Exhibit 11
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES
FOR POLICIES PURSUANT TO RULE 6E-3(T)(B)(12)(III)
This document sets forth the administrative procedures that will be followed by
Security Life of Denver ("Security Life") in connection with the issuance of
certain of its variable survivorship universal life insurance policies (the
"policies") issued through Security Life Separate Account L1 (the "Separate
Account"), the transfer of assets held under the policies, and the redemption of
interests in policies.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF THE POLICIES
A. Offering of the Policy
The policy is offered on two lives to persons or entities who satisfy
certain suitability standards ("owners"). The policy may be purchased
to acquire insurance on the lives of two individuals (joint "insureds")
in whom the owner has an insurable interest. Security Life requires
satisfactory evidence of each of the insured's insurability, which may
include a medical examination. The available issue ages are 0 through
90. Age is determined on the insured's age as of the birthday nearest
the policy date. The joint equivalent age of the insured individuals is
based on the sum of both insured's ages divided by two and cannot
exceed age 85 at time of issue.
The minimum stated death benefit is $250,000. The stated death benefit
is a dollar amount used to determine the death benefit under a policy.
Acceptance of an application depends on Security Life's underwriting
rules, and Security Life reserves the right to reject an application
for any reason.
If a policy has more than one owner (joint owners), then any
transaction under the policy except for telephone transfers of account
value will require the authorization of all owners.
B. Cost of Insurance Charges Structure, Payments and Underwriting
Standards
Security Life places the joint insureds in a premium class when the
policy is issued, based on Security Life's underwriting of the
application. This original premium class applies to the initial stated
death benefit.
The current cost of insurance charge rate for a policy is based on the
age at issue, sex, and premium class of the insured, and on the policy
year, and therefore varies from time to time. Security Life currently
places insureds in the following premium classes, based on
underwriting: Standard Tobacco (ages 15-90); Standard Nontobacco (ages
15-90), or Preferred (ages 15-90). Insureds may also be placed in a
substandard rate class, which involves a higher mortality risk that the
standard tobacco or standard nontobacco classes.
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Additionally, an uninsurable rating may be assessed to an individual
that is rated higher than table P. The uninsurable rating will be
handled in the unideath calculation the same way a table rating is
except the percentage will be higher. The uninsurable rating is capped
at the later of age 65 or 15 years from issue.
Security Life guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the
maximum cost of insurance premiums set forth in the policies. The
guaranteed cost of insurance rate for standard classes are based on the
1980 Commissioners' Standard ordinary mortality Tables, Male or Female,
Smoker or Nonsmoker Mortality Premiums (1980 CSO Tables). The
guaranteed cost of insurance rates for substandard classes are based on
multiples of or additives to the 1980 CSO Tables.
Security Life's current cost of insurance may be less than the
guaranteed cost of insurance that is set forth in the policy. Current
cost of insurance rates will be determined based on Security Life's
expectations as to future mortality, investment earnings, expenses,
taxes, and persistency experience. These rates may change from time to
time.
Cost of insurance rates (whether guaranteed or current) for an insured
in a standard nontobacco class are equal to or lower than guaranteed
cost of insurance for an insured of the same age and sex in a standard
tobacco class. Cost of insurance rates (whether guaranteed or current)
for an insured in a standard nontobacco or tobacco class are generally
lower than guaranteed cost of insurance for an insured of the same age
and sex and tobacco status in a substandard class.
The cost of insurance for the policy will not be the same for all
owners. Insurance is based on the principle of pooling and distribution
of mortality risks which assumes that each owner is charged a cost of
insurance commensurate with the insured's mortality risk as actually
determined, reflecting factors such as age, sex, health, and
underwriting method. A uniform cost of insurance charge for all
insureds would discriminate unfairly in favor of those insureds
representing higher risks. Although there will be no uniform cost of
insurance charges for all insureds for a given stated death benefit
there will be a uniform cost of insurance charge for all insureds of
the same issue age, sex, policy duration and underwriting
classification
If the insured's age or sex has been misstated in the application for
the policy or in any application for supplemental and/or rider
benefits, and if the misstatement becomes known during the lifetime of
the insured, then policy values will be adjusted to those based on the
correct monthly deductions (reflecting the correct age or sex) since
the policy date. If the policy's values are insufficient to cover the
monthly deduction on the prior monthly date, the grace period will be
deemed to have begun on such date, and notification will be sent to the
owner at least 61 days prior to the end of the grace period. See
"Policy Termination and Grace Period," below.
The policy provides coverage on joint insureds named under the policy
and a Death Benefit payable upon the death of the second insured. The
policy will remain in force as long as the policy's cash surrender
value is sufficient to cover the charges due. Security Life guarantees
that a policy will remain in force during the special continuation
period, regardless of the
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sufficiency of the cash surrender value, if the sum of the premiums
paid to date, less any partial cash surrenders and policy debt equals
or exceeds the minimum monthly premium (shown in the policy) multiplied
by the number of complete policy months since the policy date,
including the current policy month. The special continuation period is
three years following the policy date. An extended minimum guaranteed
period may be available under a Guaranteed Minimum Death Benefit Rider.
The minimum monthly premium is calculated for each policy based on the
joint equivalent age, sex and premium class of each insured, the
requested stated death benefit and any supplemental and/or rider
benefits. The minimum monthly premium may change due to changes made
during a minimum guaranteed period to the stated death benefit, the
death benefit option, ratings, and supplemental and/or rider benefits.
Security Life will notify the owner of any increase in the minimum
monthly premium.
On or after one year from the policy date, the owner may request a
reduction in the stated death benefit, by notice to Security Life,
subject to the following rules. If a change in the stated death benefit
would result in total premiums paid exceeding the premium limitations
prescribed under current tax law to qualify the policy as a life
insurance contract, Security Life will refund promptly to the owner the
amount of such excess above the premium limitations.
The minimum amount of any decrease in stated death benefit is $1,000,
and any decrease in stated death benefit will become effective on the
monthly date next following the date that notice requesting the
decrease is received and approved by Security Life. Security Life
reserves the right to decline a requested decrease in the stated death
benefit if compliance with the guideline premium limitations under
current tax law resulting from this decrease would result in immediate
termination of the policy, or if to effect the requested decrease,
payments to the owner would have to be made from the accumulated value
for compliance with the guideline premium limitations, and the amount
of such payments would exceed the cash surrender value under the
policy.
At any time after issue the owner may request an increase in the stated
death benefit; any increase in the stated death benefit must be at
least $1,000 (unless the increase is effected pursuant to a rider
providing for automatic increases in stated death benefit), and an
application must be submitted. Any increase that is not guaranteed by
rider will require satisfactory evidence of insurability and must meet
Security Life's underwriting rules. The increase in stated death
benefit will become effective on the monthly date next following the
date the request for the increase is received and approved, and the
account value will be adjusted to the extent necessary to reflect a
monthly deduction as of the effective date based on the increase in
stated death benefit.
Security Life will determine a cost of insurance rate for each increase
in coverage based on the joint equivalent age of the insureds at the
time of the increase. The following rules will apply for purposes of
determining the risk amount for each rate.
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When an increase in stated death benefit is requested, Company conducts
underwriting before approving the increase (except as noted below) to
determine whether a different premium class will apply to the increase.
If the premium class for the increase has lower cost of insurance rates
than the original premium class, then the premium class for the
increase will also be applied to the initial stated death benefit. If
the premium class for the increase has higher cost of insurance rates
than the original premium class, the premium class for the increase
will apply only to the increase in stated death benefit, and the
original premium class will continue to apply to the initial stated
death benefit.
For the purposes of determining the risk amount associated with a
stated death benefit, Security Life will attribute the account value
solely to the initial stated death benefit unless the account value
exceeds the initial stated death benefit. If the account value exceeds
the initial stated death benefit, the excess will be considered
attributable to the increases in stated death benefit in the order of
the increases. If there is a decrease in stated death benefit after an
increase, a decrease is applied first to decrease any prior increases
in stated death benefit, starting with the most recent increase and
then each prior increase.
The policy will be offered and sold pursuant to an established
mortality structure and underwriting standards in accordance with state
insurance laws. Where state insurance laws prohibit the use of
actuarial tables that distinguish between men and women in determining
premiums and policy benefits for their insured resident, Security Life
will comply.
C. Application and Payment Processing
To purchase a policy, an application must be completed and submitted
through an authorized Security Life agent. There is no minimum initial
premium payment. An owner's policy coverage will become effective on
the policy date. If an initial premium payment is submitted with the
application, then the policy date is generally the date of approval of
the owner's application. If the application is not accompanied by an
initial premium payment, then the policy date will generally be the
issue date and the investment date will be the valuation date on which
the initial premium payment is received by Security life and the
initial net premium is credited to the policy if received after the
underwriting approval date. A valuation date is each day on which both
the New York Stock Exchange and Security Life are open for business.
The issue date is the date that Security Life has completed the review
of the application, evaluated and determined underwriting approval and
has printed the policy for mailing and delivery to the Registered
Representative to deliver to the Policyowner. The initial premium does
not have to be received for issuance to occur.
The Policy Date is the date used to determine the monthly processing
date, coverage effective date and policy anniversaries. This date may
be the same as the issue and investment date but can also be a date
requested by the Policyowner. The Policy Date is not generally
determined by the receipt of the initial premium.
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The Investment Date is the date that Security Life allocates funds to
be Policy. It is determined by the next valuation date following the
date that we have received the initial premium, approved the policy for
issue and have received all issue requirements. It is generally the
same date as the policy and issue date. However, in cases of COD issues
and the backdating of the policy date (up to six months) it is
generally not the same date as the policy and issue date.
As provided for under state insurance law, the owner, to preserve
insurance age, may be permitted to backdate the policy. In no case may
the policy date be more than six months prior to the date the
application was completed. Charges for the monthly deduction for the
backdated period are deducted on the issue date. Temporary life
insurance coverage may be provided prior to the policy date under the
terms of a temporary insurance agreement. In accordance with Security
Life's underwriting rules, temporary life insurance coverage may not
exceed $3,000,000 and will not remain in effect for more than ninety
(90) days.
The initial net premium will be credited to the policy on the issue
date if all outstanding delivery requirements are satisfied. For
backdated policies, the initial net premium will be credited on the
issue date. Planned periodic premiums and unscheduled premiums that are
not underwritten will be credited to the policy and the net premiums
will be invested to the requested divisions on the valuation date they
are received by the home office. If an additional premium payment is
rejected, Security Life will return the premium payment promptly,
without any adjustment for investment experience.
The policy date is the date from which policy months, years, and
anniversaries are measured. A policy month is each one-month period
beginning with a monthly date and ending with the day immediately
preceding the next following monthly date. The monthly date is the same
day as the policy date for each succeeding month. The monthly deduction
is deducted on each monthly date.
A policy year is each period of twelve months commencing with the
policy date and ending immediately preceding the first annual date, or
any following year commencing with an annual date and ending
immediately preceding the next annual date. The annual date is the same
day in each policy year as the policy date.
The issue date, if the same as the policy date, is the date from which
the suicide and contestable periods start. It is shown in the policy,
and is the date that the policy is issued.
D. Allocation of Net Premiums
On the investment date, the account value is equal to the initial net
premium credited (initial premium payment less the premium expense
charge), less any monthly deductions made as the policy date up to six
months for backdated policies. On each investment date thereafter, the
account value is the sum of the variable account, the guaranteed
interest division, and the loan account. The account value will vary to
reflect the performance of the subdivisions to which amounts have been
allocated, interest credited on amounts allocated to the guaranteed
interest division, interest credited on amounts in the loan account,
charges, transfers, partial cash
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surrenders, loans and loan repayments. The net account value is cash
value minus any outstanding policy debt. Cash surrender value is
account value minus any applicable surrender charge.
When applying for a policy, the owner selects a plan for paying level
premium payments at specified intervals, e.g., quarterly, semi-annually
or annually, until the maturity date. If the owner elects, Security
Life will also arrange for payment of planned period premiums on a
monthly basis under a pre-authorized payment arrangement. The owner is
not required to pay premium payments in accordance with these plans;
rather, the owner can pay more or less than planned or skip a planned
periodic premium entirely. Currently, there is no minimum amount for
each premium. Security Life may establish a minimum amount 90 days
after Security Life sends the owner a written notice of such increase.
