EXHIBIT 10
PROTECTIVE LIFE INSURANCE COMPANY
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR FLEXIBLE
PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICIES
PURSUANT TO RULE *6e-3(T)(b)(12)(iii)
This document sets forth the administrative procedures that will be followed by
Protective Life Insurance Company ("Protective Life" or the "Company")
concerning the issuance of last survivor Flexible Premium Variable and Fixed
Life Insurance Policy (the "Policy"), the transfer of assets held thereunder,
and the redemption by Owners of their interests in such Policy.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES
A. APPLICATION AND UNDERWRITING
Upon receipt of a completed application, the Company will follow
underwriting (e.g., evaluation of risks) procedures designed to determine
whether the applicants are insurable. The underwriting policies of the Company
are established by management. The Company uses information from the application
and, in some cases, inspection reports, attending physician statements, or
medical examinations to determine whether a Policy should be issued as applied
for, rated, or rejected. Medical examinations of applicants are required for
Policies in excess of certain prescribed amounts and for most insurance applied
for by applicants over age 50. Medical examinations are requested of any
applicant, regardless of age and amount of requested coverage, if an examination
is deemed necessary to underwrite the risk. Substandard risks may be referred to
reinsurers for full or partial reinsurance of the substandard risk.
The Company requires blood samples to be drawn with applications for
coverage over $100,000 (ages 16-50) or $150,000 (age 51 and over). Blood samples
are tested for a wide range of chemical values and are screened for antibodies
to the HIV virus. Applications also contain questions permitted by law regarding
the HIV virus which must be answered by the proposed insureds. The Company will
not issue a Policy until the underwriting procedures have been completed.
Insurance coverage under a Policy will begin as of the Policy Effective
Date, which is generally the Issue Date. If, an initial minimum premium is
received with an application, the Policy Effective Date will be the later of the
date that the application is signed or any required medical examination is
completed. Temporary life insurance coverage (including various types of
conditional receipt) may be provided under the terms of the temporary life
insurance (or conditional receipt) agreement. In accordance with the terms of
the such agreements, temporary life insurance coverage may not exceed $500,000
and may not be in effect for more than 90 days.
In order to obtain a more favorable Issue Age, the Company may permit Owners
to "backdate" a Policy by electing a Policy Effective Date which is up to six
months prior to the date of the original application. Charges will be deducted
as of the new Policy Effective Date for the backdated period for Monthly
Deductions. Calculation of the No-Lapse Guarantee will include the Minimum
Monthly Premium for the backdated period.
B. INITIAL PREMIUM PROCESSING AND PREMIUM PAYMENTS
Premiums for the Policies will not be the same for all Owners. The Company
requires that the initial premium payment for a Policy be at least equal to the
minimum required for the mode of premium selected. For example, the initial
premium payment can never be less than $150 quarterly. Owners who request to pay
premiums on a preauthorized checking withdrawal basis are required to pay an
amount equal to two months premiums upon issuance of their Policy. Premiums paid
on a preauthorized checking withdrawal basis can never be less than $50 per
month.
For Policies issued in states where, upon cancellation during the
Cancellation Period, the Company returns at least the Owner's premium payments,
the Company reserves the right to allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) to the
Oppenheimer Money Fund Sub-Account or the Fixed Account until the expiration of
the number of days in the Cancellation Period plus six days starting from the
date the Policy is mailed from the Home
Office. Upon expiration of this period, the Policy Value in the Oppenheimer
Money Fund Sub-Account or the Fixed Account and all Net Premium Payments will be
allocated according to the Owner's allocation instructions then in effect. In
all other states, the Company will allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) in
accordance with the Owner's instructions.
Following the initial premium, the Owner may pay planned premiums in any
amount on a quarterly, semi-annual, and annual basis. For the first Policy Year,
the amount of the planned premiums can be no less than the minimum initial
premium payment calculated on an annual basis. The minimum initial premium
payment required depends on a number of factors, including the age, sex and rate
class of each of the proposed insured, the initial basic and supplemental face
amounts, any supplemental benefits and/or riders and the planned, periodic
premiums selected. If the Owner fails to pay the planned premiums, this will not
necessarily cause the Policy to lapse.
