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EXHIBIT 1.A.(11)
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES
FOR VARIABLE ADJUSTABLE LIFE INSURANCE POLICIES
ISSUED BY
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
This document sets forth the administrative procedures that will be
followed by Western Reserve Life Assurance Co. of Ohio (the "Company" or
"Western Reserve") in connection with issuing its variable adjustable life
insurance policy ("Policy") and accepting payments thereunder, transferring
assets held thereunder, and redeeming the interests of owners of the Policies
("Owners"). 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. 333-57681) as filed with the Securities and
Exchange Commission ("Commission" or "SEC").
PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND
ACCEPTANCE OF PREMIUMS
OFFER OF THE POLICIES, APPLICATION, INITIAL PREMIUMS, AND ISSUANCE
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
Face Amount. Insurance is based on the principle of pooling and distribution of
mortality risks, which assumes that each Owner pays premiums commensurate with
the Insured's mortality risk as actuarially determined utilizing factors such as
age, sex, and risk class of the Insured. Uniform premiums for all Insureds would
discriminate unfairly in favor of those Insureds representing greater risk.
Although there is no uniform premium for all Insureds, there is a uniform
premium for all Insureds of the same risk class, age, and sex and same Face
Amount.
Application. The Policy will be offered to corporations and partnerships
that meet the following conditions at issue:
- a minimum of five (5) Policies are issued, each on the life of a
different Insured; or
- the aggregate annualized first-year planned periodic premium for all
Policies is at least $100,000.
Persons wishing to purchase a Policy must complete an application and
submit it to the Administrative Office. 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 Face Amount (minimum $25,000), and name the Beneficiary.
Before an application will be deemed complete so that underwriting will
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proceed, the application must include the applicant's signature and the
Insured's date of birth, a signed authorization, and suitability information.
The premium and Face Amount selected must meet certain minimums for the Policy.
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 risk class to which the Insured is
assigned if the application is accepted. The Company currently places Insureds
in the following risk classes, based on the Company's underwriting: a male or
female or unisex risk class, and a tobacco or nontobacco risk class. This
original risk class applies to the initial Face Amount.
The risk class may change upon an increase in Face 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.
Issuing a Policy. The Policy is issued when the underwriting procedure has
been completed, the application has been approved, and an initial premium of
sufficient amount has been received.
Initial Premium. The Company may require an applicant to pay an initial
premium of sufficient amount which, if not submitted with the application or
during the underwriting period, must be submitted before the Policy will be
issued. The minimum initial premium for a Policy depends on a number of factors,
such as the age, sex, and risk class of the proposed Insured, the requested Face
Amount, and any supplemental benefits. Coverage becomes effective as of the date
the Company receives the premium. The Effective Date is used to measure Policy
Months, Policy Years, and Policy Anniversaries. If the Policy is issued as
applied for and the Company receives the premium in good order, the Effective
Date is the later of the application date or the date the Company receives the
premium. If the Effective 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
Effective 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.
ADDITIONAL PREMIUMS
Additional Premiums Permitted. Additional premiums may be paid in any
amount, and at any time, however, total premiums paid in a Policy Year may not
exceed guideline premium limitations for life insurance set forth in the
Internal Revenue Code.
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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 premium that
would make total premiums equal at most the maximum amount that may be paid
under the Policy. The Company may either refuse the entire premium, or refund
the excess premium.
The Company will also 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.
Planned Premiums. At the time of application, an Owner may select a plan
for paying premiums at specified intervals. The Owner may change the planned
premium frequency and amount by providing a written notice to the Company. Any
such change must comply with the premium limits for additional premiums
discussed above.
CREDITING PREMIUMS
Initial Premium. The initial premium will be credited to the Policy on the
Effective Date.
Additional Premiums. Additional premiums received by the Company prior to
the presumed end of the free-look period will be credited to the Policy on the
date it is received by the Company. Any additional premium received after the
presumed end of the free-look period will be credited to the Policy on the
Valuation Day it is received by the Company. The free-look period expires 20
days after the Owner receives the Policy (some states may require a longer
period).
