Borrowing From Military Life Insurance: Is It Possible?

Military life insurance is a benefit offered to active-duty members of the military through the Department of Veterans Affairs (VA) Servicemembers' Group Life Insurance (SGLI) program. This program provides low-cost term coverage with a maximum coverage amount of $500,000, which service members can choose to receive in $50,000 increments. While this life insurance option is available to military members, it does not allow for borrowing against the policy. However, upon leaving the military, service members have the option to convert their SGLI policy into a civilian policy within 120 days. This conversion allows for the possibility of borrowing against the policy, depending on the type of civilian policy chosen.

Servicemembers' Group Life Insurance (SGLI)

To be eligible for full-time SGLI coverage, you must meet at least one of the following requirements:

• You are an active-duty member of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard.
• You are a commissioned member of the National Oceanic and Atmospheric Administration (NOAA) or the U.S. Public Health Service (USPHS).
• You are a cadet or midshipman of the U.S. military academies.
• You are a member, cadet, or midshipman of the Reserve Officers Training Corps (ROTC) engaged in authorized training and practice cruises.
• You are a member of the Ready Reserve or National Guard, assigned to a unit, and scheduled for at least 12 periods of inactive training per year.
• You are a volunteer in an Individual Ready Reserve (IRR) mobilization category.

If you are in nonpay status with the Ready Reserve or National Guard, you may still be eligible for full-time SGLI coverage if you meet both of the following requirements:

• You are scheduled for 12 periods of inactive training for the year.
• You are drilling for points rather than pay.

It is important to note that you must pay your premiums directly if you fall under this category.

SGLI provides various benefits, including:

• Coverage up to a maximum of $500,000, in $50,000 increments.
• 120 days of free coverage from the date of discharge from the military.
• Extension of free coverage for up to 2 years if you become totally disabled after leaving the military.
• Part-time coverage for Reserve members who do not qualify for full-time coverage.

If you qualify for SGLI, you will be automatically enrolled through your service branch. You can make changes to your level of coverage or even refuse coverage altogether. You can also choose your beneficiaries and modify them as needed. Any changes to your SGLI coverage or beneficiaries can be submitted online through the SGLI Online Enrollment System (SOES).

The current basic SGLI premium rate is 6 cents per $1,000 of insurance coverage, which includes an additional $1 per month for Traumatic Injury Protection coverage (TSGLI). For example, for a coverage amount of $500,000, the monthly premium rate would be $30, plus $1 for TSGLI, resulting in a total monthly premium deduction of $31.

Veterans' Group Life Insurance (VGLI)

Veterans Group Life Insurance (VGLI) is a program that allows veterans to maintain their life insurance coverage after leaving the military, as long as they continue to pay the premiums. VGLI is available to those who had Servicemembers' Group Life Insurance (SGLI) while serving in the military and apply within a year and 120 days of discharge. The amount of coverage provided by VGLI depends on the level of SGLI coverage the veteran had before, ranging from $10,000 to $500,000.

To be eligible for VGLI, an individual must meet at least one of the following requirements:

• Had part-time SGLI as a member of the National Guard or Reserve and suffered an injury or disability while on duty that disqualified them from standard premium insurance rates.
• Had SGLI while in the military and are within 1 year and 120 days of being released from an active-duty period of 31 or more days.
• Are within 1 year and 120 days of retiring or being discharged from the Ready Reserve or National Guard.
• Are within 1 year and 120 days of assignment to the Individual Ready Reserve (IRR) or Inactive National Guard (ING), including members of the US Public Health Service Inactive Reserve Corps (IRC).
• Are within 1 year and 120 days of being placed on the Temporary Disability Retirement List (TDRL).

The application process for VGLI can be completed through the Office of Servicemembers' Group Life Insurance (OSGLI) using the Prudential website or by mail/fax. If applying within 240 days of discharge, proof of good health is not required. However, after this period, evidence of good health must be submitted. VGLI policyholders can also choose and update their beneficiaries at any time.

It is important to note that VGLI premium rates are determined by the applicant's age and desired coverage amount. Additionally, VGLI policies can be converted into commercial (civilian) policies at any time, with standard premium rates and no requirement for health status proof. However, the conversion policy must be a permanent policy, such as whole life insurance, and supplementary benefits are not included in the conversion.

