Program Evaluation of Benefits for Survivors of Veterans with
Service-Connected Disabilities

**[Final Report]{.smallcaps}**

**[Volume I]{.smallcaps}**

# Executive Report

**[System Flow, Inc.]{.smallcaps}**

**[Economic Systems, Inc.]{.smallcaps}**

**[Macro International, Inc.]{.smallcaps}**

**[Hay Group]{.smallcaps}**

![](media/image1.png){width="1.3541666666666667in"
height="1.3541666666666667in"}

Volume I: Executive Report

[1. Introduction 1](#introduction)

[Objectives of the Study 1](#objectives-of-the-study)

[Program Outcomes, Goals, and Measures
2](#program-outcomes-goals-and-measures)

[Organization of the Executive Report
6](#organization-of-the-executive-report)

[2. Description of Insurance and DIC Programs
7](#description-of-insurance-and-dic-programs)

[Servicemembers' Group Life Insurance (SGLI) Program
7](#servicemembers-group-life-insurance-sgli-program)

[Veterans' Group Life Insurance (VGLI) Program
7](#veterans-group-life-insurance-vgli-program)

[Service-Disabled Veterans Insurance (SDVI) Program
8](#service-disabled-veterans-insurance-sdvi-program)

[Veterans' Mortgage Life Insurance (VMLI) Program
9](#veterans-mortgage-life-insurance-vmli-program)

[Highlights of Insurance Programs 10](#highlights-of-insurance-programs)

[Dependency and Indemnity Compensation (DIC) Program
11](#dependency-and-indemnity-compensation-dic-program)

[3. Study Methodology 15](#study-methodology)

[Study Populations 15](#study-populations)

[Definition of Severely or Catastrophically Disabled Veterans
15](#definition-of-severely-or-catastrophically-disabled-veterans)

[Data Sources 16](#data-sources)

[Profile of Survey Respondents 19](#profile-of-survey-respondents)

[4. Availability and Affordability of Insurance
25](#availability-and-affordability-of-insurance)

[Availability of Insurance 25](#availability-of-insurance)

[Affordability of Insurance 28](#affordability-of-insurance)

[5. Financial and Need Outcomes for Survivors
37](#financial-and-need-outcomes-for-survivors)

[Income Replacement 37](#income-replacement)

[Income Maintenance 40](#income-maintenance)

[Other Needs 45](#other-needs)

[6. Overall Value to the Veteran and Survivor
49](#overall-value-to-the-veteran-and-survivor)

[Participation in VA Insurance Programs
49](#participation-in-va-insurance-programs)

[Satisfaction of Takers 51](#satisfaction-of-takers)

[Satisfaction of Beneficiaries 55](#satisfaction-of-beneficiaries)

[7. Cost of Insuring Service-Connected Disabled Veterans
61](#cost-of-insuring-service-connected-disabled-veterans)

[Sources of Funding of Program Subsidies
62](#sources-of-funding-of-program-subsidies)

[Analysis of Program Subsidies 63](#analysis-of-program-subsidies)

[Cost of Additional SDVI Coverage 67](#cost-of-additional-sdvi-coverage)

[8. Summary of Findings and Recommendations
69](#summary-of-findings-and-recommendations)

[Findings 69](#findings)

[Recommendations 73](#recommendations)

> ***Glossary 81***
>
> Volume I: List of Tables

[Table 1. Proposed Program Outcomes, Goals, and Measures
4](#__RefHeading___Toc515772043)

[Table 2. Insurance Programs Overview (As of September 1999)
10](#__RefHeading___Toc515772044)

[Table 3. DIC Payments to Dependent Children if No Surviving Spouse is
Entitled 13](#__RefHeading___Toc515772045)

[Table 4. Beneficiaries of Veterans Who Died Between 1994-1999
15](#__RefHeading___Toc515772046)

[Table 5. Summary Profile of Insurance Takers and Non-takers
20](#__RefHeading___Toc515772047)

[Table 6. Relationship of DIC Recipients and Beneficiaries of Insurance
Programs to the Deceased Veteran 21](#__RefHeading___Toc515772048)

[Table 7. Characteristics of Surviving Spouses
22](#__RefHeading___Toc515772049)

[Table 8. Characteristics of Surviving Spouses -- Surviving Spouses of
Severely or Catastrophically Disabled Veterans
23](#__RefHeading___Toc515772050)

[Table 9. Comparison of Benefits for Surviving Spouses
29](#__RefHeading___Toc515772051)

[Table 10. Premium Practices for Life Insurance Benefits
29](#__RefHeading___Toc515772052)

[Table 11. Annual Premiums for VGLI vs. Commercial Insurance Companies
32](#__RefHeading___Toc515772053)

[Table 12. Annual Premiums for \$50,000 of Term Life Insurance VGLI vs.
Military Mutual Aid Associations (in year 2000)
33](#__RefHeading___Toc515772054)

[Table 13. Annual Premiums for SDVI vs. Commercial Insurance Companies
-- 5-Year Term-Plan 34](#__RefHeading___Toc515772055)

[Table 14. Annual Premiums for SDVI vs. Commercial Insurance Companies
-- Ordinary Life Plan 34](#__RefHeading___Toc515772056)

[Table 15. Average Annual Household Income for Surviving Spouses in
Transitional Period (0-2 years since veteran's death) -- Before and
After Veteran's Death 38](#__RefHeading___Toc515772057)

[Table 16. Surviving Spouses Reporting Receiving DIC, VA, and Non-VA
Insurance Benefits 39](#__RefHeading___Toc515772058)

[Table 17. Life Insurance Payments Received by Surviving Spouses From VA
and Non-VA Sources (Including Those With No Other VA or Non-VA
Insurance) 40](#__RefHeading___Toc515772059)

[Table 18. Surviving Spouses Below Poverty and Below 150% of Poverty
41](#__RefHeading___Toc515772060)

[Table 19. Annual Average Income of Survivors After Spouse's Death (Over
35 Years Old), 1996 SIPP Data (adjusted to 1999)
43](#__RefHeading___Toc515772061)

[Table 20. Assessment of Current Financial Situation by Veteran's
Disability Status 44](#__RefHeading___Toc515772062)

[Table 21. Reported Additional Average Annual Income Needed by Surviving
Spouses (Including Those Without Any Additional Need)
45](#__RefHeading___Toc515772063)

[Table 22. Counseling of Surviving Spouses
46](#__RefHeading___Toc515772064)

[Table 23. Participation Rates in the Insurance Programs
49](#__RefHeading___Toc515772065)

[Table 24. Reasons for Participating in Insurance Programs
50](#__RefHeading___Toc515772066)

[Table 25: Reasons for Not Participating in Insurance Programs
50](#__RefHeading___Toc515772067)

[Table 26. Mean Satisfaction Scores for Insurance Takers
52](#__RefHeading___Toc515772068)

[Table 27. Distribution of Overall Satisfaction Ratings by Program (For
Insurance Takers Who Provided Satisfaction Scores)
53](#__RefHeading___Toc515772069)

[Table 28. Characteristics of Insurance Takers Relating to Overall
Satisfaction 54](#__RefHeading___Toc515772070)

[Table 29. Importance of Program Attributes for Insurance Takers
54](#__RefHeading___Toc515772071)

[Table 30. "Value Adds" Based on High Importance and Low Satisfaction --
Insurance Takers 55](#__RefHeading___Toc515772072)

[Table 31. Mean Satisfaction Scores for Surviving Spouses
56](#__RefHeading___Toc515772073)

[Table 32. Mean Satisfaction Scores Surviving Spouses of Veterans Who
Were Severely or Catastrophically Disabled
57](#__RefHeading___Toc515772074)

[Table 33. Distribution of Satisfaction Scores by Program (For Surviving
Spouses Who Provided Satisfaction Scores)
58](#__RefHeading___Toc515772075)

[Table 34. Characteristics of Survivors Relating to Overall Satisfaction
58](#__RefHeading___Toc515772076)

[Table 35. Importance of Program Attributes for Surviving Spouses
59](#__RefHeading___Toc515772077)

[Table 36. "Value Adds" Based on High Importance and Low Satisfaction --
Surviving Spouses 59](#__RefHeading___Toc515772078)

[Table 37. History of Subsidization of VA Insurance Programs Actual
Through 1999; Projected 2000-2020 64](#__RefHeading___Toc515772079)

[Table 38. History of Subsidization of VA Insurance Programs as a
Percent of Premiums Paid Actual Through 1999; Projected 2000-2020
65](#__RefHeading___Toc515772080)

[Table 39. SDVI Cost to Offer \$40,000 of Additional Coverage
68](#__RefHeading___Toc515772081)

[Table 40. Program Outcomes, Goals, and Results
70](#__RefHeading___Toc515772082)

[Table 41. Cost Estimates for Recommendations
78](#__RefHeading___Toc515772083)

## 1. Introduction

### Objectives of the Study

The purpose of this study is to conduct an objective, third-party
determination of the extent to which the VA Dependency and Indemnity
Compensation (DIC) program and four VA-administered insurance programs
meet their statutory intent, as well as the expectations of surviving
family members, legislators, program officials, and other stakeholders.
The four VA-administered insurance programs are: Servicemembers' Group
Life Insurance (SGLI); Veterans Group Life Insurance (VGLI); Service
Disabled Veterans Insurance (SDVI); and Veterans Mortgage Life Insurance
(VMLI).

The evaluation was performed pursuant to Contract V101(93)P-1501, Task
Order 22. Economic Systems, Inc. performed the technical lead for this
study. ORC Macro was responsible for survey design and implementation.
The Hay Group provided comparative analysis to the private sector and
other non-VA resources. Systems Flow, Inc. was the prime contractor for
the task order.

The evaluation of benefits for survivors of veterans was conducted in
order to assess the adequacy and effectiveness of the VA DIC and
insurance programs. This volume presents the Executive Report while
other volumes present a more detailed report for each of the five
programs. The main objective of the Executive Report is to summarize the
study in general and address the requirements of P.L. 105-368, Section
303, in particular. These requirements are:

1.  An identification of the characteristics that make a disabled
    veteran catastrophically disabled.

2.  A statement of the number of veterans with service-connected
    disabilities who participate in insurance programs administered by
    the Department.

3.  A statement of the number of survivors of veterans with
    service-connected disabilities who receive dependency and indemnity
    compensation under Chapter 13 of Title 38, United States Code.

4.  Data on veterans with service-connected disabilities that are
    relevant to the insurance programs administered by the Department
    and an assessment of how such data might be used to better determine
    the cost above standard premium rates of insuring veterans with
    service-connected disabilities under such programs.

5.  An analysis of various methods of accounting and providing for the
    additional cost of insuring the lives of veterans with
    service-connected disabilities under the insurance programs
    administered by the Department.

6.  An assessment of the adequacy and effectiveness of the current
    insurance programs and dependency and indemnity compensation
    programs of the Department in meeting the needs of survivors of
    severely disabled or catastrophically disabled veterans.

7.  An analysis of various methods of meeting the transitional financial
    needs of survivors of veterans with service-connected disabilities
    immediately after the deaths of such veterans.

8.  Such recommendations as the Secretary considers appropriate
    regarding means of improving the benefits available to survivors of
    veterans with service-connected disabilities under programs
    administered by the Department.

In order to address these requirements and the general study
requirements, the study team conducted research and analysis in several
areas, drawing on information from VA administrative electronic files,
an extensive survey of representative samples of program populations,
and non-VA data from numerous private and public sector sources. Areas
of study included:

-   Profile of insurance program participants and beneficiaries

-   Finances of survivors before and after the veteran's death

-   Needs of survivors

-   Reasons for participating and not participating in the programs

-   Customer satisfaction

-   Comparison between VA programs and non-VA programs and insurance
    plans

-   Subsidy costs to insure veterans with service-connected disabilities

-   Overall outcome of the VA programs

-   Policy and technical recommendations

### Program Outcomes, Goals, and Measures

Prior to the start of this study, the Department of Veterans Affairs had
developed statements of program outcomes, goals, and measures in draft
form and requested that the study team review and make recommendations.
Our assessment of appropriate program outcomes, goals, and measures is
based largely on a review of the program objectives reflected in the
legislative history.

In meetings with House and Senate Veterans Affairs Committee staff at
the beginning of the study, the staff members viewed DIC as income
replacement intended to assist survivors toward self-sufficiency
following the veteran's death. Congress, though, did not provide
specific guidance on what constitutes an appropriate level of income
support for survivors.

The major expectation of Congress and stakeholders for VA insurance
programs is that the life insurance is readily available and affordable
to servicemembers and veterans, regardless of whether they are healthy
or disabled. The insurance programs are intended to make insurance
available at premium levels that are competitive with rates offered by
commercial insurers to healthy individuals. For disabled veterans, these
premiums do not cover the full cost of insurance and the programs are
not self-supporting from premium income alone.

SGLI is made available to servicemembers to assure life insurance
coverage and affordability, regardless of serving in a combat zone or
any other hazardous nature of work in the military. Congress's objective
in enacting VGLI in 1974 was to improve the opportunity for separating
servicemembers to obtain life insurance coverage, regardless of any
disabilities that may have arisen due to military service.[^1]

Congress intended that the VMLI program provide substantial protection
so that surviving spouses of qualifying disabled veterans would not be
forced to sell their homes or use all of their VA insurance benefits to
pay the mortgage. Furthermore, the legislative history indicates that
the maximum coverage amounts should reflect prevailing home prices and
mortgage values.

The legislative history for SDVI indicates that Congress' intent was
that veterans should not be penalized in obtaining life insurance
coverage on the basis of disabilities incurred during uniformed service.
The SDVI program guarantees the opportunity to purchase insurance
coverage in cases where a veteran has a disability that is determined to
be service-connected.

Table 1 presents the study team's recommendations for outcomes, goals,
and measures for each program evaluated, which we believe best represent
legislative intent. The study team applied the respective measures in
this study in conducting the evaluation.

[]{#__RefHeading___Toc515772043 .anchor}Table 1. Proposed Program
Outcomes, Goals, and Measures

+-------------+----------------+------------------+--------------------+
| Program and | Outcomes       | Goals            | Measures           |
| Group       |                |                  |                    |
| Served      |                |                  |                    |
+-------------+----------------+------------------+--------------------+
| DIC         | Surviving      | Provide an       | Percentage of      |
| Program:    | spouses and    | adequate level   | surviving spouses  |
| Survivors   | dependents     | of income for    | and dependent      |
| of active   | receiving DIC  | eligible         | children in DIC    |
| ser         | have an        | surviving        | who live below or  |
| vicemembers | acceptable     | spouses and      | at various         |
| or veterans | level of       | dependents of    | increments above   |
| who died    | income and     | servicemembers   | the poverty level. |
| from a      | standard of    | and veterans.    |                    |
| disease or  | living.        |                  | Comparability of   |
| injury      |                | Replace          | income of DIC      |
| incurred or | Surviving      | significant      | survivors to       |
| aggravated  | spouses and    | portion of       | survivors in the   |
| in the line | dependents of  | income loss      | general            |
| of duty.    | veterans whose | during           | population.        |
|             | deaths are     | transition       |                    |
| Survivors   | determined to  | period           | Extent of income   |
| of certain  | be             | immediately      | replaced during    |
| veterans    | ser            | after veteran's  | transition period  |
| who were    | vice-connected | death.           | with life          |
| totally     | receive        |                  | insurance          |
| disabled    | appropriate    | Recognize        | benefits.          |
| due to a    | recognition.   | sacrifices made  |                    |
| servic      |                | by service-      | Percent of         |
| e-connected |                | members and      | surviving spouses  |
| condition   |                | veterans whose   | who perceive that  |
| for an      |                | deaths are       | the DIC program    |
| extended    |                | service-related. | recognizes the     |
| period of   |                |                  | sacrifices made by |
| time        |                |                  | veterans during    |
| preceding   |                |                  | military service.  |
| death, even |                |                  |                    |
| though      |                |                  |                    |
| death was   |                |                  |                    |
| not caused  |                |                  |                    |
| by the      |                |                  |                    |
| disability. |                |                  |                    |
+-------------+----------------+------------------+--------------------+
| SDVI        | Veterans with  | For veterans     | Comparability of   |
| Program:    | ser            | with             | life insurance     |
| Veterans    | vice-connected | s                | coverage amounts   |
| with        | disabilities   | ervice-connected | and premium levels |
| servic      | are provided   | disabilities,    | available under    |
| e-connected | the            | parity with the  | the SDVI program   |
| d           | opportunity to | options          | with the average   |
| isabilities | obtain life    | available to     | insurance amounts  |
|             | insurance at   | healthy          | and premiums paid  |
|             | standard       | individuals of   | by healthy         |
|             | premium rates  | similar ages to  | individuals in the |
|             | without regard | purchase         | individual         |
|             | to their       | reasonable       | insurance market.  |
|             | ser            | amounts of life  |                    |
|             | vice-connected | insurance in the |                    |
|             | impairments    | individual       |                    |
|             | for a          | market, within a |                    |
|             | reasonable     | reasonable time  |                    |
|             | time period    | following the    |                    |
|             | following      | disability being |                    |
|             | establishment  | established, and |                    |
|             | of a           | with comparable  |                    |
|             | ser            | policy features. |                    |
|             | vice-connected |                  |                    |
|             | disability.    |                  |                    |
+-------------+----------------+------------------+--------------------+
| VMLI        | Severely       | Parity with the  | Comparability of   |
| Program:    | disabled       | average          | mortgage           |
| Severely    | veterans of    | non-disabled     | protection life    |
| disabled    | any age and    | American's       | insurance          |
| veterans    | with           | ability to       | available under    |
| with        | ser            | purchase         | VMLI to home       |
| servic      | vice-connected | mortgage life    | mortgage loan      |
| e-connected | disabilities   | insurance        | features of        |
| d           | can purchase   | protection at    | current private    |
| isabilities | mortgage life  | any age in       | insurance market   |
| who have    | insurance in   | amounts          | offerings          |
| received a  | amounts        | consistent with  | regarding coverage |
| grant for   | consistent     | current limits   | amounts, premiums, |
| specially   | with current   | on mortgage      | and other policy   |
| adapted     | mortgage loans | loans and at     | features.          |
| housing.    | and at         | competitive      |                    |
|             | standard       | rates and with   |                    |
|             | premium rates. | comparable       |                    |
|             |                | policy features. |                    |
+-------------+----------------+------------------+--------------------+

####### Table 1. Proposed Program Outcomes, Goals, and Measures (Continued)

+-------------+----------------+------------------+--------------------+
| Program and | Outcomes       | Goals            | Measures           |
| Group       |                |                  |                    |
| Served      |                |                  |                    |
+-------------+----------------+------------------+--------------------+
| SGLI        | Insurance      | Availability of  | Comparability of   |
| Program:    | coverage is    | life insurance   | amount of life     |
| Active Duty | available to   | Is not affected  | insurance          |
| Ser         | servicemembers | by hazard.       | available to       |
| vicemembers | and reservists |                  | servicemembers and |
| and         | and their      | Meets or exceeds | premium cost with  |
| Reservists  | family members | life insurance   | basic,             |
|             | at comparable  | coverage levels  | supplemental, and  |
|             | costs that     | for basic,       | dependent coverage |
|             | meets or       | supplemental,    | available to       |
|             | exceeds the    | and dependent    | employees and      |
|             | total life     | coverage made    | family in large    |
|             | insurance      | available by     | private sector     |
|             | benefit        | large private    | organizations.     |
|             | available to   | sector           |                    |
|             | employees and  | employers.       | Comparability of   |
|             | their family   |                  | features regarding |
|             | members in     | Costs            | payment options to |
|             | large private  | servicemembers   | participants.      |
|             | sector         | no more than     |                    |
|             | organizations. | employee         |                    |
|             |                | premiums for     |                    |
|             |                | available in     |                    |
|             |                | large private    |                    |
|             |                | sector           |                    |
|             |                | organizations.   |                    |
|             |                |                  |                    |
|             |                | Provides option  |                    |
|             |                | to convert       |                    |
|             |                | coverage upon    |                    |
|             |                | termination.     |                    |
+-------------+----------------+------------------+--------------------+
| VGLI        | Separating     | Provide an       | Compare VGLI cost  |
| Program:    | servicemembers | option for       | per \$1,000 in     |
| Separated   | and reservists | automatic        | coverage (adjusted |
| ser         | are guaranteed | conversion of    | for health status  |
| vicemembers | the            | SGLI coverage at | and other rating   |
| and         | opportunity to | rates            | factors) with a    |
| separated   | be covered by  | competitive with | sample of private  |
| reservists  | the same life  | offerings in the | sector quotes for  |
|             | insurance      | private sector   | healthy            |
|             | benefits as    | for healthy      | individuals.       |
|             | they had       | individuals.     |                    |
|             | during active/ |                  |                    |
|             | reserve        |                  |                    |
|             | service.       |                  |                    |
|             |                |                  |                    |
|             | VGLI costs per |                  |                    |
|             | \$1,000 of     |                  |                    |
|             | coverage,      |                  |                    |
|             | adjusted for   |                  |                    |
|             | health status, |                  |                    |
|             | are consistent |                  |                    |
|             | with what they |                  |                    |
|             | would pay if   |                  |                    |
|             | purchasing     |                  |                    |
|             | equivalent     |                  |                    |
|             | coverage in    |                  |                    |
|             | the private    |                  |                    |
|             | sector.        |                  |                    |
+-------------+----------------+------------------+--------------------+

Source: Study Team Analysis

The study's assessment of the availability and affordability for members
and veterans is based on comparison to the private sector and non-VA
public organizations. The basic measure is to compare the available
insurance coverage and benefit amounts received by survivors under the
VA programs to average amounts and premiums or cost for non-disabled
individuals in the private insurance market.

Legislative intent for the insurance programs is that they provide
partial *replacement of income* during the transition period after
death. Hence, this study uses two basic financial outcome measures: 1)
replacement of household income that decreases after the veteran dies,
and 2) acceptable standard of living that meets a minimum threshold.

In addition to legislative intent, we recommend that overall value to
the program participant as rated by the participant should be added as
an important program outcome along with the appropriate goals and
measures. This is not a requirement in the legislation per se, but as
program participants are important stakeholders, their views should
weigh into the overall evaluation. For measures of outcome, we analyze
participation rates, reasons for participation versus non-participation,
and customer satisfaction.

### Organization of the Executive Report

Section 2 of the report provides a description of the VA programs
including the number of servicemembers and veterans participating in the
different programs (Requirements 2 and 3 of P.L. 105-368 in the list
above). Section 3 summarizes the study methodology and provides a
definition of severely and catastrophically disabled veterans
(Requirement 1).

Section 4 assesses the availability and affordability of insurance and
benefits provided by VA programs. Section 5 reports on the financial and
need outcomes for survivors. Section 6 examines participation rates and
customer satisfaction in assessing their expectations and overall value
as perceived by them. Sections 4, 5, and 6 address the general study
objective of determining adequacy and effectiveness of the VA programs
(Requirements 6 and 7). Section 7 reports on subsidy costs for insuring
veterans with service-connected disabilities (Requirements 4 and 5).
Section 8 presents a summary of findings and study recommendations
(Requirement 8).

## 2. Description of Insurance and DIC Programs

### Servicemembers' Group Life Insurance (SGLI) Program

SGLI is a program of low cost group life insurance, supervised by the
Department of Veterans Affairs and administered by the Office of
Servicemembers' Group Life Insurance (OSGLI) under the terms of a group
insurance contract.

Those eligible for full-time SGLI coverage include:

-   Commissioned, warrant and enlisted members of the Army, Navy, Air
    Force, Marine Corps and Coast Guard,

-   Commissioned members of the National Oceanic and Atmospheric
    Administration and the Public Health Service,

-   Cadets and midshipmen of the four service academies, and

-   Ready Reservists scheduled to perform at least 12 periods of
    inactive duty training per year.

Part-time coverage is available for eligible members of the Reserves who
do not qualify for full-time coverage.

SGLI was available in \$10,000 increments up to the maximum of \$200,000
at the time of the study (effective April 1, 2001, it was raised to
\$250,000). The coverage is automatic at the time of entry into a period
of active duty or reserve status. However, members may decline coverage
in writing or may elect reduced coverage. Proof of good health is
required if a member later wishes to participate in or increase the
amount of coverage.

SGLI takers have two options available to them upon release from
service. They can convert their full-time SGLI coverage to term
insurance under the Veterans' Group Life Insurance (VGLI) program or to
a permanent plan of insurance with any one of over 100 participating
commercial insurance companies.

If the servicemember is totally disabled upon release from military
service, a disability extension of SGLI is granted. This coverage
remains effective for up to one year from the date of separation for
SGLI participants who are totally disabled at the time of separation.

### Veterans' Group Life Insurance (VGLI) Program

VGLI is a program of post-separation insurance, which allows all
veterans who were covered by SGLI, regardless of the condition of their
health, to convert their SGLI to 5-year renewable term insurance. It is
the term option available under the SGLI conversion feature. In the
absence of commercial companies that will allow term insurance as a SGLI
conversion option, the government provides that option with VGLI. VGLI,
however, is convertible to permanent plan insurance with a commercial
company. Currently, there are almost one hundred commercial companies
that VGLI participants can choose from.

VGLI is available to individuals with full-time SGLI coverage who are
released from active duty or the Reserves. To ensure VGLI availability,
an eligible member must submit an application to the OSGLI with the
required premium within the first 120 days following separation.
(Application can still be submitted for up to one year after SGLI
coverage terminates; however, during that period evidence of good health
must be submitted.) The insurance is issued in multiples of \$10,000 up
to a maximum of \$200,000,[^2] but not for more than the amount of SGLI
the member had in force at the time of separation from service.

### Service-Disabled Veterans Insurance (SDVI) Program

SDVI was enacted by the Insurance Act of 1951 on April 25, 1951. The
Insurance Act was one of the components of Public Law 82-23 and provided
up to \$10,000 of life insurance at standard premium rates for veterans
with service-connected disabilities.

SDVI policies are available either as a permanent plan or term insurance
plan. Since the program insures veterans with service-connected
disabilities at "standard" premium rates, it is not intended to be
self-supporting and requires an annual subsidy of around \$30 million
from the Veterans Insurance and Indemnities (VI&I) fund. Since 1951,
over 369,000 policies were issued under this program, with an average
coverage amount of \$9,290 per policy. The face value of policies issued
is about \$3.4 billion.

To be eligible, a veteran must:

-   Have a service-connected disability of 0% or greater

-   Be in good health except for any service-connected conditions

-   Be separated from the service on or after April 25, 1951

-   Apply for the insurance within two years from the date of being
    notified that service-connection has been established.

The program was expanded in 1992 with the Veterans' Benefits Act of
1992, permitting those policyholders eligible for waiver of premiums due
to total disability (not necessarily due solely to service-connected
conditions) to purchase up to an additional \$20,000 in supplemental
coverage. The SDVI holder has to apply for supplemental SDVI within one
year of being notified of his/her SDVI premium waiver. Unlike SDVI,
there is no waiver of premiums for total disability for supplemental
SDVI.

Congress also enacted legislation in 1959 for "gratuitous" SDVI for
those veterans who were eligible for SDVI but did not apply for SDVI
because of a continued mental incompetence due to a service-connected
disability and who died before the appointment of a guardian or within
two years of such appointment. Gratuitous SDVI is granted in an amount
which, together with any other US Government Life Insurance (USGLI) and
National Service Life Insurance (NSLI) in force, totals \$10,000.

### Veterans' Mortgage Life Insurance (VMLI) Program

VMLI is available to veterans who receive grants for the purchase,
construction or remodeling of specially adapted homes under the
authority of Title 38, US Code, chapter 21. As of October 1, 1998, the
amount of these grants was raised to \$43,000. Grants are available to
veterans who are entitled to compensation for service-connected,
permanent and total disabilities for one or more of the following
conditions:

-   Loss or loss of use of both legs.

-   Blindness in both eyes plus the loss or loss of use of one leg.

-   Loss or loss of use of one leg with residuals of organic disease or
    injury which affects balance or propulsion.

-   Loss or loss of use of one leg together with the loss or loss of use
    of one upper extremity which affects balance or propulsion.

A few smaller (\$8,250) grants are provided to veterans who have loss of
vision or loss of use of both hands. Recipients of these grants are also
eligible for VMLI.

