Life Insurance questions (SGLI, supplemental)

[sputnik]

I went with AAFMAA and found them quite easy to deal with and pretty cheap with no exclusions. I pay $25/mo for $600k. My question for everyone, know anyone who had it and died? Did it pay out okay? Couldn't find anything bad about them but you never know.

USAA was a serious pain the ass, had to get a physical, etc, and they appeared to be substantially more expensive. So I went with AAFMAA. That said, I've always been very happy with USAA and am quite confident they'd pay out with zero hassle. So now you have me thinking.

When I retire and look to replace SGLI (from what I can tell VSGLI is too spendy--thoughts retired dudes?) I may try USAA again.

[Smokin]

Seems to be two similar threads on this, but this one seems to have better information. My wife and I just got life insurance from AAFMAA. It was really easy, only a couple pages of paperwork to fill out and only $19 for $400K is the best we found and we looked at 6-9 other companies.

Some other advice I received is to make a list of every financial account you have. Don't need account numbers or anything but a simple list that is easy to find can make life a lot easier on your family if something bad happens.

[Finance_Guy]

I went with AAFMAA and found them quite easy to deal with and pretty cheap with no exclusions. I pay $25/mo for $600k. My question for everyone, know anyone who had it and died? Did it pay out okay? Couldn't find anything bad about them but you never know.

USAA was a serious pain the ass, had to get a physical, etc, and they appeared to be substantially more expensive. So I went with AAFMAA. That said, I've always been very happy with USAA and am quite confident they'd pay out with zero hassle. So now you have me thinking.

When I retire and look to replace SGLI (from what I can tell VSGLI is too spendy--thoughts retired dudes?) I may try USAA again.

For a smoker, VGLI isn't a bad deal when you go looking for insurance elsewhere. Yes it is increasing term but I don't plan to have Term life insurance all my life. Got into another plan earlier that covers me through my end of days.

[Guest Touch & Go Rentals]

I was surprised to see so many endorsements for whole life insurance (also called universal life and cash value insurance) in this thread. I've run the numbers, and it's an awful deal. Whole life is so bad you're actually better off buying term insurance and not even bothering to invest the difference in the premiums. Let me explain why:

I recently pulled a quote for $200,000 life insurance policies. The monthly premium is listed below:

Level Term $22.49

Whole Life $222.65

Typically, for the first several years of a whole life policy, none of the premiums go towards building cash value. It's used to pay fees and expenses. Eventually, when cash value does start to grow, it does so at a very poor rate, and even then, a disproportionately small amount of the monthly premium goes towards building cash value. In the example above, it will take several years before any premiums go toward cash value, and even when they start to build cash value, it does so with far less than $200 per month (the difference between the whole and term life premiums), and then the cash value grows at a very low rate. The fact is, your cash value will never reach what the term life subscriber would have at $200/month stuffed into a cookie jar. Even if the level term subscriber were to invest a portion of that amount (or drink it, for that matter), he will still have more benefit out of the money than pouring it into whole life insurance.

But that's not the worst of it. When you die, guess how much money your family gets out of whole life? $200,000. The broker keeps your cash value. So you've spent nearly ten times as much as you would have for term, but you have nothing to show for it if you die.

Let's take the other angle... you don't die and decide to cash out. Remember how your cash value will never equal the rate of $200/month? Even if you cash out, you lose.

Whole life is a lose-lose.

You have to remember the purpose of life insurance is to replace your income for loved ones who outlive you. This perspective can help you avoid gimmick insurance, such as mortgage or cancer insurance.

Aim for term life insurance 15-20 years at 8-10 times your income. If you should die, your loved ones can live on the interest earned on your invested life insurance benefit. Every five years or so, you can get a new quote--you'll find there aren't big changes in the premiums and you can lock in rates for 20 years into the future--this may be a cheaper approach than to get a 30-year level term at the outset.

SGLI is not sufficient for the military member with a family. The military member who doesn't have a family doesn't need insurance to replace income, but may need to balance the cost of locking in rates at a younger age and/or before an injury or medical condition is discovered which would make you uninsurable in the future when you do want to insure for income replacement.

I'm in the Air Force and don't work for any life insurance company, but I do recommend a wholesaler of term insurance, such as www.zander.com where the wholesaler takes your information, looks at dozens of providers and provides you the best quote for your circumstances. I've used Zander, and they were able to search only quotes which don't have a war clause because of my military status.

