As filed with the Securities and Exchange Commission on November 8, 1999
Registration No. 333-_________
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
Initial Registration
-----------------
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: Corporate variable 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-112-00
SECURITY LIFE SEPARATE ACCOUNT L1 (File No. 333-_________)
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 in the Variable Division;
Charges and Deductions; Surrender; Partial
Withdrawals; 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 Corporate Variable Universal
Life Policy; General Policy Provisions;
11, 12 Security Life Separate Account L1
13 Policy Summary; Charges and Deductions;
Group or Sponsored Arrangements and
Corporate Purchasers
ii
Form N-8B-2 Item No. Caption in Prospectus
14, 15 Policy Summary; Free Look Period or Right
to Examine Policy Period; General Policy
Provisions; Applying for a Policy
16 Premiums; Allocation of Net Premiums; How
We Calculate Accumulation Unit Values
17 Surrender; Partial Withdrawals
18 Policy Summary; Tax Considerations;
Detailed Information about the Corporate
Variable Universal Life Policy; Security
Life Separate Account L1
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 Corporate
Variable 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
Division; How We Calculate Accumulation
Unit Values
45 Inapplicable
46 Partial Withdrawals; Detailed Information
about the Corporate Variable Universal
Life Policy
47, 48, 49, 50 Inapplicable
51 Detailed Information about the Corporate
Variable Universal Life Policy
52 Determining the Value in the Variable
Division; Right to Change Operations
53(a) Tax Considerations
53(b), 54, 55 Inapplicable
56, 57, 58 Inapplicable
59 Financial Statements
iv
Prospectus
CORPORATE VARIABLE 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 and deductions beginning on page 41 in
this prospectus.
You should read this prospectus and keep it for future reference. A prospectus
for each underlying fund 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 universal life insurance policy
o is issued by Security Life of Denver Insurance Company
o is designed primarily for use on a multi-life basis when the
insured people share a common employment or business
relationship
o is returnable by you during the free look period or right to
examine policy 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 options and the
guaranteed interest division based on your instructions
o are invested in shares of the underlying investment portfolios
under each variable investment option.
YOUR ACCOUNT VALUE
o is the sum of your holdings in the variable division, the
guaranteed interest division and the loan division
o has no guaranteed minimum cash value under the variable
division. The value varies with the value of the underlying
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.
DEATH PROCEEDS
o are paid if the policy is in force when the insured person dies
o are equal to the death benefit minus outstanding policy loans,
accrued loan interest and unpaid charges incurred before the
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
* Option 3- a stated death benefit plus the sum of the
premiums you have paid minus partial withdrawals 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.
THIS LIFE INSURANCE POLICY IS NOT A BANK DEPOSIT OR OBLIGATION, FEDERALLY
INSURED, OR BACKED BY ANY BANK OR GOVERNMENTAL AGENCY.
DATE OF PROSPECTUS _____________, _____
Form V-112-00
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
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Corporate Variable Universal Life 2
TABLE OF CONTENTS
POLICY SUMMARY.................................................................6
Your Policy...............................................................6
Free Look Period or Right to Examine Policy
Period................................................................6
Your Policy Premiums......................................................6
Allocation of Net Premiums............................................6
Charges and Deductions....................................................7
Deductions from Premiums..............................................7
Annual Deductions.....................................................7
Deductions from the Variable Divisions................................7
Monthly Deductions from Your Account
Value............................................................7
Policy Transaction Fees...............................................7
Fees and Expenses of the Investment Portfolios............................8
Investment Portfolio Annual Expenses..................................8
Variable Division........................................................10
Policy Values............................................................10
Your Account Value in the Variable Divisions.........................10
Transfers of Account Value...............................................11
Special Policy Features..................................................11
Dollar Cost Averaging................................................11
Automatic Rebalancing................................................11
Loans................................................................11
Partial Withdrawals..................................................11
Policy Modification, Termination and Continuation
Features.............................................................11
Right to Exchange Policy.............................................11
Surrender............................................................11
Lapse................................................................11
Reinstatement........................................................11
Policy Maturity......................................................11
Continuation of Coverage.............................................12
Death Benefits...........................................................12
Tax Considerations.......................................................12
INFORMATION ABOUT SECURITY LIFE, THE
SEPARATE ACCOUNT, THE INVESTMENT
OPTIONS AND THE GUARANTEED
INTEREST DIVISION........................................................12
Security Life of Denver Insurance Company................................12
Year 2000 Preparedness...................................................13
Security Life Separate Account L1........................................13
Separate Account Structure...........................................13
Order of Separate Account Liabilities................................13
Variable Investment Options..........................................13
Investment Portfolios................................................14
Objectives of the Investment Portfolios..................................14
The Guaranteed Interest Division.........................................18
DETAILED INFORMATION ABOUT THE
CORPORATE VARIABLE UNIVERSAL LIFE
POLICY...................................................................18
Applying for a Policy....................................................18
Policy Issuance......................................................18
Definition of Life Insurance.........................................19
Temporary Insurance......................................................19
Premiums.................................................................19
Scheduled Premiums...................................................19
Unscheduled Premium Payments.........................................20
Target Premium.......................................................20
Allocation of Net Premiums...........................................20
Premium Payments Affect Your Coverage....................................20
Modified Endowment Contracts.........................................21
Death Benefits...........................................................21
Base Death Benefit...................................................23
Death Benefit Options................................................23
Changes in Death Benefit Options.....................................24
Changes in Death Benefit Amounts.....................................24
Adjustable Term Insurance Rider..........................................25
Special Features.........................................................26
Right to Exchange Policy.............................................26
Policy Maturity......................................................26
Continuation of Coverage.............................................27
Policy Values............................................................27
Account Value........................................................27
Net Account Value....................................................27
Determining the Value in the Variable
Division........................................................27
How We Calculate Accumulation Unit Values............................28
Transfers of Account Value...............................................29
Excessive Trading....................................................29
Guaranteed Interest Division Transfers...............................29
Dollar Cost Averaging....................................................29
Changing Dollar Cost Averaging.......................................30
Terminating Dollar Cost Averaging....................................30
Automatic Rebalancing....................................................30
Changing Automatic Rebalancing.......................................31
Terminating Automatic Rebalancing....................................31
Policy Loans.............................................................31
Loan Repayment.......................................................32
Loans and Your Benefits..............................................31
Partial Withdrawals......................................................31
Partial Withdrawals under Death Benefit
Option 1........................................................31
Partial Withdrawals under Death Benefit
Option 2........................................................32
Partial Withdrawals under Death Benefit
Option 3........................................................33
Stated Death Benefit and Target Death Benefit
Reductions......................................................33
Partial Withdrawal Mechanics.........................................33
Lapse....................................................................33
Grace Period.........................................................33
Reinstatement............................................................34
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Corporate Variable Universal Life 3
Surrender................................................................34
General Policy Provisions................................................34
Free Look Period or Right to Examine Policy
Period..........................................................34
Your Policy..........................................................35
Age ................................................................35
Ownership............................................................35
Beneficiary(ies).....................................................35
Collateral Assignment................................................36
Incontestability.....................................................36
Misstatements of Age or Gender.......................................36
Suicide..............................................................36
Transaction Processing...............................................36
Notification and Claims Procedures...................................37
Telephone Privileges.................................................37
Non-participation....................................................37
Distribution of the Policies.........................................37
Advertising Practices and Sales Literature...........................38
Settlement Provisions................................................39
Administrative Information About the Policy..............................39
Voting Privileges....................................................39
Material Conflicts...................................................40
Right to Change Operations...........................................40
Reports to Owners....................................................41
CHARGES AND DEDUCTIONS........................................................41
Deductions from Premiums.................................................41
Tax Charges..........................................................41
Sales Charge.........................................................42
Annual Deduction.........................................................42
Deferred Sales Charge................................................42
Daily Deductions from the Variable Account...............................42
Mortality and Expense Risk Charge....................................42
Monthly Deductions from Your Account Value...............................42
Monthly Administrative Charge........................................43
Cost of Insurance Charge.............................................43
Guaranteed Issue.....................................................44
Changes in Monthly Charges...........................................44
Continuation of Coverage Administrative Fee..........................44
Policy Transaction Fees..................................................44
Partial Withdrawals..................................................44
Transfers............................................................44
Illustrations........................................................44
Premium Allocation Change............................................44
Group or Sponsored Arrangements or Corporate
Purchasers...........................................................44
Other Charges............................................................45
TAX CONSIDERATIONS............................................................45
Tax Status of the Policy.................................................45
Diversification Requirements.............................................45
Tax Treatment of Policy Death Benefits...................................46
Modified Endowment Contracts.............................................46
Multiple Policies........................................................46
Distributions Other than Death Benefits from
Modified Endowment Contracts.........................................46
Distributions Other than Death Benefits from
Policies That Are Not Modified Endowment
Contracts............................................................47
Investment in the Policy.................................................47
Policy Loans.............................................................47
Section 1035 Exchanges...................................................47
Tax-exempt Policy Owners.................................................47
Possible Tax Law Changes.................................................47
Changes to Comply with the Law...........................................47
Other....................................................................48
ILLUSTRATIONS.................................................................49
ADDITIONAL INFORMATION........................................................53
Directors and Officers...................................................53
Regulation...............................................................56
Legal Matters............................................................56
Legal Proceedings........................................................56
Experts..................................................................56
Registration Statement...................................................56
FINANCIAL STATEMENTS..........................................................57
APPENDIX A....................................................................58
APPENDIX B....................................................................59
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Corporate Variable Universal Life 4
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.................................................................10
Accumulation unit.............................................................27
Accumulation unit value.......................................................28
Adjustable term insurance rider...............................................21
Age.......................................................................18, 35
Base death benefit............................................................23
Beneficiary(ies)..............................................................12
Customer service center........................................................2
Death proceeds................................................................23
Free look period..............................................................34
General account...............................................................13
Guaranteed interest division..................................................18
Initial premium...............................................................18
Insured.......................................................................18
Investment date...............................................................18
Investment option.............................................................18
Loan division.................................................................10
Monthly processing date.......................................................24
Net account value.............................................................10
Net amount at risk............................................................10
Net premium...................................................................20
Owner.........................................................................35
Partial withdrawal............................................................32
Policy.....................................................................6, 13
Policy date...................................................................19
Policy loan...................................................................31
Portfolios....................................................................14
Rider.........................................................................25
Scheduled premium.............................................................19
Segment.......................................................................25
Separate account..............................................................13
Stated death benefit..........................................................19
Target death benefit..........................................................25
Target premium................................................................20
Total death benefit...........................................................25
Transaction date..............................................................28
Valuation date................................................................10
Valuation period..........................................................10, 28
Variable division.............................................................13
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Corporate Variable Universal Life 5
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 PERSON'S LIFETIME.