The VMLI program started in 1971 to provide mortgage life insurance to
severely disabled veterans for whom it would be difficult to obtain
mortgage insurance from commercial providers. VMLI has an age and
coverage limitation. The program terminates at age 70 and the maximum
amount of mortgage coverage is \$90,000, which is payable to the
mortgage holder only (as opposed to a beneficiary).

The purpose of a VA Specially Adapted Housing (SAH) grant is to help the
veteran build or modify a home to accommodate his or her disabilities.
There are some restrictions to receiving a SAH grant and thus,
indirectly, obtaining VMLI. For a full grant, the title must be held by
the veteran or the veteran and spouse only. If the title is held with a
person other than a spouse, then the veteran is eligible for a grant
that is proportionately no greater than the value of his or her share of
the title.

The initial amount of insurance available under VMLI is the lesser of
the following amounts:

-   \$90,000,

-   The amount of the loan balance outstanding on an SAH unit acquired
    by the veteran prior to August 11, 1971,

-   The amount of the original loan when the veteran is granted
    assistance in securing a specially adapted housing unit,

-   The amount of an existing loan when the veteran is granted
    assistance for remodeling a house owned by the veteran, or

-   The amount of the outstanding mortgage on property owned by the
    veteran and requiring no remodeling.

Since VMLI insures unhealthy individuals at standard premium rates, it
is not self-supporting and requires an annual subsidy. Administrative
costs, as well as additional premium costs above the standard rate owing
to the disability of the insured, are paid from appropriated funds. The
veteran's age, the outstanding mortgage balance, and the remaining term
of the mortgage determine the actual premium paid by the veteran.

VMLI is terminated under any of the following circumstances:

-   The veteran's 70^th^ birthday,

-   The mortgage is paid in full,

-   The termination of the veteran's ownership of the property securing
    the loan, or

-   The veteran requests cancellation.

### Highlights of Insurance Programs

Table 2 provides key data on the four insurance programs. SGLI has the
most participants since nearly all servicemembers participate in the
program. All participants in the SDVI program have service-connected
disability ratings from VA. All of the participants in the VMLI program
are catastrophically disabled veterans. About one-third of VGLI takers
in the study survey are veterans with service-connected disabilities.

[]{#__RefHeading___Toc515772044 .anchor}Table 2. Insurance Programs
Overview (As of September 1999)

  ----------- -------------- --------------- -------------- --------- ------------------
  Insurance   Current Number Maximum Amount  Average Amount Total     Population
  Program     of             of Coverage     of Coverage    Face      Coverage
              Participants                                  Amount    

  SGLI        2.3 million    \$200,000[^3]   \$186,000      \$428     Active duty
                                                            billion   members and
                                                                      reservists

  VGLI        368,000        \$200,000^2^    \$86,000       \$31.5    Individuals
                             (cannot exceed                 billion   separated from
                             SGLI coverage                            military with SGLI
                             amount)                                  coverage

  SDVI        137,557 Basic; \$10,000        \$9,341 Basic; \$1.4     Service-disabled
              8,959          Basic;\         \$17,810       billion   veterans for
              Supplemental   \$20,000        Supplemental             Basic; Totally
                             Supplemental                             disabled veterans
                                                                      for Supplemental

  VMLI        3,518          Lesser of       \$57,046       \$201     Service-disabled
                             maximum                        million   veterans with
                             mortgage amount                          permanent and
                             or \$90,000                              total disabilities
  ----------- -------------- --------------- -------------- --------- ------------------

Source: VA Administrative Electronic Files and VA Philadelphia Insurance
Center

### Dependency and Indemnity Compensation (DIC) Program

The DIC program was established on January 1, 1957, as indemnification
for the service-connected death and partial compensation for the
resulting economic loss to survivors. In 1978, DIC eligibility was
extended to survivors of veterans who died while in receipt of, or while
entitled to receive, compensation due to a service-connected disability
(continuously rated as totally disabled) for an extended period
immediately prior to death. In such cases, DIC is payable even though
the veteran's death itself was not service connected.

In October 1992, Public Law 102-568 amended the DIC statute to provide a
single basic monthly payment rate for surviving spouses. This
legislation, effective January 1, 1993, substantially changed the nature
of the DIC program to provide a uniform benefit regardless of the
veteran's military rank. Revisions to the law were intended to establish
simplicity of payment, equal treatment of all spouses, and equality of
governmental responsibility to all survivors without regard to the pay
grade of the deceased. Additional allowances for dependent children,
special medical needs, and catastrophic disability of the veteran prior
to death are available under this current rate structure.

[Basic Entitlement]{.underline}: DIC is paid to survivors whose deaths
were related to service. DIC survivors may include the following groups:

-   spouses who have not remarried,

-   spouses who remarried but whose remarriages subsequently terminated,

-   unmarried children under the age of 18 (payments made to parent or
    guardian),

-   certain helpless unmarried children age 18 or older,

-   unmarried children at least 18 years old but less than 23 who are
    enrolled in a VA-approved school, and

-   low-income parents (parents are the only survivor group for whom
    income is a factor in determining eligibility for DIC).[^4]

DIC awards for children under 18 years of age or helpless children are
made to the child in his/her own right or to a custodian (which may or
may not be the surviving spouse) on his/her behalf. In that case,
children receive DIC on a rate schedule different from that for
dependents of a surviving spouse.

For a survivor to be entitled to DIC, the servicemember or veteran must
have died from: (1) disease or injury incurred or aggravated in the line
of duty while on active duty or active duty training, (2) an injury
incurred or aggravated in line of duty while on inactive duty
training,[^5] (3) a service-connected disability under the laws
administered by the Department of Veterans Affairs, or (4) improper
treatment in a VA medical facility. The DIC program applies in all cases
of service-connected death (or death under other entitling
circumstances) after December 31, 1956. For such deaths before January
1, 1957, survivors may elect either DIC or Death Compensation, the
program that preceded DIC.

DIC may also be payable to survivors of veterans who were totally
disabled due to service-connected conditions immediately preceding death
even though death was not a result of service-connected disabilities.
The survivor is eligible for benefits if the veteran was continuously
rated as totally disabled for a period of 10 or more years immediately
prior to death or if the veteran was so rated for a period of at least
five years from the date of military discharge until death. Also,
survivors of veterans who were prisoners of war are eligible for DIC if
the veteran was rated totally disabled for one full year immediately
preceding death. Payments based on entitlement resulting from total
disability for a specified period are subject to offset by the amount
received from judicial proceedings brought on account of the veteran's
death (38 USC 1318(d)).

The DIC benefit amount for the surviving spouses of veterans who died
after January 1, 1993, was \$881 a month during the year 2000, when the
surveys were completed.[^6] If the veteran was totally disabled for
eight continuous years prior to death and the surviving spouse was
married to the veteran for those same 8 years, then the surviving spouse
receives an additional \$191 per month. Additional DIC is payable for
each dependent child of the veteran. Surviving spouses receive an
additional \$222 per month for each dependent child under age 18. If the
child is over 18 and in school and a surviving spouse is also entitled
to DIC, the DIC rate is \$188 per month, and if the child is over 18 and
a helpless child, then the DIC rate is \$373 per month. If there is no
surviving spouse, the children's rates are shown in Table 3.

[Special Allowances]{.underline}: If surviving spouses are patients in a
nursing home or require the regular aid and attendance of another
person, they are entitled to receive a special allowance of \$222 per
month. If surviving spouses are permanently housebound, they receive a
housebound special pay of \$107 per month.

[]{#__RefHeading___Toc515772045 .anchor}Table 3. DIC Payments to
Dependent Children if No Surviving Spouse is Entitled

  -------------------------- ------------------- -------------------------
  Number of Children         Total Payable       Each Child Share^\*^

  1                          \$373               \$373.00

  2                          \$538               \$269.00

  3                          \$699               \$233.00

  4                          \$835               \$208.75

  5                          \$971               \$194.20

  6                          \$1,107             \$184.50

  7                          \$1,243             \$177.57

  8                          \$1,379             \$172.37

  9                          \$1,515             \$168.33

  \*For each helpless child                      
  over 18, the additional                        
  payment is \$222 and\                          
  for each additional child                      
  after 9 children, the                          
  additional payment is                          
  \$136.                                         
  -------------------------- ------------------- -------------------------

Source: VA Compensation & Pension Service

#### Current Program Information on DIC

There are about 300,000 recipients of DIC including surviving spouses
and their dependent children. The total DIC program payment for FY 2000
was \$3.48 billion, not including Death Compensation payments (less than
\$5 million per year) and Parents' DIC (about \$25 million per year).
The current DIC rate structure is based on a flat payment rate for all
DIC recipients. Under the earlier DIC rate structure which applies to
dependents of veterans who died prior to January 1, 1993, the basic DIC
rate is based on veteran's pay grade at time of death or at time of
separation from military service.

## 3. Study Methodology

### Study Populations

The study populations for VA insurance programs and DIC were defined as
follows:

-   SGLI takers and non-takers: Active duty servicemembers and reservist
    participants and non-participants of SGLI program, as of September
    1999.

-   VGLI takers and non-takers: Participants of VGLI program as of June
    1999 and non-participants of VGLI program identified from the
    population who left the service between 1994 and 1999.

-   SDVI takers and non-takers: Participants and non-participants of
    SDVI program as of September 1999.

-   VMLI takers and non-takers: Participants and non-participants of
    VMLI program as of June 1999.

-   DIC and VA insurance program beneficiaries: Survivors of veterans
    who died between 1994 and 1999 who received payments from VA
    insurance and/or DIC programs.

Since a key focus of our study is on the transition period for survivors
after the veteran's death, we surveyed individuals who became
beneficiaries between 1994 and 1999. The samples for program
beneficiaries were limited to the time frame of 1994 to 1999 in order to
obtain good information on the transitional period after death. Going
back farther in time would have resulted in memory recall or other data
retrieval problems. Table 4 shows the number of beneficiaries according
to the study definition and the number of veterans who died between 1994
and 1999. For example, there were 11,329 servicemembers/reservists with
SGLI who died between 1994-1999, but the number of beneficiaries was
17,604, indicating that there were more than one beneficiary per
servicemember/reservist.

[]{#__RefHeading___Toc515772046 .anchor}Table 4. Beneficiaries of
Veterans Who Died Between 1994-1999

  ------------- ------------------------- --------------------------------
  Program       Number of Beneficiaries   Number of Veterans/
                                          Servicemembers Who Died Between
                                          1994-1999

  SGLI          17,604                    11,329

  VGLI          8,101                     5,950

  SDVI          24,850                    15,497

  DIC           60,697                    60,697
  ------------- ------------------------- --------------------------------

Source: VA Administrative Electronic Files

### Definition of Severely or Catastrophically Disabled Veterans

For the purpose of the study, disabled veterans refer to veterans with
service-connected disabilities unless otherwise specified in the text.
The contract defines severely disabled veterans as those with a VA C&P
Service disability rating of 70-100%, whereas catastrophically disabled
veterans are defined as those in receipt of special monthly compensation
under the provisions of 38 USC 1114 (l) through (s) at the time of
death. Minimum disability by this definition may be summarized as
follows:

-   Loss or loss of use of any two extremities (feet or hands), or

-   Blindness with sight of 5/200 or less in both eyes or field of
    vision less than 5 degrees in both eyes, or

-   In need of aid and attendance, or

-   Permanently housebound, or

-   Rated 100% disabled and having additional disability rated at least
    60%.

VA electronic data files that we received did not include any
information on the deceased veteran's disability rating or disability
condition, and therefore, it was not possible for the study team to
identify survivors of veterans with severe or catastrophic
service-connected disabilities at the time of death from VA electronic
files. We had to rely on a combination of self-response from the
survivor survey, VA electronic survivor records that we were able match
with other insurance program takers and non-takers records, and some
indicator variables available in VA electronic files.

For example, the survey response to the question, "At the time of
veteran's death, did the veteran have service-connected disabilities so
severe that he/she needed someone to care for some of his/her needs?"
was "Yes," *and* the survey response to question, "These next questions
are about the care that the veteran required for service-connected
disabilities. First, did the veteran need assistance with any of the
following?" was "Yes" to either "Getting dressed" or "Getting in and out
of bed" or "Bathing," the survivor was identified as a survivor of a
veteran with severe or catastrophic disabilities at time of death. Note
that the words "service-connected" were most likely used by many
respondents in a looser way than VA, Congress, and the professional
veteran community understand this term. However, we expect that
need-for-care reporting in the survey have high validity. We reason that
the effects on the caregiving will be similar irrespective of whether
the conditions necessitating care were service-connected or
non-service-connected. We should point out, though, that there might be
some cases where care was necessary because of a non-service-connected
disability, but for purposes of the study and for policymaking, the
effects of caregiving will be the same.

### Data Sources

Much of the information needed to assess program outcomes was collected
through a telephone survey of representative samples of the study
populations. The primary data collection was designed to provide an
approximation of a longitudinal assessment of the impact of the programs
and level of satisfaction with adjustment following the death of the
veteran. The sample sizes were determined with 90% confidence level so
that the results are representative of the study universe population
within +/- 4% points.[^7]

Secondary data sources, such as VA administrative electronic files, IRS
individual taxable income data, Statistical Abstract of the United
States, Current Population Survey, Survey of Income and Program
Participation, and Federal Financial Institutions Examination Council
were compiled and analyzed. The study team also interviewed key
stakeholders to learn about their experiences and assessments of the DIC
and insurance programs, including representatives of the Department of
Defense, Veterans Service Organizations, and House and Senate Veterans
Affairs Committee staffs.

The survey instruments for this evaluation were devised in consultation
with VA, the Department of Defense (DoD) and Veterans Service
Organizations representing survivors, veterans, and servicemembers. A
paper-based pretest with a small set of respondents was carried out to
assure that the instruments were effective in obtaining the needed
information, that the flow of questions was appropriate, that the
questions were clear and understandable, and to determine the burden
level. These instruments were programmed using computer-assisted
telephone interviewing (CATI) software. Additional testing of the CATI
versions of the survey instruments was conducted. This resulted in minor
changes to the survey instruments.

In order to locate potential respondents, current addresses and phone
numbers were obtained by using the National Change of Address database,
market research databases, the Internet, credit bureau searches, and a
private investigator.

ORC Macro conducted telephone interviews from its facility in
Plattsburgh, New York. Prior to receiving the first telephone contact,
potential participants received an introductory letter on VA letterhead
regarding the study. The letter informed members of the sample group of
their selection for the survey, briefly described the purpose, and
confirmed the legitimacy of the survey. By carrying signatures of the
Under Secretary for Benefits and the Assistant Secretary for Planning
and Analysis, the letter also conveyed the importance of the study. The
letter provided a toll-free telephone number that the intended
participants could call to schedule an interview or ask questions
regarding the study.

Our approach to this study has been grounded in a thorough understanding
of the legislative intent of the programs being evaluated and
interrelated Federal programs, the operational goals, and the
constraints and processes of organizations responsible for service
delivery; the collection of appropriate and valid data; and rigorous
application of sound evaluation methodologies. We have applied a range
of empirical methodologies from basic tabulation and simple statistical
methods to more advanced methods appropriate to estimating complex
relationships.

Parts of the report make a comparison of statistics between two or more
groups of survey respondents. Unless noted otherwise, all the
differences found are statistically significant at least at a 95% level.
For example, when we say "a significantly larger percentage of VMLI
takers (28%) have a child dependent compared to non-takers (18%)," this
means the difference is statistically significant at the 95% level.

#### Data Management Challenges

VA administrative electronic data files that we received did not include
any information on the deceased veteran's disability rating or
disability condition. Therefore, it was not possible for the study team
to identify a complete list of survivors of veterans with severe or
catastrophic service-connected disabilities at the time of death.
Instead, we used a combination of self-reporting from the survivor
survey and VA administrative electronic files.

The research questions could have been addressed more readily if there
had been an unduplicated population of veterans and their survivors that
included data about the veteran and survivor and all VA benefits
received. However, these programs are administered separately, and their
electronic administrative records are not readily linkable.

Separate VA records are typically maintained physically and conceptually
by each program area (for example, C&P, Insurance, and Education) and by
beneficiary within each program area. The records on DIC, for instance,
do not include the insurance or educational benefits received. Likewise,
insurance does not include DIC information. VA electronic files provide
limited descriptive and demographic information about the beneficiary
(veteran, survivor, or dependent); they do not systematically provide
information on VA or military benefits received from other programs.

Throughout the study, we had difficulties obtaining key data as well as
matching records in one VA data system with another. We discovered that
VA\'s record keeping systems have not used common identifiers that
permit electronic linking of insurance and disability compensation
records. While the Social Security Number is becoming a common
identifier for survivors, it was not always obtained in the past.
Consequently, it was not possible to determine the entire benefit
package provided to veterans by VA or what insurance packages survivors
received. The lack of common linkages also prevented us from directly
determining other information critical to the study. The pre-death
disability status for deceased veterans is not included in the survivor
record nor is the veteran's identifier which would permit access to
disability status data from the veteran's record. Instead, other more
costly and less precise methods had to be employed. These included using
assumptions and sometimes substituting self-reported survey information
to compensate for the lack of disability status, benefit, and insurance
information from administrative records.

Substantial work was required to synthesize the information into a
unified report that addresses issues in a fashion that is meaningful to
policymakers. The study is limited to a certain extent by the lack of
accessible administrative data. Key variables had to be estimated
through survey responses. Survey respondents were not always familiar
with the names of VA\'s programs and may not have distinguished one from
the other. Self-reported survey responses on benefit amounts and types
of benefits are less precise than administrative records. Many
beneficiaries are elderly, which further threatens reporting accuracy of
income and other key variables. Validity of self-reported data is a
concern in any survey similar to ours. Examples include:

-   Service-connected disabilities. A veteran or a survivor may consider
    some disabilities that are not service-connected for VA benefit
    purposes to be service-connected. The term "service-connected" was
    most likely used by many respondents in a looser way than it is
    understood by VA, Congress, and the professional veteran community.
    However, we expect that need-for-care reporting in the survey have
    high validity. We reason that the effects on the caregiving will be
    similar whether the conditions necessitating care were
    service-connected or non-service-connected. We should point out,
    though, that there might be some cases where care was necessary
    because of a non-service-connected disability, but for purposes of
    the study and for policymaking, the effects of caregiving will be
    the same.

-   Sources of income and expenditures. Some respondents may not
    remember the name of an income source or a benefit plan. Although
    the survivor survey covers income and expenditures item by item and
    has a separate question about "other" income and expenditures, some
    infrequent items may not have been included. Our analysis of income
    using the IRS data showed that DIC surviving spouses tended to
    understate their income. As mentioned above, most DIC surviving
    spouses are elderly, may not have been involved in household
    finances until recently, and/or may have had difficulty in
    accurately recalling their finances.

-   Other VA insurance. Respondents may not remember or know the name of
    a VA insurance program and report incorrectly. Although programs
    were described, survivors may not distinguish whether other
    insurance was received from VGLI, SGLI, or SDVI.

Although we have relied heavily on self-reported data, we have expended
significant effort in crosschecking the self-reported data for accuracy
and integrity. Throughout the report, we indicate limitations.

### Profile of Survey Respondents

The following tables and figures provide a profile of the survey
respondents in the study. The characteristics reported of insurance
program takers and non-takers are largely representative of the total
respective populations while the characteristics of beneficiary
survivors are representative of surviving spouses of veterans who died
between 1994 and 1999. Selected highlights include:

-   About 60 to 80% of participants and eligible non-participants in the
    insurance programs are married.

-   70 to 100% of participants in all the different programs are
    homeowners.

-   The average ages of SGLI and VGLI takers are 35 and 41,
    respectively.

-   The average ages of SDVI and VMLI takers are 58 and 51,
    respectively.

[]{#__RefHeading___Toc515772047 .anchor}Table 5. Summary Profile of
Insurance Takers and Non-takers

  ---------------- ----------- ---------- ---------- ---------- ------------ ---------- ---------- ----------
  Respondent       Insurance                                    Insurance                          
  Characteristic   Takers                                       Non-takers                         

                   SGLI        VGLI       SDVI       VMLI       SGLI         VGLI       SDVI       VMLI

  \% Married       69%         75%        83%        74%        59%          77%        79%        73%

  \% Homeowner     73%         77%        91%        100%       82%          69%        87%        100%

  \% With          65%         66%        62%        59%        51%          69%        59%        54%
  dependents                                                                                       

  Median[^8]       \$65,000    \$50,000   \$50,000   \$80,000   \$45,000     \$50,000   \$55,000   \$80,000
  household income                                                                                 

  Median age       33          39         58         52         34           39         58         62

  Mean age         35          41         58         51         35           38         60         61

  Total Number of  416         416        400        344        424          423        422        376
  Respondents                                                                                      
  ---------------- ----------- ---------- ---------- ---------- ------------ ---------- ---------- ----------

Source: SGLI, VGLI, SDVI, and VMLI Taker and Non-Taker Surveys

-   56% of DIC spouses survived veterans with severe or catastrophic
    disabilities while the corresponding figure for SDVI is 43%.

-   51% of VGLI surviving spouses had veterans who had service-connected
    disabilities.

-   About 15% of DIC and SDVI surviving spouses have dependent children.

-   The mean[^9] age for DIC and SDVI surviving spouses with dependent
    children is 52.

-   Over 40% of DIC and SDVI surviving spouses have health problems.

-   23% of DIC survivors work while 32% of SDVI surviving spouses work.

-   53% of SGLI and VGLI surviving spouses work.

[]{#__RefHeading___Toc515772048 .anchor}Table 6. Relationship of DIC
Recipients and Beneficiaries of\
Insurance Programs to the Deceased Veteran

  ------------------------ ---------------- ----------- ----------- -----------
  Beneficiary Is:          Beneficiaries,                           
                           All Respondents                          

                           DIC              SDVI        VGLI        SGLI

  Surviving spouse         99%              76%         65%         40%

  Veteran's child          .3%              5%          2%          3%

  Another relative         .5%              18%         32%         56%

  Other                    0%               2%          1%          1%

  Total %                  100%             100%        100%        100%

  Total Number of Survey   1,001            406         395         408
  Respondents                                                       
  ------------------------ ---------------- ----------- ----------- -----------

Source: Survivor Surveys

Figure 1. Surviving Spouse Respondents by Veteran's Disability Status
and Program

> ![](media/image2.wmf){width="2.6881944444444446in"
> height="1.9583333333333333in"}![](media/image3.wmf){width="2.667361111111111in"
> height="1.9583333333333333in"}
>
> ![](media/image4.wmf){width="2.792361111111111in"
> height="2.4159722222222224in"}

Source: Survivor Surveys and VA Administrative Electronic Files

[]{#__RefHeading___Toc515772049 .anchor}Table 7. Characteristics of
Surviving Spouses

  ------------------------------ ----------- --------- --------- ----------
  Survivor Characteristics       Surviving                       
                                 Spouses of                      

                                 DIC         SDVI      VGLI      SGLI

  Age (Q2)                                                       

  Under 51                       11%         16%       42%       65%

  51 to 60                       18%         24%       41%       30%

  61 to 70                       30%         38%       15%       5%

  Over 70                        40%         22%       2%        0%

  Mean age                       62          62        52        46

  Median Age                     63          64        52        48

  Mean age for survivors with\   52          52        47        44
  dependent children                                             

  Median age for survivors with  50          49        48        44
  dependent children                                             

  Employment Status (Q2 and Q52)                                 

  Working                        23%         32%       53%       53%

  Under 60 years of age who is   11%         14%       33%       42%
  not working                                                    

  Retired (Over 60 years of age  66%         54%       14%       5%
  who is not working)                                            

  Misc.                                                          

  With dependent children (Q4 &  14%         16%       37%       53%
  Q5)                                                            

  Home that he/she owns (Q13)    86%         93%       97%       94%

  Has health problems (Q8)       44%         41%       22%       15%

  Education (Q130)                                               

  No high school                 19%         15%       5%        5%

  High school diploma            39%         36%       31%       35%

  Some college                   30%         34%       37%       31%

  At least a bachelor's degree   11%         15%       27%       29%

  Living Situation (Q4)                                          

  Lives alone or in a group      75%         72%       59%       41%
  setting (nursing home,                                         
  assisted living)                                               

  Lives with dependents          12%         16%       35%       50%

  Lives with others, but no      11%         10%       5%        7%
  financial dependency on others                                 

  Depends financially on those   2%          2%        1%        1%
  he/she lives with                                              

  Total Number of Survey         988         310       255       165
  Respondents                                                    
  ------------------------------ ----------- --------- --------- ----------

Source: Survivor Surveys

[]{#__RefHeading___Toc515772050 .anchor}Table 8. Characteristics of
Surviving Spouses --\
Surviving Spouses of Severely or Catastrophically Disabled Veterans

  --------------------------------------- ------------------ --------- -----------
  Survivor Characteristics                Surviving Spouses            
                                          of Severely or               
                                          Catastrophically             
                                          Disabled Veterans            

                                          DIC                SDVI      VGLI

  Age (Q2)                                                             

  Under 51                                10%                20%       50%

  51 to 60                                19%                29%       39%

  61 to 70                                31%                40%       9%

  Over 70                                 40%                11%       2%

  Mean age                                61                 59        50

  Median age                              62                 61        51

  Mean age for survivors with dependent   53                 52        45
  children                                                             

  Median age for survivors with dependent 50                 51        46
  children                                                             

  Employment Status (Q2 and Q52)                                       

  Working                                 23%                36%       52%

  Under 60 years of age who is not        12%                20%       41%
  working                                                              

  Retired (over 60 years of age who is    66%                44%       8%
  not working)                                                         

  Misc.                                                                

  With dependent children (Q4 & Q5)       14%                21%       31%

  Home that he/she owns (Q13)             84%                94%       98%

  Has health problems (Q8)                49%                40%       20%

  Education (Q130)                                                     

  No high school                          21%                11%       5%

  High school diploma                     35%                33%       33%

  Some college                            31%                40%       39%

  At least a bachelor's degree            13%                15%       23%

  Living Situation (Q4)                                                

  Lives alone or in a group setting       74%                68%       59%
  (nursing home, assisted living)                                      

  Lives with dependents                   12%                21%       33%

  Lives with others, but no financial     11%                9%        8%
  dependency on others                                                 

  Depends financially on those he/she     3%                 2%        0%
  lives with                                                           

  Total Number of Survey Respondents      551                132       64
  --------------------------------------- ------------------ --------- -----------

Source: Survivor Surveys

## 4. Availability and Affordability of Insurance

As stated in the Introduction of this report, the major expectation of
Congress and stakeholders for the VA insurance programs is that the life
insurance is readily available and affordable to servicemembers and
veterans, regardless of whether they are healthy or disabled. The
insurance programs are intended to make insurance available at premium
levels that are competitive with rates offered by commercial insurers to
healthy individuals. For disabled veterans, these premiums do not cover
the full cost of insurance and the programs are not self-supporting from
premium income alone. In this section we assess how well the goal of
available and affordable insurance is being met.

The study's assessment of the availability and affordability for members
and veterans is based on comparison to the private sector and non-VA
public organizations. The basic measure is to compare the available
insurance coverage and benefit amounts received by survivors under the
VA programs to average amounts and premiums or cost purchased by
non-disabled individuals in the private insurance market.

### Availability of Insurance

#### VA Programs for Non-Disabled Veterans

Participation in the insurance program for servicemembers/reservists,
SGLI, is nearly universal (95 percent of eligible
servicemembers/reservists are enrolled). Furthermore, nearly 87 percent
of participants were enrolled at the maximum coverage amount of
\$200,000 at the time of the study survey. Automatic coverage is a
likely factor in the high participation rate. The large percentage
covered at the maximum level also indicates that many servicemembers
accepted the automatic increase in their coverage amounts as legislation
increased the program maximum since their initial enrollment. The most
recent change at the time of the study survey was an increase to
\$200,000 from \$100,000, effective in 1996. More recently, the maximum
was increased to \$250,000, effective April 1, 2001, by PL 106-419.

SGLI compares favorably to basic life insurance programs provided to
private and public sector employees working in medium to large size
organizations. Private and public sector employer life insurance
typically provides a coverage amount of one or two times salary, with
one times salary being more prevalent. The \$200,000 SGLI coverage
amount is greater than most basic plans would provide except for very
highly compensated employees. For example, an employee earning \$40,000
a year would have basic coverage of \$40,000 if the employer-sponsored
plan provided coverage of one times salary.

