Can You Cash Out VA Life Insurance?

VA life insurance policies are designed to help protect the financial future of service members and veterans. But what happens if you need to access funds before you pass away? Whether you can cash out a life insurance policy from the Department of Veterans Affairs depends on your VA life insurance policy. Not all policies build cash value—but for those that do, you may have options like surrendering the policy or taking out a policy loan. Understanding your benefits can help you make the right financial decision without risking future coverage.

What Is VA Life Insurance?

VA life insurance refers to various life insurance programs offered through the U.S. Department of Veterans Affairs. These policies are specifically designed for current and former service members. Popular plans include:

• SGLI (Servicemembers’ Group Life Insurance) – Term life insurance for active-duty members.
• VGLI (Veterans’ Group Life Insurance) – A continuation of SGLI post-separation.
• VALife (Veterans Affairs Life Insurance) – Whole life insurance for veterans with service-connected disabilities.
• Older legacy policies like NSLI, S-DVI, and USGLI may also apply.

Note: VA life insurance and VALife are different. Currently only VALife offers access to policies that can build cash value.

Can You Cash Out VA Life Insurance?

It depends on the policy type:

• SGLI and VGLI are term life insurance and do not accumulate cash value. You cannot cash out these policies.

• Legacy VA policies (e.g., NSLI, S-DVI) may accumulate cash value and allow:

  • Surrendering the policy for a payout
  • Taking a policy loan while retaining coverage

• VALife policies build cash value over time. You may access it via policy loans or surrender.

To request a surrender or loan from the VA, please visit VA.gov

Alternatives to Cashing Out

1. Policy Loans

• Some VA life insurance policies (like VALife or legacy whole life plans) allow policy loans.
• You may borrow up to 94% of the policy’s reserve value, often with 5–12% interest.
• The policy stays active while you repay the loan.
• Taking a loan will reduce the policy’s cash surrender value and death benefit until the loan is repaid.

2. Convert VGLI to Permanent Policy

• You can’t cash out VGLI, but you can convert it to a private permanent life policy.
• See VGLI conversion options for details.

3. Keep Your Policy Active

• Keeping your coverage ensures your beneficiaries receive the full death benefit.
• Permanent plans like VALife may continue growing cash value over time.

Pros and Cons of Cashing Out

Pros:

• Immediate funds, often tax-free
• Can help with emergencies, medical bills, or debt
• Flexible use for personal needs

Cons:

• Policy ends (no more coverage)
• No death benefit for beneficiaries
• May owe taxes if payout exceeds total premiums paid
• Reinstating lapsed coverage requires extra paperwork and back payments

What Happens to VA Life Insurance If You Don’t Cash Out?

If you decide to keep your VA life insurance policy:

• Your coverage continues and your death benefit remains intact
• If your policy builds cash value (like VALife), you still have the option of policy loans
• If your plan is term (like VGLI), you can maintain coverage by paying your premiums on time
• Some policies provide endowment payouts if you outlive the term and haven’t accessed the value

FAQs

Does VGLI have cash value?

No. VGLI is a term policy and does not accumulate cash value.

Can I get money from VALife before I die?

• Yes. VALife policies build cash value.
• You may request a loan or surrender the policy based on its value.

Is it better to cash out or keep coverage?

Depends on your financial needs.

• Cashing out provides short-term liquidity but ends coverage.
• Keeping the policy ensures long-term protection and value growth (if applicable).

Can I sell my VGLI policy?

• No. VGLI cannot be sold.
• You can convert it to a private policy that may allow cash-out options later.

Can you keep SGLI after separation?

No. SGLI ends at separation.

• You can convert it to VGLI.
• You must apply to convert within 1 year and 120 days after separation.
• To get guaranteed coverage without a health review, apply within 240 days of separation.

Can I cash out my VGLI policy?

• No. VGLI does not offer cash surrender or loan options.
• Your only option is to convert it to a policy that does.

What happens if I stop paying premiums?

• VGLI: Your coverage ends.
• VALife or other permanent policies: May reduce coverage or use built-up cash value to stay active temporarily.

Can I reinstate a policy if it lapses?

Yes, with the right VA forms, paid premiums, and eligibility—details in VA Reinstatement FAQ.

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The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of Ethos Technologies Inc., its affiliates, employees or any other individuals. The information and content provided is for informational purposes only, and it is not to be considered legal, tax, investment, or financial advice, recommendation, or endorsement. You should consult with an attorney or other professional to determine what may be best for your individual needs.