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 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
This policy is available only to groups of ten or more insured people with a
minimum aggregate group first year premium must total at least $250,000. We
generally require a minimum target death benefit of $50,000 per policy. We may
reduce the minimum target death benefit if the average target death benefit at
policy issuance for the group is at least $50,000.
Your policy provides life insurance protection on the insured person. 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 death of the insured
person. While your policy is in force, you may access your policy value by
taking loans or partial withdrawals. You may also surrender your policy for its
surrender value. When the insured person reaches age 100, the policy can be
surrendered or continued under the continuation of coverage option. SEE
CONTINUATION OF COVERAGE, PAGE 27.
We designed this policy primarily for use on a multi-life basis where the
insured people share common employment or a business relationship. The policy
may be owned individually or by a corporation, trust, association or similar
entity.
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 POLICY PERIOD
Within limits as specified by state law, you have the right to examine your
policy and return it for a refund of premiums paid or the account value if you
are not satisfied for any reason. The policy is then void. SEE FREE LOOK PERIOD
OR RIGHT TO EXAMINE POLICY PERIOD, PAGE 34.
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; and
o sufficient to keep your policy in force.
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 riders in
force. The amount of premium you pay affects the length of time your policy
stays in force. SEE PREMIUMS, PAGE 19.
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
investment options and the guaranteed interest division.
We apply the net premium payments to your policy after we:
o receive your initial premium;
o have the information we require;
o approve your policy application; and
o issue your policy.
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 20.
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Corporate Variable Universal Life 6
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
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 41.
2. Sales charge -- We deduct a percentage of each premium to cover a
portion of our expenses in selling your policy. This charge is 2% of
premiums you have paid in the first policy year and 0.5% of the
premiums you have paid for each policy year beyond the first. SEE
DEDUCTIONS FROM PREMIUMS, PAGE 41.
ANNUAL DEDUCTIONS
The deferred sales charge is based on a percentage of premium and is deducted
from account value at the beginning of each policy year for nine years after
each year of premium payments. It applies to the first ten years of premium
payments made. The deduction applies to each segment separately. SEE DEFERRED
SALES CHARGE, PAGE 42, AND CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
DEDUCTIONS FROM THE VARIABLE DIVISION
We assess a mortality and expense risk charge of 0.20% per year or 0.000548% per
day against the variable divisions. This charge compensates us for mortality and
expense risks under the policies. SEE DAILY DEDUCTIONS FROM THE SEPARATE
ACCOUNT, PAGE 42.
MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE
We deduct the following charges from your account value at the beginning of each
policy month:
1. Monthly administrative charge -- $12 per month for the first policy
year, then $6 per month for each policy year beyond that.
2. Cost of insurance charge -- Based on the net amount at risk on the life
of the insured person. The amount of this charge differs for:
o the segments of the base death benefit; and
o the adjustable term insurance rider.
SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42.
POLICY TRANSACTION FEES
We deduct policy transaction fees from your account value at the time of the
transaction.
The following are the current transaction fees. SEE POLICY TRANSACTION FEES,
PAGE 44.
1. Partial withdrawal fee -- $25.
2. Transfer fee -- We allow twelve free transfers among investment options
per policy year. For each transfer beyond that, a $10 fee may apply.
3. Illustrations -- You may request one free illustration per policy year.
For each illustration beyond that, a $25 fee may apply.
4. Premium Allocation Change -- You may make five free premium allocation
changes per policy year. For each premium allocation change beyond
that, a $25 fee may apply.
5. Continuation of Coverage -- We will charge a one-time $200
administrative fee when the insured person turns age 100 to activate
continued coverage.
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Corporate Variable Universal Life 7
FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS
The separate 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. The fees and expenses are shown in both gross amounts and net
amounts shown after any expenses or fees have been voluntarily absorbed by the
investment portfolio advisers.
INVESTMENT PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET
ASSETS) /1/
Fees and
Investment Total Expenses Total Net
Management Other Portfolio Waived or Portfolio
Portfolio Fees Expenses Expenses Reimbursed Expenses
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67% NA 0.67%
AIM V.I. Government Securities Fund 0.50% 0.26% 0.76% NA 0.76%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio 0.75% 0.04% 0.79% NA 0.79%
Alger American MidCap Growth Portfolio 0.80% 0.04% 0.84% NA 0.84%
Alger American Small Capitalization Portfolio 0.85% 0.04% 0.89% NA 0.89%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio 0.59% 0.09% 0.68% NA 0.68%/3/
VIP Overseas Portfolio 0.74% 0.17% 0.91% NA 0.91%/3/
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Index 500 Portfolio 0.24% 0.11% 0.35% 0.07% 0.28%/4/
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund 0.75% 0.42% 1.17%/2/ 0.24%/5/ 0.93%
INVESCO VIF-High Yield Fund 0.60% 0.47% 1.07% NA 1.07%
INVESCO VIF-Small Company Growth Fund 0.75% 11.92% 12.67%/2/ 10.80%/6/ 1.87%
INVESCO VIF-Total Return Fund 0.75% 0.49% 1.24%/2/ 0.07%/7/ 1.17%
INVESCO VIF-Utilities Fund 0.60% 1.24% 1.84%/2/ 0.76%/8/ 1.08%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST /11/
Limited Maturity Bond Portfolio 0.65% 0.11% 0.76% NA 0.76%
Partners Portfolio 0.78% 0.06% 0.84% NA 0.84%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 1.00% 0.15% 1.15% NA 1.15%
Worldwide Emerging Markets Fund 1.00% 0.61% 1.61%/2/ 0.11%/9/ 1.50%
Worldwide Real Estate Fund 1.00% 4.32% 5.32%/2/ 4.43%/10/ 0.89%
/1/ The preceding portfolio expense information was provided to us by the
portfolios, and we have not independently verified such information. These
portfolio expenses are not direct charges against division assets or reduction
from contract values; rather these portfolio expenses are taken into
consideration in computing each underlying portfolio's net asset value, which is
the share price used 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/ Certain expenses of the Fund are being voluntarily absorbed by the Funds.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 8
/3/ A Portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into arrangements
with their custodian whereby credits realized, as a result of uninvested cash
balances were used to reduce custodian expenses. Including these reductions, the
total portfolio expenses presented in the table would have been 0.66% for Growth
Portfolio and 0.89% for Overseas portfolio.
/4/ FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the funds' total portfolio expenses
would have been 0.35%.
/5/ Certain expenses of the VIF-Equity Income Fund (formerly VIF-Industrial
Income Fund) are being absorbed voluntarily by INVESCO Funds Group, Inc.
pursuant to a commitment to the Fund. After absorption, the VIF-Equity Income
Fund's "Other Expenses" and "Total Portfolio Expenses" were 0.18% and 0.93%
respectively. This commitment can be changed at any time following consultation
with the board of directors.
/6/ Certain expenses of the VIF-Small Company Growth Fund are being absorbed
voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund.
After absorption, the VIF-Small Company Growth Fund's "Other Expenses" and
"Total Portfolio Expenses" were 1.12% and 1.87% respectively. This commitment
can be changed at any time following consultation with the board of directors.
/7/ Certain expenses of the VIF-Total Return Fund are being absorbed voluntarily
by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After
absorption, the VIF-Total Return Fund's "Other Expenses" and "Total Portfolio
Expenses" were 0.42% and 1.17% respectively. This commitment can be changed at
any time following consultation with the board of directors.
/8/ Certain expenses of the VIF-Utilities Fund are being absorbed voluntarily by
INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After
absorption, the VIF-Utilities Fund's "Other Expenses" and "Total Portfolio
Expenses" were 0.48% and 1.08% respectively. This commitment can be changed at
any time following consultation with the board of directors.
/9/ Van Eck Associates Corporation (the "Advisor") absorbed expenses exceeding
1.50% of the Fund's average daily net assets. Due to this arrangement, the
actual expenses incurred were "Total Portfolio Expenses" of 1.50%. The Adviser
has voluntarily agreed to limit the Worldwide Emerging Markets Fund's total
annual operating expenses to 1.30% of the Fund's average daily net assets.
/10/ Van Eck Associates Corporation (the "Advisor") waived its management fees
and assumed certain expenses for the period January 1, 1998 to February 28,
1998. The Advisor also assumed expenses exceeding 1.00% of the Fund's average
daily net assets for the period March 1,1998 to December 31, 1998. The Fund's
expenses were also reduced by a fee arrangement based on cash balances left on
deposit with the custodian and a directed brokerage arrangement where the fund
directs certain portfolio trades to a broker that, in turn, pays a portion of
the Fund's expenses. Due to this arrangement the actual expenses incurred were
"Investment Management Fees" of 0.00%, "Other Expenses" of 0.89% and "Total
Portfolio Expenses" of 0.89%.
/11/ Neuberger Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Management and Administration Fees" include
the aggregate of the administration fees paid by the Portfolio and the
management fees paid by its corresponding Series. Similarly, the "Other
Expenses" includes all other expenses of the Portfolio and its corresponding
Series. See "Expenses" in the Trust's Prospectus. Expenses may reflect expense
reimbursement. NBMI has undertaken to reimburse certain operating expenses,
including compensation of NBMI and excluding taxes, interest, extraordinary
expense, brokerage commissions and transaction costs, that exceed, in the
aggregate, 1% of the Portfolios' average daily net asset value. These expense
reimbursement policies are subject to termination upon 60 days written notice to
the Portfolios.
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Corporate Variable Universal Life 9
VARIABLE DIVISION
If you invest in any of the following variable investment options, depending on
market conditions, you may make or lose money. These investment options are
described in the prospectuses for the underlying investment portfolios. SEE
OBJECTIVES OF THE INVESTMENT PORTFOLIOS, PAGE 14.
