Thursday, January 26, 2006
Insurance scammers target troops
Here's a report from CNN:
Military service members are provided with life insurance policies under the government-sponsored Servicemen's Group Life Insurance (SGLI).
Following reports that shed light on the poor government benefits packages offered to soldiers and blatant abuses by insurance agents, President Bush last May raised the maximum SGLI coverage to $400,000 from $250,000. He also increased the death gratuity for soldiers killed in the line of duty to $100,000 from $12,500 -- a win for military advocates who argued that the payouts were scandalously low in compensating families for the loss of their loved ones.
According to Pentagon statistics, 96 percent of service members have SGLI policies and over 160,000 military personnel pay for additional supplemental commercial life insurance, with total premiums of more than $190 million annually.
"Given the improvements in military insurance benefits, I don't think there's much need for more supplemental insurance," said John Oxendine, insurance and fire commissioner for the state of Georgia, who will testify before the Senate Banking Committee next week.
But prior to the Bush administration's benefits' boost, many soldiers bought supplemental insurance because government benefits were so low. Oxendine said some insurance agents took advantage of this need by selling young inexperienced soldiers policies with high premiums and low benefits -- an issue that was exposed by the Times in July 2004.
Oxendine said insurance agents also sold soldiers high-priced insurance policies that were touted as additional savings vehicles to help them build a financial nest egg for the future, but provided little explanation of the complexities of these hybrid products. He said some agents even befriended sergeants on military bases to build relationships with soldiers in order to lull them into a false sense of security.
I'm of the opinion that nearly every soldier should take full advantage of the SGLI program, and sign up for the max from the first date of enlistment. But I'm not opposed to some soldiers buying supplemental policies in addition to basic SGLI coverage.
For instance, $400,000 in coverage, plus a $100,000 death gratuity, may not be enough for a field-grade officer, for example, or an E-9 with a substantial income and who has several college-bound children.
Soldiers should keep in mind that while their insurance needs typically increase with time, their SGLI policies will not last forever. Effectively, their policies are term insurance, good for only as long as they are in the service.
You can convert to a 5-year term VGLI, which is renewable, upon leaving the service/ But regardless of your need, you cannot increase VGLI coverage beyond what you had with SGLI. Details here.
Every soldier with college-bound children should carefully consider his or her insurance needs, and not take for granted that SGLI coverage will be sufficient in perpetuity. The cost of college tuition consistently increases faster than the rate of inflation, while inflation itself constantly eats away at the value of your insurance policy.
Soldiers also should not take for granted that they will be able to get additional insurance later, upon retirement. They may have health problems in the future which render them uninsurable.
Most soldiers will be ok with the $400,000 SGLI policy - especially if they have no children. Those with children may wish to take a second look.
Things to look at when choosing a polioy:
Financial strength. AAA or Aa1 is best. An insurance policy is no good if the company issuing the contract isn't around in years to pay the claim.
Premiums.
Combat Zone exclusions. A serviceman's policy should not exclude deaths from acts of war or anything related to a combat zone. This defeats the purpose of insurance.
Splash, out
Jason
Saving for retirement: Seize the day
A 25-year-old worker has 40 or more years of work ahead in his or her career before retirement. If that worker contributes the maximum $4,000 per year to a Roth IRA at the beginning of each year, and realizes an 8-percent annual return on his or her investments, that worker would have saved over $1.12 million, tax free, at the age of 65.
If he or she waits just five years to begin saving, however, that figure drops to $744,409: a penalty of 33-percent in retirement income. In other words, waiting 5 years to begin saving costs a 25-year-old $74,943 per year.
Except for the tax free part, troops, the same is true for enrolling in the Thrift Savings Program, except the amounts you may contribute are even higher.
Pay off that ridiculous car loan they stuck you with at that car lot off post - for a car you're not even driving if you're deployed, sucker - and enroll in the Thrift Savings Plan as soon as you can. No, the DoD doesn't match your contributions. But aside from the lack of a matching incentive, you will not find a better 401(k) type plan in the civilian sector.
Splash, out
Jason
Military service members are provided with life insurance policies under the government-sponsored Servicemen's Group Life Insurance (SGLI).
