As filed with the Securities and Exchange Commission on March 30, 1999
Registration No. 333-72753
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Pre-Effective Amendment No. 1
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SECURITY LIFE SEPARATE ACCOUNT L1
(Exact Name of Trust)
SECURITY LIFE OF DENVER INSURANCE COMPANY
(Name of Depositor)
1290 Broadway
Denver, Colorado 80203-5699
(Address of Depositor's Principal Executive Offices)
Copy to:
GARY W. WAGGONER, ESQ. KIMBERLY J. SMITH, ESQ.
Security Life of Denver Insurance Company Sutherland Asbill & Brennan LLP
1290 Broadway 1275 Pennsylvania Avenue, NW
Denver, Colorado 80203-5699 Washington, D.C. 20004-2415
(202) 383-0314
(Name and Address of Agent for Service)
----------------------------
Title of securities being registered: Variable last survivor life insurance
policies.
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Form V-91-99
SECURITY LIFE SEPARATE ACCOUNT L1 (File No. 333-72753)
Cross-Reference Table
Form N-8B-2 Item No. Caption in Prospectus
1, 2 Cover; Security Life of Denver Insurance Company;
Security Life Separate Account L1
3 Inapplicable
4 Security Life of Denver Insurance Company
5, 6 Security Life Separate Account L1
7 Inapplicable
8 Financial Statements
9 Inapplicable
10(a), (b), (c), (d), (e) Policy Summary; Policy Values, Determining the
Value of Amounts in the Divisions of the Variable
Account; Charges, Deductions and Refunds;
Surrender; Partial Withdrawals; The Guaranteed
Interest Division; Transfers of Account Value;
Right to Exchange Policy; Lapse; Reinstatement;
Premiums
10(f) Voting Privileges; Right to Change Operations
10(g), (h) Right to Change Operations
10(i) Tax Considerations; Detailed Information about the
Variable Last Survivor Universal Life Policy;
General Policy Provisions; The Guaranteed
Interest Division
11, 12 Security Life Separate Account L1
13 Policy Summary; Charges, Deductions and Refunds;
and Group or Sponsored Arrangements or
Corporate Purchasers
ii
Form N-8B-2 Item No. Caption in Prospectus
14, 15 Policy Summary; Free Look Period or Right to
Examine Period; General Policy
Provisions; Applying for a Policy
16 Premiums; Allocation of Net Premiums; How We
Calculate Accumulation Unit Values for Each
Division
17 Premium Payments Affect Your Coverage;
Surrender; Partial Withdrawal
18 Policy Summary; Tax Considerations; Detailed
Information about the Variable Last Survivor
Universal Life Policy; Security Life Separate
Account L1; Persistency Refund
19 Reports to Owners; Notification and
Claims Procedures; Performance Information
(Appendix C)
20 See 10(g) & 10(a)
21 Policy Loans
22 Policy Summary; Premiums; Grace Period; Security
Life Separate Account L1; Detailed Information
about the Variable Last Survivor Universal
Life Policy
23 Inapplicable
24 Inapplicable
25 Security Life of Denver Insurance Company
26 Inapplicable
27, 28, 29, 30 Security Life of Denver Insurance Company
31, 32, 33, 34 Inapplicable
35 Inapplicable
36 Inapplicable
iii
Form N-8B-2 Item No. Caption in Prospectus
37 Inapplicable
38, 39, 40, 41(a) General Policy Provisions; Distribution of
the Policies; Security Life of Denver Insurance
Company
41(b), 41(c), 42, 43 Inapplicable
44 Determining the Value in the Variable Divisions;
How We Calculate Accumulation Unit Values
for Each Division
45 Inapplicable
46 Partial Withdrawals; Detailed Information about
the Variable Last Survivor Universal Life
Policy
47, 48, 49, 50 Inapplicable
51 Detailed Information about the Variable Last Survivor
Universal Life Policy
52 Determining the Value in the Variable Divisions;
Right to Change Operations
53(a) Tax Considerations
53(b), 54, 55 Inapplicable
56, 57, 58 Inapplicable
59 Financial Statements
iv
Prospectus
VARIABLE LAST SURVIVOR UNIVERSAL LIFE
A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
issued by
SECURITY LIFE OF DENVER INSURANCE COMPANY
AND
SECURITY LIFE SEPARATE ACCOUNT L1
Consider carefully the policy charges, deductions, and refunds beginning on page
48 in this prospectus.
You should read this prospectus and keep it for future reference. A prospectus
for each underlying investment portfolio must accompany and should be read
together with this prospectus.
This policy is not available in all jurisdictions. This policy is not offered in
any jurisdiction where this type of offering is not legal. Depending on the
state where it is issued, policy features may vary. You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with information that is different.
Replacing your existing life insurance policy(ies) with this policy may not be
beneficial to you.
YOUR POLICY
o is a flexible premium variable joint and survivor universal life
insurance policy;
o is issued on two lives on whom insurance coverage may continue, in whole
or in part, until both have died;
o is issued by Security Life of Denver Insurance Company; and
o is returnable by you during the free look period or right to examine
period if you are not satisfied.
YOUR POLICY PREMIUM PAYMENTS
o are flexible, so the premium amount and frequency may vary;
o are allocated to variable investment divisions and the guaranteed
interest division, based on your instructions;
o are invested in shares of the underlying investment portfolios under
each variable division; and
o can be invested in up to eighteen investment options over the policy's
lifetime.
YOUR ACCOUNT VALUE
o is the sum of your holdings in the variable divisions, the guaranteed
interest division and the loan division;
o has no guaranteed minimum cash value under the variable divisions. The
value varies with the value of the matching investment portfolio;
o has a minimum guaranteed rate of return if you have an amount in the
guaranteed interest division; and
o is subject to various expenses and charges, including possible surrender
charges.
DEATH PROCEEDS
o are paid if the policy is still in force at the second death of the two
insured people;
o are equal to the death benefit minus outstanding policy loans, accrued
loan interest and unpaid charges incurred before the second insured
person dies;
o are calculated under your choice of options;
* Option 1- a fixed minimum death benefit
* Option 2- a stated death benefit plus your account value; and
o enhanced death benefit corridor option - available with either option 1
or option 2 to increase death benefit coverage based on life expectancy
with sufficient funding; and
o are generally not federally income taxed if your policy continues to
meet the federal income tax definition of life insurance.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
DATE OF PROSPECTUS ________________ ____, 1999
Form V-91-99
ISSUED BY: Security Life of Denver UNDERWRITTEN BY: ING America Equities, Inc.
Insurance Company 1290 Broadway
Security Life Center Denver, CO 80203-5699
1290 Broadway (303) 860-2000
Denver, CO 80203-5699
(800) 525-9852
THROUGH ITS: Security Life Separate Account L1
ADMINISTERED BY: Customer Service Center
P.O. Box 173888
Denver, CO 80217-3888
(800) 848-6362
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Variable Last Survivor 2
TABLE OF CONTENTS
POLICY SUMMARY.................................................................8
Your Policy...........................................................8
Free Look Period or Right to Examine Period...........................8
Your Policy Premiums..................................................8
Allocation of Net Premiums...................................8
Variable Divisions....................................................8
Policy Values.........................................................9
Your Account Value in the Variable Divisions.................9
Transfers of Account Values..........................................10
Special Policy Features..............................................10
Additional Benefits.........................................10
Dollar Cost Averaging.......................................10
Automatic Rebalancing.......................................10
Loans ...................................................10
Partial Withdrawals.........................................10
Persistency Refund..........................................10
Policy Modification, Termination and Continuation Features...........10
Right to Exchange Policy....................................10
Policy Split Option.........................................10
Surrender...................................................10
Lapse ...................................................10
Reinstatement...............................................11
Continuation of Coverage....................................11
Death Benefits.......................................................11
Charges and Deductions...............................................11
Deductions from Premium.....................................11
Deductions from the Variable Divisions......................11
Monthly Deductions from Your Account Value..................12
Policy Transaction Fees.....................................12
Administrative Fees.........................................12
Allocation Change Fee.......................................12
Surrender Charges...........................................12
Charges from Investment Portfolios..........................12
Tax Considerations...................................................12
INFORMATION ABOUT SECURITY LIFE, THE VARIABLE ACCOUNT, THE INVESTMENT OPTIONS
AND THE GUARANTEED INTEREST DIVISION.................................13
Security Life of Denver Insurance Company............................13
Year 2000 Preparedness...............................................13
Security Life Separate Account L1....................................14
Variable Account Structure..................................14
Order of Variable Account Liabilities.......................14
Variable Divisions..........................................14
Investment Portfolios.......................................14
Objectives of the Investment Portfolios..............................15
The Guaranteed Interest Division.....................................19
Maximum Number of Investment Divisions...............................19
DETAILED INFORMATION ABOUT THE VARIABLE LAST SURVIVOR UNIVERSAL LIFE POLICY...20
Applying for a Policy................................................20
Policy Issuance.............................................20
Definition of Life Insurance................................20
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Variable Last Survivor 3
Temporary Insurance..................................................20
Premiums ............................................................21
Scheduled Premiums..........................................21
Unscheduled Premium Payments................................21
Minimum Annual Premium......................................21
Special Continuation Period.................................22
Allocation of Net Premiums..................................22
Premium Payments Affect Your Coverage................................22
Modified Endowment Contracts................................23
Death Benefits.......................................................23
Base Death Benefit..........................................24
Death Benefit Options.......................................25
Changes in Death Benefit Option 1 or 2......................25
Enhanced Death Benefit Corridor Option......................26
Changes in Death Benefit Amounts............................26
Guaranteed Minimum Death Benefit............................27
Requirements to Maintain the Guarantee Period...............28
Additional Benefits..................................................28
Adjustable Term Insurance Rider.............................29
Single Life Term Rider......................................30
Special Features.....................................................30
Policy Maturity.............................................30
Policy Split Option.........................................30
Right to Exchange Policy....................................31
Continuation of Coverage....................................31
Policy Values........................................................32
Account Value...............................................32
Net Account Value...........................................32
Cash Surrender Value........................................32
Net Cash Surrender Value....................................32
Determining the Value in the Variable Divisions.............32
How We Calculate Accumulation Unit Values for Each Division.33
Transfers of Account Value...........................................34
Excessive Trading...........................................34
Guaranteed Interest Division Transfers......................34
Dollar Cost Averaging................................................34
Changing Dollar Cost Averaging..............................35
Terminating Dollar Cost Averaging...........................35
Automatic Rebalancing................................................35
Changing Automatic Rebalancing..............................36
Terminating Automatic Rebalancing...........................36
Policy Loans.........................................................36
Loan Repayment..............................................37
Loans and Your Benefits.....................................37
Partial Withdrawals..................................................37
Partial Withdrawals under Death Benefit Option 1............38
Partial Withdrawals under Death Benefit Option 2............38
Stated Death Benefit and Target Death Benefit Reductions....38
Partial Withdrawal Mechanics................................38
Lapse ............................................................38
Grace Period................................................38
Reinstatement........................................................40
Surrender............................................................41
General Policy Provisions............................................41
Free Look Period or Right to Examine Policy Period..........41
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Variable Last Survivor 4
Your Policy.................................................41
Age ...................................................42
Ownership...................................................42
Beneficiary(ies)............................................42
Collateral Assignment.......................................42
Incontestability............................................43
Misstatements of Age or Gender..............................43
Suicide ...................................................43
Transaction Processing......................................43
Notification and Claims Procedures..........................43
Telephone Privileges........................................44
Non-participation...........................................44
Distribution of the Policies................................44
Settlement Provisions.......................................45
Administrative Information About the Policy..........................46
Voting Privileges...........................................46
Material Conflicts..........................................46
Right to Change Operations..................................47
Reports to Owners...........................................47
CHARGES, DEDUCTIONS AND REFUNDS...............................................48
Deductions from Premiums.............................................48
Tax Charges.................................................48
Sales Charge................................................48
Daily Deductions from the Variable Account...........................48
Mortality and Expense Risk Charge...........................48
Monthly Deductions from Your Account Value...........................49
Policy Charge...............................................49
Monthly Administrative Charge...............................49
Cost of Insurance Charge....................................50
Guaranteed Minimum Death Benefit Charge.....................50
Charges for Additional Benefits.............................50
Changes in Monthly Charges..................................50
Continuation of Coverage Administrative Fee.................50
Policy Transaction Fees..............................................50
Partial Withdrawals.........................................50
Transfers...................................................51
Illustrations...............................................51
Allocation Change...........................................51
Persistency Refund...................................................51
Surrender Charge.....................................................51
Fees and Expenses of the Investment Portfolios.......................52
Investment Portfolio Annual Expenses........................53
Group or Sponsored Arrangements or Corporate Purchasers..............55
Other Charges........................................................55
TAX CONSIDERATIONS............................................................55
Tax Status of the Policy.............................................55
Diversification Requirements.........................................56
Tax Treatment of Policy Death Benefits...............................56
Modified Endowment Contracts.........................................56
Multiple Policies....................................................57
Distributions Other than Death Benefits from Modified Endowment
Contracts........................................................57
Distributions Other than Death Benefits from Policies That Are Not
Modified Endowment Contracts.....................................57
Investment in the Policy.............................................57
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Variable Last Survivor 5
Policy Loans.........................................................57
Section 1035 Exchanges...............................................57
Tax-exempt Policy Owners.............................................57
Changes to Comply with the Law.......................................58
Other ............................................................58
ILLUSTRATIONS.................................................................59
ADDITIONAL INFORMATION........................................................63
Directors and Officers...............................................63
Regulation...........................................................66
Legal Matters........................................................66
Legal Proceedings....................................................66
Experts ............................................................66
Registration Statement...............................................66
FINANCIAL STATEMENTS..........................................................67
APPENDIX A....................................................................68
APPENDIX B....................................................................69
APPENDIX C....................................................................70
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Variable Last Survivor 6
INDEX OF SPECIAL TERMS
The following special terms are used in this prospectus. We explain each term on
the page(s) listed in the body of this prospectus and in the summary, if
applicable:
Account value..................................................................9
Accumulation unit.............................................................33
Accumulation unit value.......................................................33
Adjustable term insurance rider...............................................23
Adjustable term insurance rider benefit.......................................23
Age...........................................................................20
Base death benefit............................................................24
Beneficiary(ies)..............................................................11
Cash surrender value...........................................................9
Customer service center........................................................2
Continuation of coverage......................................................31
Effective date.................................................................?
Death proceeds................................................................24
Free look period..............................................................41
General account...............................................................14
Guarantee period..............................................................28
Guarantee period annual premium...............................................28
Guaranteed interest division..................................................19
Guaranteed minimum death benefit..............................................27
Initial premium...............................................................20
Insured.......................................................................20
Investment date...............................................................20
Joint equivalent age..........................................................42
Loan division..................................................................9
Minimum annual premium........................................................21
Net account value.............................................................32
Net amount at risk.............................................................9
Net cash surrender value......................................................32
Net premium................................................................8, 22
Owner......................................................................8, 42
Partial withdrawal............................................................22
Policy.....................................................................8, 14
Policy date...................................................................20
Policy loan...................................................................36
Portfolios.................................................................9, 14
Rider.....................................................................10, 28
Scheduled benefits............................................................21
Scheduled premium.............................................................21
Segment.......................................................................27
Special continuation period...................................................22
Stated death benefit..........................................................20
Surrender charge...............................................................9
Target death benefit..........................................................29
Total death benefit...........................................................29
Transaction date..............................................................33
Valuation date.................................................................9
Valuation period...........................................................9, 33
Variable account..............................................................14
Variable division(s)..........................................................14
Younger insured person's 100th birth date.....................................42
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Variable Last Survivor 7
POLICY SUMMARY
THIS SUMMARY HIGHLIGHTS SOME OF THE IMPORTANT POINTS ABOUT YOUR POLICY. THE
POLICY IS MORE FULLY DESCRIBED IN THE ATTACHED, COMPLETE PROSPECTUS. PLEASE READ
THE PROSPECTUS CAREFULLY. "WE," "US," "OUR," AND THE "COMPANY" REFER TO SECURITY
LIFE OF DENVER INSURANCE COMPANY. "YOU" AND "YOUR" REFER TO THE POLICY OWNER.
THE OWNER IS THE INDIVIDUAL, ENTITY, PARTNERSHIP, REPRESENTATIVE OR PARTY WHO
MAY EXERCISE ALL RIGHTS OVER THE POLICY AND RECEIVE THE POLICY BENEFITS DURING
THE INSURED PEOPLE'S LIFETIMES.
ANY STATE VARIATIONS ARE COVERED IN A SPECIAL POLICY FORM FOR USE IN THAT STATE.
THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. YOUR ACTUAL POLICY
AND ANY RIDERS ARE THE CONTROLLING DOCUMENTS. IF YOU WOULD LIKE TO REVIEW A COPY
OF THE POLICY AND RIDERS, CONTACT OUR CUSTOMER SERVICE CENTER.
YOUR POLICY
Your policy provides life insurance protection on the lives of two insured
people. It is issued based on both insured people's lives and insurance coverage
may continue, in whole or in part, until both have died. The policy includes the
basic policy, applications, and riders or endorsements. As long as the policy
remains in force, we pay a death benefit at the second death of the insured
people. While your policy is in force, you may access a portion of your policy
value by taking loans or partial withdrawals. You may also surrender your policy
for its net cash surrender value. At the younger insured person's 100th birth
date, the policy can be surrendered or continued under the continuation of
coverage option. SEE CONTINUATION OF COVERAGE, PAGE 31.
Life insurance is not a short-term investment. You should evaluate your need for
life insurance coverage and this policy's long-term investment potential and
risks before purchasing a policy.
FREE LOOK PERIOD OR RIGHT TO EXAMINE PERIOD
You have the right to examine your policy and return it for a refund of premiums
paid or the account value, as specified by state law, if you are not satisfied
for any reason. The policy is then void. SEE FREE LOOK PERIOD OR RIGHT TO
EXAMINE POLICY, PAGE 41.
YOUR POLICY PREMIUMS
The policy is a flexible premium policy because the amount and frequency of the
premium payments you make may vary within limits. You must make premium
payments:
o for us to issue your policy;
o sufficient to keep your policy in force; and
o as necessary to continue certain benefits.
On your application, you choose how much and how often you want to pay premiums.
Depending on your choices, it may not be enough to keep your policy or certain
riders in force. The amount of premium you pay affects the length of time your
policy stays in force. SEE PREMIUMS, PAGE 21.
ALLOCATION OF NET PREMIUMS
This policy has premium-based charges which are subtracted from your payments.
We add the balance, or the net premium, to your policy based on your investment
instructions. You may allocate the net premiums among one or more variable
divisions, the guaranteed interest division, or both. You may not invest in more
than eighteen investment divisions, including the guaranteed interest division,
over the life of your policy.
We allocate your initial net premium to the investment divisions you specify
after we:
o receive your initial premium;
o approve your policy application; and
o have the information we require.
You need to allocate your premiums to your investment choices in percentages
that are whole numbers and which total 100%. SEE ALLOCATION OF NET PREMIUMS,
PAGE 22.
VARIABLE DIVISIONS
Any amount you direct into the guaranteed interest division is credited with
interest at a fixed rate set by us. If you invest in any of the following
variable divisions, depending on market conditions, you may make or lose money.
The variable divisions are described in the prospectuses for the underlying
investment portfolios.
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Variable Last Survivor 8
Each variable division investment portfolio has its own investment objective.
SEE OBJECTIVE OF THE INVESTMENT PORTFOLIOS, PAGE 15.
A I M VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
THE ALGER AMERICAN FUND
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND & VARIABLE INSURANCE PRODUCTS FUND II
VIP Growth Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
VIP II Asset Manager Portfolio
VIP II Index 500 Portfolio
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund
INVESCO VIF-High Yield Fund
INVESCO VIF-Small Company Growth Fund
INVESCO VIF-Total Return Fund
INVESCO VIF-Utilities Fund
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman AMT Growth Portfolio
Neuberger Berman AMT Limited Maturity Bond Portfolio
Neuberger Berman AMT Partners Portfolio
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Bond Fund
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Hard Assets Fund
Van Eck Worldwide Real Estate Fund
POLICY VALUES
Your policy account value is the amount you have in the guaranteed interest
division, plus the amount you have in each variable division. If you have
outstanding policy loans, your account value includes the amount in the loan
division. The loan division is part of our general account specifically designed
to hold money for loans and loan interest. The general account contains all of
our assets other than those held in the variable account, or our other separate
accounts.
Your account value reflects:
o net premiums;
o deductions for charges;
o the investment performance of the amounts
you have in the variable divisions;
o interest earned on the amount you have in
the guaranteed interest division;
o interest earned and charged on the amount
you have in the loan division; and
o partial withdrawals.
We subtract charges and partial withdrawals you take from your account value.
You make a partial withdrawal when you withdraw part of your net cash surrender
value. Partial withdrawals may reduce the amount of base death benefit which may
trigger a surrender charge.
We may deduct a surrender charge from your account value in the event of:
o surrender;
o policy lapse;
o requested reductions in the stated death
benefit; or
o certain partial withdrawals.
SEE SURRENDER CHARGE, PAGE 12.
Your cash surrender value is equal to your account value minus any surrender
charge.
Your net cash surrender value is equal to the cash surrender value minus
outstanding policy loans and accrued loan interest, if any.
YOUR ACCOUNT VALUE IN THE VARIABLE DIVISIONS
Accumulation units are the way we measure value in the variable divisions.
Accumulation unit value is the value of a unit of a variable division on the
valuation date. Each variable division has a different accumulation unit value.
SEE DETERMINING THE VALUE OF THE VARIABLE DIVISIONS, PAGE 32.
On each valuation date, we determine the accumulation unit values. The
accumulation unit value for each variable division reflects the investment
performance of the matching investment portfolio during the valuation period.
The valuation period is the time beginning at 4:00 p.m. Eastern Time on a
valuation date and ending at 4:00 p.m. Eastern Time on the next valuation date.
Each accumulation unit value reflects asset-based charges under the policy, and
the expenses of the investment portfolios. SEE HOW WE CALCULATE ACCUMULATION
UNIT VALUES FOR EACH DIVISION, PAGE 33.
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Variable Last Survivor 9
TRANSFERS OF ACCOUNT VALUES
You may make up to twelve free transfers among the variable divisions or to the
guaranteed interest division per policy year. We charge $25 for each transfer
over twelve you make in a policy year. This charge does not apply to any
automatic rebalancing or dollar cost averaging transfers: they are free. There
are restrictions on transfers to or from the guaranteed interest division. SEE
TRANSFERS OF ACCOUNT VALUES, PAGE 34.
SPECIAL POLICY FEATURES
ADDITIONAL BENEFITS
You may attach certain additional benefits to your policy by rider. A rider
changes benefits under your policy. In most cases, we deduct a monthly charge
from your account value for these benefits. SEE ADDITIONAL BENEFITS, PAGE 28.
DOLLAR COST AVERAGING
You may choose dollar cost averaging on your application or complete a customer
service form. Dollar cost averaging is a systematic plan of transferring account
values to selected investment divisions. It is intended to protect your policy's
value from short-term price fluctuations. However, dollar cost averaging does
not assure a profit, nor does it protect against a loss in a declining market.
Dollar cost averaging is free. SEE DOLLAR COST AVERAGING, PAGE 34.
AUTOMATIC REBALANCING
You may choose automatic rebalancing on your policy. Automatic rebalancing
periodically reallocates your net account value among the investment divisions
to maintain your specified distribution of account value among those divisions.
Automatic rebalancing is free. SEE AUTOMATIC REBALANCING, PAGE 35.
LOANS
You may take loans against your policy's net cash surrender value. The net cash
surrender value is your account value minus any surrender charges, loans and
accrued loan interest. We charge an annual loan interest rate of 3.75%. We
credit an annual interest rate of 3.0% on amounts held as collateral in the loan
division as collateral for your loan. Beginning in your eleventh policy year,
where permitted by law, we may include amounts in the loan division for
calculation of your policy's persistency refund. SEE POLICY LOANS, PAGE 36.
PARTIAL WITHDRAWALS
You may withdraw part of your cash surrender value any time after your first
policy year. You may make only one partial withdrawal per policy year. Partial
withdrawals may reduce the death benefit and will reduce your account value.
Surrender charges may apply. SEE PARTIAL WITHDRAWALS, PAGE 37.
PERSISTENCY REFUND
After your tenth policy anniversary, where permitted by state law, we credit
your account value with a persistency refund on every monthly processing date.
SEE PERSISTENCY REFUND, PAGE 51.
POLICY MODIFICATION, TERMINATION AND CONTINUATION FEATURES
RIGHT TO EXCHANGE POLICY
For 24 months after the policy date you can exchange your policy for a
guaranteed policy, unless state law requires differently. Right to exchange
policy is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 31.
POLICY SPLIT OPTION
You may split your policy into two separate life insurance policies each
insuring the life of one insured person, under certain circumstances. This split
may occur upon divorce between the two insured people, business dissolution, or
a possible adverse future change in the tax law. The policy split option is
free. SEE POLICY SPLIT OPTION, PAGE 30.
SURRENDER
You may surrender your policy for its net cash surrender value at any time while
an insured person is living.
We calculate your net cash surrender value on the valuation date we receive your
request and policy at our customer service center. All insurance coverage ends
on that date. You must return your policy to us.
SEE SURRENDER, PAGE 41.
