Insurance Issues for Military Servicemembers & Their Families

Members of the armed services can be deployed on short notice, leaving little time to address their personal or business affairs. Insurance coverage, in particular, is often affected when someone moves out of state or spends an extended period of time away from home. Before you purchase any insurance policy, it is a good idea to ask the agent or broker specific questions about how the company will handle issues related to the deployment of their policyholders who are in the military.

Each company’s guidelines can vary. By shopping around, you may be able to find an insurer who takes the specialized needs of service members into account. It might be difficult to handle routine business like paying premiums timely or renewing policies when you’re deployed. Talk to your agent before you leave to learn when a policy is up for renewal and to make arrangements to pay your premiums. You may be able to renew a policy early or have your premiums paid by automated bank draft. Some insurance companies might also allow you to suspend certain coverage while you’re deployed. Most insurance companies use payment history and continuity of coverage as factors to determine their rates and eligibility standards. If your insurance lapses or expires while you’re away, you could come home to find companies unwilling to insure you or only willing to do so at a higher rate.

Life Insurance

Military Sales Online Reporting System (MSORS)
Report disciplinary actions regarding military sales to state insurance departments.

Additional Insurance Considerations for Military Servicemembers:

Helpful websites:

Servicemembers' Group Life Insurance (SGLI) and Veterans' Group Life Insurance (VGLI)

SGLI is a program of low cost group term life insurance automatically available to all servicemembers on active duty, active duty for training or inactive duty for training and members of the Reserves. This policy is automatically activated for a coverage amount of $400,000, the maximum amount of coverage, unless the servicemember opts out in writing. In addition, designated beneficiaries now receive an additional payment of $100,000 if a servicemember dies while on active duty. A servicemember can elect lower coverage or no coverage by completing the VA Form SGLV-8286. Coverage is available for spouses; dependent children are automatically insured for $10,000. When released from active duty or the Reserve, members with full-time SGLI coverage can convert their coverage to Veterans Group Life Insurance or to an individual life insurance policy. Click the link below to learn more about the SGLI and VGLI policies for military servicemembers.

For more information regarding SGLI and VGLI eligibility, benefits and premiums call toll free 1-800-419-1473 or visit the Department of Veterans Affairs Web site at http://www.insurance.va.gov/.

Who Needs Life Insurance?

Members of the armed services may consider their life insurance needs throughout their military career. The need for life insurance will vary depending upon your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt if you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes. However, it is important to remember that most military servicemembers already receive the $400,000 of life insurance coverage automatically, unless specific requests to opt out have been submitted.

If you are a servicemember that has opted out of the SGLI plan or are looking for additional life insurance above the $400,000 amount, you should consider the following factors:

  • Medical expenses prior to death, burial costs and estate taxes in excess of amounts that would be covered by any applicable veterans’ benefits;
  • Support while surviving family members try to secure employment;
  • Continued monthly bills and expenses, day-care costs, college tuition and retirement of surviving family members; and
  • Whether a policy contains exclusions for death while performing military duties.

How Much Life Insurance Do I Need?

Here are Some Questions to Ask Yourself:

  • Have I already purchased the maximum amount available to me through the Servicemembers’ and Veterans’ Group Life Insurance program? (SGLI and VGLI are government sponsored life insurance programs administered by the Office of Servicemens' Group Life Insurance (OSGLI) in Roseland, NJ.)
  • In September 2005, the maximum amount a person can purchase under the SGLI or VGLI programs is $400,000.
  • Do I really need more than the SGLI plan currently offers?
  • How much of the family income do I provide?
  • If I were to die, how would my survivors, especially my children, get by?
  • Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?
  • Do I have children for whom I would like to set aside money to finish their education in the event of my death?
  • How will my family repay debts after my death?
  • Do I have family members or organizations to whom I would like to leave money?
  • Will there be estate taxes to pay after my death?
  • How will inflation affect future needs?

There is also a life insurance needs calculation tool available on the Department of Veterans Affairs web site: http://www.benefits.va.gov/INSURANCE/lifeIns101.asp#.

Life Insurance Considerations for Military Servicemembers

An important note to members of the armed forces involves a provision that is commonly included in life insurance policies. If you have opted out or decided to purchase additional life insurance outside of the SGLI/VGLI military offered life insurance plans, you should review the list of exclusions to the policies. Many life insurance policies include a “war exclusion” provision that specifically states benefits will not be payable if the death is a result of war or the action of a military force. The Servicemember’s Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI) policies do not have this type of exclusion. In addition, many life insurance policies also contain exclusions about traveling on any non-commercial aircraft.

