May 15,1972 M29-1, Part II\
Change 7

CONTENTS

CHAPTER 31. SECTION 724 WAIVER ACCOUNTS

PARAGRAPH **PAGE\
**31.01 General 31-1\
31.02 Waiver Provisions 31 - 1\
31.03 Service Requirements 31 - 1\
31.04 Termination of Waiver 31-2\
31.05 Indebtedness Upon Maturity by Death 31-4

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May 10,1971 M29-1, Part II\
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CHAPTER 31. SECTION 724 WAIVER ACCOUNTS

31.01 GENERAL

a\. Public Law 23, 82d Congress, approved April 25, 1951, added section
622 to the National Service Life Insurance Act of 1940, as amended. This
new section, now 38 U.S.C. 724, granted the following privilege to
persons on continuous active military duty in excess of 30 days. Any
person who was insured under National Service Life Insurance or United
States Government Life Insurance was entitled, upon written application,
to a waiver of premiums on 5-year level premium term insurance and that
portion of any permanent plan insurance premium representing the cost of
the pure insurance risk. These waivers have not been granted since
December 31, 1956. However, if the insured has had continuous military
service and a section 724 waiver was granted prior to January 1, 1957,
he may retain the waiver on his insurance.

b\. Periodically, on a project basis, VA FL 29-695 is released to each
insured on 5 year level premium term accounts that have the waiver. He
is told how his benefits and his insurance will be paid to his
beneficiary should he die while the waiver is in effect and how they
would be paid should the waiver be terminated. The letter encourages him
to consult with his Personal Affairs Officer to determine if he should
continue the inservice waiver.

31.02 WAIVER PROVISIONS

a\. No premiums could have been waived under the provisions of section
724 which became due on or prior to June l, 1951, or prior to the date
of application if later than June l, 1951. Subject to these provisions,
the effective date of waiver had to have been the first premium due date
on or after the date of the application for waiver, provided the
insurance was in force at the time of application.

b\. Once granted, the waiver remained in force on the policy throughout
the insured\'s continuous active service and for 120 days after
separation from active service, unless terminated at the insured\'s
request.

c\. If the 5-year term period expires while the waiver is in force, the
term policy is automatically renewed for an additional 5-year period.

d\. On a permanent plan policy, the waiver covers only that portion of
the life insurance premium representing the cost of the PIR (pure
insurance risk). Hence, insureds with permanent plan policies must
continue paying the full amount of premiums due. The insured however,
may request a refund annually of the cost of the PIR while the waiver is
in force.

e\. A TDIP (Total Disability Income Provision) could not be granted a
section 724 waiver. This rule applied even though the insurance policy
on which the TDIP is a rider was granted the waiver.

f\. Dividends are not paid for months the insurance is in force under
section 724 waiver.

31.03 SERVICE REQUIREMENTS

a\. The following guidelines are applicable in determining continuity of
section 724 waiver:

\(1\) If a serviceman was separated from active service and reentered
active service on the same or following day excluding Sundays or legal
holidays which intervene discharge and reenlistment, his service is
deemed continuous.

\(2\) Between December 23, 1953, and December 31, 1956, both dates
inclusive, if a serviceman reentered active service at any time within
the 120 days following separation, the section 724 waiver continued in
force.

\(3\) On and after January 1, 1957, if a serviceman reentered active
service within the l20-day period following separation, but after a
break in service of one or more calendar days, the waiver terminated
upon

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M29-1, Part II May 10,1971

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expiration of the l20-day period following separation from the previous
active service. This same rule applied before December 23, 1953.

NOTE: If the policyholder reentered active service prior to December 23,
1953, and within 120 days following 4 date of separation, but with a
break in service of one or more calendar days, the waiver will be
considered continuous if the insured was erroneously informed by the VA
on or after the date of his return to active duty that the waiver was in
effect due to reentery within the 120-day period.

b\. If there is any question about the continuity of the section 724
waiver, a VA Form 29-l50, Request for Service Information, will be
released to the service department.

c\. After December 31, l956, persons in active service could no longer
apply for and be granted a section 724 waiver of premiums on their
National Service Life Insurance or United States Government Life
Insurance.

31.04 TERMINATION OF WAIVER

a\. A section 724 waiver of premiums may be terminated by:

\(l\) Establishment of allotment on a term policy.

\(2\) Discontinuance of allotment on a permanent plan policy because of
separation from active service.

NOTE: In such cases the waiver will be continuous for 120 days if
premiums are paid.

\(3\) Request for termination from the insured.

