June 1, 1970 M29-1, Part I

CONTENTS

CHAPTER 17. REPLACEMENT OR REINSTATEMENT OF INSURANCE

SURRENDERED OR EXPIRED WHILE IN ACTIVE

SERVICE-(38 U.S.C. 781)

PARAGRAPH PAGE

17.01 General 17-1\
17.02 Requirements 17-1\
17.03 Effective Date 17-3

17.04 Replacement of Total Disability Income\
Provision (TDIP) 17-3

17.05 Reinstatement of Total Disability Income\
Provision (TDIP) 17-4

17.06 Payment of Total Disability Benefits on\
NSLI or USGLI Replaced or Reinstated\
Under 38 U.S.C. 781 17-4

17.07 Waiver of Premiums on NSLI Replaced or\
Reinstated Under 38 U.S.C. 781 17-4

17.08 Addition of Total Disability Income\
Provision (TDIP) 17-5

17.09 Consideration of Application for Other

Types of Insurance 17-5

17.10 Withdrawal of Application 17-5\
17.11 Reinstatement of Paid-Up Insurance 17-5

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

CHAPTER 17. REPLACEMENT OR REINSTATEMENT OF INSURANCE

SURRENDERED OR EXPIRED WHILE IN ACTIVE

SERVICE-(38 U.S.C. 781)

17.01 GENERAL

a\. Replacement of Permanent Plan. Any person who, while in active
service on or after April 25, 1951, and before January 1, 1957,
surrendered a permanent plan policy, which was not lapsed, for its cash
value under VA Regulation 3115 or 3427 (A) or (B), or under VA
Regulation 3186 or 3514 if the policy has no cash value, may be granted
a new policy on the same plan and under the same terms and conditions a
which was surrendered. However, if the insurance surrendered was an
endowment policy with an age limitation (E @ 60, 62 or 65) and the
applicant is beyond the age limit, the replacement policy may be issued
on some other plan, including another endowment plan. The amount of the
new policy may not be in excess of the amount surrendered. (VA
Regulations 3002(A), 3003(A), 3400(A)(1) and 3510(A))

b\. Reinstatement of Permanent Plan. Any person who, while in active
service on or after April 25, 1951, and before January 1, 1957,
surrendered a permanent plan policy, which was not lapsed, for its cash
value under VA Regulation 3115 or 3427 (A) or (B), or under VA
Regulation 3186 or 3514 if the policy had no cash value, may reinstate
such surrendered insurance. An endowment plan may not be reinstated
after the endowment period has expired. However, the applicant may
replace the surrendered insurance with any other available plan. The
amount

of insurance reinstated must be in multiples of \$500 but not less than
\$ 1,000 except when the policy surrendered was for a reduced amount of
paid-up insurance. (VA Regulations 3086(A) and 3422(B)(1))

c\. Replacement of Term Plan. Any person having insurance on the term
plan, the term of which expired after April 25, 1951, and while such
person was in active service or within 120 days after separation, but in
either event before January 1, 1957, may be granted insurance on the
term plan under the same terms and conditions as the policy which
expired. (VA Regulations 3002(B), 3003(B), 3400(A)(2) and 3510(B))

NOTE: The amount of insurance granted under 38 US.C. 781, plus the
amount of any other insurance (NSLI or USGLI) in force under
premium-paying conditions or as paid-up or extended insurance
\[(excluding any paid-up additions, shall not exceed \$10,000. (VA
Regulations 3003(C) and 3510(C)).

17.02 REQUIREMENTS

a\. Application

\(1\) Application for replacement or reinstatement of insurance
surrendered or expired while in active service must be made during
continuous active service after January 1, 1957, or within 120 days
after separation from such continuous active service. (VA Regulations
3086(B) and 3422(B)(2).) (Before January 1, 1957, replacement or
reinstatement under sec. 5 of the Servicemen\'s Indemnity Act of 1951
could only be made within 120 days following separation from active
service.)

