EXHIBIT 11
STRATEGIC BENEFIT VUL
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES
FOR POLICIES PURSUANT TO RULE 6E-3(T)(B)(12)(III)
This document sets forth the administrative procedures that will be followed by
Security Life of Denver ("Security Life") in connection with the issuance of its
Strategic Benefit flexible premium variable universal life insurance policies
(the "policies") issued through Security Life Separate Account L1 (the "Separate
Account"), the transfer of assets held under the policies, and the redemption of
interests in policies for use on multi-life basis when the insured people share
a common employment or business relationship.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF THE POLICIES
A. Offering of the Policy
The policy is offered only to corporate entities or qualifying groups
of ten or more insured people who may be individual owners ("owners")
who satisfy certain suitability standards. The policy may be purchased
to insure the life of a person (an "insured") in whom the owner has an
insurable interest. Security Life requires satisfactory evidence of
insurability, which may include a medical examination of the insured.
The issue ages are 15 through 85. Age is determined by the insured's
age as of the birthday nearest the policy date.
Generally, a minimum total group first year premium of at least
$250,000 is required. However, depending on underwriting circumstances,
the minimum total group first year premium may be reduced. There is no
minimum required base death benefit, although a minimum target death
benefit of $50,000 per policy is required. The minimum target death
benefit on some policies may be less as long as the average target
death benefit for the group at policy issuance is at least $50,000.
Acceptance of an application depends on Security Life's underwriting
rules. Security Life reserves the right to reject an application for
any reason.
If a policy has more than one owner (joint owners), then transactions
under the policy except for telephone transfers of account value
require the authorization of all owners.
B. Cost of Insurance Charges Structure, Payments and Underwriting
Standards
Security Life places the insured in a premium class when the policy is
issued, based on underwriting. This original premium class applies to
the initial stated death benefit.
1
The cost of insurance charge for a policy is based on the age at issue,
sex, premium class of the insured, and on the policy year. Therefore
the charge varies from time to time. Security Life places insureds in
the following premium classes, based on underwriting: Standard smoker
(ages 0-85); and Standard Non-smoker (ages 20-85). Security Life's
definition of "Smoker" includes the use of cigarettes, cigars, pipes,
chewing tobacco, nicotine chewing gun or patch, snuff or any other
tobacco or nicotine-based product or, insureds may be placed in a
substandard rate class, with a higher mortality risk than the standard
smoker or standard non-smoker classes.
Security Life guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the
maximum cost of insurance set forth in the policies. The guaranteed
cost of insurance rate for standard classes are based on the 1980
Commissioners' Standard ordinary mortality Tables, Male or Female,
Smoker or Nonsmoker Mortality Premiums (1980 CSO Tables). The
guaranteed cost of insurance rates for substandard classes are based on
multiples of or additives to the 1980 CSO Tables.
At any time, Security Life's current cost of insurance may be less than
the guaranteed cost of insurance that is set forth in the policy.
Current cost of insurance rates are determined based on expectations as
to future mortality, investment earnings, expenses, taxes, and
persistency experience. These rates may change from time to time.
Cost of insurance rates (whether guaranteed or current) for an insured
in a standard non-tobacco class are equal to or lower than guaranteed
cost of insurance for an insured of the same age and sex in a standard
tobacco class. Cost of insurance rates (whether guaranteed or current)
for an insured in a standard non-tobacco or tobacco class are generally
lower than guaranteed cost of insurance for an insured of the same age
and sex and tobacco status in a substandard class.
The cost of insurance will not be the same for all policies. Insurance
is based on the principle of pooling and distribution of mortality
risks which assumes that each owner is charged a cost of insurance
commensurate with the insured's mortality risk as actuarially
determined, reflecting factors such as age, sex, health, and
underwriting method. A uniform cost of insurance charge for all
insureds would discriminate unfairly in favor of those insureds
representing higher risks. However, there will be a uniform cost of
insurance charge for all insureds of the same issue age, sex, policy
duration and underwriting classification.