[Guest clsoar]

I signed up for SGLI when I got to my first assignment over a year ago. About 4 months ago I realized that the monthly payment hasn't been taken out of my pay for the entire previous year. I was in the middle of T-6s and did not have time to go sit in finance for an hour waiting to be seen. T-1 academics is pretty much a vacation, so now I have time to figure out how to fix this.

Does anyone know if I will have to pay the entire previous years worth of SGLI premiums, or if perhaps personnel did not turn in the paperwork and I am just not officially signed up for SGLI, or if there is something else that it could be and if that will cost me excessive amounts of money to fix?

[MooseAg03]

The same exact thing happened to me when I PCSed to Laughlin after OTS. I filled out SGLI paperwork there when I inprocessed, however it was about 6 months before I realized I wasn't paying anything out of my check for SGLI. When I went to ask them about it they basically admitted they processed the paperwork incorrectly and I was charged the additional fees over the next month. Now the question is, if something had happened in that time I wasn't paying the premiums, would they have paid anything to my family? Who knows...

I would hope if something had happened, they could have audited the paperwork and saw that I signed up for the coverage but their clerical error prevented the allotment from starting. Then maybe my wife could have paid all premiums due and seen what she was entitled to, but once again it's all conjecture.

I would just eat the premiums, pay what you owe and get the coverage started. I only had SGLI through UPT, and then I added an AAFMAA policy worth $600K to supplement. Hopefully my wife doesn't decide I'm too much of a pain in the butt and choose to have me wacked for the life insurance.

[Guest clsoar]

that doesn't sound happy....I wonder if they can just forget that we signed up at all and then pretend that now I am signing up for the first time. I feel like that particular department at Laughlin needs a swift kick to the gonads.

[JS]

I was surprised to see so many endorsements for whole life insurance (also called universal life and cash value insurance) in this thread. I've run the numbers, and it's an awful deal. Whole life is so bad you're actually better off buying term insurance and not even bothering to invest the difference in the premiums. Let me explain why:

I recently pulled a quote for $200,000 life insurance policies. The monthly premium is listed below:

Level Term $22.49

Whole Life $222.65

Typically, for the first several years of a whole life policy, none of the premiums go towards building cash value. It's used to pay fees and expenses. Eventually, when cash value does start to grow, it does so at a very poor rate, and even then, a disproportionately small amount of the monthly premium goes towards building cash value. In the example above, it will take several years before any premiums go toward cash value, and even when they start to build cash value, it does so with far less than $200 per month (the difference between the whole and term life premiums), and then the cash value grows at a very low rate. The fact is, your cash value will never reach what the term life subscriber would have at $200/month stuffed into a cookie jar. Even if the level term subscriber were to invest a portion of that amount (or drink it, for that matter), he will still have more benefit out of the money than pouring it into whole life insurance.

But that's not the worst of it. When you die, guess how much money your family gets out of whole life? $200,000. The broker keeps your cash value. So you've spent nearly ten times as much as you would have for term, but you have nothing to show for it if you die.

Let's take the other angle... you don't die and decide to cash out. Remember how your cash value will never equal the rate of $200/month? Even if you cash out, you lose.

Whole life is a lose-lose.

You have to remember the purpose of life insurance is to replace your income for loved ones who outlive you. This perspective can help you avoid gimmick insurance, such as mortgage or cancer insurance.

Aim for term life insurance 15-20 years at 8-10 times your income. If you should die, your loved ones can live on the interest earned on your invested life insurance benefit. Every five years or so, you can get a new quote--you'll find there aren't big changes in the premiums and you can lock in rates for 20 years into the future--this may be a cheaper approach than to get a 30-year level term at the outset.

SGLI is not sufficient for the military member with a family. The military member who doesn't have a family doesn't need insurance to replace income, but may need to balance the cost of locking in rates at a younger age and/or before an injury or medical condition is discovered which would make you uninsurable in the future when you do want to insure for income replacement.

I'm in the Air Force and don't work for any life insurance company, but I do recommend a wholesaler of term insurance, such as www.zander.com where the wholesaler takes your information, looks at dozens of providers and provides you the best quote for your circumstances. I've used Zander, and they were able to search only quotes which don't have a war clause because of my military status.

