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CONTENTS

CHAPTER 23. GRATUITOUS INSURANCE (ARH)

GRANTED UNDER TITLE 38, UNITED STATES CODE, SECTION 722(b)

PARAGRAPH PAGE\
23.01 General 23-1\
23.02 Basic Determinations of Eligibility 23-1

23.03 Persons Entitled to Proceeds of Insurance under\
Title 38, United States Code, Section 722(b) 23-2

23.04 Time Allowed for Filing a Claim 23-2\
23.05 Method of Payment 23-2\
23.06 Preliminary Processing of a Claim 23-3\
23.07 Initiation of Claim to Beneficiary 23-3\
23.08 Payment of Claim 23-4\
23.09 Disallowed Claim 23-4

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October 14, 1977 M29-1,Part VI\
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CHAPTER 23. GRATUITOUS INSURANCE (ARII)

GRANTED UNDER TITLE 38, UNITED STATES CODE, SECTION 722(b)

23.01 GENERAL

a Title 38, United States Code, Section 722(b) provides that gratuitous
NSLI may be granted to mentally incompetent veterans who were otherwise
eligible to be granted RH insurance but, due to the mental
incornpetency, died without filing an application. It permits payment of
insurance in cases when death has occurred before or after the VA
rating, provided a claim is timely filed.

b\. When correspondence is received with or without a formal claim, or a
specific inquiry is made by or on behalf of a beneficiary within the
permitted class, the possibility of entitlement to ARH insurance will be
developed as ouilined in this chapter.

c\. The probability of survivors having knowledge of potential insurance
benefits under this section is not readily apparent. Likewise the chance
that gratuitous insurance may be payable is not evident until a rating
decisions of mental incompetency is made by the regional office of
jurisdiction. Therefore, discretion will be used to recognize and fully
develop cases which may be eligible for payment of gratuitous insurance
under this section.

d\. The responsibility for a determination of mental incompetency will
be that of the regional office of jurisdiction in the State where the
veteran was domiciled at the time of death. The final determination for
insurability will be made by the Insurance Program Management Division
(290), VA Center Philadelphia.

23.02 BASIC DETERMINATIONS OF ELIGIBILITY

a\. Before coverage nay be established under section 722(b), basic
entitlement must be determined before a decision can be requested from
the regional office as to whether the veteran was suffering from a
service-coninected mental incompetency. A rating decision WILL NOT be
requested when the records show that:

\(1\) The veteran died prior to April 25 1951;

\(2\) The veteran was released from a final period of service prior to
April 25, 1951;

\(3\) The veteran was separated from service under dishonorable
conditions: or

\(4\) The guardian was appointed more than l year prior to the
veteran\'s death.

b\. When any of the above conditions exist a letter will be released to
the claimant advising that the veteran for whom the gratuitous insurance
is being applied is not eligible under the law. The specific reason for
disapproval will be given. (See par. 23.09)

c\. If there are no preliminary bars to payment of gratuitous insurance,
it must be shown by satisfactory evidence that the veteran was mentally
incompetent from a service-connected disability:

\(l\) At the time of release from active service;or

\(2\) During any part of the 1-year period from the date the service
connection of a disability is first determined by the VA; or

\(3\) After release from active service but is not rated
service-connected disabled by the VA until after death, and must have
remained continuously mentally incompetent until date of death, and must
have died before the appointment ofa guardian or within 1 year after the
appointment of a guardian.

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d\. Any person who qualifies for gratuitous insurance under the above
conditions will be deemed to have applied for and been granted such
insurance, as of the date of death, in an amount which, together with
any other USGLI or NSLI in force, will aggregate \$10,000.

23.03 PERSONS ENTITLED TO PROCEEDS OF INSURANCE UNDER TITLE 38, UNITED
STATES CODE, SECTION 722(b)

a\. Section 722(b) autliorizes tlie payment of tlie insurance to a
restricted class of beneficiaries in the following order of preference:

\(1\) T9 the widow or widower of the insured, if living and while
unremarried.

\(2\) If no widow or widower, to the child or children of the insured,
if living, in equal shares.

\(3\) If no widow, widower, or child, to the parent or parents of the
insured who last bore that relationship, if living, in equal sliares.

b\. The term widow or widower is restricted to a lawful spouse of the
insured at date of death, if living, and while unremarried. A person
entitled to death benefits by reason of a deemed valid marriage under 38
U.S.C. 103 is excluded. The term child or children is restricted to
legitimate or adopted children. A stepchild or illegitimate child is
excluded. A stepparent, as such, is also excluded. The term parent or
parents includes an adoptive parent or foster parent who stood in loco
parentis to the insured and who last bore that relationship.

23.04 TIME ALLOWED FOR FILING A CLAIM

a\. No request for payment of gratuitous insurance will be accepted
unless such a request is filed within 2 years after the date of death of
tlie insured or before January 1, 1961. whichever is the later date.
Satisfactory evidence as to tlie relation of tlie claimant niust be
proved as of the date of the death of the insured. Persons shown by
satisfactory evidence to leave been mentally or legally inconipetent at
the time the riglit to apply for death benefits expires. may make such
application within l year after tlie removal of such disability to file
a timely claim.

b If the veteran\'s widow (widower) failed to file a claim within the
2-year statutory period, although fully entitled to benefits during the
entire period, a cliild of the veteran may file a claim within any time
up to l year after attaining the age of majority.