If the insured's age or sex has been misstated in the application for
the policy or in any application for supplemental or rider benefits,
and if the misstatement becomes known during the lifetime of the
insured, then policy values will be adjusted to reflect the correct
monthly deductions (based on the correct age or sex) since the policy
date. If the policy's values are insufficient to cover the monthly
deduction on the prior monthly date, the grace period will be deemed to
have begun, and notification will be sent to the owner at least 61 days
prior to the end of the grace period. See "Policy Termination and Grace
Period," below.
2
C. Death Benefit
The policy provides coverage on a named insured and a Death Benefit
payable upon the death of the insured. The policy will remain in force
as long as the policy's cash surrender value is sufficient to cover the
charges due.
On or after one year from the policy date, the owner may request a
reduction in the stated death benefit, by written notice to Security
Life, subject to the following rules. If a change in the stated death
benefit would result in total premiums paid exceeding the premium
limitations prescribed under current tax law to qualify the policy as a
life insurance contract, Security Life will refund promptly to the
owner the excess above the premium limitations.
The minimum amount of a decrease in stated death benefit is $1,000, and
any decrease in stated death benefit will become effective on the
monthly processing date next following the date that notice requesting
the decrease is received and approved by Security Life. Security Life
reserves the right to decline a requested decrease in the stated death
benefit if compliance with the guideline premium limitations under
current tax law resulting from this 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 the accumulated value
for compliance with the guideline premium limitations, and the amount
of such payments would exceed the cash surrender value under the
policy.
At any time the owner may request an increase in the stated death
benefit; any increase in the stated death benefit must be at least
$1,000 (unless the increase is effected pursuant to a rider providing
for automatic increases in stated death benefit), and an application
must be submitted. An increase that is not guaranteed by rider will
require satisfactory evidence of insurability and must meet Security
Life's underwriting rules. The increase in stated death benefit will
become effective on the next monthly processing date after the request
is approved. The account value will be adjusted to reflect a monthly
deduction (as of the effective date) based on the increased stated
death benefit.
Security Life will determine a cost of insurance rate for each increase
in coverage based on the age of the insured at the time of the
increase. The following rules will apply to determine the risk amount
for each rate.
When an increase in stated death benefit is requested, Security Life
conducts underwriting before approving the increase to determine
whether a different premium class will apply to the increase. If the
premium class for the increase has lower cost of insurance rates than
the original premium class, then the premium class for the increase
will also be applied to the initial stated death benefit. If the
premium class for the increase has higher cost of insurance rates than
the original premium class, the premium class for the increase will
apply only to the increase in stated death benefit, and the original
premium class will continue to apply to the initial stated death
benefit.
3
For the purposes of determining the risk amount associated with a
stated death benefit, Security Life will attribute the total net amount
at risk for the total stated death benefit. If there is a decrease in
stated death benefit after an increase, the decrease is applied first
to decrease prior increases in stated death benefit starting with the
most recent increase.
The policy will be offered and sold pursuant to an established
mortality structure and underwriting standards in accordance with state
insurance laws. Where state insurance laws prohibit the use of
actuarial tables that distinguish between men and women in determining
premiums and policy benefits for their insured resident, Security Life
will comply.
D. Application and Payment Processing
To purchase a policy, an application must be completed and submitted
through an authorized Security Life agent. Temporary life insurance
coverage may be provided prior to the policy date under the terms of a
temporary insurance agreement. In accordance with Security Life's
underwriting rules, temporary life insurance coverage may not exceed
$3,000,000 and will not remain in effect for more than ninety (90)
days.
An owner's policy coverage will become effective on the policy date,
which may be specified on the application. The Policy Date is used to
determine the monthly processing date, coverage effective date and
policy anniversaries.
The policy date is: 1) the date specified on the application, 2) the
back-date of the policy to save age; or if neither 1) or 2) apply, it
is the date all underwriting and administrative requirements are met if
the initial premium has been received. Otherwise, it is the date the
initial premium is received by Security Life.
The Investment Date is the date that Security Life first applies
premium to the Policy. It is the first valuation date following
Security Life's: 1) receipt of the initial premium, 2) approval of the
policy for issue, and 3) receipt of all issue requirements.
