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Life insurance for a young military family

Question: I am the 22 year-old mother of a 6 month-old daughter. I am currently unemployed while I take classes to complete my college education and my Husband is deployed with the National Guard overseas. I am concerned about my family's financial future if anything should happen to either myself or my husband. I would like more information about various life insurance options. What kinds are there? What is the difference between the types? How do I pick what one is right for my family? Are there any books or online resources with accurate and easy to understand information? Thank you for your time and help. Sincerely, Jodi, Jonesboro AR

Answer: This is a fittiing question for Veterans Day. First of all, since your husband is on active duty with the military you should be automatically covered for $400,000 in life insurance benefits through Servicemembers' & Veterans' Group Life Insurance. Here's what the handbook says: "Members on active duty, active duty for training or inactive duty for training and members of the Ready Reserve or National Guard are automatically covered for $400,000, the maximum amount of coverage."

He can also purchase up to $100,000 of SGLI coverage for you, in increments of $10,000.

The policy offered by the government is a "term" life insurance policy. Term life insurance is a pure death benefit. It doesn't pay dividends and there isn't any cash savings attached to the policy.

The section of the U.S. Department of Veteran's Affairs website that describes the life insurance benefit offers good information, including details on the policy, a calculator for figuring out how much life insurance you should carry, a life insurance glossary, and a description of the basic types of life insurance.

The differences between life policies matter a lot if you and your husband decide your family needs more life insurance--especially adding more coverage for you in case something happened to you.

Life insurance comes in two basic flavors. The first I've already mentioned, term insurance. Term insurance is a simple product, easy to understand, and it allows for competitive comparison-shopping for the best mix of price and coverage. You'll want a low cost, plain vanilla policy from a blue chip, financially strong life insurance company. Term insurance is ideal for most families with insurance needs, like you.

Cash value is the other major kind of insurance. Cash value insurance always comes with a tax sheltered savings component as well as a life insurance policy. Cash value life insurance can be complicated. There are all kinds of policies, from whole-life, universal-life, variable-life, variable-universal life, and so forth. Depending on the type of cash value policy, the insurance company may invest the savings for you or you may choose from a menu of investment options. The premium may be stable for the life of the policy or you may vary your payments. In general these policies are expensive.

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