Is SGLI enough to provide for my family if I die unexpectedly?

2016-01-21T09:30:16-05:00

I've asked this question to a lot of senior NCO's and Officers and have gotten a very mixed response. My personal opinion aside...do you think $400,000 is enough money to provide for your family in the event of your unexpected death?

http://militaryhandbooks.com/is-sgli-enough/

Is SGLI Enough? | Military Handbooks

Response by LTJG Robert M. made Jan 21 at 2016 9:35 AM

2016-01-21T09:35:04-05:00

It really depends on your family, debt, income replacement, lifestyle & current nest egg. Recommended amount is 8-10x annual income.

Response by CMSgt Mark Schubert made Jan 21 at 2016 9:41 AM

2016-01-21T09:41:21-05:00

It depends. How much is "enough"? and for how long?
Money is a tool - no amount is "enough" to make you happy, content, get over a loss of a loved one, pay for everything forever, etc.. I think it's sufficient for anyone who is willing to continue to pursue God's will. Trust in Him and these questions will be much less relevant.

Response by COL Private RallyPoint Member made Jan 21 at 2016 10:13 AM

2016-01-21T10:13:02-05:00

I'm not a financial planner, so take this for what it is worth. Everyone's situation is different - it depends on what you are trying to cover. Typically, the recommendation is for life insurance to be approximatley 10x your annual salary. Again, it depends on what you are trying to do - pay off current debt (to include mortgage, credit cards, personal loans, etc.), provide an education for your kids, set up a cushion for your spoiuse, etc. Also depends on your stage in life - a younger person with young family and new house (e.g., high expenses) should have a larger amount of life insurance than someone nearing (or in) retirement that has their house paid, kids gorwn and out of the house, and no other debt.

Response by Sgt Aaron Kennedy, MS made Jan 21 at 2016 10:28 AM

2016-01-21T10:28:48-05:00

There is no simple answer to this.

It really takes an estate planner to deal with the ramifications of Death. However, in very simple terms, the SGLI will make sure that your debts are paid (house, car, credit cards), and that your family is taken care of for a "few" years without having to think about YOUR income.

That doesn't mean that they won't need alternative income, but they won't instantly become destitute.

Let us make a couple of assumptions. Regardless of rank, the current SGLI is more a single years pay for anyone in the Service including BAH with Dependents. It is "close" to the maximum VA Home loan of $417,000, which means that in theory it will either "pay off a house" or "cover a year of salary & benefits." (if not both). So, that said, your family is covered for at least one year for major expenses.

If you have a mortgage, you will not have to worry about it (@ 8% $417k is $3k a month.), so even if your family doesn't pay the home off, they will be covered for a LONG time. Whatever debt you had "should" not be large enough to completely kill it, however by prioritizing debt, these concerns can be covered.

The real question is "when" not "if" your dependents will have to return to work, and to what extent. Children will have to eventually, just because they become adults at some point. This is part of normal planning. Spouses is another matter, and "personally" (I stress this) you should always discuss the "what if" one of you cannot work situation. Can the other cover the loss of income? The military career is one you know will end. Either at 20, 30 years. But it will end. You will see a significant drop in income until another career comes into play. It's nice to believe that something will be right there waiting, but it's far better to plan for the worse.

Response by MCPO Roger Collins made Jan 21 at 2016 10:36 AM

2016-01-21T10:36:33-05:00

Buy the most term life that you can afford, or a 20 pay life, if they still have those.

Response by PO3 Private RallyPoint Member made Jan 21 at 2016 10:47 AM

2016-01-21T10:47:28-05:00

400k is my close to 8 or 7 times of my annual income. Technically .... my family can only survive on that for 8 to 7 years with the current expenditure level, and without extra too. so? do you think is enough?

For my wife, her words ring truth, if I lived 20 years ... without salary increase or new better pay job. I still make far more than $400k in total. She want me to lived at least 20 years or more. Never over think on life insurance ... it just a plan "Z", and I should't worry at all, I am already dead if it come to it, got it? done and move on with life.

Response by SCPO Jason McLaughlin made Jan 21 at 2016 11:23 AM

2016-01-21T11:23:03-05:00

Remember that SGLI is not the only benefit provided to families upon the death of a service member, it is only "one leg of the stool". In addition there is the $100k death benefit, educational benefits provided to children, VA benefits, and Social Security Benefits. When I went through CACO training in 2009, the estimated benefits, along with SGLI, were estimated at roughly $1.2M.

