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Life insurance: why bother?


Protecting your assets through insurance is one of the three critical components in a strategy to achieve financial security. The other two are budgeting and investing for the future.  Everyone should consider some form of life insurance.  Unfortunately, many people find insurance confusing and are suspect of recommendations to buy it.  Along those lines, McKinsey & Company recently reported that many find the act of “researching, buying and owning individual life and retirement products can be unpleasant” and that “few [consumers] enjoy contemplating illness, disability, or death.”

Those in the military are fortunate in that they are able to purchase up to $400,000 of coverage at a relatively inexpensive cost of about $28 per month through the Servicemembers Group Life Insurance (SGLI) program.  The question is do they need this insurance (or possibly more)?  The short answer is that if someone else depends on your income, then you probably need life insurance.  And, although $400,000 may sound like a lot, it may not cover the costs and ongoing expenses your survivors will face. National Underwriter recently reported that there exists a significant gap of approximately $200,000 between the life insurance needs and the life insurance coverage for nearly half of American households.  Additionally, if you fall in the Millennial Generation (those born in the late 1980s to late 1990s), as many servicemembers do, you most likely are at that stage in life where you are getting married, purchasing a home, and having children. These activities have large long-term costs that you need to plan for if you die prematurely. 

As far as the insurance gap is concerned, do not assume that SGLI is enough, especially with a family dependent on your income. Instead, assess the financial burden that a loved one would face in your absence and cover that with sufficient insurance. Common expenses include: a mortgage, the cost of college, routine living expenses, and burial expenses. A good term policy can supplement (or even replace) SGLI to fill that gap. Term policies provide large amounts of coverage at low cost for a certain term. These types of policies also make excellent replacements for SGLI if you are leaving or have left the service.

Life insurance doesn’t have to be complicated. Assess your needs and close your coverage gap.  Look for quality, affordable insurance from reputable companies and do not purchase products that you don’t understand.

If you’d like to learn more, we’d be happy to discuss AAFMAA’s life insurance products with you. Just call an AAFMAA Membership Coordinator at 1-888-961-4573, or visit our website to receive an insurance quote.