Where 99.5% is used
Frequently the real-world level of a single-region application with no redundancy and a competent on-call rotation. Often what a vendor delivers while advertising 99.9%.
What it demands
Alerting that reaches a human out of hours. Three and a half hours absorbs one bad incident a month, not two.
One step either way
Dropping to 99% widens the monthly budget to 7h 12m. Moving up to 99.9% cuts it to 43m 12s.
Measuring it
You cannot report on a service level you are not measuring at a finer resolution than the budget itself. At 99.5% the monthly allowance is 3h 36m, so a check interval anywhere near that figure will miss breaches entirely. Work out your own numbers, or monitor it continuously from four regions, free to start.