Life Insurance

This week, I had the opportunity to visit the USAA headquarters in San Antonio and one subject that came up regularly was life insurance.  I expressed that I sometimes find it frustrating that the USAA reps always ask me about life insurance, regardless of why I am calling.  As the result of our conversations, I came to realize how important this it to USAA’s mission to “facilitate the financial security of its members, associates, and their families.”  It seems that a sobering number of USAA members die each year without adequate life insurance, and that has spurred USAA to make life insurance a priority in communicating with their members.

I will be the first to admit that life insurance is a tough subject, and not only because it revolves around the concept that someone could die.  Buying life insurance is challenging because it is so difficult to determine how much life insurance you really need, and it is is hard to decide which policy is right for your situation.

The first step is deciding what you want to accomplish with your life insurance.  Do you want to ensure that your spouse does not need to work?  Do you want to fund college for your kids?  Would you want the mortgage and other debts paid off?  Are you hoping to leave a large cash inheritance for your children?

The second determining how much life insurance you need.  Start by making a list of the necessary information:  current income and spending, investments, value of pensions, social security, and other benefits.  You will need to have a clear picture of your goals in order to calculate correctly.  There are bjillions of online calculators available, and unfortunately they all give you different answers.  In my case, the answers vary by hundreds of thousands of dollars.  The best you can do is take all the available information and try to make an educated decision.  Talking with representatives of various trusted organizations can help, too, but their recommendations will likely vary, as well.

Third, choose no more than three or four companies and look at their offerings.  Honestly, life insurance is overwhelming and you just can’t reasonably research every option available.  Three or four good organizations will likely have more than enough choices from which to select.  For those who are eligible, I always suggest they start at USAA because of their commitment to military families.  In addition, there are many trustworthy benefit or mutual aid societies that offer life insurance to particular groups.  You might consider checking with an insurance broker who will look through a variety of policies for you, but remember that their commission will be paid by your premiums somehow.  Determine what products are offered by each company and how they might fit in with your plans.  Consider how your needs will change as your family changes and you age.  If you currently maintain SGLI (Servicemembers Group Life Insurance), carefully consider what will happen when you are no longer on active duty.  Take advantage of the representatives to answer questions and explain your options (but be sure to know which ones are being paid on a commission basis.)

The fourth step is the hardest one, but the most important:  buy the insurance.  Don’t get paralyzed by all the choices and options.  At some point, you need to stop researching and make the purchase.  All the research in the world isn’t going to do anyone any good if you never make it to the purchase stage of the process.  Pick a date by which you will choose and make the best decision with the information that you have.  Make a chart, talk with your spouse, heck, pick a policy out of a hat if necessary.  (No, I am just kidding.)

Life insurance can be of the most important purchases a person can make, and it truly isn’t that expensive.  Denial, confusion and frustration push many people to put off buying life insurance and for some of those people, the results can be disastrous.   Don’t wait.

Life insurance calculators that I have used:

  • USAA must log in with membership information

P.S.  Some crazy FTC regulations make me state that I went to USAA’s headquarters as their guest, and they provided my transportation and lodging.  I’m not sure if I’m going to have to write this disclaimer every time I utter the letters “USAA” but I am going to find out.

About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.
  • I like using the rule of thumb – “10 times your annual income” as a good starting point when trying to gauge how much insurance you need to purchase. So, for example, if you earn $50,000 per year, then you might want to consider $500,000 worth of insurance to cover your family’s needs.

  • When you review life insurance policies for anyone in the military, make sure that is does not contain an exclusion for war-related injuries or deaths (or hostile actions). Many life insurance policies have this exclusion, which would render the policy of only limited value to a military family, especially in times of war. The last time I checked, USAA’s life insurance policies did not have this exclusion, and I can’t imagine they would have added them.

    And while you’re talking about life insurance, remember that your family may need life insurance on your spouse as well. If the non-service member spouse died, would the family be able to carry on all the activities he or she did for the family? For example, would you still be able to operate the household (cooking, cleaning, laundry, reading bedtime stories, etc.), or would you need to hire some help? Then consider the cost of that help over the long term, and make sure the life insurance policy is large enough to cover it.

    And remember that the younger you are, the lower your premiums will be.

    P.S. I was also in the group whose transportation and lodging was provided by USAA, but someone in our household has been a USAA member since 1968, and we’ve enjoyed USAA’s outstanding service long before I attended the conference at their headquarters last week.

  • Thanks for the useful information

  • Kathy Williams

    I am writing about my husband. He is a viet nam veteran with 100% disabled and unemployable. Is he entitled to life insurance benifits? Hope you can help. Thanks, Kathy

  • I read a lot of info about life insurance from military organizations. The problem is they all want to forget about us old soldiers.