Exhibit 1.(5)(a)
Great-West Life & Annuity Insurance Company
A Stock Company
8515 East Orchard Road Englewood, CO 80111
Insured: John Doe
Policy Number: 1234567
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
Great-West Life & Annuity Insurance Company, herein referred to as the Company,
will pay the Death Benefit Proceeds to the Beneficiary subject to the policy
provisions, when the Company receives due proof of the Insured's death. (Payment
of such proceeds will completely discharge the Company's liability with respect
to the amount payable.)
The Owner and Beneficiary are as shown in the application unless changed as
provided for in this policy.
The provisions on the following pages are a part of this policy.
Signed for the Company on the Issue Date.
/s/D.C. Lennox /s/W.T. McCullum
- ------------------------- -------------------------
D.C. Lennox, W.T. McCallum,
Secretary President and Chief
Executive Officer
This policy is a legal contract between the Owner and the Company. PLEASE READ
THIS POLICY CAREFULLY.
FREE LOOK PERIOD
10 DAY RIGHT TO EXAMINE POLICY: IF NOT SATISFIED WITH THE POLICY, RETURN IT TO
THE COMPANY OR AN AUTHORIZED REPRESENTATIVE WITHIN 10 DAYS OF RECEIVING IT. THE
POLICY WILL THEN BE DEEMED VOID FROM THE START, AND THE COMPANY WILL REFUND THE
GREATER OF: 1) PREMIUMS RECEIVED LESS SURRENDERS AND/OR WITHDRAWALS; OR 2) THE
POLICY VALUE ACCOUNT LESS SURRENDERS. DURING THE 10 DAY RIGHT TO EXAMINE PERIOD,
THE CASH VALUE WILL BE ALLOCATED TO THE MONEY MARKET INVESTMENT DIVISION. AT THE
END OF THE 10 DAY PERIOD, THE CASH VALUE WILL BE ALLOCATED IN THE INVESTMENT
DIVISIONS AS SPECIFIED IN THE APPLICATION.
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE
ADJUSTABLE DEATH BENEFIT. Proceeds payable at death are subject to policy
provisions. See Death Benefit Provisions. Flexible Premiums payable while the
Insured is alive. If no Premiums are paid after the first Premium, or if
subsequent Premiums prove to be too low, this coverage may cease prior to age
100. ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
INVESTMENT DIVISIONS ARE VARIABLE, MAY INCREASE OR DECREASE ACCORDINGLY, AND ARE
NOT GUARANTEED AS TO AMOUNT. Non-Participating.
J355 (98)
POLICY SPECIFICATIONS
This Policy Specifications Page, together with the Premium
Allocation Information, reflects the information with
which your policy has been established as of the
Policy Date.
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OWNER/POLICY INFORMATION
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Owner: XYZ Corporation
Insured: JOHN DOE
Policy Number: 1234567
Policy Date: January 1, 1998
Total Face Amount: $250,000
Issue Date: January 1, 1998
Issue Age/Sex: 35/ Male
Plan: Individual Flexible Premium Variable
Universal Life Insurance:
Non-Participating
Employer Number: 54321
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PREMIUM AND EXPENSE INFORMATION
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Premium Class: Standard
Initial Periodic Premium Amount: $1,593.36 Per Year
If no Premiums are paid after the first Premium or if subsequent Premiums
prove to be too low, this coverage may cease prior to age 100. The Owner
may have to pay more than the Premiums shown above to keep this policy and
coverage in force.
Summary of Charges:
Service Charge: $15.00 per month maximum
Expense Charge: 10.00% of premium maximum
Mortality & Expense Charge: .90% maximum
Risk Charges: Shown on Page 1a
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SCHEDULE OF BENEFITS AND PREMIUMS
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BENEFITS FACE AMOUNT MONTHLY COSTS PREMIUM PERIOD
Total Face To Insured's Age 100
Amount $250,000 See Page 1a
Base Face $200,000 See Page 1a
Rider Face Amount $50,000 See Page 1a
The Owner has elected Death Benefit Option 1, Level Death: the Total Face
Amount, less any partial withdrawals, less any outstanding loans, and loan
interest accrued, will be payable upon the insured's death. Each partial
withdrawal will cause a decrease in the death benefit. In some cases, growth
of the Policy Value Account may require the Company to adjust the Death
Benefit in order to comply with Internal Revenue Code Regulations. The Owner
has elected Cash Value Accumulation Test, for this calculation. The Table is
shown on Policy Page 1b.
