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ary in the assignment. Such joinder shall not be required in any case in which the insurance proceeds are payable to the assignor under option 1. No such assignment of a National Service life insurance policy shall be binding upon the United States unless in writing and until filed in the Veterans Administration. The United States assumes no responsibility for the validity of any assignment. Insurance granted under the provisions of section 722(b) of Title 38, United States Code, cannot be assigned.

(e) On insurance maturing on or after July 27, 1962, if an assignment is made by the principal beneficiary before any payment of the insurance has been made, payment to the assignee will be made in accordance with the option selected by the insured. If any payment of insurance to a beneficiary has been made, only the guaranteed unpaid installments certain may be assigned. However, if the principal beneficiary after payment under option 3 or 4 has commenced, assigns the remaining unpaid guaranteed installments certain and survives the period certain, such beneficiary shall be entitled to the resumption of the monthly installments payable for life in accordance with the monthly income option previously selected by such beneficiary.

[13 FR 7115, Nov. 27, 1948, as amended at 27 FR 10046, Oct. 12, 1962; 42 FR 6807, Feb. 4, 1977]

TAXATION AND EXEMPTION

§ 8.60 Taxation and exemption.

(a) Payments of National Service life insurance as such are exempt from taxation, but such exemption does not extend to any property purchased in part or wholly out of such payments. Payments of insurance to a beneficiary under a National Service life insurance policy are exempt from claims of creditors, and are not liable to attachment, levy, or seizure by or under any legal or equitable process whatever, either before or after receipt by the beneficiary.

(b) The exemption shall apply against the United States or any agency thereof: Provided, That except as to dividends being held to the credit

of the insured for the payment of premium under the provisions of Public Law 36, 82d Congress, or section 707 of Title 38, United States Code, the United States shall be entitled to collect by setoff or otherwise out of benefits, payable to any beneficiary under a National Service life insurance policy, the amount of any indebtedness due the United States by such beneficiary because of overpayments or illegal payments made to such beneficiary under laws administered by the Veterans Administration: Provided further, That in the settlement of any claim under a National Service life insurance policy, the United States shall be entitled to deduct the amount of unpaid premiums, or loans, or interest on such premiums or loans; or indebtedness arising from overpayments of dividends, refunds, loans, or other insurance benefits; or any other indebtedness existing under the particular insurance contract.

(c) Effective January 1, 1958, payments of insurance to a beneficiary under a National Service life insurance policy shall be subject to levy for taxes due the United States by such beneficiary (sec. 3101(c) of Title 38, United States Code).

(72 Stat. 1229; 38 U.S.C. 3101)

[24 FR 7330, Sept. 11, 1959]

INSURANCE FORFEITURE

§ 8.61 Insurance forfeiture.

Any person guilty of mutiny, treason, spying, or desertion, or who, because of conscientious objections, refuses to perform service in the Armed Forces of the United States or refuses to wear the uniform of such forces, shall forfeit all rights to insurance. No insurance shall be payable for death inflicted as a lawful punishment for crime or for military or naval offense, except when inflicted by an enemy of the United States; but the cash surrender value, if any, of such insurance on the date of death of the insured shall be paid to the designated beneficiary, if living, or otherwise to the beneficiary or beneficiaries within the permitted class in the order specified in section 716(b) of Title 38, United States Code.

[24 FR 7329, Sept. 11, 1959)

INCONTESTABILITY

§ 8.62 Incontestability.

