Life insurance dividend payment options
Some life insurance policies pay dividends. These are extra funds returned to policyholders each year. If your government life insurance policy number begins with any of these letters, your policy pays dividends: V, RS, W, J, JR, JS, or K. Keep reading to learn about your options for receiving or using your dividend.
Option 1: Pay your annual policy premium
If your dividend is less than your annual premium, you’ll receive a bill for the difference.
If your dividend is more than your policy's annual premium, you’ll have to decide what to do with the money that’s left. You can:
- Request that we pay you in cash, or
- Buy paid-up additional insurance (see option 2 below), or
- Repay a policy loan or lien if you have one (see option 5 below)
Option 2: Buy paid-up additional insurance
The insurance you buy with your dividends is in addition to your basic coverage, and you can buy it at any age. You’ll earn dividends on both your basic coverage and the paid-up additions.
You can choose this option for most policies. But if your policy number begins with the letter K, paid-up additional insurance isn’t an option for you.
With paid-up additions, you can:
- Get more protection for your beneficiaries, and
- Have cash and loan values, and
- Earn dividends, and
- Stop paying premiums
Option 3: Deposit your dividend, earn interest, and cover your premium
When you have a credit account for your dividend payments:
- The interest you earn isn’t taxable.
- You may withdraw money at any time by calling us at 800-669-8477 or sending us a written request.
- If you miss a premium payment, we’ll automatically withdraw enough money from your credit account to pay one month’s premium (and we’ll tell you when we do this).
2021 interest rates:
- National Service Life Insurance: 3.25%
- United States Government Life Insurance: 3.50%
- Veterans’ Special Life Insurance: 3.75%
- Veterans’ Reopened Insurance: 3.50%
Option 4: Deposit dividend, earn interest (can't use to cover premium)
The interest earned on this kind of account isn't taxable. It’s different from Option 3 in these ways:
- It isn’t available to term insurance policyholders.
- If you miss a premium payment, we won’t automatically withdraw money from this account to pay your premium.
- If you want to pay your premium, you’ll need to call us at 800-669-8477 or send us a written request.
Option 5: Repay a loan or lien
If you have a loan or lien against your policy, you can use your dividends to pay down the amount you owe.
Option 6: Pay premiums in advance
Use your dividends to pay premiums as far in advance as possible.
Note: You can’t use this option if your premiums are being paid using one of these payment methods:
- Automatic payment by allotment from your retirement pay, or
- Deduction from VA compensation or pension, or
- Checking account deduction (VAMATIC)
Option 7: Receive dividends in cash
Every year on your policy anniversary date, you’ll get your dividend in one of these ways:
- A U.S. Treasury check mailed to you, or
- A direct deposit of money into your bank account
Questions about dividends
Can I change my dividend payment option?
Yes. You can change your option any time by calling us at 800-669-8477. We can answer any questions you may have about how the dividend payment options work.
Note: If you need help deciding which option to choose, you may want to talk with a financial planner.
Can I choose more than one payment option?
No. You can use only one dividend payment option for each policy. If you have more than one policy, you can choose different options for each of them.
Do all VA life insurance policies pay dividends?
No. Only these policies pay dividends:
- National Service Life Insurance (policies beginning with V)
- Veterans’ Special Life Insurance (policies beginning with RS and W)
- Veterans’ Reopened Insurance (policies beginning with J, JR, and JS)
- United States Government Life Insurance (policies beginning with K)
Your policy pays dividends only if it begins with V, RS, W, J, JR, JS, or K.
Note: You may have heard rumors about special dividends for other life insurance plans. These rumors are false. We don’t pay dividends on Servicemembers' Group Life Insurance (SGLI) or Veterans' Group Life Insurance (VGLI) coverage. Learn more about the special dividend rumors.