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EXHIBIT 1.A(11)
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES
FOR VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
PEOPLES BENEFIT LIFE INSURANCE COMPANY
This document sets forth the administrative procedures that will
be followed by Peoples Benefit Life Insurance Company (the "Company") in
connection with the issuance of its variable universal life insurance policy
("Policy" or "Policies") and acceptance of payments thereunder, the transfer of
assets held thereunder, and the redemption by owners of the Policy ("Owners") of
their interests in those Policies. Capitalized terms used herein have the same
definition as in the prospectus for the Policy that is included in the current
registration statement on Form S-6 for the Policy (File No. 333-52570) as filed
with the Securities and Exchange Commission ("Commission" or "SEC").
I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND
ACCEPTANCE OF PREMIUMS
A. OFFER OF THE POLICIES, APPLICATION, INITIAL PREMIUMS, AND
ISSUANCE
1. Offer of the Policies. The Policies are offered and
issued for premiums pursuant to underwriting standards in
accordance with state insurance laws. Premiums for the Policies
are not the same for all Owners selecting the same Specified
Amount. Insurance is based on the principle of pooling and
distribution of mortality risks, which assumes that each Owner
pays charges commensurate with the Insured's mortality risk as
actuarially determined utilizing factors such as age, sex, and
premium class of the Insured. Uniform charges for all Insureds
would discriminate unfairly in favor of those Insureds
representing greater risk. Although there is no uniform charge
for all Insureds, there is a uniform charge for all Insureds of
the same premium class and same Specified Amount.
2. Application. Persons wishing to purchase a Policy
must complete an application and submit it to the Company
through an authorized agent of the Company. The application must
specify the name of the Insured and provide certain required
information about the Insured. The application also must specify
a premium payment plan, which contemplates level premiums at
specified intervals, designate Net Premium allocation
percentages, select the initial Specified Amount, and name the
Beneficiary. Before an application will be deemed complete so
that underwriting will proceed, the application must include the
Insured's signature and date of birth, a signed authorization, a
valid authorized agent's state code, and suitability
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information. The initial premium and Specified Amount selected
must meet certain minimums for the Policy.
3. Receipt of Application and Underwriting. Upon receipt
of a completed application in good order from an applicant, the
Company will follow its established insurance underwriting
procedures for life insurance designed to determine whether the
proposed Insured is insurable. This process may involve such
verification procedures as medical examinations and may require
that further information be provided about the proposed Insured
before a determination can be made.
The underwriting process determines the premium class to
which the Insured is assigned if the application is accepted.
The Company currently places Insureds in the following premium
classes, based on the Company's underwriting: a male or female
or unisex premium class, and a tobacco (smoker) or non-tobacco
(non-smoker) or preferred premium class. Juveniles (persons
under age 18) are placed in a male or female or unisex preferred
premium class. This original premium class applies to the
initial Specified Amount. The premium class may change upon an
increase in Specified Amount.
The Company reserves the right to reject an application
for any reason permitted by law. If an application is rejected,
any premium received will be returned, without interest.
4. Issuance of Policy. When the underwriting procedure has
been completed and the application has been approved, the Policy
is issued.
5. Initial Premium. An applicant must pay an initial
premium which, if not submitted with the application or during
the underwriting period, must be submitted when the Policy is
delivered. Conditional Insurance Coverage becomes effective as
of the date the Company receives the initial premium, but is
limited to $500,000 until the application is approved. Moreover,
if the proposed Insured is under the age of 15 days at death or
is more than 60 years old, no insurance shall take effect until
the policy is delivered. The Policy Date is used to measure
Policy Months, Policy Years, and Policy Anniversaries. The
Policy Date is the date coverage under this policy becomes
effective. If the Policy Date would have occurred on the 29th,
30th or 31st day of any month, the Company will designate the
28th day of the month as the Policy Date. For a premium to be
received in "good order", it must be received in cash (U.S.
currency) or by check payable in U.S. currency, and must clearly
identify the purpose for the payment.
The initial premium must be at least equal to the
minimum initial premium for a Policy. The minimum initial
premium for a Policy depends on a number of
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factors, such as the Insured's age, sex, and premium class of
the proposed Insured, the requested Specified Amount, and any
supplemental benefits.
B. ADDITIONAL PREMIUMS
1. Additional Premiums Permitted. Additional premiums may
be paid in any amount, and at any time, subject to the following
limits:
- A premium must be at least $25.