Response by LTC Private RallyPoint Member made Jan 21 at 2016 11:49 AM

2016-01-21T11:49:02-05:00

It depends on your age and current status. IMHO, $400K should be enough to set your family up for success. It's not going to be enough to allow them to sit back on their ass and do nothing for the rest of their lives.

Response by SSG Private RallyPoint Member made Jan 21 at 2016 12:13 PM

2016-01-21T12:13:44-05:00

As an insurance agent myself I would highly encourage you to look into term life insurance... even if for only $100,000. If you do it now while you are young and healthy then the monthly premium will be a lot less than if you try to get it when you are older. All it takes is a medical condition to appear to effect your chances at life insurance the premium you will pay.

SGLI is great and allows you $400,000. After you ETS/Retire you can convert to VGLI but the most you can get is $400,000. So, if you ever needed more than that post ETS/retirement you would have to apply for life insurance outside of SGLI/VGLI. It will be much harder to get and more expensive if you want until you are older. Also, term life insurance can be rolled into universal when your term expires.

Also, you can try this for a rough estimate of your needs: https://www.prudential.com/view/page/public/13849?format=frame

Life Insurance Needs Estimator

Response by 2LT Private RallyPoint Member made Jan 21 at 2016 12:35 PM

2016-01-21T12:35:58-05:00

Great Question. The answer is likely different for each individual. Many other posters have provided great responses. It's important to discuss the intended use of the death benefit, if you have high debt, maybe you wish to use benefits to pay off the debt and make life easier for your family in that sense, or maybe you're debt free and would like a paid up annuity to provide for a future income. There are a million variables in determining an individuals insurance needs. If you're concerned I would recommend looking for a Human Life Value Approach spreadsheet. There are many different approaches to evaluating needs, and many free spreadsheets on Google. I personally think that it's a shame that the Private Life Insurance Industry often makes purchasing life insurance for Military Personnel useless, many policies exclude Wartime losses, training accidents and even airline accidents unless you're a fare paying passenger. Also I should add a disclaimer that this is not financial advice, just wanted to provide you some direction in seeking out a tool to evaluate your needs.

Response by SMSgt Thor Merich made Jan 21 at 2016 12:40 PM

2016-01-21T12:40:27-05:00

It really depends on your financial situation. Will that money pay off your house, your kids college, and other expenses? Does you wife have a career that will allow her to support the family without your income? I would say no, but for some the money might be enough.

Response by Maj Chris Nelson made Jan 21 at 2016 1:13 PM

2016-01-21T13:13:18-05:00

So, My wife and I discussed this once or twice. It was agreed on that 400k would not be enough for her for life, however, it WOULD be enuf to allow her to buy a reasonable home full up, go debit free, and ensure enough time to find a good job. Would also be a nest egg for kiddo's college fund. to live on for life? not so much, but if all the major bills are GONE, she would have less to worry about for a longer period of time.

Response by SFC David Davenport made Jan 21 at 2016 1:26 PM

2016-01-21T13:26:35-05:00

For a single Soldier typically yes. For a married Soldier with no kids and a working spouse probably. But once you add children or if the spouse does not work then typically no. Seek out a professional financial planner/advisor if you want details. Every family is different so I can't really give definitive answers.

Response by LTC Paul Labrador made Jan 21 at 2016 1:51 PM

2016-01-21T13:51:39-05:00

In the short term? yes. Long term? No.

Response by TSgt Joshua Copeland made Jan 21 at 2016 2:32 PM

2016-01-21T14:32:07-05:00

I am going to quantify my "no" answer in a bit more detail. So should 400K be enough? For most people, realistically, yes. Your life insurance amount should cover paying of ALL (including mortgages) of your debt with money left over for funeral expenses and some living money. That said, It is to your advantage to lock in to a Whole life or Blended term policy as early as you can while you are still young and healthy. Term life insurance can be pretty cheap, but gets progressively more expensive as you get older and as time takes a toll on your body.

Whole Life is pretty straight forward but I will give a brief run down. This type of policy is, as the name suggest, for your whole life at a fixed premium and typically accrues a cash value that you can take loans against.

Term on the other hand is literally for a specific term or period of years (typically 5, 10, 20) and usually has a substantially lower premium then Whole Life, but no cash value. Once that period is up, the policy is done and any money paid in premiums are gone too.

