Exhibit 1.A(11) Issuance, Transfer and Redemption Memorandum
February 1998
DESCRIPTION OF ISSUANCE,
TRANSFER, AND REDEMPTION PROCEDURES FOR CONTRACTS
PURSUANT TO RULE 6E-3(T)(B)(12)(III)
FOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
UNITED OF OMAHA LIFE INSURANCE COMPANY
This document sets forth the current administrative procedures that will be
followed by United of Omaha Life Insurance Company (the "Company", "we", "us",
"our") in connection with its issuance of individual flexible premium variable
life insurance policies (the "Policies"), the transfer of assets held
thereunder, and the redemption by Policyowners ("Owners") of their interests in
those Policies. Capitalized terms used herein have the same meaning as in the
prospectus for the Policy that is included in the current registration statement
on Form S-6 for the Policy as filed with the Securities and Exchange Commission
("Commission").
I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND
ACCEPTANCE OF PREMIUMS
A. OFFER OF THE POLICIES, APPLICATIONS, INITIAL PREMIUMS,
UNDERWRITING REQUIREMENTS, AND ISSUANCE OF THE POLICIES
1. OFFER OF THE POLICIES. The Policies will be offered and sold
for premiums pursuant to established premium schedules and
underwriting standards in accordance with state insurance laws.
Initial premium payments for the Policies and related insurance
charges will not be the same for all Owners whose Policies have
the same Specified Amount. Insurance is based on the principle of
pooling and distribution of mortality risks, which assumes that
each Owner pays a premium and related insurance charges
commensurate with the Insured's mortality risk as actuarially
determined utilizing factors such as age, sex, health and
occupation. A uniform premium and insurance charge for all
Insureds would discriminate unfairly in favor of those Insureds
representing greater risk. Although there will be no uniform
insurance charges for all Insureds, there will be a uniform
insurance rate for all Insureds of the same risk class. A
description of the Expense Charges under the Policy, which
includes a cost of insurance charge and Expense Charges.
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2. APPLICATION.To purchase a Policy, an individual must submit an
application and provide evidence of insurability of the Company.
The initial premium also must be paid before the Company will
issue the Policy. The Company will not issue a Policy if the
Insured is older than age 90. Before accepting an application,
the Company conducts underwriting to determine insurability. The
Company reserves the right to reject an application or premium
for any reason. If a Policy is not issued, the Company will
return any premium payment the Owner submitted. If a Policy is
issued, it will be effective on the date of issue.
3. PAYMENT OF INITIAL PREMIUM. The minimum initial premium for a
Policy is an amount at least sufficient to purchase the minimum
initial Specific Amount of life insurance coverage ($100,000).
The initial premium will be credited to the Policy on the date
the Policy is issued. Premiums will be allocated to the Money
Market portfolio until the Allocation Date. The Policy Owner may
purchase a Policy with the proceeds of another life insurance
policy, provided a new application is completed. It may not be
advantageous to replace existing insurance with a Policy.
4. UNDERWRITING REQUIREMENT. Full underwriting standards will
apply to all proposed Insureds.
5. ISSUANCE OF THE POLICY AND DETERMINATION OF DATE OF ISSUE.
Once the Company has received the initial premium and
underwriting has been approved, the Policy will be issued on the
date the Company has received the final requirement for issue. In
addition to determining when coverage begins, the Date of Issue
determines Monthly Deduction Dates, Policy
years/months/anniversaries.
B. DETERMINATION OF OWNER OF THE POLICY. The Policy Owner possesses the
rights to benefits under the Policy during the lifetime of the Insured;
the Policy Owner may or may not be the Insured.
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C. PAYMENT OF PREMIUMS.
1. PROCEDURES FOR PREMIUM PAYMENTS. Planned premiums may be paid
annually, semiannually, or at other intervals we offer.
Beginning in the second policy year, the Policy Owner may change
the planned premium once each year. The planned premium is
flexible.
Total premium paid on a cumulative basis may not exceed
guideline premium limitations for life insurance set forth in
the Internal Revenue Code. We will monitor Policies and will
attempt to notify a Policy Owner on a timely basis if the
Owner's Policy is in jeopardy of becoming a modified endowment
contract under the Internal Revenue Code. If at any time a
premium is paid that would result in total premiums exceeding
limits established by law to qualify a Policy as a life
insurance policy, we will only accept that portion of the
premium that would make total premiums equal the maximum amount
that may be paid under the Policy. The excess will be promptly
refunded.
When any additional premium payment will result in an increase in
the Policy's Death Benefit, we will require satisfactory evidence
of insurability before accepting additional premiums after the
date of issue. However, we reserve the right to reject an
additional payment for any reason. If additional Premium is
accepted, we will credit it to the Policy's Accumulation Value
pursuant to the current accumulation instructions, unless the
Policy Owner provides other instructions as of the date
underwriting was completed.
2. GRACE PERIOD. LAPSE. AND REINSTATEMENT. If there is no
outstanding Policy loan, the Policy will lapse if, on a Monthly
Deduction Date, the Accumulation Value is insufficient to cover
the Monthly Deduction due on that date (subject to the No Lapse
Period provision); and a grace period expires without a
sufficient premium payment. If there is an outstanding loan, the
Policy will lapse on any Monthly Deduction Date when the Cash
Surrender Value is insufficient to cover the Monthly Deduction
and any loan interest due, subject to the No Lapse Period
provision. The Company allows a 61 day grace period to make a
premium payment sufficient to cover the Monthly Deduction and any
loan interest due. The grace period begins the day the Company
mails notice to the Policy Owner of the insufficiency. The Policy
will terminate as of the first day of the grace period if
necessary additional premium is not paid. Payment received during
the grace period is first applied as premium to be added to the
Accumulation Value. An Insured would need to specify if they
wanted the premium to be used to repay a loan.
Insurance coverage continues during the grace period, but the
Policy will be deemed to have no Accumulation Value for purposes
of Policy loans, surrender and withdrawals. If the Insured dies
during the grace period, the Death Benefit proceeds payable
during the grace period will equal the amount of the Death
Benefit in effect immediately prior to the commencement of the
grace period less any due and unpaid Monthly Deduction. A lapse
of the Policy may result in adverse tax consequences.
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D. ALLOCATION AND CREDITING OF INITIAL AND ADDITIONAL PREMIUMS
1. THE VARIABLE ACCOUNT. The variable benefits under the Policies
are supported by the United of Omaha Life Insurance Company's
Separate Account B (the "Variable Account"). The Variable Account
will invest in shares of one or more managed investment companies
("Funds"), each of which will have multiple investment
portfolios.
2. ALLOCATIONS AMONG THE SUB-ACCOUNTS. The Variable Account
consists of sub-accounts (the "Sub-Accounts"), each of which
invests in a portfolio of a Fund. Premiums and Policy Value are
allocated to the Sub-Accounts in accordance with the following
procedures.
A. ALLOCATION OF INITIAL PREMIUM. Upon completion of
underwriting, the Company will either issue a Policy, or
deny coverage and return all premiums. If a Policy is
issued, the initial premium payment will be allocated on
the date the Policy is issued according to the initial
premium allocation instructions specified on the
application; if a state free look requirement requires the
Company to return premiums paid if the Owner seeks to
cancel the Policy during the free look period, then the
initial premium will be allocated to the money market
subaccount until the end of the free look period, then
allocated according to the initial premium allocation
instructions specified on the application.
B. ALLOCATION OF ADDITIONAL PREMIUMS. The number of
Accumulation Units to be credited to a Policy with each
premium, other than the initial premium and additional
premiums requiring underwriting, will be determined on the
date the request or payment is received in good order by
the Company if such date is a Valuation Day; otherwise
such determination will be made on the next succeeding
date which is a Valuation Day.
C. CALCULATION OF ACCUMULATION UNIT VALUE On the date of
issue the Accumulation Value equals the initial net
premium less the Monthly Deduction for the first month.
The net premium is the premium less the premium charges
for tax and premium processing expenses. On any Monthly
Deduction Date after the date of issue the Accumulation
Value equals:
(a) the total of the values in each Subaccount; plus
(b) the accumulation value of the Fixed Account; plus
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(c) the accumulation value of the loan Account; less
(d) the Monthly Deduction for the current month.
The value for each Subaccount equals:
(a) the current number of Accumulation Units; multiplied
by (b) the current unit value.
Each net premium allocated to the Variable Account is
converted into Accumulation Units. This is done by
dividing the net premium by the Accumulation Unit value
for the Valuation Period during which the net premium is
allocated to the Variable Account. The initial
Accumulation Unit value for each Subaccount was set when
the Subaccount was established. The unit value may
increase or decrease from one Valuation Date to the next.
The Accumulation Unit value for a Subaccount on any
Valuation Date is calculated as follows:
(a) the Net Asset Value Per Share of the Portfolio
multiplied by the number of shares held in the
Subaccount, before the purchase or redemption of
any shares on that date; divided by
(b) the total number of Accumulation Units held in the
Subaccount on the Valuation Date, before the
purchase or redemption of any shares on that date.
The Accumulation Value of the Fixed Account on any Monthly
Deduction Date before deducting the Monthly Deduction
equals:
(a) the value as of the last Monthly Deduction Date;
plus
(b) any net premiums credited since the last
Monthly Deduction Date; plus
(c) any transfers from the Subaccounts to the Fixed
Account since the last Monthly Deduction Date; plus
(d) any transfers from the Loan Account to the Fixed
Account since the last Monthly Deduction Date; less
(e) any transfers from the Fixed Account to the
Subaccounts since the last Monthly Deduction Date;
less
(f) any transfers from the Fixed Account to the Loan
Account since the last Monthly Deduction Date; less
(g) any partial withdrawals and surrender charge taken
from the Fixed Account since the last Monthly
Deduction Date; plus
(h) interest credited on the balance.
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The Cash Surrender Value is the Accumulation Value less
any outstanding Policy loans and unpaid loan interest and
less any applicable Surrender Charge.
II. TRANSFERS AMONG ACCOUNTS
A. TRANSFER PRIVILEGE
Subject to the limitations and restrictions described below, transfers
out of a Subaccount of the Variable Account may be made any time after
the Right to Examine period and prior to death or the Policy Maturity
Date, by sending written notice, signed by the Policy Owner, to the
Company. The Policy Owner may make transfers, partial withdrawals,
and/or change the allocation of subsequent Premium payments, by
telephone if the Policy Owner previously authorized telephone
transactions in writing to us. We will not be liable for following
instructions communicated by telephone that we believe to be genuine.
However, we will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. If we fail to do so,
we may be liable for any losses due to unauthorized or fraudulent
instructions. All telephone requests will be recorded on voice recorder
equipment for the Policy Owner's protection. When making telephone
requests, the Policy Owner will be required to provide his/her social
security number and/or other information for identification purposes.
The Company reserves the right, at any time and without notice to any
party, to modify the transfer privileges under the Policy. Transfers are
effective on the date we receive the Policy Owner's request.
After the Right to Examine period, the Policy Owner can transfer
Accumulation Value from one Subaccount of the Variable Account to
another, or from the Variable Account to the Fixed Account or from the
Fixed Account to any Subaccount of the Variable Account within certain
limits. Transfers out of a Subaccount currently may be made as often as
the Policy Owner wishes, subject to the minimum amount specified above
(the Company reserves the right to otherwise limit or restrict transfers
in the future or to eliminate the transfer privilege). The Company
reserves the right to restrict transfers from the Variable Account to
the Fixed Account of amounts previously transferred from the Fixed
Account for up to six months.
Transfers from the Fixed Account currently may be made once each Policy
Year. Transfers from the Fixed Account do not count toward the 12 free
transfer limit described above, and no transfer charge will be imposed
on transfers from the Fixed Account. Moreover, the maximum amount that
can be transferred out of the Fixed Account during any Policy Year is
10% of the Fixed Account Value on the date of the transfer.
The Policy is designed as a long-term investment to provide death
benefit protection, and may also be used as a part of the Policy Owner's
other financial planning. The Policy is not intended for active trading
or "market timing." Excessive transfers could harm other Policy Owners
by having a detrimental effect on portfolio management (which could
occur, for example, if it caused excessive commission expense or caused
the manager to keep higher cash reserves than otherwise). Therefore, the
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Company reserves the right to limit the number of transfers from the
Subaccounts of the Variable Account and the Fixed Account if: (a) the
Company believes that excessive trading by the Policy Owner or a
specific transfer request would have a detrimental effect on
Accumulation Value or the share prices of the Portfolios; or (b) the
Company is informed by one or more of the Series Funds that the purchase
or redemption of shares is to be restricted because of excessive trading
or a transfer or group of transfers is deemed to have a detrimental
effect on share prices of one or more Portfolios or the Variable
Account.
Where permitted by law, the Company may accept the Policy Owners'
authorization of third party reallocation on the Policy Owner's behalf,
subject to the Company's rules. The Company may suspend or cancel such
acceptance at any time. For example, third party reallocation by "market
timers" could be suspended if they cause harm to other Policy Owners.
The Company will notify the Policy Owner of any such suspension or
cancellation. The Company may restrict the availability of Subaccounts
and the Fixed Account for Transfers during any period in which the
Policy Owner authorize such third party to act on the Policy Owner's
behalf. The Company will give the Policy Owner prior notification of any
such restrictions. However, the Company will not enforce such
restrictions if the Company is provided with satisfactory evidence that:
(a) such third party has been appointed by a court of competent
jurisdiction to act on the Policy Owner's behalf; or (b) such third
party has been appointed by the third-party to act on the third-party's
behalf for all the Policy Owner's financial affairs.
B. TRANSFER CHARGES
A transfer fee of $10 may be imposed for any transfer in excess of 12
per Policy Year. The transfer fee is deducted from the amount
transferred. The first 12 transfers each Policy Year are free.
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C. DOLLAR COST AVERAGING PLAN
Dollar cost averaging is a process whose objective is to shield
investments from short term price fluctuations. Since the same dollar
amount is transferred to selected Subaccounts each month, over time more
purchases of Portfolio shares are made when the value of those shares is
low, and fewer shares are purchased when the value is high. As a result,
a lower than average cost of purchases may be achieved over the long
term. While this process allows the Policy Owner to take advantage of
investment price fluctuations, it does not assure a profit or protect
against a loss in declining markets.
The Company's dollar cost averaging program allows the Policy Owner to
automatically transfer, on a periodic basis, a predetermined amount or
percentage specified by the Policy Owner from any one Subaccount or the
Fixed Account to any Subaccount(s) of the Variable Account. The
automatic transfers can occur monthly, quarterly, semi-annually, or
annually, and the amount transferred each time must be at least $100 and
must be $50 per Subaccount. At the time the program begins, there must
be at least $5,000 of Accumulation Value in the applicable Subaccount or
the Fixed Account being transferred from. If transfers are made from the
Fixed Account, the maximum periodic transfer amount is 10% of that
account's value at the time of election, or a sufficient amount to
provide transfers for 10 months. There is no maximum transfer amount
requirement out of the Subaccounts of the Variable Account.
The Policy Owner can request participation in the Dollar Cost Averaging
program when purchasing the Policy or at a later date. Transfers will
begin on the first or 15th day (or, if not a Valuation Date, the next
following Valuation Date) of the month, as specified by the Policy
Owner, during which the request is processed. The Policy Owner can
specify that only a certain number of transfers will be made, in which
case the program will terminate when that number of transfers has been
made. Otherwise, the program will terminate when the amount remaining in
the applicable Subaccount or, if applicable, the Fixed Account, is less
than $500.
The Policy Owner can increase or decrease the amount or percentage of
the transfers or discontinue the program by notifying the Company of the
change. There is no charge for participation in this program.
D. ASSET ALLOCATION PROGRAM
Under the Asset Allocation Program, the Policy Owner can instruct us to
allocate premium and Accumulation Value among the Subaccounts of the
Variable Account and the Fixed Account pursuant to allocation
instructions you specify or recommended by us and approved by the Policy
Owner. We will rebalance the Policy Owner's Policy's assets on a
quarterly, semi-annual or annual basis, as specified by the Policy
Owner, to ensure conformity with the Policy Owner's allocation
instructions. Such asset rebalancing is intended to transfer cash value
from Subaccounts that have increased in value to those that have
declined, or not increased as much, in value. Over time, this method of
investing may help the Policy Owner to "buy low and sell high," although
there can be no assurance this objective will be achieved.
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Transfers of Accumulation Value made pursuant to this program will not
be counted in determining whether the Transfer Fee applies. At the time
the program begins, there must be at least $10,000 of Accumulation Value
under the Policy.
The Policy Owner can request participation in the Asset Allocation
Program when purchasing the Policy or at a later date. The Policy Owner
can change the Policy Owner's allocation percentage or discontinue the
program by notifying us of the change. There is no charge for
participation in this program.
III. "REDEMPTION" PROCEDURES: RIGHT TO EXAMINE. DEATH BENEFIT. NO-LAPSE
PERIOD BENEFIT. POLICY LOANS. SURRENDERS. PARTIAL WITHDRAWALS.
SURRENDER CHARGE. WAIVER OF SURRENDER CHARGE. REDEMPTION'S FOR CHARGES
DEDUCTED UNDER THE POLICY. PAYMENT OPTIONS. SUSPENSION OF VALUATION.
PAYMENTS. AND TRANSFERS. AND MATURITY DATE.
A. RIGHT TO EXAMINE
If the Policy Owner is not satisfied with the Policy, the Policy Owner
may return it to us or our agent within 10 days (or more where required
by applicable State insurance law) after the Policy Owner receives the
Policy or 45 days after the Policy Owner signed the application,
whichever is later. We will cancel the Policy as of the date any
insurance became effective and refund the premiums paid within seven
days after we receive the returned policy.
B. DEATH BENEFIT
The Option 1 Death Benefit is the greater of:
The death benefit equals either death benefit Option 1 less any loan or
death benefit Option 2 less any loan.
(a) the current Specified Amount (i.e., on the date of death);
or
(b) the policy's Accumulation Value on the date of death plus
the corridor amount.
We will pay the death benefit according to the death benefit option in
effect at the time of the Insured's death. Unless otherwise requested,
Option 1 is in effect.
The Option 2 Death Benefit is the policy's Accumulation Value on the
date of death plus the greater of:
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(a) the current Specified Amount (i.e., on the date of death); or
(b) the corridor amount.
The corridor amount is the Accumulation Value on the date of death
multiplied by the corridor percentage from the table shown below for the
Insured's attained age.
- ---------------------------------------------------------
Attained Corridor AttainedCorridor Attained Corridor
Age Percentage Age Percentage Age Percentage
0-40 150% 54 57% 68 17%
41 143% 55 50% 69 16%
42 136% 56 46% 70 15%
43 129% 57 42% 71 13%
44 122% 58 38% 72 11%
45 115% 59 34% 73 9%
46 109% 60 30% 74 7%
47 103% 61 28% 75-90 5%
48 97% 62 26% 91 4%
49 91% 63 24% 92 3%
50 85% 64 22% 93 2%
51 78% 65 20% 94 1%
52 71% 66 19% 95-100 0%
53 64% 67 18% 100+ 1%
- ---------------------------------------------------------
After the first year, the Owner may change the death benefit option once
each year. The change will take effect on the Monthly Deduction Date
after we receive a written request for change, at which time the death
benefit will reflect the change in option. Any change from Death Benefit
Option 1 to Option 2 may require underwriting. The death benefit option
may not be changed from Option 1 to Option 2 after the Insured attains
age 90.
Changes in the death benefit option may result in a change in the
current Specified Amount. We will increase or decrease the current
Specified Amount to maintain the death benefit that was in effect before
the death benefit option change. Any decrease resulting from a change in
death benefit option will be subject to the applicable surrender charge.
We will send the Owner an amendment showing the death benefit option in
effect and the current Specified Amount after the change.
An increase or decrease in current Specified Amount resulting from a
death benefit option change will change the minimum monthly premium and
lifetime monthly premium requirements applicable to the NO-LAPSE PERIOD
provision.
C. NO-LAPSE PERIOD
The Policy contains a provision that can prevent it from lapsing, even
if the cash surrender value is insufficient to pay the monthly
deduction, if certain conditions are met. This provision applies only
if:
(a) either the minimum monthly premium or the lifetime monthly
premium requirement has been met; and
(b) the policy has never been reinstated; and
(c) no Additional Insured Term Insurance Rider covering the
Insured is attached.
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The minimum monthly premium per $1,000 of Specified Amount and the
minimum No-Lapse Period are shown on the policy data pages. If you meet
the minimum monthly premium requirement, then the policy will not lapse
during the minimum No-Lapse Period, if applicable.
The minimum monthly premium requirement is met on any Monthly Deduction
Date when the total premiums paid since the policy's date of issue, less
any partial withdrawals accumulated at 4% interest and less any
outstanding policy loan, equals or exceeds the minimum monthly premium
accumulated at 4% interest.
The lifetime monthly premium per $1,000 of Specified Amount and the
lifetime No-Lapse Period are shown on the policy data pages. If you meet
the lifetime monthly premium requirement, then the policy will not lapse
during the lifetime No-Lapse Period, if applicable.
The lifetime monthly premium requirement is met on any Monthly Deduction
Date when the sum of premiums paid since the policy's date of issue,
less any partial withdrawals accumulated at 4% interest and less any
outstanding policy loans, equals or exceeds the lifetime monthly premium
accumulated at 4% interest.
D. POLICY LOANS
After the first Policy Year (from the Date of Issue in Indiana), the
Policy Owner may obtain a loan for all or part of the Cash Surrender
Value less loan interest to the end of the Policy Year, and less the
Monthly Deduction amount sufficient to continue this Policy in force for
one month. This Policy must be assigned to the Company as sole security
for the loan. The Company will transfer all loan amounts from the Fixed
Account and the Subaccounts to the Loan Account. The amounts will be
transferred on a pro rata basis.
Loan interest is payable at a rate of 5.7% in advance (6.0% effective
annual rate). Interest is due on each Policy Anniversary. If the
interest is not paid when due, the Company will transfer an amount equal
to the unpaid loan interest from the Fixed Account and the Subaccounts,
to the Loan Account on a pro rata basis. The Company will credit 4%
interest to any amounts in the Loan Account, except amounts equal to a
Preferred Loan as described below, for a net annual Loan interest rate
of 2%.
The death benefit will be reduced by the amount of any loan outstanding
on the date of the Insured's death. The Company may defer making a loan
for six months unless the loan is to pay premiums to the Company.
Beginning in the 10th policy year, Preferred Loans are available. A
Preferred Loan will be credited with 6% interest, for a net annual
Preferred Loan interest rate of 0%. Any loan outstanding at the
beginning of the 10th policy year will become a Preferred Loan from that
point forward.
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All or part of a loan may be repaid at any time while the Policy is in
force. The amount of a loan repayment will be deducted from the Loan
Account and will be allocated among the Fixed Account and the
Subaccounts in the same percentages as premiums are currently allocated.
E. SURRENDERING THE POLICY FOR CASH SURRENDER VALUE
While the Insured is alive, the Policy Owner may terminate this Policy
for its Cash Surrender Value. If the Policy Owner requests a cash
surrender, the Policy must be returned to the Company to receive the
Cash Surrender Value
With regard to amounts allocated to the Fixed Account, the Cash
Surrender Value will be equal to or greater than the minimum Cash
Surrender Values required by the State in which this Policy was
delivered. The value is based on the Commissioners 1980 Standard
Mortality Table, the insured's age at last birthday, with interest at
4%. Also, Surrenders are taxable and a 10% federal tax penalty may
apply. A surrender charge may be deducted from the Accumulation Value.
The Company may defer payment of a cash surrender from the Fixed Account
for up to six months.
F. PARTIAL WITHDRAWALS
After the first Policy Year, the Owner may withdraw part of the
Accumulation Value. A surrender charge may be deducted from the
accumulation value. Withdrawals from the Fixed Account are made
beginning with the most recent Premium payment. The significance of
which payment the withdrawal is made from is pertinent for the fixed
account. Current interest for the fixed account is credited according to
an investment year method whereby the rates of interest at which premium
inflows are invested and reinvested are recognized. The current credited
rate for the upcoming month is to be applied only to premiums received
during the upcoming month. The declared current rate is expected to
apply for twelve months from the date of each deposit. Each time the
current rate is changed a new deposit grouping or "Bucket" is formed. A
new rate is set for each bucket prior to its anniversary. This rate is
expected to apply to each deposit made during the original bucket period
for the following policy year. Thus, it is imperative that we determine
up front which buckets the premium payment are being distributed from
for withdrawals so we can determine which buckets are still in existence
for crediting interest. The minimum partial withdrawal amount is $250.
The maximum partial withdrawal amount is an amount such that the
remaining cash surrender value is not less than $500 and the Specified
Amount is not less than $100,000 in Policy years one through five or not
less than $50,000 thereafter. If Death Benefit Option 1 is in effect,
the following will apply for each partial withdrawal:
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(a) the current Specified Amount will be reduced by the
amount of the withdrawal; and
(b) the Accumulation Value will be reduced by:
(1) the amount of the withdrawal; and
(2) the surrender charge applicable to the decrease in
current Specified Amount, as described in the
Policy's SURRENDER CHARGE provision.
We will send the Owner an amendment showing the current Specified
Amount after the withdrawal.
If Death Benefit Option 2 is in effect, the Accumulation Value will be
reduced by the amount of the withdrawal.
The amount of cash withdrawal requested and any surrender charge will be
deducted from the Accumulation Value on the date we receive the Owner's
written request. Partial withdrawals will result in cancellation of
Accumulation Units from each applicable Subaccount. In the absence of
instructions from the Owner, amounts will be deducted from the
Subaccounts and the Fixed Account on a pro rata basis. No more than a
pro rata amount may be withdrawn from the Fixed Account for any partial
withdrawal. We reserve the right to defer withdrawals from the Fixed
Account for up to six months from the date we receive the Owner's
written request.
Partial withdrawals may change the minimum and lifetime monthly premium
requirements applicable to the Policy's NO-LAPSE PERIOD provision.
Partial withdrawals may be taxable and subject to a 10% federal tax
penalty.
G. SURRENDER CHARGE
If a Policy is totally surrendered, or a Partial Withdrawal under Death
Benefit Option 1 is taken, or upon a requested reduction in the Policy's
Specified Amount, we may deduct a Surrender Charge from the amount
requested to be surrendered. If the Policy's current Specified Amount is
decreased, we may deduct a Surrender Charge from the Accumulation Value
based on the amount of the decrease. The Surrender charge varies by
issue age, sex (except in Montana), risk class, the length of time your
Policy has been in force and the Specified Amount. For example, a male
age 35 at issue, in the nontobacco risk class and the preferred rate
class, for surrender charge is $13.00 for each $1,000.00 of specified
amount in the first five years, declining to $1.00 per $1,000.00 in the
twelfth year and zero thereafter. The length of the Surrender Charge
period varies depending upon the Policy Owner's issue age: the period is
12 years through age 52, 11 years at age 53, 10 years at age 54, and 9
years at age 55 and thereafter. The Surrender Charge for each Owner's
Policy is stated on the Policy's data page.
The purpose of the Surrender Charge is to reimburse us for some of our
expenses incurred in distributing the Policies. The Surrender Charge and
Administrative charge may not be enough to cover all sales and
administrative expenses which we will incur in selling the Policies. Any
shortfall, including but not limited to payment of sales and
distribution expenses, would be charge to and paid by us.
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H. WAIVER OF SURRENDER CHARGE
The Company will waive the Surrender Charge upon partial withdrawals and
surrenders in the event the Policy Owner become confined to a hospital
or nursing home, disabled, diagnosed with a terminal illness or
unemployed, become an organ transplant donor or recipient, experience
significant damage to the Policy Owner's residence, or upon the death of
the Policy Owner's spouse or minor dependent.
I. REDEMPTIONS FOR CHARGES DEDUCTED UNDER THE POLICY
1. DEDUCTIONS FROM PREMIUM. Many states and municipalities charge
a premium tax. The range of charges is from 0.75% to 5.0%. We
also incur federal income tax liability under Internal Revenue
Code Section 848 (a Deferred Acquisition Cost tax) upon Policy
premium collected. We deduct 3.75% of each Policy premium payment
we receive to cover these state tax expenses (where permitted),
federal tax expenses and other general expenses. We also deduct
$2 from each Policy premium payment we receive to cover our
premium processing expenses.
2. MONTHLY DEDUCTION.
On each Monthly Deduction Date, we deduct a MONTHLY DEDUCTION
from the entire Accumulation Value equal to: (a) the COST OF
INSURANCE for the current month; plus (b) the COST OF ANY RIDERS
for the current month; plus (c) the RISK CHARGE; plus (d) the
ADMINISTRATIVE CHARGE (except no monthly deduction is deducted on
or after the Policy Anniversary when the age of the Insured is
equal to 100). (These charges are described below.) The Monthly
Deduction will be deducted from the Subaccounts and the Fixed
Account on a pro rata basis on each Monthly Deduction Date. No
Monthly Deduction is deducted from the Accumulation Value after
coverage beyond maturity is elected.
Each charge is deducted in the following manner: first, all
charges are calculated, based on the Accumulation Value on the
Monthly Deduction Date (before monthly charges are deducted, but
reflecting charges deducted from Subaccount assets), and then
deducted. The Monthly Deduction is deducted pro rata from the
Accumulation Value in the Subaccounts and the Fixed Account.
COST OF INSURANCE CHARGE.
The guaranteed cost of insurance each month used in
calculating the Monthly Deduction equals:
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(a) the net amount at risk for the month;
multiplied by
(b) the guaranteed cost of insurance charge
per $1,000 of Specified Amount; divided by
(c) 1,000.
The guaranteed monthly cost of insurance charge for each
$1,000 is shown on the Policy data pages. The charge is based on
the Insured's attained age, duration, sex (except in Montana),
and risk and rate classes.
The net amount at risk in any month equals:
(a) The death benefit; less
(b) the Accumulation Value on the Monthly
Deduction Date after deducting the rider
charge, if any, the risk charge for the
current month, and the administrative
charge.
We may use current cost of insurance charges less than
those shown. Current cost of insurance charges are based on the
Insured's issue age, sex (except in Montana), risk and rate
classes. We reserve the right to change current cost of insurance
charges. Changes in cost of insurance rates will be by class and
will be based on changes in future expectations of factors such
as:
(a) investment earnings;
(b) mortality;
(c) persistency; and
(d) expenses.
RISK CHARGE. We deduct a charge from the Policy's
Accumulation Value (including amounts of Accumulation Value moved
to the Loan Account as collateral for Policy loans), before
monthly charges are deducted, but reflecting charges deducted
from Subaccount assets, on each Monthly Deduction Date for the
mortality risks that we assume. In Policy Years 1 through 10,
this Risk Charge is equivalent to an annual charge of 0.70% of
the Accumulation Value, deducted on each Monthly Deduction Date.
In Policy Years 11 and later, this Risk Charge is equivalent to
an annual charge of 0.55% of the Accumulation Value, deducted on
each Monthly Deduction Date. The charge is deducted as 0.05833%
of the Accumulation Value, deducted on each Monthly Deduction
Date, for the first 10 Policy Years, and 0.04583% of the
Accumulation Value, deducted on each Monthly Deduction Date, for
Policy Years 11 and thereafter. The mortality risk we assume is
that Insureds may live for shorter periods of time than we
estimated, or the Accumulation Value is not enough to keep the
Policy in force during the No-Lapse Period. If all the money we
collect from this charge is not needed to cover death benefits
and expenses, the money is contributed to our general account.
Conversely, even if the money we collect is insufficient, we will
provide for all death benefits and expenses.
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ADMINISTRATIVE CHARGE. We deduct a charge of $7 from your
Accumulation Value on each Monthly Deduction Date for the costs
of issuing and administering the Policy and operating the
Variable Account.
