[Federal Register Volume 61, Number 112 (Monday, June 10, 1996)]
[Rules and Regulations]
[Pages 29289-29293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14365]



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DEPARTMENT OF VETERANS AFFAIRS

38 CFR Part 8

RIN 2900 AH55


National Service Life Insurance

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: This document amends the Department of Veterans Affairs (VA) 
regulations captioned ``National Service Life Insurance'' which were 
established under the National Service Life Insurance Act of 1940, as 
amended (38 U.S.C. 1901-1929, 1981-1988). It deletes provisions that 
have become obsolete. It also deletes provisions contained in insurance 
policies that consist of restatements of statutes and other material 
not required to be published in the Federal Register. Additionally, it 
deletes other restatements of statute and makes changes for purposes of 
clarity.

EFFECTIVE DATE: June 10, 1996.

FOR FURTHER INFORMATION CONTACT: George Poole, Chief, Insurance Program 
Administration, Department of Veterans Affairs Regional Office and 
Insurance Center, PO Box 8079, Philadelphia, PA 19101, (215) 951-5718.

SUPPLEMENTARY INFORMATION: Under the umbrella of 38 CFR part 8, four 
distinct life insurance programs exist, namely, National Service Life 
Insurance (NSLI), Veterans' Special Life Insurance (VSLI), Veterans' 
Reopened Life Insurance (VRI) and Service Disabled Veterans Insurance 
(SDVI). Most of the policyholders insured under NSLI served during 
World War II, and their average age is now 72 years. The NSLI program 
opened in October 1940, and over 22 million policies were issued, of 
which about 2 million remain. The NSLI program remained open until 
April 1951, when two new programs were established for Korean War 
veterans. VSLI, opened in April 1951, was closed to new issues in 
December 1956. SDVI, also opened in April 1951, is the only program 
still available for new issues to veterans with service-connected 
disabilities. The VRI program was a limited one-year reopening, from 
May 1965 to May 1966, of the NSLI and VSLI programs to certain disabled 
veterans. As a result of the closure of the NSLI, VSLI, and VRI 
programs, provisions concerning issuance are deleted because they are 
obsolete. Furthermore, while these three programs provide for certain 
disability provisions, there are no insureds remaining who are age 
eligible for issuance of such riders and, hence, these provisions are 
further deleted as obsolete. Other provisions, such as those 
implementing the Servicemen's Indemnity Act of 1940, and other 
``sunset'' provisions, are also obsolete and deleted accordingly.
    Also, provisions which list guaranteed payments are deleted since 
such guaranteed payments reflect only a minimum payment and subsequent 
legislation allows for higher payment schedules. Thus, publication of 
minimum payments has no practical value. Provisions that are contained 
in insurance polices are likewise deleted

[[Page 29290]]

as unnecessary. These policy provisions contain restatements of statute 
and other material not required to be published in the Federal 
Register. Additionally, other provisions that merely restate statutory 
provisions are likewise deleted.
    Lastly, some provisions are changed for purposes of clarity.
    This final rule consists of nonsubstantive changes and, therefore, 
is not subject to the notice-and-comment and effective-date provisions 
of 5 U.S.C. 553.
    The Secretary of Veterans Affairs thereby certifies that this final 
rule will not have a significant economic impact on a substantial 
number of small entities as they are defined in the Regulatory 
Flexibility Act, 5 U.S.C. 601-612. This final rule will not affect any 
entity since it does not contain any substantive provision. Therefore, 
pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial 
and final regulatory flexibility analysis requirements of sections 603 
and 604.
    The Catalog of Federal Domestic Assistance Program number for these 
regulations is 64.103.

List of Subjects in 38 CFR Part 8

    Life insurance, Mortgage insurance, Veterans.

    Approved: May 31, 1996.
Jesse Brown,
Secretary of Veterans Affairs.

    For the reasons set out in the preamble 38 CFR part 8 is amended as 
set forth below:

PART 8--NATIONAL SERVICE LIFE INSURANCE

    1. The authority citation for part 8 continues to read as follows:

    Authority: 38 U.S.C. 501, 1901-1929, 1981-1988, unless otherwise 
noted.