\(4\) Expiration of the premium-payment period on a limited payment life
contract or at the end of an endowment period on endowment policies.

\(5\) Other evidence of separation from active service.

\(6\) A 724 waiver is suspended by a disability waiver (section 712).

\(7\) Submission of an application for conversion of term insurance

\(a\) In these instances, a letter will be released advising the
applicant that we are assuming that the application and payment of
premiums (direct pay or allotment) is a request for termination of the
waiver.

\(b\) The letter will also advise him that dividends will be paid on the
converted policy, if such policy is participating. He will be requested
to notify us immediately if our action does not meet with his approval.
If a dividend option has not been recorded, a VA Form 29-432,
Disposition of Dividends, will be enclosed with the letter.

\(c\) VA Form 29-328a, Underwriting Input, or VA Form 29-8520,
Underwriting, will be prepared to effect the conversion. This will cause
the system to (l) discontinue the waiver on the new contract, (2) not
allow any term reserve and (3) if no dividend option is selected, insert
the option as dividend credit.

b\. On all cases, the insurance folder will be examined to verify
continuity of the section 724 waiver. If continuity cannot be
determined, a VA Form 29-150 will be released to the service department.

c\. Upon receipt of a VA Form 29-5886a, Record Print Out, for a term
account with a how paid code 7 and an allotment establishment as a
pending transaction, take action to:

\(I\) Update the premium segment of the master record and delete the
allotment pending transaction. The next month due will be the premium
month following the effective month of the allotment. VA Forms 29-5893a,
Premium Input, and 29-5895a, Pending Transaction Input, will be used for
this purpose.

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\(2\) Delete the section 724 waiver data from the master record; also
insert dividend information to indicate the next dividend year due and
months not due if the account is participating. VA Form 29-5892a, Policy
Input, or VA Form 29-8522, Policy, will be used for this purpose.

\(3\) Advise the insured by dictated letter on the status of the
account.

\(4\) If the allotment was not received in the correct amount, review
the insurance folder and related records

to determine if the allotment was intended for replacement, conversion,
reduction, etc. If there is no evidence of a policy change, a letter
will be written to the insured requesting clarification. A VA Form
29-1588, Request for

Allotment Deduction Change, will be sent to the service department and a
1588 (date) diary will be inserted if a change is necessary.

\(5\) Note the RPO as to action taken and file it in the insurance
folder.

d\. Upon receipt of an RPO for a permanent plan in force under section
724 waiver, with premiums paid by allotment and an allotment
discontinuance is shown as a pending transaction, take action to:

\(1\) Update the premium segment of the master record and delete the
allotment pending transaction. VA Forms 29-5893a and 29-5895a will be
used for this purpose.

\(2\) Prepare a VA Form 29-5895a to insert a 724-609 diary which will
indicate that a PIR refund is due. The callup date will be 120 days from
the premium due date of the effective month of the allotment
discontinuance.

\(3\) Release a VA Form 29-150 to the service department requesting
serviceman\'s date of separation from active service.

\(4\) Advise the insured by dictated letter of the status of the
account, and information on future PIR refund. Note the RPO as to the
action taken and file it in the insurance folder.

\(5\) Prepare a VA Form 29-320, Request for Calculation, to obtain the
amount of the PIR refund upon callup for PIR refund.

*(6)* Delete the section 724 waiver data from the master record. Also
insert dividend information to indicate the next dividend year due and
months not due if the account is participating. VA Form 29-5892a or
29-8522 will be used for this purpose.

\(7\) If premiums are not paid for the premium months within the 120-day
period following separation, VA Form 29-5893a will be prepared to apply
the entire amount of PIR credits at present value to update the master
record. If the PIR credits will not pay premiums through the current
month, use dividend credits, if available. If all available credits have
been applied and the insurance is lapsed, follow prescribed lapse
procedures.

\(8\) If premiums have been paid for all premium months within the
120-day period following separation, VA Form 29-5895a will be prepared
to insert the pending disbursement (PIR and other credits).

e\. Upon receipt of an RPO for a permanent plan in force under section
724 waiver, and an allotment discontinuance has been received and
processed by the ADP system, take action as prescribed in subparagraphs
d (2) through (8) above.

f\. If a request is received from the insured to terminate the section
724 waiver on a term account, take action to:

\(1\) Update the premium segment of the master record. The next month
due will be the premium month following the month in which the request
was postmarked. VA Form 29-5893a or 29-8523, Premium Input, will be used
for this purpose.