An Owner may make unscheduled premium payments, at any time, in any amount.
A Policy will remain in force while the surrender value is sufficient to pay the
monthly deduction unless the Policy is otherwise protected by the No-Lapse
Guarantee provision. The amount of premium, if any, which must be paid to keep
the Policy in force depends upon the surrender value of the Policy, which in
turn depends on such factors as the investment experience and the amount of
monthly deductions which includes cost of insurance. While not every insured is
subject to the same cost of insurance rate, there will be a single "rate" for
Joint Insureds in a given actuarial category.
The cost of insurance rate can vary among Policies, and from one Monthly
Anniversary Day to the next within the same Policy, depending on differences in
the cost of insurance rates, the Net Amount at Risk associated with the Basic
Face Amount and, if applicable, the Supplemental Face Amount. The monthly cost
of insurance charge is equal to the sum of the cost of insurance charges for the
Basic Face Amount and each increment of Supplemental Face Amount, which are
calculated separately based on the net amount at risk under each coverage.
For the purpose of computing the Net Amount at Risk for an Increment of Face
Amount, Policy Value is first apportioned to the Basic Face Amount and then
apportioned to any Supplemental Face Amount that is part of the Initial Face. If
Policy Value exceeds the Initial Face Amount, it is apportioned to each increase
in Supplemental Face Amount in the order that such Supplemental Face Amount was
added to the Policy.
The monthly cost of insurance rates for the Basic Face Amount and, if
applicable, the cost of insurance rates for a Supplemental Face Amount can vary
from one month to another. The rates are a function of each Joint Insured's age
at nearest birthday, sex and rate class, type of Face Amount (Basic or
Supplemental), and the number of years that a Policy has been in force since the
Policy Effective Date or the effective date of a Face Amount increase. In
general, current cost of insurance rates are greater for the Basic Face Amount
than for Supplemental Face Amount purchased at the same time, whereas guaranteed
rates for the Basic Face Amount are the same as for Supplemental Face Amount
purchased at the same time.
Protective Life currently places each Joint Insured in the following rate
classes, based on underwriting: Preferred Nonsmoker (ages 20-75), Nonsmoker
(ages 20-85), Tobacco (ages 20-85), and Smoker (ages 20-85) and substandard rate
classes which involve a higher mortality risk than the Nonsmoker or Smoker,
Tobacco classes.
Protective Life will also determine a separate cost of insurance rate for
each increment of Face Amount above the Initial Face Amount based on the Policy
duration and the Issue Age, sex and rate class of each Joint Insured at the time
of the request for an increase. The following rules will apply for purposes of
determining the rates.
Protective Life places each Joint Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to both the Basic and Supplemental portions of the
Initial Face Amount. When an increase in Face Amount is requested, Protective
Life conducts underwriting before approving the increase (except as noted below)
to determine whether a
different rate class will apply to the increase. If the rate class for the
increase has lower cost of insurance rates than the original rate class (or the
rate class of a previous increase), the rate class for the increase also will be
applied to the Initial Face Amount and any previous increases in Face Amount
beginning as of the effective date of the increase. If the rate class for the
increase has a higher cost of insurance rate than the original rate class (or
the rate class of a previous increase), the rate class for the increase will
apply only to the increase in Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of an exercise of any available guaranteed
option to increase the Face Amount without underwriting.
In no event may the total of all premiums paid in any Policy year exceed the
current maximum premium limitations for that year established by Federal tax
laws or by the Company. If the Owner pays a premium that would result in total
premiums exceeding the current maximum premium limitations, the Company will
only accept that portion of the premium that will make total premiums equal the
maximum. Any premium in excess of that amount will be returned or applied as
otherwise agreed and no further premiums will be accepted until allowed by the
current maximum premium limitations prescribed by Federal tax law.