Basic coverage for most employers in the private sector, however, is
fully employer-paid whereas servicemembers/reservists pay the full SGLI
premium cost. SGLI does not offer optional participant-paid supplemental
coverage on the insured's life or for dependents, a feature offered by
about 80% of private and public sector plans in medium to large size
organizations. Supplemental coverage on the employee's life can provide
up to five times annual pay in high-end private sector plans. In some
cases, the supplemental coverages can be continued following
termination.

SGLI does not fully meet the life insurance needs of all participants.
Although a majority of the SGLI survey respondents were favorable about
the amount and cost of SGLI coverage that they already had, a large
percentage (50%) of them indicated they would purchase more coverage if
it were available. Furthermore, more than half (56%) of SGLI
participants also have other life insurance. Primary sources for this
coverage are the individual insurance market, employers, and military
aid associations. Finally, 68% of participants with dependents said they
would like to be able to purchase dependent coverage through the SGLI
program.

A servicemember who is enrolled in SGLI will be able to convert to VGLI
at the same or lower coverage level at retirement or separation,
regardless of health or disability status. The conversion feature for
basic insurance in SGLI is superior to conversion features generally
found in private or public sector plans for employees who separate prior
to retirement. For employees who retire, SGLI provides an equivalent
benefit to the public sector and a better benefit than the private
sector.

Nearly half of SGLI participants indicated they were unaware of the
conversion option to VGLI. Although active servicemember respondents to
the survey may not yet have this issue on their minds, we believe this
to be a significant finding. Only 18 percent of separating
servicemembers who had SGLI converted to VGLI. VA does counsel
servicemembers on the conversion opportunity prior to separation from
the military. This counseling occurs under the Transition Assistance
Program (TAP) or Disabled Transition Assistance Program (DTAP).
Separating servicemembers are required to receive the counseling between
90 and 180 days prior to separation.

Nearly two-thirds of VGLI participants have other life insurance
coverage; nearly three-fourths of VGLI non-participants have other life
insurance coverage. In both cases, the majority with other insurance
either purchases it in the individual market or obtains coverage through
an employer. Nearly 60 percent of VGLI participants and nearly 69
percent of VGLI non-participants felt they had about the right amount of
insurance coverage counting all sources.

#### VA Programs for Service-Disabled Veterans

The DIC, SDVI, and VMLI programs are particularly targeted to
service-disabled veterans and survivors. The VGLI program is intended to
benefit survivors of disabled veterans as well as non-disabled veterans.
VA programs for surviving spouses of disabled veterans exceed practices
found in the private and public sectors for surviving spouses of
disabled non-veterans.

VA is consistent with private and public sector employers in providing
the opportunity for continuing life insurance coverage following a
disability. In the private sector, nearly all (87 percent) employers
continue the employee's basic life insurance and any supplemental
insurance that the employee may be purchasing. The decisions on coverage
amount during disability are nearly all made by the employer since the
basic coverage amount is determined and paid for by the employer.
Supplemental insurance coverages are principally the employee's
decision.

The amount of VA insurance coverage that a disabled veteran has is
affected by decisions made by the veteran and Congress. If the veteran
initially participates in SGLI and then elects to continue as either
VGLI term insurance or commercial insurance, then the veteran can have
coverage up to the amount carried in SGLI. If VA determines that the
veteran's disability is service-connected, then the veteran has the
option of purchasing \$10,000 of SDVI coverage. If the disability is
total, the \$10,000 coverage premium is waived, and the veteran may
elect to purchase an additional \$20,000 of SDVI coverage. However, if
the veteran was not eligible for or declined VGLI, then there may be no
VA coverage unless eligibility for SDVI is established.

Maximum coverage amount under VGLI is the same for disabled veterans as
it is for non-disabled veterans. Hence, VGLI provides greater coverage
for disabled members/veterans than the basic coverages provided by most
private sector employers. However, when supplemental coverages are
included, some private sector surviving spouses can receive a larger
total life insurance settlement. This comparison assumes that the
servicemember/veteran elects the maximum SGLI and VGLI coverages. If the
disabled veteran failed to make these elections, then the surviving
spouse would be left with inadequate or no VA insurance benefits. (The
next section reports on what insurance benefits are received by
surviving spouses from all sources.)

For many disabled veterans, SDVI is the only VA life insurance program
available. Eighty percent of SDVI participants do not have VGLI coverage
(but 66 percent have non-VA insurance). These may be veterans who either
declined SGLI while in active duty, who did not convert to VGLI at the
time they separated or retired, or who converted to a non-renewable VGLI
that has since expired. Unfortunately, among all veterans, these
individuals are most in need of life insurance coverage because they
often cannot purchase other insurance even if they pay additional
premiums.

Although it predates VGLI coverage, SDVI's role may now be more properly
thought of as a secondary or supplemental coverage source to VGLI for
veterans with service-connected disabilities. In other words, SDVI
provides the opportunity for disabled veterans to purchase supplemental
coverage (through VA) in the same manner that non-disabled veterans can
purchase supplemental coverage (in the private insurance market).

A service-disabled veteran, at the time of the study's survey, could
have a maximum of \$230,000 in VA insurance (\$200,000 in VGLI plus
\$30,000 in SDVI). In most cases, this amount would exceed that for the
typical private sector employee who would have basic life insurance
coverage of one or two times annual salary.

The VMLI program offers mortgage life insurance that is additive to all
the other VA programs. The amount varies by the amount of the mortgage
with a maximum amount of \$90,000. This program is available only for
the catastrophically disabled veteran who is in receipt of a Specially
Adapted Housing (SAH) grant from VA. There were only about 3,500
participants in the VMLI program as of September 1999.

The value of the maximum VMLI coverage amount of \$90,000 has eroded
significantly since it was last adjusted in 1992. VMLI program data
indicate that nearly half of VMLI participants have mortgages that are
larger than their VMLI coverage amounts. As of June 1999, on average,
VMLI covered about 75% of the mortgage amount of VMLI takers compared to
96% in the first five years of the VMLI program (that is, 1971-1976).

Half of the VMLI participant survey respondents indicated that they
would increase their VMLI amount if they were given a chance. Among
these, 38% indicated they would take a policy amount up to \$150,000
compared to 43% of respondents who indicated they would increase their
policy to an amount over \$150,000. The other 19% did not provide any
amount although they indicated that they would increase their VMLI
amount.

In addition to life insurance benefits for survivors of service-disabled
veterans, the DIC program provides a significant source of ongoing
income support. DIC is generally a superior survivor benefit compared to
employer-provided benefits for non-veteran survivors. An important
strength of DIC is that Congress has generally increased its benefit
annually such that it has maintained its purchasing power against
inflation over the long term. Private sector survivor benefits, in
contrast, are typically adjusted for inflation only on an ad hoc basis
or not at all.

Table 9 illustrates several examples of monthly benefit payments to
survivors of disabled veterans and other employees. The examples assume
the veteran/employees are disabled after serving 10 years and have a
final annual salary of \$40,000 and similar earnings histories. Private
sector, Federal, and state employees are assumed to contribute five
percent of salary to a thrift plan. In cases where a program provides a
lump sum benefit, we have converted this payment into an annuity. The
table does not include Social Security survivor benefits or Social
Security or DoD death gratuities.

### Affordability of Insurance

The legislative history is clear that Congress intended for VA life
insurance to be priced comparably with coverage for non-disabled
individuals in the private sector. The cost comparison is an important
element of measuring program outcome.

[]{#__RefHeading___Toc515772051 .anchor}Table 9. Comparison of Benefits
for Surviving Spouses

<table style="width:100%;">
<colgroup>
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 11%" />
<col style="width: 9%" />
<col style="width: 11%" />
<col style="width: 9%" />
<col style="width: 11%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2">VA</td>
<td colspan="2">Private Sector</td>
<td colspan="2">Federal (CSRS)</td>
<td colspan="2">Federal (FERS)</td>
<td colspan="2">States</td>
</tr>
<tr class="even">
<td>Benefit</td>
<td>Per Month</td>
<td>Benefit</td>
<td>Per Month</td>
<td>Benefit</td>
<td>Per Month</td>
<td>Benefit</td>
<td>Per Month</td>
<td>Benefit</td>
<td>Per Month</td>
</tr>
<tr class="odd">
<td>DIC</td>
<td>$881<sup>1</sup></td>
<td>Pre-ret death benefit</td>
<td>$195</td>
<td>Survivor annuity</td>
<td>$290</td>
<td>Lump sums</td>
<td>$270<sup>2</sup></td>
<td>Survivor annuity</td>
<td>$270</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>401(k)</td>
<td>$225<sup>3</sup></td>
<td>TSP</td>
<td>$150<sup>3</sup></td>
<td>Survivor annuity</td>
<td>$225</td>
<td>457 Plan</td>
<td>$150<sup>3</sup></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td>TSP</td>
<td>$225</td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td>Total</td>
<td>$881</td>
<td>Total</td>
<td>$420</td>
<td>Total</td>
<td>$440</td>
<td>Total</td>
<td>$720</td>
<td>Total</td>
<td>$420</td>
</tr>
<tr class="odd">
<td colspan="10"><p><sup>1</sup> This amount is for the surviving spouse
only. Additional monthly amounts are payable for each dependent child
($222), if the surviving spouse is housebound ($107), and if the spouse
requires aid and attendance ($222). Separate DIC payments are also
available for orphan children and for disabled adult children.</p>
<p><sup>2</sup> FERS survivors receive two lump sum payments. These are
a flat payment of $22,596.12 and a payment that is the greater of
one-half of the employee’s final annual pay at the time of death, or
one-half of the employee’s high-3 average pay. These lump sums have been
converted to a monthly annuity.</p>
<p><sup>3</sup> Lump sum account balances for 401(k) plans, the Federal
TSP, and 457 plans have been converted to a monthly annuity.</p></td>
</tr>
</tbody>
</table>

Source: Study Team Estimate

#### SGLI Premiums

Table 10 compares premium practices for the various types of life
insurance coverage between SGLI and non-VA plans. Private sector
reflects medium to large size employers.

[]{#__RefHeading___Toc515772052 .anchor}Table 10. Premium Practices for
Life Insurance Benefits

+-------------+----------+------------+------------+-----------------+
| Type        | VA       | Private    | Federal    | State           |
|             |          | Sector     | Government | Governments     |
+-------------+----------+------------+------------+-----------------+
| Basic Life  | SGL      | Employer   | Employer   | Three of five   |
| Insurance   | I-Member | pays the   | pays 1/3   | are employer    |
|             | pays     | full       | of         | paid            |
|             | full     | premium    | premium;   |                 |
|             | premium  | (93% of    | employee   | Two of five     |
|             |          | plans)     | pays 2/3   | cost share with |
|             |          |            | of premium | premium rates   |
|             |          |            |            | based on        |
|             |          |            |            | employee's age  |
|             |          |            |            | and plan        |
|             |          |            |            | experience      |
+-------------+----------+------------+------------+-----------------+
| Accidental  | No       | Employer   | Included   | Four of five    |
| Death &     | coverage | pays the   | at no      | include at no   |
| Di          |          | full       | additional | additional cost |
| smemberment |          | premium    | cost to    | to employee     |
| (AD&D)      |          | (85% of    | employee   |                 |
|             |          | plans)     |            |                 |
+-------------+----------+------------+------------+-----------------+
| Employee    | No       | Employee   | Employee   | Employee pays   |
| S           | coverage | pays the   | pays full  | the full        |
| upplemental |          | full       | cost       | premium (for    |
| Coverages   |          | premium    |            | all States that |
|             |          | (96% of    |            | offer)          |
|             |          | plans)     |            |                 |
+-------------+----------+------------+------------+-----------------+
| Dependent   | No       | Employee   | Employee   | Employee pays   |
| Coverage    | coverage | pays the   | pays full  | the full        |
|             |          | full       | cost       | premium (for    |
|             |          | premium    |            | all States that |
|             |          | (88% of    |            | offer a plan)   |
|             |          | plans)     |            |                 |
+-------------+----------+------------+------------+-----------------+
| Coverage    | VGLI     | Employers  | No change  | Three of five   |
| after       | -Veteran | continuing | prior to   | fully paid by   |
| Retirement  | pays     | coverage   | age 65;    | employees       |
|             | full     | for        | various    |                 |
|             | premium  | retirees   | elections  | One of five     |
|             |          | pay the    | can affect | fully employer  |
|             |          | full       | premium    | paid at         |
|             |          | premium    | beyond age | termination     |
|             |          | (78% of    | 65         |                 |
|             |          | employers) |            | One of five     |
|             |          |            |            | fully employer  |
|             |          |            |            | paid beginning  |
|             |          |            |            | at age 65       |
+-------------+----------+------------+------------+-----------------+

Source: Study Team table based on data from the Hay Benefits Report, and
VA, Federal Government,\
and State Government life insurance program descriptions.

Private sector employees enjoy a significant advantage over
servicemembers and Federal employees regarding the cost of life
insurance benefits. The vast majority of private sector
employer-sponsored group life programs in medium and large-sized
companies are fully employer paid. Over 90% of private sector employers
pay the group life premiums for basic coverage, not the employee. This
is based on the Hay Benefits Report, which is an annual survey of
predominantly medium to large private sector organizations in all
industrial sectors and geographic regions. It represents a cross-section
of benefit practices throughout the United States. For supplemental
coverage, the employee pays, and the premiums typically vary depending
on certain individual characteristics such as age.

In this study we compared the cost of SGLI with the cost for group life
insurance coverage in large private sector organizations. Since over 90
percent of private sector employers pay the full cost for basic group
life insurance coverage, the question becomes one of comparing the
premium paid by servicemembers for SGLI with the cost that organizations
pay to provide life insurance benefits to their employees.

The annual cost for SGLI for servicemembers/reservists is currently
\$0.96 per \$1,000 of coverage. We obtained the cost for
employer-provided life insurance coverage from the 2000 Hay Benefits
Report. Of the 1,008 organizations represented in the 2000 report, four
hundred thirty-eight employers provided information about the cost of
the life insurance coverage that they provided to their employees. For
this group, the median annual cost was \$2.04 per \$1,000.

Important adjustments are needed to account for significant demographic
differences between servicemembers/reservists and private sector
employees, in order to make a consistent comparison between the two
costs. Age and gender are two of the most important determinants of life
insurance cost. Other important factors are health status and occupation
(relating to job hazards).

For age and gender, insurers use a set of cost factors that express the
relative cost differences between ages and gender. We determined the
differences in the age/gender composition between the military work
force and the general civilian work force and then applied the cost
factors accordingly. The result indicates that the unit cost considering
age and gender for insuring the military workforce should be 74.8% of
the cost for insuring the private sector, all other factors being equal.

We multiplied this factor times the median private sector premium as
follows:

\$2.04 times \$0.748 equals \$1.526,

which is 59% higher than the current SGLI premium of \$.96 per \$1,000
of coverage. Hence, we conclude that the premium for SGLI is cost
competitive with coverage provided by U.S. employers.

#### VGLI Premiums

Because the law requires that the combined premiums of VGLI and SGLI
fully cover the cost of the two programs, coverage of disabled and
otherwise unhealthy individuals are currently reflected in VGLI and SGLI
premiums. However, the appropriate private sector measure for comparison
still requires estimates of term insurance premiums for healthy
individuals only, given what the recommended outcome measures are (see
Section 1).

We compared the annual premium for VGLI with premiums charged for
individual term coverage with a sample of commercial insurance companies
for 5-year level term insurance.[^10] Table 11 shows commercial quotes
for a \$100,000 policy and a \$200,000 policy for male non-smokers and
smokers for the health category of "Standard." (The table also shows
quotes for Best Class (excellent health status) for the sake of
additional comparison.) The quotes for smokers are more than twice the
quotes for non-smokers while differences between Best Class and Standard
are not nearly as great. Individuals in the private sector also get a
price break on the cost per \$1,000 of coverage by purchasing a
\$200,000 versus a \$100,000 policy.

Comparable rates for VGLI are considerably higher than the commercial
quotes for non-smoker. For the policy that provides \$200,000 of
standard coverage, the current VGLI premium cost per \$1,000 of coverage
for a 40-year old individual is \$2.88 while the respective standard
commercial rate is \$1.42. For a 30-year individual the differences
between VGLI premium costs and commercial quotes are not nearly as
great. Also, the VGLI rates are similar to commercial quotes for
smokers, except for the 30-year old where the commercial rates are
higher. VGLI accepts all applicants regardless of health status,
including applicants with service-connected disabilities.

Also shown in Table 11 are VA proposed lower VGLI rates which will go
into effect July 1, 2001. The current proposal is based on the Society
of Actuaries (1990-1995 experience) rates, which is commonly used in the
insurance industry. After July 1, 2001, there will be a phase-in of
\"age-based\" premiums that will lower the premiums further. The
age-based premiums will require 5-year renewal at specific ages (that
is, age 30, 35, 40, and the like). Under the current system renewals
occur at any age that is 5 years after the last renewal.

[]{#__RefHeading___Toc515772053 .anchor}Table 11. Annual Premiums for
VGLI vs. Commercial Insurance Companies

  ----------- --------- ---------- ------------ ----------- ----------- ----------
  Age         VGLI                 Commercial                           
                                   Insurance                            
                                   Companies                            

                                   Male                     Male Smoker 
                                   Non-Smoker                           

              Current   Proposed   Best Class   Standard    Preferred   Standard

  \$100,000                                                             
  Coverage                                                              

  Annual                                                                
  Premium for                                                           
  \$100,000                                                             
  Coverage                                                              
  Amount                                                                

  30          \$144     \$132      \$114        \$138       \$210       \$232

  40          \$288     \$264      \$142        \$176       \$292       \$319

  50          \$780     \$624      \$258        \$319       \$644       \$731

  60          \$1,350   \$1,350    \$572        \$713       \$1,421     \$1,607

  Annual                                                                
  Premium per                                                           
  \$1,000 for                                                           
  \$100,000                                                             
  Coverage                                                              
  Amount                                                                

  30          \$1.44    \$1.32     \$1.14       \$1.38      \$2.10      \$2.32

  40          \$2.88    \$2.64     \$1.42       \$1.76      \$2.92      \$3.19

  50          \$7.80    \$6.24     \$2.58       \$3.19      \$6.44      \$7.31

  60          \$13.50   \$13.5     \$5.72       \$7.13      \$14.21     \$16.07

  \$200,000                                                             
  Coverage                                                              

  Annual                                                                
  Premium for                                                           
  \$200,000                                                             
  Coverage                                                              
  Amount                                                                

  30          \$288     \$264      \$175        \$222       \$357       \$411

  40          \$576     \$528      \$232        \$285       \$528       \$586

  50          \$1,560   \$1248     \$454        \$584       \$1,231     \$1,409

  60          \$2,700   \$2700     \$1,090      \$1,372     \$2,785     \$3,160

  Annual                                                                
  Premium per                                                           
  \$1,000 for                                                           
  \$200,000                                                             
  Coverage                                                              
  Amount                                                                

  30          \$1.44    \$1.32     \$0.88       \$1.11      \$1.79      \$2.05

  40          \$2.88    \$2.64     \$1.16       \$1.42      \$2.64      \$2.93

  50          \$7.80    \$6.24     \$2.27       \$2.92      \$6.15      \$7.04

  60          \$13.50   \$13.50    \$5.45       \$6.86      \$13.92     \$15.80
  ----------- --------- ---------- ------------ ----------- ----------- ----------

Source: Survey of Commercial Insurance Companies and VA Philadelphia
Insurance Center

Note that the current system makes comparisons with private industry
rates difficult.  Standard practice in commercial insurance is to set
renewal at five year intervals at age 25, 30, 35, 40, and the like. 
VGLI is renewed every five years after it is issued, regardless of the
veteran\'s age.  Therefore, the VGLI premium for a veteran renewing, for
example, at age 33 would tend to be higher than the premium for a
33-year-old commercial policyholder who had renewed at age 30.  By
changing to a standard age-based renewal practice, cost comparison
between VGLI and commercial companies will be easier to make.

The proposed rates are comparable to commercial Preferred smoker rates
for all ages except for age 30. The proposed rate for age 30 is slightly
higher than commercial Standard non-smoker rate, but lower than
Preferred smoker rate.

For additional comparison, we looked at premiums for term insurance
offered by military mutual aid associations. These organizations compete
directly with VA to provide term insurance for separating and retiring
servicemembers and reservists. Table 12 compares annual premiums for
\$50,000 of term insurance for similarly aged enrollees in VGLI and for
three associations. As the table illustrates, current VGLI premiums are
significantly higher than the association costs for equivalent coverage,
similar to our comparison to commercial quotes. An important
contributing factor in the difference is that the associations do not
cover unhealthy individuals.

[]{#__RefHeading___Toc515772054 .anchor}Table 12. Annual Premiums for
\$50,000 of Term Life Insurance\
VGLI vs. Military Mutual Aid Associations (in year 2000)

  ------------- ------- --------------- -------- ------------- -------- ------------- -------- ------------- -------- ------------- --------
  Age           VGLI    Army & Air               Military               The Retired            Association            Premium       
                        Force Mutual             Benefit                Officers               Average                Ratio: VGLI   
                        Aid                      Association            Association            Premium                vs.           
                        Association\*                                                                                 Association   
                                                                                                                      Average       

                        Smoker          Non-     Smoker        Non-     Smoker        Non-     Smoker        Non-     Smoker        Non-
                                        Smoker                 Smoker                 Smoker                 Smoker                 Smoker

  30            \$72    \$72            \$120    \$45          \$81     \$26          \$29     \$48          \$77     1.5           0.9

  55            \$528   \$258           \$462    \$210         \$402    \$205         \$246    \$224         \$370    2.4           1.4

  65            \$900   \$564           \$972    \$390         \$780    \$785         \$928    \$580         \$893    1.6           1.0

  \* Army and                                                                                                                       
  Air Force                                                                                                                         
  Mutual Aid                                                                                                                        
  Association                                                                                                                       
  may provide a                                                                                                                     
  refund of                                                                                                                         
  some portion                                                                                                                      
  of premium                                                                                                                        
  each year.                                                                                                                        
  ------------- ------- --------------- -------- ------------- -------- ------------- -------- ------------- -------- ------------- --------

Source: Study Team table based on data provided by VA and Military
Mutual Aid Associations.

In spite of the much higher premium rate for VGLI relative to SGLI or
commercial policies, about 80 percent of the VGLI survey respondents
were either satisfied or very satisfied with the amount they had to pay
for coverage. About three-fourths of VGLI takers (74%) believe that the
amount they pay for premiums is reasonable. However, the participation
rate for VGLI is only 18%, and the veterans who participate in this
program do not have to show evidence of good health. As noted in Section
3, about one-fourth of the VGLI takers in the study survey were
identified as having service-connected disabilities.

#### SDVI Premiums

It is problematical to compare SDVI premium rates to private sector
premiums in that the private insurance companies generally do not offer
coverage for only \$10,000, which is the basic amount provided by SDVI.
Obtaining quotes at higher levels of coverage at a rate expressed per
\$1,000 of coverage does not resolve this as private sector rates per
\$1,000 vary depending on the total amount of coverage for the
individual. With this caveat in mind, Table 13 shows commercial quotes
for a \$50,000 term life insurance policy and the SDVI premium costs for
a \$10,000. The table also expresses the costs on the basis of per
\$1,000 of coverage. The rates for SDVI include current rates and what
they would be if they were based on more recent (1980) mortality tables.
Current SDVI premium rates are based on 1941 mortality tables. Note that
SDVI does not charge different rates for smokers and nonsmokers.

The comparative result for 5-year term coverage is that current SDVI
premium rates per \$1,000 are much higher than the commercial quotes.
For example, at the age of 50, the current SDVI premium rate of \$14.28
annually per \$1,000 is much higher than either the \$3.22 for male Best
Class non-smoker or \$3.81 for male Standard non-smoker. The respective
SDVI annual premium based on the 1980 mortality tables of \$6.00 per
\$1,000 is still much higher than the respective average commercial rate
of \$3.81 for non-smoker, but lower than the \$8.34 for the comparable
commercial smoker rate.

[]{#__RefHeading___Toc515772055 .anchor}Table 13. Annual Premiums for
SDVI vs. Commercial Insurance Companies -- 5-Year Term-Plan

  ---------- ---------- ----------- ------------ -------- ---------- -------- ----------- -------- ---------- ---------
  Age        SDVI\                  Commercial                                                                
             \$10,000               Insurance                                                                 
             Coverage               Companies\                                                                
                                    \$50,000                                                                  
                                    Coverage                                                                  

             Current    1980        Non-Smoker                                Smoker                          
                        Mortality                                                                             
                        Tables                                                                                

                                    Best Class            Standard            Preferred            Standard   

                                    Male         Female   Male       Female   Male        Female   Male       Female

  Annual                                                                                                      
  Premium                                                                                                     

  50         \$143      \$60        \$161        \$132    \$190      \$154    \$352       \$273    \$417      \$315

  60         \$312      \$156       \$295        \$220    \$345      \$265    \$692       \$493    \$836      \$571

  Annual                                                                                                      
  Premium                                                                                                     
  per                                                                                                         
  \$1,000                                                                                                     
  Coverage                                                                                                    

  50         \$14.28    \$6.00      \$3.22       \$2.63   \$3.81     \$3.08   \$7.04      \$5.46   \$8.34     \$6.31

  60         \$31.20    \$15.60     \$5.91       \$4.41   \$6.89     \$5.29   \$13.84     \$9.86   \$16.72    \$11.42
  ---------- ---------- ----------- ------------ -------- ---------- -------- ----------- -------- ---------- ---------

Source: Survey of Commercial Insurance Companies and VA Philadelphia
Insurance Center

The comparative result for the ordinary life plan is that current SDVI
premium rates per \$1,000 are also much higher than the commercial
quotes as shown in Table 14. For example, at the age of 50, the current
SDVI premium rate of \$38.76 annually per \$1,000 is much higher than
either the \$25.50 for the male category or \$20.45 for the female
category. On the other hand, the respective SDVI annual premiums based
on the 1980 mortality tables per \$1,000 are lower than the commercial
rates for non-smoker males for all age categories.

[]{#__RefHeading___Toc515772056 .anchor}Table 14. Annual Premiums for
SDVI vs. Commercial Insurance Companies -- Ordinary Life Plan

  ---------- ---------- ----------- ------------ ------------ ----------- ----------
  Age        SDVI\                  Commercial                            
             \$10,000               Insurance                             
             Coverage               Companies\                            
                                    \$50,000                              
                                    Coverage                              

             Current    1980        Non-Smoker                Smoker --   
                        Mortality   -- Preferred              Preferred   
                        Tables                                            

                                    Male         Female       Male        Female

  Annual                                                                  
  Premium                                                                 

  30         \$182      \$74        \$528        \$454        \$657       \$530

  40         \$259      \$125       \$798        \$670        \$991       \$773

  50         \$388      \$214       \$1,275      \$1,023      \$1,559     \$1,199

  60         \$612      \$376       \$2,174      \$1,731      \$2,610     \$1,913

  Annual                                                                  
  Premium                                                                 
  per                                                                     
  \$1,000                                                                 
  Coverage                                                                

  30         \$18.24    \$7.44      \$10.56      \$9.08       \$13.14     \$10.58

  40         \$25.92    \$12.48     \$15.97      \$13.41      \$19.82     \$15.46

  50         \$38.76    \$21.36     \$25.50      \$20.45      \$31.18     \$23.98

  60         \$61.20    \$37.56     \$43.49      \$34.62      \$52.21     \$38.26
  ---------- ---------- ----------- ------------ ------------ ----------- ----------

Source: Survey of Commercial Insurance Companies and VA Philadelphia
Insurance Center

Two-thirds of SDVI participants state that premiums were what they
expected and 63 percent believe their SDVI coverage would cost more if
purchased in the private sector. In expressing this sentiment, the
survey respondents may be considering their health status.

#### VMLI Premiums

In our efforts to obtain commercial quotes on mortgage life insurance,
we found that most life insurance companies no longer offer this
product. They report that the demand for it has decreased significantly
and that other life insurance products can be readily tailored to meet
the needs fulfilled by mortgage life insurance. Many years ago when the
VMLI program was enacted, there was not as much as flexibility or
options available in the design of life insurance products.

