Financial Product Sales: Actions Needed to Protect Military Members Page: 8 of 28
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time that these service members would be covered under the insurance
policy, data we obtained from several of these companies indicated that 40
percent or more of the service members that purchased these products
stopped making payments within the first 3 years. With regulators
indicating that most purchasers failed to request refunds of their saving
fund balance, few likely accumulated any savings as a result of their
According to our analysis, the amount of time that it takes for a service
member's savings fund on these combined insurance and savings products
to become totally depleted through the automatic payment provision
varied. Figure 1 shows the impact on a service member who purchases the
product providing $30,000 of insurance coverage that requires full
payment of the total life insurance premimium during the first 7 years. As
the figure shows, the money in the savings fund of a service member who
makes the required $100 monthly payments for 4 years and then stops
paying would be totally depleted to pay the subsequent insurance
premiums in just over 1 year. This occurs because of the large premiums
due in the early years on this type of policy, and because the accumulated
value of the savings fund for this product was modest. For the other type
of insurance and savings product typically being sold to military members,
which involves lower but continuous premium payments over the life of
the policy, service members who halt their payments after 4 years would
have accumulated sufficient savings to extend the $30,000 of life insurance
coverage for another 13 years. In contrast, a service member could have
used the $100 monthly payment to instead purchase $30,000 of SGLI term
coverage at a cost of only about $23 per year and invest the remainder into
the Thrift Savings Plan (TSP), which is the low-cost retirement savings
plan available to military members and federal employees. Although
ceasing payments on SGLI after 4 years would terminate the service
member's life insurance, the money contributed to the TSP and left to earn
just 4 percent interest would grow to about $9,545 in 20 years.7
7While in the service, a service member can purchase SGLI and contribute to the TSP. If a
service member leaves, he or she may elect to purchase Veterans' Group Life Insurance
(VGLI) and can either leave any accumulated savings in TSP, withdraw the money from
TSP, or roll over the TSP balance into a similar savings instrument, such as an individual
retirement account. In addition, we used the low risk TSP G Fund for this calculation
because it invests in interest bearing securities and thus was comparable to the interest
earning products offered by these insurance companies.
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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/m1/8/: accessed May 19, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.