Subject to the provisions of § 8.61, all National Service Life Insurance policies heretofore or hereafter issued, reinstated, or converted shall be incontestable from the date of issue, reinstatement, or conversion, except for fraud, nonpayment of premium, or on the ground that the applicant was not a member of the military or naval forces of the United States: Provided, That discharge or release of an insured from military or naval service for the reason of fraudulent enlistment shall not invalidate National Service Life Insurance issued on the basis of such service unless the Administrator determines that the insured was mentally or legally incapable of entering into a contract of enlistment. In such case the National Service Life Insurance so issued will be canceled as of the effective date of such insurance. [17 FR 3162, Apr. 10, 1952]

§ 8.63 Refund of premiums in fraud cases. Where National Service Life Insurance is canceled or voided for fraud and notice thereof is mailed after March 16, 1954, any premiums paid on such insurance for any period subsequent to 2 years after the date insurance was issued, reinstated, or converted because of such fraud shall be refunded without interest. On antedated policies the date of issue or conversion for the purpose of this section is the due date of the first full premium. The amount of any dividends, loan, or other insurance payment made as a result of the fraudulent issue, reinstatement, or conversion shall be deducted from such refund. The refund shall be made to the insured, if living, otherwise to the designated beneficiary; or, if no designated beneficiary survives, to the insured's estate. [24 FR 7330, Sept. 11, 1959]

EXAMINATIONS

§ 8.64 Examination of applicants for insurance or reinstatement.

(a) Except as provided in paragraph (b) of this section where physical or

mental examination is required of an applicant for National Service Life Insurance or of an applicant for reinstatement of National Service Life Insurance, such examination may be made by a medical officer of the United States Army, Navy, Air Force, or Public Health Service, or may be made free of charge to him by a fulltime or part-time salaried physician at a regional office or hospital of the Veterans Administration. Such examination may also be made, at the applicant's own expense, by a physician duly licensed for the practice of medicine by a State, possession of the United States, Commonwealth of Puerto Rico, or the District of Columbia, or by a duly licensed osteopathic physician who is a graduate of a recognized and approved college of osteopathy and who is listed in the current directory of the American Osteopathic Association. Such examination may be made by a physician or osteopath who is not related to the applicant by blood or marriage, associated with him in business, or pecuniarily interested in the insurance or reinstatement of the policy. Examinations made in a foreign country by a physician duly licensed for the practice of medicine and otherwise acceptable may be accepted if submitted through the American consul. The Administrator of Veterans Affairs may require such further medical examination or additional medical evidence as may be deemed necessary and proper to establish the physical and mental condition of the applicant at the time of the application.

(b) Where physical or mental examination is required of an applicant for issuance of National Service Life Insurance under 38 U.S.C. 725, or for the issuance of any total disability income provision to be attached thereto, such examination (including any supplemental examination or tests) shall be made at the applicant's own expense, by a physician duly licensed for the practice of medicine by a State, possession of the United States, Commonwealth of Puerto Rico, or the District of Columbia, or by a duly licensed osteopathic physician who is a graduate of a recognized and approved college of osteopathy and who is listed in the

current directory of the American Osteopathic Association. Such examination must be made by a physician or osteopath who is not related to the applicant by blood or marriage, associated with him in business, or pecuniarily interested in the issuance of the policy or the total disability income provision. Examinations made in a foreign country by a physician duly licensed for the practice of medicine and otherwise acceptable may be accepted if submitted through the American consul. The Administrator of Veterans Affairs may require such further medical examination or additional medical evidence as may be deemed necessary and proper to establish the physical and mental condition of the applicant at the time of the application.

[30 FR 3650, Mar. 19, 1965]

§ 8.65 Examination in connection with total disability benefits.

Physical examination in connection with claim for total disability benefits may be made by a medical officer of the United States Army, Navy, Air Force, or Public Health Service, or may be made at Government expense by a full-time or part-time salaried physician at a regional office or hospital of the Veterans Administration. If an insured is unable to travel, because of physical or mental condition, the Manager of a regional office or Director of a hospital may, on his own initiative or at the request of the Insurance activity concerned, authorize at Government expense examination at the residence of the insured. The Administrator of Veterans Affairs may require such further medical examination or such additional medical evidence as may be deemed necessary and proper to establish the physical and mental condition of the insured.

[28 FR 1543, Feb. 19, 1963]

§ 8.66 Expenses incident to examinations for insurance purposes.

