For military members and their families, the sacrifices and risks of serving our country can be significant. We hope this will not happen but, it's important to prepare for the untimely death of you or a family member. The overarching reason why you need life insurance is that it can provide for your family with a financial security net.
Whether you're an active-duty servicemember or a Veteran, life insurance provides financial protection and peace of mind for you and your loved ones. Let’s explore some of the key reasons why life insurance is particularly important for military members and their families.
Reasons Why You Need Life Insurance
While none of us may like to think about death, everyone needs to have the right protection plan for their loved ones. Life insurance is designed to replace your lost income, cover outstanding bills and other financial obligations in the event of your death, covering expenses such as your funeral, unpaid medical bills, mortgage payments, and more.
Purchasing a life insurance policy just might be one of the most selfless things you ever do. No matter how young or old you are, an insurance policy can provide for your end-of-life needs as well as your family’s future.
Let’s dive deeper into why you need life insurance below.
Cover Short-Term Needs
The average funeral and burial costs alone could range anywhere between $7,600 and $12,000, according to the 2023 data from the National Funeral Directors Association. If you are a Veteran receiving a VA disability compensation, your family can apply for a Burial Allowance which ranges from $300 to $2,000 reimbursement to the person who covered the cost of the funeral.
At the very least, a life insurance policy can cover the cost of your burial and any unpaid medical bills or other financial obligations you leave behind. Some policies even offer “living benefits,” which means if you’re terminally ill, you can tap into the death benefit to cover long-term care expenses.
Provide for Your Family
Your life insurance policy can help pay off outstanding debts that require long-term payments like a mortgage or car loan. Life insurance can help replace your income to ensure that your loved ones remain healthy and financially secure even after you’re gone. That could include help paying for necessities like childcare, college savings, utilities, and other monthly bills.
Leave a Tax-Free Inheritance
The benefits of a life insurance policy are not subject to federal income tax, meaning your beneficiaries likely won’t have to pay taxes on the money you leave them. As such, a life insurance policy can be a great way to leave behind money without having to worry about taxes taking any part of it.
Create a Long-Term Savings Plan
One of the lesser-known reasons why you need life insurance is that your policy can benefit you while you’re still alive. Certain types of life insurance policies (e.g., Whole Life policies) have cash value that you can borrow or do a partial withdrawal should you ever need it.
As you pay into the policy, the cash value is guaranteed to grow. This means life insurance isn’t just about mitigating risk; it can also help you achieve your long-term dreams of retirement or help you fund large purchases in the future.
Protect Your Business
If you’re a business owner, your life insurance plan can keep your doors open. This ensures your customers and employees are both looked after in the event of your death. Some entrepreneurs integrate life insurance policies into their business succession plans, creating a legacy that allows their company to thrive long after they’re gone.
Customize Your Plan to Fit Your Specific Needs
Many life insurance policies can be further customized using “riders.” A rider adds a feature to your policy that can provide additional protection for certain types of injuries or offer coverage for children. Working with a life insurance provider can help you design a plan that fits your needs.
Should I Supplement My SGLI Policy?
Military members can purchase as much as $500,000 in coverage through the Servicemembers Group Life Insurance (SGLI), resulting in a low fee of just $30 per month. $500,000 might sound like a lot, but this money won’t always cover the major financial needs you leave behind if you die at a young age.
Mortgage coverage and income replacement will require greater coverage, but you can purchase a term life insurance policy to fill this gap. A term life insurance policy provides large amounts of coverage if you die within the term period. Common term lengths include 10-, 20-, and 30-year terms, though some providers also offer shorter intervals. Costs can vary based on the length of the term and type of coverage and overall health risks, but most can obtain a policy for a low monthly cost.
Who’s Watching Over Your Family?
Having another policy to supplement your SGLI is a smart way to provide full coverage for your family. This is especially beneficial when the policy is designed for your season of life.
As the nation’s oldest non-profit financial solutions provider for military families, AAFMAA knows that a servicemember’s needs can change. That’s why we offer our members life insurance options that supplement their SGLI in ways that make sense for them.
For example, someone who is just starting out in the military may not have the same needs as a Veteran who just started their own business. That’s why we created BeyondBasic™ life insurance, which is tailored to meet the needs of those just beginning their military journey or who may be advancing their military career in officer training or other specialty schools.
To learn more about AAFMAA’s life insurance products, contact us and receive a free quote today!
This article was originally published April 4, 2017.