30 Day Financial Transition Challenge Day 17: Post-Military Life Insurance

Welcome to Day Seventeen of the “30 Day Financial Transition Challenge.”  Today’s article focuses on your post-military life insurance needs.

Bottom Line Up Front (BLUF)

As you exit the military, you need to look at your post-military income, and how you’re going to protect it.  While Survivor Benefit Plan might be a part of this plan, your post-military life insurance planning should play a complementary role.  Today, we need to look at your post-military life insurance needs & establish a plan that meets them.

Why 

You need to look out for your family’s post-military career income.  If you plan to retire completely and live solely from your retirement assets, then you do not have an insurance need.  However, if you plan to have post-military employment, odds are that you will have insurance needs that are more than what you can convert from SGLI (via VGLI or a permanent commercial policy).  You also need to evaluate the costs of protecting this income and make the decision that is right for your family.

Goal

Your goal should be to figure out:

  • If you’re adequately covered for your post-military career income.
  • Whether you believe that SBP or a term life insurance policy is the right solution for protecting your military pension.
  • If you want to convert from SGLI to VGLI or a commercial policy
  • Whether you need professional assistance to help evaluate your insurance needs

Relevant articles

What you need 

Nothing.

How-to

This exercise consists of a simple checklist of questions to help frame your approach.

  1. What are your needs?
  • Replacement of income?
    • Pension: Think about SBP, if you’re eligible.  Is it right for you?  If so, then you might want to focus on protecting your post-military career income.
    • Post-military career: $400K sounds like a lot, but it’s not.  You should look at your entire post-military career.  For example, if you expect to make $50,000 per year for 20 years after the military, that’s $1 million.  Your post-military life insurance policy should be able to cover the unexpected loss of that income.
    • Retirement: True retirement means that you don’t need income, other than what you have from your retirement assets.  If you are truly in retirement, and don’t rely upon social security or your pension for your living expenses, then you don’t need life insurance.
  • What happens if you lose your primary breadwinner? Are you at risk of losing your house, car, or college/retirement savings?
  • What happens if you lose your supportive spouse? Do you have to hire replacement help, such as a cleaning service, child care, etc.?
  1. What are your life insurance options?
  • VGLI?
  • Existing life insurance policy?
  • New insurance policy? Although SGLI allows a conversion to a whole-life policy, be very careful.
    • Whole life policies are not the best solution in most situations. It’s a very expensive alternative to term insurance, which can largely meet the same goals.
  1. Do you have concerns about insurability?
  • If so, you shouldn’t immediately write off commercial life insurance policies.
  • However, you might need to do more research on your options, apply for insurance earlier, and be prepared to discuss this in more depth.
  1. If you choose a term insurance policy, what are your options?
  • How long is your term? Should coincide with your expected second career.
  • How much coverage?
  • Who is the insurance company? You can go to USAA, or you can go to a low-cost broker.
    • Research multiple companies to find the most competitive quotes
  1. What is your time horizon?
  • You should look at having a commercial policy in place up to 1 year before you separate/retire.
  • You should go through underwriting before filing a disability claim.
  1. Do you need professional help? 
  • Financial counselor?
  • Financial planner?

Conclusion

To wrap up, today you’re going to:

  • Figure out whether you can develop a game plan for protecting your post-military life insurance on your own, or whether you need help.
  • Determine, if possible, what your post-military income needs are, and your best way to protect them.
  • If you feel an additional life insurance policy is in order, take concrete steps to get the process started.

Tomorrow, we’ll discuss your investment management.  By using the information you’ve previously compiled, you should be able to figure out where you currently stand and where you think you’ll be going over the next year or two.  This way, your investment strategy complements your values, goals, and ability to tolerate market risk.

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About Forrest Baumhover

I'm a career naval officer, and a fee-only financial planner. Half-way through my career, I discovered that I had a passion for financial planning, and have pursued this as my second career. My specialty is working with military professionals who are looking to separate or retire from the service, and who feel they need some professional guidance to make sure they're on track.
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One Response to 30 Day Financial Transition Challenge Day 17: Post-Military Life Insurance

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