What Happens to My SGLI When I Leave the Military?

A common question that I’ve heard is, “What happens to my SGLI when I retire from the military?”

This is a very important question, and one that you should address when you’re looking to either retire or separate.  There may be times where you decide that VGLI is not worth it, especially if you’re young, single and do not have dependents.  You may also decide that it’s the only choice for you, if other options don’t look feasible.  Either way, this article seeks to inform the broader audience of what your insurance situation can look like, and to provide a rough overview of things you should consider as you’re going through your transition.  In-depth topics will be covered in future blog posts, but you can also find a LOT of information on the VA’s website:  http://www.benefits.va.gov.

What is SGLI?

As everyone knows, Servicemember’s Group Life Insurance (also known as SGLI), is one of the best deals going, in terms of life insurance.  It is regarded as some of the cheapest group life insurance you can find, anywhere.  SGLI requires zero underwriting, and all servicemembers pay the same rate regardless of sex, age, physical condition, or smoking status.  All servicemembers are automatically enrolled for the maximum coverage, $400,000, and pay $28.00 per month for this coverage.  Additionally, SGLI allows servicemembers to be eligible for two other types of coverage:

TSGLI:  SGLI Traumatic Injury Protection Program

FSGLI:  Family Servicemembers Group Life Insurance

TSGLI provides additional traumatic injury coverage to all servicemembers covered under SGLI, and costs $1.00 per month.  FSGLI is available as additional life insurance for your spouse (up to $100,000) and dependent children ($10,000).  Coverage is available for dependent children at no cost, while the spousal premium ranges from $5.00 per month (for ages 34 and below) to $50.00 per month (for ages 60 and older).  Needless to say, SGLI is a good deal.

What happens when I leave the service?

The first thing to realize is that SGLI is only available for up to 120 days after separation from service or retirement.  Your TSGLI & FSGLI are dependent upon your ability to maintain SGLI coverage, so you will also lose that coverage when you are no longer eligible for SGLI.  However, the VA does give you several options to transition from SGLI to similar post-military coverage.

1. SGLI Disability Extension. If you have a total disability, you may be eligible for SGLI Disability Extension, which provides free coverage for up to 2 years after separation.  If you have a disability and think you may qualify, you should go to the VA website for more information.
2. Convert SGLI to a commercial life insurance policy. Servicemembers have the option of converting their SGLI to a permanent commercial policy within 120 days of separation from service, without having to prove good health.  However, this option includes converting to a permanent policy, such as a whole life policy, which can be much more expensive than term insurance, which is not eligible.  If you don’t know the difference between a whole life policy and a term life insurance policy, please email  I’d be more than happy to discuss it with you, and will probably write a future article on this topic.  Most fee-only financial planners will advise clients to steer clear of permanent insurance policies because they are more expensive than term policies.
3. Convert SGLI to VGLI. Also known as Veterans’ Group Life Insurance, VGLI allows you to continue the same level of coverage without having to prove good health.  You will pay more money in premiums, based upon your age.  However, the premiums are the same for men and women, and do not take into consideration any of your medical history (provided you convert your policy within 120 days of separation from service).   This might be a viable option if you have health-related concerns that might prevent you from obtaining a good term policy.
4. Purchase a Term Insurance Policy. For a lot of people, term insurance is an appropriate choice, for several reasons.

 

First, in many cases, you can purchase a 10, 20, or 30 year level-term policy.  A level-term policy simply states that the premium stays the same for that period of time.  Contrast this with VGLI, where the rates go up every 5 years.  Over time, you may find yourself paying a LOT more for VGLI than you would for similar term coverage.  This is especially true for women, non-smokers, and people in outstanding health, who pay the VGLI rate as men, smokers, and people in poor health.  Commercial policy underwriting takes many factors into consideration when pricing out a policy.

 

Second, you can purchase much more insurance.  While this article won’t tell you how to determine how much insurance you need, there are many cases in which $400,000 coverage just doesn’t begin to address the loss of income and savings potential over the insured’s career.  A commercial policy can cover much more than the VGLI amount, which can make a significant difference in your beneficiary’s quality of life in the case you die.

How do I know what choice to make?

Figure out insurance needs.   While you can get quotes from USAA, Navy Mutual Aid, or any number of insurance providers, you

Do price-shopping for 20 or 30-year term life insurance quotes.  You may decide that with good health, you can go all commercial, or you may decide that $400K in VGLI might be worth it.  How do you choose between 20 or 30 years?  That is simple, yet difficult.  Simple, because your insurance policy should cover you for the period of time that you expect to have an insurable loss—meaning if you die, you do not have enough saved up in retirement assets for your spouse or beneficiaries to live on.  Difficult because most people don’t know how long they plan to keep working 20 or 30 years in advance.  You may decide that 20 years is all you need, but if you’re in doubt, you might want to look into a 30 year term as well.

