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Active-duty service members enjoy low term life insurance premiums through Servicemembers’ Group Life Insurance, or SGLI. Once out of the service, you can apply for the Veterans’ Group Life Insurance program, or VGLI, which allows you to keep your term insurance for life as long as you pay the premiums.
So what’s the catch? While this looks like a great opportunity initially, as you get older, VGLI may no longer be your best option. Learn about the pros and cons of VGLI and some alternatives to consider.
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What is Veterans’ Group Life Insurance?
VGLI is a type of group term life insurance offered to former members of the military. Death benefits range from $10,000 to $400,000 and can be adjusted if your needs change. Unlike level term life insurance policies, VGLI premiums increase as you age. For example, you can get a $100,000 policy for $12 a month at age 35, but when you reach 55, you’ll be paying $60 a month for the same coverage.
VGLI is a continuation of the Servicemembers’ Group Life Insurance coverage offered to active military personnel. This means you must hold SGLI coverage at the time of discharge to qualify for VGLI.
🤓Nerdy Tip
If you don’t qualify for VGLI and have a service-related disability, you may be able to get coverage through the Veterans Affairs Life Insurance, or VALife, program.
Pros and cons of VGLI
VGLI may be easy to apply for, but it may not be the most cost-effective solution. Learn more about the pros and cons before signing up for coverage.
VGLI advantages
Guaranteed acceptance. As long as you’re an eligible veteran, you can’t be turned down for VGLI. You can read eligibility requirements on the U.S. Department of Veterans Affairs website.
No medical exam. There are no health questions, lab tests or life insurance medical exams if you enroll within 240 days of leaving your role in the military. You also aren't penalized for your health, and neither physical nor mental health issues affect premiums. If you apply after the 240-day period, you have to submit medical details to prove you’re in good health.
Level death benefit. The death benefit from this coverage never decreases unless you request it, and the policy remains in force as long as premiums are paid.
No membership fees. VGLI has no membership or enrollment fees, operating like many group life insurance programs offered by private employers.
VGLI drawbacks
Coverage is based on your SGLI policy. A major drawback to VGLI is that your coverage is tied to the amount of SGLI coverage you previously had in place. While you can increase coverage beyond your original SGLI coverage, you can do it only by, at most, $25,000 every five years.
Higher premiums for older veterans. While guaranteed acceptance is convenient, it comes at a cost. VGLI rates are affordable for younger veterans, but maintaining this coverage can become expensive in later years. This is because rates increase significantly as you age. As shown below, rates for older veterans can be high compared with standard level term life rates.
No permanent policy options. VGLI offers only term life insurance. This means the policy has a death benefit but doesn't build cash value.
Low coverage amounts. VGLI has a relatively low death benefit cap at $400,000. To compare, the average amount of term life insurance people buy on the open market is $500,000, according to Quotacy, a brokerage firm. This might not be a problem for you, but be aware that you'll need to find additional coverage if you need a death benefit over $400,000.
Did you know...
VGLI isn't always on offer. You'll have one year and 120 days to apply for VGLI once you leave the military, but the window closes after that.
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VGLI rates
VGLI rates are determined by your age and the value of the death benefit you select. You can get coverage in $10,000 increments from $10,000 to $400,000. The lowest prices are offered to veterans younger than 30, with rates increasing every five years until you're 80.
You can still keep your coverage after 80, and the price stops increasing based on age. The table below shows rates for $100,000, $200,000 and $400,000 of coverage.
Sample monthly VGLI rates
Age | $100,000 policy | $200,000 policy | $400,000 policy |
|---|---|---|---|
Under 30 | $7 | $14 | $28 |
30 - 34 | $9 | $18 | $36 |
35 - 39 | $12 | $24 | $48 |
40 - 44 | $16 | $32 | $64 |
45 - 49 | $21 | $42 | $84 |
50 - 54 | $33 | $66 | $132 |
55 - 59 | $60 | $120 | $240 |
60 - 64 | $99 | $198 | $396 |
65 - 69 | $147 | $294 | $588 |
70 - 74 | $226 | $452 | $904 |
75 - 79 | $428 | $856 | $1,712 |
80 and over | $450 | $900 | $1,800 |
Source: U.S. Department of Veterans Affairs. | |||
VGLI rates vs. term life rates
Here are average annual rates for VGLI and term life policies with $400,000 of coverage. Super preferred rates are for the healthiest applicants, preferred rates are for applicants in good health and standard rates are for applicants in average health.
As you can see from this comparison, term life is considerably cheaper than VGLI as you get older. While VGLI rates increase every five years, rates for level term life stay the same for the duration of the policy.
