In this article, I am going to cover the four types of life insurance that you need to understand as a service member now for each type of insurance, I will cover what it is when you might need its pros, cons, and my ultimate thoughts on how I Would utilize them or not utilize them? Now? I will remain objective throughout the review, but you will notice that I definitely have some preferences as we get to my thoughts section on each type of insurance, and I'm gonna break that down.
For you of why that is also, it should be noted that I am NOT a licensed insurance broker. However, I actually think that's, an advantage because that means I'm, not incentivized, by a commission to push a certain type of insurance in your direction.
Well, there are some benefits to having life insurance at age 80. I would much prefer to have my finances on the order and not be relying on life insurance that takes care of my family after age 60. So the first life insurance that we're gonna talk about is servicemembers group life insurance or the SGLI, which really should be fairly familiar to.
Anyone who has ever served in the military, the SGLI offers low-cost term life insurance to eligible servicemembers. When you might use it while on active duty, this is the $ 400,000 life insurance that you receive upon entering the military all right, so some pros it's, a great plan for servicemembers coverage up to $ 400,000 in $ 50,000 increments.
Now, a hundred and twenty days of free coverage from the date you leave the military there's, also an extension of free coverage for up to two years. If you're totally disabled, when you leave the military there's part-time coverage, if you're, a reserve member who doesn't qualify for a full-time coverage and you only pay three dollars a month For every fifty thousand dollars in coverage, which is extremely affordable, all right, some cons, the biggest con I have with the SGLI is that your insurance ends soon after you exit the military.
So after 120 days to two years, you will either have no life insurance or need to be accepted into a new policy. The only other con is that with the SGLI, if you don & # 39, t smash the like button on this article.
It will wish it had life insurance yeah that was really corny, but hey. If you could do me a favor hit that, like the button tells you to, but this is a useful article all right. My thoughts are just to take the full four hundred thousand dollars for the SGLI benefit.
You are in a dangerous occupation and twenty-five dollars a month is incredibly affordable to be able to give your loved ones four hundred grand if you pass away now. The next is the veteran's group, life insurance, or valid.
So what it is, the villa allows you to keep your life insurance coverage after you leave the military for as long as you continue to pay the premiums. So this is similar to the SGLI coverage. But after you exit the military, so when you might use it, you can apply for valid within one year and 120 days from your discharge for up to the amount of coverage you had through the SGLI, which is why you should do the full amount you can Apply through the office of servicemembers group life insurance or owe SGLI using the prudential website, which I'll, put a link down below to apply through some pros to this coverage up to 400 grand based on the amount of STI coverage that you Had while in the military, you can also increase your coverage by twenty-five thousand dollars every five years until you hit that four hundred thousand dollar mark or you're 60 years old.
Now, if you sign up within 240 days of leaving the military, you will not need to prove you're in good health, which is useful because some of us break, while we're in the military, let & # 39. S. Be honest now cons if you sign up after the two hundred forty-day periods, you will need to submit evidence that you're still in good health, which just means you know it's more difficult.
The vigil premium rates are based on your age and the amount of insurance coverage you want, which means that your insurance costs will increase as you get older, which you know because of this, the vigil might make sense immediately after exiting the military, but it could get Costly as you get older, for example, a $ 400,000 worth of coverage with the lowest monthly premium is thirty-two dollars for a veteran aged 29 and below, but for the same amount of coverage.
The four hundred thousand the highest monthly premium is eighteen hundred and forty dollars a month for veterans. Seventy-Five in older, which is a lot for life insurance. You shouldn't need life insurance at seventy-five anyway.
So my thoughts, if you're young and have medical conditions that would make your new and expense expensive to insure or uninsurable through most life insurance policies, definitely move into the villa when, within that period, where you don't need a Medical inspection, if you're healthy, absolutely look into a term life insurance policy elsewhere because, like I'm, paying just 40 dollars a month for a policy and it's not going to go up to eighteen hundred dollars.
As they get older so that's about the same cost of the vigil would be from my age range and I have $ 500,000, which is you know, a hundred thousand dollars more, but it's, not gonna increase. As I get older, so it's, yeah it's good now the valid will get expensive as you age, and I would probably not recommend it unless you have medical conditions that other insurance won't accept.