    2. The undesignated center heading preceding Secs. 8.16, 8.44, 
8.49, 8.55, 8.59, 8.60, 8.61, 8.62, 8.70, 8.71, 8.80a, 8.100, 8.102, 
8.103, 8.110, 8.113, 8.114, and 8.116 are removed.


Secs. 8.0, 8.3 through 8.5, 8.7, 8.10, 8.11, 8.15, 8.16 through 8.19, 
8.26a, 8.32, 8.34 through 8.36, 8.40, 8.41, 8.44, 8.47 through 8.51, 
8.54, 8.55, 8.59, 8.60, 8.61, 8.62, 8.63, 8.70, 8.71, 8.75 through 
8.78, 8.80, 8.80a through 8.83, 8.88 through 8.93, 8.95 through 8.95b, 
8.96a through 8.99c, 8.100, 8.102, 8.103 and 8.110 through 8.112b, 
8.113, 8.114 and 8.116  [Removed]

    3. Sections 8.0, 8.3 through 8.5, 8.7, 8.10, 8.11, 8.15 through 
8.19, 8.26a, 8.32, 8.34 through 8.36, 8.40, 8.41, 8.44, 8.47 through 
8.51, 8.54, 8.55, 8.59 through 8.63, 8.70, 8.71, 8.75 through 8.78, 
8.80 through 8.83, 8.88 through 8.93, 8.95 through 8.95b, 8.96a through 
8.103, and 8.110 through 8.116 are removed.


Sec. 8.1  [Redesignated as Sec. 8.0]

    4. Section 8.1 is redesignated as Sec. 8.0.


Sec. 8.2  [Redesignated as Sec. 8.1]

    5. Section 8.2 is redesignated as Sec. 8.1 following the 
undesignated center heading EFFECTIVE DATE.


Secs. 8.7a, 8.7b, 8.7c, 8.8, 8.9  [Redesignated as Secs. 8.3 through 
8.7, respectively]

    6. Sections 8.7a through 8.7c, 8.8 and 8.9 are redesignated as 
Secs. 8.3 through 8.7, respectively, following the undesignated center 
heading ``PREMIUMS''.


Sec. 8.12  [Redesignated as Sec. 8.8]

    7. Section 8.12 is redesignated as Sec. 8.8 following the 
undesignated center heading ``CALCULATION OF TIME PERIOD''.


Sec. 8.14  [Redesignated as Sec. 8.9]

    8. Secton 8.14 is redesignated as Sec. 8.9 following the 
undesignated center heading ``GRACE PERIOD''.


Secs. 8.22, 8.23, 8.24  [Redesignated as Secs. 8.10 through 8.12, 
respectively]

    9. Sections 8.22 through 8.24 are redesignated as Secs. 8.10 
through 8.12, respectively, following the undesignated center heading 
``REINSTATEMENT''.


Sec. 8.26  [Redesignated as Sec. 8.13]

    10. Section 8.26 is redesignated as Sec. 8.13 following the 
undesignated center heading ``DIVIDENDS''.


Secs. 8.27, 8.27a, 8.28  [Redesignated as Secs. 8.114 through 8.16, 
respectively]

    11. Sections 8.27 and 8.28 are redesignated as Secs. 8.14 through 
8.16, respectively, following the undesignated center heading ``CASH 
VALUE AND POLICY LOAN''.


Secs. 8.29, 8.30  [Redesignated as Secs. 8.17 and 8.18, respectively]

    12. Sections 8.29 and 8.30 are redesignated as Secs. 8.17 and 8.18, 
respectively, following the undesignated center heading ``EXTENDED TERM 
AND PAID-UP INSURANCE''.


Sec. 8.33  [Redesignated as Sec. 8.19]

    13. Section 8.33 is redesignated Sec. 8.19 following the 
undesignated center heading ``CHANGE IN PLAN''.


Secs. 8.42, 8.43  [Redesignated as Secs. 8.20 and 8.21, respectively]

    14. Sections 8.42 and 8.43 are redesignated as Secs. 8.20 and 8.21, 
respectively, following the undesignated center heading ``PREMIUM 
WAIVERS AND TOTAL DISABILITY''.


