As American servicemembers continue to serve in harm’s way in Iraq and Afghanistan, many military families are dealing with the financial risk of combat-related death through the use of commercial life insurance products.
Two out of five middle-class military families (senior NCOs and commissioned officers in pay grades E-6 and above with household incomes of at least $50,000) own some form of permanent life insurance coverage and roughly half own term life insurance products, according to the First Command Financial Behaviors Index®.
Commercial life insurance products are considerably more popular in the military than the general population. Among civilians with similar incomes, 37 percent report ownership of a permanent life insurance product and 39 percent own term policies.
“These survey findings are yet another example of the fiscal conservatism we see in the military population, which tends to focus more on savings, debt-reduction and other frugal behaviors than the general public,” said Scott Spiker, CEO of First Command. “But more importantly, the prevalence of these products is a somber reminder that military families live with the risk of wartime death. They understand the threat, and they are taking meaningful actions to protect their long-term financial security.”
Commercial life insurance is typically purchased as a supplement to the low-cost group coverage available to military personnel as part of their total benefits package. Each active duty service member is eligible for up to $400,000 in Servicemembers’ Group Life Insurance, commonly known as SGLI. Military personnel may add optional spousal coverage of up to $100,000 and dependent coverage of up to $10,000. The Index survey reveals that 73 percent of middle-class military families have life insurance coverage through the government.
After leaving the service military personnel may convert SGLI to Veterans’ Group Life Insurance (VGLI); however, premiums are higher and are based on the age of the insured. So many military families opt for supplemental commercial policies in order to increase their overall coverage now and provide longer-term protection (either in addition to or as a supplement for VGLI) for their post-military lives.
The most popular form of permanent life insurance coverage among the military is whole life insurance, which is owned by 31 percent of survey respondents. Running a distant second universal life insurance, which is owned by 9 percent of respondents.
These products are growing in popularity among middle-class military families. The Index survey reveals that 28 percent of respondents who don’t own permanent life insurance say they are likely to consider purchasing it for themselves or someone in their household. In the general population, the likelihood is just 20 percent.
This strong interest in permanent life insurance may also reflect emerging concerns about a recent proposal to overhaul the military retirement system. A separate Index survey revealed that two thirds of middle-class military families say they feel nervous about the potential change, which would phase out the 20-year cliff vesting system that has defined military careers for generations. One in five respondents revealed that they are going to start looking into different retirement options.
“As details of this proposal continue to emerge, we expect to see many active-duty families reassess their post-military plans,” Spiker said. “It makes sense that this type of reassessment will likely go beyond obvious retirement considerations to address the full range of long-term financial strategies.”
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958. Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence. www.firstcommand.com/research Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data. First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), First Command Insurance Services, Inc. and First Command Bank. Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Insurance Services, Inc. in all states except Montana, where as required by law, insurance products and services are offered by First Command Financial Services, Inc. (a separate Montana domestic corporation). Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met. In Europe, investment and insurance products and services are offered through First Command Europe Limited. First Command Europe Limited is a wholly owned subsidiary of First Command Financial Services, Inc. and is authorised and regulated by the Financial Services Authority. Certain products and services offered in the United States may not be available through First Command Europe Limited.