Military Service and Life Insurance

By Frank Addessi

Over 1.3 million American men and women now serve in the U.S. armed forces. There are many well-known benefit programs offered to these military personnel—one of the most important (and possibly overlooked) of these is exclusive access to low-cost life insurance policies.

For both civilians and military personnel, life insurance policies function in the same way: providing security for an individual's dependents and loved ones in the event of the person's death. However, service members aren't offered exclusive life insurance deals out of plain patriotic goodwill. These policies exist because civilian life policies contain exclusions that render them inadequate for members of the military

The risks incurred while part of the military are rarely covered by civilian policies. For example, traditional, civilian policy payouts are commonly withheld if the loss of life occurs because of the following circumstances:

• Acts of war
• Aviation exclusions or surcharges
• Acts of terrorism
• Military deployment status

The plans outlined below have no such exclusions or limitations, ensuring military families their coverage will protect them if something terrible befalls their service members.

Types of Policies

Policy options fall along the same lines for enrollees regardless of whether they are sponsored by the policyholder or an employer, like the U.S. government. If you want to read up on the major differences in life insurance policies, they are covered in The Simple Dollar's comprehensive Life Insurance Guide. Otherwise, review our quick recap

• Term life is the least expensive form of coverage and is pure insurance—it does not grow cash value and is only in force for a specific period.
• Whole life policies provide coverage that will be uninterrupted for your entire life; a portion of your premium accumulates as cash value.
• Variable life provides a varying death benefit based on your policy's cash value. This type of policy does not have a guaranteed death benefit.
• Universal life is another type of policy that grows cash value, but unlike whole life, this type allows for some flexibility with regards to how the excess premium is invested.
• Universal variable life is a hybrid life insurance product that combines components of universal life and variable life in one policy.

All active, reserve and veteran military members have access to at least one or two exclusive life insurance options. Depending on their service status, certain members of the military will have several exclusive life insurance policies to choose from. Whether they choose a policy from the Department of Veteran Affairs (VA) or a government-affiliated mutual aid organization, current and former military personnel are likely to find a better deal than can be found in the open market.

Some policies require their enrollees to actively serve in a certain military branch. For example, there are two private, mutual aid organizations dedicated to specific branches of the military:

• The Army and Air Force Mutual Aid Association (AAFMAA)
• The Navy Mutual Aid Association (NMAA), which also extends to the Marine Corp, Coast Guard, the U.S. Public Health Service Commissioned Corp and the National Oceanic and Atmospheric Administration

The major program dedicated to veterans and administered by the VA is called the Veterans' Group Life Insurance (VGLI). The VA also administers the Servicemembers' Group Life Insurance (SGLI) plan, which is available to active-duty and reservist service members, as well as active and reserve members of certain organizations affiliated with the military. See the SGLI link for a full list of these groups.

The Difference Is in the Benefits

The single biggest benefit of the VA-sponsored program is that it guarantees issuance regardless of your current health. This is especially important to active and veteran service members who may have suffered an injury or developed a condition that makes conventional health coverage impossible to afford.

Active-duty service members covered by SGLI policies have 240 days to apply for conversion to VGLI coverage without undergoing a health review. Conversion takes place when an active or reservist member becomes a veteran. This ensures uninterrupted coverage for newly sick or injured veterans who are at their most vulnerable. Conversion to permanent private insurance policies is also an option, but these policies will most likely carry a higher premium and will almost definitely require a health screening.

Unlike the VA programs, AAFMAA and NMAA both extend coverage offers to the families of enrolled service members and veterans. These programs offer both term and permanent insurance and have rate structures that are comparatively less expensive than private insurers.

The NMAA also offers a unique benefit called the Guaranteed Insurability Option. Once you are covered by a permanent plus plan, you will have the option to purchase an additional $20,000 of permanent coverage within 90 days of your 25th, 30th, 35th, 40th and 45th birthday; you can also purchase this option when you marry or upon the birth of a child. There is a maximum of $80,000 of additional coverage allowed but no physical is required.

The AAFMAA and NMAA also provide a long-term care contingency at no additional cost. This allows policyholders to have all or a portion of their death benefits paid out over a period of time to cover long-term care needs, which are to be stipulated by the AAFMAA and NMAA respectively. The payments are generally made directly to a care facility, and the amount paid out is subject to administrative fees.

Each of the plans has limitations on the total amount of coverage that can be purchased. SGLI and VGLI both have coverage caps of $400,000, and AAFMAA and NMAA have limits of $1 million. These coverage maximums may not be high enough to cover the full needs of every individual, which is why it is important to do your own needs assessment and not base your decision exclusively on what is available through these programs.

Weighing Your Options

Veterans and active-duty service members alike understand the importance of protecting their families and their nation. For them, life insurance policies are just another tool to ward off devastating financial hardship. If you're a current or former service member, be sure to consult your provider for more advice. Military life insurance organizations specialize in working to match policies to unique experiences and circumstances; every member of the military has more than earned the right to take advantage of such services.

Click here to see more Veterans' Resources at HealthyWomen.org.

Frank Addessi was born and raised in Brooklyn, New York, and currently lives in the hills of northeast Pennsylvania. He began work in the life insurance industry in 1982. Today he is an agent with Metropolitan Life, while also owning his own business: CPA Insurance, an independent insurance agency. He attended St. Francis College and studied English and secondary education. This blog was originally published by The Simple Dollar, a site designed to help people fight debt and bad spending habits.