Good Morning Business Owners! Today I’m pleased to bring you a guest post from Michelle Smith. Michelle is a member of Team Scorpion and Team Phoenix. As a Member of Team Phoenix, she trains on the how and when and why to use your veterans benefits. As a member of Team Scorpion, she trains on Business Insurance for Active Duty, Veteran and Military Spouse Business Owners. She also has another very informative post here. And, she has appeared on “The Deanna Wharwood Show.”
SGLI, VGLI, and SBP. What to Consider When Transitioning Out of the Service.
You are looking forward to retiring from military service and moving in a new direction. There is much to be considered. You may have attended a TAP class, discussed options with fellow service members, and are making plans. One of the things you may be thinking about is how you have protected your loved ones through the Servicemember’s Group Life Insurance Plan (SGLI) during your time in the military.
Now that you are retiring, should you convert that plan to the Veteran’s Group Life Insurance Plan (VGLI)? Should you apply for other individual insurance through a commercial entity? Can you get a better deal than VGLI? What should you consider? Also, is taking the Survivor’s Benefit Plan really necessary to protect your family? Is it worth the premiums that will come out of your retired pay? These questions are among many you may be pondering.
While no two situations are alike, there are some basics to think about: SGLI covers the service member for up to $400,000. All or part of this may be converted to the Veteran’s Group Life Insurance plan (VGLI) without showing evidence of insurability. If you have medical conditions that make qualifying for individual life insurance difficult, then VGLI is a blessing. Premiums for VGLI coverage increase over time, however, and may become unaffordable at older ages, a time when you really need coverage.
If you are in good health, and can be approved for commercial life insurance coverage, you may want to take VGLI initially, then replace it once you have been approved for commercial coverage so that you can lock in an affordable rate. If you apply for commercial life insurance, you should not cancel any group coverage until you have completed the underwriting process and been approved for individual coverage.
Do not assume that you are insurable at the best rates because of the physical requirements of military service. Insurability consists of a variety of health and lifestyle factors that are based on mortality statistics. Often insurability does not correlate with current physical readiness for deployment. You will also want to consider your need for insurance. $400,000 does not go as far as it used to. A mortgage and one or two college educations that need to be paid for should something happen to you can easily justify getting more coverage even if you opt to convert to VGLI.
When considering whether to take the Survivor’s Benefit Plan (SBP) coverage for your spouse or children, think about their true need for the income. If you are retiring from the military with a sizeable investment portfolio, you may not need to take this coverage. For many service men and women, however, SBP is a great way to ensure financial peace of mind for loved ones.
It is important to note that most wives outlive their husbands by several years. If you or your spouse’s age and health status indicate the likelihood that income will be needed for your family after you have passed on, you should consider taking the SBP. You should know that declining the SBP, or talking a less than full coverage amount, will require a consent signature from your spouse. Also, taking the SBP is not a final decision, you can later decide to opt out of SBP 24 months after your retirement date. You must make the decision before the 36th month after retirement. After this time you are committed to the SBP.
This ultimate commitment to the SBP is a positive thing. Life insurance plans can terminate if premium payments stop. Financial concerns may cause you to cancel whole life policies and take the cash value. However, SBP premiums will always be taken out of your retirement pay. It will ensure your loved ones are protected with a stream of monthly payments. If you are considering life insurance as an alternative to the SBP, remember that life insurance proceeds must be invested to create a monthly income. SBP relieves your survivors from having to make investment decisions regarding life insurance proceeds earmarked to provide a monthly income after you are gone. Also, the SBP will pay your spouse until death and your children until age 18 or 22 if they are in college. If your spouse lives a long life, SBP will ensure that they do not outlive the benefit.
To read more about SGLI consult the following link: http://benefits.va.gov/insurance/sgli.asp
To read more about VGLI consult the following link: http://www.benefits.va.gov/insurance/vgli.asp
To read more about SBP consult the following link: http://www.dfas.mil/retiredmilitary/provide/sbp.html
For a free consultation regarding your personal need or eligibility for life insurance, feel free to contact Michelle Smith at email@example.com, or at 540-710-4205. Michelle is not an agent, but can provide insight into your personal situation, and advise you regarding next steps with objectivity.
Michelle Smith also offers fee based life coaching programs. Her niche is empowering women for positive growth and change. See her website at www.mslcoaching.com. She also extends herself to military men and women to help them navigate decisions about insurance and military benefits when transitioning to civilian life. One of her offerings is a review of your existing life insurance coverage.
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