J355LD Page 1
Table A
FACTORS
ATTAINED ATTAINED
AGE MALE FEMALE AGE MALE FEMALE
20 6.52076 7.78152 60 1.91115 2.20053
21 6.33350 7.53356 61 1.86315 2.13871
22 6.14981 7.29258 62 1.81717 2.07893
23 5.96381 7.05840 63 1.77320 2.02134
24 5.79038 6.83085 64 1.73126 1.96617
25 5.61443 6.61014 65 1.69130 1.91343
26 5.44092 6.39568 66 1.65326 1.86300
27 5.27031 6.18766 67 1.61699 1.81470
28 5.10316 5.98586 68 1.58236 1.76827
29 4.93975 5.79038 69 1.54923 1.72343
30 4.78046 5.60097 70 1.51753 1.68009
31 4.62543 5.41767 71 1.48726 1.63827
32 4.47504 5.24022 72 1.45844 1.59809
33 4.32914 5.06840 73 1.43116 1.55974
34 4.18798 4.90198 74 1.40548 1.52338
35 4.05148 4.74131 75 1.38142 1.48910
36 3.91965 4.58592 76 1.35889 1.45684
37 3.79247 4.43621 77 1.33775 1.42648
38 3.66997 4.29213 78 1.31783 1.39782
39 3.55206 4.15360 79 1.29892 1.37069
40 3.43868 4.02063 80 1.28090 1.34496
41 3.32968 3.89305 81 1.26375 1.32058
42 3.22506 3.77070 82 1.24746 1.29761
43 3.12447 3.65328 83 1.23212 1.27608
44 3.02787 3.54035 84 1.21783 1.25607
45 2.93502 3.43166 85 1.20460 1.23755
46 2.84584 3.32701 86 1.19234 1.22040
47 2.76008 3.22611 87 1.18093 1.20448
48 2.67761 3.12877 88 1.17021 1.18963
49 2.59824 3.03494 89 1.16000 1.17566
50 2.52192 2.94449 90 1.15008 1.16236
51 2.44849 2.85732 91 1.14024 1.14954
52 2.37800 2.77329 92 1.13021 1.13694
53 2.31039 2.69235 93 1.11971 1.12430
54 2.24563 2.61451 94 1.10841 1.11132
55 2.18370 2.53953 95 1.09607 1.10301
56 2.12443 2.46726 96 1.08265 1.08350
57 2.06772 2.39746 97 1.06839 1.06873
58 2.01335 2.32987 98 1.05387 1.05396
59 1.96120 2.26425 99 1.04000 1.04000
J355LD Page 1b
GUARANTEED MAXIMUM MONTHLY RISK CHARGES FOR POLICY 1234567
(Based on the Attained Age of the Insured)
Monthly Monthly
Policy Risk Rate Policy Risk Rate
Age Year Per $1,000 Age Year Per $1,000
35 1 0.17 70 36 3.29
36 2 0.18 71 37 3.60
37 3 0.20 72 38 3.97
38 4 0.21 73 39 4.38
39 5 0.23 74 40 4.84
40 6 0.25 75 41 5.34
41 7 0.27 76 42 5.87
42 8 0.29 77 43 6.42
43 9 0.32 78 44 6.99
44 10 0.34 79 45 7.58
45 11 0.37 80 46 8.23
46 12 0.41 81 47 8.95
47 13 0.44 82 48 9.77
48 14 0.47 83 49 10.68
49 15 0.51 84 50 11.68
50 16 0.55 85 51 12.74
51 17 0.60 86 52 13.84
52 18 0.66 87 53 14.96
53 19 0.72 88 54 16.10
54 20 0.79 89 55 17.27
55 21 0.87 90 56 18.48
56 22 0.95 91 57 19.74
57 23 1.04 92 58 21.12
58 24 1.13 93 59 22.67
59 25 1.23 94 60 24.65
60 26 1.34 95 61 27.49
61 27 1.46 96 62 32.04
62 28 1.59 97 63 40.01
63 29 1.75 98 64 54.83
64 30 1.92 99 65 83.33
65 31 2.11
66 32 2.32
67 33 2.53
68 34 2.76
69 35 3.01
Guaranteed net single premium at Attained Age 100: $1,000 per $1,000
J355 Page 2
Table of Contents
DEFINITIONS....................................................................5
Definitions continued..........................................................6
OWNERSHIP PROVISIONS
Rights of Owner............................................................6
Assignments/Transfers......................................................6
Beneficiary................................................................7
Ownership of Series Account................................................7
GENERAL PROVISIONS
Entire Contract............................................................7
Policy Modification........................................................7
Incontestability Provision.................................................7
Suicide Exclusion..........................................................8
Voting Rights..............................................................8
Currency...................................................................8
Non-Participating..........................................................8
Misstatement of Age and/or Sex.............................................8
Policy Years and Anniversaries.............................................8
Payment of Premiums........................................................8
Allocation of Premiums.....................................................8
Grace Period Provision.....................................................9
Periodic Premium Amount....................................................9
Additional Premium Payments Provision......................................9
Reinstatement..............................................................9
Annual Statement...........................................................9
Illustration of Benefits and Values.......................................10
Exchange of Policy........................................................10
Change of Total Face Amount...............................................10
DEATH BENEFIT PROVISIONS
Death Benefit Provision...................................................10
Change of Death Benefit Option............................................11
Death Benefit Payment.....................................................11
POLICY VALUES, LOAN AND NONFORFEITURE PROVISIONS
Cost of Insurance.........................................................11
Risk Rate.................................................................12
Expense Charge............................................................12
Service Charge............................................................12
Policy Value Account......................................................12
Sub-Account Value.........................................................12
Net Investment Factor.....................................................12
Continuation of Insurance.................................................13
Policy Loan...............................................................13
Effect of a Loan..........................................................13
J355 Page 3
Table of Contents (continued)
POLICY VALUES, LOAN AND NONFORFEITURE PROVISIONS (continued)
Loan Interest.............................................................13
Loan Value................................................................13
Loan Interest Rate........................................................14
Surrender Benefit.........................................................14
Paid-Up Life Insurance Provision..........................................14
Tax Considerations........................................................14
Partial Withdrawal Provision..............................................15
Postponement..............................................................15
Emergency Procedure.......................................................15
How Values Are Computed...................................................15
TRANSFER PROVISIONS
Transfers.................................................................15
Dollar Cost Averaging.....................................................16
The Rebalancer Option.....................................................16
J355 Page 4
Definitions
Attained Age - the age of the Insured, nearest birthday, as of the Policy Date
and each policy anniversary thereafter.
Beneficiary - the person(s) named by the Owner to receive the Death Benefit
Proceeds upon the death of the Insured.
Cash Surrender Value - is equal to:
(a) Policy Value Account on the effective date of the surrender; less
(b) outstanding policy loans and accrued loan interest, if any; less
(c) any monthly cost of insurance charges.
Corporate Headquarters - Great-West Life & Annuity Insurance Company ("the
Company"), 8515 East Orchard Road, Englewood, Colorado 80111.
Death Benefit Proceeds - the amount payable upon the Insured's death. A full
description of the Death Benefit is described in the Death Benefit Provision.
Effective Date - the date on which the first Premium payment is credited to the
policy.
Evidence of Insurability - information about an Insured which is used to approve
or reinstate this policy or any additional benefit.
Insured - the person named on Page 1 as the Insured.
