What You Need To Know about VGLI life insurance
The United States government has been insuring the lives of servicemen and women since 1917. An amendment to the War Risk Insurance Act of 1914 included a provision that provided an opportunity for servicemen to obtain optional life insurance. As private insurers were reluctant to issue life insurance policies to service members on active duty, the federal government felt it necessary to provide for the families of those who served our country.
Today, retired veterans of the United States Armed Services can choose life insurance through a private insurer or through the Veterans’ Group Life Insurance (VGLI) program. VGLI provides term life insurance for veterans who have completed their service to their country. In most cases, service members on active duty who have Service Members’ Group Life Insurance (SGLI) are eligible to convert their current policies to VGLI upon their release from service. A service member wishing to convert his or her SGLI policy to a VGLI policy must do so within one year and 120 days from the time he or she is discharged.
Coverage Amounts, Premiums and Restrictions of Retired Veteran Life Insurance
Coverage amounts under the VGLI program are issued in multiples of $10,000 increments. The maximum death benefit allowed is currently $400,000. And, the amount of the death benefit cannot exceed the amount of insurance a service member had as an active service member under SGLI. Like all term life insurance policies, the amount of the premium is based on the age of the retired veteran at the time the policy is issued.
For example, under the current program, a 37-year-old man or woman buying $400,000 worth of coverage would pay $52.00 per month. He or she would pay $13.00 per month for $100,00 worth of coverage. Interestingly, premium rates for men and women are the same and smokers do not pay more for life insurance coverage than do nonsmokers.
Additionally, to purchase a retired veteran life insurance policy under the VGLI program, a veteran need not answer questions about his or her health. He or she also does not need to undergo a medical examination conducted by a physician and there is no investigation into his or her health status or family medical history. Neither can a retired veteran be denied coverage if he or she has or has had a mental health issue, post-traumatic stress disorder (PTSD) or traumatic brain injury (TBI).
Premiums for a VGLI policy can be paid monthly, quarterly or annually. A 5% discount is applied to payments made annually. Payments can be made through an automatic deduction from military retirement pay or from a Veterans’ Administration (VA) compensation payment. Veterans can also choose to pay premiums via credit card, online or by phone.
Retired veteran life insurance administered by the VA will provide a payment of up to 50% of the VGLI death benefit to a covered veteran who is diagnosed with a terminal condition that results in a prognosis of a life expectancy of 9 months or fewer. There is no contestable period with VGLI life insurance. A VGLI policy is immediate insurance. Once the contract is signed and the premium is paid, the policy is in force and the veteran is covered.
Coverage does not end at a specific age unless the policyholder chooses to end it or fails to pay the premiums. Coverage is never decreased based on age or the length of time the policy has been in force and applicants are not excluded based on an occupational hazard or lifestyle choice. VGLI insurance does not have a suicide clause under which a claim is not paid if the insured commits suicide. And, claims are paid if death results from an undeclared or declared act of war.
Converting a VGLI Policy to a Private Insurer Policy
Retired veterans who have VGLI policies can choose to convert their policies to those run by private insurance companies. A policyholder can convert his or her coverage at the standard premium rate without having to provide evidence of good health. However, he or she can only convert a VGLI policy to a permanent whole life policy.
Converting to a term policy or another type of permanent policy such as variable or universal life is prohibited. Several life insurance companies provide veterans with conversion policies. Among these are American Fidelity Life Insurance Company, John Hancock Life Insurance Company, Metropolitan Life Insurance Company, New York Life Insurance Company and Northwestern Mutual Life Insurance Company.
Other Retired Veteran Life Insurance Programs
There are two other retired veteran life insurance programs currently offered by the VA:
Retired Disabled Veteran Life Insurance
Disabled veterans are also eligible for life insurance through the VA. Known as S-DVI, this program was created in 1951 and allows veterans who were disabled during service to apply for a policy up to a face value of $10,000. Retired veterans applying for S-DVI must have been released from active duty on or after April 25, 1951 for a reason other than dishonorable discharge, must have been rated for a service-connected disability, must have been in good health prior to the service-connected condition and must apply within 2 years of the date the VA granted the service-connected disability.
Veterans’ Mortgage Life Insurance
The Veterans’ Mortgage Life Insurance (VMLI) program provides severely disabled veterans and service members with life insurance designed to pay off a home mortgage in the event of the veteran’s death. Only veterans who have received a specially adapted housing grant from the VA are eligible. The grant was designed to help disabled veterans either build a new home or modify an existing home to meet the needs presented by his or her disabilities.
VMLI pays up to $90,000 on an outstanding mortgage to the bank or lender that holds the mortgage. The amount of the policy equals the outstanding mortgage but cannot exceed $90,000. Unlike other retired veteran life insurance, VMLI is decreasing term insurance. The term is the length of the mortgage and the amount covered decreases each year as the value of the loan decreases.