Subject to certain limits (described below), the owner can change the
amount and frequency of planned periodic premiums whenever the owner
wishes by sending notice to the home office. However, Security Life
reserves the right to limit the amount of a premium payment or the
total premium payments paid.
In the application, the owner specifies the percentage of net premium
to be allocated to each subdivision and to the guaranteed interest
division. Net premiums will generally be allocated to the subdivisions
and to the guaranteed interest division on the valuation date that
Security Life receives them in accordance with the allocations
specified in the application or subsequent notice.
Security Life will allocate all net premiums received before the end of
the "free look" period (including the initial net premium) to the
division corresponding to their request or the Fidelity VIP Money
Market Division in premium refund states. For valuation states, the
initial net premium is immediately allocated to the subdivisions
requested. After the end of the "free look" period, the account value
will be allocated to the subdivisions and to the guaranteed account
based on the premium payment allocation percentages in the application.
For this purpose, the end of the "free look" period is deemed to be 5
days plus the number of state required free look days after the date
the policy is issued and mailed to the owner's Security Life agent for
delivery.
State guidelines regarding the allocation of the net initial premium
varies as does the length of time for free look. Some states mandate
that if an owner exercises his/her free look right he/she is entitled
to a full premium refund. In these instances Security Life allocates
the funds to the Fidelity Money Market division. Other states mandate
that should the owner exercise his/her free look option he/she is
entitled to receive the value of the fund allocations plus the policy
charges deducted. In these instances Security Life allocates the net
initial premium to the divisions elected on the application during the
free look period but after the 5 day deemed delivery date.
The net premium allocation percentages specified in the application
will apply to subsequent premium payments until the owner changes the
percentages. The minimum allocation percentage that an owner may
specify for a subdivision or the guaranteed account is 1%, and
allocation percentages must be whole numbers. The sum of allocations
must equal 100%.
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Security Life reserves the right to limit the number of subdivisions
(18) to which account value may be allocated. An owner can change the
allocation percentages at any time, subject to the rules below, by
sending notice to the home office or if telephone privileges are in
effect, the request can be received by phone. The change will apply to
all premium payments received with or after receipt of the owner's
notice.
E. Additional Payment
Additional unscheduled premium payments can be made at any time while
the policy is in force. Premium payments after the initial premium
payment must be made to the home office.
Security Life has the right to limit the number and amount of such
premium payments. Total premium payments paid in a policy year may not
exceed guideline premium payment limitations for life insurance set
forth in the Internal Revenue Code. Security Life will promptly refund
any portion of any premium payment that is determined to be in excess
of the premium payment limit established by law to qualify a policy as
a contract for life insurance.
Security Life reserves the right to reject any requested increase in
planned periodic premiums, or any unscheduled premium. Security Life
also reserves the right to require satisfactory evidence of
insurability prior to accepting any premium which increases the risk
amount of the policy. No premium payment will be accepted after the
maturity date.
The owner may specify that a specific unscheduled premium payment is to
be applied as a repayment of policy debt, if any.
The payment of premiums may cause a policy to be a modified endowment
contract under the Internal Revenue Code. If acceptance of a premium
paid would, in Security Life's view, cause the policy to become a
Modified Endowment Contract, then to the extent feasible Security Life
will not accept that portion of the premium that would cause the policy
to become a Modified Endowment Contract unless the owner confirms in
writing the owner's intent to convert the policy to a Modified
Endowment Contract. Security Life may return that portion of the
payment pending receipt of instructions from the owner.
F. Policy Termination and Grace Period
The policy terminates at the earliest of the end of the grace period,
the surrender of the policy by the owner, the maturity date of the
policy, or the fulfillment of Security Life's obligations under the
policy (i.e., payment of the death benefit proceeds).
If the cash surrender value on a monthly date is less than the amount
of the monthly deduction to be deducted on that date and the special
continuation period is not in effect, the policy will be in default. In
addition, if on a monthly date the cash value less any policy debt (the
cash surrender value) exceeds the amount of the monthly deduction due
for the following policy month, the policy will be in default whether
or not the special continuation period is in effect. An owner, and any
assignee of record, will be sent notice of the default.
