If you are considering converting your SGLI into VGLI and you are looking for a straightforward review of Veterans Group Life Insurance than you have come to the right place. In the following article we will highlight the positives, negatives, and potential alternatives to VGLI.
About Veterans Group Life Insurance
Active duty military have SBLI. Upon retiring from active duty retired military have the option of converting their Servicemembers Group Life Insurance (SGLI) into Veterans Group Life Insurance. Upon separating from active duty military service you will have a year and 120 days to apply (roughly 485 days). But most important, if you apply within the first 240 days then there are no health questions involved in the application process.
VGLI is group life insurance purchased from a commercial life insurance company by VA. It is available for all branches of military upon separation of service. That includes those in the National Guard who are being released, retiring, or separating and are already covered by SGLI and Individual Ready Reserve or Inactive National Guard.
Note: Veterans Group Life Insurance premiums go up every 5 years.
You can convert your SGLI or VGLI to a commercial policy, such as with Prudential Life Insurance. There are currently a handful of companies that you can choose from. These companies certainly make up some the best life insurance companies available.
- American Fidelity
- Northwestern Mutual
- New York Life
- Prudential Insurance
- Bankers Life and Casualty Company
- EMC National Life Company
- Life Insurance Company of Alabama
- SBLI Mutual Life Insurance Company
However, with only these companies to choose from your options are limited. In contrast, TermLife2Go works with dozens of top rated best life insurance companies, providing over three times as many options for our clients.
If you are considering converting your SBLI or VGLI policy, give us a call and let us compare your conversion premium with what you can qualify for from one of the many insurance companies we represent. That way you can guarantee you are getting the best company at the best price.
VGLI vs FEGLI
Please note, VGLI is different than FEGLI. FEGLI stands for Federal Employee Group Life Insurance. VGLI is an option upon separation from service. FEGLI is an option when you are a federal employee.
VGLI is excellent insurance coverage for ex-military, particularly for those with a service-connected disability, who need life insurance and would otherwise not qualify due to a pre-existing health condition. This is typically the only time we would recommend converting SGLI into VGLI.
For those with a pre-existing condition not fatal to a life insurance application, there is probably a cheaper alternative than VGLI, especially when you consider that Veteran Group Life Insurance premiums increase every five years (more on this below).
No health questions or medical exam
There are no health questions and no evidence of insurability required if your SBLI is converted within 240 days of your date of separation. Also, VGLI is no exam life insurance. That is because VGLI charges the same no matter how healthy or unhealthy you are. So if you have a service connected disability, definitely consider VGLI.
Now, if you happen to be in good health, since there is no exam to determine how healthy, or unhealthy, you may be, your monthly premium is the same as someone who is not healthy. That is because your monthly group premium is helping to supplement service-disabled veterans. So no health questions are a pro for those who are not healthy but can be a negative for those who are since you pay the same monthly premium.
Good rates for smokers
Being a smoker would fall into the pre-existing health condition category. So for all you smokers, VGLI might be the best game in town. The reason for this is that VGLI’s premiums are based solely on age. That is a huge positive for someone who chooses veteran life insurance that is unhealthy and smokes. However, for someone healthy, (even if you are a smoker), there are probably better options available in the individual marketplace.
Level Death Benefit
Another positive is that your face amount or death benefit will remain the same. When you die, your VGLI will pay out a lump sum death benefit to your beneficiary. However, you do have the option of requesting that it be lowered. This might be a good idea if you can only qualify for Veterans Group Life Insurance but your premium is too high.
Terminal Illness Rider
Veterans’ Group Life Insurance comes with a terminal illness rider. If you are diagnosed terminally ill and have been given a life expectancy of nine months or less, your policy will pay out up to 50% of the proceeds to you while you are still alive. This accelerated death benefit is a huge relief for anyone who is battling a life threatening illness.
Your VGLI insurance coverage can be converted to an individual policy with a participating commercial company. The policy will be issued at a standard rate class regardless of your health, for an amount equal to, but not greater than, your existing VGLI.
