December 22, 1978 M29-1, Part I\
Change 8

CONTENTS

CHAPTER 18. CONVERSION

PARAGRAPH PAGE\
18.01 General 18-1\
18.02 Requirements 18-1\
18.03 Applications 18-2\
18.04 Permanent Plans Available by Conversion 18-2\
18.05 Effective Dates 18-3\
18.06 Reserve 18-3\
18.07 Conversion While Insured Totally Disabled 18-4\
18.08 Effective Date of Change/Effective Date 18-4\
18.09 Conversion-Insured Rated Mentally Incompetent 18-5\
18.10 Conversion-38 U.S.C. 724 (Inservice Waiver) 18-5\
18.11 Medical Examination 18-6\
18.12 Inadvertent Conversion to NSLI Endowment Plan-Insured Totally
Disabled 18-6\
18.13 Conversion to More Than One Contract 18-6\
18.14 Partial Conversion 18-6\
18.15 Death of Insured Before Conversion 18-6\
18.16 Replacement Under 38 U.S.C. 781 and Conversion 18-6\
18.17 Reinstatement and Conversion 18-6\
18.18 Consolidation and Conversion 18-6\
18.19 Conversion With TDIP Rider 18-7\
18.20 Reduction and Conversion 18-7\
18.21 Conversion Disapproved-Term Insurance Continued 18-7\
18.22 Change or Withdrawal of Conversion Application 18-7\
18.23 Policy Indebtedness at Date of Conversion 18-8\
18.24 Disapproved Application with Beneficiary Designation 18-8

18-i

December 22,1978 M29-1, Part I\
Change 8

. CHAPTER 18. CONVERSION

18.01 GENERAL

a\. Five-Year Level Premium Term and 5-Year Limited Convertible Term
insurance, in force under premium paying conditions, may be converted,
wholly or in part, in multiples of \$500 but not less than \$1,000, to
the various permanent plans of insurance available under the same
insurance program.

b\. RS insurance (38 U.S.C. 723(a)) which has been exchanged for W
5-Year Limited Convertible Term insurance (38 U.S.C. 723(b)) cannot be
renewed after the policyholder\'s 50th birthday; therefore, if the
insured wants to retain the insurance he or she must convert it to one
or more permanent plans before the termination date of the final term
period. One year before the final termination date of the W term policy,
the insured is sent a notification alerting him or her of the necessity
of converting the policy if he or she wants to continue the protection.
Another notification is sent 90 days before termination of the term
policy. If the insured does not take action to convert the term
(policy,\] it will expire at the end of the term period. However, when
an insured with a W term policy does not convert the insurance on or
before the \[expiration\] date of the final term period and it is
determined the 90-day notification was not sent, or the insured
continues to pay the term premiums which are retained by the VA, the
insured will be allowed 31 days from the date of notice to meet
conversion requirements. The effective date of the permanent plan will
be the day following the expiration date of the final term period.
Premiums paid and accepted after the expiration date of the final term
period are earned premiums and are not subject to refund or credit.

c\. If the premiums for the W term policy are being paid by disability
waiver on the final termination date, the insurance will not be
terminated. If the notifications were sent to the insured and no reply
is received, the W term policy will be converted to Ordinary Life.
However, if it is determined that the 90 day notification was not sent
to the insured and the insured has not applied for conversion, he or she
will be notified by letter of the necessity of conversion and allowed 31
days from the date of the letter to meet the conversion requirements. If
no reply is received from the insured, the conversion to Ordinary Life
will be processed.

d\. When two or more 5-LPT policies with paid-up additions are
consolidated and converted, the paid-up additions will also be
consolidated and retained as part of the new permanent plan.

e\. When a policy with paid-up additions is split into two or more
policies, the paid-up additions will be split proportionately. If the
amount of paid -up additions to be split is an odd amount, the parent
policy will be assigned the extra dollar.

f\. When a 5-LPT policy with paid-up additions is converted to an
endowment plan, dividends earned after the conversion will be applied to
purchase paid-up endowment additions. This will result in two paid-up
additions segments; the paid-up life additions purchased before the
conversion and the paid-up endowment additions purchased after the
conversion.

18.02 REQUIREMENTS

a\. Current Conversion

\(l\) Application, formal or informal, furnishing the required
information.

\(2\) If disability waiver is not in force, payment sufficient for one
monthly premium on the new policy.

b\. Antedated Conversion

\(I\) Application, formal or informal, furnishing the required
information.

\(2\) Payment sufficient to pay the reserve on the new policy from the
effective date of the new policy to 1 month prior to the effective date
of change.