Traumatic Injury Protection Under SGLI (TSGLI)

Traumatic Injury Protection under Servicemembers' Group Life Insurance (SGLI) is known as TSGLI. It is an insurance program administered by the Department of Veterans Affairs that provides short-term financial support to help eligible service members recover from severe injuries. TSGLI benefits have been expanded to include limb reconstruction surgeries, inpatient hospital care at critical care facilities, rehabilitation facilities, and skilled nursing facilities, as well as care to help transition from an inpatient facility to living at home (therapeutic pass).

If you are insured under full-time SGLI, you are automatically covered by TSGLI. This includes active-duty members, reservists, National Guard members, funeral honours duty, and one-day muster duty. To be eligible for TSGLI payments, you must meet the following requirements:

• Be insured by SGLI when the injury occurs.
• The injury must cause a loss that is covered by the policy.
• The injury must have occurred while in service.
• You must suffer a covered loss within two years (730 days) of the traumatic injury.
• You must survive for a period of at least seven full days from the date of the traumatic injury.

TSGLI coverage is worth up to $100,000, and it is not considered disability compensation. It has no effect on entitlement to disability benefits from the Department of Veterans Affairs or the Defense Department. TSGLI provides money for a loss due to a specific traumatic event, while disability compensation is intended to provide ongoing financial support to make up for the loss of income-earning potential due to service-connected injuries.

To receive TSGLI payments, you will need to apply using the Application for TSGLI Benefits (SGLV 8600). Once complete, you can fax, email, or mail it to the VA. The cost of this benefit is a flat rate of $1 per month, which is included in the SGLI premium deducted from your base pay.

Service-Disabled Veterans' Insurance (S-DVI)

Service-Disabled Veterans Life Insurance (S-DVI) is a program that offers low-cost permanent and term life insurance coverage to eligible service members. The Department of Veterans Affairs stopped accepting new applications for S-DVI after December 31, 2022, but beneficiaries who already had the plan were allowed to keep it.

Veterans who are granted a service-connected disability rating but are otherwise in good health may apply to the VA for up to $10,000 in life insurance coverage at standard insurance rates. This application must be made within two years from the date the VA notifies them of their service-connected disability.

To be eligible for S-DVI, veterans must meet the following criteria:

• Released from active duty under conditions other than dishonorable.
• Rated for a service-connected disability (even if rated at 0%).
• In good health, except for any service-connected conditions.
• Apply within two years from the date the VA grants a service-connected disability (section 1114 of title 38, United States Code, does not count).

The VA also offers a premium waiver for veterans who are totally disabled. This waiver applies to the basic S-DVI policy. However, for supplemental S-DVI coverage, beneficiaries must paysection 1114 of title 38, United States Code, even with a waiver for the basic S-DVI premiums.

Veterans who are eligible for the premium waiver can obtain an additional policy of up to $30,000 if they pay the premiums. To be eligible, veterans must be under 65 years of age and apply for supplemental S-DVI within a year of receiving notice of the approved premium waiver.

Veterans' Mortgage Life Insurance (VMLI)

• Have a severe disability that was caused or made worse by their military service.
• Have received a Specially Adapted Housing (SAH) grant to buy, build, or modify a home to live more independently. Modifications may include installing ramps or widening doorways.
• Hold the title of the home.
• Have a mortgage on the home.
• Be under 70 years old.

VMLI provides up to $200,000 in mortgage life insurance, which is paid directly to the bank or lender that holds the mortgage. The amount of coverage equals the outstanding mortgage balance but does not exceed $200,000. It is important to note that VMLI is a decreasing-term insurance, meaning that the coverage amount decreases as the mortgage balance is paid off. If the mortgage is fully paid off, the VMLI coverage will end.

The VMLI premium is calculated based on the current mortgage balance, the remaining number of mortgage payments, and the required VMLI coverage amount. The program offers a VMLI Premium Calculator to help veterans estimate their potential premium.

To apply for VMLI, veterans must first apply for an SAH grant. If approved for the grant, the loan guaranty agent will determine eligibility for VMLI. The agent will then assist in completing the Veterans' Mortgage Life Insurance Statement (VA Form 29-8636). It is important to note that VMLI applications must be submitted before the veteran's 70th birthday.

Frequently asked questions