Understanding Cash Value in Servicemen's Group Life Insurance
Most servicemen's group life insurance policies are term coverage and do not build cash value, so they cannot be cashed in. Only policies that include a cash‑value component, such as a whole‑life rider or a separate savings element, allow a surrender for cash.
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When Cash Surrender Is Possible
If your group plan includes a cash‑value rider, you may request a surrender after any required vesting period, typically several years of continuous service. The insurer will calculate the surrender value by subtracting any administrative fees and outstanding loans from the accumulated cash amount.
How to Request a Cash Surrender
Contact the plan administrator or the insurance carrier's service center, provide proof of identity, and complete a surrender request form. The payout is usually issued by check or direct deposit within 30 days, but processing times vary by carrier.
Alternatives to Cashing Out
Instead of cashing out, you can:
- Convert the coverage to an individual policy that you keep after leaving the service.
- Borrow against the cash value, keeping the death benefit intact.
- Transfer the cash value to a qualified retirement account if the policy permits.
Tax Implications
The surrender amount above the total premiums paid is generally taxable as ordinary income. If you are under age 59½, an additional 10% early‑withdrawal penalty may apply unless an exception (e.g., disability) is met.
Key Considerations
| Factor | Impact | Typical Situation |
|---|---|---|
| Policy Type | Term vs. cash‑value | Term policies cannot be cashed. |
| Service Length | Vesting period | Often 2‑5 years before cash value is accessible. |
| Fees | Administrative and surrender charges | Reduce net cash received. |