A surviving spouse who wants to make sure they won't have any financial problems if their active duty veteran dies should be aware of the retired military spouse benefits that are available.
- There is a death benefit military members can receive upon the death of their service member spouse.
- This death benefit is in addition to other retired military spouse benefits that may be available.
- It's important for surviving spouses to understand what these benefits are if they will be enough to cover needs and lifestyle.
Eligible Monthly Payments For A Deceased Service Member
In the pre-9/11 era, when this occurred, the active-duty death benefits for a surviving spouse were insufficient. While overall compensation has improved for eligible survivors, many gold star families are still shocked at how little they receive in comparison to what they would have received in retired pay had there not been an early death.
We need to face the reality that the Government accounting office knows it saves money when a Veteran isn't alive very long. Sorry, but that's the truth.
It's the same problem we see with Social security. The payments made today are for a future promise. But there is nothing of stored value with your name on it. Payments for today's retirees come from today's new social security taxes on workers. If they live too long, there isn't enough new Soc. Sec. taxes to pay for it.
The Social security system was designed when they only expected retirees to live a couple of years past retirement. Life expectancy was only 65! We are living longer and prices are going up.
These problems are no different when it comes to how a military pension and the veteran's death benefits work.
The only way to ensure you have a proper death gratuity is to design a personalized strategy in the unlikely event of the service member's death.
Who Is An Eligible Beneficiary?
Spouse (including common-law spouse); children; parents; siblings; nieces/nephews; grandparents; stepparents or stepchildren and their descendants. A "child" may be the natural child, legally adopted child, stepchild, grandchild, or any person for whom you designate.
Active Duty Families Surviving Spouse Benefits
Military spouses who want to make sure they won't have any financial problems if their active duty veteran spouse dies should be aware of the available death benefits. To qualify for death gratuity, a surviving spouse must generally be married to the service member for at least one year before death or have children with that person.
If a service member dies while serving on active duty
Death benefits may be paid to the spouse and minor children that could include:
- A lump-sum death gratuity
- Death compensation pay for all dependents of active duty service members subject to death in service or death from injuries received in a combat theater of operations.
There are some death benefits payable to a spouse or children
Service members Group Life Insurance
The maximum available SGLI death benefit is $400,000.
Services Members Group Life insurance offers low-risk coverage for service members who are active duty, reservists, or members of the National Guard.
For death during active service, this death benefit pays the full face amount of the contract to an eligible beneficiary, tax-free.
What Is Dependency And Indemnity Compensation?
Dependency and Indemnity Compensation (DIC) is a tax-free monetary benefit payable to eligible survivors of certain Veterans. The base monthly amount is $1,437.66 for all surviving spouses. There are several factors including children, VA disability, etc. that can increase that amount substantially.
Be Informed About Veteran Spouse Benefits
What spouses of career military need to know about military retired pay
For decades many were let to believe there was only one option to provide death benefits for spouses of veterans, the SBP.
The SBP benefit is an annuity that was created to give a minimal level of support in the case that a retired veteran dies before their spouse. It is available without restriction to all retiring veterans.
Rather than paying out a lump sum to the beneficiary like most life insurance policies, it pays a portion of the deceased veteran’s retired pay each month, for the remainder of the surviving spouse’s life.
What You Probably Don’t Know about the Survivor Benefit Plan (SBP)
Unfortunately, it is characteristic of the optional SBP payments that it is not always elected as the result of a thoughtful and informed decision. Many modern military retirees and their families don’t learn about the SBP annuity until they are twelve to eighteen months out from their separation from active duty, and few retiring military members investigate alternate options for financially protecting their families.
The SBP is briefed as part of the military retirement program, and there is little to no guidance given regarding privatized options on the free market. About 80% of career service members end up taking the SBP.
This is a good thing for the government; because much like social security, the continuity of the SBP program depends upon each succeeding generation paying their own SBP premiums into it.
Why you May Decide to Decline SBP Coverage
During your retirement briefings, the SBP coverage is presented as a no-brainer for retiring service members and their families, but the program has some drawbacks that some military families find shocking:
- The SBP is the same for everyone, and it costs a lot—6.5 percent of your military retirement pay is taken away automatically.
- Despite its high cost, a retiree's surviving spouse (or any minor under the age of 21) is unlikely to achieve a positive return on investment beyond what was invested if anything at all.
- The SBP benefits are only 55% of the veteran’s pension to the surviving spouse.
- When eligible surviving spouses die before the service member, no benefits will be paid (and no refunds given). This is worth considering in instances where there is a large age difference, the spouse is incapacitated, or the service member is female (statistically, women live longer than men).
- The SBP is a one-time, irrevocable choice that must be made at retirement or within a year of a significant life change, such as marriage or parenthood. You must enroll within a certain period, and once you do, you are obligated to pay premiums for the rest of your life. [The only window to leave SBP is between the 24th and 36th month after retirement]
- The SBP does not offer any cash value or return on investment while the insured retiree is still living.
- The SBP only pays out if the insured retiree dies before the surviving spouse.
- Children are over 21 cannot be beneficiaries. If the spouse dies at any point after the retiree, if all children are over the age of 21, SBP payments stop.
- The processing time to receive SBP benefits is significantly longer than the processing time for other life insurance for military products.
The Costs of Veteran Survivor Benefits
What nobody tells you during your retirement briefings about death benefits for a surviving spouse is that in the long run, the amount of money the beneficiary receives from the SBP annuity is usually considerably less than what the monthly premium amounts could have generated as investments and insurance in the private marketplace.
A New Way To Receive Spouse Benefits
The ONLY way that it makes good financial sense to elect SBP coverage, with regards to ROI, is if a service member dies within a few years of retiring. And not only is that a morbid thing to plan for, it's also highly unlikely.
Military Retiree Pay Protection Strategy
US VetWealth's Military Pension Protection System gives military spouses more income protection and flexibility than the SBP annuity. The program is a voluntary, private insurance plan that service members can design instead of the SBP coverage.
Unlike the SBP, US VetWealth works with the nation's best insurance carriers so that any death gratuity payment pays out immediately upon the death of the insured veteran, with no waiting period required.
Plus, there are no premiums to be paid for as long as you live - so if you should ever need it, your loved ones will receive 100% of your policy face value. And unlike SBP, US VetWealth allows beneficiaries to continue receiving payments after the death of the service member or retiree. So if you're looking for better-of-mind and more options in protecting your income, US VetWealth is the way to go.
- Insurance policy benefits are paid directly to the beneficiary after the death of the service member or retiree. Beneficiaries can be changed and updated to ensure a legacy.
- SBP coverage can be turned down at retirement but once coverage is elected it must be continued for life. The US VetWealth Military Pension Protection System premiums are completely flexible.
- US VetWealth provides a simple design to allow the service member or retiree to determine how much coverage they need based on the maximum death gratuity payment from the government.
When it comes to life insurance for military families, there has always been a status quo “right” way to do things. Falls right in line with other traditional financial advice. However, we believe that this type of thinking can often lead to missed opportunities and suboptimal coverage.
The most important thing to keep in mind is that insurance is all about the amount of cost required to protect a given risk. In the case of life insurance coverage for average active duty military members, the primary goal when looking at coverage options is to replace income in the event of death. This can be accomplished by utilizing Servicemembers Group Life Insurance (SGLI) or Survivor Benefit Plan (SBP). Schedule a free SBP analysis consultation today.