Insurance, no matter what kind, is designed to provide you and your family with some financial protection in case tragedy strikes. Getting insurance involves a whole process, taking up both time and money. After paying years of premiums, the expectation is that the insurance company will take care of you in your time of need. In some cases, getting remarried can cause serious problems with insurance. You might not be as protected as you think you are.
Is your spouse in the military? There is an insurance plan called the Survivor Benefit Plan that is a program of the Department of Defense that is offered to people who are in the military. This insurance provides benefits to the surviving spouse. It appears to function like a life insurance policy. Often, when a veteran dies, the surviving spouse is offered a choice between collecting the military pension of the deceased spouse, or receiving a separate monthly benefit from the Veterans Administration. Whichever they choose is designed to provide the finances the surviving spouse needs in order to continue living her life. If the veteran died from something that was due to his military service, then his spouse also become eligible for a benefit from the Department of Veterans Affairs. This is part of the Dependency and Indemnity Compensation program.
Problems occur, however, if the surviving spouse remarries. Once that happens, there is a little known law that allows the federal government to demand that the money be paid back. It can be quite shocking to receive a completely unexpected letter in the mail, informing you that you have to pay thousands of dollars back to the government – immediately. Most people were not told about this quirk in the law when they were first offered the benefits.
There are also problems that can occur with life insurance that have nothing to do with a person being in the military. When a person gets a life insurance policy, most people will name their spouse as their beneficiary. This is the logical choice. Your spouse is the person who will be dealing with funeral costs. You and your spouse had a mortgage together, which will most likely have several years to go before it is paid off. Your spouse and your children will need the money provided by the life insurance in order to continue paying bills and living their lives.
It has been said that half of all marriages end in divorce. It isn’t unusual for people to get remarried to someone new after the divorce is finalized. Now is the time to take a look at your life insurance, and change your beneficiary from your ex to your new spouse. However, many people don’t actually get around to doing that. This can result in a situation where a person dies, and the life insurance pays out to the ex, instead of to the new spouse. If you are the new spouse, it could turn out that your spouse’s life insurance policy isn’t going to protect you after all.
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