling the coverage amount. For instance, you may choose to purchase a permanent life insurance policy with relatively low coverage to gain the living benefits, and also purchase a term life insurance policy to gain additional coverage just for a limited period of time. Universal life insurance policies are also conducive toward flexibility, as this is a type of permanent life insurance that allows you to make adjustments to coverage amount over time.
Helpful Resources
Navigating the SGLI conversion process can be easier with tools and resources designed to simplify decision-making and ensure a smooth transition.
Interactive premium calculators are user-friendly tools that allow individuals to estimate premiums for converted policies and compare coverage options. Inputting information like age, desired policy features, coverage amounts, and more will enable users to understand their personalized premium estimates.
Downloadable checklists are another helpful tool that assists users with staying organized during the SGLI process. These checklists outline each step of the conversion process, from gathering necessary documents to selecting a new insurance provider.
How AmFi Can Help
When you lose SGLI insurance, you have various insurance options, from Veterans’ Group Life Insurance (VGLI) to term life insurance to universal life insurance. When considering life insurance options, American Fidelity Life Insurance’s universal life insurance option stands out for its wealth of advantages.
Some of AmFi’s universal insurance advantages are:
flexible payment options
additional financial benefits like tax-free cash accumulation at guaranteed interest rates
rates that will not increase unless the policy expires
market-leading interest rates
a death benefit
customized plans
AmFi also offers term life insurance, which provides coverage for a specific period of time, anywhere from 5 to 20 years, and is the most affordable form of life insurance. Overall, converting your SGLI policy with AmFI ensures that you and your dependents are effectively covered with adaptable policies customized to your unique needs.
Frequently Asked Questions
What are the advantages of commercial life insurance over VGLI?
Commercial policies often provide a broader range of coverage options, higher coverage amounts, and the ability to customize your policy to meet your unique requirements and financial goals.
Can I keep both SGLI and a commercial policy simultaneously?
Yes, it’s possible to have both SGLI (or VGLI) and a commercial policy. This approach can be a smart option to provide additional coverage for someone with dependents.
Can I switch to a commercial policy at any time, or are there specific windows to consider?
You can switch to a commercial policy at any time. However, it may be difficult to get approved for a commercial policy later in life due to factors like age and health. Also, the earlier you switch to a commercial permanent life policy, the more you will get out of the living benefits.
How do the premiums compare between VGLI and commercial life insurance?
Premiums for commercial policies can vary based on factors such as age, health, and coverage amount. While VGLI may be more cost-effective for some, commercial policies may offer competitive rates with added benefits. In the short term, the lower initial premiums for VGLI may seem appealing, but over time the cash accumulation aspect of a commercial policy can more than make up for the higher premiums associated with it.
How can I determine if switching to a commercial life insurance policy is the right choice for me?
Evaluate your current and future financial needs, compare the features and costs of VGLI and commercial policies, and seek advice from financial advisors or insurance professionals to make an informed decision.
Will my military status or deployment affect my eligibility for commercial life insurance?
While military status may not disqualify you, deployment and certain activities may impact your eligibility or affect policy terms. It’s crucial to discuss your military service with potential insurers.
Can I apply for VGLI if I didn't have SGLI?
No, VGLI is specifically for those with SGLI coverage during their military service. If you don’t have SGLI, you may explore other life insurance options.
What are the advantages of VGLI?
VGLI offers renewable term coverage, regardless of health, with the option to increase coverage at certain life events. Premiums are based on age and coverage amount. For a young healthy person, premiums will be low, but there are no living benefits such as cash accumulation.
What happens if I let my SGLI coverage expire without converting to VGLI?
If you don’t convert to VGLI before your SGLI coverage expires, you may lose the opportunity to secure affordable life insurance, and obtaining coverage later could be more challenging.