Insurance

Insurance is a financial safety net that protects you and your family against unexpected events by covering financial losses in exchange for regular premium payments. Insurance transfers the financial risk of life's events to an insurance provider.
A sound insurance strategy can help protect you and your family from the financial consequences of unfortunate events. A comprehensive insurance strategy can include health insurance, liability insurance, life insurance, disability insurance and long-term care insurance among other things.
For military & veteran families, insurance plays a vital role in securing financial stability amidst frequent relocations, deployments, and career transitions.

In my experience, some veterans and military members are skeptical of the value of insurance. It's not uncommon for me to hear people say that they feel like insurance isn't worth it because they pay into their insurance policies over many years but never see a return on those payments. This strikes me as a misunderstanding of what insurance is and what it is good for. With that in mind, I would like to take a minute to address what insurance is and how insurance works so you can better understand its value and when to use it.

How Insurance Works and its Value

Insurance, as we understand it today, was only possible after the advent of statistics and the realization that some naturally occurring phenomenon fit into certain reoccurring patterns. Abraham de Moivre, Carl Gauss and Rober Adrain discovered and developed a mathematical way to predict what might happen on average for an individual so long as they were a member of a much larger group. Many people will recognize this idea as a normal distribution (or Gaussian Distribution) and understand that for most large groups of people things like a person's height, weight or even lifespan will fit into a normal distribution. 

The takeaway here is that if we get enough people into a group we may not know with certainty what will happen to any one of them but we can say with a high degree of certainty what will happen to a person on average. It is this observation that allows insurance companies to manage risks across large populations. 

When you or I pick up the phone and get a quote for life insurance or auto insurance, the insurance company doesn't know exactly when we might die or get into a car accident but they do have a good idea that 95% of the time we fit into a certain range of outcomes and that allows them to underwrite an insurance policy that shifts risk off of us as an individual and onto them as an insurance company.

The only way that this can work is if the risks that are being insured for by the insurance company don't happen too frequently. They usually need a disproportionately large percentage of their customers to be paying premiums into their plan and not making claims. That allows the insurance companies to invest the premiums they receive in any given year with a degree of certainty on what portion of their clients will file claims in a given year, and therefore when they will have to make payments on those claims to their clients. The insurance companies try the best they can to match their income from those investments to the claims they predict they will incur using the statistical models they come up with that rely on some distribution of outcomes. The insurance companies will generally buy bonds to match the maturity date or duration of the bond to the expected date of claims that must be paid out.

What that means for us as consumers of insurance products is that we get the most value from insuring against hazards (risks in insurance language) that happen relatively rarely on an individual basis but have very detrimental impacts when they do occur. AKA, low probability but high risk hazards. That allows the insurance company to spread the risk over a large population while making sure that those clients that actually do experience a peril will be financially covered.

That also means there are some risks, or hazards, that are not easily or efficiently covered by insurance because they happen too often, or the detriment that results from them is too low to justify the cost. For these hazards we generally think of avoidance or risk reduction. Risk avoidance would be akin to not driving somewhere because of the risk or that particular trip. Risk reduction would be driving there but doing so at a slower speed, during day light hours or avoiding rush hour traffic.

When risk can't be completely avoided, what are some good use cases for buying an insurance policy.

When to Use Insurance

As I wrote earlier, the best use cases for insurance are for those hazards or perils that occur infrequently but have large financial impacts.

• Health Insurance: Ensures families are able to pay for major medical bills in the event of a healthcare emergency. 

• Life Insurance: Covers medical expenses that can arise from service-related conditions.

• Disability Insurance: Safeguards homes, vehicles, and businesses against damage or liability.

• Long-Term Care Insurance: Provides support in case of disability or loss of life.

• Property & Liability Insurance: This covers things like your home, automobiles and other valuables you may have accumulated.

Life insurance is  a clear example of an unavoidable risk with severe financial implications. It is perhaps the most obvious use case for an insurance policy. 

