February 13,1979 M29-1, Part II

Change 15

CONTENTS

CHAPTER 33. AUTOMATIC SURRENDER

PARAGRAPH PAGE\
33.01 General 33-I

33.02 Processing Notices to the Insured (Automatic Surrender Date
Calculated\
by the Computer System) 33.1

33.03 Processing Notices to the Insured (Automatic Surrender Date
Calculated Clerically) 33-2\
33.04 Dividend Processing 33.3\
33.05 Insured Requested Refund of Dividend Deposit 33.4

33.06 Insured Requests Cash Surrender of Paid-Up Additions and Loan
Exceeds\
Reserve of Parent Contract 33.4

33.07 Notices to Insured Returned as Undeliverable 33.4\
33.08 Final Action 33-5\
33.09 Death Prior to End of 90-Day Period 33.5

33-i

February 13, 1979 M29-1, Part 11\
Change 15

b

CHAPTER 33. AUTOMATIC SURRENDER

33.01 GENERAL

a\. Permanent plan policies provide that loans may be granted on the
security of a policy at any time after the end of the first policy year.
Loans may also be granted on the security of paid-up additions attached
to permanent or term contracts. Loans against the security of the
paid-up additions require no waiting period. However, if at any time the
loan indebtedness equals or exceeds the policy reserve (or the combined
reserve, if paid-up additions are involved), plus any dividend deposit
accumulation, the policy shall cease and become void. This arises when
the loan principal balance plus interest increases faster than the
policy and/or paid-up additions reserve plus dividend deposit
accumulations.

b\. Limited payment life policies on which all premiums have been paid
and earned, Modified Life, Ordinary Life, Reduced Paid-up Life policies
and any policy with paid-up additions are the only ones on which the
loan indebtedness can equal or exceed the reserve.

c\. Dividend credit balance will not be taken into consideration to
determine when the loan indebtedness will equal or exceed the reserve.

d\. Lien indebtedness will not be taken into consideration to determine
when the loan indebtedness will equal or exceed the reserve.

e\. The automatic surrender procedure will be effected even though
returned mail is indicated on the master record.

33.02 PROCESSING NOTICES TO THE INSURED (AUTOMATIC SURRENDER DATE
CALCULATED BY THE COMPUTER SYSTEM)

a\. The computer system is programed to automatically calculate or
recalculate the exact critical date when the loan indebtedness will
equal or exceed the cash value of the basic contract and/or the paid-up
additions or the combined cash value of both in the following instances:

\(1\) When a loan is capitalized for interest billing.

\(2\) When a miscellaneous input, transaction type OX5, is processed.

\(3\) When the system applies transaction type 3XX to a loan and the
master record contains action type 3 or 4.

\(4\) When a dividend is authorized LOLl (loan/lien) or the paid-up
option, and the master record contains action type 3 or 4.

b\. The computer system will also release a VA Form 29-8348, Information
About Your Insurance, with the appropriate paragraphs when the loan
indebtedness will equal or exceed the reserve within 15 months and will
purge the basic policy and/or paid-up additions 30 days after the
critical date if no payment is made to reduce the indebtedness. The
system-generated VA Forms 29-8348 are released in the following
sequence:

\(l\) The initial notice is released when the policy and/or paid-up
additions are determined to be critical within 15 months.

\(2\) The followup notice is released 3 months before the critical date.

c\. The system will not release a VA Form 29-8348 when any of the
following conditions exist:

\(l\) The insured is incompetent.

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Part II February 13,1979\
*Is*

\(2\) There is a pending transaction on the 2XX or 3XX series.

\(3\) There is a monthly repayment amount in the loan segment.

\(4\) A loan was granted or a payment was Processed and the policy is
critical as of current or past due date.

\(5\) There are paid-up additions on a term, extended insurance, or a
lapsed contract and the account is critical.

\(6\) be policy is critical; there is no other policy in force with
paid-up additions.

\(7\) The How Paid Code is S.

