EXHIBIT 99.6
THE MANUFACTURERS INSURANCE COMPANY (U.S.A.)
DESCRIPTION OF PURCHASE, TRANSFER AND REDEMPTION PROCEDURES
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
(1933 FILE ACT NO. 333-85284)
This document sets forth, as required by Rule 6e-3(T)(b)(12)(iii), the
administrative procedures that will be followed by The Manufacturers Insurance
Company of America (the "Company") and any office the Company designates for the
receipt of payments and processing of policyowner requests (the "Service
Office") in connection with the issuance of its flexible premium variable
universal life insurance policies described in this registration statement (1933
Act file no. 333-85284) (the "Policy"), the transfer of assets held thereunder,
and the redemption by policyowners of their interests in the Policy.
I. ISSUING A POLICY
A. PREMIUMS
This Policy is a flexible premium variable universal life insurance
policy. The Policy permits the policyowner to pay flexible premiums.
After payment of the initial premium, premiums may be paid at any time
and in any amount during the lifetime of the insured. A Policy must
satisfy one of two tests to qualify as a life insurance contract for
purpose of Section 7702 of the Internal Revenue Code of 1986. At the
time of application, the policy owner must choose either the Cash Valve
Accumulate test or the Guideline Premium test. The test may not be
changed once the Policy is issued. A Policy will be issued with a
planned premium, which is based on the amount of premium the
policyowner wished to pay. If the Policy is issued under the Guideline
premium test, in no event may the total of all premiums paid exceed the
then-current maximum premium limitations established by federal income
tax law for Policies that qualify as life insurance. If, at any time, a
premium is paid which would result in total premiums exceeding the
above maximum premium limitation, the Company will only accept that
portion of the premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount will be
returned and no further premiums will be accepted until allowed by the
then-current maximum premium limitation. The Company also reserves the
right to request evidence of insurability of a premium payment would
result in an increase in the death benefit that is greater than the
increase in Policy Value.
B. UNDERWRITING
The acceptance of an application is subject to the Company's
underwriting rules, and the Company reserves the right to request
additional information or to reject an application for any reason. The
Company will require satisfactory evidence of insurability. This may
include medical exams and other information. Persons failing to meet
standard underwriting classification may be eligible for a Policy with
an additional rating assigned to it.
C. APPLICATION
To purchase a Policy, an applicant must submit a completed application.
A Policy will not be issued until the underwriting process has been
completed to the Company's satisfaction.
Policies may be issued on a basis which does not distinguish between
the insured's sex, with prior approval from the Company. Generally, a
Policy will only be issued on the lives of insureds from ages 0 through
90.
Each Policy is issued with a Policy Date, an Effective Date and an
Issue Date.
The POLICY DATE is the date coverage takes effect under the Policy,
provided the Company receives the minimum initial premium at its
Service Office, and is the date from which the first monthly deductions
are calculated and from which Policy Years, Policy Months and Policy
Anniversaries are determined.
The EFFECTIVE DATE is the date the underwriters approve issuance of the
Policy. If the Policy is approved without the initial premium, the
Effective date will be the date the Company receives at least the
minimum initial premium at its Service Office. The Company will take
the first Monthly Deduction on the Effective Date.
The ISSUE DATE is the date the Company issued the Policy. It is the
date from which the suicide and validity provisions are measured.
If an application accepted by the Company is not accompanied by a check
for the initial premium and no request to backdate the Policy has been
made:
(i) the Policy Date and the Effective Date will be the date the Company
receives the check at its Service Office;
(ii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Issue
Date. If the premium is not paid or if the application is rejected, the
Policy will be canceled and any partial premiums paid will be returned
to the applicant.
D. MINIMUM INITIAL FACE AMOUNT
The Company will generally issue a Policy only if it has a Face Amount
of at least $100,000 [$500,000].
E. BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon
request, by assigning a Policy Date earlier than the date the
application is signed. However, in no event will a Policy be backdated
earlier than the earliest date allowed by state law, which is generally
three months to one year prior to the date of application for the
Policy. Monthly deductions will be made for the period the Policy Date
is backdated. Regardless of whether or not a policy is backdated, Net
Premiums (premium paid less premium load) received prior to the
Effective Date of a Policy will be credited with interest from the date
of
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receipt at the rate of return then being earned on amounts allocated to
the Money Market portfolio. As of the Effective Date, the premiums paid
plus interest credited, net of the premium load, will be allocated
among the Investment Accounts (as described below under ("Policy Value
- Investment Accounts") and/or Fixed Account in accordance with the
policyowner's instructions unless such amount is first allocated to the
Money Market Trust for the duration of the Right to examine Period.