We obtained quotes for a few life insurance mortgage plans in the
private sector. We compare a commercial premium cost of \$0.50 per
\$1,000 to a significantly lower VMLI premium cost[^11] of \$0.30 per
\$1,000, for a mortgage balance of \$90,000, assuming a 43-year old male
with a 15-year mortgage. Average age at time of issue for the VMLI
takers in our study is 43 with a 15-year mortgage remaining. []{.mark}

As an additional point of comparison at one end of the age range, we
obtained an average quote of \$0.17 per \$1,000 for an initial mortgage
balance of \$150,000, assuming a 24-year old with a 30-year mortgage.
This is significantly higher than the VMLI cost of \$0.11 per \$1,000.
The scarcity of life insurance companies offering the mortgage life
insurance product hampered our efforts to obtain additional data point
comparisons.

More than two-thirds (69%) of the VMLI participants think that the
amount they pay for premiums is reasonable. Also, almost two-thirds
(64%) of the VMLI participants indicated that if they were to get the
same type of insurance from a private insurance company, they believe
they would have to pay more than the amount they pay for the VMLI
premiums.

While this section of the report has looked at availability and
affordability of VA programs, the next section examines the financial
impact that these programs have had on survivors of veterans.

## 5. Financial and Need Outcomes for Survivors

As stated in the Introduction to this report, the statutory intent for
DIC is that the program assists survivors in providing an appropriate
level of income support following the death of the servicemembers or
veterans. Congress, though, did not provide specific guidance on what
constitutes an appropriate level of income support for survivors. This
study applies different measures of financial outcomes: 1) replacement
of household income that decreases after the servicemember or veteran
dies, and 2) income support that meets a minimum threshold.

Definition of a minimum threshold of income is subjective. Therefore, we
use alternative measures to gauge acceptability of a minimum income
level for survivors. These measures include household income that is at
least 50% greater than the poverty level, income that is comparable to
survivors of non-veterans, and self-assessment of financial need. For
the income replacement measure, we first analyze the difference in
household income before and after death and then compare life insurance
benefits received to lost income during the transition period after
death. In our analysis we determine if these measures differ for
survivors of severely or catastrophically disabled veterans.

### Income Replacement

Table 15 shows total annual household income before and after veteran's
death for the sample of survey respondents in the transitional period
(that is, 0-2 years since the veteran's death) representing DIC, SDVI,
VGLI, and SGLI programs.

Total household income for the DIC respondents decreased from about
\$55,300 to \$34,500 in the transition period after the veteran's death,
resulting in a decline of \$20,800. The declines are even greater for
the other programs. Clearly, from an income replacement perspective,
survivors of service-disabled veterans fall significantly short of
maintaining the same income as when the veteran was alive.

[]{#__RefHeading___Toc515772057 .anchor}Table 15. Average Annual
Household Income[^12] for Surviving Spouses in Transitional Period\
(0-2 years since veteran's death) -- Before and After Veteran's Death

+--------------+------------+--------+-----------+--------+----------+
| Program      | Before     |        | After     |        | Di       |
|              | Veteran's  |        | Veteran's |        | fference |
|              | Death      |        | Death     |        |          |
+--------------+------------+--------+-----------+--------+----------+
|              | Mean       | Count  | Mean      | Count  |          |
+--------------+------------+--------+-----------+--------+----------+
| DIC          | \$55,300   | 254    | \$34,500  | 299    | \$20,800 |
+--------------+------------+--------+-----------+--------+----------+
| SDVI         | \$48,850   | 108    | \$27,300  | 123    | \$21,550 |
+--------------+------------+--------+-----------+--------+----------+
| VGLI         | \$71,000   | 99     | \$33,000  | 112    | \$38,000 |
+--------------+------------+--------+-----------+--------+----------+
| SGLI         | \$72,900   | 316    | \$34,400  | 53     | \$38,500 |
+--------------+------------+--------+-----------+--------+----------+
| Sources:     |            |        |           |        |          |
|              |            |        |           |        |          |
| [Before      |            |        |           |        |          |
| Veteran's    |            |        |           |        |          |
| Death:]      |            |        |           |        |          |
| {.underline} |            |        |           |        |          |
|              |            |        |           |        |          |
| DIC:         |            |        |           |        |          |
| Household    |            |        |           |        |          |
| Income data  |            |        |           |        |          |
| from SDVI    |            |        |           |        |          |
| takers &     |            |        |           |        |          |
| non-takers   |            |        |           |        |          |
| surveys, for |            |        |           |        |          |
| respondents  |            |        |           |        |          |
| over 60      |            |        |           |        |          |
| years of age |            |        |           |        |          |
|              |            |        |           |        |          |
| SDVI:        |            |        |           |        |          |
| Household    |            |        |           |        |          |
| Income data  |            |        |           |        |          |
| from SDVI    |            |        |           |        |          |
| takers       |            |        |           |        |          |
| surveys, for |            |        |           |        |          |
| respondents  |            |        |           |        |          |
| over 60      |            |        |           |        |          |
| years of age |            |        |           |        |          |
|              |            |        |           |        |          |
| VGLI:        |            |        |           |        |          |
| Household    |            |        |           |        |          |
| Income data  |            |        |           |        |          |
| from VGLI    |            |        |           |        |          |
| takers       |            |        |           |        |          |
| surveys, for |            |        |           |        |          |
| respondents  |            |        |           |        |          |
| over 40      |            |        |           |        |          |
| years of age |            |        |           |        |          |
|              |            |        |           |        |          |
| SGLI:        |            |        |           |        |          |
| Household    |            |        |           |        |          |
| Income data  |            |        |           |        |          |
| from SGLI    |            |        |           |        |          |
| takers       |            |        |           |        |          |
| surveys, for |            |        |           |        |          |
| all age      |            |        |           |        |          |
| groups       |            |        |           |        |          |
|              |            |        |           |        |          |
| [After       |            |        |           |        |          |
| Veteran's    |            |        |           |        |          |
| Death:]      |            |        |           |        |          |
| {.underline} |            |        |           |        |          |
|              |            |        |           |        |          |
| DIC: IRS     |            |        |           |        |          |
| data; SDVI,  |            |        |           |        |          |
| VGLI, and    |            |        |           |        |          |
| SGLI:        |            |        |           |        |          |
| Survivor     |            |        |           |        |          |
| Surveys data |            |        |           |        |          |
+--------------+------------+--------+-----------+--------+----------+

Life insurance benefits, in general, are intended to replace some or all
of the lost income that occurs during a transition period after the
death of a spouse or other individual. Many disabled veterans had bought
optional life insurance from VA or non-VA sources and left the proceeds
to their survivors.

Table 16 shows the percent of survey respondents who reported receiving
DIC and life insurance payments from the different VA programs and from
non-VA insurance sources as well. Note that about half of the deceased
VGLI veterans were service-disabled. More than half of DIC and SDVI
surviving spouses (53%) reported that they received life insurance
benefit payments from a private company, employer, or other non-VA
source. About two-thirds of VGLI and SGLI surviving spouses (64% and
66%, respectively) reported that they received life insurance benefit
payments from a non-VA source. On the other hand, only 11%, 9%, and 5%
of DIC surviving spouses reported receiving life insurance payments from
VGLI, SDVI, and SGLI programs, respectively.

[]{#__RefHeading___Toc515772058 .anchor}Table 16. Surviving Spouses
Reporting Receiving DIC, VA, and Non-VA Insurance Benefits

+-------------+--------+--------+-------+--------+---------+--------+
| Surviving   | \% of  |        |       |        |         |        |
| Spouse      | Sur    |        |       |        |         |        |
|             | viving |        |       |        |         |        |
| Group       | S      |        |       |        |         |        |
|             | pouses |        |       |        |         |        |
|             | Rec    |        |       |        |         |        |
|             | eiving |        |       |        |         |        |
|             | Be     |        |       |        |         |        |
|             | nefits |        |       |        |         |        |
|             | From:  |        |       |        |         |        |
+-------------+--------+--------+-------+--------+---------+--------+
|             | DIC    | SDVI   | VGLI  | SGLI   | Non-VA  | Count  |
|             |        |        |       |        |         |        |
|             |        |        |       |        | In      |        |
|             |        |        |       |        | surance |        |
+-------------+--------+--------+-------+--------+---------+--------+
| All         |        |        |       |        |         |        |
| Surviving   |        |        |       |        |         |        |
| Spouse      |        |        |       |        |         |        |
| Respondents |        |        |       |        |         |        |
+-------------+--------+--------+-------+--------+---------+--------+
| DIC         | 100%   | 9%     | 11%   | 5%     | 53%     | 988    |
+-------------+--------+--------+-------+--------+---------+--------+
| SDVI        | 43%    | 100%   | 18%   | 12%    | 53%     | 310    |
+-------------+--------+--------+-------+--------+---------+--------+
| VGLI        | 32%    | 6%     | 100%  | NA     | 64%     | 255    |
+-------------+--------+--------+-------+--------+---------+--------+
| SGLI        | 30%    | 2%     | NA    | 100%   | 66%     | 165    |
+-------------+--------+--------+-------+--------+---------+--------+
| Surviving   |        |        |       |        |         |        |
| Spouses of  |        |        |       |        |         |        |
| Servi       |        |        |       |        |         |        |
| ce-Disabled |        |        |       |        |         |        |
| Veterans    |        |        |       |        |         |        |
+-------------+--------+--------+-------+--------+---------+--------+
| DIC         | 100%   | 9%     | 11%   | 5%     | 53%     | 988    |
+-------------+--------+--------+-------+--------+---------+--------+
| SDVI        | 43%    | 100%   | 18%   | 12%    | 53%     | 310    |
+-------------+--------+--------+-------+--------+---------+--------+
| VGLI        | 65%    | 13%    | 100%  | NA     | 64%     | 126    |
+-------------+--------+--------+-------+--------+---------+--------+
| Surviving   |        |        |       |        |         |        |
| Spouses of  |        |        |       |        |         |        |
| Severely or |        |        |       |        |         |        |
| Catas       |        |        |       |        |         |        |
| trophically |        |        |       |        |         |        |
| Disabled    |        |        |       |        |         |        |
| Veterans    |        |        |       |        |         |        |
+-------------+--------+--------+-------+--------+---------+--------+
| DIC         | 100%   | 11%    | 10%   | 4%     | 55%     | 551    |
+-------------+--------+--------+-------+--------+---------+--------+
| SDVI        | 56%    | 100%   | 21%   | 12%    | 53%     | 132    |
+-------------+--------+--------+-------+--------+---------+--------+
| VGLI        | 52%    | 19%    | 100%  | NA     | 64%     | 64     |
+-------------+--------+--------+-------+--------+---------+--------+

Source: Survivor Surveys

Table 17 shows the mean and median life insurance payments from VA and
non-VA sources reported by survey respondents. The benefit payments vary
greatly across individual survivors as reflected by the wide divergence
between mean and median results. The mean is greater than the median in
almost all cases, implying that a few respondents receive relatively
high insurance payments pulling up the average. Also, having numerous
survivors without insurance results in a lower median value.

Surviving SGLI spouses, by far, reported the greatest life insurance
payments from all sources, but especially from the SGLI program. VGLI
survivors reported significantly less than SGLI survivors, but they
report much higher insurance benefits than those received by survivors
of the two programs targeted at disabled veterans -- DIC and SDVI. Based
on the median values, half of either the DIC or SDVI survivors reported
life insurance payments less than \$4,000 or \$15,000, respectively.
From an income replacement point of view, survivors of disabled veterans
are not receiving adequate insurance benefits, particularly when
examining the median values of insurance payments.

[]{#__RefHeading___Toc515772059 .anchor}Table 17. Life Insurance
Payments Received by Surviving Spouses\
From VA and Non-VA Sources (Including Those With No Other VA or Non-VA
Insurance)

+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Life Insurance  | Su  |     |     |     |     |     |      |      |
| Source          | rvi |     |     |     |     |     |      |      |
|                 | vor |     |     |     |     |     |      |      |
|                 | Gr  |     |     |     |     |     |      |      |
|                 | oup |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
|                 | DIC |     | S   |     | V   |     | SGLI |      |
|                 |     |     | DVI |     | GLI |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
|                 | M   | Med | M   | Med | M   | Med | Mean | Me   |
|                 | ean | ian | ean | ian | ean | ian |      | dian |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| > All Surviving |     |     |     |     |     |     |      |      |
| > Spouse        |     |     |     |     |     |     |      |      |
| > Respondents   |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Benefit amount  | NA  | NA  | \   | \$  | \$  | \$  | \    | \    |
| received from   |     |     | $9, | 10, | 76, | 50, | $171 | $200 |
| relevant VA     |     |     | 144 | 000 | 702 | 000 | ,181 | ,000 |
| program         |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Other VA        | \   | \$0 | \   | \$0 | \   | \$0 | \    | \$0  |
| insurance       | $6, |     | $7, |     | $1, |     | $364 |      |
| programs        | 089 |     | 719 |     | 055 |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Non-VA sources  | \$  | \$0 | \$  | \$0 | \$  | \$0 | \$38 | \$10 |
| (private        | 15, |     | 15, |     | 39, |     | ,149 | ,000 |
| company,        | 379 |     | 363 |     | 172 |     |      |      |
| employer)       |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Total amount    | \$  | \   | \$  | \$  | \$1 | \$  | \    | \    |
| received (VA    | 21, | $4, | 32, | 15, | 17, | 75, | $209 | $200 |
| and non-VA      | 828 | 000 | 198 | 000 | 110 | 000 | ,694 | ,000 |
| sources)        |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Number of       | 988 |     | 310 |     | 255 |     | 165  |      |
| Respondents     |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| > Surviving     |     |     |     |     |     |     |      |      |
| > Spouses of    |     |     |     |     |     |     |      |      |
| > S             |     |     |     |     |     |     |      |      |
| ervice-Disabled |     |     |     |     |     |     |      |      |
| > Veterans      |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Benefit amount  | NA  | NA  | \   | \$  | \$  | \$  | NA   | NA   |
| received from   |     |     | $9, | 10, | 88, | 50, |      |      |
| relevant VA     |     |     | 144 | 000 | 290 | 000 |      |      |
| program         |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Other VA        | \   | \$0 | \   | \$0 | \   | \$0 | NA   | NA   |
| insurance       | $6, |     | $7, |     | $2, |     |      |      |
| programs        | 089 |     | 719 |     | 144 |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Non-VA sources  | \$  | \$0 | \$  | \$0 | \$  | \   | NA   | NA   |
| (private        | 15, |     | 15, |     | 37, | $90 |      |      |
| company,        | 379 |     | 363 |     | 105 |     |      |      |
| employer)       |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Total amount    | \$  | \   | \$  | \$  | \$1 | \$1 | NA   | NA   |
| received (VA    | 21, | $4, | 32, | 15, | 27, | 00, |      |      |
| and non-VA      | 828 | 000 | 198 | 000 | 983 | 000 |      |      |
| sources)        |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Number of       | 988 |     | 310 |     | 126 |     | NA   |      |
| Respondents     |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| > Surviving     |     |     |     |     |     |     |      |      |
| > Spouses of    |     |     |     |     |     |     |      |      |
| > Severely or   |     |     |     |     |     |     |      |      |
| > C             |     |     |     |     |     |     |      |      |
| atastrophically |     |     |     |     |     |     |      |      |
| > Disabled      |     |     |     |     |     |     |      |      |
| > Veterans      |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Benefit amount  | NA  | NA  | \   | \$  | \$1 | \$1 | NA   | NA   |
| received from   |     |     | $9, | 10, | 01, | 00, |      |      |
| relevant VA     |     |     | 492 | 000 | 984 | 000 |      |      |
| program         |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Other VA        | \   | \$0 | \   | \$0 | \   | \$0 | NA   | NA   |
| insurance       | $4, |     | $9, |     | $3, |     |      |      |
| programs        | 175 |     | 622 |     | 921 |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Non-VA sources  | \$  | \$0 | \$  | \$0 | \$  | \$  | NA   | NA   |
| (private        | 15, |     | 17, |     | 39, | 790 |      |      |
| company,        | 155 |     | 152 |     | 208 |     |      |      |
| employer)       |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Total amount    | \$  | \   | \$  | \$  | \$1 | \$1 | NA   | NA   |
| received (VA    | 19, | $4, | 36, | 15, | 46, | 20, |      |      |
| and non-VA      | 330 | 000 | 234 | 500 | 242 | 000 |      |      |
| sources)        |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Number of       | 551 |     | 62  |     | 64  |     | NA   |      |
| Respondents     |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+
| Note: The       |     |     |     |     |     |     |      |      |
| median          |     |     |     |     |     |     |      |      |
| statistic is a  |     |     |     |     |     |     |      |      |
| measure of      |     |     |     |     |     |     |      |      |
| central         |     |     |     |     |     |     |      |      |
| tendency where  |     |     |     |     |     |     |      |      |
| half of the     |     |     |     |     |     |     |      |      |
| observations    |     |     |     |     |     |     |      |      |
| fall above the  |     |     |     |     |     |     |      |      |
| measure and     |     |     |     |     |     |     |      |      |
| half below.     |     |     |     |     |     |     |      |      |
| Medians for     |     |     |     |     |     |     |      |      |
| sub-groups do   |     |     |     |     |     |     |      |      |
| not necessarily |     |     |     |     |     |     |      |      |
| add up to the   |     |     |     |     |     |     |      |      |
| median for the  |     |     |     |     |     |     |      |      |
| whole group. In |     |     |     |     |     |     |      |      |
| some instances, |     |     |     |     |     |     |      |      |
| although more   |     |     |     |     |     |     |      |      |
| than 50% of     |     |     |     |     |     |     |      |      |
| survey          |     |     |     |     |     |     |      |      |
| respondents     |     |     |     |     |     |     |      |      |
| indicated that  |     |     |     |     |     |     |      |      |
| they have       |     |     |     |     |     |     |      |      |
| non-VA          |     |     |     |     |     |     |      |      |
| insurance, less |     |     |     |     |     |     |      |      |
| than 50%        |     |     |     |     |     |     |      |      |
| provided a      |     |     |     |     |     |     |      |      |
| dollar amount   |     |     |     |     |     |     |      |      |
| causing the     |     |     |     |     |     |     |      |      |
| median value to |     |     |     |     |     |     |      |      |
| be zero. If all |     |     |     |     |     |     |      |      |
| of those who    |     |     |     |     |     |     |      |      |
| indicated       |     |     |     |     |     |     |      |      |
| having non-VA   |     |     |     |     |     |     |      |      |
| insurance       |     |     |     |     |     |     |      |      |
| provided a      |     |     |     |     |     |     |      |      |
| dollar amount,  |     |     |     |     |     |     |      |      |
| the median      |     |     |     |     |     |     |      |      |
| value would     |     |     |     |     |     |     |      |      |
| have been       |     |     |     |     |     |     |      |      |
| somewhat above  |     |     |     |     |     |     |      |      |
| zero.           |     |     |     |     |     |     |      |      |
+-----------------+-----+-----+-----+-----+-----+-----+------+------+

Source: DIC, SDVI, VGLI, and SGLI Survivor Surveys and VA Administrative
Electronic Files.

### Income Maintenance

Financial need can be thought of as maintaining a minimum level of
income, as opposed to fully maintaining the level of income after the
veteran's death that is the same as prior to the veteran's death. A
minimum threshold of income could be applied to define this level such
as the poverty level defined by the Department of Health or Human
Services. The poverty level, though, is not likely to be a standard that
most citizens would accept as sufficient gratitude for the service of
veterans with service-connected disabilities. Therefore, a certain
percent above the poverty level such as 50% may be considered as a more
appropriate standard. A standard could also be based on comparison to
the income of survivors of disabled non-veterans. As stated earlier,
Congress did not provide specific guidance on exactly what constitutes
an acceptable standard of living. Hence, we provide alternative measures
to provide a range of comparison. We are not necessarily recommending
that one measure is superior to another.

#### Comparison to Poverty Level

The Department of Health and Human Services has poverty guidelines for
different household sizes. For the year 2000, the poverty threshold for
a household of one is \$8,350. Each additional person increases the
poverty threshold by \$2,900.

The average household incomes for survivors reported previously are well
above the poverty line. The question then is: are there any survivor
households at the low end of the income range below poverty? Table 18
reports the percent of survey respondents below poverty and below 150%
of the poverty line by program based on income reported by survey
respondents (excluding life insurance payments).[^13]

[]{#__RefHeading___Toc515772060 .anchor}Table 18. Surviving Spouses
Below Poverty and Below 150% of Poverty

  --------------------- ------------------------ ------------------------
  Program               \% Below Poverty         \% Below 150% of Poverty

  All Surviving Spouses                          
  Surveyed                                       

  DIC                   1%                       10%

  SDVI                  8%                       21%

  SGLI                  10%                      22%

  VGLI                  10%                      22%

  Surviving Spouses of                           
  Severely or                                    
  Catastrophically                               
  Disabled Veterans                              

  DIC                   2%                       10%

  SDVI                  8%                       18%
  --------------------- ------------------------ ------------------------

Source: Survivor Surveys

The percent below poverty ranges from 1% for DIC to 10% for SGLI/VGLI.
Note that there is no statistical significant difference in these
numbers by veteran's disability status. The DIC benefit payment in the
year 2000 was \$10,572 for survivors without children dependents while
the poverty line was \$8,350 for a one-person household. Unless the
survivor has several dependents combined with low income, the likelihood
of DIC survivor households falling below the poverty line is very low.
The average amount of additional annual income needed to rise above
poverty is only about \$300 to \$400 for SDVI, SGLI, or VGLI. For DIC,
the additional annual amount needed is only about \$50.

The percent below 150% of the poverty line varies between 10% for DIC
and 22% for SGLI or VGLI. However, the average amount of additional
annual income needed to rise 50% above poverty is only approximately
\$1,200 for SDVI, SGLI, or VGLI. For DIC, the additional annual amount
needed is about \$700.

The income used in the calculations for this does not include life
insurance payments. If such payments are included, then virtually all
households would be above both poverty thresholds for the transition
period after the veteran's death. For example, SGLI and VGLI survivors
receive an average of about \$200,000 and \$100,000 in total life
insurance payments, respectively, reported earlier in this section.
These are significant amounts of income even if spread out over, say,
three or four years. Life insurance payments for DIC and SDVI survivors,
on average, are much less as reported earlier in this section but
enough, in most cases, to keep them above 150% of the poverty level for
three or four years after the veteran's death. This result points to the
importance of life insurance payments for survivor households.

#### Comparison to Survivors of Disabled Non-Veterans

Another standard for assessing whether income of survivors of disabled
veterans is at a minimum acceptable level is to compare their income to
survivors of disabled non-veterans. In order to make this comparison, we
use data from two non-VA data sources, Survey of Income and Program
Participation (SIPP) and Current Population Survey (CPS). These data
sources contain detailed income information, including total personal
income, total earned income, sources of income, and participation in
welfare programs.[^14]

Table 19 lists the average annual income including payments received
from VA for the survivor after veterans' death and for comparable
non-veteran survivors. Major findings are as follows:

-   Survivors of veterans who died in the military or with a
    service-connected disability have average annual incomes that are
    more than \$5,000 higher than survivors of disabled non-veterans.

-   Survivors of veterans with a service-connected disability had lower
    incomes than service-connected veterans, implying that there is a
    decline in financial income following the death of the veteran.[^15]

[]{#__RefHeading___Toc515772061 .anchor}Table 19. Annual Average Income
of Survivors After Spouse's Death (Over 35 Years Old),\
1996 SIPP Data (adjusted to 1999)

  ---------------------------------- -------------- ------------- --------
  Survivor Group                     Mean           Median        Count

  Survivors of veterans who had      \$28,282       \$24,553      57
  service-connected disabilities                                  

  Survivors of non-veterans (in      \$22,675       \$18,419      695
  receipt of survivor benefits in                                 
  addition to Social Security                                     
  benefits)                                                       

  Disabled veterans (individual)     \$39,752       \$35,367      281
  ---------------------------------- -------------- ------------- --------

Source: Survey of Income Program Participation Data, 1996

We also report that survivors of veterans with service-connected
disabilities receive about 40% of their income from VA. Hence, the
payment of benefits from the Department of Veterans Affairs is an
important factor in raising the total income of the recipients. In
analyzing these data, we were not able to control for severity of
disability status in either the veteran group or non-veteran group.
Taking this factor into account, we consider the figures in this table
to be roughly similar to comparable income data from other sources used
in this study.

#### Survivor Assessment of Financial Need

Survey respondents were asked about their perception of financial needs.
Respondents were asked to choose one of the following statements to
describe their current financial situation:

-   Good -- I can take care of my needs and have some money left over

-   Getting by -- I can afford the basic necessities, but little else

-   Poor -- I have to make major sacrifices and cut back on necessities

As shown in Table 20, more than half of DIC survivor respondents (52%)
and SDVI respondents (59%) rated their current financial situation as
less than "good," that is, "getting by" or "poor." Moreover, 56% of DIC
surviving spouse of veterans who had severe or catastrophic disabilities
at time of death indicated that they were "getting by" or "poor"
compared to 48% of those of veterans who did not have severe or
catastrophic disabilities at time of death. The respective figures are
even higher for SDVI respondents. Somewhat more than half of the VGLI
and SGLI respondents reported their financial situation to be "good." As
indicated below, a substantial portion of VGLI respondents' deceased
spouses had service-connected disabilities.

In addition, a higher percentage of surviving DIC/SDVI spouses with
dependent children (66%/71%) rate their financial situation as less than
"good."

[]{#__RefHeading___Toc515772062 .anchor}Table 20. Assessment of Current
Financial Situation by Veteran's Disability Status

  ---------------------- ------------ ------------ ------------ ------------
  Rating                 DIC          SDVI         VGLI         SGLI

  All Surviving Spouse                                          
  Respondents                                                   

  Good                   47%          40%          53%          56%

  Getting By             41%          49%          38%          38%

  Poor                   11%          10%          8%           5%

  Don't Know             1%                        1%           

  Count                  988          310          255          165

  Surviving Spouses of                                          
  Service-Disabled                                              
  Veterans                                                      

  Good                   47%          40%          54%          NA

  Getting By             41%          49%          38%          NA

  Poor                   11%          10%          5%           NA

  Don't Know             1%                        3%           NA

  Count                  988          310          126          NA

  Surviving Spouses of                                          
  Severely or                                                   
  Catastrophically                                              
  Disabled Veterans                                             

  Good                   43%          36%          48%          NA

  Getting By             45%          52%          45%          NA

  Poor                   11%          11%          3%           NA

  Don't Know             1%                        3%           NA

  Count                  551          132          64           NA
  ---------------------- ------------ ------------ ------------ ------------

Source: DIC, SDVI, VGLI, SGLI Survivor Surveys

There is no statistically significant difference in results between
survivors of veterans who were and who were not severely or
catastrophically disabled and between survivors in their transitional
period and beyond transitional period. We also checked whether the
results differ by the length of time a veteran was disabled and did not
find any statistical difference.

Respondents were also asked how much more income they would need not to
have to make sacrifices or cut back in expenses.[^16] As Table 21
indicates, DIC and SDVI surviving spouses reported, on average
(including those without any additional need), the greatest need for
additional income, particularly if they have dependent children.
Surviving spouses with dependent children reported an average amount of
additional income needed per year of \$5,808 (DIC) and \$6,851 (SDVI),
which is significantly higher than for survivors without dependent
children. These average figures include respondents who rated their
financial situation as "good," for whom the additional amount of income
needed is assumed to be zero. We can also note that annual expenditures
of survivors with dependent children run about \$9,000 higher.

The additional perceived annual income needed by DIC survivors of
veterans who had severe or catastrophic disabilities at time of death is
about the same compared to all survivors.