I mentioned blended term which is not a super common type of policy so I will explain it a bit. This is like a cross between whole and term. You will typically pay a fixed premium for a fix period of years. What makes this type of policy different than traditional term is that at the end of the term you are presented two options. One is to take a cash value of the policy (typically half of the covered amount) OR you can let the policy stay in force and payable on death with no additional premiums due. These premiums are typically somewhere in between Term and Whole Life.

In the case of all three types of policies, the young and healthier you are the cheap the premium will be.

Now to why I said "No". While 400K is likely enough for most military members, your SGLI is term. It is only good as long as you are in the service. Converting to VGLI gets pretty expensive as you get older. It is in you and your family's best interest to establish a Whole Life or Blended Term as soon as you can while you are young, healthy and employed to make the payments.

Here is an example: I bought a blended term policy at age 29 when I was "good" health and a non-smoker. The policy is for 350K and I pay $150 a month. The term is for 20 years. After 20 years (when I am 59) I can take 165K cash or let the policy ride with no further payments and pay the full $350K when I die. Had I bought the same policy 10 years sooner at 19, I would have paid $50 a month less and be done paying by age 49. Conversely, my wife who is totally disabled was only able to get a 10 year term policy for 50K and pays the same price I do.

I am going to quantify my "no" answer in a bit more detail:

Response by 1SG Private RallyPoint Member made Jan 21 at 2016 2:35 PM

2016-01-21T14:35:20-05:00

No. But it is enough to pay off the house and any other open debts (probably). As strict income replacement, no it is not enough, but a little bit of planning can make this go far enough to secure a future.

Response by SSgt Private RallyPoint Member made Jan 21 at 2016 4:00 PM

2016-01-21T16:00:28-05:00

absolutely not and you bet your ass that this trend will continue until laws like heallthcare reform are repealed. And a new generation after the elections.

Response by CH (CPT) Private RallyPoint Member made Jan 22 at 2016 3:59 PM

2016-01-22T15:59:57-05:00

Well, you got quite a response to this question! In my civilian life I'm a financial coach and life insurance guy. There's no straight answer to the question. There are different ways to calculate how much insurance you would need, based on regular expenses, anticipated future expenses (kids going to college, etc.), and how long you would want the insurance to last. We have a few different algorithms to estimate how much insurance you would need. Ultimately, though, this question should be answered on a yearly basis. Things can change in a year, and sometimes the insurance should be adjusted in response. If you're seriously considering this question, I recommend you find a good, independent insurance agent who works through a brokerage (not a captive company that only offers one product), and who also understands the SGLI and how to work alongside it. Someone who will look for the best solution for you.

Response by SFC Pete Kain made Jan 22 at 2016 7:07 PM

2016-01-22T19:07:23-05:00

It really depends on the spouse to manage the funds. It's insurance not a lottery for crying out loud.

Response by MAJ Ken Landgren made Jan 22 at 2016 8:43 PM

2016-01-22T20:43:43-05:00

What are all the benefits is she entitled to folks?

Response by CSM Charles Hayden made Jan 22 at 2016 9:09 PM

2016-01-22T21:09:04-05:00

Family security and concerns are best shared and prepared for early, then sharpened as time moves on.

Many spouses have little interest or training in financial management. Spousal ability to 'manage' is as important as the $ available.

Preparation for deployment usually covers the necessary legal documentation.

Amongst the primary earner's responsibilities for their family is that of ensuring the survivor will be able to 'manage' family affairs. If the wage earner is not satisfied of that capability; alternate, binding arrangements should be made.

Funds and capital have a way of lasting longer, if 'doled' out minimally and periodically for family welfare per predetermined arrangements.

As a 'trustee', I have personally been engaged in such a situation like this. A hapless, distant relative is still receiving a stipend for personal support 29 years after the passing of his grandparent.

Response by 1LT Private RallyPoint Member made Jan 23 at 2016 7:28 PM

2016-01-23T19:28:34-05:00

Thank you all for your amazing responses. I'm really glad to have gotten a good conversation out of this question!

Response by CPT Private RallyPoint Member made Jan 24 at 2016 2:08 AM

2016-01-24T02:08:11-05:00

If $400,000 covers ALL of your FAMILY debt (to include mortgage) and 3 months of your current take home monetary compensa, I say you are good to go.

