You can always give SD some of the life insurance, if so inclined.

If your DH dies while SD is a minor, BM would get social security for SD (plus the military benefit).

SD has access to education/college benefits, so that is huge.

Plenty of parents don't have life insurance policies, period. With his military benefits, SD is not completely left out in the cold.

Yes, SD would live with BM if your DH passed, unless she wanted to give you custody, I suppose.

My DH had no life insurance with SD as beneficiary, BM would have just gotten social security.

Just a tip, I would be more concerned about the policy for you being only 30-40K. Once you get done with his burial costs, there won't be a whole lot left over. If your housing costs require two incomes, you might want to encourage him to get a larger policy to make sure that your housing is secure if the worst should occur.

IMHO, kids do not inherrit when there is a spouse.  Of course when there are Skids, that increases complexity.

My parents are each other's beneficiary.  My brother and I are equally their beneficiaries upon their deaths. Intact initial marriages and families simplify the iherritance topic.

DW and I are each the other's beneficiary.  SS is our beneficiary upon our deaths. DW and I met when SS-31 was 15mos old. We married the week before he turned 2yo.  I raised him as my own.  He asked me to adopt him when he was 22yo. We made that happen.

Even with Skids, I stand on this model.  In the event of a yours and ours or a yours/mine/ours kid model, the spouses are each others heirs.  A Will can divide an estate upon the demise of both spouses.  Xs, get shit for nothing.  

Unless there is a CO defining something else.

I had never put any thought into the yours/mine/ours inherritance thing until now.  What to do when a couple each have prior relationship baggage spawn and joint spawn?  I suppose that would depend on what each category of kid was likely to inherrit from their other parent.  

I might consider more heavily awarding inherritance to ours kids when the yours, and mine kids other parents have assets to award to them in an inherritance.

The simple thing to do is to divide equally between yours/mine/ours kids.   I like the Will with the caveate that anyone who contests the divistion of assets is immediately disenherrited.  That keeps an X from manipulating a kid to blow up the whole inherritance thing.  An X manipulating results in the adult kid forfeiting their inherritance.

DH had nothing when I met him. Everything we have, we built jointly and so when one dies, the other inherits everything. Following both of our deaths whatever is left over, if anything is split between his daughter and my brother. DH is significantly older than I am so likely I will outlive him.

My primary asset is my home (which was my marital home with my ex and I bought him out). I wrote my will a few years ago and set it up so my house goes into a trust, managed by my DH and DD. The trust specifies that DD24 and DD22 can live in the house as long as there's a house to live in, as long as they contribute to the expenses (split evenly between whoever is living there). I have a life insurance policy through work that will go to DH and be used to pay any remaining mortgage and future larger expenses, like a new roof for instance. DH is the only one who can opt to sell the house, only after both kids are 25, and the equity would be split between the 3 of them. If DH stays in the house until he dies, the equity will be split between my kids. (Initially, DH's third was going to go to his kids, SD32 and SS30, but I changed that a year ago when our relationship broke down and I realized they wouldn't be above forcing my kids out if DH died and my kids were still living there). I know some people will think that DH should get everything but I come from a family that believes in inheritance (in my parent's home country it's actually illegal to disinherit children). Also, my parents are the ones who bought my ex out of the house, and put my kids through school, so a portion of the equity in the house is from family money. And, I have a good pension that will go to DH, so he'll be fine. 
As for DH's money, he cashed out a pension from a government job he worked for 20 years and invested it. I initially insisted that he make his kids equal beneficiaries with me. At the time, I had close relationships with them and didn't want to be left to deal with disinherited stepkids. After his kids'  recent behaviour, he's changed it so that all of it goes to me. He's also changed his alternate power of attorney to be my DD. It used to be SD, but he realized that she can't be in the position to make decisions for him when they've been estranged. 
It's true that when you're in a second marriage / step relationship estate planning is insanely complicated, and requires a lot of thought (and a good lawyer who's seen all of the ways this can play out badly). 

That not even covers a price if a car.   Number one. He should have much more insurance.  DS is 3.  You have another 15 to 20 years to support him.  College.    You should be looking at. [ $40,000 a year  X 20 years ]. $800,000 in insurance minimum.  
 You have social security death.  Not included.   Inflation not include.  
You should have control of the money. 

1.  as others have said.. 40K is not a lot when you factor in the costs you will incur at death.. it may help cover a few months of missing income.. from him.. but it's really not enough to set you up well.

2. also.. you are more than welcome to gift SD money if you choose.

3.  This should be NUMBER ONE.. but know the rules in your legal jurisdiction..state.. whatever.  In my state.. if someone dies without a will.. 2/3 of his estate (the life insurance and any property deeded to you won't go through probate normally). will automatically go to CHILDREN..  not just minor children.

so, let's say you have a husband who has assets in his name.. that are not otherwise deeded to a successor and there is no will.

he owns 2 cars worth 10,000 and he owns stocks that are worth 100,000.

he dies.. no will.

You get equivalent of 3k worth of value of cars.. and 30K value of that stock.. his children will equally split 7K and 70K value.. you can see how that could be a big shock!  If real estate is not titled to go to the spouse.. the kid's could end up getting equity of the home.. and THAT could force a sale?

so no will is a no no

DH and I are going through the will / insurance discussions and estate planning now. He has no will and no life insurance. The estate planner was shocked and said to him "do you know what will happen to your wife if something happens to you?!" This is also after discussing the situation with SDs and knowing the state will step in and take over the assignment of assets. Yep, his kids would get a good chunk of it. He doesn't have much right now, but I reminded him his cash assets (car, bicycles, checking/savings, investments would all be up for grabs). And if he thinks OSD would play fair he's got another thing coming. So we are working on it.

None of my assets with go to SDs. Only DH, my sister and niece are beneficiaries. 

I've thought about this, too. With all kids being teens or adults and if each spouse or their family has any real assets, i think keeping finances separate might be the way to go. My SO has 4 kids, split between 2 BMs, each BM is married and has significant assets. The skids, however, are struggling and will likely never be self-supporting. I have 2 kids and my dad has significant assets. I wouldn't want to divide any inheritance i get from my dad so that each of my kids only gets 1/6 instead of 1/2. ETA and i know that my SO will try to get his kids as provided for as possible.