Chapter III.D.2.

Servicemen's Group Life Insurance

Veterans' Group Life Insurance

Legislative Authority: 38 U.S.C. §§1965-1979.

Purpose: To make life insurance protection available to members of the uniformed services at a reasonable cost.

Background: The practice of insuring the lives of members of the armed forces is of relatively recent origin. During the early wars to which the United States was a party, the general public, as well as members of the armed forces, had a low regard for life insurance, and the fact that life insurance was not used to provide financial protection for the families of members of the armed forces was evidently not looked upon as unusual. By the time the United States became involved in World War I, however, the situation had changed, and it was generally recognized that some means was needed to provide protection for the families of members of the armed forces fighting for their country. Commercial insurance companies were not used for this purpose, as they either refused these risks outright, through a war clause, or charged prohibitive premiums for waiving the clause.

To fill the gap, the Act of October 6, 1917 (War Risk Insurance Act of 1917), ch. 105 [Public Law 90, 65th Congress], §§400-405, 40 Stat. 398, 409-410 (1917), created a program of United States Government Life Insurance (USGLI) that permitted servicemembers to buy yearly renewable term life insurance in multiples of $500, with minimum coverage of $1,000 and maximum coverage of $10,000. The War Risk Insurance Act, adopted well before the end of the War, specified that the term insurance would expire if not converted to permanent insurance within five years after the War ended, but successive extensions of the cut-off date effectively nullified this provision. In practice, conversion from term to permanent insurance, although allowed, was never required. The Government was the USGLI insurer and assumed the cost of the "extra hazard" involved in insuring members of the armed forces. The USGLI program was modified and liberalized many times over the course of the years.[1] All persons who served on active duty at any time between October 6, 1917, and October 8, 1940, ultimately became eligible for USGLI coverage. The program remained available to qualified personnel until April 24, 1951.

The National Service Life Insurance Act of 1940, enacted as Title VI, Part I, of the Second Revenue Act of 1940, ch. 757 [Public Law 801, 76th Congress], §§601-618, 54 Stat. 974, 1008-1014 (1940), substituted National Service Life Insurance (NSLI) for USGLI for persons who entered service on or after that date. Persons in service both before and after October 8, 1940, could choose either NSLI or USGLI or a combination of the two, but they could not carry a combined face value amount of insurance in excess of $10,000. NSLI was five-year renewable term insurance, issued in multiples of $500, with a minimum coverage of $1,000 and a maximum coverage of $10,000 and convertible to permanent insurance after it had been in force for one year. As was the case with USGLI, the Government was the NSLI insurer and bore the excess cost resulting from the hazards of military service. Premium rates and reserves were based on a three percent interest rate rather than the 3 1/2 percent rate applicable to USGLI. This resulted in slightly higher premiums and lower death benefits, when paid on an income basis, for NSLI than for USGLI. The Veterans' Administration,[2] as the Federal agency charged with authority for administering the NSLI and USGLI programs, traditionally followed a conservative policy in setting premium rates, so that premiums charged were usually more than would be justified by reference to the mortality experience of the insured population. As a result, annual dividends have been paid to NSLI and USGLI policyholders throughout the years. NSLI was closed to new issues on April 25, 1951.

The Servicemen's Indemnity Act of 1951, enacted as Part I of the Act of April 25, 1951, ch. 39 [Public Law 23, 82d Congress], §§1-9, 65 Stat. 33, 33-35 (1951), terminated new issues of NSLI and USGLI and replaced them with a $10,000 gratuitous indemnity payable to the survivors of a member dying while serving on active duty or within 120 days after a period of active duty. The indemnity was to be paid in 120 monthly installments of $92.90 each. Thus, over the full 10-year period, payments of principal and interest totaled $11,148. The amount of the indemnity was reduced by the face value of any NSLI or USGLI policy in force. This requirement in effect negated the insurance risk for which in-service NSLI and USGLI policyholders were paying premiums. Accordingly, such personnel were permitted to surrender permanent policies for cash value or to waive that part of the premium representing pure insurance risk. In-service personnel holding term policies could waive all premiums. The policies were nonparticipating--i.e., non-dividend paying--during the waiver period.

