Life insurance is crucial for individuals that have family or loved ones that they want to have protected and secured financially after they pass along.
As a veteran, finding the best life insurance can be a task that is complicated and overwhelming to take on.
The VA (Veterans Affairs) is known to offer low-cost life insurance coverage while they are in the service, through Servicemembers’ Group Life Insurance (SGLI).
Once their time in the service has been completed, they have the option to switch over to the coverage offered by Veterans Group Life Insurance (VGLI). However, this route may not always be the best option for retired military servicemen and women.
There are other organizations that may offer better prices for the long term. The best life insurance providers will have plans that feature flexible coverage options, policies that are affordable and customer satisfaction ratings that are high.
Let’s compare and review a collection of five of our best retired military life insurance providers.
Best Overall: Military Benefit Association
The Military Benefit Association is a non-profit association that was developed in order to protect and promote the financial well-being of active and retired service members, federal employees, and their families.
Created by former service members in 1956, the MBA has been providing protection for their members’ loved ones ever since. They cover a variety of military individuals and provide exclusive benefits and services including financial education tools.
They currently pay out approximately $15 million in claims each year, and have received an A+ rating from the Better Business Bureau and other industry partners including MetLife and Liberty Mutual.
The Military Benefit Association offers two main types of life insurance plan, as well as two insurance supplement policies in order to allow for extra coverage in certain areas.
The first is known as MBA Term 90 Life Insurance. This policy is directed towards those who have done time in the service, Federal civilian employees and their spouses. It offers life insurance coverage until the policyholder has reached the age of 90, without having to requalify. This can be used as an addition to their SGLI (Servicemembers’ Group Life Insurance), or as an alternative to their VGLI (Veterans’ Group Life Insurance).
The second option is the MBA Level Term Life Insurance plan. This policy gives members insurance coverage with a fixed monthly payment for periods of 10 or 20 years. MBA Level Term allows members to have up to $600,000 in military-grade protection with no war clause, no limitation on aviation-related deaths, and an option for accelerated benefits for access to funds if the insured becomes terminally ill.
The MBA also offers TRICARE Supplement Insurance which provides coverage for certain medical expenses that may not be included in their military health insurance plan. The Hospital Indemnity Insurance policy provides direct compensation for any expense during or after a period of hospitalization.
Runner Up: American Armed Forces Mutual Aid Association - AAFMAA
The American Armed Forces Mutual Aid Association or AAFMAA was established in 1879 and is one of the longest-standing non-profit financial solutions providers.
They have been providing support in the form of insurance, financial planning, investments, mortgages and more to military families and veterans for over 140 years.
They offer a wide variety of plans that fall under the two more general policy categories, term life insurance and whole life insurance.
Term Life Insurance Plans:
Level Term 1:
- Serves eligible individuals aged 18 – 49
- Offers $50,000 – $800,000 coverage
- Less expensive than SGLI and remains after separation or retirement
Level Term 2
- Serves eligible individuals aged 18-75 & Grandchildren aged
- 18-26 $50,000 – $800,000 coverage
- Up to 75% less expensive than VGLI & includes Survivor Assistance Services
5-Year Renewable Term
- Serves Veterans, Retirees, Member Spouses & Children aged 45+
- $50,000 – $800,000 coverage
- Up to 75% less expensive that VGLI and includes Survivor Assistance Services
- Serves eligible individuals age 45-75
- $10,000 – $100,000 coverage
- No underwriting requirements
Whole Life Insurance Plans:
- Serves eligible individuals of all ages
- No upfront fees. No commissions. No surprise payments
- An income stream you will not outlive
- Financial confidence into retirement
Value-Added Whole Life:
- Serves eligible individuals up to age 80
- Renewable every 5 years
- Less expensive than VGLI
Wealth Builder Life Insurance:
- Serves eligible individuals age 60+ and Military Spouses
- $10,000 – $1,000,000 coverage
- Builds wealth through cash value growth
- Long Term Care Settlement Option included with no additional premium
Veteran Survivor Plan:
- Serves eligible individuals age 45-84
- $10,000 – $25,000 coverage
- No medical exam required
The AAFMAA offers a variety of life insurance plans that can cater to different needs and financial situations, making them a clear contender for the best retired military life insurance provider.
Alternative #1: Prudential
Prudential Life Insurance was founded in Newark, New Jersey in 1875.
They are one of the most well known insurance companies in the world and are considered the largest in the United States employing over 40 thousand individuals as of 2020.
Prudential offers a variety of extensive life insurance coverage plans. They provide both Term Life insurance plans, Permanent or “Universal” plans, as well as a number of variations of the permanent insurance plan.
Their Term Life Insurance offers temporary coverage for a fixed period of time, during which there is a guaranteed death benefit that will be paid. This plan also offers a variety of riders, which are extra benefits that policyholders can purchase in order to customize their plan to their specific needs.
