Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Valley Forge Life Insurance Company Variable Life Separate Account
(Exact Name of Trust)
B. Valley Forge Life Insurance Company
(Name of Depositor)
C. CNA Plaza, 43 South
Chicago, Illinois 60685
(Complete address of depositor's principal executive offices)
D. Name and complete address of agent for service:
Jonathan D. Kantor
Senior Vice President, General Counsel and Secretary
Valley Forge Life Insurance Company
CNA Plaza, 43 South
Chicago, Illinois 60685
Copies to:
Lynn Korman Stone
Blazzard, Grodd & Hasenauer, P.C.
P.O. Box 5108
Westport, CT 06881
(203) 226-7866
E. Flexible Premium Variable Life Insurance Policy
(Title and amount of securities being registered)
F. Proposed maximum aggregate offering price to the public of the
securities being registered:
Continuous offering
G. Amount of Filing Fee: Not Applicable
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this filing.
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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 said Section 8(a),
may determine.
- ------------------------------------------------------------------------------
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
- ------------ ------------------------------
1(a) Other Information
(b) The Variable Life Insurance Policy
2 Other Information
3 Not Applicable
4 Other Information
5 Other Information
6(a) Not Applicable
(b) Not Applicable
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Purchases; Investment Options; Access to Your Money
11 Investment Options
12 Investment Options
13 Expenses
14 Purchases
15 Purchases
16 Purchases; Investment Options
17 Access to Your Money
18 Access to Your Money
19 Reports to Owners
20 Not Applicable
21 Access to Your Money
22 Not Applicable
23 Not Applicable
24 Other Information
25 Other Information
26 Expenses
27 The Company
28 Executive Officers and Directors
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 Other Information
36 Not Applicable
37 Not Applicable
38 Other Information
39 Other Information
40 Not Applicable
41 Not Applicable
42 Not Applicable
43 Not Applicable
44 Purchases
45 Investment Options; Other Information
46 Purchases; Access to Your Money
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 Other Information; Purchases
52 Investment Options
53 Other Information
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
VALLEY FORGE LIFE INSURANCE COMPANY VARIABLE LIFE
SEPARATE ACCOUNT
AND
VALLEY FORGE LIFE INSURANCE COMPANY
This prospectus describes the Flexible Premium Variable Life Insurance Policy
that we (Valley Forge Life Insurance Company) are offering.
The policy is a variable benefit policy. We have designed the policy for use in
estate and retirement planning and other insurance needs of individuals.
You, the policyowner, have a number of investment choices in the policy. These
investment choices include fixed account options as well as the investment
options listed below. When you buy a policy and allocate funds to the investment
options you are subject to investment risk. This means that the value of your
policy may increase and decrease depending upon the investment performance of
the investment option(s) you select. Under some circumstances, the death benefit
and the duration of the policy will also increase and decrease depending upon
investment performance.
FEDERATED INSURANCE SERIES
Advised by Federated Investment Management
Company
Federated High Income Bond Fund II
Federated Prime Money Fund II
Federated Utility Fund II
THE ALGER AMERICAN FUND
Advised by Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Mid-Cap Growth Portfolio
Alger American Small Capitalization Portfolio
SOGEN VARIABLE FUNDS, INC.
Advised by Societe Generale Asset Management
Corp.
SoGen Overseas Variable Fund
VAN ECK WORLDWIDE INSURANCE TRUST
Advised by Van Eck Associates Corporation
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Hard Assets Fund
VARIABLE INSURANCE PRODUCTS FUND
(VIP) and
VARIABLE INSURANCE PRODUCTS FUND II
(VIP II)
Advised by Fidelity Management & Research
Company
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Index 500 Portfolio
MFS VARIABLE INSURANCE TRUST
Advised by MFS Investment Management
MFS Emerging Growth Series
MFS Growth With Income Series
MFS Research Series
MFS Total Return Series
JANUS ASPEN SERIES
Advised by Janus Capital Corporation
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen International Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Flexible Premium Variable
Life Insurance Policy. The Securities and Exchange Commission (SEC) maintains a
Web site (http://www.sec.gov) that contains information regarding companies that
file electronically with the SEC.
The policy:
* is not a bank deposit.
* is not federally insured.
* is not endorsed by any bank or government agency.
The policy is subject to investment risk. You may be subject to loss of
principal.
The Securities and Exchange Commission has not approved or disapproved these
securities nor has it determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This prospectus is not an offering of the securities in any state, country, or
jurisdiction in which we are not authorized to sell the policies. You should
rely only on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with information
that is different.
Date: _______, 2000
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TABLE OF CONTENTS
Page
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HIGHLIGHTS........................................................................................................1
THE COMPANY.......................................................................................................4
THE VARIABLE LIFE INSURANCE POLICY................................................................................4
EXPENSES .........................................................................................................5
PURCHASES........................................................................................................10
INVESTMENT CHOICES...............................................................................................15
DEATH BENEFIT....................................................................................................19
TAXES ........................................................................................................24
ACCESS TO YOUR MONEY.............................................................................................25
OTHER INFORMATION................................................................................................27
MORE INFORMATION.................................................................................................31
Executive Officers and Directors........................................................................31
Voting ...............................................................................................32
Disregard of Voting Instructions........................................................................32
Legal Opinions..........................................................................................33
Our Right to Contest....................................................................................33
Federal Tax Status......................................................................................33
Reports to Owners.......................................................................................37
Legal Proceedings.......................................................................................37
Experts ...............................................................................................38
Financial Statements....................................................................................38
APPENDIX - Illustrations of Policy Values........................................................................38
</TABLE>
INDEX OF SPECIAL TERMS
This prospectus is written in plain English to make it as understandable as
possible. However, by the very nature of the policy, the use of certain
technical words or terms are unavoidable. We have identified some of these words
or terms. For some we have provided you with a definition below. For the
remainder, we believe that you will find an adequate discussion in the text. We
have identified these terms and provided you with a page number that indicates
where you will find the explanation for the word or term. The word or term on
the page is in italics.