C. LAPSE AND REINSTATEMENT PROCEDURES
The Company offers a "No Lapse Guarantee" to all Owners of Policies for a
specified period of time from the policy effective date. This guarantee offers
continued life insurance coverage for the requested initial face amount provided
the Owner of the Policy continues to pay minimum monthly premiums equivalent to
one twelfth of the minimum first year annual premium, and after that, pays
premiums equivalent to a minimum monthly guarantee premium throughout the
Guarantee period. The minimum monthly guarantee premium in the second year and
later is equal to the minimum renewal annual premium divided by 12 and
multiplied by the number of months left in the Guarantee period.
The Policy's No Lapse Guarantee Provision will be threatened if the Company
does not receive an amount equal to the minimum monthly guarantee premium
specified in the Policy.
During the first 12 Policy Years, a surrender charge will be deducted if the
Policy lapses.
The Policy may be reinstated within five years after lapse and while the
Insured is still living unless the Policy has been surrendered. A Policy will be
reinstated by the Company provided that: (1) a written application for
reinstatement is received at the Home Office; (2) one of the insureds is still
living, (3) evidence of insurability satisfactory to the Company is provided;
(4) the Owner pays net premiums equal to (a) all monthly deductions due upon
lapse and (b) which are at least sufficient to keep the Reinstated Policy in
force for three months; (5) the Owner repays or reinstates any outstanding
policy debt or liens as of the date of lapse and (6) the Policy has not been
surrendered.
The amount of cash value in the Policy on the date the Policy is approved
for reinstatement will be equal to the amount of any Policy Debt reinstated or
repaid at the time of reinstatement plus the Net Premiums paid at reinstatement.
The effective date of reinstatement will be the date the Company approves the
application for reinstatement. A full monthly deduction will be charged for the
month of reinstatement.
II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
The principal policy provisions and administrative procedures regarding
"redemption" transactions are summarized below. Due to the insurance nature of
the Policies, the procedures that will be followed may be different from the
redemption procedures for mutual funds and contractual plans.
A. SURRENDERS AND PARTIAL WITHDRAWALS
An Owner of a Policy may submit a written request to the Company to
surrender the Policy at any time prior while either one of the joint insureds
are living and while the Policy is in effect. The amount available for surrender
is the surrender value as of the valuation day on or next following the date the
written surrender request, the Policy and any other required documents are
submitted and received by the
Company. If the Policy itself isn't returned to the Company the request must be
accompanied by completed affidavit of lost policy. Amounts payable from the
Variable Account upon surrender or a partial withdrawal will be paid within
seven calendar days of receipt of the written request.
Upon surrender, the Company will pay in a lump sum the surrender value that
is equal to the cash value as of the valuation day less any outstanding Policy
Debt which includes accrued interest less any applicable surrender charges.
Coverage under a Policy will end as of the date of surrender.
If the Policy is surrendered, if the Policy lapses, or if the initial Basic
face amount is reduced, through the first 12 Policy Years, a surrender charge
will be deducted from the Policy Value. The surrender charge, which is a
contingent/deferred sales charge, will be deducted before any surrender value is
paid.
The surrender charge varies depending on a number of factors including Basic
and Supplemental face amounts, issue-ages, sex and rate-classification of the
Insureds and is set forth in the Policy. The surrender charge decreases over the
twelve-year period.
Individualized illustrations will be provided to each prospective Owner
based on the Face Amounts, Death Benefit option, and anticipated pattern and
amount of premium payments suggested by the Owner. Such illustrations will be
accompanied by a sample schedule of the actual surrender charges for Policy
being illustrated.
There are no surrender charges assessed after the 12th Policy Year.
In the event of a decrease in the Basic Face Amount, a pro rata surrender
charge will be imposed equal to the portion of the total surrender charge that
corresponds to the percentage by which the Basic Face Amount is reduced. This
surrender charge will be allocated to each Sub-Account and to the Fixed Account
based on the proportion of Policy Value in each Sub-Account and in the Fixed
Account. A surrender charge imposed in connection with a reduction in the Basic
Face Amount reduces the remaining surrender charge that may be imposed in
connection with a surrender of the Policy.
