Principal National Life Insurance Co Variable Life Separate Account CORRESP Correspondence with SEC

VIA EDGAR 

November 29, 2011 

Rebecca A. Marquigny, Esq. 

Senior Counsel 

Office of Insurance Products 

Securities and Exchange Commission 

100 F Street, NE 

Washington, DC 20549-8629 

Re: Principal National Life Insurance Company Variable Life Separate Account 

Responses to Oral Comments 

Principal Variable Universal Life Income III (“VULI III”) 

(File Nos. 333-175768 & 811-22589) 

Dear Ms. Marquigny: 

This letter responds, on behalf of Principal National Life Insurance Company (the 

“Registrant”), to the comments of the Staff of the Securities and Exchange Commission (the 

“Commission”), which you communicated to me by telephone on November 15, 2011, with 

respect to the first pre-effective amendment to the Registrant’s registration statement on 

Form N-6 (“the Amendment”). Registrant filed the Amendment with the Commission on 

October 19, 2011. In response to the Commission’s comments, Registrant will make the 

changes described below in a second pre-effective amendment (the “Second Amendment”). 

I. RESPONSES TO COMMENTS 

In order to facilitate your review of Registrant’s responses, I have set forth below each of the 

Commission’s comments in numerical order immediately followed by Registrant’s response. 

Page references correspond to pages in a redlined prospectus submitted with this 

correspondence. 

Comment 1.General: Completeness.If any provision varies based on state law, 

specifically disclose this in the description of the feature and identify any elements that may 

vary (e.g., length of free-look period, what may be returned pursuant to free look, limits on 

loan amounts etc.). 

Response: You specifically referenced the Extended Coverage Rider, the Suicide 

provision, and the Reinstatement provision. 

Rebecca A. Marquigny, Esq. 

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November 29, 2011

Extended Coverage Rider (p. 25). In the Amendment, Registrant added a sentence to 

this section that stated: “The rider benefit may be different and additional restrictions 

may apply in some states.” Upon further review, Registrant determined that there 

were no material differences in the rider benefit or rider provisions by state. 

Accordingly, Registrant has removed this sentence. This section now reads as 

follows: 

Extended Coverage Rider 

This rider extends the Policy beyond the Maturity Date as long as the Policy 

is still in force and the Insured is living on the Maturity Date. The Policy will 

then terminate upon the Insured’s death. No Monthly Policy Charges are 

deducted after the Maturity Date. No additional premium payments are 

allowed, Adjustment options are not available and the death benefit option is 

changed to Death Benefit Option 1. All Division and Fixed Account values 

will be transferred to the Money Market Division and no further transfers are 

allowed. However, Your right to take partial surrenders and loans is not 

restricted. This rider is added automatically to all Policies when issued. You 

may choose not to extend the Maturity Date by requesting the rider not be 

attached to Your Policy. There is no charge for this rider. 

Suicide (p. 27). In the Amendment, Registrant added a sentence to this section that 

stated: “The suicide provision, including the length of the suicide period, may be 

different in some states.” Upon further review, it appears to Registrant that it is more 

accurate to provide only that the length of the suicide period may vary in some states. 

Registrant has modified this sentence accordingly. This section now reads as 

follows: 

Suicide 

Death proceeds are not paid if the Insured dies by suicide, while sane or 

insane, within two years of the Policy Date (or two years from the date of 

Face Amount increase with respect to such increase). In the event of the 

suicide of the Insured within two years of the Policy Date, Our only liability 

is a refund of premiums paid, without interest, minus any Loan Indebtedness 

and partial surrenders. In the event of suicide within two years of a Face 

Amount increase, Our only liability with respect to that increase is a refund of 

the cost of insurance for the increase. This amount will be paid to the 

beneficiary(ies). The length of the suicide period may vary in some states. 

Rebecca A. Marquigny, Esq.

Page 3

November 29, 2011

Reinstatement (p. 42). In the Amendment, Registrant added a sentence to this 

section that stated: “The conditions for reinstatement and/or the minimum required 

premium may be different in some states.” Upon further review, it appears to 

Registrant that it is more accurate to provide only that the time period after policy 

termination may vary in some states. Registrant has modified this sentence 

accordingly. This section now reads as follows: 

Reinstatement 

Subject to certain conditions, You may reinstate a Policy that terminated as 

described in POLICY TERMINATION AND REINSTATEMENT - Policy 

Termination (Lapse). The Policy may be reinstated provided all of the 

following conditions are satisfied: 

(a) such reinstatement is prior to the Maturity Date; 

(b) You have not surrendered the Policy; 

(c) not more than three years have elapsed since the Policy terminated 

(this time period may vary by state); 

(d) You supply evidence which satisfies Us that the Insured is alive and is 

insurable; and 

(e) You make the minimum required reinstatement premium as described 

below. 