Death Proceeds: The amount of money payable to the beneficiary if the Insured
dies while this policy is in force.
Debt: Any amount you owe us as the result of a policy loan. This includes any
accrued loan interest.
General Account: Our assets other than those allocated to the Variable Account
or any other separate account.
Investment Option: An investment choice within Valley Forge Life Insurance
Company Variable Life Separate Account available under the policy.
Policy Loan Account: That portion of the cash value resulting from a policy
loan.
Riders: An endorsement that is incorporated into your policy.
Specified Amount: A dollar amount used to determine the death benefit of your
policy. This amount is chosen by you. The minimum specified amount is $100,000.
Target Premium: A premium calculated when a policy is issued, based on the
insured's age, sex (except in unisex policies) and risk class. The Target
Premium is used to calculate the surrender charge.
Page
Beneficiary, Contingent Beneficiary
Business Day
Cash Value, Net Cash Value, Cash Surrender Value
Fixed Account I, Fixed Account II
Insured
Monthly Date
Monthly Anniversary
Owner, Joint Owner, Contingent Owner
Policy Year, Policy Anniversary
Policy Date
HIGHLIGHTS
The Variable Life Insurance Policy
The variable life insurance policy is a contract between you, the owner, and us,
an insurance company. The policy provides for life insurance coverage on the
insured. It has cash values, a death benefit, surrender rights, loan privileges
and other characteristics associated with traditional and universal life
insurance. However, since the policy is a variable life insurance policy, the
value of your policy will increase or decrease depending upon the investment
experience of the investment option(s) you choose. The death benefit associated
with the policy is distributed free from federal income taxes to the named
insured. However, estate taxes may apply.
Expenses
The policy has both insurance and investment features, and there are costs
related to each that reduce the return on your investment. We deduct:
* a premium charge from each premium payment made.
* an expense charge daily from amounts allocated to the investment options.
* a monthly deduction from cash value for: cost of insurance; cost of any
rider(s); and monthly policy fee; and
* daily investment option charges which apply to the average daily value of
the investment options.
We may assess a surrender charge if you take out money from your policy. If you
make more than 12 transfers in any policy year, unless the transfer is
pre-scheduled, we will charge a transfer processing fee. Also, for the first 12
months after an increase in the specified amount, we will deduct $10 each month
from your policy.
On or after the policy anniversary on and after the insured's 95th birthday,
policy charges will not be charged.
Purchases
You purchase the policy by completing the proper forms. In some circumstances,
we may contact you for additional information regarding the insured. We may
require the insured to provide us with medical records, physicians' statements
or a complete paramedical examination.
The minimum initial premium payment we accept is computed for you based on the
specified amount you request. The policy is designed for the payment of
subsequent premiums. The minimum subsequent premium payment you can make is $50.
Investment Choices
You can put your money in the fixed account options and/or in any of the
investment options. Currently, you may invest in all investment choices at any
one time. However, we reserve the right to limit this in the future.
Death Benefit
The amount of the death benefit depends on:
* the specified amount of insurance of your policy;
* the death benefit option in effect at the time of death; and
* under some circumstances, your cash value.
There are two death benefit options: Option 1 and Option 2. Under certain
circumstances you can change death benefit options. You can also change the
specified amount under certain circumstances after your policy has been in force
for one year.
If death benefit Option 1 is in effect, the death benefit is the greater of your
specified amount, or your cash value on the date of death multiplied by the
applicable factor. Under this option, the amount of the death benefit is fixed,
except when we use the factor to determine the benefit percentage.
If death benefit Option 2 is in effect, the death benefit is the greater of your
specified amount in effect plus the cash value, or the cash value on the date of
death multiplied by the applicable factor. Under this option, the amount of the
death benefit is variable.
Taxes
Your policy has been designed to comply with the definition of life insurance in
the Internal Revenue Code. As a result, the death proceeds paid under the policy
should be excludable from the gross income of your beneficiary. Any earnings in
your policy are not taxed until you take them out. The tax treatment of the loan
proceeds and surrender proceeds will depend on whether the policy is considered
a Modified Endowment Contract (MEC). Proceeds taken out of a MEC are considered
to come from earnings first and are includible in taxable income. If you are
younger than 59 1/2 when you take money out of a MEC, you may also be subject to
a 10% federal tax penalty on the earnings withdrawn.
Access to Your Money
You can make a total surrender of your policy at any time and we will pay you
the net cash value. You may make a partial surrender at any time after the 5th
policy anniversary, or earlier if required by state law. When you make a total
or partial surrender, a surrender charge may be assessed.
You can also borrow some of your net cash value.
Other Information
Free Look. You can cancel the policy within 10 days after you receive it (or
whatever period is required in your state). We will refund an amount equal to
the cash value plus fees or charges deducted from premium payments less any
debt. When we receive your initial net premium, we will credit the amount to
your policy on the policy date. Afterwards, we will allocate your funds to your
investment choices.
Additional Features. The following additional features are offered:
* You can arrange to have a regular amount of money automatically transferred
from the Federated Prime Money Fund II to selected investment options or
Fixed Account I each month, theoretically giving you a lower average cost
per unit over time than a single one time purchase. We call this feature
the dollar cost averaging option.
* You can arrange to have us automatically rebalance amounts in selected
investment options and Fixed Account I to return to your original
percentage allocations. We call this feature the automatic transfer option.
