Valley Forge Life Insurance Company
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Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
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READ YOUR POLICY CAREFULLY
This is a legal contract between you, the owner, and Valley Forge Life Insurance
Company (referred to as the Company, we, us and our).
We will pay the death proceeds to the beneficiary when we receive due proof of
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the death of the last Insured to die while this policy is in force. Details of
the Death Proceeds are found in the Death Benefit provisions.
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RIGHT TO EXAMINE POLICY - If for any reason you are not satisfied with this
policy, you may return it to: (a) the agent through whom it was purchased; or
(b) our Administrative Office within 10 days after you receive it. We will
refund an amount equal to the cash value plus fees or charges deducted from the
single premium less any debt.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685 on the policy date.
/s/BERNARD L. HENGESBAUGH /s/DAVID L. STONE
Chief Executive Officer Group Vice President
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Cash Value benefits provided by this policy are based on the investment
performance of the subaccounts of the Variable Account. Such benefits may
increase or decrease and are not guaranteed as to dollar amount. The amount of
the death benefit may vary based on the investment performance of the
subaccounts of the Variable Account but it will never be less than the specified
amount. The Variable Account Provisions begin on Page 16.
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MODIFIED SINGLE PREMIUM VARIABLE AND FIXED LAST TO
DIE LIFE INSURANCE POLICY Premiums are Payable until the
Earlier of the Death of the Last Insured to Die or until the
Policy Anniversary when the Younger Insured Attains Age 95
Adjustable Death Benefit
Death Proceeds Payable at Death of Last Insured to Die
Non-Participating
Investment Experience Reflected in Benefits
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VUL-103 (8/00)
POLICY SCHEDULE
Owner: [John Doe]
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<PAGE>
First Insured: [John Doe] Second Insured: [Jane Doe]
First Insured's Sex:[Male] Second Insured's Sex: [Female]
First Insured's Age:[35] Second Insured's Age: [35]
Risk Class: [Preferred - Nonsmoker] Risk Class: [Preferred - Nonsmoker]
Policy Number: [1234567] Policy Date: [July 1, 2000]
Beneficiary: As stated in the application for this policy unless changed in
accordance with policy provisions
Administrative Office: 100 CNA Drive, Nashville, TN 37214 1-800-262-1755
Monthly Date: [1st ] Day Of Each Month
Specified Amount: [$100,000]
Single Premium: [$10,000.00]
Minimum Additional Premium $50.00
Maximum Premium Guideline Single Premium
Guideline Single Premium: [$10,000.00]
Minimum Partial Surrender Amount: $1,000.00
Free Partial Surrender Amount: 10% of cash value at time of first free
partial surrender during any policy year
after the first policy year.
Minimum Loan Amount: $500.00
Policy Loan Interest Rate: 8%
Preferred Policy Loan Credited Rate: 8%
Policy Loan Credited Rate: 6%
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CHARGES AND FEES
(Maximum Charges)
EXPENSE CHARGES:
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Policy Years 1 - 10: .004141% (Daily Factor);
(1.50% Approximate Annual Rate)
Policy Years 11+: .002477% (Daily Factor);
(0.90% Approximate Annual Rate)
POLICY CHARGES
Cost of Insurance: See Cost of Insurance Provision
TRANSACTIONAL CHARGES
Transfer Processing Fee: $25 Each After First 12 In A Policy
Year (Assessed After The First 12
Transfers In A Policy Year. Not
applicable to dollar cost averaging
or automatic transfers.)
SURRENDER CHARGE
The Surrender Charge Is a Percentage of the Guideline Single Premium as Follows:
Policy Year Percentage of Guideline Single Premium
----------- --------------------------------------
1 9%
2 9%
3 8%
4 8%
5 7%
6 6%
7 4%
8 2%
9 1%
Thereafter 0%
FIXED ACCOUNT
Fixed Account I:
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Minimum Guaranteed Interest Rate: 4.00%
Interest Rate as of Effective Date: [x%.] The interest rate as
of effective date applies only to the portion of the single
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premium allocated or transferred to Fixed Account I during the
calendar month following the Policy Date. This rate is
guaranteed for one policy year.
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ALLOCATION GUIDELINES:
1.Currently, you may select as many investment options as you wish. In the
future we reserve the right to limit the number of options available. There will
always be at least 4 investment options available.
2.You may also select any fixed account which is available at the time the
premium payment or transfer is made.
3.The single premium will be allocated to the investment options on the latest
of:
a. Two business days after the policy date;
b. Two business days after our receipt of your single premium at our
Administrative Office; or
c. The date our underwriters approve this policy.
Additional premium payments will be credited to your policy as of the business
day they are received.
4.Allocation percentages must be in whole numbers. Each allocation must be at
least 1%.
TRANSFERS:
Transfers from Subaccounts: You are permitted unlimited transfers among
subaccounts. We may change this unlimited transfer right by endorsement
approved by the Insurance regulatory authority of the state in which
this policy was issued.
Transfers from Fixed Account I: You may transfer up to 25% of the value
of Fixed Account I from that account to any other account, subject to
the minimum amount to be transferred.
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Minimum Amount to be Transferred: The minimum amount which may be
transferred is $250.00 or your entire interest in any subaccount or
fixed account, if less. This requirement is waived if the transfer is
pursuant to a prescheduled transfer.
Prescheduled Transfers: You may elect the dollar cost averaging option
or the automatic transfer option. However, the portion allocated for
any prescheduled transfer option in Fixed Account I is only available
for the prescheduled transfer option. We reserve the right to limit the
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availability of any fixed account option or subaccount for a
prescheduled transfer.
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<TABLE>
<CAPTION>
INVESTMENT OPTIONS
<S> <C> <C> <C> <C> <C> <C>
[Federated High Income Bond Fund II] [Fidelity Asset Manager]
[Federated Prime Money Fund II] [Fidelity Contrafund]
[Federated Utility Fund II] [Fidelity Equity-Income]
[Fidelity Index 500]
[Alger American Growth Portfolio]
[Alger American Mid-Cap Growth Portfolio] [MFS Emerging Growth]
[Alger American Small Capitalization Portfolio] [MFS Growth With Income]
[Alger American Leveraged AllCap Portfolio] [MFS Research]
[MFS Total Return]
[Templeton Developing Markets Securities Fund]
[Templeton Asset Strategy Fund] [Janus Aspen Capital Appreciation Portfolio]
[Janus Aspen Growth Portfolio]
[First Eagle SoGen Overseas Variable Fund] [Janus Aspen Balanced Portfolio]
[Janus Aspen Flexible Income Portfolio]
[Van Eck Worldwide Emerging Markets Fund] [Janus Aspen International Growth Portfolio]
[Van Eck Worldwide Hard Assets Fund] [Janus Aspen Worldwide Growth]
[Alliance Growth and Income Portfolio] [American Century VP Income & Growth Fund]
[Alliance Premier Growth Portfolio] [American Century VP Value Fund]
[Lazard Retirement Equity Portfolio] [Morgan Stanley Emerging Markets Equity Portfolio]
[Lazard Retirement Small Cap Portfolio] [Morgan Stanley International Magnum Portfolio]
<PAGE>
</TABLE>
VARIABLE ACCOUNT: VFL Variable Life Insurance Separate Account
ADDITIONAL BENEFITS PROVIDED BY RIDER
<TABLE>
<CAPTION>
MONTHLY COST
BENEFIT DESCRIPTION EXPIRY DATE OF RIDER
<S> <C> <C> <C> <C> <C> <C>
Accelerated Death Benefit Rider None None
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Fixed Account II Rider None None
Allocation of $1,000 to 3 Year and $1,000 to 5 Year Option
Automatic Transfer Rider None None
Dollar Cost Averaging Rider I None None
Dollar Cost Averaging Rider II None None
12 Month Option Selected
</TABLE>
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
ATTAINED ATTAINED ATTAINED
AGE COST AGE COST AGE COST
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- ------------------- -------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
35 0.000207 70 0.916171
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----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
36 0.000665 71 1.087231
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
37 0.001212 72 1.277131
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----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
38 0.001865 73 1.520309
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
39 0.002655 74 1.813278
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- ------------------- --------------------- --------------------
40 0.003600 75 2.155917
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- ------------------- -------------------- --------------------- --------------------
41 0.004765 76 2.549448
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- ------------------- -------------------- -------------------- --------------------- --------------------
42 0.006130 77 2.993204
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----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
43 0.007751 78 3.487290
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
44 0.009616 79 4.042261
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
45 0.011836 80 4.677258
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
46 0.014433 81 5.411422
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
47 0.017480 82 6.267621
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
48 0.021045 83 7.264384
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
49 0.025222 84 8.391858
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
50 0.030145 85 9.645467
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
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----------------------- -------------------- -------------------- ------------------- --------------------- --------------------
51 0.036026 86 11.006968
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
52 0.043116 87 12.476371
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
53 0.051684 88 14.034587
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
54 0.061858 89 15.699852
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
55 0.073886 90 17.478050
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
56 0.087950 91 19.402100
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
57 0.104038 92 21.532475
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
58 0.122288 93 23.977165
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
59 0.143629 94 27.051140
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
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----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
60 0.168925 95 31.414780
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
61 0.199039
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
62 0.235910
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
63 0.281480
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
64 0.337115
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
65 0.402913
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
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66 0.479669
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
67 0.567515
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
68 0.666914
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
69 0.781089
----------------------- -------------------- -------------------- -------------------- --------------------- --------------------
THE MAXIMUM COST OF INSURANCE RATES DO NOT EXCEED THE COST OF INSURANCE RATES
BASED ON THE APPLICABLE (MALE OR FEMALE, SMOKER OR NONSMOKER) 1980 COMMISSIONERS
STANDARD ORDINARY MORTALITY TABLE, AGE NEAREST BIRTHDAY.
