AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 1999
FILE NO. 333-
FILE NO. 811-7337
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 11 /X/
------------------------
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
PROTECTIVE LIFE INSURANCE COMPANY
(Name of Depositor)
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
COPY TO:
NANCY KANE, ESQUIRE STEPHEN E. ROTH, ESQUIRE
2801 Highway 280 South Sutherland Asbill & Brennan LLP
Birmingham, Alabama 35223 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent Washington, D.C. 20004-2404
for Service of Process)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
TITLE OF SECURITIES BEING REGISTERED:
Interests in a separate account issued through variable life insurance
policies.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY FORM N-8B-2
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ------------------ -------------------------------------------------------------------------------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Sale of the Policies
5 Protective Variable Life Separate Account
6 Protective Variable Life Separate Account
7 Inapplicable
8 Inapplicable
9 Legal Matters
10(a) The Policy
10(b) The Policy
10(c) Surrender Privilege; Withdrawal Privilege; Policy Loans; Settlement Options
10(d) Cancellation Privilege; Exchange Privilege; Withdrawal Privilege; Policy Loans; Settlement
Options
10(e) Policy Lapse and Reinstatement
10(f) Voting Rights
10(g),(h) Other Investors in the Funds; Addition, Deletion and Substitution of Investments; Voting
Rights; Purchasing a Policy; Changes in the Policy or Benefits
10(i) Other Policy Benefits and Provisions; Death Benefit Proceeds; Settlement Options; The Fixed
Account; Maturity Benefits; Limits on the Right to Contest the Policy; Suspension or Delay
of Payments; Arbitration; Supplemental Benefits and/or Riders; Tax Considerations
11 The Funds
12 The Funds
13 Charges and Deductions; Sale of the Policies; Illustrations of Policy Values, Surrender
Values, Death Benefits and Accumulated Premiums
14 Purchasing a Policy; Cancellation Privilege; Premium Payments; Net Premium Allocations;
15 Purchasing a Policy; Cancellation Privilege; Premium Payments; Net Premium Allocations;
16 The Funds
17 Captions referenced under Items 10(c), (d), and (e) above
18 Protective Variable Life Separate Account; The Funds; Calculation of Policy Values; Tax
Considerations
19 Voting Rights; Reports to Policy Owners; Sale of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ------------------ -------------------------------------------------------------------------------------------
22 Protective Variable Life Separate Account; Financial Statements
23 Inapplicable
24 Protective Life Directors and Executive Officers; State Regulation
25 Protective Life Insurance Company
26 Charges and Deductions
27 Protective Life Insurance Company
28 Protective Life Directors and Executive Officers
29 Protective Life Insurance Company
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Sale of the Policies
35 Protective Life Insurance Company
36 Inapplicable
37 Inapplicable
38 Sale of the Policies
39 Sale of the Policies
40 Sale of the Policies
41(a) Sale of the Policies
42 Inapplicable
43 Inapplicable
44(a) Calculation of Policy Values; Premium Payments; Charges and Deductions
44(b) Charges and Deductions
44(c) Charges and Deductions
45 Inapplicable
46 Calculation of Policy Values; Surrender Privilege; Withdrawal Privilege; Charges and
Deductions; Illustrations of Policy Values, Surrender Values, Death Benefits and
Accumulated Premiums
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Summary and Diagram of the Policy; The Policy; Policy Benefits
52 Addition, Deletion and Substitution of Investments
53 Tax Considerations
54 Inapplicable
55 Inapplicable
56 Inapplicable
57 Inapplicable
58 Inapplicable
59 Financial Statements
PROSPECTUS
P R O T E C T I V E L O W L O A D
- --------------------------------------------------------------------------------
Issued by: PROTECTIVE LIFE INSURANCE COMPANY
2801 Highway 280 South
Birmingham, Alabama 35223
Telephone (800) 866-3555
- --------------------------------------------------------------------------------
This prospectus describes an individual flexible premium variable and fixed
life insurance policy (the "Policy") offered by Protective Life Insurance
Company ("Protective Life"). The Policy is designed to provide insurance
protection on the life of the Insured named in the Policy, and at the same time
provide the Owner with the flexibility to vary the amount and timing of premium
payments and, within certain limits, to change the amount of death benefits
payable under the Policy. This flexibility permits the purchaser of the policy
(the "Owner") to provide for changing insurance needs with a single insurance
policy. This Policy may not be available in all jurisdictions.
The Owner may, within limits, allocate Net Premium payments and Policy Value
to one or more Sub-Accounts of the Protective Variable Life Separate Account
(the "Variable Account") and Protective Life's general account (the "Fixed
Account"). Discussions of values under the Policy in this prospectus generally
relate only to the values allocated to the Variable Account. The assets of each
Sub-Account of the Variable Account are invested in a corresponding investment
portfolio (each, a "Fund") of Protective Investment Company, Oppenheimer
Variable Account Funds, MFS-Registered Trademark- Variable Insurance Trust,
Calvert Variable Series, Inc. and Van Eck Worldwide Insurance Trust.
The prospectuses for the Funds describe the investment objective(s) and
risks of investing in the Sub-Account corresponding to each. The Owner bears the
entire investment risk for Policy Value allocated to a Sub-Account.
Consequently, except as to Policy Value allocated to the Fixed Account, the
Policy has no guaranteed minimum Surrender Value.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or convert it to a Policy that
provides benefits that do not vary with the investment results of a separate
account by exercising the Special Transfer Right.
POLICIES (EXCEPT FOR POLICIES ISSUED IN CERTAIN STATES) INCLUDE AN
ARBITRATION PROVISION THAT MANDATES RESOLUTION OF ALL DISPUTES ARISING UNDER THE
POLICY THROUGH BINDING ARBITRATION. THIS PROVISION IS INTENDED TO RESTRICT AN
OWNER'S ABILITY TO LITIGATE SUCH DISPUTES. SEE "ARBITRATION".
Please read this prospectus and the prospectus for each of the Funds
carefully and retain copies for future reference. This prospectus must be
accompanied or preceded by the current prospectus for each of the Funds.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999
PROSPECTUS CONTENTS
PAGE
------
DEFINITIONS........................................................... 4
SUMMARY AND DIAGRAM OF THE POLICY..................................... 5
EXPENSE TABLES........................................................ 8
GENERAL INFORMATION ABOUT PROTECTIVE LIFE, THE VARIABLE ACCOUNT AND
THE FUNDS............................................................ 10
Protective Life Insurance Company................................... 10
Protective Variable Life Separate Account........................... 10
The Funds........................................................... 11
- The PIC Funds................................................... 11
- The MFS Funds................................................... 12
- The Oppenheimer Funds........................................... 12
- The Calvert Funds............................................... 12
- The Van Eck Funds............................................... 13
Other Investors in the Funds........................................ 14
Addition, Deletion or Substitution of Investments................... 14
Voting Rights....................................................... 15
THE POLICY............................................................ 15
Purchasing a Policy................................................. 15
Cancellation Privilege.............................................. 16
Premiums............................................................ 16
- Minimum Initial Premium......................................... 16
- Planned Periodic Premium........................................ 17
- Unscheduled Premiums............................................ 17
- Premium Limitations............................................. 17
- No-Lapse Guarantee.............................................. 17
- Premium Payments Upon Increase in Face Amount................... 18
Premium Allocations................................................. 18
Policy Lapse and Reinstatement...................................... 18
- Lapse........................................................... 18
- Reinstatement................................................... 19
CALCULATION OF POLICY VALUES.......................................... 19
Variable Account Value.............................................. 19
- Determination of Units.......................................... 19
- Determination of Unit Value..................................... 19
- Net Investment Factor........................................... 19
Fixed Account Value................................................. 20
POLICY BENEFITS....................................................... 20
Transfers of Policy Values.......................................... 20
- General......................................................... 20
- Telephone Transfers............................................. 20
- Reservation of Rights........................................... 20
- Dollar-Cost Averaging........................................... 20
- Portfolio Rebalancing........................................... 21
Surrender Privilege................................................. 21
Withdrawal Privilege................................................ 22
Policy Loans........................................................ 22
- General......................................................... 22
- Loan Collateral................................................. 22
- Loan Repayment.................................................. 22
- Interest........................................................ 23
1
PAGE
------
- Non-Payment of Policy Loan...................................... 23
- Effect of a Policy Loan......................................... 23
Death Benefit Proceeds.............................................. 23
- Calculation of Death Benefit Proceeds........................... 24
- Death Benefit Options........................................... 24
- Changing the Death Benefit Option............................... 24
- Changing the Face Amount........................................ 24
- Additional Coverage from Term Rider for Covered Insured
("CIR").......................................................... 25
Settlement Options.................................................. 26
- Minimum Amounts................................................. 26
- Other Requirements.............................................. 26
THE FIXED ACCOUNT..................................................... 26
The Fixed Account................................................... 27
Interest Credited on Fixed Account Value............................ 27
Payments from the Fixed Account..................................... 27
CHARGES AND DEDUCTIONS................................................ 27
Monthly Deduction................................................... 27
- Cost of Insurance Charge........................................ 28
- Cost of Insurance Charge under a CIR............................ 29
- Legal Considerations Relating to Sex -- Distinct Premium
Payments and Benefits............................................ 29
- Monthly Administration Fee...................................... 29
- Supplemental Rider Charges...................................... 29
- Mortality and Expense Risk Charge............................... 29
Transfer Fee........................................................ 29
Withdrawal Charge................................................... 29
Fund Expenses....................................................... 30
EXCHANGE PRIVILEGE.................................................... 30
Effect of the Exchange Offer........................................ 31
- Tax Considerations.............................................. 32
- Sales Commissions............................................... 32
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES, DEATH BENEFITS AND
ACCUMULATED
PREMIUMS............................................................. 32
OTHER POLICY BENEFITS AND PROVISIONS.................................. 42
Limits on Rights to Contest the Policy.............................. 42
- Incontestability................................................ 42
- Suicide Exclusion............................................... 42
Changes in the Policy or Benefits................................... 42
- Misstatement of Age or Sex...................................... 42
- Other Changes................................................... 42
Suspension or Delay of Payments..................................... 42
Reports to Policy Owners............................................ 42
Assignment.......................................................... 43
Arbitration......................................................... 43
Supplemental Riders................................................. 43
- Children's Term Life Insurance Rider............................ 43
- Accidental Death Benefit Rider.................................. 43
- Disability Benefit Rider........................................ 43
- Guaranteed Insurability Rider................................... 43
- Protected Insurability Benefit Rider............................ 43
2
PAGE
------
- Term Rider for Covered Insured.................................. 44
Reinsurance......................................................... 44
USES OF THE POLICY.................................................... 44
TAX CONSIDERATIONS.................................................... 44
Introduction........................................................ 44
Tax Status of Protective Life....................................... 45
Taxation of Life Insurance Policies................................. 45
- Tax Status of the Policy........................................ 45
-- Diversification Requirements.................................. 45
-- Ownership Treatment........................................... 45
- Tax Treatment of Life Insurance Death Benefit Proceeds.......... 46
- Tax Deferral During Accumulation Period......................... 46
- Policies Not Owned by Individuals............................... 46
- Policies Which Are Not MEC's.................................... 47
-- Tax Treatment of Withdrawals Generally........................ 47
-- Certain Distributions Required by the Tax Law in the First 15
Policy Years..................................................... 47
-- Tax Treatment of Loans........................................ 47
- Policies Which Are MEC's........................................ 47
-- Characterization of a Policy as a MEC......................... 47
-- Tax Treatment of Withdrawals, Loans, Assignments and Pledges
under MECs....................................................... 48
-- Penalty Tax................................................... 48
-- Aggregation of Policies....................................... 48
- Actions to Ensure Compliance with the Tax Law................... 48
- Other Considerations............................................ 48
Federal Income Tax Withholding...................................... 48
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE.............. 49
Sale of the Policies................................................ 49
Corporate Purchasers................................................ 49
Protective Life Directors and Executive Officers.................... 49
State Regulation.................................................... 51
Additional Information.............................................. 51
Preparation for Year 2000........................................... 51
Independent Public Accountants...................................... 52
Experts............................................................. 52
Legal Matters....................................................... 52
Financial Statements................................................ 52
APPENDICES
A-Examples of Death Benefit Options................................. A-1
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
3
DEFINITIONS
"We", "us", "our", "Protective Life", and "Company" refer to Protective Life
Insurance Company. "You" and "your" refer to the person(s) who have been issued
a Policy.
ATTAINED AGE -- The Insured's age as of the nearest birthday on the Policy
Effective Date, plus the number of complete Policy Years since the Policy
Effective Date.
CANCELLATION PERIOD -- Period shown in the Policy during which the Owner may
exercise the cancellation privilege and return the Policy for a refund.
CIR -- Optional Term Rider for Covered Insured.
DEATH BENEFIT -- The amount of insurance provided under the Policy determined by
the Death Benefit Option. The amount payable on the death of the Insured will be
reduced by any outstanding Policy Debt and any unpaid Monthly Deductions.
DEATH BENEFIT OPTION -- One of two options that an Owner may select for the
computation of Death Benefit Proceeds. Face Amount (Option 1), or Face Amount
Plus Policy Value (Option 2).
DEATH BENEFIT PROCEEDS -- The amount payable to the Beneficiary if the Insured
dies while the Policy is in force and is equal to the Death Benefit plus any
death benefit under any rider to the Policy less any Policy Debt less unpaid
monthly deductions if the Insured dies during a grace period.
FACE AMOUNT -- A dollar amount selected by the Owner and shown in the Policy.
FIXED ACCOUNT -- Part of Protective Life's General Account to which Policy Value
may be transferred or Net Premiums allocated under a Policy.
FIXED ACCOUNT VALUE -- The Policy Value in the Fixed Account.
FUND -- A separate investment portfolio of an open-end management investment
company or unit investment trust in which a Sub-Account invests.
HOME OFFICE -- 2801 Highway 280 South, Birmingham, Alabama 35223.
INITIAL FACE AMOUNT -- The Face Amount on the Policy Effective Date.
INSURED -- The person whose life is covered by the Policy.
ISSUE AGE -- The Insured's age as of the nearest birthday on the Policy
Effective Date.
ISSUE DATE -- The date the Policy is issued.
LAPSE -- Termination of the Policy at the expiration of the grace period while
the Insured is still living.
LOAN ACCOUNT -- An account within Protective Life's general account to which
Fixed Account Value and/or Variable Account Value is transferred as collateral
for Policy loans.
MINIMUM MONTHLY PREMIUM -- For Policies issued on Insured's Issue Age up to 75,
the cumulative minimum amount of premium payments that must be paid in order for
the No-Lapse Guarantee to remain in effect.
MONTHLY ANNIVERSARY DAY -- The same day in each month as the Policy Effective
Date.
MONTHLY DEDUCTION -- The fees and charges deducted monthly from the Policy Value
and/or Variable Account Value as described on the Policy Specifications Page of
the Policy.
POLICY ANNIVERSARY -- The same day and month in each Policy Year as the Policy
Effective Date in each year the Policy remains in effect.
POLICY DEBT -- The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE -- The date shown in the Policy as of which coverage under
the Policy begins.
POLICY VALUE -- The sum of the Variable Account Value, the Fixed Account Value,
and the Loan Account Value.
POLICY YEAR -- Each period of twelve months commencing with the Policy Effective
Date and each Policy Anniversary thereafter.
SUB-ACCOUNT -- A separate division of the Variable Account established to invest
in a particular Fund.
SUB-ACCOUNT VALUE -- The Policy Value in a Sub-Account.
SURRENDER VALUE -- The Policy Value minus any outstanding Policy Debt.
VALUATION DAY -- Each day the New York Stock Exchange and the Home Office is
open for business except for a day that a Sub-Account's corresponding Fund does
not value its shares.
VALUATION PERIOD -- The period commencing with the close of regular trading on
the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT -- Protective Variable Life Separate Account, a separate
investment account of Protective Life into which Net Premiums may be allocated.
VARIABLE ACCOUNT VALUE -- The sum of all Sub-Account Values.
4
SUMMARY AND DIAGRAM OF THE POLICY
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION AND DIAGRAM OF THE POLICY
SHOULD BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE POLICY IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND THERE IS NO OUTSTANDING
POLICY DEBT.
PURPOSE OF THE POLICY. The Policy is designed to be a long-term investment
providing insurance benefits. A prospective Owner should consider the Policy in
conjunction with other insurance policies he or she may own, as well as their
need for insurance and the Policy's long-term investment potential. It may not
be advantageous to replace existing insurance coverage with the Policy. In
particular, replacement should be carefully considered if the decision to
replace existing coverage is based solely on a comparison of Policy
illustrations (see below).
COMPARISON WITH UNIVERSAL LIFE INSURANCE. The Policy is similar in many
ways to fixed-benefit life insurance. As with fixed-benefit life insurance: the
Owner of a Policy pays premiums for insurance coverage on the person insured;
the Policy provides for accumulation of a Surrender Value which is payable if
the Policy is surrendered during the Insured's lifetime; and the Surrender Value
during the early Policy Years is likely to be substantially lower than the
aggregate premiums paid. However, the Policy differs from fixed-benefit life
insurance in several important respects. Unlike fixed-benefit life insurance,
the Death Benefit may and the Policy Value will increase or decrease to reflect
the investment performance of any Sub-Accounts to which Policy Value is
allocated. Also, unless the entire Policy Value is allocated to the Fixed
Account, there is no guaranteed minimum Surrender Value. If Policy Value is
insufficient to pay charges due, then, after a grace period, the Policy will
lapse without value. See "Policy Lapse and Reinstatement". However, Protective
Life guarantees that the Policy will remain in force during the first 5 Policy
Years, as long as certain requirements related to the Minimum Monthly Premium
have been met. See "Premium -- No-Lapse Guarantee," and "Policy Loans". If a
Policy lapses while loans are outstanding, certain amounts may become subject to
income tax and a 10% penalty tax. See "Tax Considerations".
DEATH BENEFIT OPTIONS. Two Death Benefit options are available under the
Policy: a level death benefit ("Option 1") and a variable death benefit ("Option
2"). Protective Life guarantees that the Death Benefit Proceeds will never be
less than the Face Amount of insurance (less any outstanding Policy Debt and
past due charges) as long as sufficient premiums are paid to keep the Policy in
force. The Policy provides for a Surrender Value that can be obtained by
surrendering the Policy. The Policy also permits loans and withdrawals, within
limits.
ILLUSTRATIONS. Illustrations in this prospectus or used in connection with
the purchase of a Policy are based on HYPOTHETICAL rates of return. THESE RATES
ARE NOT GUARANTEED. They are illustrative only and SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE. Actual rates of return may be
higher or lower than those reflected in Policy illustrations, and therefore,
actual Policy values will be different from those illustrated.
TAX CONSIDERATIONS. Protective Life intends for the Policy to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code of 1986, as amended. A Policy may be a "modified endowment
contract" under federal tax law depending upon the amount of Premium Payments
made in relation to the Death Benefit provided under the Policy. Protective Life
will monitor Policies and will attempt to notify you on a timely basis if your
Policy is in jeopardy of becoming a modified endowment contract. For further
discussion of the tax status of a Policy and the tax consequences of being
treated as a life insurance contract or a modified endowment contract, see "Tax
Considerations".
CANCELLATION PRIVILEGE. For a limited time after the Policy is issued, you
have the right to cancel your Policy and receive a refund. (See "Cancellation
Privilege"). In certain states, until the end of this "Cancellation Period,"
Protective Life reserves the right to allocate premium payments to the Sub-
5
Account investing in the Oppenheimer Money Fund or to the Fixed Account. (See
"Premium Allocations").
OWNER INQUIRIES. If you have any questions, you may write or call
Protective Life's Home Office at 2801 Highway 280 South, Birmingham, Alabama
35223, 1-800-265-1545.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS
(PRINCIPAL).
DIAGRAM OF POLICY
PREMIUM PAYMENTS
- You select a payment plan but are not required to pay premiums according to
the plan. You can vary the amount and frequency and can skip planned premium
payments. See "Premiums" pages 16 and 17 for rules and limits.
- The Policy's minimum initial premium and planned premium payments depend on
the Insured's age, sex and underwriting class, Face Amount selected, and any
supplemental riders.
- Unscheduled premium payments may be made, within limits. See page 17.
- Under certain circumstances, extra premiums may be required to prevent
lapse. See "Policy Lapse and Reinstatement" page 18.
ALLOCATION OF PREMIUM PAYMENTS
- You direct the allocation of premium among 23 Sub-Accounts and the Fixed
Account. See page 18 for rules and limits on premium allocations.
- The Sub-Accounts invest in corresponding Funds. See pages 10 through 13.
Funds available are the PIC Funds, the Oppenheimer Funds, the MFS Funds, the
Calvert Funds and the Van Eck Funds.
- Interest is credited on amounts allocated to the Fixed Account at a rate
determined by Protective Life, but not less than an annual effective rate of
4%. See pages 27 and 28 for rules and limits on Fixed Account allocations.
6
DEDUCTIONS FROM POLICY VALUE
- Monthly Deduction for cost of insurance, administration fees, mortality and
expense risk charges and charges for any supplemental rider. Administration
fees are $3.00 per month. Monthly mortality and expense risk charges are
currently equal to .062% multiplied by the Variable Account Value (which is
equivalent to an annual rate of approximately 0.75% of such amount) during
Policy Years 1 through 10 and .021% multiplied by the Variable Account Value
(which is equivalent to an annual rate of approximately 0.25%) in Policy
Years 11 and thereafter. The guaranteed monthly mortality and expense risk
charge is .075% multiplied by the Variable Account Value (which is
equivalent to an annual rate of approximately 0.90%) on all years. The
mortality and expense risk charge is not deducted from Fixed Account. See
"Monthly Deduction" pages 27 through 29.
DEDUCTIONS FROM ASSETS
- Investment advisory fees and fund operating expenses are also deducted from
the assets of each Fund. See page 31.
POLICY VALUE
- Is the amount in the Sub-Accounts and in the Fixed Account credited to your
Policy plus the value held in the general account to secure the Policy Debt.
- Varies from day to day to reflect Sub-Account investment experience,
interest credited on any Fixed Account allocations, charges deducted and any
other Policy transactions (such as Policy loans, transfers and withdrawals).
See "Calculation of Policy Value" pages 18 and 19. There is no minimum
guaranteed Policy Value. The Policy may lapse if the Policy Value is
insufficient to cover a Monthly Deduction due. See page 18.
- Can be transferred between and among the Sub-Accounts and the Fixed Account.
A transfer fee of $25 may apply if more than 12 transfers are made in a
Policy Year. See pages 20 and 21 for rules and limits. Policy loans reduce
the amount available for allocations and transfers.
- Is the starting point for calculating certain values under a Policy, such as
the Cash Value, Surrender Value, and the Death Benefit used to determine
Death Benefit Proceeds.
CASH BENEFITS DEATH BENEFITS
- - After the first Policy Year, loans may be - Available as lump sum or under a variety
taken for amounts up to 90% of Surrender of Settlement Options.
Value, at an effective annual interest - The minimum Face Amount is $250,000.
rate of 6.0% during the first 10 Policy - Two Death Benefit Options are available:
Years and currently 4.00% thereafter. See Option 1, equal to the Face Amount, and
"Policy Loans" pages 22 and 23 for rules Option 2, equal to the Face Amount plus
and limits. Policy Value. See page 24.
- - After the first Policy Year, withdrawals - Flexibility to change the Death Benefit
generally can be made provided there is Option and Face Amount. See pages 24 and 25
sufficient remaining Surrender Value. A for rules and limits.
withdrawal charge of the lesser of $25 or - The No-Lapse Guarantee keeps the Policy in
2% of the withdrawal amount requested will force regardless of the sufficiency of
apply to each withdrawal. See "Withdrawal Surrender Value so long as cumulative
Privilege" page 22 for rules and limits. premiums paid on the Policy, less any
- - The Policy may be surrendered in full at withdrawals and Policy Debt, are at least
any time for its Surrender Value. equal to the Minimum Monthly Premium. See
- - A variety of Settlement Options are "No-Lapse Guarantee" page 17.
available. See page 26. - Supplemental riders may be available. See
pages 43 and 44.