Sec. 8.46  [Redesignated as Sec. 8.22]

    15. Section 8.46 is redesignated as Sec. 8.22 following the 
undesignated center heading ``BENEFICIARIES''.


Sec. 8.52  [Redesignated as Sec. 8.23]

    16. Section 8.52 is redesignated as Sec. 8.23 following the 
undesignated center heading ``PROOF OF DEATH, AGE, OR RELATIONSHIP''.


Sec. 8.56  [Redesignated as Sec. 8.24]

    17. Section 8.56 is redesignated as Sec. 8.24 following the 
undesignated center heading ``AGE''.


Secs. 8.64, 8.65, 8.66  [Redesignated as Secs. 8.25 through 8.27, 
respectively]

    18. Sections 8.64 through 8.66 are redesignated as 8.25 through 
8.27, respectively, following the undesignated center heading 
``EXAMINATIONS''.


Sec. 8.69  [Redesignated as Sec. 8.28]

    19. Section 8.69 is redesignated as Sec. 8.28 following the 
undesignated center heading ``EXTRA HAZARDS''.


Sec. 8.79  [Redesignated as Sec. 8.29]

    20. Section 8.79 is redesignated as Sec. 8.29 following the 
undesignated center heading ``OPTIONAL SETTLEMENTS''.


Sec. 8.85  [Redesignated as Sec. 8.30]

    21. Section 8.85 is redesignated as Sec. 8.30 following the 
undesignated center heading ``RENEWAL OF TERM INSURANCE''.


Secs. 8.94, 8.96  [Redesignated as Sec. 8.31 and 8.32, respectively]

    22. Sections 8.94 and 8.96 are redesignated as Secs. 8.31 and 8.32, 
respectively, following the undesignated center heading ``SETTLEMENT OF 
INSURANCE MATURING ON OR AFTER AUGUST 1, 1946''.


Sec. 8.108  [Redesignated as Sec. 8.33]

    23. Section 8.108 is redesignated as Sec. 8.33 following the 
undesignated center heading ``NATIONAL SERVICE LIFE INSURANCE POLICY''.


Secs. 8.117, 8.118, 8.119  [Redesignated as Secs. 8.34 through 8.36]

    24. Sections 8.117 through 8.119 are redesignated as Secs. 8.34 
through 8.36, respectively, following the undesignated center heading 
``APPEALS''.
    25. In newly redesignated Sec. 8.0, paragraph (b) is amended by 
removing ``by the Chief Benefits Director. The Chief Benefits Director 
is responsible for readjusting such standards to reflect medical 
advances and current experience affecting mortality and disability''.
    26. The newly redesignated Sec. 8.1 is revised to read as follows:

[[Page 29291]]

Sec. 8.1  Effective date for insurance issued under section 1922(a) of 
title 38 U.S.C.

    The effective date may be established upon written request of the 
applicant as follows:
    (a) As of the date on which valid application and tender of premium 
are made.
    (b) As of the first day of the month in which valid application and 
tender of premium are made.
    (c) As of the first day of the month following the month in which 
valid application and tender of premium are made.
    (d) As of the first day of any month, but not more than 6 months 
prior to the month in which valid application and tender of premium are 
made: Provided, That there be paid an amount equal to the full reserve 
on the insurance at the end of the month prior to the month in which 
application is made, and the full premium on the amount of insurance 
for the month in which application is made.
    27. The newly redesignated Sec. 8.2 is revised to read as follows:


Sec. 8.2  Payment of premiums.

    Premiums on National Service Life Insurance may be paid by direct 
remittance to the Department of Veterans Affairs, or by allotment of 
service pay or retirement pay.

(Authority: 38 U.S.C. 1908)

    28. The newly redesignated Sec. 8.3 is revised to read as follows:


Sec. 8.3  Correction of errors.

    Where timely tender of the required premium is made by check or 
draft which is not paid on presentation for payment, but it is shown by 
satisfactory evidence that such nonpayment was due to an error on the 
part of the bank on which such check or draft was drawn, or was the 
result of an error in the instrument or in the execution thereof, and 
not for the lack of funds, the insured will be given an additional 31 
days from the date of the letter that gives notice of such nonpayment 
in which to tender an amount sufficient to pay all premiums through the 
current month.


