Veterans: Are You Leaving Your Family Vulnerable?

Did you know that nearly 40% of veterans don’t have life insurance coverage? That’s a staggering number, especially considering the sacrifices they’ve made. Getting started with insurance (life, specifically) can seem daunting, but it’s a critical step in securing your family’s future. Are you one of the veterans leaving your loved ones financially vulnerable?

Nearly 40% of Veterans Lack Life Insurance

According to a 2023 study by LIMRA (a life insurance and marketing research association) reported by the Department of Veterans Affairs (VA), roughly 40% of veterans don’t have life insurance. This is a problem. Many veterans assume their military benefits are enough, or they simply haven’t prioritized it. But the reality is that life insurance provides a safety net for your loved ones, covering expenses like funeral costs, mortgage payments, and future education.

What does this mean? It means a significant portion of the veteran community is potentially leaving their families vulnerable to financial hardship in the event of their death. While military service provides some death benefits, these may not be sufficient to cover all the long-term financial needs of a family. We had a client last year, a retired Army sergeant, who thought his SGLI was enough. He passed away unexpectedly, and while the SGLI helped, it didn’t cover all of his children’s college expenses. His wife is now working two jobs to make ends meet. Don’t let this happen to your family.

VGLI Enrollment Rates Are Suboptimal

While Servicemembers’ Group Life Insurance (SGLI) provides coverage during active duty, many veterans don’t transition to Veterans’ Group Life Insurance (VGLI) after separation. The VA states (here) that you have 1 year and 120 days from separation to convert your SGLI policy to VGLI. However, enrollment rates in VGLI are lower than they should be. Why? Because VGLI rates often increase with age and may not be the most competitive option compared to private insurance. Some veterans simply forget to enroll, or they procrastinate and miss the deadline.

This is a missed opportunity for many veterans. VGLI provides guaranteed coverage without requiring a medical exam, which is a huge benefit for those with pre-existing conditions. However, it’s crucial to compare VGLI rates with private insurance options to ensure you’re getting the best value. I’ve seen veterans automatically enroll in VGLI without shopping around, only to discover they could have gotten a better rate from a private insurer. Don’t make that mistake.

Average Life Insurance Coverage is Insufficient

Even among veterans who do have life insurance, the average coverage amount is often inadequate. A common rule of thumb is to have 5-10 times your annual income in life insurance coverage. However, this is just a starting point. You need to consider your specific financial situation, including your debts, living expenses, and future financial obligations like college tuition. A recent study by Policygenius (Policygenius) found that many families are underinsured by hundreds of thousands of dollars.

What does this mean for veterans? It means you need to do a thorough needs analysis to determine the right amount of coverage for your family. Don’t just rely on a generic formula. Consider your mortgage balance, credit card debt, car loans, and any other outstanding debts. Factor in your family’s monthly living expenses, including housing, food, transportation, and healthcare. And don’t forget to account for future expenses like college tuition or retirement savings. I ran into this exact issue at my previous firm. A Vietnam vet thought $250,000 was sufficient, but after factoring in his mortgage and his daughter’s future college costs, we realized he needed closer to $750,000. He increased his coverage, and his family is now much more secure.

Private Insurance Premiums Can Be Surprisingly Affordable

Many veterans assume that private life insurance is too expensive, especially if they have pre-existing health conditions. While it’s true that some health conditions can increase premiums, it’s not always the case. In fact, many private insurers offer competitive rates, especially for younger, healthier veterans. Plus, some companies specialize in insurance (life) for veterans, taking into account their unique circumstances and military service.

Here’s what nobody tells you: the key is to shop around and compare quotes from multiple insurers. Don’t just settle for the first offer you receive. Work with an independent agent who can help you find the best policy for your needs and budget. And be honest about your health history. Trying to hide information could lead to a denial of coverage down the road. We’ve seen policies that were cheaper than VGLI, even for veterans with minor health issues. It’s worth the effort to explore your options.

Challenging the Conventional Wisdom: “Just Get VGLI”

The conventional wisdom is often: “Just get VGLI; it’s easy and guaranteed.” While VGLI has its advantages, I strongly disagree that it’s always the best option. As I’ve stated, VGLI rates increase with age, which can become prohibitively expensive over time. Also, VGLI may not offer the same level of customization or policy options as private insurance. For example, some private policies offer living benefits, which allow you to access a portion of your death benefit while you’re still alive if you’re diagnosed with a terminal illness.

Furthermore, VGLI doesn’t reward healthy lifestyles. If you’re a non-smoker, maintain a healthy weight, and have no major health issues, you could qualify for significantly lower rates from a private insurer. Don’t just blindly accept VGLI as your only option. Take the time to explore private insurance (life) options, compare rates, and choose the policy that best meets your needs and budget. The best option to secure insurance (life) is to fully explore your options. I’ve seen too many veterans overpay for VGLI when they could have gotten a better deal elsewhere.

Consider this case study: A 35-year-old veteran in Atlanta, GA, with a wife and two young children, initially enrolled in VGLI for $500,000 of coverage. His monthly premium was $75. After working with a financial advisor, he discovered that he could get a similar policy from a private insurer for $55 per month, thanks to his good health and non-smoking status. Over the course of 30 years, he would save over $7,000 in premiums. That’s a significant amount of money that could be used for other financial goals, like retirement savings or his children’s education.

Getting started with life insurance, especially as a veteran, doesn’t have to be overwhelming. Take the time to research your options, compare rates, and choose the policy that best protects your family’s financial future. Don’t just settle for the easy option; take control of your financial security.

Many veterans also need to maximize benefits and minimize taxes to ensure long-term security. Plus, it’s useful to create a post-military budget, to ensure you are allocating enough resources to life insurance and other important needs.

Don’t delay. Today, get a quote from at least two different private insurance companies, and compare them to your VGLI options. Your family deserves the peace of mind that comes with knowing they’re financially protected.