</TABLE>
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The table below gives the "applicable percentage" for each attained age in
accordance with Section 7702 of the Internal Revenue Code.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
Attained Percentage Attained Percentage Attained Percentage Attained Percentage
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Age of Age of Age of Age of
Policy Policy Policy Policy
Value Value Value Value
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Through 40 250 50 185 60 130 70 115
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
41 243 51 178 61 128 71 113
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
42 236 52 171 62 126 72 111
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----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
----------------- ------------ ------------- ----------- -------------- ------------ -------------- ------------
43 229 53 164 63 124 73 109
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
44 222 54 157 64 122 74 107
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
45 215 55 150 65 120 75 thru 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
----------------- ------------ ------------- ------------ -------------- ------------ -------------- ------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
<PAGE>
Policy Schedule 2
Definitions 10
Owner, Beneficiary and Assignment Provisions
Owner 11
Contingent Owner 11
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Beneficiary 11
Assignment 11
Premium Provisions
Premium Payment 11
Right to Refund 12
Grace Period 12
Reinstatement 12
Lapse Prevention Guarantee 12
Death Benefit Provisions
Death Benefit 12
Death Proceeds 13
Payment of Claims 13
Policy Value Provisions
Cash Value 13
Subaccount 13
Policy Loan Account 13
Fixed Account I 13
Interest Crediting 14
Minimum Values 14
Basis of Computations 14
Policy Cost Factors
Monthly Deduction 14
Monthly Cost of Insurance 14
Expense Charge 14
Surrender Charge 14
Transfer Processing Fee 14
Changes in Policy Cost Factors 15
Policy Charges after the 95th Birthday of the Younger Insured 15
<PAGE>
TABLE OF CONTENTS - CONTINUED
<PAGE>
Surrender Provisions
<PAGE>
Total Surrender 15
Partial Surrenders 15
Free Partial Surrender Amount 15
Loan Provisions
Maximum Loan Value 15
Policy Loan 15
Loan Interest 16
Loan Repayment 16
Termination of Policy 16
Effect of Loan 16
The Variable Account
Variable Account 16
Investments of the Variable Account 16
Valuation of Assets 17
Change in Operation of the Variable Account 17
Accumulation Units 17
Accumulation Unit Value 17
Net Investment Factor 17
Fixed Account I 17
Transfer Provisions
Transfer Rules 18
Transfer Processing Fee 18
General Policy Provisions
Entire Contract 18
Changes 19
Incontestability 19
Suicide 19
Error in Age or Sex 19
Payment of Proceeds 19
Postponement of Payments
Right to Defer Payments or Transfers from any fixed 19
Termination 19
Annual Report 19
Non-Participating 20
Currency 20
Signature Guarantee 20
<PAGE>
<PAGE>
Settlement 20
<PAGE>
DEFINITIONS
Attained Age: The issue age plus the number of full policy years since your
policy was issued.
Business Day: Any day that the New York Stock Exchange is open.
Cash Surrender Value: The cash value less any surrender charge.
Cash Value: The total of all values under this policy held in the Variable
Account, in any fixed accounts and in the loan account. Refer to the Policy
Values Provisions for details.
Death Proceeds: The amount of money payable to the beneficiary if the death of
the last Insured to die occurs while this policy is in force. Refer to the
Death Benefit Provisions for details.
Debt: Any amount you owe us as the result of a policy loan. This includes any
accrued loan interest.
Insured: Either of the two persons, named on the policy schedule, whose life
is insured by this policy.
Investment Option: An investment choice within the Variable Account available
under the policy. Current investment options are shown on the Policy Schedule.
Issue Age: The Insured's age as of the nearest birthday on the policy date.
Monthly Date: The same day as the policy date for each succeeding month.
Policy Anniversary: The same day as the policy date for each succeeding policy
year.
Policy Date: The date coverage under this policy becomes effective and from
which the Incontestability and Suicide provisions are determined.
Policy Loan Account: That portion of the cash value resulting from a policy
loan.
<PAGE>
Policy Year: The twelve month period beginning on the policy date and ending the
day before the same date in the next calendar year; and each succeeding twelve
month period.
<PAGE>
Net Cash Value: Cash surrender value less any debt.
Specified Amount: A dollar amount used to determine the death benefit of your
policy. It is shown in the Policy Schedule.
Subaccount: A subdivision of the Variable Account.
Variable Account: Valley Forge Life Insurance Variable Life Separate Account.
Written Notice: A notice or request signed by you and received and recorded at
our Administrative Office.
<PAGE>
OWNER, BENEFICIARY AND ASSIGNMENT PROVISIONS
Owner: The person(s) or entity(ies) named in the Policy Schedule who has all
rights under this policy while at least one of the Insureds is living. Your
rights in this policy belong to your estate if you die before the death of the
last Insured to die and there is no joint owner or contingent owner. All
references to owner shall include joint owners. If there is more than one owner,
each owner shall be a joint owner of the policy. Joint owners have equal
ownership rights and both must authorize any exercising of these rights except
for transfers and allocations.
Contingent Owner: The contingent owner, if any, will become the owner if the
named owner dies before the date of the death of the last Insured to die. In the
event of Joint Owners, the contingent owner will become the owner if both named
joint owners die before the death of the last Insured to die. The contingent
owner, if any, is as named in the application, unless changed. You may name a
contingent owner at any time while at least one of the Insureds is living. Such
designation must be by written notice. Once recorded, the designation will be
effective as of the date the written notice was signed. Such change will not
affect any payment we make or action we take before it was recorded.
Beneficiary: There are two categories of beneficiary - primary and contingent.
The primary beneficiary is the person to whom the death proceeds are paid when
the death of the last Insured to die occurs. The contingent beneficiary, if any,
will become the beneficiary if no primary beneficiary is living on the date of
<PAGE>
the death of the last Insured to die. The primary beneficiary and contingent
beneficiary on the policy date are as named in the application. More than one
primary or contingent beneficiary may be named. If more than one primary
beneficiary is alive when the death of the last Insured to die occurs, we will
pay such primary beneficiaries in equal shares unless you have provided
otherwise.
If any beneficiary dies before the death of the last Insured to die occurs, that
beneficiary's interest in the death benefit will end.
<PAGE>
If any beneficiary dies at the same time as the last Insured to die, or within
30 days after that date, that beneficiary's interest in the death benefit will
end if no benefits have been paid to that beneficiary unless you direct
otherwise. If the interest of all designated beneficiaries has ended when the
death of the last Insured to die occurs, we will pay the death benefit to you.
If you are not living at that time, we will pay the death benefit to your
estate.
While the at least one Insured is alive, you may change any beneficiary. Any
change must be by written notice. Once recorded, the change will take effect as
of the date you signed it. Such change will not affect any payment we make or
action we take before it was recorded. An irrevocable beneficiary must consent
in writing to any change in beneficiary.
Assignment: While at least one Insured is living, you may assign any or all
rights under your policy. Assignment of all rights is a change of ownership. An
irrevocable beneficiary must agree in writing to any assignment. We will not be
bound by any assignment unless it is by written notice. An assignment will not
affect any payments we have made or actions we have taken before we receive
notice of the assignment. We are not responsible for the sufficiency or validity
of any assignment.
PREMIUM PROVISIONS
Premium Payment: The single premium shown on the policy schedule is due on the
policy date. Additional premiums may be paid to us at any time before the policy
anniversary nearest the 95th birthday of the younger Insured, subject to the
minimum additional premium amount and the maximum premium amount shown on the
Policy Schedule. If a policy loan is outstanding, any payments received will be
considered loan repayments and not premiums unless otherwise specified. Other
premiums may be required as described in the Grace Period Provision. We may
require evidence of insurability before accepting an additional premium payment,
if the additional premium payment would increase the net death benefit.
Additional premium payments must be sent to our Service Center.
<PAGE>
The premium is allocated to one or more subaccounts of the Variable Account or
to any fixed account in accordance with your election. Allocation of premium is
subject to the allocation guidelines shown on the Policy Schedule.
Right to Refund: We will return any additional premium in excess of the maximum
premium shown on the Policy Schedule or any premium which would cause this
policy to no longer qualify as life insurance under the Internal Revenue Code.
Grace Period: If the net cash value on any business day is not sufficient to
cover any expense charges which are due but unpaid, a grace period of 61 days
will be allowed for the payment of sufficient premium to keep your policy in
force. A minimum payment of a sum equal to two monthly deductions must be paid.
We will send you a notice at the start of the grace period to your last known
address and to any assignee. The grace period will end 61 days after we mail you
the notice.
<PAGE>
If sufficient premium is not paid by the end of the grace period, the policy
will terminate without value. If the death of the last Insured to die occurs
during the grace period, we will pay the death proceeds. (See the Death Benefit
Provisions for details.)
If the lapse prevention guarantee described below is in effect, the grace period
will not apply.
Reinstatement: If this policy terminates as provided in the grace period
provision, you may apply to reinstate this policy unless you have surrendered it
for its cash surrender value. To reinstate this policy , you must: (1) submit a
written request at any time within three years after the end of the grace
period; (2) provide proof of insurability satisfactory to us; (3) pay an amount
large enough to pay the next two monthly deductions; (4) pay any negative cash
surrender value that existed at the end of the grace period; and (5) repay or
reinstate any debt which existed at the end of the grace period.
The effective date of a reinstatement will be the monthly date on or next
following the date we approve the application for reinstatement.
If a surrender charge was applied when the policy lapsed, the surrender charge
applied will be credited to the cash value. The surrender charge on the date of
reinstatement will be the same as it was on the date of lapse. For the purpose
of determining the surrender charge on any date after the effective date of
reinstatement, the period the policy was lapsed will not count. Unless you have
provided otherwise, the allocation of the amount of the surrender charge,
additional premiums, and loan repayments will be based on the allocations in
effect at the start of the grace period.