7
EXPENSE TABLES
The Sub-Accounts invest in corresponding Funds. (See "The Funds" pages
10-13.) The current Funds available and the investment advisory fees and other
expenses are as follows:
ANNUAL FUND EXPENSES
(AS PERCENTAGE OF AVERAGE NET ASSETS)
MANAGEMENT OTHER TOTAL ANNUAL
(ADVISORY) EXPENSES AFTER FUND EXPENSES
FEES REIMBURSEMENT (AFTER REIMBURSEMENTS)
--------------- ----------------- -----------------------
PIC FUNDS (1)
International Equity Fund................................. % % %
Small Cap Value Fund...................................... % % %
Capital Growth Fund....................................... % % %
CORE U.S. Equity Fund..................................... % % %
Growth & Income Fund...................................... % % %
Global Income Fund........................................ % % %
MFS INVESTMENT MANAGEMENT-REGISTERED TRADEMARK- (MFS) FUNDS
(2)(3)
New Discovery Series...................................... % % %
Emerging Growth Series.................................... % % %
Research Series........................................... % % %
Growth With Income Series................................. % % %
Utilities Series.......................................... % % %
Total Return Series....................................... % % %
OPPENHEIMERFUNDS
Aggressive Growth Fund.................................... % % %
Global Securities Fund.................................... % % %
Growth Fund............................................... % % %
Growth & Income Fund...................................... % % %
High Income Fund.......................................... % % %
Strategic Bond Fund....................................... % % %
Money Fund................................................ % % %
CALVERT FUNDS (4)
Social Small Cap Growth Portfolio......................... % % %
Social Balanced Portfolio................................. % % %
VAN ECK FUNDS (5)
Worldwide Hard Assets Fund................................ % % %
Worldwide Real Estate Fund................................ % % %
- ------------------------
(1) The annual expenses listed for all of the PIC Funds are net of certain
reimbursements by PIC's investment manager. (See "The Funds".) Absent the
reimbursements, total expenses for the period ended December 31, 1998 were:
CORE U.S. Equity Fund %, Small Cap Value Fund %, International Equity
Fund %, Growth and Income Fund %, Capital Growth Fund %, and Global
Income Fund %. PIC's investment manager has voluntarily agreed to
reimburse certain of each Fund's expenses in excess of its management fees.
Although this reimbursement may be ended on 120 days notice to PIC, the
investment manager has no present intention of doing so.
(2) The annual expenses for the MFS Funds are net of certain adjustments made to
reflect the effects of the 1.00% expense cap for the current and prior
periods. Absent the adjustments, the Fund expenses for the period ending
December 31, 1998 were: MFS Research Series %, MFS
8
Emerging Growth Series %, MFS Growth with Income Series %, and MFS
Total Return Series %.
(3) Each Series has an expense offset arrangement which reduces the Series'
custodian based fee based on the amount of cash maintained by the Series
with its custodian and dividend disbursing agent, and may enter into other
such arrangements and directed brokerage arrangements (which would also have
the effect of reducing the Series' expenses). Any such fee reductions are
not reflected under "Other Expenses."
(4) Management Fees includes for Calvert Social Balanced a performance
adjustment, which depending on performance, could cause the fee to be as
high as 0.85% or as low as 0.55%. The Calvert Social Small Cap Growth
expenses have been restated to reflect the lower advisory fee and
administrative services fee. "Other Expenses" reflect an indirect fee. Net
fund operating expenses after reductions for fees paid indirectly (again,
restated) would be % for Calvert Social Balanced and % for Calvert
Social Small Cap Growth. Management Fees for Calvert Social Small Cap Growth
include an administrative service fee of 0.10% paid to the Advisor's
affiliate.
(5) The annual expenses listed for both of the Van Eck Funds are net of certain
arrangements. The gross expense ratio for the Worldwide Hard Assets Fund for
the year ended December 31, 1998 was % which reflects an expense offset
arrangement that reduces the custodian based fee based on amounts left on
deposit with the custodian. The gross annualized expense ratio for the
Worldwide Real Estate Fund for the year ended December 31, 1998 was %.
Van Eck Associates Corp. (the "Adviser") agreed to assume all expenses,
excluding brokerage commissions, and foreign tax and interest expenses, for
the fiscal year of 1998. [The Adviser also agreed to assume all expenses for
the period January 1, 1998 through February 28, 1998 excluding brokerage
commissions, and foreign tax and interest expenses. For the period March 1,
1998 through December 31, 1998 the Adviser agreed to assume expenses
exceeding 1% of average daily net assets, excluding brokerage commissions,
and foreign tax and interest expenses.]
The above tables are intended to assist the owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The tables reflect
the expenses for the Account and reflect the investment management fees and
other expenses and total expenses for each Fund for the period January 1, 1998
to December 31, 1998. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectus for each of the Funds,
which accompany this prospectus.
9
GENERAL INFORMATION ABOUT PROTECTIVE LIFE,
THE VARIABLE ACCOUNT AND THE FUNDS
PROTECTIVE LIFE INSURANCE COMPANY
Protective Life is a Tennessee stock life insurance company. Founded in
1907, Protective Life offers individual life and health insurance, annuities,
group life and health insurance, and guaranteed investment contracts. Protective
Life is currently licensed to transact life insurance business in 49 states and
the District of Columbia. As of December 31, 1998, Protective Life had total
assets of approximately $ - billion. Protective Life is the principal
operating subsidiary of Protective Life Corporation ("PLC"), an insurance
holding company whose stock is traded on the New York Stock Exchange. PLC, a
Delaware corporation, had consolidated assets of approximately $ - billion at
December 31, 1998.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Protective Variable Life Separate Account is a separate investment account
of Protective Life established under Tennessee law by the board of directors of
Protective Life on February 22, 1995. The Variable Account is registered with
the Securities and Exchange Commission ("SEC") as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") and is a "separate account"
within the meaning of the federal securities laws. This registration does not
involve supervision by the SEC of the management or investment policies of
practices or the Variable Account.
Protective Life owns the assets of the Variable Account. These assets are
held separate from other assets and are not part of Protective Life's General
Account. Assets of the Variable Account equal to the reserves or other contract
liabilities of the Variable Account will not be charged with liabilities that
arise from any other business that Protective Life conducts. Protective Life may
transfer to its General Account any assets of the Variable Account which exceed
the reserves and other contract liabilities of the Variable Account (which
always are at least equal to the aggregate Surrender Values under the Policies).
Protective Life may accumulate in the Variable Account the charge for mortality
and expense risks and investment results applicable to those assets that are in
excess of the reserves and other contract liabilities related to the Policies.
Protective Life is obligated to pay all benefits provided under the Policies.
The Variable Account is divided into Sub-Accounts. The income, gains or
losses, whether or not realized, from the assets of each Sub-Account are
credited to or charged against that Sub-Account without regard to any other
income, gains or losses of Protective Life. Each Sub-Account invests exclusively
in shares of a corresponding Fund. Therefore, the investment experience of your
Policy depends on the experience of the Sub-Accounts you select. In the future,
the Variable Account may include other Sub-Accounts that are not available under
the Policies and are not otherwise discussed in this Prospectus.
Currently, twenty-three Sub-Accounts of the Variable Account are available
under the Policies: PIC International Equity; PIC Small Cap Value; PIC Capital
Growth; PIC CORE U.S. Equity; PIC Growth and Income; PIC Global Income; MFS New
Discovery; MFS Emerging Growth; MFS Research; MFS Growth With Income; MFS
Utilities; MFS Total Return; OppenheimerFunds Aggressive Growth;
OppenheimerFunds Global Securities: OppenheimerFunds Growth; OppenheimerFunds
Growth & Income; OppenheimerFunds High Income; OppenheimerFunds Strategic Bond;
OppenheimerFunds Money Fund; Calvert Social Small Cap Growth; Calvert Social
Balanced; Van Eck Worldwide Hard Assets; and Van Eck Worldwide Real Estate.
10
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each Fund is an investment
portfolio of one of the following investment companies: PIC (the "PIC Funds")
managed by Protective Investment Advisors, Inc. (formerly Investment
Distributions Advisory Services, Inc.) and subadvised by Goldman Sachs Asset
Management or Goldman Sachs Asset Management International; Oppenheimer Variable
Account Funds (the "Oppenheimer Funds") managed by OppenheimerFunds, Inc.; MFS
Variable Insurance Trust (the "MFS Funds") managed by Massachusetts Financial
Services Company; Calvert Variable Series, Inc. (the "Calvert Funds") managed by
Calvert Asset Management Company, Inc.; or Van Eck Worldwide Insurance Trust
(the "Van Eck Funds") managed by Van Eck Associates Corporation. Shares of these
Funds are offered only to: (1) the Variable Account, (2) other separate accounts
of Protective Life supporting variable annuity contracts or variable life
insurance policies, (3) separate accounts of other life insurance companies
supporting variable annuity contracts or variable life insurance policies, and
(4) certain qualified retirement plans. Such shares are not offered directly to
investors but are available only through the purchase of such contracts or
policies or through such plans. See the prospectus for each Fund for details
about that Fund.
There is no guarantee that any Fund will meet its investment objectives.
Please refer to the prospectus for each of the Funds you are considering for
more information.
PIC FUNDS
PIC INTERNATIONAL EQUITY FUND. This Fund seeks long-term capital
appreciation. This Fund will pursue its objective by investing,
substantially all, and at least 65% of total assets in equity and
equity-related securities of companies that are organized outside the United
States or whose securities are primarily traded outside the United States.
PIC SMALL CAP VALUE FUND. This Fund seeks long-term capital growth.
This Fund will pursue its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of
companies with public stock market capitalizations of $1 billion or less at
the time of investment.
PIC CAPITAL GROWTH FUND. This Fund seeks long-term capital growth. The
Fund will pursue its objective by investing, under normal circumstances, at
least 90% of its total assets in a diversified portfolio of equity
securities having long-term capital appreciation potential.
PIC CORE U.S. EQUITY FUND. This Fund seeks a total return consisting of
capital appreciation plus dividend income. This Fund will pursue its
objective by investing, under normal circumstances, at least 90% of its
total assets in equity securities selected using both fundamental research
and a variety of quantitative techniques in seeking to maximize the Fund's
expected return, while maintaining risk, style, capitalization and industry
characteristics similar to the S&P 500 Index.
PIC GROWTH AND INCOME FUND. This Fund seeks long-term growth of capital
and growth of income. This Fund will pursue its objectives by investing,
under normal circumstances, at least 65% of its total assets in equity
securities having favorable prospects of capital appreciation and/or
dividend paying ability.
PIC GLOBAL INCOME FUND. This Fund seeks high total return, emphasizing
current income and, to a lesser extent, providing opportunities for capital
appreciation. This Fund will pursue its objectives by investing primarily in
high quality fixed-income securities of U.S. and foreign issuers and through
foreign currency transactions.
11
MFS FUNDS
MFS NEW DISCOVERY SERIES. This Fund seeks to provide capital
appreciation.
MFS EMERGING GROWTH SERIES. This Fund seeks to provide long-term growth
of capital.
MFS RESEARCH SERIES. This Fund seeks to provide long-term growth of
capital and future income.
MFS GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable
current income and long-term growth of capital and income.
MFS UTILITIES SERIES. This Fund seeks to provide capital growth and
current income.
MFS TOTAL RETURN SERIES. This Fund seeks primarily to provide
above-average income (compared to a portfolio invested entirely in equity
securities) consistent with the prudent employment of capital and
secondarily to provide a reasonable opportunity for growth of capital and
income.
OPPENHEIMERFUNDS
AGGRESSIVE GROWTH FUND. This Fund seeks to achieve capital appreciation
by investing in "growth-type" companies.
GLOBAL SECURITIES FUND. This Fund seeks long-term capital appreciation
by investing in securities of foreign issuers, "growth-type" companies and
cyclical industries.
GROWTH FUND. This Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies.
GROWTH & INCOME FUND. This Fund seeks a high total return (which
includes growth in the value of its shares as well as current income) from
equity and debt securities. From time to time this Fund may focus on small
to medium capitalization common stocks, bonds and convertible securities.
HIGH INCOME FUND. This Fund seeks a high level of current income from
investment in high yield fixed-income securities.
STRATEGIC BOND FUND. This Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to enhance
such income by writing covered call options on debt securities.
MONEY FUND. This Fund seeks maximum current income from investments in
"money market" securities consistent with low capital risk and the
maintenance of liquidity.
CALVERT FUNDS
SOCIAL SMALL CAP GROWTH PORTFOLIO. This Fund seeks maximum long-term
growth through investments primarily in the equity securities of small
capitalized growth companies that have historically exhibited exceptional
growth characteristics, and that, in the Advisor's opinion, have strong
earnings potential relative to the U.S. market as a whole. The Fund is
designed to provide long-term growth of capital by investing in enterprises
that make a significant contribution to society through their products and
services and through the way they do business.
SOCIAL BALANCED PORTFOLIO. This Fund seeks to achieve a total return
above the rate of inflation through an actively managed, non-diversified
portfolio of common and preferred stocks,
12
bonds, and money market instruments that offer income and capital growth
opportunity and that satisfy the social concern criteria established for the
Fund.
VAN ECK FUNDS
WORLDWIDE HARD ASSETS FUND. This Fund seeks long-term capital
appreciation by investing globally, primarily in "Hard Asset Securities".
Hard Asset Securities include equity securities of "Hard Asset Companies"
and securities, including structured notes, whose value is linked to the
price of a Hard Asset commodity or a commodity index. "Hard Asset Companies"
includes companies that are directly or indirectly (whether through supplier
relationships, servicing agreements or otherwise) engaged to a significant
extent in the exploration, development, production or distribution of one or
more of the following (together "Hard Assets"): (i) precious metals, (ii)
ferrous and non-ferrous metals, (iii) gas, petroleum, petrochemicals or
other hydrocarbons, (iv) forest products, (v) real estate and (vi) other
basic non-agricultural commodities.
WORLDWIDE REAL ESTATE FUND. This Fund seeks to maximize total return by
investing primarily in equity securities of domestic and foreign companies
which are principally engaged in the real estate industry or which own
significant real estate assets.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL BE ACHIEVED.
MORE DETAILED INFORMATION CONCERNING THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS OF THE FUNDS, THE EXPENSES OF THE FUNDS, THE RISKS ATTENDANT TO
INVESTING IN THE FUNDS AND OTHER ASPECTS OF THEIR OPERATIONS CAN BE FOUND IN THE
CURRENT PROSPECTUSES FOR THE FUNDS, WHICH ACCOMPANY THIS PROSPECTUS, AND THE
CURRENT STATEMENT OF ADDITIONAL INFORMATION FOR EACH OF THE FUNDS. THE FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF NET PREMIUMS OR TRANSFERS AMONG THE SUB-ACCOUNTS. CERTAIN FUNDS
MAY HAVE INVESTMENT OBJECTIVES AND POLICIES SIMILAR TO OTHER MUTUAL FUNDS
(SOMETIMES HAVING SIMILAR NAMES) THAT ARE MANAGED BY THE SAME INVESTMENT ADVISER
OR MANAGER. THE INVESTMENT RESULTS OF THE FUNDS, HOWEVER, MAY BE MORE OR LESS
FAVORABLE THAN THE RESULTS OF SUCH OTHER MUTUAL FUNDS. PROTECTIVE LIFE DOES NOT
GUARANTEE OR MAKE ANY REPRESENTATION THAT THE INVESTMENT RESULTS OF ANY FUND IS,
OR WILL BE, COMPARABLE TO ANY OTHER MUTUAL FUND, EVEN ONE WITH THE SAME
INVESTMENT ADVISER OR MANAGER.
Each Fund sells its shares to the Variable Account in accordance with the
terms of a participation agreement between the appropriate investment company
and Protective Life. The termination provisions of these agreements vary. Should
a participation agreement relating to a Fund terminate, the Variable Account
would not be able to purchase additional shares of that Fund. In that event,
Owners would no longer be able to allocate assets in the Variable Account or
premiums to Sub-Accounts investing in that Fund. In certain circumstances, it is
also possible that a Fund may refuse to sell its shares to the Variable Account
despite the fact that the participation agreement relating to that Fund has not
been terminated. Should a Fund decide to discontinue selling its shares to the
Variable Account, Protective Life would not be able to honor requests from
Owners to allocate premiums or transfer Account Value to the Sub-Account
investing in shares of that Fund.
Protective Life has entered into agreements with the investment managers or
advisers of several of the Funds pursuant to which each such investment manager
or adviser pays Protective Life a servicing fee based upon an annual percentage
of the average daily net assets invested by the Variable Account (and other
separate accounts of Protective Life) in the Funds managed by that manager or
adviser. These fees are in consideration for administrative services provided to
the Funds by Protective Life. Payments of fees under these agreements by
managers or advisers do not increase the fees or expenses paid by the Funds or
their shareholders.
13
OTHER INVESTORS IN THE FUNDS
PIC currently sells shares of its Funds only to Protective Life as the
underlying investment for the Variable Account as well as for variable annuity
contracts issued through Protective Life. PIC may in the future sell shares of
its Funds to other separate accounts of Protective Life or its life insurance
company affiliates supporting other variable annuity contracts or variable life
insurance contracts. In addition, upon obtaining regulatory approval, PIC may
sell shares to certain retirement plans qualifying under Section 401 of the
Code. Protective Life currently does not foresee any disadvantages to Owners
that would arise from the possible sale of shares to support its variable
annuity contracts or those of its affiliates or from the possible sale of shares
to such retirement plans. However, the board of directors of PIC will monitor
events in order to identify any material irreconcilable conflicts that might
possibly arise if such shares were also offered to support variable life
insurance contracts other than the Policies or variable annuity contracts or to
retirement plans. In event of such a conflict, the board of directors would
determine what action, if any, should be taken in response to the conflict. In
addition, if Protective Life believes that the PIC's response to any such
conflicts insufficiently protects Owners, it will take appropriate action on its
own, including withdrawing the Account's investment in the Fund. (See the PIC
prospectus for more detail.)
Shares of the Oppenheimer Funds, MFS Funds, Calvert Funds and Van Eck Funds
are sold to separate accounts of insurance companies, which may or may not be
affiliated with Protective Life or each other, a practice known as "shared
funding." They may also be sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
policies, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners
of Protective Life's Policies whose Policy Values are allocated to the Variable
Account and of owners of other contracts whose contract values are allocated to
one or more other separate accounts investing in any one of the Funds. Shares of
some of these Funds may also be sold to certain qualified pension and retirement
plans. As a result, there is a possibility that a material conflict may arise
between the interests of Policy Owners generally or certain classes of Policy
Owners, and such retirement plans or participants in such retirement plans. In
the event of any such material conflicts, Protective Life will consider what
action may be appropriate, including removing the Fund from the Variable Account
or replacing the Fund with another fund. As is the case with PIC, the board of
directors (or trustees) of each of the Oppenheimer Funds, MFS Funds, Calvert
Funds and Van Eck Funds monitors events related to their Funds to identify
possible material irreconcilable conflicts among and between the interests of
the Fund's various investors. There are certain risks associated with mixed and
shared funding and with the sale of shares to qualified pension and retirement
plans, as disclosed in each Fund's prospectus.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Protective Life reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
a Fund are no longer available for investment or if in Protective Life's
judgment further investment in any Fund should become inappropriate in view of
the purposes of the Variable Account, Protective Life may redeem the shares, if
any, of that Fund and substitute shares of another Fund. Protective Life will
not substitute any shares attributable to a Policy's interest in the Variable
Account without notice and any necessary approval of the SEC and state insurance
authorities.
Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Account, each of which would invest in shares corresponding to a
new Fund. Subject to applicable law and any required SEC approval, Protective
Life may, in its sole discretion, establish new Sub-Accounts or eliminate one or
more Sub-Accounts if marketing needs, tax considerations or investment
conditions warrant. Any new Sub-Accounts may be made available to existing
Owner(s) on a basis to be determined by Protective Life.
14
If any of these substitutions or changes are made, Protective Life may by
appropriate endorsement change the Policy to reflect the substitution or other
change. If Protective Life deems it to be in the best interest of Owner(s), and
subject to any approvals that may be required under applicable law, the Variable
Account may be operated as a management investment company under the 1940 Act,
it may be deregistered under that Act if registration is no longer required, or
it may be combined with other Protective Life separate accounts. Protective Life
reserves the right to make any changes to the Variable Account required by the
1940 Act or other applicable law or regulation.
VOTING RIGHTS
Protective Life is the legal owner of Fund shares held by the Sub-Accounts
and as such has the right to vote on all matters submitted to shareholders of
the Funds. However, in accordance with applicable law, Protective Life will vote
shares held in the Sub-Accounts at meetings of shareholders of the Funds in
accordance with instructions received from Owners with Policy Value in the
Sub-Accounts. Should the 1940 Act or any regulation thereunder be amended, or
should the current interpretation thereof change, or Protective Life determines
that it is permitted to vote such shares in its own right, it may elect to do
so.
Protective Life will send Owners voting instruction forms and other voting
materials (such as Fund proxy statements, reports and other proxy materials)
prior to shareholders meetings. The number of votes as to which an Owner may
give instructions is calculated separately for each Sub-Account and may include
fractional votes.
The number of votes attributable to a Sub-Account for an Owner is determined
by applying the Owner's percentage interest, if any, in a particular Sub-Account
to the total number of votes attributable to that Sub-Account. An Owner holds a
voting interest in each Sub-Account to which Variable Policy Value is allocated
under his or her Policy. Owners only have voting interests while the Insured is
alive. The number of votes for which an Owner may give instructions is
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of that Fund.
Shares as to which no timely instructions are received and shares held
directly by Protective Life are voted by Protective Life in proportion to the
voting instructions that are received with respect to all Policies participating
in a Sub-Account. Voting instructions to abstain on any item are applied to
reduce the votes eligible to be cast on that item.
Protective Life may, if required by state insurance officials, disregard
Owner voting instructions if such instructions would require shares to be voted
so as to cause a change in sub-classification or investment objectives of one or
more of the Funds, or to approve or disapprove the investment management
agreement or an investment advisory agreement. In addition, Protective Life may
under certain circumstances disregard voting instructions that would require
changes in the investment management agreement, investment manager, an
investment advisory agreement or an investment adviser of one or more of the
Funds, provided that Protective Life reasonably disapproves of such changes in
accordance with applicable regulations under the 1940 Act. If Protective Life
ever disregards voting instructions, Owners will be advised of that action and
of the reasons for such action in the next semiannual report.
THE POLICY
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed
application (which Protective Life must approve) and an initial premium payment
through a licensed representative of Protective Life who is also a registered
representative of a broker-dealer having a distribution agreement with
Investment Distributors, Inc. ("IDI"). The initial premium must be an amount at
least equal to the minimum
15
required. See "Premium," below. Protective Life requires satisfactory evidence
of the Insured's insurability, which may include a medical examination of the
Insured. Generally, Protective Life will issue a Policy covering an Insured up
to age 75 if evidence of insurability satisfies Protective Life's underwriting
rules. Acceptance of an application depends on Protective Life's underwriting
rules, and Protective Life reserves the right to reject an application for any
reason. With the consent of the Owner, a Policy may be issued on a basis other
than that applied for (I.E., on a higher premium class basis due to increased
risk factors). A POLICY IS ISSUED AFTER PROTECTIVE LIFE APPROVES THE
APPLICATION. PREMIUM IS NOT A REQUIREMENT TO ISSUE A POLICY. PREMIUM MAY BE
COLLECTED AT THE TIME OF POLICY DELIVERY.
Insurance coverage under a Policy begins on the Policy Effective Date which
generally is also the Issue Date. If however the initial premium is submitted
with the application and the Policy is issued as applied for in the application,
the Policy Effective Date is the later of the date the application is signed or
any required medical examination is completed. Temporary life insurance coverage
also may be provided under the terms of a temporary insurance agreement. In
accordance with the terms of such agreements, the total amount of insurance
which may become effective prior to delivery of the Policy to the owner may not
exceed $500,000 (including the amount of any life insurance and accidental death
benefits then in force or applied for with the Company) and may not be in effect
for more than 90 days.
In order to obtain a more favorable Issue Age, Protective Life may permit
the Owner to "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. Charges for the Monthly
Deduction for the backdated period are deducted as of the new Policy Effective
Date.
The Owner of the Policy may exercise all rights provided under the Policy.
The Insured is the Owner, unless a different person is named as Owner in the
application. By written notice received by Protective Life at the Home Office
while the Insured is living, the Owner may name a Contingent Owner or a new
Owner. If the application names more than one person as Owner, they are joint
Owners. In this event, the exercise of any right under the Policy (such as
transfers of Policy Values) requires the authorization of all Owners. Unless the
Owner provides otherwise, in the event of one joint Owner's death, ownership
passes to any surviving joint Owner(s). Unless a contingent Owner has been
named, ownership of the Policy passes to the estate of the last surviving Owner
upon his or her death. A change in Owner may have tax consequences. See "Tax
Considerations".
CANCELLATION PRIVILEGE
You may cancel your Policy for a refund during the Cancellation Period by
returning it to Protective Life's Home Office or to the sales representative who
sold it along with a written cancellation request. The Cancellation Period is
determined by the law of the state in which the application is signed and is
shown in your Policy. In most states it expires at the latest of (1) ten days
after you receive your Policy, (2) 45 days after you sign your application, or
(3) 10 days after Protective Life mails or delivers a Notice of Right of
Withdrawal. Return of the Policy by mail is effective upon receipt by Protective
Life. We will treat the Policy as if it had never been issued. Within seven
calendar days after receiving the returned Policy, Protective Life will refund
(i) the difference between premiums paid and amounts allocated to the Fixed
Account or the Variable Account, plus (ii) Fixed Account Value determined as of
the date the returned Policy is received, plus (iii) Variable Account Value
determined as of the date the returned Policy is received. This amount may be
more or less than the aggregate premiums paid. In states where required,
Protective Life will refund premiums paid.
PREMIUMS
MINIMUM INITIAL PREMIUM. The minimum initial premium required depends on a
number of factors, including the age, sex and rate class of the proposed
Insured, the Initial Face Amount requested
16
by the applicant, any supplemental riders requested by the applicant and the
planned periodic premiums that the applicant selects. See "Planned Periodic
Premiums," below. Consult your sales representative for information about the
initial premium required for the coverage you desire.