* In some states, at any time during the first 18 months your policy is in
force, you can convert the policy to any permanent non-variable policy
offered by us in your state. We call this feature the right to convert.
* If the insured becomes terminally ill, we will pay you a portion of the
death benefit. We call this feature the accelerated benefit.
* If the insured becomes disabled, under certain circumstances, we will waive
the monthly deductions. We call this the waiver of monthly deduction
benefit.
* We also offer a number of additional riders that are common to life
insurance policies.
These features and riders may not be available in your state and may not be
suitable for your particular situation.
Inquiries
If you need more information about buying a policy, please contact us at:
Valley Forge Life Insurance Company
100 CNA Drive
Nashville, TN 37214
(800) 262-1755
THE COMPANY
Valley Forge Life Insurance Company, with its administrative office located at
100 CNA Drive, Nashville, TN 37214, is a wholly- owned subsidiary of Continental
Assurance Company ("Assurance"). Assurance is a wholly- owned subsidiary of
Continental Casualty Company ("Casualty"), which is wholly-owned by CNA
Financial Corporation ("CNA"). Loews Corporation owns approximately 86% of the
outstanding common stock of CNA as of September 30, 1999.
We are principally engaged in the sale of life insurance and annuities. We are
licensed in the District of Columbia, Guam, Puerto Rico and all states except
New York, where we are only admitted as a reinsurer.
THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy is a contract between you, the owner, and us,
an insurance company. The policy described in this prospectus is a flexible
premium variable life insurance policy. The policy is "flexible" because:
* the frequency and amount of premium payments can vary;
* you can choose between death benefit options; and
* you can increase or decrease the amount of insurance coverage, all within
the same policy of insurance.
The policy is "variable" because the cash value, when allocated to the
investment options, may increase or decrease depending upon the investment
results of the selected investment options. Under certain circumstances, the
death benefit and the duration of your policy may also vary.
During the life of the insured, you can surrender the policy for all or part of
its net cash value. You may also obtain a policy loan using the policy as
security and by properly assigning it to us.
We also make available a number of riders to meet a variety of your estate
planning needs.
To the extent you select any of the investment options, you bear the investment
risk. If your net cash value is insufficient to pay any expense charges, the
policy may terminate.
Because the policy is like traditional and universal life insurance, it provides
a death benefit which is paid to your named beneficiary. When the insured dies,
the death proceeds are paid to your beneficiary. These proceeds should be
excludable from the gross income of the beneficiary, however estate taxes may
apply. The tax-free death proceeds makes this an excellent way to accumulate
money you do not think you will use in your lifetime. It is also a tax-efficient
way to provide for those you leave behind. If you need access to your money, you
can borrow from the policy or make a total or partial surrender.
Purchasing Considerations
The policy is designed for individuals and businesses that have a need for death
protection but who also desire to potentially increase the values in their
policies through investments in the investment options. The policy offers the
following to individuals:
* create or conserve one's estate;
* supplement retirement income; and
* access to funds through loans and surrenders.
If you currently own a variable life insurance policy on the life of the
insured, you should consider whether the purchase of the policy described in
this prospectus is appropriate. Replacement of an existing policy with this
policy may not be advantageous to your situation.
EXPENSES
There are charges and other expenses associated with the policy that reduce the
return on your investment in the policy. The charges and expenses are described
below.
Premium Charge
We deduct a premium charge from each premium payment you make to reimburse us
for the expenses associated with selling the policy and for tax charges and
costs we incur. The premium charge is as follows:
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Policy Years 1-10: 7.5% of all premiums up to the target premium.
Policy Years 11 and later: 5.5% of all premiums up to the target premium.
All Years: 3.5% of all premiums in excess of the target premium.
</TABLE>
Monthly Deductions
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 monthly cost of any riders attached to your policy; and
* the monthly policy fee.
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 investment options and fixed accounts.
Cost of Insurance. This charge compensates us for the insurance coverage we
provide in the month following the charge. We determine the monthly cost of
insurance rate each year as of the policy anniversary. The rate will be charged
for the next policy year. The cost of insurance rate for a specified amount of
insurance portion for a policy month equals the sum of:
* the standard cost of insurance rate for that month from the table of our
standard cost of insurance rates; and
* an additional rate or charge for any extra mortality risk classification
(substandard insurance) that applies for the specified amount of insurance
portion.
The additional rate or charge for an extra mortality risk classification for any
policy month equals the amount of extra mortality that the risk classification
represents for that month. Each portion of the specified amount will have its
own cost of insurance rate which may be different from any other portion.
The total cost of insurance rate for a policy month will be uniform for all
specified amount of insurance portions that:
* are in the same specified amount band, sex, and risk classification;
* take effect when the insureds are the same age; and
* have been in force the same length of time.
We may charge less than the maximum cost of insurance rates shown in your policy
from time to time based on our expectations as to future cost elements such as:
investment earnings, mortality, persistency, expenses and taxes. Any change we
make will apply to all specified amount portions in the same risk
classification.
Since the mortality tables used with the policy distinguish between males and
females, the cost of insurance and the benefits payable will differ between
males and females of the same age. Employers, employee plans and employee
organizations should seek legal advice to determine whether the Civil Rights Act
of 1964, Title VII, or other applicable law prohibits the use of sex distinct
mortality tables. We will offer the policy based upon unisex mortality tables
where required.
Monthly Cost of Riders. The amount of any charges associated with riders, if
any, each policy month is determined in accordance with the rider and is shown
on the schedule page of your policy.