F. TEMPORARY INSURANCE
In accordance with the Company's underwriting practices, temporary
insurance coverage may be provided under the terms of a Temporary
Insurance Agreement. Generally, temporary life insurance may not exceed
$1,000,000 and may not be in effect for more than 90 days. This
temporary insurance coverage will be issued on a conditional receipt
basis, which means that any benefits under such temporary coverage will
only be paid if the life insured meets the Company's usual and
customary underwriting standards for the coverage applied for.
The acceptance of an application is subject to the Company's
underwriting rules, and the Company reserves the right to request
additional information or to reject an application for any reason.
Persons failing to meet standard underwriting classification may be
eligible for a Policy with an additional rating assigned to it.
G. RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after it is
received. Some states provide a longer period of time to exercise this
right. The Policy will indicate if the policyowner has a longer time.
The Policy can be mailed or delivered to the Company's agent who sold
it or to the Service Office. Immediately on such delivery or mailing,
the Policy shall be deemed void from the beginning. Within seven days
after receipt of the returned Policy at its Service Office, the Company
will refund to the policyowner an amount equal to either:
(1) the amount of all premiums paid or
(2) (a) the difference between payments made and amounts allocated
to the Separate Account and the Fixed Account; plus
(b) the value of the amount allocated to the Separate Account
and the Fixed Account as of the date the returned Policy is
received by the Company; minus
(c) any partial withdrawals made and policy loans taken.
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Whether the amount described in (1) or (2) is refunded depends on the
requirements of the applicable state.
If a policyowner requests an increase in face amount which results in
new surrender charges, he or she will have the same rights as described
above to cancel the increase. If canceled, the Policy Value and the
surrender charges will be recalculated to the amounts they would have
been had the increase not taken place. A policyowner may request a
refund of all or any portion of premiums paid during the free look
period, and the Policy Value and the surrender charges will be
recalculated to the amounts they would have been had the premiums not
been paid.
The Company reserves the right to delay the refund of any premium paid
by check until the check has cleared.
H. PREMIUM ALLOCATION
No premiums will be accepted prior to receipt of a completed
application by the Company. All premiums received prior to the
Effective Date of the Policy will be held in the general account of the
Company and credited with interest from the date of receipt at the rate
of return then being earned on amounts allocated to the Money Market
Trust.
On the later of the Effective Date or the date the premium is received,
the Net Premiums paid plus interest credited will be allocated among
the Investment Accounts or the Fixed Account in accordance with the
policyowner's instructions, unless such amount is first allocated to
the Money Market Trust for the duration of the Right to Examine Period.
All Net Premiums received on or after the Effective Date will be
allocated among Investment Accounts or the Fixed Account as of the
business day the premiums were received at the Service Office. Monthly
deductions are due on the Policy Date and at the beginning of each
policy month thereafter. However, if due prior to the Effective Date,
they will be taken on the Effective Date instead of the dates they were
due.
Premiums may be allocated to either the Fixed Account for accumulation
at a rate of interest determined by the Company (the rate of interest
will be at least 3%) or to one or more of the Investment Accounts for
investment in the Portfolio shares held by the corresponding
sub-account of the Separate Account. Allocations among the Investment
Accounts and the Fixed Account are made as a percentage of the premium.
The percentage allocation to any account may be any number between zero
and 100, provided the total allocation equals 100. A policyowner may
change the way in which premiums are allocated at any time without
charge. The change will take effect on the date a written request for
change satisfactory to the Company is received at the Service Office.
Changes may also be made by telephone if a valid authorization form is
on file with us.
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II. DEATH BENEFIT OPTION CHANGES
The death benefit option may be changed once each Policy Year after the
first Policy Year. The change will occur on the first day of the next
Policy month after a written request for a change is received at the
Service Office. The Company reserves the right to limit a request for a
change if the change would cause the Policy to fail to qualify as life
insurance for tax purposes. The Company will not allow a change in the
death benefit option if it would cause the Face Amount to decrease
below $100,000 [$500,000].
No new Surrender Charges will apply to an increase in Face Amount
solely due to a change in the death benefit option.
A change in the death benefit option will result in a change in the
Policy's Face Amount, in order to avoid any change in the amount of the
death benefit, as follows:
Change from Option 1 to Option 2
The new Face Amount will be equal to the Face Amount prior to the
change minus the Policy Value on the date of the change.
