- Filed Under
When you leave the military, you can't take Servicemembers' Group Life Insurance with you.
You can, however, convert it to another insurance policy.
But what exactly does "convert" mean?
About 99 percent of active-duty members and 92 percent of reservists have SGLI coverage, a group term life policy with low-cost premiums that stay level regardless of a person's age or gender. The monthly cost drops if troops opt to choose lower amounts of coverage than the $400,000 maximum, which costs $27 a month. The term of the policy is the time on active duty.
Troops may convert their SGLI coverage automatically to a Veterans' Group Life Insurance policy, which also is a group term policy, but the premiums increase every five years.
A 40-year-old with $400,000 of VGLI coverage would pay $68 a month, but that coverage would cost $600 a month by the time the veteran reaches age 65, and maxes out at $1,800 a month at age 75 and older.
Troops also may convert their SGLI coverage to a permanent commercial policy at standard premium rates, without having to provide proof of good health. Twenty insurance companies participate in this program with the Veterans Affairs Department.
To convert SGLI to a commercial policy under these terms, troops must convert to a permanent policy, such as whole life insurance. Permanent policies are more costly at younger ages than term policies, but premiums don't rise with age. Permanent policies also build cash value; term policies don't.
Spouses also may convert Family SGLI coverage to a commercial policy, and VGLI policyholders also may later convert their VGLI policies to a commercial policy.
A VGLI policyholder in good health may be able to meet the underwriting criteria of private insurers and qualify for premiums lower than standard rates offered by the converting companies, VA officials said.
But for those not in good health, the conversion privilege gives VGLI policyholders the right to convert their coverage at any time to whole life insurance offered by one of the 20 participating companies — without providing proof of good health.
The premium is a standard rate for a healthy individual, VA officials said.
Few VGLI-covered veterans are using this conversion privilege, probably because the premium for whole life insurance is initially much higher than the term insurance premium they are paying for their VGLI coverage, officials said.
For example, a VGLI-covered veteran at age 40 with $400,000 of coverage would pay about $550 a month for a conversion whole life policy, compared with $68 a month for $400,000 of VGLI coverage.
But that VGLI premium keeps going up every five years, while the whole life premium stays the same forever.
CONVERT YOUR POLICY: A CHECKLIST
From SGLI to a commercial policy under VA program
• Apply within 120 days of your military separation.
• Pick a company from a list on http://www.benefits.va.gov/insurance/converting.asp">VA's insurance website.
• Ask the company for the reinsurance or conversion department. If you're contacting a local sales office of the company, make sure it knows you're converting SGLI coverage.
• Provide proof of eligibility — a copy of your discharge (Form DD-214 or NGB-22) or written reservist orders along with a copy of your final leave and earnings statement.
• Make sure you understand all of the terms of the policy, starting with the premium costs and the amount of coverage. Read the documents.
• Pay the required premiums. Be prepared to pay higher premiums for permanent policies than for term coverage.
From SGLI to VGLI
• Apply within 240 days of your military separation.
• Apply using the https://www.ebenefits.va.gov/ebenefits-portal/ebenefits.portal">ebenefits.va.gov website, or download and complete SGLV8714, Application for Veterans' Group Life Insurance, and mail it to the Office of Servicemembers' Group Life Insurance.
From Family SGLI to a commercial permanent policy
• Apply within 120 days of a service member's death, separation from the military, divorce from the spouse, or the member's written election to terminate SGLI or Family SGLI.
• Pick a company from the participant list.
• Apply to a local sales office of the selected company.
• Provide a copy of the most recent LES to the agent, showing the deduction for Family SGLI, along with proof of coverage — a document that depends on the circumstances that caused the end of coverage.
From VGLI to a commercial permanent policy
• Pick a company from the participant list.
• Apply to a local sales office of the company selected.
• Obtain a letter from the Office of Servicemembers' Group Life Insurance verifying coverage — a VGLI conversion notice.