\(3\) If disability waiver is not in force, payment sufficient for one
monthly premium on the new policy.

18-1

M29-1, Part I December 22, 1978

Change 8

18.03 APPLICATIONS

a\. Application for conversion, whenever practical, should be submitted
on one of the following forms:

\(I\) VA Form 29-358, Application for Conversion. (USGLI and NSLI)

\(2\) VA Form 29-358a, Application for Exchange to Special Endowment at
Age 96 Plan. (USGLI only for

insurance age 65 and older)

( \]

b\. An informal application, over the signature of the insured or his or
her (legal\] guardian, furnishing the required information, may be
considered as a qualifying application.

c\. As term policies approach the renewal date, an appropriate
application for conversion is sent to the insured.

18.04 PERMANENT PLANS AVAILABLE BY CONVERSION

a\. National Service Life Insurance

\(I\) Modified Life (-Age 651\
(2) (Modified Life-Age 70\]\
(3) (Ordinary Life\]\
(4) (20-Payment Life\]\
(5) (30-Payment Life\] ..\
(6) (20-Year Endowment\]\
(7) (Endowment at Age 60\
(8) Endowment at Age 65\]\
b. United States Government Life Insurance\
(1) Ordinary Life\
(2) 20-Payment Life\
(3) 30-Payment Life\
(4) 20-Year Endowment\
(5) 30-Year Endowment\
(6) Endowment at Age 62\
(7) Special Endowment at Age 96

c\. Plans Not Available at Certain Ages

\(1\) Under the USGLI program, conversion to the Special Endowment at
Age 96 plan is not permitted until the insured has reached his or her
65th birthday.

18-2

December 22, 1978 M29-1, Part I\
Change 8

\(2\) Under the NSLI (V-H-RH-W) program, conversion to the Modified Life
plans ( \] must be made before \[the following ages:

\(a\) On the Modified Life-Age 65 plan,\] before insurance age 61. (VA
Regulation 3512.2) However, if the application is submitted during the
latter half of the applicant\'s 60th year of age (issue age 61) and
there is evidence that the application was submitted late because the
applicant was confused by the instructions, the conversion will be
approved and the policy antedated to the latest possible effective date
to conform to the regulation.

\(b\) On the Modified Life-Age 70 plan, before insurance age 70; that
is, applications are acceptable up to the end of 6 months following the
applicant\'s 69th birthday.\]

\(3\) Under the USGLI and NSLI (V and H) programs, if the issue age of
the insured on the effective date of the permanent plan policy is 66 or
older, the insured may not convert to the 30-Payment Life or the 30-Year
Endowment plan of insurance. If his or her age is 76 ( \] or older, he
or she may not convert to the 20-Payment Life or the 20-Year Endowment
plan of insurance.

\(4\) Under the NSLI (RH) program, if the issue age of the insured on
the effective date of the permanent plan policy is 70 or older, the
insured may not convert to a 30-Payment Life plan of insurance. If his
or her age is 80 or older, he or she may not convert to the 20-Payment
Life or the 20-Year Endowment plan of insurance.

\(5\) Under the NSLI (RS-W) program, if the issue age of the insured on
the effective date of the permanent plan policy is 71 or older, the
insured may not convert to a 30-Payment Life policy. If his or her age
is 81 or older, he or she may not convert to the 20-Payment Life or the
20-Year Endowment plan of insurance.\]

18.05 EFFECTIVE DATES

a\. Current Effective Date. The premium due date of the premium month in
which the application is submitted, or the next following premium due
date.

b\. Future Effective Date. The date a future premium becomes due after
the next following due date. This date must be not later than the 4th
month after the postmark date of the application.

c\. Intermediate Effective Date. The date any past premium became due
within any term period, (providing it would not result in the contract
maturing as an endowment within 2 months of the effective date of the
change.\] Under the NSLI program, it is not permissible to antedate a
conversion to a younger age \[ \] to qualify for a Modified Life plan of
insurance, (nor\] is it permissible for a (USGLI policyholder\] to
antedate \[an exchange\] to an age younger than 65 when (exchanging\] to
the Special Endowment at Age 96 plan of insurance.

d\. Original Effective Date. The effective date of the original term
contract. The permanent plan policy may not be antedated prior to the
effective date of the original term contract.

e\. When a conversion is processed with an effective date different from
the one applied for, the insured will be advised of the reason. He or
she will also be informed that if VA action is not agreeable, further
requirements will be sent upon request.