As provided under state insurance law, the owner may be permitted to
backdate the policy to preserve insurance age. In no case may the
policy date be more than six months prior to the application date. The
monthly deductions for the backdated period are deducted on the policy
date.
The initial premium payment must be at least equal to the sum of the
scheduled premiums from the policy date through the investment date.
Planned periodic premiums and unscheduled premiums that are not
underwritten will be credited to the policy and the net premium
invested on the valuation date they are received by Security Life. If a
premium payment is rejected, Security Life will return it promptly,
without adjustment.
4
The policy date is the date from which policy months, years, and
anniversaries are measured. A policy month is a one-month period
beginning with a monthly processing date and ending with the day
immediately preceding the next following monthly processing date (i.e.
8/15 - 9/14). The monthly processing date is the same as the policy
date for each succeeding month. The monthly deductions are made on each
monthly processing date.
A policy year is twelve months commencing with the policy date and
ending with the day immediately preceding the next annual date (i.e.
8/15/1999 - 8/14/2000).
The issue date, if the same as the policy date, is the date from which
the suicide and contestable periods start. It is shown in the policy.
E. Allocation of Net Premiums
On the investment date, the account value equals the initial premium
payment minus premium expense charges, minus monthly deductions made as
the policy date (up to six months for backdated policies). On each
investment date thereafter, the account value is the sum of the amounts
in the variable investment options, the guaranteed interest division,
and the loan division. The account value will vary with the performance
of the selected investment options, interest credited on amounts in the
guaranteed interest division, interest credited on amounts in the loan
division, charges, transfers, partial withdrawals, loans and loan
repayments. The net account value is cash value minus outstanding
policy debt.
When applying for a policy, the owner selects a plan for paying premium
payments at specified intervals, e.g., quarterly, semi-annually or
annually, until the maturity date. If the owner elects, Security Life
will arrange for payment of planned period premiums on a monthly basis
under a pre-authorized, electronic funds transfer (bank draft)
arrangement. The owner is not required to pay premium in accordance
with the plan; but can pay more or less than planned or skip a planned
premium entirely. Currently, there is no minimum amount for each
premium payment. Security Life may establish a minimum amount effective
90 days after sending a written notice to the owner. Subject to certain
limits (described below), the owner can change the amount and frequency
of planned periodic premiums at any time by sending a notice to
Security Life. However, Security Life reserves the right to limit the
amount of a premium payment or the total premium paid.
In the application, the owner specifies the percentage of net premium
to be allocated to each investment option including the guaranteed
interest division (G.I.D.). Net premiums generally will be invested on
the valuation date that Security Life receives them and in accordance
with the owner's most recent allocation instructions.
The net premium allocation percentages specified in the application
will apply to subsequent premium payments until the owner instructs
otherwise. The minimum percentage that may be specified for an
investment option is 1%, and all percentages must be whole numbers. The
sum of allocations must equal 100%. Security Life limits the number of
investment options (18) to which account value may be allocated over
the life of the policy. An owner can change the allocation percentages
5
at any time by sending a notice to the home office or, if telephone
privileges are in effect, the request can be received by phone. The
change applies to all premium payments received with or after receipt
of the owner's notice.
F. Free Look
Some states mandate that if an owner exercises his/her free look right
he/she is entitled to a full premium refund. Other states mandate that
if the owner exercises his/her free look option he/she is entitled to
receive the value of the fund allocations plus a refund of the policy
charges previously deducted.
Amounts you designate for the guaranteed interest division will be
invested into that division on the investment date. If the owner's
state requires return of premium during the free look period, amounts
designated for the variable division are initially invested into the
Liquid Asset Portfolio. Later, these amounts are transferred from the
Liquid Asset Portfolio to the selected variable investment options, at
the earlier of:
1) five days after we mailed your policy and you state free look
period has ended; or
2) you have actually received your policy, we have received your
delivery receipt and your state free look period has ended.
If the owner's state provides for return of account value during the
free look period or no free look period, amounts designated for the
variable division are invested directly into the selected variable
investment options.
G. Additional Payment
Additional unscheduled premium payments can be made at any time while
the policy is in force. Premium payments after the initial premium
payment must be made to the home office.
