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What Veterans and their Spouses Need to Know about Life Insurance

What Veterans and their Spouses Need to Know about Life Insurance

Submitted by Veronica Baxter

Before separating from military service, there are some decisions you need to make regarding the financial future of your family. An individual life insurance policy may figure into those plans.

Government-sponsored Ways to Protect Your Family Financially

Military Pension

Prior to separating, you will have the option to provide that your spouse receive a portion of your military pension when you die. This is at significant cost, so be sure to weigh the benefits of provided for your surviving spouse against the loss of retirement income to pay for that.

 

If you are a war-time veteran, your surviving spouse and unmarried surviving children may be eligible for a modest Survivors Pension, also called a Death Pension.

Serviceman’s Group Life Insurance (SGLI)

This low-cost group term life insurance policy is available to active duty, active duty/inactive duty for training, and National Guardsman and Reservists. Upon separation from the military you have the opportunity to convert this policy to a either Veterans’ Group Life Insurance (VGLI) or to an individual plan. Again, veterans should weigh the cost of converting this insurance with the potential benefit.

 

To convert the SGLI policy to VGLI, a veteran must take action within one year and 120 of discharge. If the veteran submits an application to convert within 240 days of discharge the insurer will not require any proof of insurability or take a medical exam.

Dependency and Indemnity Compensation (DIC)

Veterans’ survivors can receive thousands of dollars in tax-free payments if certain criteria is met: 

 

  • Service member dies during service;
  • Veteran dies due to a service-connected disability;
  • Veteran’s death unrelated to service but VA rated him or her totally disabled from a service connected disability.

Service-Disabled Veterans Insurance (S-DVI)

Any veteran who is rated disabled qualifies for a Serivice-Disabled Veterans Insurance (S-DVI) that provides life insurance coverage up to $10,000. Totally disabled veterans can have premiums waived and apply for an additional $30,000 in life insurance coverage, for which they must pay premiums.

Private Individual Life Insurance

For many veterans, private individual life insurance bridges the gap between what is available to their surviving spouse and children through the government, and what their surviving family needs to survive financially. Even if you and your family qualify for all available government financial assistance programs listed above, those benefits may still leave your family short.

 

For those who do not qualify for many of these benefits, for example, the surviving spouses who married veterans after they separated from the military, or for the surviving spouses of those who did not opt to convert their Serviceman’s Group Life Insurance to an individual plan, or for the surviving spouse of a veteran who was not disabled prior to death, a private individual life insurance policy may be the only remaining way a veterant can provide for his or her spouse.

AD&D Insurance

Accidental Death and Dismemberment Insurance is a type of life insurance policy that pays benefits to the insured should he or she become accidentally injured, and death benefits to the insured’s named beneficiaries should the insured die accidentally or from injuries sustained in an accident.

 

AD&D insurance can be a stand-alone policy, in which case it is generally less expensive than traditional life insurance. AD&D insurance can also be a rider on an existing life insurance policy.

 

AD&D insurance can be valuable if a veteran later becomes disabled or dies due to injuries sustained in a non-service-related accident.

Burial Insurance or PreNeed Funeral Insurance

For veterans who do not qualify for whatever reason for government burial benefits, other types of insurance can cover funeral costs. These policies vary greatly among different insurance companies, but in general, the benefit is quite low, ranging from $5,000 to $25,000.

 

Burial insurance pays the benefit directly to the beneficiary and any amount left over after funeral and burial costs are paid may be used to pay other expenses, such as outstanding medical bills, etc.

 

PreNeed Funeral Insurance pays the benefit directly to the funeral service provider of the insured’s choice.

Converting SGLI to USAA Term LIfe Insurance

For members of the military and veterans, USAA offers terms from 10 to 30 years and can replace some or all of the life insurance coverage a veteran had under SGLI. USAA also offers a term life event option rider which permits veterans to increase coverage by up to $100,000 if he or she gets married, buys a house, or has a baby.

