By Barbara O’Neill, Ph.D., CFP®
Life is full of surprises and some of them are expensive. As a result, many people transfer the risk of potential loss to a third-party insurance company. Due to the nature of military life, service members and their families have unique insurance needs. Below is a brief description of seven military-specific insurance considerations:
- Military Insurance Rates – Service members may receive special military-related insurance breaks on property insurance. Several insurance companies serve veterans and active-duty members exclusively, with features designed to meet their unique needs. Some other companies provide military discounts.
- Wartime Exclusions – Homeowners’ insurance policies typically list damages caused by war as an exclusion, along with floods, earthquakes, and nuclear hazards. Therefore, if service members are in a combat zone, they may not have adequate coverage for their belongings.
- Vacancy Clauses – Property insurance policies may state that coverage is limited if a home is vacant for a designated period of time (e.g., typically 30 or 60 days). If a service member expects their house to be empty for longer than the designated period, they need to discuss options with their insurer.
- Military Housing – Renter’s insurance is important for service members who live in military housing. The federal government provides only minimal, limited coverage for personal possessions if they are damaged or stolen from military quarters.
- Coverage During Deployment – Service members who are deployed with no one using their vehicle should check with their insurer to review options. They may be able to pay a lower premium to reflect the fact that they are not driving the vehicle or even cancel the policy and reinstate it without penalty when they return.
- Accidental Landlord Issues – Some service members become “accidental landlords” when they are unable to sell their current home before an upcoming PCS move. Doing this brings a host of potential liability issues that need to be planned and insured for.
- Life Insurance – Military service provides the opportunity to purchase up to $400,000 of low-cost term life Servicemembers’ Group Life Insurance (SGLI). Whether this is enough coverage depends on a service member’s lifecycle stage, career accomplishments and pay grade and other personal variables.
Key messages about insurance for Personal Financial Managers (PFMs) to share with service members are:
- Anticipate financial risks in advance and plan ahead for them
- Discuss risk exposures and coverage options with insurance professionals
- Set aside adequate emergency reserves to cover insurance deductibles and other out-of-pocket expenses
For additional information, review the OneOp Personal Finance webinar, Financial Risk Management for Military Families.
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