PLANNED PERIODIC PREMIUMS. In the application the Owner selects a plan for
paying level premiums at specified intervals (e.g., quarterly, semi-annually or
annually). At the Owner's election, Protective Life will also arrange for
payment of planned periodic premiums on a monthly basis (on any day except the
29th, 30th, or 31st of a month) under a pre-authorized payment arrangement. You
are not required to pay premiums in accordance with these plans; rather, you can
pay more or less than planned or skip a planned periodic premium entirely. (See,
however, "Policy Lapse and Reinstatement"). Subject to the limits described
below, you can change the amount and frequency of planned periodic premiums
whenever you want by written notice to Protective Life at the Home Office.
Unless you have arranged to pay planned periodic premiums by pre-authorized
payment arrangement or have otherwise requested, you will be sent reminder
notices for planned periodic premiums.
UNSCHEDULED PREMIUMS. Subject to the limitations described below,
additional unscheduled premiums may be paid in any amount and at any time. By
written notice to Protective Life at the Home Office, the Owner may specify that
all unscheduled premiums are to be applied as repayments of Policy Debt, if any.
PREMIUM LIMITATIONS. Premiums may be paid by any method acceptable to
Protective Life. If by check, the check must be from an Owner (or the Owner's
designee other than a sales representative), payable to Protective Life
Insurance Company, and be dated prior to its receipt at the Home Office.
Additional limitations apply to premiums. Premium payments must be at least
$150 ($50 if paid monthly by a pre-authorized payment arrangement) and must be
remitted to the Home Office. See "Premium Allocations." Protective Life also
reserves the right to limit the amount of any premium payment. In addition, at
any point in time aggregate premiums paid under a Policy may not exceed
guideline premium payment limitations for life insurance policies set forth in
the Internal Revenue Code. Protective Life will immediately refund any portion
of any premium payment that is determined to be in excess of the limits
established by law to qualify a Policy as a contract for life insurance.
Protective Life will monitor Policies and will attempt to notify the Owner on a
timely basis if his or her Policy is in jeopardy of becoming a modified
endowment contract under the Internal Revenue Code. See "Tax Considerations".
NO-LAPSE GUARANTEE. In return for paying the Minimum Monthly Premium or an
amount equivalent thereto by the Monthly Anniversary Day, Protective Life
guarantees that a Policy will remain in force during the first 5 Policy Years
regardless of the Policy Value, if, for each month that the Policy has been in
force since the Policy Effective Date, the total premiums paid less any
withdrawals and Policy Debt is greater than or equal to the Minimum Monthly
Premium (shown in the Policy) multiplied by the number of complete policy months
since the Policy Effective Date, including the current policy month. The Minimum
Monthly Premium is calculated for each Policy based on the age, sex and rate
class of the Insured, the requested Face Amount and any supplemental riders. The
Company will not notify you in the event the No-Lapse Guarantee is no longer in
effect.
If you increase your Policy's Face Amount while the No-Lapse Guarantee is in
effect, Protective Life will NOT EXTEND the period of this guarantee. The
guarantee period is based on the Initial Face Amount. However, upon an increase
in Face Amount, Protective Life will recalculate the Minimum Monthly Premium,
which will generally also increase. Protective Life will notify you of any
increase in the Minimum Monthly Premium and will amend your Policy to reflect
the change.
17
PREMIUM PAYMENTS UPON INCREASE IN FACE AMOUNT. Depending on the Policy
Value at the time of an increase in the Face Amount and the amount of the
increase requested, an additional premium payment may be necessary or a change
in the amount of planned periodic premiums may be advisable. See "Death Benefit
Proceeds". You will be notified if a premium payment is necessary or a change
appropriate.
PREMIUM ALLOCATIONS
Owners must indicate in the application how premium is to be allocated to
the Sub-Accounts and/ or to the Fixed Account. These allocation instructions
apply to both initial and subsequent Net Premiums. Owners may change the
allocation instructions in effect at any time by written notice to Protective
Life at the Home Office. Whole percentages must be used. The minimum percentage
that may be allocated to any Sub-Account or to the Fixed Account is 10% of
premium and the sum of allocations must add up to 100%.
For Policies issued in states where, upon cancellation during the
Cancellation Period, Protective Life returns at least your premiums, Protective
Life reserves the right to allocate your initial premium (and any subsequent
premium paid during the Cancellation Period) to the Oppenheimer Money Fund
Sub-Account or the Fixed Account until the expiration of the number of days in
the Cancellation Period plus 6 days starting from the date that the Policy is
mailed from the Home Office. Thereafter, the Policy Value in the Oppenheimer
Money Fund Sub-Account or the Fixed Account and all premium will be allocated
according to your allocation instructions then in effect.
Planned periodic premiums and unscheduled premiums not requiring additional
underwriting will be credited to the Policy and the premiums will be invested as
requested on the Valuation Date they are received by the Home Office. However,
any premium paid in connection with an increase in Face Amount will be allocated
to the Fixed Account until underwriting has been completed. When approved, the
Policy Value in the Fixed Account attributable to the resulting premium will be
reallocated in accordance to your allocation instructions then in effect. If an
additional premium payment is rejected, Protective Life will return the premium
immediately, without any adjustment for investment experience.
Unless designated by the Owner as a loan repayment, premiums received from
Owners (other than planned periodic premiums) are treated as unscheduled
premiums.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, failure to pay planned
periodic premiums will not necessarily cause a Policy to lapse. Conversely,
paying all planned periodic premiums will not necessarily prevent a Policy from
lapsing. Except when the No-Lapse Guarantee is in effect, a Policy will lapse if
its Policy Value is insufficient to cover the Monthly Deduction (See "Monthly
Deduction") on the Monthly Anniversary Day.
If the Policy Value on a Monthly Anniversary Day is less than the amount of
the Monthly Deduction due on that date and the No-Lapse Guarantee is not in
effect, the Policy will be in default and a grace period will begin. This could
happen if investment experience has been sufficiently unfavorable that it has
resulted in a decrease in Policy Value or the Policy Value has decreased because
you have not paid sufficient premium to offset prior Monthly Deductions.
In the event of a Policy default, the Owner has a 61-day grace period to
make a payment of premium sufficient to cover the current and past-due Monthly
Deductions. Protective Life will send to the Owner, at the last known address
and the last known address of any assignee of record, notice of the premium
required to prevent lapse. The grace period will begin when the notice is sent.
A Policy will remain in effect during the grace period. If the Insured should
die during the grace period, the Death Benefit Proceeds payable to the
Beneficiary will reflect a reduction for the Monthly Deductions
18
due on or before the date of the Insured's death as well as any unpaid Policy
Debt. See "Death Benefit Proceeds". Unless the premium stated in the notice is
paid before the grace period ends, the Policy will lapse.
REINSTATEMENT. An Owner may reinstate a Policy within 5 years of its lapse
provided that: (1) a request for reinstatement is made by written notice
received by Protective Life at the Home Office, (2) the Insured is still living,
(3) the Owner pays premium equal to (a) all Monthly Deductions that were due but
unpaid during the grace period, and (b) which are at least sufficient to keep
the reinstated Policy in force for three months, (4) the Insured provides
Protective Life with satisfactory evidence of insurability, (5) the Owner repays
or reinstates any Policy Debt which existed at the end of the grace period; and
(6) the Policy has not been surrendered. The "Approval Date" of a reinstated
Policy is the date that Protective Life approves the Owner's request for
reinstatement and requirements 1-7 above have been met.
CALCULATION OF POLICY VALUES
VARIABLE ACCOUNT VALUE
THE VARIABLE ACCOUNT VALUE REFLECTS THE INVESTMENT EXPERIENCE OF THE
SUB-ACCOUNTS TO WHICH IT IS ALLOCATED, ANY PREMIUMS ALLOCATED TO THE
SUB-ACCOUNTS, TRANSFERS IN OR OUT OF THE SUB-ACCOUNTS, OR ANY WITHDRAWALS OF
VARIABLE ACCOUNT VALUE. THERE IS NO GUARANTEED MINIMUM VARIABLE ACCOUNT VALUE. A
POLICY'S VARIABLE ACCOUNT VALUE THEREFORE DEPENDS UPON A NUMBER OF FACTORS. THE
VARIABLE ACCOUNT VALUE FOR A POLICY AT ANY TIME IS THE SUM OF THE SUB-ACCOUNT
VALUES FOR THE POLICY ON THE VALUATION DAY MOST RECENTLY COMPLETED.
DETERMINATION OF UNITS. For each Sub-Account, the premium(s) or Policy
Value transferred are converted into units. The number of units credited is
determined by dividing the dollar amount directed to each Sub-Account by the
value of the unit for that Sub-Account for the Valuation Day on which the
premium(s) or transferred amount is invested in the Sub-Account. Therefore,
premiums allocated to or amounts transferred to a Sub-Account under a Policy
increase the number of units of that Sub-Account credited to the Policy.
DETERMINATION OF UNIT VALUE. The unit value at the end of every Valuation
Day is the unit value at the end of the previous Valuation Day times the net
investment factor, as described below. The Sub-Account Value for a Policy is
determined on any day by multiplying the number of units attributable to the
Policy in that Sub-Account by the unit value for that Sub-Account on that day.
NET INVESTMENT FACTOR. The net investment factor is an index applied to
measure the investment performance of a Sub-Account from one Valuation Period to
the next. Each Sub-Account has a net investment factor for each Valuation Period
which may be greater or less than one. Therefore, the value of a unit may
increase or decrease. The net investment factor for any Sub-Account for any
Valuation Period is determined by dividing (1) by (2), where:
(1) is the result of:
a. the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund to the Sub-Account, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Protective Life to have resulted from the operations of the
Sub-Account.
(2) is the net asset value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
19
FIXED ACCOUNT VALUE
The Fixed Account Value under a Policy at any time is equal to: (1) the
premium allocated to the Fixed Account, plus (2) amounts transferred to the
Fixed Account, plus (3) interest credited to the Fixed Account, less (4)
transfers from the Fixed Account (including any transfer fees deducted), less
(5) withdrawals from the Fixed Account (including any withdrawal charges
deducted), less (6) Monthly Deductions. See "The Fixed Account," for a
discussion of how interest is credited to the Fixed Account.
POLICY BENEFITS
TRANSFERS OF POLICY VALUES
GENERAL. Upon receipt of written notice to Protective Life at the Home
Office at any time on or after the later of the following: (1) thirty days after
the Policy Effective Date, or (2) six days after the expiration of the
Cancellation Period, you may transfer the Fixed Account Value or any Policy
Value in a Sub-Account to other Sub-Accounts or the Fixed Account, subject to
certain restrictions. Transfers (including telephone transfers -- described
below) are processed as of the date a request is received at the Home Office.
Protective Life may, however defer transfers under the same conditions that
payment of Death Benefit Proceeds, withdrawals and surrenders may be delayed.
See "Suspension or Delay of Payments". The minimum amount that may be
transferred is the lesser of $100 or the entire Policy Value in any Sub-Account
or the Fixed Account from which the transfer is made. If, after the transfer,
the Policy Value remaining in a Sub-Account(s) or the Fixed Account would be
less than $100, Protective Life reserves the right to transfer the entire amount
instead of the requested amount. The maximum amount which may be transferred
from the Fixed Account in any Policy Year is the greater of (1) $2500, or (2)
25% of the Fixed Account Value. Protective Life reserves the right to limit
transfers to 12 per Policy Year. For each additional transfer over 12 in any
Policy Year, Protective Life reserves the right to charge a transfer fee. The
transfer fee, if any, is deducted from the amount being transferred. See
"Transfer Fee".
TELEPHONE TRANSFERS. Transfers may be made upon instructions given by
telephone, provided the appropriate election has been made on the application or
written authorization is provided.
Protective Life will send you a confirmation of all instructions
communicated by telephone to determine if they are genuine. For telephone
transfers we require a form of personal identification prior to acting on
instructions received by telephone. We also make a tape-recording of the
instructions given by telephone. If we follow these procedures we are not liable
for any losses due to unauthorized or fraudulent instructions. Protective Life
reserves the right to suspend telephone transfer privileges at any time for any
class of Policies.
RESERVATION OF RIGHTS. Protective Life reserves the right without prior
notice to modify, restrict, suspend or eliminate the transfer privileges
(including telephone transfers) at any time, for any class of Policies, for any
reason. In particular, we reserve the right not to honor transfer requests by a
third party holding a power of attorney from an Owner where that third party
requests simultaneous transfers on behalf of the Owners of two or more Policies.
DOLLAR-COST AVERAGING. If you elect at the time of application or at any
time thereafter by written notice to the Home Office, you may systematically and
automatically transfer, on a monthly or quarterly basis, specified dollar
amounts from or to the Fixed Account or any of the Sub-Account(s). This is known
as the dollar-cost averaging method of investment. By transferring on a
regularly scheduled basis as opposed to allocating the total amount at one
particular time, an Owner may be less susceptible to the impact of market
fluctuations in Sub-Account unit values. Protective Life, however, makes no
guarantee that the dollar-cost averaging method will result in a profit or
protect against loss.
20
To elect dollar-cost averaging, Policy Value in the source Sub-Account or
the Fixed Account Value must be at least $5,000 at the time of election.
Automatic transfers for dollar-cost averaging are subject to all transfer
restrictions other than the maximum transfer amount from the Fixed Account
restriction. You may elect dollar cost averaging for periods of at least 12
months but no longer than 48 months. At least $100 must be transferred each
month or $300 each quarter. Dollar-cost averaging transfers may commence on any
day of the month that you request following six days after the end of the
Cancellation Period, except the 29th, 30th, or 31st. If no day is selected,
transfers will occur on the Monthly Anniversary Day.
Once elected, Protective Life will continue to process dollar-cost averaging
transfers until the earlier of the following: (1) the number of designated
transfers has been completed, or (2) the Policy Value in the source Sub-Account
or the Fixed Account is depleted, (3) the Owner, by written notice received by
Protective Life at the Home Office, instructs Protective Life to cease the
automatic transfers, (4) a grace period begins under the Policy, or (5) the
maximum amount of Policy Value has been transferred under a dollar-cost
averaging election.
Automatic transfers made to facilitate dollar-cost averaging will not count
toward the 12 transfers permitted each Policy Year if Protective Life elects to
limit the number of transfers or impose the transfer fee. Protective Life
reserves the right to discontinue offering automatic dollar-cost averaging
transfers upon 30 days' written notice to the Owner.
PORTFOLIO REBALANCING. At the time of application or at any time thereafter
by written notice to Protective Life, you may instruct Protective Life to
automatically transfer, on a quarterly, semi-annual or annual basis, your
Variable Account Value among specified Sub-Accounts to achieve a particular
percentage allocation of Variable Account Value among such Sub-Accounts
("Portfolio Rebalancing"). Such percentage allocations must be in whole numbers
and must allocate amounts only among the Sub-Accounts. No amounts will be
transferred to the Fixed Account as part of Portfolio Rebalancing. A minimum
Variable Account Value of $100 is required for Portfolio Rebalancing. Unless you
instruct otherwise when electing rebalancing, the percentage allocation of your
Variable Account Value for Portfolio Rebalancing will be based on your premium
allocation instructions in effect at the time of rebalancing. Any allocation
instructions that you give us that differ from your then current premium
allocation instructions will be deemed to be a request to change your premium
allocation. Portfolio Rebalancing may commence on any day of the month that you
request following six days after the end of the Cancellation Period except the
29th, 30th or 31st. If no day is selected, rebalancing will occur on each
applicable Monthly Anniversary Day.
Once elected, Portfolio Rebalancing begins on the first quarterly,
semi-annual or annual anniversary following election. You may change or
terminate Portfolio Rebalancing by written instruction received by Protective
Life at the Home Office, or by telephone if you have previously authorized us to
take telephone instructions. Portfolio Rebalancing transfers do not count as one
of the 12 free transfers available during any Policy Year. Protective Life
reserves the right to assess a processing fee for this service or to discontinue
Portfolio Rebalancing upon 30 days written notice to the Owner.
SURRENDER PRIVILEGE
At any time while the Policy is still in force and while the Insured is
still living, You may surrender your Policy for its Surrender Value. Surrender
Value is determined as of the end of the Valuation Period during which the
written notice requesting the surrender is received at the Home Office, the
Policy and any other required documents are received by Protective Life. The
Surrender Value is paid in a lump sum unless the Owner requests payment under a
settlement option. See "Settlement Options". Payment is generally made within
seven calendar days. See "Suspension or Delay of Payments", and "Payments from
the Fixed Account". A Policy which terminates upon surrender cannot later be
reinstated.
21
WITHDRAWAL PRIVILEGE
At any time after the first Policy Year, an Owner, by written notice
received at the Home Office, may make a withdrawal of Surrender Value in minimum
amounts of $500. Protective Life will withdraw the amount requested, plus a
withdrawal charge, from Policy Value as of the end of the Valuation Period
during which the written request is received. See "Withdrawal Charge".
The Owner may specify the amount of the withdrawal to be made from any
Sub-Account or the Fixed Account. If the Owner does not so specify, or if the
Sub-Account Value or Fixed Account Value is insufficient to carry out the
request, the withdrawal from each Sub-Account and the Fixed Account is based on
the proportion that such Sub-Account Value(s) and Fixed Account Value bears to
the total unloaned Policy Value on the Valuation Day immediately prior to the
withdrawal. Payment is generally made within seven calendar days. See
"Suspension or Delay of Payments", and "Payments from the Fixed Account".
If Death Benefit Option 1 is in effect, Protective Life reserves the right
to reduce the Face Amount by the withdrawn amount. Protective Life may reject a
withdrawal request if the withdrawal would reduce the Face Amount below the
minimum amount for which the Policy would be issued under Protective Life's
then-current rules, or if the withdrawal would cause the Policy to fail to
qualify as a life insurance contract under applicable tax laws, as interpreted
by Protective Life. If the Face Amount at the time of the withdrawal includes
increases from the Initial Face Amount and the withdrawal requires a decrease of
Face Amount, the reduction is made first from the most recent increase, then
from prior increases, if any, in reverse order of their being made and finally
from the Initial Face Amount.
POLICY LOANS
GENERAL. After the first Policy Anniversary and while the Insured is still
living, an Owner may borrow $500 or more from Protective Life using the Policy
as the security for the loan. Policy loans must be requested by written notice
received at the Home Office and the maximum amount that an Owner may borrow is
an amount equal to 90% of the Policy's Surrender Value on the date that the loan
request is received. Outstanding Policy loans therefore reduce the amount
available for new Policy loans. Loan proceeds generally are mailed within seven
calendar days of the loan being approved. See "Suspension or Delay of Payments",
and "Payments from the Fixed Account".
LOAN COLLATERAL. When a Policy loan is made, an amount equal to the loan is
transferred out of the Sub-Accounts and the Fixed Account and into a Loan
Account established for the Policy. Like the Fixed Account, a Policy's Loan
Account is part of Protective Life's General Account and amounts therein earn
interest as credited by Protective Life from time to time. Because Loan Account
values are part of Policy Value, a loan will have no immediate effect on the
Policy Value. In contrast, Surrender Value (including, as applicable, Variable
Account Value and Fixed Account Value) under a Policy is reduced immediately by
the amount transferred to the Loan Account. The Owner(s) can specify the
Sub-Accounts and the Fixed Account from which collateral is transferred to the
Loan Account. If no allocation is specified, collateral is transferred from each
Sub-Account and from the Fixed Account in the same proportion that the value in
each Sub-Account and the Fixed Account bears to the total unloaned Policy Value
on the date that the loan is made.
On each Policy Anniversary, an amount of Policy Value equal to any due and
unpaid loan interest (explained below), is also transferred to the Loan Account.
Such interest is transferred from each Sub-Account and the Fixed Account in the
same proportion that each Sub-Account Value and the Fixed Account Value bears to
the total unloaned Policy Value.
LOAN REPAYMENT. You may repay all or part of your Policy Debt (the amount
borrowed plus unpaid interest) at any time while the Insured is living and the
Policy is in force. Loan repayments
22
must be sent to the Home Office and are credited as of the date received. The
Owner may specify in writing that any unscheduled premiums paid while a loan is
outstanding be applied as loan repayments. When a loan repayment is made, Policy
Value in the Loan Account in an amount equal to the repayment is transferred
from the Loan Account to the Sub-Accounts and the Fixed Account. Thus, a loan
repayment will have no immediate effect on the Policy Value, but the Surrender
Value (including, as applicable, Variable Account Value and Fixed Account Value)
under a Policy is increased immediately by the amount transferred from the Loan
Account. Unless specified otherwise by the Owner(s), amounts are transferred to
the Sub-Accounts and the Fixed Account in the same proportion that premium is
allocated.
INTEREST. During Policy Years 2 through 10, Protective Life will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and thereafter, Protective Life currently charges
interest daily on any outstanding loan at an effective annual rate of 4.0% (with
a maximum guaranteed rate of 4.25%). Interest is due and payable at the end of
each Policy Year while a loan is outstanding. We will notify you of the amount
due. If interest is not paid when due, the amount of the interest is added to
the loan and becomes part of the Policy Debt.
The Loan Account is credited with interest at an effective annual rate of
not less than 4%. Thus, the net cost of a loan is 2.0% per year during Policy
Years 2 through 10, and currently 0.00% thereafter (the difference between the
rate of interest charged on Policy loans and the amount credited on the
equivalent amount held in the Loan Account). Protective Life determines the rate
of interest to be credited to the Loan Account in advance of each calendar year.
The rate, once determined, is applied to the calendar year which follows the
date of determination. On each Policy Anniversary, the interest earned on the
Loan Account since the previous Policy Anniversary is transferred to the
Sub-Accounts and to the Fixed Account. The interest is transferred and allocated
to the Sub-Accounts and the Fixed Account in the same proportion that premium is
allocated.
NON-PAYMENT OF POLICY LOAN. If the Insured dies while a loan is
outstanding, the Policy Debt is deducted from the Death Benefit in calculating
the Death Benefit Proceeds.
If the Loan Account Value exceeds the Cash Value (I.E., the Surrender Value
becomes zero) on any Valuation Date, the Policy may be in default. If this
occurs, you, and any assignee of record, will be sent notice of the default. You
will have a 31-day grace period to submit a sufficient payment to avoid a lapse
(I.E., termination) of the Policy. The notice will specify the amount that must
be repaid to prevent lapse.
EFFECT OF A POLICY LOAN. A loan, whether or not repaid, has a permanent
effect on the Death Benefit and Policy values because the investment results of
the Sub-Accounts and current interest rates credited on Fixed Account Value do
not apply to Policy Value in the Loan Account. The larger the loan and longer
the loan is outstanding, the greater will be the effect of Policy Value being
held as collateral in the Loan Account. See "No Lapse Guarantee". Depending on
the investment results of the Sub-Accounts or credited interest rates for the
Fixed Account while the loan is outstanding, the effect could be favorable or
unfavorable. Policy loans also may increase the potential for Lapse if
investment results of the Sub-Accounts to which Surrender Value is allocated is
unfavorable. If a Policy lapses with loans outstanding, certain amounts may be
subject to income tax. In addition, if your Policy is a "modified endowment
contract," loans may be currently taxable and subject to a 10% penalty tax. See
"Tax Considerations," for a discussion of the tax treatment of Policy loans.
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, Protective Life will pay the Death
Benefit Proceeds upon receipt at the Home Office of satisfactory proof of the
Insured's death. Protective Life may require return of the Policy. The Death
Benefit Proceeds are paid to the primary beneficiary or a contingent
beneficiary. The Owner may name one or more primary or contingent beneficiaries
and change such
23
beneficiaries, as provided for in the Policy. If no beneficiary survives the
Insured, the Death Benefit Proceeds are paid to the Owner or the Owner's estate.
Death Benefit Proceeds are paid in a lump sum or under a Settlement Option (see
"Settlement Options").
CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds are equal
to the Death Benefit under the Death Benefit Option selected calculated as of
the date of the Insured's death, plus any supplemental rider benefits, minus any
Policy Debt on that date and, if the Insured died during a grace period, minus
any past due Monthly Deductions. Under certain circumstances, the amount of the
Death Benefit may be further adjusted. See "Limits on Rights to Contest the
Policy" and "Misstatement of Age or Sex".
If part or all of the Death Benefit is paid in one sum, Protective Life will
pay interest on this sum as required by applicable state law from the date of
receipt of due proof of the Insured's death to the date of payment.
DEATH BENEFIT OPTIONS. The Policy Owner may choose one of two Death Benefit
Options for use in determining the Death Benefit. Under Death Benefit Option 1,
the Death Benefit is the greater of: (1) the Face Amount under the Policy on the
date of the Insured's death, or (2) a specified percentage of Policy Value on
the date of the Insured's death. Under Death Benefit Option 2, the Death Benefit
is the greater of: (1) the Face Amount under the Policy plus the Policy Value on
the date of the Insured's death, or (2) the same specified percentage of the
Policy Value on the date of the Insured's death.
The specified percentage is 250% when the Insured has reached an "Attained
Age" of 40 or less by date of death, and decreases each year thereafter to 100%
when the Insured has reached an "Attained Age" of 95 at death. A table showing
these percentages for Attained Ages 0 to 95 and examples of Death Benefit
calculations for both Death Benefit Options are found in Appendix A.
