VGLI Isn't the Only Option
Most retiring senior military officers or NCO's are aware of Veterans Group Life Insurance (VGLI). The good thing about VGLI is that if you apply for coverage within 120 days of retiring, you don't have to answer any health questions or provide proof of insurability. The bad thing about VGLI is that the premiums increase every five years and can become very costly or even cost prohibitive.
What many aren't aware of is that there is another option. Converting to an individual policy at standard rates. 11 different companies offer conversion options to a whole life policy without any health questions as well.
SGLI to Individual Policy. How Does it Work?
You can convert your Servicemembers Group Life Insurance (SGLI) and your Family SGLI (FSGLI) policy on your spouse to an individual policy. You can also convert a VGLI policy to an individual policy as well. The one you can't covert is FSGLI for children. Like VGLI, in order to convert your SGLI to an individual policy without any health questions, you must apply within 120 days of a qualifying event. A qualifying event for a service member would be separation from service. In the case of a spouse their are more events that qualify for conversion. These include separation of the servicemember, death of the service member, divorce, and termination of SGLI or FSGLI. You'll have to provide several documents which vary depending on the reason for conversion. At a minimum you'll have to provide a final Leave and Earnings Statement (LES).
In the case of VGLI, if you're covered by VGLI, there is no time limit and you only need to provide a VGLI conversion notice.
It is important to note that you can only convert to a whole life policy. Term, Universal Life and other types of life insurance policies are not options. Options with riders, such as waiver of premiums, are limited.
Should You Convert SGLI to an Individual Policy?
Like with most questions concerning life insurance, it depends on the need. If you need the coverage even if you live to a ripe old age, then converting to an individual whole life policy may be the best option. You'll pay higher premiums now, but eventually they will likely be lower than VGLI premiums.
Conversely, if the insurance need is temporary, funding college for a child as one example, then converting to VGLI may be the better option.
Of course, if you elect the Survivor's Benefit Program (SBP), which I think most retiring senior military officers and NCO's should do, additional insurance may or may not be required.
Also, if you're in good health, an individual policy where you do undergo medical underwriting may be the better option.
Military Members Need Military Specific Financial Advice
Retirees from the corporate sector don't necessarily have equivalent options. If you work with a generic financial planner you can expect generic solutions. If you want solutions to reflect your unique military and veteran situations, work with a financial advisor that sleeps, eats and breathes military financial planning.
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