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The special continuation period is during the first five policy years.
If the special continuation period is in effect, Security Life
guarantees that the client's policy will not lapse, regardless of its
net cash surrender value, if on a monthly processing date the sum of
all premiums paid minus partial withdrawals and loans is greater than
or equal to the sum of minimum monthly premiums from the inception of
the policy to the current date. At the end of the special continuation
period the client must pay end premium to bring the net cash surrender
value to zero plus the amount needed to pay the following two months'
monthly deduction. If this is insufficient the policy will lapse.
If a policy goes into default, the owner will be allowed a 61-day grace
period to pay a premium payment sufficient to cover the monthly
deductions due during the grace period and for a period of two
additional months or a sufficient amount to avoid termination of the
policy due to excessive loans. Security Life will send notice of the
amount required to be paid during the grace period ("grace period
premium payment") to the owner's last known address and the address of
any assignee of record. The grace period will begin when the notice is
sent. An owner's policy will remain in effect during the grace period.
If the insured should die during the grace period and before the grace
period premium payment is paid, the death benefit proceeds will still
be payable to the beneficiary, although the amount paid will reflect a
reduction for the monthly deductions due on or before the date of the
insured's death (and for any policy debt). If the grace period premium
payment has not been paid before the grace period ends, the policy will
lapse. It will have no value and no benefits will be payable.
The maturity date is the date when insurance coverage under the policy
terminates and maturity benefit is paid. It is generally the insured's
100th birthday, and is shown in the policy. The maturity benefit is
equal to the cash surrender value on the maturity date.
G. Reinstatement of a Policy Terminated for Insufficient Values
The policy may be reinstated within five years after lapse and before
the maturity date, subject to compliance with certain conditions,
including the payment of a necessary premium payment and submission of
satisfactory evidence of insurability.
H. Repayment of a Loan
An owner may repay all or part of policy debt at any time while the
insured is living and the policy is in force. Loan repayments must be
sent to the home office and will be credited as of the date received.
The owner may give Security Life notice that a specific unscheduled
premium made while a loan is outstanding is to be applied as a loan
repayment. When a loan repayment is made, account value in the loan
account in an amount equivalent to the repayment is transferred from
the loan account to the subdivisions and the guaranteed account in
accordance with the owner's current net premium allocation
instructions.
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I. Policy Riders
Supplemental and/or rider benefits may be available and, if so, may be
added to the policy. Monthly charges for these benefits and/or riders,
if any, will be deducted from the account value as part of the monthly
deduction. The supplemental and/or rider benefits available with the
policies provide fixed benefits that do not vary with the investment
experience of the separate account. The following supplemental and/or
rider benefits may be available: Adjustable Term Insurance Rider,
Single Life Term Rider, Enhanced Death Benefit Corridor Option.
Additional rules and limits apply to these supplemental and/or rider
benefits, and are set forth in the applicable endorsement or rider.
II. TRANSFERS AMONG INVESTMENT DIVISIONS
Several subdivisions of the Separate Account are available for allocation
of Net Premiums paid under the policy, subject to certain limitations set
forth in the policy. Each subdivision of the Separate Account invests its
assets in shares or units of an underlying portfolio. Available
subdivisions of the Separate Account currently invest in portfolios of AIM
Variable Insurance Funds, Inc., The Alger American Fund, Fidelity Variable
Insurance Products Fund and Variable Insurance Products Fund II, INVESCO
Variable Investment Funds, Inc., Neuberger Berman Advisors Management
Trust, Van Eck Worldwide Insurance Trust. All Funds are registered under
the Investment Company Act of 1940 as an open-end management investment
company. Additional funds may be available for Security Life products in
the future.
After the free-look period and prior to the maturity date, the owner may
transfer all or part of the account value (except the loan account) from
subdivisions investing in one portfolio to other subdivision(s) or to the
guaranteed interest division, or transfer a part of an amount in the
guaranteed interest to the subdivisions(s), subject to the following
restrictions. The minimum transfer amount is the lesser of $100 or the
entire amount in that subdivision or the guaranteed interest. A transfer
request that would reduce the amount in a subdivision or the guaranteed
interest division below $100 will be treated as a transfer request for the
entire amount in that subdivision or the guaranteed interest division. With
the exception of the Conversion Right (described below), Security Life
reserves the right to limit the number or frequency of transfers permitted
in the future.
