Part I Chapter 18 - Conversion

Part I Chapter 18 - Conversion

Publication Date: June 21, 2023

18.01 GENERAL

2. Five-Year Level Premium Term and 5-Year Limited Convertible Term insurance, in force under premium paying conditions, may be converted, wholly or in part, in multiples of $500 but not less than $1,000, to the various permanent plans of insurance available under the same insurance program.

3. RS insurance (38 U.S.C. 1923(a)) which has been exchanged for W 5-Year Limited Convertible Term insurance (38 U.S.C. 1923(b)) cannot be renewed after the policyholder's 50th birthday; therefore, if the insured wants to retain the insurance he or she must convert it to one or more permanent plans before the termination date of the final term period. One year before the final termination date of the W term policy, the insured is sent a notification alerting him or her of the necessity of converting the policy if he or she wants to continue the protection. Another notification is sent 90 days before termination of the term policy. If the insured does not take action to convert the term (policy,] it will expire at the end of the term period. However, when an insured with a W term policy does not convert the insurance on or before the [expiration] date of the final term period and it is determined the 90-day notification was not sent, or the insured continues to pay the term premiums which are retained by the VA, the insured will be allowed 31 days from the date of notice to meet conversion requirements. The effective date of the permanent plan will be the day following the expiration date of the final term period. Premiums paid and accepted after the expiration date of the final term period are earned premiums and are not subject to refund or credit.

4. If the premiums for the W term policy are being paid by disability waiver on the final termination date, the insurance will not be terminated. If the notifications were sent to the insured and no reply is received, the W term policy will be converted to Ordinary Life. However, if it is determined that the 90 day notification was not sent to the insured and the insured has not applied for conversion, he or she will be notified by letter of the necessity of conversion and allowed 31 days from the date of the letter to meet the conversion requirements. If no reply is received from the insured, the conversion to Ordinary Life will be processed.

5. When two or more 5-LPT policies with paid-up additions are consolidated and converted, the paid-up additions will also be consolidated and retained as part of the new permanent plan.

6. When a policy with paid-up additions is split into two or more policies, the paid-up additions will be split proportionately. If the amount of paid -up additions to be split is an odd amount, the parent policy will be assigned the extra dollar.

7. When a 5-LPT policy with paid-up additions is converted to an endowment plan, dividends earned after the conversion will be applied to purchase paid-up endowment additions. This will result in two paid-up additions segments; the paid-up life additions purchased before the conversion and the paid-up endowment additions purchased after the conversion.

8. G Insurance (38 U.S.C. 1922B) is not subjected to conversions as these policies may only be issued as whole life policies.

References:

• 38 U.S.C. 1923: Veterans’ Special Life Insurance
• 38 U.S.C. 1922B: Service-Disabled Veterans’ Insurance

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18.02 REQUIREMENTS

1. Current Conversion

   1. Application, formal or informal, furnishing the required information.

   2. If disability waiver is not in force, payment sufficient for one monthly premium on the new policy.

2. Antedated Conversion

   1. Application, formal or informal, furnishing the required information.

   2. Payment sufficient to pay the reserve on the new policy from the effective date of the new policy to 1 month prior to the effective date of change.

   3. If disability waiver is not in force, payment sufficient for one monthly premium on the new policy.

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18.03 APPLICATIONS

1. Application for conversion, whenever practical, should be submitted on one of the following forms:

   1. VA Form 29-358, Application for Conversion. (USGLI and NSLI)

   2. VA Form 29-358a, Application for Exchange to Special Endowment at Age 96 Plan. (USGLI only for insurance age 65 and older)

2. An informal application, over the signature of the insured or his or her (legal] guardian, furnishing the required information, may be considered as a qualifying application.

