As a servicemember, your retirement pension is one of the most important benefits you receive for your years of service. But what happens upon your death? 

Will the military still provide for your spouse and children? In addition to any life insurance policies you may have, you can also provide for your surviving family members through the military’s Survivor Benefit Plan.

First, visit the Defense Department’s Survivor Benefit Plans site, especially if you want to fully understand what your SBP premium and amount would be. It’s also a great resource for conducting as SBP vs. Life Insurance comparison.

Related: Military Survivor Planning; Are You and Your Loved Ones Prepared?

What is the Survivor Benefit Plan?

The Survivor Benefit Plan (SBP) is a financial protection program offered by the Department of Defense to provide surviving spouses and eligible dependents with lost military or retirement pay upon the death of an enrolled servicemember or military retiree. Also known as a “survivor annuity plan,” the SBP military program pays the named beneficiary a lifetime benefit of up to 55% of the servicemember’s military pension.

Related: 3 ways to Avoid Creating Problems for your Survivors

Servicemembers have several basic options when choosing their program and beneficiaries, and the price varies. Choosing not to enroll in SBP requires your spouse to agree and to provide a notarized signature acknowledging their concurrence. If you do not submit an election, or if your election is invalid due to incomplete paperwork, coverage automatically starts at an amount equal to the spouse-only option.

What are the advantages and disadvantages of the Survivor Benefit Plan?

SBP Advantages:

• Leaves your selected beneficiary with a guaranteed lifetime income of up to 55% of your elected amount of coverage.
• Premiums are pre-tax and typically automatically deducted from your gross pay, which decreases your taxable income.
• Benefits are protected against inflation and increase each December with a cost-of-living adjustment based on the Consumer Price Index.
• Rates will not increase or be cancelled or revoked based on age or illness.
• SBP Annuity payments are not impacted by Social Security benefits.

SBP Disadvantages:

• Coverage is provided at no cost during active service, but costs are at least 6.5% of your gross pension pay after retirement.
• Your beneficiary generally must live long enough to receive seven months of payments for every five years you paid into the program, in order for your investment to break even. (e.g., if you paid in for 20 years, your beneficiary must receive 28 months of payments before they have received everything you invested into the program.
• Once enrolled, you have a one-year window to cancel SBP.
• It takes 30 years to pay up on SBP.
• If your spouse dies, your SBP option will be suspended, or if you elected your dependent children, the benefit will be distributed to your eligible children.

How much does the Survivor Benefit Plan cost? 

During active duty, SBP is provided at no cost. After retirement, retired servicemembers typically pay up to a pre-tax 6.5% of their gross retirement pay. Coverage costs also vary based on the amount of pay selected. Full coverage is 6.5% of your full gross pay. Reduced coverage means your beneficiary will receive payments based on a smaller percentage of your gross pay. The cost is still 6.5% of whatever that percentage of your gross pay may be, rather than 100% of your gross pay. Check out the Defense Department actuary site to get options based on your pay.  

Who can serve as my beneficiary? 

The SBP provides several options when it comes to choosing your beneficiary:

1. Spouse only is the most popular option.

2. Spouse and children provides coverage for your spouse, plus an equal distribution among your dependent children. An eligible child must be the servicemember’s legal, unmarried dependent who is either under 18, or under 22 and enrolled in an accredited college or university. Disabled or incapacitated children are also eligible. Adding children to the program increases the cost, although that cost will vary based on the ages of the retiree, spouse, and youngest child.

3. Former spouse is another option, especially if the servicemember has been court ordered to provide coverage for a former spouse.

4. Children only is a possible option if you’re married, but you must get a signed agreement from your spouse. You can also select your dependent children if you are not married.

5. Natural Interest Person (NIP) is an option for those with no other eligible dependents. An example might be a sibling, or a child who is older than the eligibility age. The pay is the same 55%, but the cost is higher at 10% versus 6.5%. However, NIP coverage can be cancelled at any time.

Related: 5 Things to Consider When Selecting Your Life Insurance Beneficiaries

Can I cancel or change my SBP coverage?

It depends. Changing or cancelling your SBP coverage is very difficult once you start the program. However, there are a few exceptions:

• If you do not enroll because you do not have any beneficiaries, you can add a spouse or child if it’s done within one year of your wedding date or child’s date of birth.
• If you already have beneficiaries at the time of enrollment but elect out of the option, you cannot change that decision later on.
• You can cancel or terminate your SBP election between the 25th and 36th month of your retirement. Your spouse must provide written concurrence.
• You can withdraw from SBP due to a qualifying disability. This is because your spouse will most likely qualify for VA Dependency and Indemnity Compensation (DIC) benefits. Again, your beneficiary must provide written consent. Due to the passage of DIC and SBP being paid concurrently in year 2023, please think about this decision very carefully.
• If you choose a Natural Interest Person as your beneficiary, you can terminate at any time.
• If you get divorced, you may be able to cancel SBP benefits depending on the court-ordered divorce decree.
• If your covered spouse dies, the coverage will be cancelled or suspended, or the benefit will transfer fully to eligible children if they were already listed as beneficiaries. If coverage is suspended, you can elect to continue coverage in the event of remarriage if you notify DFAS within one year of the remarriage. 

Learn More About the SBP Military Benefit

If you have more questions about if SPB or if you need help deciding which life insurance option is right for your family, this video can help answer some questions:

Although death is not an easy thing to think about, that's exactly why you should take time now to help your loved ones prepare now for the day you won't be here. Download our Military Survivor Checklist to ensure they are prepared for steps they will need to take to claim the benefits you've earned through your military service. If you are an AAFMAA Member, your survivors will receive full, personal assistance from our Survivor Assistance Services (SAS) team when the time comes. Visit the SAS section of the AAFMAA Member Center to download the Member version of our Military Survivor Checklist, which will inform you and your loved ones of all of the steps we will take on your behalf.

You may also call us at 888-961-4573 to speak with one of our Member Benefits Representatives or email [email protected] today. 

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This article was originally published October 3, 2021.