Lapse Prevention Guarantee: The Company guarantees that the policy will not
<PAGE>
lapse if 100% of the Guideline Single Premium shown on the Policy Schedule was
paid as the single premium and if no loans or partial surrenders were taken.
DEATH BENEFIT PROVISIONS
Death Benefit:
We will pay the death benefit as soon as we receive due written proof that the
death of the last Insured to die has occurred while this policy is in force.
<PAGE>
Death Proceeds: The death proceeds equals:
1. The greater of the specified amount or the applicable percentage of
the cash value on the date of death of the last insured to die; plus
2. any life insurance benefits provided by rider which are payable at the death
<PAGE>
of the last Insured to die; less
3. any debt; less
4. any due and unpaid premiums.
We will pay the death proceeds after we receive due proof of death of both
insureds at our Administrative Office. The death proceeds will be adjusted under
certain conditions. If it is not possible to determine which insured died first,
we will assume that the older insured died first. Refer to the Incontestability,
Suicide, and Error in Age or Sex Provision.
Payment of Claims: When this policy becomes a claim by the death of the last
Insured to die, settlement will be made upon receipt of due proof of death. If
proceeds are not paid within 30 days of receipt of due proof of death, the
payment will include interest at the legal rate from the date of death of the
last Insured to die until the date the claim is paid.
POLICY VALUE PROVISIONS
Cash Value: The cash value is the sum of the value in each subaccount, any fixed
account and the policy loan account. The value in each subaccount on the policy
date is equal to the portion of the initial premium allocated to the subaccount.
<PAGE>
The cash value reflects net premiums paid, monthly deductions, the investment
experience of the subaccounts selected, any interest credited on any fixed
account selected, any interest earned or interest charged on amounts allocated
to the policy loan account, and any deductions due as a result of a transfer or
a partial surrender.
Subaccount: The value in each subaccount on each subsequent business day is
equal to:
1) the value in the subaccount on the preceding business day multiplied by
its net investment factor; plus
2) any amounts allocated to the subaccount; plus
3) any amounts transferred to the subaccount; less
4) any amounts transferred from the subaccount; less
5) the portion of any charges which are due and charged to the
subaccount, less
6) any partial surrender amounts allocated to the subaccount.
Policy Loan Account: The value in the policy loan account is zero, unless you
take a policy loan. On the business day a policy loan is taken, the value in the
policy loan account is equal to the amount of any previous loans with accrued
interest plus the amount of the requested loan.
The value in the policy loan account on each subsequent business day is equal
to: 1) the value in the policy loan account on the preceding business day; plus
2) guaranteed interest credited; plus 3) any amounts transferred to the policy
<PAGE>
loan account because of additional policy loans; plus 4) any due and unpaid loan
interest during the current business day; less 5) the amount of any loan
repayments you make during the current business day.
Fixed Account I : The value in Fixed Account I is equal to: 1) the premiums
allocated to Fixed Account I; plus 2) guaranteed interest credited; plus 3) any
excess interest credited; plus 4) any amounts transferred to Fixed Account I;
less 5) any amounts transferred from Fixed Account I; less 6) the portion of any
charges which are due and charged to Fixed Account I; less 7) any surrender
amounts and surrender charges deducted from Fixed Account I.
Interest Crediting: We credit interest daily to Fixed Account I at the minimum
guaranteed interest rate shown on the policy schedule. We may credit excess
interest to Fixed Account I in an amount which we will declare from time to
time. Declared interest rates will be guaranteed for one Policy Year.
Minimum Values: Your policy values are at least equal to those set by law in the
state where the policy was issued. Where required, we have given insurance
regulators a detailed statement of how we compute values and benefits.
<PAGE>
Basis of Computation: All values are based on the applicable (male or female,
smoker or non-smoker) Commissioners 1980 Standard Ordinary Mortality Table, Age
Nearest Birthday.
POLICY COST FACTORS
Monthly Deduction: Each monthly date, we will make certain deductions from the
cash value of your policy. The monthly deduction is for the cost of insurance
for the following month.
The first monthly deduction will be determined as of the policy date.
The monthly deduction will be deducted on a pro-rata basis from the cash
surrender value allocated to the subaccounts and any fixed accounts based on the
proportion of the cash value that is attributable to each subaccount and any
fixed accounts.
Monthly Cost of Insurance Rate: This is a monthly rate per $1,000 of coverage.
We determine the monthly cost of insurance rate each year as of the policy
anniversary. This rate will be charged for the next policy year. The monthly
cost of insurance rate will not exceed the maximum guaranteed monthly cost of
insurance rate shown on the Policy Schedule.
The monthly cost of insurance is determined as (1) times (2) where:
(1) is the net amount at risk which is equal to the Death Benefit divided by
the monthly equivalent of the guaranteed interest rate, minus cash value
<PAGE>
before charges, all divided by 1,000; and
(2) is the monthly cost of insurance rate per $1,000 of coverage on the monthly
date.
Expense Charge: We deduct an expense charge daily from each subaccount of the
Variable Account. The expense charge is shown on the Policy Schedule.
Surrender Charge: The surrender charge is levied when you make a partial or
total surrender of the cash value. The surrender charge is a percentage of the
Guideline Single Premium shown on the Policy Schedule and is assessed in
proportion to the reduction in cash value. Subsequent surrender charges will be
calculated in the same way. The surrender charge is shown on the Policy
Schedule.
Transfer Processing Fee: Transfer processing fees are levied when the number of
transfers among subaccounts and/or any fixed accounts exceeds the number of free
transfers allowed in a policy year. The amount of the Transfer Processing Fee
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and the number of free transfers are shown on the Policy Schedule.
Changes in Policy Cost Factors: Changes in cost of insurance rates, credited
interest rates, policy expense charges or other charges will be by class and
will be based on changes in future expectations.
If required, the procedures for making such changes are on file with the
insurance regulators in the state in which this policy was delivered.
Policy Charges after the 95th Birthday of the Younger Insured: Policy Charges as
shown on the Policy Schedule will not apply on and after the policy anniversary
nearest the younger Insured's attained age 95.
SURRENDER PROVISIONS
Total Surrender: You may surrender your policy for its net cash value at any
time while it is in force by written notice. We may also require return of your
policy.
The date of surrender will be the date we receive your written request. The net
cash value will be determined as of the end of the normal business day during
which your written notice is received. All coverage will end on the date of
surrender.
Partial Surrenders: A partial surrender may be made at any time after the end of
the first policy year by written notice. The Free Partial Surrender Amount as
defined below may be withdrawn free of surrender charges in any policy year
after the end of the first policy year.
When you make a partial surrender, we will reduce the cash value by the partial
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surrender amount and any surrender charges. We will also reduce the specified
amount. The reduction in specified amount will be proportional to the reduction
in cash value due to the partial surrender. A new Policy Schedule will be issued
reflecting the changes.
The minimum partial surrender is shown on the Policy Schedule. We may require
that any partial surrender amounts be first deducted from the cash value in the
subaccounts.
Partial surrenders will be allowed only if this policy continues to qualify as a
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contract of life insurance under IRC Section 7702.
Free Partial Surrender Amount: The free partial surrender amount (determined as
shown on the Policy Schedule) will not be subject to the surrender charge. The
free partial surrender amount for any policy year after the first policy year is
determined at the time of the first partial surrender in a policy year. If the
free partial surrender amount for a policy year is not taken in the first
partial surrender of a policy year, the free partial surrender amount available
for any other partial surrender in a policy year equals (a) minus (b), where:
(a) is the free partial surrender amount for that policy year; and (b) is the
total of prior free partial surrender amounts withdrawn the same
policy year.
LOAN PROVISIONS
Maximum Loan Value: The maximum loan value is 90% of the net cash value as of
the date of the loan.
Policy Loan: You may obtain a loan at any time while your policy is in force by
written notice. The amount of the loan and all existing loans may not be more
than the maximum loan value as of the date we process the loan. No policy loan
will be less than the minimum loan amount shown on the Policy Schedule. The loan
will be made upon the sole security and proper assignment of this policy to us.
Loan Interest: The loan interest rate is as stated in the Policy Schedule.
Interest is charged daily and is payable at the end of each policy year or upon
repayment, if earlier. Unpaid interest will be added to the existing debt as of
the due date and will be charged interest at the same rate as the rest of the
loan.
The Company credits a higher effective annual interest rate on: (1) amounts
borrowed up to an amount equal to cash value less the aggregate premiums; (2)
all loans against policies in the 11th policy year or later; and (3) the amount
of any outstanding policy loan transferred in a tax-free exchange. These Loans
are considered preferred loans.
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Loan Repayment: All or part of a loan may be repaid to us at any time while
this policy is in force.
Termination of Policy: If the total debt ever equals or exceeds the cash value
less the surrender charge, your policy will terminate without value, subject to
31 days prior notice and to the Grace period provision.
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Effect of a Loan: When you take a policy loan, we will transfer an amount equal
to the policy loan from a subaccount or Fixed Account I to the policy loan
account. We will also transfer any loan interest that becomes due and unpaid .
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. When you repay part or all of a loan, we will transfer an
amount equal to the portion of the loan principal repaid plus any interest
credited in the loan account on that portion of the principal repaid, to a
subaccount or any fixed account.
Unless otherwise specified, transfers from the subaccounts to the policy loan
account will be in proportion to the cash value in each subaccount as of the
loan date. Loan amounts will be transferred from any fixed account only when
insufficient amounts are available in the subaccounts.
