VGLI is for veterans for precisely the reason you noted - they became uninsurable for life insurance for some reason while serving. It’s a standard DVA benefit that gets briefed when someone departs the service. The insured still has to pay premiums. I was eligible for it when I retired from AD, but chose not to use it, as I did not need it for those reasons.
There are also companies who serve the military community with other term and whole life insurance products in individual policies that the service member retains after leaving active duty as personal policies. Those companies do not have combat exclusions or other stipulations for AD, such as no coverage for military pilot. The civilian parallel is while you work for Acme, Inc., you get the employee group term life as a benefit, but you usually, as you accrete spouse, house and kids, get individual policies as well. When you leave Acme, you probably no longer have that group term life, but you have your individual policies.
Two companies, long-established dot-orgs, which we always mention to our sponsor alumni family, are Navy Mutual Aid Assn and Armed Forces Benefit Assn.