April 25, 2014, 08:00:00 AM
WASHINGTON – 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 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 (VA) continues to place the interests of Servicemembers 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 Servicemembers’ 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. (Chart below). 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 from seven cents per $1,000 of insurance to 6.5 cents per $1,000 of insurance 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. 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 Servicemember with the maximum $400,000 of life insurance, this change will mean an increase of two dollars a month.
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 2014. For information on the new rates, visit http://benefits.va.gov/insurance/sgli.asp
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