AIM 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 MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND & VARIABLE INSURANCE PRODUCTS FUND II
VIP Growth Portfolio
VIP Overseas 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 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 Real Estate Fund
POLICY VALUES
Your account value is the amount you have in the guaranteed interest division,
plus the amount you have in each variable investment option. If you have an
outstanding policy loan, your account value includes the amount in the loan
division. The loan division is part of our general account specifically designed
to hold money used as collateral 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
investment options;
o interest earned on the amount you have in the guaranteed interest
division;
o interest earned 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 account value.
Partial withdrawals may reduce the amount of base death benefit.
Your net account value is equal to the account value minus the amount of your
outstanding policy loans and accrued loan interest, if any. Your surrender value
is the same as your net account value.
YOUR ACCOUNT VALUE IN THE VARIABLE DIVISION
Accumulation units are the way we measure value in the variable division.
Accumulation unit value is the value of a unit of a variable investment option
on the valuation date. Each variable investment option has a different
accumulation unit value. SEE DETERMINING THE VALUE IN THE VARIABLE DIVISION,
PAGE 27.
On each valuation date, we determine the accumulation unit values. The
accumulation unit value for each variable investment option reflects the
investment performance of the underlying 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 28.
The valuation date is each date for which the net asset value of the investment
portfolio shares and unit values of the divisions are determined. Valuation
dates are each day the New York Stock Exchange and the company's customer
service center are open for business and a corresponding investment portfolio
values its shares, or as required by law.
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Corporate Variable Universal Life 10
TRANSFERS OF ACCOUNT VALUE
You may make up to twelve free transfers among the variable divisions or to the
guaranteed interest division per policy year. We may charge $10 for each
transfer over twelve you make in a policy year. This charge does not apply to
automatic rebalancing or dollar cost averaging transfers. There are restrictions
on transfers from the guaranteed interest division. SEE TRANSFERS OF ACCOUNT
VALUE, PAGE 29.
SPECIAL POLICY FEATURES
DOLLAR COST AVERAGING
Dollar cost averaging is a systematic plan of transferring account values to
selected variable investment options. 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 29.
AUTOMATIC REBALANCING
Automatic rebalancing periodically reallocates your net account value among the
investment options to maintain your specified distribution of account value
among those divisions. Automatic rebalancing is free. SEE AUTOMATIC REBALANCING,
PAGE 30.
LOANS
You may take loans against your policy's net account value. We charge an annual
loan interest rate of 3.25%. We credit an annual interest rate of 3% on amounts
held in the loan division as collateral for your loan. SEE POLICY LOANS, PAGE
31.
PARTIAL WITHDRAWALS
You may withdraw part of your net account 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. SEE
PARTIAL WITHDRAWALS, PAGE 32.
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. The right to exchange
your policy is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 26.
SURRENDER
You may surrender your policy at any time while the insured person is living.
We calculate your surrender value on the valuation date we receive your request
and policy at our customer service center. All insurance coverage ends on the
date we receive your request. You must return your policy or a lost policy form
to us. SEE SURRENDER, PAGE 34.
LAPSE
In general, insurance coverage continues as long as your policy's net account
value is enough to pay the monthly deductions. SEE LAPSE, PAGE 33.
REINSTATEMENT
You may reinstate your policy and its riders within five years of its lapse if
you still own the policy and the insured person is still living.
You will need to give proof that the insured person continues to be insurable.
You will also need to pay required reinstatement premiums.
We will reinstate any policy loans existing when coverage ended, with accrued
loan interest to the date of the lapse. SEE REINSTATEMENT, PAGE 34.
POLICY MATURITY
If the insured person is still living on the maturity date or the policy
anniversary nearest the date when the insured person reaches age 100 and you do
not choose continuation of coverage, you must surrender your policy and we will
pay the net account value. Your policy then ends. SEE POLICY MATURITY, PAGE 26.
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Corporate Variable Universal Life 11
CONTINUATION OF COVERAGE
If the insured person is still living at age 100, you may either surrender your
policy or choose the continuation of coverage feature. If the continuation of
coverage feature becomes effective, we will deduct a one-time administrative fee
of $200 and keep your policy in force. SEE CONTINUATION OF COVERAGE, PAGE 27.
DEATH BENEFITS
At the insured person's death, 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 any outstanding
policy loan on your policy and accrued loan interest. Based on the death benefit
option you have chosen, the base death benefit varies.
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 death benefit at issue may vary from the stated death benefit plus
adjustable term insurance coverage for some 1035 exchanges.
There is no minimum stated death benefit to issue a policy. Generally, there is
a minimum target death benefit of $50,000 per policy. SEE DEATH BENEFITS, PAGE
21.
You may change your stated death benefit amount while your policy is in force,
subject to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
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 45.
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 46.
You should consult a qualified legal or tax adviser before you purchase your
policy.
INFORMATION ABOUT SECURITY LIFE, THE SEPARATE 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 except New
York. At the close of 1998, the company and its consolidated subsidiaries had
over $174.3 billion of life insurance in force. As of December 31, 1998, our
total assets were over $10.0 billion, and our shareholder's equity was over $926
million.
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Corporate Variable Universal Life 12
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 $461.8 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 is committed to
ensuring that information processing and delivery systems will be Year 2000
compliant before December 31, 1999.
Our project team implemented the Year 2000 project plan which included the
analysis, remediation and testing of our in-house source code. We followed our
normal project management methodology, including communication with senior
management on a monthly and as-needed basis and we allocated sufficient funds to
ensure Year 2000 processing capabilities. On June 28, 1999, the analysis,
remediation and system testing phases of the plan were completed. We will
continue to do precautionary testing throughout 1999.
Security Life has developed a contingency plan with established manual
procedures that we believe will allow us to continue to do business in the event
our systems do not perform as expected. However, there is no assurance Security
Life's efforts will be successful, or that interaction with other service
providers will not impact our services.
SECURITY LIFE SEPARATE ACCOUNT L1
SEPARATE ACCOUNT STRUCTURE
We established Security Life Separate Account L1 (the "separate 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 separate account or Security Life.
The variable account is a separate investment account. We keep the separate
account assets separate from our general account and other separate accounts. It
is used to support our variable life insurance policies and for other purposes
allowed by law and regulation. We may offer other variable life insurance
contracts with different benefits and charges 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 separate account or other separate accounts.
The company owns all the assets in the separate account. We credit gains to or
charge losses against the separate account without regard to performance of
other investment accounts.
ORDER OF SEPARATE ACCOUNT LIABILITIES
State law provides that we may not charge general account liabilities against
separate account assets equal to its reserves and other liabilities. This means
that in the event we were ever to become insolvent, the separate account assets
will be used first to pay separate account policy claims. Only if assets remain
in the separate account after these claims have been satisfied can these assets
be used to pay other policy owners and our creditors.
The separate account may have liabilities from assets credited to other variable
life policies offered by the separate account. If the assets of the separate
account are greater than required reserves and policy liabilities, we may
transfer the excess to our general account.
VARIABLE INVESTMENT OPTIONS
The separate account has several divisions. Each investment option invests in
shares of a matching
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Corporate Variable Universal Life 13
investment portfolio. Each investment portfolio has its own investment
objective. This means that the investment performance of a policy depends on the
performance of the investment portfolios you choose. These investment portfolios
are not available directly to individual investors. They are available only 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 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 separate 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 AIM Advisors, Inc.; Fidelity Management & Research Company; Fred Alger
Management, Inc.; INVESCO Funds Group, Inc.; Neuberger Berman Management Inc.;
and Van Eck Associates Corporation. 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.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM 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 adviser. AIM has acted as an investment adviser 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
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Corporate Variable Universal Life 14
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 growing 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 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.
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 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") manages and provides investment
and other services to the funds named here. However, Bankers Trust Company also
provides sub-advisory services for VIP II Index 500 Portfolio. FMR is the
management arm of Fidelity Investments(R), which was established in 1946, and is
one of America's largest mutual fund managers.
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 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 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(R) 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(R) 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
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Corporate Variable Universal Life 15
up of ten diversified investment portfolios. Five of these investment portfolios
are described 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 (Formerly, INVESCO VIF-Industrial Income
Portfolio) -- 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 investment growth 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
uses 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, INVESCO tries to identify companies that it
believes 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 high total return through both
growth and current income.
It normally invests at least 30% of its assets in common stocks of
companies with a strong history of paying regular dividends and 30% of its
assets in debt securities. Debt securities include obligations of the
United States Government 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 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 utilities economic sector.
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Corporate Variable Universal Life 16
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.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust (the "Trust,") is a registered,
open-end management investment company. It was organized as a Delaware business
trust on May 23, 1994. The Trust is made up of separate portfolios
("Portfolios"), each of which invests all of its net investable assets in a
matching series ("Series") of Advisers Managers Trust ("Managers Trust").
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 which directly purchase and manage their own securities portfolios.
Neuberger Berman Management Incorporated acts as investment manager to Managers
Trust. Neuberger Berman, LLC 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 Limited Maturity Bond Portfolio -- seeks the highest available
current income consistent with liquidity and low risk to principal; total
return is the secondary goal.
The Limited Maturity Bond Portfolio invests mainly in investment-grade
bonds and other debt securities from U.S. Government and corporate issuers.
These may include mortgage-and asset-backed securities.
The 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 maintains an average portfolio duration
of four years or less. However, the series may invest in securities of any
duration.
Neuberger Berman Partners Portfolio -- seeks growth of capital. The Portfolio
invests mainly in common stocks of mid-to large-capitalization companies.
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.
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 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.
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Corporate Variable Universal Life 17
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 3% 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.
DETAILED INFORMATION ABOUT THE CORPORATE VARIABLE UNIVERSAL LIFE POLICY
This prospectus describes our standard Corporate variable 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 51 are to show how the policies work.
APPLYING FOR A POLICY
You purchase this variable universal life policy by submitting an application to
us. On the policy date, the insured person must be no less than 15 years of age
and no older than age 85. The insured person is the person on whose life we
issue a policy and upon whose death we pay death proceeds. Age is the insured
person's age on the birthday nearest the policy date plus the number of
completed policy years since the policy date.
We may back-date the policy up to six months to allow the insured person 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 your policy, we require
satisfactory evidence of insurability of the insured person and payment of your
initial premium. Investment options include the variable and the guaranteed
interest divisions, but not the loan division. This evidence may include
completion of all underwriting and issue requirements.
The investment date is the first date we apply your net premium payments to your
policy. 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 equal to at least the sum of the scheduled premiums which are
due from your policy date through your investment date.
This policy is available only to groups of ten or more insured people with a
minimum total group first year premium of at least $250,000. We generally
require
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Corporate Variable Universal Life 18
a minimum target death benefit of $50,000 per policy. We may reduce the minimum
target death benefit if the average target death benefit at policy issuance for
the group or sponsored arrangement is at least $50,000. Our underwriting and
reinsurance procedures in effect at the time you apply limit the maximum stated
and target 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. The policy
date is:
o the date you designate on your application, subject to our approval; or
o the back-date of the policy to save age, if we permit this for your
policy.
If there is no designated date or back-date, the policy date is the date all
underwriting and administrative requirements have been met if we have received
your initial premium before we issue your policy.
DEFINITION OF LIFE INSURANCE
The federal income tax definition of life insurance is the cash value
accumulation test. SEE TAX STATUS OF THE POLICY, PAGE 45.
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 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.
SCHEDULED PREMIUMS
Your premiums are flexible. You may select your scheduled (planned) 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
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Corporate Variable Universal Life 19
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.
UNSCHEDULED PREMIUM PAYMENTS
Generally speaking, you may make unscheduled premium payments at any time,
however:
1. We may limit the amount of your unscheduled premium payments that would
result in an increase in the base death benefit amount required by the
federal income tax law definition of life insurance. We may require
satisfactory evidence that the insured person is insurable at the time
that you make the unscheduled premium payment if the death benefit is
increased due to your unscheduled premium payments.
2. We may require proof that the insured person is insurable if your
unscheduled premium payment will cause the net amount at risk to
increase; and
3. We will return 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 46 AND CHANGES TO COMPLY WITH THE LAW,
PAGE 47.
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 tax or sales charges.
Unscheduled premiums for more than $10,000 require proof of insurability of the
insured person.
TARGET PREMIUM
Target premiums are not based on the scheduled premium. Target premiums are
actuarially determined based on the age, sex and premium class of the insured
person. The target premium for your policy and any segments added since the
policy date are listed in the schedule we will provide to you. SEE PREMIUMS,
PAGE 19.
ALLOCATION OF NET PREMIUMS
The net premium is the balance remaining after we take tax and sales charges
(excluding the deferred sales charge) from your premium payment. We add the net
premium to your account value according to your instructions.
We apply the initial net premium to your policy after:
a) we receive the amount of premium required for your insurance coverage
to begin;
b) all issue requirements have been met and received by our customer
service center;
c) we approve your policy application; and
d) your policy is issued.
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
investment option into the Money Market Portfolio until 15 days after we issue
your policy (deemed delivery time, plus a typical 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 investment options
directly into your selected investment portfolios. SEE FREE LOOK PERIOD OR RIGHT
TO EXAMINE POLICY PERIOD, PAGE 34.
We allocate premium payments received after we apply your initial net premium
payment to your policy 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 make five free premium allocation changes per year. After the five free
premium allocation changes, we may 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
Your coverage lasts only as long as your net account value is enough to pay the
monthly charges and your account value is more than your outstanding policy loan
plus accrued loan interest. If these conditions are no longer met, your policy
will enter the 61-day grace period and you must make a premium payment
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Corporate Variable Universal Life 20
to avoid lapse. SEE LAPSE, PAGE 33, AND GRACE PERIOD, PAGE 33.
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 46.
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 one Corporate 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 for additional
insurance coverage.
Death benefits are valued as of the date of death of the insured person. The
stated death benefit is the permanent element of your policy. The adjustable
term insurance rider is the term insurance element of your policy.
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. Generally, your target death benefit may be no less than $50,000 to
issue your policy.
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 person. Use of the adjustable term insurance rider may
reduce sales compensation. SEE ADJUSTABLE TERM INSURANCE RIDER, PAGE 25.
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Corporate Variable Universal Life 21
DEATH BENEFIT SUMMARY
THIS CHART ASSUMES NO DEATH BENEFIT OPTION CHANGES, INCREASES OR DECREASES IN
STATED OR TARGET DEATH BENEFIT AND THAT PARTIAL WITHDRAWALS ARE LESS THAN THE
PREMIUM PAID.
OPTION 1 OPTION 2 OPTION 3
============== =================================== =================================== =======================================
STATED The amount of policy death The amount of policy death The amount of policy death
DEATH benefit at issue, not including benefit at issue, not including benefit at issue, not including
BENEFIT rider coverage. This amount rider coverage. This amount rider coverage. This amount
stays level throughout the life of stays level throughout the life of stays level throughout the life of
the contract. the contract. the contract.
BASE DEATH The greater of the stated death The greater of the stated death The greater of the stated death
BENEFIT benefit or the account value benefit plus the account value, benefit plus the sum of all
multiplied by the death benefit or the account value multiplied premiums you have paid minus
corridor factor. by the death benefit corridor partial withdrawals you have
factor. taken, or the account value
multiplied by the death benefit
corridor factor.
TARGET Stated death benefit plus Stated death benefit plus Stated death benefit plus
DEATH adjustable term insurance rider adjustable term insurance rider adjustable term insurance rider
BENEFIT benefit. This amount remains benefit. This amount remains benefit. This amount remains
level throughout the life of the level throughout the life of the level throughout the life of the
policy. policy. policy.
TOTAL DEATH This is the total death proceeds. This is the total death proceeds. This is the total death proceeds.
BENEFIT It is the greater of the target It is the greater of the target It is the greater of the target
death benefit or the base death death benefit plus the account death benefit plus the sum of all
benefit. value, or the base death benefit. premiums you have paid minus
partial withdrawals you have
taken, or the base death benefit.
ADJUSTABLE The adjustable term insurance The adjustable term insurance The adjustable term insurance
TERM rider benefit is the total death rider benefit is the total death rider benefit is the total death
INSURANCE benefit minus base death benefit, benefit minus the base death benefit minus the base death
RIDER but it will not be less than zero. benefit, but it will not be less benefit, but it will not be less
BENEFIT If the account value multiplied than zero. If the account value than zero. If the account value
by the death benefit corridor multiplied by the death benefit multiplied by the death benefit
factor is greater than the stated corridor factor is greater than the corridor factor is greater than the
death benefit, the adjustable stated death benefit plus the stated death benefit plus the sum
term insurance benefit will be account value, the adjustable of all premiums you have paid
decreased. It will be decreased term insurance rider benefit will minus partial withdrawals you
so that the sum of the base death be decreased. It will be have taken, the adjustable term
benefit and the adjustable term decreased so that the sum of the insurance rider benefit will be
insurance rider benefit is not base death benefit and the decreased. It will be decreased
greater than the target death adjustable term insurance rider so that the sum of the base death
benefit. If the base death benefit benefit is not greater than the benefit and the adjustable term
becomes greater than the target target death benefit plus the insurance rider benefit is not
death benefit, then the adjustable account value. If the base death greater than the target death
term insurance rider benefit is benefit becomes greater than the benefit plus the sum of all
zero. target death benefit plus the premiums you have paid minus
account value, then the partial withdrawals you have
adjustable term insurance rider taken. If the base death benefit
benefit is zero. becomes greater than the target
death benefit plus the sum of all
premiums you have paid minus partial
withdrawals you have taken, then the
adjustable term insurance rider benefit
is zero.
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Corporate Variable Universal Life 22
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 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 when the insured person dies. 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 insured person's date of
death.
There could be outstanding policy charges if the insured dies while your policy
is in the grace period.
DEATH BENEFIT OPTIONS
You have a choice of three death benefit options: option 1, option 2 or option 3
(described below). You may choose death benefit option 3 only prior to the issue
of your policy. Your choice may result in your having a base death benefit which
is greater than your stated death benefit. You may change your death benefit
option after the policy date and before the continuation of coverage feature
begins. SEE CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24 AND SEE CONTINUATION OF
COVERAGE, PAGE 27.
Under death benefit option 1, your base death benefit is the greater of:
1. your stated death benefit on the date of the insured person's death; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
Under death benefit option 2, your base death benefit is the greater of:
1. your stated death benefit plus your account value on the date of the
insured person's death; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
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. Under option 2,
investment performance is reflected in your insurance coverage.
Under death benefit option 3, the base death benefit is the greater of:
1. your stated death benefit plus the sum of all premiums you have paid
minus partial withdrawals you have taken under your policy; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
Therefore, the base death benefit generally will increase as you pay premiums,
and decrease as you take partial withdrawals. In no event will your base death
benefit be less than your stated death benefit.
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 insured person's age; and
o the insured person's gender.
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.
If the insured person is 100 years of age or older and the continuation of
coverage feature is in effect, only death benefit option 1 is available.
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Corporate Variable Universal Life 23
CHANGES IN DEATH BENEFIT OPTIONS
You may request a change in your death benefit option after the policy date and
before the continuation of coverage feature. A death benefit option change
applies to your entire stated or base death benefit. You may change from death
benefit option 1 to option 2, or from option 2 to option 1. You may also change
from death benefit option 3 to option 1. You may not change from death benefit
option 3 to option 2. You may choose death benefit option 3 only prior to the
issue of your policy.
Your death benefit option change is effective on your next monthly processing
date after we accept and approve your requested change, so long as at least five
days remain before your monthly processing date. If fewer than five days remain
before your monthly processing date, your death benefit option change is
effective on your next monthly processing date.
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.
For you to change from death benefit option 1 to option 2, you must provide to
us proof that the insured person is insurable under our normal rules of
underwriting for your policy class.
We may not allow a change to your death benefit option if it reduces the target
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
account value as of the effective date of the change.
Option 2 Option 1 your stated death benefit before the change plus your
account value as of the effective date of the change.
Option 3 Option 1 your stated death benefit before the change plus (a)
the sum of the premiums you have paid, minus (b)
partial withdrawals you have taken as of the effective
date of the change.
We increase or decrease your stated death benefit to keep the net amount at risk
the same on the date of your death benefit option change. Additionally, there is
no change to the amount of term insurance if you have an adjustable term
insurance rider. SEE COST OF INSURANCE CHARGE, PAGE 43.
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.
For example, 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
adjust the target premium when you change your death benefit option.
CHANGES IN DEATH BENEFIT AMOUNTS
You may increase the target or stated death benefit while your policy is in
force and before the policy anniversary when the insured person turns age 86.
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 death
benefit. The request is effective as of the next monthly processing date after
we receive your request and approve it. On the monthly processing date, we
deduct the monthly deductions from your account value. 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.
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 if it will disqualify your policy as life
insurance under 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 45.
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Corporate Variable Universal Life 24
If you decrease your death benefit, you may not decrease your target death
benefit below the minimum we require to issue your policy.
There may be tax consequences as a result of a decrease in your death benefit.
SEE TAX STATUS OF THE POLICY, PAGE 45 AND MODIFIED ENDOWMENT CONTRACTS, PAGE 46.
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, we divide subsequent decreases in stated death benefit among
your benefit segments pro rata unless state law requires differently.
You must provide satisfactory evidence that the insured person is still
insurable in order to increase your death benefit.
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 once in a policy year.
The initial death benefit segment, 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 sales charge;
o a new deferred sales charge;
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 and deferred sales charge, premiums you
pay after an increase are applied to your policy segments in the same proportion
as the target premiums for each segment bears to the sum of the target premium
for all segments. For each coverage segment, your schedule shows your target
premiums.
We allocate the net amount at risk among segments in the same proportion that
each segment bears to the total stated death benefit.
ADJUSTABLE TERM INSURANCE RIDER
You may increase your death proceeds by adding an adjustable term insurance
rider on the insured person's life. A rider changes benefits under your policy.
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.
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.
OPTION 3: If option 3 is in effect, the total death benefit is the
greater of:
a. the target death benefit plus the sum of the premiums you
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Corporate Variable Universal Life 25
have paid minus partial withdrawals you have taken; 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 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 or more, 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 24.
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 option 2 and base
decreases may reduce the amount of your target death benefit. SEE PARTIAL
WITHDRAWALS, PAGE 32, AND CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24.
The only charge for this coverage is the cost of insurance charge. 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
time. They will be based on the issue age, gender, and premium class of the
person insured, 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 CHARGE, PAGE 43.
There are no deferred sales charges for this coverage. The total charge that you
pay may be less if you have coverage under an adjustable term insurance rider
instead of the base death benefit. If the target death benefit is increased by
you after the rider is issued, we use the same cost of insurance rate schedule
for the entire coverage for this rider. These rates are based on the original
premium class even though satisfactory new evidence of insurability is given to
us for the increased schedule.
Not all policy features apply to the adjustable term insurance rider. Under this
rider, there is no surrender value and policy loans are not available. The
adjustable term insurance rider does not contribute to the policy account value
nor to investment performance under your policy. The adjustable term insurance
rider provides benefits only at the insured person's death.
SPECIAL FEATURES
RIGHT TO EXCHANGE POLICY
During the first 24 months after your policy date, you have the right to
exchange your policy for a guaranteed policy, unless state law requires
differently. To do this, we transfer the amount you have in the variable
division to the guaranteed interest division. We allocate all of your future net
premiums to the guaranteed interest division. We do not allow any future
payments or transfers to the variable division after you exercise this right.
We will not charge you for this exchange. SEE THE GUARANTEED INTEREST DIVISION,
PAGE 18.
POLICY MATURITY
If the insured person reaches age 100 and you do not want the continuation of
coverage feature, you may surrender the policy for the net account value. Your
policy then ends. Some part of this payment may be taxable. You should consult
your tax adviser.
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Corporate Variable Universal Life 26
CONTINUATION OF COVERAGE
The continuation of coverage feature allows your insurance coverage to continue
beyond when the insured person reaches age 100. If you allow the continuation of
coverage feature to become effective, we:
o transfer your net account value (excluding the amount in the loan
division) into the guaranteed interest division;
o charge a one-time $200 administrative fee to your policy to cover
future expenses;
o terminate the adjustable term insurance rider and the target death
benefit becomes the stated death benefit;
o convert death benefit option 2 or 3 to death benefit option 1, if
applicable; and
o terminate investment features.
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 until the insured person's death, unless the
policy lapses or is surrendered. However, we deduct no further cost of insurance
charges and your monthly deductions cease. SEE CONTINUATION OF COVERAGE
ADMINISTRATIVE FEE, PAGE 44.
Your net account value may not be transferred into the variable division after
the insured person reaches age 100.
During the continuation of coverage period, you may take policy loans or partial
withdrawals from your policy.
If you have outstanding policy loans, interest continues to accrue. If you fail
to make sufficient loan 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
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. All other
consequences of surrender apply. SEE SURRENDER, PAGE 34. The continuation of
coverage feature may not be available in all states. If a state has approved
this feature, it is automatic and you do not need to take any action to activate
it.
The tax consequences of coverage continuing beyond when the insured person
reaches age 100 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 division, 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 on the amount 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 and accrued loan interest, if any. Your surrender value
is the same as your net account value.
DETERMINING THE VALUE IN THE VARIABLE DIVISION
The amounts included in the variable division are measured by accumulation units
and accumulation unit values.
The value of a variable investment option is the accumulation unit value for
that option times the number of accumulation units you own in that option. Each
variable investment option has a different accumulation unit value.
You purchase accumulation units whenever you allocate premium or make transfers
to a variable investment option. This includes transfers from the loan division.
The valuation date is each date for which the net asset value of the investment
portfolio shares and
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Corporate Variable Universal Life 27
unit values of the variable investment options are determined. Valuation dates
are each day the New York Stock Exchange and the company's customer service
center are open for business and a corresponding investment portfolio values its
shares, or as required by law.
We redeem accumulation units:
o when you take a partial withdrawal;
o when amounts are transferred from a variable investment option
(including transfers to the loan division);
o for the monthly deductions from your account value;
o for policy transaction charges;
o on surrender; and
o to pay the death benefit after the insured person dies.
We calculate the number of variable investment option accumulation units
purchased or redeemed by:
1. dividing the dollar amount of your transaction by:
2. the accumulation unit value calculated at the close of business on the
valuation date of the transaction.
The accumulation unit value is the value determined as of each valuation date.
The accumulation unit value of each variable investment option varies with the
investment performance of the underlying 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 take from the separate
account.
SEE HOW WE CALCULATE ACCUMULATION UNIT VALUES, PAGE 28.
The date of a transaction is the date we receive your premium or transaction
request at our customer service center, so long as the date of receipt is a
valuation date. Each valuation date ends at 4:00 p.m. Eastern time. We use the
accumulation unit value which is next calculated after we receive your premium
or transaction request and we use the number of accumulation units attributable
to your policy on the date of receipt.
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.
The value of amounts allocated to the variable investment option goes up or down
depending on investment performance.
FOR AMOUNTS IN THE VARIABLE INVESTMENT OPTIONS, THERE IS NO GUARANTEED MINIMUM
CASH VALUE.
HOW WE CALCULATE ACCUMULATION UNIT VALUES
We determine accumulation unit values on each valuation date.
We generally set the accumulation unit value for a variable investment option at
$10 when the investment option is first opened. 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 variable investment
option 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.
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.
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Corporate Variable Universal Life 28
4. We then subtract a charge for the mortality and expense risk which we
assume under your policy. The daily charge is 0.000548% of the
accumulation unit value. This is an annual rate of 0.20% of the
accumulation unit value. If the previous day was not a valuation date,
the charge is multiplied by the additional number of days since the
prior valuation date.
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 investment options,
or the guaranteed interest division, in each policy year. You may not make
transfers until after your free look period ends if your state requires a refund
of premium during the free look period.
We do not limit your number of transfers, but we may charge a $10 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 not make transfers during the continuation of
coverage period.
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.
EXCESSIVE TRADING
Excessive trading activity can disrupt investment portfolio management
strategies and increase portfolio expenses by causing:
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
Transfers into the guaranteed interest division are not restricted.
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. A request
received by us within 30 days after your policy anniversary is effective as of
the valuation date we receive it. 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.
DOLLAR COST AVERAGING
If your policy has at least $10,000 invested in either the 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 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.
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Corporate Variable Universal Life 29
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 until after the end of
your free look period if your state requires refund 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
investment option invested in either the 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
investment option to one or more other variable investment options. 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 investment option is 1% of
the total amount you transfer to all investment options 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 37.
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 investment option 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 investment option
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 investment options 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 investment options included in
automatic rebalancing matches the automatic rebalancing allocation percentage
for that investment option. This action rebalances the amounts in the investment
options that do not match your set allocation. This happens if an investment
option outperforms other investment options for that time period.
You may choose the automatic rebalancing feature on your application or later by
completing our 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
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Corporate Variable Universal Life 30
specify, automatic rebalancing will occur on the last valuation date of a
calendar quarter.
If you choose automatic rebalancing on your policy application, the first
transfer occurs on the date you select (after your free look period if your
state requires return of all premiums paid during the 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.
You may have both automatic rebalancing and dollar cost averaging at the same
time. The investment option 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 VALUE, PAGE 29.
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.
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, new policy loans must be at least $100.
The maximum amount you can borrow on any valuation date, unless required
differently by state law, is your net account value minus the monthly deductions
to your next policy anniversary or 13 monthly deductions if you take a loan
within thirty days before 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 37.
When you request a loan you may specify one investment option from which the
loan will be taken. If you do not specify one, the loan will be taken
proportionately from each active investment option you have.
When you take a policy loan, we transfer an amount equal to your policy loan
from the specified investment option proportionately or from the variable and
the guaranteed interest divisions to the loan division. We follow this same
process for loan interest due at your policy anniversary. We credit the loan
division with interest at an annual rate of 3%.
The loan division is part of our general account, separate from the guaranteed
interest division.
Loan interest charges on your policy loan accrue daily at an annual interest
rate of 3.25%. 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.
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.
Policy loans may cause your policy to lapse if your net account value is not
enough to pay all deductions each month. SEE LAPSE, PAGE 33.
Policy loans may have tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH
BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM
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Corporate Variable Universal Life 31
POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
LOAN REPAYMENT
You may repay all or part of your policy loan at any time. We assume that any
payments you make, other than scheduled premiums, are policy loan repayments.
You must tell us otherwise if you want additional payments to be premium
payments.
When you make a loan repayment, we transfer an amount equal to your repayment
from the loan division, the variable investment options and the guaranteed
interest division in the same proportion as your current premium allocation,
unless you tell us otherwise.
LOANS AND YOUR BENEFITS
Taking a loan decreases the amount you have in the variable division. 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.
The benefits under your policy may be affected.
The loan is a first lien on your policy. If you do not repay your policy loan,
we deduct your outstanding policy loan and accrued loan interest from the death
benefit payable, the surrender value payable.
The policy lapses when the account 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
46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT
MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
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.