23.05 METHOD OF PAYMENT

a\. Settlement of insurance under 38 U.S.C. 722(b) is payable at the
election of the first beneficiary under 3 optional modes of payment as
follows:

\(l\) In 240 equal monthly installments; or

\(2\) In equal monthly installnients for 120 months certain with such
paynients continuing during the remaining lifetime of the first
beneficiary; or

\(3\) As a refund life income in monthly installments payable for such
period certain as niay be required in order that the sum of installments
certain, including a last installment of such reduced amount as may be
necessary will equal the face value of the contract, less any
indebtedness, with such payment continuing throughout the lifetinie of
the first beneficiary. However, such optional settlenient will not be
available in any case in which settlement would result in payments of
installnients over a shorter period than l20 months.

b\. Any installments not paid to a beneficiary during his or her
lifetime are paid to the beneficiary or beneficiaries next in order
within the permitted class. No person has a vested right to ally
installments of the insurance and no installments will be paid to the
heirs or legal representatives of the veteran or beneficiary.

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c\. Assignments of insurance benefits payable under the provisions of 38
U.S.C. section 722(b) are not authorized.

23.06 PRELIMINARY PROCESSING OF A CLAIM

a\. When it has been determined that all basic requirements for
eligibility for insurance under 38 U.S.C. 722(b) have been met, a letter
will be sent to the regional office of jurisdiction requesting a rating
decision of mental incompetency.

b\. Photocopies of all pertinent material will be made and a letter
enclosing the original correspondence, not including the formal or
informal claim, will be sent to the regional office of jurisdiction. The
regional office will be requested to furnish a memorandum rating in
accordance with M2l-1, chapter 56, paragraph 56.18, for the purpose of
issuing insurance under 38 U.S.C. 722(b). The letter will also advise
the regional office that if the rating board determines a decision of
mental incompetency, the XC-folder is to be returned on a temporary
transfer with the memorandum rating. The regional office will be further
advised that if mental incompetency is not determined, only the rating
sheet need be returned with a copy of the letter.

c\. Tentative letters to all parties concerned will also be prepared. A
60-day manual diary will be prepared for proper control.

d\. If a favorable decision is returned from the regional office, the
XC-folder with all pertinent material will be sent to the Chief,
Insurance Program Management Division (290), VAC Philadelphia, for a
final determination as to the issuance of the insurance.

e\. If all requirements are met, an ARH number will be assigned by that
Division and the XC-folder returned to the appropriate center for
adjudicative action. If there is no evidence in the XC-folder to
establish whether the veteran was under guardianship at the time of
death, the file will be returned with a statement to the effect that all
requirements have been met except the provisions concerning a guardian.
It will be the responsibility of the Death Claims activity to ascertain
whether a guardian was appointed more than l year prior to the
veteran\'s death.

23.07 INITIATION OF CLAIM TO BENEFICIARY

**-** a. Upon receipt of a favorable determination of insurability from
the Insurance Program Management Division, information concerning the
preferred beneficiary will be obtained by use of a VA Form 29-541,
Certificate Showing Residence and Heirs of Deceased Veteran. This form
will not be necessary when the records in the XC-folder show that the
veteran was survived by an unremarried widow who would be the first
preferred beneficiary.

b\. Evidence of death of the insured and proof of death of any person in
a higher order of precedence than the claimant will be required, or
proof of remarriage of widow (widower). Proof of relationship of a
beneficiary will be established as outlined in chapter 22, paragraph
22.06, prior to the approval of an award.

c\. A VA Form 29-4125a, Claim for Monthly Payments, and VA Form
29-4125-4, Tables for Monthly Payments, Options 2, 3 and 4 will be
enclosed with a dictated letter to the beneficiary. The explanation as
to tlie number of months available under option 2 on Part II of the VA
Form 29-4125a will be adjusted to read: Equal monthly installments for
240 months. Option 2 will also be deleted from VA Form 29-4125-4.

d\. The letter should explain to the beneficiary that gratuitous
insurance can only be paid under option 2 in 240 equal monthly
installments at the rate of \$5.16 per \$1,000 of insurance; or for life
under options 3 and 4 at the rates shown for the beneficiary\'s age at
the date of death of the insured on VA Form 29-4125-4. The beneficiary
will be advised tliat if option 3 or 4 is selected, proof of age will be
required. In addition. if the beneficiary did not submit a formal claim
whereby information concerning guardianship cannot be determined, a
paragraph requesting this information will also be inserted. The first
beneficiary will be requested to complete Parts I, II ;and III of VA
Form 29-4125a. Any necessary evidence to establish entitlement will also
be requested.

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23.08 PAYMENT OF CLAIM

a\. When the claim for payment and the necessary evidence to establish
entitlement to the proceeds of the gratuitous insurance is received, the
appropriate personnel in the Death Claims activity will prepare VA Form
29-444, Award Brief and Authorization Form, in accordance with the
instructions outlined in chapter 5.

b\. A dictated letter will be released to the beneficiary advising that
settlement of the claim has been made. In cases in which settlement is
made to a widow or widower, the letter will include the paragraph
regarding remarriage as stated in chapter 22, paragraph 22.09c.

23.09 DISALLOWED CLAIM

a\. When a claim for gratuitous insurance has been disallowed based on a
determination by the Insurance Program Management Division, a dictated
letter will be sent to the claimant and all interested persons
furnishing a full and adequate explanation for the action taken.

b\. Letters to claimants will not include notice of a right to sue. The
standard appeals paragraphs will be used (with substitution of a 60-day
appeal period in contested claims). When the evidence indicates there
are individuals within the next permitted class of beneficiaries, these
individuals will be notified of their possible entitlement and the case
will be treated as a contested claim.

c\. If a claim has been disallowed based on the determination by the
regional office that the person was not mentally incompetent under 38
U.S.C. 722(b), the claimant will be advised as to the reason for
disapproval. In this case, the claimant will not be informed of the
right to initiate an appeal. However, the claimant will be advised of
the right to appeal the decision made by the regional office but that
such an appeal must be made to that office in which the decision
originated. The address of the VA regional office concerned will be
included in the letter.

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