3. As term policies approach the renewal date, an appropriate application for conversion is sent to the insured.

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18.04 PERMANENT PLANS AVAILABLE BY CONVERSION

1. National Service Life Insurance

   1. Modified Life-Age 65

   2. Modified Life-Age 70

   3. Ordinary Life

   4. 20-Payment Life

   5. 30-Payment Life

   6. 20-Year Endowment

   7. Endowment at Age 60

   8. Endowment at Age 65

2. United States Government Life Insurance

   1. Ordinary Life

   2. 20-Payment Life

   3. 30-Payment Life

   4. 20-Year Endowment

   5. 30-Year Endowment

   6. Endowment at Age 62

   7. Special Endowment at Age 96

3. Plans Not Available at Certain Ages

   1. Under the USGLI program, conversion to the Special Endowment at Age 96 plan is not permitted until the insured has reached his or her 65th birthday.

   2. Under the NSLI (V-H-RH-W) program, conversion to the Modified Life plans must be made before [the following ages:

      1. On the Modified Life-Age 65 plan, before insurance age 61. (VA Regulation 3512.2) However, if the application is submitted during the latter half of the applicant's 60th year of age (issue age 61) and there is evidence that the application was submitted late because the applicant was confused by the instructions, the conversion will be approved and the policy antedated to the latest possible effective date to conform to the regulation.

      2. On the Modified Life-Age 70 plan, before insurance age 70; that is, applications are acceptable up to the end of 6 months following the applicant's 69th birthday.

   3. Under the USGLI and NSLI (V and H) programs, if the issue age of the insured on the effective date of the permanent plan policy is 66 or older, the insured may not convert to the 30-Payment Life or the 30-Year Endowment plan of insurance. If his or her age is 76 or older, he or she may not convert to the 20-Payment Life or the 20-Year Endowment plan of insurance.

   4. Under the NSLI (RH) program, if the issue age of the insured on the effective date of the permanent plan policy is 70 or older, the insured may not convert to a 30-Payment Life plan of insurance. If his or her age is 80 or older, he or she may not convert to the 20-Payment Life or the 20-Year Endowment plan of insurance.

   5. Under the NSLI (RS-W) program, if the issue age of the insured on the effective date of the permanent plan policy is 71 or older, the insured may not convert to a 30-Payment Life policy. If his or her age is 81 or older, he or she may not convert to the 20-Payment Life or the 20-Year Endowment plan of insurance.

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18.05 EFFECTIVE DATES

1. Current Effective Date. The premium due date of the premium month in which the application is submitted, or the next following premium due date.

2. Future Effective Date. The date a future premium becomes due after the next following due date. This date must be not later than the 4th month after the postmark date of the application.

3. Intermediate Effective Date. The date any past premium became due within any term period, providing it would not result in the contract maturing as an endowment within 2 months of the effective date of the change. Under the NSLI program, it is not permissible to antedate a conversion to a younger age to qualify for a Modified Life plan of insurance, nor is it permissible for a USGLI policyholder to antedate an exchange to an age younger than 65 when exchanging to the Special Endowment at Age 96 plan of insurance.

4. Original Effective Date. The effective date of the original term contract. The permanent plan policy may not be antedated prior to the effective date of the original term contract.

5. When a conversion is processed with an effective date different from the one applied for, the insured will be advised of the reason. He or she will also be informed that if VA action is not agreeable, further requirements will be sent upon request.

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18.06 RESERVE

1. On an antedated conversion, the reserve or the difference in reserve may be paid by a direct payment or by a direct payment and a loan on the new contract, if the new contract is antedated 12 months or more. The amount of reserve or the difference in reserve must be paid in full. No shortages will be allowed.

2. If the term insurance premiums are being waived or have been waived during the current term period under 38 U.S.C. 1924, no reserve credit will be allowed on the term contract.

3. Usually, the reserve on the term contract is used as a credit on the initial premium for the new contract.  However, if no premiums are due because of disability waiver (38 U.S.C. 1912 or 1948) or it is not administratively possible to apply the credit when premiums are being paid by deduction from military retirement pay, VA benefit payments or payroll deduction accounts, the reserve credit (if $1 or more) will be paid to the insured. Any reserve that is less than $1 will be held as a premium credit.

