Life insurance is very important because it not only provide financial protection for your family but it also allow you to leave them with a non – taxable amount at the time of your death. In a way, your life insurance will replace your income once you pass away. For your beneficiaries, this means they can have money to cover most of the essential expenses such as mortgages and personal loans. It can also be used to pay for your children’s tuition in college and pay off debts.
We don’t leave forever and it is necessary to look out for our loved ones even when we are no longer here. Unfortunately, life insurance is one of the most poorly understood financial planning schemes and this mistake invariably causes significant financial hardship for the survivors. The main purpose of life insurance is to protect the survivors from the difficult financial consequences of a person’s premature death.
This is particularly true not only among regular Joes but also among Service Members and veterans. That is why they are encouraged to obtain SGLI (Service Members' Group Life Insurance) or VGLI (Veterans' Group Life Insurance) that provides low-cost term coverage to eligible service members and qualified veterans.
What is SGLI / VGLI
Servicemembers' Group Life Insurance or SGLI is a form of life insurance program made available for all active duty and reserve members of the uniformed services of the United States. This insurance program is supervised by the United States Department of Veterans Affairs and is administered by the Prudential Insurance Company of America.
The SGLI coverage is available in $50,000 increments up to the maximum amount of $400,000. Service members are insured automatically with a maximum $400,000 coverage unless they refuse coverage or choose a reduced amount. All members have a couple of options available upon release from service. They can either convert their full-time SGLI coverage to renewable term insurance under VGLI or Veterans' Group Life Insurance program or to convert to a permanent plan of insurance with any of the participating commercial insurance companies.
How Transitioning Veterans Can Convert Their SGLI|VGLI To A Commercial Policy
Under specific conditions, the choice to switch to a commercial insurance policy is allowed for persons covered under the SGLI and VGLI programs and this includes spouses covered under FSGLI. Service members covered under the SGLI program have the option to convert their SGLI coverage to an individual policy of insurance within 120 days from the date of separation from the military.
When you leave the military, your SGLI also ends unless you qualify for a disability extension. But even if you will no longer have your SGLI, there are several ways to continue your $400,000 coverage. If done within a certain timeframe (120 days), you can continue coverage without having to prove good health.
For a Service Member to be able to convert SGLI coverage, he or she must:
• Find an insurance company from the Participating Companies listing,
• Apply to a local sales office of the company selected
• Provide a copy of his/her separation document (Form DD-214 or NGB-22, or written Reservist orders along with a copy of last Leave & Earnings Statement (LES).
Veterans can convert their coverage into a commercial policy following the industry’s standard premium rates. All this can be done without the need to provide proof of good health as stated earlier. The conversion policy should be a permanent policy like whole life policy for example. Other types of policies like Term, Variable Life, or Universal Life Insurance will not be allowed as conversion policies. Additionally, supplementary policy benefits like Accidental Death and Dismemberment or Waiver of Premium for will not be considered part of the conversion policy.
To convert VGLI to commercial policy on the other hand, service members have additional requirements including:
• Obtain a letter from OSGLI verifying coverage (VGLI Conversion Notice),
• Give a copy of that notice to the agent who takes the application
The same agreement with SGLI applies to VGLI conversion as well. Service Members can also convert any amount $25,000 or greater, up to their maximum eligible conversion amount. On the other hand, any unconverted coverage will be lost.
Speak With Your Independent Insurance Advisor
Converting your SGLI or VGLI to commercial policy is easy but you still need the help of an independent insurance advisor to ensure you are doing the right choice. As an insurance advisor, he or she can help review your information as well as other existing policies if there are any. They can also give you a precise analysis of what exactly it is that you need to sufficiently provide for your family. An advisor can also assist your loved ones personally in the event of a claim. During these times, advisors understand that it is a very difficult time for everyone involved and they know how to handle things in a sensitive manner.
As experienced insurance advisors, they are there to help you not only in converting your SGLI or VGLI to a commercial policy but they can also help you with your life insurance needs including other forms of insurance like disability and critical illness. You have to remember that one of the requirements for converting into a commercial policy is that the conversion policy should be a permanent policy. With the help of your insurance advisor, they can provide you with the necessary information that will allow you to choose the most ideal permanent policy based on your situation. They are there to help you find the right protection. Knowing that your loved ones will be taken care of even when you are gone is a guaranteed peace of mind that any amount of money cannot buy.
With his experience in the industry, your insurance advisor has the knowledge and skills needed to determine the perfect type and specific amount of protection so your loved ones will not be burdened with financial issues when you are gone.