Under Death Benefit Option 1, the Death Benefit remains level at the Face
Amount unless the Policy Value multiplied by the specified percentage exceeds
that Face Amount, in which event the Death Benefit will vary as the Policy Value
varies. Owners who are satisfied with the amount of their insurance coverage
under the Policy and who prefer to have favorable investment performance and
additional premiums reflected in higher Policy Value, rather than increased
Death Benefits, generally should select Option 1. Under Death Benefit Option 2,
the Death Benefit always varies as the Policy Value varies (although it is never
less than the Face Amount). Owners who prefer to have favorable investment
performance and additional premiums reflected in increased Death Benefits
generally should select Option 2.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, you may change the Death Benefit option on your Policy subject to
the following rules. After any change, the Face Amount must be at least
$250,000. The effective date of the change will be the Monthly Anniversary Day
that coincides with or next follows the day that Protective Life receives and
accepts the request. Protective Life may require satisfactory evidence of
insurability.
When a change from Option 1 to Option 2 is made, the Face Amount after the
change is effected will be equal to the Face Amount before the change less the
Policy Value on the effective date of the change. When a change from Option 2 to
Option 1 is made, the Face Amount after the change will be equal to the Face
Amount before the change is effected plus the Policy Value on the effective date
of the change.
CHANGING THE FACE AMOUNT. On or after the first Policy Anniversary, you may
request a change in the Face Amount. If a change in the Face Amount would result
in total premiums paid exceeding the premium limitations prescribed under
current tax law to qualify your Policy as a life insurance contract, Protective
Life will immediately return to you the amount of such excess above the premium
limitations.
24
Protective Life reserves the right to decline a requested decrease in the
Face Amount if compliance with the guideline premium limitations under current
tax law resulting from such a decrease would result in immediate termination of
the Policy, or if to effect the requested decrease, payments to the Owner would
have to be made from Policy Value for compliance with the guideline premium
limitations, and the amount of such payments would exceed the Surrender Value
under the Policy.
Any increase in the Face Amount must be at least $10,000 and an application
must be submitted. Protective Life reserves the right to require satisfactory
evidence of insurability. In addition, the Insured's Attained Age must be less
than the current maximum Issue Age for the Policies, as determined by Protective
Life from time to time. A change in planned periodic premiums may be advisable.
See "Premiums Upon Increase in Face Amount". The increase in Face Amount will
become effective on the date shown on the supplemental Policy Specifications
Page which will be issued and attached to the Policy, and the Policy Value will
be adjusted to the extent necessary to reflect a monthly deduction as of the
effective date based on the increase in Face Amount. When the No-Lapse Guarantee
is in effect, the Policy's Minimum Monthly Premium amount is also generally
increased. See "No-Lapse Guarantee," and "Premiums Upon Increase in Face
Amount".
An increase in Face Amount may be cancelled by the Owner in accordance with
the Policy's cancellation privilege provisions, which also apply to increases in
Face Amount. In such case, the amount refunded will be calculated in accordance
with such provisions described above, except that if no additional premiums are
required in connection with the Face Amount increase, then the amount refunded
is limited to that portion of the first Monthly Deduction following the increase
that is attributable to cost of insurance charges for the increase and the
monthly administration fee for the increase. See "Cancellation Privilege".
The Face Amount after any decrease must be at least $250,000. Protective
Life reserves the right to prohibit any decrease in Face Amount (i) for three
years following an increase in Face Amount; and (ii) for one Policy Year
following the last decrease in Face Amount. If the Initial Face Amount of the
Policy has been increased prior to the requested decrease, then the decrease
will first be applied against any previous increases in Face Amount in the
reverse order in which they occurred. The decrease will then be applied to the
Initial Face Amount. A decrease in Face Amount will become effective on the
Monthly Anniversary Day that coincides with or next follows receipt and
acceptance of a request at the Home Office.
Decreasing the Face Amount of the Policy may have the effect of decreasing
monthly cost of insurance charges. Decreasing the Face Amount also may have tax
consequences. See "Tax Considerations".
ADDITIONAL COVERAGE FROM TERM RIDER FOR COVERED INSURED ("CIR"). An owner
may also obtain additional insurance coverage by purchasing a CIR at the time
the Policy is issued (or later, subject to availability and additional
underwriting). A CIR increases the Death Benefit under the Policy by the face
amount of the CIR. The face amount of the CIR does not vary with the investment
experience of the Variable Account (see "Supplemental Riders"). In addition, a
CIR may be canceled separately from the Policy (I.E., it can be canceled without
causing the Policy to be canceled or to Lapse). The cost of insurance charge for
the CIR will be deducted from the Policy Value as part of the Monthly Deduction
(see "Monthly Deduction -- Cost of Insurance Charge under a CIR"). No additional
surrender or premium expense charge is assessed in connection with a CIR.
Owners may increase or decrease the face amount of a CIR separately from the
Face Amount of a Policy. Likewise, the Face Amount of a Policy may be increased
or decreased without affecting the face amount of a CIR. Since no surrender
charge is assessed in connection with a decrease of face amount under a CIR,
such a decrease may be less expensive than a decrease in Face Amount of the
Policy if the Face Amount decrease would be subject to a surrender charge. On
the other hand, continuing coverage on such an increment of Face Amount may have
a cost of insurance charge that is higher
25
than the same increment of face amount under the CIR. Owners should consult
their sales representative before deciding whether to decrease the Face Amount
of the Policy or the CIR face amount.
Owners should consult their sales representative when deciding whether to
purchase a CIR.
SETTLEMENT OPTIONS
The Policy offers a variety of ways of receiving proceeds payable under the
Policy, such as on surrender or death, other than in a lump sum. These
alternative Settlement Options are summarized below. Any sales representative
authorized to sell this Policy can further explain these Settlement Options upon
request. All of these Settlement Options are forms of fixed-benefit annuities
(except Option 3) which do not vary with the investment performance of a
separate account. Under each Settlement Option (other than Option 3), no
surrender or withdrawal may be made once payments have begun.
The following Settlement Options may be elected.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period of up to 30 years. The amount of each payment depends on the
total amount applied, the period selected and the monthly payment rates
Protective Life is using when the first payment is due.
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named annuitant. Payments will
continue for the lifetime of the annuitant with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
OPTION 3 -- INTEREST INCOME. Protective Life will hold any amount applied
under this Option. Interest on the unpaid balance will be paid each month at a
rate determined by Protective Life. This rate will not be less than the
equivalent of 3% per year.
OPTION 4 -- PAYMENTS FOR A FIXED AMOUNT. Equal monthly payments will be
made of an agreed fixed amount. The amount of each payment may not be less than
$10 for each $1,000 applied. Interest will be credited each month on the unpaid
balance and added to it. This interest will be at a rate set by us, but not less
than an effective rate of 3% per year. Payments continue until the amount
Protective Life holds runs out. The last payment will be for the balance only.
MINIMUM AMOUNTS. Protective Life reserves the right to pay the total amount
of the Policy in one lump sum, if less than $5,000. If monthly payments are less
than $50, payments may be made quarterly, semi-annually, or annually at
Protective Life's option.
OTHER REQUIREMENTS. Settlement Options must be elected by written notice
received by Protective at the Home Office. The Owner may elect Settlement
Options during the Insured's lifetime; beneficiaries may elect Settlement
Options thereafter if Death Benefit Proceeds are payable in a lump sum. The
effective date of an Option applied to Death Benefit Proceeds is the date of the
Insured's death. The effective date of an Option applied to Surrender Value is
the date as of which the withdrawal or surrender is executed.
If Protective Life has available, at the time a Settlement Option is
elected, Options or rates on a more favorable basis than those guaranteed, the
higher benefits will apply.
THE FIXED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS AND, AS A RESULT, THE STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN
THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT. THE DISCLOSURE
26
REGARDING THE FIXED ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
THE FIXED ACCOUNT
The Fixed Account consists of assets owned by Protective Life with respect
to the Policies, other than those in the Variable Account. It is part of
Protective Life's general account assets. Protective Life's general account
assets are used to support its insurance and annuity obligations other than
those funded by separate accounts, and are subject to the claims of Protective
Life's general creditors. Subject to applicable law, Protective Life has sole
discretion over the investment of the assets of the Fixed Account. The Loan
Account is part of the Fixed Account. Guarantees of premium allocated to the
Fixed Account, and interest credited thereto, are backed by Protective Life. The
Fixed Account Value is calculated daily. See "Fixed Account Value".
INTEREST CREDITED ON FIXED ACCOUNT VALUE
Protective Life guarantees that the interest credited during the first
Policy Year to the initial premium allocated to the Fixed Account will not be
less than the initial annual effective interest rate shown in the Policy. The
interest rate credited to subsequent premium allocated to or amounts transferred
to the Fixed Account will be the annual effective interest rate in effect on the
date that the premium is received by Protective Life or the date that the
transfer is made. The interest rate is guaranteed to apply to such amounts for a
twelve month period which begins on the date that the premium is allocated or
the date that the transfer is made.
After an interest rate guarantee expires as to a premium or amount
transferred, (I.E., 12 months after the premium or transfer is placed in the
Fixed Account) Protective Life will credit interest on the Fixed Account Value
attributable to such premium or transferred amount at the current interest rate
in effect. New current interest rates are effective for such Fixed Account Value
for 12 months from the time that they are first applied. Protective Life, in its
sole discretion, may declare a new current interest rate from time to time. The
initial annual effective interest rate and the current interest rates that
Protective Life will credit are annual effective interest rates of not less than
4.00%. For purposes of crediting interest, amounts deducted, transferred or
withdrawn from the Fixed Account are accounted for on a "first-in-first-out"
(FIFO) basis.
PAYMENTS FROM THE FIXED ACCOUNT
Payments from the Fixed Account for a withdrawal, surrender or loan request
may be deferred for up to six months from the date Protective Life receives the
written request. If a payment from the Fixed Account is deferred for 30 days or
more, it will bear interest at a rate of 4% per year (or an alternative rate if
required by applicable state insurance law), compounded annually while payment
is deferred.
CHARGES AND DEDUCTIONS
MONTHLY DEDUCTION
On the Issue Date, Protective Life will deduct the Monthly Deduction from
the Policy Value. Subsequent Monthly Deductions will be made on each Monthly
Anniversary Day thereafter. The Monthly Deduction consists of (1) cost of
insurance charges ("cost of insurance charge"), (2) administration charges (the
"monthly administration fee"), (3) mortality and expense risk charge (the
"mortality and expense risk charge") and (4) any charges for supplemental riders
("supplemental charges"), as described below. The Monthly Deduction is deducted
from the Sub-Accounts and the Fixed Account pro-rata on the basis of the
relative Policy Value in each.
27
COST OF INSURANCE CHARGE. This charge compensates Protective Life for the
expense of underwriting the Death Benefit. The charge depends on a number of
variables and therefore will vary from Policy to Policy and from Monthly
Anniversary Day to Monthly Anniversary Day. For any Policy, the cost of
insurance on a Monthly Anniversary Day is calculated by multiplying the current
cost of insurance rate for the Insured by the Net Amount at Risk under the
Policy for that Monthly Anniversary Day.
The cost of insurance rate for a Policy is based on and varies with the
Issue Age, duration, sex and rate class of the Insured and on the number of
years that a Policy has been in force. Protective Life currently places Insureds
in the following rate classes, based on underwriting: Preferred (ages 18-75) or
Nonsmoker (ages 0-75), or Tobacco (ages 15-75) or Smoker (ages 15-75), and
substandard rate classes, which involve a higher mortality risk than the Smoker,
Tobacco or Nonsmoker classes.
Protective Life will determine a cost of insurance rate for increments of
Face Amount above the Initial Face Amount based on the Issue Age, duration, sex
and rate class of the Insured at the time of the request for an increase. The
following rules will apply for purposes of determining the Net Amount at Risk
for each rate.
Protective Life places the Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to the Initial Face Amount. When an increase in Face
Amount is requested, Protective Life conducts underwriting before approving the
increase (except as noted below) to determine whether a different rate class
will apply to the increase. If the rate class for the increase has lower cost of
insurance rates than the original rate class, the rate class for the increase
also will be applied to the Initial Face Amount. If the rate class for the
increase has a higher cost of insurance rate than the original rate class, the
rate class for the increase will apply only to the increase in Face Amount, and
the original rate class will continue to apply to the Initial Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of a conversion from a term or a graded
premium whole life contract or on exercise of a guaranteed option to increase
the Face Amount without underwriting. See "Supplemental Riders".
In the case of a term conversion, the rate class that applies to the
increase is the same rate class that applied to the term contract. In the case
of a guaranteed option, the Insured's rate class for an increase will be the
class in effect when the guaranteed option rider was issued.
Where, as in Death Benefit Option 1, the net amount at risk is equal to the
Death Benefit less Policy Value, the entire Policy Value is applied first to
offset the Death Benefit derived from the Initial Face Amount. Only if the
Policy Value exceeds the Initial Face Amount is the excess applied to offset the
portion of the Death Benefit derived from increases in Face Amount in the order
of the increases. If there is the decrease in Face Amount after an increase, the
decrease is applied first to decrease any prior increases in Face Amount,
starting with the most recent increase and then each prior increase.
Protective Life guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the maximum cost
of insurance rates set forth in the Policies. The guaranteed rates for standard
classes are based on the 1980 Commissioners' Standard Ordinary Mortality Tables,
Male or Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO Tables"). [The
guaranteed rates for substandard classes are based on multiples of or additions
to the 1980 CSO Tables.]
Protective Life's current cost of insurance rates may be less than the
guaranteed rates that are set forth in the Policy. Current cost of insurance
rates will be determined based on Protective Life's expectations as to future
mortality, investment earnings, expenses, taxes, and persistency experience.
Cost of insurance rates (whether guaranteed or current) for an Insured in a
nonsmoker standard class are lower than guaranteed rates for an Insured of the
same age and sex in a smoker standard class. Cost of insurance rates (whether
guaranteed or current) for an Insured in a nonsmoker or
28
smoker standard class are generally lower than guaranteed rates for an Insured
of the same age and sex and smoking status in a substandard class.
COST OF INSURANCE CHARGE UNDER A CIR. The cost of insurance charge is
determined in a similar manner for the face amount under a CIR and for any
increase in the face amount under a CIR. Generally, both the current and the
guaranteed cost of insurance rates under a CIR are substantially the same as the
current and guaranteed cost of insurance rates on the Face Amount of the Policy.
LEGAL CONSIDERATIONS RELATING TO SEX -- DISTINCT PREMIUM PAYMENTS AND
BENEFITS. Mortality tables for the Policies generally distinguish between males
and females. Thus, premiums and benefits under Policies covering males and
females of the same age will generally differ.
Protective Life does, however, also offer Policies based on unisex mortality
tables if required by state law. Employers and employee organizations
considering purchase of a Policy should consult with their legal advisors to
determine whether purchase of a Policy based on sex-distinct actuarial tables is
consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Upon request, Protective Life may offer Policies with unisex mortality
tables to such prospective purchasers.
MONTHLY ADMINISTRATION FEE. This charge compensates Protective Life for
administration expenses associated with the Policies and the Variable Account.
These expenses relate to premium billing and collection, recordkeeping,
processing death benefit claims, Policy loans, Policy changes, reporting and
overhead costs, processing applications and establishing Policy records. The
monthly administration fee is a flat charge of $3 per month.
SUPPLEMENTAL RIDER CHARGES. See "Supplemental Riders".
MORTALITY AND EXPENSE RISK CHARGE. This charge compensates Protective Life
for the mortality risk it assumes which is that the Insureds on the Policies may
die sooner than anticipated and therefore Protective Life will pay an aggregate
amount of death benefits greater than anticipated. The expense risk Protective
Life assumes is that expenses incurred in issuing and administering the Policies
and the Variable Account will exceed the amounts realized from the
administrative charges assessed against the Policies.
Protective Life deducts a monthly charge from assets in the Sub-Accounts
attributable to the Policies. This charge does not apply to Fixed Account assets
attributable to the Policies. The maximum monthly mortality and expense risk
charge to be deducted is equal to .075% multiplied by the Variable Account
Value, which is equivalent to an annual rate of approximately 0.90% of such
amount. Protective Life reserves the right to charge less than the maximum
charge. The monthly mortality and expense risk charge is currently equal to
.062% multiplied by the Variable Account Value, (which is equivalent to an
annual rate of approximately 0.75% of such amount) during policy years 1 through
10 and .021% multiplied by the Variable Account Value (which is equivalent to an
annual rate of approximately 0.25% of such amount) in Policy Years 11 and
thereafter.
TRANSFER FEE
Protective Life reserves the right to impose a $25 transfer fee on any
transfer of Policy Value between or among the Sub-Accounts or the Fixed Account
in excess of the 12 free transfers permitted each Policy Year. If the fee is
imposed, it will be deducted from the amount requested to be transferred. If an
amount is being transferred from more than one Sub-Account or the Fixed Account,
the transfer fee will be deducted proportionately from the amount being
transferred from each. This fee, if imposed, will reimburse Protective Life for
administrative expenses incurred in effecting transfers.
WITHDRAWAL CHARGE
Protective Life will deduct an administrative charge upon a Withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This charge will be
deducted from the amount withdrawn unless
29
the Owner requests the charge to be deducted from the Policy Value in addition
to the amount requested to be withdrawn. See "Withdrawal Privilege" for rules
for allocating the deduction.
FUND EXPENSES
The value of the net assets of each Sub-Account reflects the investment
advisory fees and other expenses incurred by the corresponding Fund in which the
Sub-Account invests. See the prospectus for each of the Funds.
EXCHANGE PRIVILEGE
The Company is offering, where allowed by law, to owners of certain existing
life policies (the "Existing Life Policy" and/or "Existing Life Policies")
issued by it the opportunity to exchange such a life policy for this Policy. The
Company reserves the right to modify, amend, terminate or suspend the Exchange
Privilege at any time or from time to time. Owners of Existing Life Policies
may, exchange their Existing Life Policies for this Policy. Owners of Existing
Life Policies may also make a partial or full surrender from their Existing Life
Policies and use the proceeds to purchase this Policy. All charges and
deductions described in this prospectus are equally applicable to Policies
purchased in an exchange. All charges and deductions may not be assessed under
an Existing Life Policy in connection with an exchange, surrender, or partial
surrender of an Existing Life Policy.
The Policy differs from the Existing Life Policies in many significant
respects. Most importantly, the Policy Value under this Policy may consist,
entirely or in part, of Variable Account Value which fluctuates in response to
the net investment return of the Variable Account. In contrast, the policy
values under the Existing Life Policies always reflect interest credited by the
Company. While a minimum rate of interest (typically 4 or 4 1/2 percent) is
guaranteed, the Company in the past has credited interest at higher rates.
Accordingly, policy values under the Existing Life Policies reflect changing
current interest rates and do not vary with the investment performance of a
Variable Account.
Other significant differences between the Policy and the Existing Life
Policies include: (1) additional charges applicable under the Policy not found
in the Existing Life Policies; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state laws and regulations
applicable to each of the types of policies.
30
A table which generally summarizes the different charges under the
respective policies is as follows. For more complete details owners of Existing
Life Policies should refer to their policy forms for a complete description.
EXISTING LIFE POLICY POLICY
Sales Charges/Premium Ranges from 0% to 12% of premium None
Expense Charge payments in all policy years.
The premium expense charge can
vary by age.
Administrative Fees Ranges from $4 to $5 monthly. $3 per month in all Policy Years
Mortality and Expense None A monthly charge equal to .062%
Charges multiplied by the Variable
Account Value, (which is
equivalent to annual rate of
0.75% of such amount) during
Policy Years 1-10; and
currently a monthly charge
equal to .021% multiplied by
the Variable Account (which is
equivalent to 0.25% of such
amount) in Policy Years 11 and
thereafter. The guaranteed
monthly mortality and expense
risk charge is .075% multiplied
by the Variable Account Value
(which is equivalent to an
annual rate of approximately
0.90%) in all years.
Withdrawal Charges $25 The lesser of $25 or 2% of the
withdrawal amount requested.
Monthly Deductions A monthly deduction consisting A monthly deduction consisting
of: (1) cost of insurance of: (1) cost of insurance
charges (2) administrative fees charges (2) administrative fees
(see above) (3) any charges for (see above) (3) monthly
supplemental riders. (applies mortality and expense charges
to Existing Life Policies which (see above) and (4) any charges
are universal life plans) for supplemental riders.
Surrender Charges Surrender charges vary by policy None
type and are incurred during a
surrender charge period which
ranges from 0 years up to 19
years.
Guaranteed Interest Ranges from 4% to 5%. Only Fixed Account : 4%.
Rate
EFFECT OF THE EXCHANGE OFFER
1. This Policy will be issued to Existing Life Policy Owners. Evidence of
insurability may be required.
31
2. If an Existing Life Policy owner is within current issue age limits, the
Owner may carry over existing Riders and/or Supplement Benefits if available
with the Policy. Evidence of insurability may be required. An increase or
addition of Riders &/or Supplemental Benefits will require full evidence of
insurability.
3. The Contestable and Suicide provisions in the Policy will begin again as
of the effective date of the exchange, if evidence of insurability is required.
If evidence of insurability is not required on the exchange, the Contestable and
Suicide provisions will not begin again.
TAX CONSIDERATIONS. Owners of Existing Life Policies should carefully
consider whether it will be advantageous to replace an Existing Life Policy with
a Policy. IT MAY NOT BE ADVANTAGEOUS TO EXCHANGE AN EXISTING LIFE POLICY FOR A
POLICY (OR TO SURRENDER IN FULL OR IN PART AN EXISTING LIFE POLICY AND USE THE
SURRENDER OR PARTIAL SURRENDER PROCEEDS TO PURCHASE A POLICY.)
The Company believes that an exchange of an Existing Life Policy for a
Policy generally should be treated as a nontaxable exchange within the meaning
of Section 1035 of the Code. A Policy purchased in an exchange will generally be
treated as a newly issued contract as of the effective date of the Policy. This
could have various tax consequences. (See "Tax Considerations".)
IF YOU SURRENDER YOUR EXISTING LIFE POLICY IN WHOLE OR IN PART AND AFTER
RECEIPT OF THE PROCEEDS YOU USE THE SURRENDER PROCEEDS OR PARTIAL SURRENDER
PROCEEDS TO PURCHASE A POLICY, IT WILL NOT BE TREATED AS A NON-TAXABLE EXCHANGE.
THE SURRENDER PROCEEDS WILL GENERALLY BE INCLUDIBLE IN INCOME.
Owners of Existing Life Policies should consult their tax advisers before
exchanging an Existing Life Policy for this Policy, or before surrendering in
whole or in part their Existing Life Policy and using the proceeds to purchase
this Policy.
SALES COMMISSIONS. Sales representatives offering the Policies to Existing
Life Policies Owners will receive a standardized sales commission. In most
cases, this sales commission will be somewhat less than that paid in connection
with sales of the Policies to other purchasers. (See "Sale of Policies")
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how
certain values under a Policy change with investment performance over an
extended period of time. The tables illustrate how Policy Values, Surrender
Values and Death Benefits under a Policy covering an Insured of a given age on
the Issue Date, would vary over time if planned premium payments were paid
annually and the return on the assets in each of the Funds were an assumed
uniform gross annual rate of 0%, 6% and 12%. The values would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The tables also show planned periodic
premiums accumulated at 5% interest compounded annually. THE HYPOTHETICAL
INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. Actual rates of
return for a particular Policy may be more or less than the hypothetical
investment rates of return and will depend on a number of factors including the
investment allocations made by an Owner and prevailing rates. These
illustrations assume that net premium is allocated equally among the
Sub-Accounts available under the Policy, and that no amounts are allocated to
the Fixed Account.
The illustrations reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross after tax return of the
selected Funds. The tables assume an average annual expense ratio of 0.88% of
the average daily net assets of the Funds available under the Policies. This
average annual expense ratio is based on the expense ratios of each of the Funds
for the last fiscal year, adjusted, as appropriate, for any material changes in
expenses effective for the current fiscal year
32
of a Fund. For information on Fund expenses, see the prospectus for each of the
Funds accompanying this prospectus.
In addition, the illustrations reflect the monthly charge to the Variable
Account for assuming mortality and expense risks, which is currently equal to
.062% multiplied by the Variable Account Value, (which is equivalent to an
annual rate of approximately 0.75% of such amount) during Policies Years 1-10
and .021% multiplied by the Variable Account Value (which is equivalent to an
annual rate of approximately 0.25% of such amount) in Policy Years 11 and
thereafter. The guaranteed monthly mortality and expense risk charge is equal to
.075% multiplied by the Variable Account Value (which is equivalent to 0.90% of
such amount). After deduction of Fund expenses and the mortality and expense
risk charge, the illustrated gross annual investment rates of return of 0%, 6%
and 12% would correspond to approximate net annual rates for Policy Years 1-10
of -1.63%, 4.37% and 10.37%, respectively and for Policy Years 11 and thereafter
- -1.13%, 4.87% and 10.87%, respectively.
The illustrations also reflect the deduction of the monthly administration
fee and the monthly cost of insurance charge for the hypothetical Insured.