\(2\) The applicant must have had continuous protection under section 2
of the Servicemen\'s Indemnity Act of 1951 from the date of surrender of
the permanent plan, or date of expiration of the term policy, through
December 31, 1956, continuous active service from January 1, 1957, to
January 1, 1959, and continuous active service thereafter.

NOTE: Any person who reenters active service on the date of separation
or the following day is considered to be in continuous active service.
If the final day of the 120-day period falls on a Saturday, Sunday or
legal holiday, the time period is extended to include the next workday.
If a Sunday or legal holiday intervenes between the date of discharge
and the date of re en try into active duty, the period of active duty
will be considered continuous, provided the service person reenters
active duty on the next day following the Sunday or legal holiday. If
there is a break in active service, the service person will lose his or
her rights under 38 US.C 781, and will not be eligible to apply for
insurance either during the remainder of his or her next period of
active service or within the 120-day period following separation from
his or her next period of active service. If the applicant is in active
service,

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

information regarding his or her service must be certified by a
commissioned or noncommissioned officer who has custody of the service
record. If applicant is not in active service, the service information
should be certified by a VA Veterans Benefits Counselor, or a certified
copy or a photocopy of DD Form 214, \[Report of Separation From Active
Duty,\] may be submitted with the application.

\(3\) Written request over the veteran\'s signature containing the
necessary information will be considered an application. \[If
supplemental information is needed, it will be requested by a dictated
letter. When a physical examination is needed, VA Form 29-352,
Application for Reinstatement, will be used.\]

\(4\) If the applicant is mentally incompetent and a \[legal guardian\]
has been appointed, application may be made only by the \[legal
guardian\] and, if required under State law, after the court has
authorized the \[legal guardian\] to make such application.

\(5\) If the applicant is mentally incompetent and \[a legal guardian\]
has not been appointed, application may be made by the incompetent
veteran provided he or she has sufficient mental capacity to understand
the nature of his or her act, and submits medical evidence to that
effect.

\(6\) Term insurance may be replaced and simultaneously converted to a
permanent plan. Permanent plan contracts may also be replaced or
reinstated and the plan changed as of the same effective date. However,
a specific request for both actions must be submitted; i.e., an
application for replacement and an application for conversion, etc.

b\. Premium. Except for paid-up insurance, there must be paid an amount
to cover the premium on the requested amount and plan of insurance for
the month in which application is made. The initial premium may be paid
by direct pay or allotment from service department active or retirement
pay. Subsequent premiums may also be paid by deduction from VA benefit
payments.

c\. Reserve. Reserve will be required in the following instances:

\(1\) When Reinstating a Permanent Plan Policy. In these cases, reserve
will be charged as follows:

\(a\) If premiums were paid and earned for 12 or more months, the amount
required is the reserve on the amount of insurance to be reinstated,
from the original effective date of the surrendered policy to the
premium due date of the premium month in which the application is
submitted.

\(b\) If premiums were paid and earned for less than 12 months, the
amount required is:

[l]{.underline}. The reserve on the amount of insurance to be
reinstated, from the original effective date of the surrendered policy
to the premium due date of the premium month in which the application is
submitted; less

[2]{.underline}. The reserve on the amount to be reinstated, from the
original effective date to the date of surrender. Interest on this
reserve will be computed from the surrender date to the premium due date
of the premium month in which the application is submitted.

\(2\) When Reinstating a Reduced Paid-Up Policy. Reserve will be charged
on the amount of paid-up insurance reinstated. In these cases,
calculation of the required reserve will be requested from the Chief
Actuary (299), \[Philadelphia, Pa.\]

\(3\) When Replacing a Term or Permanent Plan Contract As of a Prior
Effective Date. If the effective date is established as of the first of
any month before the month in which application is made, reserve will be
charged from the effective date through the month prior to the month in
which the application is submitted. .