4. The fractional reserve values for the various funds may be determined from the applicable tables in the following manuals:

   1. K-M29-4, part II

   2. V or H-M29-2, part III A

   3. RS or RH-M29-6, parts I and II

   4. W-M29-8, part III

References:

• • 38 U.S.C. 1924: In-Service Waiver of Premiums
  • 38 U.S.C. 1912: Total Disability Waiver
  • 38 U.S.C. 1948: Total Disability Provision

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18.07 CONVERSION WHILE INSURED IS TOTALLY DISABLED

1. National Service Life Insurance

   1. Upon application by the insured, a term policy on which premiums are being waived under 38 U.S.C. 1912 may be converted to any of the permanent plans except an endowment plan.

   2. Upon application by the insured, a term policy on which premiums are being waived under 38 U.S.C. 1912 and payment is being made under total disability income rider may be converted to any of the permanent plans except an endowment plan.

   3. Premiums on the converted policy will continue to be waived and the disability income paid as long as the insured remains totally disabled.

   4. Conversion as of a prior effective date may be made by payment of the difference in reserve. The waiver of the new premium on the converted plan will be effective as of the next premium due.

2. United States Government Life Insurance

   1. Upon application by the insured, a term policy on which premiums are being waived under 38 U.S.C. 1948 (if the insured is not totally and permanently disabled) may be converted to any of the permanent plans including endowment plans.

   2. Premiums on the converted policy will continue to be waived and the disability income paid so long as the insured remains totally disabled.

   3. Conversion as of a prior effective date may be made by payment of the difference in reserve. The waiver of the new premium on the converted plan will be effective as of the next premium due.

References:

• • 38 U.S.C. 1912: Total Disability Waiver
  • 38 U.S.C. 1948: Total Disability Provision

       User Guides

• • Waiver Application Process Guide

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18.08 EFFECTIVE DATE OF CHANGE/EFFECTIVE DATE

The effective date of change for conversion will always be the premium due date and will be determined as follows:

1. Use the premium due date of the premium (not calendar) month in which the request for conversion is submitted, governed by the postmark date if mailed, by the earliest VA receiving stamp date if otherwise delivered, or by the date of execution if received through military channels, if:

   1. Endowment at Age 62

   2. Special Endowment at Age 96

2. Plans Not Available at Certain Ages

1. Under the USGLI program, conversion to the Special Endowment at Age 96 plan is not permitted until the insured has reached his 65th birthday.

2. Under the NSLI (V-H-RH-W) program, conversion to the Modified Life plan of insurance must be made before insurance age 61. (VA Regulation 3512.2) However, if the application for conversion is submitted during the latter half of the applicant's 60th year of age (insurance age 61) and there is evidence the application was submitted late because the applicant was confused by the instructions, the conversion will be approved, and the policy antedated to the latest possible effective date to conform with the regulation.

3. Under the USGLI and NSLI (V and H) programs, if the issue age of the insured on the effective date of

• • The premium for that month has not been paid.

  • The insured requests that the effective date of the permanent plan be established as of the premium due date of the month in which the application is submitted, even though the premium for that month has been paid. In this event, allow credit for the unearned premium on the amount of insurance converted.

1. Use the premium due date of the next premium (not calendar) month, unless otherwise requested by the insured, if:

   1. The premium for the month in which the request is submitted has been paid. However, if the applicant requests an effective date which is not in order and it is obvious he or she wants a current conversion, the underwriter may establish an effective date that will agree with the status of the term contracting being converted. For example:

Application mailed: 9-14-78
Requested effective date: 10-1-78
Account paid through: 8-31-78

The conversion may be granted with an effective date of September 1, 1978.

NOTE: The provisions of VA Regulation 3018 for USGLI and VA Regulation 3407.2 for NSLI provide for the acceptance of delayed underwriting applications within 61 days of the due date when accompanied by a premium payment.

1. The method of payment is by deduction from military retirement pay, deduction from any benefits due and payable by the VA, or by payroll deductions.

2. Premiums on the term contract are being waived under 38 U.S.C. 1912, 1924 or 1948.

1. Use the premium due date indicated by the insured, if the insured requests that the permanent plan become effective as of a premium due date which is later than the next premium due date, provided the effective date requested is not later than the fourth premium due after the postmark date of the application, and all requirements are met.

2. When a term contract that is effective on the 29th, 30th, or 31st day of the month is converted and flare is no corresponding date in the month the change is to be effective and/or in the month the new policy is to be effective, the effective date of change and/or the effective date will be the last day of the month.

