How to Choose the Right Life Insurance

Choosing life insurance is a tough task. Here are a few tips to help you:

1. If an agent or company contacts you and wants you to cancel your current policy to buy a new one, contact your original agent or company before making any decisions. Canceling your policy to buy another could be very costly to you.

2. Take your time and make the right decision. Don’t rush into a decision.

3. When you purchase a policy, make your check payable to the insurance company — not to the agent. Be sure you are given a receipt.

4. Periodically review your life insurance plan, particularly when your financial responsibilities undergo a significant change.

5. After you have purchased an insurance policy, keep in mind that you may have a “free-look” period for 10 days after you receive the policy. You can change your mind during this period. If you decide not to keep the policy, the company will cancel the policy and give you an appropriate refund.

6. If you have a complaint about your insurance agent or company, contact the customer service division of your insurance company. If you still are dissatisfied, contact your state insurance department. Most departments have a consumer affairs division that can offer help.

7. Discuss the insurance plan with your spouse so that he or she understands which gaps the insurance proceeds are designed to fill.

8. Estimate your total insurance needs by examining the needs and various stages of your surviving spouse’s life. Buy insurance to cover those gaps.

9. Term policies will generally provide military families with the most coverage for the smallest premium and are especially appropriate for young families. (Term insurance protects the policyholder for a specified time period: one year, five years, twenty years, etc. It has no savings feature, and is therefore cheaper than other policy types.)

10. Bonus tip: Shop around. It can pay to compare rates from different companies.

Tricare: Supplemental Insurance

TRICARE is the United States Military health care program for military members and their families, providing worldwide, comprehensive healthcare coverage including health plans that meet the minimum requirements of the Affordable Care Act, plus prescriptions, dental plans, and special plans tailored for certain types of medical conditions or coverage requirements. The TRICARE system is managed by the Defense Health Agency.

TRICARE requires certain co-pays and there may be health expenses not covered by a particular plan; that is where TRICARE supplemental insurance can help. But supplemental insurance should not be confused with TRICARE itself. The supplemental plan a servicemember and family might choose will not be affiliated with TRICARE but with another agency.

What Kinds Of Out-Of-Pocket Costs Might Require TRICARE Supplemental Insurance?

A service member’s individual out-of-pocket expenses under TRICARE will vary depending on the medical condition and the type of TRICARE plan the service member chooses. There are a variety of coverage options that have varying degrees of out-of-pocket costs.

TRICARE Coverage Options

  • TRICARE For Life
  • TRICARE Young Adult
  • TRICARE Select
  • TRICARE Select Overseas
  • TRICARE Reserve Select
  • TRICARE Prime (including Prime, Prime Remote, Prime Overseas, and Prime Remote Overseas
  • TRICARE Retired Reserve
  • US Family Health Plan

Active duty military members who choose one of the TRICARE PRIME options have no out-of-pocket expenses, no enrollment fees, no network co-pays, and no point-of-service fees. Once the active duty military member starts adding family members, the potential for co-pays and out-of-pocket expenses begins.

Retirees, family members of military retirees, and other beneficiaries are subject to enrollment fees, co-pays, and point-of-service fees.

The non-Prime TRICARE options include more deductibles, co-pays, and other potential cost-sharing expenses. Active duty members typically pay less than other groups eligible for coverage for co-pays, deductibles, etc.

For those enrolled in certain programs such as TRICARE For Life, no enrollment fees apply but the veteran must be covered by Medicare Part A and Medicare Part B.

Not all plans feature the same requirements, co-pays, or deductibles, but it’s clear that once you move down from TRICARE Prime, additional expenses will apply that may make it worthwhile to explore TRICARE supplemental insurance options.

How Does TRICARE Supplemental Insurance Work?

The first thing to know about TRICARE supplemental insurance is that it is not associated with TRICARE at all, but rather provided by a third party. The U.S. government weighs in on supplemental insurance on the TRICARE official site, stating:

“Many military associations and private companies offer supplemental insurance policies. Unlike other health insurance you have in addition to TRICARE, such as Medicare or an employer-sponsored health insurance, which pays first, supplemental insurance pays after TRICARE pays its’ portion of the bill.”

