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: