Yes, the benefits are included in the estate. The general rule is that if someone receives benefits as a result of the death of the decedent, it's included.

The valuation may be interesting. The method that I generally use is the one described in PPCs 706/709 DeskBook. It usually comes up with a very high number; I've never worried about it because benefits are normally payable to a surviving spouse.

At least there will be a deduction for the estate tax paid on IRD.