Life Insurance in Virginia

Group coverage: what Virginia workers actually have

Most Virginians do not start from zero. Many have some life insurance through work, and the first step is to find out how much and what happens to it. According to the U.S. Census Bureau, 2020 to 2024 American Community Survey, the median household income is about $93,170, the median resident is about 39 years old and owners with a mortgage pay a median of about $2,127 a month. A household with those numbers usually has two incomes, a mortgage and children, and often relies on employer benefits that look larger than they are.

Federal employees and FEGLI

Federal employees get basic life insurance through the Federal Employees’ Group Life Insurance program, with optional add-ons that employees can buy in units of salary. The basic benefit is modest relative to a family’s needs. The optional coverage can be attractive when you are young, but the premiums step up with age and become expensive in your fifties and sixties. Another quirk is what happens at retirement. To keep coverage into retirement, you generally must have had it for the five years before retiring, and in retirement the basic benefit may reduce over time unless you pay extra to keep it. Many federal workers buy private term insurance for the years when children are at home and use FEGLI as a supplement. A planner can compare the cost of keeping each layer with the cost of private options.

Military families

Service members have Servicemembers’ Group Life Insurance, which is inexpensive on active duty, and spouses can have coverage under a family program. The coverage ends soon after separation. Veterans can convert to Veterans’ Group Life Insurance within a limited window, but its premiums rise in five-year steps with age. Many veterans instead buy private coverage, and the cheapest time to apply is while still in service and healthy. For the many military families in Hampton Roads and Northern Virginia, the plan should also account for the Survivor Benefit Plan for retirees, which pays a monthly annuity to a spouse and can be compared with the cost of life insurance. A planner familiar with military benefits can lay out all the layers.

Choosing between term and permanent

Term insurance covers a number of years that you choose. If you die during the term, the policy pays, and if you outlive it, coverage ends. Because most term policies never pay a claim, the premium for a large benefit is low. It is the right answer for most families raising children or carrying a mortgage. Look for a conversion right.

Permanent policies, including whole and universal life, stay in force for life if premiums are paid and build cash value. They cost many times more than term. They can fit needs that never end, such as providing for a child with disabilities, leaving cash to settle a large estate or funding a business agreement. They are rarely a good investment, so compare them with buying term and investing the difference. Indexed and variable versions tie cash value to markets, so ask for an illustration that shows weak years as well as strong ones. Our life insurance guide compares the types in detail.

How much is enough

A good method starts with a monthly budget. Add up what your household spends, subtract what the survivor would earn and multiply the shortfall by the years of support needed, often until the youngest child is independent. Add the mortgage balance, other debts, tuition and funeral costs. Subtract savings, existing coverage and expected survivor benefits, including Social Security and any federal or military annuity. In Northern Virginia, childcare alone can run $2,000 to $3,000 a month per child, so the figure for a family with young children can be large. A stay-at-home parent provides work that would cost thousands of dollars a month to replace and needs coverage too. Our budgeting and saving guide can help you pin down the numbers.

What drives the price

Age matters most, so each year of delay raises the premium. Health, weight, tobacco use and family history follow, and so do the term length and benefit. Some occupations and hobbies, including aviation, diving and certain military roles, can raise the rate or add exclusions. Active-duty service members should ask whether a private policy excludes death in war, and what happens during deployment. Because each insurer weighs these factors differently, quotes for the same person vary widely, and an agent who represents many carriers can compare them.

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Virginia rules worth knowing

No estate or inheritance tax. Virginia collects neither, and death benefits are generally free of income tax for the beneficiary. Very large estates should look at federal estate tax, which can count a policy you own. Our estate planning guide explains trusts and beneficiary forms.

Not a community property state. Ownership follows the names on the policy and accounts, and courts divide marital property fairly in a divorce. Courts can require a spouse to maintain coverage to secure support, so update beneficiaries after any change in family status.

Creditor protection. Virginia law protects some life insurance proceeds from creditors, with limits. Ask an attorney if protection is a goal.

Regulation. The State Corporation Commission’s Bureau of Insurance licenses insurers and agents, publishes consumer guides and takes complaints. Check an agent’s license before you buy.

Contractors and small business owners

Government contractors range from small firms to large publicly traded companies, and many employees have a modest group policy at most. Owners of small contracting firms, restaurants, medical practices and farms need to think about the business itself. Partners can fund a buyout with policies on each other, so survivors can purchase a deceased partner’s share at an agreed price and the family receives cash. A company can insure a person it cannot replace quickly, such as the executive who holds key client relationships. Lenders sometimes require owners who personally back loans to carry coverage. And in companies whose value rests on contracts and cleared employees, a founder’s death can cause a sudden loss of value, which makes planning more urgent.

When disability is the bigger risk

For people in their working years, the chance of a long disability exceeds the chance of death. Federal employees have disability retirement and short-term sick leave rules, military members have a separate system and contractors have whatever their employer offers. Private disability insurance replaces a portion of income and should be considered alongside life insurance. Later in life, long-term care coverage or a life policy with a care rider can offset the cost of help at home or a facility. An advisor can review all of these alongside your retirement plan.

How to choose an agent or advisor

1. Compare carriers. An agent tied to several carriers can lay offers out together.
2. Check the license. Confirm the license through the state search before you disclose medical history.
3. Ask about pay. Commissions are normal and run higher on permanent products, so learn what the suggested policy earns the seller.
4. Start with the need. Fix the amount and the length first, and shop second.
5. Consider a fee-only review. An advisor who answers only to clients can evaluate your current policy with nothing to sell.
6. Use the free-look window. A new policy usually gives you a short window to return it for your money back.

Two-career households and single parents

The shape of your household changes the shape of coverage. In a two-career couple, each partner’s income supports the lifestyle, so each needs a policy sized to what the survivor could not cover alone. A common trap is insuring only the higher earner, then discovering that the lower earner’s loss would have forced a move or a sale of the house. In a single-parent household, the stakes are even higher, since no second adult can step in. These parents should pair a generous term policy with a will that names a guardian and a plan for who holds the money until children are adults, which often means a trust or a custodian rather than the child’s other parent. Naming a minor as beneficiary without such arrangements can lead to a court-supervised account and delays.

Using life insurance in an estate plan

For most families, life insurance is simply income protection. For larger estates it can also be a planning tool. A policy owned by an irrevocable trust keeps the death benefit out of the taxable estate and can provide cash to heirs or to pay taxes and expenses without forcing a sale of land, a business or a waterfront home. Families with an uneven inheritance, for example a farm that passes to one child, can use a policy to give other children equal value. A policy can also fund charitable gifts. These uses require careful drafting by an attorney, and the trust must be set up and funded correctly to achieve the result.

Keeping coverage in force

Coverage is useful only if it is active on the day of a claim. After a missed payment the insurer typically gives a grace period, and then the policy may lapse. Reinstatement can require fresh medical evidence. Bank drafts prevent most accidents, and a call to the insurer before you stop paying may uncover alternatives such as a smaller benefit or a new payment schedule. Military families should confirm that payments keep flowing during a deployment or a move. After weddings, births, divorces and deaths, reread the beneficiary line, because a form signed years ago can still name a former spouse and will override your will.

Frequently asked questions