Protective Life's current cost of insurance charges, and the guaranteed maximum
cost of insurance charges that Protective Life has the contractual right to
charge, are reflected in separate illustrations on each of the following pages.
All the illustrations reflect the fact that no charges for federal or state
income taxes are currently made against the Variable Account and assume no
Policy Debt or charges for supplemental riders.
The illustrations are based on Protective Life's sex distinct rates for
nonsmokers. Upon request, Owner(s) will be furnished with a comparable
illustration based upon the proposed Insured's individual circumstances. Such
illustrations may assume different hypothetical rates of return in addition to
those illustrated in the following tables.
33
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$4,500 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- -------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --- ------ ----------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
46 1 4,725 3,986 3,986 250,000 4,240 4,240 250,000 4,494 4,494 250,000
47 2 9,686 7,883 7,883 250,000 8,639 8,639 250,000 9,426 9,426 250,000
48 3 14,896 11,645 11,645 250,000 13,156 13,156 250,000 14,792 14,792 250,000
49 4 20,365 15,315 15,315 250,000 17,840 17,840 250,000 20,683 20,683 250,000
50 5 26,109 18,838 18,838 250,000 22,640 22,640 250,000 27,096 27,096 250,000
51 6 32,139 22,266 22,266 250,000 27,614 27,614 250,000 34,140 34,140 250,000
52 7 38,471 25,470 25,470 250,000 32,639 32,639 250,000 41,754 41,754 250,000
53 8 45,120 28,426 28,426 250,000 37,697 37,697 250,000 49,981 49,981 250,000
54 9 52,101 31,114 31,114 250,000 42,767 42,767 250,000 58,876 58,876 250,000
55 10 59,431 34,343 34,343 250,000 48,642 48,642 250,000 69,262 69,262 250,000
56 11 67,127 37,560 37,560 250,000 54,913 54,913 250,000 81,018 81,018 250,000
57 12 75,208 40,538 40,538 250,000 61,312 61,312 250,000 93,922 93,922 250,000
58 13 83,694 43,251 43,251 250,000 67,828 67,828 250,000 108,108 108,108 250,000
59 14 92,604 45,755 45,755 250,000 74,528 74,528 250,000 123,793 123,793 250,000
60 15 101,959 47,953 47,953 250,000 81,345 81,345 250,000 141,120 141,120 250,000
61 16 111,782 49,770 49,770 250,000 88,237 88,237 250,000 160,295 160,295 250,000
62 17 122,096 51,423 51,423 250,000 95,408 95,408 250,000 181,704 181,704 250,000
63 18 132,926 52,871 52,871 250,000 102,851 102,851 250,000 205,623 205,623 254,973
64 19 144,297 54,169 54,169 250,000 110,638 110,638 250,000 232,134 232,134 283,204
65 20 156,237 55,297 55,297 250,000 118,789 118,789 250,000 261,444 261,444 313,732
66 21 168,773 56,684 56,684 250,000 127,628 127,628 250,000 293,991 293,991 349,850
67 22 181,937 57,798 57,798 250,000 136,841 136,841 250,000 329,927 329,927 389,314
68 23 195,759 58,610 58,610 250,000 146,463 146,463 250,000 369,597 369,597 432,429
69 24 210,272 59,086 59,086 250,000 156,534 156,534 250,000 413,382 413,382 479,523
70 25 225,511 59,189 59,189 250,000 167,103 167,103 250,000 461,703 461,703 530,958
71 26 241,511 58,874 58,874 250,000 178,232 178,232 250,000 515,024 515,024 581,977
72 27 258,312 58,100 58,100 250,000 190,000 190,000 250,000 574,003 574,003 637,143
73 28 275,952 56,819 56,819 250,000 202,502 202,502 250,000 639,295 639,295 696,832
74 29 294,475 55,032 55,032 250,000 215,866 215,866 250,000 711,672 711,672 761,489
75 30 313,924 52,602 52,602 250,000 230,216 230,216 250,000 791,973 791,973 831,571
76 31 334,345 49,431 49,431 250,000 245,617 245,617 257,898 881,194 881,194 925,253
77 32 355,787 45,396 45,396 250,000 261,704 261,704 274,789 979,719 979,719 1,028,705
78 33 378,301 40,446 40,446 250,000 278,485 278,485 292,409 1,088,498 1,088,498 1,142,923
79 34 401,941 34,324 34,324 250,000 295,972 295,972 310,770 1,208,519 1,208,519 1,268,945
80 35 426,763 26,947 26,947 250,000 314,190 314,190 329,899 1,340,918 1,340,918 1,407,964
81 36 452,827 17,965 17,965 250,000 333,148 333,148 349,806 1,486,860 1,486,860 1,561,203
82 37 480,193 7,081 7,081 250,000 352,861 352,861 370,504 1,647,645 1,647,645 1,730,027
83 38 508,928 * * * 373,355 373,355 392,023 1,824,752 1,824,752 1,915,989
84 39 539,099 * * * 394,630 394,630 414,362 2,019,659 2,019,659 2,120,642
85 40 570,779 * * * 416,709 416,709 437,544 2,234,091 2,234,091 2,345,796
86 41 604,043 * * * 439,576 439,576 461,555 2,469,721 2,469,721 2,593,207
87 42 638,970 * * * 463,242 463,242 486,404 2,728,503 2,728,503 2,864,928
88 43 675,644 * * * 487,703 487,703 512,088 3,012,474 3,012,474 3,163,098
89 44 714,151 * * * 512,951 512,951 538,599 3,323,813 3,323,813 3,490,003
90 45 754,583 * * * 538,978 538,978 565,926 3,664,860 3,664,860 3,848,103
91 46 797,037 * * * 565,775 565,775 588,406 4,038,160 4,038,160 4,199,687
92 47 841,614 * * * 594,264 594,264 612,092 4,453,404 4,453,404 4,587,006
93 48 888,420 * * * 624,702 624,702 637,196 4,916,741 4,916,741 5,015,076
94 49 937,566 * * * 657,392 657,392 663,966 5,435,474 5,435,474 5,489,829
95 50 989,169 * * * 692,688 692,688 692,688 6,018,308 6,018,308 6,018,308
96 51 1,043,353 * * * 731,002 731,002 731,002 6,675,660 6,675,660 6,675,660
97 52 1,100,245 * * * 771,177 771,177 771,177 7,404,272 7,404,272 7,404,272
98 53 1,159,983 * * * 813,302 813,302 813,302 8,211,867 8,211,867 8,211,867
99 54 1,222,707 * * * 857,473 857,473 857,473 9,107,008 9,107,008 9,107,008
100 55 1,288,567 * * * 903,788 903,788 903,788 10,099,185 10,099,185 10,099,185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable current cost of insurance rates, a monthly
administrative charge of $3.00 per month in all Policy Years, and a monthly
mortality and expense risk charge equal to .062% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.75% of such
amount) during Policy Years 1-10 and .021% multiplied by the Variable
Account Value (which is equivalent to an annual rate of 0.25%) in Policy
Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
34
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$4,500 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT -------------------------- --------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ------------ ------ --------- ------- ------- --------- ------- ------------ --------- ---------
46 1 4,725 3,577 3,577 250,000 3,818 3,818 250,000 4,059 4,059 250,000
47 2 9,686 7,039 7,039 250,000 7,743 7,743 250,000 8,476 8,476 250,000
48 3 14,896 10,383 10,383 250,000 11,776 11,776 250,000 13,286 13,286 250,000
49 4 20,365 13,608 13,608 250,000 15,919 15,919 250,000 18,527 18,527 250,000
50 5 26,109 16,709 16,709 250,000 20,172 20,172 250,000 24,239 24,239 250,000
51 6 32,139 19,685 19,685 250,000 24,537 24,537 250,000 30,473 30,473 250,000
52 7 38,471 22,524 22,524 250,000 29,008 29,008 250,000 37,272 37,272 250,000
53 8 45,120 25,215 25,215 250,000 33,577 33,577 250,000 44,688 44,688 250,000
54 9 52,101 27,749 27,749 250,000 38,242 38,242 250,000 52,784 52,784 250,000
55 10 59,431 30,110 30,110 250,000 42,993 42,993 250,000 61,623 61,623 250,000
56 11 67,127 32,290 32,290 250,000 47,826 47,826 250,000 71,288 71,288 250,000
57 12 75,208 34,276 34,276 250,000 52,738 52,738 250,000 81,867 81,867 250,000
58 13 83,694 36,062 36,062 250,000 57,729 57,729 250,000 93,474 93,474 250,000
59 14 92,604 37,639 37,639 250,000 62,799 62,799 250,000 106,231 106,231 250,000
60 15 101,959 38,985 38,985 250,000 67,941 67,941 250,000 120,278 120,278 250,000
61 16 111,782 40,081 40,081 250,000 73,146 73,146 250,000 135,777 135,777 250,000
62 17 122,096 40,904 40,904 250,000 78,409 78,409 250,000 152,920 152,920 250,000
63 18 132,926 41,419 41,419 250,000 83,714 83,714 250,000 171,929 171,929 250,000
64 19 144,297 41,585 41,585 250,000 89,047 89,047 250,000 193,071 193,071 250,000
65 20 156,237 41,359 41,359 250,000 94,392 94,392 250,000 216,588 216,588 259,905
66 21 168,773 40,697 40,697 250,000 99,740 99,740 250,000 242,407 242,407 288,464
67 22 181,937 39,561 39,561 250,000 105,090 105,090 250,000 270,660 270,660 319,379
68 23 195,759 37,905 37,905 250,000 110,440 110,440 250,000 301,572 301,572 352,840
69 24 210,272 35,677 35,677 250,000 115,792 115,792 250,000 335,392 335,392 389,055
70 25 225,511 32,808 32,808 250,000 121,144 121,144 250,000 372,390 372,390 428,249
71 26 241,511 29,191 29,191 250,000 126,479 126,479 250,000 412,857 412,857 466,529
72 27 258,312 24,560 24,560 250,000 131,706 131,706 250,000 457,252 457,252 507,549
73 28 275,952 18,997 18,997 250,000 136,936 136,936 250,000 506,084 506,084 551,631
74 29 294,475 12,147 12,147 250,000 142,071 142,071 250,000 559,838 559,838 599,027
75 30 313,924 3,756 3,756 250,000 147,089 147,089 250,000 619,131 619,131 650,088
76 31 334,345 * * * 151,995 151,995 250,000 684,709 684,709 718,944
77 32 355,787 * * * 156,801 156,801 250,000 756,474 756,474 794,298
78 33 378,301 * * * 161,530 161,530 250,000 834,971 834,971 876,719
79 34 401,941 * * * 166,215 166,215 250,000 920,786 920,786 966,825
80 35 426,763 * * * 170,885 170,885 250,000 1,014,545 1,014,545 1,065,272
81 36 452,827 * * * 175,554 175,554 250,000 1,116,903 1,116,903 1,172,748
82 37 480,193 * * * 180,233 180,233 250,000 1,228,543 1,228,543 1,289,970
83 38 508,928 * * * 184,933 184,933 250,000 1,350,166 1,350,166 1,417,675
84 39 539,099 * * * 189,677 189,677 250,000 1,482,496 1,482,496 1,556,621
85 40 570,779 * * * 194,525 194,525 250,000 1,626,293 1,626,293 1,707,608
86 41 604,043 * * * 199,587 199,587 250,000 1,782,373 1,782,373 1,871,491
87 42 638,970 * * * 205,031 205,031 250,000 1,951,602 1,951,602 2,049,182
88 43 675,644 * * * 211,093 211,093 250,000 2,134,902 2,134,902 2,241,647
89 44 714,151 * * * 218,113 218,113 250,000 2,333,266 2,333,266 2,449,929
90 45 754,583 * * * 226,565 226,565 250,000 2,547,715 2,547,715 2,675,100
91 46 797,037 * * * 237,126 237,126 250,000 2,779,282 2,779,282 2,890,454
92 47 841,614 * * * 249,279 249,279 256,757 3,036,279 3,036,279 3,127,368
93 48 888,420 * * * 262,309 262,309 267,555 3,322,811 3,322,811 3,389,267
94 49 937,566 * * * 276,382 276,382 279,146 3,643,867 3,643,867 3,680,305
95 50 989,169 * * * 291,696 291,696 291,696 4,005,560 4,005,560 4,005,560
96 51 1,043,353 * * * 308,534 308,534 308,534 4,416,002 4,416,002 4,416,002
97 52 1,100,245 * * * 326,075 326,075 326,075 4,867,997 4,867,997 4,867,997
98 53 1,159,983 * * * 344,349 344,349 344,349 5,365,752 5,365,752 5,365,752
99 54 1,222,707 * * * 363,386 363,386 363,386 5,913,901 5,913,901 5,913,901
100 55 1,288,567 * * * 383,219 383,219 383,219 6,517,544 6,517,544 6,517,544
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable guaranteed cost of insurance rates, a
monthly administrative charge of $3.00 per month in all Policy Years, and a
monthly mortality and expense risk charge equal to .075% multiplied by the
Variable Account Value, which is equivalent to an annual rate of 0.90% of
such amount during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
35
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$10,000 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ----------- ------ --------- ------- ------- --------- ------- ---------- ---------- ----------
46 1 10,500 9,390 9,390 259,390 9,971 9,971 259,971 10,552 10,552 260,552
47 2 21,525 18,596 18,596 268,596 20,342 20,342 270,342 22,157 22,157 272,157
48 3 33,101 27,571 27,571 277,571 31,077 31,077 281,077 34,868 34,868 284,868
49 4 45,256 36,359 36,359 286,359 42,235 42,235 292,235 48,844 48,844 298,844
50 5 58,019 44,901 44,901 294,901 53,771 53,771 303,771 64,148 64,148 314,148
51 6 71,420 53,252 53,252 303,252 65,752 65,752 315,752 80,971 80,971 330,971
52 7 85,491 61,270 61,270 311,270 78,047 78,047 328,047 99,315 99,315 349,315
53 8 100,266 68,924 68,924 318,924 90,635 90,635 340,635 119,298 119,298 369,298
54 9 115,779 76,184 76,184 326,184 103,491 103,491 353,491 141,051 141,051 391,051
55 10 132,068 83,988 83,988 333,988 117,587 117,587 367,587 165,748 165,748 415,748
56 11 149,171 91,936 91,936 341,936 132,760 132,760 382,760 193,746 193,746 443,746
57 12 167,130 99,537 99,537 349,537 148,402 148,402 398,402 224,504 224,504 474,504
58 13 185,986 106,753 106,753 356,753 164,497 164,497 414,497 258,279 258,279 508,279
59 14 205,786 113,648 113,648 363,648 181,125 181,125 431,125 295,460 295,460 545,460
60 15 226,575 120,099 120,099 370,099 198,183 198,183 448,183 336,283 336,283 586,283
61 16 248,404 126,008 126,008 376,008 215,584 215,584 465,584 381,030 381,030 631,030
62 17 271,324 131,645 131,645 381,645 233,619 233,619 483,619 430,410 430,410 680,410
63 18 295,390 136,956 136,956 386,956 252,259 252,259 502,259 484,865 484,865 734,865
64 19 320,660 142,015 142,015 392,015 271,604 271,604 521,604 545,017 545,017 795,017
65 20 347,193 146,793 146,793 396,793 291,659 291,659 541,659 611,452 611,452 861,452
66 21 375,052 151,850 151,850 401,850 313,031 313,031 563,031 685,444 685,444 935,444
67 22 404,305 156,491 156,491 406,491 335,070 335,070 585,070 767,074 767,074 1,017,074
68 23 435,020 160,677 160,677 410,677 357,764 357,764 607,764 857,125 857,125 1,107,125
69 24 467,271 164,371 164,371 414,371 381,100 381,100 631,100 956,464 956,464 1,206,464
70 25 501,135 167,527 167,527 417,527 405,056 405,056 655,056 1,066,043 1,066,043 1,316,043
71 26 536,691 170,096 170,096 420,096 429,608 429,608 679,608 1,186,915 1,186,915 1,436,915
72 27 574,026 172,040 172,040 422,040 454,735 454,735 704,735 1,320,255 1,320,255 1,570,255
73 28 613,227 173,313 173,313 423,313 480,413 480,413 730,413 1,467,359 1,467,359 1,717,359
74 29 654,388 173,945 173,945 423,945 506,690 506,690 756,690 1,629,742 1,629,742 1,879,742
75 30 697,608 173,791 173,791 423,791 533,439 533,439 783,439 1,808,900 1,808,900 2,058,900
76 31 742,988 172,774 172,774 422,774 560,593 560,593 810,593 2,006,557 2,006,557 2,256,557
77 32 790,638 170,802 170,802 420,802 588,069 588,069 838,069 2,224,614 2,224,614 2,474,614
78 33 840,670 167,892 167,892 417,892 615,888 615,888 865,888 2,465,286 2,465,286 2,715,286
79 34 893,203 163,835 163,835 413,835 643,839 643,839 893,839 2,730,792 2,730,792 2,980,792
80 35 948,363 158,668 158,668 408,668 671,953 671,953 921,953 3,023,849 3,023,849 3,273,849
81 36 1,006,281 152,155 152,155 402,155 699,984 699,984 949,984 3,347,181 3,347,181 3,597,181
82 37 1,067,095 144,195 144,195 394,195 727,804 727,804 977,804 3,703,943 3,703,943 3,953,943
83 38 1,130,950 134,880 134,880 384,880 755,484 755,484 1,005,484 4,097,841 4,097,841 4,347,841
84 39 1,197,998 123,931 123,931 373,931 782,712 782,712 1,032,712 4,532,589 4,532,589 4,782,589
85 40 1,268,398 111,399 111,399 361,399 809,501 809,501 1,059,501 5,012,649 5,012,649 5,263,281
86 41 1,342,318 96,908 96,908 346,908 835,421 835,421 1,085,421 5,541,275 5,541,275 5,818,339
87 42 1,419,933 80,431 80,431 330,431 860,381 860,381 1,110,381 6,121,840 6,121,840 6,427,932
88 43 1,501,430 61,816 61,816 311,816 884,152 884,152 1,134,152 6,758,917 6,758,917 7,096,863
89 44 1,587,002 40,908 40,908 290,908 906,494 906,494 1,156,494 7,457,390 7,457,390 7,830,259
90 45 1,676,852 17,581 17,581 267,581 927,180 927,180 1,177,180 8,222,513 8,222,513 8,633,639
91 46 1,771,194 * * * 946,031 946,031 1,196,031 9,059,995 9,059,995 9,422,395
92 47 1,870,254 * * * 963,009 963,009 1,213,009 9,991,575 9,991,575 10,291,322
93 48 1,974,267 * * * 977,938 977,938 1,227,938 11,031,051 11,031,051 11,281,051
94 49 2,083,480 * * * 990,633 990,633 1,240,633 12,191,263 12,191,263 12,441,263
95 50 2,198,154 * * * 1,000,904 1,000,904 1,250,904 13,474,111 13,474,111 13,724,111
96 51 2,318,562 * * * 1,008,543 1,008,543 1,258,543 14,892,796 14,892,796 15,142,796
97 52 2,444,990 * * * 1,013,342 1,013,342 1,263,342 16,461,962 16,461,962 16,711,962
98 53 2,577,739 * * * 1,015,085 1,015,085 1,265,085 18,197,838 18,197,838 18,447,838
99 54 2,717,126 * * * 1,013,531 1,013,531 1,263,531 20,118,402 20,118,402 20,368,402
100 55 2,863,482 * * * 1,008,439 1,008,439 1,258,439 22,243,593 22,243,593 22,493,593
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable current cost of insurance rates, a monthly
administrative charge of $3.00 per month in all Policy Years, and a monthly
mortality and expense risk charge equal to .062% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.75% of such
amount) during Policy Years 1-10 and .021% multiplied by the Variable
Account Value (which is equivalent to an annual rate of 0.25%) in Policy
Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
36
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$10,000 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- -------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- --- ------ ----------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
46 1 10,500 8,967 8,967 258,967 9,534 9,534 259,534 10,101 10,101 260,101
47 2 21,525 17,709 17,709 267,709 19,397 19,397 269,397 21,154 21,154 271,154
48 3 33,101 26,225 26,225 276,225 29,599 29,599 279,599 33,250 33,250 283,250
49 4 45,256 34,513 34,513 284,513 40,148 40,148 290,148 46,489 46,489 296,489
50 5 58,019 42,569 42,569 292,569 51,048 51,048 301,048 60,977 60,977 310,977
51 6 71,420 50,390 50,390 300,390 62,309 62,309 312,309 76,833 76,833 326,833
52 7 85,491 57,965 57,965 307,965 73,929 73,929 323,929 94,180 94,180 344,180
53 8 100,266 65,279 65,279 315,279 85,903 85,903 335,903 113,148 113,148 363,148
54 9 115,779 72,323 72,323 322,323 98,233 98,233 348,233 133,887 133,887 383,887
55 10 132,068 79,080 79,080 329,080 110,909 110,909 360,909 156,551 156,551 406,551
56 11 149,171 85,536 85,536 335,536 123,928 123,928 373,928 181,318 181,318 431,318
57 12 167,130 91,678 91,678 341,678 137,285 137,285 387,285 208,379 208,379 458,379
58 13 185,986 97,499 97,499 347,499 150,980 150,980 400,980 237,954 237,954 487,954
59 14 205,786 102,986 102,986 352,986 165,009 165,009 415,009 270,278 270,278 520,278
60 15 226,575 108,117 108,117 358,117 179,356 179,356 429,356 305,597 305,597 555,597
61 16 248,404 112,867 112,867 362,867 194,004 194,004 444,004 344,185 344,185 594,185
62 17 271,324 117,212 117,212 367,212 208,932 208,932 458,932 386,336 386,336 636,336
63 18 295,390 121,113 121,113 371,113 224,105 224,105 474,105 432,365 432,365 682,365
64 19 320,660 124,527 124,527 374,527 239,479 239,479 489,479 482,609 482,609 732,609
65 20 347,193 127,408 127,408 377,408 255,008 255,008 505,008 537,436 537,436 787,436
66 21 375,052 129,714 129,714 379,714 270,645 270,645 520,645 597,257 597,257 847,257
67 22 404,305 131,417 131,417 381,417 286,355 286,355 536,355 662,535 662,535 912,535
68 23 435,020 132,480 132,480 382,480 302,092 302,092 552,092 733,773 733,773 983,773
69 24 467,271 132,869 132,869 382,869 317,809 317,809 567,809 811,526 811,526 1,061,526
70 25 501,135 132,537 132,537 382,537 333,446 333,446 583,446 896,390 896,390 1,146,390
71 26 536,691 131,403 131,403 381,403 348,902 348,902 598,902 988,987 988,987 1,238,987
72 27 574,026 129,226 129,226 379,226 363,906 363,906 613,906 1,089,826 1,089,826 1,339,826
73 28 613,227 126,179 126,179 376,179 378,599 378,599 628,599 1,199,909 1,199,909 1,449,909
74 29 654,388 121,972 121,972 371,972 392,653 392,653 642,653 1,319,844 1,319,844 1,569,844
75 30 697,608 116,475 116,475 366,475 405,885 405,885 655,885 1,450,468 1,450,468 1,700,468
76 31 742,988 109,609 109,609 359,609 418,157 418,157 668,157 1,592,757 1,592,757 1,842,757
77 32 790,638 101,302 101,302 351,302 429,328 429,328 679,328 1,747,789 1,747,789 1,997,789
78 33 840,670 91,499 91,499 341,499 439,269 439,269 689,269 1,916,767 1,916,767 2,166,767
79 34 893,203 80,160 80,160 330,160 447,862 447,862 697,862 2,101,034 2,101,034 2,351,034
80 35 948,363 67,207 67,207 317,207 454,940 454,940 704,940 2,302,025 2,302,025 2,552,025
81 36 1,006,281 52,490 52,490 302,490 460,256 460,256 710,256 2,521,243 2,521,243 2,771,243
82 37 1,067,095 35,811 35,811 285,811 463,500 463,500 713,500 2,760,290 2,760,290 3,010,290
83 38 1,130,950 16,912 16,912 266,912 464,283 464,283 714,283 3,020,862 3,020,862 3,270,862
84 39 1,197,998 * * * 462,168 462,168 712,168 3,304,793 3,304,793 3,554,793
85 40 1,268,398 * * * 456,754 456,754 706,754 3,614,160 3,614,160 3,864,160
86 41 1,342,318 * * * 447,696 447,696 697,696 3,951,323 3,951,323 4,201,323
87 42 1,419,933 * * * 434,699 434,699 684,699 4,318,951 4,318,951 4,568,951
88 43 1,501,430 * * * 417,489 417,489 667,489 4,720,014 4,720,014 4,970,014
89 44 1,587,002 * * * 395,852 395,852 645,852 5,157,645 5,157,645 5,415,527
90 45 1,676,852 * * * 369,515 369,515 619,515 5,631,783 5,631,783 5,913,372
91 46 1,771,194 * * * 338,141 338,141 588,141 6,143,772 6,143,772 6,393,772
92 47 1,870,254 * * * 301,309 301,309 551,309 6,711,848 6,711,848 6,961,848
93 48 1,974,267 * * * 258,445 258,445 508,445 7,334,469 7,334,469 7,584,469
94 49 2,083,480 * * * 208,759 208,759 458,759 8,014,937 8,014,937 8,264,937
95 50 2,198,154 * * * 150,573 150,573 400,573 8,757,674 8,757,674 9,007,674
96 51 2,318,562 * * * 80,733 80,733 330,733 9,566,098 9,566,098 9,816,098
97 52 2,444,990 * * * * * * 10,441,124 10,441,124 10,691,124
98 53 2,577,739 * * * * * * 11,377,681 11,377,681 11,627,681
99 54 2,717,126 * * * * * * 12,357,555 12,357,555 12,607,555
100 55 2,863,482 * * * * * * 13,356,769 13,356,769 13,606,769
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable guaranteed cost of insurance rates, a
monthly administrative charge of $3.00 per month in all Policy Years, and a
monthly mortality and expense risk charge equal to .075% multiplied by the
Variable Account Value, which is equivalent to an annual rate of 0.90% of
such amount during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
37