LAPSE
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Variable Last Survivor 10
In general, insurance coverage continues as long as your policy's net cash
surrender value is enough to pay the monthly deductions. However, your policy
and its riders are guaranteed not to lapse during the first five years of your
policy if the conditions of the special continuation period have been met. SEE
LAPSE, PAGE 38.
REINSTATEMENT
You may reinstate your policy and its riders within five years of its lapse if
the insured people meet the same underwriting requirements as were met at policy
issue.
You will need to give proof of insurability as at policy issue. You will also
need to pay required reinstatement premiums.
If the guaranteed minimum death benefit lapses and you do not correct it, this
feature terminates. Once it terminates, you cannot reinstate this feature.
We will reinstate any policy loans existing when coverage ended, with accrued
loan interest to the date of the lapse. SEE REINSTATEMENT, PAGE 40.
CONTINUATION OF COVERAGE
At the younger insured person's 100th birth date, you may choose to let the
continuation of coverage feature become effective. If the continuation of
coverage feature becomes effective, we will deduct a one-time administrative fee
of $400 and keep your policy in force. SEE CONTINUATION OF COVERAGE, PAGE 31.
DEATH BENEFITS
At the second death of the two insured people, we pay death proceeds to the
beneficiary(ies) if your policy is still in force. The beneficiary(ies) is(are)
the person or people you name to receive the death proceeds. The death proceeds
equal the base death benefit plus amounts payable by rider, minus the amount of
your outstanding policy loan and accrued loan interest. The base death benefit
varies according to which death benefit option you have chosen.
The base death benefit does not include any adjustable term insurance rider you
may have on your policy. The target death benefit includes any adjustable term
insurance rider you may have on your policy plus your base death benefit. The
total death benefit is at least equal to or greater than your target death
benefit.
The minimum target death benefit to issue your policy is $250,000. If you have
an adjustable term rider, the minimum stated death benefit to issue your policy
is $100,000. However, we may lower this minimum for group or sponsored
arrangements, or corporate purchasers. SEE DEATH BENEFIT, PAGE 23.
You may change your base death benefit amount while your policy is in force,
subject to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 26.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUM
We make the following deductions from each premium payment you make:
1. Tax charges -- We currently deduct a charge of 2.5% of premiums for
state and local taxes. We currently deduct a charge of 1.5% of each
premium to cover our estimated cost of the federal income tax treatment
of deferred acquisition costs. SEE TAX CHARGES, PAGE 48.
2. Sales charge -- We deduct a percentage of each premium to cover a
portion of our expenses in selling your policy. This charge is based on
the length of time since your policy or a segment became effective.
Sales Charge Percentage
-----------------------
To Segment Above Segment
Segment Target Target
Year Premium Premium
------- ---------- -------------
1 - 5 5.5% 2%
6 + 2% 2%
SEE DEDUCTIONS FROM PREMIUMS, PAGE 48.
DEDUCTIONS FROM THE VARIABLE DIVISIONS
We assess a mortality and expense risk charge of 0.75% per year or 0.002055% per
day against the variable divisions. This charge compensates us for mortality and
expense risks under the policies. SEE DAILY DEDUCTIONS FROM THE VARIABLE
ACCOUNT, PAGE 48.
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Variable Last Survivor 11
MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE
We deduct the following charges from your account value at the beginning of each
policy month:
1. Policy charge -- $15 per month for the first ten policy years and $9
per month for each policy year after the tenth.
2. Monthly administrative charge-- A charge of no less than $0.07 and no
more than $0.095 per $1,000 for the first ten policy years. We charge
$0.023 per $1,000 for each policy year after the tenth. The exact per
$1,000 charge for your policy is based on the insured people's issue
ages and policy duration.
3. Cost of insurance charge -- Based on the net amount at risk on the
lives of the insured people. The amount of this charge differs for the
segments of the base death benefit and the adjustable term insurance
rider.
4. Guaranteed minimum death benefit (if applicable) -- $0.005 per $1,000
of stated death benefit per month.
5. Charges for additional benefits -- The cost of additional benefits you
choose. The adjustable term insurance rider charge is included in the
cost of insurance charge.
SEE MONTHLY DEDUCTIONS FROM THE ACCOUNT VALUE, PAGE 49.
POLICY TRANSACTION FEES
We deduct policy transaction fees from the variable and guaranteed interest
divisions. We deduct these fees proportionately based on the account value in
each investment division in which you have amounts invested immediately before
the transaction.
The following are the current transaction fees. SEE POLICY TRANSACTION FEES,
PAGE 50.
1. Partial withdrawal fee -- $25.
2. Transfer fee -- We allow twelve free transfers among investment
divisions per policy year. For each transfer beyond that, a $25 fee
applies.
3. Illustrations -- You may request one free illustration per policy year.
For each illustration beyond that, a $25 fee may apply.
ADMINISTRATIVE FEES
Continuation of Coverage -- To activate continued coverage, we will deduct a
one-time $400 administrative fee from your account value at the younger insured
person's 100th birth date.
ALLOCATION CHANGE FEE
You may make five free premium and five free automatic rebalancing allocation
changes per policy year. We charge you $25 for each additional allocation change
per policy year. The $25 fee is withdrawn from your investment divisions on a
pro-rata basis.
SURRENDER CHARGES
During the first nine years of your policy or of a new coverage segment, we
assess a surrender charge if you:
o surrender the policy;
o reduce the stated death benefit (other than
by changing the death benefit option);
o let your policy lapse; or
o take a partial withdrawal which reduces
your stated death benefit.
The surrender charge is a percentage of your target premium. It depends upon the
insured people's ages at the policy date. SEE SURRENDER CHARGE, PAGE 51.
CHARGES FROM INVESTMENT PORTFOLIOS
The investment portfolios have investment management fees, 12(b)(1) fees and
other expenses which are deducted by the portfolio managers. SEE CHARGES FROM
PORTFOLIOS, PAGE 52.
TAX CONSIDERATIONS
Under current federal income tax law, death benefits of life insurance policies
generally are not subject to income tax. In order for this treatment to apply,
the policy must qualify as a life insurance contract. We believe it is
reasonable to conclude that the policy will qualify as a life insurance
contract. SEE TAX STATUS OF THE POLICY, PAGE 55.
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Variable Last Survivor 12
Assuming the policy qualifies as a life insurance contract, under current
federal income tax law, your account value earnings are generally not subject to
income tax as long as they remain within your policy. However depending on
circumstances, the following events may cause taxable consequences for you:
o partial withdrawals;
o surrender; or
o lapse.
In addition to the events listed above, if your policy is a modified endowment
contract, loans against or secured by the policy may cause income taxation. A
penalty tax may be imposed on a distribution from a modified endowment contract
as well. SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 56.
You should consult a qualified legal or tax adviser before you purchase your
policy.
INFORMATION ABOUT SECURITY LIFE, THE VARIABLE ACCOUNT, THE INVESTMENT OPTIONS
AND THE GUARANTEED INTEREST DIVISION
SECURITY LIFE OF DENVER INSURANCE COMPANY
Security Life of Denver Insurance Company ("Security Life") is a stock life
insurance company organized under the laws of the State of Colorado in 1929. Our
headquarters are located at 1290 Broadway, Denver, Colorado 80203-5699. We are
admitted to do business in the District of Columbia and all states. At the close
of 1998, the company and its consolidated subsidiaries had over $XXX.X billion
of life insurance in force. As of December 31, 1998, our total assets were over
$X.X billion, and our shareholder's equity was over $XXX million.
We have a complete line of life insurance products, including:
o annuities;
o individual life;
o group life;
o pension products; and
o market life reinsurance.
Security Life is a wholly owned indirect subsidiary of ING Groep, N.V. ("ING").
ING is one of the world's three largest diversified financial services
organizations. ING is headquartered in Amsterdam, The Netherlands. It has
consolidated assets over $XXX.X billion on a Dutch (modified U.S.) generally
accepted accounting principles basis, as of December 31, 1998.
The principal underwriter and distributor for our policies is ING America
Equities, Inc. ING America Equities is a stock corporation organized under the
laws of the State of Colorado in 1993. It is a wholly owned subsidiary of
Security Life and is a registered broker-dealer with the SEC and the NASD. ING
America Equities, Inc. is located at 1290 Broadway, Denver, Colorado 80203-5699.
YEAR 2000 PREPAREDNESS
Security Life of Denver Insurance Company is aware of the computer problems that
may exist surrounding the Year 2000. Our senior management projects information
processing and delivery systems to have a Year 2000 readiness interim target
completion date of June 29, 1999 with a final completion date of December 31,
1999.
The Year 2000 problem originates from the predominant use in computer programs
of a two-digit field to capture the year, for example 99 instead of 1999. When
we reach the year 2000 many of these programs will assume the year 00 is
actually 1900 rather than 2000. This incorrect assumption can lead to erroneous
results, false calculations or system failures. This is not only a computer
problem, but also applies to other machinery or equipment containing computer
chips which calculate dates for correct performance, the so-called "embedded
systems". That is why errors, ranging from telephone shutdown to other services
may occur as well. This potential risk is often referred to as the "Millennium
Bug" or the "Year 2000 problem".
The problem is made more complex by the many lines of code that can be affected
in a single system, the number of systems required to support business
activities and the interdependence of both the internal and external systems
involved in exchanging data. This is particularly true for the financial
services industry, where information is at the heart of the business and which
depends heavily on the uninterrupted transfer of data world-wide, bank-to- bank
and with clearing houses, exchanges and agencies. If the potential problems are
not addressed,
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Variable Last Survivor 13
this could in some cases result in business system failure. From a financial
perspective, this could, for instance, lead to incorrect interest calculations
or over/under payments.
A project plan has been implemented and our project team has analyzed and
remediated our in-house source code. We completed the remediation in December,
1998. The project plan covers Security Life, ING America Equities, Inc.,
Midwestern United Life Insurance Company, and First ING Life Insurance Company
of New York. We will follow our normal project management methodology including
communication with senior management on a monthly and as-needed basis. Our
targeted completion date is scheduled for June 28, 1999, but there is no
assurance that Security Life will be successful, or that interaction with other
service providers will not impact our services at that time.
Security Life has completed an inventory and assessment of all vendor products.
We are in the process of verifying that each vendor product is Year 2000 ready.
Funds have been allocated for the 1999 efforts, and we believe we have
sufficient resources to ensure Year 2000 processing capabilities.
SECURITY LIFE SEPARATE ACCOUNT L1
VARIABLE ACCOUNT STRUCTURE
We established Security Life Separate Account L1 (the "variable account") on
November 3, 1993, under Colorado's insurance law. It is a unit investment trust,
registered with the SEC under the Investment Company Act of 1940. The SEC does
not supervise our management of the variable account or Security Life.
The variable account is a separate investment account. It is used to support our
variable life insurance policies and for other purposes allowed by law and
regulation. We keep the variable account assets separate from our general
account and other separate accounts. We may offer other variable life insurance
contracts, with different charges and benefits, that invest in the variable
account. We do not discuss these contracts in this prospectus. The variable
account may invest in other securities not available for the policy described in
this prospectus. The general account contains all of our assets other than those
held in the variable account (variable divisions) or other separate accounts.
The company owns all the assets in the variable account. We credit gains to or
charge losses against the variable account without regard to performance of
other investment accounts.
ORDER OF VARIABLE ACCOUNT LIABILITIES
State law provides that we may not charge general account liabilities against
variable account assets equal to its reserves and other liabilities.
The variable account may have liabilities from assets credited to other variable
life policies offered by the variable account. If the assets of the variable
account are greater than required reserves and policy liabilities, we may
transfer the excess to our general account.
VARIABLE DIVISIONS
The variable account has several divisions. Each division invests in shares of a
matching investment portfolio. This means that the investment performance of a
policy depends on the performance of the investment portfolios you choose. Each
investment portfolio has its own investment objective. These investment
portfolios are not available directly to individual investors. They are only
available as the underlying investments for variable annuity and variable life
insurance contracts and certain pension accounts.
INVESTMENT PORTFOLIOS
Each of the investment portfolios is a separate series of an open-end management
investment company. The investment company receives investment advice from a
registered investment adviser who is not associated with us.
The investment portfolios sell shares to separate accounts of insurance
companies. These insurance companies may or may not be affiliated with us. This
is known as "shared funding." Investment portfolios may sell shares as the
underlying investment for both variable annuity and variable life insurance
contracts. This process is known as "mixed funding."
The investment portfolios may sell shares to certain qualified pension and
retirement plans that qualify under Section 401 of the Internal Revenue Code
("IRC"). As a result, a material conflict of interest may arise between
insurance companies, owners of
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Variable Last Survivor 14
different types of contracts and retirement plans, or
their participants.
If there is a material conflict, we will consider what should be done, including
removing the investment portfolio from the variable account. There are certain
risks with mixed and shared funding, and with selling shares to qualified
pension and retirement plans. See the investment portfolios' prospectuses.
OBJECTIVES OF THE INVESTMENT
PORTFOLIOS
Each investment portfolio has a different investment objective that it tries to
achieve by following its own investment strategy. The objectives and policies of
each investment portfolio affect its return and its risks. With this prospectus,
you must receive the current prospectus for each investment portfolio. We
summarize the investment objectives for each investment portfolio here. You
should read each investment portfolio prospectus.
Certain investment portfolios offered under this policy have investment
objectives and policies similar to other funds managed by the portfolio's
investment adviser. The investment results of a portfolio may be higher or lower
than those of other funds managed by the same adviser. There is no assurance,
and no representation is made, that the investment results of any investment
portfolio will be comparable to those of another fund managed by the same
investment adviser.
Some investment portfolio advisers (or their affiliates) may pay us compensation
for servicing, administration or other expenses. Currently, these advisers
include A I M Management Group, Inc.; Fidelity Investments; Fred Alger
Management, Inc.; INVESCO Funds; Neuberger Berman Management, Inc.; and Van Eck
Global. The amount of compensation is usually based on the aggregate assets of
the investment portfolio from contracts that we issue or administer. Some
advisers may pay us more than others.
We have agreements with the investment portfolio advisers under which we receive
certain fees in return for providing certain services. These fees are commonly
known as 12(b)(1) fees. These fees are usually charged by the advisers to the
investment portfolios, but are in some cases absorbed by the investment
portfolio.
A I M VARIABLE INSURANCE FUNDS, INC.
A I M Variable Insurance Funds, Inc. is a registered, open-end, series,
management investment company. A I M Advisors, Inc., ("AIM") serves as each
fund's investment advisor. AIM has acted as an investment advisor since its
organization in 1976. Today, AIM, together with its subsidiaries, advises or
manages over 110 investment portfolios encompassing a broad range of investment
objectives.
AIM V.I. Capital Appreciation Fund -- seeks growth of capital through
investment in common stocks, with emphasis on medium- and small-sized
growth companies.
AIM V.I. Government Securities Fund -- seeks to achieve high, current income
consistent with reasonable concern for safety of principal by investing in
debt securities issued, guaranteed or otherwise backed by the United States
Government.
THE ALGER AMERICAN FUND
The Alger American Fund is a registered investment company organized on April 6,
1988. It is a multi- series Massachusetts business trust. The Fund's investment
manager is Fred Alger Management, Inc., which has provided investment advisory
services since 1964.
Alger American Growth Portfolio -- seeks long-term capital appreciation. The
portfolio focuses on companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in equity securities of
large companies The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
Alger American Leveraged AllCap Portfolio -- seeks long-term capital
appreciation. Under normal circumstances, the portfolio invests in the
equity securities of companies of any size which demonstrate promising
growth potential.
The portfolio can leverage, that is, borrow money, to buy additional
securities. By borrowing money, the portfolio has the potential to increase
its returns if the increase in the value of the securities purchased
exceeds the cost of borrowing, including interest paid for the money
borrowed.
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Variable Last Survivor 15
Alger American MidCap Growth Portfolio -- seeks long-term capital appreciation.
The portfolio focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in equity
securities of companies having a market capitalization within the range of
companies in the S&P(R) MidCap 400 Index. This may not be true during
temporary defensive periods.
Alger American Small Capitalization Portfolio -- seeks long-term capital
appreciation.
The portfolio focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace. Under normal circumstances, the portfolio invests primarily in
equity securities of small capitalization companies. A small capitalization
company is one that has a market capitalization within the range of
companies included in the Russell(R) 2000 Growth Index or the S&P(R)
SmallCap 600 Index.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND
II
Fidelity Variable Insurance Products Fund ("VIP" established November 13, 1981)
and Variable Insurance Products Fund II ("VIP II" established March 21, 1988)
are open-end, diversified, management investment companies. These funds are
organized as Massachusetts business trusts.
Fidelity Management & Research Company ("FMR") generally manages and runs the
funds named here. However, Bankers Trust Company sub-advises VIP II Index 500
Portfolio. FMR is the management arm of Fidelity Investments, which was
established in 1946 and is now America's largest mutual fund manager.
VIP Growth Portfolio -- seeks capital appreciation.
FMR's principal investment strategies include:
o Investing primarily in common stocks.
o Investing in companies that it believes have above-average growth
potential (stocks of these companies are often called "growth" stocks).
o Investing in domestic and foreign issuers.
o Using fundamental analysis of each issuer's financial condition and
industry position and market and economic conditions to select
investments.
VIP Money Market Portfolio -- seeks as high a level of current income as is
consistent with the preservation of capital and liquidity.
FMR's principal investment strategies include:
o Investing in U.S. dollar-denominated money
market securities, including U.S.
Government securities and repurchase
agreements, and entering into reverse
repurchase agreements.
o Investing more than 25% of total assets in the financial services
industry.
o Investing in compliance with industry- standard requirements for money
market funds for the quality, maturity and diversification of
investments.
VIP Overseas Portfolio -- seeks long term growth of capital.
FMR's principal investment strategies include:
o Investing at least 65% of total assets in
foreign securities.
o Investing primarily in common stocks.
o Allocating investments across countries and
regions considering the size of the market in each country and region
relative to the size of the international market as a whole.
o Using fundamental analysis of each issuer's financial condition and
industry position and market and economic conditions to select
investments.
VIP II Asset Manager Portfolio -- seeks high total return with reduced risk
over the long term by allocating its assets among stocks, bonds, and
short-term instruments.
FMR's principal investment strategies include:
o Allocating the fund's assets among stocks,
bonds, and short-term and money market
instruments.
o Maintaining a neutral mix over time of 50% of assets in stocks, 40% of
assets in bonds, and 10% of assets in short-term and money market
instruments.
o Adjusting allocation among asset classes gradually within the following
ranges: stock class (30 - 70%), bond class (20 - 60%), and
short-term/money market class (0 - 50%).
o Investing in domestic and foreign issuers.
o Analyzing an issuer using fundamental
and/or quantitative factors and evaluating
each security's current price relative to
estimated long-term value in selecting instruments.
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Variable Last Survivor 16
VIP II Index 500 Portfolio -- seeks investment results that correspond to the
total return of common stocks publicly traded in the United States as
represented by the S&P 500.
Bankers Trust Company (BT)'s principal investment strategies include:
o Investing at least 80% of assets in common stocks included in the S&P
500.
o Lending securities to earn income for the fund.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a registered, open-end management
investment company. It was organized as a Maryland corporation on August 19,
1993. It is currently made up of ten diversified investment portfolios. We
describe five of these investment portfolios here.
INVESCO Funds Group, Inc. is the Funds' investment adviser. As the adviser, it
is mostly responsible for providing the portfolios with investment management,
various administrative services, and supervising the Fund's daily business
affairs.
INVESCO Capital Management, Inc. sub-advises the Total Return Fund. "VIF" refers
to INVESCO Variable Investment Fund. INVESCO Distributors, Inc. ("IDI"),
provides distribution services for the INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Equity Income Fund -- seeks high current income, with growth of
capital as a secondary objective.
The fund normally invests at least 65% of its assets in dividend-paying
common and preferred stocks, although in recent years that percentage has
been somewhat higher. Stocks held by the fund generally are expected to
produce a relatively high level of income and a consistent, stable return.
Although it focuses on the stocks of larger companies with a strong record
of paying dividends, the fund also may invest in companies that have not
paid regular dividends. The fund's equity investments are limited to stocks
that can be traded easily in the United States; it may, however, invest in
foreign securities in the form of American Depository Receipts (ADRs).
The rest of the fund's assets are invested in debt securities, generally
corporate bonds that are rated investment grade or better. The fund also
may invest up to 15% of its assets in lower-grade debt securities commonly
known as "junk bonds", which generally offer higher interest rates, but are
riskier investments than investment grade securities.
INVESCO VIF-High Yield Fund -- seeks to provide a high level of current income.
It invests substantially all of its assets in lower- rated debt securities,
commonly called "junk bonds," and preferred stock, including securities
issued by foreign companies. Although these securities carry with them
higher risks, they generally provide higher yields-- and therefore higher
income--than higher-rated debt securities.
INVESCO VIF-Small Company Growth Fund -- seeks to make your investment grow over
the long term.
The fund normally invests at least 80% of its assets in equity securities
of companies with market capitalizations of $1 billion or less. INVESCO use
a bottom-up investment approach to the fund's investment portfolio,
focusing on companies that are in the developing stages of their life
cycles. Using this approach, we try to identify companies that we believe
are undervalued in the marketplace, have earnings which may be expected to
grow faster than the U.S. economy in general, and/or offer the potential
for accelerated earnings growth due to rapid growth of sales, new products,
management changes, or structural changes in the economy. The prices of
securities issued by these small companies tend to rise and fall more
rapidly than those of more established companies.
The remainder of the fund's assets can be invested in a wide range of
securities that may or may not be issued by small companies. In addition to
equity securities, the fund can invest in foreign securities and debt
securities, including so-called "junk bonds."
INVESCO VIF-Total Return Fund -- seeks to provide you with high total return
through both growth and current income from those investments. It normally
invests at least 30% of its assets in common stocks of companies with a
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Variable Last Survivor 17
strong history of paying regular dividends and 30% of its assets in debt
securities. Debt securities include obligations of the U.S. Governments and
government agencies. The remaining 40% of the fund is allocated among these
and other investments at INVESCO's discretion, based upon current business,
economic and market conditions.
INVESCO VIF-Utilities Fund -- seeks capital
appreciation and income. The fund is
aggressively managed. Although the fund can
invest in debt securities, it primarily invests in equity securities that
INVESCO believes will rise in price faster than other investments, as well
as options and other investments whose value is based upon the values of
equity securities.
The fund normally invests at least 80% of its assets in companies doing
business in the utilities economic sector. The remainder of the fund's
assets are not required to be invested in the sector.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
The Neuberger Berman Advisers Management Trust (the "Trust," formerly known as
Neuberger & Berman) is a registered, open-end management investment company. It
is organized as a Delaware business trust dated May 23, 1994. The Trust is made
up of separate portfolios, each of which invests all of its net investable
assets in a matching series of Advisers Managers Trust ("AMT" or "Managers
Trust"). The Managers Trust is a diversified, open-end management investment
company organized as a New York common law trust on May 24, 1994.
This master feeder structure is different from that of many other investment
companies. Many other investment companies directly purchase and manage their
own securities portfolios. Neuberger Berman Management Incorporated acts as
investment manager to Managers Trust. Neuberger Berman, L.L.C. is the
sub-adviser.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
Shares of the separate Portfolios of Neuberger Berman Advisers Management Trust
are sold only through the currently effective prospectus and are not available
to the general public. Shares of the AMT Portfolios may be purchased only by
life insurance companies to be used with their separate accounts which fund
variable annuity and variable life insurance policies.
Neuberger Berman Growth Portfolio -- seeks capital appreciation, regardless of
income. It may invest in small, medium and large capitalization securities
believed to have maximum potential for long-term capital appreciation.
The portfolio managers currently focus on the securities of
medium-capitalization companies. The managers use a growth-oriented
investment approach. A growth-oriented approach seeks stocks of companies
that are expected to grow at above-average rates.
Neuberger Berman Limited Maturity Bond Portfolio -- seeks highest current income
consistent with low risk to principal, and liquidity; and secondarily,
total return.
The Limited Maturity Bond Portfolio invests in a diversified portfolio of
U.S. Government and Agency securities and investment grade debt issued by
financial institutions, corporations and others.
The Limited Maturity Bond Portfolio may invest up to 10% of its net assets,
measured at the time of investment, in below investment grade fixed income
securities, or comparable unrated securities.
The Limited Maturity Bond Portfolio's dollar weighted average portfolio
duration may range up to four years. However, the series may invest in
securities of any duration.
Neuberger Berman Partners Portfolio -- seeks capital growth through an
investment approach designed to increase capital with reasonable risk. Its
investment program seeks securities believed to be undervalued based on
strong fundamentals, including low price to earnings ratio, consistent cash
flow, and the company's track record through all points of the market
cycle.
The portfolio may invest up to 15% of the series'
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Variable Last Survivor 18
net assets, measured at the time of investment, in below investment grade
corporate debt securities or comparable unrated securities.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on January 7, 1987. On April 12, 1995, Van Eck Investment Trust
changed its name to Van Eck Worldwide Insurance Trust. Van Eck Associates
Corporation serves as investment adviser and manager to the funds.
Van Eck Worldwide Bond Fund -- seeks high total return--income plus capital
appreciation--by investing globally, primarily in a variety of debt
securities.
Van Eck Worldwide Emerging Markets Fund -- seeks long term capital appreciation
by investing in equity securities in emerging markets around the world.