Life insurance is critical because it provides financial security for our loved ones when we pass away. The need for life insurance arises out of the recognition that our family, or others, rely on us either for our income, labor or general well-being. To approximate what an appropriate amount of life insurance is you should complete a Detailed Needs Analysis (DNA). A DNA seeks to account for what amount of money would be required to offset the absence of your income and labor in addition to any harm that might arise from the loss of your presence. 

Veterans, military members and their families have a few distinct life insurance options available to them.

• SGLI (Servicemember's Group Life Insurance): This is the life insurance we all have access to while on active duty. The rates on this life insurance is incredibly cheap compared to private alternatives. When I was serving in the Army I maxed out my SGLI policy benefit on account of how affordable the policy was even though nobody was directly in need of me for financial support.
• FSGLI (Family Servicemember's Group Life Insurance): Sometimes it makes sense to get an insurance policy that covers your spouse or dependent child. It is not terribly uncommon for a milspouse to take on the role of a stay-at-home parent or house keeper either out of desire, circumstance or a combination of the two.  As a servicemember, it is important to recognize the value of those activities your spouse is doing and ask yourself the question, "what would I have to pay to get a professional to do the same work?" In the worst case scenario that may be required. So, even though your spouse may not be making an income they are still likely providing value to the household which would result in a financial need should they pass away prematurely. Like SGLI, FSGLI is offered to military members at ultra competitive rates.
• Veteran's Group Life Insurance (VGLI): When you transition out of the military the VA offers you the ability to get a life insurance policy through them. This is exceptionally helpful for anyone who is not immediately transitioning into the workforce but still has financial responsibilities to their family or others. Two examples are when a service member transitions out of the military to pursue higher education, or gets medically discharged and no longer has access to a group life insurance policy. In the case of the latter, they may also no longer be eligible for a privately offered life insurance policy due to their medical history. If that is the case, a veteran may want to consider the VGLI because they are able to get a policy without being screened for health if they do so within 240 days of leaving the service. I have found that the rates offered through the VA VGLI are usually competitive with rates at private insurance companies.
• Group Life Insurance: Most medium sized to large employers will offer access to a group life insurance policy through payroll deductions just like the military does. Often times these plans are heavily subsidized by the employer giving you a reduced cost per dollar of coverage. This is a great option for someone who is working and wants a policy to cover their family.
• Private Life Insurance: For various reasons, sometimes the other options are not available or don't quit meet your needs. If that is the case you may find that a life insurance policy you have access to through a large private insurance company is the best option. There are many large insurance companies that sell life insurance policies to individuals directly. This could be a great option for someone who is self-employed or running a small business for example. 

Coming in right behind life insurance is health insurance. I can scarcely think of an example of someone who has gone through their entire life without the need of paying for health care in the United States. As many of you will be aware, healthcare emergencies are cited in about 66%, or two thirds, of all bankruptcy filings. Clearly being under insured is a risk all its own.

Thankfully, military members and veterans have several options available to them for health insurance. 