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$3,750 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT ------------------------------ ---------------------------- ----------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ----------- --------- --------- ------- ------- --------- ------- ---------- ---------- ----------
46 1 3,938 3,144 3,144 250,000 3,350 3,350 250,000 3,556 3,556 250,000
47 2 8,072 6,210 6,210 250,000 6,818 6,818 250,000 7,451 7,451 250,000
48 3 12,413 9,196 9,196 250,000 10,406 10,406 250,000 11,717 11,717 250,000
49 4 16,971 12,102 12,102 250,000 14,119 14,119 250,000 16,392 16,392 250,000
50 5 21,757 14,836 14,836 250,000 17,868 17,868 250,000 21,426 21,426 250,000
51 6 26,783 17,387 17,387 250,000 21,642 21,642 250,000 26,842 26,842 250,000
52 7 32,059 20,327 20,327 250,000 26,021 26,021 250,000 33,266 33,266 250,000
53 8 37,600 23,172 23,172 250,000 30,544 30,544 250,000 40,311 40,311 250,000
54 9 43,417 25,922 25,922 250,000 35,219 35,219 250,000 48,044 48,044 250,000
55 10 49,525 28,575 28,575 250,000 40,051 40,051 250,000 56,540 56,540 250,000
56 11 55,939 31,214 31,214 250,000 45,200 45,200 250,000 66,140 66,140 250,000
57 12 62,674 33,683 33,683 250,000 50,474 50,474 250,000 76,685 76,685 250,000
58 13 69,745 35,991 35,991 250,000 55,892 55,892 250,000 88,302 88,302 250,000
59 14 77,170 38,128 38,128 250,000 61,455 61,455 250,000 101,117 101,117 250,000
60 15 84,966 40,085 40,085 250,000 67,168 67,168 250,000 115,280 115,280 250,000
61 16 93,151 41,789 41,789 250,000 72,979 72,979 250,000 130,918 130,918 250,000
62 17 101,746 43,402 43,402 250,000 79,045 79,045 250,000 148,334 148,334 250,000
63 18 110,771 44,898 44,898 250,000 85,362 85,362 250,000 167,735 167,735 250,000
64 19 120,247 46,340 46,340 250,000 92,002 92,002 250,000 189,402 189,402 250,000
65 20 130,197 47,695 47,695 250,000 98,958 98,958 250,000 213,585 213,585 256,302
66 21 140,645 49,247 49,247 250,000 106,469 106,469 250,000 240,473 240,473 286,163
67 22 151,614 50,645 50,645 250,000 114,301 114,301 250,000 270,210 270,210 318,848
68 23 163,132 51,891 51,891 250,000 122,484 122,484 250,000 303,102 303,102 354,630
69 24 175,227 52,956 52,956 250,000 131,032 131,032 250,000 339,477 339,477 393,793
70 25 187,925 53,842 53,842 250,000 139,984 139,984 250,000 379,707 379,707 436,664
71 26 201,259 54,505 54,505 250,000 149,354 149,354 250,000 424,193 424,193 479,338
72 27 215,260 54,939 54,939 250,000 159,188 159,188 250,000 473,453 473,453 525,533
73 28 229,960 55,082 55,082 250,000 169,510 169,510 250,000 528,013 528,013 575,534
74 29 245,396 54,913 54,913 250,000 180,378 180,378 250,000 588,479 588,479 629,672
75 30 261,603 54,344 54,344 250,000 191,835 191,835 250,000 655,524 655,524 688,300
76 31 278,621 53,339 53,339 250,000 203,963 203,963 250,000 729,933 729,933 766,430
77 32 296,489 51,826 51,826 250,000 216,853 216,853 250,000 812,219 812,219 852,830
78 33 315,251 49,712 49,712 250,000 230,618 230,618 250,000 903,183 903,183 948,342
79 34 334,951 46,831 46,831 250,000 245,321 245,321 257,587 1,003,691 1,003,691 1,053,876
80 35 355,636 43,115 43,115 250,000 260,683 260,683 273,718 1,114,713 1,114,713 1,170,449
81 36 377,356 38,430 38,430 250,000 276,706 276,706 290,541 1,237,299 1,237,299 1,299,164
82 37 400,161 32,616 32,616 250,000 293,405 293,405 308,075 1,372,594 1,372,594 1,441,223
83 38 424,106 25,486 25,486 250,000 310,799 310,799 326,339 1,521,845 1,521,845 1,597,937
84 39 449,249 16,697 16,697 250,000 328,893 328,893 345,338 1,686,367 1,686,367 1,770,686
85 40 475,649 6,080 6,080 250,000 347,711 347,711 365,096 1,867,671 1,867,671 1,961,055
86 41 503,369 * * * 367,265 367,265 385,628 2,067,360 2,067,360 2,170,728
87 42 532,475 * * * 387,564 387,564 406,942 2,287,159 2,287,159 2,401,517
88 43 563,036 * * * 408,617 408,617 429,048 2,528,944 2,528,944 2,655,391
89 44 595,126 * * * 430,433 430,433 451,955 2,794,747 2,794,747 2,934,484
90 45 628,819 * * * 453,017 453,017 475,667 3,086,758 3,086,758 3,241,096
91 46 664,198 * * * 476,370 476,370 495,425 3,407,344 3,407,344 3,543,637
92 47 701,345 * * * 501,078 501,078 516,110 3,763,426 3,763,426 3,876,328
93 48 740,350 * * * 527,323 527,323 537,870 4,159,897 4,159,897 4,243,095
94 49 781,305 * * * 555,322 555,322 560,875 4,602,530 4,602,530 4,648,556
95 50 824,308 * * * 585,330 585,330 585,330 5,098,166 5,098,166 5,098,166
96 51 869,461 * * * 617,645 617,645 617,645 5,654,941 5,654,941 5,654,941
97 52 916,871 * * * 651,529 651,529 651,529 6,272,072 6,272,072 6,272,072
98 53 966,652 * * * 687,059 687,059 687,059 6,956,102 6,956,102 6,956,102
99 54 1,018,922 * * * 724,313 724,313 724,313 7,714,283 7,714,283 7,714,283
100 55 1,073,806 * * * 763,377 763,377 763,377 8,554,653 8,554,653 8,554,653
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable current cost of insurance rates, a monthly
administrative charge of $3.00 per month in all Policy Years, and a monthly
mortality and expense risk charge equal to .062% multiplied by the Variable
Account Value, (which is equivalent to an annual rate of 0.75% of such
amount) during Policy Years 1-10 and .021% multiplied by the Variable
Account Value (which is equivalent to an annual rate of 0.25%) in Policy
Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
38
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$3,750 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- -------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ----------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
46 1 3,938 2,919 2,919 250,000 3,117 3,117 250,000 3,316 3,316 250,000
47 2 8,072 5,747 5,747 250,000 6,326 6,326 250,000 6,929 6,929 250,000
48 3 12,413 8,481 8,481 250,000 9,624 9,624 250,000 10,864 10,864 250,000
49 4 16,971 11,120 11,120 250,000 13,015 13,015 250,000 15,153 15,153 250,000
50 5 21,757 13,663 13,663 250,000 16,500 16,500 250,000 19,833 19,833 250,000
51 6 26,783 16,104 16,104 250,000 20,077 20,077 250,000 24,938 24,938 250,000
52 7 32,059 18,441 18,441 250,000 23,747 23,747 250,000 30,511 30,511 250,000
53 8 37,600 20,668 20,668 250,000 27,509 27,509 250,000 36,597 36,597 250,000
54 9 43,417 22,775 22,775 250,000 31,355 31,355 250,000 43,242 43,242 250,000
55 10 49,525 24,761 24,761 250,000 35,290 35,290 250,000 50,509 50,509 250,000
56 11 55,939 26,625 26,625 250,000 39,316 39,316 250,000 58,465 58,465 250,000
57 12 62,674 28,366 28,366 250,000 43,439 43,439 250,000 67,191 67,191 250,000
58 13 69,745 29,988 29,988 250,000 47,668 47,668 250,000 76,778 76,778 250,000
59 14 77,170 31,497 31,497 250,000 52,014 52,014 250,000 87,333 87,333 250,000
60 15 84,966 32,891 32,891 250,000 56,483 56,483 250,000 98,968 98,968 250,000
61 16 93,151 34,154 34,154 250,000 61,070 61,070 250,000 111,799 111,799 250,000
62 17 101,746 35,267 35,267 250,000 65,766 65,766 250,000 125,962 125,962 250,000
63 18 110,771 36,198 36,198 250,000 70,551 70,551 250,000 141,603 141,603 250,000
64 19 120,247 36,905 36,905 250,000 75,402 75,402 250,000 158,893 158,893 250,000
65 20 130,197 37,352 37,352 250,000 80,299 80,299 250,000 178,041 178,041 250,000
66 21 140,645 37,519 37,519 250,000 85,239 85,239 250,000 199,304 199,304 250,000
67 22 151,614 37,388 37,388 250,000 90,221 90,221 250,000 222,913 222,913 263,037
68 23 163,132 36,956 36,956 250,000 95,260 95,260 250,000 248,837 248,837 291,139
69 24 175,227 36,218 36,218 250,000 100,373 100,373 250,000 277,278 277,278 321,643
70 25 187,925 35,151 35,151 250,000 105,563 105,563 250,000 308,483 308,483 354,755
71 26 201,259 33,701 33,701 250,000 110,818 110,818 250,000 342,715 342,715 387,267
72 27 215,260 31,785 31,785 250,000 116,113 116,113 250,000 380,347 380,347 422,186
73 28 229,960 29,281 29,281 250,000 121,406 121,406 250,000 421,738 421,738 459,695
74 29 245,396 26,043 26,043 250,000 126,651 126,651 250,000 467,297 467,297 500,007
75 30 261,603 21,912 21,912 250,000 131,808 131,808 250,000 517,500 517,500 543,375
76 31 278,621 16,727 16,727 250,000 136,855 136,855 250,000 572,912 572,912 601,558
77 32 296,489 10,322 10,322 250,000 141,778 141,778 250,000 633,671 633,671 665,355
78 33 315,251 2,518 2,518 250,000 146,577 146,577 250,000 700,262 700,262 735,275
79 34 334,951 * * * 151,256 151,256 250,000 773,211 773,211 811,871
80 35 355,636 * * * 155,806 155,806 250,000 853,080 853,080 895,734
81 36 377,356 * * * 160,199 160,199 250,000 940,461 940,461 987,484
82 37 400,161 * * * 164,392 164,392 250,000 1,035,975 1,035,975 1,087,774
83 38 424,106 * * * 168,325 168,325 250,000 1,140,267 1,140,267 1,197,281
84 39 449,249 * * * 171,925 171,925 250,000 1,254,002 1,254,002 1,316,702
85 40 475,649 * * * 175,135 175,135 250,000 1,377,888 1,377,888 1,446,782
86 41 503,369 * * * 177,889 177,889 250,000 1,512,660 1,512,660 1,588,293
87 42 532,475 * * * 180,118 180,118 250,000 1,659,102 1,659,102 1,742,057
88 43 563,036 * * * 181,721 181,721 250,000 1,818,014 1,818,014 1,908,915
89 44 595,126 * * * 182,562 182,562 250,000 1,990,241 1,990,241 2,089,753
90 45 628,819 * * * 182,427 182,427 250,000 2,176,622 2,176,622 2,285,453
91 46 664,198 * * * 180,999 180,999 250,000 2,378,010 2,378,010 2,473,131
92 47 701,345 * * * 177,777 177,777 250,000 2,600,725 2,600,725 2,678,746
93 48 740,350 * * * 171,954 171,954 250,000 2,848,177 2,848,177 2,905,141
94 49 781,305 * * * 162,170 162,170 250,000 3,124,569 3,124,569 3,155,814
95 50 824,308 * * * 145,947 145,947 250,000 3,435,179 3,435,179 3,435,179
96 51 869,461 * * * 118,279 118,279 250,000 3,787,049 3,787,049 3,787,049
97 52 916,871 * * * 67,535 67,535 250,000 4,174,543 4,174,543 4,174,543
98 53 966,652 * * * * * * 4,601,267 4,601,267 4,601,267
99 54 1,018,922 * * * * * * 5,071,193 5,071,193 5,071,193
100 55 1,073,806 * * * * * * 5,588,694 5,588,694 5,588,694
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable guaranteed cost of insurance rates, a
monthly administrative charge of $3.00 per month in all Policy Years, and a
monthly mortality and expense risk charge equal to .075% multiplied by the
Variable Account Value, which is equivalent to an annual rate of 0.90% of
such amount during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
39
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$7,500 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- -------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ----------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
46 1 7,875 6,827 6,827 256,827 7,255 7,255 257,255 7,684 7,684 257,684
47 2 16,144 13,508 13,508 263,508 14,790 14,790 264,790 16,123 16,123 266,123
48 3 24,826 20,043 20,043 270,043 22,611 22,611 272,611 25,389 25,389 275,389
49 4 33,942 26,430 26,430 276,430 30,729 30,729 280,729 35,565 35,565 285,565
50 5 43,514 32,576 32,576 282,576 39,055 39,055 289,055 46,640 46,640 296,640
51 6 53,565 38,462 38,462 288,462 47,578 47,578 297,578 58,686 58,686 308,686
52 7 64,118 44,712 44,712 294,712 56,945 56,945 306,945 72,460 72,460 322,460
53 8 75,199 50,802 50,802 300,802 66,657 66,657 316,657 87,590 87,590 337,590
54 9 86,834 56,732 56,732 306,732 76,727 76,727 326,727 104,212 104,212 354,212
55 10 99,051 62,500 62,500 312,500 87,166 87,166 337,166 122,475 122,475 372,475
56 11 111,878 68,359 68,359 318,359 98,384 98,384 348,384 143,160 143,160 393,160
57 12 125,347 73,980 73,980 323,980 109,970 109,970 359,970 165,903 165,903 415,903
58 13 139,490 79,370 79,370 329,370 121,946 121,946 371,946 190,935 190,935 440,935
59 14 154,339 84,516 84,516 334,516 134,313 134,313 384,313 218,484 218,484 468,484
60 15 169,931 89,404 89,404 339,404 147,075 147,075 397,075 248,808 248,808 498,808
61 16 186,303 93,943 93,943 343,943 160,153 160,153 410,153 282,106 282,106 532,106
62 17 203,493 98,329 98,329 348,329 173,761 173,761 423,761 318,905 318,905 568,905
63 18 221,543 102,529 102,529 352,529 187,889 187,889 437,889 359,549 359,549 609,549
64 19 240,495 106,622 106,622 356,622 202,642 202,642 452,642 404,535 404,535 654,535
65 20 260,394 110,565 110,565 360,565 218,004 218,004 468,004 454,286 454,286 704,286
66 21 281,289 114,713 114,713 364,713 234,369 234,369 484,369 509,697 509,697 759,697
67 22 303,229 118,627 118,627 368,627 251,335 251,335 501,335 570,915 570,915 820,915
68 23 326,265 122,309 122,309 372,309 268,932 268,932 518,932 638,570 638,570 888,570
69 24 350,453 125,721 125,721 375,721 287,147 287,147 537,147 713,316 713,316 963,316
70 25 375,851 128,869 128,869 378,869 306,013 306,013 556,013 795,924 795,924 1,045,924
71 26 402,518 131,692 131,692 381,692 325,498 325,498 575,498 887,179 887,179 1,137,179
72 27 430,519 134,190 134,190 384,190 345,625 345,625 595,625 988,014 988,014 1,238,014
73 28 459,920 136,281 136,281 386,281 366,339 366,339 616,339 1,099,378 1,099,378 1,349,378
74 29 490,791 137,948 137,948 387,948 387,645 387,645 637,645 1,222,388 1,222,388 1,472,388
75 30 523,206 139,082 139,082 389,082 409,454 409,454 659,454 1,358,184 1,358,184 1,608,184
76 31 557,241 139,653 139,653 389,653 431,754 431,754 681,754 1,508,116 1,508,116 1,758,116
77 32 592,978 139,584 139,584 389,584 454,484 454,484 704,484 1,673,627 1,673,627 1,923,627
78 33 630,502 138,785 138,785 388,785 477,562 477,562 727,562 1,856,301 1,856,301 2,106,301
79 34 669,902 137,086 137,086 387,086 500,821 500,821 750,821 2,057,810 2,057,810 2,307,810
80 35 711,272 134,457 134,457 384,457 524,231 524,231 774,231 2,280,154 2,280,154 2,530,154
81 36 754,711 130,806 130,806 380,806 547,692 547,692 797,692 2,525,481 2,525,481 2,775,481
82 37 800,322 126,037 126,037 376,037 571,094 571,094 821,094 2,796,168 2,796,168 3,046,168
83 38 848,213 120,055 120,055 370,055 594,325 594,325 844,325 3,094,850 3,094,850 3,344,850
84 39 898,498 112,637 112,637 362,637 617,132 617,132 867,132 3,424,310 3,424,310 3,674,310
85 40 951,298 103,810 103,810 353,810 639,505 639,505 889,505 3,787,896 3,787,896 4,037,896
86 41 1,006,738 93,484 93,484 343,484 661,313 661,313 911,313 4,189,194 4,189,194 4,439,194
87 42 1,064,950 81,533 81,533 331,533 682,382 682,382 932,382 4,632,140 4,632,140 4,882,140
88 43 1,126,073 67,858 67,858 317,858 702,556 702,556 952,556 5,121,086 5,121,086 5,377,140
89 44 1,190,251 52,368 52,368 302,368 721,675 721,675 971,675 5,659,269 5,659,269 5,942,232
90 45 1,257,639 34,966 34,966 284,966 739,567 739,567 989,567 6,250,518 6,250,518 6,563,044
91 46 1,328,396 15,560 15,560 265,560 756,057 756,057 1,006,057 6,899,622 6,899,622 7,175,607
92 47 1,402,690 * * * 771,013 771,013 1,021,013 7,620,598 7,620,598 7,870,598
93 48 1,480,700 * * * 784,245 784,245 1,034,245 8,421,943 8,421,943 8,671,943
94 49 1,562,610 * * * 795,561 795,561 1,045,561 9,307,524 9,307,524 9,557,524
95 50 1,648,615 * * * 804,756 804,756 1,054,756 10,286,352 10,286,352 10,536,352
96 51 1,738,921 * * * 811,620 811,620 1,061,620 11,368,425 11,368,425 11,618,425
97 52 1,833,742 * * * 815,924 815,924 1,065,924 12,564,814 12,564,814 12,814,814
98 53 1,933,304 * * * 817,432 817,432 1,067,432 13,887,799 13,887,799 14,137,799
99 54 2,037,845 * * * 815,898 815,898 1,065,898 15,350,988 15,350,988 15,600,988
100 55 2,147,612 * * * 811,061 811,061 1,061,061 16,969,462 16,969,462 17,219,462
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable current cost of insurance rates, a monthly
administrative charge of $3.00 per month in all Policy Years, and a monthly
mortality and expense risk charge equal to .062% multiplied by the Variable
Account Value (which is equivalent to an annual rate of 0.75% of such
amount) during Policy Years 1-10 and .021% multiplied by the Variable
Account Value (which is equivalent to an annual rate of 0.25%) in Policy
Years 11 and thereafter.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$7,500 ANNUAL PLANNED PREMIUM
$250,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE RATES
PREMIUM 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS GROSS INVESTMENT RETURNS
END OF AT --------------------------- ---------------------------- -------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
AGE YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ---- ------ ----------- ------ --------- ------- ------- --------- ------- --------- --------- ---------
46 1 7,875 6,593 6,593 256,593 7,013 7,013 257,013 7,435 7,435 257,435
47 2 16,144 13,020 13,020 263,020 14,269 14,269 264,269 15,570 15,570 265,570
48 3 24,826 19,279 19,279 269,279 21,772 21,772 271,772 24,471 24,471 274,471
49 4 33,942 25,368 25,368 275,368 29,528 29,528 279,528 34,211 34,211 284,211
50 5 43,514 31,287 31,287 281,287 37,543 37,543 287,543 44,870 44,870 294,870
51 6 53,565 37,030 37,030 287,030 45,819 45,819 295,819 56,532 56,532 306,532
52 7 64,118 42,596 42,596 292,596 54,362 54,362 304,362 69,294 69,294 319,294
53 8 75,199 47,976 47,976 297,976 63,173 63,173 313,173 83,255 83,255 333,255
54 9 86,834 53,159 53,159 303,159 72,247 72,247 322,247 98,522 98,522 348,522
55 10 99,051 58,147 58,147 308,147 81,593 81,593 331,593 115,224 115,224 365,224
56 11 111,878 62,936 62,936 312,936 91,214 91,214 341,214 133,499 133,499 383,499
57 12 125,347 67,526 67,526 317,526 101,120 101,120 351,120 153,503 153,503 403,503
58 13 139,490 71,922 71,922 321,922 111,323 111,323 361,323 175,411 175,411 425,411
59 14 154,339 76,130 76,130 326,130 121,839 121,839 371,839 199,421 199,421 449,421
60 15 169,931 80,149 80,149 330,149 132,675 132,675 382,675 225,738 225,738 475,738
61 16 186,303 83,960 83,960 333,960 143,823 143,823 393,823 254,575 254,575 504,575
62 17 203,493 87,543 87,543 337,543 155,271 155,271 405,271 286,160 286,160 536,160
63 18 221,543 90,859 90,859 340,859 166,987 166,987 416,987 320,727 320,727 570,727
64 19 240,495 93,863 93,863 343,863 178,930 178,930 428,930 358,522 358,522 608,522
65 20 260,394 96,511 96,511 346,511 191,061 191,061 441,061 399,823 399,823 649,823
66 21 281,289 98,785 98,785 348,785 203,360 203,360 453,360 444,957 444,957 694,957
67 22 303,229 100,668 100,668 350,668 215,811 215,811 465,811 494,286 494,286 744,286
68 23 326,265 102,161 102,161 352,161 228,414 228,414 478,414 548,230 548,230 798,230
69 24 350,453 103,269 103,269 353,269 241,173 241,173 491,173 607,253 607,253 857,253
70 25 375,851 103,973 103,973 353,973 254,068 254,068 504,068 671,843 671,843 921,843
71 26 402,518 104,221 104,221 354,221 267,044 267,044 517,044 742,500 742,500 992,500
72 27 430,519 103,934 103,934 353,934 280,014 280,014 530,014 819,745 819,745 1,069,745
73 28 459,920 102,995 102,995 352,995 292,847 292,847 542,847 904,112 904,112 1,154,112
74 29 490,791 101,271 101,271 351,271 305,390 305,390 555,390 996,167 996,167 1,246,167
75 30 523,206 98,634 98,634 348,634 317,482 317,482 567,482 1,096,538 1,096,538 1,346,538
76 31 557,241 94,975 94,975 344,975 328,977 328,977 578,977 1,205,933 1,205,933 1,455,933
77 32 592,978 90,208 90,208 340,208 339,741 339,741 589,741 1,325,154 1,325,154 1,575,154
78 33 630,502 84,264 84,264 334,264 349,652 349,652 599,652 1,455,103 1,455,103 1,705,103
79 34 669,902 77,075 77,075 327,075 358,583 358,583 608,583 1,596,772 1,596,772 1,846,772
80 35 711,272 68,537 68,537 318,537 366,364 366,364 616,364 1,751,213 1,751,213 2,001,213
81 36 754,711 58,486 58,486 308,486 372,752 372,752 622,752 1,919,518 1,919,518 2,169,518
82 37 800,322 46,703 46,703 296,703 377,436 377,436 627,436 2,102,831 2,102,831 2,352,831
83 38 848,213 32,921 32,921 282,921 380,035 380,035 630,035 2,302,351 2,302,351 2,552,351
84 39 898,498 16,833 16,833 266,833 380,111 380,111 630,111 2,519,359 2,519,359 2,769,359
85 40 951,298 * * * 377,270 377,270 627,270 2,755,325 2,755,325 3,005,325
86 41 1,006,738 * * * 371,103 371,103 621,103 3,011,875 3,011,875 3,261,875
87 42 1,064,950 * * * 361,243 361,243 611,243 3,290,857 3,290,857 3,540,857
88 43 1,126,073 * * * 347,286 347,286 597,286 3,594,284 3,594,284 3,844,284
89 44 1,190,251 * * * 328,849 328,849 578,849 3,924,414 3,924,414 4,174,414
90 45 1,257,639 * * * 305,474 305,474 555,474 4,283,669 4,283,669 4,533,669
91 46 1,328,396 * * * 276,685 276,685 526,685 4,674,721 4,674,721 4,924,721
92 47 1,402,690 * * * 241,896 241,896 491,896 5,100,419 5,100,419 5,350,419
93 48 1,480,700 * * * 200,358 200,358 450,358 5,563,755 5,563,755 5,813,755
94 49 1,562,610 * * * 151,032 151,032 401,032 6,067,760 6,067,760 6,317,760
95 50 1,648,615 * * * 92,203 92,203 342,203 6,615,118 6,615,118 6,865,118
96 51 1,738,921 * * * 20,723 20,723 270,723 7,207,384 7,207,384 7,457,384
97 52 1,833,742 * * * * * * 7,843,329 7,843,329 8,093,329
98 53 1,933,304 * * * * * * 8,515,623 8,515,623 8,765,623
99 54 2,037,845 * * * * * * 9,203,616 9,203,616 9,453,616
100 55 2,147,612 * * * * * * 9,880,771 9,880,771 10,130,771
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable guaranteed cost of insurance rates, a
monthly administrative charge of $3.00 per month in all Policy Years, and a
monthly mortality and expense risk charge equal to .075% multiplied by the
Variable Account Value, which is equivalent to an annual rate of 0.90% of
such amount during all Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium payment is made at the beginning of each
Policy Year. Values would be different if the premiums are paid with a
different frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
41
OTHER POLICY BENEFITS AND PROVISIONS
LIMITS ON RIGHTS TO CONTEST THE POLICY
INCONTESTABILITY. Protective Life will not contest the Policy, or any
supplemental rider, after the Policy or rider has been in force during the
Insured's lifetime for two years from the Policy Effective Date or the effective
date of the rider, unless fraud is involved. Any increase in the Face Amount
will be incontestable with respect to statements made in the evidence of
insurability for that increase after the increase has been in force during the
life of the Insured for two years after the effective date of the increase.