Since the Servicemen's Indemnity Act of 1951, ch. 39, id., terminated new issues of NSLI and USGLI, it also established a Veterans' Special Term Life Insurance (VSLI) program to provide low-cost insurance during the transition from military to civilian life. Insurance Act of 1951, enacted as Part II of the Act of April 25, 1951, ch. 39 [Public Law 23, 82d Congress], §§10-13, 65 Stat. 33, 36-38 (1951). VSLI was five-year renewable term insurance issued in multiples of $500, with minimum coverage of $1,000 and maximum coverage of $10,000, to veterans who applied within 120 days after release from active duty. It was at first nonconvertible and nonparticipating, but it was made convertible in 1959 and participating in 1974. VSLI was issued from April 1951 through December 1956.

Both of the Government insurance programs described above, as well as the Servicemen's Indemnity Act gratuity, guaranteed the payment of a fixed sum of money on the death of a covered individual. Neither was designed as a permanent income replacement plan for dependent survivors of military personnel. The Servicemen's and Veterans' Survivor Benefits Act, ch. 837 [Public Law 881, 84th Congress], §§201-210, 70 Stat. 857, 862-868 (1956), created the Dependency and Indemnity Compensation (DIC) program as a partial income replacement program, to take effect January 1, 1957. It also placed military personnel under the Social Security system effective January 1, 1957, and thus made their dependents eligible for survivor benefits under that system. The Servicemen's and Veterans' Survivor Benefits Act concurrently abolished the $10,000 Servicemen's Indemnity Act gratuity and ended the VSLI program. The DIC and Social Security programs are outside the "insurance" mainstream treated in this chapter.[3]

Beginning January 1, 1957, no Government life insurance program was generally available to members or former members of any of the uniformed services for the first time in 40 years. This situation continued until the Act of September 29, 1965, Public Law 89-214, 79 Stat. 880 (1965), established the Servicemen's Group Life Insurance (SGLI) program, as new Subchapter III of Chapter 19, Title 38, United States Code.

The SGLI program has been modified several times since its inception, but most of its fundamentals have remained intact. SGLI is term insurance: it has no cash, loan, paid-up, or extended insurance values. Neither does it provide accidental death or disability benefits. SGLI coverage is in addition to any coverage a member may have under any other Government policy. A member eligible for SGLI is insured in the maximum authorized amount unless he declines in writing to be insured or elects in writing less-than-maximum coverage. This "automatic" feature is a departure from the earlier programs under which an individual was required to take affirmative action to be insured in any amount. SGLI also differs from the previous programs in that the Government is not the insurer. The Prudential Insurance Company is the primary SGLI insurer under a contract with the Department of Veterans Affairs, the Federal agency charged with supervisory responsibility for the program. Several hundred other private insurance companies participate in the program as reinsurers. SGLI premiums are collected by the services from their members, normally by payroll deduction, and are remitted monthly to the Department of Veterans Affairs. Any extra hazard costs of SGLI attributable to military service are determined by the Department of Veterans Affairs on an actuarial basis and paid to that agency by each of the services from appropriated funds.

The SGLI authorized by the Act of September 29, 1965, Public Law 89-214, §1, 79 Stat. 880, 880-881 (1965), adding then new 38 U.S.C. §767 (current 38 U.S.C. §1967), was in the maximum amount of $10,000. All personnel on active duty for more than 30 days were insured, in the absence of an individual election to the contrary. Coverage continued for 120 days after separation, with the cost of such extended coverage being included in the premiums paid while on active duty. Up to the end of this 120-day period, the insured had the right to purchase an individual policy of permanent insurance in an amount equal to his SGLI coverage from any of the companies in the program. Participating companies had to agree to issue such policies upon application and payment of required premiums, at standard rates and without a medical examination, as a condition of admission into the program.