Monthly Policy Fee. There is a monthly policy fee which is equal to $26 per
policy month for the first policy year. Thereafter, the fee is $6 per policy
month. The charges reimburse us for expenses incurred in the administration of
the policies. Such expenses include: confirmations, annual account statements,
maintenance of policy records, maintenance of variable account records,
administrative personnel costs, mailing costs, data processing costs, legal
fees, accounting fees, filing fees, the costs of other services necessary for
policy owner servicing and all accounting, valuation, regulatory and updating
requirements.
Expense Charge
We deduct an expense charge from each investment option each business day. The
expense charge is equal to:
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Policy Years 1-10: Approximately .90%, on an annual basis, of the
cash value of each investment option.
Policy Years 11 and later: Approximately .45%, on an annual basis, of the
cash value of each investment option.
</TABLE>
This charge compensates us for some of the mortality risks we assume, and the
risk that we will experience costs above that for which we are compensated. It
also compensates us for some of the administrative costs in administering the
policy. We expect to profit from the charge.
Surrender Charges
A surrender charge may be deducted if you make a full or partial surrender. The
surrender charge varies by issue age, specified amount, sex, smoking status, and
contract duration. The surrender charge is $16 per $1,000 of specified amount of
insurance for the first 6 policy years. The charge then grades down to zero over
policy years 7 through 15 as shown in the following table:
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Policy Years % of Surrender Charge
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1-6 100%
7 80%
8 70%
9 60%
10 50%
11 40%
12 30%
13 20%
14 10%
15+ No Surrender Charge
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Transfer Processing Fee
You may transfer values from one investment option to another, or to or from the
fixed accounts. The first 12 transfers in a policy year are free. The fee for
each additional transfer is currently $25. The transfer processing fee is
deducted from the amount which is transferred. Prescheduled dollar cost
averaging transfers or automatic transfers are not counted when we determine
transfer processing fees. Each written notice of transfer is considered to be
one request regardless of the number of investment options or any fixed account
involved in the transfer.
Income Tax Charge
We do not currently assess any charge for income taxes. We reserve the right to
assess a charge for such taxes against the investment options or your cash value
if we determine that such taxes will be incurred.
Charges after the Insured's 95th Birthday
On or after the policy anniversary on or after the insured's 95th birthday,
there will not be any policy charges.
Waiver of Monthly Deduction Rider
If you choose the waiver of monthly deduction rider, we will waive monthly
deductions if the insured becomes totally disabled, as defined in the rider. The
waiver will begin on the latest date when:
* we have been notified of the onset of a total disability;
* we have received due proof of total disability; and
* total disability has continued for 6 consecutive months.
If you choose this feature, the monthly cost of this rider is shown on your
policy schedule. The rider will terminate:
* on the first policy anniversary on or after the insured's 65th birthday;
* if you give us written notice to terminate it; or
* when the policy terminates.
This benefit may not be available in your state.
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Investment Option Annual Expenses
(as a percentage of average net assets)
The annual expenses of the portfolios below are based on data provided by the respective fund
groups. We have not independently verified such data. Future expenses may be greater or less
than those shown.
Other
Expenses Total Annual
(after Expenses
reimbursement (after reimbursement
Management for certain for certain
Fees portfolios) portfolios)
---- ----------- -----------
FEDERATED INSURANCE SERIES:
<S> <C> <C> <C> <C>
Federated High Income Bond Fund II 0.60% 0.18% 0.78%[1]
Federated Prime Money Fund II 0.49% 0.31% 0.80%[1]
Federated Utility Fund II 0.68% 0.25% 0.93%[1]
VARIABLE INSURANCE PRODUCTS FUND (VIP) AND
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
Fidelity VIP Equity-Income Portfolio 0.49% 0.09% 0.58%[2]
Fidelity VIP II Asset Manager Portfolio 0.54% 0.10% 0.64%[2]
Fidelity VIP II Contrafund Portfolio 0.59% 0.11% 0.70%[2]
Fidelity VIP II Index 500 Portfolio 0.24% 0.11% 0.35%[2]
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Mid-Cap Growth Portfolio 0.80% 0.04% 0.84%
Alger American Small Capitalization
Portfolio 0.85% 0.04% 0.89%
MFS VARIABLE INSURANCE TRUST:
MFS Emerging Growth Series 0.75% 0.10% 0.85%[3]
MFS Growth With Income Series 0.75% 0.13% 0.88%[3]
MFS Research Series 0.75% 0.11% 0.86%[3]
MFS Total Return Series 0.75% 0.16% 0.91%[3]
SOGEN VARIABLE FUNDS, INC.:
SoGen Overseas Variable Fund 0.75% 0.75% 1.50%[4]
VAN ECK WORLDWIDE INSURANCE TRUST:
Van Eck Worldwide Emerging Markets Fund 1.00% 0.61% 1.61%[5]
Van Eck Worldwide Hard Assets Fund 1.00% 0.20% 1.20%[6]
JANUS ASPEN SERIES
Janus Aspen Capital Appreciation Portfolio 0.70% 0.22% 0.92%[7]
Janus Aspen Growth Portfolio 0.65% 0.03% 0.68%[7]
Janus Aspen Balanced Portfolio 0.72% 0.02% 0.74%
Janus Aspen Flexible Income Portfolio 0.65% 0.08% 0.73%
Janus Aspen International Growth Portfolio 0.66% 0.20% 0.86%[7]
Janus Aspen Worldwide Growth Portfolio 0.65% 0.07% 0.72%[7]
</TABLE>
[1] Federated Investment Management Company has voluntarily agreed to waive a
portion of its management fee with respect to these funds. Absent this
waiver, the total annual expenses would have been 0.78%, 0.81% and 1.00%
for the Federated High Income Bond Fund II, the Federated Prime Money Fund
II and the Federated Utility Fund II, respectively. There has been no
waiver of the management fee for the Federated High Income Bond Fund II.