Security Life has the right to limit the number and amount of such
premium payments. Total premium payments paid in a policy year may not
exceed guideline premium payment limitations for life insurance set
forth in the Internal Revenue Code. Security Life will promptly refund
the portion of any premium payment that is determined to be in excess
of the premium payment limit established by law to qualify a policy as
a contract for life insurance.
Security Life reserves the right to reject a requested increase in
planned periodic premiums, or unscheduled premium. Security Life also
reserves the right to require satisfactory evidence of insurability
prior to accepting a premium which increases the risk amount of the
policy. No premium payment will be accepted after the maturity date.
The payment of premiums may cause a policy to be a Modified Endowment
Contract (M.E.C.) under the Internal Revenue Code. If acceptance of a
premium paid would, in Security Life's view, cause the policy to become
a M.E.C., then to the extent feasible Security Life will not accept
that portion of the premium that would cause the policy to become a
M.E.C. unless the owner confirms in writing that it is his/her intent
to convert the policy to a M.E.C.. Security Life may return the excess
portion of the payment pending receipt of instructions from the owner.
6
The owner may specify that a specific unscheduled payment is to be a
repayment of policy debt.
H. Policy Termination and Grace Period
The policy terminates at the earliest of: 1) the end of the grace
period, 2) the surrender of the policy or, 3) the fulfillment of
Security Life's obligations under the policy (i.e., payment of the
death benefit proceeds).
If the cash surrender value on a monthly processing date is less than
the amount of the monthly deduction to be deducted, the policy will be
in default. In addition, if on a monthly processing date the
outstanding policy debt exceeds the account value, the policy will be
in default. The owner, and any assignee of record, will be sent notice
of the default.
If a policy goes into default, the owner will be allowed a 61-day grace
period to pay a premium payment sufficient to cover the monthly
deductions due during the grace period and for two additional months,
or a sufficient amount to avoid termination caused by a high
outstanding loan balance. Security Life will send notice of the amount
required ("grace period premium payment") to the owner's last known
address and the address of the assignee of record. The grace period
will begin when the notice is sent. The policy will remain in effect
during the grace period. If the insured should die during the grace
period, the death benefit proceeds will be payable to the beneficiary,
but the amount paid will be reduced for the monthly deductions which
were due as of the date of death and for outstanding policy debt. If
the grace period premium payment is not paid by the end of the grace
period, the policy will lapse. It will have no value and no benefits
will be payable.
I. Reinstatement of a Policy Terminated for Insufficient Values
The policy may be reinstated within five years after lapse and before
the maturity date, subject to compliance with certain conditions,
including a necessary premium payment and submission of satisfactory
evidence of insurability.
J. Repayment of a Loan
An owner may repay all or part of his/her policy debt at any time while
the insured person is living and the policy is in force. Loan
repayments must be sent to the home office and will be credited as of
the date received. The owner may instruct Security Life that a specific
unscheduled payment is to be applied as a loan repayment. When a loan
repayment is made, account value in the loan division in an amount
equal to the repayment, is transferred from the loan division to the
investment options according to the owner's current net premium
allocation instructions.
7
K. Policy Riders
Rider benefits may be available to be added to the policy. Monthly
charges for the rider will be deducted from the account value as part
of the monthly deductions. The only rider available is the Adjustable
Term Insurance Rider.
Additional rules and limits apply to the rider benefits and are set
forth in the rider.
II. TRANSFERS AMONG INVESTMENT OPTIONS
Several investment options of the Separate Account are available for
allocation of net premiums paid under the policy, subject to certain
limitations set forth in the policy. Each invests in shares or units of an
underlying portfolio. Currently available investment options invest in
portfolios of AIM Variable Insurance Funds, Inc., The Alger American Fund,
Fidelity Variable Insurance Products Fund and Variable Insurance Products
Fund II, the GCG Trust, INVESCO Variable Investment Funds, Inc., Neuberger
Berman Advisors Management Trust, Van Eck Worldwide Insurance Trust and
Merrill Lynch Asset Management, L.P. All Funds are registered under the
Investment Company Act of 1940 as open-end management investment companies.
