August 19, 2002 M29-1, Part IV

CONTENTS

CHAPTER 1. SERVICE-DISABLED VETERANS\' INSURANCE (S-DVI)

TITLE 38 U.S.C. 1922(a)

PARAGRAPH PAGE

1.01 General 1-1

1.02 Preliminary Processing of Formal Applications 1-2

1.03 Processing Formal Applications 1-2

1.04 Processing Applications for Incompetent Veterans 1-6

1.05 Questionable Entitlement 1-7

1.06 Processing Informal Applications 1-7

1.07 Applications Disapproved or Medically Rejected 1-8

1.08 Existing Insurance in Force 1-9

1.09 Determination of Total Disability of Applicant 1-10

1.10 Beneficiary Designations 1-10

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August 19, 2002 M29-1, Part IV

CHAPTER 1. SERVICE-DISABLED VETERANS\' INSURANCE (S-DVI)

> TITLE 38 U.S.C. 1922(a)

1.01 GENERAL

a\. Life insurance, S-DVI, is available to persons released from active
duty with military service on or after April 25, 1951, under other than
dishonorable conditions, with a service connected disability or
disabilities for which compensation would be payable if 10 per cent or
more in degree and except for which such persons would be insurable
according to the standards of good health established by the
Administrator.

b\. Applications for S-DVI insurance must be made within 2 years from
the date of notification by the VA that such disability(ies) is service
connected. Prior to September 1, 1991, applications for Service-Disabled
Veterans\' Insurance (S-DVI) had to be made within 1 year from the date
of notification by the VA for service connected disabilities.

c\. Application for S-DVI insurance should be made on VA Form 29-4364,
Application for Service-Disabled Veterans Insurance .

d\. VA Form 29-4364a, application for Service-Disabled Veterans\'
Insurance (S-DVI) Non-medical, has been discontinued. However, if it is
submitted, it will be considered as a valid application for S-DVI
insurance, if timely submitted. The rules established in this chapter
will apply when processing this application. However, when a complete
physical examination report is furnished, whether required or not, it
will be evaluated under the good health standards. All medical
information furnished will be considered. If the old application
contains missing items, no further development is necessary if the
questions are no longer a part of the new application.

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August 19, 2002 M29-1, Part IV

1.02 PRELIMINARY PROCESSING OF FORMAL APPLICATIONS

a\. All incoming applications for S-DVI insurance will be checked
through BIRLS or local index before an S-DVI number is assigned. If a
prior insurance number is V, RS, or RH, that number will become the
insurance file number. Otherwise, a new file number will be assigned to
the application.

b\. If the file number supplied by BIRLS is a J or K number, an RH
number will be established as the insurance file number. Necessary input
documents will be prepared to delete the J or K master record and insert
it under the newly assigned RH number. The Live Claims Section will be
responsible for the insertion of a temporary master record when a prior
insurance number exists.

c\. When establishing a temporary master record, a 45-day diary will be
created with a call-up code 972, without a message. Once the temporary
master record is established, any money sent in with the application
will be inserted on the account. Acknowledgment that the application is
receiving attention will be released automatically to the veteran.

1.03 PROCESSING FORMAL APPLICATIONS

a\. Upon receipt of the S-DVI application, the Veterans Claim Examiner
will review the application to assure that the temporary master record
was properly established. If a temporary record was not established, the
necessary actions will be taken to establish the record.

b\. If the information on the application was incomplete, the missing
data and any other requirements which may be necessary to complete the
record will be obtained from the applicant.

c\. Upon receipt of the requested information, input will be prepared to
insert the missing data in the temporary record. If in order, the
missing information can be inserted and the account turned \"live\" .

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August 19, 2002 M29-1, Part IV

d\. Review of VA Form 29 - 4364

\(1\) Generally applications submitted by competent individuals will be
processed without any additional records, provided that section 2 of the
application is completed and the rating and the BDN (Benefits Delivery
Network) inquiry screens dispose of all the impairments noted on the
application. If the impairments are not disposed by either of these
methods, contact will be made with the regional office of jurisdiction
for any ratings needed.

\(2\) If an application is submitted by an incompetent veteran or by a
legal guardian or federal fiduciary acting on behalf of an incompetent
veteran as provided under VA Regulation 38 CFR 8.36, 38 CFR 13.55), the
information will be obtained from the regional office of jurisdiction
before a determination of good health is made.