SUICIDE EXCLUSION. If the Insured dies by suicide, while sane or insane,
within two years after the Policy Effective Date, the Death Benefit will be
limited to the premium payments made before death, less any Policy Debt and any
withdrawals. If the Insured dies by suicide within two years after an increase
in Face Amount, the Death Benefit with respect to the increase will be limited
to the sum of the monthly cost of insurance charges made for that increase.
CHANGES IN THE POLICY OR BENEFITS
MISSTATEMENT OF AGE OR SEX. If the Insured's age or sex has been misstated
in the application for the Policy or in any application for supplemental riders,
the Death Benefit under the Policy or such supplemental riders is the amount
which would have been provided by the most recent cost of insurance charge, and
the cost of such supplemental riders, at the correct age and sex.
OTHER CHANGES. At any time Protective Life may make such changes in the
Policy as are necessary to assure compliance with any applicable laws,
regulations or rulings issued by a government agency. This includes, but is not
limited to, changes necessary to comply at all times with the definition of life
insurance prescribed by the Code. Any such changes will apply uniformly to all
affected Policies and Owners will receive notification of such changes.
SUSPENSION OR DELAY IN PAYMENTS
Protective Life will ordinarily pay any Death Benefit proceeds, Policy
loans, withdrawals, or surrenders within seven calendar days after receipt at
the Home Office of all the documents required for such a payment. Other than the
Death Benefit, which is determined as of the date of death, the amount will be
determined as of the date of receipt of all required documents. However,
Protective Life may delay making a payment or processing a transfer request if
(1) the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading on the Exchange is restricted by the SEC, or the SEC declares
that an emergency exists as a result of which the disposal or valuation of
Variable Account assets is not reasonably practicable; or (2) the SEC by order
permits postponement of payment to protect Owners. See also "Payments from the
Fixed Account".
REPORTS TO POLICY OWNERS
Each year you will be sent a report at your last known address showing, as
of the end of the current report period: the Death Benefit; Policy Value; Fixed
Account Value; Variable Account Value; Loan Account Value; Sub-Account Values;
premiums paid since the last report; withdrawals since the last report; any
Policy loans and accrued interest; Surrender Value; current premium allocations;
charges deducted since the last report; and any other information required by
law. You will also be sent an annual and a semi-annual report for each Fund
underlying a Sub-Account to which you have allocated Policy Value, including a
list of the securities held in each Fund, as required by the 1940 Act. In
addition, when you pay premiums or request any other financial transaction under
your Policy you will receive a written confirmation of these transactions.
42
ASSIGNMENT
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon Protective Life, it must be in writing and filed
at the Home Office. Once Protective Life has received a signed copy of the
assignment, the Owner's rights and the interest of any beneficiary (or any other
person) will be subject to the assignment. Protective Life assumes no
responsibility for the validity or sufficiency of any assignment. An assignment
is subject to any Policy Debt. An assignment may result in certain amounts being
subject to income tax and a 10% penalty tax. See "Tax Considerations".
ARBITRATION
The Policy provides that any controversy, dispute or claim by any Owner(s),
Insured, or beneficiary (a "claimant") arising out of insurance provided under
the Policy will be submitted to binding arbitration pursuant to the Federal
Arbitration Act. Arbitration will be binding upon any claimant as well as
Protective Life and may not be set aside in later litigation except upon the
limited circumstances set forth in the Federal Arbitration Act. Arbitration
expenses will be borne by the losing party or in such proportion as the
arbitrator(s) shall decide. Consult the Policy for additional information. This
provision does not apply to Policies issued in certain states.
SUPPLEMENTAL RIDERS
The following supplemental riders are available and may be added to your
Policy. Monthly charges for these riders will be deducted from your Policy Value
as part of the monthly deduction (see "Monthly Deduction"). The supplemental
riders available with the Policies provide fixed benefits that do not vary with
the investment experience of the Variable Account.
CHILDREN'S TERM LIFE INSURANCE RIDER. Provides a death benefit payable on
the death of a covered child. More than one child can be covered. There is no
cash value for this benefit.
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional death benefit
payable if the Insured's death results from certain accidental causes. There is
no cash value for this benefit.
DISABILITY BENEFIT RIDER. Provides for the crediting of a specific premium
to a Policy on each Monthly Anniversary during the total disability of the
Insured. After the Insured has been totally disabled (as defined in the rider)
for six months, Protective Life will credit premium to the Policy equal to the
disability benefit amount shown in the Policy multiplied by the number of
Monthly Anniversary Days that have occurred since the onset of total disability.
Monthly Anniversary Days that occur more than one calendar year prior to the
date that We receive a claim under a rider are not included for the purpose of
this calculation. Subsequent to the time that the Insured has been totally
disabled for six months, We will credit a premium equal to the disability
benefit amount on each Monthly Anniversary Day. The Owner may change the
disability benefit amount by written notice received by Protective Life at the
Home Office at any time before the Insured becomes totally disabled. Increases
are subject to evidence of insurability.
GUARANTEED INSURABILITY RIDER. Provides the right to increase the Face
Amount of your Policy under two options. The Option exercise date depends on the
rider selected: Variable Option or Survivor's Choice. Under the Variable Option
you can increase the Face Amount at designated future points in time (selected
at issue) without evidence of insurability. Under the Survivor's Choice Option,
you specify (at issue) a designated life (other than the Insured). When the
designated person dies, the Owner has the option to increase the Face Amount
without evidence of insurability. See "Changing the Face Amount".
PROTECTED INSURABILITY BENEFIT RIDER. Provides the right to increase the
Face Amount of your Policy at designated option dates at age 25, 28, 31, 34, 37
and 40 without evidence of insurability.
43
TERM RIDER FOR COVERED INSURED (CIR). Provides an additional death benefit
payable on the death of the covered Insured without increasing the Policy's Face
Amount. The CIR may be purchased at the time the Policy is issued (or later,
subject to availability and additional underwriting). A CIR may be canceled
separately from the Policy (I.E., it can be canceled without causing the Policy
to be canceled or to lapse). There is no cash or loan value for this benefit.
Additional rules and limits apply to these supplemental riders. Not all such
riders may be available at any time, and supplemental riders in addition to
those listed above may be made available. Please ask your Protective Life agent
for further information, or contact the Home Office.
REINSURANCE
The Company may reinsure a portion of the risks assumed under the Policies.
USES OF THE POLICY
Life insurance, including variable life insurance, can be used to provide
for many individual and business needs, in addition to providing a death
benefit. Possible applications of a variable life insurance policy, such as this
Policy include: (1) serving as vehicle for accumulating funds for a college
education, (2) estate planning, (3) serving as an investment vehicle on various
types of deferred compensation arrangements, (4) buy-sell arrangements, (5)
split dollar arrangements, and (6) a supplement to other retirement plans.
As with any investment, using this Policy under these or other applications
entails certain risks. For example, if investment performance of Sub-Accounts to
which Policy Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate Cash Value or
Surrender Value sufficient to adequately fund the application for which the
Policy was purchased. Similarly, certain transactions under a Policy entail
risks in connection with the application for which the Policy is purchased.
Withdrawals, policy loans and interest paid on policy loans may significantly
affect current and future Policy Value, Cash Value, Surrender Value or Death
Benefit Proceeds. If, for example, a policy loan is taken but not repaid prior
to the death of the Insured, the Policy Debt is subtracted from the Death
Benefit in computing the Death Benefit Proceeds to be paid to a beneficiary.
Prior to utilizing this Policy for the above applications you should
consider whether the anticipated duration of the Policy is appropriate for the
application for which you intend to purchase it.
In addition, you need to consider the tax implications of using the Policy
with these applications. (The tax implications of using this Policy with these
applications can be complex and generally are not addressed in the discussion of
"Tax Considerations" below.) Loans and withdrawals will affect the Policy Value
and Death Benefit. There may be penalties and taxes if the policy is
surrendered, lapses, matures or if a withdrawal is made. BECAUSE OF THESE RISKS,
YOU NEED TO CAREFULLY CONSIDER HOW YOU USE THIS POLICY. THIS POLICY MAY NOT BE
SUITABLE FOR ALL PERSONS, UNDER ANY OF THESE APPLICATIONS.
TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Policy
is not exhaustive, does not purport to cover all situations, and is not intended
as tax advice. The federal income tax treatment of the Policy is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
44
This discussion does not address state or local tax consequences associated
with the purchase of the Policy. In addition, PROTECTIVE LIFE MAKES NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF
ANY TRANSACTION INVOLVING A POLICY.
TAX STATUS OF PROTECTIVE LIFE
Protective Life is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of Protective Life, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing federal income tax
laws, Protective Life is not taxed on investment income and realized capital
gains of the Variable Account, although Protective Life's federal taxes are
increased in respect of the Policies because of the federal tax law's treatment
of deferred acquisition costs. Currently, a charge for federal income taxes is
not deducted from the Sub-Accounts or the Policy's Cash Value. Protective Life
reserves the right in the future to make a charge against the Variable Account
or the Value of a Policy for any federal, state, or local income taxes that it
incurs and determines to be properly attributable to the Variable Account or the
Policy. Protective Life will promptly notify the Owner of any such charge.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. Section 7702 of the Code establishes a statutory
definition of life insurance for federal tax purposes. Protective Life believes
that the Policy will meet the current statutory definition of life insurance,
which places limitations on the amount of premiums that may be paid and the
Policy Values that can accumulate relative to the Death Benefit. As a result,
the Death Benefit payable under the Policy will generally be excludable from the
Beneficiary's gross income, and interest and other income credited under the
Policy will not be taxable unless certain withdrawals are made (or are deemed to
be made) from the Policy prior to the Insured's death, as discussed below. This
tax treatment will only apply, however, if (1) the investments of the Variable
Account are "adequately diversified" in accordance with Treasury Department
regulations, and (2) Protective Life, rather than the Owner, is considered the
owner of the assets of the Variable Account for federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department
regulations prescribe the manner in which the investments of a segregated
asset account, such as the Variable Account, are to be "adequately
diversified". If the Variable Account fails to comply with these
diversification standards, the Policy will not be treated as a life
insurance contract for federal income tax purposes and the Owner would
generally be taxable currently on the income on the contract (as defined in
the tax law). Protective Life expects that the Variable Account, through the
Funds, will comply with the diversification requirements prescribed by the
Code and Treasury Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for federal income tax
purposes, of the assets of a segregated asset account, such as the Variable
Account, used to support their contracts. In those circumstances, income and
gains from the segregated asset account would be includible in the contract
owners' gross income. The Internal Revenue Service (the "IRS") has stated in
published rulings that a variable contract owner will be considered the
owner of the assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, the Treasury Department
announced, in connection with the issuance of regulations concerning
investment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of
a segregated asset account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account". This
announcement also stated that guidance would be issued
45
by way of regulations or rulings on the "extent to which policyholders may
direct their investments to particular sub-accounts [of a segregated asset
account] without being treated as owners of the underlying assets". As of
the date of this prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of the assets of a
segregated asset account. For example, the Owner of this Policy has the
choice of more investment options to which to allocate Premium Payments and
Variable Account Values, and may be able to transfer among investment
options more frequently, than in such rulings. These differences could
result in the Policy Owner being treated as the owner of a portion of the
assets of the Variable Account and thus subject to current taxation on the
income and gains from those assets. In addition, Protective Life does not
know what standards will be set forth in the regulations or rulings which
the Treasury Department has stated it expects to issue. Protective Life
therefore reserves the right to modify the Policy as necessary to attempt to
prevent Owners from being considered the owners of the assets of the
Variable Account. However, there is no assurance that such efforts would be
successful.
The remainder of this discussion assumes that the Policy will be treated as
a life insurance contract for federal tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
amount of the Death Benefit Proceeds payable from a Policy by reason of the
death of the Insured is excludable from gross income under Section 101 of the
Code. Certain transfers of the Policy for valuable consideration, however, may
result in a portion of the Death Benefit Proceeds being taxable.
If the Death Benefit Proceeds are not received in a lump sum and are,
instead, applied under either Settlement Options 1, 2, or 4, generally payments
will be prorated between amounts attributable to the Death Benefit which will be
excludable from the beneficiary's income and amounts attributable to interest
(accruing after the Insured's death) which will be includible in the
beneficiary's income. If the Death Benefit Proceeds are applied under Option 3
(Interest Income), the interest payments will be includible in the beneficiary's
income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Policy Value is
generally not taxable to the Owner unless amounts are received (or are deemed to
be received) from the Policy prior to the Insured's death. If there is a
surrender of the Policy, an amount equal to the excess of the Cash Value over
the "investment in the contract" will be includible in the Owner's income. The
"investment in the contract" generally is the aggregate premiums paid less the
aggregate amount received under the Policy previously to the extent such amounts
received were excludable from gross income. Whether withdrawals (or other
amounts deemed to be distributed) from the Policy constitute income to the Owner
depends, in part, upon whether the Policy is considered a "modified endowment
contract" ("MEC") for federal income tax purposes.
POLICIES NOT OWNED BY INDIVIDUALS. In the case of Policies issued to a
nonnatural taxpayer, or held for the benefit of such an entity, a portion of the
taxpayer's otherwise deductible interest expenses may not be deductible as a
result of ownership of a Policy even if no loans are taken under the Policy. An
exception to the latter rule is provided for certain life insurance contracts
which cover the life of an individual who is a 20-percent owner, or an officer,
director, or employee of, a trade or business. Entities that are considering
purchasing the Policy, or entities that will be beneficiaries under a Policy,
should consult a tax advisor.
46
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC
(described below), the amount of any withdrawal from the Policy generally
will be treated first as non-taxable recovery of premium and then as income
from the Policy. Thus, a withdrawal from a Policy that is not a MEC
generally will not be includible in income except to the extent it exceeds
the investment in the contract immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As indicated above, Section 7702 places limitations on the amount of
premiums that may be paid and the Policy Values that can accumulate relative
to the Death Benefit. Where cash distributions are required under Section
7702 in connection with a reduction in benefits during the first 15 years
after the Policy is issued (or if withdrawals are made in anticipation of a
reduction in benefits, within the meaning of the tax law, during this
period), some or all of such amounts may be includible in income
notwithstanding the general rule described in the preceding paragraph. A
reduction in benefits may result upon a decrease in the Face Amount, a
change from one Death Benefit Option to the other, if withdrawals are made,
and in certain other instances.
TAX TREATMENT OF LOANS. If a Policy is not classified as a MEC, a loan
received under the Policy generally will be treated as indebtedness of the
Owner. As a result, no part of any loan under a Policy will constitute
income to the Owner so long as the Policy remains in force. If a Policy
lapses when a loan is outstanding, the amount of the loan outstanding will
be treated as the proceeds of a surrender for purposes of determining
whether any amounts are includable in the Owner's income.
Generally, interest paid on any loans under this Policy will not be tax
deductible. The non-deductibility of interest includes interest paid or
accrued on indebtedness with respect to one or more life insurance policies
owned by a taxpayer covering any individual who is or has been an officer or
employee of, or financially interested in, any trade or business carried on
by the taxpayer. A limited exception to this rule exists for certain
interest paid in connection with certain "key person" insurance. In the case
of interest paid in connection with a loan with respect to a Policy covering
the life of any key person, interest is deductible only to the extent that
the aggregate amount of loans under one or more life insurance policies does
not exceed $50,000. Further, even as to such loans up to $50,000, interest
would not be deductible if the Policy were deemed for federal tax purposes
to be a single premium life insurance policy or, in certain circumstances,
if the loans were treated as "systematic borrowing" within the meaning of
the tax law. A "key person" is an individual who is either an officer or a
twenty percent owner of the taxpayer. The maximum number of individuals who
can be treated as key persons may not exceed the greater of (1) 5
individuals or (2) the lesser of 5 percent of the total number of officers
and employees of the taxpayer or 20 individuals. Owners should consult a tax
advisor regarding the deductibility of interest incurred in connection with
this Policy.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. In general, a Policy will be
considered a MEC for federal income tax purposes if (1) the Policy is
received in exchange for a life insurance contract that was a MEC, or (2)
the Policy is entered into after June 21, 1988 and premiums are paid into
the Policy more rapidly than the rate defined by a "7-Pay Test". This test
generally provides that a Policy will fail this test (and thus be considered
a MEC) if the accumulated amount paid under the Policy at any time during
the 1st 7 Policy Years exceeds the cumulative sum of the net level premiums
which would have been paid to that time if the Policy provided for paid-up
future benefits after the payment of 7 level annual premiums. A material
change of the Policy (as defined in the tax law) will generally result in a
re-application of the 7-Pay Test. In addition, any reduction
47
in benefits during the 7-Pay period will affect the application of this
test. Protective Life will monitor the Policies and will attempt to notify
Owners on a timely basis if a Policy is in jeopardy of becoming a MEC. The
Policy Owner may then request that Protective Life take whatever steps are
available to avoid treating the Policy as a MEC, if that is desired.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER
MECS. If the Policy is a MEC, withdrawals from the Policy will be treated
first as withdrawals of income and then as a recovery of premiums paid.
Thus, withdrawals will be includible in income to the extent the Policy
Value exceeds the investment in the contract. The amount of any Policy Debt
will be treated as a withdrawal for tax purposes. In addition, the
discussion of interest on loans and of lapses while loans are outstanding
under the caption "Policies Which Are Not MECs" also applies to Policies
which are MECs.
If the Owner assigns or pledges any portion of the Policy Value (or
agrees to assign or pledge any portion), such portion will be treated as a
withdrawal for tax purposes. The Owner's investment in the contract is
increased by the amount includible in income with respect to any assignment,
pledge, or loan, though it is not affected by any other aspect of the
assignment, pledge, or loan (including its release or repayment). Before
assigning, pledging, or requesting a loan under a Policy treated as a MEC,
an Owner should consult a qualified tax advisor.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawal (or the
amount of any deemed withdrawal) from a MEC are subject to a penalty tax
equal to 10% of the portion of the proceeds that is includible in income,
unless the surrender or withdrawal is made (1) after the Owner attains age
59 1/2, (2) because the Owner has become disabled (as defined in the tax
law), or (3) as substantially equal periodic payments over the life or life
expectancy of the Owner (or the joint lives or life expectancies of the
Owner and his or her beneficiary, as defined in the tax law).
AGGREGATION OF POLICIES. All life insurance contracts which are treated
as MECs and which are purchased by the same person from Protective Life or
any of its affiliates within the same calendar year will be aggregated and
treated as one contract for purposes of determining the tax on withdrawals
(including deemed withdrawals). The effects of such aggregation are not
clear; however, it could affect the amount of a withdrawal (or a deemed
withdrawal) that is taxable and the amount which might be subject to the 10%
penalty tax described above.
ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW. Protective Life believes
that the maximum amount of premiums it has determined for the Policies will
comply with the federal tax definition of life insurance. Protective Life will
monitor the amount of premiums paid, and, if the premiums paid exceed those
permitted by the tax definition of life insurance, Protective Life will
immediately refund the excess premiums. Protective Life also reserves the right
to increase the Death Benefit (which may result in larger charges under a
Policy) or to take any other action deemed necessary to ensure the compliance of
the Policy with the federal tax definition of life insurance.
OTHER CONSIDERATIONS. Changing the Owner, exchanging the Policy, changing
from one Death Benefit Option to another, and other changes under the Policy may
have tax consequences (other than those discussed herein) depending on the
circumstances of such change or withdrawal. Federal estate and state and local
estate, inheritance and other tax consequences of ownership or receipt of Policy
proceeds depend on the circumstances of each Policy Owner or beneficiary.
FEDERAL INCOME TAX WITHHOLDING
Protective Life will withhold and remit to the federal government a part of
the taxable portion of a surrender and withdrawal made under a Policy unless the
Owner notifies Protective Life in writing at or before the time of the surrender
or withdrawal that he or she elects not to have any amounts withheld. Regardless
of whether the Owner requests that no taxes be withheld or whether Protective
48
Life withholds a sufficient amount of taxes, the Owner will be responsible for
the payment of any taxes including any penalty tax that may be due on the
amounts received. The Owner may also be required to pay penalties under the
estimated tax rules, if the Owner's withholding and estimated tax payments are
insufficient to satisfy the Owner's total tax liability.
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE
SALE OF THE POLICIES
Investment Distributors, Inc. ("IDI"), a wholly-owned subsidiary of
Protective Life Corporation, acts as a principal underwriter of the Policies.
IDI also acts as principal underwriter of variable annuity contracts issued
through Protective Variable Annuity Separate Account. IDI is a registered
broker-dealer under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc. There is no premium expense
charge to cover sales and distribution expenses. To the extent that sales and
distribution expenses are paid, if at all, Protective will pay them from its
other assets or surplus in its General Account, which include amounts derived
from mortality and expense risk charges and other charges of the Policy. The
Policies are sold by certain registered representatives of broker-dealers
(including ProEquities, Inc., ("PES") an affiliate of Protective Life and IDI)
that have entered into selling agreements with IDI, who are also appointed and
licensed as insurance agents of Protective Life. PES or the other broker-dealer
may receive compensation in an amount no greater than 10% of the target first
year premium paid plus the first year cost of any riders, and % of excess
first year premium. In years thereafter, PES or the other broker-dealer may
receive asset based compensation at an annualized rate of .25% per policy year
of the unloaned Policy Value. PES or the other broker-dealer may pass a portion
of this compensation on to the Registered Representative or the manager of the
registered representative.
[Upon any subsequent increase in Face Amount or any subsequent increase in
riders, marketing allowances will also be paid based on the amount of the
increase in Face Amount or increase in rider.] [Other allowances and overrides,
and non-cash compensation, also may be paid. Registered representatives who meet
certain productivity and profitability standards may be eligible for additional
compensation.]
PROTECTIVE LIFE DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, address and principal
occupations during the past five years of each of Protective Life's directors
and executive officers. The address for each of these individuals is c/o
Protective Life Insurance Company 2801 Highway 280 South, Birmingham, Alabama
35223.
NAME AGE POSITION WITH PROTECTIVE LIFE
- -------------------- --- -------------------------------------------------------------------
Drayton Nabers, Jr. 58 Chairman of the Board and Director
John D. Johns 47 President and Director
R. Stephen Briggs 49 Executive Vice President and Director
Jim E. Massengale 56 Executive Vice President, Acquisitions and Director
A.S. Williams III 62 Executive Vice President, Investments, Treasurer and Director
Danny L. Bentley 40 Senior Vice President, Dental and Consumer Benefits and Director
Richard J. Bielen 38 Senior Vice President, Investments and Director
Carolyn King 48 Senior Vice President, Investment Products and Director
Deborah J. Long 45 Senior Vice President, General Counsel, Secretary and Director
Steven A. Schultz 45 Senior Vice President, Financial Institutions and Director
Wayne E. Stuenkel 45 Senior Vice President and Chief Actuary and Director
Judy Wilson 40 Senior Vice President, Guaranteed Investment Contracts
Jerry W. DeFoor 46 Vice President and Controller, and Chief Accounting Officer
49
Mr. Nabers has been Chairman of the Board and a Director of Protective Life
since August 1996. Mr. Nabers has been Chairman of the Board and Chief Executive
Officer of PLC and a Director since August 1996. From May 1994 to August 1996,
Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and
a Director of PLC. From May 1992 to May 1994, he was President and Chief
Executive Officer and a Director of PLC. Mr. Nabers has served in various
capacities with PLC and its subsidiaries since 1979. He is also a director of
Energen Corporation, National Bank of Commerce of Birmingham, and Alabama
National Bancorporation.