Change from Option 2 to Option 1
The new Face Amount will be equal to the Face Amount prior to the
change plus the Policy Value on the date of the change.
III. FACE AMOUNT CHANGES
Subject to the limitations stated in the prospectus for the Policy and
stated in this memorandum, a policyowner may, upon written request,
increase or decrease the Face Amount of the Policy. The Company
reserves the right to limit a change in Face Amount so as to prevent
the Policy from failing to qualify as life insurance for tax purposes.
A. INCREASE IN FACE AMOUNT
Increases in Face Amount are subject to satisfactory evidence of
insurability. An increase in Face Amount may be made once each Policy
Year after the first Policy Year. Any increase in Face Amount must be
at least $50,000 or such other Minimum Face Amount Increase as the
Company may establish on 90 days written notice to the Policyowner. An
increase will become effective at the beginning of the Policy Month
following the date the Company approves the requested increase. The
Company reserves the right to refuse a requested increase if the life
insured's Attained Age (life insured's age plus the number of whole
years that have elapsed since the Policy Date) at the effective date of
the increase would be greater than the maximum issue age for new
Policies at that time.
B. NEW SURRENDER CHARGES FOR AN INCREASE
An increase in Face Amount will result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if
a new Policy were being purchased for the increase in Face Amount. The
premiums
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attributable to the new Face Amount will not exceed the Surrender
Charge Premium Limit associated with that increase. There will be no
new surrender charges associated with restoration of a prior decrease
in Face Amount. As with the purchase of a Policy, a policyowner will
have free look right with respect to any increase resulting in new
surrender charges.
An additional premium may be required for a Face Amount increase, and a
new No-Lapse Guarantee Premium will be determined, if the No-Lapse
Guarantee is in effect at the time of the face amount increase. (See
"Lapse and Reinstatement - No-Lapse Guarantee" below)
C. INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in
Face Amount, these prior decreases will be restored first. The
insurance coverage eliminated by the decrease of the oldest Face Amount
will be deemed to be restored first.
D. DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the
first Policy Year. Any decrease in Face Amount must be at least $50,000
or such other Minimum Face Amount Decrease as the Company may establish
on 90 days written notice to the policyowner. A written request from a
policyowner for a decrease in the Face Amount will be effective at the
beginning of the Policy Month following the date the Company approves
the requested decrease. If there have been previous increases in Face
Amount, the decrease will be applied to the most recent increase first
and thereafter to the next most recent increases successively. Under no
circumstances may the sum of all decreases cause the Policy to fall
below the minimum Face Amount of $100,000 [$500,000].
E. CHANGING BOTH THE FACE AMOUNT AND THE DEATH BENEFIT OPTION
If a change to both the Face Amount and the death benefit option are
requested in the same month, the death benefit option change shall be
deemed to occur first.
IV. POLICY VALUE
A. DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the
policyowner by making a policy loan or partial withdrawal, or upon
surrender of the Policy. The Policy Value may also affect the amount of
the death benefit. The Policy Value at any time is equal to the sum of
the values in the Investment Accounts, the Fixed Account, and the Loan
Account.
B. INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for each
sub-account of the Separate Account to which net premiums or transfer
amounts have been allocated. Each Investment Account under a Policy
measures the interest of the Policy in the corresponding sub-account.
The value of the Investment Account
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established for a particular sub-account is equal to the number of
units of that sub-account credited to the Policy times the value of
such units.
C. FIXED ACCOUNT
Amounts in the Fixed Account do not vary with the investment
performance of any sub-account. Instead, these amounts are credited
with interest at a rate determined by the Company.
D. LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account.
Amounts in the Loan Account do not vary with the investment performance
of any sub-account. Instead, these amounts are credited with interest
at a rate which is equal to the amount charged on the outstanding
Policy Loan (the aggregate amount of policy loans, including borrowed
and accrued interest, less any loan repayments) less the Loan Interest
Credited Differential set forth in the Policy. (See "Policy Loans -
Interested Credited to Loan Account" below)
E. UNITS AND UNIT VALUES
Crediting and Canceling Units
Units of a particular sub-account are credited to a Policy when net
premiums are allocated to that sub-account or amounts are transferred
to that sub-account. Units of a sub-account are canceled whenever
amounts are deducted, transferred or withdrawn from the sub-account.
The number of units credited or canceled for a specific transaction is
based on the dollar amount of the transaction divided by the value of
the unit on the Business Day* on which the transaction occurs. The
number of units credited with respect to a premium payment will be
based on the applicable unit values for the Business Day on which the
premium is received at the Service Office, except for any premiums
received before the Effective Date. For premiums received before the
Effective Date, the values will be determined on the Effective Date.
Units are valued at the end of each Business Day. When an order
involving the crediting or canceling of units is received after the end
of a Business Day, or on a day which is not a Business Day, the order
will be processed on the basis of unit values determined on the next
Business Day. Similarly, any determination of Policy Value, Investment
Account value or death benefit to be made on a day which is not a
Business Day will be made on the next Business Day.
*Business Day is any day that the New York Stock Exchange is open for
trading. The Company will deem each Business day to end at the close of
regularly scheduled trading of the New York Stock Exchange (currently
4:00 p.m. Eastern Time) on that day.
Unit Values
The value of a unit of each sub-account was initially fixed at $10.00
or $12.00. For each subsequent Business Day the unit value for that
sub-account is determined by multiplying the unit value for the
immediately preceding Business Day by the net investment factor for the
that sub-account on such subsequent Business Day.
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The net investment factor for a sub-account on any Business Day is
equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Portfolio shares held by
that sub-account as of the end of such Business Day before any policy
transaction are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by
that sub-account as of the end of the immediately preceding Business
Day after all policy transaction were made for that day.
The value of a unit may increase, decrease, or remain the same,
depending on the investment performance of a sub-account from one
Business Day to the next.
V. TRANSFER OF POLICY VALUE
A. GENERAL TRANSFERS
At any time, a policyowner may transfer Policy Value (the sum of the
values in the Loan Account, the Fixed Account and the Investment
Accounts) from one sub-account to another or to the Fixed Account.
Transfers involving the Fixed Account are subject to certain
limitations noted below. Transfer requests must be in writing in a
format satisfactory to the Company, or by telephone if a currently
valid telephone transfer authorization form is on file.
The Company reserves the right to impose limitations on transfers,
including the maximum amount that may be transferred. The Company
reserves the right to modify or terminate the transfer privilege at any
time in accordance with applicable Transfer privileges are also subject
to any restrictions that may be imposed by any underlying trust. In
addition, the Company reserves the right to defer the transfer
privilege at any time when the Company is unable to purchase or redeem
shares of the trust.
While the Policy is in force, the policyowner may transfer the Policy
Value from any of the Investment Accounts to the Fixed Account without
incurring transfer charges and without being subject to the twelve
transfer limit described below:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in
the investment objectives of any of the sub-accounts or within
60 days of the date of notification of such change, whichever
is later.
A policyowner may make up to twelve transfers each policy year free of
charge. Additional transfers in each policy year may be made at a cost
of per transfer as set forth in the currently effective prospectus.
This charge will be deducted from the Investment Account or the Fixed
Account to which the transfer is being made. All transfer requests
received by the Company on the same Business Day are treated as a
single transfer request.
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The maximum amount that may be transferred from the Fixed Account in
any one policy year is the greater of $500 or 15% of the Fixed Account
Value at the previous Policy Anniversary. Any transfer which involves a
transfer out of the Fixed Account may not involve a transfer to the
Investment Account for the Money Market Trust.
Although failure to follow reasonable procedures may result in the
Company being liable for any losses resulting from unauthorized or
fraudulent telephone transfers, the Company will not be liable for
following instructions communicated by telephone that the Company
reasonably believes to be genuine. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone are
genuine. Such procedures shall consist of confirming that a valid
telephone authorization form is on file, tape recording of all
telephone transactions and providing written confirmation thereof.
VI. POLICY SURRENDER AND PARTIAL WITHDRAWALS
A. POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any
time while the life insured is living. The Net Cash Surrender Value is
equal to the Policy Value less any surrender charges and outstanding
monthly deductions due (the "Cash Surrender Value") minus the Policy
Debt. If there have been any prior Face amount increases, the Surrender
Charge will be the sum of the Surrender Charge for the Initial Face
Amount plus the Surrender Charge for each increase. The Net Cash
Surrender Value will be determined at the end of the Business Day on
which the Company receives the Policy and a written request for
surrender at its Service Office. After a Policy is surrendered, the
insurance coverage and all other benefits under the Policy will
terminate.
A policyowner may make a partial withdrawal of the Net Cash Surrender
Value once each Policy Month after the first Policy Anniversary. The
policyowner may specify the portion of the withdrawal to be taken from
each Investment Account and the Fixed Account. In the absence of
instructions, the withdrawal will be allocated among such accounts in
the same proportion as the Policy Value in each account bears to the
Net Policy Value (Policy Value less the value in the Loan Account).
Withdrawals will be limited if they would otherwise cause the Face
Amount to fall below $100,000 [$500,000].
If Death Benefit Option 1 is in effect when a partial withdrawal is
made and the death benefit equals the Face Amount, the Face Amount of
the Policy will be reduced by the amount of the withdrawal plus any
applicable Surrender Charges. Otherwise, if the death benefit is the
Minimum Death Benefit* as described in the Policy, the Face Amount will
be reduced by the amount, if any, by which the withdrawal plus the
pro-rata Surrender Charge exceeds the difference between the death
benefit and the Face Amount.
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*The Minimum Death Benefit is on any date the Policy Value on that date
multiplied by the applicable minimum death benefit percentage for the
Attained Age of the life insured.
If Death Benefit Option 2 is in effect, partial withdrawals do not
affect the Face Amount of a Policy.
When the Face Amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a
partial withdrawal will be applied in the same manner as a requested
decrease in Face Amount, i.e., against the Face Amount provided by the
most recent increase, then against the next most recent increases
successively and finally against the initial Face Amount.
As long as the Policy is in force, the Company will ordinarily pay any
policy loans, surrenders, partial withdrawals or insurance benefit
within seven days after receipt at its Service Office of all the
documents required for such a payment. The Company may delay the
payment of any policy loans, surrenders, partial withdrawals, or
insurance benefit that depends on Fixed Account values for up to six
months or in the case of any Investment Account for any period during
which (i) the New York Stock Exchange is closed for trading (except for
normal weekend and holiday closings), (ii) trading on the New York
Stock Exchange is restricted (iii) an emergency exists as a result of
which disposal of securities held in the Separate Account is not
reasonably practicable or it is not reasonably practicable to determine
the value of the Separate Account's net assets or (iv) the SEC, by
order, so permits for the protection of security holders; provided that
applicable rules and regulations of the SEC shall govern as to whether
the conditions described in (2) and (3) exist.
B. SURRENDER CHARGES
The Company will deduct a Surrender Charge if during a maximum of 15
years following the Policy date, or the effective date of a Face Amount
increase:
- the Policy is surrendered for its Net Cash Surrender Value,
- a partial withdrawal is made,
- the Face Amount is decreased in excess of the Surrender Charge
Decrease Exemption, or
- the Policy lapses.
The Surrender Charge, together with a portion of the premium charge, is
designed to compensate the Company for some of the expenses it incurs
in selling and distributing the Policies, including agents'
commissions, advertising, agent training and the printing of
prospectuses and sales literature. The Surrender Charge is calculated
separately for the initial Face Amount and each Face Amount increase.
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The Surrender Charge period varies based on the age of the Insured on
the date of issuance of the Policy or the date of any Face Amount
increase (as applicable) as follows:
AGE SURRENDER CHARGE PERIOD
0-50 15 Years
51 14 Years
52 13 Years
53 12 Years
54 11 Years
55+ 10 Years
Surrender Charge Calculation
The Surrender Charge is the sum of (i) plus (ii), multiplied by (iii),
multiplied by the applicable Grading Percentage, where:
(i) is the Rate per $1000 of initial Face Amount (or Face Amount
increase);
(ii) is 120% of the lesser of (a) the premiums paid in the first
Policy Year per $1000 of initial Face Amount (or the premiums
attributable to each $1000 of Face Amount increase in the
first year following the increase) or (b) the Surrender Charge
Premium Limit set out in the Policy for the initial Face
Amount (or furnished by the Company with respect to a Face
Amount increase); and
(iii) is the initial Face Amount (or the Face Amount increase)
divided by 1000.
The Rate per $1000 of initial Face Amount is based on the life
insured's Age at issuance of the Policy and the death benefit option in
effect. The Rate per $1000 of Face Amount increase is based on the life
insured's Attained Age and the death benefit option in effect at the
time of an increase. The Rates per $1000 are set forth in the following
table.