Following reports that shed light on the poor government benefits packages offered to soldiers and blatant abuses by insurance agents, President Bush last May raised the maximum SGLI coverage to $400,000 from $250,000. He also increased the death gratuity for soldiers killed in the line of duty to $100,000 from $12,500 -- a win for military advocates who argued that the payouts were scandalously low in compensating families for the loss of their loved ones.
According to Pentagon statistics, 96 percent of service members have SGLI policies and over 160,000 military personnel pay for additional supplemental commercial life insurance, with total premiums of more than $190 million annually.
"Given the improvements in military insurance benefits, I don't think there's much need for more supplemental insurance," said John Oxendine, insurance and fire commissioner for the state of Georgia, who will testify before the Senate Banking Committee next week.
But prior to the Bush administration's benefits' boost, many soldiers bought supplemental insurance because government benefits were so low. Oxendine said some insurance agents took advantage of this need by selling young inexperienced soldiers policies with high premiums and low benefits -- an issue that was exposed by the Times in July 2004.
Oxendine said insurance agents also sold soldiers high-priced insurance policies that were touted as additional savings vehicles to help them build a financial nest egg for the future, but provided little explanation of the complexities of these hybrid products. He said some agents even befriended sergeants on military bases to build relationships with soldiers in order to lull them into a false sense of security.
I'm of the opinion that nearly every soldier should take full advantage of the SGLI program, and sign up for the max from the first date of enlistment. But I'm not opposed to some soldiers buying supplemental policies in addition to basic SGLI coverage.
For instance, $400,000 in coverage, plus a $100,000 death gratuity, may not be enough for a field-grade officer, for example, or an E-9 with a substantial income and who has several college-bound children.
Soldiers should keep in mind that while their insurance needs typically increase with time, their SGLI policies will not last forever. Effectively, their policies are term insurance, good for only as long as they are in the service.
You can convert to a 5-year term VGLI, which is renewable, upon leaving the service/ But regardless of your need, you cannot increase VGLI coverage beyond what you had with SGLI. Details here.
Every soldier with college-bound children should carefully consider his or her insurance needs, and not take for granted that SGLI coverage will be sufficient in perpetuity. The cost of college tuition consistently increases faster than the rate of inflation, while inflation itself constantly eats away at the value of your insurance policy.
Soldiers also should not take for granted that they will be able to get additional insurance later, upon retirement. They may have health problems in the future which render them uninsurable.
Most soldiers will be ok with the $400,000 SGLI policy - especially if they have no children. Those with children may wish to take a second look.
Things to look at when choosing a polioy:
Financial strength. AAA or Aa1 is best. An insurance policy is no good if the company issuing the contract isn't around in years to pay the claim.
Premiums.
Combat Zone exclusions. A serviceman's policy should not exclude deaths from acts of war or anything related to a combat zone. This defeats the purpose of insurance.
Splash, out
Jason
A 25-year-old worker has 40 or more years of work ahead in his or her career before retirement. If that worker contributes the maximum $4,000 per year to a Roth IRA at the beginning of each year, and realizes an 8-percent annual return on his or her investments, that worker would have saved over $1.12 million, tax free, at the age of 65.
If he or she waits just five years to begin saving, however, that figure drops to $744,409: a penalty of 33-percent in retirement income. In other words, waiting 5 years to begin saving costs a 25-year-old $74,943 per year.
Except for the tax free part, troops, the same is true for enrolling in the Thrift Savings Program, except the amounts you may contribute are even higher.
Pay off that ridiculous car loan they stuck you with at that car lot off post - for a car you're not even driving if you're deployed, sucker - and enroll in the Thrift Savings Plan as soon as you can. No, the DoD doesn't match your contributions. But aside from the lack of a matching incentive, you will not find a better 401(k) type plan in the civilian sector.
Splash, out
Jason
If he or she waits just five years to begin saving, however, that figure drops to $744,409: a penalty of 33-percent in retirement income. In other words, waiting 5 years to begin saving costs a 25-year-old $74,943 per year.
Except for the tax free part, troops, the same is true for enrolling in the Thrift Savings Program, except the amounts you may contribute are even higher.
Pay off that ridiculous car loan they stuck you with at that car lot off post - for a car you're not even driving if you're deployed, sucker - and enroll in the Thrift Savings Plan as soon as you can. No, the DoD doesn't match your contributions. But aside from the lack of a matching incentive, you will not find a better 401(k) type plan in the civilian sector.
Splash, out
Jason