Security Life will make the transfer as of the end of the valuation period
during which such transfer is requested and received by Security Life.
Currently, there is a 12 free transfer limit on the number of transfers
that can be made between subdivisions or to the guaranteed interest
division. Currently, Security Life assesses a transfer charge equal to $25
for each transfer during a policy year in excess of the first twelve
transfers. The transfer charge will be deducted from the subdivisions or
the guaranteed interest division from which the requested transfer is being
made, on a pro-rata basis.
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Telephone transfers will be based upon instructions given by telephone,
provided the appropriate election has been made at the time of application
or proper authorization has been provided to Security Life. Security Life
reserves the right to suspend telephone transfer privileges at any time,
for any reason, if Security Life deems such suspension to be in the best
interests of owners.
During the first twenty-four policy months following the issue date, and
within sixty days of the later of notification of a change in the
investment policy of the separate account or the effective date of such
change, the owner may exercise a one-time Conversion Right by requesting
that all or a portion of the variable account be transferred to the
guaranteed interest division. Exercise of the Conversion Right is not
subject to the transfer charge. Following the exercise of the Conversion
Right, net premiums may not be allocated to the subdivisions of the
variable account, and transfers of account value to the subdivisions will
not be permitted. The other terms and conditions of the policy will
continue to apply.
Transfers may also be effected pursuant to any Dollar Cost Averaging Plan
or Auto Rebalancing Plan elected by the owner from time to time and as
described in the current prospectus for the policies.
III. REDEMPTION PROCEDURES, SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Cash Surrender Value
An owner may surrender the policy at any time for its cash surrender
value by submitting notice to the home office. Security Life may
require return of the policy. A surrender charge may apply. A surrender
request will be processed as of the valuation date the surrender notice
and all required documents are received. Payment will be made within
seven calendar days. An owner's policy will terminate and cease to be
in force if it is surrendered. It cannot later be reinstated.
Security Life will make the payment of the cash and surrender value out
of its general interest division and, at the same time, transfer assets
from the Separate Account to its general interest division in an amount
equal to the sum of account value (applicable to the policy) held in
each subdivision of the Variable Account.
B. Death Claims
The death benefit proceeds are equal to the sum of the base death
benefit for each coverage segment under the death benefit option
selected, calculated on the date of the second insured's death, plus
any supplemental and/or rider benefits, minus any outstanding Policy
Loan including accrued but unpaid interest, minus any unpaid monthly
deductions incurred prior to the date of death. If the insured's age or
sex has been misstated in the application for the policy or in any
application for supplemental and/or rider benefits, and if the
misstatement becomes known after the death of the second insured, then
the death benefit under the policy or such supplemental and/or rider
benefits will be that which the cost of insurance charge which was
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deducted from the Account Value on the last monthly Processing Date
prior to the death of the second insured would have purchased for the
correct sex and age.
Security Life will pay interest at the rate declared by us or at a
higher rate required by law.
Security Life will usually pay the death benefit proceeds to the
beneficiary within seven days after receipt at its Home Office of due
proof of death of the second insured and all other requirements
necessary to make payment. If the payment of the death benefit of a
policy is contested, payment of proceeds may be delayed.
The Death Benefit payable depends on the death benefit option in effect
on the date of death. Subject to certain conditions, owners may change
the death benefit option. Under Option 1, the death benefit is the
greater of the specified amount, which includes the account value or
the Applicable Percentage of account value on the date of the second
insured's death. Under Option 2, the death benefit is the greater of
the specified amount plus the account value on the date of death, or
the Applicable Percentage of the account value on the date of the
second insured's death.
The "Applicable Percentage" which is the AV on the date of death
multiplied by the appropriate factor from the Definition of Life
Insurance factors shown in the policy's appendix A or B. A table
showing the Applicable Percentages for Attained Ages 0 to 100 is set
forth in the policy.