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

17.03 EFFECTIVE DATE

a\. Insurance Replaced Under 38 U.S.C. 781 (VA Regulation 3402(B))

\(1\) The effective date of insurance replacing a policy under 38 U.S.C.
781 may not be before April 25, 1951, or before the date of entry into
active service. Subject to these limitations, and upon written request
of the applicant, the effective date may be established as of:

\(a\) The date on which valid application and payment of premiums are
made;

\(b\) The first day of the month in which valid application and payment
of premiums are made;

\(c\) The first day of the month following the month in which valid
application and payment of premiums are made; or

\(d\) The first day of any month, but not more than 6 months before the
month in which valid application and payment of the required reserve and
premiums are made.

\(2\) Unless otherwise specified by the applicant, the effective date
will be established as of the date on which valid application and
payment of premiums are made.

\(a\) If a veteran submits an application, then later the premium within
the 120-day period, the effective date will be established as of the
date the money is received.

\(b\) If a veteran submits an incomplete application within the 120-day
period, and supplemental information after the 120-day period but within
the additional period allowed, the effective date will be established as
of the date of the incomplete application and not the date the
supplemental information is received.

b\. Insurance Reinstated Under 38 U.S.C. 781. The effective date of
reinstatement will be the last monthly premium due date before the
acceptable application and required premiums are delivered to the VA,
unless delivered on a premium due date. If delivered on a premium due
date, that date will be the reinstatement date. If the application is
submitted by mail properly addressed to the VA, the postmark date will
be the date of delivery. (VA Regulation 3422(D))

17.04 REPLACEMENT OF TDIP (TOTAL DISABILITY INCOME PROVISION) (VA
REGULATIONS 3162.1(B) AND 3496.1(B))

a\. General. If the TDIP was in force at the time the permanent plan
policy to which it was attached was surrendered for its cash value while
the insured was in active service, the discontinued TDIP may be
replaced, without medical application, at the same time the insurance is
replaced. The amount of TDIP may not be in excess of the amount which
was discontinued at the time the insurance was surrendered. The TDIP
will be issued under the same terms and conditions as the previous rider
with the following exceptions:

\(1\) The NSLI \$5 rider may not be replaced after age 60, and

\(2\) The USGLI rider may not be replaced after age 65.

b\. Requirements

\(1\) Application should be made on the same \[request used in applying
for replacement of the insurance.

\(2\) There must be included with the initial insurance premium an
amount to cover the initial TDIP premium. Premium for the TDIP must be
paid in the same manner and at the same time as premiums on the policy
to which it is attached.

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

c\. Effective Date

\(1\) NSLI. The TDIP will be effective as of ilk same date the policy
becomes effective, except if the policy is dated back, the effective
date of the TDIP will be the first day of the month during which
requirements are met.

\(2\) USGLI. The TDIP will be effective as of the same date the policy
becomes effective, except if the policy is dated back, the effective
date of the TDIP will be the first day of the month during which
requirements are met, unless request is made that it become effective as
of the premium due date in the following month. (VA Regulation 3163)

I7.05 REINSTATEMENT OF TDIP (VA REGULATIONS 3162.1(A) AND 3496.1(A))

a\. General. If the TDIP was in force at the time the permanent plan
policy to which it was attached was surrendered for its cash value while
the insured was in active service, the surrendered TDIP may be
reinstated, without medical application, at the same time the insurance
is reinstated, with the following exceptions:

\(1\) The NSLI \$5 rider may not be reinstated after age 60, and

\(2\) The USGLI rider may not be reinstated after age 65.

b\. Requirements

\(1\) Application should be made on the same request used in applying
for reinstatement of the insurance.

\(2\) There must be included with the initial premium and reserve on the
insurance policy, an amount sufficient to pay the initial TDIP premium
and reserve.

c\. Effective Date. The effective date of reinstatement for the TDIP
will be the same date as the effective date of reinstatement of the
policy to which it is attached.