Thanks for crunching the numbers and saving me the the time and effort of posting the same thing. I briefly worked in the financial planning (read: life insurance sales) business, have a good friend who did the same, and our maid-of-honor from our wedding is currently a CFP. Bottom line - whole life is a huge scam and a waste of time and money; it benefits the insurance salesmen very well, however. Like you said, you pay, on average over ten-times the rate of term, only to get marginal "returns" on your cash value "investment." Stick to term life insurance (probably why SGLI is term and not whole).

[Guest]

Just to offer a counterpoint...

I have a USAA universal life policy I started over 20 years ago and it has a cash value greater than the sum total of the payments I have made. The minimum return is 4.5% and the average return has been 6.7%. I could stop paying premiums (which are fixed and very low by todays standards for my age) and maintain the coverage for 36 years. Not great but definitely not a bad deal either. I put this in the "better to be lucky than good" bucket of decisions I've made.

That said, the rest of my insurance has been and continues to be term.

[Champ Kind]

Anyone ever seen a definitive explanation on what SGLI does *not* cover? Lots of rumors out there.... In using the Googles, all I was able to find was this blurb on the VA website:

"How Can SGLI Coverage be Forfeited?

The coverage provided by the SGLI program will be forfeited only when an insured member is found guilty of mutiny, treason, spying, or desertion, or refuses, because of conscientious objections, to perform service in the Armed Forces of the United States, or refuses to wear the uniform of such force.

No insurance shall be payable for death inflicted as a lawful punishment for crime or for military or naval offense except when inflicted by an enemy of the United States."

https://www.insurance.va.gov/sgliSite/SGLI/mythsRumors.htm

I've been slacking for years and telling myself that SGLI is "enough", but now, especially with a newborn, I know I need more coverage. I am just trying to decide whether or not I should count on SGLI in my calculations for fear that something random may happen to me and the government would find some obscure reason to keep from paying up.

[HuggyU2]

If you need supplemental, look at Army Air Force Mutual Aid Association.

They have the best rates I've seen. And no "aviation" nor "war" clause.

If you're going to bet against yourself, you might as well pay as little as you can...

[Chida]

Just to offer a counterpoint...

I have a USAA universal life policy I started over 20 years ago and it has a cash value greater than the sum total of the payments I have made. The minimum return is 4.5% and the average return has been 6.7%. I could stop paying premiums (which are fixed and very low by todays standards for my age) and maintain the coverage for 36 years. Not great but definitely not a bad deal either. I put this in the "better to be lucky than good" bucket of decisions I've made.

That said, the rest of my insurance has been and continues to be term.

AAFMAA whole life seems to be a good deal. I pay around $500 per month on a 20 year policy ($400k or so for me and $100k for the wife). If I want to cash out I get paid the higher of my cash value or premiums paid. Last year (which was pretty bad for interest) the return was 7% (on premiums paid of course). After 20 years I stop paying and the cash value continues to accrue. I am covered until I am 100 years old and my beneficiaries receive the higher of the cash value or the policy face value (as I understand it). If I want I can borrow against it, such as to buy a house.

[matmacwc]

Dude, you need to look up Dave Ramsey and his opinion of whole life, I think you are getting F'd in the A.

[JS]

AAFMAA whole life seems to be a good deal. I pay around $500 per month on a 20 year policy ($400k or so for me and $100k for the wife). If I want to cash out I get paid the higher of my cash value or premiums paid. Last year (which was pretty bad for interest) the return was 7% (on premiums paid of course). After 20 years I stop paying and the cash value continues to accrue. I am covered until I am 100 years old and my beneficiaries receive the higher of the cash value or the policy face value (as I understand it). If I want I can borrow against it, such as to buy a house.

Like most complicated financial products out there, I am sure these products fit certain peoples needs and financial situations, but in general, I have found term to be a better deal (see above post of mine, and the one above it). Lots of people fall for the sales pitch that whole life insurance has "cash value," or that you get back the premiums you pay, or whatever. I think you will find that if you purchased a $30/month term policy, and invested the other $470/month in some sort of retirement account or mutual fund, you would also accrue "cash value" and (most likely) get back an amount much greater than your initial investment.

I am just not sure why people think that buying an overly expensive insurance policy that is disguised as a poor investment (compared to traditional investment vehicles) is such a good idea. The one way to really tell if whole life insurance is a good financial move is to look at how badly the insurance sales people want you to buy it, or to ask one of those sales men what type of commission they get by selling whole life as opposed to term. High commissions mean that more of what you pay goes toward things other than insuring your life or building wealth, which is the point of term insurance and mutual funds, respectively.