[]{#__RefHeading___Toc515772063 .anchor}Table 21. Reported Additional
Average Annual Income Needed by Surviving Spouses\
(Including Those Without Any Additional Need)

  ------------------------- ---------------------- ----------------------
  Program                   Additional Income      Count
                            Needed                 

  All Surviving Spouse                             
  Respondents                                      

  DIC                       \$3,408                868

  SDVI                      \$4,285                270

  VGLI                      \$3,314                233

  SGLI                      \$2,920                148

  Surviving Spouses of                             
  Severely or                                      
  Catastrophically Disabled                        
  Veterans                                         

  DIC                       \$3,504                478

  SDVI                      \$5,369                115

  VGLI                      \$3,927                55

  SGLI                      NA                     NA

  Surviving Spouses with                           
  Dependent Children                               

  DIC                       \$5,808                123

  SDVI                      \$6,851                43

  VGLI                      \$4,027                90

  SGLI                      \$3,420                79
  ------------------------- ---------------------- ----------------------

Source: DIC, SDVI, VGLI, SGLI Survivor Surveys

It appears that the amount of income required to fulfill the financial
need is much less based on survivor assessment compared to the
before/after household income difference. Instead of a \$20,000 to
\$30,000 annual shortfall, survivors, on average, perceive a financial
need in the range of \$3,000 to \$6,000, depending on whether or not the
survivor has dependents. Partly affecting this is the decrease in
expenditures that result due to one less person in the household. The
decrease in expenditures after death of the veteran is about \$4,800 for
DIC/SDVI survivor respondents and \$6,600 for SGLI/VGLI survivor
respondents.

### Other Needs

Results from the survey of surviving spouses on other needs, including
counseling need of survivors, education and career development, and
health insurance, are discussed here.

#### Counseling

Several questions relating to counseling were asked of surviving spouses
including:

-   Did you receive any counseling to help you cope with your loss
    (bereavement counseling)?

-   Did you take any courses to improve your chances of getting a good
    job since your spouse's death?

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-   If not, did you want to take courses?

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-   Did you receive any counseling to help you find employment?

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```
-   If not, did you want employment counseling?

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-   Did you receive any financial counseling to help you plan your
    income and expenses?

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```
-   If not, did you want financial counseling?

Table 22 shows that 42% and 37% of SGLI and VGLI surviving spouses,
respectively, received bereavement counseling compared to 25% and 26% of
DIC and SDVI surviving spouses, respectively. The table below also
presents the percentage of surviving spouses who took courses to improve
job skills. Again, the percentages of DIC and SDVI surviving spouses who
had employment counseling are significantly less than they are for SGLI
and VGLI surviving spouses. Younger surviving spouses (such as SGLI and
VGLI compared to DIC and SDVI) tend to receive counseling at a higher
rate than those who are older.

[]{#__RefHeading___Toc515772064 .anchor}Table 22. Counseling of
Surviving Spouses

  --------------------------------- --------- --------- --------- --------
  Surviving Spouses                 DIC       SDVI      SGLI      VGLI

  \% Received bereavement           25%       26%       42%       37%
  counseling (Q89)                                                

  \% Took courses to improve job    12%       8%        21%       18%
  skills (Q96)                                                    

  \% Received financial counseling  8%        8%        21%       20%
  (Q102)                                                          

  \% Received employment counseling 2%        1%        1%        2%
  (Q99)                                                           

  The following percentages are                                   
  based on those who did not take                                 
  courses or receive counseling                                   

  \% Wanted to take course (Q97)    18%       23%       28%       36%

  \% Wanted financial counseling    7%        11%       19%       19%
  (Q103)                                                          

  \% Wanted employment counseling   4%        8%        12%       10%
  (Q100)                                                          

  Number of Respondents             988       310       165       255
  --------------------------------- --------- --------- --------- --------

Source: Survivor Surveys

To further assess the need for counseling and training programs, we also
asked the respondents who did not participate if they had wanted to. 18%
and 23% of DIC and SDVI surviving spouses, respectively, versus 28% and
36% of SGLI/VGLI spouses, respectively, wanted to take courses but did
not. The data do not show a correlation between veteran's disability
status and participation in education/training programs.

#### Other Sources of Support

VA benefits could be thought of as being part of a total package
including not only DIC benefits or VA insurance benefits, but also life
insurance from all sources, education benefits, commissary and exchange
services, and health insurance. In this study we view life insurance
benefits from all sources to be an important benefit to replace income
loss attributable to the veteran's death during the transition period.
Earlier in this section we presented tabulations of insurance benefits
received from all sources.

With Chapter 35 educational benefits administered by VA, career
development after the veteran's death is available to help survivors
make a transition to greater financial independence and to help children
pay for college as the veteran might have done if it were not for
service to the nation. These benefits are also available to spouses of
living veterans who are permanently and totally disabled by a
service-connected disability.

VA does not have statistics on the percentage of eligible spouses or
children who participate in VA Chapter 35 program. In our analysis of
responses from the study's survey of survivors, we found that about 2%
of surviving spouses were receiving Chapter 35 benefits at the time of
the survey. This 2% may have included survivors who started their
training before their spouse died. About 12% of the survivor respondents
reported taking courses after the veteran's death to improve their
chances of getting a good job. The average length of training for all
Chapter 35 users is about 17 months, and 85% start their training within
five years after first becoming eligible.

A separate study was recently completed that provided a program
evaluation of the survivors' and dependents' education assistance
program (38 U.S.C., Chapter 35).[^17] A major finding of this study was
that the education benefits have made only marginal differences for
families of veterans who are service-connected or deceased. The report
for this study also makes several recommendations on how to make the
program more effective, including increasing the benefit amounts and
improving communication procedures for the program.

Commissary and exchange services offer discount savings in survivor
purchases of food and other living expenses, but only about a third of
the survivors in our study have access to and take advantage of such
services. Also, the amount of savings gained through the purchases is
modest as survivors are likely to have opportunities to shop at other
discount stores and obtain similar savings. Less than two percent of the
beneficiaries have no health insurance from any source (based on survey
responses).

## 6. Overall Value to the Veteran and Survivor

Overall value of VA programs to the veteran and survivor, as perceived
by the program participant, is part of the study's evaluation of the
adequacy and effectiveness of the programs. This includes the value of
the product, service, and premium paid by the program participants. We
examine participation rates in the program and reasons for participating
and not participating as reflective of the programs' value. We also
analyze survey questions on overall customer satisfaction and
satisfaction with particular features of the programs.

### Participation in VA Insurance Programs

Participation in VA insurance programs is voluntary for servicemembers
and veterans. Table 23 shows the participation rates for the four
insurance programs in 1999. SGLI has the highest participation rate of
95%. Coverage for servicemembers is automatic unless they choose to not
to participate. In contrast, only 18% of SGLI participants choose to
convert to VGLI when they separate or retire from service. Many of them,
of course, obtain life insurance from their civilian employers, and
military aid associations offer lower premium rates for healthy
individuals than VGLI does. SDVI has the lowest participation rate of
3.5%. SDVI insurance coverage is only \$10,000, unless the veteran is
totally or catastrophically disabled, in which case he/she can qualify
for an additional \$20,000. In fact, the participation rate in SDVI is
higher among severely and catastrophically disabled veterans than other
eligible veterans. VMLI has a substantially higher participation rate of
65% of eligibles. VMLI also offers a much higher maximum mortgage
insurance amount of \$90,000 compared to \$10,000 or \$30,000 for SDVI.

[]{#__RefHeading___Toc515772065 .anchor}Table 23. Participation Rates in
the Insurance Programs

  --------------- -------------- -------------- -------------- -------------
  Participation   SGLI           VGLI           SDVI           VMLI

  Yes             95%            18%            3.5%           65%

  No              5%             82%            96.5%          35%
  --------------- -------------- -------------- -------------- -------------

Source: VA Philadelphia Insurance Center

Table 24 shows the percent distribution of applicable survey respondents
who gave certain reasons for participating. On the whole, the most
dominant reasons for participation in the programs were: price of
premium was reasonable; responsibility to family; convenient, did not
have to shop around; and encouragement by the VA/military. These results
are fairly consistent across the four programs. Table 25 shows the
percent distribution of applicable survey respondents who gave certain
reasons for *not* participating. The only dominant reason for not
participating that was consistent across the four programs was: already
had insurance/did not need more insurance. In fact, we determined that
eligible people are less likely to take VA insurance if they have non-VA
insurance. A huge factor affecting non-participation only in the SDVI
program was: not being aware of the program (61%). It is possible that
respondents were informed of this program and their eligibility a long
time ago and they have forgotten about it. Another explanation may be
failure by VA to notify individual of entitlement. However, VA
administrative procedures call for notification of eligibility for SDVI
at the time that the veteran is notified of determination of
service-connected disability.

[]{#__RefHeading___Toc515772066 .anchor}Table 24. Reasons for
Participating in Insurance Programs

  -------------------------- ----------- ----------- ----------- -----------
  Reasons                    SGLI        VGLI        SDVI        VMLI

  Price of premium           41%         44%         29%         21%
  reasonable                                                     

  Convenient, didn't have to 21%         22%         14%         10%
  shop around                                                    

  Responsibility to my       19%         15%         14%         15%
  family                                                         

  Want to cover funeral      5%          2%          10%         40%
  expenses                                                       

  Unqualified for private    1%          4%          16          15%
  sector alternatives due to                                     
  disability                                                     

  Encouraged by VA/Military  31%         16%         16%         2%

  Private sector             1%          2%          1%          3%
  alternatives too expensive                                     

  Encouraged by              0%          2%          1%          0%
  family/friends                                                 

  Other/Do not know/Refused  8%          11%         24%         14%

  Number of Respondents      416         416         400         344

  Note: Totals may add to                                        
  over 100% since                                                
  respondents were allowed                                       
  to provide more than one                                       
  reason.                                                        
  -------------------------- ----------- ----------- ----------- -----------

Source: Q3, 18, and 38 of Veteran Surveys and Q3 of SGLI Survey

[]{#__RefHeading___Toc515772067 .anchor}Table 25: Reasons for Not
Participating in Insurance Programs

  -------------------------- ----------- ----------- ----------- -----------
  Reasons                    SGLI        VGLI        SDVI        VMLI

  Already had                48%         22%         11%         6%
  insurance/didn't need                                          
  (more) insurance                                               

  Lack of money              6%          8%          2%          2%

  Single, no dependents      9%          1%          1%          5%

  Had sufficient             3%          1%          2%          2%
  savings/investments                                            

  Do not want insurance from 8%          8%          2%          0%
  VA/Government                                                  

  Premiums not competitive   6%          10%         1%          1%

  Too expensive              0%          0%          4%          5%

  Have dependents, but don't 1%          1%          1%          0%
  believe in insurance                                           

  Maximum face amount too    0%          0%          1%          1%
  low                                                            

  Was not aware of the       5%          6%          61%         13%
  program                                                        

  Didn't get forms in on     1%          1%          1%          0%
  time                                                           

  Too much paperwork         1%          1%          0%          0%

  Did not have a mortgage    NA          NA          NA          28%
  when received the SAH                                          
  grant                                                          

  Do not remember receiving  NA          NA          NA          15%
  an SAH grant                                                   

  Applied but turned down    0%          0%          0%          3%

  Took option to convert to  NA          5%          NA          NA
  commercial insurance                                           

  Was over 70 years old when NA          NA          NA          1%
  received the SAH grant                                         

  Other/Do not know/Refused  16%         29%         18%         23%

  Number of Respondents      424         423         422         376

  Note: Totals may add to                                        
  over 100% since                                                
  respondents were allowed                                       
  to provide more than one                                       
  reason.                                                        
  -------------------------- ----------- ----------- ----------- -----------

Source: Q13, 33, 46 of Veteran Surveys and Q13 of SGLI Survey

### Satisfaction of Takers 

The objectives of our analysis of customer satisfaction of insurance
takers were to:

-   Measure the overall satisfaction level of takers

-   Measure the satisfaction level of takers with specific program
    attributes such as maximum insurance coverage and amount paid for
    insurance coverage

-   Determine which program attributes are the most important in
    affecting overall customer satisfaction

-   Identify areas of improvement that will have the greatest impact on
    satisfaction.

The takers were asked to give a satisfaction rating for the following:

-   Forms for enrolling

-   Brochures/written material on coverage and benefits

-   DoD/VA staff counseling on how much insurance to buy

-   Amount of insurance he/she has

-   Maximum amount you can buy

-   Amount he/she pays for insurance coverage (that is, premium)

-   Helpfulness of DoD/VA staff

-   Age 70 policy termination (applicable to VMLI only)

-   Overall

Satisfaction ratings had five levels of gradation from very satisfied
(5) to very dissatisfied (1). Questions about satisfaction with program
were posed only to those who are participating in the programs. They are
classified as the takers of the insurance programs. For purposes of
analysis, those who answered "not aware of this feature," "don't know,"
or those who "refused" to answer the specific satisfaction question were
not included in computing mean satisfaction scores.

To analyze the survey responses on customer satisfaction, we relied
primarily on the calculation of average ratings and the frequency
distribution of the five satisfaction ratings. We also calculated the
relative importance of each program attribute to overall satisfaction.
Our approach was not to directly ask respondents which attributes
contribute most to their overall satisfaction, but to base it on the
strength of the statistical correlations between the satisfaction with a
given attribute and overall satisfaction. Those attributes with
satisfaction that correlate more strongly with overall satisfaction are
viewed as more important than attributes with little correlation with
overall satisfaction. An attribute can have a low satisfaction score but
still correlate highly with overall satisfaction and vice versa. From a
program manager's point of view, attributes that have the most potential
for improving satisfaction are those with a low satisfaction score but
high correlation with overall satisfaction.

Results showed that most respondents for all programs (over 80% of those
who provided a satisfaction score) were either "satisfied" or "very
satisfied" *overall* with the program. We also found that the overall
satisfaction was more affected by some aspects of the program than
others. In particular, "brochures/written materials," "forms for
enrolling," and "premium" were more important in affecting overall
satisfaction while "VA staff counseling" and "helpfulness of VA staff"
were less important.

#### Average Satisfaction Scores -- Insurance Takers

Average results are shown in Table 26. The satisfaction scores ranged
mostly between 3.6 and 4.2 across the various attributes with a score of
about 4 for overall satisfaction, that is, "satisfied," as opposed to
"very satisfied" or "neutral."[^18] We found no significant differences
in mean satisfaction scores for severely and catastrophically disabled.

[]{#__RefHeading___Toc515772068 .anchor}Table 26. Mean Satisfaction
Scores for Insurance Takers

  ------------------------ ----------- ----------- ----------- -----------
  Satisfaction Attributes  Mean Score                          

                           SGLI        VGLI        SDVI        VMLI

  Forms                    4.2         4.2         4.2         4.1

  Premium                  4.2         4.0         3.9         4.0

  Brochures                4.0         4.0         4.1         3.9

  Amount of current        4.0         3.7         3.4         3.4
  insurance policy                                             

  Maximum insurance amount 3.7         3.6         3.2         3.3

  DoD/VA counseling        3.6         3.6         3.6         3.7

  Range (for common        3.6 -- 4.2  3.6 -- 4.2  3.2 -- 4.2  3.3 -- 4.1
  attributes)                                                  

  Conversion feature       3.6         3.8                     

  Payroll deduction        4.5                                 

  Helpfulness of VA staff              3.8         4.1         3.9

  Age 70 policy expiration                                     3.2

  Range (for all           3.6 -- 4.5  3.6 -- 4.2  3.2 -- 4.2  3.2 -- 4.1
  attributes)                                                  

  Overall Satisfaction     NA[^19]     4.2         3.9         3.9

  Note: 1=Very                                                 
  Dissatisfied,                                                
  2=Dissatisfied,                                              
  3=Neutral, 4=Satisfied                                       
  and 5=Very Satisfied                                         
  ------------------------ ----------- ----------- ----------- -----------

Source: SDVI, VMLI, VGLI, and SGLI Taker Surveys

The average satisfaction scores are generally very similar across the
different insurance programs. Highest satisfaction scores were for:
forms for enrolling; premium (amount that the taker pays for the
insurance); and brochures/written material on coverage and benefits.
With the exception of SGLI, the amount of the taker's current insurance
policy received the least favorable satisfaction ratings. The maximum
insurance amount received the lowest rating for all programs, including
3.2 for SDVI and 3.3 for VMLI. The 3.2 rating for SDVI is not surprising
given that basic policy covers only \$10,000, and the supplemental
policy covers an additional \$20,000. Survey respondents were also
particularly less satisfied with the age 70 policy conversion feature of
the VMLI program with a rating of only 3.2. DoD/VA counseling on how
much insurance to buy was also at the low end of the range of
satisfaction ratings for all programs.

The distribution of satisfaction responses of all respondents is
reported in Table 27. The majority of respondents are either "very
satisfied" or "satisfied" with the program overall, that is, about 80%
for SDVI and VMLI and 90% for VGLI.

[]{#__RefHeading___Toc515772069 .anchor}Table 27. Distribution of
Overall Satisfaction Ratings by Program\
(For Insurance Takers Who Provided Satisfaction Scores)

  --------- ------------ ----------- ---------- -------------- --------------
  Program   Very         Satisfied   Neutral    Dissatisfied   Very
            Satisfied                                          Dissatisfied

  SDVI      27%          54%         9%         6%             4%

  VGLI      33%          58%         7%         3%             1%

  VMLI      23%          56%         12%        8%             2%
  --------- ------------ ----------- ---------- -------------- --------------

Source: SDVI, VMLI, and VGLI Taker Surveys

#### Who is satisfied and who is not?

On the whole, we found that there was relatively little difference in
satisfaction across different veteran groups. In Table 28 we show
results for veteran characteristics that reflect differences in
satisfaction worth noting. However, the results in this table are not as
consistent across the different programs as they are for other results
reported in this section of the Executive Report. Lower satisfaction
occurs for both the SDVI and VMLI programs for disabled veterans who
perceive future life insurance needs to increase.

#### Importance of Program Attributes

Table 29 below shows the relative importance of each attribute to
overall satisfaction in percentage terms. The importance weights are
expressed in percentage terms that add up to 100% and are derived from
statistical correlation analysis. The attributes that contribute the
most to overall satisfaction ratings are: forms, brochures, and the
premium cost, which are, roughly speaking, about equal in importance.
The attributes, helpfulness of VA staff and VA counseling, are of the
least importance to overall satisfaction to insurance takers. These
results are consistent for the three programs reported in Table 29.[^20]

[]{#__RefHeading___Toc515772070 .anchor}Table 28. Characteristics of
Insurance Takers Relating to Overall Satisfaction

  -------------------------------- ------------ ------------ ------------
  Veteran Characteristics          SDVI         VMLI         VGLI

  Perceive future life insurance   Less         Less         
  needs to increase                satisfied    satisfied    

  Service-connected disability                               Less
                                                             satisfied

  Has total assets \> \$125,000    Less                      
                                   satisfied                 

  Age 41-60                                                  Less
                                                             satisfied

  Over 70 years old                Less                      
                                   satisfied                 

  Has VMLI mortgage insurance      More                      
                                   satisfied                 

  Also has VGLI                                 More         
                                                satisfied    

  Also has SDVI                                 More         
                                                satisfied    

  Has some college training or                  More         
  above                                         satisfied    
  -------------------------------- ------------ ------------ ------------

Source: SDVI, VMLI, and VGLI Taker Surveys and Study Team Analysis

[]{#__RefHeading___Toc515772071 .anchor}Table 29. Importance of Program
Attributes for Insurance Takers

  ------------------------------------------ --------- --------- ---------
  Satisfaction Attribute                     SDVI      VMLI      VGLI

  Premiums                                   20%       20%       31%

  Forms                                      20%       20%       21%

  Brochures                                  24%       23%       22%

  Amount of current insurance policy one has 14%       12%       7%

  Maximum insurance amount available         15%       12%       7%

  Helpfulness of VA staff                    3%        3%        4%

  VA/DoD counseling                          3%        4%        4%

  Conversion features                        NA        NA        7%

  Age 70 policy expiration                   NA        3%        NA

  Overall Satisfaction                       100%      100%      100%
  ------------------------------------------ --------- --------- ---------

Source: SDVI, VMLI, and VGLI Taker Surveys

Table 30 indicates which attributes rank high in importance to the
customer but low in the customer's stated satisfaction score. These
"Value Adds" represents the greatest potential for improvement in
overall satisfaction. In particular, the attributes, "amount of
insurance" and "maximum coverage amount you can buy," have a relatively
low satisfaction score, but are relatively important to the customer
(although they are not the most important). Note that, effective April
1, 2000, the maximum amount of coverage was increased from \$200,000 to
\$250,000. Other attributes may be high or higher in importance, but not
low in satisfaction.

[]{#__RefHeading___Toc515772072 .anchor}Table 30. "Value Adds" Based on
High Importance and Low Satisfaction\
-- Insurance Takers

  ----------------------------------------- --------- --------- ---------
  Value Adds - Attributes                   SDVI      VGLI      VMLI

  Maximum insurance amount                  X         X         X

  Amount of current insurance policy                  X         X

  Forms                                                         

  Brochures                                                     

  Helpfulness of VA staff                                       

  Premiums                                  X                   

  VA counseling                                                 
  ----------------------------------------- --------- --------- ---------

Source: SDVI, VGLI, and VMLI Taker Surveys

### Satisfaction of Beneficiaries

Beneficiary respondents were asked two sets of questions related to
satisfaction. The first set of questions include overall satisfaction
with:

-   Forms to fill out to get benefits

-   Amount of time required to fill out forms

-   Brochures/written material that explain benefits

-   Time it took to get benefits started

-   Being able to call a toll free number for help

-   The helpfulness of VA staff

-   Amount of benefits received

As for takers beneficiary satisfaction ratings had five levels of
gradation from very satisfied to very dissatisfied: 5 = very satisfied;
4 = satisfied; 3 = neutral; 2 = dissatisfied, and 1 = very dissatisfied.

The second set of questions, using the same scale, address the relative
ease of:

-   Finding out who to contact at VA

-   Finding out what the survivor was eligible for

-   Understanding the forms and instructions

-   Finding out where to send the forms

-   Getting death certificate and other documents (VA requires the
    claimant to furnish a death certificate)

-   Overall score on the relative ease of getting the benefits.

Tabulations of average survey results showed that most respondents (over
80% of those who provided a satisfaction score) were either "satisfied"
or "very satisfied" *overall*. Satisfaction scores, however, still
showed enough variation to let us assess differences in satisfaction
scores by program attributes.

We also found that some of the most important factors driving overall
satisfaction had relatively lower scores. For example, the benefit
amount and the amount of time it takes to receive benefits are two key
drivers of overall satisfaction that received relatively low
satisfaction ratings.

#### Average Satisfaction Scores -- Surviving Spouses

Table 31 shows mean satisfaction scores for overall satisfaction and 13
attributes of the process. Overall satisfaction for each program was
close to "satisfied," ranging from 3.9 for DIC to 4.4 for SGLI.[^21]
Overall satisfaction with the relative ease to get benefits was also
close to "satisfied," ranging from 4.2 for DIC to 4.3 for SGLI. The
results are similar for respondents of veterans who were severely or
catastrophically disabled, as shown in Table 32.

[]{#__RefHeading___Toc515772073 .anchor}Table 31. Mean Satisfaction
Scores for Surviving Spouses

  ------------------------------- --------- --------- --------- ---------
  Satisfaction and Relative Ease  Mean                          
                                  Score                         

                                  DIC       SDVI      VGLI      SGLI

  Helpfulness of VA staff         4.3       4.2       4.1       4.3

  Forms you had to fill out to    4.1       4.2       4.3       4.2
  get benefits                                                  

  Brochures & written materials   4.1       4.1       4.2       4.1
  explaining benefits                                           

  Amount of time required to fill 4.0       4.2       4.3       4.2
  out forms                                                     

  Being able to call a toll-free  4.0       4.1       4.0       3.9
  number for help                                               

  Time it took to get benefits    3.9       4.0       4.1       4.0
  started                                                       

  Amount of benefits received     3.7       3.8       3.7       4.3

  Overall satisfaction            3.9       4.0       4.1       4.4

  Get the death certificate &     4.5       4.4       4.3       4.3
  other documents                                               

  Find out where to send the      4.5       4.3       4.2       4.3
  forms                                                         

  Find out who to contact         4.3       4.3       4.3       4.2

  Find out benefit eligibility    4.2       4.2       4.1       4.1

  Understand the forms &          4.2       4.0       4.2       4.1
  instructions                                                  

  Relative ease to get benefit    4.2       4.2       4.3       4.3

  Note: 1=Very Dissatisfied,                                    
  2=Dissatisfied, 3=Neutral,                                    
  4=Satisfied and 5=Very                                        
  Satisfied                                                     
  ------------------------------- --------- --------- --------- ---------

Source: Survivor Surveys

[]{#__RefHeading___Toc515772074 .anchor}Table 32. Mean Satisfaction
Scores\
Surviving Spouses of Veterans Who Were Severely or Catastrophically
Disabled

  ----------------------------------------- --------- --------- ---------
  Satisfaction and Relative Ease            Mean                
                                            Score               

                                            DIC       SDVI      VGLI

  Helpfulness of VA staff                   4.2       4.2       3.9

  Forms you had to fill out to get benefits 4.0       4.3       4.2

  Brochures & written materials explaining  4.1       4.1       4.1
  benefits                                                      

  Amount of time required to fill out forms 4.0       4.2       4.3

  Being able to call a toll-free number for 4.0       4.1       3.9
  help                                                          

  Time it took to get benefits started      3.8       4.0       4.0

  Amount of benefits received               3.6       3.7       3.6

  Overall satisfaction with DIC             3.9       4.0       3.9

  Get the death certificate & other         4.4       4.3       4.3
  documents                                                     

  Find out where to send the forms          4.4       4.2       4.0

  Find out who to contact                   4.2       4.2       4.0

  Find out benefit eligibility              4.1       4.1       3.8

  Understand the forms & instructions       4.0       4.0       4.1

  Relative ease to get benefit              4.1       4.3       4.1

  Note: 1=Very Dissatisfied,                                    
  2=Dissatisfied, 3=Neutral, 4=Satisfied                        
  and\                                                          
  5=Very Satisfied                                              
  ----------------------------------------- --------- --------- ---------

Source: Survivor Surveys

Highest satisfaction scores were for: providing/getting required
documents, such as the death certificate (with a range of 4.3 to 4.5);
knowing where to send the forms (4.2 to 4.5); and finding out who to
contact (4.2 to 4.3). With the exception of SGLI, benefit amount has the
lowest satisfaction rating with a range in average score of 3.7 to 3.8,
that is, somewhat less than "satisfied." The time it takes to get
benefits started also has lower satisfaction scores between 3.9 and 4.1
relative to satisfaction scores for other attributes. The adjective
"lower" is used advisedly since the mean scores are close to or above 4,
indicating that respondents are "satisfied."

The percent distributions of responses across the five satisfaction
ratings are reported in Table 33. At the low end, 73% of VGLI survivor
respondents reported either a "satisfied" or "very satisfied" rating
while at the high end 94% of SGLI survivor respondents reported
"satisfied" or "very satisfied." 80% of DIC survey respondents and 84%
of SDVI respondents reported that they were either "satisfied" or "very
satisfied." A related important outcome measure for DIC is the percent
of DIC respondents who report that the DIC program recognizes their
sacrifices "very well" or "fairly well." Based on this study, the result
for this measure is 70%.

[]{#__RefHeading___Toc515772075 .anchor}Table 33. Distribution of
Satisfaction Scores by Program\
(For Surviving Spouses Who Provided Satisfaction Scores)

  ---------- ------------ ------------ ----------- -------------- --------------
  Program    Very         Satisfied    Neutral     Dissatisfied   Very
             Satisfied                                            Dissatisfied

  DIC        24%          56%          12%         6%             2%

  SDVI       30%          54%          7%          4%             6%

  SGLI       52%          42%          4%          1%             1%

  VGLI       31%          42%          11%         13%            3%
  ---------- ------------ ------------ ----------- -------------- --------------

Source: Survivor Surveys

#### Who is satisfied and who is not?

We looked at differences in overall satisfaction scores for different
veteran survivor groups, as shown in Table 34. In particular, we found
that groups with less satisfaction included: those who had to cut at
least one expense after the veteran's death; has health problems; has
dependent child; provided full-time care to veteran (DIC); and/or
veteran was severely or catastrophically disabled, as shown in the table
below.

