The Insurance Gap and How to Bridge It
For those on Active Duty, the $500,000 of SGLI may not provide necessary income for your spouse and children, especially if you have a mortgage, college costs, or aging parents. Many servicemembers do not have enough life insurance to protect their family’s goals and lifestyle in the event of the unexpected death of anyone that contributes to the household well-being, especially income earners. Nearly half of American households have a significant gap of approximately $200,000 between their life insurance coverage and their life insurance needs. It would be hard enough to deal with the loss of a loved one emotionally; life insurance protects against the financial consequences of such a loss.
Take the very simplified example of an Active Duty servicemember with a family who has $500,000 SGLI coverage and purchases a home with a $500,000 mortgage. An important question to answer: Does the surviving spouse earn sufficient income to sustain the family lifestyle and continue to pursue the goals your family have been working for?
When SGLI may not be enough to provide the protection for your spouse and children:
Recent statistics show that nearly half of American households have a gap of about $200,000 between their life insurance coverage and their actual needs. Here is a simple example:
| Current family Life Insurance (SGLI) |
$500,000 |
| Family Mortgage |
$500,000 |
| Unfunded college savings |
$100,000 |
| Life Insurance Required* |
$100,000 |
Also, both spouses in the family should have life insurance coverage. Each one contributes to their family’s pursuits and should have coverage to protect the surviving spouse and children. Even if your spouse is not working outside of the home, their contribution should be accounted for.
Additionally, if one spouse is leaving or has left military service, he or she will most likely need to replace that SGLI coverage, in essence creating a larger shortfall. You are often better off replacing your life insurance prior to separation with a policy that will remain in effect long after service ends. There are inexpensive -term life insurance policies available for this very purpose. You can easily estimate the cost to provide the protection you and your spouse need.
Building a solid protection plan for your family is an essential step to take toward a more secure financial future. You can estimate your life insurance needs to understand if you have an insurance gap.You can also call and speak to an AAFMAA Membership Coordinator (insert call rail number for sales) for expert guidance in helping you achieve financial security and peace of mind for your family.
This article was originally published May 18, 2017.