Additional funds may be made available in the future.
After the free-look period and prior to the maturity date, the owner may
transfer all or part of the account value from the investment options to
other investment options or to the guaranteed interest division. An amount
may be transferred from the guaranteed interest division to the variable
investment options, subject to some restrictions. The minimum transfer
amount is the lesser of $100 or the entire amount in that investment option.
A transfer request that would reduce the amount in an investment option
below $100 will be treated as a transfer request for the entire amount.
Transfers from the guaranteed interest division are permitted only within
the first 30 days of a policy year. Transfer requests received within 30
days prior to a policy anniversary will be processed on the policy
anniversary. Such transfers are limited in amount to the greatest of: 25% of
the balance in the guaranteed interest division on the policy anniversary;
the total withdrawn in the prior policy year; or $100. With the exception
of the Right to Exchange (described below), Security Life reserves the right
to limit the number or frequency of transfers permitted in the future.
Security Life will make the transfer as of the end of the valuation period
during which such transfer is received by Security Life. Currently, there is
a limit on the number (12) of free transfers that can be made between
investment options in a policy year. Currently, Security Life assesses an
excess transfer charge of $10 for each transfer in excess of the first
twelve transfers during a policy year. The excess transfer charge will be
deducted from the investment option from which the requested transfer is
being made.
Transfer requests will be accepted by telephone, provided the appropriate
authorization has been provided to Security Life. Security Life reserves the
right to suspend telephone transfer privileges at any time, for any reason,
if Security Life deems such suspension to be in the best interests of
owners.
8
During the first twenty-four policy months following the policy date, and
within sixty days of the later of notification of a change in the investment
policy of the separate account or the effective date of such change, the
owner may exercise a one-time Right to Exchange the policy by requesting
that all of the variable account value be transferred to the guaranteed
interest division. Exercise of the Right to Exchange is not subject to the
excess transfer charge. Following the exercise of the Right to Exchange,
premium may not be allocated to the variable account, and transfers of
account value to the variable account will not be permitted. The other terms
and conditions of the policy will continue to apply.
Transfers may also be effected pursuant to the dollar cost averaging or auto
rebalancing feature if elected by the owner as described in the current
prospectus.
III. REDEMPTION PROCEDURES, SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Cash Surrender Value
An owner may surrender the policy at any time for its cash surrender
value by submitting notice to the home office. Security Life may
require return of the policy. A surrender request will be processed as
of the valuation date the surrender notice and all required documents
are received. Payment generally will be made within seven calendar
days. An owner's policy will terminate and cease to be in force if it
is surrendered. It cannot be reinstated later.
B. Death Claims
The death benefit proceeds are equal to the sum of the base death
benefit for each coverage segment under the death benefit option
selected, calculated on the date of the insured's death, plus rider
benefits, minus outstanding policy debt, minus unpaid monthly
deductions incurred prior to the date of death. If the insured's age or
sex has been misstated in the application for the policy or in an
application for supplemental or rider benefits, and if the misstatement
becomes known after the death of the insured person, then the death
benefit under the policy or such supplemental or rider benefits will be
that which the cost of insurance charge which was deducted from the
account value on the last monthly processing date prior to the death of
the insured would have purchased for the correct sex and age.
Security Life will pay interest at the rate declared by us or at a
higher rate required by law.
Security Life will usually pay the death benefit proceeds to the
beneficiary within seven days after receipt at its Home Office of due
proof of death of the insured and all other requirements necessary to
make payment. If the payment of the death benefit of a policy is
contested, payment of proceeds may be delayed.
9
The death benefit payable depends on the death benefit option in effect
on the date of death. Subject to certain conditions, owners may change
the death benefit option. Under Option 1, the base death benefit is the
greater of the specified amount, which includes the account value or
the applicable percentage of account value on the date of the insured's
death. Under Option 2, the base death benefit is the greater of the
specified amount plus the account value on the date of death, or the
applicable percentage of the account value on the date of the insured's
death. Under Option 3, the base death benefit is the greater of the
stated death benefit plus the sum of all premiums received minus
partial withdrawals, or the account value multiplied by the applicable
percentage of the account value on the date of the insured's death.
