A look at life insurance for the military

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When Veterans Day arrives, many Americans may wonder: How do we insure the lives of our military?

Service members and their families enjoy a carefully woven safety net of life insurance, death gratuity, lifelong survivor benefits, financial counseling and bereavement support, all tailored to meet the unique challenges of modern military life should the unthinkable happen.

The life insurance portion of today’s safety net is underwritten and administered by Prudential in an exclusive partnership with the Department of Veterans Affairs, or VA. According to its most recent figures, the VA was the nation’s seventh largest insurer in 2009 with 7.1 million individuals insured for $1.33 trillion.

Here’s a rundown of the major insurance and benefit programs for military members, veterans and their survivors.

Servicemembers’ Group Life Insurance

The centerpiece of VA life coverage is Servicemembers’ Group Life Insurance, or SGLI. Each service member entering a period of active duty or reserve status is automatically covered for the maximum $400,000 death benefit. Premiums, which currently run $27 per month for the maximum coverage, are automatically deducted from their paycheck.

All service members covered by SGLI also receive Traumatic Injury Protection coverage for an additional $1 per month that pays benefits from $25,000 to $100,000, depending on the severity of the covered injury.

“Policy provisions, including maximum benefit amounts, rate categories and the manner in which the premiums are set, are all established by federal law,” says Sheila Bridgeforth, a Prudential spokeswoman. “Their premiums are based on peacetime mortality. If extra hazards of military service result in additional program costs, each branch of the service may supplement the premium.”

In addition to active service members, SGLI is available to Ready Reservists, members of the Coast Guard, commissioned members of the National Oceanic and Atmospheric Administration and the Public Health Service, cadets and midshipmen of the four military academies, and members of the Reserve Officer Training Corps.

Upon death, the $400,000 SGLI benefit is put into an interest-bearing Prudential Alliance Account in the beneficiary’s name. Beneficiaries may choose a lump-sum payment or 36 equal monthly installments, a feature designed to allow survivors time to grieve and plan their future.

Most survivors take the lump-sum payment for two reasons, says Ami Neiberger-Miller, public affairs officer for the Tragedy Assistance Program for Survivors, or TAPS, an independent, publicly funded nonprofit that works with surviving families.

“Their pay is stopped, and they have a year to move if they’ve been living on post,” she says. “The military will fund the move itself through their other benefits, but I know of several widows who have used that (SGLI) money to purchase a home.”

Unlike most civilian life policies, SGLI premiums do not vary by age, sex, health or tobacco use.

In the event a covered service member becomes totally disabled while on active duty, they may extend their SGLI coverage for up to two years.

Family SGLI

Service members also may purchase Family SGLI that covers spouse and children up to a maximum coverage amount of $100,000. The rates are uniform and affordable — $5 per month through age 34 for the maximum coverage and up to $50 per month for those 60 and over.

Death gratuity

When a member of the military dies while on active duty or within 120 days of separation, the last unit they served with pays their next of kin a $100,000 death gratuity.

“In these wars, a number of deaths are among people who are very young — 19 or early 20s. About 45 percent of casualties don’t leave a spouse,” says Neiberger-Miller. “If the next of kin are the parents, they will receive SGLI and the death gratuity, but there is no ongoing monthly (survivor) benefit per se.”

Surviving family benefits

In addition to the death gratuity, the surviving spouse and family receive payment from the government for unused accrued leave, reimbursement for part of the costs of burial, Dependency Indemnity Compensation, or DIC, of $1,154 per month, TRICARE health care coverage and Basic Allowance for Housing, or BAH, for one year.

“These benefits go until the survivor dies,” says Neiberger-Miller. “The benefits do change over time; for example, the children do age out of TRICARE at age 18 unless they go to college, where they’re able to stay on for a few extra years.”

Veterans’ Group Life Insurance

Upon separation, a service member with full SGLI coverage may convert their coverage to renewable term life through the Veterans’ Group Life Insurance program, or VGLI. Term coverage is available in multiples of $10,000 up to the SGLI maximum.

VGLI rates, (effective July 2008) for a $400,000 term policy range in five-year increments from $32 a month up through age 29, to $68 per month for ages 40-44, $144 a month for ages 50-54, $432 for ages 60-64 and $900 per month for ages 70-74.

Among the advantages of VGLI: Rates are the same regardless of sex or tobacco use, no medical exam or health review required if you apply within 120 days after separation, and no exclusions for mental health issues, post-traumatic stress disorder, traumatic brain injury or acts of war.

Service members also have the option to convert their SGLI to a permanent whole life policy at regular rates from a VA list of participating insurance companies.

Financial and bereavement counseling

SGLI, FSCL and VGLI beneficiaries receive free full-service financial planning services through the VA’s Beneficiary Financial Counseling Service.

Neiberger-Miller says the one underrated benefit available to all surviving family members is bereavement counseling, available for life at any VA center.

“Without it, financial issues can become overwhelming,” she says. “Research shows that it takes five to seven years for survivors to hit their new normal. It’s not uncommon for survivors to have short-term memory loss for up to a year after the death. You can’t put a dollar figure on bereavement counseling. Somebody might go two or three times, somebody else might go every week for five years. When you consider that that might cost $100 a week, it adds up to a significant benefit.”