The Act of June 25, 1970, Public Law 91-291, §2, 84 Stat. 326, 327 (1970), amending then 38 U.S.C. §767 (current 38 U.S.C. §1967), raised the SGLI maximum from $10,000 to $15,000 in addition to authorizing "part-time" coverage for certain reservists. Reserve members on active duty for less than 31 days or performing inactive-duty training scheduled in advance were, absent an election not to be covered, insured against death during such duty and while proceeding directly to and returning directly from the place of duty. SGLI was also payable if the reserve member incurred a disability during a period of coverage and death resulted from the disability within 90 days. If the disability did not result in death within 90 days but did cause the member to be uninsurable at standard rates, he had the right to purchase an individual policy of permanent commercial insurance, under the same rules applicable to "full-time" SGLI, at the end of the 90 days.

The Act of June 20, 1972, Public Law 92-315, 86 Stat. 227 (1972), extended SGLI coverage to cadets or midshipmen of the United States Military, Naval, Air Force, and Coast Guard Academies.

The Veterans' Insurance Act of 1974, Public Law 93-289, §4(1), 88 Stat. 165, 166 (1974), further amending then 38 U.S.C. §767 (current 38 U.S.C. §1967), increased the SGLI maximum from $15,000 to $20,000. It also (1) extended "full-time" coverage to Ready Reserve members assigned to a unit or position in which they might be required to perform active duty and in which they would each year be scheduled for at least 12 periods of inactive-duty training, and to reserve members under age 61 with at least 20 years of satisfactory service as defined in 10 U.S.C. §1332[4] who were members of, or eligible for, assignment to the Retired Reserve but who were not receiving retired pay; (2) changed the disability-extension period for "part-time" reserve coverage from 90 to 120 days; (3) revoked the right to exchange SGLI for an individual commercial policy; and (4) created a new program of Veterans' Group Life Insurance (VGLI).

The Veterans' Disability Compensation, Housing, and Memorial Benefits Amendments Act of 1981, Public Law 97-66, §401, 95 Stat. 1026, 1030-1031 (1981), increased the SGLI maximum to $35,000. The Veterans' Administration Health-Care Amendments of 1985, Public Law 99-166, §401, 99 Stat. 941, 956-957 (1985), further increased the SGLI maximum, this time to $50,000 and provided that amounts of less than $50,000 would be issued in increments of $10,000. The Persian Gulf Conflict Supplemental Authorization and Personnel Benefits Act of 1991, Public Law 102-25, §336(a)(1), 105 Stat. 75, 89-90 (1991), further increased the SGLI maximum, this time to $100,000. The Veterans' Benefits Act of 1992, Public Law 102-568, §201, 106 Stat. 4320, 4324 (1992), again increased the SGLI maximum, this time to $200,000. The National Defense Authorization Act for Fiscal Year 1996, Public Law 104-106, §646, 110 Stat. 186, 369-370 (1996), slightly modified the SGLI program by providing for automatic coverage for all servicemembers in the amount of $200,000 except for members who specifically request in writing not to be insured at all or to be insured for some lesser amount than $200,000 that is evenly divisible by $10,000. Persons eligible for such coverage include all members of the uniformed services on active duty, active duty for training, or inactive-duty training, as well as members of the Retired Reserve of any service and persons who, upon application, would be eligible for assignment to a Retired Reserve.[5]

SGLI coverage normally ends for an active duty member on the 120th day after separation from active duty, and for a member of the Ready Reserve on the 120th day after separation from a full-time-coverage status. If, however, the member is totally disabled on the date of separation, the coverage ends on the date total disability ceases or one year from the date of separation, whichever is earlier, but in no event sooner than 120 days after separation. SGLI coverage for a Retired Reserve ends when he receives retired pay or on his 61st birthday, whichever occurs first. Part-time reserve coverage stops after each period of qualifying duty, including travel time, and resumes at the start of the next period. If a part-time member is disabled during one of the intermittent coverage periods, coverage may be extended for up to 120 days.

