Servicemembers Favor Permanent, Not Temporary Life Insurance

Whole life coverage most popular, but variable coverage shows most growth

Three-quarters of servicemembers have permanent life insurance, vs. 41% of civilians. Three-quarters of servicemembers have permanent life insurance, vs. 41% of civilians.

Permanent life insurance ownership among members of the military has increased seven points over the last year, according to First Command Financial Services. The firm’s annual life insurance survey found 75% of commissioned officers and senior NCOs have some kind of permanent life insurance.

Among those who don’t, 44% say they’re considering purchasing it, the survey found, up 16 points over the past four years.

Whole life insurance is by far the most popular product, although the rate of ownership is unchanged since last year at 42%. The survey did note that over a third of respondents with whole life bought their coverage in the last five years. Universal life, at 22% was also statistically unchanged since last year’s survey.

Although it had the lowest rate of ownership, variable life insurance saw the most growth. One in five respondents said they had that type of coverage, up eight points.

The survey compared military respondents’ life insurance coverage to that of the general population. Just 41% of civilians have some form of permanent life insurance, up only four points since 2011 and unchanged since last year.

On the contrary, civilian families are more likely to utilize temporary coverage. The survey found such coverage “dropped to a new low for military families and reached a record high in the general population.” Just a third of military families own term life insurance, down 19 points, while coverage increased six points for civilian families to 48%.

First Command — which sells insurance and provides investing, banking and financial planning services — noted in a statement that military families use permanent insurance products as supplemental coverage to government benefits. Active-duty personnel are eligible for up to $400,000 in Servicemembers' Group Life Insurance and may add optional spousal coverage of up to $100,000 and dependent coverage of up to $10,000.

Veterans can convert their SGLI benefits to Veterans' Group Life Insurance but may face higher premiums.

“Adding permanent life insurance to government-provided coverage allows servicemembers and their families to more fully and effectively address their present and future needs,” Scott Spiker, CEO of First Command Financial Services, said in the statement. “This add-on strategy allows families to focus on the current uncertainties of military life — uncertainties that can include the risk of a combat death — as well as pursue long-term financial security.”

--- Check out Advisors Who Serve(d) Tell Their Stories: Fourth of July, 2015 on ThinkAdvisor.

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