The TRICARE official site warns its’ insured clients to consider supplemental insurance carefully since the cost of the additional plan may exceed the actual out-of-pocket expenses the plan is designed to offset (depending on circumstances).

Does Everyone Need Tricare Supplemental Insurance Coverage?

The short answer is no. Active duty members are fully covered under TRICARE Prime options, and those with special circumstances may not necessarily need to resort to additional coverage thanks to a set of special TRICARE programs such as the Extended Care Health Option (ECHO).

The Extended Healthcare Option is open to TRICARE beneficiaries diagnosed “with moderate or severe intellectual disability, a serious physical disability, or an extraordinary physical or psychological condition” according to the TRICARE official site. Those beneficiaries include:

  • Transitional Compensation Program
  • Active duty family members;
  • Family members who are covered under the Transitional Assistance Management Program
    Children or spouses of former service members who are victims of abuse and qualify for the
  • Family members of deceased active duty sponsors (while still considered “transitional survivors.”)
  • Family members of activated or ordered to active duty service for more than 30 days in a row including the Army National Guard, Army Reserve, Navy Reserve, Marine Corps Reserve, Air National Guard, Air Force Reserve, U.S. Coast Guard Reserve;

TRICARE Policy Changes May Affect Your Coverages

Some who started out not interested in TRICARE supplemental insurance may, due to policy changes and other factors, wind up needed supplemental coverage. A good example of this was the 2013 TRICARE policy changes that resulted in certain military retirees losing access to TRICARE Prime and needing to switch to TRICARE Standard.

That policy change affected military retirees, their dependents, surviving dependents, and TRICARE Young Adult members who live outside a reasonable commuting distance to the nearest military medical facility or base closure site.

The switch to TRICARE Standard in those cases resulted in changes to co-pays and other expenses, and likely sent some former TRICARE Prime enrollees affected by that change in search of supplemental insurance.

TRICARE reserves the right to change its’ policies in the future, so knowing your options for additional covered if and when needed is definitely a good idea if future medical expenses are anticipated for chronic conditions, recurring issues, etc.

There’s More to Life Than SGLI and VGLI

Several years ago, I knew a good man with a beautiful family who lost a battle with cancer while three of his four children were still in elementary school. To this day, it hurts to think about it. But that’s the nature of death, isn’t it? It’s tough on the survivors.

So what about you? If you died unexpectedly, how would your survivors get by? Would the financial strain be as bad as the emotional one?

In the military, you’ve got Servicemembers’ Group Life Insurance and, possibly, the VA Death Gratuity to help ease the financial stress on your loved ones. That nice set of benefits could mean up to $500,000 for your family if you die.

If you’re covered by SGLI, each of your children automatically receives $10,000 of coverage. You also can buy up to $100,000 of coverage for your spouse, unless your spouse is in the military (and therefore, already eligible for SGLI).

Unfortunately, when you leave the military you leave these great benefits behind. In most cases, 120 days after you step into the civilian world, your SGLI coverage stops, leaving you with no life insurance unless you’ve made other arrangements.

In general, there are two ways to handle this possible shortfall:

1. Buy a Policy on Your Own

One option for replacing SGLI is to buy a term policy or permanent policy on your own, outside of VA-related programs. Because individual policies require medical underwriting, they generally have lower premiums than insurance obtained by converting your SGLI to a VA-related policy. If you’re able to pass the medical requirements to get one of these policies, this can be an attractive approach to replacing your SGLI.

Another way to replace your SGLI outside of the VA is by getting group term insurance from a civilian employer. Though this typically is a low-cost option, there are at least two major drawbacks to this approach. First, your insurance once again will be tied to your employer. Second, this type of insurance is typically offered in multiples of your annual income, which means you may be limited to getting coverage that’s only one or two times the amount you earn.

For example, if you earn $50,000, your maximum amount of life insurance might be twice that amount — $100,000. So, depending on your salary, you might not be able to get the level of coverage you need.

2. Buy a Policy Through a VA Program

But what if medical issues would disqualify you from getting a personal policy? Fortunately, the VA has two SGLI conversion programs that don’t require medical screening.

