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History of Servicemembers' and Veterans' Group Life Insurance
Although the United States Government has provided life insurance coverage to the Armed Forces since World War I, the SGLI program of protection was a decidedly different approach. The origins of SGLI date back to the Vietnam War. As the armed forces began to suffer significant casualties, the private life insurance companies were unwilling to underwrite the coverage for members of the service. While actuaries are extremely accurate in predicting deaths during peacetime, it is almost impossible to estimate how many deaths there will be during a war. This created the need for a government sponsored life insurance program to cover servicemembers placed in harms way. Servicemens' Group Life Insurance (SGLI) was instituted in 1965 to meet this need.
Although they were not able to meet the insurance needs of the armed forces, commercial insurers lobbied for a role in providing coverage, and wanted to prevent the government from providing coverage indefinitely after servicemembers separated from the service. As a result, the law creating SGLI provided for group coverage administered by the commercial insurance industry, instead of the Government. Thus, the establishment of SGLI in 1965 resulted in VA purchasing a group life insurance policy from the Prudential Insurance Company of America. To administer the policies, Prudential established the Office of Servicemens' Group Life Insurance (OSGLI), which is currently located in Roseland, NJ.
SGLI initially covered only active duty personnel, but it has expanded over the years to cover reservists, National Guard members and several other groups. All service members are automatically covered by SGLI unless they decline the coverage in writing. The maximum amount of protection has increased significantly since the program's inception. Originally, the coverage was limited to $10,000. It has gradually increased over the years through legislation to its current maximum coverage level of $400,000. However, coverage expires 120 days after separation from the service.
In order to help service members maintain insurance coverage during their transition to civilian life, a second program was established in 1974 to cover recently separated veterans. This new program was called Veterans' Group Life Insurance (VGLI). VGLI allowed servicemembers to convert their SGLI to five-year non-renewable term coverage. At the end of the five-year period, VGLI was convertible to a commercial permanent plan policy. In December 1992, it became indefinitely renewable as a term insurance policy with a conversion option at the end of each five-year term period. Presently, veterans can convert their VGLI at any time.
In 1997, legislation changed the program name from Servicemens' to Servicemembers' in recognition of increasing number of women serving in the Armed Forces.
The year 2001 marked a large expansion in the SGLI program. This program expansion, called Family Coverage, took effect on November 1, 2001. It provides insured service members' spouses with automatic coverage of $100,000, or the coverage level of the service member, whichever is less. Dependent children are also automatically insured, at no cost to the service member, for a set amount of $10,000 per child.
In December 2005, the SGLI program will begin providing protection against traumatic injury. Traumatic Injury Coverage will be automatically provided to all servicemembers enrolled in SGLI for an additional premium of $1.00 per month. Service members who experience specific traumatic injuries or lengthy hospital stays will receive between $25,000 and $100,000. The coverage is designed to provide severely injured servicemembers with financial assistance to allow their family members to support them throughout their recovery.
The SGLI program is an example of how government and private industry can work together to serve the financial needs of a large segment of the population.
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