Exhibit 11
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
joint and survivor 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.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF THE POLICIES
A. Offering of the Policy
The policy is offered on two lives to persons or entities who satisfy
certain suitability standards ("owners"). The policy may be purchased
to insure the lives of two individuals ("insureds") in whom the owner
has an insurable interest. Security Life requires satisfactory
evidence of each of the insured's insurability, which may include a
medical examination. The issue ages are 0 through 90. Age is
determined by the insured's age as of the birthday nearest the policy
date. The joint equivalent age is based on the sum of the insureds'
ages divided by two. It must be at least 15 and cannot exceed age 85
at the time of policy issue.
For Estate Designer ("ED"), the minimum stated death benefit is
$1,000; however, the required minimum total death benefit is
$500,000. The total death benefit includes stated death benefit plus
coverage provided under a term rider.
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 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 insureds in a premium class when the policy
is issued, based on underwriting. This original premium class applies
to the initial stated death benefit.
The current cost of insurance charge for a policy is based on the age
at issue, sex, premium class of the insureds, 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 15-90); Standard Nonsmoker (ages 15-90), or
Preferred (ages 15-90). Security Life's definition of "smoker"
includes the use of cigarettes, cigars, pipes, chewing tobacco,
nicotine gum or patch, snuff, or any other tobacco or nicotine-based
product. Or,
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insureds may be placed in a substandard rate class, with a higher
mortality risk than the standard smoker or standard nonsmoker
classes.
Additionally, an uninsurable rating may be assessed to an individual
that is rated higher than table P. The uninsurable rating will be
handled in the unideath calculation the same way a table rating is
except the percentage will be higher. The uninsurable rating is
capped at the later of age 65 or 15 years from issue.
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 nonsmoker 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 nonsmoker or
smoker class are generally lower than guaranteed cost of insurance
for an insured of the same age and sex and smoker 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.
The policy provides coverage on two insureds and a Death Benefit
payable upon the death of the second insured. The policy will remain
in force as long as the policy's cash surrender value is sufficient
to cover the charges due. Security Life guarantees a policy will
remain in force
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during the special continuation period, regardless of the cash
surrender value, if the total premium paid to date, minus partial
withdrawals and policy debt equals or exceeds the minimum monthly
premium (shown in the policy) multiplied by the number of complete
policy months, including the current policy month. The special
continuation period is five years from the policy date.
The minimum monthly premium is based on the joint equivalent age, sex
and premium class of each insured, the stated death benefit and
supplemental or rider benefits. The minimum monthly premium may
change as a result of changes to the stated death benefit, the death
benefit option, ratings, and supplemental or rider benefits. Security
Life will notify the owner of change in the minimum monthly premium.
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 stated death benefit decrease is $1,000. The
decrease will become effective on the monthly processing date next
following the date that the decrease is 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. An 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
requires 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 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 joint equivalent age of the
insureds at the time of the increase. The following rules 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
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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.
To determine the risk amount associated with a stated death benefit,
Security Life generally will attribute the account value solely to
the initial stated death benefit. However, if the account value
exceeds the initial stated death benefit, the excess will be
attributed to the increases in stated death benefit in the order of
the increases. If there is a stated death benefit decrease after an
increase, the decrease is applied first to prior stated death benefit
increases, 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.
C. 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.
The Policy Date is used to determine the monthly processing date,
coverage effective date and policy anniversaries. The insurance
coverage becomes effective on the policy date, which may be specified
on the application.
The policy date is: 1) the date specified on the application, and 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 AND 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.
Monthly deductions for the backdated period are deducted on the
policy date. The initial premium payment must be at least equal to
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
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Security Life. If premium payment is rejected, Security Life will
return it promptly, without adjustment.
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 - 9/15). The monthly processing date is the same as the
policy date for each succeeding month. The monthly deductions are
made 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.
D. Allocation of Net Premiums
On the investment date, the account value equals the initial premium
payment minus the 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
account value minus outstanding policy debt. Cash surrender value is
account value plus the applicable refund of sales charge. Net cash
surrender value is the cash surrender 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,
semiannually 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 periodic 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 most recent allocations instructions.
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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 at any time by sending a notice to Security
Life or, if telephone privileges are in effect, the request can be
received by telephone. The change applies to all premium payments
received with or after receipt of the owner's notice.
E. 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
Fidelity VIP Money Market Portfolio. Later, these amounts are
transferred from the Money Market Portfolio to the selected variable
investment options, at the earlier of:
1) five days after we mailed your policy and your 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.
F. 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 Security Life.
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.
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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.
The owner may specify that a specific unscheduled payment is to be a
repayment of policy debt.
G. 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 and the special
continuation period is not in effect, the policy will be in default.
In addition, if on a monthly processing date the cash value less
policy debt exceeds the amount of the monthly deduction due for the
following policy month, the policy will be in default whether or not
the special continuation period is in effect. An owner, and 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 to be paid ("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 second insured
person 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
the insured's 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.
H. 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.
I. Repayment of a Loan
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An owner may repay all or part of his/her policy debt at any time
while at least one 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.
J. Policy Riders
Rider benefits may be available to be added to the policy. Monthly
charges for riders, if any, will be deducted from the account value
as part of the monthly deductions. The following rider benefits may
be available: Adjustable Term Insurance Rider and Single Life Term
Rider.
Additional rules and limits apply to these benefits and are set forth
in the applicable endorsement or rider.
II TRANSFERS AMONG INVESTMENT OPTIONS
Several investment options of the Separate Account are available for
allocation of net premiums, 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, The Alger American Fund, Fidelity
Variable Insurance Products Fund and Variable Insurance Products Fund II,
INVESCO Variable Investment Funds, Inc., Neuberger Berman Advisors
Management Trust and Van Eck Worldwide Insurance Trust. 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
Estate Designer May 1, 2000
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be made between investment options in a policy year. Currently, Security
Life assesses an excess transfer charge of $25 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.
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 second insured's death, plus
supplemental or rider benefits, minus outstanding policy debt minus
unpaid monthly deductions incurred prior to the date of death. If an
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 second
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 second insured
would have purchased for the correct sex and age.
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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 second 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.
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 or the applicable
percentage of account value on the date of the second 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 second
insured's death. Under option 3, the base death benefit is the
greater of the specified amount plus the sum of all premiums
received, minus partial withdrawals or the applicable percentage of
the account value on the date of the second insured's death.
The "applicable percentage" is the appropriate factor from the
Definition of Life Insurance factors shown in the policy's appendix A
or B. A table showing the applicable percentages for attained ages 0
to 100 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 next 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 death benefit will be the
specified death benefit before the change plus the sum of premiums
received minus partial withdrawals taken as of the effective date of
the change.
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C. Policy Loan
After the first monthly processing date and while at least one
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 net 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.
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
3.75%. 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 policy debt.
D. Partial Withdrawals
An owner may make partial cash surrenders (known as partial
withdrawals) from 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.
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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 withdrawals will be processed as of the valuation date the
request is received by Security Life, and generally will be paid
within seven calendar days.
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,
and (3) charges for supplemental or 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, 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 $400 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 second 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 second 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
Estate Designer May 1, 2000
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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.
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 $2000
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 arrangement 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.
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