Van Eck Worldwide Hard Assets Fund -- seeks long term capital appreciation by
investing primarily in "hard assets securities." Income is a secondary
consideration. Hard assets include:
o precious metals;
o forest products;
o ferrous and non-ferrous metals;
o gas, petroleum, petrochemical or other hydrocarbons;
o real estate; and
o other basic non-agricultural commodities.
Van Eck Worldwide Real Estate Fund -- seeks high total return by investing in
equity securities of companies that own significant real estate or
principally do business in real estate.
THE GUARANTEED INTEREST DIVISION
You may allocate all or a part of the net premiums and transfers of your net
account value into the guaranteed interest division. The guaranteed interest
division is part of our general account which guarantees principal. It pays
interest at a fixed rate that we declare.
The general account supports our non-variable insurance and annuity obligations.
We have not registered interests in the guaranteed interest division under the
Securities Act of 1933. Also, we have not registered the guaranteed interest
division or the general account as an investment company under the Investment
Company Act of 1940 (because of exemptive and exclusionary provisions). This
means that the general account, the guaranteed interest division and its
interests are generally not subject to regulation under these Acts.
The SEC staff has not reviewed the disclosures included in this prospectus
relating to the general account and the guaranteed interest division. These
disclosures, however, may be subject to certain requirements of the federal
securities law regarding accuracy and completeness of statements made in this
prospectus.
The amount you have in the guaranteed interest division is the sum of net
premiums you allocate to that division, plus transfers you made to the
guaranteed interest division, plus interest earned.
Amounts you transfer out of or withdraw from the guaranteed interest division
reduce this amount. It is also reduced by deductions for charges from your
account value allocated to the guaranteed interest division.
We declare the interest rate that applies to all amounts in the guaranteed
interest division. These interest rates are never less than the minimum
guaranteed interest rate of 4.0% and will be in effect for periods of at least
twelve months. Interest compounds daily at an effective annual rate that equals
the declared rate. We credit interest to the guaranteed interest division on a
daily basis. We pay interest regardless of the actual investment performance of
our account. We bear all of the investment risk for the guaranteed interest
division.
MAXIMUM NUMBER OF INVESTMENT
DIVISIONS
You may invest in a total of eighteen divisions over the lifetime of your
policy. Investment divisions include the variable and the guaranteed interest
divisions. The loan division does not count toward the eighteen division
maximum.
As an example, if you have had funds in seventeen variable divisions and the
guaranteed interest division (or eighteen variable divisions), these are the
only divisions to which you may later add or transfer
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Variable Last Survivor 19
funds. You may want to use fewer divisions in the early years of your policy, so
that you can invest in other divisions in the future. Further, if you invest in
eighteen variable divisions, you will not be able to invest in the guaranteed
interest division.
DETAILED INFORMATION ABOUT THE VARIABLE LAST SURVIVOR UNIVERSAL LIFE POLICY
This prospectus describes our standard Variable Last Survivor Universal Life
insurance policy. There may be differences in the policy because of state
requirements where we issue your policy. We will describe any such differences
in your policy.
The illustrations beginning on page 60 show how the Variable Last Survivor
policies work.
APPLYING FOR A POLICY
You may purchase a Variable Last Survivor policy by submitting an application to
us. On the policy date, the joint equivalent age of the two insured people must
be no older than age 85. The insured people are the two people on whose lives we
issue the policy. The insured people share some relationship and commonly
include, among others: husband and wife; business partners; parent and child;
grandparent and grandchild; and siblings. Upon the second death of the insured
people we pay the death proceeds. Age is each insured person's age on the
birthday nearest the policy date plus the number of completed policy years since
the policy date.
The individual age of each insured person must be no more than 90 years of age
on the policy date. There is no maximum age difference between the two insured
people. We may back-date the policy up to six months to allow either or both of
the insured people to give proof of a younger age for the purposes of your
policy.
POLICY ISSUANCE
Before we issue a policy or apply your net premium to the investment divisions,
we require satisfactory evidence of insurability of both insured people and
payment of your initial premium. This evidence may include a medical examination
and completion of all underwriting and issue requirements.
The investment date is the date we apply your initial net premium to the policy.
It is the valuation date when we have received your initial premium, your policy
is issued, and all issue requirements have been met. Your initial premium is the
premium we must receive before coverage can begin. The initial premium is the
first premium we receive and apply to your policy. It must be at least equal to
the sum of the scheduled premiums which are due from your policy date through
your investment date.
If you have a policy with no adjustable term insurance rider, your stated death
benefit may be no less than $250,000. If you choose to have an adjustable term
insurance rider, your stated death benefit may be as little as $100,000, as long
as your target death benefit is at least $250,000. SEE CHANGES IN DEATH BENEFIT
AMOUNTS, PAGE 26.
We may reduce the minimum stated death benefit for group or sponsored
arrangements or corporate purchasers. Our underwriting and reinsurance
procedures in effect at the time you apply limit the maximum stated death
benefit.
The policy date as shown on your policy schedule determines:
o monthly processing dates;
o policy months;
o policy years; and
o policy anniversaries.
It is not affected by the date you receive the policy. The policy date may be
different from the date we receive your first premium payment. If the policy
date is earlier, we charge monthly deductions from the policy date.
DEFINITION OF LIFE INSURANCE
We apply a test to make sure that your policy meets the federal tax definition
of life insurance. The Guideline Premium/Cash Value Corridor Test applies to
your policy. We may limit premium payments relative to your policy death benefit
under this test. SEE TAX STATUS OF THE POLICY, PAGE 55.
TEMPORARY INSURANCE
If you apply and qualify, we may issue temporary insurance in an amount equal to
the face amount of insurance for which you applied. The maximum
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Variable Last Survivor 20
amount of temporary insurance for binding limited life insurance coverage is $3
million, which includes any in force coverage with us. This temporary insurance
is in force as long as you meet all requirements.
Coverage begins when:
1. you have completed and signed our binding limited life insurance
coverage form;
2. we receive and accept a premium payment of at least your scheduled
premium (selected on your application); and
3. part I of the application is completed.
Binding limited life insurance coverage ends on the earliest of:
o the date we return your premiums;
o five days after we mail notice of termination to the address on your
application;
o the date your policy coverage starts;
o the date we refuse to issue you a policy based on your application; or
o 90 days after you sign our binding limited life insurance coverage
form.
There is no death benefit under the temporary insurance agreement if:
o there is a material misrepresentation in your answers on the binding
limited life insurance coverage form;
o there is a material misrepresentation in statements on your
application;
o the person or persons intended to be the insured people die by suicide
or self- inflicted injury; or
o the bank does not honor your premium check.
PREMIUMS
You may choose the amount and frequency of premium payments, within limits.
During the continuation of coverage period premium payments will not be accepted
or scheduled. SEE CONTINUATION OF COVERAGE, PAGE 31.
SCHEDULED PREMIUMS
Your premiums are flexible. You may select your scheduled premium (within our
limits) when you apply for your policy. The scheduled premium, shown in your
policy and schedule, is the amount you choose to pay over a stated time period.
THIS AMOUNT MAY OR MAY NOT BE ENOUGH TO KEEP YOUR POLICY IN FORCE. You may
receive premium reminder notices for the scheduled premium on a monthly,
quarterly, semiannual, or annual basis. You are not required to pay the
scheduled premium.
Alternatively, you may choose to pay your premium by electronic funds transfer
each month. This option is not available for your initial premium. The financial
institution that makes your electronic funds transfer may charge for this
service.
You can change the amount of your scheduled premium within our minimum and
maximum limits at any time. If you fail to pay your scheduled premium or if you
change the amount of your scheduled premium, your policy performance will be
affected. During the special continuation period, your scheduled premium should
not be less than the special continuation premium shown in your policy. If you
want the guaranteed minimum death benefit, your scheduled premium should not be
less than the guarantee period annual premium shown in your policy. SEE
GUARANTEED MINIMUM DEATH BENEFIT, PAGE 27.
UNSCHEDULED PREMIUM PAYMENTS
Generally speaking, you may make unscheduled premium payments at any time,
however, we will return all or part of premium payments which are greater than
the "seven-pay" limit for your policy if your payment would cause your policy to
become a modified endowment contract, unless you send us notice acknowledging
the new modified endowment contract status for your policy.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 56 AND CHANGES TO COMPLY WITH LAW, PAGE
58.
If you have an outstanding policy loan and you make an unscheduled payment, we
will consider this payment a loan repayment, unless you tell us otherwise. If
your payment is a loan repayment, we do not take out the tax and sales charges
which apply to premium payments.
MINIMUM ANNUAL PREMIUM
You must pay a minimum annual premium during your first five policy years to
qualify for the special continuation period discussed below.
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Variable Last Survivor 21
Your minimum annual premium is based on:
o each insured person's age, gender, premium class and any rating;
o the stated death benefit of your policy; and
o any additional benefits you select.
Your minimum annual premium is shown in the schedule pages of your policy. We
may reduce the minimum annual premium for group, or sponsored arrangements, or
for corporate purchasers.
SPECIAL CONTINUATION PERIOD
During the special continuation period, we guarantee that your policy will not
lapse, regardless of its net cash surrender value, if on a monthly processing
date during the first five policy years the sum of:
o all premiums that you have paid; minus
o partial withdrawals that you have taken; minus
o policy loans that you have taken, including accrued loan interest is
greater than or equal to;
o the minimum monthly premiums for each policy month, starting with the
first month of your policy through the current policy monthly
processing date.
The minimum monthly premium is one-twelfth of the minimum annual premium.
During the first five years of your policy, we do not permanently waive certain
charges. Instead, we continue to deduct these charges. This deduction may result
in your policy having a negative net cash surrender value, unless you pay enough
premium to prevent this. The negative balance is your unpaid monthly deductions
owing. At the end of the special continuation period to avoid lapse of your
policy, you must pay enough premium to bring the net cash surrender value to
zero. SEE LAPSE, PAGE 38.
ALLOCATION OF NET PREMIUMS
The net premium is the balance remaining after we take premium-based charges
from your premium payment. We add the net premium to your account value
according to your instructions.
On the investment date, we will apply the net premium payments we have received
from you to your policy. Your initial net premium is allocated to your
allocation investment choices on the valuation date when:
a) we receive the amount of premium required for your insurance coverage
to begin; and
b) all issue requirements have been met and received by our customer
service center.
All amounts you designated for the guaranteed interest division will be
allocated to that division. If your state requires return of your premium during
the free look period, we invest amounts you have designated for the variable
divisions into the Fidelity VIP Money Market Division until 15 days after we
issue your policy (deemed delivery time, plus an average free look period, which
varies by state). If your state provides for return of account value during the
free look period, we invest amounts you designated for the variable divisions
directly into your selected investment portfolios. SEE FREE LOOK PERIOD OR RIGHT
TO EXAMINE POLICY, PAGE 41.
After you make your initial net premium, we allocate net premiums among your
investment choices on the valuation date of receipt. We always use your most
recent premium allocation instructions. Your instructions must specify
percentages that are whole numbers totaling 100%.
You may invest in a maximum of eighteen divisions over the lifetime of your
policy. This eighteen investment division maximum includes the variable
divisions and the guaranteed interest division, but not the loan division. SEE
MAXIMUM NUMBER OF INVESTMENT DIVISIONS, PAGE 19.
You may make five free premium allocation changes per year. After the five free
premium allocation changes, we charge you $25 for each additional allocation
change per policy year. The $25 fee is withdrawn from each investment division
pro rata to the amount in each division.
PREMIUM PAYMENTS AFFECT YOUR
COVERAGE
Unless you have the guaranteed minimum death benefit feature or are in the
special continuation period, your policy continues in effect only until your net
cash surrender value no longer covers the monthly deductions for your benefits.
If this happens, your policy will enter the 61-day grace period and you must
make a premium payment to avoid lapse. SEE LAPSE, PAGE 38, AND SEE GRACE PERIOD,
PAGE 38.
If you pay your minimum annual premium each year during the first five policy
years, we guarantee your policy and riders will not lapse during the special
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Variable Last Survivor 22
continuation period, regardless of your net cash surrender value. SEE SPECIAL
CONTINUATION PERIOD, PAGE 22.
Under the guaranteed minimum death benefit, the stated or base death benefit
portion of your policy remains effective until the end of the guarantee period.
The guaranteed minimum death benefit feature does not apply to riders which can
lapse and terminate during the guarantee period. You must meet all conditions of
the guarantee. SEE GUARANTEED MINIMUM DEATH BENEFIT PROVISION, PAGE 27.
MODIFIED ENDOWMENT CONTRACTS
There are special federal income tax rules for distributions from certain life
insurance policies known as "modified endowment contracts." These rules apply to
distributions such as policy loans, surrenders, and partial withdrawals.
Whether or not these rules apply depends upon whether or not the premiums you
paid are greater than the "seven-pay" limit. SEE MODIFIED ENDOWMENT CONTRACTS,
PAGE 56.
If we find that your scheduled premium causes your policy to be a modified
endowment contract on your policy date, we will require you to acknowledge that
you know the policy is a modified endowment contract. We will issue your policy
based on the scheduled premium you selected. If you do not want your policy to
be issued as a modified endowment contract, you may reduce your scheduled
premium to a level which does not cause your policy to be a modified endowment
contract. We will then issue your policy based on the revised scheduled premium.
DEATH BENEFITS
You can decide the amount of insurance you need, now and in the future. You can
combine the long-term advantages of permanent life insurance base coverage with
the flexibility and short-term advantages of term life insurance. Both permanent
and term life insurance are available under your variable last survivor policy.
When we issue your policy, we base the initial insurance coverage on the
instructions in your application. The initial death benefit is the stated death
benefit amount. You can add an adjustable term insurance rider or single life
term rider for additional insurance coverage.
The stated death benefit is the permanent element of your policy. The adjustable
term insurance rider is the term insurance element of your policy.
As a variable last survivor policy, your policy has a joint nature to the death
benefits. This means that we do not pay death proceeds until the second death of
the insured people. Your death benefit is calculated as of the date of the
second death of the insured people.
The adjustable term insurance rider acts as a bridge. It provides term insurance
coverage which automatically adjusts to fill the gap between your total death
benefit and your base death benefit depending on which death benefit option you
choose. If you have a policy with no term rider, your stated death benefit may
be no less than $250,000. If you choose to have an adjustable term insurance
rider, your stated death benefit may be as low as $100,000, as long as your
target death benefit is at least $250,000.
We do not guarantee coverage provided by the adjustable term insurance rider
under the guaranteed minimum death benefit. It may be to your economic advantage
to include part of your insurance coverage under the adjustable term insurance
rider. Both the cost of insurance under the adjustable term insurance rider and
the cost of insurance for the base death benefit are deducted monthly from your
account value and generally increase with the age of the insured people. Use of
the adjustable term insurance rider may reduce sales compensation. SEE
ADJUSTABLE TERM INSURANCE RIDER, PAGE 29.
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Variable Last Survivor 23
DEATH BENEFIT SUMMARY
Option 1 Option 2
Stated Death The amount of policy death benefit at issue, The amount of policy death benefit at issue,
Benefit not including rider coverage. A death not including rider coverage. A death benefit
benefit increase causes a new death benefit increase causes a new death benefit segment to
segment to be added after issue; the amount be added after issue; the amount of the increase
of the increase (the stated increase amount) (the stated increase amount) is added to the
is added to thestated death benefit. stated death benefit.
Base Death The greater of the stated death benefit, or The greater of the stated death benefit, plus the
Benefit the account value multiplied by the death account value or the account value multiplied
benefit corridor factor. by the death benefit corridor factor.
Target Death Stated death benefit plus adjustable term Stated death benefit plus adjustable term
Benefit insurance rider benefit. insurance rider benefit.
Adjustable This amount is set at issue and can be This amount is set at issue and can be
Term Insurance scheduled to change each year. If the base scheduled to change each year. If the base
Rider Benefit death benefit increases to meet the death benefit increases to meet the
requirements of the Guideline requirements of the Guideline Premium/Cash
Premium/Cash Value Corridor Test, the Value Corridor Test, the adjustable term
adjustable term insurance benefit will be insurance rider benefit will be decreased. It
decreased so that the sum of the base death will be decreased so that the total death benefit
benefit and the adjustable term insurance is the greater of the target death benefit plus
rider benefit is not greater than the target the account value, or the account value
death benefit. If the base death benefit multiplied by the death benefit corridor factor.
becomes greater than the target death In other words, the adjustable term insurance
benefit, the adjustable term insurance rider rider benefit can be defined as the total death
benefit is zero. In other words, the benefit minus the base death benefit, but it will
adjustable term insurance rider benefit can not be less than zero.
be defined as the target death benefit minus
base death benefit, but it will not be less
than zero.
Total Death The greater of the target death benefit and The greater of the target death benefit plus the
Benefit the base death benefit. account value, or the base death benefit plus
the adjustable term insurance rider benefit.
BASE DEATH BENEFIT
Your base death benefit can be different from your stated death benefit as a
result of:
o your choice of death benefit option;
o your choice of the enhanced death benefit corridor option;
o a change in your death benefit option;
o increases to satisfy the federal income tax law definition of life
insurance;
o partial withdrawals;
o increases or decreases in the stated death benefit; or
o a transaction which causes the base death benefit to change.
As long as your policy is in force, we will pay the death proceeds to your
beneficiary(ies) at the second death of the insured people. The beneficiary(ies)
is(are) the person (people) you name to receive the death proceeds from your
policy. The death proceeds are:
o your base death benefit; plus
o any rider benefits; minus
o your outstanding policy loan with accrued loan interest; minus
o outstanding policy charges due before the second death of the insured
people.
There could be outstanding policy charges if the
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Variable Last Survivor 24
second death of the insured people happens while your policy is in the grace
period or in the five-year special continuation period.
DEATH BENEFIT OPTIONS
You have a choice of two death benefit options in addition to the enhanced death
benefit corridor option: option 1 or option 2 (described below). Your choice may
result in your having a base death benefit, which is greater than your stated
death benefit. Your death benefit is calculated as of the date of the second
death of the insured people. You may change your death benefit option after the
policy date and before the continuation of coverage feature begins. You may not
change your enhanced death benefit corridor option. You must choose whether or
not you want the enhanced death benefit corridor option before we issue your
policy. SEE CHANGES IN DEATH BENEFIT OPTION 1 OR 2, PAGE 25.
Under death benefit option 1, your base death benefit is the greater of:
1. your stated death benefit; or
2. your account value multiplied by the appropriate factor from the
"Definition of Life Insurance Factors" shown in Appendix A or B
depending on whether or not you elect the enhanced death benefit
option.
Under death benefit option 2, your base death benefit is the greater of:
1. your stated death benefit plus your account value; or
2. your account value multiplied by the appropriate factor from the
"Definition of Life Insurance Factors" shown in Appendix A or B
depending on whether or not you elect the enhanced death benefit
option.
Under option 1 positive investment performance is generally reflected in a
reduced net amount at risk. This lowers your policy's total cost of insurance
charges. Option 1 offers insurance coverage that is a set amount with
potentially lower cost of insurance charges over time. You should choose option
2 if you want to have investment performance reflected in your insurance
coverage.
Federal income tax law requires that your death benefit be at least as much as
your account value multiplied by a factor defined by law. This factor is based
on:
o the younger insured person's age; and
o the Guideline Premium/Cash Value Corridor Test for the federal income
tax law definition of life insurance; and
o the enhanced death benefit corridor option, if elected.
We will adjust your policy to continue to qualify as life insurance under the
federal income tax laws in existence at the time the policy was issued.
CHANGES IN DEATH BENEFIT OPTION 1 OR 2
You may request a change in your death benefit option 1 or 2 after your first
policy year and before the continuation of coverage feature begins. Your death
benefit option change is effective on your next monthly anniversary after we
accept and approve your requested change, so long as at least five days remain
before your monthly anniversary. If fewer than five days remain before your
monthly anniversary, your death benefit option change is effective on your next
monthly anniversary.
After we approve your request, we send a new policy schedule page to you. You
should attach it to your policy. We may ask you to return your policy to our
customer service center so that we can note the change in your schedule. A death
benefit option change applies to your entire stated or base death benefit.
Changing your death benefit option may reduce or increase your target death
benefit, as well as your stated death benefit.
We may not allow you to change the death benefit option if it reduces the target
or stated death benefit below the minimum we require to issue your policy.
On the effective date of your option change, your stated death benefit is
changed as follows:
Change Change Stated Death Benefit
From To Following Change:
Option 1 Option 2 your stated death benefit
before the change minus
your gross account value as
of the effective date of the
change.
Option 2 Option 1 your stated death benefit
before the change plus your
gross account value as of the
effective date of the change.
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Variable Last Survivor 25
We increase or decrease your stated death benefit to keep the net amount at risk
the same on the date you change your death benefit option. Additionally, there
is no change to the amount of term insurance if you have an adjustable term
insurance rider. SEE COST OF INSURANCE CHARGES, PAGE 50.
If you change your death benefit option, we adjust the stated death benefit for
each of your segments by allocating your account value to each benefit segment.
If you change from death benefit option 1 to option 2, your stated death benefit
is decreased by the amount of your account value allocation to that segment. If
you change from death benefit option 2 to option 1, your stated death benefit is
increased by the amount allocated to that segment.
We do not impose a surrender charge for any decrease in your stated death
benefit due to your changing your death benefit option. There is no change to
the target premium. SEE SURRENDER CHARGE, PAGE 51.
Death benefit option 2 is not available during the continuation of coverage
period. If you select this on your policy, it automatically converts to death
benefit option 1 upon the younger insured person's 100th birth date.
ENHANCED DEATH BENEFIT CORRIDOR OPTION
You may elect, at any time prior to the issuance of your policy, the enhanced
death benefit corridor option.
This option generally provides an opportunity for you to have an increased death
benefit on the lives of the insured people at certain ages. Under death benefit
options 1 and 2, to calculate your base death benefit value, your account value
is multiplied by a factor shown in Appendix A or B depending on whether or not
you elect this option. The result of this calculation is your base death benefit
if it exceeds your stated death benefit. Under the enhanced death benefit
corridor option, we calculate your base death benefit using the factors shown on
Appendix B. SEE DEATH BENEFIT OPTIONS, PAGE 25.
There is no separate charge for this feature. However, the same account value
may generate a higher base death benefit under policies with this option than on
policies where you do not elect the option. Cost of insurance charges are based
on the net amount at risk, which is the difference between the account value and
the base death benefit. Therefore, as a result of the increased death benefit,
the cost of insurance charges may be higher for policies where you elect this
option. Your registered representative/agent can provide you with a personalized
illustration to show the difference between a policy with this option and one
without it. If your policy does not have sufficient account value, electing this
option may have no effect on your base death benefit.
Adding this option to your policy does not affect the operation of your policy's
riders, including the adjustable term insurance rider. When the base death
benefit is more than the stated death benefit, transactions which reduce your
account value (such as a partial withdrawal) also reduce your death benefit. The
dollar reduction to the death benefit under these circumstances is greater for
policies with the enhancement option than on those without the option.
Once elected, this option cannot be deleted from your policy. You may lose the
benefit of this option if your account value falls below the minimum level
needed to keep it in effect. Once elected, this option continues as long as
coverage on the original insured people continues.
CHANGES IN DEATH BENEFIT AMOUNTS
You may want to increase the target or stated death benefit under your policy.
You may do this while your policy is in force and before the policy anniversary
when the joint equivalent age of the insured people is 85.
You must provide satisfactory evidence that each insured person is still
insurable to increase your death benefit. You may request a decrease in the
stated death benefit only after your first policy anniversary.
Contact our customer service center to request an increase or decrease in your
policy death benefit. The request is effective as of the next monthly processing
date after we receive your request and approve it, unless there are underwriting
or other requirements which must be met before your request is effective. Any
requested change in your coverage must be for at least $1,000.
After we approve your request, we will send you a new schedule page for your
policy which includes the:
o stated death benefit;
o benefit under applicable riders;
o guaranteed cost of insurance rates of each segment;
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Variable Last Survivor 26
o new surrender charge; and
o target death benefit schedule.
Keep the new schedule with your policy. We may ask you to send your policy to us
so that we can note the change in your schedule.
We may not approve a requested change because it will disqualify your policy as
life insurance under the applicable federal income tax law. If we disapprove a
change for any reason, we provide you with a notice of our decision. SEE TAX
CONSIDERATIONS, PAGE 55.
If your policy does not have an adjustable term insurance rider, your stated
death benefit may be no less than $250,000. If you choose to have an adjustable
term insurance rider, your stated death benefit may be as low as $100,000 as
long as your target death benefit is at least $250,000.
There may be tax consequences as a result of a decrease in your death benefit,
as well as a possible surrender charge. SEE TAX STATUS OF THE POLICY, PAGE 55
AND MODIFIED ENDOWMENT CONTRACTS, PAGE 56.
Requested reductions in the death benefit will first be applied to decrease the
target death benefit. We decrease your stated death benefit only after your
adjustable term insurance rider coverage is reduced to zero. If you have more
than one segment (see below), we divide subsequent decreases in stated death
benefit among your benefit segments pro rata unless state law requires
differently.
Unless you tell us differently, we assume any request you make for an increase
in your target death benefit is also a request for an increase to the stated
death benefit. Thus, the amount of your adjustable term insurance rider will not
change.
You may change the target death benefit only once in a policy year.