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 and Single) 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 and
Single) Premium or whether the premium was intended for another policy issued by
the Company. In the case of an underpayment, if the Net Cash Value on a Monthly
Deduction Day is less than the monthly deduction to be made on that day, the
Policy will be in default and a late period will begin. The Company will notify
Owners of the required premium that must be paid prior to the end of the late
period.
PREMIUMS UPON INCREASE IN FACE AMOUNT, PREMIUMS DURING A LATE PERIOD, AND
PREMIUMS UPON REINSTATEMENT
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Premiums Upon Increase in Face Amount. Generally, no premium is required
for an increase in Face Amount. However, depending on the Cash Value at the time
of an increase
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in the Face Amount and the amount of the increase requested, an additional
premium or change in the amount of planned premiums may be advisable.
Premiums During a Late period. If the Net Cash Value on a Monthly
Deduction Day is less than the amount of the monthly deduction due on that date,
the Policy will be in default and a late period will begin.
- The late period will end 62 days after the date on which the Company
sends a late period notice stating the amount required to be paid
during the late 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 late period.
- Failure to make a sufficient payment within the late period will
result in lapse of the Policy without value or benefits payable.
Premiums Upon Reinstatement. A Policy that lapses without value may be
reinstated at any time within five years after lapse by submitting: a written
application for reinstatement by the Owner; evidence of the Insured's
insurability satisfactory to the Company; and payment of a premium that, after
deducting charges against the premium, is large enough to cover the next two
monthly deduction that will become due after the time of reinstatement.
- Upon reinstatement, the Cash Value will be the Cash Value at the
date of lapse minus any decrease in the amount of any charges
between the date of lapse and the date of reinstatement.
- The amount of any Indebtedness on the date of lapse will be
reinstated when reinstatement takes effect. No interest from the
date of lapse to the date of reinstatement is included in that
amount.
ALLOCATIONS OF NET PREMIUMS
Net Premium. The Net Premium is equal to the premium paid less the
applicable percent of premium load.
The Separate Account. An Owner may allocate Net Premiums to one or more of
the Subaccounts of WRL Series Life Corporate Account (the "Separate Account").
The Separate Account currently consists of eight Subaccounts, the assets of
which are used to purchase shares of a designated corresponding investment
portfolio of BT Insurance Funds Trust, Russell Insurance Fund, or
________________________________ (each a "Fund," together, the "Funds"). Each
Fund is registered under the Investment Company Act of 1940 as an open-end
management investment company. Additional Subaccounts may be added from time to
time to invest in any of the available portfolios of a Fund or any other
investment company.
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When an Owner allocates an amount to a Subaccount (either by Net Premium
allocation, transfer of Cash 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 Day when the allocation, transfer or
repayment is effected. A Subaccount's unit value is determined for each
Valuation Period 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. On the first Valuation Day, the unit value is started
with a nominal value of $1. The net investment factor is an index used to
measure the investment performance of a Subaccount from one Valuation Period to
the next.
Allocations to the Separate Account. Net Premiums are allocated to the
Subaccounts in accordance with the following procedures:
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. The percentage of each Net Premium that may be allocated to any
Subaccount must be a whole number, and the sum of the allocation percentages
must be 100%. Such allocation percentages may be changed at any time by the
Owner submitting a written notice to the Administrative Office, provided that
the requirements described above are met.
Allocation During Free-Look Period. Until the free-look period expires,
all Net Premiums will be allocated to the General Account. The free-look period
is a period expiring 20 days after an Owner receives a Policy (some states may
require a longer period), during which an Owner may cancel the Policy and
receive a refund equal to the greater of the Cash Value as of the date the
Policy is returned, or the premiums paid. At the end of the free-look period,
the Cash Value is transferred to and allocated to the Subaccounts based on the
Net Premium allocation percentages then in effect. For this purpose, the Company
assumes the free-look period starts 4 days after the Policy is sent to the
Owner.
Allocation After Free-Look Period. Additional Net Premiums received after
the free- look period expires will be credited to the Policy and allocated to
the Subaccounts in accordance with the allocation percentages in effect on the
Valuation Day that the premium is received at the Administrative Office.
Allocation percentages can be changed at any time.
LOAN REPAYMENTS AND INTEREST PAYMENTS
Repaying Indebtedness. The Owner may repay all or part of any Indebtedness
at any time while the Policy is in force and the Insured is living. Indebtedness
is equal to the sum of all outstanding Policy loans including both principal
plus any accrued interest. Loan repayments must be sent to the Administrative
Office and will be credited as of the date received. Loan repayments will not be
subject to a premium charge. If the Death Benefit becomes payable while a Policy
loan is outstanding, Indebtedness will be deducted in calculating the Death
Benefit.
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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 Account to the Subaccounts and allocated as directed
by the Owner when submitting the repayment. If no direction is provided, the
amount will be allocated in accordance with the Owner's current Net Premium
allocation percentages.
Interest on Loan Account. On each Monthly Deduction Day, the amount in the
Loan Account will be credited with interest at a minimum guaranteed annual
effective rate of 4%. On each Policy Anniversary, the interest earned is
transferred to the Subaccounts in accordance with the instructions for Net
Premium allocations then in effect.
Notice of Excessive Indebtedness. If Indebtedness exceeds the Cash Value
on any Monthly Deduction Day, the Policy will be in default. The Company will
send Owners and any assignee of record, notice of the default. The notice will
specify the amount that must be paid to prevent lapse. This amount must be paid
to the Administrative Office within a 31-day late period to avoid lapse. A
Policy that lapses due to excessive Indebtedness can be reinstated.
TRANSFERS
TRANSFERS AMONG THE SUBACCOUNTS
After the free-look period, by written request to the Administrative
Office, the Owner may transfer Cash Value between and among the Subaccounts of
the Separate Account. For this purpose, the Company assumes the free-look period
ends 24 days after the Policy is mailed to the Owner.
In any Policy Year, the Owner may make an unlimited number of transfers;
however, the Company reserves the right to impose a transfer charge of $25 for
each transfer in excess of 12 during any Policy Year. For purposes of the
transfer charge, each transfer request is considered one transfer, regardless
of the number of Subaccounts affected by the transfer. Any unused "free"
transfers do not carry over to the next year.
The minimum amount that may be transferred from each Subaccount is $500
or, if less, the balance in the Subaccount. The minimum amount that must remain
in a Subaccount following a transfer is $500. If a transfer request does not
conform to this provision, the transfer will be rejected.
The Company reserves the right to modify, restrict, suspend, or eliminate
the transfer privileges at any time and for any reason.
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ASSET REBALANCING
An Owner may instruct the Company to automatically rebalance (on a
quarterly, semi-annual or annual basis) the Cash 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 Administrative Office. The percentage
allocations must be in whole percentages. Subsequent changes to the percentage
allocations may be made at any time by written instructions to the
Administrative Office. Once elected, asset rebalancing remains in effect until
the Owner instructs the Company to discontinue asset rebalancing. 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 charge. The
Company reserves the right to discontinue offering the asset rebalancing program
at any time and for any reason.
TRANSFER ERRORS
In accordance with industry practice, the Company will establish
procedures to address and to correct errors in amounts transferred among the
Subaccounts, except for de minimis amounts. The Company will correct non-de
minimis 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.
REDEMPTION PROCEDURES
"FREE-LOOK" RIGHTS
The Policy provides for an initial free-look right during which an Owner
may cancel the Policy by returning it to the Company or to an agent of the
Company before the end of the 20 day free-look period. The Company deems the
free-look period to being 4 days after the Policy is mailed to the Owner. The
free-look period may be longer in some states. Upon returning the Policy to the
Company, the Policy will be deemed void from the beginning. Within seven days
after the Company or the Administrative Office receives the cancellation request
and Policy, the Company or the Administrative Office will pay a refund equal to
the greater of the Cash Value as of the date the Policy is returned, or the
total premiums received.
