Usually, VA benefits are exempted from tax. SGLI proceeds received due to the death of the insured are not a part of taxable gross income. However, But the proceeds value is included in the estates value which may be subjectable to taxation. If SGLI proceeds are paid to your beneficiary in 36 equal monthly payments, the interest portion included in these payments is also exempt from taxation. In addition, delayed settlement interest (interest accrued from the date of the insured’s death to the date of settlement) is also exempt. You are not required to report any installment interest or delayed settlement interest that you received in addition to the proceeds to the Internal Revenue Service (IRS).