- Total premiums paid in a Policy Year may not exceed
guideline premium limitations for life insurance set
forth in the Internal Revenue Code.
2. Refund of Excess Premium Amounts. 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, the Company 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 premium
will be refunded. The Company will also refund premiums if
payment of a greater amount would increase the death benefit by
application of the death benefit ratio. The Company will monitor
Policies and will attempt to notify an Owner on a timely basis
if the Owner's Policy is in jeopardy of becoming a modified
endowment contract under the Internal Revenue Code.
3. Planned Premiums. At the time of application, each Owner
will select a plan for paying premiums at specified intervals.
The Owner may change the planned premium frequency and amount.
Any such change must comply with the premium limits for
additional premiums discussed above.
4. Allocating Premiums
a. Initial Premiums. Prior to the Investment Start
Date, the Company will place the initial premiums (less
charges) in the Premium Suspense Account. On the first
Valuation Date on or following the Investment Start Date
the Company will transfer the amounts in the Premium
Suspense Account to the Fixed Account and/or the
Separate Account in accordance with the allocation
instructions. The Investment Start Date is when we
allocate amounts in the Premium Suspense Account to the
Subaccounts and the Fixed Account in accordance with
your allocations instructions. The Investment Start Date
is the latest of : (a) the date of the application; (b)
the date all required medical examinstions or diagnostic
test are completed; (c)
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the date of issue requested in the application unless
underwriting is not yet completed; (d) the date of
underwriting approval; (e) the date we receive the first
premium at our Home Office; and (f) the date all other
requirements are met.
b. Other Premiums. Other premiums received by the
Company after the Investment Start Date will be
allocated in accordance with allocation instructions on
the Valuation Date on or following the date the premium
is received at the Home Office.
c. Electronic Funds Transfer. An Owner may arrange
with the Company to have monthly premiums paid via
pre-authorized, automatic deductions from the Owner's
checking account. The Company will notify the Owner's
bank of the automatic deduction, and funds will be
deducted from the Owner's checking account and credited
to the Owner's Policy on the next Valuation Date.
C. OVERPAYMENTS AND UNDERPAYMENTS In accordance with industry
practice, the Company will establish procedures to handle errors
in initial and additional premium payments to refund
overpayments and collect underpayments, except for de minimis
amounts. The Company will issue a refund check for any minimal
overpayment in excess of the guideline annual premium amount.
For larger overpayments, the Company will place the premium in a
suspense account to determine whether the premium actually is in
excess of the guideline annual premium or whether the premium
was intended for another policy issued by the Company. In the
case of an underpayment, if the Cash Surrender Value on a
Monthly Date is less than the Monthly Deduction to be made on
that date and the Policy is not in a No-Lapse Period, the Policy
will be in default and a grace period will begin. The Company
will notify Owners of the required premium that must be paid
prior to the end of the grace period.
D. PREMIUMS UPON INCREASE IN SPECIFIED AMOUNT, PREMIUMS DURING A
GRACE PERIOD, AND PREMIUMS UPON REINSTATEMENT
1. Premiums Upon Increase in Specified Amount. Generally,
no premium is required for an increase in Specified Amount.
However, depending on the Policy Value at the time of an
increase in the Specified Amount and the amount of the increase
requested, an additional premium or change in the amount of
planned premiums may be advisable. Also, the Minimum Monthly
Premium for the No- Lapse Period will increase and the No-Lapse
Period will begin anew. See "Changing the Specified Amount."
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2. Premiums During a Grace Period. If the Cash Surrender
Value on a Monthly Date is less than the amount of the Monthly
Deduction due on that date, and the Policy is not in a No-Lapse
Period, the Policy will be in default and a grace period will
begin. During the No-Lapse Period, the Policy will remain in
force, regardless of the sufficiency of the Cash Surrender
Value, if the total premiums paid less any withdrawals and
Indebtedness, is greater than or equal to the cumulative Minimum
Monthly Premium for the Policy. The Minimum Monthly Premium is
the amount necessary to guarantee coverage for a No-Lapse
Period. The Minimum Monthly Premium is based in part on the
No-Lapse Period selected (5 Policy Years, 20 Policy Years, 30
Policy Years or to Insured's age 100), sex, age, and premium
class of the Insured, the requested Specified Amount and any
supplemental benefits and riders.
- The grace period will end 61 days after the date on
which the Company sends a grace period notice stating
the amount required to be paid during the grace period
to the Owner's last known address and to any assignee of
record. The Policy does not lapse, and the insurance
coverage continues, until the expiration of this grace
period.
- If the grace period ends prior to the end of the
No-Lapse Period, the required premium must be large
enough to provide the lesser of (1) the Minimum Monthly
Premium required at the end of the grace period, or (2)
an amount large enough to provide an increase in the
Cash Surrender Value to cover the Monthly Deductions for
the grace period. If the grace period ends after the end
of the No-Lapse Period, the required premium must be
large enough to provide an increase in the Cash
Surrender Value to cover the Monthly Deductions for the
grace period.
- Failure to make a sufficient payment within the grace
period will result in lapse of the Policy without value
or benefits payable.
3. Premiums Upon Reinstatement. A Policy that lapses
without value may be reinstated at any time within five years
after lapse by submitting: evidence of the Insured's
insurability satisfactory to the Company; Written Notice
requesting reinstatement of the policy; the Insured's written
consent to reinstatement; payment or reinstatement of any
Indebtedness; and payment of enough premium to keep the Policy
in force for at least 3 months.
E. ALLOCATIONS OF NET PREMIUMS AMONG THE SEPARATE ACCOUNT AND THE
FIXED ACCOUNT
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1. Net Premium. The net premium is equal to the premium
paid less the premium expense charge.
2. The Separate Account. An Owner may allocate Net Premiums
to one or more of the Subaccounts of Peoples Benefit Variable
Life Account A (the "Separate Account"). The Separate Account
currently consists of twenty Subaccounts, the assets of each of
which are used to purchase shares of one portfolio from the
following mutual funds: Janus Aspen Series, Fidelity Variable
Insurance Products Funds, AIM Variable Insurance Funds and
Oppenheimer Variable Account Funds (the "Funds"). The Funds are
registered under the Investment Company Act of 1940 as open-end
management investment companies. Additional Subaccounts may be
added from time to time to invest in any of the portfolios of
the Funds or any other investment company.
When an Owner allocates an amount to a Subaccount
(either by Net Premium allocation, transfer of Policy Value or
repayment of a Policy loan) the Policy is credited with units in
that Subaccount. The number of units is determined by dividing
the amount allocated, transferred or repaid to the Subaccount by
the Subaccount's unit value for the Valuation Date when the
allocation, transfer or repayment is effected. A Subaccount's
unit value is determined for each Valuation Period after the
date of establishment (the unit value for each Subaccount was
arbitrarily set at $10 when the Subaccount was established) by
multiplying the value of a unit for a Subaccount for the prior
Valuation Period by the net investment factor for the Subaccount
for the current Valuation Period. The net investment factor is
an index used to measure the investment performance of a
Subaccount from one Valuation Period to the next (net of the
mortality and expense charge and any applicable taxes).
3. The Fixed Account. Owners also may allocate Net Premiums
to the Fixed Account, which guarantees a minimum fixed rate of
interest.
4. Allocations Among the Separate Account and the Fixed
Account. Net Premiums are allocated to the Subaccounts and the
Fixed Account in accordance with the following procedures:
a. General. In the application for the Policy, the
Owner will specify the percentage of Net Premium to be
allocated to each Subaccount of the Separate Account
and/or the Fixed Account. The percentage of each Net
Premium that may be allocated to any Subaccount or the
Fixed Account must be a whole number not less than 5%,
and the sum of the allocation percentages must be 100%.
Such allocation percentages may be changed at any time
(up to 4 times per Policy year) by the Owner submitting
a written
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notice or telephone instructions to the Home Office,
provided that the 5%/100% requirements described above
are met.
b. Allocation Prior to the Investment Start Date.
Prior to the Investment Start Date, all Net Premiums
will be allocated to the Premium Suspense Account. On
the Valuation Date on or following the Investment Start
Date, the amounts in the Premium Suspense Account will
be transferred to the Fixed Account and/or the Separate
Account in accordance with the allocation instructions.
c. Allocation After the Investment Start Date. Net
Premiums received after the Investment Start Date will
be allocated to the Subaccounts or Fixed Account in
accordance with the allocation percentages in effect on
the Valuation Date on or following the date that the
premium is received at the Home Office, unless other
instructions by written notice accompany the premium, in
which case the Net Premium will be allocated in
accordance with those instructions, provided such
instructions comply with the Company's allocation rules.
F. LOAN REPAYMENTS AND INTEREST PAYMENTS
1. Loan Repayments. The Owner may repay all or part of the
Indebtedness at any time while the Policy is in force and the
Insured is living. The Indebtedness is equal to the sum of all
outstanding Policy loans, including both principal and any
accrued interest. Repayments of Indebtedness must be sent to the
Home Office and will be credited as of the date received.
Repayments of Indebtedness will not be subject to a premium
expense charge. If the Death Benefit becomes payable while a
Policy loan is outstanding, the Indebtedness will be deducted in
calculating the Death Benefit.
2. Allocation for Repayment of Policy Loans. On the date
the Company receives a repayment of all or part of a loan, an
amount equal to the repayment will be transferred from the loan
reserve (part of the Fixed Account) to the Subaccounts and the
Fixed Account. If no direction is provided, the amount will be
allocated in accordance with the Owner's current allocation
instructions.
3. Interest on Loan Reserve. On each Monthly Date, the
amount in the loan reserve will be credited with interest at a
minimum guaranteed annual effective rate of 3%. See "Policy
Loans" below.
4. Notice of Excessive Indebtedness. If the Indebtedness
exceeds the Policy Value less the Surrender Charge on any
Monthly Date the Policy will lapse. The
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Company will send Owners and any assignee of record, notice of
the lapse. The notice will specify the amount that must be paid
to prevent termination. This amount must be paid to the Home
Office within a 61-day grace period to avoid termination. A
Policy that terminates due to excessive Indebtedness can be
reinstated.
II. TRANSFERS
A. TRANSFERS AMONG THE SUBACCOUNTS AND THE FIXED ACCOUNT
The Owner may transfer Policy Value between and among
the Subaccounts of the Separate Account and the Fixed Account by
written or telephone request to the Home Office.
In any Policy Year, the Owner may make an unlimited
number of transfers; however, the Company will impose a transfer
processing fee of $25 for each transfer in excess of 12 during
any Policy Year. For purposes of the transfer processing fee,
each transfer request is considered one transfer, regardless of
the number of Subaccounts affected by the transfer. We will
treat all transfer requests received on the dame day as a single
request. Any unused "free" transfers do not carry over to the
next year.
The minimum amount that may be transferred from each
Subaccount or the Fixed Account is $100 or the balance in the
Subaccount or the Fixed Account if less than $100. There is no
minimum amount that must remain in a Subaccount or the Fixed
Account following a transfer. If a transfer request does not
conform to this provision, the transfer will be rejected.
For any class of Policies, the Company reserves the
right to modify, restrict, suspend, or eliminate the transfer
privileges (including telephone transfer privileges) at any time
and for any reason.
B. DOLLAR COST AVERAGING
The dollar-cost averaging program permits Owners to
systematically transfer on a monthly basis a set dollar amount
from a "source" account (either the Fixed Account, the AIM VI
Government Securities Fund Subaccount, the Oppenheimer Bond
Fund/VA Subaccount or the Fidelity VIP Money Market Subaccount)
to any combination of Subaccounts and/or the Fixed Account.
Owners may elect to participate in the dollar-cost averaging
program at any time by sending the Company a written request. To
use the dollar-cost averaging program, Owners must transfer
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at least $100 from the source account and the source account
must have at least $5,000 in Policy Value. Once elected,
dollar-cost averaging remains in effect from the date the
Company receives the Owner's request until the value of the
source account is depleted, an election to participate in asset
rebalancing program is made or until the Owner cancels the
program by written request. There is no additional charge for
dollar-cost averaging. A transfer under this program is not
considered a transfer for purposes of assessing a transfer
processing fee. The Company reserves the right to discontinue
offering the dollar-cost averaging program at any time and for
any reason.
C. ASSET REBALANCING
An Owner may instruct the Company to automatically
rebalance (on a semi-annual basis) the Policy Value to return to
the percentages specified in the Owner's allocation
instructions. An Owner may elect to participate in the asset
rebalancing program at any time by sending the Company a written
request at the Home Office and having a minimum Policy Value of
at least $5,000. The percentage allocations must be in whole
percentages and be at least 5%. Subsequent changes to the
percentage allocations may be made at any time by written or
telephone instructions to the Home Office (up to 4 times per
Policy Year). Once elected, asset rebalancing remains in effect
from the date an Owner's written request is received until the
Owner instructs the Company to discontinue asset rebalancing or
a transfer is made to or from any Subaccount other than under a
scheduled rebalancing. Asset rebalancing is not available while
an Owner is participating in the dollar-cost averaging program.
There is no additional charge for using asset rebalancing, and
an asset rebalancing transfer is not considered a transfer for
purposes of assessing a transfer processing fee. The Company
reserves the right to discontinue offering the asset rebalancing
program at any time and for any reason.
D. TRANSFER ERRORS
In accordance with industry practice, the Company will
establish procedures to address and to correct errors in amounts
transferred among the Subaccounts and the Fixed Account, except
for de minimis amounts. The Company will correct errors it makes
and will assume any risk associated with the error. Owners will
not be penalized in any way for errors made by the Company. The
Company will take any gain resulting from the error.
III. "REDEMPTION" PROCEDURES
A. "FREE-LOOK" RIGHTS
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The Policy provides for an initial free-look period
during which an Owner may cancel the Policy by returning it to
the Company or to an agent of the Company who sold it before the
end of 10 days after the Policy is received. The free-look
period may be longer in some states. Upon returning the Policy
to the Company or to an authorized agent for forwarding to the
Home Office, the Policy will be deemed void from the beginning.
Within seven days after the Company or the Home Office receives
the cancellation request and Policy, the Company or the Home
Office will refund all payments made under the Policy (less any
withdrawals and Indebtedness).
B. SURRENDERS
1. Requests for Cash Surrender Value. The Owner may
surrender the Policy at any time for its Cash Surrender Value.
The Cash Surrender Value on any Valuation Date is the Policy
Value less any applicable surrender charge minus any
Indebtedness. The Cash Surrender Value will be determined by the
Company on the Valuation Date on or following the date on which
the Home Office receives all required documents, including a
satisfactory written request signed by the Owner. The written
request must include the Policy number, signature of the Owner,
and clear instructions regarding the request. The Company will
cancel the Policy as of the date the written request is received
at the Home Office and the Company will ordinarily pay the Cash
Surrender Value within seven days following receipt of the
written request and all other required documents.
2. Surrender of Policy -- Surrender Charges. If the Policy
is surrendered during the first 19 Policy Years or the first 19
years after an increase in Specified Amount, the Company will
deduct a surrender charge based on the Specified Amount at
issue, or increase, as applicable. The surrender charge will be
deducted before any surrender proceeds are paid. The surrender
charge is set forth in each Policy and depends on the Insured's
age at issue, or on the Policy Anniversary preceding an
increase, sex and premium class. It is calculated as an amount
per thousand of the Specified Amount at issue (or increase).
C. WITHDRAWALS
1. When Withdrawals are Permitted. At any time after the
first Policy Year, the Owner may, by submitting a written
request to the Home Office, withdraw a portion of the Cash
Surrender Value subject to the following conditions:
- The minimum amount that may be withdrawn is the lesser
of $500 or the Cash Surrender Value if less than $500
(withdrawal of the Cash Surrender Value will be
considered a Surrender of the Policy).
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- The amount withdrawn must be less than the then-current
Cash Surrender Value and may not reduce the Cash
Surrender Value below $500.
- No more than 1 withdrawal may be made during a Policy
Year.
- A withdrawal processing fee equal to the lesser of $25
or 2% of the amount withdrawn will be assessed on each
withdrawal. The withdrawal processing fee will be
deducted from the Policy Value along with the amount
requested to be withdrawn.
- When the Owner requests a withdrawal, the Owner must
direct how the withdrawal will be deducted from the
Policy Value otherwise, we will deduct the amount
(including any fee) from the Subaccounts and the Fixed
Account on a pro-rata basis (that is according to the
percentage of Policy Value contained in each Subaccount
and the Fixed Account).
- The Company generally will pay a withdrawal request
within seven days after the Valuation Date when the Home
Office receives the request and all the documents
required for such a payment.
- The Company may delay making a payment if: (1) the
disposal or valuation of the Separate Account's assets
is not reasonably practicable because the New York Stock
Exchange is closed for other than a regular holiday or
weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by
order permits postponement of payment to protect Peoples
Benefit Policy Owners. The Company also may defer making
payments attributable to a check that has not cleared,
and may defer payment of proceeds from the Fixed Account
for a withdrawal, surrender or Policy loan request for
up to six months from the date the request is received.
- If the Level Death Benefit is in effect, a withdrawal
will reduce the Specified Amount dollar-for-dollar. If
the Specified Amount reflects increases in the Initial
Specified Amount, the withdrawal will reduce first the
most recent increase, and then the next most recent
increase, if any, in reverse order, and finally the
Initial Specified Amount. If the Increasing Death
Benefit is in effect, the Specified Amount is unaffected
by the withdrawal.
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D. LAPSES
If a sufficient premium has not been received by the
61st day after a grace period notice is sent, the Policy will
lapse without value and no amount will be payable to the Owner.
E. MONTHLY DEDUCTIONS
On each Monthly Date, redemptions in the form of
deductions will be made from the Policy Value for the Monthly
Deduction, which is a charge compensating the Company for the
services and benefits provided, costs and expenses incurred, and
risks assumed by the Company in connection with the Policy. The
Monthly Deduction consists of four components: (a) the cost of
insurance charge; (b) a monthly administrative charge; (c) any
charges for additional benefits added by riders to the Policy;
(d) any charges for substandard premium class ratings. The
Monthly Deduction will be deducted from the Subaccounts of the
Separate Account and the Fixed Account on a pro rata basis.
1. Cost of Insurance Charge. The cost of insurance charge
is the primary charge for the death benefit provided by the
Policy. The cost of insurance charge is calculated monthly, and
depends on a number of variables, including the age, sex,
premium class, and Specified Amount of the Insured. The charge
varies from Policy to Policy and from Monthly Date to Monthly
Date. The charge is calculated separately for the Specified
Amount at issue and for any increase in the Specified Amount.
The cost of insurance charge is equal to the Company's
current monthly cost of insurance rate for the Insured
multiplied by the net amount at risk under the Policy for the
Specified Amount at issue or increase. The net amount at risk is
equal to the difference between (1) the death benefit at the
beginning of the month divided by 1.0024663, and (2) the Policy
Value at the beginning of the month.
The Company's current cost of insurance rates may be
less than the guaranteed rates. Current cost of insurance rates
will be determined based on the Company's expectations as to
future mortality, investment earnings, expenses and persistency.
These rates may change from time to time, but they will never be
more than the guaranteed maximum rates set forth in the Owner's
policy. The Company can change the rates without notice to
Owners. The maximum cost of insurance rates are based on the
Insured's age last birthday at the start of the Policy Year,
sex, and tobacco use. The guaranteed maximum rates are based on
the Commissioner's 1980 Standard Ordinary Smoker and Non-Smoker
Mortality Tables.
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2. Monthly Administrative Charge. The current monthly
administrative charge is $10 per month and is guaranteed never
to exceed $10 a month. This charge is designed to reimburse the
Company for expenses associated with underwriting applications,
increases in Specified Amount, riders, various overhead and
other expenses associated with providing the services and
benefits provided by the Policy, sales and marketing expenses,
and other costs of doing business, such as federal, state and
local premium and other taxes and fees.
3. Supplemental Benefit Charges. An Owner may add
supplemental benefits to the Policy. These benefits are made
available by the Company through riders to the Policy. If any
additional benefits are added to a Policy, charges for these
benefits will be deducted monthly as part of the Monthly
Deduction.
4. Substandard Rating Charges. If the Insured is placed in
a substandard premium class, an additional charge will be
deducted. This charge compensates the Company for the additional
mortality risk assumed.
F. DEATH BENEFITS
No change in death benefits will be permitted that will
result in the Policy being disqualified as a life insurance
policy under Section 7702 of the Internal Revenue Code.
1. Payment of Death Proceeds. As long as the Policy remains
in force, the Company will pay the death benefit to the
Beneficiary upon receipt at the Home Office of due proof of the
Insured's death. The death benefit is equal to the amount of
insurance determined under the Death Benefit Option in effect on
the date of the Insured's death, plus any supplemental death
benefit provided by riders, minus any Indebtedness on the date
of death and, if the date of death occurred during a grace
period, minus the past due Monthly Deductions. The death benefit
will be paid to the Beneficiary in a lump sum generally within
seven days after the Valuation Date by which the Company has
received at the Home Office all materials necessary to
constitute due proof of death. If a payment option is elected,
the death benefit will be applied to the option within seven
days after the Valuation Date by which the Company received due
proof of death and payments will begin under that option when
provided by the option.
2. Death Benefit Options. The Policy Value on the Insured's
date of death is used in determining the amount of insurance.
Under the Level Death Benefit, the death benefit is the greater
of (1) the Specified Amount, or (2) the applicable percentage
amount of the Policy Value based on the Insured's age at the
start of the current Policy Year, as determined using the table
of percentages prescribed by
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federal income tax law. Under the Increasing Death Benefit, the
death benefit is the greater of (1) the Specified Amount plus
the Policy Value, or (2) the applicable percentage amount of the
Policy Value based on the Insured's age at the start of the
current Policy Year, as determined using the table of
percentages prescribed by federal income tax law. The percentage
is 250% to age 40 and declines thereafter as the Insured's age
increases. A table of percentages is shown in the prospectus
under "Death Benefit Options." The Company may change the table
if the table of percentages currently in effect becomes
inconsistent with any federal income tax laws and/or
regulations.
Under the Level Death Benefit, the death benefit
ordinarily will not change. Under the Increasing Death Benefit,
the death benefit will vary directly with the investment
performance of the Policy Value.
3. Changing the Death Benefit Option. The Death Benefit
Option is selected in the application for the Policy. The Owner,
by written request submitted to, and received by, the Home
Office, may change the Death Benefit Option on the Policy
subject to the following rules:
- After the first Policy Year, the Death Benefit Option
may be changed only once each twelve month period;
- The resulting Specified Amount must be at least equal to
the Minimum Specified Amount;
- The effective date of the change will be the Monthly
Date on or following the date when the Company approves
the request;
- When a change from the Level Death Benefit to the
Increasing Death Benefit is made, the Specified Amount
will be decreased by the Policy Value on the effective
date of the change;
- When a change from the Increasing Death Benefit to Level
Death Benefit is made, the Specified Amount after the
change will be increased by the Policy Value on the
effective date of the change; and
- Only one Death Benefit Option change is allowed for a
Policy. Before approving a change in Death Benefit
Option, the Company will review the Guideline Annual
Premiums.
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4. Changing the Specified Amount. The initial Specified
Amount is set at the time the Policy is issued. The minimum
initial Specified Amount is $50,000 for issue ages 0 to 85. The
Owner may increase or decrease the Specified Amount from time to
time, subject to the following conditions:
- Only one change (increase or decrease) may be made
during any 12 month period.
Rules for Increases
- To increase the Specified Amount, the Owner must see an
agent authorized by the Company.
- Any increase in the Specified Amount must be at least
$10,000 and an application on a prescribed form must be
submitted. The Company may require additional evidence
of insurability. When an increase in Specified Amount is
requested, the Company conducts underwriting before
approving the increase to determine whether a different
premium class will apply to the increase. If an increase
in Specified Amount is approved, a different premium
class may apply to the increase, based on the Insured's
circumstances at the time of the increase.
- There must be enough Cash Surrender Value to make a
Monthly Deduction that includes the cost of insurance
for the increase.
- If approved, the increase in Specified Amount will
become effective on the next Monthly Date after the
Company approves the request.
- No increases will be allowed after the Policy
Anniversary when the Insured is age 85.
- Revised pages to the Policy will be sent to the Owner
indicating the amount of the increase, the effective
date of the increase, the premium class for the increase
and any changes in premium.
Rules for Decreases
- To decrease the Specified Amount, the Owner must submit
a written request to the Home Office.
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- The Specified Amount after the decrease must be at least
$50,000 for issue ages 0 to 85.
- The effective date of any decrease in Specified Amount
will be the next Monthly Date after written request is
processed.
- Any decrease will first be used to reduce the most
recent increase, then the next most recent increases,
then the initial Specified Amount.
- No surrender charge will be deducted upon a decrease in
Specified Amount.
- The surrender charge will not be reduced upon a decrease
in Specified Amount.
G. POLICY LOANS
1. Policy Loans. The Owner may obtain a Policy loan from
the Company at any time by submitting a written or telephone
request to the Home Office. The maximum Loan Amount is 90% of
the Policy's Cash Surrender Value less 6 months of Monthly
Deductions at the time of the loan. Policy loans will be
processed on the Valuation Date on or following the date the
request is received and loan proceeds generally will be sent to
the Owner within seven days thereafter.
2. Collateral for Policy Loans. When a Policy loan is made,
an amount equal to the loan proceeds plus interest in advance is
transferred from the Policy Value in the Subaccounts or Fixed
Account to the Loan Reserve. This withdrawal is made in
accordance with the owner's instructions.
3. Interest on Policy Loans. The Company charges interest
in advance on any outstanding Policy loan at an annual effective
interest rate of 5.66%. Interest is due and payable at the
beginning of each Policy Year while a Policy loan is
outstanding. If, on any Policy Anniversary, the interest accrued
has not been paid, the amount of the interest is added to the
loan and becomes part of the outstanding Indebtedness. The
Company will allocate annually the amount of unpaid interest
transferred from each Subaccount and the Fixed Account in
accordance with the current premium allocation.