Investment Divisions - the divisions of the Series Account that purchase shares
in specific securities. The Company may, at times: o make additional Series
Accounts or additional Series Account Investment Divisions available; o
eliminate Investment Divisions; o combine two or more Investment Divisions; or o
substitute a new portfolio for the portfolio in which an Investment Division
invests.
Subject to any required regulatory approvals, the Company has the right to
transfer assets of a Series Account or of an Investment Division to another
Series Account or Investment Division. When permitted by law, the Company may
modify the policy to comply with applicable federal and state laws and combine
the Series Account with other Series Accounts.
Issue Date - the date from which the incontestability and suicide exclusions are
measured and is shown on Page 1.
Loan Account - all outstanding loans plus credited loan interest held in the
general account of the Company. The Loan Account is not part of the Series
Account.
J355 Page 5
Definitions (continued)
Loan Account Value - the sum of all outstanding loans plus credited loan
interest for this policy.
Policy Date - the effective date of coverage under this policy. The Policy
Months, policy years and anniversaries are measured from the Policy Date shown
on Page 1.
Policy Value Account - the Sub-Account Value plus the Loan Account Value.
Premiums - amounts received and allocated to the Sub-Account(s) prior to any
deductions.
Request - any instruction in a form, written, telephoned or computerized,
satisfactory to the Company and received at the Corporate Headquarters from the
Owner or the Owner's assignee (as specified in a form acceptable to the Company)
or the Beneficiary, (as applicable) as required by any provision of this policy
or as required by the Company. The Request is subject to any action taken or
payment made by the Company before it was processed.
Series Account - the segregated investment account established by the Company as
a separate account under Colorado law named the COLI VUL-2 Series Account. It is
registered as a unit investment trust under the Investment Company Act of 1940,
as amended.
The Company owns the assets in the Series Account. The investments held in the
Series Account provide variable life insurance benefits under this policy and
the Series Account is used for other purposes permitted by applicable laws and
regulations. This account is kept separate from the general account and other
series accounts the Company may have.
Sub-Account - sub-division(s) of the Owner's Policy Value Account containing the
value credited to the Owner from the Series Account.
Sub-Account Value - the sum of the values of the Sub-Accounts credited to the
Owner under the Policy Value Account. The Sub-Account Value is credited with a
return based upon the investment experience of the Investment Division(s)
selected by the Owner and will increase or decrease accordingly.
Transaction Date - the date on which any Premium payment or Request from the
Owner will be processed by the Company. Premium payments and Requests received
after 4:00 p.m. EST/EDT will be deemed to have been received on the next
business day. Requests will be processed and the Sub-Account Value will be
valued on each date that the New York Stock Exchange ("NYSE") is open for
trading.
Transfer - the moving of money from one Sub-Account to one or more
Sub-Account(s).
J355 Page 6
Definitions (continued)
Underlying Fund - a portfolio of securities managed in accordance with a
specified investment objective, or a registered management investment company in
which the assets of the Series Account may be invested.
Valuation Date - the date on which the net asset value of each Underlying Fund
is determined. A Valuation Date is each day that the New York Stock Exchange is
open for regular business. The value of an Investment Division's assets is
determined at the end of each Valuation Date. To determine the value of an asset
on a day that is not a Valuation Date, the value of that asset as of the end of
the previous Valuation Date will be used.
Valuation Period - the period between two successive Valuation Dates, starting
at the close of the NYSE on one Valuation Date and ending at the close of the
NYSE on the next succeeding Valuation Date.
Ownership Provisions
RIGHTS OF OWNER
While the Insured is living, all benefits and rights under this policy belong to
the Owner. However, the Owner's rights are subject to the rights of any assignee
or irrevocably named Beneficiary.
ASSIGNMENTS/TRANSFERS
The Owner may assign this policy while the Insured is living. The Company will
not recognize an assignment until the original or a certified copy is recorded
at the Corporate Headquarters. When filed, the Owner's rights and those of the
Beneficiary are subject to the assignment. The Company is not responsible for
the validity of any assignment.
When recorded by the Company, a transfer of ownership will revoke any
designation of a Secondary Owner. It will not change a Beneficiary. All benefits
and rights under this policy will belong to the new Owner, subject to the terms
and conditions of the policy and the interest of any recorded assignee.
BENEFICIARY
While the Insured is living, the Owner may change the Beneficiary by Request
unless a previous designation was made irrevocable. Any change is subject to any
existing assignment of this policy. A recorded change of Beneficiary will take
effect as of the date the notice was signed. However, the change will not affect
any payment made by the Company before it received a Request for a change of
Beneficiary.
J355 Page 7
Ownership Provisions (continued)
The Company may rely on an affidavit by any responsible person to identify a
Beneficiary or verify the non-existence of a Beneficiary not identified by name.
OWNERSHIP OF SERIES ACCOUNT
The Company has absolute ownership of the assets of the Series Account. The
portion of the assets of the Series Account equal to the reserves and other
Contract liabilities with respect to the Series Account are not chargeable with
liabilities arising out of any other business the Company may conduct.
Income and realized and unrealized gains or losses from the assets in the Series
Account are credited to or charged against the account without regard to other
income, gains or losses arising out of any other business the Company may
conduct.
Assets of the Series Account held in or represented by any other separate
account of the Company used in connection with this policy, in an amount equal
to such other account's reserves and other contract liabilities shall not be
chargeable with the liabilities arising out of any other business the Company
may conduct.
General Provisions
ENTIRE CONTRACT
This policy, any endorsements, any riders, and the application form the entire
contract. A copy of the application is attached. After issue, amendments or
changes in writing and agreed to by the Company are part of the contract.
All statements in the application, in the absence of fraud, are considered
representations and not warranties. Only statements in the application will be
used to defend a claim or to cancel the policy for misrepresentation.
Only the President, a Vice-President, or the Secretary of the Company have the
authority to change or waive any provisions of the policy. No agent or broker
has the authority to change any term of this policy or to make any agreements
binding to the Company.
