VGLI Rates -Too Costly?

Are VGLI Life Insurance Rates too high?US-DeptOfVeteransAffairs-Seal

They can be, read more about Veterans Group Life Insurance Rates

I recently discussed the cost of VGLI rates with a friend of mine who use to work at the VA and assisted veterans transitioning out of the Military.

As many of you vets know when you are in the military you get SGLI and the option of taking VGLI once you transition out. He pointed out that the rates will get very expensive as you age and he also noted that the maximum of Term Life insurance coverage caps at $400,000 of coverage.

This article will discuss and compare VGLI and Standard Term Life Insurance Rates. I will also point out reasons you may want to continue with VGLI as well as reasons why you may want to consider standard Term Life Insurance.

VGLI ( Veterans Group Life Insurance) History

This program has been around since 1974. It was designed as a simple 5 year plan , until someone applied for standard civilian Term Life Insurance. In 1992 it became renewable for as long as someone wanted to continue with the plan.

Here are some good points about the plan:

1. Premiums are based on age only – Depending you are age, initially the rates might not be to bad, however,  as you age, the rates will go up.
2. No Medical questions – As long as you apply within 240 days of separation , everyone is approved regardless of health
3. No Medical Exam is needed
4. You can request up to 50% of the face amount should you be diagnosed with a Terminal Disease and death is projected to occur within 9 months.
5. Tobacco users – Plan is based on Standard health , Non Tobacco rates.

Here are some bad points:

1. Same rates for men and woman. Women lose on this deal as they generally have lower rates on standard life insurance plans.
2. No Non-Tobacco Rates – In checking their rates , they seem to be based on Non Smoking rates, so if you do smoke this is to your advantage. However, Non Smokers could get a better health rating from a standard plan and further reduce their rates.
3. The monthly premiums will go up when you reach certain age brackets.
4. Only offer up to $400K of coverage. Depending on your situation you could be underinsured.
5. Rates go way up as you age. Wait, I already mentioned this, but do not miss this very, very  important issue!

How VGLI Rates Stack up:

Let’s take a quick look at the rates.

I will use a 45 year old male, Non Smoker, California resident, $400,000 of 20 year Term Life Insurance. Standard health class.

Veterans Group Life Insurance Rates


Here are some comparison civilian Term Life Insurance rates:

Banner Life Insurance $400K , 20 year Term , Standard Heath, $82.69
SBLI Life Insurance $400K, 20 year Term , Preferred Standard Health $70.54
SBLI LIfe Insurance $400K , 20 year Term, Preferred Health $51.85

Summary of VGLI Rate comparison:

Initially their premium is within range of most Term Life Insurance plans that  offer coverage under a Standard Health rating and a non tobacco user.
A Standard Health rating allows for a few minor health impairments such as controlled High Blood Pressure / High Cholesterol , Height / Weight out of range, family history of health.
As you can also see, if you are healthy and no medical issues and within standard Height and Weight charts you can certainly apply for a Preferred health rating and get a great rate that will never increase during the policies term period.

Where the plan starts to falter is when they raise the rates when you hit a certain age bracket.

On our example of VGLI rates, they have been locked in for an a age group. When he hits 50 look at the rate increase! $144 a month  And the following 5 years, $268 per month, ouch!

In our example , it would be better for him to lock in a standard term life insurance rate , now,  even if it’s a few dollars more than the VGLI rate,  because standard term life insurance rates do not increase!

When should you consider the VGLI plan?

If you have a moderate to severe health impairment then the VGLI plan would be the way to go.
If you are near 50 , consider a lower term life VGLI amount with a small whole life plan. Whole life plans offer a Simplified Issue policy for those that are 50 and over. It is commonly known as a final expense or a  burial insurance plan. These plans take more health conditions and you only answer Yes and No questions.
If you are a tobacco user, who intends to quit within a 5 year window, then the VGLI plan would be an option, now, and , at the 13th month of no tobacco product use, consider looking into a standard term life plan with No Smoking rates.

Twelve ( 12)  months of no tobacco product use, is when the price breaks start. The longer you go without tobacco use, the better the rates.

When to consider a standard Term life Plan

When you are considering separation from the military it might be a good time to shop around. If you have already separated, keep the VGLI and search around for better rates. Do not go un insured, even if you have to drop the face amount to get a more affordable rate.

A standard fully underwritten term life insurance plan will require a medical exam ( no cost to you) and the process can take 4-6 weeks to complete. There is never a cost to apply and if they come back with a rate you do not like, you do not have to accept the offer.

About M2 Insurance

I am an independent broker who works with over 60+ AM Best A Rated Term and Whole life insurance carriers. I am here to help and with that I promise: no hard sell or high pressure.

Working with M2 Insurance  is easy: We discuss your needs and current health, I run a quote , give you the information and then you make the decision. I only do one or two follow up’s and thats it. If you do not realize the importance of life insurance there is nothing I can say or do to change your mind.