After the first Policy Year, the Owner may also request a partial withdrawal
by sending a written request to the Company. An Owner may make a partial
withdrawal of an amount equal to or greater than $500. The request must be
submitted in writing to the Company. The Company will withdraw the amount
requested, plus a withdrawal charge, as of the date the request is received in
the Home Office. The Owner may elect to deduct the amount of the withdrawal from
any Sub-Account or the Fixed Account. If the Owner does not specify an
allocation, or if the Sub-Account value or Fixed Account value is insufficient
to carry out the request, the withdrawal will be based on the proportion that
such Sub-Account value(s) and Fixed Account value, bear to the total unloaned
Policy Value on the valuation day immediately prior to the withdrawal. No
withdrawal amounts will be processed if the withdrawal would result in there
being insufficient surrender value to pay any surrender charges applicable upon
a full surrender.
The Company will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This withdrawal
charge will be deducted from the Policy Value in addition to the amount
requested to be withdrawn and will be considered to be part of the withdrawal
amount. The withdrawal charge will be allocated in the manner described above
for the requested amount.
The death benefit will be affected by withdrawals. If death benefit option A
is in effect, then the Company reserves the right to reduce the face amount by
the amount withdrawn (inclusive of withdrawal charge). If the Owner requests
that the initial face amount be retained, the Company will honor this request
provided the amount of withdrawal does not exceed $2,000. If the request for
withdrawal exceeds $2,000, then the Company will request that satisfactory
evidence of insurability be provided with the withdrawal request. If death
benefit option B is in effect, then the Company will not reduce the face amount.
The face amount after a partial withdrawal may not be less than the minimum
amount for which the Policy would be issued under the Company's current rules.
If the withdrawal causes the Policy to fail to qualify as a life insurance
contract under applicable tax laws, as interpreted by the Company, it will not
be processed. If the Face Amount at the time of withdrawal requires a decrease
of Face Amount, the
reduction is made first from the most recent increase, then from prior
increases, if any in reverse order of their being made and finally from the
initial Face Amount.
B. CHANGES IN FACE AMOUNT
An Owner may increase or decrease the amount of Supplemental face amount of
the Policy after the first Policy Anniversary by submitting a written request to
the Company during the lifetime of both of the insureds. A supplemental
application is required for an increase in face amount. The Company reserves the
right to require satisfactory evidence of insurability for the requested
increase portion. The Basic face amount can not be increased. Face Amount
increases and decreases are subject to the following rules:
1. For increases in face amount, the attained age of the older insured must
be less than the maximum current issue age for the Policies, as
determined by the Company from time to time.
2. The amount of the requested increase must be at least $25,000.
3. Any increase in face amount will be effective on the date indicated on
the Supplemental policy specifications page, which will be sent to the
Owner.
4. If the No-Lapse Guarantee provision is in effect, the minimum monthly
premium amount required to keep the Policy in force will generally
increase and additional premium payments may be required.
5. The monthly cost of insurance charge will be adjusted as of the next
monthly anniversary day following the date of the written request.
6. There will be an administrative charge assessed based on a rate per
$1,000 of increased coverage. This administrative charge will be deducted
from the Policy Value monthly during the twelve month period following
the effective date of the increase. The fee will be equal to the lesser
of $23.50 plus $0.06 per thousand of increase in Supplemental face amount
or $250.
7. A decrease in face amount will first be applied against any
Supplementary face amount, until the minimum Supplemental face amount has
been reached. Any remaining decrease will be applied against the Basic
face amount. A decrease request will not be accepted by the Company, if
the amount requested would decrease the Basic face amount below $100,000.
8. A proportionate Contingent Deferred Sales Charge will be imposed for
decreases in the Basic face amount (please note previous section on
"Surrenders and Partial Withdrawals").
The Company reserves the right to not process any decrease in Face Amount if
compliance with guideline premium limitations under current tax law resulting
from such a decrease would result in immediate termination of the Policy, or if
to effect the requested decrease payments to the Owner would have to be made
from Policy Value for compliance with the guideline premium limitations, and the
amount of such payments would exceed the Surrender Value of the Policy. In
addition, the Company reserves the right to prohibit any decrease in Face Amount
(i) for three years following an increase in Face Amount and (ii) for one Policy
Year following the last decrease in Face Amount.