J355 Page 8
General Provisions (continued)
POLICY MODIFICATION
The Company may terminate an Investment Division or Underlying Fund. In that
event, the Owner, by Request, may change the allocation of the Premium. If no
Request is made by the date of termination, future Premium allocations to the
terminated Investment Division or Underlying Fund will be allocated to the Money
Market Investment Division. Any modification will not affect the terms,
provisions or conditions which are, or may be, applicable to Premium payments
previously made to any such Investment Division.
incontestability provision
This policy will not be contested on the basis of misrepresentation after it has
been in force during the Insured's lifetime for 2 years from the Issue Date.
However, this 2 year limit does not apply to any rider attached to this policy
which provides:
(a) benefits in the event of disability; or
(b) additional insurance in the event of accidental death.
If the Total Face Amount is increased, the amount of the increase will in like
manner be incontestable after it has been in force during the Insured's lifetime
for 2 years from the effective date of the increase.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within 2 years from the
Issue Date (1 year if issued in Colorado or North Dakota), the proceeds payable
under this policy will be limited to an amount equal to all Premiums paid on
this policy less outstanding policy loans, accrued loan interest, partial
withdrawals and the cost for riders. Payment will be made to the Beneficiary.
If the face amount is increased, and if the Insured commits suicide, while sane
or insane, within 2 years from the effective date of any increase (1 year if
issued in Colorado or North Dakota), the Company will pay only that portion of
the Policy Value Account and the cost of insurance paid for the amount of
increase. The face amount of the policy will be reduced to the face amount that
was in effect prior to the increase.
VOTING RIGHTS
The Company will exercise any voting rights associated with the Series Account
investments in its sole discretion in accordance with applicable law.
J355 Page 9
General Provisions (continued)
CURRENCY
All amounts to be paid to or by the Company will be in the currency of the
United States of America.
NON-PARTICIPATING
This policy is non-participating. It is not eligible to share in the Company's
divisible surplus.
MISSTATEMENT OF AGE AND/OR SEX
If the Insured's age and/or sex on the Policy Date has been misstated, the
benefits payable under this policy will be the amount of insurance that the cost
of insurance (deducted from the Policy Value Account at the beginning of the
month in which death occurred) would have purchased for the correct age and/or
sex on the Policy Date.
If the age and/or sex of the Insured or any other person covered under a rider
has been misstated on the Policy Date, the benefits payable under the rider will
be the benefit that the amount charged would have purchased for the correct age
and/or sex on the Policy Date.
If the age is misstated in such a way that the Insured was not eligible for
coverage under the policy, the Company's liability will be limited to a return
of the Premiums paid, less any partial withdrawals and outstanding loans and
accrued loan interest and the cost for riders.
POLICY YEARS AND ANNIVERSARIES
Policy years and anniversaries will be measured from the Policy Date shown on
Page 1.
PAYMENT OF PREMIUMS
The first Premium is due on or before the Policy Date shown on Page 1. The
Company will mail the Owner a billing notice 30 days in advance of the Premium
due date.
All Premiums after the first are to be made payable to the Company at the
Corporate Headquarters and will be due on the first day of any Policy Month in
which the cost of insurance exceeds the Policy Value Account less any
outstanding loans and less any accrued loan interest. Subject to limitations as
provided in this policy, Premiums paid after the first may be paid in any amount
and at any time before the Paid-Up Life Insurance Provision goes into effect.
Receipts will be furnished upon Request.
ALLOCATION OF PREMIUMS
During the Free Look Period, amounts to be allocated to one or more of the
Investment Divisions will first be allocated to the Money Market Investment
Division and will remain there until the next Transaction Date following the end
of the Free Look Period plus 5 calendar days. On that date, the Sub-Account
Value held in the Money Market Investment Division will be allocated to the
Investment Division(s) selected by the Owner.
J355 Page 10
General Provisions (continued)
If the policy is returned during the Free Look Period, it will be void from the
start, and the Company will refund the amount described on the front cover of
this policy.
After the Free Look Period, subsequent Premium payments will be allocated in the
Policy Value Account as Requested by the Owner. If there are no accompanying
instructions, then allocations will be made in accordance with standing
instructions. Allocations will be effective upon the Transaction Date.
GRACE PERIOD PROVISION
The first day of each Policy Month is the due date for any Premium required to
keep the policy in force for that month. Except for the first Premium, if the
amount in the Policy Value Account, less any outstanding policy loans and less
any accrued loan interest, on the last day of a Policy Month is not sufficient
to cover the monthly deduction for the cost of insurance for the next Policy
Month, a grace period of 61 days from the due date will be allowed for the
payment of an amount sufficient to cover the monthly cost of insurance for the
next 2 months.
Coverage will remain in force during the grace period. If the Premium due is not
paid within the grace period, all coverage under this policy will cease at the
end of the 61 day period.
Notice of such Premium due will be mailed to the last known address of the Owner
and any assignee of record at least 31 days prior to the date coverage will
cease.
If the Insured dies during the grace period, any cost of insurance charges due
and unpaid will be deducted from the Death Benefit Proceeds.
PERIODIC PREMIUM AMOUNT
The Company may suggest a periodic premium amount. The actual amount of Premiums
needed may change, depending on the number of Premium payments made, changes in
coverage, investment experience, monthly risk rate, and partial withdrawals
made.
ADDITIONAL PREMIUM PAYMENTS PROVISION
Besides the periodic premium amount, the Owner may make additional Premium
payments as described below prior to the date the Paid-Up Life Insurance
Provision goes into effect.
J355 Page 11
General Provisions (continued)
Additional Premium payments may be limited to amounts that will not exceed tax
guidelines and jeopardize the tax status of the policy as life insurance. The
minimum additional Premium that will be accepted at one time is $100. The
Company reserves the right to restrict or refuse additional Premium payments
that exceed the Initial Periodic Premium Amount shown on Page 1.