17.06 PAYMENT OF TOTAL DISABILITY BENEFITS ON NSLI OR USGLI REPLACED OR
REINSTATED UNDER 38 U.S.C. 781

Payment of monthly benefits under a TDIP attached to a permanent plan
policy issued or reinstated under 38 U.S.C.781 shall not be denied
because total disability of the applicant commenced prior to the date of
his or her application for replacement or reinstatement. (VA Regulations
3162.2 and 3496.2)

17.06 WAIVER OF PREMIUMS ON NSLI REPLACED OR REINSTATED UNDER 38 U.S.C.
781

a\. Waiver of premiums shall not be denied on permanent plans of
insurance issued or reinstated under 38 U.S.C. 781 because total
disability of the insured commenced prior to the date of his or her
application for replacement or reinstatement. (VA Regulation 3440)

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August 31, 1971 M29-1, Part I\
Change 2

b\. On permanent plans issued under 38 U.S.C. 781, waiver of premiums
shall not be effective prior to the premium due date of the month in
which the application for replacement is submitted or the effective date
of such insurance, whichever is the later date. (VA Regulation 3441(A))

c\. On permanent plans reinstated under 38 U.S.C. 78l, waiver of
premiums shall not be effective prior to the effective date of the
reinstatement. (VA Regulation 3441(A))

17.08 ADDITION OF TOTAL DISABILITY INCOME PROVISION (TDIP)

If the TDIP was not in force at the time a permanent plan policy was
surrendered while the insured was in active service, or if it was
attached to a term policy which expired while the insured was in active
service, the \$10 age 65 rider may he added to a policy reinstated or
replaced under 38 U.S.C. 781 (if the insured meets\] the requirements
outlined in chapter 16.

17.09 CONSIDERATION OF APPLICATION FOR OTHER TYPES OF INSURANCE

a\. Replacement Insurance Instead of Reinstatement. If, in response to a
request for the payment of\' the necessary reserve, the applicant,
within the specified time, asks for a replacement policy instead of
reinstating the old policy, the request will be granted provided all
other requirements are met. In such cases the effective date will he
established based upon the original application.

b\. Accepting a Disapproved Application for Replacement as an
Application for RH Insurance. Where a timely application for replacement
of term insurance is medically rejected, it may be considered as an
informal application for RH insurance provided (l) there is sufficient
credit to meet the monetary requirements and (2) the applicant completes
part I and signs part II of a VA Form 29-4364 within the prescribed
period. The insurance will be made effective as of the date requested on
the original application.

17.10 WITHDRAWAL OF APPLICATION

a\. Where the applicant has submitted a timely application with an
initial premium and all other requirements are met, the application may
not be withdrawn if the request is submitted after the effective date of
the insurance.

b\. If additional evidence or other requirements must be furnished
before a determination of acceptability can be made, the application may
be withdrawn, provided the request is submitted prior to the date of
submission of the additional requirements.

17.11 REINSTATEMENT OF PAIDUP INSURANCE

Reinstatement of paid-up insurance surrendered for cash under the
provisions of 38 U.S.C. 8 l, will be effected on the same basis as
prescribed in the preceding paragraphs for reinstatement of insurance
under premium paying conditions with the following exceptions:

a\. Where the full amount of paid-up insurance surrendered for its cash
value is to be reinstated, such amount need: not be in multiples of
\$500 and may he less than \$1 ,000.

b\. The amount required to cover the cost of reinstatement of paid-up
insurance will be the reserve per thousand on the paid-up insurance, at
the attained age of the insured, times the number of thousands of
paid-up insurance being reinstated.

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M29-l, Part I

change 2

The attained age of the insured will be the age at issue of the parent
permanent plan policy plus the number of years and months between the
effective date of such permanent plan policy and the last monthly
anniversary of such date prior to the application for reinstatement.

d\. The effective date of the reinstated paid-up insurance will he the
effective date of surrender for the paid- up insurance.

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