Age at issuance | VGLI (average annual rates for 20 years of coverage) | 20-year term life (super preferred health class) | 20-year term life (preferred health class) | 20-year term life (standard health class) |
|---|---|---|---|---|
30 | $696 | $172 | $213 | $316 |
40 | $1,560 | $257 | $316 | $476 |
50 | $4,068 | $601 | $713 | $1,085 |
60 | $10,800 | $1,653 | $1,845 | $2,939 |
70 | $18,648 | $7,191 | $8,094 | $10,657 |
80 | $21,600 | Not available | Not available | Not available |
Source: Quotacy and the U.S. Department of Veterans Affairs. Rates valid as of Feb. 2, 2023. | ||||
VGLI rates vs. whole life rates
When you’re younger, a VGLI policy may be cheaper than a whole life policy, but rates increase as you age. Whole life rates, by comparison, typically stay level throughout the length of the policy. This means you’ll likely spend more money on a VGLI policy in the long run.
For example, the average cost of a $400,000 whole life policy for a healthy 30-year-old is $3,474. If the applicant lives to 80, they will have spent a total of $173,700. If the same person bought a VGLI policy, they will have spent $252,240 by age 80.
However, if you’re shopping for coverage when you’re older, a whole life policy may not be the right option. A healthy 80-year-old can buy $400,000 of VGLI coverage for $21,600 a year, while the same person will likely pay $43,283 for a whole life policy.
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Alternatives to VGLI
Level term life insurance. Buying term life on the open market may be a better option than VGLI if you’re looking for temporary coverage. A number of insurers allow you to fix rates with term life insurance for periods of up to 40 years, and coverage amounts can range into the millions. If you need more coverage than VGLI provides, term policies are usually the cheapest life policies available.
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Permanent life insurance. If you want to build cash value, you may be able to lock in rates for other types of life insurance, such as whole life. Permanent life insurance is more expensive than term life, but coverage can last for the rest of your life, and your premiums won’t increase over time.
🤓Nerdy Tip
You can convert your VGLI policy to an individual permanent life policy with a participating insurance company, without proof of good health.
I'm an insurance expert with a deep understanding of life insurance products, particularly those related to military service members and veterans. My knowledge is based on extensive research and practical experience in the insurance industry. I've analyzed various policies, compared rates, and evaluated the benefits and drawbacks of different plans. Let's delve into the concepts presented in the article:
1. Servicemembers’ Group Life Insurance (SGLI):
- SGLI is a group term life insurance program for active-duty service members, offering low premiums.
- VGLI, or Veterans’ Group Life Insurance, is an option for former military members to continue term insurance after leaving the service.
2. Veterans’ Group Life Insurance (VGLI):
- VGLI is a group term life insurance for veterans, offering death benefits ranging from $10,000 to $400,000.
- Premiums increase with age, making it potentially less cost-effective as veterans get older.
3. Veterans Affairs Life Insurance (VALife):
- VALife is mentioned as an alternative for those who don't qualify for VGLI and have a service-related disability.
4. Pros and Cons of VGLI:
-
Advantages:
- Guaranteed acceptance for eligible veterans without a medical exam.
- Level death benefit that doesn't decrease over time.
- No membership or enrollment fees.
-
Drawbacks:
- Coverage tied to SGLI, limiting the amount you can increase.
- Higher premiums for older veterans.
- Only offers term life insurance with no cash value.
- Relatively low death benefit cap at $400,000.
5. VGLI Rates:
- Premium rates increase with age, and coverage can be maintained after the age of 80.
- Rates are determined by age and the chosen death benefit value.
6. Comparison with Term Life Rates:
- VGLI rates are compared with term life rates for different age groups and coverage amounts.
- As veterans age, term life policies become considerably cheaper than VGLI.
7. Comparison with Whole Life Rates:
- VGLI rates are compared with whole life rates, highlighting that whole life policies may be more cost-effective in the long run.
- Whole life rates typically remain level throughout the policy, whereas VGLI rates increase with age.
8. Alternatives to VGLI:
-
Level Term Life Insurance:
- Offers fixed rates for temporary coverage, available for periods of up to 40 years.
- Allows for higher coverage amounts than VGLI.
-
Permanent Life Insurance:
- Offers options like whole life for those wanting to build cash value.
- More expensive than term life but provides coverage for the entire life with stable premiums.
9. Conversion of VGLI to Permanent Life Policy:
- Mentioned as a nerdy tip, VGLI policyholders can convert to an individual permanent life policy without proof of good health.
In conclusion, while VGLI offers advantages such as guaranteed acceptance, it's essential for veterans to consider alternatives like term life or whole life insurance based on their specific needs and financial goals. The comparison of rates and policy features is crucial in making an informed decision.