References:

• • 38 U.S.C. 1912: Total Disability Waiver
  • 38 U.S.C. 1924: In-Service Waiver of Premiums
  • 38 U.S.C. 1948: Total Disability Waiver

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18.09 CONVERSION-INSURED RATED MENTALLY INCOMPETENT

1. An insured who has been rated mentally incompetent and has no [legal] guardian may apply for conversion of term insurance if he or she possesses sufficient mental capacity to understand the nature of the act. The question as to an incompetent's ability to make such a contract change must be medically determined before processing the application.

2. When a legal guardian has been appointed, application may be made by the legal guardian with the approval of the court of jurisdiction, if required by State laws. Court approval is not required on applications for conversion if premiums are waived because of a statutory disability.

3. When a mentally incompetent insured with a legal guardian signs an application for conversion during a period when he or she is lucid, the legal guardian must also sign the application. In this situation, it is not necessary to prove the mental capacity of the insured.

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18.10 CONVERSION - 38 U.S.C. 1924 (IN SERVICE WAIVER)

Term insurance in force under in-service waiver may be converted, wholly or in part, to any of the permanent plans of insurance available under the same insurance program. The waiver will not be continued on the converted permanent plan. It will be continued on that portion of the term insurance, if $1,000 or more, not converted. The insured Will be advised that the VA is assuming he or she wishes the in-service waiver terminated on the permanent plan. If the insured informs the VA he or she wishes the waiver to continue on the permanent plan, the waiver will be reactivated as of the effective date of the insurance.

References:

• • 38 U.S.C. 1924: In-Service Waiver of Premiums

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18.11 MEDICAL EXAMINATION

Conversion may be made without a medical examination, except when it is necessary to determine whether the applicant, requesting conversion of an NSLI term policy to an endowment plan, is totally disabled.

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18.12 INADVERTENT CONVERSION TO NSLI ENDOWMENT PLAN - INSURED TOTALLY DISABLED

If it is disclosed that term insurance was converted to an endowment plan through administrative error, or otherwise, not involving fraud on the part of the insured, while totally disabled, he or she will be permitted to retain the endowment plan, but will not be eligible at any time during the current period of total disability for waiver of premiums due to being totally disabled when application for conversion to the endowment plan was submitted. The insured will be afforded the privilege of changing the plan of the endowment contract to [any of the life permanent plans,] or reverting to the term insurance, without a physical examination report. This will make it possible to secure a disability premium waiver for the current period of disability. If the policyholder does not respond to the offer, he or she retains the endowment policy.

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18.13 CONVERSION TO MORE THAN ONE CONTRACT

A term contract in an amount of $2,000 or more may be converted to more than one permanent plan contract.

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18.14 PARTIAL CONVERSION

A portion of a term contract may be converted and the remainder allowed to lapse, or all or part of the remaining term insurance may be retained. The amount converted and the amount continued as term insurance must be in multiples of $500 and no policy will be issued for less than $I,000. However, a USGLI term policy that has been rerated after a period of TPD (total permanent disability) may be converted regardless of the amount of term insurance that is available for conversion.

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18.15 DEATH OF INSURED BEFORE CONVERSION

When an application for conversion is acceptable but the insured dies before the effective date of change, the application will be disapproved.

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18.16 REPLACEMENT UNDER 38 U.S.C. 1981 AND CONVERSION

Term contracts may be replaced under 38 U.S.C. 1981 and simultaneously converted to a permanent plan.

References:

• • 38 U.S.C. 1981: Replacement of Surrendered and Expired Insurance

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18.17 REINSTATEMENT AND CONVERSION

If the term insurance is in a state of lapse, reinstatement requirements must be met before the conversion may be effected. However, it is permissible to reinstate the term insurance and convert to a permanent plan at the same time.

18.18 CONSOLIDATION AND CONVERSION

1. Two or more term contracts bearing different effective dates (effective day and/or month and/or year) may be consolidated and converted as of the premium due date (effective day) of the contract bearing the latest effective date (day, month and year). Such consolidated contract may be antedated in the same manner as a single contract, except the effective date may not be earlier than the effective date of the term contract bearing the latest effective date.