[2] A portion of the brokerage commissions that these funds pay was used to
reduce fund expenses. In addition, these funds have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses presented in the table would
have been .57%, .63% and .66% for the Equity-Income, Asset Manager and
Contrafund Portfolios, respectively.
[3] Each of these funds has an expense offset arrangement which reduces its
custodian fee based upon the amount of cash it maintains with its custodian
and dividend disbursing agent, and may enter into such arrangements and
directed brokerage arrangements (which would also have the effect of
reducing its expenses). Any such fee reductions are not reflected under
"Other Expenses".
[4] The annualized ratios of operating expenses to average net assets for the
period ended December 31, 1998 would have been 4.98% without the effect of
earnings credits, and the investment advisory fee waiver and expense
reimbursement provided by the adviser.
[5] For the year ended December 31, 1998, Van Eck Associates Corporation agreed
to waive its management fees and assume all expenses of the Fund except
interest, taxes, brokerage commissions and extraordinary expenses exceeding
1.50% of average daily net assets.
[6] The fund directs certain portfolio trades to a broker that, in turn, pays a
portion of the Fund's operating expenses. The fund also has a fee
arrangement based on cash balances left on deposit with the custodian,
which reduces the fund's operating expenses. Due to this, management fees,
other expenses, and total annual expenses were 1.00%, 0.16% and 1.16%,
respectively.
[7] Expenses are stated net of contractual waivers and fee reductions by Janus
Capital. Absent these waivers, the total annual expenses would have been
0.97%, 0.75%, 0.95% and 0.74% for the Janus Aspen Capital Appreciation
Portfolio, Janus Aspen Growth Portfolio, Janus Aspen International Growth
Portfolio, and Janus Aspen Worldwide Growth Portfolio, respectively.
PURCHASES
Premiums
The initial premium is due on the policy date. The policy date is the date
coverage under the policy becomes effective. Other premiums may be required. All
premiums must be sent to us at our Administrative Office. Before we send out the
policy, the application and the premium must be in good order as determined by
our administrative rules.
Your first policy year starts on the day the coverage is effective under your
policy (the policy date). 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) is referred to as a policy year. Future policy
years start on the same day and month in each subsequent year. We call that date
a policy anniversary. Your monthly date is the same day as the policy date for
each succeeding month.
Application for a Policy
In order to purchase a policy, you must submit an application to us that
requests information about the proposed insured. In some cases, we may contact
you for additional information. We may request that the insured provide us with
medical records, a physician's statement or possibly require other medical
tests.
Subsequent Premiums
The policy is designed to allow you to make subsequent premium payments. You can
make premiums during the lifetime of the insured or until the insured's age 95.
You may change the amount and frequency of premiums. We have the right to limit
the amount of any increase. Each premium after the initial premium must be at
least $50. Unless you tell us otherwise, any subsequent payments will be
considered premiums and not loan repayments. Subsequent premium payments will be
credited to your policy as of the day they are received.
Allocation of Premium
The initial premium is credited on the policy date. The initial premium will be
allocated to the investment options on the latest of:
* 2 business days after the policy date;
* 2 business days after our receipt of your initial premium at our
administrative office; or
* the date our underwriters approve this policy.
Your premium is allocated to the available fixed accounts or one or more of the
investment options, as selected by you. This allocation is not subject to the
transfer fee provision (see "Transfer Fee"). Currently, you can select as many
investment options as you wish. However, we reserve the right to limit this in
the future. All allocation percentages must be in whole numbers and at least 1%.
You may change the allocation of future premiums by providing us with written
notice. The change will be effective on the date we receive your request at our
administrative office.
Our Right to Reject or Return a Premium Payment
In order to receive the tax treatment for life insurance under the Internal
Revenue Code (Code), a policy must initially qualify and continue to qualify as
life insurance under the Code. To maintain this qualification, we have reserved
the right under the policy to return any premiums paid which we have determined
will cause the policy to fail as life insurance. We also have the right to make
changes in the policy or to make a distribution to the extent we determine this
is necessary to continue to qualify the policy as life insurance. Such
distributions may have current income tax consequences to you.
If subsequent premiums will cause your policy to become a Modified Endowment
Contract (MEC), we will contact you prior to applying the premium to your
policy. If you elect to have the premium applied, we require that you
acknowledge in writing that you understand the tax consequences of a MEC before
we will apply the premiums.
Total Disability Waiver of Premium Rider
We make available a total disability waiver of premium rider. Under this rider,
we will credit a premium while the policy is in force if the insured becomes
totally disabled, as defined in the rider. The premium credited will be the
lesser of:
* 1/12th of the waiver of premium amount shown on your policy schedule; or
* the monthly average of premiums paid on your policy over the last 36 policy
months.
Benefits will begin on the latest date when we have been notified of the onset
of total disability; and we have received due proof of total disability; and
total disability has continued for 6 consecutive months.
If you choose this feature, the monthly cost of this rider is shown on your
policy schedule. The rider will terminate:
* on the first policy anniversary on or after the insured's 65th birthday;
* if you give us written notice to terminate it; or
* when the policy terminates.
The rider may not be available in your state.
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. We will send you
a notice at the start of the grace period to your last known address and to any
assignee. A minimum payment of an amount equal to 2 monthly deductions must be
paid. The grace period will end 61 days after we mail you the notice. If
sufficient premium is not paid by the end of the grace period, the policy will
terminate without value. If the insured dies during the grace period, we will
pay the death proceeds. If the lapse prevention guarantee described below is in
effect, the grace period will not apply until the beginning of the policy year
following the lapse prevention guarantee period.
