As a veteran myself, I understand the decision-making process that goes into what type of life insurance to buy once you leave the service and you’re looking to replace your SGLI benefits. Depending upon your age when you leave the service, the Veterans Group Life Insurance may seem like a good option. The rates can be relatively inexpensive, and it mirrors the SGLI coverage amounts. In this article I am going to detail how the VGLI works, as well as show detailed charts on what you could feasibly pay with a VGLI policy when compared with a commercial policy.
How does the VGLI work?
The VGLI works in age groupings of five year increments and allows you to choose the amount of coverage you want from $10,000 to $400,000 in increments of $10,000. Age groupings are as follows: Age 29 and below, 30-34, 35-39, 40,44, 45-49, 50-54, 55-59, 60-64, 65-69, 70-74 and 75 and over. Once you have the policy the rates will continue to rise as you age into the next category. For instance, let’s use a 40-year-old male getting out of the service and decides to do a $400,000 VGLI term. Between the ages of 40-44 this person will pay only $68 a month. Once he turns 45, however, his payments will rise to $88 a month between the ages of 45-49. Simply put, this is an increasing term.
How much can I expect to pay for a 20, 25- or 30-year term?
For this example, I am going to use a 40-year-old male again getting a $400,000 policy and show what he will pay for a 20, 25- and 30-year term of keeping the policy. Reference the table below for the amounts calculated per year groups:
|Age Group||Monthly Premium||Total Paid Per Group||Total Paid Overall|
How this table works, I took the monthly premium and multiplied it by 60 months, or 5 years’ worth of months, for each grouping. As you can see the monthly premiums start to sky-rocket once you get to the age group 55-59. If you’re wondering if these are good rates, lets compare them to one company, Americo.
Comparison of VGLI to Commercial Rates.
I am using a company, Americo’s, rates for this example. Of note, these are not the cheapest rates in the industry, nor are they the most expensive. I will use the same scenario, a 40-year-old veteran getting a $400,000 policy through Americo. Additionally, Americo’s policy rates are locked at the age they are approved and cannot be changed, and it’s not just a traditional term. The policy has living benefits that also pay out while you’re alive in the case of critical chronic or terminal illness. For more information about these living benefit riders, click here for another article where I go in depth on how they work. See below table:
|Years of Policy||Monthly Premium||Total Paid|
Again, in this table I used a 40-year- old veteran and what his rates would be with a 20, 25- and 30-year policy. I calculated the number of months with the monthly premium for the overall total paid for the policy. It looks something like this: 148.01 x 12 x 20 = 35,522.40. As you can see, even though the rates are more expensive on the front end, over time you either nearly break even or start to pay significantly less with a commercial policy when compared with VGLI.
|Years||VGLI Overall Paid||Americo Overall Paid|
As you can see, VGLI barely beats out Americo on a 20-year run but gets beat over a 25- and 30-year period. So much that on a 30-year term this vet would pay over $23,000 less for the same amount of policy, that has additional payout benefits!
Which Policy is Best For Me?
That depends on what you’re looking for and how long you’re looking for coverage. In the short term, a 5- or 10-year period, the VGLI will likely beat the price of any company. But ask yourself, if you just recently retired, you are 38-41 years old and likely pretty healthy would a 5-year term benefit you? What about a 10-year term? I cannot necessarily answer that for you. It depends on your family and financial situation, what you want your policy to do for you and your family, basically, what’s your why for getting the policy. Speak with an advisor that is focused on serving you with the best possible plan that fits your situation and do some research. Click here if you want to get some term quotes and here if you want to get some whole life final expense quotes. You can arm yourself with the knowledge you need to make the appropriate decision for your family!