Sec. 8.5  [Amended]

    29. In newly redesignated Sec. 8.5, paragraph (a)(5) is amended by 
removing, ``(Secs. 8.14 and 8.15)'' and adding, in its place, 
``(Sec. 8.9)''; and paragraphs (a)(7) and (b)(3), are amended by 
removing ``(Sec. 8.29)'' and adding, in its place ``(Sec. 8.17)''.


Sec. 8.6  [Amended]

    30. In newly redesignated Sec. 8.6, paragraph (a) is amended by 
removing ``section 5502(f) of title 38 U.S.C., and Sec. 13.57'' and 
adding, in its place, ``Part 13''.
    31. The newly redesignated Sec. 8.7 is revised to read as follows:


Sec. 8.7  Authorization for deduction of premiums from compensation, 
retirement pay, or pension.

    Deductions from benefits for the payment of premiums shall be 
effective on the month the authorization for such deduction is received 
by the Department of Veterans Affairs or on any successive month 
specified by the insured. Such deduction shall be applied to the 
premium due in the succeeding calendar month and shall continue monthly 
so long as the benefit payments are due and payable to the insured and 
the amount is sufficient to pay the premium or until such authorization 
is revoked by the veteran or otherwise terminated. When premium 
deductions are authorized by the insured, the premium will be treated 
as paid for purposes of preventing lapse of the insurance, so long as 
there is due and payable to the insured a benefit amount sufficient to 
provide the premium payment. If authorization was executed by the 
Director of a VA hospital or domiciliary or chief officer of a State 
hospital or other institution to make deductions from an institutional 
award, the authorization will cease and terminate at the termination of 
the institutional award and the insurance shall lapse unless another 
authorization for deduction from monthly benefit payments is executed 
by the insured. The insured will be notified by letter directed to the 
last address of record of the termination of the authorization to 
deduct premiums, but failure to give such notice shall not prevent 
lapse.


Sec. 8.8  [Amended]

    32. Newly redesignated Sec. 8.8 is amended by removing 
``Secs. 8.7a, 8.7b, or 8.7c'' and adding, in its place, ``Secs. 8.3, 
8.4 or 8.5''.
    33. The newly redesignated Sec. 8.9 is revised to read as follows:


Sec. 8.9  Establishment of grace period.

    For the payment of any premium under a National Service Life 
Insurance policy, a grace period of 31 days from and after the date on 
which the premium was due will be allowed without interest during which 
time the policy will remain in force. When a payment of premium is 
mailed, the postmark date will be accepted as the date on which the 
payment was tendered. If a premium is not paid before the expiration of 
the grace period, the effective date of lapse shall be the due date of 
the unpaid premium. If the policy matures within the grace period, the 
unpaid premium or premiums shall be deducted from the amount of 
insurance payable.
    34. The newly redesignated Sec. 8.10 is revised to read as follows:


Sec. 8.10  Reinstatement of National Service Life Insurance except 
insurance issued pursuant to section 1925 of title 38 U.S.C.

    (a) Any policy which lapses and which is not surrendered for a cash 
value or for paid-up insurance, may be reinstated upon written 
application signed by the applicant, payment of all premiums in 
arrears, and evidence of good health as required under Sec. 8.11 (a) or 
(b), whichever is applicable. If a policy is not reinstated within 6 
months from the due date of the premium in default, interest must be 
paid in addition to premiums for all months in arrears from their 
respective due dates at the rate of 5 percent per annum, compounded 
annually. The payment or reinstatement of any indebtedness against a 
policy must be made upon application for reinstatement, and any excess 
of indebtedness and interest over the reserve of the policy must be 
paid at that time. A lapsed National Service Life Insurance policy 
which is in force under extended term insurance may be reinstated 
within 5 years from the date extended insurance would expire upon 
application and payment of all premiums in arrears with the required 
interest. In any case in which the extended insurance under an 
endowment policy provides protection to the end of the endowment 
period, the policy may be reinstated at any time before maturity upon 
application and payment of the premiums with the required interest. A 
policy on the level term premium plan may be reinstated within 5 years 
of the date of lapse upon written application signed by the insured, 
evidence of insurability and payment of two monthly premiums, one for 
the month of the lapse, the other for the month of reinstatement.
    (b) Reinstatement of insurance issued under section 1925, title 38 
U.S.C. Any policy of insurance issued under 38 U.S.C. 1925 which has 
been lapsed for not more than 5 years shall be reinstated under the 
same provisions of paragraph (a) of this section.
    (c) Effective date of reinstatements. Reinstatement is effected on 
the date an acceptable application and the required monetary payments 
are delivered to the Department of Veterans Affairs. If application for 
reinstatement is submitted by mail, properly addressed to the 
Department of Veterans Affairs, the postmark date shall be the date of