18.06 RESERVE

a\. On an antedated conversion, the reserve or the difference in reserve
may be paid by a direct payment or by a direct payment and a loan on the
new contract, if the new contract is antedated 12 months or more. The
amount of reserve or the difference in reserve must be paid in full. No
shortages will be allowed.

b\. If the term insurance premiums are being waived or have been waived
during the current term period under 38 U.S.C. 724, no reserve credit
will be allowed on the term contract.

18-3

M29-1, Part I December 22, 1978

Change 8

c\. Usually the reserve on the term contract is used as a credit on the
initial premium for the new contract. However, if no premiums are due
because of disability waiver (38 U.S.C. 7I2 or 748) or it is not
administratively possible to apply the credit when premiums are being
paid by allotment, deduction from benefit payments or payroll deduction
accounts, the reserve credit (if \$1 or more) will be paid to the
insured. Any reserve that is less than \$1 will be held as a premium
credit.

d\. The fractional reserve values for the various funds may be
determined from the applicable tables in the following manuals:

\(I\) K-M29-4, part II

\(2\) V or H-M29-2, part III A

\(3\) RS or RH-M29-6, parts I and II

\(4\) W-M29-8, part III

18.07 CONVERSION WHILE INSURED IS TOTALLY DISABLED

a\. National Service Life Insurance

\(1\) Upon application by the insured, a term policy on which premiums
are being waived under 38 U.S.C. 7I2 may be converted to any of the
permanent plans except an endowment plan.

\(2\) Upon application by the insured, a term policy on which premiums
are being waived under 38 U.S.C. 7I2 and payment is being made under
total disability income rider may be converted to any of the permanent
plans except an endowment plan.

\(3\) Premiums on the converted policy will continue to be waived and
the disability income paid as long as the insured remains totally
disabled.

\(4\) Conversion as of a prior effective date may be made by payment of
the difference in reserve. The waiver of the new premium on the
converted plan will be effective as of the next premium due.

b\. United States Government Life Insurance

\(1\) Upon application by the insured, a term policy on which premiums
are being waived under 38 U.S.C. 748 (if the insured is not totally and
permanently disabled) may be converted to any of the permanent plans
including endowment plans.

\(2\) Premiums on the converted policy will continue to be waived and
the disability income paid so long as the insured remains totally
disabled.

\(3\) Conversion as of a prior effective date may be made by payment of
the difference in reserve. The waiver of the new premium on the
converted plan will be effective as of the next premium due.

18.08 EFFECTIVE DATE OF CHANGE/EFFECTIVE DATE

The effective date of change for conversion will always be the premium
due date and will be determined as follows:

a\. Use the premium due date of the premium (not calendar) month in
which the request for conversion is submitted, governed by the postmark
date if mailed, by the earliest VA receiving stamp date if otherwise
delivered, or by the date of execution if received through military
channels, if:

18-4

October 1,1973 M29-1, Part I\
Change 8

\(6\) Endowment at Age 62

\(7\) Special Endowment at Age 96

c\. Plans Not Available at Certain Ages

\(I\) Under the USGLI program, conversion to the Special Endowment at
Age 96 plan is not permitted until the insured has reached his 65th
birthday.

\(2\) Under the NSLI (V-H-RH-W) program, conversion to the Modified Life
plan of insurance must be made before insurance age 61. (VA Regulation
3512.2) However, if the application for conversion is submitted during
the latter half of the applicant\'s 60th year of age (insurance age 61)
and there is evidence the application was submitted late because the
applicant was confused by the instructions, the conversion will be
approved and the policy antedated to the latest possible effective date
to conform with the regulation.

\(3\) Under the USGLI and NSLI (V and H) programs, if the issue age of
the insured on the effective date of

18-2a

December 22, 1978 M29-1, Part I\
Change 8\
(1) The premium for that month has not been paid.

\(2\) The insured requests that the effective date of the permanent plan
be established as of the premium due date of the month in which the
application is submitted, even though the premium for that month has
been paid. In this event, allow credit for the unearned premium on the
amount of insurance converted.

b\. Use the premium due date of the next premium (not calendar) month,
unless otherwise requested by the insured, if:

\(1\) The premium for the month in which the request is submitted has
been paid. However, if the applicant requests an effective date which is
not in order and it is obvious he or she wants a current conversion, the
underwriter may establish an effective date that will agree with the
status of the term contracting being converted. For example:

Application mailed 9-14-78\
Requested effective date 10-1-78\
Account paid through 8-31-78

The conversion may be granted with an effective date of September 1,
1978.

(NOTE: The provisions of VA Regulation 3018 for USGLI and VA Regulation
3407.2 for NSLI provide for the acceptance of delayed underwriting
applications (within 61 days of the due date) when accompanied by a
premium payment.\]

\(2\) The method of payment is by allotment of service pay, by deduction
from any benefits due and payable by the VA, or by payroll deductions.