COST OF RIDERS.
ADDITIONAL INSURED RIDER. The rider cost of term
insurance equals the rider benefit amount, multiplied by the
rider's cost of insurance charge for each $1,000 of benefit
amount, divided by 1,000. This charge is based on the Additional
Insured's attained age, sex (except in Montana) and rate class.
ACCIDENTAL DEATH BENEFIT RIDER. The cost is
determined by the Insured's attained age and sex (just age in
Montana) per each $1,000 of rider coverage elected, multiplied by
the rider benefit amount, divided by $1,000.
DISABILITY RIDER. The cost is a fixed rate
determined by the Insured's attained age and sex (just age in
Montana) per each $1.00 of rider monthly deduction amount
multiplied by the amount of the monthly deduction amount.
3. ACCELERATED DEATH BENEFIT RIDER
4% (7.4% in Vermont and Oklahoma) of the elected amount is
imposed at the time the election is made to receive the
accelerated death benefits provided by this rider.
J. PAYMENT OPTIONS
OPTION 1 -- PROCEEDS HELD ON DEPOSIT AT INTEREST. While the
Proceeds are held by the Company, the company will annually:
(a) pay interest to the Payee; or
(b) add interest to the Proceeds.
OPTION 2 -- INCOME OF A SPECIFIED AMOUNT. The Company will pay
the Proceeds in monthly installments of a specified amount until
the Proceeds, with interest, have been fully paid.
OPTION 3 -- INCOME FOR A SPECIFIED PERIOD. The Company will pay
the Proceeds in installments for the number of years the Policy
Owner chooses. The monthly incomes for each $1,000 of Proceeds,
shown in the table set forth in the Policy, include interest. The
Company will provide the income amounts for payments other than
monthly upon request.
OPTION 4 -- LIFETIME INCOME. The Company will pay the Proceeds
as a monthly income for as long as the Payee lives. The following
guarantees are available:
GUARANTEED PERIOD - The monthly income will be paid for a
certain number of years and as long thereafter as the
Payee lives; or
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GUARANTEED AMOUNT (INSTALLMENT REFUND) -
The monthly income will be paid until the sum of all
payments equals the Proceeds placed under this option and
as long thereafter as the Payee lives.
If a fixed Payment Option is chosen, the monthly income will be
the amount computed using either the Lifetime Monthly Income
Table set forth in the Policy (which is based on the 1983a
Mortality Table and interest at 3% or, if more favorable to the
Payee, our then current lifetime monthly income rates for payment
of Proceeds. If a variable Payout Option is chosen, all variable
payments, other than the first variable payment, will vary in
amount according to the investment performance of the applicable
Subaccounts.
NOTE CAREFULLY. If no guarantee is elected, then IT WOULD BE
POSSIBLE FOR ONLY ONE PAYMENT TO BE MADE if the Payee(s) were to
die before the due date of the second payment; only two Payments
if the Payee(s) were to die before the due date of the third
payment; and so forth. When the last Payee dies, we will pay to
the estate of that Payee any remaining guaranteed Payments under
a fixed payout option.
OPTION 5 -- LUMP SUM. The Proceeds will be paid in one sum.
OPTION 6 -- ALTERNATIVE SCHEDULE. Upon request and if available,
the Company will provide payments for other options, including
joint and survivor periods. Certain options may not be available
in some States.
If variable payments are being made under Option 2 or 6 and do
not involve life contingencies, then the Policy Owner may
surrender the Policy and receive the commuted value of any unpaid
payments.
Additional information about any Payout Option may be obtained by
contacting us.
K. SUSPENSION OF VALUATION, PAYMENTS, AND TRANSFERS
The Company will suspend all procedures requiring valuation of the
Variable Account (including transfers, surrenders and loans) on any day
the New York Stock Exchange is closed or trading is restricted due to an
existing emergency as defined by the Securities and Exchange Commission,
or on any day the Commission has ordered that the right of surrender of
the Policies be suspended for the protection of Policy Owners, until
such condition has ended.
L. MATURITY DATE.
The Policy's maturity date is the Policy Anniversary next following the
Insured's 100th birthday. On the maturity date we will pay the Policy
Owner the Policy's Accumulation Value, less any loan and unpaid loan
interest, if (a) the Insured is then living; (b) this Policy is in
force; and (c) coverage beyond maturity is not elected. The Policy may
terminate prior to the maturity date if the premiums paid are
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insufficient to continue this Policy in force. If the Policy does
continue in force to the maturity date, it is possible there will be
little or no Cash Surrender Value at that time. Policy values will be
affected by the investment experience of the Variable Account and to the
extent cost of insurance charges are more favorable than guaranteed
charges.
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