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For military members, buying life insurance isn’t the only way to guarantee their family’s financial survival. By choosing to participate in the Survivor Benefit Plan (SBP), you can ensure that your family maintains a stable source of income.
Typically, the death of a military member would mean that military retirement pay ceases, which can leave families struggling to maintain. But by participating in the SBP, beneficiaries retain their financial security and may be able to avoid a hefty life insurance premium.
The great thing about the SBP is that unlike typical life insurance there isn’t a chance that beneficiaries will outlive the benefit.
Although the amount varies, beneficiaries receive a guaranteed percentage of their retirement pay after death. However, the amount your beneficiary will receive depends on your elected coverage.
Military members usually opt for full coverage, which would allow your spouse to receive 55 percent of your retired pay. Plus, this benefit can be applied to your children, dependant grandchildren and even former spouses, too.
However, if you ever decided to reduce you coverage amount, you’ll need your spouse’s permission to make a change to your policy.
If you decided to enroll in the SBP, you would be charged a monthly fee, which comes directly from your retirement pay.
Fortunately, the percentage charged is the lesser of:
• 6.5 percent of your insured military pay, or
• 2.5 percent of the first $635 protected plus 10 percent of the remaining balance
For example, if you insured $1,800 through the SBP, then your monthly cost would be $117, according to USAA. Additionally, after 30 years of steady SBP payments, you’ll no longer have to pay a premium.
Through a similar program, reservists are able to protect their retirement income, too. Through the Reserve Component Survivor Benefit Plan (RCSBP), protecting their spouse from a huge financial setback is possible.
However, while the RCSBP is similar, there are distinctive differences in the coverage options available:
The SBP affords participants numerous advantages, but there are two benefits that truly separate the program from the standard life insurance policy:
4 Comments
I’m a Gold Star Wives. My husband died from service connected disabilities and my DIC is offset by SBP. Does everyone who has signed up for SBP know about the SBP/DIC offset? I bet not.
This Survivor Benefit Plan does not mention Disabled Veterans.
I would like to make sure my wife will not lose her home because of my death.
The problem is I have been diagnosed with PTSD which getting life insurance very difficult. I would really appreciate your assistance and/or comments.
Surviving spouses of retired service members who die of a service connected cause have their SBP reduced dollar-for-dollar by the amount of DIC the surviving spouse receives from the VA. Surviving spouses of retired service members and those who died on active duty after December 31, 1992 will receive $1195 per month in DIC in calendar year 2012. Those who were married to the veteran for 8 years will receive will receive $1450 per month in DIC. Any SBP to which the surviving spouse is entitled will be reduced by these amounts in 2012.
Surviving spouses of service members who died on active duty before 9-11-2001 receive SBP without payment of premiums if the service member was retirement eligible (served 20 years) when he/she died.
Surviving spouses of those who die on active duty after 9-11-2001 can reassign the SBP to the children and receive the full amount of SBP in the children’s names. When the child is 18, that child’s portion of the SBP goes directly to the child if the child remains in school.
If the surviving spouse reassigns the SBP benefit to the children, the surviving spouse loses the benefit for life.
Premiums are 6.5% of the service members retirement pay. If a service member’s retirement pay were $2000 per month, the premium would be $130 per month. On an income of $2000 per month, a premium of $130 per month can be quite hefty.
When the service member or retired service member dies, the surviving spouse receives a PARTIAL refund of the premiums the service member paid. If the surviving spouse is entitled to more SBP than DIC, the surviving spouse receives the additional amount of SBP, e.g., The surviving spouse is entitled to $2000 per month in SBP and receives $1450 in DIC, the surviving spouse will receive $550 in SBP.
Surviving spouses also receive DIC for the children until the reach the age of 18.
The surviving spouse needs to apply for DIC from the VA within 1 year after the service member’s death. The major advantage of DIC is that it is tax exempt; SBP is taxable. Those who receive DIC are also eligible for education benefits, VA home loan guarantees, a 10 point preference for federal employment and a variety of state benefits that vary from state to state.
Surviving spouses are also eligible for Social Security benefits against the Social Security account of the deceased service member at age 60. Surviving spouses with young children are eligible for Social Security for the children until they reach the age of 18 and for themselves until the youngest child reaches the age of 16.
SBP is still a good investment for many people, but both spouses need to be aware of the benefits the survivor will receive, how long it will take for the survivor to receive the benefits and make sure that the survivor has enough savings to surviwe until the benefits are received and that the survivor has enough income on which to live.
If my husband (retired/100% sevice connected death) had not paid into SBP would I still get the same amount each month? What were the benefits (increased income for the surviving spouse other than DIC) of my husband signing up for SBP?