Most servicemembers are automatically enrolled in SGLI when they join the military. Servicemembers Group Life Insurance (SGLI) makes sure your loved ones will be taken care of in the event of your death or serious injury. But is it enough? What happens if your family needs more coverage than SGLI provides? Let’s take a closer look at SGLI, including how it works and how you can evaluate whether it’s enough for you.
Who Is Eligible for SGLI?
In addition to active-duty servicemembers, SGLI is available to the following:
- Ready Reservists
- National Guard
- Members of the Commissioned Corps of the National Oceanic and Atmospheric Administration and the Public Health Service
- Cadets and Midshipmen
- Reserve Officer Training Corps (ROTC) members
Understanding SGLI Coverage
Servicemembers' Group Life Insurance is a low-cost term life insurance plan for eligible servicemembers. It provides coverage up to $500,000, offering financial security to military personnel and their families.
Spouses and Dependents
FSGLI, or Family SGLI, available by request, provides additional coverage for your spouse and children. Note that FSGLI is free for your children until they turn 18, but there is an added cost for your spouse. In addition, spouse coverage is limited to just $100,000.
Additional SGLI Coverage
In the case of traumatic injury, TSGLI, or Traumatic SGLI, provides up to an additional $100,000. This coverage is applicable for injuries such as limb or vision loss. TSGLI can be purchased for an added premium on your SGLI.
Covered Scenarios
Servicemembers are protected against both service-related and non-service-related deaths, including combat, accidents, illnesses, and natural causes. The Traumatic SGLI coverage also extends to injuries sustained during active duty. This broad coverage offers peace of mind to you and your family based on the unique needs of a military lifestyle.
Evaluating SGLI for You and Your Family
You can evaluate whether your family's needs are adequately covered with Servicemembers' Group Life Insurance by understanding its scope. In the following sections, we’ll delve into those specific aspects.
Off-Duty Deaths
SGLI provides coverage beyond active-duty scenarios. The policy encompasses deaths occurring during personal time, which adds a valuable layer of protection for servicemembers and their family. However, whether this coverage is adequate for your family will depend on your lifestyle, potential risks, and financial obligations. Ask yourself if the provided amount aligns with your family's long-term needs, making sure to factor in potential expenses and future financial obligations.
Coverage for Dependents
As mentioned above, FSGLI covers your children until they turn 18 at no extra cost to your premium. FSGLI can cover spouses up to $100,000 for an additional monthly payment. Monthly payments range from $0.45 to $4.50 per $1,000 of coverage based on your spouse’s age.
Coverage for Veterans
Regular SGLI ends 120 days after you leave military service. However, that coverage can be converted to a Veterans’ Group Life Insurance policy (VGLI) without evidence of insurability. Note that your SGLI isn’t automatically converted. To convert from SGLI to VGLI, you must apply to the Office of Servicemembers Group Life Insurance within 120 days of separating from active duty. VGLI will activate on the 121st day or when the SGLI office receives the premium.
Methods for Calculating How Much Life Insurance You Need
Determining the appropriate amount of life insurance you need involves evaluating your family's distinct lifestyle and future financial obligations. Your family's circumstances may differ from your neighbor’s, which is why there’s no one universal amount of coverage. That’s why understanding these methods is essential for making informed decisions about securing the right level of financial protection.
Let’s explore the various methods commonly used to calculate your specific coverage needs.
10x Your Income
For some time, it was common to purchase a policy that was at least equal to 10 times your income. However, this method can cause issues later. Most people take out these policies while their income is low and fail to increase the policy through the years as their income increases. Unless someone consistently lives below their means, this amount is unlikely to provide financial security that would support them through retirement.
10x Your Income, Plus Current and Future Debts
Another popular method for calculating coverage needs is by multiplying your income by ten, then adding in current debt, such as mortgages and vehicles, as well as future debts, such as college education. This method, however, can also leave out critical estimates and calculations. It assumes a fixed multiplier without accounting for individual variations in lifestyle, spending patterns, and inflation rates.
The DIME Method
One of the most accurate methods for calculating how much life insurance your military family needs is the DIME formula. This easy-to-remember acronym could be your best option when estimating your life insurance needs. Here’s how it works:
D (Debts & Final Expenses): Calculate all of your debt (excluding mortgages), such as credit card balances, vehicle payments, and your funeral and burial expenses.
I (Income): Next, consider your income. For this calculation, we’re going to avoid the “10x” equation by personalizing it to your situation. Let’s say you want to ensure your spouse and young children have a financial cushion that will last until your youngest child graduates college. For some families, this may result in 20 years of income. If your children are older or you have no children, you may need less coverage. When calculating your income, don’t forget to also factor in bonuses and incentive payments.
M (Mortgage): Be sure to add your mortgage balance and give yourself a cushion if you have rental properties.
E (Education): Last, calculate any education expenses for all of your children (private schools, college, etc.) and add this to the figures above.
More comprehensive life insurance formulas, such as the DIME method, give a more accurate amount of life insurance you need to properly care for your family. If you have been wondering if SGLI coverage is enough for your family, you may now realize that $500,000, while a substantial and helpful amount of coverage, may not be enough to carry your family long-term and provide them with the level of care you desire.
Find the Right Coverage with AAFMAA
At AAFMAA, we offer life insurance for servicemembers and their families. Whatever your needs may be, we have a plan that will serve you. Try our simple Life Insurance Needs Calculator to determine your needs beyond SGLI. Then, browse our full range of life insurance policies designed with you in mind. Already know what you want? Fill out our online application or contact us today!
This article was originally published November 20, 2018.