How much life insurance should I have?
While everyone’s situation is unique, a good rule of thumb for most families is to have at least 10x their income in life insurance coverage, but 20x is optimal, especially for younger families.
Using this guidance, an E-5 making $41,000 of Basic Pay a year has the minimum $500,000 of coverage that SGLI provides, but using the 20x optimal coverage factor, that leaves a $320,000 gap. This does not include the Housing and Subsistence allowances your surviving family would lose.
To find out if you may have a coverage gap, it may take more than simple mathematics. You should also ask yourself the following questions:
- Are you generally young and healthy? If you are, you can get lower rates for coverage now, but you’ll have to pay higher monthly premiums the longer you wait to acquire a policy.
- Do you have any children or dependents who rely on your income? Many parents turn to life insurance to help take care of their family in the event of death. You’ll want to have enough coverage to ensure their livelihood for the long term.
- Do you have a lot of debt? Mortgages, credit card bills and personal loans are a few examples of debts that a policy can help settle after you're gone. Your personal debt is not something your loved ones or estate should have to cover for you.
- Do you believe you’ll earn considerably more money in the future? If there’s a chance your earning potential will increase as you move through your career, take advantage of the lower coverage rates available to you now while you're young and healthy. You’ll have to pay higher monthly premiums the longer you wait.
- Do you plan to separate from the military soon? You will have the opportunity to switch your SGLI coverage to VGLI without a medical exam, but your coverage amount cannot exceed the amount of SGLI coverage you already had. Depending on your age and health situation, replacing SGLI with insurance from a private carrier instead of (or in addition to) VGLI may be much more cost-effective and ensure you have the right amount for the years to come.
If you answered “yes” to any of these questions and have only basic, minimal life insurance coverage, you should consider increasing your death benefit. If you’re unsure about how much you really need, our free online Life Insurance Needs Calculator can help you assess your situation so you can make an informed decision.
Work with AAFMAA’s Military Life Insurance Experts
If you’re thinking of purchasing an additional life insurance policy to fill the gaps left by SGLI, contact our Life Insurance team at 866-219-8055. Our experts can help you determine the best policy for you and just how much coverage you may need.