Basic Types of Life Insurance

All life insurance policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.

Term Insurance
Term insurance generally has lower premiums in the early years, but does not build up cash values. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.

Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.

You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase.

Term life insurance may be more desirable for people who are starting out, on a budget or have a fixed time period when their objectives call for life insurance.

Permanent Insurance
Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection. These policies include a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher.

Whole life plans have level premiums which means they do not increase as you age. These policies are designed and priced for you to keep over a long period of time. If you don’t intend to keep the policy for the long term, it could be the wrong type of insurance for you. Whole life insurance policies develop “cash values”. The cash value is one of the guarantee provisions of the policy. Whole life policies may be more desirable for people who need coverage for their entire life.

Tips On Buying Life Insurance

  • Make sure you feel comfortable with the insurance agent and company.
  • Individuals that solicit life insurance on military installations are required to obtain authorization from the Department of Defense as an authorized solicitor and all insurance agents must have a license from a state insurance department. Ask to see the agents’ permits or licenses.
  • Decide how much you need, for how long, and what you can afford to pay.
  • Learn what kinds of policies will provide what you need and pick the one that is best for you.
  • Do not sign an application until you review it carefully to be sure the answers are complete and accurate.
  • Do not buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.
  • Do not feel pressured to sign an allotment form during a classroom session related to financial planning that includes a solicitation to purchase life insurance or investment products.

See the NAIC's Consumer Alert for other considerations for purchasing life insurance.

Life Insurance Deceptive Sales Practices and “Red Flags”

  • Solicitation of life insurance products as “investment” or “savings” products sold as or with savings or investment products.
  • Non-military personnel posing as financial counselors or advisors on veterans' benefits.
  • Non-military or former military personnel acting as investment advisors in a group or classroom setting.
  • Pressure to rush through the application process, to complete an allotment form or to authorize withdrawal of funds from your bank account for the purchase of a life insurance policy.
  • Agents selling on the base without authorization from your base solicitations officer or the Department of Defense.
  • Agents selling without a valid license issued by a state insurance department.
  • Delays in receiving a copy of the insurance policy.

Homeowners Insurance Considerations for Military Servicemembers

What happens if your home is vacant? Many homeowners policies have a "vacancy clause," and if you are gone for an extended period, you could trigger it. In this event, some or all of your coverage may not apply in the event of a loss. The precise definition of vacancy can vary from policy to policy. Some policies, for example, might not pay claims if your house is unoccupied for 60 days or more. However, many companies offer an endorsement that will provide coverage for a dwelling that is unoccupied for an extended period of time. You should consult with your insurance agent or company to learn how the company defines vacancy and whether the company will pay claims if a house is unoccupied.

Check your coverage. It is a good idea to review your homeowners policy with your agent before you leave - it could help you avoid a dispute or disagreement in the future. Make sure your policy limits are sufficient to cover your home and your personal property at today’s costs. You may want to increase your coverage if you have made additions or improvements to your property.

With regard to personal property coverage, the military generally will not pay to repair or replace property that is damaged or lost in military housing or in a war zone. Homeowners insurance typically covers personal property that you take with you while traveling, but most policies exclude coverage for damage caused directly or indirectly from war. Talk to your agent about whether personal items that you take with you during your deployment will be covered if they are lost, stolen, or damaged.

Renters Insurance Considerations for Military Servicemembers

If you rent property, you should consider renters insurance often referred to as personal property coverage. In many states, if you rent your home and have renters insurance, your policy will typically pay to repair or replace personal property you take with you while traveling. However in many states, most policies exclude coverage for damage caused directly or indirectly from war. Ask your agent or company whether your renters policy will pay to repair or replace any property you take with you during your deployment.

Auto Insurance Considerations for Military Servicemembers

If you will be deployed for an extended period of time and no one will be driving your vehicle, you may be able to suspend some or all of your coverage to save on premium payments. Not all states allow for coverage to be suspended, nor do all insurance companies. You should contact your agent or company and state insurance department for the specific laws and policy limitations. You may want to ask if liability coverage, collision coverage, comprehensive coverage, uninsured/underinsured motorist, medical payments and personal injury protection coverage can be suspended while you are deployed.