Reinstatement
If your policy terminated at the end of a grace period and you have not
surrendered it for its cash surrender value, you can request that we reinstate
it (restore your insurance coverage). To reinstate your policy you must:
* submit a written request for reinstatement at any time within 3 years after
the end of the grace period;
* submit proof of insurability satisfactory to us;
* pay an amount large enough to cover the next 2 monthly deductions;
* pay any negative cash surrender value that existed at the end of the grace
period; and
* repay or reinstate any debt which existed at the end of the grace period.
The effective date of a reinstatement is the monthly date on or following the
day we approve the request for reinstatement.
If a surrender charge was applied when the policy lapsed, the surrender charge
applied will be credited to the cash value of your policy. The surrender charge
on the date of reinstatement is equal to the surrender charge on the date of
lapse. To determine the surrender charge on any date after the effective date of
reinstatement, we will not consider the period during which the policy was
lapsed. Unless you tell us 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
We guarantee that your policy will not lapse during the 5 year lapse prevention
guarantee period if throughout that period, (a) equals or exceeds (b) where:
(a) is the aggregate premium payments made less the amount of any
surrenders (including applicable surrender charges) less any loan
amount; and
(b) is the minimum monthly lapse prevention guarantee premium multiplied
by the number of complete months since the policy date, including the
current month.
Cash Value
The cash value is the sum of the value in each investment option, any fixed
account and the policy loan account. On the policy date, the cash value in each
investment option is equal to the portion of the initial premium allocated to
the investment option. After the policy date the cash value equals the sum of
the value in the fixed accounts and in the investment options you have selected.
The cash value reflects:
* premiums paid;
* the monthly deductions;
* the investment experience of the investment options 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.
Cash Surrender Value and Net Cash Value
Your cash surrender value equals your cash value less the surrender charge. Your
net cash value equals the cash surrender value less any debt.
During the insured's life, you may:
* take loans based on the net cash value;
* make partial surrenders (after the 5th policy anniversary); or
* surrender the policy for its net cash value.
Method of Determining Your Cash Value Allocated to an Investment Option
The value of your policy will go up or down depending upon the investment
performance of the investment option(s) you choose and the charges and
deductions made against your cash value. In order to keep track of the value of
your cash value, we use a unit of measure we call an accumulation unit. (An
accumulation unit works like a share of a mutual fund.)
Every business day we determine the value of an accumulation unit by multiplying
the accumulation unit value for the immediately preceding business day by a
factor for the investment option for the current business day.
The factor is determined by:
* dividing the value of an investment option at the end of the current
business day by the value of an investment option for the previous business
day; and
* subtracting the expense charge.
The value of an accumulation unit may go up or down from day to day.
When you make a premium payment, we credit your policy with accumulation units.
The number of accumulation units credited is determined by dividing the amount
of premiums allocated to the investment option by the value of the accumulation
unit for that investment option. When we assess any charges we do so by
deducting accumulation units from your policy. When you take a loan we reduce
the number of the accumulation units in your policy and transfer the amount to
the loan account.
Our business day is each day that we and the New York Stock Exchange are open
for business. Our business day closes when the New York Stock Exchange closes,
usually 4:00 p.m. Eastern time.
INVESTMENT CHOICES
The policy offers investment options which invest in various funds. The
investment options listed below are currently available in connection with the
policy.
You should read this prospectus and the accompanying prospectuses for the
investment options carefully before investing. Certain portfolios may not be
available under the policy offered by this prospectus.
The investment objectives and policies of certain investment options are similar
to the investment objectives and policies of other mutual funds that the
investment advisers manage. Although the objectives and policies may be similar,
the investment results of the investment options may be higher or lower that the
results of such other mutual funds. The investment advisers cannot guarantee,
and make no representation, that the investment results of similar funds will be
comparable even though the funds have the same advisers.
FEDERATED INSURANCE SERIES
Advised by Federated Investment Management Company
Federated High Income Bond Fund II
Federated Prime Money Fund II
Federated Utility Fund II (seeks high current income and moderate
capital appreciation by investing in securities of utility companies)
THE ALGER AMERICAN FUND
Advised by Fred Alger Management, Inc.
Alger American Growth Portfolio
Alger American Mid-Cap Growth Portfolio
Alger American Small Capitalization Portfolio
SOGEN VARIABLE FUNDS, INC.
Advised by Societe Generale Asset Management Corp.
SoGen Overseas Variable Fund
VAN ECK WORLDWIDE INSURANCE TRUST
Advised by Van Eck Associates Corporation
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Hard Assets Fund
VARIABLE INSURANCE PRODUCTS FUND (VIP) and
VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
Advised by Fidelity Management & Research Company
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio (long-term capital appreciation)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Index 500 Portfolio
MFS VARIABLE INSURANCE TRUST
Advised by MFS Investment Management
MFS Emerging Growth Series
MFS Growth With Income Series
MFS Research Series
MFS Total Return Series (seeks long-term capital growth and future income)
JANUS ASPEN SERIES
Advised by Janus Capital Corporation
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen International Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Shares of the investment options may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with us. Certain
investment options may also be sold directly to qualified plans. The funds
believe that offering their shares in this manner will not be disadvantageous to
you.
We may enter into certain arrangements under which we are reimbursed by the
investment options' advisers, distributors and/or affiliates for the
administrative services which we provide to the funds.
Substitution and Limitations on Further Investments
We may substitute one of the investment options you have selected with another
investment option. We will not do this without the prior approval of the
Securities and Exchange Commission. We may also limit further investment in an
investment option. We will give you notice of our intention to do this.
Fixed Account Options
You may allocate premiums and cash values to one of our fixed account options.
