Service members have simple, affordable life insurance coverage through the Servicemembers Group Life Insurance program, aka 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.
When Should You Start Looking at Life Insurance?
Today.
Not kidding. Looking at life insurance needs, now and into the future, should be part of your regular financial review. You want to know how much insurance you want and need, and when you want and need it. There’s an imperfect balance between buying life insurance while you are young and it is cheap vs. buying too much insurance while you’re young and it is cheap. But sometimes you may want to buy insurance before you need it as part of a long-term plan.
And then you need to start shopping ASAP.
But what I often see happen is that military members are happily reliant on the great coverage of SGLI. As they approach the end of their military service, they realize that they need to replace that coverage. By this point, they are older, and maybe more broken. And the insurance they need has gotten more expensive.
One common time to purchase life insurance is when you have new kids. A 20 or 25 year term policy would provide coverage while those kids are dependent on your financial support. That’s certainly not the only time to buy, but that’s *a* time to buy.
How Much Life Insurance Do I Need?
Basically, you’re trying to ensure that you have insurance to fill in the gap between the streams of income your survivors would have and the income they would want to have. For some people, there’s no need for life insurance at all. Maybe the spouse has an adequate income themselves and you don’t have dependent children. Or your expenses are less than Survivor Benefit Plan benefits. Maybe you have a huge nest egg that could support the survivors without needing more. Every situation is unique.
And so you probably want some help figuring this out. There are 1001 life insurance calculators available on the internet. The one I like the best is actually and coincidentally hosted by the Department of Veterans Affairs. Explore the Veterans Affairs Life Insurance Needs calculator and see what you think.
I really want to recommend some more, but none are as good. I find that they all require some jiggling around of things like SBP payments to get the right outcomes. And who wants to jiggle if there’s a tool that doesn’t make them do that?
If you’re not happy with the calculator results, you may want to find a fee-only financial advisor who understands military pay and benefits. I suggest you start looking with the Military Financial Advisors Association.
Term or Permanent Life Insurance
Once you figure out how MUCH life insurance you need, you will want to think about what type of policy you need. The two basic groups are term insurance and permanent insurance, including whole life and a bunch of popular-on-social-media options. I could write pages and pages about types of life insurance, but there are plenty of places to learn about it. This article’s title implies that it is only about whole life insurance, but it’s a pretty good primer on insurance in general.
What I want to add to whatever you learn elsewhere is this: Most people need a term life insurance policy to cover a specific need. That might be paying off a mortgage or putting kids through college or reaching the age where your survivor would receive Social Security benefits.
But there are lots of people who want to sell you a permanent life insurance policy, so you want to know about them. The first question you want to ask yourself is: What unique need do you have that would point you towards whole life? From an academic perspective, there are three primary reasons you would want to purchase permanent life insurance: you have a special needs child, you have an ultra-high net worth (defined as roughly $14M per per – the federal estate tax level), or you own a closely held business (a business owned jointly with only a few other people, like you and your siblings inherited your grandparent’s farm.) There can be other reasons why whole life makes sense but they are exceptions. And “because some guy selling insurance says so” isn’t really an exception. That’s just a sales pitch.
Extended SGLI
SGLI will continue to cover you, at no cost, for 120 days after retirement.
Now forget that I said that.
Pretend that SGLI ends on the day you leave the military. Because what you do NOT want to do is figure that you’ve got 120 days, and then procrastinate and get distracted and find yourself without adequate life insurance on day 121.
This happens to people. The results could be catastrophic.
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. Once you’ve started thinking about separation or 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. Permanent policies may be lumped together and called “whole life” even though there are a whole range of types.
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 there are three main places to start shopping.
Your Military Organizations
Many major military benefits organizations sell life insurance. This includes (in no particular order):
Navy Mutual Aid Association (not just for the Navy!)
Military Officers Association of America
Armed Forces Mutual
Military Benefit Association
These are not suggestions or endorsements, just ideas for where you could start looking.
Use A Broker
You can also check with a broker. An insurance broker has a relationship with several insurance companies. One of the major benefits of an insurance broker is that they can compare policies, and they may know nuances about each company. For example, let’s say you have sleep apnea. A broker may know that Company A won’t insure anyone with sleep apnea, but Company B will insure you with a demonstrated history of using your CPAP as directed. This is a made up example, but you get the point.
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. Again, not an endorsement. Simply an idea of what you might be looking for.
Use An Online Insurance Search Tool
There are many online tools that will help you shop for life insurance. I recommend you set up a Google voice phone number and a throwaway email address before you start using one of these tools, because they will almost definitely sell your information to insurance companies who will be very eager to get you into a policy.
When to Start Shopping
Please, please don’t wait to start the civilian life insurance process. Often, folks suggest that you 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. Check with your organizations to see what they offer. If you don’t see something advertised, but they have life insurance, call them. You might learn something new.
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. Or maybe you’re so swamped with getting out of the military that you’re not going to get a new policy in place before SGLI runs out.
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.
That said, I regret not looking into this option. Our specific situation may have benefited from a permanent life insurance policy. And I don’t know what might have been available through this program because I did not look.
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.
Also keep in mind that this is typically a process that may take weeks or months. While there are online insurance companies that can do automatic or instant underwriting, they may or may not be your best option. You want time to explore all the companies and plans available to you.
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.