As the number of veterans separating from service increases year over year, I foresee a need for advisors to become more adept in navigating veteran’s benefits alongside their clients. Additionally, there are some benefits that active service members are entitled to that are prudent for financial advisors to keep in mind. Over the course of my next several blogs, I will introduce several of those benefits.
In this post, I will talk about the various life insurance benefits available to service members and veterans and most importantly, I will demonstrate how to protect your client’s insurability. This conversation is geared more towards the client who is National Guard or Reserve as they are who you are more likely to have as a client.
Every member of the National Guard or Reserve who is activated and deployed is eligible for Servicemembers Group Life Insurance (SGLI) for the duration of their activation/deployed. They do not have to be deployed overseas for this benefit, they just need to have active duty orders. SGLI has a base death benefit of 50K and go as high as 400K. As a veteran myself, I always elected the highest death benefit of 400K because it was cheap and it was going to my family in place of me should I die in combat and I wanted them to remember me fondly. Now for some strange reason, I was the statistical outlier in that regard. In most cases, many of the soldiers in my unit, to include those who were married with children, didn’t elect more than the base amount.
Remember, this is a conversation about protecting insurability for the future. Let’s say that you have a client, SSG Smith from Antigo, WI. SSG Smith is a Cavalry Scout, a dangerous job and should he be deployed with the Wisconsin National Guard it is very likely that he will be in harm’s way on a daily basis. SSG Smith’s unit receives orders to activate and deploy to Southwest Asia in support of current operations against ISIS. Before he deploys, he sits down with you to make sure that all of his financial matters are squared away. During the conversation, you ask SSG Smith what death benefit he elected for his SGLI and his answer is 100K and you take that as a good answer and move on to another topic. Here’s where we dig into that protecting insurability conversation, he needs to elect that 400K and here’s why:
- SSG Smith deploys to Al Asad Air Base, Al Anbar Province in Iraq
- During his deployment, SSG Smith hits an IED while on patrol
- Thankfully SSG Smith survives, but due to the force of the blast he now Traumatic Brain Injury
- SSG Smith re-deploys to Wisconsin and after therapy he heads back to work
- Six months after going back to work, he starts to suffer from PTSD
- Simultaneously, his construction company with his brother is growing and he needs both personal and business insurance
- Due to his history of TBI and recent diagnosis of PTSD, SSG Smith is not a great insurance risk, the best offer we could find was Table 6
- This is bad news, because this out of range of his budget for both his business and personal needs
- This isn’t 100% bad news because he has 100K in SGLI coverage that is convertible to Veterans Group Life Insurance within 1 year and 120 days of separation from active duty and if converted within 240 days, he does not need to answer health questions. In addition, both SGLI and VGLI are fully convertible to permanent coverage offered through several carriers
- 100K is better than nothing, but wouldn’t it be great if he had more insurance?
This is why it is crucial that service members deploying elect 100% of the coverage that they are eligible to receive. The cost is nominal, and if they deploy and return with no issues it won’t have caused a financial burden. However, if they deploy and return with issues that affect their insurability, it is an invaluable benefit.
In addition to SGLI and VGLI, members of the Wisconsin National Guard have access to an additional benefit, Group Term Life Insurance for Wisconsin National Guard Servicemembers which offers up to 45K in additional term coverage and if convertible to a New York Life whole life policy. If, SSG Smith elected this coverage in addition to his 400K of SGLI, he’d have 445K of total death benefit that could be converted to permanent insurance. Because of foresight and planning, his insurability was protected and he has options that he would not otherwise have.
A summary of each benefit can be found here: