Exhibit 1.A(11)
Memorandum describing issuance, transfer and redemption procedures
DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES
FOR INDIVIDUAL AND JOINT SURVIVORSHIP
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO
This document sets forth the administrative procedures, as required by
Rule 6e-3(T)(b)(12)(iii), that will be followed by Western Reserve Life
Assurance Co. of Ohio (the "Company" or "Western Reserve") in connection with
the issuance of WRL Freedom Navigator, its individual and joint survivorship
modified single premium variable 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. 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. 333-68367) 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 PREMIUM, AND ISSUANCE
OFFER OF THE POLICIES. The Policies are offered and issued for a
single premium pursuant to underwriting standards in accordance
with state insurance laws. The initial premium for the Policies is
not the same for all owners with the same specified amount.
Insurance is based on the principle of pooling and distribution of
mortality risks, which assumes that each owner pays an initial
premium commensurate with the insured's (or joint insureds')
mortality risk as actuarially determined utilizing factors such as
age, gender, and rate class of the insured (or joint insureds).
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 rate class, age, and gender and same
specified amount.
APPLICATION. Persons wishing to purchase a Policy must complete an
application and submit it to the Company or through any licensed
life insurance agent who is also a registered representative of a
broker-dealer having a selling agreement with the principal
underwriter for the Policy. The application must specify the name
of the insured(s) and provide certain required information about
the insured(s). The application must be accompanied by an initial
premium, designate premium allocation percentages, and name the
beneficiary. The minimum initial premium is $20,000. The Company
determines the specified amount for a Policy based on the initial
premium paid and other characteristics of the proposed insured (or
joint insureds), such as age, gender and rate class. The Company
bases the minimum initial premium for the owner Policy on the
guideline single premium established under federal tax laws given
the age, gender and rate class of the insured (or joint insured).
RECEIPT OF APPLICATION AND UNDERWRITING. Upon receipt of the
initial premium and a completed application in good order from an
applicant, the Company will follow either simplified or expanded
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 (or joint insured) before a determination can be
made.
Generally, Policies issued within the simplified issue age and
premium limits will be underwritten on a simplified issue basis.
Policies outside the simplified issue age limits or for premium
amounts that exceed the simplified issue premium limit will be
underwritten on an
expanded underwriting basis. For a single life Policy the
simplified issue age and premium limits are as follows:
Issue Ages 35 - 49 $50,000
Issue Ages 50 - 80 $100,000
If the Policy is issued from ages 18- 34 or 81 -90 or if the
Policy is issued for an amount that exceeds the simplified issue
premium limit, then the Policy will be underwritten on an expanded
underwriting basis. For Joint Policies, the same basic
requirements apply, but some additional conditions are required
for simplified issue. These include: the insureds must be spouses,
the minimum age for both insureds is 45, and the difference in age
between the two insureds cannot exceed 20 years. The premium limit
for a Joint Policy is based on the age of the younger insured. If
the Policy fails to meet these requirements, it will be subject to
expanded underwriting.
The underwriting process determines the rate class to which the
insured is assigned if the application is accepted. The Company
currently places insureds in the following rate classes, based on
the Company's underwriting: a male or female rate class, and a
standard tobacco use or a select non-tobacco use rate class. This
original rate class applies to the initial 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.
ISSUANCE OF POLICY. When the underwriting procedure has been
completed, the application has been approved, and an initial
premium of sufficient amount has been received, the Policy is
issued. This is the Policy date.
The Policy date is the date when our underwriting process is
complete, full life insurance coverage goes into effect, the
Company issues the Policy, and the Company begins to deduct the
daily and monthly insurance charges. The Policy date is shown on
the schedule page of the Policy. It is also the date when,
depending on the owner's state of residence, the Company will
allocate the initial premium either to the reallocation account or
to the subaccounts and fixed account options selected on the
application. We measure Policy months, years, and anniversaries
from the Policy date.
INITIAL PREMIUM AND CONDITIONAL COVERAGE . An applicant must pay
an initial premium with the application. If the insured qualifies
for simplified underwriting, conditional coverage becomes
effective as of the date the Company receives the initial premium
of at least $20,000 and a completed application. If the insured
does not qualify for simplified underwriting, conditional coverage
begins on the date all medical tests and exams are completed.
Conditional coverage is limited to the lesser of the specified
amount applied for or $300,000 (reduced by all amounts payable
under other life insurance or accidental death benefits that the
insured (or joint insured) has in force or pending with the
Company. Conditional coverage continues until the application is
approved or other conditions specified in the prospectus are met.
FAXED APPLICATION AND PAYMENT BY WIRE TRANSFER. The Company will
accept the initial premium by wire transfer and Policy
applications by fax under the following conditions:
o If the owner wishes to make payments by wire transfer, the
owner should instruct his or her bank to wire federal funds
to the Company.
o If the owner sends the initial premium by wire transfer, the
owner must, at the same time, send a completed application by
faxed transmission and send the signed application to the
Company's office.
o If the Company accepts the initial premium payment by wire
transfer accompanied by a faxed application, the Company will
allocate the premium on the Policy date (or
reallocation date if the owner resides in a state that
requires the full refund of premium during the free look
period) according to the owner's instructions once the
application is received.
o If the owner sends the initial premium by wire transfer but
does not send the faxed application simultaneously, or if the
application is incomplete, the Company will keep the initial
premium for up to 5 business days. If the Company cannot
obtain the faxed application or necessary information within
5 business days, the Company will return the initial premium
to the owner, unless the owner allows the Company to keep it
until the faxed application or necessary information is
received by the Company.
o When the Company receives the original signed application and
if the allocation instructions are different from those in
the faxed application, then the Company will reallocate the
Policy's cash value in accordance with the instructions on
the original signed application on the first valuation date
following receipt of the original signed application.
TAX-FREE EXCHANGES (1035 EXCHANGES). The Company will accept as
part of the initial premium money from one contract that
qualified for a tax-free exchange under Section 1035 of the
Internal Revenue Code. The Company will permit the owner to make
one additional cash payment within three business days of receipt
of the proceeds from the 1035 exchange before determining the
Policy's specified amount.
B. ADDITIONAL PREMIUMS
ADDITIONAL PREMIUMS PERMITTED. The owner has limited flexibility
to add additional premiums to the Policy since the Company
requires that the initial premium equal the maximum amount that
can be applied to the Policy at issue. In general, the owner may
not pay any additional premiums on the Policy for several years
in order for the Policy to continue to qualify as a life
insurance contract as defined in federal tax laws and
regulations. At the time the Policy allows for the payment of
additional premiums, the Company reserves the right to limit or
refund any premium if: the amount is below our current minimum
additional premium requirement; OR the premium would increase the
death benefit by more than the amount of the premium; OR
accepting the premium would disqualify the Policy as a life
insurance contract as defined in federal tax laws and
regulations.
An owner may pay premiums by any method the Company deems
acceptable. The Company will treat any payment made as a loan
repayment unless it is clearly marked as a premium payment.
C. CREDITING PREMIUMS
INITIAL PREMIUM. The initial premium will be credited to the
Policy on the Policy date. Once the Company determines that the
insured(s) meets its underwriting requirements, full insurance
coverage begins, the Company issues the Policy, and begins to
deduct monthly and daily insurance charges from the premium. On
the Policy date, the Company will allocate the initial premium to
the subaccounts and fixed account options the owner elected on
the application, provided the owner lives in a state that does
not require a refund of full premium during the free look period.
If the owner's state requires a return of the full premium in the
event the owner exercises his or her free look right, the Company
will place the initial premium in the reallocation account until
the reallocation date.
On any day that the Company credits premiums or transfers cash
value to a subaccount, the Company will convert the dollar amount
of the premium (or transfer) into subaccount units at the unit
value for that subaccount, determined at the end of that
valuation date. We will credit amounts to the subaccounts only on
a valuation date, that is, on a date the New York Stock Exchange
is open for trading.
REALLOCATION ACCOUNT. If the owner's state requires the Company
to return the initial premium in the event the owner exercises
his or her free-look right, the Company will allocate the initial
premium on the Policy date to the reallocation account. While
held in the reallocation account, the premium will earn interest
at the current rates for the standard fixed account. The premium
will remain in the reallocation account for the number of days in
the applicable state free look period plus five days.
On the first valuation date on or after the reallocation date,
the Company will reallocate all cash value from the reallocation
account to the subaccounts and fixed account options the owner
selected on the application. If the owner requested either fixed
or standard dollar cost averaging, the Company will reallocate
the cash value to the fixed DCA account or the money market
subaccount, respectively, on the reallocation date.
For states that do not require a full refund of the initial
premium, the reallocation date is the same as the Policy date and
the Company will allocate the initial premium on the Policy date
to the subaccounts and the fixed account options in accordance
with the instructions on the application.
D. PREMIUMS DURING A GRACE PERIOD AND PREMIUMS UPON REINSTATEMENT
If the net surrender value is less than the amount of the monthly
deduction due on any Monthiversary, and the Guaranteed Minimum
Death Benefit rider is not in effect, the Policy will be in
default and a grace period will begin. If the Guaranteed Minimum
Death Benefit rider is in effect, the Policy will remain in
force, regardless of the sufficiency of the net surrender value.
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 and the final date by which the Company must receive
the payment. The notice will be sent 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 and the Guaranteed Minimum Death Benefit
rider is not in effect, all coverage under the Policy will
terminate without value. The owner may reinstate the Policy only
if the owner resides in a state that provides for reinstatement,
the insured (or joint insureds) meets the Company's insurability
requirements and the owner pays an amount large enough to cover
any monthly deductions due at the time of termination and upon
restatement; plus one monthly deduction; plus the repayment of
any outstanding loan amount, including interest due.
E. ALLOCATIONS OF INITIAL PREMIUM AMONG THE SUBACCOUNTS AND THE
FIXED ACCOUNT OPTIONS
THE SEPARATE ACCOUNT. An owner may allocate premiums to one or
more of the subaccounts of the WRL Series Life Account (the
"separate account"). The separate account currently consists of
23 subaccounts, the assets of which are used to purchase shares
of a designated corresponding investment portfolio of a fund. The
fund is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. Additional
subaccounts may be added from time to time to invest in other
portfolios of the fund or any other investment company.
When an owner allocates an amount to a subaccount (either by
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 date 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. The unit value for each
subaccount was arbitrarily set as $10 at the time the subaccount
commenced operations. The net investment factor is an index used
to measure the investment performance of a subaccount from one
valuation period to the next.
THE FIXED ACCOUNT OPTIONS. Owners also may allocate premiums to
the fixed account options-- the standard fixed account and the
fixed dollar cost averaging ("fixed DCA") account - both of which
guarantee principal and a minimum fixed rate of interest.
Money allocated or transferred to the STANDARD fixed account
option will earn interest at a current interest rate in effect at
that time. The interest rate will equal at least 3%.
At the time of purchase, the owner may place a minimum of $5,000
in the fixed DCA account. Money placed in the fixed DCA account
will earn interest for six months at an annual rate of at least
3%. Money will be transferred out of the fixed DCA account over
the year in 6 equal monthly installments and placed in the
subaccounts and standard fixed option according to the owner's
allocation instructions.
ALLOCATIONS PREMIUM AMONG THE SEPARATE ACCOUNT AND THE FIXED
ACCOUNT OPTIONS. Premiums are allocated to the subaccounts and
the fixed account options in accordance with the following
procedures:
GENERAL. In the application for the Policy, the owner will
specify the percentage of premium to be allocated to each
subaccount of the separate account and/or the fixed account
options. The percentage of each premium that may be allocated to
any subaccount or the standard fixed account must be a whole
number, and the sum of the allocation percentages must be 100%.
If the owner selects the fixed DCA account, the entire initial
premium must be allocated to that account at the time of
application. If the owner selects standard dollar cost averaging,
then the owner must allocate at least $5,000 to the money market
subaccount.