REINSTATEMENT
This policy may be reinstated within 3 years after the coverage ceased, unless
it has been surrendered.
The Company must receive:
o A Request from the Owner.
o Evidence of Insurability for the Insured and any other person covered
by rider, at the Owner's expense.
o Payment of the cost of insurance for the grace period.
o Payment of an amount equal to 4 months' cost of insurance. Such payment
less the expense charges will be credited to the Policy Value Account
as of the date of reinstatement.
o Payment or reinstatement of any policy loan which was outstanding as of
the date the coverage ceased, including interest thereon. Interest will
be 6.00% per year. Interest will be compounded annually to the date of
the policy reinstatement.
Reinstatement will become effective on the date the application for
reinstatement is approved by the Company.
ANNUAL STATEMENT
Within 30 days after each policy anniversary, the Company will send the Owner a
statement showing:
o The Policy Value Account;
o The Death Benefit
o Premiums paid and investment experience since the last statement;
o Partial withdrawals and charges since the last statement;
o Outstanding policy loans and loan interest paid since the last
statement;
o The current allocation in each of the Investment Divisions; and
o Any further information required by the state in which the policy was
issued.
J355 Page 12
General Provisions (continued)
ILLUSTRATION OF BENEFITS AND VALUES
The Owner may at any time Request from the Company an illustration of future
Death Benefits and Cash Surrender Values. The first illustration provided during
a policy year will be at no charge. Each additional illustration during that
policy year will be subject to a maximum fee of $50. This illustration will be
based on: o The current Policy Value Account; o Assumed investment experience; o
Coverage amounts and the Death Benefit option elected; o Recommended periodic
premium amounts; and o Current monthly risk rates.
EXCHANGE OF POLICY
Subject to the Company's approval, the Owner may exchange this policy for a new
fixed policy with the Company. The new policy will have the same Policy Date,
Issue Age, and Insured as this policy on the date of exchange.
The Total Face Amount of the new policy may not exceed the Total Face Amount of
this policy on the date of exchange. The premium rate will be the rate used for
the new policy of insurance on the Policy Date for the mortality class in which
this policy has been placed. The Company will determine any other requirements
or costs. Any excess Cash Surrender Value will be payable to the Owner; this
distribution may be a taxable event to the Owner.
Although evidence of insurability will not be required, the following terms
apply:
o the exchange must be made within 24 months after the Issue Date of this
policy; and
o any Loan Account Value must be repaid.
CHANGE OF TOTAL FACE AMOUNT
By Request, the Owner may at any time increase or decrease the Total Face Amount
provided by this policy, subject to the Company's approval. Any change in Total
Face Amount may be limited to amounts that will not exceed tax guidelines and
jeopardize the tax status of the policy as life insurance.
For a decrease in Total Face Amount:
o The Company must receive a Request.
o The decrease will become effective on the first day of the Policy
Month following receipt of the Request.
o The decrease will apply first to the most recent increase or increases
in Total Face Amount for purposes of the Incontestability Provision.
The minimum decrease amount will be $25,000. The Total Face Amount may not be
decreased below $100,000 unless prior approval is obtained from the Company.
J355 Page 13
General Provisions (continued)
For an increase in Total Face Amount:
o The Company must receive a Request.
o The increase will be subject to Evidence of Insurability satisfactory
to the Company.
o The increase will be effective on the policy anniversary following the
approval of the Request for the increase, subject to the deduction of
the first month's cost of insurance from the Policy Value Account.
The minimum increase amount will be $25,000.
Death Benefit Provisions
DEATH BENEFIT PROVISION
The Death Benefit option for this policy as of the Issue Date is shown on Page
1. The Death Benefit is determined by the option in effect at the Insured's date
of death.
Option 1: Level Death
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, less any partial withdrawals;
and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
Option 2: Coverage Plus
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, plus the Policy Value Account on
the Insured's date of death; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
Option 3: Premium Accumulation
The Death Benefit will be the greater of:
a) the Total Face Amount shown on Page 1, plus the accumulated value of
all Premiums paid at interest shown on Page 1, less any partial
withdrawals; and
b) the Policy Value Account on the Insured's date of death times the
applicable Factor shown in the Table on Page 1b.
J355 Page 14
Death Benefit Provisions (continued)
The Death Benefit will be reduced by the amount of any outstanding loans and
loan interest accrued.
CHANGE OF DEATH BENEFIT OPTION
After the first policy year, but not more than once each policy year, the Owner
may change the Death Benefit option by Request. Any change will be effective on
the first day of the Policy Month following the date the Company approves the
Request. A maximum fee of $100 will be deducted from the Policy Value Account
for each change.
A change in the Death Benefit option is subject to the following conditions:
o If the change is from Option 1 to Option 2, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
Policy Value Account. Evidence of Insurability may be required.
o If the change is from Option 1 to Option 3, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
accumulated value of all Premiums at the interest rate shown on Page 1.
Evidence of insurability may be required.
o If the change is from Option 2 to Option 1, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
Policy Value Account.
o If the change is from Option 2 to Option 3, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
policy value account less the accumulated value of all Premiums at the
interest rate shown on Page 1.
o If the change is from Option 3 to Option 1, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount plus the
accumulated value of all Premiums at the interest rate shown on Page 1.
o If the change is from Option 3 to Option 2, the amount payable upon the
death of the Insured will remain the same and the new Total Face Amount, at
the time of the change, will equal the prior Total Face Amount less the
policy value account plus the accumulated value of all Premiums at the
interest rate shown on Page 1.
J355 Page 15
Death Benefit Provisions (continued)
DEATH BENEFIT PAYMENT
The Death Benefit payable on the Insured's death will be paid in a lump sum
unless the Owner elects to receive all or a portion of the Death Benefit
Proceeds under a settlement option that the Company is then offering.
The Company will pay interest on the Death Benefit Proceeds from the date of
death to the date of settlement at a rate not less than that required by law.
