At first glance, you might be wondering why we are discussing life insurance in the context of a divorce case. Even though death may seem like a long way’s off, life insurance is an important benefit provided by the Government in certain instances that should, at a minimum, be one of many items discussed. It is possible that you or your spouse also have other life insurance policies outside of the Government sponsored plan, and these should also be discussed at a minimum in the context of your case with your attorney. It is important to note that a State Court will not likely order you or your spouse to designate certain beneficiaries under this or any life insurance policy, but it is an important benefit that you may want to discuss with your attorney about negotiating for in the context of a Separation Agreement – particularly if there are children and child support involved in your case.
So, first off, what is SGLI?
SGLI stands for “Servicemembers’ Group Life Insurance”
SGLI is a program of low cost group life insurance for service-members on active duty, Ready Reservists, members of the National Guard, as well as certain other federal employees and service academy folks. SGLI is not free and the premium is most often deducted directly from the service-member’s pay check. This amount often then appears as an item on the service-member’s LES (Leave and Earning Statement).
SGLI coverage is available in $50,000 increments up to the maximum of $400,000. The premium for the maximum of $400,000 worth of life insurance coverage is roughly $27 per month.
Most service-members fill out an SGLI election form when they come into the service and they are also periodically asked to update the form. This is an extremely important form – otherwise known as Form SGLV 8286 – because it details the amount of coverage (up to $400,000) and who the beneficiaries and contingent beneficiaries are.
Service-members with SGLI coverage have two options available to them upon release from service. They can convert their full-time SGLI coverage to term insurance under the Veterans' Group Life Insurance (VGLI) program or they can convert to a permanent plan of insurance with one of the participating commercial insurance companies.
Importantly, service-members covered under the SGLI program have the option to convert their SGLI coverage to an individual policy of insurance within 120 days from the date of separation from the military.
VGLI stand for “Veterans’ Group Life Insurance”
VGLI is a program of post-separation (from the service) insurance which allows service-members to convert their SGLI coverage to renewable term insurance. Members with full-time SGLI coverage are eligible for VGLI upon release from service.
VGLI coverage is issued in multiples of $10,000 up to a maximum of $400,000. However, a service-member's initial VGLI coverage amount cannot exceed the amount of SGLI they had in force at the time of separation from service. It is important to note that the premiums on VGLI are different than those for SGLI and are based on other factors such as age, for example.
FSGLI stands for Family Service-members’ Group Life Insurance
Family Service-members' Group Life Insurance (FSGLI) is a program extended to the spouses and dependent children of members insured under the SGLI program. FSGLI provides up to a maximum of $100,000 of insurance coverage for spouses, not to exceed the amount of SGLI the insured member has in force, and $10,000 for dependent children. Spousal coverage is issued in increments of $10,000. This is important to discuss with your attorney as you are approaching your divorce – whether you are the service-member or the spouse of a service-member.
Finally, there is also something called the Accelerated Benefit Option which gives terminally-ill SGLI, Family SGLI and VGLI policyholders as well as other claimants access to the death benefits of their policies before they die. The member may receive a portion of the face value of the insurance in a lump sum payment. A member is eligible to receive an Accelerated Benefit if he/she or a covered spouse has a valid written prognosis from a physician of 9 months or less to live. Only the insured member may apply for an Accelerated Benefit. No one else can apply on the member's behalf. In the case of a terminally ill spouse, only the member may apply for accelerated benefits.
The amount of Accelerated Benefit available to a member is up to 50% of the face value of the member's insurance coverage. If a member elects less than the maximum, the amount requested must be in increments of $5,000.
The portion of the face value of insurance which is not paid in a lump sum as an accelerated benefit is payable to the member's designated beneficiary or beneficiaries upon his or her death. In the case of a terminally ill spouse, the remainder of the insurance is payable to the member upon the spouses death.
Important Note About SGLI
It is mentioned above that a service-member elects SGLI coverage or changes a beneficiary using the Form SGLV 8286. This form currently has “Prudential” written across the top –as this company is now the Administrator of the SGLI program. Once the form is completed and signed, it is oftentimes found in the service-member’s service record. The elections and beneficiary designations can very easily be changed. If you are concerned about this, you should discuss this topic with your attorney and seek to ascertain this information through the discovery process. There are ways to negotiate this and other items in the course of drafting a Separation Agreement and potentially having court orders issued to enforce terms in the Separation Agreement.
Because SGLI may be one of the biggest assets a service-member may have at his or her death, it is an important topic to know about. This section only scratches the surface here and you are strongly encouraged to discuss SGLI with your attorney and how it relates to the specific facts of your case.