\(3\) Premiums on the term contract are being waived under 38 U.S.C.
712, 724 or 748.

c\. Use the premium due date indicated by the insured, if the insured
requests that the permanent plan become effective as of a premium due
date which is later than the next premium due date, provided the
effective date requested is not later than the *fourth* premium due
after the postmark date of the application, and all requirements are
met.

d\. When a term contract that is effective on the 29th, 30th, or 31st
day of the month is converted and flare is no corresponding date in the
month the change is to be effective and/or in the month the new policy
is to be effective, the effective date of change and/or the effective
date will be the last day of the month.

18.09 CONVERSION-INSURED RATED MENTALLY INCOMPETENT

(a.) An insured who has been rated \[mentally\] incompetent and has no
\[legal\] guardian may apply for conversion of term insurance if he or
she possesses sufficient mental capacity to understand the nature of the
act. The question as to an incompetent\'s ability to make such a
contract change must be medically determined \[before\] processing the
application.

(b.) When a \[legal guardian\] has been appointed, application may be
made by the \[legal guardian with the approval of the court of
jurisdiction,\] if required \[by\] State laws. (Court approval is not
required on applications for conversion if premiums are waived because
of a statutory disability.

c.\] When a mentally incompetent insured \[with a legal guardian\] signs
\[an\] application for conversion during a period \[when he or she is
lucid,\] the \[legal guardian\] must also sign the application. \[ \] In
this situation, it is not necessary to prove the mental capacity of the
insured.

18.10 CONVERSION-38 U.S.C. 724 (IN SERVICE WAIVER)

Term insurance in force under inservice waiver may be converted, wholly
or in part, to any of the permanent plans of insurance available under
the same insurance program. The waiver will not be continued on the
converted

18-5

M29-1, Part I December 22, 1978

Change 8

permanent plan. It will be continued on that portion of the term
insurance, if \$1,000 or more, not converted. The insured Will be
advised that the VA is assuming he or she wishes the inservice waiver
terminated on the permanent plan. If the insured informs the VA he or
she wishes the waiver to continue on the permanent plan, the waiver will
be reactivated as of the effective date of the insurance.

18.11 MEDICAL EXAMINATION

Conversion may be made without a medical examination, except when it is
necessary to determine whether the applicant, requesting conversion of
an NSLI term policy to an endowment plan, is totally disabled.

18.12 INADVERTENT CONVERSION TO NSLI ENDOWMENT PLAN-INSURED TOTALLY
DISABLED

If it is disclosed that term insurance was converted to an endowment
plan through administrative error, or otherwise, not involving fraud on
the part of the insured, while totally disabled, he or she will be
permitted to retain the endowment plan, but will not be eligible at any
time during the current period of total disability for waiver of
premiums due to being totally disabled when application for conversion
to the endowment plan was submitted. The insured will be afforded the
privilege of changing the plan of the endowment contract to \[any of the
life permanent plans,\] or reverting to the term insurance, without a
physical examination report. This will make it possible to secure a
disability premium waiver for the current period of disability. If the
policyholder does not respond to the offer, he or she retains the
endowment policy.

18.13 CONVERSION TO MORE THAN ONE CONTRACT

A term contract in an amount of \$2,000 or more may be converted to more
than one permanent plan contract.

18.14 PARTIAL CONVERSION

A portion of a term contract may be converted and the remainder allowed
to lapse, or all or part of the remaining term insurance may be
retained. The amount converted and the amount continued as term
insurance must be in multiples of \$500 and no policy will be issued for
less than \$I,000. However, a USGLI term policy that has been rerated
after a period of TPD (total permanent disability) may be converted
regardless of the amount of term insurance that is available for
conversion.

18.15 DEATH OF INSURED BEFORE CONVERSION

When an application for conversion is acceptable but the insured dies
before the *effective date of change,* the application will be
disapproved.

18.16 REPLACEMENT UNDER 38 U.S.C. 781 AND CONVERSION

Term contracts may be replaced under 38 U.S.C. 781 and simultaneously
converted to a permanent plan.

18.17 REINSTATEMENT AND CONVERSION

If the term insurance is in a state of lapse, reinstatement requirements
must be met before the conversion may be effected. However, it is
permissible to reinstate the term insurance and convert to a permanent
plan at the same time.

18.18 CONSOLIDATION AND CONVERSION

a\. Two or more term contracts bearing different effective dates
(effective day and/or month and/or year) may be consolidated and
converted as of the premium due date (effective day) of the contract
bearing the latest effective date (day, month and year). Such
consolidated contract may be antedated in the same manner as a single
contract, except the effective date may not be earlier than the
effective date of the term contract bearing the latest effective date.