[]{#__RefHeading___Toc515772076 .anchor}Table 34. Characteristics of
Survivors Relating to Overall Satisfaction

  ---------------------------- ----------- ----------- ----------- -----------
  Survivor Characteristics     DIC         SDVI        SGLI        VGLI

  Had to cut at least one      Less        Less        Less        Less
  expense after veteran's      satisfied   satisfied   satisfied   satisfied
  death (Q65a)                                                     

  Has health problem (Q8)      Less        Less                    Less
                               satisfied   satisfied               satisfied

  Under 60 years old (Q2)      Less                                
                               satisfied                           

  Has dependent child (Q4 &    Less                                Less
  Q5)                          satisfied                           satisfied

  Provided full-time care to   Less                                
  veteran (Q72b)               satisfied                           

  Working (Q2 and Q52)                     Less                    
                                           satisfied               

  Retired -- defined as no     More                    Less        
  earnings /self employment    satisfied               satisfied   
  income and over 60 years old                                     
  (Q2 & Q52)                                                       

  Received life insurance                              Less        
  payments from a non-VA                               satisfied   
  source (Q120)                                                    

  0-2 years since spouse's                             More        
  death                                                satisfied   

  Veteran had severe or        Less                                Less
  catastrophic disabilities    satisfied                           satisfied
  ---------------------------- ----------- ----------- ----------- -----------

Source: Survivor Surveys

#### Importance of Program Attributes

Table 35 below states the relative importance of the detailed attributes
to overall satisfaction in percentage terms. The importance weights are
expressed in percentage terms that add up to 100% (except for rounding).
Except for SGLI, the attribute that contributes the most to the overall
satisfaction rating is the amount of the benefit received. It is also
the attribute with the lowest satisfaction score for DIC, SDVI, and
VGLI. Other attributes that contribute significantly to the overall
satisfaction rating are forms, amount of time required to fill out
forms, brochures, and understanding the forms and instructions. The
attributes, helpfulness of VA staff, toll-free number, and finding out
where to send the forms, are of the least importance to overall
satisfaction. These results are very consistent across the different
programs.

Table 36 indicates which attributes rank high in importance to the
customer but low in customer's stated satisfaction score. These "Value
Adds" represents the greatest potential for improvement in overall
satisfaction. With the exception of SGLI, one attribute, in particular,
benefit amount, has the lowest satisfaction score, but it is viewed as
the most important to the customer. Other areas for potential
improvement are time to fill out forms, understand the forms and
instructions, explanation of benefits, and time to get benefit.

[]{#__RefHeading___Toc515772077 .anchor}Table 35. Importance of Program
Attributes for Surviving Spouses

  ------------------------------------- -------- -------- -------- --------
  Satisfaction and Relative Ease        DIC      SDVI     SGLI     VGLI

  Amount of benefits received           18%      17%      12%      13%

  Amount of time required to fill out   13%      12%      14%      14%
  forms                                                            

  Forms you had to fill out to get      12%      12%      15%      14%
  benefits                                                         

  Brochures and written materials that  12%      11%      11%      15%
  explain benefits                                                 

  Ease of getting benefits              12%      9%       11%      11%

  Understand the forms & instructions   12%      12%      11%      12%

  Get the death certificate & other     9%       9%       7%       7%
  documents                                                        

  Time it took to get benefits started  8%       10%      10%      8%

  Find out benefit eligibility          1%       2%       2%       1%

  Find out who to contact               1%       2%       2%       1%

  Find out where to send the forms      1%       1%       2%       1%

  Helpfulness of VA staff               1%       1%       2%       1%

  Being able to call a toll-free number 1%       1%       2%       1%
  for help                                                         
  ------------------------------------- -------- -------- -------- --------

Source: Survivor Surveys

[]{#__RefHeading___Toc515772078 .anchor}Table 36. "Value Adds" Based on
High Importance and Low Satisfaction\
-- Surviving Spouses

  ------------------------------------- -------- -------- -------- --------
  Value Adds - Attributes               DIC      SDVI     SGLI     VGLI

  Amount of time required to fill out   X        X        X        
  forms                                                            

  Understand the forms & instructions   X        X        X        X

  Amount of benefits received           X        X                 X

  Brochures and written materials that  X        X        X        
  explain benefits                                                 

  Forms you had to fill out to get      X                 X        
  benefits                                                         

  Time it took to get benefits started           X        X        X

  Ease of getting benefits                                         

  Get the death certificate & other                                
  documents                                                        

  Find out benefit eligibility                                     

  Find out who to contact                                          

  Find out where to send the forms                                 

  Helpfulness of VA staff                                          

  Being able to call a toll-free number                            
  for help                                                         
  ------------------------------------- -------- -------- -------- --------

Source: Survivor Surveys

## 7. Cost of Insuring Service-Connected Disabled Veterans

In this section we report the cost and funding of providing life
insurance to disabled veterans who are eligible for certain subsidized
VA insurance programs under which they can purchase insurance at
standard premium rates (rates for healthy individuals). These programs
require subsidies because the standard premium rates charged to veterans
are not sufficient to fund the full costs of the programs. This section
addresses Requirements \# 4 and \# 5 as listed in Section 1.

As discussed in Section 1, there are three such programs currently
available to disabled veterans:

-   The **[Service-Disabled Veterans Insurance (SDVI)]{.underline}**
    program, which makes up to \$30,000 in life insurance available to
    veterans with service-connected disabilities,

-   The **[Veterans' Mortgage Life Insurance (VMLI)]{.underline}**
    program, which makes up to \$90,000 of mortgage life insurance
    available to severely disabled veterans who receive grants for
    Specially Adapted Housing, and

-   The **[Veterans' Group Life Insurance (VGLI)]{.underline}** program,
    which provides SGLI policyholders the option of converting their
    SGLI coverage (available in \$10,000 increments up to a maximum of
    \$200,000 at time of study) to 5-year renewable term insurance upon
    separation from the service, regardless of the condition of their
    health.

A fully-funded life insurance program requires that, over the lifetime
of the group of policies, the premium income, with interest, will be
sufficient to fund the benefits paid out. If the premium income, with
interest, is not sufficient, then the insurance company suffers a loss
on that set of policies.

With the exception of one-year term insurance, fully-funded insurance
also requires build-up of a reserve. The reason for the reserve is that,
in the early years of the policy, the cost of insurance each year is
less than the premium collected in that year, but in the later years of
the policy the cost of insurance is greater than the premium collected.

All three of the insurance programs described above, at the time they
originated, intended to make insurance available to disabled veterans at
premium levels which were at (or close to) standard premium rates (that
is, competitive with rates offered by commercial insurers to healthy
individuals). As a result, these premiums do not cover the full cost of
insurance, and the programs are not fully-funded (that is,
self-supporting) from premium income alone. Of course, this is all in
keeping with Congressional intent of making life insurance coverage (i)
readily available and (ii) affordable to veterans and separating
servicemembers, whether they are healthy or disabled. Therefore, by
design, these programs need a subsidy to enable them to operate and
remain solvent.

The need for subsidies under the SDVI and VMLI programs, which only
cover disabled veterans, is quite clear since premiums for both programs
are at standard rates. Less evident is the need for the VGLI program to
be subsidized since it is available to both healthy and unhealthy VGLI
policyholders. When servicemembers separate from the service, they need
to decide whether to convert their SGLI to VGLI or to convert their
coverage to a commercial insurance carrier. Veterans desiring to
purchase permanent life insurance will be able to convert to a permanent
plan with any of the participating companies regardless of their health
status. For veterans desiring to purchase term insurance, healthy
individuals will generally seek out the lowest premium, commercial term
insurance for which they qualify; while unhealthy individuals will find
that they are either uninsurable or that commercial term insurance
premium rates applicable to them are unaffordable. As a result, the
unhealthy individuals seeking term insurance will be more likely to
convert their SGLI to VGLI. This selection process generally results in
higher risk (that is, poorer health) veterans opting for VGLI and
healthy individuals leaving VGLI, resulting in the need to subsidize the
VGLI program.

### Sources of Funding of Program Subsidies

##### Service-Disabled Veterans Insurance (SDVI) & Veterans' Mortgage Life Insurance (VMLI)

Because of their reliance upon annual subsidies in order to be able to
pay claims and other program expenses, both the SDVI and VMLI programs
operate on a virtually pay-as-you-go basis. Each year, both programs
receive annual federal government contributions from the Veterans
Insurance and Indemnities (VI&I) appropriation (established by Congress
and maintained by VA) in such amounts as are required to meet the year's
operating deficit. VA actuaries determine annual reserves for each
program (in amounts needed if the programs were fully-funded) and report
them in their insurance financial statements.

##### Veterans' Group Life Insurance (VGLI)

Unlike SDVI and VMLI, the source of VGLI's subsidy is not the VI&I
appropriation but rather the SGLI fund. In a manner similar to the way
that the VI&I provides annual subsidies to SDVI and VMLI to keep them
solvent, the SGLI fund makes annual transfers of funds to meet VGLI's
operating deficit and changes in reserve requirements. Annually, as a
part of the ongoing financial operation of the SGLI fund, reserves for
future VGLI costs (based upon anticipated future premium deficiencies in
the VGLI program) are actuarially determined and reported in the SGLI
financial statements.

Since SGLI, besides being the source of subsidy of VGLI, is also a
self-supporting program on its own, SGLI premium levels must be set
somewhat higher than the level needed to fully-fund SGLI. Therefore,
SGLI policyholders subsidize the VGLI program by financing the
additional cost related to those veterans who are disabled or in poor
health at the time they convert their coverage to VGLI.

### Analysis of Program Subsidies

Our analysis of the SDVI, VMLI, and VGLI program subsidies consisted of:

-   A compilation of the annual subsidies under each program for the
    years 1990 through 2020, based upon actual amounts from 1990 through
    1999 and projected amounts from 2000 through 2020. The results of
    this analysis are shown in Table 37.

-   A compilation of the total annual premiums and annual subsidies
    under each program for the years 1990 through 2020, with each year's
    subsidy expressed as a percent of that year's total premium. The
    results of this analysis are shown in Table 38.

Both the actual past information (for 1990-1999) and the projected
future information (for 2000-2020) for Table 37 and Table 38 were
obtained from VA actuaries at VA Regional Office and Insurance Center in
Philadelphia. All SDVI and VMLI information in these tables is reported
on a fiscal year-end 9/30 basis; all VGLI information is reported on a
plan year-end 6/30 basis. As noted at the bottom of the tables, since
VGLI premium reductions are expected in the future, VA actuaries did not
feel it would be meaningful to project annual subsidies for the VGLI
program beyond the year 2010.

It should also be noted that the SDVI subsidy and premium information in
Table 37 and Table 38 include both Basic and Supplemental SDVI.

Projected results for years 2000-2010 assume that the current premiums
charged SGLI and VGLI participants will remain in effect throughout the
projection. Since substantial gains from operations are expected in the
future, which will lead to SGLI and/or VGLI premium reductions, actual
future annual premiums and subsidies could differ significantly from
those shown. Also, as a result of this uncertainty, projections beyond
2010 are not shown.

The dollar amounts of annual SDVI and VGLI subsidies fluctuated
significantly over the years 1990 through 1999. VMLI subsidy levels, on
the other hand, have been fairly stable and grading upward over the same
time period.

[]{#__RefHeading___Toc515772079 .anchor}Table 37. History of
Subsidization of VA Insurance Programs\
Actual Through 1999; Projected 2000-2020

  ------ ------------ ----------- ------------ ---------------- ------------
  Year   Subsidy (\$)                          Subsidy (\$)     Total (\$)
         From VI&I                             from SGLI        

         SDVI         VMLI        Sub-Total    VGLI\*           

  1990   8,268,000    3,399,000   11,667,000   10,328,323       21,995,323

  1991   8,840,000    4,246,000   13,086,000   18,987,768       32,073,768

  1992   19,804,000   3,336,000   23,140,000   21,674,339       44,814,339

  1993   15,795,000   3,705,000   19,500,000   23,181,638       42,681,638

  1994   6,989,500    5,429,000   12,418,500   8,368,428        20,786,928

  1995   28,504,689   5,818,000   34,322,689   26,570,635       60,893,324

  1996   34,283,000   6,157,000   40,440,000   15,202,216       55,642,216

  1997   29,705,510   5,902,299   35,607,809   11,418,980       47,026,789

  1998   43,430,000   5,139,930   48,569,930   (10,228,654)     38,341,276

  1999   34,364,000   6,061,001   40,425,001   (13,547,876)     26,877,125

  2000   20,470,000   6,205,519   26,675,518   20,300,000       46,975,518

  2001   11,710,000   6,356,593   18,066,593   21,400,000       39,466,593

  2002   27,006,869   6,303,018   33,309,887   20,200,000       53,509,887

  2003   27,925,583   6,400,365   34,325,949   19,100,000       53,425,949

  2004   28,830,979   6,512,608   35,343,587   18,700,000       54,043,587

  2005   29,730,615   6,636,658   36,367,273   17,800,000       54,167,273

  2006   30,546,524   6,834,342   37,380,866   16,400,000       53,780,866

  2007   31,297,997   6,953,587   38,251,584   17,000,000       55,251,584

  2008   32,018,403   7,128,526   39,146,928   17,500,000       56,646,928

  2009   32,473,605   7,286,441   39,760,046   16,900,000       56,660,046

  2010   32,859,839   7,404,801   40,264,641   16,800,000       57,064,641

  2011   33,096,034   7,510,605   40,606,639   N/A              N/A

  2012   33,245,540   7,593,855   40,839,395   N/A              N/A

  2013   33,331,390   7,655,256   40,986,647   N/A              N/A

  2014   33,338,034   7,672,072   41,010,106   N/A              N/A

  2015   33,321,275   7,670,756   40,992,031   N/A              N/A

  2016   33,237,372   7,675,572   40,912,944   N/A              N/A

  2017   32,883,353   7,658,828   40,542,181   N/A              N/A

  2018   32,264,855   7,565,305   39,830,160   N/A              N/A

  2019   31,763,754   7,441,777   39,205,532   N/A              N/A

  2020   31,200,434   7,356,067   38,556,501   N/A              N/A
  ------ ------------ ----------- ------------ ---------------- ------------

\* Note: Since VGLI premium reductions are expected in the future, it
would not be meaningful\
to project annual subsidies for the VGLI program beyond the year 2010.

Source: VA Philadelphia Insurance Center

[]{#__RefHeading___Toc515772080 .anchor}Table 38. History of
Subsidization of VA Insurance Programs as a Percent of Premiums Paid\
Actual Through 1999; Projected 2000-2020

  ------ ------------ ------------ --------- ----------- ----------- --------- ------------- -------------- ---------
  Year   SDVI                                VMLI                              VGLI                         

         Premiums     Subsidy (\$) Subsidy   Premiums    Subsidy     Subsidy   Premiums (\$) Subsidy (\$)   Subsidy
         (\$)                      as % of   (\$)        (\$)        as % of                                as % of
                                   Premium                           Premium                                Premium

  1990   19,033,000   8,268,000    43%       1,360,000   3,399,000   250%      31,140,051    10,328,323     33%

  1991   20,899,000   8,840,000    42%       1,306,000   4,246,000   325%      33,321,298    18,987,768     57%

  1992   19,743,000   19,804,000   100%      1,382,000   3,336,000   241%      36,161,327    21,674,339     60%

  1993   21,434,000   15,795,000   74%       1,529,000   3,705,000   242%      44,760,508    23,181,638     52%

  1994   33,460,756   6,989,500    21%       2,132,000   5,429,000   255%      57,886,218    8,368,428      14%

  1995   34,034,793   28,504,689   84%       1,774,000   5,818,000   328%      68,939,458    26,570,635     39%

  1996   33,025,775   34,283,000   104%      2,210,000   6,157,000   279%      77,926,256    15,202,216     20%

  1997   34,089,974   29,705,510   87%       2,140,439   5,902,299   276%      91,510,318    11,418,980     12%

  1998   35,920,210   43,430,000   121%      2,178,333   5,139,930   236%      103,949,444   (10,228,654)   -10%

  1999   35,624,740   34,364,000   96%       2,240,887   6,061,001   270%      110,078,877   (13,547,876)   -12%

  2000   36,241,663   20,470,000   56%       2,238,827   6,205,519   277%      101,400,000   20,300,000     20%

  2001   36,487,136   11,710,000   32%       2,244,934   6,356,593   283%      111,500,000   21,400,000     19%

  2002   36,681,882   27,006,869   74%       2,283,603   6,303,018   276%      120,000,000   20,200,000     17%

  2003   36,853,502   27,925,583   76%       2,323,795   6,400,365   275%      128,700,000   19,100,000     15%

  2004   36,998,615   28,830,979   78%       2,365,074   6,512,608   275%      138,700,000   18,700,000     13%

  2005   37,115,094   29,730,615   80%       2,412,875   6,636,658   275%      149,300,000   17,800,000     12%

  2006   37,198,668   30,546,524   82%       2,444,179   6,834,342   280%      159,800,000   16,400,000     10%

  2007   37,247,431   31,297,997   84%       2,482,457   6,953,587   280%      168,800,000   17,000,000     10%

  2008   37,257,451   32,018,403   86%       2,514,634   7,128,526   283%      177,800,000   17,500,000     10%

  2009   37,221,557   32,473,605   87%       2,535,230   7,286,441   287%      188,500,000   16,900,000     9%

  2010   37,134,655   32,859,839   88%       2,550,483   7,404,801   290%      199,500,000   16,800,000     8%

  2011   36,987,546   33,096,034   89%       2,562,043   7,510,605   293%      N/A           N/A            N/A

  2012   36,768,530   33,245,540   90%       2,564,744   7,593,855   296%      N/A           N/A            N/A

  2013   36,467,600   33,331,390   91%       2,559,680   7,655,256   299%      N/A           N/A            N/A

  2014   36,081,611   33,338,034   92%       2,550,638   7,672,072   301%      N/A           N/A            N/A

  2015   35,615,623   33,321,275   94%       2,543,419   7,670,756   302%      N/A           N/A            N/A

  2016   35,075,693   33,237,372   95%       2,529,802   7,675,572   303%      N/A           N/A            N/A

  2017   34,462,465   32,883,353   95%       2,500,899   7,658,828   306%      N/A           N/A            N/A

  2018   33,779,623   32,264,855   96%       2,469,044   7,565,305   306%      N/A           N/A            N/A

  2019   33,027,358   31,763,754   96%       2,445,460   7,441,777   304%      N/A           N/A            N/A

  2020   32,204,003   31,200,434   97%       2,424,957   7,356,067   303%      N/A           N/A            N/A
  ------ ------------ ------------ --------- ----------- ----------- --------- ------------- -------------- ---------

Note: Since VGLI premium reductions are expected in the future, it would
not be meaningful\
to project annual subsidies for the VGLI program beyond the year 2010.

Source: VA Philadelphia Insurance Center

The only negative annual subsidies in Table 38 were for VGLI for the
years ended 6/30/98 and 6/30/99. During this period, there was a
significant improvement in VGLI mortality and annual VGLI premiums
exceeded annual VGLI death claims and other program expenses. As a
result, in each of these two years there was a transfer back to SGLI
from VGLI, rather than the usual transfer from SGLI to keep VGLI
solvent. (Note: Due to the several years of favorable VGLI experience,
VA reduced VGLI premiums (by an average of 30 percent) for those under
age 50 effective April 1, 1999. This is expected to restore the program
to the more common position of needing an annual transfer from SGLI to
meet its operating deficit.)

The annual subsidies required to meet the operating deficits of these
programs can be thought of as an approximation of the annual premium
shortfalls for the programs, which arise because standard premiums are
being charged to many who may be living medically substandard lives.
Thus, it is appropriate to calculate (as done in Table 38) the annual
subsidy as a percent of annual premium for each program and to observe
how this percentage changes over time and differs from program to
program.

As an illustration of how these percentages might be interpreted,
suppose that the year-to-year subsidy as a percent of premium for a
particular program was 50%. Under this scenario, one could say that the
approximate level of premium which would have been necessary for the
program to be fully-funded, on average, was 150% of the actual premium
charged.

Based upon the percentages shown in Table 38 for each of the three
programs, the relative levels of subsidy (measured not in dollars, but
as a percent of premiums) over the years 1990 through 1999 are as
follows:

-   VMLI has required the heaviest subsidy, averaging 270% of premiums
    over these years,

-   SDVI has required the next largest subsidy, averaging 80% of
    premiums over 1990 -- 1999, and

-   VGLI has required the least subsidy, averaging 17% of premiums over
    1990 -- 1999.

These results are expected, recognizing that:

-   The VMLI program generally covers the most severely disabled
    individuals out of the three programs under consideration.

-   The VGLI program (unlike VMLI and SDVI, which cover
    [only]{.underline} disabled individuals) covers both healthy and
    unhealthy veterans. Thus, much of the experience under this program
    is favorable healthy life experience.

-   The SDVI program covers only disabled individuals, whose
    disabilities are, on average, less severe than those covered by
    VMLI. Therefore, it makes sense for the subsidy for this program
    (expressed as a percent of premiums) to be in between the VMLI and
    VGLI subsidy levels.

### Cost of Additional SDVI Coverage

Consideration in this study was also given to estimating the subsidy
costs for increasing SDVI Basic coverage from \$10,000 to \$50,000 and
reducing the premiums by basing the rates on the 1980 mortality rate
tables. We estimate the additional costs for newly eligible veterans as
well as current takers.

The following assumptions are made in developing the cost estimates: No
waiver of premium provisions will be available in the additional
\$40,000 coverage; premiums charged will be based on the 1980 mortality
tables; 50% of the currently insured will purchase the additional
coverage; lapse (non-renewal) rate is 2%; and interest rate is 5%. In
addition, a key parameter affecting the cost results is the assumption
for participation rate of the newly eligible veterans. The overall
participation for the total population of SDVI eligible veterans is
about 3.5%. Increasing the coverage and reducing the premium rate are
very likely to result in higher participation rates. However, the
specific level of increased participation is difficult to predict, and
therefore, we have specified alternative assumptions that reflect a
range of plausible rates. In particular, we specify a range of 6% to 25%
participation rate for newly eligible veterans. We assume that newly
eligible veterans who chose to participate in VGLI will not participate
in SDVI since they will already have a substantial amount of life
insurance coverage.

Estimates vary from \$57 to \$71 million for the year 2002 and from \$76
to \$162 million for the year 2010, reflecting the range in
participation rates from 6% to 25%. Table 39 provides the estimates for
three alternatives.

[]{#__RefHeading___Toc515772081 .anchor}Table 39. SDVI Cost to Offer
\$40,000 of Additional Coverage

  ----------- --------- --------------- ------------ ------------- --------------
  Fiscal Year Policy    Insurance       Premiums     Death Claims  Government
              Count     Amount                                     Subsidy
                                                                   Required

  New Issues:                                                      
  5,000 in                                                         
  first year                                                       

  2002        69,948    2,797,904,705   39,959,886   97,101,828    57,141,942

  2003        71,104    2,844,142,167   38,727,228   100,256,353   61,529,125

  2004        72,160    2,886,392,996   37,370,079   103,318,194   65,948,116

  2005        73,121    2,924,836,004   36,569,600   106,280,980   69,711,380

  2006        73,992    2,959,671,453   46,627,909   109,119,669   62,491,759

  2007        74,778    2,991,109,240   45,478,273   111,820,615   66,342,342

  2008        75,484    3,019,358,736   44,496,377   114,380,153   69,883,776

  2009        76,116    3,044,624,368   43,679,034   116,799,048   73,120,013

  2010        76,677    3,067,070,066   43,021,506   119,113,661   76,092,155

  New Issues:                                                      
  10,000 in                                                        
  first year                                                       

  2002        79,723    3,188,924,411   42,674,288   104,572,270   61,897,982

  2003        85,436    3,417,449,417   42,947,481   112,638,561   69,691,079

  2004        90,837    3,633,490,646   42,863,645   120,551,798   77,688,153

  2005        95,936    3,837,450,256   43,780,834   128,312,572   84,531,738

  2006        100,744   4,029,741,240   55,608,810   135,901,995   80,293,185

  2007        105,269   4,210,778,503   56,272,495   143,309,890   87,037,395

  2008        109,524   4,380,967,691   57,138,326   150,537,224   93,398,898

  2009        113,518   4,540,708,699   58,197,248   157,581,639   99,384,391

  2010        117,259   4,690,360,326   59,437,693   164,476,193   105,038,500

  New Issues:                                                      
  20,000 in                                                        
  first year                                                       

  2002        99,266    3,970,644,577   48,111,593   119,516,820   71,405,227

  2003        114,090   4,563,585,536   51,401,106   137,409,722   86,008,616

  2004        128,176   5,127,047,977   53,867,677   155,029,379   101,161,702

  2005        141,547   5,661,880,281   58,225,630   172,390,248   114,164,618

  2006        154,223   6,168,920,499   73,598,559   189,485,678   115,887,119

  2007        166,225   6,648,993,310   77,894,448   206,312,274   128,417,826

  2008        177,572   7,102,896,825   82,460,997   222,880,118   140,419,121

  2009        188,286   7,531,421,878   87,277,326   239,180,527   151,903,201

  2010        198,383   7,935,317,086   92,318,049   255,239,865   162,921,816

  Notes: 1.                                                        
  No waiver                                                        
  of premiums                                                      
  will be                                                          
  allowed. 2.                                                      
  Premiums                                                         
  based on                                                         
  1980 CSO                                                         
  Basic                                                            
  Tables and                                                       
  5%                                                               
  interest.                                                        
  ----------- --------- --------------- ------------ ------------- --------------

Source: VA SDVI Administrative Electronic Files and Study Team Analysis

## 8. Summary of Findings and Recommendations 

### Findings

In providing an overall synthesis of recommendations, we first review
the question of whether or not DIC and the insurance programs are
fulfilling their legislative intent. As discussed in Section 1, the
study team reviewed the legislative history of the programs and
developed a recommended set of outcome measures based on this review and
VA's own draft measures. Table 1 in Section 1 lists the recommended
outcomes, goals, and measures for each program. We applied these
measures in conducting the study.

Congress only provided general guidance on the expected outcomes of the
program, not specific parameters. For the insurance programs, the key
emphasis is on making insurance *available and affordable* to
servicemembers and veterans, regardless of health or disability status.
For DIC, the key emphasis is on assuring that survivors of veterans have
an appropriate level of income support following the death of the
veteran such that they attain a minimum level of income. Another
important outcome is that the programs achieve a high value as perceived
by the program participant.

The study team relied on several measures to evaluate actual outcomes
against expected outcomes. The outcome of available and affordable
insurance was based on comparisons to insurance in the private sector.
The outcome of appropriate level of income support for survivors was
evaluated by alternative measures of a minimum threshold of household
income including: poverty level; 50% above the poverty level; comparison
of disabled veteran survivor income to disabled non-veteran survivor
income; and self-assessment of financial need. The outcome of high value
perceived by the program participant was assessed by analysis of survey
responses to questions on customer satisfaction and expectations.

Table 40 presents the highlights of study results that relate to the
outcomes and goals listed in Table 1. In summary, the study findings
indicate that several of the expected outcomes are largely fulfilled but
there are important exceptions as well, particularly with the comparison
of VGLI and SDVI premiums to the private sector. VA insurance is
generally available in terms of comparison to the non-VA sector,
regardless of the hazardous nature of certain work in the military or
disability status. Basic life insurance coverage is greater under the
SGLI and VGLI programs. While supplemental coverage as an option is not
available under SGLI and VGLI, the current maximum of \$250,000 (or the
previous maximum of \$200,000 during the time of the study) well exceeds
basic coverage typically provided by employers in the private sector.

The availability and affordability of VA insurance for disabled veterans
exceed availability and affordability in the private sector. We did find
that many DIC and SDVI survivors had very little life insurance. Basic
coverage under SDVI is only \$10,000, and many DIC survivors received no
life insurance. However, veterans of DIC and SDVI survivors had the
opportunity to have enrolled in VGLI upon leaving the service. Hence,
one could conclude that life insurance was available, but the veteran
had elected not to participate when they had the opportunity.

SGLI insurance is less than commercial rates paid by employers for their
employees, but VGLI and SDVI premium rates are significantly higher than
comparable rates for healthy individuals in the private sector. The SGLI
premium rates overall are 58% less than the median of private sector
premiums, adjusting for age and gender differences between the military
work force and the general civilian work force. VGLI premium rates,
roughly summarizing, are twice comparable rates for healthy non-smokers
in the private sector. The differences for SDVI premiums are even
greater.