Policy Values, Loan and Nonforfeiture Provisions
COST OF INSURANCE
An amount will be deducted on the first day of each Policy Month from the Policy
Value Account to pay the cost of insurance for that Policy Month. The cost of
insurance is calculated on the first day of each Policy Month and is equal to:
the Death Benefit divided by 1.00327374 less the Policy Value Account
on the first day of each Policy Month, multiplied by the current
monthly risk rate for the Insured's Attained Age
plus
the extra charge for any rated class
plus
the monthly Service Charge
plus
the cost of any riders.
If there has been an increase or decrease in Death Benefit during the policy
year, the cost of insurance calculation will be adjusted accordingly to reflect
the change.
RISK RATE
The maximum monthly risk rate is shown on Page 1a. The Company may charge a
lower monthly risk rate. The maximum risk rates shown on Page 1a are based on
the Sex-Distinct Commissioners 1980 Standard Ordinary Mortality Table, age
nearest birthday.
Any change in the monthly risk rate will be made uniformly by class.
EXPENSE CHARGE
The maximum expense charge for this policy is shown on Page 1. The charge is a
percentage of all Premiums paid. This charge is guaranteed and may not be
increased.
The expense charge will be deducted from each Premium paid. This would include
any Premium paid to reinstate the policy.
SERVICE CHARGE
The maximum service charge for this policy is shown on Page 1. This charge is
deducted from the Policy Value Account on the first day of each policy month.
This charge is guaranteed and may not be increased.
J355 Page 16
Policy Values, Loan and Nonforfeiture Provisions (continued)
POLICY VALUE ACCOUNT
The Policy Value Account is equal to the Sub-Account Value plus the Loan Account
Value.
Each Premium less any expense charge will be credited to the Policy Value
Account on the date received at the Corporate Headquarters. On the first day of
each Policy Month a deduction will be made from this account for the cost of
insurance.
SUB-ACCOUNT VALUE
The Sub-Account Value is the total dollar amount of all accumulation units under
each of the Owner's Sub-Accounts. Initially, the value of each Accumulation Unit
was set at $10.00. Each Sub-Account's Value is equal to the sum of:
o the value of the Sub-Account at the last Valuation Date;
o any Premium, less Expense Charges deducted from Premiums received
during the current Valuation Period which is allocated to the
Sub-Account;
o any loan repayment amount;
o all values transferred to the Sub-Account; and
o any net investment return allocated to the Sub-Account.
MINUS the following:
o all values transferred to another Sub-Account and the Loan Account
Value taken from the Sub-Account during the current Valuation Period;
o all partial withdrawals from the Sub-Account during the current
Valuation Period.
In addition, whenever a Valuation Period includes the monthly anniversary day,
value of the Sub-Account at the end of such period is reduced by the portion of
the cost of insurance charges allocated to the Sub-Account and any other
investment charges specified on Page 1.
The Sub-Account Value is expected to change from Valuation Period to Valuation
Period, reflecting the investment experience of the selected Investment
Division(s) as well as the deductions for charges.
Premiums which the Owner allocates to an Investment Division are used to
purchase accumulation units in the Investment Division(s) the Owner selects. The
number of accumulation units to be credited will be determined by dividing the
portion of each Premium allocated to or amount transferred to the Investment
Division by the value of an Accumulation Unit determined at the end of the
Valuation Period during which the Premium was received or the amount was
transferred to the Investment Division. In the case of the initial Premium,
accumulation units for that payment will be credited to the Sub-Account Value
held in the Money Market Investment Division until the end of the Free Look
Period. In the case of any subsequent Premium, accumulation units for that
payment will be credited at the end of the Valuation Period during which we
receive the Premium. The value of an Accumulation Unit for each Investment
Division for a Valuation Period is established at the end of each Valuation
Period and is calculated by multiplying the value of that unit at the end of the
prior Valuation Period by the Investment Division's Net Investment Factor for
the Valuation Period.
J355 Page 17
Policy Values, Loan and Nonforfeiture Provisions (continued)
NET INVESTMENT FACTOR
The net investment factor for any Investment Division for any Valuation Period
is determined by dividing (a) by (b), and subtracting (c) from the result where:
(a) is the net result of:
(i) the net asset value held in the Investment Division determined as
of the end of the current Valuation Period; plus
(ii) the amount of any dividend (or, if applicable, capital gain
distributions) on assets held in the Investment Division if the
"ex-dividend" date occurs during the current Valuation Period;
minus or plus
(iii) a charge or credit for any taxes incurred by or reserved for in the
Investment Division, which is determined by the Company to have
resulted from the investment operations of the Investment Division.
(b) is the net result of:
(i) the net asset value held in the Investment Division determined as
of the end of the immediately preceding Valuation Period; minus or
plus
(ii) the charge or credit for any taxes incurred by or reserved for in
the Investment Division for the immediately preceding Valuation
Period.
(c) is an amount representing the Mortality and Expense risk charge deducted
from each Investment Division on a daily basis, equal to an annual rate as
a percentage of the daily net asset value of each Investment Division. The
actual mortality and expense charge is determined by the company, but may
not exceed the annual guaranteed maximum Mortality and Expense charge of
.90%
The net investment factor may be greater than, less than, or equal to one.
Therefore, the accumulation unit value may increase, decrease or remain
unchanged.
The net asset value includes a deduction for an investment advisory fee. This
fee compensates the investment adviser for services provided to the Underlying
Fund. The fee may differ between Underlying Funds and may be renegotiated each
year.
CONTINUATION OF INSURANCE
If Premium payments cease, coverage under this policy or any attached riders
will continue until the Policy Value Account, less any outstanding loans, and
less loan interest accrued is insufficient to cover the monthly deduction for
the cost of insurance. When the amount is insufficient, the Grace Period
Provision will go into effect.
POLICY LOAN
While this policy is in force, the Owner, by Request, may obtain a loan from the
Company on the security of the policy. The minimum loan amount is $500. The
total amount of loans cannot be more than the maximum described in the Loan
Value Provision.
