Life insurance for veterans is one of many benefits offered to those who have served our country, but 120 days after leaving military service, you’ll have to convert your veteran life insurance policy into a civilian one or lose coverage. Too often, veterans let coverage lapse, leaving their families unprotected and missing out on tax-advantaged opportunities to grow and protect wealth.
Know your options when it comes to converting veterans life insurance to civilian life insurance. In this article, we’ll explain the various types of life insurance for veterans with tips on how to find the best policy for your budget and financial goals.
LIFE INSURANCE FOR VETERANS
Servicemembers’ Group Life Insurance (SGLI) from the Department of Veterans Affairs (VA) offers up to $400,000 in life insurance coverage to active duty personnel, a benefit that continues after you leave the military for up to 120 days.
During this approximately 4 month period, you’ll want to start shopping for a new policy or plan to convert your SGLI policy, as underwriting can take 6-8 weeks to complete. These are the most common courses of action:
- Convert your Servicemembers’ Group Life Insurance (SGLI) policy to a Veterans’ Group Life Insurance (VGLI) policy.
- Buy a new life insurance policy from a private (non-military) insurance company.
- Convert your SGLI/VGLI policy to a new policy from a private insurer.
Each option comes with its pros and cons. Choosing which is right for you depends on your financial goals and your family’s needs.
CONVERTING SGLI to VGLI
Pros
- Converting your SGLI policy to a VGLI policy may be the most straightforward way to continue your insurance coverage.
- You don’t have to take a medical exam when converting your SGLI policy to a VGLI policy within 240 days, so existing health conditions won’t influence your insurance eligibility. (Note that SGLI coverage ends after 120 days. Although you may still qualify for a VGLI policy, you won’t have insurance coverage beyond 120 days until you convert.)
- VGLI may payout up to 50% of your death benefit if you have a shortened life expectancy (9 months or less) when you convert your policy.
- VGLI policies are permanent; you’ll have life insurance coverage for life.
Cons
- Policies from the VA are capped at $400,000 and may not provide sufficient insurance for your family’s needs.
- Life insurance for veterans is based on the coverage you had while you were active-duty military, with little to no opportunity to increase coverage at a future date.
- Annual premiums increase every 5 years, costing hundreds of dollars per month. In fact, premiums for veterans over 75 with full coverage cost more than $1,800 per month.
- If you wait beyond 240 days after leaving active-duty, you will have to take a medical exam as part of your VGLI application underwriting that could influence your eligibility. You could face higher premiums or be denied coverage altogether.
- VGLI doesn’t offer as many policy riders as private insurance companies.
- If you were dishonorably discharged, you may not be eligible for VGLI.
BUYING A NEW LIFE INSURANCE POLICY
Pros
- You have more options as to the type of insurance policy you buy and the amount of coverage you can receive, including choosing a policy that accumulates cash value and grows tax-advantaged wealth.
- Some insurance companies have exclusions for certain military-related pre-existing conditions like PTSD.
- Assuming you don’t have any serious pre-existing conditions, private life insurance for veterans can be more affordable than VGLI policies.
- For the same rate as a VGLI policy, you can get significantly more coverage from a private insurance company.
- If you opt for a whole life insurance policy, premiums remain level for life.
- A dishonorable discharge doesn’t disqualify you from applying for insurance.
Cons
- Depending on the type of insurance policy you purchase, you may have to take a medical exam.
- If you opt for term life insurance, your coverage will eventually expire.
- With so many types of insurance and coverage options, it can be overwhelming to find the right policy for your financial goals and family’s needs.
CONVERTING YOUR VETERANS INSURANCE POLICY TO A PRIVATE POLICY
Pros
- You can usually convert your veterans life insurance policy to a private policy without a medical exam or needing to prove you’re in good health.
- You’re usually eligible for standard premium rates from your new insurance company.