18-6

December 22, 1978 M29-1, Part I

. Change 8

b\. Term contracts with different premium due dates (effective days) may
not be consolidated and converted while disability premium waiver is in
effect because a waiver is granted effective as of the monthly
anniversary date and is terminated as of the ending date of the
insurance premium month. Contracts bearing the same premium due date
(effective day) with different effective dates (month and/or year) in
force under disability premium waiver, may be consolidated and converted
under one permanent plan contract within the limitations outlined in
subparagraph **a** above.

18.19 CONVERSION WITH TDIP RIDER

a\. A term policy with TDIP attached may be converted to any of the
available permanent plans.

b\. When an application for conversion of NSLI is received and the term
policy has a \$5 or \$10 age 60 rider and the applicant indicates he or
she wants to continue the rider, he or she will be advised of the
availability of the \$10 age 65 rider.

18.20 REDUCTION AND CONVERSION

a\. When conversion of a reduced amount of term insurance under NSLI or
USGLI is to be effected as of the premium due date of the premium month
in which requirements are met, and the applicant does not indicate what
disposition is to be made of the remaining term insurance, apply any
money remitted with the application that is not required for the
conversion or any dividend credit available under 38 U.S.C. 707 or 746
to continue such term insurance in force.

b\. When conversion of a reduced amount of term insurance under NSLI is
to be effected as of the premium due date of the premium month in which
requirements are met, and the premium for that month has not been paid
for the amount of term insurance being discontinued, apply any dividend
credit available under 38 U.S.C. 707 to continue such insurance in force
for that month.

18.21 CONVERSION DISAPPROVED-TERM INSURANCE CONTINUED

a\. When an application for conversion is disapproved, \[the insured
will be advised of the reason for disapproval of the application and
status of the term policy. A new application for conversion will be
furnished in the event he or she wishes to reapply.\]

b\. When \[the disapproved\] application for conversion is (for the full
amount of an insurance contract, or part of an insurance contract on
which the insured indicated a desire to continue the remaining amount of
term insurance, the money tendered as .premium for the permanent plan
will be used to pay premiums on the term insurance for as many months as
possible.

c\. When an application for reduction and conversion is disapproved, the
money tendered for the permanent plan will be used to keep the reduced
amount of term insurance in force for as many months as possible.\]

18.22 CHANGE OR WITHDRAWAL OF CONVERSION APPLICATION

a\. When a properly signed request for withdrawal of an application for
conversion bears a postmark date or is otherwise delivered to the VA
before the *effective date of change,* or if there is evidence that such
request was placed in military channels before the *effective date of
change,* the request will be granted. So, when a request for a
permissible plan or amount, other than that stated in the application,
is submitted within 60 calendar days from the date of conversion, it
will be granted. After 60 calendar days from the effective date of
conversion, any change to the contract will be processed as a policy
change. The insured will be informed of the necessary additional
requirements to change the insurance to the amount and plan desired.
When an application for conversion has been processed and the insured
requests the application be canceled, the request will be granted if it
is submitted within 60 calendar days from the date of conversion. Both
current and antedated conversions may be canceled. The 5-LPT policy will
be restored.

18-7

M29-1, Part I December 22, 1978\
Change 8

b\. When additional evidence such as medical evidence, health
certification, or disability statement is necessary, the request may be
granted for withdrawal of an application or for change in the amount
and/or plan requested on the application, provided such request is
otherwise acceptable.

c\. When applications for reinstatement and conversion have been
submitted and an acceptable request for withdrawal of the application
for conversion only is received, the application for reinstatement will
be processed. The applicant will be advised that the application for
conversion was disregarded per his or her request.

18.23 POLICY INDEBTEDNESS AT DATE OF CONVERSION

a\. When a term contract with an indebtedness is converted, fully or in
a reduced amount with no term insurance retained, the total indebtedness
will be carried on the new permanent plan(s).

b\. When a term contract with an indebtedness is partially converted to
one or more permanent plans and the remaining term insurance is
retained, the indebtedness will be distributed to each of the policies
according to the amount of insurance on a pro rata basis.

18.24 DISAPPROVED APPLICATION WITH BENEFICIARY DESIGNATION

When a beneficiary designation is part of an application for conversion
and the application is disapproved, the designation, if otherwise
acceptable, will be made a matter of record. While the insured will be
requested to confirm the designation, the designation on the disapproved
application for conversion will receive regular processing, including
assignment of a reel number and microfilming.

18\~