J355 Page 18
Policy Values, Loan and Nonforfeiture Provisions (continued)
EFFECT OF A LOAN
When a policy loan is made, funds are transferred out of the Series Account and
into the Loan Account. When a policy loan is repaid, the amount of repayment is
added according to current allocations to the Series Account.
A loan, whether or not repaid, will have a permanent effect on the Cash
Surrender Value and on the Death Benefit, as described in this policy. If not
repaid, any indebtedness will reduce the amount of Death Benefit Proceeds and
the amount available upon surrender of this policy.
A policy loan will not be treated as a taxable distribution under Section 72
unless:
o this policy is surrendered or lapsed while there is an outstanding
loan; or
o this policy is a modified endowment contract.
If this policy is a modified endowment contract, a 10% penalty will apply to the
amount of the loan included as gross income unless the loan is made after the
date the Owner becomes 59[]or becomes disabled.
LOAN INTEREST
Interest credited on the Loan Account is the loan interest rate less a maximum
of .90%.
A policy loan will be a first lien on the policy in favor of the Company.
The Owner must Request if any part of a Premium is to be applied to repay a
policy loan. The expense charge will not apply to repayments of policy loans.
Loan amounts will be withdrawn from all the Sub-Accounts on a pro rata basis.
The Owner may designate Loan repayments will be added to all the Sub-Accounts on
a pro rata basis.
LOAN VALUE
The maximum loan value is equal to:
90% of the Policy Value Account at the time of the loan
less
the current monthly deductions remaining for the balance of the policy year
less
interest on the loan to the next policy anniversary date.
J355 Page 19
Policy Values, Loan and Nonforfeiture Provisions (continued)
LOAN INTEREST RATE
The loan interest rate will be determined annually at the beginning of each
policy year. It is guaranteed for that policy year and applies to all loans
outstanding during that policy year. Interest is due and payable on each policy
anniversary. Interest not paid when due will be added to the loan and will bear
interest at the loan interest rate.
The maximum loan interest rate for policy loans is based on a Published Monthly
Average. That average is:
(a) The Moody's Corporate Bond Yield Average - Monthly Average Corporates
as published by Moody's Investors Service, Inc. or any successor
thereto; or
(b) In the event that the Moody's Corporate Bond Yield Average - Monthly
Average Corporates is no longer published, a substantially similar
average, established by regulation issued by the Commissioner.
The Company must reduce the loan interest rate if the maximum loan interest rate
is lower than the loan interest rate for the previous policy year by one-half of
one percent or more.
Any increase to the loan interest rate must be at least one-half of one percent.
No increase may be made if the loan interest rate would exceed the maximum loan
interest rate.
The Company will send to the Owner and any assignee of record with loans advance
notice of any increase in the rate.
SURRENDER BENEFIT
The Owner may surrender this policy for the Surrender Benefit. The Surrender
Benefit is the Policy Value Account less any outstanding policy loans and less
accrued loan interest on the date of surrender.
PAID-UP LIFE INSURANCE PROVISION
If the Insured is living and the policy is in force on the policy anniversary at
Attained Age 100, the entire Policy Value Account less any outstanding loans and
less loan interest accrued will be applied as a single Premium to purchase
paid-up insurance. This net single Premium will be based on the Sex-Distinct
Commissioners 1980 Standard Ordinary Smoker or Non-Smoker Mortality Table and 4%
interest.
J355 Page 20
Policy Values, Loan and Nonforfeiture Provisions (continued)
The paid-up policy may be surrendered at any time. If it is surrendered within
30 days after a policy anniversary, the Cash Value will not be less than it
would have been on that policy anniversary.
TAX CONSIDERATIONS
This policy is intended to constitute life insurance for tax purposes and is
designed to meet the requirements of Internal Revenue Code (Code) Sections 101
and 7702, as they existed on the Issue Date. If, in the Company's sole
discretion, the Cash Value at any time reaches an amount which could jeopardize
this policy's treatment as life insurance for tax purposes, the Company reserves
the right to refund the portion of the Premium or Cash Value in excess of the
allowable limits.
This policy may be purchased as a modified endowment contract. Distributions
from modified endowment contracts are subject to different taxation rules than
distributions from a life insurance policy that is not a modified endowment
contract.
If the policy is not a modified endowment contract when issued, the payment of
excess Premium or a material change in the benefits or terms of the contract as
provided in Code Section 7702A will cause the policy to be treated as a new
contract and may cause the policy to become a modified endowment contract. It is
entirely the Owner's responsibility to monitor Premium payments and material
changes to ensure that the contract does not become a modified endowment
contract.
Nothing in this policy is to be construed as tax advice, and the Company
recommends that the Owner discuss the tax consequences under the policy with a
competent tax adviser.
PARTIAL WITHDRAWAL PROVISION
The Owner may make a partial withdrawal from the Policy Value Account at any
time while the policy is in force. The minimum amount per withdrawal is $500.
The maximum amount that may be withdrawn is 90% of the Policy Value Account less
the Loan Account Value.
There is no administrative fee charged for the first partial withdrawal in any
policy year. However, a maximum administrative fee of $25 will be deducted from
the Policy Value Account for each additional partial withdrawal made in the same
policy year.
J355 Page 21
Policy Values, Loan and Nonforfeiture Provisions (continued)
The partial withdrawal will be effective on the Transaction Date. The Policy
Value Account will be reduced by the withdrawal amount, which will be taken from
all the Sub-Accounts on a pro-rata basis.
If the policy is in force under Option 1, Level Death Benefit, or Option 3,
Premium Accumulation, then the Death Benefit also will be reduced by the amount
of each withdrawal.
Withdrawals may not be repaid directly into the Policy Value Account. Any
payments received will be subject to the Additional Premium Payments Provision.
