Does Your Life Insurance Match Your Life?
Make Sure Your Life Insurance Matches You and Your Family’s Needs?
Though money can’t begin to fill the void caused by a death in a family, making sure the financial needs of your loved ones will be met, even in the worst case scenario, will give you peace of mind. When you join the military, you’re automatically eligible for Service Members Group Life Insurance (SGLI). This is a term policy with relatively inexpensive premiums that are deducted from your pay. It maxes out $400,000. SGLI has no war zone exclusion, and requires no intensive paperwork or physical exam.
There are two things you need to do when enrolling in SGLI:
- Choose your beneficiary wisely
- Reassess your coverage at every major milestone
Choosing Your Beneficiary
The beneficiary is the person you designate to receive the insurance settlement in the event of your death. Since you won’t be around to oversee what they do, choose someone you can trust to be financially responsible for people and things that matter most to you. You’ll also want to assign a secondary beneficiary since there’s no guaranty your primary beneficiary will outlive you. Make sure your beneficiary knows your policy exists, where it’s kept, what it covers, and how to claim the benefits.
Should your relationship with your beneficiary change or end (due to divorce, estrangement, or some other reason), you may need to designate a new beneficiary. Some people keep their ex-spouse on the life insurance policy, some don’t. Divorcing couples should be aware that life insurance laws are complex and can take precedence over state court orders. Don’t take anything for granted. Your ex-spouse could potentially remove you as their beneficiary, at any time, without your knowledge or consent.
Reassess Your Coverage at Every Major Milestone
Reassessing your life insurance is an ongoing process. What’s viable today may not be viable tomorrow. Here are some life stages that will have a major impact on your life insurance requirements:
Single and independent — no kids, no mortgage, no debts with co-signors
In this stage of your life your death wouldn’t leave anyone else in a financial dilemma, so it boils down to personal preference. You could forego life insurance, carry a minimal amount to cover the out-of-pocked expenses of settling your estate, or carry a larger amount for the peace of mind that comes with knowing you’d be leaving money to someone you care about.
Married, no kids.
There are several things to consider: Is your spouse an equal earner? How much debt do you have? Could your spouse singlehandedly cover the mortgage in the event of your death? (And vice versa?) Regardless of your answers, both you and your spouse should carry life insurance. Working spouses of military members typically need to carry more life insurance coverage than service members, since the government has no survivor benefits in place when a (civilian) military spouse dies.
When you shop for for additional insurance, find an insurance agent who understands the military lifestyle.
Lifestyle Upgrades: Home Ownership, Career Advancement, Major Purchases
Revisit your life insurance policy every time your financial obligations and/or standard of living increases. You’ll want to make sure you and your spouse are both carrying enough insurance for the survivor to move forward without a major financial reversal.
Starting a Family
Kids are expensive. According to the U.S. Department of Agriculture’s latest numbers the cost of raising a child from birth to age 18 is $233,610.00 . . . not to mention college. If one spouse is a stay-at-home parent, losing the family breadwinner will probably mean they’ll have to enter the workforce, so child care will again change the household budget.
Growing Your Family
With every new baby or other dependent comes added responsibility, and a need for more life insurance.
If you or your spouse have or acquire ownership interest in a business, protecting that interest with life insurance is a wise move.
Making sure your life insurance policy is sufficient should be something you do along with your other pre-deployment financial planning.
The Empty Nest
You’ll probably need less life insurance once your kids are grown and on their own.
Leaving the Military
When you leave the military, your SGLI policy will end, but you may be eligible to replace it with a Veterans’ Group Life Insurance (VGLI) policy. Due to Covid-19, the terms of application period for VGLI coverage has been extended.
Planning ahead, staying current, and making wise adaptations to change when it comes to life insurance will let you sleep well at night knowing your family’s future is secure.