The Universal Life Insurance plan offers permanent coverage, has the potential to accrue cash value over time, and allows members to access the money in their policy.
There are three variants of the Universal coverage policy that provide different customization options for policyholders. One example would be the Survivorship Universal Life Insurance plan, which provides members with the ability to cover two lives with one policy.
Prudential offers a variety of good coverage to its members, and should definitely be considered as a front runner for the best retired military life insurance provider.
Alternative #2: USAA - United Services Automobile Association
The United Services Automobile Association or the USAA, was founded in 1922 in San Antonio when 25 officers joined together to insure each other’s automobiles.
In 1923 the USAA expanded their membership to include Navy and Marine Corps officers. Fast forward to 2017 which marked a huge milestone in this company’s development. With over 12 million members and a net worth of $31 billion, the USAA has come a long way.
Today, this tiny organization formed almost 100 years ago serves and protects millions of members and has become one of few fully integrated financial services organizations in America.
The USAA has a simple three step formula for getting new members started on one of their insurance plans:
1. Get an estimate – Answer a few questions designed to help get a good idea of what their needs may be. Once this is complete, they will present prospective members with the most suitable options that are within their financial means.
2. Apply – Once they have decided on an appropriate plan, apply for the one that will best support their future coverage goals. The application will then be reviewed by the organization’s underwriters, which may be followed by a quick and easy medical review. If that ends up being the case, they will come to the applying members location to perform the review for convenience.
3. Purchase – When the application process has been successfully completed and all pertinent information has been collected, members can proceed with the purchase of their plan. Their life insurance will now be approved and activated ensuring that their loved ones are fully protected. Premium payments will not be necessary until the policy has been completely finalized.
Similar to other life insurance providers, the USAA offers two different general coverage plans. Term Coverage and Permanent Coverage.
Term coverage plans provide income replacement protection for premiums of as little as $12 a month. It also includes benefits for things such as mortgage payments, kid’s education payments and the ability to have fixed monthly premium rates. This plan provides income replacement protection for time periods of 10 to 30 years.
Some obvious potential drawbacks to Term Coverage is the fact that coverage is temporary and therefore needs to be monitored and kept up to date to ensure benefits are available when needed. Another aspect to keep in mind is the fact that the total cost of insurance over a member’s lifetime could be more expensive, as well as the fact that there is no flexibility in terms of changing premiums.
Alternative #3: USBA - Uniformed Services Benefit Association
The Uniformed Services Benefit Association or the USBA is an organization that was founded in 1959 in order to help cater to the needs of active duty military personnel.
At that time, these people were having significant difficulty finding the appropriate life insurance coverage that would ensure protection for their loved ones in the case of combat-related deaths.
The Uniformed Services Benefit Association was one of the pioneer companies to get rid of the “war clause” in each and every one of the military life insurance plans that they offered.
Today, thanks to the support and financial backing of the New York Life Insurance Company, the USBA is continuing their mission to help the individuals who serve for the greater good of their nation find ideal coverage for the future of them and their families.
The Uniformed Services Benefit Association can be accessed by individuals who meet the membership eligibility guidelines. They serve a variety of groups including Retired Military, Retired Reservists, Honorably Discharged Veterans (regardless of their length of service), their family members (current spouses, widows, un-remarries formed spouses and eligible dependents of USBA members.
When deciding on a life insurance plan with the USBA, there are two insurance types to choose from.
The first is whole life insurance, also known as permanent insurance. As its name implies, this plan provides lifetime protection. The policies have been designed to offer lifelong financial protection for retired military families. The whole life plan provides members the option to borrow against the accumulated cash value, and is oftentimes a great option for future real estate planning.
In terms of cost, the whole life insurance plan by USBA has a set monthly premium, which is usually more expensive than the premiums associated with a term life plan. The insurance will guarantee lifetime coverage as long as the premium is paid on time each month. This plan builds cash value through accumulation over time which provides a number of potential benefits for its members.
The second life insurance plan option from the USBA, as mentioned earlier, is the term life plan. These plans provide coverage and protection for a set period of time. Once the term comes to an end, active members can decide if they would like to renew their term coverage, convert to a whole life plan, or move to a different provider if so desired.
These plans will give out death benefits ONLY if the insured individual passes away while the term policy is paid for and active. Herein lies the potential issue with a term life plan from the Uniformed Servicemen Benefit Association. If for some reason the policy is not active at the time of the insured person’s death, there will be no death benefits paid to surviving family members or associated individuals.
The term life policy is generally the least expensive and therefore most affordable option for military retirees. The monthly premium costs will be significantly lower than the premiums associated with a whole life insurance plan. When the plan is purchased at a young age, premium costs will be low, but these plans are designed to have them increase as members enter new age brackets.
