Insurable Interest Coverage
The insurable interest option is available only if you are unmarried with either no dependent children or one dependent child. You may elect insurable interest coverage for that child regardless of the child’s age or dependency. Only one individual may be covered under the insurable interest option.
People who can be covered are:
a. Any relative more closely related to you than a cousin. This includes relatives such as parents, stepparents, grandparents, grandchildren, aunts, uncles, sisters, brothers, half-sisters, half-brothers, dependent or nondependent child or stepchild; or
b. An individual who would be financially affected by your death. This must be a natural person (not a company, organization, fraternity, etc.) with a financial interest in your life.
SBP Costs (Premiums)
The monthly cost is 10 percent of retired pay plus 5 percent more for each full five years the person covered is younger than the retiree. The maximum cost is 40 percent of retired pay.
For example, if a retiree is 45 and the person covered is 32, the age difference is 13 years, or two full five year periods. Therefore the cost percentage of retired pay would be 20 percent:
10 + (2 x 5) = 20 percent
If retired pay is $1,000 per month, then the monthly cost will be 20 percent of $1,000, or $200.
The monthly SBP payment to an insurable interest person is equal to 55 percent of the gross retired pay (the base amount is always the gross retired pay) less SBP cost of coverage. Payments are increased by cost-of-living adjustments (COLAs) at the same time and by the same percentage as retired pay is increased.
Continuing our example, if retired pay is $1,000 per month, the monthly cost is 20 percent of $1,000, or $200.
The monthly benefit will be 55 percent of the remaining $800 ($1,000 - $200 = $800) of retired pay.
Thus, the benefit amount will be $440 (.55 x $800 = $440) per month.
Unlike other coverage categories, you may voluntarily terminate SBP insurable interest coverage (if the insured is not a former spouse) or change insurable interest SBP to cover a new spouse or child. See “Stopping SBP“ for details.