NOTE: The above conditions will cause the System to generate an RPO
(record printout) for one of the following reason codes: 352, 353, 357,
358, and/or 376.

33.03 PROCESSING NOTICES TO THE INSURED (AUTOMATIC SURRENDER

DATE CALCULATED CLERICALLY)

a\. The system cannot compute the exact critical date when one or more
of the following conditions exist:

\(l\) The master record has a dividend deposit segment.

\(2\) A loan was established on a lapsed account and there are no
paid-up additions.

\(3\) There are multiple loans with different effective dates.

\(4\) An endowment contract matures within 15 months after the loan
capitalization date.

The above conditions will cause the system to generate an RPO with one
of the following reason codes: 319, 350or 35l.

b\. When the computer system is unable to calculate the exact critical
date or release a VA Form 29-8348, an RPO will be generated for clerical
action by the Policy Service Technician.

c\. When the computer system does not calculate the exact critical data,
the insurance folder will be reviewed for possible prior calculations
based on the same loan balance. If a prior calculation is not of record,
the RPO will be sent to the Miscellaneous Accounts and Service Unit for
a calculation of the exact date the loan indebtedness will equal or
exceed the cash value. The cash value is the policy reserve plus the
reserve of any paid-up additions and/or the dividend deposit balance, if
any.

NOTE: lf the policy will mature within 15 months after the loan
capitalization date, the Policy Service Technician will calculate the
loan balance as of the maturity date. If loan plus interest as of the e
maturity date is less than the face amount of insurance plus paid-up
additions and/or dividend deposit, the contract is not critical.

d\. When the critical date is furnished by computers or if the computer
system calculated the exact critical date but did not release a VA Form
29-8348 to the insured, the Policy Service Technician will release the
proper notification using AT (automatic typewriter) or a dictated
letter.

e\. Proper notice is considered to have been given if at least one
notice has been released but not less than 90 days before the automatic
surrender date.

f\. When it is determined that a proper notice has not been given and/or
there are less than 90 days before the automatic surrender date or the
surrender date has passed, the insured will be allowed 90 days from the
date of the letter to reduce the indebtedness and keep the insurance in
force. This letter will be the final notice and will be noted
accordingly. If the 90 day period extends past the date the policy would
be surrendered and purged from the record, a *9*0 day freeze diary will
be inserted to prevent the purge.

33-2

Total Amount of Suggested Monthly

[Indebtedness]{.underline} [Payment Amount]{.underline}\
Up to \$1,200 \$6\
\$1,200.01 to \$ 1,800 \$ 8\
\$1,800.01 to \$ 2,200 \$10\
\$2,200.01 to \$ 2,600 \$12\
\$2,600.01 to \$ 3,000 \$14\
\$3,000.01 to \$ 3,400 \$16\
\$3,400.01 to \$ 3,800 \$18\
\$3,800.01 to \$ 4,200 \$20\
\$4,200.01 to \$ 4,600 \$22\
\$4,600.01 to \$ 5,000 \$24\
\$5,000.01 to \$ 5,400 \$26\
\$5,400.01 to \$ 5,800 \$28\
\$5,800.01 to \$ 6,200 \$30\
\$6,200.01 to \$ 6,600 \$32\
\$6,600.01 to \$ 7,000 \$34\
\$7,000.01 to \$ 7,400 \$36\
\$7,400.01 to \$ 7,800 \$38\
\$7,800.01 to \$ 8,200 \$40\
\$8,200.01 to \$ 8,600 \$42\
\$8,600.01 to \$ 9,000 \$44\
\$9,000.01 to \$ 9,400 \$46\
\$9,400.01 to \$ 9,800 \$48\
\$9,800.01 to \$10,200 \$50

This payment schedule assumes that you also pay the annual loan
interest, when due, to prevent cancellation of your policy. We will bill
you for the interest shortly before the loan anniversary date.