Health Insurance Considerations for Military Servicemembers

Service and employer health plans. Active duty personnel have coverage through the military, as do reservists and National Guard members after 30 consecutive days of active service. Many reservists and National Guard members, however, have health coverage for themselves and their families through an employer-sponsored health plan, and some may wish to continue that coverage, particularly for their dependents, during their active duty period. Talk with your benefits administrator at work to learn what will happen with your health coverage if you are called to active duty. While employers are not required to pay the cost of health coverage for you and your dependents while you are on active duty, some employers may choose to continue benefits at their current level.

If your employer does not continue paying the cost of your health coverage, you are entitled to continue the coverage at your own cost under federal law. The Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA) both allow you to continue coverage for yourself and your dependents for up to 18 months, however, you may be required to pay 102 percent of the full premium for coverage. Any person covered by the health plan may choose to continue coverage even if others who are covered do not. This means, for instance, that your spouse could continue coverage through USERRA and COBRA even if you do not.

If your employer discontinued your health coverage and you return to the company directly after your military deployment, federal law requires that you be allowed to resume plan membership without any type of waiting period.

Policy lapses or cancellations

It is important that you make arrangements to have your insurance premiums paid timely while you are deployed. If your insurance company cancels your policy for failure to pay your premium on time - or for any other legal reason – you will likely have trouble getting a new insurance policy and, when you do find a company willing to insure you, you may have to pay higher rates. Many companies will decline to insure drivers who have lapses in their insurance coverage. And if your coverage lapsed for more than 30 days, companies may be able to charge you a higher premium.

Assigning 'power of attorney'

Power of attorney is a special legal designation that authorizes someone to act on your behalf in insurance, financial, personal, or legal matters. If you are deployed, you may want to consider assigning power of attorney to a spouse, family member, or trusted friend. To assign power of attorney, you and the individual you designate must sign a form before a notary public. Ask your base personnel office about where to find a notary. You may also consult the business listings in your local telephone directory to find notaries in your area.

Contacting Your State Department of Insurance

You should contact a state insurance department if you believe you have encountered deceptive sales practices or you discover that the policy you purchased was misrepresented to you. The state you contact should be the state where you are currently listed as a resident, regardless of whether you are currently stationed in some other state or you are stationed outside of the United States . You may also contact your resident state insurance department if you have any general questions about insurance.

State Department of Insurance Web Sites

State Department of Insurance Contact Phone Numbers

File a Complaint Electronically with Your State Department of Insurance

Better Business Bureau for Military

The U. S. Better Business Bureau system is working with the U.S. military to encourage servicemembers and their families to use the programs and materials of the BBB system for a variety of consumer-related issues. Visit the Better Business Bureau for Military at http://www.bbb.org/council/programs-services/bbb-military-line/ .

Department of Labor Employee Benefits Security Administration (EBSA)

For more information about your rights concerning health insurance coverage under USERRA and COBRA, call the U.S. Department of Labor Employee Benefits Security Administration at 1-866-444-EBSA (3272) or visit its Web site at www.dol.gov/ebsa/.

NAIC Resolution re: Waiver of Occupancy Requirement for Military Servicemembers

Please click the link below to view a resolution, which was presented by John W. Oxendine, Georgia Insurance and Safety Fire Commissioner, to the NAIC membership during the NAIC’s 2005 Spring National Meeting. The resolution addresses the waiver of any occupancy requirement for Armed Services personnel who can demonstrate they have taken reasonable steps to maintain and protect such property. The NAIC membership unanimously adopted this resolution on March 13, 2005.

Proposed Resolution of States Supporting Armed Forces Personnel

Legal Assistance Web Sites

Click on the following links to obtain legal advice for your respective branch of the military services.

Army: http://www.jagcnet.army.mil/Legal
Navy: http://www.jag.navy.mil/
Air Force: http://hqja.jag.af.mil/
Marines: http://www.hqmc.marines.mil/sja/UnitHome.aspx
Coast Guard: http://www.uscg.mil/legal/

Federal Trade Commission

Visit the FTC’s Web page at http://www.consumer.ftc.gov/features/feature-0009-military-families to access information on consumer-related issues for military families.

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NAIC Support:

Tim Mullen
Director of Market Regulation and Consumer Affairs
tmullen@naic.org
816-783-8260

Petra Wallace
Market Regulation Specialist
pwallace@naic.org
816-783-8272