Allocation percentages may be changed at any time by the owner
submitting a written notice or telephone instructions to the
Company's office. In the future, the Company may decide that the
minimum amount that can be allocated to a particular subaccount
is 1.00% of each premium payment.
ALLOCATION TO THE REALLOCATION ACCOUNT. If the owner lives in a
state that requires a refund of full premium during the free look
period, then on the Policy date the Company will allocate the
initial premium to the reallocation account until the
reallocation date. The reallocation account is the standard fixed
account. While held in the reallocation account, premium will
earn interest at the current rates for the standard fixed
account. The premium will remain in the reallocation account for
the number of days in the applicable state's free look period,
plus five days. This is the reallocation date. On the first
valuation date on or after the reallocation date, the cash value
will be reallocated to the subaccounts or fixed account options
selected by the owner on the application.
ALLOCATION AFTER THE REALLOCATION DATE. Additional premiums
received after the reallocation date will be credited to the
Policy and allocated to the subaccounts or standard fixed account
in accordance with the allocation percentages in effect on the
valuation date that the premium is received at the Company's
office. Allocation percentages can be changed at any time.
F. LOAN REPAYMENTS AND INTEREST PAYMENTS
REPAYING LOAN AMOUNT. The owner may repay all or part of the loan
amount at any time while the Policy is in force and the insured
is living. The loan amount is equal to the sum of all
outstanding Policy loans including both principal plus any
accrued interest. Loan repayments must be sent to the Company's
office and will be credited as of the date received. If the death
benefit becomes payable while a Policy loan is outstanding, the
loan amount will be deducted in calculating the death benefit.
ALLOCATION FOR REPAYMENT OF POLICY LOANS. On the date the Company
receives a repayment of all or part of a loan, the Company will
compare the amount of the outstanding loan to the amount in the
loan reserve. Any amount in excess of the amount of the
outstanding loan amount will be transferred from the loan reserve
to the subaccounts and the standard fixed account and allocated
in the same manner as current premiums are allocated, or as
directed by the owner.
INTEREST ON LOAN RESERVE. The amount in the loan reserve will be
credited with interest at a minimum guaranteed annual effective
rate of 3%. See "Policy Loans" below. Any interest earned that is
in excess to the amount of the outstanding loan amount will be
transferred on the Policy anniversary to the subaccounts and the
standard fixed account in accordance with the instructions for
premium allocations then in effect.
II. TRANSFERS
A. TRANSFERS AMONG THE SUBACCOUNTS AND THE FIXED ACCOUNT
The owner may transfer cash value between and among the
subaccounts of the separate account and, subject to certain
special rules, to and from the fixed account options.
In any Policy year, the owner may make an unlimited number of
transfers; however, the Company reserves the right to impose an
excess transfer charge of $10 for each transfer in excess of 12
during any Policy year. For purposes of the transfer charge, all
transfer requests made in one day are 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.
There is no minimum amount that may be transferred from each
subaccount or the standard fixed account option and there is no
minimum amount that must remain in a subaccount or the fixed
account options following a transfer. Money in the fixed DCA
account may be transferred entirely after the first Policy month.
Requests to transfer from the standard fixed account must be
received by the Company during the 30-day period following the
end of each Policy year unless the owner has selected fixed
dollar cost averaging, and only one such transfer may be made in
a Policy year. The maximum transfer amount from the standard
fixed account to the subaccounts in any Policy year is the
greater of 25% of the cash value in the standard fixed account on
the date of the transfer, or the amount transferred from the
standard fixed account in the immediately prior Policy year
(excluding transfers from the fixed DCA account).
The Policy, as applied for and issued, will automatically receive
telephone transfer privileges unless the owner provides other
instructions. The telephone transfer privileges allow the owner
to give authority to the registered representative or agent of
record for the Policy to make telephone transfers and to change
the allocation of future payments among the subaccounts and the
standard fixed account on the owner's behalf according to the
owner's instructions.