...I am covered until I am 100 years old...

More proof that you are probably over insured and paying too much. Why would you pay into a program to cover you to an age that you have a 0.754% chance of reaching? Most basic life insurance strategies put you at the most financial risk when you first have kids and a lot of new or future debt (mortgage, future college costs, living expenses for wife and kids for the next 20-30 years). The same strategies generally say that when you are in retirement, you have much less to lose, financially. Why death won't be a good thing, what risks is the insurance policy covering against? The paid mortgage? The grown kids? The wife who is collecting social security already?

[Champ Kind]

AAFMAA plug: I was covered within 48 hours of clicking "apply online" on their site. Very friendly over the phone, fast electronic correspondence, and the rates cannot be beat (I'd been shopping around for a couple of weeks).

I would encourage anyone to take a look at their plans. If you don't think you need additional term life insurance (aside from your SGLI), or that it costs too much, you're absolutely incorrect. For about the price of a steak dinner I am covered to the point that I know my wife and kid will be more than taken care of (mortgage, college, several years of living expenses).

[Ravens52]

AAFMAA plug: I was covered within 48 hours of clicking "apply online" on their site. Very friendly over the phone, fast electronic correspondence, and the rates cannot be beat (I'd been shopping around for a couple of weeks).

I would encourage anyone to take a look at their plans. If you don't think you need additional term life insurance (aside from your SGLI), or that it costs too much, you're absolutely incorrect. For about the price of a steak dinner I am covered to the point that I know my wife and kid will be more than taken care of (mortgage, college, several years of living expenses).

I am looking at the AAFMAA as well, hit me up bro!

I NEED A NAV IN THE WINDOW NOOOOOOOW

[JS]

I would encourage anyone to take a look at their plans. If you don't think you need additional term life insurance (aside from your SGLI), or that it costs too much, you're absolutely incorrect. For about the price of a steak dinner I am covered to the point that I know my wife and kid will be more than taken care of (mortgage, college, several years of living expenses).

Agreed, there are a lot of good insurance calculators out there, and many of them tell me that I need about twice what SGLI covers. Plus some back of the envelope calculations for a mid-30 year old with kids:

Mortgage - $200K

2 Kids college - $200K (at least)

$40K/year for the wife until the kids leave - $600K

That's all in today's dollars, of course. Your life insurance payment would gain interest, but the cost of college and cost of living would go up, etc. and maybe cancel each other out. A lot of the online calculators do a much better job of explaining it and crunching the numbers with interest rates, etc.

AAFMAA is what I decided on as well. The only problem is that the term does not go out as far as USAA or some other companies. In other words, it is a little cheaper because they won't cover you when you start to reach the years where there is a decent chance you might croak (age 49 is the age where I think AAFMAA's premiums go up dramatically and the benefit declines a lot, which is fine, because I will be at less financial risk at that age - hopefully - with the kids gone and the house paid for, etc)

[BFM this]

The only problem is that the term does not go out as far as USAA or some other companies. In other words, it is a little cheaper because they won't cover you when you start to reach the years where there is a decent chance you might croak (age 49 is the age where I think AAFMAA's premiums go up dramatically and the benefit declines a lot, which is fine, because I will be at less financial risk at that age - hopefully - with the kids gone and the house paid for, etc)

That was part of my consideration as well, but it was specifically why I went with AAFMA. I wanted coverage during my prime earning years--years before I had my own nest egg/financial foundation built. Those are the vulnerable years in my mind.

20 years from now, I will have eclipsed what that policy would offer, so it will at that point be redundant.

[BattleRattle]

**THREAD REVIVAL**

Looking for someone knowledgeable about ins and outs of SGLI, especially as I near active-duty retirement (and carry quite a bit of term insurance from private companies). Please PM me.

[BattleRattle]

THREAD REVIVAL PART DEUX: Looking to speak to someone via PM who considers themselves to be relatively smart on SGLI/life insurance situations.

Please lmk--thanks.

BR

[Guardian]

Anything but term is a waste of your money. SGLI is term. Whole life, equity life, (there are 50 other types similar that pay others other than you) are all rip offs. Must only get Term. After age 60 transition from term life insurance to long term health care insurance.