The initial, or first segment, is the stated death benefit on the effective date
of the policy. An increase in the stated death benefit (other than one caused by
an option change) will cause a new segment to be created. The segment year
begins on the segment effective date and ends one year later. The following may
apply to each new segment:
o a new minimum annual premium during the first five years of your
policy;
o a new sales charge;
o new surrender charges;
o new cost of insurance charges, guaranteed and current;
o a new incontestability period;
o a new suicide exclusion period; and
o a new target premium.
A requested increase in your stated death benefit creates a new segment. Once we
create a new segment, it is permanent unless state law requires differently. If
an option change causes the stated death benefit to increase, no new segment is
created. Instead, the size of each existing segment(s) is(are) changed. If it
causes the stated death benefit to decrease, each segment is decreased.
To determine the applicable sales charge, premiums you pay after an increase are
applied to your policy segments in the same proportion as the target premium for
each segment bears to the sum of the target premium for all segments.
We allocate the net amount at risk among segments in the same proportion that
each segment bears to the total stated death benefit.
GUARANTEED MINIMUM DEATH BENEFIT
Usually, how long your policy remains in force depends on your policy's net cash
surrender value. Because we deduct charges monthly from your net cash surrender
value, your coverage lasts only as long as your net cash surrender value is
enough to pay these charges and your account value is more than your loan
interest due during the special continuation period. Your account value and the
length of time your policy remains in force depends on:
1. timing and amount of any premium payments;
2. the investment performance of the variable divisions;
3. the interest you earn in the guaranteed interest division;
4. the amount of your monthly charges; and
5. partial withdrawals you take.
You can choose whether or not to put the guaranteed minimum death benefit
feature in force only at the issue of your policy. This feature extends the
period that your policy's stated death benefit remains in effect even if the
variable divisions have poor investment performance. It has a guarantee period
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Variable Last Survivor 27
that lasts until the younger insured person's 100th birth date, so long as you
have met all requirements.
The guaranteed minimum death benefit coverage does not apply to any riders,
including the adjustable term insurance rider. Therefore, if your net cash
surrender value is not enough to pay the deductions as they come due on your
policy and if your policy is outside the special continuation period, only the
stated death benefit portion of your coverage is guaranteed to stay in force.
All riders will end.
The guaranteed minimum death benefit feature is not available in some states.
If you choose the guaranteed minimum death benefit feature, we currently charge
the guaranteed rate of $0.005 per $1,000 of your stated death benefit each month
during the guarantee period.
REQUIREMENTS TO MAINTAIN THE GUARANTEE PERIOD
To qualify for the guaranteed minimum death benefit you must pay an annual
premium higher than the minimum annual premium. This higher premium is called
the guarantee period annual premium. The guarantee period monthly premium is
equal to one-twelfth of the guarantee period annual premium. Your net account
value must also meet certain diversification requirements.
Your guarantee period annual premium depends on:
o your policy's stated death benefit;
o each insured person's age, gender, premium class and underwriting
characteristics;
o the death benefit option you chose;
o additional rider coverage on your policy; and
o other additional benefits on your policy.
At each monthly processing date we test to see if you have paid enough premium
to keep your guarantee in place. We calculate:
o actual premiums paid; minus
o the amount of any partial withdrawals you make; minus
o policy loans you take with accrued loan interest. This amount must
equal or exceed;
o the sum of the guarantee period monthly premium payments for each
policy month starting with your first policy month through the end of
the policy month that begins on the current monthly processing date.
You must continually meet the requirements of the guarantee period for this
feature to remain in effect. We show the guarantee period annual premium on your
policy schedule. If your policy benefits increase, the guarantee period annual
premium increases. If your policy fails to meet this test on any monthly
processing date, the guarantee period ends, and thus the guaranteed minimum
death benefit lapses.
The guarantee period ends if your net account value on any monthly processing
date is not diversified as follows:
1. you must invest your net account value in at least five investment
divisions; and
2. you may invest no more than 35.0% of your net account value in any one
division.
Your policy will continue to meet the diversification requirements if:
1. you have automatic rebalancing and you meet the two diversification
tests listed above; or
2. you have dollar cost averaging which results in transfers into at least
four additional investment divisions with no more than 35.0% of any
transfer directed to any one division.
SEE DOLLAR COST AVERAGING, PAGE 34, AND AUTOMATIC REBALANCING, PAGE 35.
If you fail to satisfy either the premium test or the diversification test and
you do not correct it, this feature terminates. Once it terminates, you cannot
reinstate the guaranteed minimum death benefit feature. The guaranteed period
annual premium no longer applies.
ADDITIONAL BENEFITS
Your policy may include additional benefits, which we attach by rider. A rider
changes benefits under your policy and may or may not add an additional cost to
your policy. We deduct a monthly charge from your account value for each rider
you choose. You may cancel these rider benefits at any time. If you choose any
of these benefits your policy will include the details. Not all riders are
available for all policies. You may schedule your term rider coverage to
increase or decrease at issue. If you want to increase your scheduled benefits
after issue of your
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Variable Last Survivor 28
rider, new guidelines may apply. Scheduled benefits are the kind and amount of
benefits you choose under your policy over a stated period of time.
Periodically we may offer other riders than those listed here. You should
contact your registered representative for a complete list of the riders now
available.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 56, FOR INFORMATION ON THE POSSIBLE TAX
EFFECTS OF ADDING OR CANCELING THESE BENEFITS.
ADJUSTABLE TERM INSURANCE RIDER
You may increase your death proceeds by adding an adjustable term insurance
rider. The amount we pay is the term death benefit in force at the time of the
second death of the two people. As the name suggests, the adjustable term
insurance rider adjusts over time.
You specify a target death benefit when you apply for this rider. The target
death benefit can be level or can be scheduled to change at the beginning of any
policy year. We generally restrict your target death benefit to an amount not
more than four times your stated death benefit at issue. Under certain
circumstances, we will be willing to allow you to specify a target death benefit
of up to eight times your stated death benefit during the first four policy
years. After this four-year period, the normal target death benefit maximum
would apply.
The death benefit for the adjustable term insurance rider is the difference
between your total death benefit and your base death benefit. The death benefit
automatically adjusts daily as your base death benefit changes. Total death
benefit depends on which death benefit option is in effect:
OPTION 1: If option 1 is in effect, the total death benefit is the
greater of:
a. the target death benefit, or
b. the account value multiplied by the appropriate factor
from the death benefit corridor factors in the policy.
OPTION 2: If option 2 is in effect the total death benefit is the
greater of:
a. the target death benefit plus the account value; or
b. the account value multiplied by the appropriate factor
from the death benefit corridor factors in the policy.
For example, under option 1, assume your base death benefit increases because of
or as a result of an increase in your account value. The adjustable term
insurance rider adjusts to provide death proceeds equal to your total death
benefit in each year:
Base Death Total Death Adjustable Term
Benefit Benefit Insurance Rider Amount
---------- ----------- ----------------------
201,500 250,000 48,500
202,500 250,000 47,500
202,250 250,000 47,750
It is possible that the amount of your adjustable term insurance may be zero if
your base death benefit increases enough. Using the same example, if the base
death benefit under your policy grew to $250,000, the adjustable term insurance
would be zero.
The adjustable term insurance can never be less than zero. Even when the
adjustable term insurance is reduced to zero, your rider remains in effect until
you remove it from your policy. Therefore, if later the base death benefit is
reduced below your target death benefit, the adjustable term insurance rider
amount reappears to maintain the total death benefit.
You may change the target death benefit schedule after it is issued, based on
our rules. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 26.
We may deny any future, scheduled increases to your target death benefit if you
cancel a scheduled change, or if you ask for an unscheduled decrease in your
target death benefit.
Partial withdrawals, changes from death benefit option 1 to death benefit option
2, and base decreases may reduce the amount of your target death benefit. SEE
PARTIAL WITHDRAWALS, PAGE 37 AND CHANGES IN DEATH BENEFIT OPTION, PAGE 25.
There is no defined premium for a given amount of adjustable term insurance
coverage. Instead, we deduct a monthly cost of insurance charge from your
account value. The cost of insurance for this rider is calculated as the monthly
cost of insurance rate for the rider coverage multiplied by the adjustable term
death benefit in effect that month. The cost of insurance rates will be
determined by us from time to
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Variable Last Survivor 29
time. They will be based on the issue ages, genders and premium classes of the
insureds, as well as the length of time since your policy date. The monthly
guaranteed maximum cost of insurance rates for this rider will be in the policy.
SEE COST OF INSURANCE CHARGES, PAGE 50.
There are no sales or surrender charges for this coverage. This means that an
increase in your target death benefit which does not increase your stated death
benefit does not increase the total surrender charge for your policy. Further, a
decrease in your adjustable term insurance rider coverage does not cause a
surrender charge to be assessed. If the target death benefit schedule is
increased by you after the rider is issued, we use the same rates for the entire
coverage for this rider. These rates are based on the original premium classes
even though satisfactory new evidence of insurability is given to us for the
increased schedule.
SINGLE LIFE TERM RIDER
This rider provides a benefit upon the death of one of the primary insured
people under your policy. You may choose to add a single life term rider to just
one insured person; or, you may add two single life term riders: one for each
insured person under your policy. You may add this rider when your policy is
issued or at a later time. The insured person must be insurable according to our
rules.
We will issue the single life term rider for an insured person who is age 85 or
younger. Coverage may continue under this rider until the earlier of when:
o the insured person covered by this rider reaches age 100;
o the continuation of coverage provision becomes effective; and
o the insured person covered by this rider dies. SEE CONTINUATION OF
COVERAGE, PAGE 31.
The minimum amount of coverage for each single life term rider is $1,000. The
maximum coverage for an insured person under this rider is subject to our
underwriting determinations. We can schedule the death benefit for your single
life term rider when we issue it. You may increase or decrease coverage under
this rider.
Your request for an increase or decrease in coverage is effective as of the next
monthly processing date after we approve your request, unless there are
underwriting or other requirements which must be met before your request is
effective. Any requested change in your coverage must be for at least $1,000. If
you schedule or request an increase after issue, the insured person under this
rider will again be subject to our underwriting requirements. The charge for
this rider is based on the age, gender, premium class, and underwriting
characteristics of the insured person covered by this rider.
The charge for this rider is deducted on each monthly processing date. It is
charged as a cost per each $1,000 of the net amount at risk under this rider.
See the schedule pages attached to your policy for information on your actual
cost. There are no surrender charges for decreases in the amount of coverage
under the single life term rider.
SPECIAL FEATURES
POLICY MATURITY
You can surrender your policy at anytime. However, at the younger insured
person's 100th birth date, if you do not want the continuation of coverage
feature, you should surrender the policy, otherwise continuation of coverage
will become effective. Your policy then ends. Some part of this payment may be
taxable. You should consult your tax adviser.
POLICY SPLIT OPTION
Under certain circumstances, you may exchange your policy for a single life
insurance policy on each person insured under your policy. You do not need to
provide evidence of insurability on either insured person to make this exchange
if there is no overall increase in death benefit amounts, and neither single
life policy coverage is greater than 50% of the original death benefit.
On the effective date of the exchange, the available death benefit under your
policy will be divided between the two single life insurance policies. The
maximum amount you may allocate to each single life policy without underwriting
is 50% of your available death benefit amount. The sum of the face amounts for
the two single life insurance policies may not be more than the total death
benefit amount under your original policy. You are not required to use the
maximum death benefit amount available for either insured person.
You may split your policy to provide coverage of more than 50% of the total
death benefit under your
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Variable Last Survivor 30
original policy for one insured person. To do so, you must provide proof that
the insured person is insurable at the time of the policy split. For coverage of
50% or less of the total death benefit under your original policy, you do not
need to provide proof of insurability.
You may use the policy split option if:
a) there is a final divorce decree regarding the marriage of the two
insured people;
b) there is a change to the federal estate tax law which results in
either:
i) removal of the unlimited marital deduction provision; or
ii) a reduction in the current maximum federal estate tax of at least
a 50% reduction after your policy date; or
c) there is a dissolution of business carried on or owned by the two
insured people.
You must send us written notice of your election to split your policy under the
policy split option within 180 days of the occurrence of these stated events.
You must provide satisfactory evidence that the contingent event has occurred.
The effective date of the exchange is the first monthly processing date after we
have approved your policy exchange. The insurance under the two individual life
insurance policies will start on the effective date of your exchange only if
both insured people are alive on that date. The new single life insurance
policies will not provide insurance coverage until that time. If either insured
person is not alive on that date, your exchange is void.
All terms and conditions under the new policies apply once your policy is split.
Consult your new single life insurance policies upon split.
The premiums under each new policy will be based on each insured person's age,
gender and premium class at the time of the split of your policy. Premiums will
be due for each new policy under the terms of the new policy as of the effective
date of the exchange. The surrender value of the old policies will be allocated
to the new policies on the effective date of the exchange in the same proportion
that the face amount was divided between the two single life insurance policies,
unless we agree to a different allocation. If this allocation would cause an
increase in the face amount of either new single life insurance policy, we may
limit the amount of surrender value you may apply to each new policy. Any
remaining surrender value will be paid to you in cash, and may be taxable. Any
loan on your policy will be divided and transferred to each new single life
insurance policy in the same proportion as your cash value is allocated. Any
remaining outstanding loan balance must be paid in cash before the effective
date of the exchange. Any person or entity to which you have assigned your
policy must agree to the exchange. Any assignment of your policy will apply to
each new single life insurance policy.
If you have a single life term insurance rider on your policy at the date of the
policy split, you may have a term insurance rider insuring the same insured
person if such a rider is available on the new policy. Any other riders on new
policies are subject to the availability of the riders under the new policy and
new proof of insurability of the insured people.
Your right to split your policy into two single life insurance policies ends on
the earliest of:
a) the policy anniversary nearest the younger insured person's 100th birth
date; or
b) the first death of the insured people;
c) the end of your policy grace period; or
d) the termination or surrender of your policy.
Exercising the policy split option may be treated as a taxable transaction.
Moreover, the two single life insurance policies that result from a policy split
could be treated as a Modified endowment contract. SEE TAX CONSIDERATIONS, PAGE
55. You should consult a tax adviser when exercising the policy split option.
RIGHT TO EXCHANGE POLICY
During the first 24 months after your policy date, you have the right to
exchange your policy to a guaranteed policy, unless state law requires
differently. To do this, we transfer the amount you have in the variable
divisions to the guaranteed interest division. We allocate all of your future
net premiums only to the guaranteed interest division. We do not allow any
future payments or transfers to the variable divisions when you exercise this
right.
We will not charge you for the transfer to make this exchange. SEE THE
GUARANTEED INTEREST DIVISION, PAGE 19.
CONTINUATION OF COVERAGE
The continuation of coverage feature allows insurance coverage to continue in
force beyond the younger insured person's 100th birth date. If you choose to
allow the continuation of coverage feature to become effective, we:
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Variable Last Survivor 31
o transfer your net account value (excluding the amount in the loan
division) into the guaranteed interest division;
o charge a one-time $400 administrative fee to your policy to cover
future expenses;
o terminate all riders;
o convert death benefit option 2 to death benefit option 1, if
applicable; and
o terminate investment features such as dollar cost averaging and
automatic rebalancing.
At the younger insured person's 100th birth date, if you have then in effect, an
adjustable term insurance rider, the target death benefit becomes the stated
death benefit. The adjustable term insurance rider then terminates. If you have
no adjustable term insurance rider coverage, your stated death benefit is
unchanged. You may make no further premium payments.
Your insurance coverage continues in force until the second death of the insured
people, unless the policy lapses or is surrendered. However, we deduct no
further cost of insurance charges. Your monthly deductions also cease when
continuation of coverage begins. SEE CONTINUATION OF COVERAGE ADMINISTRATIVE
FEE, PAGE 50.
Your net account value may not be transferred into the variable divisions after
the younger insured person's 100th birth date.
During the continuation of coverage period, you may take policy loans or partial
withdrawals from your policy. If we are paying a persistency refund on the
guaranteed interest division, and your policy is in the continuation of coverage
period, we credit you with the persistency refund. SEE PERSISTENCY REFUND, PAGE
51.
If you have outstanding policy loans, interest continues to accrue. If you fail
to make any loan payments or loan interest payments, it is possible that the
loan plus accrued interest may become greater than your account value and cause
your policy to lapse. To avoid this, you may repay loans and make loan interest
payments during the continuation of coverage period. However, we will not accept
any additional premium payments.
If you wish to stop coverage after the continuation of coverage feature begins,
you may surrender your policy and receive the net account value. There is no
surrender charge after the younger insured person's 100th birth date. All normal
consequences apply. SEE SURRENDER, PAGE 41, AND SURRENDER CHARGE, PAGE 51.
The continuation of coverage feature may not be available in all states. If a
state has approved this feature, it is an automatic feature and you do not need
to take any action to activate it.
The tax consequences of coverage continuing beyond the younger insured's
person's 100th birth date are uncertain. You should consult a tax adviser as to
those consequences.
POLICY VALUES
ACCOUNT VALUE
Your account value is the total amount you have in the guaranteed interest
division, the variable divisions, and the loan division. Your account value
reflects:
o net premiums;
o deductions for charges;
o partial withdrawals;
o investment performance of the variable divisions;
o interest earned on the amount you have in the guaranteed interest
division; and
o interest earned and charged on the amounts you have in the loan
division.
NET ACCOUNT VALUE
Your policy's net account value is your account value minus the amount of your
outstanding policy loans (including accrued loan interest).
CASH SURRENDER VALUE
Your cash surrender value is your account value minus any surrender charge.
NET CASH SURRENDER VALUE
Your net cash surrender value is your cash surrender value minus the amount of
your outstanding policy loans, and accrued loan interest.
DETERMINING THE VALUE IN THE VARIABLE DIVISIONS
The amounts included in the variable divisions are measured by accumulation
units and accumulation unit values.
On any given day, the value of a variable division is the accumulation unit
value for that division times
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Variable Last Survivor 32
the number of accumulation units you own in that
division. Each variable division has a different
accumulation unit value.
You purchase accumulation units of a division whenever you allocate premium or
make transfers to that division. This includes transfers from the loan division.
We redeem accumulation units from the variable divisions:
o when you take a partial withdrawal;
o when amounts are transferred from a variable division (including
transfers to the loan division);
o for the monthly deductions from your account value;
o for policy transaction charges;
o for surrender charges;
o on surrender; and
o to pay the death benefit upon the second death of the insured people.
We calculate the number of variable division accumulation units purchased or
redeemed as of any valuation date by:
1. dividing the dollar amount of your transaction by:
2. the division's accumulation unit value calculated at the close of
business on the valuation date of the transaction.
The accumulation unit value is the value of an accumulation unit determined as
of each valuation date. The accumulation unit value of each division varies with
the investment performance of the matching portfolio. It reflects:
o investment income;
o realized and unrealized capital gains and losses;
o investment portfolio expenses; and
o daily mortality and expense risk charges we make to the variable
account.
SEE HOW WE CALCULATE ACCUMULATION UNIT VALUES FOR EACH DIVISION, PAGE 33.
The date of a transaction is the valuation date we receive your premium or an
acceptable request at our customer service center.
If your premium or request reaches our customer service center on a day that is
not a valuation date, or after the close of business on a valuation date, the
transaction is processed on the next valuation date. Otherwise, your transaction
is processed on the valuation date.
We take monthly deductions from your account value as of the monthly processing
date. If your monthly processing date is not a valuation date, the monthly
deduction is processed on the next valuation date. We take transaction charges
or surrender charges as of the effective date of your transaction.
The value of amounts allocated to the variable divisions goes up or down
depending on investment performance.
For amounts in the variable divisions, there is no guaranteed minimum cash
value.
HOW WE CALCULATE ACCUMULATION UNIT VALUES FOR EACH DIVISION
We determine accumulation unit values for the variable divisions on each
valuation date. We perform all policy transactions as of a valuation date.
We generally set the accumulation unit value for a division at $10 on the date
when the division is first opened and begins accepting amounts. After that, the
accumulation unit value on any valuation date is:
1. the accumulation unit value for the preceding valuation date multiplied
by
2. the accumulation experience factor for that division for the valuation
period.
Every valuation period begins at 4:00 p.m. Eastern time on a valuation date and
ends at 4:00 p.m. Eastern time on the next valuation date.
We calculate an accumulation experience factor for each investment division
every valuation date as follows:
1. We take the share value of the underlying portfolio shares in the
division as reported to us by the investment portfolio managers as of
the close of business on that valuation date.
2. We add dividends or capital gain distributions declared per share and
reinvested by the investment portfolio on the date that the share value
is affected. If applicable, we subtract a charge for taxes from this
amount.
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Variable Last Survivor 33
3. We divide the remaining amount by the value of the shares in the
underlying investment portfolio for the variable division at the close
of business on the previous valuation date.
4. We then subtract a charge for the mortality and expense risk which we
assume under your policy. The daily charge is .002055% of the
accumulation unit value. This is an annual rate of .75% of the
accumulation unit value. If the previous day was not a valuation date,
the charge is multiplied by the number of days between the two
valuation dates.
The result of these calculations is the accumulation experience factor for the
valuation period.
TRANSFERS OF ACCOUNT VALUE
You may make up to twelve free transfers among the variable divisions, or the
guaranteed interest division, in each policy year. We do not limit your number
of transfers, but we charge a $25 fee for each transfer that you make after the
first twelve in each policy year. We do not include transfers for automatic
rebalancing or dollar cost averaging toward your twelve free transfers.
You may make transfer requests in writing, or by telephone if you have telephone
privileges, to our customer service center. Your transfer takes effect on the
valuation date we receive your request. The minimum amount you may transfer is
$100. This minimum does not need to come from one division or be transferred to
one division as long as the total amount you transfer is at least $100. However,
if the amount remaining in a variable division is less than $100 when you make a
transfer request, we transfer the entire amount out of that division.
If you elect telephone privileges, you may make transfers by calling our
customer service center. You may not make transfers during the continuation of
coverage period. SEE TELEPHONE PRIVILEGES, PAGE 44.
EXCESSIVE TRADING
Excessive trading activity can disrupt investment portfolio management
strategies and increase portfolio expenses. Thus, we limit excessive transfer
activity. Excessive transfers may cause:
o increased trading and transaction costs;
o disruption of planned investment strategies;
o forced and unplanned portfolio turnover;
o lost opportunity costs; and
o the investment portfolios to have large asset swings that decrease
their ability to provide maximum investment return to all policyowners.
In response to excessive trading, we may place restrictions or refuse transfers
made by third-party agents acting on behalf of owners such as a market timing
service. We will refuse or place restrictions on transfers when we determine, in
our sole discretion, that transfers are harmful to the investment portfolios, or
to policyowners as a whole.
GUARANTEED INTEREST DIVISION TRANSFERS
You may transfer from the guaranteed interest division only in the first 30 days
of each policy year. Transfer requests received within 30 days before your
policy anniversary are deemed to occur on your policy anniversary. Transfer
requests made at any other time will not be processed.
Transfers from the guaranteed interest division are limited to the largest of:
o 25% of your guaranteed interest division balance at the time of your
first transfer or withdrawal out of it in that policy year;
o the sum of the amounts you have transferred and withdrawn from the
guaranteed interest division in the prior policy year; or
o $100.
Transfers of your account value into the guaranteed interest division are not
restricted.
DOLLAR COST AVERAGING
If your policy has at least $10,000 invested in either the Fidelity VIP Money
Market Portfolio, or the Neuberger Berman AMT Limited Maturity Bond Portfolio,
you can elect dollar cost averaging. The main goal of dollar cost averaging is
to protect your policy values from short-term price changes.
DOLLAR COST AVERAGING DOES NOT ASSURE A PROFIT NOR DOES IT PROTECT YOU AGAINST A
LOSS IN A DECLINING MARKET.
This systematic plan of transferring account values is
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Variable Last Survivor 34
intended to reduce the risk of investing too much when the price of an
investment portfolio's shares is high. It also reduces the risk of investing too
little when the price of an investment portfolio's shares is low.
Since you transfer the same dollar amount to other divisions each period, you
purchase more units in a division if the unit value is low, and you purchase
fewer units if the unit value is high.
You may add dollar cost averaging to your policy at any time. The first dollar
cost averaging date must be at least five days after we receive your dollar cost
averaging request. Dollar cost averaging cannot begin before the end of your
free look period, if your state requires return of all premiums paid during the
free look period.
With dollar cost averaging, you designate either a dollar amount, or a
percentage of your account value, for automatic transfer from either the
division invested in either the Fidelity VIP Money Market Portfolio or the
Neuberger Berman AMT Limited Maturity Bond Portfolio for automatic transfer.
Each period, we automatically transfer the amount you select from your chosen
source division to one or more other variable divisions. You may not make
transfers to or from the guaranteed interest division or the loan division under
dollar cost averaging.
The minimum percentage you may transfer to any one division is 1.0% of the total
amount you transfer to all divisions you select. You must transfer at least $100
for each dollar cost averaging transfer.
Dollar cost averaging may occur on the same day of the month either monthly,
quarterly, semi-annually, or annually. Unless you tell us otherwise, dollar cost
averaging automatically takes place monthly, on the monthly processing date.
We do not count dollar cost averaging transfers toward your twelve free
transfers per policy year. There is no charge for this feature.
You may have both dollar cost averaging and automatic rebalancing at the same
time. The dollar cost averaging division from which your transfer will be taken
cannot be included in your automatic rebalancing program.
CHANGING DOLLAR COST AVERAGING
You may change your dollar cost averaging program one time per policy year. If
you have telephone privileges, you may make changes to the dollar cost averaging
program by telephoning our customer service center. SEE TELEPHONE PRIVILEGES,
PAGE 44.