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. STANDARD DOLLAR COST AVERAGING
The standard dollar cost averaging program permits owners to
systematically transfer on a monthly basis a set dollar amount
from the subaccount investing in the money market portfolio to
any combination of subaccounts. 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 have at least $5,000 in the money market
subaccount. At the beginning of dollar cost averaging, the owner
must choose the time period (12, 24, or 36 months) over which the
entire amount in the money market subaccount will be transferred
in equal monthly installments. 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
charge. The Company reserves the right to discontinue offering
the dollar cost averaging program at any time and for any reason.
Dollar cost averaging is not available while owners are
participating in the asset rebalancing program.
C. FIXED DOLLAR COST AVERAGING
To be eligible for fixed dollar cost averaging, the owner must
elect the fixed DCA account on the application and put the entire
initial premium in the fixed DCA account. Money placed in the
fixed DCA account will earn interest at rates we declare from
time to time. Money will be transferred out of the fixed DCA
account in 6 equal monthly installments with the first transfer
occurring on the first Monthiversary after the Policy date or
reallocation date. Interest accrued on the initial premium will
be transferred in the last month of the fixed DCA account term.
Money in the fixed DCA account may be transferred entirely to
other subaccounts or the standard fixed account after one month .
There is no charge for participating in the fixed DCA account.
Transfers from the fixed DCA account do not count as transfers
for purposes of the transfer charge.
The Company reserves the right to stop offering the fixed DCA
account at any time for any reason. The Company may offer a
higher 30-day interest rate guaranteed for one month.
D. ASSET REBALANCING
An owner may instruct the Company to automatically rebalance (on
a quarterly, semi-annual or annual basis) the Policy's cash value
to return to the percentages specified in the owner's currently
effective allocation instructions. An owner may elect to
participate in the asset rebalancing program at any time by
sending the Company a written request to the Company's office.
The percentage allocations must be in whole percentages.
Subsequent changes to the percentage allocations may be made at
any time by written or telephone instructions to the Company's
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. Portfolio rebalancing is not
available while an owner is participating in the fixed or
standard dollar-cost averaging program. Asset rebalancing will
cease if the owner makes any transfer to or from any subaccount
other than on a scheduled basis.
E. 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 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.
III. "REDEMPTION" PROCEDURES
A. "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 10 days after the
Policy is delivered. 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 Company's office, the
Policy will be deemed void from the beginning. Within seven days
after the Company's office receives the cancellation request and
Policy, the Company will pay a refund. In most states, the refund
will be equal to the sum of:
o any monthly deductions or other charges we deducted from
amounts allocated to the subaccounts and the fixed
account options; PLUS
o the cash value to the subaccounts and the fixed account
options on the date the Company (or its agent) receives
the returned Policy, except that amounts allocated to
the fixed DCA account will be treated as if they had
been allocated to the standard fixed account.
If any state law prohibits the calculation above, the Company
will refund, without interest, the total of all premiums paid for
the Policy. In such states, the initial premium will be allocated
to the reallocation account on the Policy date and remain in the
reallocation account until the reallocation date.
B. SURRENDERS
REQUESTS FOR NET SURRENDER VALUE. The owner may surrender the
Policy at any time for its net surrender value. The net surrender
value on any valuation date is the cash value, minus any
applicable surrender charge, and minus any applicable loan
amount. The net surrender value will be determined by the Company
on the valuation date the Company's office receives all required
documents, including a satisfactory written request signed by the
owner. The Company will cancel the Policy as of the date the
written request is received at the Company's office and the
Company will ordinarily pay the net surrender value within seven
days following receipt of the written request and all other
required documents. The Policy cannot be reinstated after it is
surrendered.
SURRENDER OF POLICY -- SURRENDER CHARGE. If the Policy is
surrendered during the first 9 Policy years, the Company will
deduct a surrender charge from cash value and pay the remaining
cash value (less any outstanding loan amounts) to the owner. The
surrender charge is 9.75% of the initial premium if the Policy is
surrendered before the end of the first Policy year, and then
declines gradually to 0% after the ninth Policy year. The rate at
which the surrender charge declines depends on the insured's (or
joint insureds') age, gender and whether the Policy is a single
life or joint policy.