[[Page 29292]]

delivery. The effective date of reinstatement of the insurance shall be 
the last monthly premium due date prior to the delivery or postmark 
date of the application for reinstatement, except where reinstatement 
is effected on the due date of a premium, then in such case that date 
shall be the reinstatement date.
    (d) Inquiry during the grace period. When the insured makes inquiry 
prior to the expiration of the grace period disclosing a clear intent 
to continue insurance protection, such as a request for information 
concerning premium rates or conversion privileges, etc., an additional 
reasonable period not exceeding 60 days may be granted for payment of 
premiums due; but the premiums in any such case must be paid during the 
lifetime of the insured.


Sec. 8.11  [Amended]

    35. In newly redesignated Sec. 8.11, paragraph (b) is amended by 
removing ``Sec. 8.1'' and adding, in its place, ``Sec. 8.0''; it is 
further amended by removing ``Sec. 8.0 (b), (d)(2)(i), or (d)(2)(ii)'' 
and adding, in its place, ``38 U.S.C. 1922(a), 1925(b), or 1925(c)''; 
and by removing ``Sec. 8.0(d)(2)(iii)'' and adding, in its place, ``38 
U.S.C. 1925(a)''.


Sec. 8.12  [Amended]

    36. Newly redesignated Sec. 8.12 is amended by removing 
``Sec. 8.23'' and adding, in its place, ``Sec. 8.11''; and by removing 
``Sec. 8.23(a)'' and adding, in its place, ``Sec. 8.11(a)''.


Sec. 8.13  [Amended]

    37. In newly redesignated Sec. 8.13, paragraph (f) is amended by 
removing ``in Sec. 8.60'' and adding, in its place, ``Sec. 5301 of 
title 38 U.S.C.''; and paragraph (g) is amended by removing 
``Secs. 8.29 and 8.30,'' and adding, in its place, ``Secs. 8.17 and 
8.18''.
    38. The newly redesignated Sec. 8.14 is revised to read as follows:


Sec. 8.14  Cash value and policy loan.

    (a) Provisions for cash value, paid-up insurance, and extended term 
insurance, except as provided in Sec. 8.17(b), shall become effective 
at the completion of the first policy year on any plan of National 
Service Life Insurance other than the 5-year level premium term plan. 
The cash value at the end of the first policy year and at the end of 
any policy year thereafter, for which premiums have been paid in full, 
shall be the reserve with any dividend accumulations, where applicable.
    (b) Upon written request and upon complete surrender of the 
insurance and all claims thereunder, the United States will pay to the 
insured the cash value of the policy less any indebtedness, provided 
the policy has been in force by payment or waiver of the premiums for 
at least 1 year. Paid-up additions do not have to be in force for 1 
year before they have cash values. Unless otherwise requested by the 
insured, a surrender will be deemed completed as of the end of the 
premium month in which the application for cash surrender is delivered 
to the Department of Veterans Affairs, or as of the date of the check 
for the cash value, whichever is later. If the application is forwarded 
by mail, properly addressed, the postmark date will be taken as the 
date of delivery. If it is forwarded through military channels, the 
date the application is placed in military channels will be taken as 
the date of delivery.
    (c) All values, reserves and net single premiums on participating 
National Service Life Insurance, other than as provided in paragraph 
(e) of this section, shall be based on the American Experience Table of 
Mortality, with interest at the rate of 3 percent per annum. For each 
month after the first policy year for which month a premium has been 
paid or waived, the reserve at the end of the preceding policy year 
shall be increased by one-twelfth of the increase in reserve for the 
current policy year.

(Authority: 38 U.S.C. 1902, 1906)

    (d) All values on insurance, reserves, and net single premiums 
issued under the provisions of section 1922(a) of title 38 U.S.C., and 
on modified life and ordinary life plans of insurance issued under 
section 1904(c), (d), and (e), respectively, shall be based on the 
Commissioners 1941 Standard Ordinary Table of Mortality with interest 
at the rate of 2\1/4\ percent per annum. Values between policy years 
shall be proportionally adjusted.