Veterans' Group Life Insurance, or VGLI, is a program of post-separation insurance that provides for the conversion of SGLI to an indefinitely renewable five year term policy. Former members of the active duty force may elect to continue group coverage under the VGLI program. An electing member may choose any amount available under the VGLI program so long as the amount chosen does not exceed the member's SGLI coverage. Ready Reserves under full-time SGLI may continue group coverage only if they are uninsurable at standard rates as a result of a disability incurred during a period of active duty or inactive-duty training. Members under part-time SGLI may continue group coverage only at the end of a 120-day period during which their SGLI was continued in force as a result of a disability incurred during a period of active duty or inactive-duty training. Retired Reserves cannot continue group coverage under VGLI.

Like SGLI, VGLI is available in $10,000 increments up to a maximum of $200,000. 38 U.S.C. §§1977(a) and 1967(a), as amended by the Persian Gulf Conflict Supplemental Authorization and Personnel Benefits Act of 1991, Public Law 102-25, §336(b), 105 Stat. 75, 90 (1991), and the Veterans' Benefits Act of 1992, Public Law 102-568, §202, 106 Stat. 4320, 4324 (1992). To obtain VGLI, an individual must apply for it and pay an initial premium within the period of his extended SGLI coverage--i.e., normally, within 120 days after separation. VGLI takes effect on the day following the expiration of SGLI coverage. Premiums have to be paid by the insured directly to the office designated by the insurer to administer the program. An insured person whose VGLI is in force at the end of any five-year period following initial coverage has an enforceable right to renew his VGLI coverage for another five-year term or to purchase an individual policy of permanent insurance in an amount equal to his VGLI coverage, without a medical examination, at standard rates, regardless of health, from any private insurance company participating in the program. Pursuant to amendments to the VGLI program made by the Veterans' Administration Health-Care Amendments of 1985, Public Law 99-166, §401(b)(2), 99 Stat. 941, 957 (1985), VGLI coverage is available to members of the Individual Ready Reserve (IRR) and the Inactive National Guard (ING).

No person may carry combined SGLI and VGLI coverage in excess of $200,000 at the same time.

Cost: As previously indicated, the Government pays the annual premium costs of SGLI attributable to the extra hazard of military service. The annual cost of SGLI attributable to the extra hazard of military service for fiscal years 1972 through 1975 was:

Note: The Veterans' Administration determined that the added cost of insuring for the extra hazard of military service had become negligible and payment of this SGLI cost was suspended after October 1974.

[1]E.g., World War Veterans' Act, 1924, ch. 320 [Public Law 242, 68th Congress], Title III, §§300-307, 43 Stat. 607, 624-627 (1924).

[2] The Veterans Administration was redesignated as the Department of Veterans Affairs by the Department of Veterans Affairs Act, Public Law 100-527, §2, 102 Stat. 2635. Pursuant to that Act, from and after March 15, 1989, all references in any Federal law, Executive Order, rule, regulation, delegation of authority, or any document of or pertaining to the Veterans Administration is statutorily deemed to refer to the Department of Veterans Affairs. Department of Veterans Affairs Act, Public Law 100-527, id., §10, 102 Stat. at 2640-2641; also see 38 U.S.C.A. §301 note. (Some references to the "Veterans' Administration" or "VA" have been retained in the present chapter, largely for historical reasons. It should be understood, however, that the Federal agency currently charged with authority for administering the laws and regulations formerly administered by the Veterans' Administration is the Department of Veterans Affairs.)

[3] See Chapter III.D.4., "Dependency and Indemnity Compensation," and Chapter IV.C.1., "Government Contribution to Social Security," hereof, below.

[4] Now 10 U.S.C. §12732.

[5] Retired Reserve SGLI is unique in that coverage is not "automatic"; to obtain coverage, a person normally must apply and pay an initial premium within 120 days after becoming qualified.