C. PARTIAL WITHDRAWALS
WHEN WITHDRAWALS ARE PERMITTED. After the first Policy year, the
owner may withdraw a portion of the cash value, subject to the
following conditions:
o The owner must make partial withdrawal requests in writing.
o Only one partial withdrawal is allowed during a 12-month
period.
o The most that can be withdrawn is earnings, that is, cash
value MINUS total outstanding loans, MINUS any interest owed
on the Policy loans, and MINUS total premiums paid.
o The owner can specify the subaccount(s) and the standard
fixed account from which the withdrawal will be taken.
Otherwise, the Company will deduct the amount from the
separate account and the fixed account in accordance with
the current allocation instructions.
o The Company generally will pay a partial withdrawal request
within seven days following the valuation date on which the
withdrawal request is received.
o There is no charge for a partial withdrawal.
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 the
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. The Company will not defer payment
of a withdrawal or Policy loan requested to pay a premium due on
a policy issued by the Company.
EFFECT OF WITHDRAWAL ON DEATH BENEFIT. A partial withdrawal will
reduce the cash value by the amount of the partial withdrawal. A
partial withdrawal will reduce the specified amount by an amount
equal to the amount of the partial withdrawal multiplied by the
ratio of the initial specified amount to the initial premium. A
partial withdrawal will also reduce the Guaranteed Minimum Death
Benefit by an amount equal to the amount of the partial
withdrawal multiplied by the ratio of the initial specified
amount to the initial premium.
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 DEDUCTION AND DAILY CHARGE
On each Monthiversary, redemptions in the form of deductions will
be made from 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 three components: (a) the cost of insurance charge,
if any; (b) a monthly Policy charge ; and (c) any charges for
additional benefits added by riders to the Policy.
THE MONTHLY DEDUCTION. A monthly deduction will be deducted from
each subaccount and the fixed account on the Policy date and on
each Monthiversary in accordance with the current premium
allocation instructions. If the value of any account is
insufficient to pay that account's portion of the monthly
deduction, the Company will take the monthly deduction on a
pro-rata basis from all accounts (I.E., in the same proportion
that the value in each subaccount and the fixed account bears to
the total cash value on the Monthiversary).
The monthly deduction is equal to:
o the monthly Policy charge based on the Policy's separate
account assets; PLUS
o the monthly Policy charge based on the Policy's fixed
account assets; PLUS
o the monthly cost of insurance charge for the Policy, if any;
PLUS
o the monthly charge for any benefits provided by riders
attached to the Policy (currently, only the Guaranteed
Minimum Death Benefit rider).
COST OF INSURANCE CHARGE. The Company reserves the right to
deduct a cost of insurance charge. The cost of insurance charges
are calculated monthly, and depend on a number of variables,
including the age, gender and rate class of the insured. The
charge varies from Policy to Policy
and from Monthiversary to Monthiversary. The charge is calculated
each month for the specified amount at issue.
MONTHLY POLICY CHARGE. The monthly Policy charge based on the
separate account's assets is equal to: (1) the separate account
monthly deduction charge divided by 12; multiplied by (2) the sum
of the Policy's subaccount values on the Monthiversary of each
monthly deduction.
The monthly Policy charge based on the fixed account's assets is
equal to: (1) the fixed account monthly deduction charge divided
by 12; multiplied by (2) the fixed account value on the
Monthiversary of each monthly deduction, minus any outstanding
loans.
DAILY CHARGE. Each valuation date, the Company deducts a daily
charge at the annual rate of 0.50% from assets in the subaccounts
as part of the calculation of the unit value for each subaccount.
GUARANTEED MINIMUM DEATH BENEFIT RIDER CHARGE. If the owner
selects the Guaranteed Minimum Death Benefit rider at
application, the Company will deduct a monthly charge on the
Policy date and on each Monthiversary equal to 0.02% multiplied
by the sum of the subaccount values, if any, on the valuation
date of each monthly deduction; plus 0.02% multiplied by the
fixed account value on the valuation date of each monthly
deduction.