Except as provided in § 8.64(b), necessary transportation expenses incident to physical or mental examinations for insurance purposes at regional offices or hospitals shall be furnished when the insured is ordered to

report for examination at the specific request of the insurance activity concerned, or the Manager of a regional office or Director of a hospital. Such expenses will be borne by the United States and will be paid from the applicable appropriation of the Department of Medicine and Surgery. Transportation, meal and lodging requests in connection with reporting to and returning from the place of examination may be furnished the applicant, or the applicant may travel at his own expense and claim reimbursement for such travel on a mileage basis, provided prior authority has been given for the travel. Travel incident to such an examination by salaried employees of the Veterans Administration will be in accordance with the Standardized Government Travel Regulations. If such an examination is made by a medical examiner on a fee basis, payment will be made at a fee not in excess of the schedule of fees in effect and approved by the Veterans Administration for medical and professional services in the State in which the examination is made. Where no approved State fee schedule is in effect or where a fee for the type of examination authorized is not listed in the approved State fee schedule in effect, such examinations will be furnished at a fee not in excess of that listed in the "Guide for Charges for Medical and Ancillary Services" of the Department of Medicine and Surgery in effect at the time the examination is authorized. If the particular examination is not covered by a schedule in effect and/or the said guide, a fee not in excess of what is reasonable and customarily charged in the community concerned may be allowed.

[30 FR 3650, Mar. 19, 1965]

EXTRA HAZARDS

§ 8.69 Definition of "disease or injury traceable to the extra hazards of the military or naval service."

A disease or injury may be found to be traceable to the extra hazards of the military or naval service when it appears from the evidence that the said disease or injury was in fact caused by, or is traceable to, the performance of duty in the active mili

tary, naval, or air service (as that term is defined in section 101 of Title 38, United States Code).

[24 FR 7330, Sept. 11, 1959]

CLAIMS ALLEGING INSURANCE CONTRACT WHERE THERE IS NO APPLICATION FOR INSURANCE ON FILE

§ 8.70 Claims alleging insurance contract where there is no application for insurance on file.

In those cases where claim is made alleging that a person made valid application for National Service life insurance on file, the claimant will be reject to reinstatement or a waiver of payment of premiums is in order, or that the insurance matured by reason of the death of the insured at a time when the insurance was in force, and that there was a valid designation of beneficiary, and where there is no application for insurance on file, the claimant will be required to submit all available evidence concerning the alleged application for insurance in such manner and on such forms as may be deemed necessary. The evidence submitted by the claimant and the evidence as disclosed by records in possession of the Government relative to the question as to whether the person made a valid application for insurance will be considered and, if found sufficient to establish as a fact that the said person did apply for insurance and if the other allegations of said claim are sustained, a record of insurance will be established in accordance with such finding. However, if it be determined that the evidence is not sufficient to establish as a fact that the said person applied for insurance as alleged, or determined that any insurance applied for as alleged would not be valid or not subject to reinstatement, or determined that the said person did not die at a time when the insurance would have been in force if insurance had been applied for, or, in case of death, if it be determined that there was no valid designation of beneficiary, the claimant will be so informed. The claimant will be notified of his right to initiate an appeal by filing a notice of disagreement and the time limitation for filing such notice. Further, the claimant will be informed

that unless he desires to initiate and perfect an appeal to the Board of Veterans Appeals, a disagreement exists as to the matters in controversy as contemplated by the provisions of 38 U.S.C. 784 as far as the Veterans Administration is concerned. The Director, Insurance Service, or Deputy Director for Underwriting, Accounts and Insurance Claims will make all original determinations as to whether a person made valid application for insurance as alleged. The determination as to the validity of beneficiary designations, in death cases, will be made by the claims activity in the office having jurisdiction over the insurance death claim.

[29 FR 1462, Jan. 29, 1964]

PARENTS, BROTHERS, AND SISTERS OF ILLEGITIMATES

§ 8.71 Parents, brothers, and sisters of illegitimates.