Converting SGLI to AAFMAA Term Life Insurance

Veterans who are members of AAFMAA are eligible for up to $800,000 in term life insurance coverage. Term options available to veterans depend upon the age of the veteran and how long he or she needs life insurance coverage.

 

In conclusion, there are private sector insurance options that can make up for the gap in what amount funds your lifestyle now, and what amount will be available to your surviving family once you die.  Consult an insurance agent in your area to explore your options, and get the peace of mind that comes with providing for your family’s financial future.

 

About the Author

Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia.  She works frequently with Chad G. Boonswang, Esq., a life insurance attorney in Philadelphia.

Early Medical Retirement Can Put Servicemembers’ Pensions At Risk

Early Medical Retirement Can Put Servicemembers’ Pensions At Risk

Early Medical Retirement Can Put Servicemembers’ Pensions At Risk

By Debbie Gregory

Life in the military isn’t easy, but if you serve long enough, the financial rewards are generous. Military pension benefits, after 20 years of service, are 50% of the final salary, paid for the rest of the rest of the servicmember’s life.

But that same pension can vanish if a servicemember is forced out of the military for health reasons.

When a military member has a medical condition (including mental health conditions) which renders them unfit to perform their required duties, they may be separated (or retired) from the military for medical reasons.

Until recently, if military members left before 20 years of service, they didn’t get any pension benefit. This leads to what’s known as “cliff vesting” around the 20-year mark. Given the obvious dangers inherent in the service, and the stress it puts on families, attrition is steep in the early years.

U.S. Code 1176 protects servicemembers nearing 20 years of service, and retirement eligibility, from being discharged or denied reenlistment without just cause. But unfortunately, it doesn’t extend to medical cases.

Military medical retirement is intended to compensate for a military career cut short because of disability. Typically, a medical retirement is issued when a medical condition is severe enough to interfere with the proper performance of your military duties.

For servicemembers who have less than 20 years of service, to be permanently retired, they must be found unfit due to a “stable” condition rated at 30% or higher. Stable means unlikely to change enough to qualify for a revised disability rating.

Retirement pay will be the retired base pay multiplied by the percentage assigned to the disability. Retired base pay is calculated by averaging the highest 36 months of basic pay.

 

Divorce Rules for Dividing a Military Pension

mil divorce

By Debbie Gregory.

Without question, divorce is traumatic for any family. The division of assets is handled differently in every divorce case, and also depends on the law of the state where the divorce case is pending. A service member’s military pension/retired pay can be a valuable asset in a divorce, legal separation or dissolution of marriage.

In 1982 Congress passed the Uniformed Services Former Spouse Protection Act, which allows state courts to treat disposable retired pay either as property solely of the member, or as property of the member and his spouse in accordance with the laws of the state court. But there is no concrete rule in the act to determine the appropriate division of retired pay.

A state court can divide retired pay in any way it chooses (subject to the laws of that state). All 50 states treat military pension as marital or community property. And the state court can award a share of the military retired pay to a former spouse of military member, regardless of the length of the union.

With that said, the Department of Defense can only make direct payments of a military member’s retired pay to the former spouse if the former spouse was married to the military member for a period of at least 10 years, with at least 10 years of the marriage overlapping a period of military service creditable to retired pay.

Additionally, the DoD cannot make direct payments if the division of retired pay is in excess of 50 percent, or 65 percent if alimony or child support is paid in addition to division of retired pay.

While disability pay is not subject to division as property, it is subject to garnishment for alimony or child support.

Before a court can grant a divorce to military members or spouses, it must have “jurisdiction” or the authority to hear the case. For civilians, jurisdiction is generally the place where the person lives. However, for military personnel, jurisdiction may be the place where the person holds legal residence, even if the service member is stationed somewhere else.

If the marriage lasted at least 20 years and the service member had at least 20 years of creditable service, and there was at least a 20-year overlap between the marriage and the military service, the former spouse is allowed to retain all military benefits and privileges, including medical, commissary, military exchanges.

Military Connection salutes and proudly serves veterans and service members in the Army, Navy, Air Force, Marines, Coast Guard, Guard and Reserve,  and their families.