Retirement from the military can bring many big changes to your life, and you may be curious about which military benefits carry over into civilian life and which do not. Unfortunately, you do not get SGLI after retirement from the military. However, it does not expire immediately. Reading this quick article will give you the information you need to understand what happens to your SGLI, so that you can act promptly and avoid losing the life insurance coverage that may be a vital part of protecting your family.
Servicemembers' Group Life Insurance: SGLI
SGLI stands for Servicemembers’ Group Life Insurance. It is an opt-out life insurance program, meaning that, as an active duty military service member or member of the National Guard, you are automatically eligible for SGLI and enrolled unless you explicitly opt out of it. For that reason, you may just be discovering that you even had SGLI in the first place now that you’re nearing retirement.
Who is Eligible for Servicemembers' Group Life Insurance (SGLI)?
Servicemembers’ Group Life Insurance (SGLI) is not free, but it is a very low-cost life insurance program, especially compared to standard premium rates of civilian life insurance. For those military service members who do not opt out, they are automatically enrolled in SGLI, with the monthly premium of the policy coming out of their military paychecks.
Managing SGLI Coverage Amount
The other aspect of SGLI that is automatic is how much SGLI coverage you get. As long as you don’t opt out of SGLI and do not explicitly request a lesser amount of coverage, the SGLI coverage you have as a service member will be equal to the maximum coverage, which at this time is $500,000.
Coverage refers to the main benefit of life insurance, known as the death benefit. If you die while your SGLI coverage is active, $500,000 is the amount of money that your next of kin will inherit.
What is Family Servicemembers' Group Life Insurance (FSGLI)?
FSGLI stands for Family Servicemembers’ Group Life Insurance. It allows the spouse and children of active duty service members to also obtain low cost life-insurance. Unlike SGLI, FSGLI is an opt-in program, meaning your family members will not be automatically enrolled in the program.
However, as long as you have SGLI coverage, your family members are guaranteed FSGLI coverage should they choose to sign up for it. The cost for your family members’ FSGLI would again come out of your military paycheck.
When Does SGLI Expire?
SGLI coverage expires 120 days after your military retirement separation date. During that 120-day period, you are provided with a grace period of free coverage. After that period, you are no longer eligible for SGLI. The one exception to this is if you have a service-connected disability, in which case you may be eligible for an SGLI disability extension of up to two years free coverage.
If you die after that period of time expires without taking action, your family will not get any death benefit payout, as the policy will have expired. You will also retain no value from the SGLI policy. It can’t be sold for money, and the money you paid into it from your military paycheck to keep it active is not returned to you.
It is also important to note that your family members’ FSGLI coverage is tied to your SGLI enrollment, which means they will also lose their FSGLI coverage when you retire from the military.
For these reasons, it is vital for you to understand the steps you can take to ensure that, before you completely lose your SGLI coverage, you have a plan in place for securing new coverage, and there are multiple ways to do this, which correspond to different time-sensitive windows of opportunity.
Do Retired Veterans Get Free Life Insurance?
Just as SGLI and FSGLI are not free, retired veterans do not get free life insurance. However, the Department of Veterans Affairs (VA) provides two helpful pathways toward ensuring that veterans and their family members can obtain life insurance after military retirement as easily as possible and at relatively low costs.
Veterans' Group Life Insurance: VGLI
VGLI stands for Veterans Group Life Insurance. It is the simplest way to maintain life insurance coverage after retirement from the military, and provides the same basic benefits as SGLI.
You can apply for Veterans’ Group Life Insurance (VGLI) through the Office of Servicemembers’ Group Life Insurance (OSGLI) following retirement. As long as you do so within 240 days of your retirement date, you are guaranteed approval for VGLI without providing proof of good health, as long as you had SGLI coverage while serving.
If you miss that 240-day window, you can still apply for VGLI coverage within 1 year and 120 days of your retirement date, but you would have to submit evidence of good health to be approved.
With VGLI, you are eligible for up to the same amount of coverage you had with SGLI: up to $500,000. If you had a lesser amount of SGLI than $500,000, you can increase the amount by $25,000 after your first year and then in $25,000 every 5 years.