Response by SFC Christopher Perry made Jan 24 at 2016 12:05 PM

2016-01-24T12:05:43-05:00

Personally, I feel that if you max it out, it is more than enough to do what it is intended to do. Life insurance is not really intended to provide your family the ability to live a life of ease for the remainder of their lives. It is meant to provide a cusion in the event of your untimely passing. I am sure there are those of those that will disagree. Look at the number of years it will take you to earn that $400k. That is the number of years you have provided your family. This is the time you have allowed them to adjust to the new norm. Most folks will adjust much more quickly in your absence. Which means that more than likely this will put your children through college and start them on the right path in life.

Response by 1SG Private RallyPoint Member made Jan 25 at 2016 12:34 AM

2016-01-25T00:34:38-05:00

The purpose of the life insurance is to provide enough income to take care of the expenses involved in funeral and memorial costs, and to provide enough income to allow the surviving kin a buffer to recover from the financial shock of loosing that income provider. It is not meant, for example, to allow the surviving spouse to retire off of the death. I have not looked up the latest worth of wages and benefits for an E6, but (including medical, housing, and food) I think it's near $40k. The SGLI payment would cover nearly 10 years...that should be enough for beneficiaries to recover.

Having said that, the SGLI benefit does seem to be a greater value for enlisted then officers. Especially General Officers

Response by PO2 Private RallyPoint Member made Jan 26 at 2016 3:23 PM

2016-01-26T15:23:01-05:00

I don't think so but I'm not sure. Invest in more than one policy if possible.

Response by CH (CPT) Private RallyPoint Member made Mar 4 at 2016 12:23 AM

2016-03-04T00:23:17-05:00

Insurance is not a NEED product. It's a WANT product. How much money do you want your beneficiaries to have? How long do you want the money to last? What do you want your beneficiary to be able to do with the money? Do you want to provide retirement income for your family? Do you want to find your kids' college and your daughter's wedding? No one needs life insurance. You won't have any use for it in the grave. Life insurance isn't for you, it's for the people and causes you love.

Ask yourself this: if it was free insurance day, how much would you want? Most say "as much as I can get." What if it was free Brussels sprouts day? Now how much do you want? Not that much. The only mitigating factor on getting stocked up on life insurance is cost.

This entire discussion is very interesting. I'm also an insurance consultant on the civilian side. I use insurance for specialty applications like cash flow after retirement, corporate compensation packages, and college funding. Life insurance does more than pay your burial costs-properly used it makes a dollar do the job of many dollars.

I encourage everyone in this discussion to find a competent, professional life insurance specialist to help you and your family build a reliable plan--done right, it should provide a lifetime of income and funding for your family as well as protect against unfortunate events, not just death.

Response by CH (CPT) Private RallyPoint Member made Mar 4 at 2016 12:25 AM

2016-03-04T00:25:59-05:00

One more thought--I don't think the SGLI provides living benefits (similar to a log term care policy). I don't remember that in my policy.

Living benefits allow the insured/owner of the policy to access a portion of the death benefit in the event of disability--you get sick or injured and can't work, need help soon basic things like eating and dressing yourself. Most robust policies these days provide for living benefits. I consider it essential. I'll have to research SGLI again. Any input?

Response by CPT Daniel Walk, M.B.A. made Jan 20 at 2017 10:41 PM

2017-01-20T22:41:16-05:00

This is a great question. If a person has some anxiety over this issue, they need to make an active decision about how to use the money. Nobody finds out the extent of the financial and non-financial support the military provides until their spouse passes. Army Community Services employ a Certified Financial Planner that works with widows.

First, the idea that using the insurance to pay debt is a bit deceptive. Anyone who incurs bad debt, then uses the SGLI to pay off the debt is most likely to only incur more debt. So, the idea is to take care of the most important things first. This can be done through a trust.

You don't need to set your spouse up for a couple years of leisure. that's not necessary. It's reasonable to set aside some amount to fund modest living expenses for six or so months.
Here are a few ideas I have talked to people about, should a service member pass while on active duty:

Allocate a portion of the benefit to Coverdell ESAs, or other tax-advantaged educational accounts

Allocate a portion of the benefit to an IRA for the spouse's eventual retirement, the IRA must include the specific investments that will preserve the capital investment AND account for long-term inflation.

Allocate a portion toward in individual health savings accounts or something else that helps with health care expenses later.

Whether the SGLI is enough or not, really depends on how you plan to use it. Plan before you need it.