TERMINATING DOLLAR COST AVERAGING
You may cancel dollar cost averaging by sending satisfactory notice to our
customer service center. We must receive it at least five days before the next
dollar cost averaging date.
Dollar cost averaging will terminate if:
1. you specify a termination date; or
2. your balance remaining in the division from which your dollar cost
averaging transfers are taken reaches a dollar amount you set; or
3. on any dollar cost averaging date, the amount in the division from
which you want to make a transfer is equal to or less than the amount
to be transferred. We will transfer the remaining amount and dollar
cost averaging ends.
AUTOMATIC REBALANCING
Automatic rebalancing provides you with a method for maintaining a consistent
approach to investing account values over time, and simplifying the process of
asset allocation (by dividing amounts among the investment options you have
chosen.)
Transfers made for automatic rebalancing do not count toward your twelve free
transfers per policy year. There is no charge for this feature.
If you choose this feature, on each rebalancing date we transfer amounts among
the divisions to match your pre-set automatic rebalancing allocation
percentages. After the transfers, the ratio of your account value in each
division to your total account value for all divisions included in automatic
rebalancing matches the automatic rebalancing allocation percentage for that
division. This action rebalances the amounts in the investment divisions that do
not match your set allocation. This happens if an investment division
outperforms other divisions for that time period.
You may choose the automatic rebalancing feature on your application or later by
completing our
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Variable Last Survivor 35
customer service form. Automatic rebalancing may occur on the same day of the
month either monthly, quarterly, semi-annually, or annually. If you do not
specify, automatic rebalancing will occur quarterly.
If you choose automatic rebalancing on your policy application, the first
transfer occurs on the date you select (after your free look period). If you
elect this feature after your policy date, we process the first transaction on
the date you have requested. If you requested no date, processing is on the last
valuation date of the calendar quarter we receive your notice at our customer
service center.
When you choose automatic rebalancing allocations, you may choose up to eighteen
total investment divisions. SEE MAXIMUM NUMBER OF INVESTMENT DIVISIONS, PAGE 19.
You may have both automatic rebalancing and dollar cost averaging at the same
time. The division from which your dollar cost averaging transfers are taken
cannot be included in your automatic rebalancing allocating program. You may not
include the loan division in your automatic rebalancing allocations.
CHANGING AUTOMATIC REBALANCING
You may change your allocation percentages for automatic rebalancing at any
time. Your allocation change is effective on the valuation date that we receive
it at our customer service center. If you reduce the amount allocated to the
guaranteed interest division, it is considered a transfer from that division.
You must meet the requirements for the maximum transfer amount and time
limitations on transfers from the guaranteed interest division. SEE TRANSFERS OF
ACCOUNT VALUES ON PAGE 34.
If you have automatic rebalancing and the guaranteed minimum death benefit and
you ask for an allocation which does not meet the guaranteed minimum death
benefit diversification requirements, we will notify you that the allocation
needs to be changed and ask you for revised instructions.
TERMINATING AUTOMATIC REBALANCING
You may terminate automatic rebalancing at any time, as long as we receive your
notice of termination at least five days before the next automatic rebalancing
date. If you have the guaranteed minimum death benefit and you terminate the
automatic rebalancing feature, you still must meet the diversification
requirements of your net account value for the guarantee period to continue. SEE
GUARANTEED MINIMUM DEATH BENEFIT, PAGE 27.
POLICY LOANS
You may borrow against your policy at any time after the first monthly
processing date, by using your policy as security for a loan, or as otherwise
required by law. The amount you borrow is called a policy loan. Your policy loan
is:
1. the total amount you borrow from your policy; plus
2. any policy loan interest that is capitalized when due; minus
3. policy loan repayments you make.
Unless state law requires differently, any new policy loan you take must be at
least $100. The maximum amount you can borrow on any valuation date, unless
required differently by state law, is your net cash surrender value minus the
monthly deductions to your next policy anniversary.
Your request for a policy loan must be directed to our customer service center.
If you have telephone privileges, you may request a policy loan for less than
$25,000 by telephoning our customer service center. SEE TELEPHONE PRIVILEGES,
PAGE 44.
Based on our administrative system, we may have other rules for policy loans.
For example, we may require that your loan request be for a dollar amount rather
than a percentage to be taken from a specific division.
Loan interest charges on your policy loan accrue daily at an annual interest
rate of 3.75%. Interest is due in arrears on each policy anniversary. If you do
not pay your interest when it is due, we add it to your policy loan on your
policy anniversary.
If you request an additional loan, we add the amount you request to your
existing outstanding policy loan. This way, there is only one loan outstanding
on your policy at any time.
You may repay all or part of your policy loan at any time while your policy is
in force. We assume that any payments you make, other than your scheduled
premiums, are policy loan repayments. You must tell us otherwise if you want us
to consider additional payments as premiums.
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Variable Last Survivor 36
When you request a loan you may specify one investment division from which the
loan will be taken. If you do not specify one, the loan will be taken
proportionately from each active investment division you have.
When you take a policy loan, we transfer an amount equal to your policy loan
amount from the variable and the guaranteed interest divisions in the same
proportion they represent of your total net account value to the loan division.
We follow this same process for loan interest in the amount due at your policy
anniversary. We credit the loan division with interest at an annual rate of
3.0%. After your tenth policy year, the loan division is credited with a
persistency refund at an annual rate of 0.60%.
The loan division is part of our general account, separate from the guaranteed
interest division. When we make transfers to the loan division, we redeem
sufficient units of the variable divisions to cover the amount of the loan which
you take from the variable account. Unless you tell us otherwise, we deduct the
amount transferred from each division in the same proportion that your account
value in that division has to your net account value immediately before the loan
transaction. We determine the amounts in each division as of the valuation date
when we receive your loan request.
Policy loans may cause your policy to lapse if your net cash surrender value is
not enough to pay all deductions each month. SEE LAPSE, PAGE 38.
Any policy loans you take may have tax consequences. SEE DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 57, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 57.
LOAN REPAYMENT
We transfer the amount of interest credited to the loan division for a policy
year from the loan division on your policy anniversary. When you make a loan
repayment, we transfer an amount equal to your repayment from the loan division
up to the amount of your policy loan. Unless you tell us otherwise, we allocate
these transfers among the variable divisions and the guaranteed interest
division in the same proportion as your current premium allocation.
LOANS AND YOUR BENEFITS
Taking a loan decreases the amount you have in the variable divisions. Accruing
loan interest will change your net account value as compared to what it would
have been if you did not take a loan.
Even if you repay your loan, it has a permanent effect on your account value.
This means that the benefits under your policy may be affected.
The loan is a first lien on your policy. This means we deduct your outstanding
policy loan and accrued loan interest from the death benefit payable and the
cash surrender value payable on surrender.
Failure to repay your loan may affect the guaranteed minimum death benefit
feature and the length of time your policy remains in force. The policy lapses
(FOR EXCEPTIONS, SEE SPECIAL CONTINUATION PERIOD, PAGE 21 AND GUARANTEED MINIMUM
DEATH BENEFITS, PAGE 26) when the cash surrender value minus policy loans and
accrued loan interest is not enough to cover your monthly deductions. If your
policy lapses with a loan outstanding, you may have adverse tax consequences.
SEE DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS,
PAGE 57, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT
MODIFIED ENDOWMENT CONTRACTS, PAGE 57.
If you use the continuation of coverage feature and you have a policy loan, loan
interest continues to accrue. If you do not make loan payments your policy could
lapse.
If you do not repay your policy loan, we deduct the outstanding policy loan
amount and accrued loan interest from the death benefits payable, or the cash
surrender value payable upon surrender.
PARTIAL WITHDRAWALS
You may request a partial withdrawal on any valuation date after your first
policy anniversary by contacting our customer service center. You may request
partial withdrawals by telephone, but the partial withdrawal must be for an
amount less than $25,000. SEE TELEPHONE PRIVILEGES, PAGE 44.
You may take only one partial withdrawal per policy year. We may set rules on
partial withdrawals, based on our administrative system. For example, we may
require that you specify a dollar amount rather than a percentage to be taken
from a specific division.
The minimum partial withdrawal you may take is $100. The maximum partial
withdrawal you may
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Variable Last Survivor 37
take is the amount which leaves $500 as your net cash surrender value. If you
request a withdrawal of more than this maximum, we require you to surrender your
policy. When you take a partial withdrawal, we deduct your withdrawal amount
plus a service fee from your account value. If applicable, we deduct a surrender
charge from your account value if your partial withdrawal causes a reduction in
your stated death benefit. SEE CHARGES, DEDUCTIONS AND REFUNDS, PAGE 48.
Partial withdrawals may have adverse tax consequences. SEE MODIFIED ENDOWMENT
CONTRACTS, PAGE 56.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1
If you selected death benefit option 1, and if no more than fifteen years have
passed since your policy date and the joint equivalent age of the insured people
is not yet age 81, you may make a partial withdrawal of up to the greater of
10.0% of your account value, or 5.0% of your stated death benefit without
decreasing the stated death benefit.
Any additional amounts you withdraw will reduce your stated death benefit by the
amount of the withdrawal.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 2
If you have selected death benefit option 2, a partial withdrawal does not
reduce your stated death benefit or target death benefit. However, we reduce the
total death benefit by at least the partial withdrawal amount because your
account value is reduced.
STATED DEATH BENEFIT AND TARGET DEATH BENEFIT REDUCTIONS
Generally, we reduce the stated death benefit by the amount of the partial
withdrawal. A partial withdrawal may reduce your target death benefit.
Partial withdrawals do not reduce the stated death benefit if your base death
benefit has been increased to qualify your policy as life insurance under the
federal income tax laws, if you withdraw an amount that is no greater than the
amount that reduces your account value to a level which no longer requires your
base death benefit to be increased to qualify as life insurance for federal
income tax law purposes. SEE TAX STATUS OF THE POLICY, PAGE 55.
We require a minimum stated death benefit and a minimum target death benefit to
issue your policy. You are not allowed to take a partial withdrawal if it
reduces your stated death benefit or target death benefit below this minimum.
SEE GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS, PAGE 55.
PARTIAL WITHDRAWAL MECHANICS
Unless you tell us otherwise, we will make a partial withdrawal from the
guaranteed interest division and the variable divisions in the same proportion
that each division has to your net account value immediately before your
withdrawal. The amount withdrawn from the guaranteed interest division may not
be for more than your total withdrawals multiplied by the ratio of your account
value in the guaranteed interest division to your total net account value
immediately before the partial withdrawal transaction.
We will send a new schedule page for your policy showing the effect of your
withdrawal if there is any change to your stated death benefit or your target
death benefit.
To make this change, we may ask that you return the policy to our customer
service center. Your withdrawal and any reductions in the death benefits are
effective as of the valuation date on which we receive your request. SEE
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE
57, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT
MODIFIED ENDOWMENT CONTRACTS, PAGE 57.
LAPSE
Your insurance coverage continues as long as your net cash surrender value is
enough to pay all deductions each month. Lapse does not apply if either the
guaranteed minimum death benefit or the special continuation period is in effect
and you have met all requirements. SEE SPECIAL CONTINUATION PERIOD, PAGE 22 AND
GUARANTEED MINIMUM DEATH BENEFIT, PAGE 27.
If the continuation of coverage feature is active, the policy could lapse even
though there are no further monthly deductions. If there is an outstanding
policy loan, your policy will lapse if the loan plus the accrued interest owed
is more than the account value.
GRACE PERIOD
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Variable Last Survivor 38
Your policy enters the 61-day lapse grace period if, on a monthly processing
date:
1. your net cash surrender value is zero (or less); and
2. the five-year special continuation period has expired, or you have not
paid the required special continuation period premium; and
3. you do not have the guaranteed minimum death benefit rider or it has
expired or terminated.
We notify you that the policy is in a grace period at least 30 days before the
grace period ends. We provide this notice to you, or a person to whom you have
assigned your policy, at the last address in our records. We will send you a
lapse notice if the guaranteed minimum death benefit is going to lapse. We also
notify you of the required premium payment necessary to reinstate your policy.
This amount is generally the amount of past due charges, plus the amount that
covers your estimated monthly policy and rider deductions for the next two
months. If the second death of the insured people occurs during the grace
period, we will deduct overdue monthly charges from your policy's death
proceeds.
If we receive your payment of the required amount before the end of the grace
period, we apply it to your account value in the same manner as your other
premium payments, then we make the overdue deductions from your account balance.
If you do not pay the full amount we request within the 61-day grace period,
your policy and all of its riders lapse without value. We then withdraw your
remaining account balance from the variable divisions and the guaranteed
interest division. We deduct amounts which you owe us, including any surrender
charge and inform you that the policy has ended.
If the second death of the insured people occurs during the grace period, we pay
death proceeds to your beneficiary(ies) with reductions for policy loans,
accrued loan interest, and monthly deductions owed.
IF YOU HAVE THE GUARANTEED MINIMUM DEATH BENEFIT IN EFFECT
After the special continuation period has ended, and if the guaranteed minimum
death benefit is in effect, your policy's stated death benefit will not lapse
during the guarantee period. This is true even if your net cash surrender value
is not enough to cover all of the deductions from your account value on any
monthly processing date. SEE GUARANTEED MINIMUM DEATH BENEFIT, PAGE 27.
The guaranteed minimum death benefit does not protect benefits you may have
under riders attached to your policy. Nor does it protect any amount of the base
death benefit which is more than the stated death benefit. These benefits lapse
if on any monthly processing date, your policy net cash surrender value is not
enough to pay all monthly deductions from your account value (unless your policy
is in the five-year special continuation period and your account value is more
than the interest due on your loan).
While the guaranteed minimum death benefit applies, we reduce your account value
by monthly deductions, but not below zero. We permanently waive monthly
deductions during the guarantee period which would reduce your account value
below zero.
The guaranteed minimum death benefit terminates if your policy does not meet the
monthly premium or diversification tests. If your guaranteed minimum death
benefit terminates, the normal test for lapse then resumes. SEE REQUIREMENTS TO
MAINTAIN THE GUARANTEE PERIOD, PAGE 28.
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Variable Last Survivor 39
LAPSE SUMMARY
SPECIAL CONTINUATION PERIOD GUARANTEED MINIMUM DEATH BENEFIT
If you meet the If you do not meet the If you meet the If you do not meet the
requirements requirements requirements requirements
Your policy does not Your policy enters the Your policy does not Your policy enters the
lapse if you do not have grace period if your net lapse if you do not have grace period if your net
enough net cash cash surrender value is enough net cash cash surrender value is
surrender value to pay the not enough to pay the surrender value to pay the not enough to pay the
monthly charges. The monthly charges, or if monthly deductions. monthly charges. If you
charges are delayed until your loan interest due is However, if you have any do not pay enough
the earlier of: 1) the date more than your account riders, they lapse after the premium to cover the past
you have enough net cash value. If you do not pay grace period and only due monthly charges,
surrender value to cover enough premium to cover your base coverage plus the monthly charges
the monthly charge the past due monthly remains in force. through the end of the
deduction, or 2) until the charges and interest due, Charges for your base grace period (at the end
end of the special plus the monthly charges coverage are deducted of the following two
continuation period. and interest due through each month until your months), your policy
the end of the grace remaining account value lapses.
period (at the end of the is not enough to pay these
following two months), charges. At this point,
your policy lapses. we permanently waive
the monthly charges.
REINSTATEMENT
If you do not pay enough premium before the end of the grace period, your policy
lapses. You may still reinstate your policy and its riders (other than the
guaranteed minimum death benefit) within five years after the grace period ends.
Unless state law requires differently, we will reinstate your policy and riders
if:
1. you have not surrendered your policy for its net cash surrender value;
2. you provide satisfactory evidence to us that both insured people are
alive and that each insured person (and any people insured under your
riders) is still insurable according to our normal rules of
underwriting for your type of policy; and
3. we receive enough premium from you to keep your policy and its riders
in force from the beginning to the end of the grace period and for two
months after the reinstatement date.
If one insured person has either died or has become uninsurable since your
policy date, when your policy lapses, we will not reinstate your policy. If one
insured person was uninsurable at the issue of your policy and remains
uninsurable, we will review underwriting requirements applicable to each insured
person at the time of reinstatement to determine whether your policy may be
reinstated. Each surviving insured person may apply for individual insurance
coverage at that point with proof of insurability.
Reinstatement is effective as of the monthly processing date following our
approval of your reinstatement application. When we reinstate your policy, we
also reinstate the surrender charges for the amount and time remaining when your
policy lapsed. If you had a policy loan when coverage ended, we reinstate it
with accrued loan interest to the date of lapse. The cost of insurance charges
in effect at the time of reinstatement for the age of each insured person are
adjusted to reflect the time since the lapse.
We apply the net premiums received after reinstatement according to the premium
allocation instructions in effect at the start of the grace period, unless you
tell us otherwise.
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Variable Last Survivor 40
SURRENDER
You may surrender your policy for its net cash surrender value any time before
the second death of the insured people. You do this by sending a written request
and your policy to our customer service center.
Your policy net cash surrender value is your cash surrender value, minus policy
loans you have taken including accrued loan interest.
We compute your net cash surrender value as of the valuation date we receive
your surrender request and policy at our customer service center. All insurance
coverage ends on that date.
We do not pro-rate or add back charges and expenses deducted from your account
value on the monthly anniversary before the date your surrender is processed. If
you surrender your policy during the first nine policy years or segment years we
deduct a surrender charge from your net account value. SEE SURRENDER CHARGE,
PAGE 51.
A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 57, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 57.
GENERAL POLICY PROVISIONS
FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD
You have the right to examine your policy. If for any reason you do not want it,
you may return your policy to us or your registered representative within the
period shown in the policy. If you return your policy to us within your state's
specified time limit, we will consider it canceled as of your policy date.
If you cancel your policy during this free look period, you will receive a
refund as determined under state law.
Generally, there are two types of free look refunds. Some states require a
return of all premiums paid while others permit payment of the account value
plus a refund of all charges deducted. Your policy will specify what free look
refund applies in your state. The type of free look refund allowed in your state
will affect when your initial net premium is invested into the variable
divisions you selected.
That portion of your initial net premium that you have allocated to the variable
divisions will be held in the division investing in the Fidelity Money Market
Portfolio for 15 days after we issue your policy (five days deemed delivery time
plus a typical free look period of 10 days), unless state law requires
otherwise, if:
o you made a premium payment before we issued your policy;
o you have provided all information and documents we have requested; and
o your state requires us to return your premiums paid if you cancel your
policy during the free look period.
At the end of 15 days, your account value will be allocated among your chosen
variable divisions, based on your most recent premium allocation instructions.
The investment date is the date we apply the net premium payment we have
received from you to your policy. This is after you have provided all
information and documents we have requested.
That portion of your initial net premium that you have allocated to the variable
divisions will be invested according to your most recent premium allocation
instructions on the date we issue your policy if:
o you made a premium payment before we issued your policy;
o you have provided all information and documents we have requested; and
o your state permits us to return the account value plus a refund of all
charges deducted.
Amounts you allocated to the guaranteed interest division will be invested into
that division when we issue your policy if you have made a premium payment and
have no outstanding information or document requests from us. Once we have
applied your net premium to your selected investment divisions, you may transfer
funds between investment divisions and activate policy investment features such
as automatic rebalancing or dollar cost averaging.
YOUR POLICY
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Variable Last Survivor 41
The entire contract between you and us is the combination of:
o your policy;
o a copy of your original application and any applications for benefit
increases or decreases;
o all of your riders;
o endorsements;
o schedule pages; and
o reinstatement applications.
If you make a change to your coverage, we give you a copy of your changed
application and new schedules. If you sent us your policy, we attach these items
to your policy and return it to you. Otherwise, you need to attach them to your
policy.
Unless there is fraud, we consider all statements made in an application to be
representations and not guarantees. We use no statement to deny a claim, unless
it is in an application.
A president or an officer of our company and our secretary or assistant
secretary must sign all changes or amendments we make to your policy. No other
person may change the terms or conditions of your policy.
AGE
We issue your policy at the joint equivalent age of the insured people stated in
your policy schedule. The joint equivalent age of the insured people is based on
the sum of both insured people's ages adjusted for the difference in ages and
gender, divided by two and rounded up.
The younger insured person's 100th birth date is the 100th anniversary of the
younger insured person's birth regardless if he/she has survived. The policy
anniversary nearest to this date is the date used for policy purposes.
The insured people must each be less than 90 years of age at policy issue. The
maximum joint equivalent age of the insured people must be no more than 85.
There is no limit to the difference in the insured people's ages. Age is
measured as the age of the insured person on the birth date nearest the policy
anniversary.
To process joint life insurance, we use the joint equivalent age to calculate
rates, charges and values. We determine the joint equivalent age at any given
time by adding the number of completed policy years to the age calculated at
issue and shown in the schedule.
OWNERSHIP
The original owner is the person named as the owner in the policy application.
The owner can exercise all rights and receive the benefits until the second
death of the insured people. This includes the right to change the owner,
beneficiaries, or method to pay proceeds.
As a matter of law, all rights of ownership are limited by the rights of any
person who has been assigned rights under the policy, and any irrevocable
beneficiary(ies).
You may name a new owner by giving us written notice. The effective date of the
change to the new owner is the date the prior owner signs the notice. However,
we will not be liable for any action we take before a change is recorded at our
customer service center. A change in ownership may cause the prior owner to
recognize taxable income on gain under the policy.
BENEFICIARY(IES)
You, as owner, name the beneficiary(ies) when you apply for your policy. The
primary beneficiary(ies) who survives both of the insured people receives the
death proceeds. Other surviving beneficiary(ies) receive death proceeds only if
there is no surviving primary beneficiary(ies). If more than one
beneficiary(ies) survives both insured people, they share the death proceeds
equally, unless you have told us otherwise. If none of your policy beneficiaries
has survived both insured people, we pay the death proceeds to you or to your
estate, as owner.
Once you tell us who the beneficiary(ies) is/are, we keep this information on
file. You may name a new beneficiary(ies) any time before the second death of
the insured people. We pay the death proceeds to the most recent
beneficiary(ies) whom you have named.
We do not make multiple payments.
COLLATERAL ASSIGNMENT
You may assign your policy as security by sending written notice to us. After we
record the assignment, your rights as owner and the beneficiary's(ies') rights
(unless the beneficiary(ies) were made an irrevocable beneficiary(ies) under an
earlier assignment) are subject to the assignment. It is your responsibility to
make sure the assignment is valid.
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Variable Last Survivor 42
INCONTESTABILITY
After your policy has been in force while both insured people are alive for two
years from your policy date, we will not question the validity of the statements
in your application. After your policy has been in force while both insured
people are alive for two years from the effective date of any new segment or
from the effective date of an increase in any other benefit, we will not contest
the statements in your application for the new segment or other increase.
After this policy has been in force while both insured people are alive for two
years from the effective date of any reinstatement, we will not contest the
statements in your application for reinstatement.
MISSTATEMENTS OF AGE OR GENDER
If either insured person's age or gender has been misstated, we adjust the death
benefit. We adjust death benefits to the amount which would have been purchased
for each insured person's correct age and gender. We base the adjusted death
benefit on the cost of insurance charges deducted from your account value on the
last monthly processing date before the second death of the insured people, or
as otherwise required by state law.
SUICIDE
If either insured person commits suicide, while that insured person is sane or
insane within two years of your policy date, as required by state law, we will
make a limited death benefit payment to the beneficiary(ies). We will pay in one
sum:
1. the total of all premiums paid to the time of death; minus
2. the amount of outstanding policy loans and accrued loan interest; minus
3. any partial withdrawals you have taken, unless state law requires
otherwise.
We make a limited payment to the beneficiary(ies) for a new segment or other
increase if the second death of the insured people is due to suicide, while that
insured person is sane or insane within two years of the effective date of a new
segment, or within two years of an increase in any other benefit, as required by
state law. The limited payment we make is equal to the cost of insurance and
monthly expense charges which were deducted for such increase.
TRANSACTION PROCESSING
Generally, within seven days of when we receive all information required to
process a payment, we pay:
o death proceeds;
o net cash surrender value upon surrender;
o partial withdrawals; and
o loan proceeds.
We may delay processing these transactions if:
o the NYSE is closed for trading;
o trading on the NYSE is restricted by the SEC;
o there is an emergency so that it is not reasonably possible to sell
securities in the variable divisions or to determine the value of an
investment division's assets; or
o a governmental body with jurisdiction over the separate account allows
suspension by its order.
Any SEC rules and regulations that apply determine whether or not these
conditions exist.
We execute transfers among the variable divisions as of the valuation date of
our receipt of your request at our customer service center.
We determine death proceeds as of the date of the second death of the insured
people. The death proceeds are not affected by changes in the value of the
variable divisions after the second death of the insured people. We pay interest
at our stated rate (or at a higher rate if required by law) from the date of the
second death of the insured people to the date of payment.
We may delay payment from our guaranteed interest division for up to six months,
unless state law requires otherwise, of:
o surrender proceeds;
o withdrawal amounts; or
o loan amounts.
We pay interest at our declared rate (or at a higher rate if required by law)
from the date we receive the request if we delay payment more than 30 calendar
days.
NOTIFICATION AND CLAIMS PROCEDURES
Except for certain authorized telephone requests, we must receive in writing any
election, designation, change, assignment or request made by the owner.
