Why it’s Important to Understand the Military Benefits System

At the height of the 2008 financial crisis, I found myself leaving the Army and doing what so many former Army officers do: I became a financial advisor at a standard broker-dealer marketing to the military community.

Now, I had never really done any financial planning while I was in the Army. I sure as heck didn’t know anything about life insurance, and what I did know only had to do with the government benefits. You see, every active-duty servicemember is told to sign up for Service Members Group Life Insurance, commonly known as SGLI. They’re told that it is a benefit, and in some ways I guess that’s true because it’s offered to everybody regardless of their health status. The weird thing is that in order to be in the military, you have to be in pretty good health, so the fact that group term insurance is offered in this way is a bit misleading.

This is why it’s important for the financial world to truly understand how the active-duty insurance benefits work. Of course it’s good to have SGLI. It’s sort of cheap. You can probably get a cheaper life insurance policy on the free market, but it’s better than nothing considering that most soldiers probably wouldn’t get around to purchasing life insurance otherwise.

We need to educate active duty military better about why they need to get private, free-market insurance, not necessarily to replace SGLI, but because what’s often overlooked is that the replacement will eventually be mandatory when the service member leaves the military. Veterans Group Life Insurance is also pitched as a benefit from the VA. The costs of VGLI are significantly higher than the costs of SGLI, and they get higher every 5 years as the servicemember ages. Again, this a benefit in that everybody qualifies for it, but what’s overlooked or forgotten about is the fact that if a servicemember gets a private policy while they’re on active duty and still young and healthy, before they get injuries or disabilities from service, then they would have a private insurance policy that they own and which is priced according to their individual health, not their status as part of a group. 

Not to mention SGLI and VGLI only offer $400,000 in death benefit coverage. That seemed like a lot 20 years ago, but we all know that nowadays, with inflation, it’s not going to hold up very long. Not only are many service members underinsured to begin with, what they think of as a benefit is actually a cost that’s giving them a false sense of security while they’re on active duty. They find themselves in a bind when they go to transition out of the military, perhaps with a health issue, and they can no longer qualify for a privatized solution. At that point, the expensive VGLI is their only option, so once again our government thinks it’s doing the best thing in offering a perceived benefit and helping active-duty servicemembers only for their solution to backfire on servicemembers later in their lives.

Nobody talks about this because of the assumption that our government takes care of military and veterans. Military and veterans don’t bother to educate themselves about it because they believe the government is taking care of them. As a former Army officer, a veteran, and a former financial advisor, I don’t believe that the standard advice is solving the problems that our military families face. I find it to be our duty to educate these families and better prepare our retiring service members for the modern financial world and the role insurance plays in it.

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