VGLI is only available to veterans, meaning that FSGLI policies cannot be converted to VGLI policies. For spouses and children wishing to retain coverage, private life insurance is the only option for them after a service member’s military retirement.
The Cost of Veterans' Group Life Insurance (VGLI)
While VGLI can be a great way to ensure that your coverage doesn’t lapse after retirement, it’s not the best long-term option for all former service members. Unlike SGLI, the VGLI premium rates are tied to age and will increase in cost with every 5-year age bracket. You can see the rate chart for VGLI premiums on the VA’s VGLI page.
It is important to fully understand the cost structure of VGLI before you decide to apply for it. Our agents speak to many veterans in their 50s and 60s who signed up for VGLI right when they retired in their youth, and are just now learning after decades of paying for it that the cost has risen every 5 years. Unfortunately for many of them, VGLI becomes prohibitively expensive at this age, but it can also be difficult to obtain private life insurance at an affordable rate.
So, it’s important to think about the long-term implications of life insurance while you’re still young.
Veterans’ Group Life Insurance tends to be most advantageous for young people who wish to quickly secure temporary coverage, ensuring that there is no gap between the coverage they had with SGLI and a private life insurance option with better long-term benefits and fixed lifetime costs.
Convert VGLI Coverage or SGLI Coverage to Private Life Insurance
The VA has a list of 11 private companies that are approved for military conversions from SGLI, FSGLI, and VGLI to private life insurance policies, of which American Fidelity Life Insurance Company is proud to be one.
Conversion from one of these military life insurance policies to a private, commercial policy is only available for certain permanent life insurance policies, such as whole life policies. As the name implies, these life insurance policies provide coverage for the insured person’s entire lifetime, typically at a fixed monthly premium that will not increase over time. Permanent life policies also provide insurance benefits beyond the basic term life insurance benefits of SGLI, FSGLI, and VGLI.
Those with SGLI and FSGLI have 120 days to convert to a private policy without showing proof of good health. Those with VGLI can convert at any time, which is another reason why VGLI can be a good short-term option, as it prolongs the conversion window indefinitely.
However, if you understand the benefits of private, permanent life insurance and know that you want to convert your SGLI or VGLI to such a policy, it is best to do so as soon as possible, so that you can lock in the cheapest lifetime monthly premium possible and maximize the value of the additional benefits that come with a permanent conversion policy.
How Much Life Insurance Do I Need?
This is a very important question for anyone wishing to obtain life insurance following military retirement, and the answer will differ depending on the unique circumstances and financial goals of you and your family.
There are general guidelines that can help you answer this question, but the best way is to simply contact one of our life insurance agents, as they are trained to assess your situation and make recommendations tailored to your individual needs.
Life Insurance Coverage Amount
Once again, life insurance coverage refers to the amount of the death benefit that would be paid out to your beneficiaries upon your death. And while $500,000 is the default amount provided for SGLI, this is not necessarily the right amount of coverage for everyone. In many cases, a lesser amount of coverage would be sufficient to protect your family members.
It is also important to remember you can update your beneficiary information throughout the course of your policy, and may be able to adjust the death benefit amount, too, in some cases.
Life Insurance Benefits
Another factor to weigh when considering private permanent insurance, such as whole life insurance, is the additional benefits beyond the death benefit, such as cash value accumulation. Permanent life insurance policies accumulate cash value with interest over time, which can be withdrawn or borrowed against during the insured person’s lifetime, and which can add to the total payout following the death of the insured if left untouched. This is another reason why $500,000 in face value coverage may be more than you actually need.
Convert SGLI, FSGLI, or VGLI to Permanent Life Insurance With AmFi
SGLI, FSGLI, and VGLI are low-cost insurance programs that enable active duty members, former service members, national guard, and their families to receive insurance benefits. But they are not necessarily the best long-term insurance solutions. American Fidelity Life Insurance offers conversion-eligible whole life insurance, as well as term life insurance and universal life insurance options, which are not eligible for conversion but still available for veterans and their families. To determine which option is best for you, and how much coverage you might need, submit a request to talk to an agent today.