2. Term contracts with different premium due dates (effective days) may not be consolidated and converted while disability premium waiver is in effect because a waiver is granted effective as of the monthly anniversary date and is terminated as of the ending date of the insurance premium month. Contracts bearing the same premium due date (effective day) with different effective dates (month and/or year) in force under disability premium waiver, may be consolidated and converted under one permanent plan contract within the limitations outlined in subparagraph a above.

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18.19 CONVERSION WITH TDIP RIDER

1. A term policy with TDIP attached may be converted to any of the available permanent plans.

2. When an application for conversion of NSLI is received and the term policy has a $5 or $10 age 60 rider and the applicant indicates he or she wants to continue the rider, he or she will be advised of the availability of the $10 age 65 rider.

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18.20 REDUCTION AND CONVERSION

1. When conversion of a reduced amount of term insurance under NSLI or USGLI is to be effected as of the premium due date of the premium month in which requirements are met, and the applicant does not indicate what disposition is to be made of the remaining term insurance, apply any money remitted with the application that is not required for the conversion or any dividend credit available under 38 U.S.C. 1907 or 1946 to continue such term insurance in force.

2. When conversion of a reduced amount of term insurance under NSLI is to be effected as of the premium due date of the premium month in which requirements are met, and the premium for that month has not been paid for the amount of term insurance being discontinued, apply any dividend credit available under 38 U.S.C. 1907 to continue such insurance in force for that month.

References:

• • 38 U.S.C. 1907: Payment or Use of Dividends
  • 38 U.S.C. 1946: Dividends to Pay Premiums

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18.21 CONVERSION DISAPPROVED-TERM INSURANCE CONTINUED

1. When an application for conversion is disapproved, the insured will be advised of the reason for disapproval of the application and status of the term policy. A new application for conversion will be furnished in the event he or she wishes to reapply.

2. When the disapproved application for conversion is for the full amount of an insurance contract, or part of an insurance contract on which the insured indicated a desire to continue the remaining amount of term insurance, the money tendered as a premium for the permanent plan will be used to pay premiums on the term insurance for as many months as possible.

3. When an application for reduction and conversion is disapproved, the money tendered for the permanent plan will be used to keep the reduced amount of term insurance in force for as many months as possible.

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18.22 CHANGE OR WITHDRAWAL OF CONVERSION APPLICATION

1. When a properly signed request for withdrawal of an application for conversion bears a postmark date or is otherwise delivered to the VA before the effective date of change, or if there is evidence that such request was placed in military channels before the effective date of change, the request will be granted. So, when a request for a permissible plan or amount, other than that stated in the application, is submitted within 60 calendar days from the date of conversion, it will be granted. After 60 calendar days from the effective date of conversion, any change to the contract will be processed as a policy change. The insured will be informed of the necessary additional requirements to change the insurance to the amount and plan desired. When an application for conversion has been processed and the insured requests the application be canceled, the request will be granted if it is submitted within 60 calendar days from the date of conversion. Both current and antedated conversions may be canceled. The 5-LPT policy will be restored.

2. When additional evidence such as medical evidence, health certification, or disability statement is necessary, the request may be granted for withdrawal of an application or for change in the amount and/or plan requested on the application, provided such request is otherwise acceptable.

3. When applications for reinstatement and conversion have been submitted and an acceptable request for withdrawal of the application for conversion only is received, the application for reinstatement will be processed. The applicant will be advised that the application for conversion was disregarded per his or her request.

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18.23 POLICY INDEBTEDNESS AT DATE OF CONVERSION

1. When a term contract with an indebtedness is converted, fully or in a reduced amount with no term insurance retained, the total indebtedness will be carried on the new permanent plan(s).

2. When a term contract with an indebtedness is partially converted to one or more permanent plans and the remaining term insurance is retained, the indebtedness will be distributed to each of the policies according to the amount of insurance on a pro rata basis.

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18.24 DISAPPROVED APPLICATION WITH BENEFICIARY DESIGNATION

When a beneficiary designation is part of an application for conversion and the application is disapproved, the designation will not be accepted.  

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