You must use a form acceptable to us. We are not
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Variable Last Survivor 43
liable for actions taken before we receive and record the written notice. We may
require you to return your policy for policy change, or at the time of
surrender.
If an insured person dies while your policy is in force, please let us or your
registered representative know as soon as possible. We will immediately send you
instructions on how to make a claim upon the second death of the insured people,
or at either insured person's death if you have a single life term rider. As
proof of a deceased insured person's death, we may require you to provide proof
of the deceased insured person's age, and a certified copy of the deceased
insured person's death certificate.
The beneficiary(ies) and the deceased insured person's next of kin may need to
sign authorization forms. These forms allow us to get information about the
deceased insured person. This information may include medical records of doctors
and hospitals used by the deceased insured person.
TELEPHONE PRIVILEGES
Telephone privileges are automatically provided to you. If you do not wish to
have this feature, contact our customer service center. Telephone privileges
allow you to call our customer service center to:
o make transfers;
o change premium allocations;
o change features in your dollar cost averaging and automatic rebalancing
programs;
o request partial withdrawals; or
o request a policy loan.
Our customer service center uses reasonable procedures to make sure that
instructions received by telephone are genuine. These procedures may include:
1. requiring some form of personal identification;
2. providing written confirmation of any transactions; and
3. tape recording telephone calls.
By accepting automatic telephone privileges, you authorize us to record your
telephone calls to us. If we use reasonable procedures to confirm instructions,
we are not liable for losses due to unauthorized or fraudulent instructions. We
may discontinue this privilege at any time.
NON-PARTICIPATION
Your policy does not participate in the surplus earnings of Security Life.
DISTRIBUTION OF THE POLICIES
The principal underwriter (distributor) for our policies is ING America
Equities, Inc. ING America Equities, Inc. is a wholly owned subsidiary of
Security Life. It is registered as a broker-dealer with the SEC and the NASD. We
pay ING America Equities, Inc. for acting as the principal underwriter under a
distribution agreement.
We sell our policies through registered representatives of other broker-dealers
including, but not limited to:
1. VESTAX Securities Corporation, a subsidiary of ING America Insurance
Holdings, Inc.;
2. Locust Street Securities, Inc., an affiliate of Security Life of Denver
Insurance Company; and
3. Multi-Financial Services, Inc., an affiliate of Security Life of Denver
Insurance Company.
4. IFG Network Securities, Inc., a subsidiary of Investors Financial
Group, Inc., which is a subsidiary of ING America Insurance Holdings,
Inc.
These broker-dealers have entered into selling agreements with us. They are
registered with the SEC and the NASD. State insurance officials also license the
registered representatives to sell our variable life policies.
Under these selling agreements, we pay a distribution allowance to other
broker-dealers, who then pay commissions to the registered representative who
sells this policy. The distribution allowance may be up to 90.0% of the first
target premium that you pay. For premiums that you pay over your first target
premium, the distribution allowance may be up to 5.0% in policy years one
through five, and up to 2.0% after the fifth policy year.
Broker-dealers may receive annual renewal payments of up to 0.2% of the net
account value in policy years five through twenty.
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Variable Last Survivor 44
Compensation arrangements may vary among broker-dealers and depend on particular
circumstances. In addition to the above-described compensation, we may pay:
o override payments;
o expense allowances;
o bonuses;
o special marketing fees;
o wholesaler fees and marketing allowances; and
o training allowances.
Under our sales incentive programs, to the extent permitted by law, registered
representatives who meet set production levels may qualify to receive other
compensation such as:
o expense-paid trips;
o expense-paid educational seminars; and
o merchandise.
We pay the distribution allowance from our own resources which includes sales
charges deducted from premiums and surrender charges.
SETTLEMENT PROVISIONS
You may elect to have the beneficiary(ies) receive the death proceeds other than
in one payment. If you make this election, you must do so before the second
death of the insured people. If you have not made this election, the
beneficiary(ies) may do so within 60 days after we receive proof of the second
death of the insured people.
You may take your net cash surrender value in other than one payment.
The investment performance of the variable divisions does not affect payments
under these settlement options. Instead, interest accrues at a fixed rate based
on the option you choose. Payment options are subject to our rules at the time
you make your selection. A periodic payment must be at least $20. Currently,
these alternate payment options are available if the proceeds are $2,000 or
more.
Option I: PAYOUTS FOR A DESIGNATED PERIOD: Payout payments may be made
monthly, quarterly, semi-annually, or annually.
These payments may last for a period from five to thirty years. The
installment dollar amounts are equal except for any excess
interest. Settlement Option Table I in your policy shows the amount
of the first monthly payout for each $1,000 of account value
applied.
Option II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD: Payout
payments may be made monthly, quarterly, semi-annually, or
annually.
We make these payments throughout the lifetime of the person
receiving the payment, or if longer for guaranteed periods of five,
ten, fifteen, or twenty years. You may choose the length of time to
receive the guaranteed payments. If you choose a longer guaranteed
period, this will decrease the amount of your periodic payments.
The installment dollar amounts are equal except for any excess
interest. The Settlement Option Table II in your policy shows the
amount of the first monthly payout for each $1,000 of account value
applied. This option is available only for the insured people's
ages shown in this table.
Option III: HOLD AT INTEREST: Amounts may be left on deposit with us to be
paid at the death of the person you choose to receive the payment,
or at a chosen earlier date. We will pay interest at our declared
rate on any unpaid balance (or at a higher rate if required by
law). You may choose interest to be accumulated or be paid monthly,
quarterly, semi-annual, or annual basis.
You may not leave money on deposit for more than 30 years.
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Variable Last Survivor 45
Option IV: PAYOUTS OF A DESIGNATED AMOUNT: Payouts will be made until
proceeds, including interest, are exhausted. Interest is at a rate
we declare (or at a higher rate as required by law). Payout payment
choices are on a monthly, quarterly, semi-annual, or annual basis.
Option V: OTHER: You, as owner, may ask us to apply money under any options
we offer at the time we pay the benefit.
The beneficiary(ies) or other person (successor to the beneficiary(ies)) who has
the right to receive payments may name someone else to receive amounts that we
would otherwise pay to the beneficiary's(ies') estate if he/she/they die(s). The
person who has the right to receive payment may name another person, at any
time. Designating another person to receive payment may have income, gift or
estate tax consequences. Consult a professional tax adviser before making this
designation.
We must approve an arrangement that involves someone who is to receive payment
who is not a human being (for example, a corporation). We must approve a
situation involving a person who is to receive payment while acting on behalf of
another, called a fiduciary. We base the details of all arrangements on our
rules at the time the arrangements are effective. This includes rules on the:
o minimum amount we pay under an option;
o minimum amounts for installment payments;
o withdrawal rights;
o right to receive payments over time, which we may offer as a lump sum
payment;
o naming of people who have the right to receive payment and their
successors; and
o proof of age and survival.
ADMINISTRATIVE INFORMATION ABOUT THE POLICY
VOTING PRIVILEGES
We invest the variable divisions' assets in shares of investment portfolios. We
are the legal owner of the shares held in the variable account and we have the
right to vote on certain issues. Among other things, we may vote on issues
described in the fund's current prospectus, or issues requiring a vote by
shareholders under the Investment Company Act of 1940. Even though we own the
shares, we give you the opportunity to tell us how to vote the number of shares
attributable to your account value. We count fractional shares. If you have a
voting interest, we send you proxy material and a form on which to give us your
voting instructions.
Each investment portfolio's shares have the right to one vote. The votes of all
investment portfolios are cast together on a collective basis, except on issues
for which the interests of the portfolios differ. In these cases, voting is done
on a portfolio-by-portfolio basis.
Examples of issues that require a portfolio-by- portfolio vote are:
1. changes in the fundamental investment policy of a particular investment
portfolio; or
2. approval of an investment advisory agreement.
We vote the shares in accordance with your instructions at meetings of
investment portfolio shareholders. We vote any investment portfolio shares that
are not attributable to policies, and any investment portfolio shares for which
the owner does not give us instructions, the same way we vote as if we did
receive owner instructions.
We reserve the right to vote investment portfolio shares without getting
instructions from policy owners if the federal securities laws, regulations, or
their interpretations change to allow this.
You may only instruct us on matters relating to the investment portfolios
corresponding to divisions in which you have invested assets as of the record
date set by the investment portfolio's Board for the portfolio's shareholders
meeting. We determine the number of investment portfolio shares in each division
that we attribute to your policy by dividing your account value allocated to
that division by the net asset value of one share of the matching investment
portfolio.
MATERIAL CONFLICTS
We are required to track events to identify any material conflicts arising from
using investment portfolios for both variable life and variable annuity separate
accounts. The boards of the investment portfolios, Security Life, and other
insurance companies participating in the investment portfolios,
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Variable Last Survivor 46
have this same duty. There may be a material conflict if:
o state insurance law or federal income tax law changes;
o investment management of an investment portfolio changes; or
o voting instructions given by owners of variable life insurance policies
and variable annuity contracts differ.
The investment portfolios may sell shares to certain qualified pension and
retirement plans qualifying under Code Section 401. These include cash or
deferred arrangements under Code Section 401(k). Therefore, there is a
possibility that a material conflict may arise between the interests of owners
in general, or between certain classes of owners, and these retirement plans or
participants in these retirement plans.
If there is a material conflict, we have the duty to determine appropriate
action, including removing the portfolios involved from our variable investment
options. We may take other action to protect policy owners. This could mean
delays or interruptions of the variable operations.
When state insurance regulatory authorities require us, we may ignore voting
instructions relating to changes in an investment portfolio's adviser or its
investment policies. If we do ignore voting instructions, we give you a summary
of our actions in the next semi-annual report to owners.
Under the Investment Company Act of 1940, we must get your approval for certain
actions involving our separate account. In this case, you have one vote for
every $100 of value you have in the variable divisions. We cast votes credited
to amounts in the variable divisions, but not credited to policies in the same
proportion as votes cast by owners.
RIGHT TO CHANGE OPERATIONS
Subject to state limitations, we may from time to time make any of the following
changes to our separate account.
1. Change the investment objective.
2. Offer additional divisions which will invest in portfolios we find
appropriate for policies we issue.
3. Eliminate variable divisions.
4. Combine two or more variable divisions.
5. Substitute a new investment portfolio for a portfolio in which the
division currently invests. A substitution may become necessary if, in
our judgment:
o a portfolio no longer suits the purposes of your policy;
o there is a change in laws or regulations;
o there is a change in a portfolio's investment objectives or
restrictions;
o the portfolio is no longer available for investment; or
o another reason we deem a substitution is appropriate.
6. Transfer assets related to your policy class to another separate
account.
7. Withdraw the separate account from registration under the 1940 Act.
8. Operate the separate account as a management investment company under
the 1940 Act.
9. Cause one or more divisions to invest in a mutual fund other than, or
in addition to, the investment portfolios.
10. Stop selling these policies.
11. End any employer or plan trustee agreement with us under the
agreement's terms.
12. Limit or eliminate any voting rights for the separate account.
13. Make any changes required by the 1940 Act, or its rules or regulations.
We will not make a change until it is effective with the SEC and approved by the
appropriate state insurance departments, if necessary. We will notify you of
changes. If you then wish to transfer the amount you have in the affected
division to another variable division, or to the guaranteed interest division,
you may do so free of charge. Just notify us at our customer service center.
REPORTS TO OWNERS
At the end of each policy year we send a report to you that shows:
o your total policy death benefit (your stated death benefit plus
adjustable term insurance
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Variable Last Survivor 47
rider death benefit, if any);
o your account value;
o your policy loans, if any, plus accrued interest;
o your net cash surrender value;
o information about the variable divisions; and
o your account transactions during the previous year showing net
premiums, transfers, deductions, loans, or withdrawals.
We also send semi-annual reports with financial information on the investment
portfolios, including a list of the investment holdings of each portfolio to
you.
We send confirmation notices to you throughout the year for certain policy
transactions.
CHARGES, DEDUCTIONS AND REFUNDS
The amount of a charge may not exactly correspond to the cost incurred by us to
provide the service or benefits associated with the particular policy. Many
charges are not at "cost". For example, the sales charges may not cover all of
the sales and distribution expenses actually incurred by us. Proceeds from other
charges, including the mortality and expense risk charge or cost of insurance
charges, may be used in part to cover such expenses.
DEDUCTIONS FROM PREMIUMS
We consider any payment we receive to be a premium if the younger insured
person's 100th birth date has not occurred and you do not have an outstanding
loan. After we deduct certain expenses from your premium payment, we add the
remaining net premium to your account value.
TAX CHARGES
We pay state and local taxes in almost all states. These taxes vary in amount
from state to state and may vary from jurisdiction to jurisdiction within a
state. Currently, state and local taxes range from 0.5% to 5.0% with some states
not imposing these types of taxes. We currently deduct an amount equal to 2.5%
of each premium payment you make to cover these taxes. The 2.5% rate
approximates the average tax rate we expect to pay in all states. We also
currently deduct an amount equal to 1.5% of each premium payment you make to
cover our estimated costs for the federal income tax treatment of deferred
acquisition costs. This cost is determined solely by the amount of life
insurance premiums we receive.
We reserve the right to increase or decrease your premium expense charge for
taxes as a result of changes in the tax law, within limits set by state law. We
also reserve the right to increase or decrease your premium expense charge for
the federal income tax treatment of deferred acquisition costs based on any
change in that cost to us.
SALES CHARGE
We deduct a percentage from each of your premium payments to compensate us for
the costs we incur in selling the policies. We base the percentage on the time
expired since your policy date or addition of a segment and on your premium up
to and above a target premium:
Sales Charge Percentage
-----------------------
Up to Segment Above Segment
Segment Target Target
Year Premium Premium
------- ------- -------
1 - 5 5.5% 2%
6 + 2% 2%
To determine your applicable sales charge, premiums you pay after an increase in
stated death benefit are allocated to your policy segments in the same
proportion as the target premium for each segment bears to the sum of the target
premium for all segments.
The sales charge covers the costs of distribution, preparing our sales
literature, promotional expenses, and other direct and indirect expenses. The
amount charged is not specifically related to sales expenses in a particular
year.
We may reduce or waive the sales charge for certain group or sponsored
arrangements or for corporate purchasers.
DAILY DEDUCTIONS FROM THE VARIABLE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
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Variable Last Survivor 48
We deduct a charge each day for the mortality and expense risks we assume. This
charge is 0.002055% per day of the amount you have in the variable divisions.
This is an annual rate of 0.75%.
The mortality risk we assume is that insured people, as a group, may live less
time than we estimated. We assume risk that expenses we incur in issuing and
administering the policies and in operating the variable divisions are greater
than the amount we estimated when we set these charges.
The mortality and expense risk charge does not apply to your account value which
is invested in the guaranteed interest division or the loan division.
MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE
We deduct charges from your account value on each monthly processing date. On or
after November 1, 1999, when you apply for a policy or later, you may designate
a single withdrawal investment division from which we will take your monthly
deductions. You may choose to have us withdraw the monthly deduction from the
guaranteed interest division or the variable divisions in which you have
amounts. You may not use the loan division as your designated withdrawal
investment division from which to deduct monthly deductions.
If you do not choose a withdrawal investment division from which to deduct
monthly deductions, or if the amount you have in your designated withdrawal
investment division is not enough to cover the monthly deductions, these charges
are taken from the variable and guaranteed interest divisions in the same
proportion that your account value in each division has to your total net
account value as of the monthly processing date.
If you change your designated withdrawal investment division from which to
deduct monthly deductions, we consider this an allocation change.
VARIABLE DIVISIONS FROM
WHICH WE DEDUCT CHARGES
MONTHLY CHARGES: COST OF INSURANCE LOANS AND
CHARGES, RIDER CHARGES, ADMINISTRATION FEES TRANSACTION FEES PARTIAL SURRENDERS
- --------------- ---------------------------------------------- --------------------- -------------------------------
Default Pro-rata Pro-rata Pro-rata
- --------------- ---------------------------------------------- --------------------- -------------------------------
Choice May choose one fund, including GID Pro-rata May choose any fund or
combination of funds
- --------------- ---------------------------------------------- --------------------- -------------------------------
POLICY CHARGE
The initial policy charge is $15 per month for the first ten years of your
policy. After the first ten years of your policy, the policy charge is $9 per
month. This charge compensates us for such costs as:
o application processing;
o medical examinations;
o establishment of policy records; and
o insurance underwriting costs.
MONTHLY ADMINISTRATIVE CHARGE
For this policy, we charge a per month administrative charge of no less than
$0.07 and no more than $0.095 per $1,000 for the greater of the stated death
benefit, or the target death benefit, for the first ten policy years. We charge
$0.023 per $1,000 for each policy year after the tenth for the greater of the
stated death benefit or the target death benefit. The exact per $1,000 charge
for your policy is based on the insured people's issue ages and policy duration.
This charge is designed to compensate us for ongoing costs such as:
o premium billing and collections;
o claim processing;
o policy transactions;
o record keeping;
o reporting and communications with policy
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Variable Last Survivor 49
owners; and
o other expenses and overhead.
COST OF INSURANCE CHARGE
The cost of insurance charge compensates us for the ongoing costs of providing
insurance coverage, including the expected cost of paying death proceeds that
are more than your account value at the second death of the insured people.
The cost of insurance charge is based in part on the risk class to which the
insured people belong. The cost of insurance charge is equal to our current
monthly cost of insurance rate times the net amount at risk for each portion of
your death benefit. We calculate the net amount at risk monthly, at the
beginning of each policy month. We determine your account value after we deduct
your policy and rider charges due on that date, and other cost of insurance
charges for the base death benefit, adjustable term insurance rider and single
life term riders.
If your base death benefit at the beginning of a month increases (due to
requirements of the federal income tax law definition of life insurance), the
net amount at risk for your base death benefit for that month also increases.
Similarly, the net amount at risk for your adjustable term insurance rider
decreases. This means that the amount of your cost of insurance charge varies
from month to month with changes in your net amount at risk, changes in the
death benefit and with the increasing age of the insured people. We allocate the
net amount at risk to any segments in the same proportion that each segment has
to the total stated death benefit for all coverage segments as of the monthly
processing date.
We base your cost of insurance rates on the insured people's ages, genders,
ratings and premium classes on the policy for each segment date, or on the date
you add a base coverage segment.
Separate cost of insurance rates apply to:
o each segment of the base death benefit;
o your adjustable term insurance rider; and
o single life term riders.
These rates are never more than the guaranteed maximum rates shown in your
policy; however, they may change from time to time. The guaranteed maximum rates
are based on the 1980 Commissioner's Standard Ordinary Sex Distinct
Mortality Table.
There are no cost of insurance charges after the younger insured person's 100th
birth date.
GUARANTEED MINIMUM DEATH BENEFIT CHARGE
If you choose the guaranteed minimum death benefit feature, we currently charge
$0.005 per $1,000 of stated death benefit each month during the guarantee
period. We guarantee it never to exceed $0.005 per $1,000 of death benefit.
CHARGES FOR ADDITIONAL BENEFITS
On each monthly processing date, we deduct the cost of additional benefits under
your riders, including the adjustable term insurance rider and the single life
term rider. SEE ADDITIONAL BENEFITS, PAGE 28.
CHANGES IN MONTHLY CHARGES
Changes we make in the cost of insurance charges or charges for additional
benefits are for a class of insured persons. We base the new charge on changes
in expectations about:
o investment earnings;
o mortality;
o the time policies remain in effect;
o expenses; and
o taxes.
New monthly charges will never be more than the guaranteed maximum rates shown
in your policy.
CONTINUATION OF COVERAGE ADMINISTRATIVE FEE
At the younger insured person's 100th birth date, if your policy has not been
surrendered, the continuation of coverage period begins. We will charge a
one-time administrative fee of $400. This charge compensates us for maintaining
and servicing your policy until the second death of the insured people. We then
no longer charge you a monthly administrative fee.
POLICY TRANSACTION FEES
We also charge fees for certain transactions you may make under your policy. We
take these fees from the variable and the guaranteed interest divisions in the
same proportion that your account value in each division has to your net account
value immediately after the transaction.
PARTIAL WITHDRAWALS
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Variable Last Survivor 50
For our costs, we charge a service fee of $25 against your account value for
each partial withdrawal you take. We may also deduct a surrender charge from
your account value. SEE PARTIAL WITHDRAWALS, PAGE 37.
TRANSFERS
There is a $25 fee for each additional transfer over twelve per policy year. If
you include multiple transfers in one transfer request, it counts as one
transfer. There is no transfer fee if you are transferring your account value
into the guaranteed interest division under the right to exchange feature in
your policy. SEE TRANSFERS OF ACCOUNT VALUES, PAGE 34, AND RIGHT TO EXCHANGE
POLICY, PAGE 31.
ILLUSTRATIONS
The first policy illustration you request in a policy year is free. After that,
we may charge a fee of up to $25 for each additional policy illustration you
request.
ALLOCATION CHANGE
You may make five free premium allocation changes per policy year. After the
five free premium allocation changes, we charge you $25 for each additional
premium allocation change per policy year.
PERSISTENCY REFUND
Where state law allows us, we pay long-term policy owners a persistency refund.
Each month your policy remains in force after your tenth policy anniversary, we
credit your account value with a refund. This refund equals 0.6% of your account
value on an annual basis. On a monthly basis, this equals 0.05%.
We do not guarantee that we will pay a persistency refund on the guaranteed
interest division.
We add the persistency refund to the variable and guaranteed interest divisions
in the same proportion that your account value in each division has to your net
account value as of the monthly processing date. If we pay a persistency refund
on the guaranteed interest division, we will pay it to you if your policy is in
the continuation of coverage period.
Here are two examples of how the persistency refund may affect your account
value each month:
EXAMPLE 1: YOUR POLICY HAS NO LOAN:
o account value = $10,000 (all in the variable divisions)
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Before After
Persistency Persistency
Refund Refund
------ ------
Variable
divisions $10,000.00 $10,005.00
EXAMPLE 2: YOUR POLICY DOES HAVE A LOAN:
o account value = $10,000
o account value in the variable divisions = $6,000
o account value in the loan division = $4,000
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Before After
Persistency Persistency
Refund Refund
------ ------
Variable
divisions $6,000.00 $6,005.00
Loan $4,000.00 $4,000.00
SURRENDER CHARGE
We may deduct a surrender charge from your account value during the first nine
years of your policy or coverage segment if you:
o surrender your policy;
o reduce your stated death benefit;
o allow your policy to lapse; or
o take a partial withdrawal which decreases your stated death benefit
during the first nine years of your policy or during the first nine
years of your policy after you increase your stated death benefit.
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Variable Last Survivor 51
The surrender charge compensates us for issuing and distributing policies. We
deduct surrender charges proportionately based on the account value in each
investment division in which you have amounts invested immediately following the
transaction.
If you change your death benefit option, this may decrease your stated death
benefit. Under these circumstances, we do not deduct a surrender charge from
your account value, and we do not reduce future surrender charges.
If you change your death benefit option, this may increase the stated death
benefit. We do not increase your surrender charge in this case. However, all
other increases in your stated death benefit create a new segment which will be
subject to its own nine year surrender charge period.
If your surrender charge changes, we send you a new schedule showing the change.
The surrender charge remains level for the first five years of each coverage
segment and then decreases through the ninth year. Thereafter, the surrender
charge is zero. For purposes of calculating surrender charges, target premium is
premium attributable to base death benefit coverage.
SURRENDER CHARGES AS A PERCENTAGE OF SURRENDER TARGET PREMIUM
JOINT EQUIVALENT AGE YEARS 1 - 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9
-------------------- ----------- ------ ------ ------ ------
15 - 78 100% 80% 60% 40% 20%
79 93% 80% 60% 40% 20%
80 85% 70% 55% 40% 20%
81 78% 65% 50% 35% 20%
82 72% 60% 45% 30% 20%
83 65% 50% 40% 30% 20%
84 60% 45% 35% 25% 15%
85 54% 40% 30% 20% 10%
You should review the surrender charge table in the schedule pages of your
policy for your specific surrender charge amount each year.
If you increase your stated death benefit (other than by a death benefit option
change), we will send a new schedule page to you. You should attach this new
page to your policy. In some instances, we may ask you to send your policy to us
so that we can make this change for you.
FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS
The variable account purchases shares of the investment portfolios at net asset
value. This price reflects investment management fees and other direct expenses
that are deducted from the portfolio assets. The following table describes these
investment management fees and other direct expenses of the investment
portfolios.
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Variable Last Survivor 52
INVESTMENT PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS) /1/
Investment Total Portfolio
Portfolio Management Fees Other Expenses Expenses
A I M VARIABLE INSURANCE FUNDS, INC.
AIM V.I. - Capital Appreciation
AIM V.I. - Government Securities
THE ALGER AMERICAN FUND
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio
VIP Money Market Portfolio
VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio
VIP II Index 500 Portfolio
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Equity Income Fund
INVESCO VIF - High Yield Fund
INVESCO VIF - Small Company Growth Fund
INVESCO VIF - Total Return Fund
INVESCO VIF - Utilities Fund
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST /2/
Growth Portfolio
Limited Maturity Bond Portfolio
Partners Portfolio
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Real Estate Fund
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Variable Last Survivor 53
/1/ The investment portfolios provided this portfolio expense information. We
have not independently verified this information. These portfolio expenses are
not direct charges against division assets or reductions from contract values.
Rather, we factor these portfolio expenses when computing each underlying
portfolio's net asset value. We use the share price to calculate the unit values
of the divisions. For a more complete description of the portfolios' costs and
expenses, see the prospectuses for the portfolios.
