Written By: Heather Walrath, AFC®
Military service provides many benefits for family members. However, many benefits are misunderstood and underutilized. Here are four key programs you need to know to empower military and veteran families to use their earned benefits.
Automatic Life Insurance Coverage for Families
If a service member has Servicemember Group Life Insurance (SGLI), their spouse and children are automatically given a Family Servicemembers’ Group Life Insurance (FSGLI) policy. For a spouse, the maximum amount of coverage is $100k, and there is a small cost based on age. If a spouse is under 35, the cost for $100k coverage is $4.50 per month. If a spouse is uninsurable through a civilian policy due to a medical condition, this can be a significant benefit. Children are enrolled for a free $10k policy. Little known fact? If a child is stillborn or miscarried late in pregnancy, the benefit also applies! Many people are unaware of this as the child was not entered into the DEERS eligibility system.
All SGLI Policies Include Traumatic Inquiry Protection
The reality is that a service member is much more likely to become injured than to die while serving on active duty. If they are enrolled in ANY amount of SGLI they also have TSGLI—Traumatic Injury Protection, that provides short-term financial support of up to $100k to help eligible service members recover from a severe injury. The injury does NOT have to be combat-related. If a service member declines SGLI they are also declining TSGLI and missing out on a valuable benefit! If a service member prefers other life insurance, they should be encouraged to continue at least some SGLI coverage to have TSGLI coverage and to protect their future insurability when they leave the military by converting to another insurance policy without underwriting. Also, a service member needs to make sure that other policies they may get do not have military or hazardous activity exclusions.
VA Survivor Benefit Amounts are Not the Same as the Veteran’s Disability Payments
VA disability compensation provides a tax-free payment to a veteran. Many families rely on this compensation and don’t realize that the compensation ends when the veteran dies. If the veteran’s death is connected to their service, or if they were at 100% PT disability rating for a qualifying amount of time, the surviving spouse and eligible children may receive a survivor’s compensation from the VA in the form of Dependency Indemnity Compensation (DIC). However, DIC is a flat rate adjusted each year for inflation and not related to the amount the veteran received when they were alive. For many survivors, this monthly DIC amount will be substantially less. For 2023, the DIC rate for a spouse is $1,563. And the reality is, it is not likely that a surviving spouse will qualify. As of September 2022, there were approximately 5.4 million veterans receiving disability compensation. However, there were only 477,000 survivors receiving service-connected benefits. (https://www.benefits.va.gov/REPORTS/abr/docs/2022-compensation.pdf).
There is a RARE Survivor Benefit Plan Open Season during 2023
Enrolling in the Survivor Benefit Plan (SBP) BEFORE retirement is the only way a portion of a service member’s retirement pay continues for an eligible beneficiary. Unfortunately, there is a tremendous amount of misinformation floating around regarding SBP. While not the best choice for everyone, it can provide a valuable inflation-protected income for the lifetime of a spouse or disabled child. Unless they are disabled, benefits for children only last until age 18 or 22 if in school. Spouse coverage costs a retiree 6.5% of the amount of their retirement pay that they choose to cover. However, child coverage costs significantly less than spouse coverage—usually less than $20 per month, based on the age of the youngest child and the amount elected. Unfortunately, many service members don’t realize that child coverage cost is significantly less than spouse coverage and decline coverage all together if they don’t feel their spouse will continue to need the retirement income.
In 2020 the “Widow’s Tax” was repealed. This legislation had prevented eligible spouses from concurrent receipt of both the DIC and SBP benefits. Under this law, the SBP benefit was offset by the DIC benefit. For this reason, many retirees who felt their spouses would be eligible for DIC declined to enroll in SBP. With the elimination of the offset, the 2023 National Defense Authorization Act provided for an Open Enrollment Season for SBP to provide another opportunity to enroll in SBP. An Open Enrollment Season for SBP is extremely rare—the last one was in 2005. The current season allows for anyone who was receiving retirement pay as of 22 Dec 2023 who may have previously declined enrollment to now opt in. However, they will be responsible for payments and interest retroactive to their date of retirement. This special season also allows anyone who is currently enrolled to cancel their enrollment. Anyone who may want to reassess their initial SBP election decision has until 31 Dec 2023 to take advantage of the SBP Open Enrollment.
Heather Walrath, AFC® is a 2009 Military Spouse Fellow and has worked as a financial educator for 14 years. Currently she is a financial educator and military benefits liaison with Navy Mutual. She has been a military spouse for 25 years.