TABLE OF GUARANTEED SURRENDER CHARGE RATES PER $1000
OF FACE AMOUNT OR FACE AMOUNT INCREASE
-------------------------------------------------------------------
AGE AT ISSUANCE OR DEATH BENEFIT DEATH BENEFIT
ATTAINED AGE AT INCREASE OPTIONS 1 AND 3 OPTION 2
---------------------------- ---------------------- ---------------
25 or less $7.54 $6.50
---------------------------- ---------------------- ---------------
26 - 35 $6.61 $5.78
---------------------------- ---------------------- ---------------
36 - 45 $6.09 $4.85
---------------------------- ---------------------- ---------------
46 - 55 $4.13 $4.65
---------------------------- ---------------------- ---------------
56 - 65 $2.99 $1.96
---------------------------- ---------------------- ---------------
66+ $2.48 $1.96
-------------------------------------------------------------------
The Grading Percentage varies with the Policy Month in which the
transaction causing the assessment of the Surrender Charge occurs. As
indicated in the following table, the Grading Percentage starts at 100%
for the first Policy Month and grades down evenly each Policy Month
reaching zero at the end of a maximum of 15 years.
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GRADING PERCENTAGES DURING THE SURRENDER CHARGE PERIOD
(Applicable to the Initial Face Amount and Subsequent Increases)
The Grading Percentages Will Not Exceed The Following:
--------------------------------------------------------------------------
SURRENDER CHARGE AGE AND GRADING PERCENTAGE**
PERIOD*
----------------- --------- -------- -------- --------- -------- ---------
0-50 51 52 53 54 55+
----------------- --------- -------- -------- --------- -------- ---------
1 100% 100% 100% 100% 100% 100%
----------------- --------- -------- -------- --------- -------- ---------
2 93% 93% 92% 92% 91% 90%
----------------- --------- -------- -------- --------- -------- ---------
3 87% 86% 85% 83% 82% 80%
----------------- --------- -------- -------- --------- -------- ---------
4 80% 79% 77% 75% 73% 70%
----------------- --------- -------- -------- --------- -------- ---------
5 73% 71% 69% 67% 64% 60%
----------------- --------- -------- -------- --------- -------- ---------
6 67% 64% 62% 58% 55% 50%
----------------- --------- -------- -------- --------- -------- ---------
7 60% 57% 54% 50% 45% 40%
----------------- --------- -------- -------- --------- -------- ---------
8 53% 50% 46% 42% 36% 30%
----------------- --------- -------- -------- --------- -------- ---------
9 47% 43% 38% 33% 27% 20%
----------------- --------- -------- -------- --------- -------- ---------
10 40% 36% 31% 25% 18% 10%
----------------- --------- -------- -------- --------- -------- ---------
11 33% 29% 23% 17% 9% 0%
----------------- --------- -------- -------- --------- -------- ---------
12 27% 21% 15% 8% 0%
----------------- --------- -------- -------- --------- -------- ---------
13 20% 14% 8% 0%
----------------- --------- -------- -------- --------- -------- ---------
14 13% 7% 0%
----------------- --------- -------- -------- --------- -------- ---------
15 7% 0%
----------------- --------- -------- -------- --------- -------- ---------
16 0%
--------------------------------------------------------------------------
* The Grading Percentages shown are at the beginning of each Policy
Year. Proportionate Grading Percentages apply for other Policy Months.
**Age for the Initial Face amount refers to the Age at Policy Date. For
a subsequent Face Amount increase, Age refers to the attained age at
the time of the increase.
Surrender Charges will be reduced or eliminated if certain riders are
added to the Policy.
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Surrender Charges on a Partial Withdrawal
A partial withdrawal made during the Surrender Charge Period will
result in the assessment of a pro-rata portion of the Surrender Charges
to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal to
the Net Cash Surrender Value of the Policy as of the date of the
withdrawal. It will equal (a) divided by (b), multiplied by (c), where:
(a) is the amount of the partial Net Cash Surrender Value withdrawal;
(b) is the Net Cash Surrender Value prior to the withdrawal; and
(c) is the current total Surrender Charge prior to the withdrawal.
The Surrender Charges will be deducted from the Policy Value at the
time of the partial withdrawal on a pro-rata basis from each of the
Investment Accounts and the Fixed Account unless you direct that the
Surrender Charges be deducted from one or more Investment Accounts or
the Fixed Account. If the amount in the accounts is not sufficient to
pay the Surrender Charges assessed, then the amount of the withdrawal
will be reduced.
Whenever a portion of the surrender charges are deducted as a result of
a partial withdrawal, the Policy's remaining surrender charges will be
reduced in the same proportion that the surrender charge deducted bears
to the total surrender charge immediately before the partial
withdrawal.