PARTIAL WITHDRAWALS
You may request a partial withdrawal on any valuation date after your first
policy anniversary by contacting our customer service center. You make a partial
withdrawal when you withdraw part of your net account value. If your request is
by telephone, the partial withdrawal must be for an amount less than $25,000 and
may not cause a decrease in your death benefit; otherwise, your request must be
in writing. SEE TELEPHONE PRIVILEGES, PAGE 37.
You may take only one partial withdrawal per policy year.
The minimum partial withdrawal you may take is $100. The maximum partial
withdrawal you may take is the amount which leaves $500 as your net account
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 any service fee from your account value. SEE CHARGES,
PAGE 41.
Partial withdrawals may have adverse tax consequences. SEE DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 47.
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 insured person is not yet age 81, you may
make a partial withdrawal of up to the greater of 10% of your account value, or
5% of your stated death benefit without decreasing the stated death benefit.
Otherwise amounts you withdraw will reduce your stated death benefit by the
amount of the withdrawal unless your policy death benefit has been increased due
to the federal income tax definition of life insurance.
If your policy death benefit has been increased due to the federal income tax
definition of life insurance at the time of the partial withdrawal, then at
least part of your partial withdrawal may be made without reducing your stated
death benefit.
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.
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Corporate Variable Universal Life 32
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 3
If you have selected death benefit option 3 and your partial withdrawal is less
than the total of premiums you have paid less the total of your prior partial
withdrawals, then your stated death benefit will not be reduced. However, your
total death benefit will be reduced by at least the amount of your partial
withdrawal.
If your partial withdrawal is more than the amount of premiums you have paid
less the total of your prior partial withdrawals, then the excess is treated in
the same manner as partial withdrawals under death benefit option 1. SEE PARTIAL
WITHDRAWALS UNDER DEATH BENEFIT OPTION 1, PAGE 32.
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 45.
We require a minimum target death benefit to issue your policy. You are not
allowed to take a partial withdrawal if it reduces your target death benefit
below this minimum. SEE GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS,
PAGE 44.
PARTIAL WITHDRAWAL MECHANICS
Unless you tell us otherwise, we will make a partial withdrawal from the
guaranteed interest division and the variable division in the same proportion
that each 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 withdrawal 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. Or, 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 46, AND DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS, PAGE 47.
LAPSE
Your insurance coverage continues as long as your net account value is enough to
pay all deductions each month.
In any policy year, if you have an outstanding policy loan, your policy will
lapse if the loan plus the accrued interest owed is more than the account value.
After the insured person reaches age 100 and if the continuation of coverage
feature is active, the policy could lapse even though there are no further
monthly deductions.
GRACE PERIOD
Your policy enters the 61-day lapse grace period if, on a monthly processing
date your net account value is zero (or less).
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 notify you of the
required premium payment necessary to prevent your policy from lapsing. This
amount is generally the amount of past due charges, plus the amount that covers
your estimated monthly policy deductions for the next two months. If the insured
person dies 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 we receive 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 take the overdue deductions from your account balance.
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Corporate Variable Universal Life 33
If you do not pay the full amount required within the 61-day grace period, your
policy (and rider) lapse without value. We then withdraw your remaining account
balance from the variable and guaranteed interest divisions. We deduct amounts
you owe us and inform you that the policy has ended.
REINSTATEMENT
If you do not pay enough premium before the end of the grace period, your policy
lapses. You may reinstate your policy and rider within five years after the
grace period ends.
Unless state law requires differently, we will reinstate your policy and rider
if:
1. you have not surrendered your policy for its surrender value;
2. you provide satisfactory evidence to us that the insured person is
still insurable according to our normal rules of underwriting; and
3. we receive enough premium from you to keep your policy and rider in
force from the beginning to the end of the grace period and for two
months after the reinstatement date.
Reinstatement is effective as of the monthly processing date following our
approval of your reinstatement application. 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 the 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.
SURRENDER
You may surrender your policy for its surrender value any time while the insured
person is living. You do this by sending a written request and your policy or a
lost policy form to our customer service center.
We compute your surrender value as of the valuation date we receive your
surrender request and policy at our customer service center. All insurance
coverage ends on the date we receive your surrender request and policy. SEE
POLICY VALUES, PAGE 10.
We do not pro-rate or add back charges and expenses to your account value which
we deducted on the monthly anniversary before the date your surrender is
processed.
A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 47.
GENERAL POLICY PROVISIONS
FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD
You have the right to examine your policy. The right to examine your policy (or
free look period) starts on the date you receive 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 by 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 and additional net premiums paid
before the end of the free look period are invested into the variable division.
If your state requires us to return the premiums paid if you cancel your policy
during the free look period, that portion of the net premiums you paid during
the free look period allocated to the variable investment options will be held
in the division investing in the Money Market Portfolio for 15 days after we
issue your policy (five days deemed delivery time plus a
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Corporate Variable Universal Life 34
typical free look period of 10 days), unless state law requires otherwise.
At the end of 15 days, your account value will be allocated among your chosen
variable investment options, based on your most recent premium allocation
instructions.
If your state requires us to return your account value plus a refund of all
charges deducted, that portion of your premiums paid that you have allocated to
the variable investment options will be invested according to your most recent
premium allocation instructions on the date we issue your policy.
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 options, you may transfer
funds between investment options and activate policy investment features such as
automatic rebalancing or dollar cost averaging.
YOUR POLICY
Some groups under this policy may choose to use a master policy and certificate
rather than a series of individual policies.
The entire contract between you and us is the combination of:
o the policy (or certificate);
o a copy of your original application and any applications for benefit
increases or decreases;
o the adjustable term insurance rider;
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 send 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 insured person's age stated in your policy schedule.
This is based on the insured person's age as of the nearest birth date to the
policy date. We determine the insured person's age at any given time by adding
the number of completed policy years to the age calculated at issue and shown in
the schedule. At issue of your policy, the insured person must be no less than
age 15 and no more than age 85.
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 during the insured
person's lifetime before the maturity date. 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 the insured person 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 the insured person, they share the death proceeds equally, unless you
have told us otherwise. If none of your policy beneficiaries has survived the
insured person, 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
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Corporate Variable Universal Life 35
beneficiary during the insured person's lifetime. We pay the death proceeds to
the most recent beneficiary(ies) whom you have most recently named and which we
have on record. 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) was 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.
INCONTESTABILITY
After your policy has been in force while the insured person is 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 the insured
person is 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 benefit increase.
After this policy has been in force while the insured person is 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 the 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 the 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 insured person's death, or as otherwise
required by state law.
If unisex cost of insurance rates apply, we do not make any adjustments for a
misstatement of gender.
SUICIDE
If the insured person commits suicide, while that insured person is sane or
insane within two years of your policy date, unless otherwise required by state
law, we limit death benefits to:
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.
If the insured person has been changed, and the new insured person dies by
suicide within two years of the change date, we then limit the death benefit to:
1. your net account value as of the change date; plus
2. the premiums you paid since the change date; minus
3. the sum of any increases in policy loans, accrued loan interest, and
partial withdrawals taken since the change date.
We make a limited payment to the beneficiary(ies) for a new segment or other
increase if the insured person commits suicide, while 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, unless otherwise 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 surrender value;
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.
SEC rules and regulations determine whether or not these conditions exist.
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Corporate Variable Universal Life 36
We execute transfers among the variable investment options as of the valuation
date of our receipt of your request at our customer service center.
We determine death proceeds as of the insured person's date of death. The death
proceeds are not affected by subsequent changes in the value of the variable
investment options. We pay interest at our stated rate (or at a higher rate if
required by law) from the insured person's date of death 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 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 liable for actions taken before
we receive and record the written notice. We may require you to return your
policy for certain policy changes or if you surrender it.
If the 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. As proof of the 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 and your agent or
registered representative, unless you decline it on the application or contact
our customer service center. Telephone privileges allow you or your
agent/registered representative, if applicable, 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.;
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Corporate Variable Universal Life 37
2. Locust Street Securities, Inc., an affiliate of Security Life of Denver
Insurance Company;
3. Multi-Financial Services, Inc., an affiliate of Security Life of
Denver Insurance Company; and
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.
Under these selling agreements, we pay a distribution allowance to
broker-dealers, who then pay commissions to the registered representative who
sells this policy. During the first policy year, the distribution allowance may
be up to 12% of the target premium that you paid, with no allowance on premiums
that you paid over your first target premium. For policy years two through four,
the distribution allowance may be up to 10% of the target premium, with no
allowance on premiums you have paid over the target premium. For policy years
five through ten, the distribution allowance may equal up to 2% of the target
premiums that you have paid, with no allowance on premiums you have paid over
target premium. After the tenth policy year, there is no distribution allowance.
Broker-dealers may receive annual renewal payments of up to 0.20% of the net
account value beginning in the first year of your policy.
Compensation arrangements vary among broker-dealers and depend on particular
circumstances. In addition to the above-described compensation, we may pay:
o wholesaler fees and marketing allowances; and
o training allowances.
We pay all distribution and other allowances from our resources which includes
sales charges deducted from premiums.
ADVERTISING PRACTICES AND SALES LITERATURE
We may use advertisements and sales literature to promote this product,
including:
o articles on variable life insurance and other information published in
business or financial publications;
o indices or rankings of investment securities; and
o comparisons with other investment vehicles, including tax
considerations.
We may use information regarding the past performance of the variable investment
options. Past performance is not indicative of future performance of the
investment options or the policies and is not reflective of the actual
investment experience of policyowners.
We may feature certain investment options and their managers, as well as
describe asset levels and sales volumes for our products. We may refer to past,
current, or prospective economic trends and investment performance or other
information we believe may be of interest to our customers.
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 during the insured
person's lifetime. If you have not made this election, the beneficiary(ies) may
do so within 60 days after we receive proof of the insured person's death.
You may take your 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 on
a monthly, quarterly, semi-annual, or annual basis 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.
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Corporate Variable Universal Life 38
Option II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD:
Payout payments may be made on a monthly, quarterly, semi-annual,
or annual basis throughout the lifetime of the person receiving the
payment, or if longer for guaranteed periods of five, ten, fifteen,
or twenty years. You choose the length of time to receive the
guaranteed payments. If you choose a longer guaranteed period, the
amount of your periodic payments will be lower.
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 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 on a
monthly, quarterly, semi-annual, or annual basis.
You may not leave money on deposit for more than 30 years.