If the insured was born an illegitimate and not legitimatized before his death, the terms "parent," "father," "mother," "brother," and "sister" employed in the National Service Life Insurance Act, as amended, and the National Service life insurance provisions of Title 38, United States Code, shall include as to relationship by consanguinity:

(a) The mother.

(b) The father, only if he shall establish that he can meet "in loco parentis" requirements of the act.

(c)(1) Brothers or sisters, if children of the same mother.

(2) Brothers or sisters, if children of the same father and if it is shown to the satisfaction of the Administrator that the family relationship usual between brothers and sisters existed between them and the serviceman at the time he entered the service.

(Sec. 608, 54 Stat. 1012, as amended; 38 U.S.C.808)

[13 FR 7116, Nov. 27, 1948, as amended at 19 FR 6971, Oct. 29, 1954; 24 FR 7330, Sept. 11, 1959]

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(b) If the beneficiary is 30 or more years of age at the time of death of the insured, in equal monthly installments for life, with 120 months certain (option 3, § 8.79).

(c) In lieu of the mode of payment shown in paragraphs (a) and (b) of this section, the insured or the first beneficiary may elect settlement as a refund life income (option 4, § 8.79).

[13 FR 7117, Nov. 27, 1948, as amended at 24 FR 7331, Sept. 11, 1959]

§ 8.76 Selection and revocation of option. The insured under a National Service Life Insurance policy may, during his lifetime, make his selection of the optional settlement set forth in §§ 8.79, 8.80, 8.80c or 8.81, whichever is applicable. Such selection shall not be valid unless and until notice thereof is received in the Veterans Administration. The insured may select a different optional settlement for the contingent beneficiary from that selected for the principal beneficiary. However, if the principal beneficiary entitled to settlement in one sum survives the insured or if the principal beneficiary not entitled to settlement in one sum survives the insured and receives any payment, the option selected for the contingent beneficiary shall have no force or effect, except as provided below in this section. Where the insured has selected a lump-sum settlement for the contingent beneficiary, and the principal beneficiary, not entitled to settlement in one sum, dies after payment has commenced but before all installments certain have been paid, the present value of the remaining unpaid installments certain shall be paid to the contingent beneficiary in one sum, unless

such contingent beneficiary elects to continue to receive the remaining unpaid installments certain as they become due and payable. The insured may, during his lifetime, revoke his selection of the optional settlement, but the revocation shall not be valid unless and until notice thereof is received in the Veterans Administration. [30 FR 3650, Mar. 19, 1965]

§ 8.77 Election of optional settlement by beneficiary.

(a) Insurance maturing on or after August 1, 1946, except insurance granted under section 722(b) of Title 38, United States Code. (1) If the insured under a National Service life insurance policy has not selected one of the optional settlements and dies on or after August 1, 1946, the insurance shall be payable in 36 equal monthly installments, but the designated beneficiary may elect to receive settlement under option 2, 3, or 4. Such an election shall not be valid unless and until it is received in the Veterans Administration. If the insured has selected an optional settlement, then at the death of the insured the designated beneficiary may elect to receive payment in installments spread over a greater period of time than that selected by the insured; thus:

(i) If the insured has selected option 1, the beneficiary may elect to receive payment under option 2, 3, or 4;

(ii) If the insured has selected option 2 with monthly installments not in excess of 120, the beneficiary may elect to receive payment in a greater number of installments under option 2 or may elect to receive payment under option 3 or 4;

(iii) If the insured has selected option 2 with monthly installments in excess of 120, the beneficiary may elect to receive payment in a greater number of installments under option 2 or may elect to receive payment under option 4: Provided, The number of installments certain payable under option 4, are not less than the number selected by the insured;

(iv) If the insured has selected option 3, the beneficiary may elect to receive payment under option 4;

(v) If the insured has selected option 4 and named no contingent benefici

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