Surrender Charge on Decrease in Face Amount
If the Face Amount of insurance is decreased, a pro-rata Surrender
Charge will be deducted from the Policy Value for decreases in excess
of the Surrender Charge Decrease Exemption. A decrease in Face Amount
caused by a change from Death Benefit Option 1 to Option 2 will not
incur a pro-rata Surrender Charge. Each time a pro-rata Surrender
Charge is deducted for a Face Amount decrease, the remaining Surrender
Charge will be reduced in the same proportion that the Surrender Charge
deducted bears to the total Surrender Charge immediately before the
Face Amount decrease.
The Surrender Charge Decrease Exemption is 10% of the initial Face
Amount. Once Cumulative Face Amount decreases exceed 10% of the initial
Face Amount, the Surrender Charge Decease Exemption no longer applies
and a surrender charge will be applied to Face Amount decreases in
excess of the Exemption amount. This amount is set at issuance of the
Policy and applies to decreases in the initial Face Amount of insurance
only. This exemption does not apply to a full surrender of the Policy
or a partial withdrawal of Net Cash Surrender Value.
VII. LAPSE AND REINSTATEMENT
A. LAPSE
Unless the No-Lapse Guarantee Cumulative Premium Test is satisfied, a
Policy will go into default if at the beginning of any Policy Month the
Policy's Net Cash Surrender Value would be zero or below after
deducting the monthly deduction then due. The Company will notify the
policyowner of the default and will allow a 61 day grace period in
which the policyowner may make a premium payment sufficient to bring
the Policy out of default. The required payment will be equal
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to the amount necessary to bring the Net Cash Surrender Value to zero,
if it was less than zero on the date of default, plus the monthly
deductions due at the date of default and payable at the beginning of
each of the two Policy Months thereafter, plus any applicable premium
load. If the required payment is not received by the end of the grace
period, the Policy will terminate with no value.
Death During Grace Period
If the life insured should die during the grace period, the Policy
Value used in the calculation of the death benefit will be the Policy
Value as of the date of default and the insurance benefit will be
reduced by any outstanding monthly deductions due at the time of death.
No-Lapse Guarantee
In those states where it is permitted, as long as the No-Lapse
Guarantee Cumulative Premium Test is satisfied during the No-Lapse
Guarantee Period, as described below, the Company will guarantee that
the Policy will not go into default even if adverse investment
experience or other factors should cause the Policy's Net Cash
Surrender Value to fall to zero or below during such period.
The Monthly No-Lapse Guarantee Premium is one-twelfth of the No-Lapse
Guarantee Premium.
The No-Lapse Guarantee Premium is set at issuance of the Policy and
reflects any Additional Rating and Supplementary Benefits, if
applicable. It is subject to change if there is (i) a change in the
Face Amount of the Policy, (ii) a change of the death benefit option,
(iii) a decrease in the Face Amount of insurance due to a partial
withdrawal, or (iv) any change in the Supplementary Benefits added to
the Policy or the Risk Classification of the life insured.
The No-Lapse Guarantee Period is described under "Definitions."
While the No-Lapse Guarantee is in effect, the Company will determine,
at the beginning of any Policy Month that a Policy would otherwise be
in default, whether the No-Lapse Guarantee Cumulative Premium Test,
described below, has been met. If the test has not been satisfied, the
Company will notify the policyowner of that fact and allow a 61-day
grace period in which you may make a premium payment sufficient to keep
the policy from going into default. This required payment, as described
in the notification, will be equal to the lesser of:
(a) the outstanding premium requirement to satisfy the No-Lapse
Guarantee Cumulative Premium Test at the date of default plus
the Monthly No-Lapse Guarantee Premium due for the next two
Policy Months, or
(b) the amount necessary to bring the Net Cash Surrender Value to
zero plus the monthly deductions due, plus the next two
monthly deductions plus the applicable premium charge.
If we do not receive the required payment by the end of the grace
period, the No-Lapse Guarantee and the Policy will terminate.
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B. REINSTATEMENT
A policyowner may, by making a written request, reinstate a Policy
which has terminated after going into default at any time within the
five-year period following the date of termination subject to the
following conditions:
(a) Evidence of the life insured's insurability, satisfactory to
the Company, is provided to the Company; and
(b) A premium equal to the amount that was required to bring the
Policy out of default immediately prior to termination, plus
the amount needed to keep the Policy in force to the next
scheduled date for payment of the Planned Premium, must be
paid to the Company.