\(3\) Generally, all questions relating to the applicant\'s health
should be answered and all yes answers should be explained. If the
explanation is inadequate or more information is needed, contact with
the veteran will be made. If a supplemental application is needed, it
will be adapted to the particular information required to approve the
original application. Numerical ratings will be assigned as necessary in
accordance with M29-1, Part V.

\(4\) Unanswered questions pertaining to separation dates, compensation
or pension, etc. may be resolved by referring to the rating decision,
claims folder or other related materials.

\(5\) Endowment plans of insurance cannot be issued to an applicant if
totally disabled. Therefore, when a totally disabled applicant submits
an application requesting an endowment plan of insurance, the 20 Payment
Life Plan will be substituted. The applicant will be advised of the
reason for the substitution and offered an opportunity to withdraw the
application.

\(6\) If the application is not signed, a photocopy of Section 2 of the
application submitted (omitting the signature) will be sent to the
veteran requesting that the form be currently signed and dated.

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August 19, 2002 M29-1, Part IV

\(7\) If the application is from an individual who is still on active
duty in the military service, the applicant will be advised that the
application cannot be processed until he or she is released from the
service. The applicant will also be notified that the application will
be held in a pending status until we receive notification of his or her
separation from active duty. A 60-day diary will be established on the
temporary master record. If notice of separation is not received with 60
days, a follow-up letter will be sent to the applicant to determine his
or her military status. If there is no response within 30 days, the
application will be disapproved.

e\. In addition to the application being reviewed for medical
acceptability, it will also be checked to see that the monetary
requirements are met before final approval of the application is made.
Depending upon the method of payment of premiums selected by the
applicant, the following will apply:

\(1\) If the application is received from a veteran who is not receiving
VA benefits, and the application indicates direct remittance or EFT
(Electronic Funds Transfer) to pay premiums, the first premium should
accompany the application. If a remittance is not received, the
applicant will be requested to submit the initial and any subsequent
premiums within 15 days.

\(2\) If the veteran is in receipt of VA benefits at the time the
application is made for S-DVI insurance, and the amount being received
from benefits is sufficient to pay the insurance premiums, the initial
and subsequent premiums may be paid by this method. If DFB (deduction
from benefits) payments are not subsequently established because VA
compensation is not payable or the amount of compensation is
insufficient to pay the premiums, or the applicant is receiving service
retirement pay, the applicant will be allowed 31 days to pay all
premiums necessary to place the account on a premium-paying basis. If
the amount is not paid, the application will be disapproved.

\(a\) When an application indicates direct remittance, but no money or
insufficient money accompanies the application, we will ask for the
money needed to pay premiums for the plan selected. If the veteran
selected no plan, but sent in sufficient money to pay a term premium, we
will issue term insurance. If the veteran selected no plan and remitted
no money, we will allow 31 days to send in sufficient money for term
insurance. If no payment is received, the application will be
disapproved and any remittance will be refunded.

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August 19, 2002 M29-1, Part IV

\(b\) If no plan is selected, but the veteran had indicated payment to
be made by direct remittance and remitted an amount which identifies a
certain plan, that plan will be issued. Where the amount remitted is
greater than the term premium, but does not match any other plan, term
insurance will be issued and the excess money will be held as a credit
to be deducted from the next premium due. Appropriate notification will
be released to the veteran.

\(c\) Where direct remittance is indicated and the veteran has selected
a plan other than term, but remitted insufficient money for the premium,
we will allow 15 days for the veteran to send in the difference. If the
difference is not received, the application will be disapproved and the
money refunded.

\(d\) Where the application shows the method of premium payment to be
other than direct remittance, and no plan is indicated, we will issue
term insurance. Where a plan is indicated, but there is insufficient
money from compensation or allotment for the plan selected, the
applicant will be allowed 31 days to pay the premiums necessary to place
the account on a premium paying basis. If the amount is not paid, the
application will be disapproved and the money refunded.

\(e\) On any application where the amount of insurance is not shown but
the plan and remittance equate with a dollar amount, we will issue that
amount of insurance. If the plan and remittance do not equate with a
dollar amount, we will secure supplemental information.

