The United States government first became involved in the insurance industry when war broke out in Europe in 1914 as merchant ship owners could not get marine insurance from private companies. In response, Congress passed the War Risk Insurance Act on September 2, 1914, providing marine insurance protection for merchant ships supplying the allies in the war against Germany.
When America entered the war against Germany in April 1917, life insurance issued by private companies either excluded protection against the extra hazards of war, or if such protection was offered, the premiums rates were significantly higher than normal rates.
Two amendments to the War Risk Insurance Act occurred in 1917 to better protect those individuals serving our country. The first amendment added merchant marine personnel. The second amendment authorized for the first time issuance of government life insurance to members of the armed forces.
Over four millions policies were issued during World War 1.
Ever since WWI, the U.S. Department of Veterans Affairs has significantly expanded the type of life insurance it provides to current and previous members of the armed services.
They currently offer five different programs:
· Servicemembers’ Group Life Insurance
· Veterans’ Group Life Insurance
· Servicemembers’ Group Life Insurance Traumatic Injury Protection
· Service-Disabled Veterans’ Insurance
· Veterans’ Mortgage Life Insurance
Whenever an individual enlists in the armed services, they are granted access to a number of benefits to protect their lives and the life of their family. In fact, term life insurance coverage is almost automatic for all active duty service members and coverage can range from $50,000 to $400,000.
Due to the nature of their profession and dedication to the United States, the VA supplies these men and women with adequate coverage for a very low price and without a medical exam.
Once they have completed their service, veterans are allowed to convert their term life insurance policy into a lifetime guarantee with no proof of good health or answering any health questions. The enrollment period to covert from SGLI to VGLI is one year and 120 from the date of separation.
Once enrolled in VGLI, veterans will have the opportunity to increase their coverage by $25,000 every five years up to the legislated maximum amount of $400,000, until age 60.
While converting your policy and continuing your insurance through the VA certainly has its advantages, it may not be the best option for all veterans and here is why.
Guaranteed acceptance may be a simple and easy way to secure life insurance, but it also comes with a high price. VGLI rates are affordable for younger veterans, but maintaining this coverage can become quite expensive in the future. This is because VGLI premium rates are based off of age with premium rates increasing every five years.
Due to budgetary issues, the VA has recently increased premium rates overall by five cents per $1,000 of coverage. The VA also only offers term life insurance that only carries a death benefit and does not have a cash value component that could serve as an investment.
Like many other life events, converting your SGLI policy into a VGLI policy is a very case-by-case scenario.
On the other hand, if you are facing health challenges, VGLI may still be your best option for maintaining lifetime term coverage as private companies may deny you.