The VA offers life insurance options for active service members and veterans. Servicemembers' Group Life Insurance (SGLI) and Veterans' Group Life Insurance (VGLI) have affordable rates for coverage up to $400,000.
These plans pay a death benefit but don't build cash value. There are five types of permanent life insurance through the VA. If you have any of them, you may be able to cash out your life insurance.
- Service-Disabled Veterans Insurance (S-DVI) is exclusively for veterans with a service-connected disability. S-DVI is the only permanent VA life insurance program that still issues new policies. It's often referred to as "RH Insurance" because policy numbers begin with RH letters. Basic coverage maxes out at $10,000, but up to $30,000 more can be added through the program's eight additional options. Basic coverage doesn't build cash value, but supplemental programs do.
- United States Government Life Insurance (USGLI) was issued to veterans of World War I, with new policies issued until 1951. Fewer than 8,000 policies remain active today.
- National Service Life Insurance (NSLI) is a VA life insurance policy for World War II veterans.
- Veterans' Special Life Insurance (VSLI) policies were issued to Korean War-era veterans until 1957.
- Veterans Reopened Insurance (VRI) was only offered to veterans for one year ending in May 1966.
Can you cash out a life insurance policy?
Cash value life insurance can be accessed in three ways after you've had the policy for more than one year.
- You can take out a loan for up to 94% of your policy's reserve value, which is the amount of cash value that's built up in your policy. The Veterans Benefits Administration (VBA) will determine what the cash value of a life insurance policy is by subtracting any unpaid premiums or debts to calculate the basis for your loan amount. Loans carry interest rates from 5 to 12 percent.
- You can surrender the policy and receive the cash surrender value of life insurance, which is the total amount of cash value that's accrued. After surrendering your policy, you'll no longer have life insurance coverage.
- There are three endowment options under the supplemental RH programs. Under the first, you pay level premiums for 20 years, and then your coverage ends. Coverage ends on the other two endowments when you reach either 60 or 65 years of age. If you outlive the term, you'll receive a check for the policy's face value, minus any loans you may have taken out against your policy.
How to Cash Out a VA Life Insurance Policy
You can apply for a VA cash out surrender or loan by completing and mailing the Application for Cash Surrender Value or Policy Loan (Form 29-1526) to the Department of Veterans Affairs. You'll need your policy number(s), contact information, and banking information if you want to receive payment via direct deposit.
The money you receive isn't taxable when you cash out life insurance policies, so you won't pay taxes on life insurance cashouts. Endowment payments happen automatically when coverage ends, so ensure your direct deposit information is up to date.
While you can't cash out life insurance policies issued through SGLI or VGLI, you may be able to convert them into a permanent cash value life policy. Visit the VA's website for details on how to do this.
Other cash value life policy options
There are several types of life insurance, but only permanent life insurance builds cash value.
Use our term and cash value coverage calculator for life insurance online to determine how much coverage you need, then get a free, no-obligation quote estimate to understand the costs. Whether you cash out your VA policy or not, you can always add private insurance to protect your family's financial stability.