C. CHANGE IN DEATH BENEFIT OPTION
On or after the first Policy Anniversary, the Owner may request in writing a
change in the death benefit option. Any change will go into effect on the
monthly anniversary day that coincides with or next follows the date the Company
receives and accepts the request for change. If the Owner requests a change from
the Option A to Option B, the face amount will be increased to equal the face
amount on the effective date of change. If the Owner requests a change from a
Option B to Option A, the face amount will be decreased so that it equals the
death benefit less the policy value on the date of the change. The Company
reserves the right to require satisfactory proof of insurability before allowing
a change in death benefit options.
D. DEATH BENEFIT CLAIMS
While the Policy remains in force, the Company will pay a death benefit to
the named beneficiary in accordance with the death benefit option elected by the
Owner. The Company will pay the death benefit
within seven calendar days after receipt in its home office of all necessary
proof of death of both of the insureds. Payment of a death benefit may be
postponed under certain circumstances, such as the New York Stock Exchange being
closed for reasons other than customary weekend and holiday closings. The death
benefit proceeds will be determined as of the date of the insured's death and
will be equal to:
1. the death benefit under the option elected; plus
2. any additional benefits due under any supplemental and/or riders
benefits attached to this Policy; less
3. any policy debt; less
4. any liens for payments made under an accelerated death benefit rider or
endorsement plus accrued interest; less
5. any unpaid monthly deductions if the insured dies during the grace
period.
The death benefit proceeds will be determined based on the death benefit
option elected by the Owner on the application for insurance or any request for
change in death benefits. If Death Benefit Option A is chosen, the death benefit
will be the greater of (a) the face amount of insurance on the insured's date of
death; or (b) a specified percentage of the policy value on the date of the
insured's death as indicated on the table of percentages included in the Policy.
If Death Benefit Option B is chosen, the death benefit will be the greater of
(a) the face amount of insurance on the insured's date of death plus the policy
value on the insured's date of death: or (b) a specified percentage of the
policy value on the insured's date of death as indicated on the Table of
Percentages included in the Policy. The specified percentage is 250% when the
Insured has reached an "Attained Age" of 40 or less by date of death, and
decreases each year thereafter to 100% when the Insured has reached an "Attained
Age" of 95 at death.
E. POLICY LOANS
After the first Policy Anniversary and while either of the insureds are
still living, an Owner may borrow from the Company no less than $500 and not
more than 90% of the Surrender Value on the date the loan request is received.
The Owner must submit a written request for a Policy loan. Any amount due an
Owner under a loan will generally be paid within seven calendar days after the
Company receives a loan request.
When a Policy loan is made, an amount equal to the loan is transferred out
of the Sub-Account(s) and the Fixed Account and into the Policy's loan account.
The Owner can specify the Sub-Accounts and Fixed Account from which collateral
is transferred to the loan account. If no allocation is specified, collateral is
transferred from each Sub-Account and from the Fixed Account in the same
proportion that each Sub-Account value and the Fixed Account value bears to the
total unloaned Policy value on the date that the loan is made.
Like the Fixed Account, a Policy's loan account is part of Protective Life's
General Account. During the first ten Policy years, the Company will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and after, the Company will charge interest daily on any
outstanding loan at an effective annual rate not to exceed 4.25%. Interest is
due and payable at the end of each Policy Year while a loan is outstanding. If
interest is not paid when due, the amount of the interest is added to the loan
and becomes part of the Policy Debt.
The loan account is credited with interest at an effective annual rate of
not less than 4.0%. The maximum net cost of a loan is 2.0% per year during
Policy Years 1 through 10, and .25% thereafter. During the first ten Policy
years and on each Policy anniversary, the net difference between interest earned
and interest charged will be transferred to the loan account and deducted from
the Sub-Account(s) and the Fixed Account in the same proportion that each
Sub-Account value and the Fixed Account value bears to the total unloaned Policy
value. The Company determines the rate of interest to be credited to the loan
account in advance of each calendar year. The rate, once determined, is applied
to the calendar year that follows the date of determination.
If both of the insureds dies while a loan is outstanding, the Policy debt is
deducted from the death benefit in calculating the death benefit proceeds.