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 division's assets in shares of investment portfolios. We
are the legal owner of the shares held in the separate 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:
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Corporate Variable Universal Life 39
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 instruct us only 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, 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 investment options which will invest in portfolios we
find appropriate for policies we issue.
3. Eliminate variable investment options.
4. Combine two or more variable investment options.
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
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Corporate Variable Universal Life 40
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 wish to transfer the amount you have in the affected option to
another variable investment option, 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 net policy death benefit (your stated death benefit plus
adjustable term insurance rider death benefit, if any);
o your account value;
o your policy loan if any, plus accrued interest;
o your surrender value;
o information about the variable investment options; 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 AND DEDUCTIONS
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 insured person is not
yet age 100 and you do not have an outstanding policy 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% to 5%. We currently deduct
2.5% of each premium payment you make to cover these taxes which approximates
the average tax rate we expect to pay.
We currently deduct 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.
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Corporate Variable Universal Life 41
SALES CHARGE
We deduct a percentage from each of your premium payments to compensate us for
the costs we incur in selling the policies. This charge is 2% of the premiums
you pay in the first policy year and 0.5% of the premiums you pay for each
policy year beyond the first.
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.
ANNUAL DEDUCTION
DEFERRED SALES CHARGE
We deduct a deferred sales charge that is based on a percentage of the premium
payments you make in each of the first ten policy years, up to your target
premium, as specified in your schedule pages. The charge is based on premium
payments, but is deducted from your account value in equal installments on each
of the ten policy anniversaries following the date on which you make the premium
payment. Each policy segment has its own target premium and deferred sales
charge. We allocate your premium payments to determine the deferred sales
charges under your policy if you have more than one segment. SEE CHANGES IN
DEATH BENEFIT AMOUNTS, PAGE 24.
The deferred sales charge compensates us for a portion of the costs we incur in
selling the policies. There is no deferred sales charge on premiums which are in
excess of the target premium. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
Deferred Sales
Policy or Charge as a Deducted at
Segment Year Percentage of Beginning of
Premium Paid Target Premium Policy Years
------------ ------------ --------------
1 2% 2 - 10
2 1.5% 3 - 11
3 1.5% 4 - 12
4 1.5% 5 - 13
5 0.25% 6 - 14
6 0.25% 7 - 15
7 0.25% 8 - 16
8 0.25% 9 - 17
9 0.25% 10 - 18
10 0.25% 11 - 19
DAILY DEDUCTIONS FROM THE VARIABLE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a charge each day for the mortality and expense risks we assume. This
charge is 0.000548% per day of the amount you have in the variable divisions.
This is an annual rate of 0.20%.
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. You
have the option to designate a single withdrawal investment option from which we
will take your monthly deductions. You may make this designation at policy
application or later. You may not use the loan division as your designated
withdrawal investment option from which to deduct monthly deductions.
If you do not choose a withdrawal investment option from which to deduct monthly
deductions, or if the amount in your designated withdrawal investment option 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 option from which monthly
deductions are deducted, we consider this a premium allocation change for which
there may be a charge. SEE POLICY TRANSACTION FEES, PAGE 44.
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Corporate Variable Universal Life 42
DIVISIONS FROM WHICH WE DEDUCT CHARGES
MONTHLY CHARGES: COST OF
INSURANCE CHARGES AND LOANS AND
ADMINISTRATION FEES TRANSACTION FEES PARTIAL WITHDRAWALS
- ----------- ----------------------------------------- --------------------------- -----------------------------------
CHOICE May choose one withdrawal investment Proportionally among May choose any withdrawal
option, including guaranteed interest variable and guaranteed investment options or combination
division interest divisions of investment options, subject to
requirements
- ----------- ----------------------------------------- --------------------------- -----------------------------------
DEFAULT Proportionally among variable investment Proportionally among Proportionally among variable
option and guaranteed interest division variable investment options investment options and guaranteed
and guaranteed interest interest division
division
MONTHLY ADMINISTRATIVE CHARGE
For this policy, we charge an administrative charge of $12 per month for the
first policy year and $6 per month for each policy year beyond that. The monthly
administrative 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 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 under the policy, including the expected cost of paying death
proceeds that are more than your account value at the insured person's death.
The cost of insurance rates may depend on the:
o issue age of the insured people in the group;
o risk class of the insured people in the group;
o size of the group; and
o total premium the group pays.
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.
For the base death benefit, the net amount at risk is calculated using the
difference between the current base death benefit and your account value. We
determine the amount of your account value after we deduct your policy charges
due on that date, other than cost of insurance charges for the base death
benefit and adjustable term insurance rider.
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 person. 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 apply unisex rates where appropriate under the law. This currently includes
the State of Montana and policies purchased by employers and employee
organizations in connection with employment-related insurance or benefit
programs.
Separate cost of insurance rates apply to each segment of the base death benefit
and your adjustable term insurance rider.
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
for base coverage are based on the 1980 Commissioner's Standard Ordinary Sex
Distinct Mortality Table.
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Corporate Variable Universal Life
43
The maximum rates for the initial and any new segment will be printed in the
schedule which we will provide to you. This may result in higher cost of
insurance charges than those that would apply if the policy were on an
individual instead of group basis.
GUARANTEED ISSUE
We only offer this policy on a guaranteed issue basis. We issue these policies
up to a preset face amount with evidence of insurability requirements.
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
When the insured person reaches age 100, if your policy has not been
surrendered, the continuation of coverage period begins. We will charge a
one-time administrative fee of $200. This charge compensates us for maintaining
and servicing your policy until the death of the insured person. 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
We deduct a service fee of $25 of the amount you request from your account value
for each partial withdrawal you take to cover our costs. SEE PARTIAL
WITHDRAWALS, PAGE 32.
TRANSFERS
There may be a $10 fee for each additional transfer over twelve per policy year
to cover our costs. If you include multiple transfers in one request, it counts
as one transfer. There is no transfer fee if you are exercising the right to
exchange feature in your policy. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29, AND
RIGHT TO EXCHANGE POLICY, PAGE 26.
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.
PREMIUM ALLOCATION CHANGE
You may make five free premium allocation changes per policy year. After the
five free premium allocation changes, we may charge you $25 for each additional
premium allocation change per policy year. If you change your designated
withdrawal investment option, we consider this a premium allocation charge for
which there may be a charge. SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE,
PAGE 42.
GROUP OR SPONSORED ARRANGEMENTS
OR CORPORATE PURCHASERS
Groups of individuals, corporations or other institutions may purchase this
policy. For some group or sponsored arrangements including employees and certain
family members of employees of Security Life of Denver, its affiliates and
appointed sales agent or special exchange programs which we may offer from time
to time, we may reduce or waive the:
o administrative charge;
o minimum target death benefit;
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 based on the
characteristics of the 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 may either purchase policies covering a
group of individuals or endorse a policy to
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Corporate Variable Universal Life 44
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 which we take into account when we
reduce charges. We make reductions to charges based on our rules in effect when
we approve a policy application. We may change these rules from time to time.
We will not be unfairly discriminatory in the variation in the 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.
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 Internal Revenue
Code Section 7702. However, there is very little guidance, with respect to
policies issued on a substandard basis. Nevertheless, we believe it is
reasonable to conclude that our policies satisfy the applicable requirements. If
it is subsequently determined that a policy does not satisfy the applicable
requirements, we will take appropriate and reasonable 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.
Specifically this policy must meet the requirements of the "cash value
accumulation test" as specified in Code Section 7702.
Under the cash value accumulation test, there is no limit to the amount that may
be paid in premiums as long as there is enough death benefit in relation to
account value at all times. The death benefit at all times must be at least
equal to an actuarially determined factor, depending on the insured person's age
and sex at any point in time, multiplied by the account value. SEE APPENDIX A,
PAGE 58, FOR A TABLE OF THE CASH VALUE ACCUMULATION TEST FACTORS.
We will at all times assure that the policy meets the statutory definition which
qualifies the policy as life insurance for federal income tax purposes. In
addition, as long as the policy remains in force, increases in account value as
a result of interest or investment experience will not be subject to federal
income tax unless and until there is a distribution from the policy, such as a
partial withdrawal or loan. SEE TAX TREATMENT OF POLICY DEATH BENEFITS, PAGE 46.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the Code Section 7702 tests, 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'
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 45
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 Treasury regulations or rulings. 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 101(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 adviser to determine whether or not a policy transaction will cause
the policy to be classified as a modified endowment contract.
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
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 46
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% additional income tax penalty may be imposed on the 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. Finally, neither distributions from, nor
loans from or secured by, a policy that is not a modified endowment contract are
subject to the 10% 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-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
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 47
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 mortality charge used to calculate whether your policy
qualifies as life insurance for federal income tax purposes. We must base these
calculations on reasonable mortality charges 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 used in the calculation 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 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.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 48
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
Smoker Benefit Insurance Death Death
Gender Age Status Option Test Benefit Premium Benefit
- ------ --- ------ ------ ---- ------- ------- ------
Male 45 Non-smoker 1 CVAT 300,000 $5,750 300,000
Male 45 Non-smoker 1 CVAT 150,000 $5,750 300,000
The tables show how death benefits, account values, and 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%, 6%, or 12% over the periods indicated in each table. Values would differ
from those shown in the tables if the annual investment returns were not
constant. The amounts shown would differ if we had used female or unisex rates.
These illustrations assume there are no policy loans.
We illustrate premium payments as if they were made at the beginning of the
year. The third column of each table shows what would happen if an amount equal
to the assumed premiums earned interest, after taxes, of 5% compounded annually.
The net investment return on your policy is lower than the gross investment
return on the variable division. This is due to the mortality and expense risk
charge, and the portfolio charge for management fees and portfolio expenses. We
show the effect of the net investment return in the amounts for death benefits,
account values and surrender values.
The tables reflect annual investment management fees of 0.65% 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
0.29% of the portfolios' average daily net assets. This is an average of all the
portfolios' other expenses for the year ending December 31, 1998, after any
absorption by investment portfolio managers has been made. The average of all
portfolios' total expenses is 0.94%.
Actual fees vary by portfolio. The portfolio fees and expenses used in the
illustrations are the net amounts shown after absorption of fees and expenses by
the portfolio's investment manager. Absent such absorption, the total average
investment management fees, average other portfolio expenses and the average of
all portfolios' total expenses used in the illustrations would have been higher
(0.72%, 1.15% and 1.87%, respectively). The tables assume that the current
expense reimbursement arrangements will continue. However, they may not continue
through 1999.