So I already mentioned that, but you just want to reiterate that that's, my thoughts. The next is term life insurance. Now what it is term life insurance is a type of life insurance that guarantees payment of a stated death benefit.
If the covered person dies during a specified term after that term expires, the policyholder can renew it for another term, convert it to permanent coverage or you just terminate it. Then you don't, get anything when you might use it really.
You can use term life insurance at any time, provided that your health allows you to be insured, so the younger and healthier you are when applying for policy the lower your monthly premiums will be all right.
Some pros for term life insurance is the most affordable coverage type. My new policy is good for thirty years with five hundred thousand dollars in coverage, and it only costs. I said it costs less than forty thousand forty dollars a month, but actually yeah and well might yeah before you tell us about that.
One ordered it so the results will vary, but you could get even better coverage. My wife did and she's. All denied so most terms, expire before the company has to pay at the death benefit. So hopefully you & # 39.
Ll, never need this policy. Basically, they're betting that you'll dot. You'll, you'll outlive the policy. Now it covers you long enough to get your finances and retirement squared away and then, after that, you should & # 39.
T need a policy because you're gonna watch. The rest of my articles and you're gonna. Have your retirement? Take care of it's great for young people with children in order to ensure that the children are taken care of in the unlikely event of early death.
Be eligible to renew the policy after it expires, so some policies do offer guaranteed to reinsure ability, but this usually makes the original policy more expensive. But when you renew or convert this policy, you will be older, which means that your premiums will most likely be higher due to age or medical conditions right it.
Isn't easy to predict what your life will look like in 20 to 30 years and therefore, how long a term you should get coverage for so that's kind of a downside. It doesn't build capital as the whole life insurance does, but we'll get to that in a minute term.
Life insurance is on is inflexible. The term and the death benefit are generally set in stone, so you can't really play with them that much now my thoughts term life is a great way to ensure that you are insured or covered until retirement.
My wife and I both have term life policies in place until we are 60. We're, confident that we continue to invest that there will be absolutely no need for life insurance after the age of 60 for either of us right.
Like I'm gonna make sure she's taken care of. I'm gonna make sure I'm taken care of we'll be good. She'll make sure I'm, taking care of at what term life insurance is so much more affordable than whole life.
Insurance like 10 to 15 times more affordable, and you can then take that and invest the difference to build wealth which I like. So I recommend that you lock in a whole term life insurance policy about a year before you eggs in the military.
That way, any medical issues you were going to bring up during your VA claim. They won't, be documented, yet, which means that you'll, be much more insurable, which is what I just did. I just locked in term life insurance policy and I've got about a year until I yeah yes or no reserves.
So that way, if you claim a lot of medical issues on your VA claim, you will be much more expensive to insure, and you really don't want to do that until after you & # 39, ve got insurance, so this isn't to say that you shouldn't claim medical issues on your claim.
You absolutely should, but you should, however, secure life insurance six to twelve months before that, even though you slow the SGLI to ensure that you get a less expensive monthly premium. Now, life insurance, alright, what it is whole life insurance, provides coverage for the remainder of the insurance life, in addition to providing a death benefit.
The younger and healthier you are when applying for a policy the lower your monthly premiums will be just like every other coverage. Some of the pros for whole life are that it lasts for a lifetime rather than the agreed-upon term now, provided you maintain the premium payments.
This savings component can be invested and the policyholder can access this money while alive by withdrawing or borrowing against the cash value of the life insurance. They are fixed premiums and you never have to recertify your health or worry about premiums increasing, no matter what.
Now there are tax advantages for the money invested in cash value, whole life insurance policies that are, another pro at cons extremely extremely extremely expensive. When compared to term life, as a personal example, my wife and I took out whole life and policies in 2016, we didn't, really know what we were doing.
Her policy cost around fifty dollars a month and insured her for a whopping. Fifty thousand dollars now fast forward to 2020, so we're older and we switched to term life now that we have done our own research instead of just listening to a sale.
Her new policy costs around twenty dollars a month, so thirty dollars less and covers her for five hundred thousand dollars until she's sixty so 10 times as much insurance. So we received ten times the insurance coverage for less than half the monthly premium.