A Policy loan may be repaid in whole or in part at any time while one of the
insureds is living and the Policy is in force. Loan repayments will be credited
as of the date they are received in the Home Office. When a loan repayment is
made, Policy Value in the loan account in an amount equal to the repayment will
be transferred from the loan account to the Sub-Accounts and/or the Fixed
Account in the same proportion that premium payments are allocated. Amounts paid
while a Policy loan is outstanding will be treated as premiums unless the Owner
requests in writing that these payments be treated as repayment of indebtedness.
III. TRANSFERS
A Policy's Policy Value, except amounts credited to the loan account, may be
transferred among the Sub-Accounts and between the Fixed Account which is a part
of the Company's General Account and the Sub-Accounts.
Upon receipt of written notice or a telephone request from the Owner, the
Company will accept transfer requests subject to the limitations described
below. Transfer requests will be accepted at any time on or after the later of
the following: (1) thirty days after the Policy effective date, or (2) six days
after the expiration of the cancellation period. Transfers (including telephone
transfers) are processed as of the date the request is received by the Company.
The minimum amount of Policy value that may be transferred is the lesser of:
(1) $100; or (2) the entire amount in any Sub-Account or the Fixed Account from
which the transfer is made. If, after the transfer, the amount remaining in a
Sub-Account(s) or the Fixed Account is less than $100, the Company reserves the
right to transfer the entire amount instead of the requested amount. The Company
also reserves the right to limit transfers to 12 per Policy year and to charge a
transfer fee for each additional transfer over 12 in any Policy year. If the fee
is imposed, it will be deducted from the amount requested to be transferred. If
an amount is being transferred from more than one Sub-Account or the Fixed
Account, the transfer fee will be deducted proportionately from the amount be
transferred from each.
Protective Life reserves the right to restrict the maximum amount which may
be transferred from the Fixed Account in any Policy Year. The maximum is
currently the greater of: (1) $2,500; or (2) 25% of the Fixed Account value.
Telephone transfers may be made upon instructions given by telephone,
provided the appropriate election has been made on the application or written
authorization is provided. We require a form of personal identification before
acting on these telephone instructions. All transfer requests made by telephone
instruction will be recorded as a method of documenting authenticity. A
confirmation of all instructions received by telephone will be mailed to the
Owner.
The Company currently intends to allow transfers for the foreseeable future,
Although the Prospectus provides that the Company may at any time, for any class
of Policies, modify, restrict, suspend, or eliminate the transfer privilege
(including telephone transfers). In particular, we reserve the right not to
honor transfer requests by a third party holding a power of attorney from an
Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Policies.
The Owner may direct the Company to systematically and automatically
transfer, on a monthly or quarterly basis, specified dollar amounts from or to
the Fixed Account or from or to any Sub-Account(s). This is known as the dollar
cost averaging method of investment. By transferring on a regularly scheduled
basis as opposed to allocating the total amount at one time, an Owner may be
less susceptible to the impact of market fluctuations in Sub-Account unit
values. The Company makes no guarantee that the dollar cost averaging method
will result in a profit or protect against loss. The Company reserves the right
to assess a processing fee for this service. The Company reserves the right to
stop offering dollar cost averaging upon 30 days' written notice.
To elect dollar-cost averaging, the fixed account value must be at least
$5,000 at the time of election. The Owner may elect dollar cost averaging for
periods of at least 12 months but no longer than 48 months. At least $100 must
be transferred on a monthly basis and a minimum of $300 on a quarterly basis.
Dollar-cost averaging transfers may commence on any day of the month that the
Owner requests, except the 29th, 30th, or 31st.
The Company will continue to process dollar cost averaging transfers until
the earlier of the following:
(1) the designated number of transfers has been completed;
(2) the Fixed Account value is depleted;
(3) the Owner, by written notice, instructs the Company to cease the
automatic transfers;
(4) a grace period begins under the Policy; or
(5) the maximum amount of Policy value has been transferred under a dollar
cost averaging election.