(Authority: 38 U.S.C. 1904, 1906)

    (e) All values on insurance, reserves, and net single premiums 
issued under the provisions of section 1923(b) of title 38 U.S.C., and 
on modified life and ordinary life plans of such insurance issued under 
section 1904 (c), (d), and (e), respectively, shall be based on table 
X-18 (1950-54 Intercompany Table of Mortality) with interest at the 
rate of 2\1/2\ percent per annum. Values between policy years shall be 
proportionally adjusted.

(Authority: 38 U.S.C. 1904, 1923)

    (f) All values, reserves, and net single premiums on 
nonparticipating insurance on which the requirements of good health 
were waived under the provisions of section 602(c)(2) of the National 
Service Life Insurance Act, as amended (``H'' Insurance), and on the 
modified life and ordinary life plans of such ``H'' insurance issued 
under section 1904 (c), (d), and (e), respectively, of title 38 U.S.C. 
shall be based on the American Experience Table of Mortality, with 
interest at the rate of 3 percent per annum. Values between policy 
years shall be proportionally adjusted. The provisions of the ``Net 
Cash Value'' clause in National Service Life Insurance policies are 
hereby amended accordingly.
    (g) All values, reserves, and net single premiums on participating 
modified life and ordinary life plan insurance issued under section 
1904 (b), (d), and (e), respectively, of title 38 U.S.C. shall be based 
on the 1958 Commissioners Standard Ordinary Basic Table of Mortality 
and interest at the rate of 3 percent per annum. Values between policy 
years shall be proportionally adjusted.
    (h) All values, reserves, and net single premiums on insurance 
issued under the provisions of section 1925(b) of title 38 U.S.C, and 
on modified life and ordinary life plans of such insurance issued under 
section 1904 (c), (d), and (e), respectively, shall be based on the 
1958 Commissioners Standard Ordinary Basic Mortality Table and interest 
at the rate of 3\1/2\ percent per annum. Values between policy years 
shall be proportionally adjusted.
    (i) All values, reserves, and net single premiums on insurance 
issued under the provisions of section 1925(c) of title 38 U.S.C., and 
on modified life, ordinary life, 20-payment life and 30-payment life 
plans, where appropriate, of such insurance issued under section 1904 
(c), (d), and (e), respectively, shall be based on the American 
Experience Table of Mortality and interest at the rate of 3\1/2\ 
percent per annum. Values between policy years shall be proportionally 
adjusted.

(Authority: 38 U.S.C. 1906)

    (ii) [Reserved]


Sec. 8.15  [Amended]

    39. In newly redesignated Sec. 8.15, paragraph (a) is amended by 
removing ``under the provisions of Sec. 8.27 (a) through (g) the 
insured may elect to receive payment in monthly installments under 
option 2 (Secs. 8.79, 8.80, 8.80c, and 8.81, as applicable) or as a 
refund life income option in accordance with the applicable provisions 
of Secs. 8.80, 8.80c, 8.81, and 8.92a.'' and adding, in its place, 
``the insured may elect to receive payment in monthly installments 
under option 2 or as a refund life income.''; by removing ``Sec. 8.89'' 
and adding, in its place, ``title

[[Page 29293]]

38 U.S.C. 1917''; by removing paragraphs (b) and (c).


Sec. 8.18  [Amended]

    40. Newly redesignated Sec. 8.18 is amended by removing ``as set 
forth in Sec. 8.26(a)''.
    41. The newly redesignated Sec. 8.19 is revised to read as follows:


Sec. 8.19  Conversion of a 5-year level premium term policy as provided 
for under Sec. 1904 of title 38 U.S.C.

    National Service Life Insurance on the level premium term plan 
which is in force may be exchanged for a permanent plan policy upon 
written application by the insured and the payment of the current 
monthly premium at the attained age for the plan of insurance selected 
(except where premium waiver under 38 U.S.C. 1912 is effective). The 
reserve (if any) on the policy will be allowed as a credit on the 
current monthly premium except where premium waiver is effective. 
Conversion to an endowment plan may not be made while the insured is 
totally disabled. The conversion will be made without medical 
examination, except when deemed necessary to determine whether an 
applicant for conversion to an endowment plan is totally disabled, and 
upon complete surrender of the term insurance while in force by payment 
or waiver of premium.