On or after one year from the policy date, the owner may change the
death benefit option on the policy, by notice to Security Life, subject
to the following rules. A change in the Death Benefit Option may be
requested at least 30 days prior to a policy anniversary. After any
changes, the specified amount must be at least $250,000. The effective
date of the change will be the monthly date next following the day that
Security life receives and accepts notice of the request for change.
Security Life may require satisfactory evidence of insurability.
When a change from Option 1 to Option 2 is made, the specified amount
after the change is effected will be equal to the specified amount
before the change less the account value on the effective date of the
change. When a change from Option 2 to Option 1 is made, the specified
amount after the change will be equal to the specified amount before
the change is effected and the death benefit will be increased by the
account value on the effective date of the change.
Security Life will make payment of the death benefit proceeds out of
its general account and, at the same time, will transfer the account
value applicable to the policy out of the Separate Account to the
general account.
C. Policy Loan
After the first policy year and while the insured is living, provided
the policy is not in the grace period, the owner may borrow against the
policy at any time by submitting notice to the home office. The minimum
amount of any loan request is $100. The maximum loan amount is the
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net cash surrender value less monthly deductions to the next policy
anniversary. Maximum loan amounts may be different if required by state
law.
Outstanding loans reduce the amount available for new loans. Loans will
be processed as of the date the loan notice is received and approved.
Loan proceeds generally will be sent to the owner within seven calendar
days.
Loan interest charges on a Policy Loan accrue daily at a compound
annual interest rate of 3.75%. Interest is due in arrears on each
policy anniversary.
Outstanding loans (including unpaid interest added to the loan) plus
accrued interest not yet due equals the policy debt.
When a policy loan is made, an amount sufficient to secure the loan is
transferred out of the variable account and the guaranteed account and
into the policy's loan account. Thus, a loan will have no immediate
effect on the account value, but other policy values, such as the cash
surrender value and the death benefit proceeds, will be reduced
immediately by the amount transferred to the loan account. This
transfer is made against the account value in each subdivision and the
guaranteed account in proportion to the account value in each on the
effective date of the loan, unless the owner specifies that transfers
be made form specific subdivisions. an amount of account value equal to
any due and unpaid loan interest which exceeds interest credited to the
loan account will also be transferred to the loan account on each
annual date. Such interest will be transferred from each subdivision
and the guaranteed account in the same proportion that account value in
each subdivision and the guaranteed account bears to the total unloaned
account value.
The loan account will be credited with interest at an effective annual
rate of not less than the annual loan interest rate of 3%.
D. Partial Withdrawals
An owner may make partial cash surrenders under the policy at any time
after the 1st policy anniversary subject to the conditions below. An
owner must submit notice to the home office. Each partial cash
surrender must be at least $100. The maximum partial withdrawal is the
amount which will leave $500 as the Net Cash Surrender Value. When a
Partial Withdrawal is taken, the amount of the withdrawal plus a
service fee is deducted from the Account Value. As of the date Security
life receives notice of a partial cash surrender request, the cash
value will be reduced by the partial cash surrender amount.
Unless the owner requests that a partial cash surrender be deducted
from specified subdivisions, the partial cash surrender amount will be
deducted from account value in the subdivisions and in the guaranteed
account pro-rata in proportion to the account value in each.
If death benefit Option 1 is in effect, Security life may reduce the
specified amount. Security Life may reject a partial cash surrender
request if the partial cash surrender would reduce the
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specified amount below $250,000, or if the partial cash surrender would
cause the policy to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by Security Life.
Partial cash surrender requests will be processed as of the valuation
date notice is received by Security Life, and generally will be paid
within seven calendar days.
E. Monthly Charges
On each monthly date, Security Life will deduct from the account value
the monthly deductions due, commencing as of the policy date. An
owner's policy date is the date used to determine the applicable
monthly date. The monthly deduction consists of (1) cost of insurance
charges ("cost of insurance charge"), (2) the monthly administrative
charge (the "administrative charge"), and (3) any charges for
supplemental and/or rider benefits ("supplemental and/or rider benefit
charges". The monthly deduction is deducted from the subdivisions of
the Variable Account and from the guaranteed interest division pro rata
on the basis of the portion of account value in each.
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