Mr. Johns has been President of Protective Life and President and Chief
Operating Officer of PLC since August 1996. He was Executive Vice President and
Chief Financial Officer of Protective Life and PLC from October 1993 to August
1996. From August 1988 to October 1993, he served as Vice President and General
Counsel of Sonat Inc. He is a director of National Bank of Commerce of
Birmingham and Alabama National Bancorporation.
Mr. Briggs has been Executive Vice President of Protective Life and PLC
since October 1993. From January 1993 to October 1993 he was Senior Vice
President, Life Insurance and Investment Products of Protective Life and PLC.
Mr. Briggs had been Senior Vice President, Ordinary Marketing of Protective Life
since April 1986 and PLC since August 1988. Mr. Briggs has been associated with
PLC and its subsidiaries since 1977.
Mr. Massengale has been Executive Vice President, Acquisitions of Protective
Life and PLC since August 1996. From May 1992 to August 1996 he served as Senior
Vice President of Protective Life and PLC. Mr. Massengale has been employed by
PLC and its subsidaries since 1983.
Mr. Williams has been Executive Vice President, Investments and Treasurer of
Protective Life and PLC since August 1996. From July 1981 to August 1996 he was
Senior Vice President, Investments and Treasurer of Protective Life and PLC. Mr.
Williams has been employed by the PLC and its subsidiaries since 1964.
Mr. Danny L. Bentley has been Senior Vice President, Dental and Consumer
Benefits of Protective Life and PLC since August 1996. From May 1989 to August
1996, he was Vice President, Group Marketing of Protective Life. Mr. Bentley has
been employed by PLC and its subsidiaries since 1980.
Mr. Bielen has been Senior Vice President, Investments of Protective Life
and PLC since August 1996. From August 1991 to August 1996, he was Vice
President, Investments of Protective Life.
Ms. King has been Senior Vice President, Investment Products Division of
Protective Life and PLC since April 1995. From August 1994 to March 1995, she
served as Senior Vice President and Chief Investment Officer of Provident Life
and Accident Insurance Company and of its parent company, Provident Life and
Accident Insurance Company of America. She served as President of Provident
National Assurance Company from November 1987 to March 1995. From November 1986
to August 1994, she served as Vice President of Provident Life and Accident
Insurance Company of America.
Ms. Long has been Senior Vice President, Secretary and General Counsel of
Protective Life since September 1996 and of PLC since November 1996. Ms. Long
was Senior Vice President and General Counsel of Protective Life from February
1994 to September 1996 and of PLC from February 1994 to November 1996. From
August 1993 to January 1994, Ms. Long served as General Counsel of PLC and from
February 1984 to January 1994 she practiced law with the law firm of Maynard,
Cooper & Gale, P.C.
Mr. Schultz has been Senior Vice President, Financial Institutions of
Protective Life and PLC since March 1993. Mr. Schultz served as Vice President,
Financial Institutions of Protective Life from February 1989 to March 1993 and
of PLC from February 1993 to March 1993. Mr. Schultz has been employed by PLC
and its subsidiaries since 1989.
50
Mr. Stuenkel has been Senior Vice President and Chief Actuary of Protective
Life and PLC since March 1987. Mr. Stuenkel is a Fellow in the Society of
Actuaries and has been employed by PLC and its subsidiaries since 1978.
Ms. Wilson has been Senior Vice President, Guaranteed Investment Contracts
of Protective Life and PLC since January 1995. From July 1991 to December 31,
1994, she served as Vice President, Guaranteed Investment Contracts of
Protective Life.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting
Officer of Protective Life and PLC since April 1989, Mr. DeFoor is a certified
public accountant and has been employed by PLC and its subsidiaries since August
1982.
STATE REGULATION
Protective Life is subject to regulation by the Department of Insurance of
the State of Tennessee, which periodically examines the financial condition and
operations of Protective Life. Protective Life is also subject to the insurance
laws and regulations of all jurisdictions where it does business. The Policy
described in this prospectus has been filed with and, where required, approved
by, insurance officials in those jurisdictions where it is sold.
Protective Life is required to submit annual statements of operations,
including financial statements, to the insurance departments of the various
jurisdictions where it does business to determine solvency and compliance with
applicable insurance laws and regulations.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained at the SEC's principal office
in Washington, D.C. by paying the SEC's prescribed fees.
PREPARATION FOR YEAR 2000 (TO BE UPDATED)
Older computer hardware and software often denote the year using two digits
rather than four; for example, the year 1997 often is denoted by such hardware
and software as "97." It is probable that such hardware and software will
malfunction when calculations involving the year 2000 are attempted because the
hardware and/or software will interpret "00" as representing the year 1900
rather than the year 2000. This "Year 2000" issue potentially affects all
individuals and companies (including Protective, its customers, business
partners, suppliers, banks, custodians and administrators) who rely on computers
or devices containing computer chips.
Protective has developed and is implementing a Year 2000 transition plan
intended to identify and modify or replace primary hardware and/or software
systems on which it relies that have a Year 2000 issue. Protective is also
developing and implementing a plan to identify and modify or replace secondary
hardware and/or software systems on which it relies that have a Year 2000 issue.
Substantial resources are being devoted to this effort; however the costs to
develop and implement these plans are not expected to be material. Protective is
also confirming that its service providers are implementing plans to identify
and modify or replace their systems that have a Year 2000 issue.
Protective currently anticipates that its systems will be able to process
transactions dated beyond 1999 on or before December 31, 1999. There can be no
assurance, however, that Protective's efforts will be successful, that
interaction with other service providers with Year 2000 issues will not impair
Protective's operations, or that the Year 2000 issue will not otherwise
adversely affect Protective.
51
INDEPENDENT PUBLIC ACCOUNTANTS
The audited statement of assets and liabilites of the Protective Variable
Life Separate Account (comprised of seventeen Sub-Accounts) as of December 31,
1996, December 31, 1997 and December 31, 1998 and the related statements of
operations and changes in net assets for the period from June 19, 1996 (date of
inception) through December 31, 1996 and for the years ended December 31, 1997
and December 31, 1998 and included in this Prospectus, have been included herein
in reliance on the report of Coopers and Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of Protective Life as of December 31, 1998,
1997 and 1996 and the consolidated statements of income, stockholder's equity
and cash flows for each of the three years in the period ended December 31, 1998
and the related financial statement schedules included in this Prospectus, have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
EXPERTS
Actuarial matters included in this prospectus have been examined by Stephen
Peeples whose opinion is filed as an exhibit to the registration statement.
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice
on certain matters relating to the federal securities laws.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities of the Protective Variable
Life Separate Account (comprised of seventeen Sub-Accounts) as of December 31,
1996, December 31, 1997 and December 31, 1998 and the related statements of
operations and changes in net assets for the period from June 19, 1996 (date of
inception) through December 31, 1996 and for the years ended December 31, 1997
and December 31, 1998 as well as the Report of Independent Accountants are
contained herein.
The audited consolidated balance sheets for Protective Life as of December
31, 1998, 1997 and 1996 and the related consolidated statements of income,
stockholder's equity, and cash flows for the years ended December 31, 1998, 1997
and 1996 as well as the Report of Independent Accountants are contained herein.
52
INDEX TO FINANCIAL STATEMENTS
(FINANCIALS WILL BE FILED BY PRE-EFFECTIVE AMENDMENT.)
F-1
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H
- ------------------------------------------------------------------------------------------------------------------------------
GIC AND
ANNUITY
DEFERRED FUTURE DEPOSITS AND PREMIUMS REALIZED BENEFITS
POLICY POLICY OTHER AND NET INVESTMENT AND
ACQUISITION BENEFITS UNEARNED POLICYHOLDERS' POLICY INVESTMENT GAINS SETTLEMENT
SEGMENT COSTS AND COSTS PREMIUMS FUNDS FEES INCOME (1) (LOSSES) EXPENSES
- ------------------------ ----------- ---------- -------- -------------- --------- ---------- ---------- ----------
Year Ended December 31,
1997:
Life Insurance
Acquisitions.......... $138,052 $1,025,340 $ 1,437 $ 311,150 $102,635 $110,155 $ 0 $116,506
Individual Life....... 252,321 920,924 356 16,334 127,480 54,593 0 114,678
West Coast............ 108,126 739,463 0 95,495 14,122 30,194 0 28,304
Specialty Insurance
Products
Dental and Consumer
Benefits............ 22,459 120,925 2,536 80,654 151,110 23,810 0 110,148
Financial
Institutions........ 52,836 159,422 391,085 6,791 72,263 16,341 0 27,643
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 1,785 180,690 0 2,684,676 0 211,915 (3,180) 179,235
Investment Products... 56,074 177,150 0 1,184,268 12,367 105,196 589 82,019
Corporate and Other..... 952 380 1,282 185 229 5,284 0 339
Unallocated Realized
Investment Gains
(Losses).............. 0 0 0 0 0 0 4,415 0
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
TOTAL............... $632,605 $3,324,294 $396,696 $4,379,553 $480,206 $557,488 $ 1,824 $658,872
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
Year Ended December 31,
1996:
Life Insurance
Acquisitions.......... $156,172 $1,117,159 $ 1,087 $ 251,450 $106,543 $106,015 $ 0 $118,181
Individual Life....... 220,232 793,370 685 15,577 116,710 48,442 3,098 96,404
Specialty Insurance
Products
Dental and Consumer
Benefits............ 27,944 119,010 2,572 83,632 156,530 16,249 0 125,797
Financial
Institutions........ 32,040 119,242 253,154 1,880 73,422 13,898 0 42,781
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 1,164 149,755 0 2,474,728 0 214,369 (7,963) 169,927
Investment Products... 50,637 149,743 0 1,120,557 8,189 98,719 3,858 73,093
Corporate and Other..... 12 170 55 192 656 1,089 0 710
Unallocated Realized
Investment Gains
(Losses).............. 0 0 0 0 0 0 6,517 0
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
TOTAL............... $488,201 $2,448,449 $257,553 $3,948,016 $462,050 $498,781 $ 5,510 $626,893
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
Year Ended December 31,
1995:
Life Insurance
Acquisitions.......... $123,889 $ 851,994 $ 590 $ 250,550 $ 98,501 $ 95,018 $ 0 $100,016
Individual Life....... 186,496 672,569 336 14,709 99,018 40,237 0 80,067
Specialty Insurance
Products
Dental and Consumer
Benefits............ 24,974 123,279 2,806 85,925 142,483 14,329 0 109,447
Financial
Institutions........ 36,283 84,162 189,973 1,495 65,669 9,276 0 24,020
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 993 68,704 0 2,451,693 0 203,376 (3,908) 165,963
Investment Products... 37,534 127,104 0 1,061,507 4,566 95,661 4,938 72,111
Corporate and Other..... 14 342 62 263 1,445 536 0 1,476
Unallocated Realized
Investment Gains
(Losses).............. 0 0 0 0 0 0 921 0
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
TOTAL............... $410,183 $1,928,154 $193,767 $3,866,142 $411,682 $458,433 $ 1,951 $553,100
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
----------- ---------- -------- -------------- --------- ---------- ---------- ----------
- ------------------------
COL. A COL. I COL. J
- ------------------------
AMORTIZATION
OF DEFERRED
POLICY OTHER
ACQUISITION OPERATING
SEGMENT COSTS EXPENSES (1)
- ------------------------ ------------ ------------
Year Ended December 31,
1997:
Life Insurance
Acquisitions.......... $16,606 $ 23,016
Individual Life....... 27,354 18,178
West Coast............ 961 6,849
Specialty Insurance
Products
Dental and Consumer
Benefits............ 15,711 38,572
Financial
Institutions........ 30,812 20,165
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 618 3,945
Investment Products... 15,110 12,312
Corporate and Other..... 3 6,833
Unallocated Realized
Investment Gains
(Losses).............. 0 0
------------ ------------
TOTAL............... $107,175 $129,870
------------ ------------
------------ ------------
Year Ended December 31,
1996:
Life Insurance
Acquisitions.......... $17,162 $ 24,292
Individual Life....... 28,393 28,611
Specialty Insurance
Products
Dental and Consumer
Benefits............ 5,326 43,027
Financial
Institutions........ 24,900 10,673
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 509 3,840
Investment Products... 14,710 13,197
Corporate and Other..... 1 4,508
Unallocated Realized
Investment Gains
(Losses).............. 0 0
------------ ------------
TOTAL............... $91,001 $128,148
------------ ------------
------------ ------------
Year Ended December 31,
1995:
Life Insurance
Acquisitions.......... $20,601 $ 22,551
Individual Life....... 20,403 22,748
Specialty Insurance
Products
Dental and Consumer
Benefits............ 3,052 37,657
Financial
Institutions........ 26,809 14,229
Retirement Savings and
Investment Products
Guaranteed Investment
Contracts........... 386 4,140
Investment Products... 11,446 10,494
Corporate and Other..... 3 8,069
Unallocated Realized
Investment Gains
(Losses).............. 0 0
------------ ------------
TOTAL............... $82,700 $119,888
------------ ------------
------------ ------------
- ------------------------
(1) Allocations of Net Investment Income and Other Operating Expenses are based
on a number of assumptions and estimates and results would change if
different methods were applied.
S-1
SCHEDULE IV -- REINSURANCE
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- ---------------------------------------------------------------------------------------------------------
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
----------- ----------- ----------- ----------- -----------
Year Ended December 31, 1997:
Life insurance in force............... $78,240,282 $34,139,554 $11,013,202 $55,113,930 20.0%
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
Premiums and policy fees:
Life insurance........................ $ 387,108 $ 147,184 $ 74,738 $ 314,662 23.8%
Accident and health insurance......... 336,575 187,715 10,656 159,546 6.7%
Property and liability insurance...... 6,139 176 35 5,998 0.6%
----------- ----------- ----------- -----------
TOTAL................................. $ 729,822 $ 335,075 $ 85,459 $ 480,206
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year Ended December 31, 1996:
Life insurance in force............... $53,052,020 $18,840,221 $16,275,386 $50,487,185 32.2%
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
Premiums and policy fees:
Life insurance........................ $ 272,331 $ 113,487 $ 129,717 $ 288,561 45.0%
Accident and health insurance......... 338,709 194,687 29,467 173,489 17.0%
----------- ----------- ----------- -----------
TOTAL................................. $ 611,040 $ 308,174 $ 159,184 $ 462,050
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Year Ended December 31, 1995:
Life insurance in force............... $50,346,719 $17,524,366 $11,537,144 $44,359,497 26.0%
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----
Premiums and policy fees:
Life insurance........................ $ 308,422 $ 116,091 $ 66,565 $ 258,896 25.7%
Accident and health insurance......... 356,285 217,082 13,583 152,786 8.9%
----------- ----------- ----------- -----------
TOTAL................................. $ 664,707 $ 333,173 $ 80,148 $ 411,682
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
S-2
APPENDIX A (S. PEOPLE)
EXAMPLES OF DEATH BENEFIT COMPUTATIONS UNDER OPTIONS 1 AND 2
OPTION 1 EXAMPLE. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Policy Debt.
Under Option 1, a Policy with a $250,000 Face Amount will generally pay $250,000
in Death Benefits. However, because the Death Benefit must be equal to or be
greater than 250% of the Policy Value, any time that the Policy Value exceeds
$100,000, the Death Benefit will exceed the $250,000 Face Amount. Each
additional dollar added to Policy Value above $100,000 will increase the Death
Benefit by $2.50. A Policy with a $250,000 Face Amount and a Policy Value of
$125,000 will provide Death Benefit of $312,500 ($125,000 x 250%); a Policy
Value of $150,000 will provide a Death Benefit of $375,000 ($150,000 x 250%); a
Policy Value of $175,000 will provide a Death Benefit of $437,500 ($175,000 x
250%).
Similarly, so long as Policy Value exceeds $100,000, each dollar taken out
of Policy Value will reduce the Death Benefit by $2.50. If, for example, the
Policy Value is reduced from $112,500 to $100,000 because of partial surrenders,
charges, or negative investment performance, the Death Benefit will be reduced
from $281,250 to $250,000. If at any time, however, the Policy Value multiplied
by the Face Amount percentage is less than the Face Amount, the Death Benefit
will equal the current Face Amount of the Policy.
The Face Amount percentage becomes lower as the Insured's Attained Age
increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than between 0 and 40), the specified amount factor would be
185%. The Death Benefit would not exceed the $250,000 Face Amount unless the
Policy Value exceeded approximately $135,138 (rather than $100,000), and each
dollar then added to or taken from the Policy Value would change the life
insurance proceeds by $1.85 (rather than $2.50).
OPTION 2 EXAMPLE. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Policy Debt.
Under Option 2, a Policy with a Face Amount of $250,000 will generally provide a
Death Benefit of $250,000 plus Policy Value. Thus, for example, a Policy with a
Policy Value of $25,000 will have a Death Benefit of $275,000 ($250,000 +
$25,000); a Policy Value of $50,000 will provide a Death Benefit of $300,000
($250,000 + $50,000). The Death Benefit, however, must be at least 250% of the
Policy Value. As a result, if the Policy Value exceeds $166,665, the Death
Benefit will be greater than the Face Amount plus Policy Value. Each additional
dollar of Policy Value above $166,665 will increase the Death Benefit by $2.50.
A Policy with a Face Amount of $250,000 and a Policy Value of $175,000 will
provide a Death Benefit of $437,500 ($175,000 x 250%); a Policy Value of
$200,000 will provide a Death Benefit of $500,000 ($200,000 x 250%).
Similarly, any time Policy Value exceeds $166,665, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $200,000 to $187,500 because of partial surrenders,
charges, or negative investment performance, the Death Benefit will be reduced
from $500,000 to $468,750. If at any time, however, Policy Value multiplied by
the Face Amount percentage is less than the Face Amount plus the Policy Value,
then the Death Benefit will be the current Face Amount plus Policy Value of the
Policy.
The Face Amount percentage becomes lower as the Insured's Attained Age
increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than under 40), the Face Amount factor would be 185%. The
amount of the Death Benefit would be the sum of the Policy Value plus $250,000
unless the Policy Value exceeded $294,118 (rather than $166,665), and each
dollar then added to or taken from the Policy Value would change the Death
Benefit by $1.85 (rather than $2.50).
A-1
TABLE OF FACE AMOUNT PERCENTAGES
ATTAINED ATTAINED
AGE PERCENTAGE ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE AGE PERCENTAGE
- --------------------------------------------------------------------------------------------------------
0-40 250% 50 185% 60 130% 70 115%
41 243% 51 178% 61 128% 71 113%
42 236% 52 171% 62 126% 72 111%
43 229% 53 164% 63 124% 73 109%
44 222% 54 157% 64 122% 74 107%
45 215% 55 150% 65 120% 75-90 105%
46 209% 56 146% 66 119% 91 104%
47 203% 57 142% 67 118% 92 103%
48 197% 58 138% 68 117% 93 102%
49 191% 59 134% 69 116% 94 101%
95+ 100%
A-2
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article XI of the By-laws of Protective Life provides, in substance, that
any of Protective Life's directors and officers, who is a party or is threatened
to be made a party to any action, suit or proceeding, other than an action by or
in the right of Protective Life, by reason of the fact that he is or was an
officer or director, shall be indemnified by Protective Life against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such claim,
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Protective
Life and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. If the claim, action or suit is or
was by or in the right of Protective Life to procure a judgment in its favor,
such person shall be indemnified by Protective Life against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Protective Life, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to Protective
Life unless and only to the extent that the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. To the extent that a director or officer has been successful on the
merits or otherwise in defense of any such action, suit or proceeding, or in
defense of any claim, issue or matter therein, he shall be indemnified by
Protective Life against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, not withstanding that he has
not been successful on any other claim issue or matter in any such action, suit
or proceeding. Unless ordered by a court, indemnification shall be made by
Protective Life only as authorized in the specific case upon a determination
that indemnification of the officer or director is proper in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to, or who have been successful on the merits
or otherwise with respect to, such claim action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion or (c) by the shareholders.
In addition, the executive officers and directors are insured by PLC's
Directors' and Officers' Liability Insurance Policy including Company
Reimbursement and are indemnified by a written contract with PLC which
supplements such coverage.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification may be against public policy as expressed in the Act and
may be, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director,
II-1
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATIONS PURSUANT TO RULE Section 26(e) of the Investment Company Act of
1940
Protective Life hereby represents that the fees and charges deducted under
the variable life insurance policies described herein are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by it under such policies.
II-2
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with the
items of Form N-8B-2.
The prospectus consisting of 55 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations pursuant to Section 26(e) of the Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Nancy Kane, Esq.
Stephen Peeples, F.S.A., M.A.A.A.
Sutherland, Asbill & Brennan, L.L.P.
PricewaterhouseCoopers, L.L.P.
The following exhibits:
1.A. (1) Certified resolutions of the board of directors of Protective Life Insurance Company establishing
Protective Variable Life Separate Account.*
(2) None.
(3)(a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors,
Inc. and Protective Variable Life Separate Account.**
(a)(1) Amendment I to the Underwriting Agreement.+++
(b) Form of Distribution Agreement between Investment Distributors, Inc. and selling broker-dealers.**
(4) None.
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission
on August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission
on May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to
the Form N-4 Registration Statement (File No. 333-60149) filed with
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to
the Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 3, 1998.
++++To be filed by amendment.
II-3
(5)(a) Form of Contract.++++
(b) Children's term life rider.*
(c) Accidental death benefit rider.*
(d) Disability benefit rider.*
(e) Guaranteed insurability rider.*
(f) Protected insurability benefit rider.*
(g) Term Rider for Covered Insured.****
(6)(a) Charter of Protective Life Insurance Company.*
(b) By-Laws of Protective Life Insurance Company.*
(7) None
(8) None
(9)(a) Participation/Distribution Agreement.**
(a)(1) Amendment 1 to the Participation Agreement.+++
(b) Participation Agreement (Oppenheimer Variable Account Funds).***
(c) Participation Agreement (MFS Variable Insurance Trust).***
(d) Participation Agreement (Acacia Capital Corporation).***
(e) Participation Agreement (Van Eck Worldwide Insurance Trust).++
(10) Contract Application.****
2. Opinion and consent of Nancy Kane, Esq.++++
3. Not applicable.
4. Not applicable.
5. See Exhibit 27.
6. Notice of Withdrawal Right. (Not Applicable)
7. Opinion and consent of Stephen Peeples, F.S.A., M.A.A.A.
8. Consent of Sutherland, Asbill & Brennan, L.L.P.++++
9. Consent of PricewaterhouseCoopers, L.L.P.++++
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption
procedures.++++
24. Power of Attorney.
27. Financial Data Schedules.*****+
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission
on August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement, (File No. 33-61599) as filed with the
Commission on December 22, 1995.
***Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement (File No. 333-52215) as filed with the Commission
on May 8, 1998.
*****Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Form S-6 Registration Statement (File No. 33-61599) as filed with the
Commission on April 30, 1998.
+Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 19, 1998.
++Incorporated herein by reference to Pre-Effective Amendment Number 1 to
the Form N-4 Registration Statement (File No. 333-60149) as filed with the
Commission on October 26, 1998.
+++Incorporated herein by reference to Pre-Effective Amendment Number 1 to
the Form S-6 Registration Statement (File No. 333-45963) as filed with the
Commission on June 3, 1998.
++++To be filed by amendment.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form S-6 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Birmingham, State of Alabama on February 22,
1999.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
PROTECTIVE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns, President
PROTECTIVE LIFE INSURANCE COMPANY
As required by the Securities Act of 1933, Registration Statement on Form
S-6 has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------------------------ ----------------
*
------------------------------------------- Chairman of the Board and Director (Principal Executive February 22,
Drayton Nabers, Jr. Officer) 1999
/s/ JOHN D. JOHNS
------------------------------------------- President and Director (Principal Financial Officer) February 22,
John D. Johns 1999
/S/ JERRY W. DEFOOR
------------------------------------------- Vice President, Controller and Chief Accounting Officer February 22,
Jerry W. DeFoor (Principal Accounting Officer) 1999
*
------------------------------------------- Director February 22,
R. Stephen Briggs 1999
*
------------------------------------------- Director February 22,
Jim E. Massengale 1999
*
------------------------------------------- Director February 22,
A.S. Williams III 1999
SIGNATURE TITLE DATE
- ------------------------------------------------------------------------------------------------------------------ ----------------
*
------------------------------------------- Director February 22,
Danny L. Bentley 1999
*
------------------------------------------- Director February 22,
Richard J. Bielen 1999
*
------------------------------------------- Director February 22,
Carolyn King 1999
*
------------------------------------------- Director February 22,
Deborah J. Long 1999
*
------------------------------------------- Director February 22,
Steven A. Schultz 1999
*
------------------------------------------- Director February 22,
Wayne E. Stuenkel 1999
*By: /s/ NANCY KANE
--------------------------------------
Nancy Kane
February 22,
Attorney-in-Fact 1999
EXHIBIT INDEX
7. Opinion and consent of Stephen Peeples, F.S.A., M.A.A.A.
24. Power of Attorney