If the reinstatement is approved, the date of reinstatement will be the
later of the date we approve the policyowner's request or the date we
receive the required payment at our Service Office. In addition, any
Surrender Charges will be reinstated to the amount they were at the
date of default. The Policy Value on the date of reinstatement, prior
to the crediting of any Net Premium paid on the reinstatement, will be
equal to the Policy Value on the date the Policy terminated.
VIII. POLICY LOANS
While the Policy is in force and has an available loan value, a
policyowner may borrow against the Policy Value of the Policy. The
Policy serves as the only security for the loan.
A. AVAILABLE LOAN VALUE
The amount of any loan cannot exceed 100% of the Policy Net Cash
Surrender Value (Cash Surrender Value less Policy Debt) less required
charges to maintain the Policy value to the next anniversary, at the
guaranteed interest rate.
B. INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually
on the Policy Anniversary. During the first ten Policy Years, the rate
of interest charged will be an effective annual rate of 5.25%.
Thereafter the rate of interest charged will be an effective annual
rate of 4%, subject to the Company's reservation of the right to
increase the rate if the Company determines, in its sole discretion,
that there is a substantial risk that a loan will be treated as a
taxable distribution under Federal tax law. If the interest due on a
Policy Anniversary is not paid by the policyowner, the interest will be
borrowed against the Policy and added to the Policy Debt.
Interest on the Policy Debt will continue to accrue daily if there is
an outstanding loan when monthly deductions and premium payments cease
at the life insured's Attained Age 100. The Policy will go into default
at any time the Policy Debt exceeds the Policy Value. At least 61 days
prior to termination, the Company will send you a notice of the pending
termination. Payment of interest on the Policy Debt during the 61 day
grace period will bring the Policy out of default.
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C. LOAN ACCOUNT
When a loan is made, the amount necessary to cover the loan principal,
plus loan interest due to the next Policy Anniversary, will be deducted
from the Investment Accounts or the Fixed Account and transferred to
the Loan Account. The policyowner may designate how the amount to be
transferred to the Loan Account is allocated among the accounts from
which the transfer is to be made. In the absence of instructions, the
amount to be transferred will be allocated to each account in the same
proportion as the value in each Investment Account and the Fixed
Account bears to the Net Policy Value. A transfer from an Investment
Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the
Investment Account. However, since the Loan Account is part of the
Policy Value, transfers made in connection with a loan will not change
the Policy Value.
D. INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an
effective annual rate of at least 4%. This rate is guaranteed not to be
less than 3.5%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited
Differential which is currently 1.25% during the first ten policy years
and 0.0% thereafter,and is guaranteed not to exceed 1.25% during the
first ten policy years and 0.5% thereafter. The Company may change the
Loan Interest Credited Differential as of 90 days after sending you
written notice of such change.
For a Policy that is not a Modified Endowment Contract ("MEC"), the tax
consequences associated with a loan interest credited differential of
0% are unclear. A tax advisor should be consulted before effecting a
loan to evaluate the tax consequences that may arise in such a
situation. If the Company determines, in its sole discretion, that
there is a substantial risk that a loan will be treated as a taxable
distribution under federal tax law as a result of the differential
between the credited interest rate and the loan interest rate, the
Company retains the right to increase the loan interest rate to an
amount that would result in the transaction being treated as a loan
under federal tax law.
E. LOAN ACCOUNT ADJUSTMENTS
On the first day of each Policy Anniversary the difference between the
Loan Account and the Policy Debt is transferred to the Loan Account
from the Investment Accounts or the Fixed Account. Amounts transferred
to the Loan Account will be taken from the Investment Accounts and the
Fixed Account in the same proportion as the value in each Investment
Account and the Fixed Account bears to the Net Policy Value
F. LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the
death of the life insured, provided that the Policy is in force. When a
repayment is made, the amount is credited to the Loan Account and
transferred to the Fixed Account or the Investment Accounts. Loan
repayments will be allocated first to the Fixed Account until the
associated Loan Sub-Account is reduced to zero and then to
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each Investment Account in the same proportion as the value of the
corresponding Loan Sub-Account bears to the value of the Loan Account.
Amounts paid to the Company not specifically designated in writing as
loan repayments will be treated as premiums. Where permitted by
applicable state law, when a portion of the Loan Account amount is
allocated to the Fixed Account, the Company may require that any
amounts paid to it be applied to outstanding loan balances.
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