M29-1, Part II

Advanced Manual Change No. 2-82 August 24, 1982

Chapter 33 - Automatic Surrender

Paragraph 33.03 - Processing Notices To The Insured

(Automatic Surrender Date Calculated Clerically)

A. [Change:]{.underline} M29-1, Part fl, Chapter 33, Paragraph 33.03.

B. [Purpose:]{.underline} To reflect a new, expanded table and paragraph
advising the insured\
to pay annual interest when due.

C. [Procedure]{.underline}: Page 33-3, delete section \"h\" and
substitute the following:

h\. When requesting repayments to reduce the loan balance, the amount
requested will be determined by the schedule below, and the subsequent
paragraph will be used to inform the insured of the annual loan interest
due.

Total Amount of Suggested Monthly\
[Indebtedness]{.underline} [Payment Amount]{.underline}

Up to \$1,200 \$6\
\$1,200.01 to \$ 1,800 \$ 8\
\$1,800.01 to \$ 2,200 \$10\
\$2,200.01 to \$ 2,600 \$12\
\$2,600.01 to \$ 3,000 \$14\
\$3,000.01 to \$ 3,400 \$16\
\$3,400.01 to \$ 3,800 \$18\
\$3,800.01 to \$ 4,200 \$20\
\$4,200.01 to \$ 4,600 \$22\
\$4,600.01 to \$ 5,000 \$24\
\$5,000.01 to \$ 5,400 \$26\
\$5,400.01 to \$ 5,800 \$28\
\$5,800.01 to \$ 6,200 \$30\
\$6,200.01 to \$ 6,600 \$32\
\$6,600.01 to \$ 7,000 \$34\
\$7,000.01 to \$ 7,400 \$36\
\$7,400.01 to \$ 7,800 \$38\
\$7,800.01 to \$ 8,200 \$40\
\$8,200.01 to \$ 8,600 \$42\
\$8,600.01 to \$ 9,000 \$44\
\$9,000.01 to \$ 9,400 \$46\
\$9,400.01 to \$ 9,800 \$48\
\$9,800.01 to \$10,200 \$50

This payment schedule assumes that you also pay the annual loan
interest, when due, to prevent cancellation of your policy. We will bill
you for the interest shortly before the loan anniversary date.

2.\
D. New or Revised

[Insurance Forms:]{.underline} None

ROBERT W. CAREY

Assistant Director for In [DISTRIBUTION]{.underline}:

335/29 120\
310/291 245\
310/290 45\
244C 10\
Library 1

M29-1, Part II\
February 13,1979 Change 15

g\. If the insured makes- payment after the surrender date but within
the 90-day period, a dictated letter will be prepared informing the
insured that he or she has 3l days from the date of the letter or until
the end of the 90-day period, whichever is later, to make another
payment sufficient to keep the policy in force.

h\. When requesting repayments to reduce the loan balance, the amount
requested will be determined as follows:

Total Amount of Suggested Monthly

Indebtedness Payment Amount

\$1,800.01 to \$2,200\
\$2,200.01 to \$2,600 \$12\
\$2,600.01 to \$3,000 \$14\
\$3,000.01 to \$3,400 \$16\
\$3,400.01 to \$3,800 \$18\
\$3,800.01 to \$4,200 \$20\
\$4,200.01 to \$4,600 \$22\
\$4,600.01 to \$5,000 \$24\
\$5,000.01 to \$5,400 \$26\
\$5,400.01 to \$5,800 \$28\
\$5,800.01 to \$6,200

33.04 DIVIDEND PROCESSING

a\. The computer system will not authorize a dividend when the following
conditions exist:

\(1\) The master record indicates action type 3 or 4;

\(2\) The dividend option is other than LOLl or paid-up additions; and

\(3\) The dividend year is a current date with a current callup date.

b\. When the conditions outlined in subparagraph a are present and a
dividend is due (if premiums are being paid on the policy), the computer
system will generate an RPO, reason code 694, for clerical action. (The
record is automatically frozen.) The Policy Service Technician will
determine if the dividend payment is in order, and if so:

\(1\) A letter will be released informing the insured that the dividend
is due and request permission to apply the dividend to reduce the policy
loan and to change the dividend option to LOLl.