SURRENDERS
Requests for Net Cash Value. The Owner may surrender the Policy at any
time for its Net Cash Value. The Net Cash Value on any Valuation Day is the Cash
Value less any Indebtedness. The Net Cash Value will be determined by the
Company on the Valuation Day the Administrative 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 Administrative Office and the
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Company will ordinarily pay the Net Cash Value within seven days following
receipt of the written request and all other required documents. The Policy
cannot be reinstated after it is surrendered.
WITHDRAWALS
When Withdrawals are Permitted. At any time after the first Policy Year,
the Owner may withdraw a portion of the Net Cash Value subject to the following
conditions by submitting a written request to the Administrative Office:
- The minimum amount that may be withdrawn is $500.
- The maximum amount withdrawn is the amount that would leave at least
$500 in the Subaccount from which the withdrawal is made.
- A withdrawal processing fee equal to the lesser of $25 or 2% of the
amount withdrawn will be assessed on each withdrawal made during a
Policy Year. The withdrawal processing fee will be deducted from the
Net Cash Value along with the amount requested to be withdrawn.
- When the Owner requests a withdrawal, the Owner may direct how the
withdrawal will be deducted from the Net Cash Value. If no
directions are provided, the withdrawal will be deducted from the
Net Cash Value in the Subaccounts on a pro-rata basis.
- The Company generally will pay a withdrawal request within seven
days after receipt by the Administrative Office of 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 Owners. The Company
also may defer making payments attributable to a check that has not
cleared.
- If Life Insurance Benefit Option 1 is in effect, a withdrawal will
reduce the Face Amount dollar-for-dollar. If the Face Amount
reflects increases in the Initial Face 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 Face
Amount. If Life Insurance Benefit Option 2 is in effect, the Face
Amount is unaffected by the withdrawal. If Life Insurance Benefit
Option 3 is in effect and the withdrawal is greater than the sum of
the premiums paid, the
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Face Amount is reduced by the amount of the withdrawal minus the sum
of the premiums paid; otherwise the Face Amount is not reduced.
LAPSES
If a sufficient premium has not been received by the 62nd day after a late
period notice is sent, the Policy will lapse without value and no amount will be
payable to the Owner.
MONTHLY DEDUCTIONS
On each Monthly Deduction Day, redemptions in the form of deductions will
be made from the Cash 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 Policy charge; (c) any charges for additional
benefits added by riders to the Policy; and (d) a factor representing the
mortality and expense risk charge. The monthly deduction will be deducted from
the Subaccounts of the Separate Account on a pro rata basis.
Cost of Insurance Charge. The cost of insurance charge is the primary
charge for the life insurance benefit provided by the Policy. The cost of
insurance charges are calculated monthly, and depend on a number of variables,
including the age, sex and risk class of the Insured. The charge varies from
Policy to Policy and from Monthly Deduction Day to Monthly Deduction Day. The
charge is calculated separately for the Face Amount at issue and for any
increase in the Face Amount.
The cost of insurance charge is calculated for the Face Amount at issue
and for any increase in Face Amount. The monthly cost of insurance charge is
equal to (1) multiplied by the result of (2) minus (3), where:
(1) is the monthly cost of insurance rate per $1,000 of insurance;
(2) is the number of thousands of Life Insurance Benefit for the Policy
(as defined in the applicable Option 1, Option 2 or Option 3)
divided by 1.0032737; and
(3) is the number of thousands of Cash Value as of the Monthly Deduction
Day (before this cost of insurance, and after the mortality and
expense risk charge, any applicable Policy charge and the cost of
any riders are subtracted).
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
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the Policy Year, sex, and tobacco use. The Commissioners 1980 Standard Ordinary
Non-Smoker Table applies if the Insured is classified as non-tobacco; otherwise,
the Commissioners 1980 Standard Ordinary Smoker Mortality Table applies.
Modifications are made for risk classes other than standard.
Monthly Policy Charge. During the first Policy Year, the monthly Policy
charge is $16.50 per month. During subsequent Policy Years, the monthly Policy
charge currently is $4 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 Face Amount, and 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.
Supplemental Benefit Charges. An Owner may add supplemental benefits to
the Policy. Such 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.
Mortality and Expense Risk Charge. The Company deducts a monthly charge
from the Cash Value to compensate it for mortality and expense risks that it
assumes under the Policy. The monthly charge is approximately equivalent to an
effective annual rate of 0.45% of an average of the Cash Value during the Policy
Month preceding the Monthly Deduction Day. The guaranteed rate for this charge
is approximately equivalent to an effective annual rate of 0.90% of an average
of the Cash Value during the Policy Month preceding the Monthly Deduction Day.
LIFE INSURANCE BENEFITS
Payment of Life Insurance Benefit Proceeds. As long as the Policy remains
in force, the Company will pay the life insurance benefit to the Beneficiary
upon receipt at the Administrative Office of due proof of the Insured's death.
The life insurance benefit is equal to the amount of insurance determined under
the Life Insurance Benefit Option in effect on the date of the Insured's death,
plus any supplemental life insurance benefit provided by riders, minus any
Indebtedness on that date and, if the date of death occurred during a late
period, minus the past due monthly deductions. The life insurance benefit will
be paid to the Beneficiary in a lump sum generally within seven days after the
Valuation Day by which the Company has received at the Administrative 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 Day by which the Company received due proof of death and payments
will begin under that option when provided by the option.
Life Insurance Benefit Options. The Cash Value on the Insured's date of
death is used in determining the amount of insurance.
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- Under Option 1, the Life Insurance Benefit is the greater of the
Face Amount of the Policy or the applicable percentage (the
"limitation percentage") times the Cash Value on the date of death.
Accordingly, under Option 1 the Life Insurance Benefit will remain
level unless the limitation percentage times the Cash Value exceeds
the Face Amount, in which case the amount of the Life Insurance
Benefit will vary as the Cash Value varies.
- Under Option 2, the Life Insurance Benefit is equal to the greater
of the Face Amount plus the Cash Value of the Policy or the
limitation percentage times the Cash Value on the date of death.
Accordingly, under Option 2 the amount of the Life Insurance Benefit
will always vary as the Cash Value varies.
- Under Option 3, the Life Insurance Benefit is equal to the greater
of the Face Amount plus cumulative premiums paid less cumulative
partial withdrawals, or the corridor percentage times the Cash
Value. Accordingly, under Option 3, the amount of Life Insurance
Benefit will always vary with the premiums paid and partial
withdrawals taken, and may vary as the Cash Value varies.
Changing the Life Insurance Benefit Option. The Life Insurance Benefit
Option is selected in the application for the Policy. The Owner, by written
request submitted to the Company or the Administrative Office, may change the
Life Insurance Benefit Option on the Policy subject to the certain rules;
however, no change will be permitted that may result in the Policy being
disqualified as a life insurance policy under Section 7702 of the Code. The
effective date of any change will be the Monthly Deduction Day on or after the
Company approves the request. No charges will be imposed for making a change in
Life Insurance Benefit Option. If the Life Insurance Benefit Option is changed
from Option 2 to Option 1, the Face Amount will be increased by an amount equal
to the Cash Value on the effective date of change. If the Life Insurance Benefit
Option is changed from Option 1 to Option 2, the Face Amount will be decreased
by an amount equal to the Cash Value on the effective date of the change. If the
Life Insurance Benefit Option is changed from Option 3 to Option 1, the Face
Amount will be increased by the sum of the premiums paid less the sum of partial
withdrawals. If the Life Insurance Benefit Option is changed from Option 1 to
Option 3, the Face Amount will be decreased by the sum of the premiums paid less
the sum of partial withdrawals. The Company will not allow changes between
Options 2 and 3.
Changing the Face Amount. Subject to certain limitations, an Owner may
increase or decrease the Face Amount of a Policy. A change in Face Amount may
affect the net amount at risk, which may affect an Owner's cost of insurance
charge. A change in Face Amount could also have Federal income tax consequences.