F. DEATH BENEFITS
PAYMENT OF DEATH BENEFIT PROCEEDS. As long as the Policy remains
in force, the Company will pay the death benefit proceeds to the
beneficiary upon receipt at the Company's office of due proof of
the insured's (or surviving insured's) death. The death benefit
proceeds is equal to:
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 Company's 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.
THE DEATH BENEFIT PROCEEDS. The death benefit proceeds will
equal:
o the death benefit (described below); MINUS
o any past due monthly deductions if the insured (or surviving
insured) dies during the grace period; MINUS
o any outstanding Policy loan on the date of death; MINUS
o any interest owed on the Policy loan(s).
If all or part of the death benefit proceeds are paid in one sum,
we will pay interest on this sum as required by applicable state
law from the date we receive due proof of the insured's death to
the date the Company makes payment.
THE DEATH BENEFIT. The death benefit is determined at the end of
the valuation period in which the insured (or surviving insured)
dies. The death benefit is equal to:
o the current specified amount; or
o a specified percentage, called the limitation percentage,
multiplied by the cash value on the insured's (or surviving
insured's) date of death.
THE GUARANTEED MINIMUM DEATH BENEFIT RIDER. If the owner
purchases the Guaranteed Minimum Death Benefit rider at the time
of application and the rider is in effect upon the
insured's (or surviving insured's) death, the Company guarantees
to provide a death benefit as described in the current prospectus
for the Policy.
G. POLICY LOANS
POLICY LOANS. The owner may obtain a Policy loan from the Company
at any time by submitting a written, faxed, or telephone request
to the Company's office. The maximum loan amount is 90% of the
Policy's cash value at the time of the loan. Policy loans will be
processed as of the valuation date the request is received and
loan proceeds generally will be sent to the owner within seven
days thereafter. Taking a Policy loan will terminate the
Guaranteed Minimum Death Benefit rider, if any.
COLLATERAL FOR POLICY LOANS. When a Policy loan is made, an
amount equal to the loan proceeds is transferred from the cash
value in the subaccounts or standard fixed account to the loan
reserve. This withdrawal is made based on the owner's current
premium allocation instructions, unless the owner directs a
different allocation when requesting the loan.
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
anniversary. 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 reserve from each
subaccount and the standard fixed account based on the owner's
current premium allocation instructions, unless the owner directs
otherwise.
EFFECT ON DEATH BENEFIT. If the death benefit becomes payable
while a Policy loan is outstanding, the loan amount will be
deducted in calculating the death benefit. The Company will send
the owner, and any assignee of record, notice of the default. The
owner will have a 61-day grace period to submit a sufficient
payment to avoid lapse.
I. LUMP SUM PAYMENTS BY THE COMPANY
Lump sum payments of withdrawals, surrenders or death benefits
from the subaccounts will be ordinarily made within seven days of
the valuation date on which the Company receives the request and
all required documentation at the
Company's 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 the 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 transfer, partial withdrawal, or
surrender request.
J. CONVERSION RIGHT
The owner has the right to transfer all of the subaccount value
to the standard fixed account. During the first 24 Policy months,
such a transfer is not counted for purposes of determining
whether a transfer charge applies.
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 minimus
amounts. The Company will assume the risk of any non de minimus
errors caused by the Company.
L. MISSTATEMENT OF AGE OR SEX
If the insured's (or either joint insured's) age or gender has
been misstated in the application or any other supplemental
application, then the death benefit under the Policy will be
adjusted based on what the initial premium would have purchased
based on the insured(s)' correct age and gender.
M. 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 (or while both joint insureds are still
alive) for a minimum period, generally for two years from the
Policy date of the Policy or effective date of a reinstatement.
If the Policy is purchased as a joint policy, at the end of the
second Policy year, the Company will send the owner a notice
asking whether either joint insured has died. The Company can
contest the Policy's validity if the owner does not notify the
Company that a joint insured has died and if the Policy is still
in force.
N. LIMITED DEATH BENEFIT
The Policy limits the death benefit if the insured dies by
suicide generally within two years after the Policy date of the
Policy (or reinstatement date, if provided by state law).