(f.) When supplemental information has been requested, but not received,
we will attempt to contact the applicant by phone to ascertain the
reason for non-submission. If the applicant indicated that he wants
insurance issued to him, despite his noncompliance, we will allow a
further 15 day period to submit requirements.

\(g\) There is no change in the requirement that where there is evidence
suggesting the possibility of premium waiver, the case will also be
referred to the Veterans Claim Examiner for a decision.

NOTE: All of the above presupposes that basic eligibility, except for
monetary requirements, have been met.

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August 19, 2002 M29-1, Part IV

\(3\) If premiums are to be paid by an allotment from service retirement
pay, action will be taken to establish an allotment on a month-in
advance basis. A frozen diary will be inserted on the temporary master
record. If the allotment is of record at the time the application is
approved or is subsequently established, but is not timely to validate
the contract, liens will be established to place the account on a
month-in-advance basis. A letter will be released to the insured
advising him of the lien. If the allotment has not been received when
the application is approved the prior diary will be deleted and a
frozen, \"953, 1588, and month number diary\" will be inserted with a
call-up date 120 days from the date of the original request.

4\. When all medical and monetary requirements are met, the application
will be approved and the Veterans Claim Examiner will sign and date the
application.

1.04 PROCESSING APPLICATIONS FOR INCOMPETENT VETERANS

a\. If a veteran has been rated incompetent during any part of the 2
year period for filing an S-DVI application for insurance, application
for such insurance may be made within 2 years after a legal guardian or
a federal fiduciary is appointed or within 2 years after removal of such
disability, whichever is earlier. Prior to September 1, 1991,
application had to be made within 1 year.

b\. Only the legal guardian or a federal fiduciary acting on behalf of
the veteran may submit an application for S-DVI.

c\. An application may be accepted from an incompetent insured if a
physician\'s statement is enclosed with the application stating that the
veteran was lucid and knew the importance of his act.

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August 19, 2002 M29-1, Part IV

1.05 QUESTIONABLE ENTITLEMENT

a\. The purpose of the law 338 U.S.C. 1922(a), is to provide insurance
for seriously disabled veterans who have a service connected disability.
It is not intended to apply in those instances in which the second or
subsequent ratings are re-ratings of the same disability or
disabilities. A secondary disability which is a manifestation of an
original service connected disability is considered a different
disability for eligibility purposes, and the veteran is entitled to a
new 2 year eligibility. The following are examples of the foregoing
reasoning:

\(1\) The veteran originally was granted service connection for diabetes
mellitus and 2 years later was granted service connection for
psychoneurosis. The narrative in the second rating contained a statement
that the psychoneurosis was secondary to the diabetes mellitus. In this
case, the second rating entitles the veteran to a new 2 year period.

\(2\) The veteran originally was granted service connection for diabetes
mellitus, and 6 years later was granted service connection for gangrene
and removal of toes, due to and attributed to diabetes mellitus. In this
case, the veteran is entitled to a new 2 year period, even though the
second disability is a manifestation of the original disability.

\(3\) The veteran originally was granted service connection for diabetes
mellitus, and 6 years later was re-rated for the same disability. Since
the second rating is a re-rating of the original condition, there is no
additional period of eligibility.

b\. When there is any doubt as to whether subsequent rating grants
entitlement to a new 2 year period, the case should be referred to the
Section Chief for an opinion before the insurance is granted.

1.06 Processing Informal Applications

a\. Any written statement requesting S-DVI insurance will be considered
as an informal application. The requests will be developed as follows:

\(1\) An RH number will be assigned.

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August 19, 2002 M29-1, Part IV

\(2\) The necessary inputs will be made to establish a temporary master
record.

\(3\) Diary the case for 45 days.

\(4\) If requirements are met, release an application and advise the
applicant to return the application within 31 days.

b\. If the application or reply is not received at the end of the diary
period, the request will be disapproved and the remittance, if any, will
be refunded.