Fixed Account I is part of our general account, and will offer a uniform
interest rate guaranteed for one policy year by us. At our discretion, we may
declare an excess interest rate for this account. Fixed Account II offers
various interest rates and time periods to select from. We have segregated our
assets in Fixed Account II from our general account. The interest rates offered
by Fixed Account II will depend on the time period you select. In certain
circumstances, if you make a surrender from Fixed Account II before the
expiration of the time period, you may be subject to an interest adjustment. The
adjustment may be positive or negative.
Transfers
You can make transfers as described below. We have the right to terminate or
modify these transfer provisions.
You can make transfers by telephone. If you own the policy with a joint owner,
unless we are instructed otherwise, we will accept instructions from either you
or the other owner. We will use reasonable procedures to confirm that
instructions given to us by telephone are genuine. If we fail to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. However, we will not be liable for following telephone
instructions that we reasonably believe to be genuine. We may tape record
telephone instructions.
Transfers are also subject to the following:
* Currently, you can make 12 transfers every policy year without charge.
* We will assess a $25 transfer fee for each transfer in excess of the
free 12 transfers allowed per policy year. Transfers made pursuant to
the dollar cost averaging option and the automatic transfer option
will not count in determining the application of any transfer fee.
* The minimum amount which you can transfer is $250 or your entire value
in the investment option or any fixed account option, if it is less.
This requirement is waived if the transfer is made in connection with
the dollar cost averaging option or the automatic transfer option.
* You may not make a transfer until after the end of the free-look
period.
* A transfer will be effected as of the end of the normal business day
when we receive an acceptable transfer request.
* We are not liable for a transfer made in accordance with your
instructions.
* Your right to make transfers is subject to modification if we
determine, in our sole opinion, that the exercise of the right by one
or more owners is, or would be, to the disadvantage of other owners.
Restrictions may be applied in any manner reasonably designed to
prevent any use of the transfer right which is considered by us to be
to the disadvantage of other owners. A modification could be applied
to transfers to, or from, one or more of the investment options and
could include, but is not limited to:
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
investment options by an owner at any one time.
* 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
request for purchase of another investment option). In such a case,
the redemption order would be processed at the source investment
option's next determined accumulation unit value. However, the
purchase into the new investment option would be effective at the next
determined accumulation unit value for the new investment option only
after we receive the proceeds from the source investment option, or we
otherwise receive cash on behalf of the source investment option.
* Transfers do not change your allocation instructions for future
premium payments.
Dollar Cost Averaging
Dollar cost averaging allows you to systematically transfer a set amount each
month (for a period of 6 or 12 months) from the Federated Prime Money Fund II to
any of the investment options or Fixed Account I. By allocating amounts on a
regularly scheduled basis as opposed to allocating the total amount at one
particular time, you may be less susceptible to the impact of market
fluctuations. Dollar cost averaging may not be available in your state.
If you select this option, we will open a dollar cost averaging account for you.
You must have at least $1,000 in the Federated Prime Money Fund II in order to
participate in the dollar cost averaging option. The minimum amount which can be
transferred each month is $100, or 10% of the total amount being transferred.
Dollar cost averaging transfers will begin on the date you request, but no
sooner than 7 business days after we receive the request provided the transfers
do not begin until 30 days after the effective date of your policy. All dollar
cost averaging transfers are made effective the same day each month. However,
this day may not be later than the 28th of each month. If the calender day
selected is not a business day, transfers are made as of the next business day.
Dollar cost averaging will terminate when any of the following occurs:
* at the end of the 6 or 12 month period you designate; or
* within 7 days of your written request to terminate theses transfers.
If this option is terminated, all money remaining in the dollar cost averaging
account will be transferred to Fixed Account I. We have the right to modify,
discontinue or suspend the dollar cost averaging option. If you participate in
the dollar cost averaging option, the transfers made under the program are not
taken into account in determining any transfer fee. There is no additional
charge for this option.
Dollar cost averaging does not assure a profit and does not protect against loss
in declining markets. Dollar cost averaging involves continuous investment in
the selected investment option(s) regardless of fluctuating price levels of the
investment option(s). You should consider your financial ability to continue the
dollar cost averaging option through periods of fluctuating price levels.
Automatic Transfer Option
Once your money has been allocated among the investment choices, the performance
of the elected options may cause your allocation to shift. You can direct us to
automatically rebalance your cash value in selected investment options and Fixed
Account I to return to your original percentage allocations by selecting our
automatic transfer option. The automatic transfer option may not be available in
your state.
You have the choice of rebalancing monthly, quarterly, semi-annually or
annually. All transfers must take place before the 28th of the month. Allocation
percentages must be in whole numbers.
If you participate in the automatic transfer option, the transfers made under
the program are not taken into account in determining any transfer fee. You may
stop the automatic transfer option at any time by written notice. We must
receive your written notice at least seven days before the first business day in
a new period. Once automatic transfer has been elected, any subsequent transfer
instructions that differ from the then current instructions are treated as a
request to change the automatic transfer allocation. All changes must be by
written notice.
Example:
Assume that you want your initial premium split between 2 investment
options. You want 80% to be in the MFS Growth With Income Series and 20% to
be in the Janus Aspen International Growth Portfolio. Over the next 2 1/2
months the domestic market does very well while the international market
performs poorly. At the end of the quarter, the MFS Growth With Income
Series now represents 86% of your holdings because of its increase in
value. If you had chosen to have your holdings rebalanced quarterly, on the
first day of the next quarter, we would sell some of your units in the MFS
Growth With Income Series to bring its value back to 80% and use the money
to buy more units in the Janus Aspen International Growth Portfolio to
increase those holdings to 20%.