Minimum Required Premium 

During the first 10 Policy Years, the minimum required premium is the lesser 

of the cumulative premium shortfall or the Net Surrender Value shortfall, 

each set forth below. 

The cumulative premium shortfall is the amount of premium necessary for the 

Policy to satisfy the No-Lapse Guarantee Monthly Premium requirement 

following expiration of the grace period. The cumulative premium shortfall is 

((a) minus (b)) plus (c) where: 

(a) is the cumulative minimum monthly premium due at the end of the 

grace period. 

(b) is the amount equal to all premiums paid minus the sum of the Loan 

Indebtedness and partial surrenders. 

(c) is three no-lapse guarantee monthly premiums. 

Rebecca A. Marquigny, Esq. 

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November 29, 2011

The Net Surrender Value shortfall is the amount of premium necessary to (i) 

reimburse Us for the Monthly Policy Charges during the grace period and (ii) 

provide enough Policy Value to pay the Monthly Policy Charge for three 

Monthly Dates after the grace period. The Net Surrender Value shortfall is 

((a) plus (b)) divided by (c) where: 

(a) is the amount by which the surrender charge is more than the Net 

Policy Value at the end of the grace period after the Monthly Policy 

Charge is deducted. 

(b) is three Monthly Policy Charges. 

(c) is 1 minus the Maximum Premium Expense Charge percentage. 

During Policy Years 11 and later, the minimum required premium is the Net 

Surrender Value shortfall described above. 

NOTE:The minimum required premium during a grace period and the 

minimum required premium to reinstate a policy are calculated 

differently. The minimum required premium for reinstatement is 

calculated so as to allow Us to recover Monthly Policy Charges due 

and unpaid during the grace period and to provide enough Policy 

Value to pay three Monthly Policy Charges after reinstatement of the 

Policy. As a result, the minimum required premium for reinstatement 

will be higher than the minimum required premium for grace period. 

Reinstatement will be effective on the next Monthly Date following the date 

We approve the reinstatement application. Your rights and privileges as 

Owner(s) are restored upon reinstatement. The reinstated Policy will have the 

same Policy Date as the original Policy. 

If a policy loan or loan interest was unpaid when the Policy terminated, the 

policy loan must be reinstated or repaid (loan interest does not accrue over the 

period the Policy was terminated). We do not require payment of Monthly 

Policy Charges during the period the Policy was terminated. 

Premiums received with Your reinstatement application are held in Our 

General Account without interest while We complete underwriting for the 

reinstatement. If the reinstatement is approved, premiums are allocated to 

Your selected Division(s), Fixed Account and/or Fixed DCA Account on the 

reinstatement date. We will use the premium allocation percentages in effect 

at the time of termination of the Policy unless You provide new allocation 

instructions. 

Rebecca A. Marquigny, Esq. 

Page 5

November 29, 2011

If You reinstate Your Policy and then it is fully surrendered, a surrender
charge may be imposed. The surrender charge, if any, is calculated based on
the number of years the Policy was in force. The period of time during which
the Policy was terminated is not included in these calculations.
If You reinstate Your Policy, the Return of Cost of Insurance Rider is not
reinstated.
Comment 2.Policy Benefits Summary: Death Benefits & Proceeds (p. 4).Please identify
the default death benefit if a contractowner does not specify a choice on the application.
Alternatively, clarify that the death benefit option must be selected before a contract will be
issued.
Response: Registrant has identified the default death benefit. This section now
reads as follows:
POLICY BENEFITS
Death Benefits and Proceeds
The Company guarantees to pay a death benefit for as long as the Policy is in
force. The death proceeds are paid to the beneficiary(ies) when the Insured
dies. Death proceeds are calculated as of the date of death of the Insured. The
amount of the death proceeds is:
·	the death benefit plus interest (as explained in DEATH BENEFITS AND
	POLICY VALUES — Death Proceeds);
·	minus Loan Indebtedness;
·	minus any overdue Monthly Policy Charges (Overdue Monthly Policy
	Charges arise when a Policy is in a grace period and the Net Surrender
	Value is insufficient to cover the sum of the cost of insurance and of
	additional benefits provided by any rider plus other policy charges).
Death proceeds are paid in cash or applied under a benefit payment option.
The Policy provides for three death benefit options. A death benefit option is
elected on the application. We will issue the Policy with Death Benefit
Option 1 if You do not elect a death benefit option on the application. Subject
to certain conditions, the death benefit option may be changed after the Policy
has been issued.

Rebecca A. Marquigny, Esq. 

Page 6

November 29, 2011

Comment 3.Policy Risks Summary (p. 5).Please use plain English to describe the risk of 

poor investment performance more clearly and directly (e.g., if your selected underlying 

finds perform poorly, you could lose the entire amount you invested in them). The revised 

summary should also explain why policy and surrender charges make this product an 

inappropriate short-term investment (i.e., during the earlier policy years these expenses are 

higher and have a more negative impact on contract value).SeeIC-25522. 