The Uniformed Services Benefit Association offers Term policies at coverage lengths of 5, 10, 15 or 20 years, all with renewable options.
Retired Military Life Insurance FAQs
Does The Military Provide Life Insurance After Retirement
While actively participating in the military, individuals are given SGLI (Servicemembers’ Group Life Insurance). This offers a low-cost term coverage to eligible service members who meet the requirements. Their SGLI ends after a standard 120 day period post retirement or transition from the U.S military service.
Retiring veterans will have the option to convert their SGLI to Veterans’ Group Life Insurance (VGLI). The premiums associated with VGLI are based on the veteran’s age at the time of retirement from the service and are the same for both men and women.
Therefore, the military does provide life insurance after retirement in the form of the Veterans’ Group Life Insurance program. This will maintain military retiree’s coverage after they leave the military, as long as they continue to pay the associated monthly premiums when due.
Does My Spouse Get My Military Retirement If I Die?
For the most part, military retired pay stops upon the death of the retiree insured.
In terms of spousal support in situations of military retiree death, there is a plan that is available for those situations.
The Survivor Benefit Plan or SBP allows retirees to ensure that after their passing, a continuous lifetime annuity is paid to their eligible dependents. The annuity is based on a percentage of retired pay and supports eligible survivors with an inflation-adjusted monthly income.
Military retirees pay premiums for SBP coverage after retirement has occurred. Premiums are paid with regards to gross retired pay which means they do not count as income and therefore require less tax and less out-of-pocket costs for SBP.
The maximum SBP annuity for the spouse is based on 55 percent of the policyholder’s retired pay. However, a smaller amount may be offered. Coverage is also available for a former spouse or, if the retiree has no direct dependents, can be applied to an “insurable interest” such as a business partner or parent.
Are Payments From Life Insurance Taxable?
In most cases, when the beneficiary or beneficiaries of a life insurance policy receive the associated death benefit, the money paid out is not considered income that is taxable. Therefore they do not have to pay taxes on the income received.
There are however a few potential situations in which the beneficiary can be taxed on a portion or the entire amount of money paid out. If the policyholder decides not to have their death benefit paid out immediately after their death, but instead held by the provider, the beneficiary may have to pay taxes on any interest earned during that period of time.
Can You Cash Out A Life Insurance Policy Before Death?
When people think typically of life insurance policies and how they work, they are thinking of money being paid out only when a death has occurred. However, it is possible to cash out a life insurance policy before death to some degree.
When individuals who have life insurance experience financial life emergencies, or just need an influx of cash for an investment or other endeavours, cashing out on a life insurance policy is an appealing option.
There are a number of cash out options available to policyholders, and a number of factors to consider that will contribute to the payout amount and the resulting effect the cash out will have on the insurance policy.
Not every type of life insurance plan will provide the option to withdraw money from the policy before death has occurred. There are two main life insurance plan styles that will have the cash value building feature that makes cashing out possible. Whole Life Insurance and Universal Life Insurance plans allow members to withdraw cash.
There are two main ways for members to access the cash in their policy before death has occurred.
1. Loan or Withdrawal From the Cash Value:
Whole life policies will usually only allow loans on the associated cash value, while Universal life policies will often allow loans and withdrawals to be made.
2. Surrender Your Policy Completely:
Surrendering a policy means that the member’s insurance will be revoked – the insurance associated with the policy being surrendered. The cash value that is released to the policyholder is subject to surrender charges, therefore it is important to be aware of those before taking action. Surrender charges will
decrease with the age of a policy.
Individuals who have retired from the military are subject to changing life insurance plans, and in many cases these people do not have the proper guidance to arrange what is best for them.
There are a number of companies who offer life insurance plans for people who have served, but who offers the best retired military life insurance?
We have reviewed five of our favorite providers, their company background, and what they have to offer in terms of life insurance coverage. Some have been around for over 100 years while others are relatively new, but still offer great life insurance plans.
All of these providers offer the two general types of life insurance coverage for the most part, term life and whole life or universal life plans. Of the five, we have concluded that the Military Benefit Association or the MBA, offers the best retired military life insurance coverage.
Created by former service members in 1956, since then they have been providing protection for their members and their loved ones. They cover a variety of military individuals and provide exclusive benefits and services including important financial education tools for members.
They currently pay out approximately $15 million in claims each year, and have received an impressive A+ rating from the Better Business Bureau, as well as other industry partners including MetLife and Liberty Mutual.
We also discussed a number of frequently asked questions concerning military life insurance payouts, potential taxes on those payouts, and questions in regards to cashing out of a policy before death has occured.
This guide will provide guidance and advice for individuals inquiring about retired military life insurance options, and the protection of their family’s future.