As an organisation, the US military
is vast, running up an annual wage bill of about $130bn for the
almost 1.5m full-time personnel and over 1.4m reservists in its
five service branches.
US military personnel also
represent a segment of the population more likely to buy life
insurance than their civilian counterparts, according to First
Command Financial Services.
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The
investment advisory and financial services company bases its view
on the results of its
First Command Financial Behaviors Index
which monitors life insurance buying trends amongst military
personnel.
In its most recent study, First
Command found that 42% of middle-class military families own
permanent life insurance coverage and 49% own term life insurance
products.
This, notes First Command, is far
higher than among individuals in the general population with
similar incomes. Specifically, 37% of this non-military segment own
a permanent life insurance product and 39% own term policies.
First Command defines middle-class
military personnel as non-commissioned and commissioned officers in
pay grades E-6 and above and with annual household incomes of at
least $50,000.
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By GlobalDataMonthly income of an E-6 grade
member of the military with 20 years’ service is currently $3,590
excluding other benefits. Monthly income of member of the military
with 20 years’ service on the highest pay grade, O-10, is
$15,647.
Significantly, First Command’s term
and permanent life ownership data among military personnel is in
addition to low-cost group cover available to them.
For example, First Command notes
that an active duty service member is eligible for up to $400,000
in Service Members’ Group Life Insurance, commonly referred to as
SGLI.
Under SGLI, military personnel may
also add optional spousal cover of up to $100,000 and dependent
cover of up to $10,000.
First Command research indicates
that 73% of middle-class military families have life insurance
coverage through the government.
“The popularity of commercial life
insurance in the military community is yet another example of the
fiscal conservatism we see in this population,” says First Command
CEO Scott Spiker.
“This community tends to focus more
on savings, debt-reduction and other frugal behaviours than the
general public.”
Spiker adds: “More importantly, the
prevalence of these products is a sombre reminder that military
families live with the risk of wartime death.
“They understand the threat, and
they are taking meaningful actions to protect their long-term
financial security.”
Military personnel also appear to
take more cognisance of change that lies ahead.
According to First Command, after
leaving the service, military personnel may convert SGLI to
Veterans’ Group Life Insurance (VGLI) under which premiums are
higher and based on an insured’s age.
Many military families thus opt for
commercial policies to increase their overall coverage now and
provide longer-term protection, either in addition to or to
supplement VGLI for their post-military lives.
First Command also found that
permanent life insurance is growing in popularity amongst members
of the military.
Of members who do not yet have
permanent life cover, 28% are likely to purchase it for themselves
or someone in their household. In the general population, the
likelihood is 20%, notes First Command.
Interest in permanent life
insurance amongst military personnel may reflect concerns about a
recent proposal to overhaul the military retirement system, notes
Spiker.
“As details of this proposal
continue to emerge, we expect to see many active-duty families
reassess their post-military plans,” he says.
“It makes sense that this type of
reassessment will likely go beyond obvious retirement
considerations to address the full range of long-term financial
strategies.”
Founded in 1958, Fort Worth,
Texas-based First Command focuses on providing advisory, investment
broking and banking services to members of the military and other
federal employees.
At the end of 2010 the company reported a client-base of 284,000
families, $51.2bn in in-force life insurance policies and $16.4bn
in managed accounts and brokered mutual funds.