The owner may direct the Company to systematically and automatically
transfer on a quarterly, semiannual, or annual basis, contract value among
specified Variable Sub-Accounts. This is known as the portfolio rebalancing
method of investment and is done to achieve a particular percentage allocation
among such Sub-Accounts. By transferring on a regularly scheduled basis as
opposed to allocating the total amount at one time, an Owner may be less
susceptible to the impact of market fluctuations in Variable Sub-Account unit
values. The Fixed Account value will not be considered in the automatic transfer
process. The Company makes no guarantee that the portfolio rebalancing method
will result in a profit or protect against loss. The Company reserves the right
to assess a processing fee for this service. The Company reserves the right to
stop offering portfolio rebalancing upon 30 days' written notice.
The Applicant/Owner can elect portfolio rebalancing at the time of
application or any time thereafter by submitting a written request to the
Company. This feature is available on a quarterly, semiannual, and annual basis
and may commence on any day of the month that the Owner requests, except the
29th, 30th or 31st. Once elected, portfolio rebalancing will begin on the first
modal anniversary following the election.
The Company will continue to process these automatic transfers until the
earlier of the following:
(1) Variable Sub-Account values are depleted;
(2) the Owner requests the company to cease the automatic transfers, by
written notice. This can also be requested by telephone if the owner
previously authorized us to take telephone instructions.
IV. REFUNDS
The right to examine and cancel the Policy is as defined in the Policy. The
Owner may cancel a Policy for a refund during the Cancellation Period by
returning it to the Company's home office or to the sales representative who
sold it along with a written request. The Cancellation Period is determined by
the law of the state in which the application is signed and is shown in the
Policy. In most states, it expires at the latest of: (1) 10 days after the Owner
receives the Policy; (2) 45 days after the Owner signs the application; or
(3) 10 days after the Company mails or delivers a Notice of Right of Withdrawal.
Return of the Policy by mail is effective when it is received at the home
office.
Within seven calendar days after receiving the returned Policy, the Company
will refund (i) the difference between premiums paid and amounts allocated to
the fixed account or the variable account (after deduction of any policy fees
and/or other charges), plus (ii) fixed account value determined as of the date
the returned Policy is received, plus (iii) variable account value determined as
of the date the returned Policy is received. This amount may be more or less
than the aggregate Premium Payments. In states where required, the Company will
refund premiums paid to the Owner of the Policy.
An increase in Face Amount may also be cancelled by the Owner in accordance
with the Policy's cancellation period provisions. The amount refunded will be
calculated in accordance with the provisions described above. If no additional
premium payments are required in connection with the Face Amount increase, the
amount refunded is limited to that portion of the first monthly deduction
following the increase and will be reallocated to the Sub-Account(s) and the
Fixed Account in the same proportion that each Sub-Account Value and the Fixed
Account value bears to the total unloaned Policy Value as of the effective date
of the cancellation. The effective date of this cancellation will be equal to
the effective date of the face increase.
V. GENERAL PROVISIONS
A. SUICIDE
If either of the joint insureds commits suicide, while sane or insane,
within two years from the Policy Effective Date, the death benefit will be
limited to the premiums paid before death, less any Policy debt and less any
withdrawals. If either of the joint insureds commits suicide, while sane or
insane, within two years after an increase in face amount, the death benefit
with respect to such increase shall be limited to the sum of the monthly cost of
insurance charges deducted for such increase.
B. REPRESENTATIONS AND CONTESTABILITY
The Company can not contest the Policy or any supplemental benefit and/or
rider after the Policy or rider has been in force during the insureds' lifetime
for two years from the Policy Effective Date or the effective date of the rider,
unless fraud is involved. The Company also has the right to contest the validity
of any policy change based on material misstatements made in any application for
that change and any reinstatement of benefits within two years during the
lifetime of the insureds after the reinstatement has been approved.
C. MISSTATEMENT OF AGE OR SEX
Questions in the application concern the insureds' dates of birth and sex.
If either of the dates of birth or sex given in the application or any
application for supplemental benefits and/or riders is not correct, the death
benefit and any benefits provided under any riders to this Policy will be
adjusted to those that would have been purchased by the most recent cost of
insurance change and the cost of any such supplemental benefits provided by such
riders, at the correct age and sex.