4. Effect of Policy Loans. If the death benefit becomes
payable while a Policy loan is outstanding, the Indebtedness
will be deducted in calculating the death benefit. If the
Indebtedness exceeds the Policy Value, less any applicable
Surrender
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Charge, on any Monthly Date, the Policy will lapse. The Company
will send the Owner, and any assignee of record, notice of the
lapse. The Owner will have a 61-day grace period to submit a
sufficient payment to avoid termination.
H. PAYMENT OPTIONS
The Policy offers five methods of receiving proceeds
payable under the Policy. In addition to these methods, which
are described below, payment may be made by any other method to
which the Company agrees. If proceeds from a surrender or death
benefits are to be applied to a payment option, the proceeds
will usually be applied within seven days of the Valuation Date
on or following the date on which the Company receives the
request and all required documentation at the Home Office.
- Interest Payments. The Company will pay interest at
agreed upon intervals. Withdrawals of at least $100 may
be made at any time, and the Company will pay interest
to the date of withdrawal on the amount withdrawn.
- Payments for a Specified Period. The Company will make
equal payments at the end of each monthly interval for a
fixed number of years. The present value of any unpaid
payments may be withdrawn at any time.
- Life Income. The Company will make equal payments at the
end of each monthly interval for as long as the payee is
alive. The amount of each payment is based on the
payee's age and sex at the start of the first monthly
interval. The Company may require proof of the payee's
age and sex. The payee may not withdraw the present
value of the payments. If the payee dies during a
certain period, the Company will continue the payments
to the successor payee to the end of the certain period,
or the successor payee may have the present value of any
remaining payments (in the certain period) paid in one
sum.
- Payments of a Specified Amount. The Company will make
equal monthly payments until the amount put under this
method together with compound interest has been paid.
The unpaid balance may be withdrawn at any time.
- Joint and Survivor Life Income. The Company will make
equal payments at the end of each monthly interval as
long as at least one of the two payees is alive. The
Company will base each payment on the age and sex of
both payees at the start of the first monthly interval.
The Company may require
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proof of the age and sex of each payee. The payees may
not withdraw the present value of any payments.
I. LUMP SUM PAYMENTS BY THE COMPANY
Lump sum payments of withdrawals, surrenders or death
benefits from the Subaccounts will be made within seven days of
the Valuation Date on or following the date on which the Company
receives the request and all required documentation at the Home
Office. The Company may postpone the processing of any such
transactions for any of the following reasons:
1. If the disposal or valuation of the Separate Account's
assets is not reasonably practicable because the New York Stock
Exchange ("NYSE") is closed for trading other than for customary
holiday or weekend closings, or trading on the NYSE is otherwise
restricted, or an emergency exists, as determined by the
Securities and Exchange Commission ("SEC").
2. When the SEC by order permits a delay for the protection
of Owners.
3. If the payment is attributable to a check that has not
cleared.
The Company may defer for up to six months after the
date the Company receives the request, the payment of any
proceeds from the Fixed Account for a withdrawal, surrender or
Policy loan request.
J. EXCHANGE PRIVILEGE
At any time, while the Policy is in force during the
life of the Insured, the Owner may exchange the Policy without
evidence of insurability to a universal life policy on the life
of the Insured providing benefits that do not vary with the
investment experience of the Separate Account. This conversion
is accomplished by the transfer of the entire Policy Value in
the Subaccounts to the Fixed Account and the allocation of all
future premiums to the Fixed Account. No charge will be imposed
on the transfer in exercising this exchange privilege.
K. REDEMPTION ERRORS
In accordance with industry practice, the Company will
establish procedures to address and to correct errors in amounts
redeemed from the Subaccounts and the Fixed Account, except for
de minimis amounts. The Company will assume the risk of any
errors caused by the Company.
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L. MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex has been misstated in the
application, the Death Benefit under the Policy will be the
amount that would have been provided by the correct age and sex.
The adjustment will be based on the ratio of the correct cost of
insurance for the most recent Monthly Date for that benefit to
the cost of insurance charge that was made.
M. INCONTESTABILITY
The Policy limits the Company's right to contest the
Policy as issued or as increased, except for material
misstatements contained in the application, after it has been in
force during the Insured's lifetime for a minimum period,
generally for two years from the Issue Date of the Policy or
effective date of the increase.
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