Response: Registrant has revised the language to use plain English to describe the 

risk of poor investment performance more clearly and directly. Registrant has also 

revised the summary to explain why policy and surrender charges make this product 

an inappropriate short-term investment. This section now reads as follows: 

POLICY RISKS 

Risks of Poor Investment Performance 

Your Policy Value will fluctuate depending on the investment performance of 

the Divisions to which You allocate Your premium payments. Poor 

investment performance could diminish Your entire Policy Value and death 

benefit. 

Positive investment performance does not guarantee that Your Policy Value 

will equal the total of Your premium payments after deducting applicable 

Policy and rider charges. Certain Policy and rider charges are higher during 

earlier Policy Years than during subsequent Policy Years. This has a more 

negative impact on Policy Value during earlier Policy Years, making the 

Policy not suitable as a short-term savings vehicle. 

Comment 4.Fee Tables: Charge Names (pp. 7-10). 

Where a particular feature has more than one fee, use a unique name for each charge to avoid 

confusion. For example, the name "Death Benefit Advance Rider" currently refers to: (i) the 

annual charge for this feature; and (ii) the $150 administrative service charge that is assessed 

only at the time the benefit is exercised. Consider substituting a more descriptive name for 

the transaction charge (e.g., "Benefit Processing Charge" or something similar). 

Response: You specifically referenced the two fees that apply to both the 

Accelerated Benefits Rider and the Death Benefit Advance Rider. In order to clarify 

the difference in the fees for each of these features, while also ensuring that the 

Registrant does not have to re-file its policies and revise its customer 

correspondence, Registrant modified the explanation of these fees in the Fee Tables 

Rebecca A. Marquigny, Esq. 

Page 7

November 29, 2011

by adding a parenthetical explanation of each fee. Registrant believes that this 

approach will provide better disclosure for its customers than adding a descriptive 

letter or number to each fee and explaining the difference between prospectus 

definitions and policy/correspondence definitions in a footnote. The applicable 

sections of the Fee Tables now read as follows: 

	Transaction Fees
Charge	When Charge is	Amount Deducted
	Deducted
Optional Insurance Benefits
Accelerated Benefits Rider	at the time of death
(processing fee)	benefit advance
Maximum		$150 administrative fee
Current		None
Death Benefit Advance Rider	at the time of death
(processing fee)	benefit advance
Maximum		$150 administrative fee
Current		None

Periodic Charges Other Than Underlying Mutual Fund Operating Expenses
Charge	When Charge is	Amount Deducted
Deducted
Optional Insurance Benefits(10)
Accelerated Benefit Rider	annually, if You have a
(annual interest charge)	death benefit advance
	(accrued daily)
Maximum		5.50% of death proceeds advance
Current		per 5.50% year ofdeath proceeds
		advanceper year(9)
Death Benefit Advance Rider	annually, if You have a
(annual interest charge)	death benefit advance
	(accrued daily)
Maximum		18% of death proceeds advanced
		per year(11)
Current		per 5.50% year of(9)death proceeds
		avanceper year(9)

Rebecca A. Marquigny, Esq. 

Page 8

November 29, 2011

Comment 5.Premium Expense Charge (pp. 16-17).Neither the fee table nor the narrative
indicate who bears the burden of tax rate increases. If the investor's tax expense could
increase in this situation, please state this directly.
Response: Registrant bears the risk that actual tax rates will be higher than the
maximum charge for taxes reflected in the SUMMARY: FEE TABLES section.
Registrant has disclosed this in the double asterisk footnote in this section, which
now reads as follows:
	** The actual premium taxes We pay vary from state to state. The expense
	charge is based on the average tax rate We expect to pay nationwide, the
	premiums We receive from all states and other expense assumptions.
	Therefore, Policy Owners could end up paying a higher Premium Expense
	Charge than their state requires. We bear the risk that actual tax rates will
	be higher than the maximum charge reflected in the SUMMARY: FEE
	TABLES section.
Comment 6.Charges, Generally.Some of the references to charges indicate that the
charge is a certain percentage, but do not reference to what the percentage relates. Please
clarify this where applicable.
Response: Registrant has clarified this information for the following charges:
•	Net policy loan charge (p. 19). References to this charge have been changed to
	specify that the charge is a percentage of Loan Indebtedness.
•	Interest charged on Loan Indebtedness (p. 39). References to interest charged on
	Loan Indebtedness have been changed to specify that the interest charged is a
	percentage of Loan Indebtedness.
•	Loan Account interest rate (p. 40). References to the Loan Account interest rate
	have been changed to specify that the interest earned is a percentage of the
	amount in the Loan Account.
•	Net policy loan charge (p. 40). References to the net policy loan charge have
	been changed to specify that the charge is a percentage of Loan Indebtedness.
Comment 7.Surrender Value Enhancement Rider (p. 26).Please explain how a
prospective purchaser can determine whether he or she is eligible for premium financing
(i.e., how does someone know if they will qualify under the "then relevant underwriting
guidelines").