Oh and the cash value of her account after four years and over twenty-five hundred dollars in premiums, it was like four hundred dollars, not that great. Now it takes a long time for you to build up cash value in your account.
That said, nobody has ever been able to explain it to me concisely. It just always seems so complicated. So I figure if a concept is so complex that the professionals can't break it down. I don't want to use it as an investment strategy.
I like simple and stress-free investing the insurance industry does not have a fiduciary responsibility to look out for your best interest, so that's. True with everything. But here's, the kicker, the commissions for whole life insurance sales are much larger.
Like we're talking, I know 10 to 15 times larger cuz. It's, an annual premium of that and that's. How much more they cost, so they're incentivized to push whole life insurance. Also, no insurance brokerage has ever been honest with me about the difference in Commission between term and whole life.
Every fee-only financial advisor I've ever talked to. You, though, have recommended term life, so my thoughts whole life insurance is complicated, expensive, and unnecessary. I would much rather have a policy that costs 10 % of what a whole life policy or less might cost and then invest the difference.
So there's, some benefits there, but I don't think it's great for building wealth. I think it's good if you're already wealthy. So I would also argue that if you are well enough off that you get super fund, a whole life insurance policy - I probably don't need life insurance.
To begin with, you might do better, just leaving it in the stock market, so you would theoretically be able to provide for your family without having an expensive insurance policy, which is just kind of my thoughts on not use it someday.
But it's where I stand right now, so I'm, not a huge fan of whole life insurance policies because again they're. Expensive and insurance brokers are highly incentivized to push whole life, which means it's extremely lucrative for the company, which means there are fees and it's.
Just really hard to understand like get to the bottom of all. This so they're, also very complicated, which I've mentioned. I think you can just do much better by investing the money left over from the smaller premiums of term life insurance very insurance.
Now I've mentioned that before, but so my friend Robert Farrington wrote an article that broke the term verse whole life debate down pretty simple and it really helps solidify my decision. A lot of the articles you see written about this are companies that provide whole life insurance, which means that there again, they're less objective.
They're incentivized, so it's on the college investor and I'm gonna link down below to it definitely check it out. I know kind of hit on whole life there, but there are some companies out there, including even military companies that are just there.
Talking about how whole life is, the best investment you can ever have, and I mean some of these people don't even own whole life. Like I've. Had people tell me that whole life insurance is the best thing ever and then I go and talk to them about their policy.
They're like well, you know, I haven't got it yet. Well, if it's such a great investment vehicle, why don & # 39? T, you own one! Yet if it's that great, then you shouldn't have to wait right, it just seems weird, and then it's just complicated and there's.
Always her muddled fees and people won't even talk to you about it like in a Facebook group. They want to pull you offline and talk to you about it somewhere else. Just all seems kind of smoke and mirrors and fishy.
Some of the best financial guys that I know who've been at this for the longest time just say it's complex. Why worry about it? Do term, invest the difference. You'll be just fine. Whole life has some benefits like if you have a bad, you know if you come up with a crazy illness or if you have a bad illness or hereditary or whatever like.
If it's, something you don't, think you're gonna be insurable for you. Don't know like there's. There are situations where it works, or if you have the money you need, you know I mention a lot of that just be cautious and that don't, no matter what no matter.
What don & #! 39 t. Take your thrift savings plan and roll it into a whole life policy. That is like the worst thing you could ever do and I've seen people say liquidate your TSP and roll it into a whole life.
No, that's. I think the term, like a whole life from what I've, seen they offer like five percent interest since yeah it's guaranteed, so you're, not gonna lose money. The stock market has averaged seven or eight percent annually for its existence, that's, two or three percent better with fewer fees and that's huge to me, and that means the TSP is earning more and has better tax advantages.
In the Roth IRA then if you take the penalty and roll it into a whole life, so don & # 39. T get is super crazy on this, but if somebody's trying to sell you on whole life, come talk to me. I'll point you the direction of somebody's, mind who will shoot straight with you and they're, not incentivized at all, and there, just brilliant, brilliant people.
So let me know to reach out to me here: Instagram, wherever, if you did & # 39, t already smash that like button, please do and have a great day.