Financial Product Sales: Actions Needed to Protect Military Members Page: 7 of 28
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automatic premium payment deductions from military members'
paychecks for these insurance products.
These products provide additional death benefits but are significantly
more expensive than other life insurance coverage available to service
members. For example, service members purchasing these products make
payments of about $100 per month for additional death benefits generally
ranging from $25,000 to $50,000. In contrast, all service members are
currently able to purchase $400,000 of life insurance through
Servicemembers' Group Life Insurance (SGLI) for $26 per month.5
Although the insurance products these six companies were selling also
included a savings component that recently promised to earn interest
between 6.5 and 8.1 percent, these products also included features that
reduced the likelihood that service members purchasing them would
accumulate large amounts of savings. As we reported, military members
move frequently and many leave the service after a few years, which which
may reduce their ability or willingness to continue making payments to
fulfill a long-term financial commitment. However, the products being
marketed by these insurance companies require a long series of payments
to result in significant benefits to their purchasers. For example, most of
the payments made in the earliest years-ranging from 1 to 7 years-
would be used to pay the premiums for life insurance coverage. In
subsequent years, more of the service members' payment would be
allocated to the savings components In addition, these products also
included features that allowed the companies to use the money
accumulated in a service member's savings fund to automatically pay any
unpaid insurance premiums. Although this would extend the period of
5Previously, service members were automatically covered for the maximum amount of
$250,000 of insurance on their first day of active duty status, unless they declined or
reduced their coverage. Included in the Emergency Supplemental Appropriations Act of
Defense, the Global War on Terror, and Tsunami Relief, for the Fiscal Year Ending
September 30, 2005, Pub. L. No. 109-13, sec. 1012 (May 11, 2005), were provisions that
increased this amount to $400,000 effective September 1, 2005. This act also increased the
death gratuity paid upon a service member's death from $12,000 to $100,000, under certain
6For example, for a $100 monthly payment for the product sold by three of the companies
100 percent of the first year's payments would be allocated to the insurance premium.
Between the second and the seventh years, 75 percent of the purchaser's total payment
would be allocated to the life insurance premium and 25 percent would allocated to the
savings fund. After 7 years, all of the total payment would be allocated to the savings. Three
other companies sold products that allocated 75 percent of the total payment to the life
insurance premium during the first year, followed by 25 percent in subsequent years.
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United States. Government Accountability Office. Financial Product Sales: Actions Needed to Protect Military Members, text, November 17, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc292981/m1/7/: accessed May 27, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.