Military Families and Life Insurance

Military families sometimes have trouble finding the life insurance they need.

Servicemembers’ Group Life Insurance (SGLI) offers as much as $400,000 worth of coverage, and this is an excellent beginning for military families. (The SGLI life insurance needs calculator is available online – but note the SGLI’s web site advisory: “VA’s Life Insurance Needs Calculator does not include every financial situation that may affect you. The Calculator should be used as a guide only and is not a substitute for a financial planner.”)

However, young soldiers seem to mature more quickly than their non-military peers. And military families can develop advanced financial planning needs earlier, as well. As a result, young military families with children may need more than SGLI can provide.

This is where the private sector can help, by securing the future of our military families. The keys are

  1. To understand what the underwriters look for
  2. Too recognize that timing is everything

What do underwriters look for?

Underwriters look out for anything that poses an additional risk to the life insurance company. High risks can make life insurance very expensive or even unavailable at all.

In some cases, the high risk is because of current health or medical history. In other cases, it’s because of a dangerous hobby or profession (such as the military). For others, it’s due to their traveling for business or pleasure. It could even be because of smoking or chewing tobacco.

The vast majority of people have some factor in their life that represents a distinct risk to a life insurance underwriter, and that factor can cost money.

Timing is everything

Although military personnel are typically healthier than the general population, they are considered an increased risk by the life insurance industry as soon as they sign up for Boot Camp. And that’s just during peacetime.

In times of war, our military can be sent to political hot spots all over the globe. Then, life insurance quickly becomes completely unaffordable. So what to do?

  • If you’re already in the military, don’t wait. Once you’re relocated to a war zone, the chances of finding affordable life insurance will dramatically decrease. So, sit down and think about what your spouse and children will need to secure their futures. Does SGLI provide enough? If not, please contact a broker in the private sector to supplement your coverage.
  • If you’re thinking about joining the military, don’t wait. Life insurance is more affordable when you’re a civilian. Remember, life insurance underwriters will ask about your future plans. Once you start actively planning to sign up for Boot Camp, all bets are off.
  • If you’re the parent of a high school student who might join the military, don’t wait. Life insurance is most affordable when you’re a civilian and young and healthy.

And this brings me to an unusual – but highly effective – financial planning solution for military families. Namely, please consider purchasing a life insurance policy for your young children – before they’d even consider purchasing it for themselves.

The financial benefits to them can be enormous. The vast majority of boys and girls in grade school and high school are considered to be very low risk candidates in the life insurance industry, and underwriters typically assign very low premiums for significant amounts of life insurance. (Also note, you don’t have to keep paying the premium – it can be their responsibility when they are ready!)

Therefore, by placing life insurance on the life of your child now, you prevent higher-risk (and higher cost) underwriting later. Once their policy is in force, it will stay as such regardless of any changes in their health, career, or lifestyle.

The more things change, the more they stay the same

Once they’re out of high school and start making their way in the world – even if they choose a non-military profession – children start picking up habits, establishing lifestyles, and having experiences that could make it difficult and expensive for them to purchase life insurance. For example, something as simple as picking up the smoking habit while cramming for college exams could double their premium.

Or, let’s say they will enter the corporate world and become a purchasing agent for a global corporation – certainly a prestigious occupation. But, if their job requires frequent travel to their company’s factory in China, that will be a factor in life insurance underwriting.

Or, perhaps they will explore dangerous recreational activities such as scuba diving, rock climbing, or flying aircraft. These activities can be extremely fun and challenging, and can help our children enjoy the great outdoors. But when the time comes to buy life insurance to protect their new family and mortgage, these fun activities will affect the rate.

Or, perhaps they will get sick. We hope and pray they all live healthy and long lives. But we also know that health can become impaired. And we also know that such impairments can increase the price of life insurance or make it unavailable.

Finally, perhaps they will carry on your family tradition of service to country – in the military, law enforcement, fire fighting, or emergency response. In this case, as discussed above, getting life insurance can become very difficult. If it’s even available, your child’s policy may have limitations imposed by the underwriter.

Encouraging the next generation

I know how eagerly we parents try to do things for our children. We are always looking for ways to help them get ahead and have an advantage in life. This is not to say we want to spoil them, although that can happen. There just seems to be a very strong ethic among Americans – brought over by the many waves of immigrants to our land – to make life better for the next generation.

Putting your child’s life insurance policy into force – setting in stone a low premium for a substantial benefit no matter what the future brings – this is a powerful gift that encourages the next generation to build their own families and their own “next generation” – your grandchildren.