Budget for the insurance choice.  Whatever you choose, it WILL be more expensive than SGLI.  Make sure you take this into consideration well in advance of your separation or retirement.  Make sure this is a permanent part of your budget.  With term insurance, your rate will remain the same for the term of the policy.  However, with VGLI, you’ll have to account for the rate change every fifth year (for example, age 30-34, age 35-39, etc.).  You can see the latest VGLI rates here .

As always, this blog serves to answer your questions and address concerns.  If you like this blog, please forward it on to other people who may benefit.  If you have issues or concerns, or if you have a question you’d like me to answer, please feel free to contact me.  You can reach me through my website, or via email.  In the meanwhile, take charge of your life!

 

Ten Questions With Tania Baumhover

Tania Baumhover, the love of my life!

I hope you liked last week’s interview with Spencer Baker.  If you missed it, you can catch it here.  Please feel free if you think I need to make changes to this interview format.  This week’s interview is with my wife, Tania.  Tania’s the best person I’ve ever known.  If it weren’t for her, I’m not sure I would have ever found someone who would be able to put up with me, much less be my soul mate.  So, even though it might seem like a cop-out, there’s probably not another person whose opinion I’d rather have out there, for people to resonate with as they’re going through their own transition.

1.  What’s your military background? Career, family, etc. 

I’ve been married for 15+ years to a Naval Supply Corps Officer.  We have 3 kids, 11, 8, & 8.  I used to work in commercial real estate, but became a stay-at-home mother when our oldest child was born.  I went back to work about a year ago as a veterinary technician.

 

2.  What is it that you want to do (or did you want to) after you leave active duty? Or, if you’ve already transitioned, did you end up where you wanted to be?

When we moved to Tampa, we had been considering this to be a tour where we could either stay in or retire.  With that in mind, we moved to a community which we thought would be easier to retire into.  I have a good friend from our last duty station who had retired, and became very good friends with everyone in our wardroom.  However, we all left eventually, and she felt ‘left behind.’  I did not want that to happen to us, and that was part of the decision not to live in Fish hawk, which is the predominantly military community for MacDill AFB.

 

3.  What is it about your service experience that you think has best prepared you for your transition?

The adaptability that everyone is forced to develop over a military career.  You constantly have to make new friends.  For example, the people who have lived in the same neighborhood for 30 years have never had to meet new people or do other uncomfortable things.  Being in the military allows you to be more comfortable stepping out of your comfort zone.

 

4.  Think of the most challenging part of your life to this point. What is it that you did that helped you through it?

The hardest was having the twins while my husband (you) were deployed to Africa.  Including my oldest, I had three kids that were three and under, and we were living in Italy at the time, so I couldn’t even rely upon my family.  I consider myself an independent person, and this was the first time that I really had to depend on other people for help.  I learned how to ask for help.

 

5.  On a scale of 1 to 10, how confident are you (or were you) in your financial situation as you transition?

Three.  Most people who are transitioning from the military are transitioning into a paying career.  Creating your own business means that income is not a sure thing.  With that said, we have some time until we transition, and we do have savings set aside (as well as our pension), and we have a solid plan.  However, as most military folks are apt to do, we do still spend a lot of time thinking about the uncertainty of starting a business, in this case, a financial planning practice.  (Yikes!  How are we going to make it?)

 

6.  What’s (or was) your biggest fear about your transition?

Resolving the income gap that will start the month after we retire.

7.  If you had one question that someone could answer (or could have answered) for you (not doing something for you, but a question that they could answer), what would it be?

What’s going to happen in the future, and are we prepared for it?  For example, we’re healthy now, but would we be prepared for a major life-changing event?

8.  What would you like to see “out there” that doesn’t exist, but if it did, it would solve a big problem for you, and other people like you?

I wish there was a book that was specifically written to help military spouses better understand all of the personal finance issues that affect our lives.  (Sounds like a good idea).

9.  Which person has helped you through your military career and/or transition the most?

Forrest Baumhover (this isn’t really a fair question, since I’m interviewing my wife).

10.  Do you want to be contacted by people who think you might be able to help them? If so, how do people get in touch with you?

Sure.  They can get a hold of me on Facebook.  I help try to monitor the traffic on Military in Transition’s Group, just to keep out the trolls and spammers.  Feel free to PM me if there’s anything I can help with!