Granted, if you’re healthy, insurance under these programs will likely be more expensive than buying a policy of your own, but at least you have options.  The first option is to convert your SGLI policy to a renewable term insurance policy known as Veterans’ Group Life Insurance. The second is to convert your SGLI policy to a permanent life insurance policy, such as whole life, offered by a traditional insurance provider participating in the program. The main advantage of the conversion programs is that neither requires health checks or questions, provided the conversion occurs within 120 days of separation from the military.

A Prudent Policy

As I already mentioned, SGLI is a great perk, but it can also make sense to buy a separate life insurance policy while you’re still on active duty. Here are a couple of reasons:

  • Sufficient protection. The basic SGLI death benefit of $400,000 might seem like a lot of money, but once you consider all the potential needs of the surviving family, it may not be enough. An extra policy could help cover your debts, fund college for your children, or allow your family to maintain their desired standard of living.
  • Coverage in transition. If you buy a policy when you’re healthy, you still have it if you get sick or hurt, or if you leave the military.

In the end, we all hope to look back one day on the money we spent on life insurance and happily realize we hadn’t needed the full benefit. But one of the sad realities of life is that at some unpredictable point, it ends. So take steps to ensure that if it happens to you sooner rather than later, your family won’t be caught short.

Do Service Members Need Life Insurance?

Life insurance is one of the most important components of your personal financial plan. Unfortunately, life insurance is poorly understood, and breadwinners’ mistakes invariably cause great financial hardship for their survivors. The primary purpose of life insurance is to protect your survivors from the adverse financial consequences of your premature death.

If service members have no survivors, then it’s unnecessary to buy life insurance beyond the amount needed to pay for any outstanding debts or settle the estate.

If service members are married or have young children, then it’s prudent to have life insurance to insulate the family from financial disaster. service members who want to marry or have children soon should explore life insurance options.

How Much Life Insurance Do Service Members Need?

The general idea in determining life insurance needs is the estimate the family’s actual financial situation in the event of the policyholder’s death. Life insurance is not a measure of devotion to loved ones or a monument to self-importance. It is insurance in case of premature death, and it should be used to protect dependents against undue financial hardship.

If a service member is not alive to provide for his or her family, insurance coverage should be sufficient to enable them to live comfortably. service members should determine the expenses survivors would incur in the years following their death and the income they will receive. By matching income with expenses, policyholders can easily see any short-falls (there may be none) that are best covered by life insurance.

Plan for a basic monthly income for the family, plus additional needs such as education for the children, special medical care for predictable problems, and a reserve for emergencies. As life changes, some of the needs disappear. For example, if the policyholder’s children are grown and through college, there is no need to leave money for the children’s education. Thus service members need to reevaluate insurance needs periodically to make sure the survivors’ situation hasn’t changed. In any case, there is never a requirement to make the policyholder’s family wealthy upon his or her death; buy only the coverage for identifiable needs.

The first step is to estimate the monthly expenses the policyholder believes his survivors will face. If you don’t know where to start in estimating these expenses, a good rule of thumb is two-thirds of your present monthly income for those years when children will be at home, and one-half after they have left.

What Type of Policy Should You Buy?

Currently, an active duty service member may elect to take up to $250,000 of coverage for $.65 per month per $10,000 of coverage, regardless of age. This is very inexpensive insurance for older officers and noncommissioned officers. In effect, the large numbers of young service members make possible low premiums for the older service members.

For this reason, and because it is convertible after service members leave the service, SGLI should probably be the basic building block of a military family’s insurance program. However, military credit unions may offer a better policy at less cost than SGLI.

There are three main types of life insurance:

  • Variable – Has a flexible structure designed to allow greater return on the savings portion of the policy.
  • Permanent – Premiums are paid until your death but also build savings. This type of life insurance offers guaranteed premiums and guaranteed cash values. Some types offer cash value growth driven by the equity markets. While premiums are higher than you initially would pay for the comparable amount of term insurance, over time the permanent life insurance cost may be lower than term insurance.
  • Term – Lasts for a specific period; has no savings component. Term life offers the lowest initial premium expense. Over time, however, term insurance premiums can increase significantly. In the long run the cost may even surpass the cost of permanent life insurance.