POSTPONEMENT
In accordance with state law, if the Company receives a Request for surrender,
partial withdrawal, or a loan, the Company may postpone any payment for up to 7
days. For Investment Divisions which are not valued on each business day, the
Company may defer until the next Valuation Date:
o determination and payment of any surrenders, partial withdrawals or
loans;
o determination and payment of any death proceeds in excess of the face
amount; and
reallocation of the Sub-Account value.
During the postponement period, the Sub-Account Value will continue to be
subject to the investment experience (gains or losses) of the Underlying Fund(s)
and all applicable charges.
EMERGENCY PROCEDURE
If the Company cannot value the Investment Divisions due to a national stock
exchange closure, with the exception of weekends or holidays, or if trading is
restricted due to an existing emergency as defined by the Securities and
Exchange Commission (SEC), or as otherwise ordered by the SEC, the Company may
postpone all procedures which require valuation of the Investment Divisions
until valuation is possible.
HOW VALUES ARE COMPUTED
All guaranteed calculations are based on the Sex-Distinct Commissioners 1980
Standard Ordinary Mortality Table, age nearest birthday, at an interest rate of
4% per year. These computations assume that Death Benefits are to be paid at the
end of the policy year in which death occurs. Any net single Premium will be
computed on the basis of the Insured's Attained Age and Premium class.
A detailed statement of the method of computing the values of this policy has
been filed with the Insurance Department of the state in which this policy is
delivered. All policy values equal or exceed those required by the law of that
state or jurisdiction.
J355 Page 22
Policy Values, Loan and Nonforfeiture Provisions (continued)
Transfer Provisions
TRANSFERS
The Owner may make Transfers by Request. The following provisions apply:
o While this policy is in force, the Owner, by request may Transfer all or a
portion of the Sub-Account Value among the Investment Divisions currently
offered by the Company.
o A Transfer will be effective upon the Transaction Date.
o There is no administrative charge for the first twelve Transfers made in a
calendar year. There is a maximum $10 administrative fee for each
subsequent Transfer. All Transfers made on a single Transaction Date will
be aggregated to count as only one Transfer toward the twelve free
Transfers; however, if a one time rebalancing Transfer also occurs on the
Transaction Date, it will be counted as a separate and additional Transfer.
DOLLAR COST AVERAGING
By Request, the Owner may elect Dollar Cost Averaging in order to purchase units
of the Variable Sub-Accounts over a period of time.
The Owner may Request to automatically Transfer a predetermined dollar amount,
subject to the Company's minimum, at regular intervals from any one or more
designated Variable Sub-Accounts to one or more of the remaining, then
available, Variable Sub-Accounts. The unit value will be determined on the dates
of the Transfers. The Owner must specify the percentage to be Transferred into
each designated Variable Sub-Account. Transfers may be set up on any one of the
following frequency periods: monthly, quarterly, semiannually, or annually. The
Transfer will be initiated on the Transaction Date one frequency period
following the date of the Request. The Company will provide a list of Variable
Sub-Accounts eligible for Dollar Cost Averaging which may be modified from time
to time. Amounts Transferred through Dollar Cost Averaging are not counted
against the twelve free Transfers allowed in a calendar year.
The Owner may terminate Dollar Cost Averaging at any time by Request. Dollar
Cost Averaging will terminate automatically upon the annuity commencement date.
J355 Page 23
Transfer Provisions (continued)
Participation in Dollar Cost Averaging and the Rebalancer Option at the same
time is not allowed. Participation in Dollar Cost Averaging does not assure a
greater profit, or any profit, nor will it prevent or necessarily alleviate
losses in a declining market. The Company reserves the right to modify, suspend,
or terminate Dollar Cost Averaging at any time.
THE REBALANCER OPTION
By Request, the Owner may elect the Rebalancer Option in order to automatically
Transfer among the Variable Sub-Accounts on a periodic basis. This type of
automatic Transfer program automatically reallocates the Variable Account Value
to maintain a particular percentage allocation among Variable Sub-Accounts
selected by the Owner. The amount allocated to each Variable Sub-Account will
grow or decline at different rates depending on the investment experience of the
Variable Sub-Account.
The Owner may Request that rebalancing occur one time only, in which case the
Transfer will take place on the Transaction Date of the Request. This Transfer
will count as one Transfer towards the twelve free Transfers allowed in a
calendar year.
Rebalancing may also be set up on a quarterly, semiannual, or annual basis, in
which case the first Transfer will be initiated on the Transaction Date one
frequency period following the date of the Request. On the Transaction Date for
the specified Request, assets will be automatically reallocated to the selected
funds. Rebalancing will continue on the same Transaction Date for subsequent
periods. In order to participate in the Rebalancer Option, the entire Variable
Account Value must be included. Transfers set up with these frequencies will not
count against the twelve free Transfers allowed in a calendar year.
The Owner must specify the percentage of Variable Account Value to be allocated
to each Variable Sub-Account and the frequency of rebalancing. The Owner may
terminate the Rebalancer Option at any time by Request. The Rebalancer Option
will terminate automatically upon the annuity commencement date.
Participation in the Rebalancer Option and Dollar Cost Averaging at the same
time is not allowed. Participation in the Rebalancer Option does not assure a
greater profit, nor will it prevent or necessarily alleviate losses in a
declining market. The Company reserves the right to modify, suspend, or
terminate the Rebalancer Option at any time.
J355 Page 24
ADJUSTABLE DEATH BENEFIT. Proceeds payable at death are subject to policy
provisions. See Death Benefit Provisions. Flexible Premiums payable while the
Insured is alive. If no Premiums are paid after the first Premium, or if
subsequent Premiums prove to be too low, this coverage may cease prior to age
100. ALL PAYMENTS AND VALUES BASED ON THE INVESTMENT EXPERIENCE OF THE
INVESTMENT DIVISIONS ARE VARIABLE, MAY INCREASE OR DECREASE ACCORDINGLY, AND ARE
NOT GUARANTEED AS TO AMOUNT. Non-Participating.
J355 Page 25