I hope you liked this interview.  It seems pretty cheesy for me to interview my wife for this article, but you’d be surprised how long we spent trying to figure out the answers to some of these questions.  I promise, I will try to have more interviews with military spouses, but that really depends on how many people I can get for interviews.  If you’d like your story to get out there, please feel free to reach out through the Military in Transition Facebook Group, or feel free to send me an email.

Invest in Flowers, Not Rims

Flowers

The other day, I had dropped off my truck at the Firestone on base to get the oil changed. I usually do this first thing in the morning, then walk into the office, since it’s fairly convenient. However, that day, it was slightly drizzling, so I decided to walk through the Base Exchange mall to get out of the rain. Since it was early morning, the place was dead, which allowed me to realize something that had happened a few months earlier-Our flower shop got replaced by a store that specializes in auto rims. And this made me sad.

Weekend Wrap-up: Military Personal Finance Articles You Should Read (4/8-4/14)

Enjoy this edition of “Military Personal Finance Articles You Should Read.” This blog entry only serves to summarize some of the previous week’s best personal finance articles, blog posts, and other content from a variety of sources so that you don’t have to. The intent isn’t for you to read every single article (although you’re a superstar if you do), but it’s to curate a lot of content into one easily digestible article that allows you to pick and choose the content you want.

This issue starts with a couple of Kate Horrell articles:

Ten Questions With Spencer Baker

Spencer Baker, Founder of Great Life, Tampa Bay

A couple of weeks ago, I asked the Military In Transition Facebook Group whether it would be worthwhile to read articles based upon other peoples’ experiences.  It seemed that the overwhelming response was in line with my thinking.  After talking with a lot of people about their retirement story, I realized that each conversation gave me a little bit of perspective about my own story.  This inspired me to start an article series to share the stories of some of the people I’ve talked with.  I hope that reading these stories puts a little bit of perspective into your life as you write your own transition story.  

Does Your Financial Plan Pass the Sleep Test?

With the exception of my wife, my grandmother is the most inspiring person I’ve ever known. I don’t know where I would be today without her. Although we didn’t always see eye to eye, especially on financial matters, I learned an extremely valuable investing lesson from her.

Weekend Wrap-up: Military Personal Finance Articles You Should Read (4/1-4/7)

Enjoy this edition of “Military Personal Finance Articles You Should Read.” This blog entry only serves to summarize some of the previous week’s best personal finance articles, blog posts, and other content from a variety of sources so that you don’t have to. The intent isn’t for you to read every single article (although you’re a superstar if you do), but it’s to curate a lot of content into one easily digestible article that allows you to pick and choose the content you want.

This issue starts with a couple of Kate Horrell articles:

What is the Fiduciary Standard and Why Do I Care?

The Department of Labor is expected to issue its long-awaited fiduciary rule, which means that advisers who provide investment advice for retirement accounts and IRAs will now be subject to the fiduciary standard.  Which begs the questions:  “What is a fiduciary, and what does this mean when I’m looking for a financial adviser?”

As you might note, most of my articles are aimed for people who are looking to help themselves–‘how-to’s’ of sorts.  This article is aimed at people who believe they need to hire someone to help them with their financial planning needs.  This doesn’t purport to advise whether you should hire a planner, just to define a term that is commonly tossed about in the financial planning industry:  the fiduciary standard.

Term Life Insurance Vs. Survivor Benefit Plan—A Side By Side Comparison

Caveat: This is the third article that I’ve written about Survivor Benefit Plan. It is meant to be read with the other two articles so you can formulate your own educated opinion about your personal situation, which may be different from outlined here.   This article is also the basis for a chapter for an ebook that I’m currently writing about the Survivor Benefit Plan, which I plan to release by summer.  If you’d like to receive updates, please send me an email or join Military in Transition on Facebook.  I hope you like it.

I’ve written a couple of times about the Survivor Benefit Plan (SBP). Both articles received some unanticipated pushback from different people.

The first article vs. the second article

Weekend Wrap-up: Military Personal Finance Articles You Should Read (3/25-3/31)

Enjoy this edition of “Military Personal Finance Articles You Should Read.” This blog entry only serves to summarize some of the previous week’s best personal finance articles, blog posts, and other content from a variety of sources so that you don’t have to. The intent isn’t for you to read every single article (although you’re a superstar if you do), but it’s to curate a lot of content into one easily digestible article that allows you to pick and choose the content you want.

This issue starts with a couple of Kate Horrell articles:

• Can military service make you a millionaire?  Actually, a guest post by USAA’s JJ Montanaro
• SBP Open Season Benefits Certain Remarried Retirees.

From there, we have a simple primer on the recently passed military retirement program, by MOAA’s Shane Ostrom.

Also, we have a couple of college planning articles.