/2/ We have agreements with the investment portfolio advisers under which we
receive certain fees in return for providing certain services. These fees are
commonly known as 12(b)(1) fees. These fees are usually charged by the advisers
to the investment portfolios, but are in some cases absorbed by the investment
portfolio.
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Variable Last Survivor 54
GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS
Individuals, corporations or other institutions may purchase this policy. For
group or sponsored arrangements (including our home office employees), corporate
purchases, or special exchange programs which we may offer from time to time, we
may reduce or waive the:
o surrender charge, including the surrender charge on partial
withdrawals;
o length of time a surrender charge applies;
o administrative charge;
o minimum stated death benefit;
o minimum target death benefit;
o minimum annual premium;
o target premium;
o sales charges;
o cost of insurance charges; or
o other charges normally assessed.
We can reduce or waive these items due to expected economies under a group or
sponsored arrangement or with a corporate purchaser. Group arrangements include
those in which there is a trustee, an employer or an association. The group
either purchases policies covering a group of individuals on a group basis or
endorses a policy to a group of individuals. Sponsored arrangements include
those in which an employer or association allows us to offer policies to its
employees or members on an individual basis.
Our sales, administration and mortality costs generally vary with the size and
stability of the group, among other factors. We take all these factors into
account when we reduce charges. A group or sponsored arrangement must meet
certain requirements to qualify for reduced charges. We make reductions to
charges based on our rules in effect when we approve a policy application form.
We may change these rules from time to time.
Sponsored arrangements or corporations may have different group premium payments
and premium requirements.
We will not be unfairly discriminatory in any variation in the surrender charge,
administrative charge, or other charges, fees and privileges. These variations
are based on differences in costs or services.
OTHER CHARGES
Under current law, we pay no tax on investment income and capital gains included
in variable life insurance policy reserves. This means that no charge is
currently made to any variable division for our federal income taxes. If the tax
law changes and we have federal income tax chargeable to the variable divisions,
we may make such a charge in the future.
In most states, we must pay state and local taxes. If these taxes increase, we
may charge for such taxes.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the policy and does not purport to be complete or
to cover all tax situations. This discussion is not intended as tax advice.
Counsel or other competent tax advisers should be consulted for more complete
information. This discussion is based upon our understanding of the present
federal income tax laws. No representation is made as to the likelihood of
continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
This policy is designed to qualify as a life insurance contract under the
Internal Revenue Code. All terms and provisions of the policy shall be construed
in a manner which is consistent with that design. In order to qualify as a life
insurance contract for federal income tax purposes and to receive the tax
treatment normally accorded life insurance contracts under federal tax law, a
policy must satisfy certain requirements which are set forth in the Internal
Revenue Code. Specifically, the policy must meet the requirements of the
"Guideline Premium/Cash Value Corridor Test," as specified in Code section 7702.
The Guideline Premium/Cash Value Corridor Test provides for a maximum premium in
relation to the death benefit, and a minimum "corridor" of death benefit in
relation to account value. SEE APPENDIX B, PAGE 69 FOR A TABLE OF THE GUIDELINE
PREMIUM/CASH VALUE CORRIDOR TEST FACTORS.
There is very little guidance with respect to policies issued on a last survivor
basis, however, we believe it is reasonable to conclude that our policies
satisfy the
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Variable Last Survivor 55
applicable requirements. If it is subsequently determined that a policy does not
satisfy the applicable requirements, we will take appropriate steps to bring the
policy into compliance with such requirements and we reserve the right to
restrict policy transactions or modify your policy in order to do so.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the Code Section 7702 Guideline Premium/Cash Corridor
Test, Code Section 817(h) requires separate account investments, such as our
variable account, to be adequately diversified. The Treasury has issued
regulations which set the standards for measuring the adequacy of any
diversification. To be adequately diversified, each variable division must meet
certain tests. If your variable life policy is not adequately diversified under
these regulations, it is not treated as life insurance under Code Section 7702.
You would then be subject to federal income tax on your policy income as you
earn it. Our variable divisions' investment portfolios have promised they will
meet the diversification standards that apply to your policy.
In certain circumstances, you, as owner of a variable life insurance contract,
may be considered the owner for federal income tax purposes of the separate
account assets used to support your contract. Any income and gains from the
separate account assets are includable in the gross income from your policy
under these circumstances. The IRS has stated in published rulings that a
variable contract owner is considered the owner of separate account assets if
the contract owner has "indicia of ownership" in those assets. "Indicia of
ownership" includes the ability to exercise investment control over the assets.
Your ownership rights under your policy are similar to, but different in some
ways from those described by the IRS in rulings in which it determined that
policy owners are not owners of separate account assets. For example, you have
flexibility in allocating your premium payments and in your policy values. These
differences could result in the IRS treating you as the owner of a pro rata
share of the variable account assets. We do not know what standards will be set
forth in the future, if any, in the Treasury's regulations or rulings that it
expects to issue. We reserve the right to modify your policy, as necessary, to
try to prevent you from being considered the owner of a pro rata share of the
variable account assets or to otherwise qualify your policy for favorable tax
treatment.
The following discussion assumes that the policy will qualify as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY DEATH BENEFITS
We believe that the death benefit under a policy is generally excludable from
the gross income of the beneficiary(ies) under section 10(a)(1) of the Code.
However, there are exceptions to this general rule. Additionally, federal and
local transfer, estate inheritance, and other tax consequences of ownership or
receipt of policy proceeds depend on the circumstances of each policy owner or
beneficiary(ies). A tax adviser should be consulted about these consequences.
Generally, the policy owner will not be taxed on any of the policy cash value
until there is a distribution. When distributions from a policy occur, or when
loans are taken from or secured by a Policy, the tax consequences depend on
whether or not the policy is a "modified endowment contract."
Special rules also apply if you are subject to the alternative minimum tax. You
should consult a tax adviser if you are subject to the alternative minimum tax.
MODIFIED ENDOWMENT CONTRACTS
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," and are given less favorable tax treatment
than other life insurance contracts. Due to the flexibility of the policies as
to premiums and benefits, the individual circumstances of each policy will
determine whether or not it is classified as a modified endowment contract. The
rules are too complex to be summarized here, but generally depend on the amount
of premiums paid during the first seven policy years. Certain changes in a
policy after it is issued could also cause it to be classified as a modified
endowment contract. A current or prospective policy owner should consult with a
competent advisor to determine whether or not a policy transaction will cause
the policy to be classified as a modified endowment contract.
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Variable Last Survivor 56
MULTIPLE POLICIES
All modified endowment contracts that are issued by us (or our affiliates) to
the same policy owner during any calendar year are treated as one modified
endowment contract for purposes of determining the amount includable in the
policy owner's income when a taxable distribution occurs.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS
Once a policy is classified as a modified endowment contract, the following tax
rules apply both prospectively and to any distributions made in the prior two
years:
1. All distributions other than death benefits, including distributions
upon surrender and withdrawals, from a modified endowment contact will
be treated first as distributions of gain taxable as ordinary income
and as tax-free recovery of the policy owner's investment in the policy
only after all gain has been distributed.
2. Loans taken from or secured by a policy classified as a modified
endowment contract are treated as distributions and taxed first as
distributions of gain taxable as ordinary income and as tax-free
recovery of the policy owner's investment in the policy only after all
gain has been distributed.
3. A 10.0% additional income tax penalty may be imposed on distribution
amount subject to income tax. Consult a tax adviser to determine
whether or not you may be subject to this penalty tax.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS
Distributions other than death benefits from a policy that is not classified as
a modified endowment contract are generally treated first as a recovery of the
policy owner's investment in the policy. Only after the recovery of all
investment in the policy, is there taxable income. However, certain
distributions which must be made in order to enable the policy to continue to
qualify as a life insurance contract for federal income tax purposes, if policy
benefits are reduced during the first fifteen policy years, may be treated in
whole or in part as ordinary income subject to tax.
Loans from or secured by a policy that is not a modified endowment contract are
generally not treated as distributions. However, the tax consequences of a loan
from such a policy after the ninth policy year are uncertain. You should consult
a tax adviser as to such consequences. Finally, neither distributions from, nor
loans from or secured by, a policy that is not a modified endowment contract are
subject to the 10.0% additional income tax.
INVESTMENT IN THE POLICY
Your investment in the policy is generally the total of your aggregate premiums.
When a distribution is taken from the policy other than a policy loan, your
investment in the policy is reduced by the amount of the distribution that is
tax free.
POLICY LOANS
In general, interest on a policy loan will not be deductible. Before taking out
a policy loan, you should consult a tax adviser as to the tax consequences.
SECTION 1035 EXCHANGES
Code Section 1035 generally provides that no gain or loss shall be recognized on
the exchange of one life insurance policy for another life insurance policy, or
for an endowment or annuity contract. We accept 1035 exchanges with outstanding
loans. Special rules and procedures apply to Section 1035 exchanges. If you wish
to take advantage of Section 1035, you should consult your tax adviser.
TAX-EXEMPT POLICY OWNERS
Special rules may apply to a policy that is owned by a tax-exempt entity.
Tax-exempt entities should consult their tax adviser regarding the consequences
of purchasing and owning a policy. These consequences could include an effect on
the tax-
- --------------------------------------------------------------------------------
Variable Last Survivor 57
exempt status of the entity and the possibility of the unrelated business income
tax.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative action is uncertain, there is always the
possibility that the tax treatment of the policy could be changed by legislation
or otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
CHANGES TO COMPLY WITH THE LAW
So that your policy continues to qualify as life insurance under the Code, we
reserve the right to refuse to accept all or part of your premium payments, or
to change your death benefit. We may refuse to allow you to make partial
withdrawals that would cause your policy to fail to qualify as life insurance.
We also may:
o make changes to your policy or its riders; or
o take distributions from your policy to the degree that we deem
necessary to qualify your policy as life insurance for tax purposes.
If we make any change of this type, it applies the same way to all affected
policies. We will give you advance notice of this change.
The tax law limits the amount we can charge for mortality costs and other
expenses used to calculate whether your policy qualifies as life insurance for
federal income tax purposes. We must base these calculations on reasonable
mortality charges and other charges reasonably expected to be paid. The Treasury
issued proposed regulations on what it considers reasonable mortality charges.
We believe that the charges used for your policy should meet the Treasury's
current requirement for "reasonableness." We reserve the right to make changes
to the mortality charges if future regulations have standards which make changes
necessary in order to continue to qualify your policy as life insurance for
federal income tax purposes.
Additionally, assuming that you do not want your policy to be or to become a
modified endowment contract, we include a policy endorsement under which we have
the right to amend your policy, including riders. We do this to attempt to
enable your policy to continue to meet the seven-pay test for federal income tax
purposes. If the policy premium you pay is more than the seven-pay limit, we
have the right to remove any excess premium or to make any appropriate
adjustments to your policy's account value and death benefit. It is not clear,
however, whether we can take effective action pursuant to this endorsement under
all possible circumstances to prevent a policy that has exceeded the premium
limitation from being classified as a modified endowment contract.
Any increase in your death benefit will cause an increase in your cost of
insurance charges.
OTHER
Policy owners may use our policies in various arrangements, including:
o qualified plans;
o non-qualified deferred compensation or salary continuance plans;
o split dollar insurance plans;
o executive bonus plans;
o retiree medical benefit plans; and
o other plans.
The tax consequences of these plans may vary depending on the particular facts
and circumstances of each arrangement. If you want to use any of your policies
in this type of arrangement, you should consult a qualified tax adviser
regarding the tax issues of your particular arrangement.
In recent years, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new policy or a
change in an existing policy should consult a tax adviser.
The IRS requires us to withhold income taxes from any portion of the amounts
individuals receive in a taxable transaction. We do not withhold income taxes if
you elect in writing not to have withholding apply. If the amount withheld for
you is insufficient to cover income taxes, you may have to pay income taxes and
possibly penalties later.
The transfer of the policy or designation of a beneficiary may have federal,
state, and/or local transfer and inheritance tax consequences, including the
imposition of gift, estate, and generation-skipping transfer taxes. For example,
the transfer of the policy to, or the designation as a beneficiary of, or the
payment of proceeds to, a person who is assigned to
- --------------------------------------------------------------------------------
Variable Last Survivor 58
a generation which is two or more generations below the generation assignment of
the policy owner may have generation skipping transfer tax consequences under
federal tax law. The individual situation of each policy owner or beneficiary
will determine the extent, if any, to which federal, state, and local transfer
and inheritance taxes may be imposed and how ownership or receipt of policy
proceeds will be treated for purposes of federal, state and local estate,
inheritance, generation skipping and other taxes.
YOU SHOULD CONSULT QUALIFIED LEGAL OR TAX ADVISERS FOR COMPLETE INFORMATION ON
FEDERAL, STATE, LOCAL, AND OTHER TAX CONSIDERATIONS.
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES, AND
ACCUMULATED PREMIUMS
The following tables are intended to show how the policy works. This includes
how benefits and values can vary over a long period of time. Each table also
compares these values with total premiums paid with interest. The policies
illustrated include:
Definition
Death of Life Stated Target
Tobacco User Benefit Insurance Death Death
Gender Age Status Option Test Benefit Premium Benefit
------ --- ------ ------ ---- ------- ------- -------
Male 50 Non-tobacco User 1 GP 1,000,000 $12,500 1,000,000
Preferred
Female 50 Non-tobacco User
Preferred
The tables show how death benefits, account values, and cash surrender values of
a hypothetical policy could vary over an extended period of time, assuming the
variable divisions had constant hypothetical gross annual investment returns of
0.0%, 6.0%, or 12.0% over the periods indicated in each table. Various expenses
of the investment portfolios were voluntarily absorbed by the portfolio's
investment manager. Absent such reimbursement, the fees and expenses used in
this illustration would be higher.
We have agreements with the investment portfolio advisers under which we receive
certain fees in return for providing certain services. These fees are commonly
known as 12(b)(1) fees. These fees are usually charged by the advisers to the
investment portfolios, but are in some cases absorbed by the investment
portfolio.
Values would differ from those shown in the tables if the annual investment
returns were not constant.
These illustrations assume there are no policy loans. The amounts shown would
differ if we had used two females or two males.
The third column of each table shows what would happen if an amount equal to the
assumed premiums earned interest, after taxes, of 5.0% compounded annually.
We illustrate premium payments as if they were made at the beginning of the
year.
The difference between the account value and the cash surrender value in the
first nine years of the policy shows the effect of the surrender charge.
The net investment return on your policy is lower than the gross investment
return on the variable divisions. We show this effect in the amounts for death
benefits, account values and cash surrender values. This effect is due to
deductions from premiums, the mortality and expense risk charge, monthly
deductions, cost of insurance rider
- --------------------------------------------------------------------------------
Variable Last Survivor 59
charges, and surrender charges. The tables show charges at our current rates.
SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 49. The tables also show
charges at the maximum rates we guarantee in our policies. The mortality and
expense risk investment fee is 0.75% annually on a guaranteed basis. These
illustrations show current rates, which include a persistency refund of 0.6% of
the annual account value beginning after the tenth policy anniversary.
The tables also reflect the effect on each division's investment performance of
the portfolio charge for management fees and portfolio expenses.
The tables reflect annual management fees of 0.7126% of the portfolios'
aggregate average daily net assets. This hypothetical rate is a simple average
of the investment advisory fees applying to the investment portfolios for the
year ending December 31, 1998. We assume other portfolio expenses at the rate of
0.1939% of the portfolios' average daily net assets. This is an average of all
the portfolios' other expenses for the year ending December 31, 1998. These
charges total 0.9065%. Actual fees vary by portfolio. The sponsor may have
agreements to waive or otherwise pay each investment division for operating
expenses which are greater than certain limits. The tables assume that the
current expense reimbursement arrangements will continue. However, they may not
continue.
The effect of these charges and expenses, and mortality and expense risk charges
results in a net rate of return of:
o (1.53)% on a 0% gross rate of return;
o 4.42% on a 6% gross rate of return; and
o 10.38% on a 12% gross rate of return.
The tables assume that charges have been deducted. This includes administrative
and sales charges. The tables show that we do not currently charge against the
variable account for state or federal taxes. If we charge for the taxes in the
future, it will take a higher gross rate of return than the rates shown to
produce the same death benefits, account values, and cash surrender values.
If we are asked to do so, we will give you a comparable personal illustration
based on:
o the insured people's ages and genders;
o standard premium class assumptions;
o initial stated death benefit;
o the chosen death benefit option;
o scheduled premiums consistent with your policy form; and
o special features elected on your policy.
At issue, we deliver an individualized illustration showing the scheduled
premium you chose and the insured people's actual risk classes. After we issue
the policy, if you ask us to, we will give you an illustration of future policy
benefits. We base these hypothetical future benefits on both guaranteed and
current cost factor assumptions and actual account value.
- --------------------------------------------------------------------------------
Variable Last Survivor 60
PROSPECT: INSURED PERSON NO. 1'S NAME
MALE 50 NON-TOBACCO USER PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-TOBACCO USER
SECURITY LIFE
VARIABLE LAST SURVIVOR UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING GUARANTEED CHARGES
Assuming Hypothetical Gross Investment Return of:
-----------0.00%-------- ---------12.00%--------- -----------6.00%----------
PREMIUM CASH CASH CASH
ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH
YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
1 13000 13650 10653 1767 1000000 12005 3119 1000000 11328 2443 1000000
2 13000 27983 21056 12171 1000000 25163 16278 1000000 23069 14183 1000000
3 13000 43032 31200 22314 1000000 39579 30694 1000000 35224 26339 1000000
4 13000 58833 41069 32183 1000000 55363 46477 1000000 47793 38908 1000000
5 13000 75425 50646 41761 1000000 72634 63749 1000000 60773 51888 1000000
6 13000 92846 60190 53082 1000000 91834 84726 1000000 74451 67343 1000000
7 13000 111138 69398 64067 1000000 112830 107499 1000000 88541 83210 1000000
8 13000 130345 78254 74699 1000000 135790 132236 1000000 103040 99486 1000000
9 13000 150513 86735 84958 1000000 160898 159121 1000000 117941 116164 1000000
10 13000 171688 94816 94816 1000000 188358 188358 1000000 133237 133237 1000000
15 13000 294547 134338 134338 1000000 384580 384580 1000000 224507 224507 1000000
20 13000 451350 153792 153792 1000000 705991 705991 1000000 324402 324402 1000000
25 13000 651475 133462 133462 1000000 1253479 1253479 1341222 423618 423618 1000000
30 13000 906890 15550 15550 1000000 2167665 2167665 2276048 496693 496693 1000000
AGE 65 13000 322925 140234 140234 1000000 436554 436554 1000000 243989 243989 1000000
THE EXPENSE CHARGES AND COST OF INSURANCE RATES WILL NEVER BE GREATER THAN THOSE
WHICH WERE USED TO CALCULATE THE ABOVE VALUES.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO THE DIVISIONS OF
THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND THE INVESTMENT
EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT THESE
HYPOTHETICAL GROSS INVESTMENT RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT
AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN
A DIFFERENT FREQUENCY THAN SHOWN.
- --------------------------------------------------------------------------------
Variable Last Survivor 61
PROSPECT: INSURED PERSON NO. 1'S NAME:
MALE 50 NON-TOBACCO USER PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-TOBACCO USER
SECURITY LIFE
VARIABLE LAST SURVIVOR UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING CURRENT CHARGES
Assuming Hypothetical Gross Investment Return of:
--------0.00%------ ---------12.00%--------- ----------6.00%---------
PREMIUM CASH CASH CASH
ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH
YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
1 13000 13650 10653 1767 1000000 12005 3119 1000000 11328 2443 1000000
2 13000 27983 21056 12171 1000000 25163 16278 1000000 23069 14183 1000000
3 13000 43032 31200 22314 1000000 39579 30694 1000000 35224 26339 1000000
4 13000 58833 41150 32265 1000000 55448 46563 1000000 47876 38991 1000000
5 13000 75425 50933 42047 1000000 72944 64058 1000000 61071 52186 1000000
6 13000 92846 60824 53716 1000000 92540 85432 1000000 75121 68013 1000000
7 13000 111138 70543 65211 1000000 114141 108810 1000000 89769 84437 1000000
8 13000 130345 80088 76534 1000000 137949 134395 1000000 105035 101481 1000000
9 13000 150513 89457 87680 1000000 164186 162409 1000000 120941 119164 1000000
10 13000 171688 98645 98645 1000000 193097 193097 1000000 137509 137509 1000000
15 13000 294547 148809 148809 1000000 403872 403872 1000000 241358 241358 1000000
20 13000 451350 193607 193607 1000000 756919 756919 1000000 371116 371116 1000000
25 13000 651475 228244 228244 1000000 1350529 1350529 1445066 530841 530841 1000000
30 13000 906890 242734 242734 1000000 2345328 2345328 2462595 727244 727244 1000000
AGE 65 13000 322925 158321 158321 1000000 460703 460703 1000000 265130 265130 1000000
THE CURRENT COST OF INSURANCE RATES ARE SUBJECT TO CHANGE. ACCOUNT VALUES WILL
VARY FROM THOSE ILLUSTRATED IF ACTUAL RATES DIFFER FROM THOSE ASSUMED. CURRENT
MORTALITY CHARGE RATES ARE BASED ON CURRENT MORTALITY EXPERIENCE AND ARE NOT
DEPENDENT UPON FUTURE IMPROVEMENTS IN UNDERLYING MORTALITY.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS AND POLICY CHARGES MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
THE DIVISIONS OF THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND
THE INVESTMENT EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT
THESE HYPOTHETICAL GROSS INVESTMENTS RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT
AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN
A DIFFERENT FREQUENCY THAN SHOWN.
- --------------------------------------------------------------------------------
Variable Last Survivor 62
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS
Set forth below is information regarding the directors and principal officers of
Security Life of Denver Insurance Company. Security Life's address, and the
business address of each person named, except as noted with one or two asterisks
(*/**), is Security Life Center, 1290 Broadway, Denver, Colorado 80203-5699. The
business address of each person denoted with one asterisk (*) is ING North
America Insurance Corporation, 5780 Powers Ferry Road, Atlanta, Georgia
30327-4390. The business address of each person denoted with two asterisks (**)
is Security Life of Denver Insurance Company, 9140 Arrowpoint Blvd., Suite 400,
Charlotte, North Carolina 28273.
Name and Principal
Business and Address Position and Offices with Security Life of Denver
- -------------------- -------------------------------------------------
Stephen M. Christopher Director, President and Chief Executive Officer
Thomas F. Conroy Director, President Security Life Reinsurance
Michael W. Cunningham* Director, Executive Vice President
Linda B. Emory* Director, Executive Vice President and Appointed
Actuary
James L. Livingston, Jr. Executive Vice President and Chief Operating
Officer
Jeffrey R. Messner Executive Vice President and Chief Marketing
Officer
Jess A. Skriletz President, ING Institutional Markets
John R. Barmeyer* Senior Vice President, Chief Legal Officer
Wayne D. Bidelman Senior Vice President, CCRC
Eugene L. Copeland Senior Vice President and General Counsel,
Security Life Reinsurance and ING Institutional
Markets
Michael Fisher* Senior Vice President, Litigation
Carol D. Hard Senior Vice President, Variable Products
Philip R. Kruse Senior Vice President
Charles LeDoyen** Senior Vice President, Structured Settlements
Timothy P. McCarthy Senior Vice President, Marketing Services
Gregory G. McGreevey Senior Vice President, New Product and Market
Development
- --------------------------------------------------------------------------------
Variable Last Survivor 63
Name and Principal
Business and Address Position and Offices with Security Life of Denver
- -------------------- -------------------------------------------------
Jeffery W. Seel* Senior Vice President, Chief Investment Officer
Lawrence D. Taylor Senior Vice President, Chief Actuary
Louis N. Trapolino Senior Vice President, Distribution
William D. Tyler* Senior Vice President, Chief Information Officer
Katherine Anderson Vice President
Carole A. Baumbusch Vice President, Special Projects
Evelyn A. Bentz Vice President, M Financial Sales
Thomas Kirby Brown, Jr. Vice President, Operations, ING Institutional
Markets
Douglas W. Campbell Vice President, Agency Sales
Daniel S. Clements Vice President and Chief Underwriter
Stanley F. Eckert Vice President, National Marketing
Larry D. Erb Vice President, Information Technology
Martha K. Evans Vice President, Variable Operations
Fitz Fisher Vice President, Information Technology
Deborah B. Holden* Vice President, Corporate Benefits
Brian Holland Vice President, Sales and International Risk
Management
Kenneth R. Kiefer** Vice President, Operations, Structured
Settlements
Richard D. King Vice President, Medical Director
C. Lynn McPherson* Vice President
Sue A. Miskie Vice President, Corporate Services
David S. Pendergrass* Vice President and Treasury Officer
Stephen R. Pryde Vice President, Administration
Christiaan M. Rutten Vice President, Structured Reinsurance
- --------------------------------------------------------------------------------
Variable Last Survivor 64
Name and Principal
Business and Address Position and Offices with Security Life of Denver
- -------------------- -------------------------------------------------
Casey J. Scott Vice President, National Marketing
Alan C. Singer Vice President, Customer Relations and Regulatory
Compliance
Mark A. Smith Vice President, Insurance Services
Jerome M. Strop Vice President, Strategic Marketing
Gary W. Waggoner Vice President, General Counsel and Corporate
Secretary
William Wojciechowski* Vice President, CCRC
Amy L. Winsor Treasurer and Finance Officer
Eric G. Banta Assistant Secretary
Roger O. Beebe Actuarial Officer
Marsha K. Crest Agency Administration Officer
John B. Dickinson Actuarial Officer
Relda A. Fleshman Deputy General Counsel
Shirley A. Knarr Actuarial Officer
Glen E. Stark Actuarial Officer
William J. Wagner Actuarial Officer
- --------------------------------------------------------------------------------
Variable Last Survivor 65
REGULATION
We are regulated and supervised by the Division of Insurance of the Department
of Regulatory Agencies of the State of Colorado which periodically examines our
financial condition and operations. In addition, we are subject to the insurance
laws and regulations in every jurisdiction in which we do business. As a result,
the provisions of this policy may vary somewhat from jurisdiction to
jurisdiction.