Decreases. Any decrease in the Face Amount will become effective on the
Monthly Deduction Day on or following receipt of a written request from the
Owner by the Company at the Administrative Office. No requested decrease in the
Face Amount will be permitted during the first Policy Year. The Face Amount
remaining in force after any requested
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decrease may not be less than $25,000. If, following the decrease in Face
Amount, the Policy would not comply with the maximum premium limitations
required by Federal tax law, the decrease may be limited to the extent necessary
to meet these requirements.
Increases. For an increase in the Face Amount, written application must be
submitted. The Company will also require that additional evidence of
insurability be submitted. The Company reserves the right to decline any
increase request. Any increase will become effective on the Monthly Deduction
Day after the Company approves the request for the increase. No increase in the
Face Amount will be permitted during the first Policy Year. An increase need not
be accompanied by an additional premium, but there must be sufficient Net Cash
Value to cover the next Monthly Deduction after the increase becomes effective.
The initial Face Amount is set at the time the Policy is issued. The minimum
initial Face Amount is $50,000. The Owner may increase or decrease the Face
Amount from time to time, however, no change will be permitted that may result
in the Policy being disqualified as a life insurance policy under Section 7702
of the Code:
POLICY LOANS
Policy Loans. The Owner may obtain a Policy loan from the Company at any
time after the first Policy Year by submitting a written request to the
Administrative Office. The maximum loan amount is 90% of the Cash Value at the
time of the loan. Policy loans will be processed as of the Valuation Day the
request is received and loan proceeds generally will be sent to the Owner within
seven days thereafter.
Collateral for Policy Loans. When a Policy loan is made, an amount equal
to the requested loan amount plus interest in advance for one year is withdrawn
from each of the Subaccounts on a pro-rata basis (unless you specify otherwise)
and transferred to the Loan Account until the loan is repaid.
Interest on Policy Loans. The Company charges interest daily on any
outstanding Policy loan at an effective annual interest rate of 6%. Interest is
due and payable at the end of each Policy Year while a Policy loan is
outstanding. On each Policy Anniversary, any unpaid amount of loan interest
accrued since the last Policy Anniversary becomes part of the outstanding loan.
An amount equal to the unpaid amount of interest is transferred to the Loan
Account from each Subaccount on a pro-rata basis according to the respective
values in each Subaccount.
Effect on Life Insurance Benefit. If the life insurance benefit becomes
payable while a Policy loan is outstanding, the Indebtedness will be deducted in
calculating the life insurance benefit. If the Indebtedness exceeds the Cash
Value on any Monthly Deduction Day, the Policy will be in default. The Company
will send the Owner, and any assignee of record, notice of the default. The
Owner will have a 31-day late period to submit a sufficient payment to avoid
lapse.
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PAYMENT OPTIONS
The Policy offers four 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 life insurance benefits are to be applied to a payment option, the
proceeds will usually be applied within seven days of the Valuation Day on which
the Company receives the request and all required documentation at the
Administrative Office.
- Fixed Period Method. The Company will make equal payments, including
interest at the rate of at least 4% per year, 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 Method. 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 paid in one sum.
- Joint Life Income Method. 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, and
may require proof of the Age and sex of each payee. The payees may
not withdraw the present value of any payments.
REDEMPTION ERRORS
In accordance with industry practice, the Company will establish
procedures to address and to correct errors in amounts redeemed from the
Subaccounts, except for de minimis amounts. The Company will assume the risk of
any non de minimus errors caused by the Company.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex has been misstated in the application, the
Life Insurance 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 Deduction Day for
that benefit to the cost of insurance charge that was made.
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INCONTESTABILITY
The Policy limits the Company's right to contest the Policy as issued or
as increased, for reasons of 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 Effective Date of the Policy or
effective date of the increase.
LIMITED LIFE INSURANCE BENEFIT
The Policy limits the Life Insurance Benefit if the Insured dies by
suicide generally within two years after the Effective Date of the Policy or
effective date of the increase.
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