Veteran life insurance practice raises questions

Nov 29, 2010

Life insurance benefits for veterans may be held by a provider for a time.

One of the benefits of having life insurance is that it provides funds to a family after a loved one has passed away.

Through contracts with the federal government, some life insurance companies provide particular life insurance policies to members of the armed forces and veterans. However, these policies have come under fire of late because of the way they deal with death benefits.

Rather than give families a lump-sum payment, some of the companies in question have held onto the funds. At issue is the fact that these companies are making interest of almost 5 percent, while only offering as little as a 0.5 percent return to beneficiaries.

Members of the insurance industry say the practice is employed so that the bereaved families have time to cope with the situation without having to deal with a large amount of money at the same time. They also note that the families have the right to collect their funds at any time.

While this particular practice is being weighed, the idea of getting life insurance is still recommended by many experts. Having it can provide for certain expenses, such as funeral costs, while also allowing families to continue to make payments on mortgages.

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