The Servicemembers’ Group Life Insurance (SGLI) program will adjust its monthly premium rate from 6.5 cents per $1,000 back to the 2006 rate of 7 cents per $1,000 of insurance, a modest increase to ensure the SGLI program remains in a strong financial position. For a servicemember with the maximum $400,000 of life insurance, this change will mean an increase of two dollars a month.
Since the start of the SGLI program in 1965, monthly premiums have decreased from 20 cents per $1,000 to the current 6.5 cents per $1,000. There have been periodic increases and decreases, but over the past 30 years premiums have fluctuated only 2.5 cents per $1,000 of insurance.
In July 2008, VA lowered the monthly premium rate for basic SGLI to reduce excess reserve funds in the program. Insurance companies hold reserve funds to ensure they can pay future claims. It is common practice in the group insurance industry to adjust premium rates as reserve funds increase and decrease, which typically happens when there are changes in the economy and/or changes in the number of death claims.
In order for the program to remain in good financial condition, it is now necessary to increase the premium rate by half a cent per $1,000 of insurance. Since 2008, as a result of the half-cent reduction and decreases in interest rates, reserve funds have decreased. VA also uses actuaries, individuals who deal with financial impact of risk, to conduct program experience studies when evaluating and adjusting reserve assumptions. Each year an independent auditor verifies the accuracy of their reserve calculations.
The new premium rate will take effect on July 1, 2014. Individual Ready Reserve members who are drilling for points toward retirement or who do not receive pay for other reasons, will be billed by their branch of service for the higher premium beginning in July 1014. For information on the new rates, visit http://benefits.va.gov/insurance/sgli.asp.
Remember Mother’s Day, May 11, and Armed Forces Day on May 17. Speak to you again next week.