The Dept. of Veterans Affairs has confirmed that it has sent 10,000 letters to the beneficiaries of military members with life insurance policies in an effort to clear up confusion surrounding a number of issues, including death benefits provided through what is called an “Alliance Account.”
In addition, the VA is creating a group of experts who will be responsible for reviewing the current life insurance program. Prudential Financial, Inc. covers the program, which includes accounts similar to money-market accounts that are put in place to help surviving family members of deceased military men and women cover funeral and other costs.
A spokesperson for Prudential says that the company “continues to work with VA to address the concerns that have been raised’ regarding the handling of these accounts.
In July, the mother of a soldier who was killed in Afghanistan went public with concerns that she was being “misled” by the VA, which prompted NY Attorney General Andrew Cuomo to call for further investigation of the current death benefit practices. Right now, Prudential places earnings into money-market-esque accounts belonging to military members and then provides the beneficiary with a checkbook that they can use to withdraw funds. If the beneficiary wants, they can write a check immediately and deposit the money into a different account. Some prefer to receive a check in the mail, but this is only done by request.
Beneficiaries receive interest rates dictated by the money-market industry, and Prudential guarantees a minimum rate of over 0.5 percent per year. They have provided the military with life insurance services for over 45 years. The Alliance Accounts were introduced in 1999. A letter introducing the program promised to “better serve beneficiaries.”
Some critics of the death benefit accounts offered by the VA and Prudential say that they are “deceptive” because they allow the insurers to hold off on paying the benefits while they earn investment gains on the funds.
About 60,000 accounts are currently active, and the money within is guaranteed to be “secure” and “available” at any time to the beneficiary. The military offers coverage up to the amount of $400,000 per military member.
The recent letters distributed to beneficiaries more clearly described the offerings of the Alliance Account and provided additional information to those concerned about their account.