Since the amount you borrow is removed from a subaccount or Fixed Account I, a
loan will have a permanent effect on any death benefit and cash surrender value
of this policy. The effect may be favorable or unfavorable. This is true whether
you repay the loan or not. If the loan is not repaid, debt will reduce the
amount of any death proceeds.
THE VARIABLE ACCOUNT
Variable Account: The Variable Account is designated on the Policy Schedule and
consists of assets set aside by us, which are kept separate from our general
assets and all of our other Variable Account assets. The assets of the Variable
Account, equal to reserves and other liabilities of your policy and those of
other owners, will not be charged with liabilities arising out of any other
business we may do. The Variable Account is used to fund only the variable life
insurance benefits.
The Variable Account assets are divided into subaccounts. The assets of the
subaccounts are allocated to the investment options shown on the Policy
Schedule.
Investments of the Variable Account: We may, from time to time, add additional
investment options to those options shown on the Policy Schedule. You may be
permitted to transfer cash value to the additional investment option(s).
If the shares of any of the investment options become unavailable for investment
by the Variable Account, or we deem further investment in these shares
inappropriate, we may limit further purchase of such shares or substitute shares
of another investment option for shares already purchased under this policy. The
investment policy of the Variable Account may not be changed without the
approval of the Pennsylvania Insurance Commissioner. The approval process for
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such changes is on file with the Pennsylvania Insurance Commissioner.
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Valuation of Assets: Assets of the Variable Account are valued at their fair
market value in accordance with our procedures.
Change in Operation of the Variable Account: We reserve the right to modify the
structure or operation of the Variable Account. In such an event, we guarantee
that such modification will not affect the value of your contract and such
change will be made in accordance with any regulatory requirements.
Accumulation Units: Accumulation Units shall be used to account for all amounts
allocated to or surrendered from a subaccount as a result of premium payments,
transfers, surrenders, or fees and charges. We will determine the number of
accumulation units of a subaccount purchased or canceled. This is done by
dividing the amount allocated to (or the amount surrendered from) the
subaccount, by the dollar value of one accumulation unit of the subaccount as of
the business day during which we received written notice.
Accumulation Unit Value: The Accumulation Unit Value for each subaccount was set
at $10 when the subaccount became part of the Variable Account. Subsequent
accumulation unit values for each subaccount are determined by multiplying the
accumulation unit value for the immediate preceding business day by the net
investment factor of the subaccount for the current business day. The
accumulation unit value may increase or decrease from business day to business
day.
Net Investment Factor: The net investment factor for each subaccount is
determined by dividing (1) by (2) and subtracting (3) from the result, where:
1) is the result of:
(a) the net asset value per share of the investment option held in the
subaccount, determined at the end of the business day; plus
(b) the per share amount of any dividend or capital gain distributions made
by the investment option held in the subaccount, if the "ex-dividend"
date occurs as of the current business day; plus or minus
(c) a per share charge or credit for any taxes reserved for, which we
determine to have resulted from the operations of the subaccount.
2) is the net asset value per share of the investment option held in the
subaccount, determined at the end of the last prior business day.
3) is a daily factor representing the expense charges (shown on the
Policy Schedule) deducted from the subaccount.
FIXED ACCOUNT I
Fixed Account I is funded by the general account of the Company. The general
account consists of all of our assets other than those held in any separate
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investment account. Fixed Account I is credited with interest as described under
the Policy Value Provisions. In addition to allocating your premiums to one or
more of the subaccounts described above, you may direct all or part of your
premium payments into any fixed account.
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TRANSFERS
Transfer Rules: A transfer is subject to the following:
1) The maximum number of transfers without a Transfer Processing Fee is shown on
the Policy Schedule; 2) We reserve the right to assess a Transfer Processing Fee
as shown on the Policy Schedule if the number of transfers exceeds the maximum
number of free transfers shown on the Policy Schedule. We will notify you if we
deduct a Transfer Processing Fee and will deduct such fee from the amount which
is transferred; 3)You may not make a transfer until after the end of the free
look period; 4)The minimum amount which may be transferred is shown on the
Policy Schedule; 5)A transfer will be effected as of the end of the normal
business day when we receive an acceptable transfer request; 6)We are not liable
for a transfer made in accordance with your instructions; 7)Your right to make
transfers is subject to modification if we determine
that the exercise of the right by one or more owners of this policy is, or
would be, to the disadvantage of other owners of this policy. Restrictions may
be applied in any manner reasonably designed to prevent any use of the
transfer right which we consider to be to the disadvantage of other owners of
this policy. A modification could be applied to transfers to or from one or
more of the subaccounts and could include:
a. the requirement of a minimum time period between each transfer; or
b. not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
c. limiting the dollar amount that may be transferred between the subaccounts
at any one time;
8)During times of drastic economic or market conditions, we may suspend the
transfer privilege temporarily without notice and treat transfer requests
based on their separate components (a redemption order with a simultaneous
request for purchase of another subaccount). In such a case, the redemption
order would be processed at the source subaccount's next determined
accumulation unit. However, the purchase into the new subaccount would be
effective at the next determined accumulation unit value for the new
subaccount only after we receive proceeds from the source subaccount, or we
otherwise receive cash on behalf of the source subaccount;
9)Transfers do not change the allocation instructions for future premium
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payments;
10)You may elect to make transfers by telephone. However, to elect this option
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you must first make a written request. If there are joint owners, unless we
are instructed to the contrary, instructions by telephone will be accepted
from either of the joint owners. We will use reasonable procedures to confirm
that instructions communicated by telephone are genuine.