(Authority: 38 U.S.C. 1904)

    42. The newly redesignated Sec. 8.21 is revised to read as follows:


Sec. 8.21  Total disability-speech.

    The organic loss of speech shall be deemed to be total disability 
under National Service Life Insurance. Organic loss of speech will mean 
the loss of the ability to express oneself, both by voice and whisper, 
through the normal organs of speech if such loss is caused by organic 
changes in such organs. Where such loss exists, the fact that some 
speech can be produced through the use of an artificial appliance or 
other organs of the body will be disregarded.
    43. The newly redesignated Sec. 8.22 is revised to read as follows:


Sec. 8.22  Beneficiary and optional settlement changes.

    The insured shall have the right at any time, and from time to 
time, and without the knowledge or consent of the beneficiary to cancel 
or change a beneficiary and/or optional settlement designation. A 
change of beneficiary or optional settlement to be effective must be 
made by notice in writing signed by the insured and forwarded to the 
Department of Veterans Affairs by the insured or designated agent, and 
must contain sufficient information to identify the insured. A 
beneficiary designation and an optional settlement selection, but not a 
change of beneficiary, may be made by last will and testament duly 
probated. Upon receipt by the Department of Veterans Affairs, a valid 
designation or change of beneficiary or option shall be deemed to be 
effective as of the date of execution. Any payment made before proper 
notice of designation or change of beneficiary has been received in the 
Department of Veterans Affairs shall be deemed to have been properly 
made and to satisfy fully the obligations of the United States under 
such insurance policy to the extent of such payments.


Sec. 8.23  [Amended]

    44. Newly redesignated Sec. 8.23 is amended by removing ``of 
Secs. 3.1(j), 3.204, 3.205 (a) and (b), 3.209, 3.211, and 3.212'' and 
adding, in its place, ``found in Part 3''.


Sec. 8.25  [Amended]

    45. In newly redesignated Sec. 8.25, paragraph (b) is removed; and 
paragraph (a) is amended by removing ``(a) Except as provided in 
paragraph (b) of this section where'' and adding, in its place, 
``Where''.


Sec. 8.27  [Amended]

    46. Newly redesignated Sec. 8.27 is amended by removing 
``Sec. 8.64(b)'' and adding, in its place, ``Sec. 8.25''.
    47. The newly redesignated Sec. 8.29 is revised to read as follows:


Sec. 8.29  Options.

    Insurance will be paid in a lump sum only when selected by the 
insured during his or her lifetime or by his or her last will and 
testament.


Sec. 8.30  [Amended]

    48. In newly redesignated Sec. 8.30, in the heading, ``and limited 
convertible 5-year level premium plan'' is removed; in paragraph (a), 
in the first sentence, ``except as provided in paragraph (c) of this 
section,'' is removed; and ``or limited convertible 5-year level 
premium term plan'' is removed; in paragraph (b)(3)(ii), ``(Sec. 8.1)'' 
is removed and ``(8.0)'' is added in its place; paragraph (c) is 
removed
    49. Newly redesignated Sec. 8.32 is revised to read as follows:


Sec. 8.32  Application for reinstatement of total disability income 
provision.

    A total disability income provision which is lapsed may be 
reinstated if the insured meets the same requirements as those for 
reinstatement of the policy to which the total disability income 
provision is attached; except that in no event shall the requirement of 
a health statement or other medical evidence be waived in connection 
with the reinstatement of the total disability income provision.
    50. Newly redesignated Sec. 8.33 is revised to read as follows:


Sec. 8.33  Policy provisions.

    Contracts of insurance authorized to be made in accordance with the 
terms and conditions set forth in the forms and policy plans are 
subject in all respects to the applicable provisions of title 38 
U.S.C., amendments and supplements thereto, and applicable Department 
of Veterans Affairs regulations promulgated pursuant thereto, all of 
which together with the insured's application, required evidence of 
health, including physical examination, if required, and tender of 
premium shall constitute the contract.

[FR Doc. 96-14365 Filed 6-7-96; 8:45 am]
BILLING CODE 8320-01-P