WASHINGTON (AFNS) — The Servicemembers’ Group Life Insurance program will adjust its monthly premium rate from 6.5 cents per $1,000 back to the 2006 rate of seven cents per $1,000 of insurance, a modest increase to ensure the SGLI program remains in a strong financial position.
The Department of Veterans Affairs continues to place the interests of service members first and foremost by keeping SGLI premiums as low as possible while also maintaining the necessary reserve levels to ensure funds are available to pay claims to service members’ beneficiaries. 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 order for the program to remain in good financial condition, it is now necessary to increase the premium rate. Since 2008, as a result of the half-cent reduction and decreases in interest rates, reserve funds have decreased. 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. VA also uses actuaries, individuals who deal with financial impact of risk, to conduct program experience studies when evaluating and adjusting reserve assumptions; and each year, an independent auditor verifies the accuracy of their reserve calculations.
For a service member with the maximum $400,000 of life insurance, this change will mean an increase of two dollars per month.
The new premium rate will take effect 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 July 2014. For information on the new rates, visit http://benefits.va.gov/insurance/sgli.asp.