- You have more options as to the type of insurance policy you buy and the amount of coverage you can receive, including choosing a policy that accumulates cash value and grows tax-advantaged wealth.
- For the same rate as a VGLI policy, you can get significantly more coverage from a private insurance company.
- If you opt for a whole life insurance policy, premiums remain level for life.
Cons
- If you opt for term life insurance, your coverage will eventually expire.
- With so many types of insurance and coverage options, it can be overwhelming to find the right policy for your financial goals and family’s needs.
- If you were dishonorably discharged, you may not be eligible for VGLI and therefore cannot transfer a policy. You’ll need to apply for a private policy and may be subject to a medical exam.
In most cases, it makes sense to transfer veterans life insurance to private insurance where you’ll enjoy greater coverage options and have more flexibility to find a policy and premium that fit your budget.
LIFE INSURANCE FOR DISABLED VETERANS
The VA considers disabled veterans those who are unable to work or have one of the following:
- Total loss of hearing
- Loss of speech
- Permanent loss of the use of both your hands
- Permanent loss of the use of both your feet
- Permanent loss of sight
- Permanent combinations of loss of the use of a hand, foot and/or eye
If you’re disabled at your time of separation, you have additional insurance options and it may make more sense to stick with a policy underwritten by the VA. You’ll be eligible to keep your existing SGLI coverage for an additional 2 years and/or be eligible for Service-Disabled Veterans Insurance (S-DVI), which provides $10,000-$40,000 of additional life insurance coverage. ($10,000 basic coverage plus an additional $30,000 in supplemental coverage.)
Certain disabled veterans can qualify to have their life insurance premiums waived, meaning they receive free life insurance coverage. If you qualify, it makes sense to keep your coverage from the VA. However, because coverage is limited, you may also want to look into purchasing supplemental insurance from a private insurance company that works specifically with disabled veterans.
CHOOSING A PRIVATE INSURANCE POLICY
If you decide to purchase a private insurance policy or to transfer your existing veterans life insurance, you’ll need to decide if you want term coverage or permanent coverage. Term policies are less expensive but they eventually expire. If you don’t pass away within the specified term, you typically won’t see any of the money back that you’ve paid into the policy. Permanent life insurance lasts for the duration of your life and guarantees a payout when you pass away.
In addition to offering lifetime coverage and a guaranteed death benefit, permanent life insurance policies also provide several living benefits that can help you grow wealth. One of the most common types of permanent life insurance is whole life insurance, which comes with a built-in investment feature called cash value. A portion of your premium goes into this account, where it earns a guaranteed rate of return and growth accumulates tax-deferred.
During your lifetime, you can use your cash value like your own personal bank. Borrow from it tax-free to help fund investments, generate business capital for entrepreneurial ventures, purchase real estate, pay for your childrens’ college education, or even as retirement income. Any unpaid policy loans will be deducted from the policy’s death benefit. With guaranteed level premiums and protection from market volatility, whole life insurance can act as your financial foundation and provide a source of reliable cash flow both you and your family can count on.
To transfer your VGLI to private insurance or to purchase a private insurance policy, it’s best to work with an independent insurance agent who can shop around for you and find you the best policy for your budget and family’s needs. This is especially true if you’re disabled or have PTSD, as certain insurance companies are more likely to approve your application. Independent insurance agents prioritize your interests and aren’t contracted with any one particular insurance company.
Before you meet with an insurance agent, you may want to be prepared with a copy of your separation papers, proof of current insurance (if you have an SGLI or VGLI policy), a copy of your last leave and earnings statement, and a list of financial goals, which could include items like paying off your mortgage, purchasing real estate, starting your own business, paying for your childrens’ education, retirement goals, and passing down generational wealth.
The Wealth Strategists at Paradigm Life work with the nations top-insurance providers and are experts in finding policies for veterans. In fact, several of our insurance agents are veterans themselves. Our consultations are always free and we’re here to help as you transition from active-duty to civilian life. 
today.