\(2\) VA Form 29-5895a, Pending Transaction Input Card, or VA Form
29-8526, Pending Transaction, transaction type 008, will be prepared as
input to *insert a 45-day diary pending a reply.*

\(3\) If the insured does not reply by the end of the diary period, the
pending diary and the policy freeze will be deleted and the dividend
authorized under the option of record by preparation of VA Form 29-8528,
Paid Dividend/Dividend History, transaction type 616, without control
accounts. If the insured replies before the end of the diary period
requesting that the dividend be authorized under an option other than
LOLl, the dividend will be authorized in accordance with the insured\'s
request.

c\. When the conditions outlined in subparagraph a above are present and
a dividend is due, the policy is paid through the premium-paying period
and the dividend option is other than paid-up additions, the computer
system will automatically suppress the RPO, reason code 694, and take
the following action:

M29-1, Part II February 13,1979\
Change 15

\(l\) Change the dividend option to LOLl; and

\(2\) Release VA Form 29-8348 to the insured with the following message:

Your Government Life Insurance policy provides that when a loan
indebtedness equals or exceeds the cash value, the policy will be
canceled automatically and cannot be reinstated. We have changed your
dividend option to the indebtedness option and will use your dividends
to reduce the loan indebtedness. We suggest you make monthly payments to
reduce your indebtedness so as to continue your protection.

33.05 INSURED REQUESTS REFUND OF DIVIDEND DEPOSIT

a\. If, after the first or final notice has been sent and the action
type is 3 or 4, the insured requests refund of all or part of the
dividend deposit balance before the automatic surrender date, or when
the action type is other than 3 or 4 and the input to refund all or part
of the dividend deposit balance is rejected (reason code 480), the
computer will be requested to recompute the automatic surrender date.

b\. When a partial refund of the dividend deposit balance is requested
and the remaining cash value (policy reserve only or policy reserve plus
the reduced amount of dividend deposit) is sufficient to carry the loan
indebtedness to a date later than the date the refund will be processed,
the refund will be made and the automatic surrender routine initiated
again.

c\. However, if the insured requests refund of the entire dividend
deposit balance and it is necessary to use all or part of this balance
together with the policy reserve to carry the loan indebtedness to the
date of refund, only that portion of the dividend deposit balance that
is not needed to pay the loan indebtedness is refundable. A dictated
letter will be prepared informing the insured of the amount of dividend
deposit that is refundable and that, if the refund is made, the
insurance will be terminated as of the date of the refund. The insured
will also be told that if he or she still wants the available dividend
deposit balance to be refunded, he or she has 3l days to confirm the
request and if no reply is received, the dividend deposit balance will
be used to keep the insurance in force for as long as possible.

33.06 INSURED REQUESTS CASH SURRENDER OF PAID-UP ADDITIONS AND LOAN
EXCEEDS RESERVE OF PARENT CONTRACT

a\. If, after the first or final notice has been sent and the action
type is 3 or 4, the insured requests surrender of all or part of the
paid-up additions balance (or when the action type is other than 3 or 4
and the input to surrender the paid-up additions only is rejected
(reason code 608)), the computers will be requested to recompute the
automatic surrender date.

b\. When a partial surrender of the paid-up additions is requested and
the remaining cash value (policy reserve only or policy reserve plus the
reduced amount of paid-up additions) is sufficient to carry the loan
indebtedness to a date later than the date of surrender, the surrender
will be processed and the automatic surrender routine initiated again.

c\. However, if the insured is requesting a complete surrender of the
paid-up additions and it is necessary to use all or part of the paid-up
additions together with the policy reserve to carry the loan
indebtedness to the date of surrender, only that portion of the paid-up
additions that is not needed to pay the loan indebtedness is refundable.
A dictated letter will be prepared informing the insured of the amount
of paid-up additions that is refundable and that, if the surrender is
made, the insurance will be terminated as of the date of the refund. The
insured will also be told that if he or she still wants the available
surrender value, he or she has 3l days to confirm the request and if no
reply is received, the paid-up additions will be retained to keep the
insurance in force for as long as possible.