The effect of these portfolio charges and expenses, and mortality and expense
risk charges results in a net rate of return of:
o (1.14)% on a 0% gross rate of return;
o 4.85% on a 6% gross rate of return; and
o 10.84% on a 12% gross rate of return.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 49
The tables assume that charges have been deducted including deductions for
premiums, cost of insurance rider charges, monthly deductions and administrative
and sales charges. The tables show charges at our current rates. The tables also
show charges at the maximum rates we guarantee in our policies. SEE MONTHLY
DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42. The tables reflect that we do not
currently charge against the separate 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
surrender values.
If we are asked to do so, we will give you a comparable personal illustration
based on:
o each insured person's age and gender;
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.
For individual policies, at issue we deliver an individualized illustration
showing the scheduled premium you chose and the insured person's actual risk
class. This Corporate policy is issued only to groups. For this policy, we
deliver an illustration similar to the individualized illustration. However,
this illustration shows a single life scheduled premium and risk class that is
representative of the particular group covered by this policy. We base these
hypothetical future benefits on both guaranteed and current cost factor
assumptions and actual account value.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 50
[to be filed by amendment]
PROSPECT: INSURED PERSON'S NAME
MALE 45 NON-TOBACCO USER PRESENTED BY:
SECURITY LIFE
CORPORATE VARIABLE UNIVERSAL LIFE
STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $5,750.00
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 5750
2 5750
3 5750
4 5750
5 5750
6 5750
7 5750
8 5750
9 5750
10 5750
15 5750
20 5750
25 5750
30 5750
AGE 65 5750
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.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 51
[to be filed by amendment]
PROSPECT: INSURED PERSON'S NAME:
MALE 45 NON-TOBACCO USER PRESENTED BY:
SECURITY LIFE
CORPORATE LAST SURVIVOR UNIVERSAL LIFE
STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $5,750.00
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 5750
2 5750
3 5750
4 5750
5 5750
6 5750
7 5750
8 5750
9 5750
10 5750
15 5750
20 5750
25 5750
30 5750
AGE 65 5750
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.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 52
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 Chairman, President and Chief Executive Officer
Thomas F. Conroy Director, President, ING Reinsurance
Michael W. Cunningham* Director, Executive Vice President
Linda B. Emory* Director
Jess A. Skriletz Chief Executive Officer and General Manager, ING
Reinsurance and ING Institutional Markets
Gregory G. McGreevey President, ING Institutional Markets
Jerome J. Cwiok Executive Vice President and Chief Operations
Officer
James L. Livingston, Jr. Executive Vice President and Chief Financial
Officer
Jeffrey R. Messner Executive Vice President and Chief Marketing
Officer
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, ING
Reinsurance
Arnold A. Dicke Senior Vice President, Chief Actuary, ING
Reinsurance
Charles LeDoyen** Senior Vice President, Structured Settlements
Terry L. Morrison Senior Vice President, New Business Operations
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 53
Name and Principal
Jeffery W. Seel* Senior Vice President, Chief Investment Officer
Mark A. Smith Senior Vice President, Customer Service
Operations
Lawrence D. Taylor Senior Vice President, Chief Actuary
William D. Tyler* Senior Vice President, Chief Information Officer
Katherine Anderson Vice President, Chief Product Actuary, ING
Reinsurance
Evelyn A. Bentz Vice President, M Financial Sales
Joseph H. Bradford, III Vice President, Communications
Thomas Kirby Brown, Jr. Vice President, Operations, ING Institutional
Markets
Douglas W. Campbell Vice President, Agency Sales
Kim M. Curley Vice President, Valuation
Stanley F. Eckert Vice President, National Marketing
Shari A. Enger Vice President and Controller
Larry D. Erb Vice President, Information Technology
Nathan E. Eshelman Vice President, Product Development
Martha K. Evans Vice President, Variable Operations
Fitz E. Fisher Vice President, Information Technology
Craig Fowler Vice President, Risk Management and Chief
Actuary, ING Institutional Markets
Deborah B. Holden* Vice President, Corporate Benefits
Brian Holland Vice President, Domestic and International Risk
Management
Thomas D. Hull Vice President, Product Development
Kenneth R. Kiefer** Vice President, Structured Settlements,
Operations
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 54
Name and Principal
Stephen F. Kraysler Vice President, Structured Reinsurance
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, Business Operations
Christiaan M. Rutten Vice President, International Reinsurance
Shelley Ray Schaal-Pettet Vice President, Human Resources
Casey J. Scott Vice President, National Marketing
Alan C. Singer Vice President, Customer Relations and Regulatory
Compliance
Jerome M. Strop Vice President, Strategic Marketing
Gary W. Waggoner Vice President, General Counsel and Corporate
Secretary
Amy L. Winsor Vice President and Treasurer
William Wojciechowski* Vice President, CCRC
Jay Thomas Wolfmeier Vice President and Chief Underwriter
Eric G. Banta Assistant Secretary
Roger O. Beebe Actuarial 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
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 55
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 certain 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
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.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 56
FINANCIAL STATEMENTS
[to be filed by amendment]
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 57
APPENDIX A [to be filed by amendment]
FACTORS FOR THE
CASH VALUE ACCUMULATION TEST
FOR A LIFE INSURANCE POLICY
Attained Attained Attained
Age Male Female Unisex Age Male Female Unisex Age Male Female Unisex
--- ---- ------ ------ --- ---- ------ ------ --- ---- ------ ------
0
1 34 67
2 35 68
3 36 69
4 37 70
5 38 71
6 39 72
7 40 73
8 41 74
9 42 75
10 43 76
11 44 77
12 45 78
13 46 79
14 47 80
15 48 81
16 49 82
17 50 83
18 51 84
19 52 85
20 53 86
21 54 87
22 55 88
23 56 89
24 57 90
25 58 91
26 59 92
27 60 93
28 61 94
29 62 95
30 63 96
31 64 97
32 65 98
33 66 99
100
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 58
APPENDIX B [to be filed by amendment]
PERFORMANCE INFORMATION
POLICY PERFORMANCE
The following hypothetical illustrations demonstrate how the actual investment
experience of each variable investment option 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 $5,750 annual premium, paid at
the beginning of each year, for a hypothetical policy with a $300,000 face
amount death benefit Option 1, issued on a preferred, nonsmoker male, Age 45. It
is assumed that all premiums are allocated to the investment option 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, page 41. This prospectus also contains illustrations based on assumed
rates of return. See Illustrations of Death Benefits, Account Values, Surrender
Values and Accumulated Premiums, page 49.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 59
HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment]
Nonsmoker Male Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
AIM VI CAPITAL APPRECIATION FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
AIM VI GOVERNMENT SECURITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP OVERSEAS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP II INDEX 500 PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF EQUITY INCOME FUND
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF HIGH YIELD FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 60
HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment]
Nonsmoker Male Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
INVESCO VIF SMALL COMPANY GROWTH FUND
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF TOTAL RETURN FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
INVESCO VIF UTILITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
NEUBERGER BERMAN AMT LIMITED MATURITY BOND PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
NEUBERGER BERMAN AMT PARTNERS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE BOND FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE EMERGING MARKETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE REAL ESTATE FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 61
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.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 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. [To
be filed by amendment]
(c) Commission Schedule for Policies.[To be filed by amendment]
(4) Not Applicable.
(5) (a) Specimen Corporate Variable Universal Life Insurance Policy
(Form No. 2505(VUL)-3/00).
(b) Specimen Adjustable Term Insurance Rider (Form No. R2006-3/00).
(c) Certificate of Insurance.
(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 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/
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Corporate Variable Universal Life II - 2
(b) (i) Third Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable
Investment Funds, Inc. and INVESCO Funds Group, Inc./4/
(ii) Fourth Amendment to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors Corporation
and Security Life of Denver Insurance Company./4/
(iii) Fourth Amendment to Participation Agreement among Variable
Insurance Products Fund II, Fidelity Distributors
Corporation and Security Life of Denver Insurance
Company./4/
(iv) Amendment No. 2 to Participation Agreement among AIM
Variable Insurance Funds, Inc., Security Life of Denver
Insurance Company and ING America Equities, Inc./4/
(v) Fourth Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable
Investment Funds, Inc. and INVESCO Funds Group, Inc.
(vi) Amendment No. 3 to Participation Agreement among AIM
Variable Insurance Funds, Inc., Security Life of Denver
Insurance Company and ING America Equities, Inc.
(9) Not Applicable.
(10) Specimen Guaranteed Issue Variable Life Insurance
Application with Guaranteed Issue Binding Limited Life
Insurance Coverage Form (Form Nos. Q2009-11/97 and
Q-1112 B-6/98).
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.
11. Issuance, Transfer and Redemption Procedures Memorandum.[To be filed by
amendment]
- ---------------
/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 Pre-Effective Amendment No. 2 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 May 10, 1999 (File No. 333-72753).
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 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
8th day of November, 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
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 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/ James L .Livingston, Jr.
- -----------------------------
James L .Livingston, Jr.
Executive Vice President and Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Shari A. Enger
- -----------------------------
Shari A. Enger
Vice President and Controller
DIRECTORS:
/s/ Thomas F. Conroy
- -----------------------------
Thomas F. Conroy
/s/ Linda B. Emory
- -----------------------------
Linda B. Emory
Michael W. Cunningham
/s/ Michael W. Cunningham
- -----------------------------
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 5
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
1.A(3)(b)(v) Fourth Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable Investment
Funds, Inc. and INVESCO Funds Group, Inc.
1.A(3)(b)(vi) Amendment No. 3 to Participation Agreement among AIM Variable
Insurance Funds, Inc., Security Life of Denver Insurance
Company and ING America Equities, Inc.
1.A(5)(a) Specimen Corporate Variable Universal Life Insurance Policy
(Form No. 2505 (VUL)-3/00).
1.A(5)(b) Specimen Adjustable Term Insurance Rider (Form No.
R2006-3/00).
1.A(5)(c) Certificate of Insurance.
1.A(10) Specimen Guaranteed Issue Variable Universal Life Insurance
Application with Guaranteed Issue Binding Limited Life
Insurance Coverage Form (Form Nos. Q2009-11/97 and Q-1112
B-6/98).
3.A Opinion and consent of Gary W. Waggoner as to securities being
registered.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 6