+-------------+---------------+----------------+---------------------+
| []{#__Ref   |               |                |                     |
| Heading___T |               |                |                     |
| oc515772082 |               |                |                     |
| .a          |               |                |                     |
| nchor}Table |               |                |                     |
| 40. Program |               |                |                     |
| Outcomes,   |               |                |                     |
| Goals, and  |               |                |                     |
| Results     |               |                |                     |
+-------------+---------------+----------------+---------------------+
| Program and | Outcomes      | Goals          | Results             |
| Group       |               |                |                     |
| Served      |               |                |                     |
+-------------+---------------+----------------+---------------------+
| DIC         | Surviving     | Provide an     | \% of surviving DIC |
| Program:    | spouses and   | adequate level | spouses below the   |
| Survivors   | dependents    | of income for  | poverty level is    |
| of active   | receiving DIC | eligible       | estimated to be 0.  |
| ser         | have an       | surviving      |                     |
| vicemembers | acceptable    | spouses and    | Income of DIC       |
| or veterans | level of      | dependents of  | survivors is about  |
| who died    | income and    | servicemembers | \$5,000 higher than |
| from a      | standard of   | and veterans.  | counterparts in the |
| disease or  | living.       |                | general population. |
| injury      |               | Replace        |                     |
| incurred or | Surviving     | significant    | Replacement of      |
| aggravated  | spouses and   | portion of     | income loss during  |
| in the line | dependents of | income loss    | transition period   |
| of duty.    | veterans      | during         | with life insurance |
|             | whose deaths  | transition     | benefits is only    |
| Survivors   | are           | period         | \$4,000 or less for |
| of certain  | determined to | immediately    | half of DIC         |
| veterans    | be            | after          | survivors.          |
| who were    | serv          | veteran's      |                     |
| totally     | ice-connected | death.         | 70% of surviving    |
| disabled    | receive       |                | spouses perceive    |
| due to a    | appropriate   | Recognize      | that the DIC        |
| servic      | recognition.  | sacrifices     | program recognizes  |
| e-connected |               | made by        | the sacrifices made |
| condition   |               | service-       | by veterans during  |
| for an      |               | members and    | military service.   |
| extended    |               | veterans whose |                     |
| period of   |               | deaths are     |                     |
| time        |               | se             |                     |
| preceding   |               | rvice-related. |                     |
| death, even |               |                |                     |
| though      |               |                |                     |
| death was   |               |                |                     |
| not caused  |               |                |                     |
| by the      |               |                |                     |
| disability. |               |                |                     |
+-------------+---------------+----------------+---------------------+
| SDVI        | Veterans with | For veterans   | SDVI participants   |
| Program:    | serv          | with           | had opportunity to  |
| Veterans    | ice-connected | ser            | obtain VGLI         |
| with        | disabilities  | vice-connected | insurance, but many |
| servic      | are provided  | disabilities,  | declined it. Half   |
| e-connected | with the      | parity with    | of SDVI             |
| d           | opportunity   | the options    | beneficiaries       |
| isabilities | to obtain     | available to   | receive only        |
|             | life          | healthy        | \$15,000 or less in |
|             | insurance at  | individuals of | life insurance      |
|             | standard      | similar ages   | payments from all   |
|             | premium rates | to purchase    | sources. The        |
|             | without       | reasonable     | \$10,000 basic      |
|             | regard to     | amounts of     | coverage provided   |
|             | their         | life insurance | by SDVI is not      |
|             | serv          | in the         | adequate.           |
|             | ice-connected | individual     |                     |
|             | impairments   | market, within | SDVI premium rates  |
|             | for a         | a reasonable   | are much higher     |
|             | reasonable    | time following | than standard       |
|             | time period   | the disability | commercial rates    |
|             | following     | being          | for non-smokers.    |
|             | establishment | established,   |                     |
|             | of a          | and with       |                     |
|             | serv          | comparable     |                     |
|             | ice-connected | policy         |                     |
|             | disability.   | features.      |                     |
+-------------+---------------+----------------+---------------------+
| VMLI        | Severely      | Parity with    | The \$90,000        |
| Program:    | disabled      | the average    | maximum mortgage    |
| Severely    | veterans of   | non-disabled   | protection life     |
| disabled    | any age and   | American's     | insurance under     |
| veterans    | with          | ability to     | VMLI covers about   |
| with        | serv          | purchase       | 75% of the face     |
| servic      | ice-connected | mortgage life  | value of mortgages  |
| e-connected | disabilities  | insurance      | of VMLI             |
| d           | can purchase  | protection at  | participants.       |
| isabilities | mortgage life | any age in     |                     |
| who have    | insurance in  | amounts        | VMLI premium rates  |
| received a  | amounts       | consistent     | are significantly   |
| grant for   | consistent    | with current   | lower than in the   |
| specially   | with current  | limits on      | private sector for  |
| adapted     | mortgage      | mortgage loans | healthy             |
| housing.    | loans, and at | and at         | individuals.        |
|             | standard      | competitive    |                     |
|             | premium       | rates and with |                     |
|             | rates.        | comparable     |                     |
|             |               | policy         |                     |
|             |               | features.      |                     |
+-------------+---------------+----------------+---------------------+

# Table 40. Program Outcomes, Goals, and Results (Continued) {#table-40.-program-outcomes-goals-and-results-continued .Table-Heading}

+-------------+---------------+----------------+---------------------+
| SGLI        | Insurance     | Availability   | Current \$250,000   |
| Program:    | coverage is   | of life        | SGLI coverage is    |
| Active Duty | available to  | insurance Is   | significantly       |
| Ser         | s             | not affected   | higher than basic   |
| vicemembers | ervicemembers | by hazard.     | plans provided by   |
| and         | and           |                | private sector      |
| Reservists  | reservists    | Meets or       | employees. Optional |
|             | and their     | exceeds life   | supplemental        |
|             | family        | insurance      | coverage is not     |
|             | members at    | coverage       | available as it     |
|             | comparable    | levels for     | often is in the     |
|             | costs that    | basic,         | private sector.     |
|             | meets or      | supplemental,  |                     |
|             | exceeds the   | and dependent  | SGLI survivors in   |
|             | total life    | coverage made  | the study           |
|             | insurance     | available by   | population          |
|             | benefit       | large private  | received, on        |
|             | available to  | sector         | average, about      |
|             | employees and | employers.     | \$200,000 in life   |
|             | their family  |                | insurance benefits. |
|             | members in    | Costs          |                     |
|             | large private | servicemembers | Most private sector |
|             | sector        | no more than   | employers pay for   |
|             | o             | employee       | basic coverage.     |
|             | rganizations. | premiums for   | SGLI premium paid   |
|             |               | available in   | by service- member  |
|             |               | large private  | compares favorably  |
|             |               | sector         | to premium costs    |
|             |               | organizations. | for group life      |
|             |               |                | insurance           |
|             |               | Provides       | (including basic    |
|             |               | option to      | and supplemental).  |
|             |               | convert        | Overall, median     |
|             |               | coverage upon  | private sector      |
|             |               | termination.   | premiums are 58%    |
|             |               |                | higher than SGLI    |
|             |               |                | premium.            |
|             |               |                |                     |
|             |               |                | Conversion at       |
|             |               |                | termination for     |
|             |               |                | basic insurance is  |
|             |               |                | superior to         |
|             |               |                | conversion feature  |
|             |               |                | generally found in  |
|             |               |                | the private sector. |
+-------------+---------------+----------------+---------------------+
| VGLI        | Separating    | Provide an     | Conversion of SGLI  |
| Program:    | s             | option for     | to VGLI is better   |
| Separated   | ervicemembers | automatic      | than most private   |
| ser         | and           | conversion of  | sector employers.   |
| vicemembers | reservists    | SGLI coverage  |                     |
| and         | are           | at rates       | VGLI survivors in   |
| separated   | guaranteed    | competitive    | the study           |
| reservists  | the           | with offerings | population          |
|             | opportunity   | in the private | received, on        |
|             | to be covered | sector for     | average, about      |
|             | by the same   | healthy        | \$100,000 in life   |
|             | life          | individuals.   | insurance benefits. |
|             | insurance     |                |                     |
|             | benefits as   |                | VGLI cost for the   |
|             | they had      |                | veteran compares    |
|             | during        |                | unfavorably with a  |
|             | active/       |                | sample of private   |
|             | reserve       |                | sector quotes for   |
|             | service.      |                | healthy             |
|             |               |                | individuals.        |
|             | VGLI costs    |                | Comparisons depend  |
|             | per \$1,000   |                | on specific age of  |
|             | of coverage,  |                | individual, but in  |
|             | adjusted for  |                | many cases VGLI     |
|             | health        |                | rates are more than |
|             | status, are   |                | twice the           |
|             | consistent    |                | commercial quotes.  |
|             | with what     |                |                     |
|             | they would    |                |                     |
|             | pay if        |                |                     |
|             | purchasing    |                |                     |
|             | equivalent    |                |                     |
|             | coverage in   |                |                     |
|             | the private   |                |                     |
|             | sector.       |                |                     |
+-------------+---------------+----------------+---------------------+

Source: Study Team Analysis

For the outcome measure of acceptable minimum level of income, the
lowest income standard that we examined is the poverty level. We found
that most survivors are well above the poverty level as defined by the
Department of Health and Human Services.[^22] This standard, though, is
not likely to be one that most citizens would accept as sufficient
gratitude for the service of veterans with service-connected
disabilities. If the minimum threshold is set at 50% above the poverty
level, we find that the income of most, but not all, survivors, exceed
this level. Another standard is comparison of disabled veteran survivor
income to the average income of other comparable survivors of
non-veterans. We found that the veteran survivors' annual income is
about \$5,000 ahead of their non-veteran counterparts, on average.

Another standard that we examined is the survivors' self-assessment of
how much additional income that they need in order not to have to cut
back on basic living expenses or make sacrifices. We found this measure
of annual financial need to be mostly in the range of \$3,000 to
\$6,000. The need at the higher end of this range was for survivors with
dependent children, particularly for DIC and SDVI survivors. The
presence of dependents in the survivor household has a very pronounced
effect on increasing the perceived need for additional annual income
from about \$3,000 to \$6,000. Furthermore, annual expenditures of
survivors with dependent children run about \$9,000 and \$7,500 higher
than survivors without children for DIC and SDVI survivors,
respectively.

Income replacement during the transition period after death for
survivors with SGLI or VGLI insurance appears to be adequate,
particularly with average insurance payments from all sources of about
\$210,000 and \$117,000, respectively. However, income replacement for
survivors of disabled veterans without SGLI or VGLI insurance is
considerably less. Study findings indicate a loss in household income of
\$20,000 to \$40,000 for most families. Most DIC and SDVI survivors
receive very little life insurance payments to replace lost income. Half
of DIC survivors receive less than \$4,000 in life insurance payments
while half of SDVI survivors receive less than \$15,000.

Income replacement is a higher standard than minimally acceptable level
of income. Since Congressional intent was focused more on the latter
than the former for disabled veteran survivors, we would have to
conclude that Congressional intent is met.

Overall satisfaction with the programs and fulfillment of expectations
are generally good, but there are some areas where customer responses
were less than satisfied. In particular, satisfaction ratings were
relatively weak for maximum insurance amounts for SDVI and VMLI.
Satisfaction ratings provided by beneficiaries were relatively weak for
certain program attributes, including: understanding the benefit forms;
filling out the forms; and materials explaining benefits. These
particular attributes ranked higher in importance to the beneficiary
compared to other program attributes even though the satisfaction
ratings were relatively weak.

#### Status of Survivors of Severely or Catastrophically Disabled Veterans

An important purpose of the study (Requirement \# 6 as listed in
Section 1) was to report on the status of survivors of severely or
catastrophically disabled veterans. Throughout the study then this group
was analyzed separately. Severely and catastrophically survivors were
included in the survey respondents for the DIC and SDVI programs.
Overall, we found that the outcomes for these survivors were similar to
findings reported for other survivors.

Total household income decreased from about \$61,000 to \$32,000 in the
year after the veteran's death for veterans who were severely or
catastrophically disabled at the time of death. Similarly, for survivors
of veterans who were not severely or catastrophically disabled,
household income dropped from about \$57,000 to \$36,000. Life insurance
payments received were about the same for both groups of survivors. Half
of DIC survivors of veterans who were severely or catastrophically
disabled receive less than \$4,000 in life insurance payments for
survivors, which is the same result for other survivors. Half of the
SDVI survivors of veterans who were severely or catastrophically
disabled receive less than \$7,750 while the respective figure for the
other survivors is a little higher at \$15,000. The percent below the
poverty line and below 150% of the poverty line is about the same for
both groups of survivors.

Self-assessment of financial need was very similar. That is, survivors
of veterans who were severely or catastrophically disabled expressed the
need for additional annual income to fall mostly in the range of \$3,000
to \$6,000. The customer satisfaction level expressed by survey
respondents was also about the same for both groups of survivors.

#### Transitional Financial Needs of Survivors

Another important purpose of the study (Requirement \# 7 as listed in
Section 1) was to report on transitional financial needs of survivors of
veterans with service-connected disabilities immediately after the
deaths of such veterans. The study as a whole focused on the transition
of survivors within 5 years after death of the veteran, and the results
reported above in this section cover this period. In addition, we
defined "immediately after deaths of such veterans" as the period within
the first two years after death of the veteran and analyzed financial
outcomes for this period separately from financial outcomes for the 2 to
5 year period after death.

We found no evidence to conclude that the financial status of survivors
was much different between the immediate 0 to 2 year period after death
versus the 2 to 5 year period. In particular, annual income,
expenditures, and total debts are about the same for both periods.

### Recommendations

A general recommendation in response to key findings is to aggressively
promote substantial increases in life insurance coverage for the
service-disabled veterans and to lessen the barriers to coverage.
Specific recommendations for this are found below under the sub-heading
of "SDVI."

#### DIC

Study recommendations specific to the DIC program are:

1.  **Increase DIC amount by \$250 per month for DIC surviving spouses
    with dependent children who are in 5-year period after death.**
    While the DIC program provides increased benefits for survivors that
    vary according to the number of dependent children, the evidence
    suggests a need for even greater benefit allowances for these
    survivors. Furthermore, this additional need is affected more by the
    presence of dependent children in the household than by the number
    of children. An additional monthly allowance of \$250 for one or
    more children would account for the difference in financial need
    between DIC (and SDVI) survivors with and without children as
    perceived by the respective survivors and supported by other
    indicators. This amount is substantially less than what would be
    needed to replace lost income after the veteran's death, taking into
    account changes in expenditures.

Survivors without children expressed the need for additional financial
support as well, albeit less than survivors with children. In lieu of an
additional DIC payment for them, Recommendation No. 5 and No. 6 below
for automatic enrollment in SDVI with increased coverage should
adequately take care of their financial need during the transition
period after death.

9.  **Provide lump-sum payments to DIC recipients in lieu of monthly
    payments**. Paying DIC to beneficiaries in a lump sum rather than in
    monthly installments has the potential advantage of assisting
    survivors in achieving self-sufficiency more quickly following the
    veteran's death. There are also significant practical obstacles such
    as ensuring survivors have the financial acumen to manage the
    payment, potential for remarriage of a lump sum recipient, recouping
    erroneous payments, and significant short-term outlay costs.

#### SDVI 

Study recommendations for the SDVI program are:

10. **Automatically provide SDVI insurance coverage to any newly
    eligible veteran with service-connected disability and is not
    enrolled in VGLI.** Current participation in the SDVI program
    requires that the eligible individual apply for the insurance within
    two years from the date that he or she is notified that
    service-connected disability has been established. Instead, VA
    should automatically provide insurance coverage to any member or
    veteran who has a service-connected disability and is not enrolled
    in VGLI. The veteran could opt out of participation but would have
    to formally decline the coverage. In order to expedite the process,
    VA could automatically deduct premium costs (albeit subsidized) for
    the insurance coverage from disability compensation payments to the
    veteran.

11. **Increase basic coverage maximum amount from \$10,000 to
    \$50,000.** The SDVI coverage limits should be greatly expanded to
    cover the loss of income for at least two years after the veteran's
    death. Based on study estimates of lost income, the limit on Basic
    coverage should be increased from \$10,000 to \$50,000. Note that
    financial planners often recommend to their clients that they obtain
    enough life insurance to cover several multiples of their work
    salary.

12. **Reduce SDVI premium rates based on 1980 Mortality tables.** VA
    should prepare and submit an appropriate legislative proposal that
    would implement reduced premium rates for veterans that reflect the
    more recent mortality rates (based on the 1980 tables, as opposed to
    the 1941 tables that the current premium rates are based on).
    Comparison to commercial rates justifies at least this reduction.

#### VMLI 

The termination of coverage at age 70 means that between approximately
30 to 50 enrollees are dropped annually from coverage while they still
have unpaid mortgages. The number varies by year according to the
demographics of the covered population.

The maximum coverage limit is inadequate and there is no automatic means
to increase the limit as housing costs and mortgage amounts increase.
The current maximum coverage limit was last increased in December 1992,
when it was raised from \$40,000 to \$90,000. The increase was applied
to all existing enrollments at the time; many disabled veterans received
a significant increase in the amount of their VMLI coverage. With the
increase, the VMLI program then covered 91 percent of the total mortgage
balances of enrollees. Because there are no provisions for automatic
indexing of this limit, each year a smaller percentage of the mortgages
of new program participants is covered by the program. Currently, the
\$90,000 limit covers approximately 75 percent of the face value of
mortgages held by VMLI participants.

Consequently, the Study Team recommends that VA consider the following
legislative improvements to VMLI:

13. **Remove the provision terminating VMLI coverage at age 70.**

14. **Increase the current coverage maximum for current participants
    from \$90,000 to between \$150,000 and \$200,000.**

15. **Index the coverage maximum based on the annual increase in new
    loan origination amounts as reported annually by the Federal
    Financial Institutions Examination Council (FFIEC).**

16. **Examine methods to increase participation by eligible disabled
    veterans.** More frequent follow-ups with housing grant recipients,
    perhaps with personal telephone contact with the veteran or the
    veteran's spouse would encourage more widespread use of this
    important benefit. Since VMLI non-takers are eligible for VMLI even
    years after receiving the SAH grant, they may be interested in
    participating in VMLI now.

#### SGLI 

VA should consider two additions to the SGLI program to make it more
comparable to coverage offered to employees in large private sector
organizations and to better achieve its goals for the SGLI program:

17. **Offer for participants who are enrolled in the maximum SGLI
    coverage to purchase optional supplemental insurance in the amount
    of either 50% or 100% of their basic SGLI coverage amount.** For
    example, a participant could purchase either an additional \$125,000
    or \$250,000 of supplemental coverage if he or she were enrolled at
    the current maximum amount of \$250,000. If the maximum were
    subsequently increased, the optional coverage amounts would increase
    correspondingly. Cost of the supplemental coverage would be fully
    covered by participant premiums.

18. **Offer option for participants to purchase optional coverage on
    their spouses and/or children.** Spouse coverage could be
    established as either a percentage of the participant's coverage
    amount (for example, 25% or 50%), or at a flat dollar amount (for
    example, \$50,000 but not to exceed the participant's coverage
    level). Child coverage would be at a flat amount per child (for
    example, \$5,000 or \$10,000). Costs for spouse and child coverage
    would be fully covered by participant premiums.

#### VGLI

Recommendations specific to the VGLI program are:

19. **If supplemental insurance coverage is established within SGLI,
    these features should be "convertible" to VGLI, at the veteran's
    option, provided basic coverage is converted.**

20. **VA should work with the DoD to more fully publicize the conversion
    to VGLI features of SGLI to increase participation in VGLI.** The
    conversion options are clearly described on VA's SGLI website.
    However, VA may want to review the insurance materials provided to
    new servicemembers and to servicemembers who have applied for
    separation or retirement as well as DoD practices for counseling
    these individuals on insurance options. More generally speaking, DoD
    and VA should conduct a more vigorous campaign in convincing all
    members leaving the service to participate in VGLI, a mutual aid
    association program, or other life insurance program. Such
    campaigning should be formally integrated into the discharge
    process. Increasing enrollments in VGLI or other programs would
    extend the safety net of life insurance coverage to more disabled,
    as well as healthy veterans.

21. **Reduce VGLI premium rates to make them more comparable to
    commercial quotes.** This would attract greater participation of
    healthy individuals, helping to offset some of the increase in costs
    and provide more coverage for individuals who might later become
    disabled and not have sufficient insurance (as is currently the
    situation with many DIC and SDVI survivors).

#### Technical Recommendations

The Study Team's overall technical recommendations are:

22. **VA should review DIC and insurance forms for beneficiaries,
    procedures for filling out the forms, and materials that explain
    benefits for potential improvement that increases beneficiary
    satisfaction**.

23. **VA should implement an ongoing review of the outcomes of DIC and
    the insurance programs.**

24. **VA should implement efforts to integrate VA electronic files that
    are currently separate across the different programs.**

For the ongoing review, we recommend that the outcome measures be
structured more around the group of veterans being served rather than
focusing primarily on the different programs. In particular, we would
organize outcome measurement according to these customer groups:

-   Active duty servicemembers

-   Disabled insurance takers

-   Non-disabled insurance takers (who are not active duty members)

-   Beneficiaries of disabled veterans

-   Beneficiaries of non-disabled servicemembers and veterans

The reason for this approach is that it is more congruent with measuring
outcomes that focus on the *customer* and *One VA* core value (as cited
in VA's overall Strategic Plan FY 2001-2006). In addition, many
insurance-takers and beneficiaries are participants in multiple
programs, and they have difficulty in distinguishing one program from
another. They tend to view the value of the different programs
collectively rather than separately from each other. Measures that
distinguish one program from another could still be applied, but at more
detailed levels of outcome measurement rather than at the highest level
of aggregation.

The ongoing evaluation effort should focus on the major outcomes that
were recommended and investigated in this study, including:

-   Available and affordable insurance

-   Maintenance of a minimally acceptable level of income

-   Replacement of lost income after veteran's death

-   Value of the programs as perceived by program participants

For available and affordable insurance, comparison to the private sector
or other non-VA sources on coverage and premium costs should be made at
least once a year. The particular comparisons reported in this study
could serve as a basis on ongoing assessment. For acceptable level of
income and replacement of lost income, measures similar to the ones used
in this study should also be applied. For the customer's perception of
overall value, we recommend that VA administer a shorter version of the
study's survey that focuses on customer satisfaction and selected other
questions that address customer expectations.

Certain methodological issues should be addressed. One is to establish
relative importance for different outcomes and measures. Establishing
weights allows the managers to obtain an overall summary of outcome and
to consider trade-offs between different outcome criteria. Sensitivity
analysis can be performed to assess the impact of different management
intervention strategies on overall outcome.

For integration of VA administrative electronic files (Recommendation
17), the ongoing evaluation could be accomplished more readily if there
were an unduplicated population of veterans and their survivors that
included data about the veteran and survivor and all VA benefits
received. At present, these programs are administered separately, and
their electronic administrative records are not readily linkable, as
discussed in Section 3.

Recommendations for ongoing evaluation are discussed in greater detail
in Volume V, Appendix J, *Methodological Considerations for Outcome
Measures for DIC and Insurance Programs*. This paper also provides
estimates of the cost to implement the recommendations for outcome
measures of the different VA insurance programs.

#### Estimated Costs of Recommendations

Table 41 presents costs estimates for the 17 recommendations listed
above. Further analysis or detail can be found in the respective areas
of discussion in each volume of the different VA programs. Cost
estimates are provided for SDVI for all three SDVI recommendations
combined.

[]{#__RefHeading___Toc515772083 .anchor}Table 41. Cost Estimates for
Recommendations

+----------------------------------+----------------------------+------+
| Recommendations                  | Cost to VA                 | Pe   |
|                                  |                            | riod |
+==================================+============================+======+
| DIC                              |                            |      |
+----------------------------------+----------------------------+------+
| 1\. Increase DIC amount by \$250 | \$35 million for DIC       | An   |
| per month for DIC surviving      | surviving spouses within 5 | nual |
| spouses with dependent children  | years after veteran's      |      |
| who are in 5-year period after   | death in 2002.             |      |
| death                            |                            |      |
+----------------------------------+----------------------------+------+
| 2\. Provide lump-sum payments to | Potentially cost neutral   | An   |
| DIC recipients in lieu of        | over 30-year period of     | nual |
| monthly payments                 | time, but significant      |      |
|                                  | outlays required in first  |      |
|                                  | 10 years. (See DIC report  |      |
|                                  | for detailed projections.) |      |
+----------------------------------+----------------------------+------+
| SDVI                             |                            |      |
+----------------------------------+----------------------------+------+
| 3\. Automatically provide        | \$57-\$71 million in 2002  | An   |
| insurance coverage to any newly  |                            | nual |
| eligible veteran with            | \$76-\$162 million in 2010 |      |
| service-connected disability and |                            |      |
| is not enrolled in VGLI          | Estimates vary depending   |      |
|                                  | on assumptions of          |      |
| 4\. Increase basic coverage      | participation rate for     |      |
| maximum amount from \$10,000 to  | newly eligible veterans    |      |
| \$50,000                         | varying from 6% to 25%.    |      |
|                                  |                            |      |
| 5\. Reduce SDVI premium rates    |                            |      |
| based on 1980 Mortality tables   |                            |      |
+----------------------------------+----------------------------+------+

# Table 41. Cost Estimates for Recommendations (Continued) {#table-41.-cost-estimates-for-recommendations-continued .Table-Heading}

+----------------------------------+----------------------------+---+-----+
| Recommendations                  | Cost to VA                 | P |     |
|                                  |                            | e |     |
|                                  |                            | r |     |
|                                  |                            | i |     |
|                                  |                            | o |     |
|                                  |                            | d |     |
+==================================+============================+===+=====+
| VMLI                             |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 6\. Remove the provision         | \$400,000 in 2002          | A |     |
| terminating coverage at age 70   |                            | n |     |
|                                  | \$566,000 in 2010          | n |     |
|                                  |                            | u |     |
|                                  |                            | a |     |
|                                  |                            | l |     |
+----------------------------------+----------------------------+---+-----+
| 7\. Increase the current         | [2% Mortgage               | A |     |
| coverage maximum for current     | Growth]{.underline}        | n |     |
| participants from \$90,000 to    |                            | n |     |
| between \$150,000 and \$200,000  | [\$150,000]{.underline}    | u |     |
|                                  | [\$200,000]{.underline}    | a |     |
|                                  |                            | l |     |
|                                  | 2002 \$1.19 million \$1.40 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | 2010 \$1.75 million \$2.27 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | [6% Mortgage               |   |     |
|                                  | Growth]{.underline}        |   |     |
|                                  |                            |   |     |
|                                  | [\$150,000]{.underline}    |   |     |
|                                  | [\$200,000]{.underline}    |   |     |
|                                  |                            |   |     |
|                                  | 2002 \$1.20 million \$1.42 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | 2010 \$1.92 million \$2.70 |   |     |
|                                  | million                    |   |     |
+----------------------------------+----------------------------+---+-----+
| 8\. Index the coverage maximum   | [2% Mortgage               | A |     |
| based on the annual increase in  | Growth]{.underline}        | n |     |
| new loan origination amounts as  |                            | n |     |
| reported annually by the Federal | [\$150,000]{.underline}    | u |     |
| Financial Institutions           | [200,000]{.underline}      | a |     |
| Examination Council (FFIEC)      |                            | l |     |
|                                  | 2002 \$1.19 million \$1.40 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | 2010 \$1.84 million \$2.32 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | [6% Mortgage               |   |     |
|                                  | Growth]{.underline}        |   |     |
|                                  |                            |   |     |
|                                  | [\$150,000]{.underline}    |   |     |
|                                  | [\$200,000]{.underline}    |   |     |
|                                  |                            |   |     |
|                                  | 2002 \$1.20 million \$1.42 |   |     |
|                                  | million                    |   |     |
|                                  |                            |   |     |
|                                  | 2010 \$2.36 million \$3.00 |   |     |
|                                  | million                    |   |     |
+----------------------------------+----------------------------+---+-----+
| 9\. Examine methods to increase  | \$35,000 for study.        | O |     |
| participation by eligible        |                            | n |     |
| disabled veterans                |                            | e |     |
|                                  |                            | - |     |
|                                  |                            | t |     |
|                                  |                            | i |     |
|                                  |                            | m |     |
|                                  |                            | e |     |
+----------------------------------+----------------------------+---+-----+
| SGLI                             |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 10\. Offer option for            | Program is self-funding.   | A |     |
| participants who are enrolled in |                            | n |     |
| the maximum SGLI coverage to     |                            | n |     |
| purchase optional supplemental   |                            | u |     |
| insurance in the amount of       |                            | a |     |
| either 50% or 100% of their      |                            | l |     |
| basic SGLI coverage amount       |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 11\. Offer for participants to   | Program is self-funding.   | A |     |
| purchase optional coverage on    |                            | n |     |
| their spouses and/or children    |                            | n |     |
|                                  |                            | u |     |
|                                  |                            | a |     |
|                                  |                            | l |     |
+----------------------------------+----------------------------+---+-----+
| VGLI                             |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 12\. If supplemental insurance   | Program is self-funding.   | A |     |
| coverage is established within   |                            | n |     |
| SGLI, these features should be   |                            | n |     |
| "convertible" to VGLI, at the    |                            | u |     |
| veteran's option, provided basic |                            | a |     |
| coverage is converted            |                            | l |     |
+----------------------------------+----------------------------+---+-----+
| 13\. VA should work with the DoD | Program is self-funding.   | A |     |
| to more fully publicize the      |                            | n |     |
| conversion to VGLI features of   |                            | n |     |
| SGLI to increase participation   |                            | u |     |
| in VGLI                          |                            | a |     |
|                                  |                            | l |     |
+----------------------------------+----------------------------+---+-----+
| 14\. Reduce VGLI premium rates   | VA already phasing in      | A |     |
| to make them more comparable to  | lower age-based premiums.  | n |     |
| commercial quotes                | Effect will draw more      | n |     |
|                                  | healthy individuals into   | u |     |
|                                  | plan offsetting lower      | a |     |
|                                  | premium revenues. Net      | l |     |
|                                  | effect is indeterminate.   |   |     |
+----------------------------------+----------------------------+---+-----+
| Technical Recommendations        |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 15\. Review DIC and insurance    | \$125,000 for review       |   | On  |
| forms for beneficiaries,         |                            |   | e-t |
| procedures for filling out the   |                            |   | ime |
| forms, and materials that        |                            |   |     |
| explain benefits for potential   |                            |   |     |
| improvement that increases       |                            |   |     |
| beneficiary satisfaction         |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 16\. Implement an ongoing review | \$235,000 - \$335,000      |   | Ann |
| of the outcomes of DIC and the   |                            |   | ual |
| insurance programs               |                            |   |     |
+----------------------------------+----------------------------+---+-----+
| 17\. Implement efforts to        | Further study needed to    |   | On  |
| integrate VA electronic files    | provide accurate estimate. |   | e-t |
| that are currently separate      | Costs could be             |   | ime |
| across the different programs    | substantial, exceeding     |   |     |
|                                  | \$500,000.                 |   |     |
+----------------------------------+----------------------------+---+-----+

Source: Study Team Calculations, Insurance Takers and Survivor Surveys
and VA Administrative Electronic Files

# Glossary

**A&A** -- see Aid and Attendance

**Accidental Death and Dismemberment (AD&D)** is insurance providing
payment only if the insured\'s death results from an accident or if the
insured accidentally severs a limb above the wrist or ankle joints or
totally and irreversibly loses his or her eyesight.

