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GOVERNMENT-PROVIDED LIFE INSURANCE

Governmental agencies offer various forms of life insurance protection. These agencies include the Department of Veterans Affairs, the Social Security Administration, and the State of Wisconsin. Because these governmental agencies are not the main thrust of this book, the treatment of these agencies and the forms of life insurance protection they offer will be necessarily brief.

Department of Veterans Affairs

Since World War I, the United States government has made life insurance available to current and former members of the armed services. More recently, Congress created Servicemen�s Group Life Insurance (SEGLI) to provide members of the uniformed services on active duty with life insurance written on a group basis through private life insurance companies. SEGLI in the maximum amount of $100,000 (periodically increased from the original $10,000 maximum) is provided automatically to essentially all members of the armed forces unless such persons affirmatively elect no insurance or insurance in reduced amounts. No evidence of insurability is required. The coverage continues during active duty through 120 days after separation from the service. The individual is free to name any beneficiary he or she chooses.

Under the Veterans Insurance Act of 1974, Congress also created a program of postseparation insurance that will automatically convert SEGLI to a 5-year nonrenewable term policy known as Veterans Group Life Insurance (VGLI). At the end of the term period, the insured may convert VGLI to an individual commercial life insurance policy at standard rates with any of the participating insurers.

Social Security Administration

Governments, both state and federal, play an important role in providing economic security to individuals and families. Although this book focuses primarily on private life insurance, because social security is so pervasive that it affects the design and sale of life insurance products, a short discussion of the program is appropriate.

The Social Security Administration, an agency of the Department of Health and Human Services, administers the Social Security OASDI (Old Age, Survivors, and Disability Insurance) program. The availability of coverage under the OASDI program is tied to gainful employment. For the worker and members of his or her family to be entitled to benefits, the worker must have achieved insured status. There are three categories of insured status: (1) fully insured, (2) currently insured, and (3) disability insured. Which benefits are available depend on the individual worker�s insured status. OASDI provides retirement, disability, and spouse�s and child�s benefits to retired and disabled workers and their families and widow(er)�s, mother�s/father�s, parent�s, child�s, and lump-sum death benefits to survivors of a deceased worker if he or she dies while insured under the program. After a worker�s death, a modest separate $255 lump-sum burial allowance is paid to the surviving spouse or other designated person.

State of Wisconsin

Wisconsin is the only state in which government is authorized to sell life insurance. In 1911 the Wisconsin legislature created the State Life Insurance Fund. The Fund may issue life insurance policies in amounts up to $10,000 on the lives of persons who are within the state at the time the insurance is issued. The policies written are the standard forms issued by commercial companies on a participating basis.

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