Transfer Processing Fee: A number of transfers during each policy year are free
as shown on the Policy Schedule. We will deduct from the amount being
transferred the processing fee shown on the Policy Schedule for transfers in
excess of the free amount of transfers. Each written notice of transfer is
considered to be one request regardless of the number of subaccounts or any
fixed account affected by the transfer.
GENERAL POLICY PROVISIONS
Entire Contract: We have issued this policy in consideration of the application
and initial premium payment. A copy of the application is attached to and made a
part of this policy. The policy, including the application and any attached
riders or endorsements, forms our entire contract with you. All statements made
by or for each Insured in the application or any supplemental application will
be considered representations and not warranties. In the absence of fraud, we
will not use any statement made by or for each Insured to deny a claim unless
the statement is in the application or supplemental application and a copy of
the statement has been furnished to the claimant.
Changes: No change may be made to this policy unless it is in writing and has
been signed by our Chairman, President, a Vice President or our Secretary.
Incontestability: We cannot contest the validity of this policy after it has
been in force during the lifetime of each Insured for two years from the policy
date; nor can we contest any reinstatement after it has been in force, while
each Insured is alive, for two years after the effective date of such
reinstatement.
We cannot contest this policy or any reinstatement during the two year period
after the policy date or the effective date of a reinstatement unless: 1) An
answer in the application for the policy or reinstatement was not true or
complete; and 2) If we had known the truth, we would not have issued the policy
as we did.
Any statement made by each Insured will not be used in any contest unless a copy
is furnished to the beneficiary.
Suicide: If either Insured commits suicide, while sane or insane, within two
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years from the policy date, our liability shall be limited to the single premium
paid prior to death, less any debt and less any partial surrenders. This policy
will immediately terminate on the first such death by suicide.
Error in Age or Sex: If the age or sex of either Insured has been misstated, all
payments and benefits under the policy will be those which the most recent cost
of insurance rates would have purchased at the correct equal age and sex of the
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Insureds.
Payment of Proceeds: Unless an optional mode of settlement is elected, all
benefits will be paid in one sum to the beneficiary.
Postponement of Payments: We will pay surrender proceeds or the amount of a
policy loan as soon as possible after we receive your written notice. We will
pay any death proceeds when we receive due proof of death. (Due proof of death
includes all information we may reasonably require.)
The payment or transfer from the Variable Account may be postponed if:
1. The New York Stock Exchange is closed, other than customary weekend or
holiday closing, or trading on the exchange is restricted as determined by
the Securities and Exchange Commission ("SEC"); or
2. The SEC permits, by an order, the postponement for your protection; or
3. The SEC determines that an emergency exists that would make the disposal of
securities held in the variable account or determination of their value not
reasonably practicable.
Right to Defer Payments or Transfers from any Fixed Account: Except for a policy
loan to pay premiums, we have the right to defer payment of any surrender or
transfer of any fixed account value for up to six months from the date we
receive your written notice, unless the law in your state provides otherwise.
Termination: This policy will terminate on the date when the earliest of the
following events occurs:
1. you request in writing that coverage terminate; or
2. the death of the last Insured to die occurs; or
3. the grace period ends.
Annual Report: At least once each policy year, we will send you a report showing
current cash values and any other information required by law or regulation. We
will mail this report to you at your last known address.
Non-Participating: This policy will not share in our profits or surplus
earnings.
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Currency: Any money we pay, or that is paid to us, must be in United States
currency.
Signature Guarantee: For your protection, a request for surrender, policy loan,
or a change in ownership must be by written notice. We may require the signature
to be guaranteed by a member firm of the New York, Boston, Midwest,
Philadelphia, or Pacific Stock Exchange, or by a commercial bank (not a savings
bank), which is a member of the Federal Deposit Insurance Corporation. In some
cases, the Company may require additional documentation of a customary nature.
SETTLEMENT
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Proceeds will be paid in a lump sum, or in any other mutually agreed upon
payment option.
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MODIFIED SINGLE PREMIUM VARIABLE AND FIXED LAST TO DIE
LIFE INSURANCE POLICY Premiums are Payable until the Earlier
of the Death of the Last Insured to Die
or until the Policy Anniversary when the Younger Insured Attains Age 95
Adjustable Death Benefit
Death Proceeds Payable at Death of Last Insured to Die
Non-Participating
Investment Experience Reflected in Benefits
VUL-103 (8/00)