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\(2\) Delete the section 724 waiver data from the master record. Also,
insert dividend information to indicate the next dividend year due and
months not due if the account is participating. **VA** Form 29-5892a or
29-8522 will be used for this purpose.

\(3\) Advise the insured by dictated letter of the status of the
account.

g\. If a request is received from the insured to terminate the section
724 waiver for a permanent plan, take action to:

\(1\) Obtain computation of PIR refund by preparing and releasing VA
Form 29-320. The computation will be from the effective date of the
waiver or from the termination date of the last preceding PIR refund
period, to the end of the premium month in which the request was
postmarked.

\(2\) Delete the section 724 waiver data from the master record. Also,
show dividend information to indicate the next dividend year due if the
account is participating. VA Form 29-5892a or 29-8522 will be used for
this purpose.

\(3\) Insert the pending disbursement (PIR and other credits) by
preparing VA Form 29-5895a or 29-8526, pending Transaction.

\(4\) Advise the insured by dictated letter on the status of tee
account.

h\. At the expiration of the premium-payment period on a limited payment
life contract or an endowment period on an endowment policy while the
premiums are waived under section 724, process as follows:

\(I\) Prepare a VA Form 29-320 to obtain computation of PIR refund. The
computation will be from the effective date of the waiver or from the
termination date of the last preceding PIR refund period, to the
expiration of the premium-paying period.

\(2\) VA Form 29-5892a or 29-8522 will be prepared to delete the section
724 waiver data. Also show dividend information to indicate the next
dividend year due and months not due if the account is participating.

\(3\) VA Form 29-5895a or 29-8526 will be prepared to insert the pending
disbursement (PIR and other credits).

\(4\) Prepare any other input that may be necessary to update the master
record.

\(5\) Advise the insured on the action taken and status of the account.

i\. If evidence of separation from active service is obtained from
sources other than official channels and the insurance premiums are
waived under section 724, take action to verify separation date and
process as prescribed above according to the circumstances of the case.

\[31.05 INDEBTEDNESS UPON MATURITY BY DEATH

a\. Public Law 92-197, enacted December 15, 1971, provides for an
indebtedness to be established on any Government Life Insurance contract
(USGLI and NSLI) maturing by death on or after January l, 1972, whenever
the premiums are being waived under 38 U.S.C. 724.

b\. The indebtedness to be established will include an amount equal to
the amount of premiums that were waived for any period on or after
January 1, 1972, less the dividends that would have been payable on
participating policies except for the fact that premiums were waived
under section 724. The premium indebtedness applies to current as well
as any predecessor accounts (term or permanent plan) on which premiums
were waived on or after January 1, 1972. Any indebtedness established
under this law will take the form of a premium lien. Interest will not
be charged on the premium lien. For an account with an effective date
other than the first of the month, an

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indebtedness will not be established for a death occurring during
January 1972, if the death occurred during December 1971 premium month.

c\. When input is inserted into the computer system to initiate
processing of a death claim and the record indicates premiums are being
waived under section 724, the system will provide a partially completed
VA Form 29-368d, Report of Status for Settlement of Death Claims,
suspend automatic processing of the claim and freeze the master record.
Premium liens will be clerically calculated and entered in the master
record. PIR (pure insurance risk) refunds effected for any period
beginning with the January 1972 premium month, less potential dividends,
will become a premium Lien. If the full premiums have been paid on a
permanent plan contract and no PIR refund has been made for the premium
month of January 1972 or later, the settlement will be made as though no
section 724 waiver existed and will include dividends (for participating
accounts) for the period involved. It will be necessary to continue to
verify the continuity of section 724 waivers (and allotments, where
applicable) with the appropriate service department. Liens will not be
established unless a section 724 waiver is in effect for the premium
month in which death occurred. In the adjudication of death claims, a
section 724 waiver will be deemed to have been discontinued prior to the
premium month in which death occurred providing the insured was eligible
for a disability waiver under 38 U.S.C. 712 or 713. In these instances,
no premium lien is to be established.

d\. Premium liens established under the provisions of Public Law 92-197,
unless paid prior to settlement, are deductible from the proceeds of the
Insurance. In such case, the liability of the Government under Section
724(b) shall be reduced by the amount so deducted from the proceeds.
Beneficiaries will be permitted to pay the established indebtedness
before settlement in order to provide for larger installments whenever a
settlement option is other than cash (lump sum).

e\. The same control account applicable to all premium Liens is used.

f\. Loan and cash surrender of accounts under a section 724 waiver as
well as maturing endowments and USGLI accounts maturing because of total
permanent disability are not affected by this law.\]

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