33.07 NOTICES TO INSURED RETURNED AS UNDELIVERABLE

a\. When notices to the insured are returned as undeliverable, efforts
will be made to obtain a current address. (For procedures to follow in
obtaining a current address, see ch. 13.) If the current address of the
insured is obtained before the date the insurance will be surrendered, a
dictated letter will be released informing him or her

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February 13,1979 M29-I, Part II

Change 15

of efforts to notify him or her that the insurance is in danger of
surrender. The returned notice will be enclosed with the letter. If
there are 90 days or less remaining before the surrender date or the
surrender date has passed, the letter will inform the insured that this
is the final notice and that he or she will be allowed 90 days to reduce
the indebtedness.

b\. When all efforts to obtain a current address fail, notice will be
considered to have been given and the insurance protection will cease as
of the date the loan indebtedness equals or exceeds the cash value.

33.08 FINAL ACTION

a\. If the loan indebtedness has not been reduced after the FINAL NOTICE
has been released, I month after -the automatic surrender date, the
computer system will generate an RPO, reason code 904. (The RPO is
generated l month after the surrender date to eliminate premature
purging of records because a sufficient remittance to reduce the
indebtedness may have been tendered by the insured just prior to the
surrender date.)

b\. Upon receipt of the RPO, the Policy Service Technician will prepare:

\(l\) VA Form 29-5894a, Optional Segment Input Card, or VA Form 29-8525,
Dividend/Loan/Lien, to delete the loan.

\(2\) If appropriate, an additional VA Form 29-5894a or 29-5825 to
delete the dividend credit/deposit balance.

\(3\) VA Form 29-5897a, Accounting Control Input Card-ADP, or VA Form
29-8527, Accounting Control, to complete any necessary accounting and to
purge the master record.

\(4\) A dictated letter advising the insured of action taken.

c\. The RPO will be noted to indicate release of the necessary input
documents, dated, initialed and filed in the insurance folder.

d\. Any credits, such as dividend credit balance, that were not used to
reduce the indebtedness will be refunded to the insured.

e\. If it subsequently develops that the insured died within 90 days
from the date the insurance protection ceased, the case will be referred
to the Chief, Insurance Program Management Division, VA center
Philadelphia, for decision if the insurance will be considered in force
on the date of death.

33.09 DEATH PRIOR TO END OF 90-DAY PERIOD

a\. If the insured, not having made a payment to reduce the
indebtedness, dies after the date the policy would automatically be
surrendered but prior to the end of the 90-day period from the date of
notice, the insurance will be considered in force on the date of death.
The outstanding loan, with interest to the date of death, will be
deducted from the settlement.

b\. If it is determined, after being notified of the death of an
insured, that he or she was never notified of the potential automatic
surrender of the policy, the insurance will be considered in force on
the date of death. The outstanding loan, with interest to the date of
death, will be deducted from the settlement. However, if the outstanding
indebtedness equals or exceeds the face amount of insurance on the date
of death, the policy will be terminated and no settlement will be
processed.

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M29-1, Part II January 30, 1974

**Change** **11**

c\. If no payments arc made to reduce the indebtedness 1 month after the
date furnished the insured in subparagraph b above an RPO, reason code
904, will be generated. Upon receipt of the RPO, the reserves of the
basic policy and the paid-up additions will be used to clerically
compute a date when the loan indebtedness will equal or exceed the
combined reserves.

d\. If the new date is within 15 months, the insured will be advised of
the date when t!\~ loan indebtedness will equal or exceed the combined
reserves. will also be told that if payments are not made to reduce the
indebtedness, the basic policy and the paid-up additions will be
terminated as of that dale.

e\. If the new date is not within 15 months, the insured will be advised
that the cash value of the paid-up additions is being used to keep 12\'s
policy in force.\]

b

33-6