We are required to submit annual statements, including financial statements, of
our operations and finances to the insurance departments of the various
jurisdictions in which we do business to determine solvency and compliance with
state insurance laws and regulations.
We are also subject to various federal securities laws and regulations.
LEGAL MATTERS
The legal matters in connection with the policy described in this prospectus
have been passed on by the General Counsel of Security Life. Sutherland Asbill &
Brennan LLP has provided advice on matters relating to the federal securities
laws.
LEGAL PROCEEDINGS
Security Life, as an insurance company, is ordinarily involved in litigation. We
do not believe that any current litigation is material to Security Life's
ability to meet its obligations under the policy or to the variable account, and
we do not expect to incur significant losses from such actions. ING America
Equities, Inc., the principal underwriter and distributor of the policy, is not
engaged in any litigation of any material nature.
EXPERTS
The consolidated financial statements of Security Life of Denver Insurance
Company and Subsidiaries at December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and the financial statements
of the Separate Account L1 at December 31, 1998, and for each of the three years
in the period ended December 31, 1998, appearing in this prospectus and
registration statement have been audited by _________________________,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing. [to be filed by amendment.]
Actuarial matters in this prospectus have been examined by Lawrence D. Taylor,
F.S.A., M.A.A.A., who is Senior Vice President and Chief Actuary of Security
Life. His opinion on actuarial matters is filed as an exhibit to the
Registration Statement we filed with the SEC. [to be filed by amendment.]
REGISTRATION STATEMENT
We have filed a Registration Statement relating to the Variable Account and the
variable life insurance policy described in this prospectus with the SEC. The
Registration Statement, which is required by the Securities Act of 1933,
includes additional information that is not required in this prospectus under
the rules and regulations of the SEC. The additional information may be obtained
from the SEC's principal office in Washington, DC. There is a charge for this
material.
- --------------------------------------------------------------------------------
Variable Last Survivor 66
FINANCIAL STATEMENTS
[to be filed by amendment]
- --------------------------------------------------------------------------------
Variable Last Survivor
67
APPENDIX A
FACTORS FOR THE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
Attained Attained Attained Attained
Age of Younger Factor Age of Younger Age of Younger Age of Younger
Insured Insured Factor Insured Factor Insured Factor
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.05
5 2.50 30 2.50 55 1.50 80 1.05
6 2.50 31 2.50 56 1.46 81 1.05
7 2.50 32 2.50 57 1.42 82 1.05
8 2.50 33 2.50 58 1.38 83 1.05
9 2.50 34 2.50 59 1.34 84 1.05
10 2.50 35 2.50 60 1.30 85 1.05
11 2.50 36 2.50 61 1.28 86 1.05
12 2.50 37 2.50 62 1.26 87 1.05
13 2.50 38 2.50 63 1.24 88 1.05
14 2.50 39 2.50 64 1.22 89 1.05
15 2.50 40 2.50 65 1.20 90 1.05
16 2.50 41 2.43 66 1.19 91 1.04
17 2.50 42 2.36 67 1.18 92 1.03
18 2.50 43 2.29 68 1.17 93 1.02
19 2.50 44 2.22 69 1.16 94 1.01
20 2.50 45 2.15 70 1.15 95 1.00
21 2.50 46 2.09 71 1.13 96 1.00
22 2.50 47 2.03 72 1.11 97 1.00
23 2.50 48 1.97 73 1.09 98 1.00
24 2.50 49 1.91 74 1.07 99 1.00
100 1.00
THE POLICY'S BASE DEATH BENEFIT AT ANY TIME WILL BE AT LEAST EQUAL TO THE
ACCOUNT VALUE TIMES THE APPROPRIATE FACTOR FROM THIS TABLE.
- --------------------------------------------------------------------------------
Variable Last Survivor 68
APPENDIX B
ENHANCED DEATH BENEFIT CORRIDOR
FACTORS FOR THE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
Attained Attained Attained Attained
Age of Younger Age of Younger Age of Younger Age of Younger
Insured Factor Insured Factor Insured Factor Insured Factor
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.09
5 2.50 30 2.50 55 1.50 80 1.14
6 2.50 31 2.50 56 1.46 81 1.18
7 2.50 32 2.50 57 1.42 82 1.22
8 2.50 33 2.50 58 1.38 83 1.26
9 2.50 34 2.50 59 1.34 84 1.31
10 2.50 35 2.50 60 1.30 85 1.35
11 2.50 36 2.50 61 1.28 86 1.33
12 2.50 37 2.50 62 1.26 87 1.31
13 2.50 38 2.50 63 1.24 88 1.29
14 2.50 39 2.50 64 1.22 89 1.27
15 2.50 40 2.50 65 1.20 90 1.26
16 2.50 41 2.43 66 1.19 91 1.24
17 2.50 42 2.36 67 1.18 92 1.22
18 2.50 43 2.29 68 1.17 93 1.19
19 2.50 44 2.22 69 1.16 94 1.16
20 2.50 45 2.15 70 1.15 95 1.12
21 2.50 46 2.09 71 1.13 96 1.11
22 2.50 47 2.03 72 1.11 97 1.09
23 2.50 48 1.97 73 1.09 98 1.06
24 2.50 49 1.91 74 1.07 99 1.03
100 1.00
THE POLICY'S BASE DEATH BENEFIT AT ANY TIME WILL BE AT LEAST EQUAL TO THE
ACCOUNT VALUE TIMES THE APPROPRIATE FACTOR FROM THIS TABLE.
- --------------------------------------------------------------------------------
Variable Last Survivor 69
APPENDIX C
PERFORMANCE INFORMATION
POLICY PERFORMANCE
The following hypothetical illustrations demonstrate how the actual investment
experience of each Division of the Variable Account affects the Cash Surrender
Value, Account Value and Death Benefit of a policy. These hypothetical
illustrations are based on the actual historical return of each portfolio as if
a policy had been issued on the date indicated. Each portfolio's Annual Total
Return is based on the total return calculated for each fiscal year. These
Annual Total Return figures reflect the portfolio's management fees and other
operating expenses but do not reflect the policy level or Variable Account
asset-based charges and deductions, which if reflected, would result in lower
total return figures than those shown.
The illustrations are based on the payment of a $12,500 annual premium, paid at
the beginning of each year, for a hypothetical policy with a $1,000,000 face
amount death benefit Option 1, issued on a preferred, nonsmoker male, Age 50 and
a preferred, nonsmoker female, age 50. It is assumed that all premiums are
allocated to the Division illustrated for the period shown. The benefits are
calculated for a specific date. The amount and timing of Premium Payments and
the use of other policy features, such as policy loans, would affect individual
policy benefits.
The amounts shown for the Cash Surrender Values, Account Values and Death
Benefits take into account the charges against premiums, current cost of
insurance and monthly deductions, the daily charge against the Variable Account
for mortality and expense risks, and each portfolio's charges and expenses. SEE
CHARGES, DEDUCTIONS AND REFUNDS, PAGE 48. This prospectus also contains
illustrations based on assumed rates of return. SEE ILLUSTRATIONS OF DEATH
BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND ACCUMULATED PREMIUMS, PAGE 59.
- --------------------------------------------------------------------------------
Variable Last Survivor 70
HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 2.50% 2,151 11,036 1,000,000
12/31/95 35.69% 20,673 29,559 1,000,000
12/31/96 17.58% 38,171 47,056 1,000,000
12/31/97 13.51% 56,208 65,093 1,000,000
12/31/98 19.30% 80,917 89,802 1,000,000
AIM V.I. GOVERNMENT SECURITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 (3.73)% 1,450 10,335 1,000,000
12/31/95 15.56% 15,397 24,282 1,000,000
12/31/96 2.29% 26,616 35,501 1,000,000
12/31/97 8.16% 40,703 49,589 1,000,000
12/31/98 7.66% 55,522 64,407 1,000,000
ALGER AMERICAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 4.14% 2,336 11,221 1,000,000
12/31/91 40.39% 21,976 30,861 1,000,000
12/31/92 12.38% 37,516 46,401 1,000,000
12/31/93 22.47% 60,600 69,485 1,000,000
12/31/94 1.45% 71,811 80,696 1,000,000
12/31/95 36.37% 117,130 124,238 1,000,000
12/31/96 13.35% 146,812 152,143 1,000,000
12/31/97 25.75% 200,125 203,679 1,000,000
12/31/98 48.07% 313,916 315,693 1,000,000
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 12.04% 3,226 12,111 1,000,000
12/31/97 19.68% 18,394 27,279 1,000,000
12/31/98 57.83% 50,930 59,815 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 71
HYPOTHETICAL ILLUSTRATION (Continued) [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 (1.54)% 1,696 10,581 1,000,000
12/31/95 44.45% 21,969 30,854 1,000,000
12/31/96 11.90% 37,307 46,192 1,000,000
12/31/97 15.01% 56,090 64,976 1,000,000
12/31/98 30.30% 89,105 97,990 1,000,000
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 64.48% 9,158 18,043 1,000,000
12/31/90 8.71% 22,242 31,127 1,000,000
12/31/91 57.54% 56,838 65,723 1,000,000
12/31/92 3.55% 69,632 78,518 1,000,000
12/31/93 13.28% 91,451 100,336 1,000,000
12/31/94 (4.38)% 98,461 105,569 1,000,000
12/31/95 44.31% 161,802 167,133 1,000,000
12/31/96 4.18% 180,581 184,135 1,000,000
12/31/97 11.39% 213,927 215,704 1,000,000
12/31/98 15.53% 259,929 259,929 1,000,000
FIDELITY VIP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 31.51% 5,425 14,310 1,000,000
12/31/90 (11.73)% 13,018 21,903 1,000,000
12/31/91 45.51% 38,443 47,328 1,000,000
12/31/92 9.32% 54,078 62,963 1,000,000
12/31/93 19.37% 78,445 87,331 1,000,000
12/31/94 (0.02)% 90,393 97,501 1,000,000
12/31/95 35.36% 140,552 145,883 1,000,000
12/31/96 14.71% 175,056 178,611 1,000,000
12/31/97 23.48% 230,639 232,416 1,000,000
12/31/98 39.49% 337,128 337,128 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 72
HYPOTHETICAL ILLUSTRATION (Continued) [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/89 9.12% 2,897 11,782 1,000,000
12/31/90 8.04% 15,332 24,218 1,000,000
12/31/91 6.09% 27,888 36,774 1,000,000
12/31/92 3.90% 40,039 48,924 1,000,000
12/31/93 3.23% 52,166 61,051 1,000,000
12/31/94 4.25% 67,385 74,493 1,000,000
12/31/95 5.87% 84,445 89,776 1,000,000
12/31/96 5.41% 101,807 105,361 1,000,000
12/31/97 5.51% 119,987 121,764 1,000,000
12/31/98 5.46% 138,853 138,853 1,000,000
FIDELITY VIP OVERSEAS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 26.28% 4,834 13,719 1,000,000
12/31/90 (1.67)% 14,997 23,883 1,000,000
12/31/91 8.00% 28,202 37,087 1,000,000
12/31/92 (10.72)% 33,350 42,235 1,000,000
12/31/93 37.35% 63,435 72,320 1,000,000
12/31/94 1.72% 76,942 84,050 1,000,000
12/31/95 9.74% 98,161 103,493 1,000,000
12/31/96 13.15% 124,999 128,553 1,000,000
12/31/97 11.56% 152,694 154,471 1,000,000
12/31/98 12.75% 185,110 185,110 1,000,000
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/90 6.72% 2,626 11,512 1,000,000
12/31/91 22.56% 18,334 27,219 1,000,000
12/31/92 11.71% 33,197 42,082 1,000,000
12/31/93 21.23% 54,692 63,577 1,000,000
12/31/94 (6.09)% 60,262 69,147 1,000,000
12/31/95 16.96% 85,943 93,051 1,000,000
12/31/96 14.60% 113,014 118,345 1,000,000
12/31/97 20.65% 151,354 154,908 1,000,000
12/31/98 15.05% 187,651 189,428 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 73
HYPOTHETICAL ILLUSTRATION (Continued) [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
FIDELITY VIP II INDEX 500 PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/93 9.74% 2,967 11,852 1,000,000
12/31/94 1.04% 13,798 22,683 1,000,000
12/31/95 37.19% 36,761 45,646 1,000,000
12/31/96 22.82% 59,880 68,765 1,000,000
12/31/97 32.82% 96,010 104,895 1,000,000
12/31/98 28.31% 140,573 147,682 1,000,000
INVESCO VIF-EQUITY INCOME FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 29.25% 5,169 14,054 1,000,000
12/31/96 22.28% 21,357 30,243 1,000,000
12/31/97 28.17% 43,336 52,221 1,000,000
12/31/98 15.30% 63,157 72,042 1,000,000
INVESCO VIF-HIGH YIELD FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 19.76% 4,097 12,982 1,000,000
12/31/96 16.59% 18,683 27,568 1,000,000
12/31/97 17.33% 35,751 44,636 1,000,000
12/31/98 1.42% 46,773 55,659 1,000,000
INVESCO VIF-SMALL COMPANY GROWTH FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 16.38% 3,716 12,601 1,000,000
INVESCO VIF-TOTAL RETURN FUND
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/95 22.79% 4,439 13,325 1,000,000
12/31/96 12.18% 17,999 26,885 1,000,000
12/31/97 22.91% 37,070 45,955 1,000,000
12/31/98 9.56% 52,724 61,609 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 74
HYPOTHETICAL ILLUSTRATION (Continued) [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
INVESCO VIF-UTILITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 9.08% 2,892 11,778 1,000,000
12/31/96 12.76% 16,410 25,295 1,000,000
12/31/97 23.41% 35,312 44,197 1,000,000
12/31/98 25.48% 59,578 68,463 1,000,000
NEUBERGER BERMAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 29.47% 5,194 14,079 1,000,000
12/31/90 (8.19)% 13,707 22,592 1,000,000
12/31/91 29.73% 34,127 43,012 1,000,000
12/31/92 9.54% 49,512 58,397 1,000,000
12/31/93 6.79% 64,336 73,221 1,000,000
12/31/94 (4.99)% 72,208 79,316 1,000,000
12/31/95 31.73% 112,839 118,170 1,000,000
12/31/96 9.14% 136,324 139,878 1,000,000
12/31/97 29.01% 191,467 193,244 1,000,000
12/31/98 15.53% 234,166 234,166 1,000,000
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 10.77% 3,083 11,968 1,000,000
12/31/90 8.32% 15,597 24,482 1,000,000
12/31/91 11.34% 30,030 38,915 1,000,000
12/31/92 5.18% 42,885 51,771 1,000,000
12/31/93 6.63% 57,210 66,095 1,000,000
12/31/94 (0.15)% 69,215 76,323 1,000,000
12/31/95 10.94% 90,790 96,121 1,000,000
12/31/96 4.31% 107,272 110,826 1,000,000
12/31/97 6.74% 127,206 128,983 1,000,000
12/31/98 4.39% 144,919 144,919 1,000,000
NEUBERGER BERMAN PARTNERS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 36.47% 5,985 14,871 1,000,000
12/31/96 29.57% 24,245 33,130 1,000,000
12/31/97 31.25% 48,369 57,254 1,000,000
12/31/98 4.21% 61,375 70,260 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 75
HYPOTHETICAL ILLUSTRATION (Continued) [to be filed by amendment]
Nonsmoker Male Age 50
Nonsmoker Female Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
VAN ECK WORLDWIDE BOND FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 11.25% 3,137 12,022 1,000,000
12/31/91 18.39% 17,989 26,874 1,000,000
12/31/92 (5.25)% 26,394 35,279 1,000,000
12/31/93 7.79% 40,294 49,180 1,000,000
12/31/94 (1.32)% 49,699 58,584 1,000,000
12/31/95 17.30% 73,915 81,023 1,000,000
12/31/96 2.53% 88,240 93,571 1,000,000
12/31/97 2.38% 102,617 106,172 1,000,000
12/31/98 12.75% 129,295 131,072 1,000,000
VAN ECK WORLDWIDE EMERGING MARKETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 26.82% 4,895 13,780 1,000,000
12/31/97 (11.61)% 12,583 21,469 1,000,000
12/31/98 (34.15)% 11,937 20,822 1,000,000
VAN ECK WORLDWIDE HARD ASSETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/91 (2.93)% 1,540 10,425 1,000,000
12/31/92 (4.09)% 11,260 20,146 1,000,000
12/31/93 64.83% 41,942 50,827 1,000,000
12/31/94 (4.78)% 49,187 58,072 1,000,000
12/31/95 10.99% 66,881 75,766 1,000,000
12/31/96 18.04% 94,565 101,674 1,000,000
12/31/97 (1.67)% 104,541 109,872 1,000,000
12/31/98 (30.93)% 79,064 82,618 1,000,000
VAN ECK WORLDWIDE REAL ESTATE FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 (11.35)% 593 9,478 1,000,000
The assumptions underlying these values are described in Performance
Information, page 70.
*These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Variable Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Variable Last Survivor 76
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Please refer to the Articles of Incorporation listed as Exhibits 1.A(6)(a) and
1.A(6)(b-g) and the By-Laws listed as Exhibits 1.A(6)(h) and 1.A(6)(h)(i).
Security Life of Denver's (the "corporation") Certificate of Incorporation and
bylaws provide that the corporation shall have every power and duty of
indemnification of directors, officers, employees and agents, without
limitation, provided by the laws of the state of Colorado. Under Colorado law,
the corporation has the power to indemnify such persons against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with any threatened, pending or completed action,
suit or proceeding, if such person acted in good faith and in a manner which
that person reasonably believed to be in or not opposed to the best interest of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of actions by
or in the right of the corporation, such indemnification cannot be made where
such person is adjudged liable to the corporation, except pursuant to a court
order. The corporation is required to indemnify directors, officers, employees
and agents against expense actually and reasonably incurred in connection with
actions where such persons have been successful on the merits or otherwise in
defense of such actions.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the securities and Exchange
commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling preceding, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
UNDERTAKING REQUIRED BY SECTION 26(E)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED
Security Life of Denver Insurance Company represents that the fees and charges
deducted under the Policy, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred and the risks assumed by
the Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference table.
The prospectus.
- --------------------------------------------------------------------------------
Variable Last Survivor II - 1
The undertaking to file reports.
The undertaking regarding indemnification.
The undertaking required by Section 26(e)2(A) of the Investment Company Act
of 1940, as amended.
The signatures.
Written consents of the following persons:
Lawrence D. Taylor (See Exhibit 6B). [To be filed by amendment]
Ernst & Young, L.L.P. (See Exhibit 7A). [To be filed by amendment]
Sutherland Asbill & Brennan, LLP (See Exhibit 7B). [To be filed by
amendment]
The following exhibits:
1.A (1) Resolution of the Executive Committee of the Board of Directors of
Security Life of Denver Insurance Company ("Security Life of Denver")
authorizing the establishment of the Registrant. /1/
(2) Not Applicable.
(3) (a) Security Life of Denver Distribution Agreement./1/
(b) Specimen Amendment to Broker/Dealer Supervisory and Selling
Agreement for Variable Contracts with Compensation Schedule.
(c) Commission Schedule for Policies.
(4) Not Applicable.
(5) (a) Specimen Variable Last Survivor Universal Life Insurance Policy
(Form No.2504 (JTVUL)-8/99).
(b) Adjustable Term Insurance Rider (Form No. R2003-8/99)./4/
(c) Single Life Term Insurance Rider (Insured #1)
(Form No. R2004-8/99)./4/
(d) Single Life Term Insurance Rider (Insured #2)
(Form No. R2005-8/99)./4/
(e) Aviation Exclusion Rider (Form No. S-9622).
(6) (a) Security Life of Denver's Restated Articles of Incorporation./1/
(b-g) Amendments to Articles of Incorporation through June 12,
1987./1/
(h) Security Life of Denver's By-Laws./1/
(i) Bylaws of Security Life of Denver Insurance Company (Restated
with Amendments through September 30, 1997)./2/
(7) Not Applicable.
(8) (a) Participation Agreements
(i) Participation Agreement by and among AIM Variable Insurance
Funds, Inc., Life Insurance Company, on Behalf of Itself and
its Separate Accounts and Name of Underwriter of Variable
Contracts and Policies./3/
(ii) Sales Agreement by and among The Alger American Fund, Fred
Alger Management, Inc., and Security Life of Denver
Insurance Company./1/
(iii)Sales Agreement by and among Neuberger & Berman Advisers
Management Trust, Neuberger & Berman Management
Incorporated, and Security Life of Denver Insurance
Company./1/
(iv) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Security Life of
Denver Insurance Company./1/
(v) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Security Life
of Denver Insurance Company./1/
(vi) Participation Agreement among INVESCO Variable Investment
Funds, Inc., INVESCO
- --------------------------------------------------------------------------------
Variable Last Survivor II - 2
Funds Group, Inc., and Security Life of Denver Insurance
Company./1/
(vii)Participation Agreement between Van Eck Investment Trust and
the Trust's investment adviser, Van Eck Associates
Corporation, and Security Life of Denver Insurance
Company./1/
(9) Not Applicable.
(10) Specimen Variable Last Survivor Life Insurance Application with
Binding Limited Life Insurance Coverage Form (Form No. Q-2006-9/97).
2. Included as Exhibit 1.A(5) above.
3.A Opinion and consent of Gary W. Waggoner as to securities being registered.
4. Not Applicable.
5. Not Applicable.
6.A Opinion and consent of Lawrence D. Taylor.[To be filed by amendment]
7.A Consent of Ernst & Young L.L.P. [To be filed by amendment]
B Consent of Sutherland Asbill & Brennan LLP. [To be filed by amendment]
8. Not Applicable.
- -----------
/1/ Incorporated herein by reference to Post-Effective Amendment No. 7 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on April 27, 1998 (File No. 33-74190).
/2/ Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on October 29, 1998 (File No. 33-74190).
/3/ Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on March 2, 1998 (File No. 33-74190).
/4/ Incorporated herein by reference to the Initial Registration to the Form
S-6 Registration Statement of Security Life of Denver Insurance Company and
its Security Life Separate Account L1, filed with the Securities and
Exchange Commission on February 22, 1999 (File No. 333-72753).
- --------------------------------------------------------------------------------
Variable Last Survivor II - 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Security Life of
Denver Insurance Company and the Registrant, Security Life Separate Account L1,
have duly caused this Registration Statement to be signed on their behalf by the
undersigned, hereunto duly authorized, and their seal to be hereunto fixed and
attested, all in the City and County of Denver and the State of Colorado on the
30th day of March, 1999.
SECURITY LIFE OF DENVER INSURANCE COMPANY
(Depositor)
BY: /s/ Stephen M. Christopher
---------------------------------
Stephen M. Christopher
President
(Seal)
ATTEST:
/s/ Gary W. Waggoner
- ----------------------------
Gary W. Waggoner
SECURITY LIFE SEPARATE ACCOUNT L1
(Registrant)
BY: SECURITY LIFE OF DENVER INSURANCE COMPANY
(Depositor)
BY: /s/ Stephen M. Christopher
---------------------------------
Stephen M. Christopher
President
(Seal)
ATTEST:
/s/ Gary W. Waggoner
- -----------------------------
Gary W. Waggoner
- --------------------------------------------------------------------------------
Variable Last Survivor II - 4
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities with
Security Life of Denver Insurance Company and on the date indicated.
PRINCIPAL EXECUTIVE OFFICERS:
/s/ Stephen M. Christopher
- -----------------------------
Stephen M. Christopher
President, Chief Executive Officer and Director
/s/ Jim Livingston
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Jim Livingston
Chief Operations Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Amy L. Winsor
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Amy L. Winsor
Treasurer and Finance Officer
DIRECTORS:
/s/ Thomas F. Conroy
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Thomas F. Conroy
/s/ Linda B. Emory
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Linda B. Emory
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Michael W. Cunningham
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Variable Last Survivor II - 5
EXHIBIT INDEX
Exhibit No. Description of Exhibit
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1.A(3)(b) Amendment to the Broker-Dealer Supervisory and Selling Agreement
for Variable Contracts with Compensation Schedule.
1.A(3)(c) Commission Schedule for Policies.
1.A(5)(a) Specimen Variable Last Survivor Universal Life Insurance Policy
(Form No. 2504 (JTVUL)-8/99).
1.A(5)(e) Aviation Exclusion Rider (Form No. S-9622).
1.A(10) Specimen Variable Last Survivor Life Insurance Application with
Binding Limited Life Insurance Coverage Form(Form No.
Q-2006-9/97).
3.A Opinion and consent of Gary W. Waggoner as to securities being
registered.
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Variable Last Survivor II - 6