When should you get life insurance?

When should you get life insurance?

Life insurance provides survivors with financial assistance that can take away the financial aspects of loss by providing survivors with money when it is needed the most.

While you are automatically enrolled in a life insurance policy while serving in the armed forces, this policy will not continue after your retirement or discharge from the military. You may also choose to acquire an additional policy for additional benefits while in the armed forces.

Should you wish to continue having an insurance policy after separation from the military, you have several options available to you. 

It is important to learn more about veterans life insurance before selecting a policy in order to select a policy that will provide you with an adequate amount of coverage. You will also need to determine the amount of insurance that you should acquire and it is beneficial to learn how these policies work in the event of a beneficiaries’ passing. 

Why is it important to have a life insurance policy

Life insurance is essential in protecting your survivors from financial burden in the event of your passing. An insurance policy provides survivors with money when it is likely needed the most. The finances received from a policy can be used towards payments such as: 

  • Income replacement. 
  • The finances necessary to cover your final expenses, including funeral and/or transport costs. 
  • The ability to eliminate financial debts or other liabilities. 

While there are several insurance policy options for veterans and active-duty service members, it is worth reviewing these policies carefully in order to ensure that a policy fits the amount of coverage that you and your family need and that a policy will be paid out in the event of a military-related passing. 

When does the military-provided life insurance policy end?

All military service members are automatically enrolled in a life insurance policy called Servicemembers’ Group Life Insurance (SGLI) at the maximum level of coverage ($400,000). However, this coverage will only last for a set period of time after you separate from the armed forces. Coverage will either last until 120 days after your retirement date or the date that you leave the armed forces. 

Understanding the Most Common Life Insurance Types

If you are interested in obtaining a veterans life insurance policy, then it is important to decide whether you are more interested in a term or whole type of policy. 

Term life insurance policies are temporary policies that are good for a set period of time. This period of time is chosen when initiating a policy, but common periods of time include 5-, 10-, 20- and 30-year policies. A prominent benefit of term policies is that premiums will remain the same for the entire duration of the policy. These policies commonly allow consumers to purchase a greater amount of coverage for less in comparison to a whole (permanent) policy. 

A whole life insurance policy is considered a permanent policy, as these policies last forever and accrue a cash value. These policies are advantageous for their lack of expiration dates, but these policies often cost more in comparison to term-based policies. 

The type of policy that is best for you will largely depend on your personal preferences and your financial situation. Therefore, it is important to determine which type of policy that you and your family would prefer before looking at coverage options.

How much life insurance do I need? 

The amount of life insurance that you may need will likely differ from another family. There is no “one-size-fits-all” approach to insurance amounts. However, some experts recommend selecting a policy amount that is five to 10 times your annual income. You may need to adjust to make a family budget to cover the cost of life insurance.

The USAA recommends that, when estimating the amount of life insurance that your family may need, you consider the following factors: 

  • Liabilities 
  • Income replacement
  • Final expenses
  • Education

When calculating your desired policy amount, you should ensure that your policy will include all outstanding liabilities that you have. Your policy should have enough money to pay off loans for mortgages, cars, student expenses, credit card debt or other types of consumer loans. 

Income replacement amounts should be enough to cover at least five years of your annual income. In doing so, your survivors will not need to immediately change their lifestyle or worry about having to replace your income. 

Final expenses can quickly become a financial burden as these expenses can add up quickly, especially if long-term care or medical expenses have significantly reduced savings. These potential costs should always be considered when building a policy. 

Lastly, education expenses may or may not be important to you and your surviving family. If you have younger children living within the home, you may want to consider whether or not you wish to include potential college expenses in your policy amount. 

How does life insurance work? 

When creating a veterans life insurance policy, you will be asked to list a beneficiary for the policy. In the event of your passing, that beneficiary will need to file a claim with your insurer, submit a death certificate, proof of their identity and complete a form. 

If the circumstances surrounding your passing are covered under your policy and the insurer does not contest the claim for suspicion of fraud or illegal activities, the insurer will pay your policy amount to the beneficiary. Payments can be made in one lump-sum that is tax-free or through annual payments that could potentially exceed the death benefit amount.  

Learn About Veterans Life Insurance Policy Options

When selecting a veterans life insurance policy, it is important to review any military-related clauses that are included within the policy. If you are currently a service member, the “war clause” will be the most important clause to review. If a policy includes a war clause, the policy may not pay out in the event that the policyholder dies in a war zone or through an act of war or terror.

There are several insurers that offer veteran and military policies. However, you may also benefit from one of many civilian policies, based upon your military status. However, the Veterans’ Group Life Insurance (VGLI) is a popular choice among veterans. These policies are easy to qualify for with premium amounts that are based upon your age instead of your health. 

For this reason, payments are generally affordable and increase every five years due to the increase in age of the policyholder. While VGLI rates can be very good, it is worth knowing that policies have a limit of $400,000. Depending on your situation, this may or may not be a sufficient amount to meet your needs. 

When considering various insurers, it is also important to keep in mind that, should you select a policy that is offered through an employer, that policy may not continue if your employment ever ends. Therefore, it is important to ensure that the policy is portable before enrolling in an employment-based policy.