Within these major categories, there are many variations that will allow you to meet your life insurance needs.

The Right Life Insurance for the Military

Confused about life insurance — whether you need it, what kind, how much and the like? So are a lot of people in the military. While the military provides you with Servicemembers’ Group Life Insurance (SGLI) coverage, that may not be enough for some people. To make those decisions easier, we’ve boiled it down to the basics.

Confused about life insurance — whether you need it, what kind, how much and the like? So are a lot of people in the military. While the military provides you with Servicemembers’ Group Life Insurance (SGLI) coverage, that may not be enough for some people. To make those decisions easier, we’ve boiled it down to the basics.

1. Is there a “war clause?”

A little known fact about life insurance policies ? some don’t pay if you die as a result of war. For members of the military, this is a significant issue. When looking for a life insurance policy, make sure that if you die as a result of combat duty, your family will receive the benefits of that policy. None of the life insurance policies at USAA contain a war clause.

2. Do you need it?

That’s the easy part. If you’re not responsible for anyone or anything, you probably don’t need life insurance. If you’re single, with no kids, and a lot of people aren’t counting on your income, you probably don’t need life insurance. Remember, the military already provides you with a maximum of $400,000 of life insurance. But if you’re married, have children, or take care of aging parents, SGLI coverage is most likely not enough. It’s probably a good idea to get additional life insurance, as well.

3. Can I get it?

Members of the military have difficult and often dangerous jobs. Some military professions, such as like fighter pilots and paratroopers, are unable to receive life insurance simply because some companies feel their line of work is too risky. A good bet is to find an insurance company that understands the military, and will provide you coverage regardless of your military career.

4. Life (insurance) after the military

Planning to separate from the military? It’s a good idea to start shopping around at least two months ahead for life insurance. Your SGLI policy won’t be valid once you leave the military. It can take up to six weeks to get a life insurance policy, so don’t cancel your SGLI until your new policy has been issued and the first premium paid.

Coverage for you

One option is to convert your SGLI to a five-year renewable term policy with Veteran’s Group Life Insurance (VGLI), which will provide up to $400,000 in coverage. If you’re in poor health, this can be a good value. But if you’re healthy, you might find a more affordable option with a commercial life insurance company.

Coverage for your spouse

Your spouse is an important part of your family’s financial security even if he or she doesn’t earn an income. Think of it this way: What would it cost to replace the childcare, meal preparation, and other household tasks your spouse does? If you had the $100,000 of coverage for your spouse under SGLI, you will not be able to convert it to VGLI once you separate from the military. The good news is: purchasing a relatively inexpensive life insurance policy can offset the expenses associated with losing a spouse.

5. How much insurance do you need?

There’s no magic formula but you can start by figuring out what you want life insurance to do for you. Do you simply want a policy to cover your funeral, debts, and unpaid medical bills? Or are you worried about providing enough college money for your children or retirement savings for your spouse if you die suddenly? Some experts say you should buy a policy that’s seven to 10 times your income. But that’s not the answer for everyone.

“Getting the right amount and type of insurance depends on your specific situation,” says Rob Schaffer, executive director of Product Management for USAA Life Insurance Co. “You need to ask yourself some key questions to decide what fits your budget and your circumstances. This is where talking to an insurance company or financial adviser can help.”

6. What kind do you need? How long do you need it?

Consider the kind of insurance you want: term or permanent life insurance. Buying term insurance is like renting a house, but the lease on the insurance policy can be used only for a specific term — 10 years, 20 years, or whatever you choose. Permanent insurance, on the other hand, generally has a higher premium than term, but lasts for a lifetime. The policy also builds cash value that you can borrow against or withdraw if you have an unexpected need for it.

Once you decide between term and permanent life insurance, you have one more step — sign up. Both types of life insurance have several options. Make sure you research the information, consult with a financial adviser, and choose carefully. But whatever you do, don’t delay. The cost goes up with age.

7. Shop around to find the right fit.

The first, and most important step, is to find the right policy for your budget and family’s needs. We make it easy to compare policies with our life insurance tool that matches you to multiple partners, so you can shop around … in one stop.