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Friday, November 26, 2010

Veterans’ Benefits: Current Life Insurance Programs

Christine Scott
Specialist in Social Policy

The Department of Veterans Affairs (VA) administers and supervises several life insurance programs for active servicemembers and veterans. The VA supervises the Servicemembers’ Group Life Insurance (SGLI) and Veterans’ Group Life Insurance (VGLI) programs, which are administered by the Office of Servicemembers’ Group Life Insurance (OSGLI), a division of Prudential Financial. The Service-Disabled Veterans’ Insurance (S-DVI) program, on the other hand, is administered entirely by the VA. Access to VA-administered life insurance programs gives servicemembers and veterans, who may not be eligible for private life insurance policies, the opportunity to carry group life insurance. This provides for their families in the event of the servicemember’s or veteran’s death.

In September 1965, with the passage of P.L. 89-214, Congress established the SGLI program and mandated the VA to enter into an agreement with the private insurance industry to meet the insurance needs of Vietnam era servicemembers. As a result, VA established an agreement with Prudential Financial to administer its policies. When first enacted, the SGLI program provided up to $10,000 in coverage for policyholders. Today, servicemembers can receive a maximum of $400,000 insurance coverage under the program.

On August 1, 1974, with the enactment of P.L. 93-289, VGLI became available to servicemembers. VGLI provides for the conversion of SGLI after separation from active military duty. VGLI is a five-year renewable term policy that, like SGLI, provides a maximum of $400,000 of coverage.

Servicemembers may have their SGLI and VGLI proceeds paid either as a lump sum or over a period of 36 months. Since 1999, if the member chose to have his or her benefits paid as a lump sum without specifying that the payment be made via a single check, beneficiaries would have received payments via retained asset accounts called Alliance Accounts. However, in light of recent media coverage condemning this practice as a violation of contractual agreements, Prudential is to now send beneficiaries of VA life-insurance policies a check when they ask for a lump-sum benefit payment rather than keeping the money in an Alliance Account and mailing a draft book, unless an Alliance Account is specifically requested. Free financial counseling is available to SGLI and VGLI beneficiaries if the policyholder chooses to have payments made via an Alliance Account.

During the Korean War, before SGLI and VGLI were established, Congress passed the Insurance Act of 1951 (P.L. 82-23) and established the S-DVI program. S-DVI was created to meet the insurance needs of certain veterans with service-connected disabilities, many of whom would not be eligible for private life insurance due to their service-connected disabilities. Currently, policies are issued for a maximum face value of $10,000. Retained asset accounts are not offered under the S-DVI program.

Several bills have been introduced in the 111
th Congress that would affect the VA’s current life insurance programs: H.R. 5993, H.R. 2713, H.R. 1037, S. 3718, and S. 728.

This report provides information on the current VA life insurance programs available for servicemembers and veterans, management and administration issues, and associated policy issues and legislation.

Date of Report: November 16, 2010
Number of Pages: 26
Order Number: R41435
Price: $29.95

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