Borrowing From Sgli Life Insurance: What You Need To Know

Servicemembers' Group Life Insurance (SGLI) is a low-cost term insurance policy for active-duty service members, reservists, and other eligible individuals. While SGLI provides valuable coverage in the event of injury or death, it does not build cash value. This means that policyholders cannot borrow against their SGLI policy as it does not accumulate a cash reserve. However, upon separation from service, SGLI can be converted into a permanent cash value life insurance policy, which may then allow for borrowing or withdrawal.

SGLI and VGLI may not be enough to cover your family's needs

Servicemembers' Group Life Insurance (SGLI) and Veterans' Group Life Insurance (VGLI) are important benefits for service members and veterans, offering low-cost coverage options. However, it's important to recognize that SGLI and VGLI may not provide sufficient financial protection for your family's needs in the event of your injury or death. Here's why:

Maximum Coverage Limits

While SGLI offers a generous maximum death benefit of $400,000 to $500,000, this amount may not be enough to adequately support your family in your absence. The rising costs of living, including housing, healthcare, and education, need to be considered. The true purpose of life insurance is to provide a stream of income for your survivors, replacing the income you would have provided if you were still alive. Therefore, the coverage amount may fall short of what your family would need to maintain their quality of life.

Spouse and Dependent Coverage

SGLI provides minimal spouse protection, with a maximum coverage of $100,000. This amount is often inadequate to meet the needs of families, especially those with children. Childcare expenses can be significant, and the loss of your spouse's income could have a devastating impact on your family's financial situation.

Temporary Coverage

Another limitation of SGLI is that it is temporary coverage. Like most employer-provided group insurance plans, SGLI terminates when you leave your service or employer. While SGLI offers a grace period of 120 days of free coverage after leaving active duty, it eventually expires. You have the option to convert to VGLI, but the premiums can be expensive and increase every five years.

Individual Circumstances

Every family is unique, and their financial needs vary. SGLI and VGLI may not take into account specific circumstances, such as the number of dependents, existing debts or loans, and future educational or healthcare expenses. The coverage provided by these plans might not be sufficient to maintain your family's standard of living or meet their long-term financial goals.

Inflation and Cost of Living

Finally, it's important to consider the effects of inflation and the increasing cost of living. Over time, the purchasing power of a fixed sum of money decreases due to inflation. The coverage amount provided by SGLI and VGLI might not keep pace with inflation, eroding the financial protection it offers to your family in the long run.

In conclusion, while SGLI and VGLI are valuable benefits, they may not be sufficient to cover all your family's needs in the event of your death or disability. It is essential to assess your individual circumstances, future goals, and the specific financial requirements of your dependents. Exploring additional life insurance options can help ensure your family has the necessary financial support and peace of mind they deserve.

SGLI costs 6 cents per $1,000 of coverage

Servicemembers' Group Life Insurance (SGLI) is a low-cost term insurance policy for eligible service members. It is available to active-duty service members, reservists, and members of the National Guard, among others. SGLI costs 6 cents per $1,000 of coverage, with an additional $1 monthly charge for Traumatic Injury Protection (TSGLI). This brings the monthly premium to $25 for $400,000 worth of coverage.

The SGLI program offers military members affordable life insurance premiums. The cost of SGLI life insurance is 6 cents per $1,000 of coverage, which is a decrease from the previous rate of 7 cents per $1,000. This makes SGLI an even more attractive option for those seeking life insurance.

The monthly premium for SGLI coverage depends on the amount of insurance chosen. For example, the monthly premium for $500,000 of coverage is $30, while the premium for $100,000 of coverage is $6. The premium includes the additional $1 per month for TSGLI coverage.

SGLI provides valuable financial protection for service members and their loved ones. It is important to note that SGLI does not build cash value, and it cannot be borrowed against. However, it can be converted into a permanent cash value life policy after leaving the military.

SGLI members can take up to $400,000 of coverage

Servicemembers' Group Life Insurance (SGLI) is a term insurance policy for active-duty service members, reservists, and National Guard members. It offers low-cost coverage to eligible service members, with the option to choose their level of coverage or even refuse it entirely.

If a member elects to be insured for less than the maximum amount or to decline coverage, they must complete the Servicemembers Group Life Insurance Election and Certificate. This certificate designates one or more beneficiaries to receive payment from the insurance proceeds. It is important to note that SGLI coverage does not affect the member's right to retain any other government or private insurance or their entitlement to other veterans' benefits.

For those with spouses also in the military and participating in SGLI, each spouse can be insured under basic SGLI as well as SGLI family coverage for a maximum of $400,000 each. To ensure both spouses have coverage, they must list each other as spouses on their Defense Enrollment Eligibility Reporting System (DEERS) record.

SGLI also offers part-time coverage for reserve members who do not qualify for full-time coverage. Additionally, upon separation from service, SGLI coverage can be converted into a Veterans Group Life Insurance (VGLI) program or a permanent insurance plan with a commercial insurance company.

SGLI includes Traumatic Injury Protection (TSGLI)

Servicemembers' Group Life Insurance (SGLI) offers low-cost term coverage to eligible service members. SGLI includes Traumatic Injury Protection (TSGLI), which is a rider under SGLI that provides short-term financial assistance to service members and veterans who have suffered certain serious traumatic injuries while in service. TSGLI benefits can be used to help cover expenses connected to recovery and rehabilitation, including limb reconstruction surgeries, inpatient hospital care at critical care facilities, and therapeutic passes to help transition from an inpatient facility to living at home.

TSGLI provides insurance payments of up to $100,000, and all active or previously active service members with full-time SGLI coverage are automatically covered by TSGLI. To be eligible for TSGLI benefits, individuals must meet certain requirements, including being insured by SGLI when the injury occurs, suffering a covered loss within two years of the traumatic injury, and surviving for a period of at least seven full days from the date of the injury.

The cost of TSGLI coverage is included in the SGLI premium, which is automatically deducted from the base pay of service members who are signed up for SGLI. The current basic SGLI premium rate is 6 cents per $1,000 of insurance coverage, plus an additional $1 per month for TSGLI coverage.

While individuals cannot borrow directly from SGLI or TSGLI, they may be able to convert their SGLI policy into a permanent cash-value life policy and then borrow against the value of that policy. This can be done by completing and mailing the Application for Cash Surrender Value or Policy Loan (Form 29-1526) to the Department of Veterans Affairs.

You can apply for a VA cash-out surrender or loan by completing and mailing Form 29-1526

Servicemembers' Group Life Insurance (SGLI) and Veterans' Group Life Insurance (VGLI) are life insurance options offered by the VA for active service members and veterans. These plans pay a death benefit but do not build cash value. However, you may be able to convert them into a permanent cash-value life policy.

If you have a permanent life insurance plan, you can apply for a VA cash-out surrender or loan by completing and mailing Form 29-1526, the Application for Cash Surrender Value or Policy Loan. This form can be mailed to the Department of Veterans Affairs, and you will need your policy number(s), contact information, and banking information if you wish to receive payment via direct deposit.

It is important to note that the cash value of a life insurance policy is determined by the Veterans Benefits Administration (VBA) by subtracting any unpaid premiums or debts from the total amount of cash value that has accrued. Loans based on the cash value of your life insurance policy carry interest rates ranging from 5% to 12%.

Additionally, while you can surrender your policy and receive the cash surrender value, doing so will result in the loss of your life insurance coverage. Therefore, it is important to carefully consider your options and ensure you have adequate financial protection before making any decisions regarding your life insurance policy.

Frequently asked questions