Military service members have simple, affordable life insurance coverage through the Servicemembers Group Life Insurance program, usually called SGLI. Military spouses may be covered through Family SGLI, or FSGLI. But this coverage ends shortly after military separation or retirement. Many families still need life insurance protection during the next stage of their life. There are a couple of ways to proceed, and the best choice is unique to you and your family.
This post is part of The Comprehensive Military Retirement Checklist. Be sure to read all the other posts that go with the checklist, too!
As with all information on this website, this is not an official source. We gather and distill information so that’s easy to access and understand, but we can’t share every possible variation and exception. Always refer to official sources and verify that information provided applies to your unique situation.
Extended SGLI
SGLI will continue to cover you, at no cost, for 120 days after retirement.
You may be eligible for up to two years of extended SGLI coverage if you are totally disabled and unable to work when you leave the military, or if you have certain serious, permanent injuries. Servicemembers’ Group Life Insurance Disability Extension (SGLI-DE) requires an application.
Purchasing A Civilian Policy
For those who are able to get a civilian life insurance policy, that is usually the most affordable option. There are pros and cons to when you want to get that policy, but once you’ve started thinking about retirement, you definitely want to push ahead relatively quickly. It’s important to have enough time to explore all your options, apply for a policy, and have it be underwritten and approved before you make decisions about the Survivor Benefit Plan and/or converting your SGLI to another policy.
Your options generally include a term policy or some sort of permanent policy, generally lumped together as a group called “whole life” even though that’s an inexact grouping that includes some policies that aren’t technically considered whole life.
Where To Get a Civilian Life Insurance Policy
There are a bjillion places to get life insurance. Unfortunately, some of these policies give the selling agent a large commission, which can cloud their judgment on what is the best policy for you. I highly recommend you talk to someone who doesn’t sell insurance about your life insurance needs, so that you start shopping for your policy with a pretty clear idea of what you want or need. (If you’re not sure where to find someone, you might check out the Military Financial Advisors Association.)
Once you’ve identified your wants or needs, then start shopping the major military-affiliated associations that offer life insurance. Then, check with a broker – there are some that specialize in working with military families. (We used Insure The Heroes and Melissa was amazing at explaining everything, even the stuff we didn’t know that we didn’t understand. And I’ve taken a higher-level insurance course, and there was still stuff she needed to explain.)
Please, please don’t wait to start the civilian life insurance process. Often, folks suggest “get it before you start retirement medical work, or before you start the VA disability process. The insurance experts I know recommend that you start earlier. Keep in mind that companies may defer issuing a policy while you have outstanding medical appointments – which will probably be most of your last year of service.
Transitioning Policies
Some organizations, usually military benefit groups, offer special civilian insurance that is designed to replace SGLI at prices less than VGLI. In some cases, no medical underwriting is required. I have not vetted any of these policies, and you should do your due diligence before making any purchase.
Converting SGLI to VGLI
You may apply to convert your SGLI coverage into Veterans Group Life Insurance (VGLI) coverage. You are not required to submit any health documentation if you apply to convert your coverage within 240 days after retirement. After 240 days, you may still convert your SGLI to VGLI coverage until one year and 120 days after retirement, but you will need to complete a health assessment.
You may obtain VGLI coverage from $10,000 to $500,000. Your initial purchase may not be more than the amount of SGLI coverage you had when you retired. You may increase your VGLI coverage by $25,000 every five years, until you reach 60 years of age or $500,000 in coverage.
VGLI premiums are based on age and increase every five years. They eventually become very expensive. For this reason, most financial advisors recommend that you get civilian insurance if you are medically eligible. However, VGLI is a great option if you are unable to obtain civilian coverage; it may be your only option. There are also situations in which VGLI is a good choice for a specific, short period of time…perhaps you only need coverage for a few years until your children are old enough to go to school, or while a spouse completes an educational program.
VGLI premiums are paid by allotment from military pay or by electronic funds transfer from your checking or savings account.
Converting SGLI or FSGLI To A Private Life Insurance Policy
Retiring service members may convert their SGLI coverage into an individual, permanent life insurance policy through participating civilian carriers. There is no required health underwriting, and the conversation must be made within 120 days of retirement. Eligible policy types are restricted.
I have talked to a handful of trusted financial advisors about this topic, and the universal reaction was, “Why would you do that?” There may be niche situations where this is the right option for you, but I would not pursue this route without having a clear understanding of what is unique about your situation, and how that uniqueness makes this the best choice for you.
About Employer-Sponsored Policies
Life insurance offered by your employer is great for three reasons: it is simple, it usually doesn’t require medical underwriting, and it may be cheap. But there is a very big reason why it isn’t smart to build your life insurance foundation on employer-sponsored policies: The coverage (usually) goes away with your employment. This can happen unexpectedly, and may happen at a time where you can’t get affordable replacement coverage. Worst case scenario, you become very ill and need to leave your job, and are completely uninsurable because of the illness.
Life insurance through your job is great for a “little bit extra,” but you really want to have your own policies that aren’t tied to your employer.
Get On It!
The right time to look into your life insurance options is now. For most people, a civilian policy is the first place to look. That will be your least expensive option over time if you are medical eligible for good rates.
Please, please don’t wait to start the civilian life insurance process. Often, folks suggest “get it before you start retirement medical work, or before you start the VA disability process. The insurance experts I know recommend that you start earlier. Keep in mind that companies may defer issuing a policy while you have outstanding medical appointments – which will probably be most of your last year of service.
If you need it, life is one of the most important parts of your financial plan. Don’t procrastinate in setting up this vital coverage.
Yes, yes, yes — I hope everyone heeds your advice that this is something you need to plan for and execute before your retirement date. I got mine six months from retirement and felt that it was plenty of time, but would not have wanted to start any later than that. No one from my insurance provider asked me wait until VA claims or other medical appointments were completed.
My needs were pretty simple — a 10-year term life policy. But the military-affiliated sites I checked with did not have the best rates at the time. I found the best rate from one of the major aggregators (I forget whether it was SelectQuote or Policygenius). I got a policy from a reputable insurer that was perfect for me. But, again, my needs were simple.
One warning: If you go with one of the major online sellers you need to be ready to commit, because they will call and email you, get your records from the DoD, schedule your medical and lab appointments, and basically hand-carry you over the finish line. (They get paid by commission, after all.) This was great for me because I knew what I wanted. But if I had only been in the ‘shopping around’ phase, I definitely would have been turned off by all of the attention.