The "applicable percentage" is the appropriate factor from the
Definition of Life Insurance factors shown in the policy's appendix A.
A table showing the applicable percentages for attained ages 0 to 95 is
set forth in the policy.
On or after one year from the policy date, the owner may change the
death benefit option on the policy, by notice to Security Life, subject
to the following rules. A change in the Death Benefit Option may be
requested at least one day prior to a policy anniversary. After the
change, the specified death benefit amount must still comply with the
minimum to issue a policy. The effective date of the change will be the
next monthly processing date following the day that Security life
approves the request. Security Life may require satisfactory evidence
of insurability for some changes.
An owner may change from death benefit option 1 to option 2, from
option 2 to option 1 or from option 3 to option 1. NO CHANGE FROM DEATH
BENEFIT OPTION 1 OR 2 TO OPTION 3, OR OPTION 3 TO OPTION 2 IS
PERMITTED.
When a change from Option 1 to Option 2 is made, the specified death
benefit amount after the change is effected will be the specified death
benefit amount before the change minus the account value on the
effective date of the change. When a change from Option 2 to Option 1
is made, the specified death benefit amount after the change will be
the specified death benefit amount before the change plus the account
value on the effective date of the change. When a change from Option 3
to Option 1 is made, the specified amount will be the stated death
benefit before the change plus the sum of premiums received minus
partial withdrawals taken as of the effective date of the change.
C. Policy Loan
After the first monthly processing date and while the insured is
living, provided the policy is not in the grace period, the owner may
borrow against the policy by submitting a request to the home office.
The minimum amount of a loan is $100. The maximum loan amount is the
cash surrender value less monthly deductions to the next policy
anniversary or 13 monthly deductions if the loan request is received
within 30 days prior to a policy anniversary. Maximum loan amounts may
be different if required by state law.
10
An outstanding loan reduces the amount available for a new loan. A loan
is processed as of the date the loan request is approved. Loan proceeds
generally will be sent to the owner within seven calendar days.
When a policy loan is made, an amount sufficient to secure the loan is
transferred out of the investment options and into the policy's loan
division. Thus, a loan will have no immediate effect on the account
value, but other policy values, such as the cash surrender value and
the death benefit proceeds, will be reduced immediately by the amount
borrowed. This transfer is made from the account value in each
investment option in proportion to the account value in each on the
date of the loan, unless the owner specifies that transfers be made
from a specific investment option. An amount equal to due and unpaid
loan interest which exceeds interest credited to the loan division will
be transferred to the loan division on each policy anniversary. Such
interest will be transferred from each investment option in the same
proportion that account value in each bears to the total unloaned
account value.
The loan account will be credited with interest at an effective annual
rate of not less than the annual loan interest rate of 3%. Loan
interest accrues daily at a compound annual interest rate of 3.25%.
Interest is due in arrears on each policy anniversary. Outstanding loan
amounts (including unpaid interest added to the loan) plus accrued
interest not yet due equals the total policy debt.
D. Partial Withdrawals
An owner may make partial cash surrenders (known as partial
withdrawals) under the policy at any time after the first policy
anniversary. An owner must submit a request to the home office. Each
partial withdrawal must be at least $100. The maximum partial
withdrawal is the amount which will leave $500 as the net cash
surrender value. When a partial withdrawal is taken, the amount of the
withdrawal plus a service fee is deducted from the account value. This
service fee is 2% of the amount of the withdrawal, up to a maximum fee
of $25. As of the date Security Life processes the partial withdrawal,
the cash value will be reduced by the partial withdrawal amount.
Unless the owner requests that a partial cash surrender be deducted
from specified investment options, it will be deducted from the
investment options on a pro-rata basis in proportion to the account
value in each.
If death benefit Option 1 is in effect, Security life may reduce the
specified death benefit amount. Security Life may reject a partial
withdrawal request if it would reduce the specified death benefit
amount below the minimum amount required to issue the policy, or if the
partial withdrawal would cause the policy to fail to qualify as a life
insurance contract under applicable tax laws, as interpreted by
Security Life.
