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Affordable Life Insurance For The US Armed Forces Payout Structure To Be Clarified


Until recently the act of getting affordable life insurance if you were in the US Armed Forces was straight forward enough. The life insurance cover for the military has been provided by Prudential Financial Inc since 1965, but had the structure of the policy changed in 1999 when they brought in their ĎAlliance Account Programí.

But in breaking news, brought to you by we discuss how the Alliance Account Program is now under scrutiny.

The way the Alliance Account program worked was that instead of simply sending you a check when a policy was payable (as with most traditional affordable life insurance policies), the money would instead be deposited into a money-marker like fund, and then the beneficiaries of the policies (which can be up to $400,000 for members of the military), are then given checkbooks that enable them to draw on the money.

There was no hold on the money at any time, so the beneficiaries could simply write a check for the whole amount if they wished and deposit the money somewhere else. But the controversy over the policies has long been that they are simply a way for the insurance company to hold on to the money for longer and earn interest on it, whilst the relatives are in no fit state to do anything with it.
On the flip side of that, the insurance companies have claimed that it is a useful and simple financial service, and that the simplicity is good for the grieving relatives, who donít want to make complicated financial decisions when they are still in the process of grieving.

These two opposing views have been brought into sharp focus this week with the news that the US Department of Veteran Affairs has decided to send letters out to 10,000 beneficiaries of these policies to clarify exactly how these money market type accounts work, and to offer guidance as to how they can be used.

Many beneficiaries simply want to receive a check in the mail for the full amount. And whilst this is possible, it has to be specifically requested, which has been a cause of consternation for some, as the rate of interest that is paid on the fund that the money is deposited into is minimal, currently 0.5% a year.

The situation has also recently come to a head in New York, where New York Attorney General Andrew Cuomo has also launched an industry wide probe into the accounts.
It remains to be seen how the situation will be resolved, but the fact remains that life insurance remains a necessity for both members of the armed forces, and everyday members of the public who wish to safeguard their families futures.

Additionally, the US Department of Veteran Affairs has also decided to convene a new working group to investigate a whole raft of issues related to how the life insurance program is run, which Prudential has backed and say they will fully co-operate with.

And so whilst we at wait to see how the various hearings turn out, we would nevertheless urge people to take steps to sort out their life insurance if they havenít yet done so.

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