• TriCare: It is impossible to talk about health insurance for the military community without discussing TriCare. TriCare enrollment is eligible to active duty service members, their families, retirees, activated National Guard and Reservist and their families among others. The accessibility for this program is broad and the costs are quite low. Active duty military member pay nothing and even for retirees the premiums and co-pays are remarkably low. You could fill a book with everything there is to know about TriCare but for our purposes now let's just say it is a great benefit.
• VA Healthcare: The VA offers healthcare to veterans either for free or heavily subsidized rates based on their level service-connected disability. This VA healthcare system is what is commonly referred to as a single-payer system. Single-payer systems act as a single payer for healthcare services and therefore has immense bargaining power. The VA is unique in so far as it is also the provider for much of that healthcare in addition to the payer. The VA however does not act as the exclusive provider as they also will make referrals through the Community Care Network (CCN) for various reasons. In recent years the VA has spent a large portion of its budget for veterans to get care through the CCN.
• Private Group Health Insurance: This option is typically provided by most medium to large companies. Like Group Life Insurance, it is typically heavily subsidized by the employer to help attract and retain top talent. Usually these health insurance plans offer employees a variety of options to choose from so they can get coverage the best approximates their needs. For example, a typical group health insurance plan will provide options for high or low deductible plans so employees can select the level of coverage they feel suits them best. This provides financial planers a few ways to help optimize your financial lives as well.
• Public Health Insurance: There are also various public health insurance options available as well. Most people know these options more commonly as Medicare and Medicaid. Medicare is the health insurance that people pay into through their working career and is then usually available to them upon normal retirement age. Medicaid is typically thought of as a social program setup to help those who are somehow unable to get access to other forms of health insurance, usually due to disability, blindness, being a child, pregnant, or in a nursing home. Generally, Medicaid will cost the user little to nothing out-of -pocket. It is not unusual for veterans to end up on Medicaid or Medicare despite their access to other forms of health insurance/care.

A common approach to health insurance in the veteran community is to take a hybrid approach in which a veteran or their family utilizes both the VA Healthcare system in addition to one of the other options. By leveraging multiple health insurance options veterans can unlock services and cost savings not typically available to others.

Whether you’re stationed stateside, deployed overseas, or transitioning to civilian life, protecting your home, possessions, and financial future is essential. Property and liability insurance serves as a critical safety net—especially for military members, veterans, and their families, who may face unique risks due to mobility, deployments, and service-related activities.

What Is Property Insurance?

Property insurance covers physical assets like your home, apartment, furniture, electronics, or personal belongings. Think of this type of insurance as insurance that covers the property you own. This includes:

• Homeowners Insurance – For those who own a home, this policy typically covers your dwelling, attached structures, and personal property. It also provides loss-of-use coverage, helping with living expenses if your home becomes uninhabitable due to a covered event.

• Renters Insurance – Even if you live in base housing or a rental property off-base, renters insurance can cover your belongings in case of fire, theft, or other disasters.

• PCS (Permanent Change of Station) Considerations – When you're frequently moving, it's easy to overlook how your belongings are covered in transit. A good renters or homeowners policy may offer limited coverage during moves, but you may want to supplement with coverage specifically designed for PCS moves or military transit.

Tip: The Servicemembers Civil Relief Act (SCRA) may protect your current coverage or help you cancel policies without penalty when you receive orders—check with your insurer.

What Is Liability Insurance?

Liability insurance protects you if you're found legally responsible for injuring someone or damaging their property. This coverage often comes bundled in homeowners or renters insurance but can also be extended through umbrella insurance. You can think of this type of insurance as protecting other people's property and persons from you. It's about making another party whole after some injury that you were somehow found to be responsible for.

Here’s how liability insurance works:

• Personal Liability – If someone slips and falls on your property and sues you, this coverage helps pay for legal fees and damages.

• Property Damage to Others – Covers costs if your kids accidentally damage a neighbor’s property or your pet causes harm.

• Umbrella Insurance – Provides extra liability protection beyond your standard policy limits, which is especially useful if you have significant assets or a high-risk profession (including service members). This type of policy only kicks in if the underlying insurance policy has exhausted all of its liability coverage.

A typical homeowners insurance policy, or auto policy, will include coverage for both property and liability hazards.

Military life often involves more variables than the average household: frequent moves, deployments, remote assignments, and unexpected transitions. These circumstances increase exposure to risks that can threaten your financial stability. Property and liability insurance gives you peace of mind and protection when Murphey's Law comes calling.

Consider these unique situations:

• Living on base or in military housing? You may still need renters insurance to cover your personal belongings.

• Deployed overseas? Not all policies offer global coverage—review your policy or speak with a knowledgeable agent.

• Hosting events at home? Personal liability coverage helps in case of accidents, which is key for family gatherings or celebrations.