Partial withdrawal requests will be processed as of the valuation date
the request is received by Security Life, and generally will be paid
within seven calendar days.
11
E. Monthly Charges
On each monthly processing date, Security Life will deduct from the
account value the monthly deductions due, commencing as of the policy
date. An owner's policy date is the date used to determine the
applicable monthly processing date. The monthly deduction consists of
(1) cost of insurance charges, (2) the monthly administrative charge,
(3) mortality and expense charge, and (4) charges for rider benefits.
The monthly deduction is deducted from the investment options,
including the guaranteed interest division pro rata based on the
account value in each investment option, unless the owner has selected
a designated deduction investment option for the policy.
F. Continuation of Coverage
The maturity date is generally the insured's 100th birthday, and is
shown in the policy.
At the policy's maturity date, the owner may surrender the policy for
its net cash surrender value. Or, he/she may allow insurance coverage
to continue under the continuation of coverage feature. If the policy
is in effect and not surrendered, the target death benefit, which
includes term rider coverage, becomes the specified death benefit
amount. All riders are terminated. Policies with death benefit options
2 or 3 become policies with death benefit option 1. A one-time fee of
$200 is deducted to cover all future costs of the policy and the
account value is transferred into the Guaranteed Interest Division. No
further premium payments can be made, however, loan and interest
payments are accepted. All variable investment features terminate.
Loans and partial withdrawals may be taken. The policy will continue
until the death of the insured person, so long as it does not lapse.
G. Settlement Options
During the insured's lifetime, the owner may elect that the beneficiary
receive the death proceeds other than in one sum. If this election has
not been made, the beneficiary may do so within 60 days after the
insured person's death. The Owner may also elect to take the net cash
surrender value under one of these options.
Option I: Payouts for a Designated Period: Payouts will be made in 1,
2, 4 or 12 installments per year as elected for a
designated period, which may be 5 to 30 years. The
installment dollar amounts will be equal except for any
excess interest. The amount of the first monthly payout for
each $1,000 of account value applied is shown in Settlement
Option Table I in the policy.
Option II: Life Income with Payouts Guaranteed for a Designated
Period: payouts will be made in 1, 2, 4 or 12 installments
per year throughout the payee's lifetime, or if longer, for
a period of 5, 10, 15, or 20 years as elected. The
installment dollar amounts will be equal except for any
excess interest. The amount of the first monthly payout for
each $1,000 of account value applied is shown in Settlement
Option Table II in the policy. This option is not available
for ages not shown in this Table.
12
Option III: Hold at Interest: Amounts may be left on deposit with us to
be paid upon the death of the payee or at any earlier date
elected. Interest on any unpaid balance will be at the rate
declared by us or at any higher rate required by law.
Interest may be accumulated or paid in 1, 2, 4 or 12
installments per year, as elected. Money may not be left on
deposit for more than 30 years.
Option IV: Payouts of a Designated Amount: Payouts will be made until
proceeds, together with interest, which will be at the rate
declared by us or at any higher rate required by law, are
exhausted. Payouts will be made in 1, 2, 4 or 12 equal
installments per year, as elected.
Option V: Other: The owner may ask us to apply the money under any
other option that we make available at the time the benefit
is paid.
Payments under these options are not affected by the investment
experience of any division of our variable account. Instead, interest
accrues pursuant to the options chosen. Payment options will also be
subject to our rules at the time of selection. These alternate payment
options are only available if the proceeds applied are $2,000 or more
and a periodic payment will be at least $20.
The beneficiary or any other person who is entitled to receive payment
may name a successor to receive any amount that we would otherwise pay
to that person's estate if that person died. The person who is entitled
to receive payment may change the successor at any time.
We must approve an arrangements that involve a payee who is not a
natural person (for example, a corporation), or a payee who is a
fiduciary. Also, the details of all arrangements will be subject to our
rules at the time the arrangements take effect. This includes rules on
the minimum amount we will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (i.e., the
rights to receive payments over time, for which we may offer a lump sum
payment), the naming of people who are entitled to receive payment and
their successors, and the ways of proving Age and survival.
13