There is no suicide exclusion
Most life insurance policies come with a two year suicide exclusion. This means that if the insured commits suicide in the first two years of the policy the carrier does not have to pay the death claim. In contrast, Veterans’ Group Life Insurance does not have a two year suicide exclusion.
VGLI: The Negatives
Your VGLI rates almost double every five years
The #1 negative about VGLI is that at age 75 your rates will double. For example, a $400,000 life insurance policy for a 40 year old is $68 a month. Remember however, Veterans’ Group Life Insurance is set up so that the rate goes up every 5 years. So at age 45, a $400,000 policy is $88 a month. (You can view the chart on VGLI rates here).
The premium rate continues to climb until age 75 where the premium rate is fixed for the remainder of your life at $1,840 a month. The reality is, very few people will be able to pay the premiums past age 74. Could you imagine being retired on a fixed income and have to pay $1800 a month for life insurance? Neither can we. See the VGLI rate chart below.
Disclaimer: VGLI rates are taken from the Department of Veteran Affair’s website and are subject to change. This section of sample quotes is for informational purposes to give our visitors an idea of what rates may be as you age. VGLI rates last updated as of October 2017.
|Coverage||Age 50-54||Age 55-59||Age 60-64||Age 65-69||Age 70-74||Age 75 +|
There is a 5% discount rate if you pay your VGLI premium annually. You go here to compare the above VGLI monthly premium rates with the following term life insurance rates.
Men and women charged the same premium
With most other companies, life insurance quotes for women are much lower than for men when comparing similar ages and health classes. Women are typically healthier and have a longer life expectancy so it makes sense that life insurance is cheaper.
However, Veterans Group Life Insurance makes no such concessions when it comes to the premium for a man or women. Both will pay the same because VGLI only takes age into account.
So I suppose that this is a VGLI pro and con. Pro for men since their rates are the same as a women. Con for a women since they are probably paying too much in relation to men.
VGLI Possible Alternative
When we speak to clients who are considering converting their SGLI to VGLI or already have Veterans Group Life Insurance, we try and emphasize that what they are paying today is NOT what they will be paying down the road.
Why does this matter? The reason this matters is because what may seem like manageable VGLI rates today may be unmanageable five or ten years down the road when VGLI rates have doubled or tripled.
VGLI Insurance Product Options
A few different types of life insurance to consider other than VGLI would be either a term life insurance policy, a return of premium policy, or a universal life insurance policy, such as indexed universal life. Now all three of these could be more expensive initially.
However, the key is running a scenario where we determine your VGLI rates in twenty years or so and add up the premium you will have paid and compare it to what you would have paid over the same time with a individual policy.
Often the individual life insurance policy will be substantially less once your VGLI rates have quadrupled over the 20 years.
VGLI vs Private Individual Life Insurance
Here is an example of a male age 40 at a preferred rate class. We use a preferred rate class. You can read about the different life insurance health rate classes here.
Consider a $250,000 policy for a 40 year old. The VGLI premium is $42.50 a month. However, that same policy premium jumps to a whooping $270 a month at age 60. And by age 70 the VGLI payment is $575. Finally, by age 75 your VGLI premium payment is a whopping $1,150!
In contrast, a preferred male age 40 would pay $37 a month for 30 year term life insurance. A 35 year return of premium policy, where all your money is returned if you don’t die, is $104.54. And a Universal Life policy that lasts the rest of your life would be $126 a month fixed premium.
In this example, VGLI was more than the term and less than the return of premium and universal life insurance. However, by age 60 you would be paying more than double a month in VGLI premiums compared to those two either the ROP or Universal Life policies.
The bottom line is we might be able to save you thousands of dollars over the life of your VGLI policy. We have saved many people over the years substantial amounts of money on life insurance. It is our knowledge, experience, and options that allow us to achieve our goal of finding you the best life insurance rates—for you, based on your unique health and lifestyle.
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