1.07 Applications Disapproved or Medically Rejected

a\. When an application for S-DVI insurance is disapproved or rejected,
the applicant will be advised by letter as to the reasons why the
insurance was denied.

b\. When an application is rejected because of medical impairments, the
applicant will be informed as to all the reasons for the disapproval and
advised of his or her right to appeal. If the medical condition for
which the insurance is being disapproved was considered for service
connection but such disability was denied by the regional office, the
veteran will be advised to direct an appeal or notice of disagreement to
the regional office where his or her claim file is located and not to
the Insurance Office.

c\. When an application is disapproved, or approved for less than
\$10,000 and the applicant is still eligible for additional S-DVI
insurance, the veteran will be advised as of the final date of the 2
year period.

d\. When an application is disapproved because the rating decision is
more than 2 years from the date of notification, the veteran will be so
advised. The veteran will also be informed that if he or she believes
that a service connected disability exists for which a rating has been
previously established, to contact the regional office of jurisdiction
advising them of the fact. The veteran will be further informed that
reapplication for S-DVI insurance can be made within 2 years from the
date he or she is notified that a second rating has been granted for the
new disability.

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August 19, 2002 M29-1, Part IV

e\. If a temporary master record has been established and the
application is disapproved or medically rejected, a VA Form 29-4437
(Underwriting Numerical Rating) will be prepared. In addition, the
Veterans Claims Examiner will take action to delete the temporary master
record and refund any remittances.

1.08 Existing Insurance in Force

a\. Application for S-DVI insurance must be made in multiples of \$500
and not less than \$1,000. No person can carry Government life insurance
(either Service-Disabled Veterans\' Insurance or U.S. Government Life
Insurance or both) in excess of \$10,000 at any one time.
Servicemember\'s Group Life Insurance or Veterans Group Life Insurance
is not considered in the \$10,000 maximum.

b\. If the records indicate that the applicant is carrying or has
carried Government life insurance, the previous records will be
considered before any action is taken on the new application. In order
to determine that the maximum statutory limit will not be exceeded, the
following examination of facts should be made:

\(1\) The face amount of any Government life insurance contract in force
under premium paying conditions (including waiver of premiums under sec.
712 or 724).

\(2\) The face amount of any Government life insurance contract
providing protection under the extended insurance provision thereof.

\(3\) The paid-up amount of any Government life insurance excluding the
amount purchased by dividends for paid-up addition.

c\. An applicant may be issued up to \$10,000 of S-DVI insurance even
though he or she is receiving installment payments on a matured
endowment policy.

d\. If the applicant desires to keep his or her present contract, the
application will be disapproved or processed in a reduced amount,
according to the applicant\'s request.

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August 19, 2002 M29-1, Part IV

1.09 Determination of Total Disability of Applicant

a\. Since S-DVI insurance is only available to persons suffering from
some form of disability, the Veterans Claims Examiner must always
consider the possibility of the insured\'s entitlement to premium
waiver.

b\. In this respect, it is not the intention of these instructions to
imply that for every S-DVI case a VA Form 29-357, Claim for Disability
Insurance Benefits, should be sent to the applicant for possible
consideration of premium waiver. However, prudent judgment should be
exercised to insure that all deserving veterans receive full
consideration.

c\. When endowment insurance has been requested and there appears to be
the possibility of total disability, the case is referred to the Senior
Claims Examiner for a decision to determine total disability on the date
of application. Final action on the application will not be taken until
the decision has been made. If the applicant is found totally disabled,
20 Payment Life Plan will be substituted. The applicant will be advised
of the reason for the substitution and offered an opportunity to
withdraw the application.

1.10 Beneficiary Designations

The following procedures will apply to beneficiary designations on S-DVI
applications.

a\. If the applicant is physically unable, for any reason, to sign an
application, and a beneficiary has been designated, the applicant will
be requested to obtain statements from two disinterested parties to the
effect that the designated beneficiary is in accordance with his or her
wishes. The applicant will also be advised that the witnesses must sign
and date the statement and show their address of record.

b\. When a legal guardian or a federal fiduciary applies for insurance
on behalf of an incompetent veteran, the beneficiary will always be the
estate of the insured.

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August 19, 2002 M29-1, Part IV

c\. When an application for S-DVI insurance is disapproved (because the
veteran has NSLI) and the application contains an acceptable beneficiary
designation which is different from that on the active insurance, the
designation will not be made a matter of record. A VA Form 29-336
(Designation of Beneficiary) will be enclosed with a letter of
disapproval. The insured will be advised of the beneficiary designation
on all contracts in force and that the designation on the disapproved
S-DVI application will not change any current designation(s) on policies
presently in force. The insured will be informed to complete the
enclosed VA Form 29-336, if he or she wants to make any changes.

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