September 29, 2005
Contact: Jeff Schrade (202)224-9093

(Washington, DC) Totally disabled servicemembers discharged from the military will have more time to apply for life insurance under legislation approved unanimously by the U.S. Senate Wednesday. The Veterans Benefits Improvement Act of 2005 (S. 1235), sponsored by the chairman of the U.S. Senate Committee on Veterans' Affairs, also provides the Department of Veterans Affairs more flexibility on mortgage interest rate cap protection for VA loans, and provides financial assistance for active duty personnel who struggle with the loss of a stillborn.

These provisions will now be negotiated with the U.S. House of Representatives for inclusion in an omnibus bill to be voted on later this year.

"The Senate has made some significant changes which will truly help our nation's veterans and their families," said Chairman Larry Craig. Describing the legislation he authored, the senator from Idaho laid out for his colleagues the challenges disabled veterans face.

"The opportunity to convert life insurance coverage to Veterans' Group Life Insurance (VGLI) is essential for totally disabled veterans, many of whom have no hope of obtaining commercial insurance coverage," Craig said.

Under current law, servicemembers discharged from the military have a 120-day grace period within which they are provided premium-free coverage under the Servicemembers' Group Life Insurance (SGLI) program and may convert to VGLI coverage without needing to meet underwriting requirements. Servicemembers separated from military service who are totally disabled may apply for an extension of the free SGLI coverage and VGLI conversion benefit that lasts up to one year after military discharge.

"Preliminary data obtained from VA suggest only 45 percent of totally disabled servicemembers apply for the extension despite VA's outreach effort. My legislation will provide one additional year within which severely disabled veterans may apply. The extra year will give VA more time ? a total of two years after their discharge from the military ? to reach veterans when they are perhaps more able to focus on their financial planning needs," Craig said.

The Idaho Republican also told his colleagues of the benefits within the legislation for veterans seeking mortgage financing with a VA loan guaranty, noting that Hybrid Adjustible Rate Mortgages are a new, but popular, financing option for borrowers.

"I am informed by industry and VA experts that without providing VA with greater flexibility to set an appropriate interest rate cap for annual adjustments, lenders will either be reluctant to make VA hybrid ARM loans available to veterans, or will require that veterans pay higher interest rates than otherwise would be required. My legislation provides VA with the flexibility it needs to fix this problem," Craig said.

The bill also provides language sought by Sen. Rick Santorum (R-Pennsylvania) which will provide $10,000 in insurance coverage for the stillborn births of personnel insured under the SGLI program.

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