Rebecca A. Marquigny, Esq. 

Page 9

November 29, 2011

Response: Registrant has added a sentence at the end of this section instructing the 

prospective purchaser to contact their registered representative to see if this rider is 

available for their policy. The section now reads as follows: 

Surrender Value Enhancement Rider 

This rider provides for a waiver of a portion of the surrender charges for a 

limited time. If You fully surrender Your Policy within the first seven Policy 

Years, We will reduce the amount of surrender charge We collect; provided, 

however, that the full policy surrender is not related to a replacement or 

exchange. In addition, We may provide an additional amount that is 

equivalent to a stated percentage of the sum of premiums received less partial 

surrenders since issue. The additional amount varies by age, gender and risk 

class of the Insured. The rider is only available for Policies issued for 

business cases and approved premium finance cases. Premium financing 

involves the lending of money, typically by a third party finance entity, to 

cover the cost of an insurance premium. Policies with the rider must be 

sufficiently funded as defined in Our then current underwriting guidelines. 

The rider may not be added after the Policy has been issued. The use of this 

rider disqualifies the use of the Cost of Living Increase Rider and the Salary 

Increase Rider. If the Policy is issued with the rider, an additional sales 

charge (independent of the sales charge applicable to all Policies) is imposed 

on premium paid in excess of Target Premium in the first seven Policy Years. 

Contact your registered representative to see if this rider is available for Your 

Policy. 

Comment 8.Examination Offer (Free-Look Provision) (p. 39).Please specify where 

premium payments are allocated during the examination offer period. 

Response: Registrant has added a sentence to this section stating that premium 

payments are allocated to the Money Market Division during the examination offer 

period. The new sentence also refers prospective purchasers to the PREMIUMS – 

Allocation of Premiums section for more information. This section now reads as 

follows: 

Examination Offer (Free-Look Provision) 

It is important to Us that You are satisfied with the purchase of Your Policy. 

Under state law, You have the right to return the Policy for any reason during 

the examination offer period (a “free look”). If You properly exercise Your 

free look, We will rescind the policy and We will pay You a refund. The state 

in which the Policy is issued determines the examination offer period and the 

type of refund that applies. 

Rebecca A. Marquigny, Esq. 

Page 10

November 29, 2011

	Your premium payments are allocated to the Money Market Division when
	the examination offer period begins (see PREMIUMS – Allocation of
	Premiums). If You return this Policy before expiration of the examination
	offer period, We will refund Your full premium in states where required. In
	states where permitted, We will refund the Net Policy Value, which may be
	more or less than Your premium.
	Your request to return the Policy must be in writing. The request and the
	Policy must be mailed to Us or returned to the agent no later (as determined
	by the postmark) than the last day of the examination offer period as shown
	below.
	The examination offer period is the later of:
	·	10 days after the Policy is delivered to You; or
	·	such later date as specified by applicable state law.
NOTE:	See GENERAL DESCRIPTION OF THE POLICY – Delay of
Payments.
Comment 9.Other Required Disclosure, Exhibits, and Representations.Any exhibits,
financial statements and other required disclosure not included in this registration statement
must be filed in a pre-effective amendment to the registration statement.
Response: The Second Amendment will include financial statements and all other
remaining disclosures, exhibits, and representations.
II. ADDITIONAL CHANGES
In addition to the changes referenced above, Registrant has also made the changes described
below.
A.	Table of Separate Account Divisions
Principal Variable Contracts Funds, Inc. has changed investment advisers for its SmallCap
Growth Account II and SmallCap Value Account I funds. Accordingly, Registrant has
reflected these changes on pp. 61 and 62.
B.	Glossary
Registrant noticed that the term “No-Lapse Guarantee Premium” should instead be “No-
Lapse Guarantee Monthly Premium”. Registrant has made this change in the Glossary (p.
12) and in other sections of the prospectus as necessary (pp. 28, 29, 36, 41, 42).

Rebecca A. Marquigny, Esq. 

Page 11

November 29, 2011

We understand that the Registrant is responsible for the accuracy and adequacy of the
disclosure in the filing and that staff comments or our changes to the disclosure in response
to the staff comments do not foreclose the Commission from taking any action with respect
to the filing. In addition, the Registrant may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal securities laws of
the United States.
Sincerely,
/s/ Charles Schneider
Charles M. Schneider
Counsel
Law Department
(515) 246-5688
Enclosure
cc:	Sara Wiener