**Activities of Daily Living (ADL)**. Typical types of ADLs include:

-   Bathing, grooming, using the toilet, dressing

-   Taking medication

-   Assisting with walking and/or transferring

-   Exercising, range of motion

-   Planning and preparing meals

-   Laundry and light housekeeping

-   Supervision and companionship

-   Running errands, such as to the grocery store and to doctor
    appointments

**AD&D** -- see Accidental Death and Dismemberment

**ADL** -- see Activities of Daily Living

**Aid and Attendance (A&A**) is an additional allowance payable to a
beneficiary who is a patient in a nursing home or is so disabled as to
require the aid and attendance of another person.

**Automatic Enrollment/Coverage** is insurance coverage that is
automatic until, and unless, it is declined by the individual. *SGLI*
uses this automatic enrollment feature.

**Beneficiary of Insurance** is a person to whom the proceeds of a life
insurance policy are payable when the insured dies.

**Bureau of Labor Statistics**

**BLS** -- see Bureau of Labor Statistics, U.S. Department of Labor.

**C&P** -- see Compensation and Pension Service

**Causal Path Analysis** is also called Structural Equation Modeling. It
is used to identify the causal relationships between variables. It
basically consists of several multiple regression equations. Different
from a multiple regression, one needs to estimate all regression
equations simultaneously in a Causal Path Analysis and a variable in a
Causal Path model can be a dependent variable in one equation and an
independent variable in another equation. In addition, Causal Path
Analysis can include two kinds of variables: observed and latent.
Observed variables have data like gender or height. Latent variables are
not directly observable, but are constructed based on the correlations
of the observed variables. For example, there is a high correlation of
individual test scores between English and History. This may be
attributable to an unobservable variable called "verbal aptitude."
Causal Path Analysis, by effectively reducing the number of observed
variables via the construction of fewer unobservable variables,
effectively reduces the level of multicollinearity and yields more
precise results.

**CES** -- see Consumer Expenditure Survey

**Chi Square** is often used to assess the \"goodness of fit\" between
an obtained set of frequencies in a random sample and what is expected
under a given statistical hypothesis. For example, Chi Square can be
used to determine if there is reason to reject the statistical
hypothesis that the frequencies in a random sample are as expected when
the items are from a normal distribution. A calculated value of Chi
Square compares the frequencies of various kinds (or categories) of
items in a random sample to the frequencies that are expected if the
population frequencies are as hypothesized by the investigator.

**Civil Service Retirement System (CSRS)** originated in 1920 and has
provided retirement, disability, and survivor benefits for most civilian
employees in the Federal government. The system was originally
administered by the Department of the Interior until 1930 when it moved
to the new Veterans Administration. But in 1934, it found a home with
the Civil Service Commission and in 1979 with the Office of Personnel
Management. Benefits have continued to evolve to the present time. They
are now financed by both employee and Government contributions to the
retirement fund, and provide benefits based on length of service and the
average salary over the highest three years of pay. This continuing need
to modernize benefits resulted in the creation of a new Federal
Employees Retirement System (FERS) to replace CSRS in 1987. However,
there are still many civilian Federal employees covered by CSRS, and
over 2 million people continue receiving CSRS retirement and survivor
benefits each month.

**Compensation and Pension Service (C&P)** is the VA organization
responsible for administering VA monetary benefit programs for
disability and death.

**Consumer Expenditure Survey (CES).** A program conducted by the Bureau
of Labor Statistics (BLS) consists of two surveys---the quarterly
Interview survey and the Diary survey---that provide information on the
buying habits of American consumers, including data on their
expenditures, income, and consumer unit (families and single consumers)
characteristics. The Interview survey includes monthly out-of-pocket
expenditures such as housing, apparel, transportation, health care,
insurance, and entertainment. The Diary survey includes weekly
expenditures of frequently purchased items such as food and beverages,
tobacco, personal care products, and nonprescription drugs and supplies.

**Consumer Price Index (CPI).** A measure of the average changes over
time in the prices paid by urban consumers for a market basket of
consumer goods and services. CPI is computed by Bureau of Labor
Statistics (BLS).

**Conversion Option/feature/privilege** allows the policy-owner, before
an original insurance policy expires, to elect to have a new policy
issued that will continue the insurance coverage.

**Correlation.** A measure used to tell the strength of a linear
relationship between two variables.

**CPI** -- see Consumer Price Index

**CPS** -- see Current Population Survey

**CSRS** -- see Civil Service Retirement System

**Current Population Survey (CPS)** is a monthly survey conducted by the
U.S. Census Bureau for the Bureau of Labor Statistics of U.S. civilian,
non-institutionalized population.

**Debt** is an amount of money, a service, or an item of property that
is owed to somebody. For study purposes the following items are included
in debt: home mortgage, consumer loans, car loans, credit cards, and
"other" debts that respondents reported.

**Department of Defense (DoD).** United States Department of Defense
(Army, Navy, and Air Force).

**Department of Veterans Affairs (VA).** United States Department of
Veterans Affairs.

**Dependency and Indemnity Compensation (DIC)** is the VA program that
provides monthly payments to surviving spouses and dependent children of
veterans who died in service or as a result of a service-related
disability.

**Dependent Variable** is the outcome that we are trying to explain in a
regression analysis. Any change in the dependent variable is viewed as a
function of changes in the independent variable(s).

**DIC** -- see Dependency and Indemnity Compensation

**Disability Waiver.** See "waiver of premiums."

**DoD** -- see Department of Defense

**Dummy Variables** are used in regression analysis to modify the form
of non-numeric variables, for example sex or marital status, to allow
their effects to be included in the regression model.

**ECI** -- see Employment Cost Index

**Employment Cost Index (ECI)** is a measure of the change in the cost
of labor, free from the influence of employment shifts among occupations
and industries. The compensation series includes changes in wages and
salaries and employer costs for employee benefits. The wage and salary
series and the benefit cost series provide the change for the two
components of compensation. ECI is conducted by Bureau of Labor
Statistics (BLS).

**Face Amount** is the amount that will be paid on the insurance policy
at the time of the insured's death or when the policy matures.

**Factor Analysis** is a data reduction and summarization technique used
to analyzing the interrelationships among many variables and capturing
their common underlying dimensions (factors).

**Federal Employees Retirement System (FERS)** became effective in 1987,
and almost all new Federal civilian employees hired after 1983 are
automatically covered by this new retirement system. FERS is a response
to the changing times and Federal workforce needs. Many of its features
are \"portable\" so that employees who leave Federal employment may
still qualify for the benefits. The new retirement system is flexible.
Covered employees are able to choose what is best for their individual
situation.

**Federal Employees' Group Life Insurance (FEGLI)** is a group insurance
program offered to federal civilian employees.

**FEGLI** -- see Federal Employees' Group Life Insurance

**FERS** -- see Federal Employees Retirement System

**Group Life Insurance** is a life insurance that a person is eligible
to purchase through membership in a group. The group may not be formed
just to buy insurance.

**Group Setting.** Nursing home, assisted living, dormitory**.**

**Helpless Child** is a dependent child of a veteran who is determined
to have become permanently incapable of self-support prior to age 18.
There is no age limit for payment of VA benefits to helpless children.

**Housebound** is an additional allowance payable to a beneficiary who
is so disabled as to be permanently confined to the home or immediate
premises.

**Indemnity** is security against loss or damage.

**Independent Variable** is the factor that is used as a predictor in a
regression analysis. The independent variable is conceptualized as
accounting for changes in the dependent variable.

**Insurance Coverage** is the amount or type of protection provided by
an insurance policy.

**Insurance Service** is the organization within VA that manages the VA
life insurance programs. It is located at the VA Regional Office and
Insurance Center, 5000 Wissahickon Ave., Philadelphia, PA 19101.

**Internal Revenue Service (IRS)** is a U.S. government organization
within the Department of Treasury. IRS provided some data about the
population and samples for this study.

**IRS** -- see Internal Revenue Service

**Logistic Regression** is similar to a regression model but is suited
to models where the dependent variable is dichotomous (that is, it can
take only two values -- 0 for non-participants and 1 for participants).

In multiple regression models, the interpretation of the regression
coefficient is straightforward -- the amount of change in the dependent
variable for a one-unit change in the independent variable. When
logistic regression is used, the interpretation of the estimated
coefficients is different. The logistic model can be specified in terms
of the "odds" of an event occurring. For example, the odds of being an
insurance taker are defined as the ratio of probability that it will
occur to the probability that it will not. The estimated coefficients
are the odds of an event occurring, expressed in logarithmic value, and
may not provide a straightforward interpretation.

**Mean.** Also called the \"average.\" Obtained by adding item scores
and dividing by the total number of items.

**Median.** The middle value in a group of sequential data. If you
ranked 99 scores, the fiftieth score would be the median. It has
forty-nine scores larger and forty-nine scores smaller. Sometimes use of
the mean alone may be misleading. For example, mean income of a small
community will be inflated by the presence of a few millionaires.
However, the median (middle) income will be a more accurate reflection
of the overall community's true income level.

**Mortgage Insurance.** The benefits of this type of term life insurance
policy are intended to pay off the balance due on a mortgage after the
death of the insured and is paid to the mortgage lender. Its face amount
decreases with the outstanding balance of the mortgage loan.

**Multivariate Analysis** uses more than one variable to forecast,
predict, or understand a situation. For instance, if economists want to
predict the likelihood of a recession, they might look at consumer
spending. But spending is only one variable of many that affects the
economy. To get a more accurate picture, a wide range of factors must be
considered from financial variables to human behavior and psychology.
Multivariate analysis gathers and assembles all possible information on
numerous variables to make predictions, answer questions and test
hypotheses.

**Net Worth** is defined as total assets minus total debts. Total assets
include: home, non-retirement investments, retirement savings (401k,
IRA, KEOGH,), cars and other assets. Total debts include: home mortgage,
consumer/education loans, car loans, credit card debts, and any other
debts.

**Non-taker** is an individual who elects not to participate in the
insurance program.

**Non-user** is an individual who elects not to participate in a benefit
program.

**Office of Servicemembers' Group Life Insurance (OSGLI)** is a division
of the Prudential Insurance Company, which has contracted with VA to
handle the day-to-day administration of the SGLI and VGLI programs.

**OSGLI** -- see Office of Servicemembers' Group Life Insurance

**Outcomes** are the results or impacts on the target group or issue of
a government action, policy, or program.

**Outcome measures** are the yardsticks to compare results of actual
program results to the intended results. Outcome measures are expressed
in a quantifiable form and indicate the degree to which the program is
achieving its outcomes. An outcome measure shows the change or
difference the program has on the particular target group or issue area
indicated.

**Outliers** are extreme data points. They can greatly affect some
statistical measures and have negligible effects on others. The measures
which are most affected by outliers are the variance, standard
deviation, and weighted mean. A few outliers will have negligible
effects on medians and percentiles. Usually, extreme data points
represent errors in data reporting which arise from miscoding or
misinterpretation of data entry instructions. In such cases, these
outliers should be eliminated, so that they will not distort the
measurements.

**Poverty** is the state of not having enough money to take care of
basic needs such as food, clothing, and housing. The Department of
Health and Human Services has poverty guidelines for different household
sizes. For the year 2000, the poverty threshold for a household of 1 is
\$8,350. Each additional person increases the poverty threshold by
\$2,900. For the year 1999, the poverty threshold for a household of 1
was \$8,240. Each additional person in the 1999 household increased the
poverty threshold by \$2,820.

**Premiums** are periodic payments made to keep a policy in force.

**Regression** is used to characterize the manner in which one measure
changes as the other measure changes. For any set of related measures,
it is possible to specify a line that approximates the mean of the Y
measures for those items with a given X measure. By revealing how the
mean of the Y measures changes as the various X measures change, this
line is understood to describe the regression of Y on X.

**R²** shows the proportion of variance accounted for in the dependent
variable by considering changes in the independent variable(s). This
value is expressed as a percentage, and the higher the value, the better
the level of prediction in a regression equation. In a multiple
regression analysis, partial R² describes the proportion of variance in
the dependent variable accounted for by one independent variable. The
model R² describes the proportion of variance in the dependent variable
accounted for by all the independent variables that have entered the
regression model or equation up to that point.

**RH Insurance**. "RH" is the prefix used for Service Disabled Veterans
Insurance policies. See "Service Disabled Veterans Insurance."

**SAH** -- see Specially Adapted Housing

**Sample Weight** is a numerical value, assigned to a sample unit for
use in estimation. It is equal to the sampling rate reciprocal.

**Sampling Error** is the measure of sampling variability, that is, the
variations that might occur by chance because only a sample of the
population is surveyed. In other words, that part of the error of an
estimate which is related to the estimate being based on a sample rather
than from a census of the universe.

**SDVI** -- see Service-Disabled Veterans Insurance

**Service-connected (or Service-related).** A disability or death is
considered service connected if it was incurred or aggravated during
active military service. Service connection entitles veterans or
survivors to certain VA benefits including DIC, SDVI, and others.

**Service-Disabled Veterans Insurance (SDVI)** is a VA life insurance
program that provides life insurance to veterans with service-connected
disabilities. The veteran must have been separated from service on or
after April 25, 1951 and must be in good health except for the
service-connected conditions. SDVI is also known as RH insurance.

**Servicemembers' Group Life Insurance (SGLI)** is a VA supervised
program that provides group life insurance protection to active duty
servicemembers and ready reservists and certain members of the
Individual Ready Reserves.

**Significance Level (Level of Statistical Significance).** The result
of a statistical test does not guarantee that any changes accounted for
in the dependent variable will reflect the \"truth.\" A certain amount
of error is always present and results must be interpreted in light of
the potential error (or noise) in the measurements. Thus, a level of
statistical significance is adopted for any statistical test. This level
is a probabilistic statement about the likelihood of the results of the
test occurring by chance alone. The commonly accepted level is 5%, which
is denoted as p \< .05. By this criterion, any result which has a
probability of occurring by chance that is lower than 5% (0.05) is
accepted as an accurate finding.

**SIPP** -- see Survey of Income and Program Participation

**SGLI** -- see Servicemembers' Group Life Insurance

**SMC** -- see Special Monthly Compensation

**Social Security Administration (SSA)** is the Government agency that
provides disability, retirement, and survivors' protection. SSA began
life as the Social Security Board (SSB) by President Roosevelt in 1935.
SSB was renamed the Social Security Administration in 1946. SSA and VA
often serve the same people at the same time. To prevent mispayment
(under payment as well as overpayment), VA works closely with SSA.

**Special Monthly Compensation (SMC)** is a rate paid in addition to or
in place of 0% to 100% combined degree compensation. To qualify, a
veteran must be disabled beyond a combined degree percentage or due to
special circumstances (for example, aid and attendance, loss of use of
one hand, and the like).

**Specially Adapted Housing (SAH)** is a lump-sum monetary allowance
payable toward the construction or remodeling of a residence to
accommodate the special housing needs of a veteran who is
catastrophically disabled by service-connected disability.

For the purposes of 38 USC 2101, a specially adapted house is a family
dwelling or unit, together with the necessary land, that has been
specially designed to overcome the physical limitations of the
individual beneficiary.

**SSA** -- see Social Security Administration

**Survey of Income and Program Participation (SIPP)** is a longitudinal
survey with monthly interviewing of persons age 15 and over in
households of U.S. civilian, non-institutionalized population.

**Standard Deviation** is one of several indices of variability that
statisticians use to characterize the dispersion among the measures in a
given population. To calculate the standard deviation of a population it
is first necessary to calculate that population\'s variance.
Numerically, the standard deviation is the square root of the variance.
Unlike the variance, which is a somewhat abstract measure of
variability, the standard deviation can be readily conceptualized as a
distance along the scale of measurement.

**Standard Error**, or Standard Error of the Mean, is an estimate of the
standard deviation of the sampling distribution of means based on the
data from one or more random samples.

**Stratification** involves sorting the population into subgroups and
then systematically selecting from these groups, ensuring that their
representation in the sample was proportional to their relative sizes.
Alternatively, you could randomly select a proportional number of
participants from each subgroup.

**Supplemental Insurance/Coverage** is additional insurance coverage
that is sometimes made available through an employer to individuals who
are already covered by basic life insurance offered by the company.

**Taker.** A person who elects to participate in a VA insurance program.

**Term Insurance** is insurance protection intended for a limited time
period. This insurance normally does not accumulate a cash value. It
remains in force for a specified period of time after which it is
subject to renewal or termination.

**Underwriting** is the process of evaluating a risk for the purpose of
issuing insurance coverage on it.

**User.** A person who elects to participate in a VA benefits program.

**VA** -- see Department of Veterans Affairs.

**Variance** is a descriptive statistic indicating how the numbers in a
distribution are clustered around the mean. If the numbers are
relatively close to one another, the distribution will have a low
variance. If the numbers are very different from one another, the
distribution will have a high variance. The variance in a distribution
reflects both systematic differences (due to the influence of
independent variables) and error variance (or \"noise\").

**VBA** -- see Veterans Benefits Administration.

**Veterans Benefits Administration (VBA)** is one of three
Administrative agencies of the Department of Veterans Affairs (with the
Veterans Health Administration and the National Cemetery
Administration). VBA is responsible for administering all VA benefits
programs.

**Veterans' Group Life Insurance (VGLI)** is a VA supervised program of
post separation group term life insurance. SGLI can be converted to VGLI
after separation while the SGLI policy is still in force.

**Veterans' Mortgage Life Insurance (VMLI)** is a VA program that
provides mortgage life insurance to catastrophically disabled veterans
at standard (healthy) premium rates.

**VGLI** -- see Veterans' Group Life Insurance

**VMLI** -- see Veterans' Mortgage Life Insurance

**Waiver of Premium** is a rider or provision included in some life
insurance policies exempting the insured from paying premiums after he
or she has been disabled for a specified period of time, usually six
months.

**War or Aviation Clause** is a clause in a commercial insurance policy
that prohibits payment in the event that the policyholder is killed as
the result of an act of war or in an aviation accident.

**Whole Life, Permanent, or Cash Value Insurance** is a life insurance
policy intended to provide lifetime protection. Premiums for these types
of policies generally do not increase periodically as term insurance
premiums do. Permanent plan policies have cash and loan values while
term insurance does not.

**Welfare** is the physical, social, and financial conditions under
which somebody may live satisfactorily.

**Working.** The study definition of working is any survey respondent
who reported income from earnings and/or self employment.

[^1]: Some quotes from the legislative history are:

    [Availability of SGLI:]{.underline} "First, although it is true that
    commercial insurance is available without restriction to servicemen
    who are performing essentially peacetime duties, it is argued that
    those men who have been alerted for, or who are serving in, a combat
    zone are not readily able to obtain -- at standard rates and without
    war exclusion clauses -- commercial insurance coverage."
    "Accordingly, this approach (SGLI) will make available in every case
    a reasonable amount of insurance protection." Source: Statement of
    W.J. Driver, Administrator of Veterans' Affairs, September 9, 1965;
    House of Representatives, 89^th^ Congress, Report No. 1003,
    September 15, 1965, page 16.

    [Affordability of SGLI:]{.underline} "The premium rates charged by
    the companies (issuing SGLI coverage) would be determined by the
    Administrator on a basis consistent with the lowest rates charged
    large employers for group insurance." Source: House of
    Representatives, 89^th^ Congress, Report No. 1003, September 15,
    1965, page 14.

    [Availability and Affordability of VGLI:]{.underline} "... the
    Veterans' Administration study also revealed that inability to
    afford insurance was a major reason for low conversion... His
    financial situation too often prohibits him from taking out any life
    insurance, much less adequate insurance. Veterans' Group Life
    Insurance is intended to provide a low-cost policy of life insurance
    during this readjustment period following which the veteran will be
    in a better position to recognize the value of commercial life
    insurance and to purchase that amount which he considers adequate
    and necessary." Source: Senate, 93^rd^ Congress, Report No. 93-723,
    Veterans' Insurance Act of 1974, March 1, 1974, page 18.

    [Availability of VMLI:]{.underline} "It is a documented fact, Mr.
    President, that the men with these disabilities have severely
    curtailed life expectancies. Moreover, few, if any, of them can
    obtain mortgage protection life insurance from commercial sources.
    It is a matter of simple justice, therefore, to allow these men, who
    have sacrificed their physical health to defend their country, to be
    secure in the knowledge that widows and families will be protected
    in their efforts to maintain a home in the event the veteran dies
    before age 70." Source: Senator Bentsen speaking in the
    Congressional Record, August 6, 1971, page S13403.

    [Affordability of VMLI:]{.underline} "The eligible veterans under
    this program would pay premiums at a rate not to exceed the cost of
    premiums in similar policies covering 'standard individuals'. The
    remainder of the premium costs would be paid by the Government ...."
    Source: Senator Bentsen speaking in the Congressional Record, August
    6, 1971, page S13403.

[^2]: The maximum was increased to \$250,000, effective April 1, 2001,
    by PL 106-419.

[^3]: Recently, the maximum was increased to \$250,000, effective April
    1, 2001, by PL 106-419.

[^4]: Evaluation of parents' DIC is not included within the scope of
    this study and will be evaluated with VA's other means based
    program, nonservice-connected pension.

[^5]: PL 106-419, signed into law on November 1, 2000, provides DIC to
    survivors of reservists who die as the result of a stroke or heart
    attack incurred during inactive duty training.

[^6]: Rates for calendar year 2000 (effective 12/01/99) are used
    throughout the report for consistency. Public Law 106-413 raised DIC
    rates effective 12/01/00 by a cost of living adjustment factor of
    3.5%.

[^7]: The standard errors computed for each question and response after
    the survey revealed that the sample is typically representative of
    the relevant universe population at 90% confidence level with +/- 4
    points or lower margin of error for those questions that all
    respondents provided answers. If you conducted the same survey 100
    times, 90 out of the 100 administrations should yield results within
    +/- 4% of the current numbers.

[^8]: The middle value in a group of sequential data.

[^9]: Also called the \"average.\" Obtained by adding item scores and
    dividing by the total number of items.

[^10]: The number of quotes received from commercial companies was in
    the range of 6 and 25, depending on factors such as age, health
    status, and smoking status (for example, some companies did not
    provide quotes for smokers over 50 years of age). All of the
    companies surveyed were rated at least A- by the rating companies.
    Quotes were received for two health classifications: Best Class
    (Preferred Plus) and Standard (Regular). Note that for smokers the
    best available health classification is Preferred or Standard. In
    Best Class classification no personal or family history of major
    illness is allowed and insured must have excellent weight, blood
    pressure, and cholesterol readings. In Preferred classification no
    personal or family history of major illness is allowed and insured
    must have good weight, blood pressure, and cholesterol readings. In
    Standard classification some health impairments such as certain
    cardiovascular diseases or diabetes are allowed and average weight,
    blood pressure, and cholesterol readings are required.

[^11]: Current VMLI premiums are based on the 1958 mortality tables.

[^12]: Note that the source for this table for each program is the study
    survey with the exception of the DIC program. Relative to IRS
    records, DIC surviving spouses tended to understate their income in
    the survey and therefore, IRS data is used for the "after veteran's
    death income" for the DIC surviving spouses. Study groups of DIC
    surviving spouses are on average 66 years old; may not have been
    involved in household finances until recently; and/or may have had
    difficulty in accurately recalling their finances. Our investigation
    reveals small differences between the income data reported in the
    survey and the IRS income for the other beneficiary groups.

[^13]: Percent of spouses below poverty cannot be based on the
    aggregated data received from IRS. Therefore, we rely on the study
    survey responses to compute this statistic.

[^14]: Note that the SIPP data includes those survivors of veterans in
    receipt of DIC and those in receipt of death pension, but does not
    include the rest of survivors of veterans who do not receive any
    survivor payments from VA.

[^15]: This is not surprising given the fact that disability
    compensation received by severely or catastrophically
    service-disabled veterans can range from \$1,018 to \$5,000 per
    month. However, note that service-connected disability compensation
    benefits for calendar year 2000 could be as low as \$98 per month.

[^16]: Note that if the respondent rated her/his financial status as
    "good," or indicated that s/he did not have to cut any expenses, the
    additional amount of income needed is assumed zero.

[^17]: *Program Evaluation of the Survivors' and Dependents' Education
    Assistance Program (38 U.S.C., Chapter 35)*, prepared by Klemm
    Analysis Group for the Department of Veterans Affairs, Contract
    V101(93)P-1500 Task Order 12, June 23, 2000.

[^18]: Overall satisfaction rating was inadvertently left out of the
    survey questionnaire for SGLI respondents.

[^19]: The overall satisfaction rating had been inadvertently left out
    of the SGLI survey taker questionnaire.

[^20]: The study team was unable to determine the importance weights for
    the SGLI program as the overall satisfaction rating had been
    inadvertently left out of the SGLI survey taker questionnaire.

[^21]: Note that a survey of survivors of veterans who had VMLI was not
    part of the study.

[^22]: Percent of spouses below poverty cannot be based on the
    aggregated data received from IRS. Therefore, we rely on the study
    survey responses to compute this statistic.