DEATH BENEFIT
The amount of the death benefit depends on the total specified amount of
insurance, your cash value on the date of the insured's death and the death
benefit option (Option 1 or Option 2) in effect at that time. The insured
is the person whose life is covered by this policy. The insured is named on
the schedule page of your policy. The actual amount we pay the beneficiary
will be reduced by any outstanding debt and any due and unpaid premiums.
The initial specified amount and the death benefit option in effect on the
policy date (the date when the insured's life is covered under the policy) are
shown on the schedule page of your policy.
Option 1. The amount of the death benefit under Option 1 is the greater of:
* the specified amount; or
* the applicable percentage of the cash value on the date of death.
Option 2. The amount of the death benefit under Option 2 is the greater of:
* the specified amount plus the cash value on the date of death; or
* the applicable percentage of the cash value on the date of death.
Death Proceeds
The death proceeds equal:
* the death benefit provided by your policy; plus
* any insurance on the insured's life that may be provided by riders to your
policy; less
* any debt; less
* any due and unpaid premiums.
We will pay the death proceeds after we receive due proof of death and any
other information that we reasonably require. The death proceeds may be
adjusted under certain conditions.
Change in Specified Amount
You may change the specified amount after this policy has been in force for
1 year subject to the following:
* You must request the change in writing.
* A decrease will be applied first against prior increases, if any, on a
last-in, first-out basis, then against the initial specified amount. A
decrease in specified amount will not reduce the specified amount lower
than $100,000. A prorata share of any applicable surrender charge may
apply.
* An increase in specified amount will require proof of insurability.
* Any change in the specified amount must be for at least $25,000.
If you increase the specified amount, we will deduct a $10.00 monthly specified
amount increase fee for the first 12 months after the increase.
A change will be effective on the monthly date following our approval or
recording of the change. We will show the effective date of any change in
specified amount in a supplemental policy schedule we will send you.
Change in Death Benefit Option
You may change the death benefit option subject to the following:
* You must request the change in writing.
* If you want to change death benefit Option 1 to Option 2, you must submit
proof of insurability satisfactory to us. The specified amount will be
reduced by the amount of cash value so that the death benefit is not
increased as of the date of change.
* If you want to change death benefit Option 2 to Option 1, the specified
amount will be increased by the amount of cash value.
Other Riders
Accelerated Benefit Rider
You can elect the accelerated benefit rider. This rider provides that you may
elect to receive an advance of the death benefit proceeds of the policy if the
insured is terminally ill, as defined in the rider. Receipt of an accelerated
death benefit amount may be taxable. You should contact your personal tax or
financial adviser for specific information.
The maximum accelerated death benefit will be the lesser of:
* 75% of the policy death benefit on the day we receive the request; or
* $250,000 from all policies in force with us.
If payments are made in other than a lump sum, the minimum amount of any payment
will be $500. Surrender charges will not be assessed against any benefits paid
under this rider.
This rider terminates on the earliest of: the date the policy terminates, or the
date you give us written notice to terminate; or the date that the benefit
advance plus accrued interest equals the policy death benefit less all debt.
Death benefits, cash values, and loan values, if any, will be reduced if a
benefit is paid pursuant to this rider. Also, the receipt of an accelerated
death benefit amount may adversely affect the recipient's eligibility for
Medicaid or other government benefits or entitlements.
Accidental Death Benefit Rider
You can elect the accidental death benefit rider. This rider provides that if
the insured dies accidentally (as defined in the rider), we will pay the
accidental death benefit amount shown on your policy schedule. The injury that
causes the death must occur after attained age 1 and before the policy
anniversary on or after the insured's 70th birthday.
This rider terminates on the policy anniversary on or after the insured's age
70; or if you give us written notice to terminate it; or when the policy
terminates.
Additional Insurance Rider
You can elect the additional insurance rider. This rider provides that we will
pay the additional insurance death benefit when we receive due written proof of
the insured's death. The additional insurance death benefit will be the
additional insurance specified amount shown on your policy schedule less the
excess, if any, of 1 over 2 or 3, where:
1 is the cash value on the date of death times the applicable percentage of
cash value shown on your policy schedule;
2 is the specified amount, if death benefit option 1 is shown on your policy
schedule; and
3 is the specified amount plus the cash value, if death benefit option 2 is
shown on your policy schedule.
This rider terminates when you give us written notice to terminate it; or on the
policy anniversary on or after the insured's age 95; or when the policy
terminates.
We require an additional premium for this rider as shown on your policy
schedule.
Term Insurance on Children Rider
You can elect the term insurance on children rider pursuant to company
underwriting guidelines and state laws. This rider provides that we will pay the
beneficiary an amount if a covered child's (as defined in the rider) death
occurs while the rider is in force or within a certain period as described
below:
* $250 if the covered child's death occurs after he/she is 14 days old and
before he/she is 6 months old; or
* $1,000 if the covered child's death occurs on or after he/she turns 6
months old and before the policy anniversary nearest the covered child's
22nd birthday.
If the policy terminates because the insured dies, existing coverage on any
child under this rider will be continued as fully paid-up insurance until the
child's 22nd birthday. At age 22, conversion will be allowed as provide in the
rider.
This rider terminates when you give us written notice to terminate it and send
us the policy to show the change; or on the policy anniversary on or nearest the
insured's age 65; or when the policy terminates.
The cost for this rider, as shown on your policy schedule, will be added to the
monthly deduction.
Other Insured Term Insurance Rider
You can elect the other insured term insurance rider. This rider provides that
we will pay the other insured (unless changed, the other insured is the person
named in the application for this rider) specified amount shown on your policy
schedule when we receive proof of the other insured's death.
Under certain conditions, you can change the other insured specified amount any
time after the rider is one year old by written notice to us.
This rider terminates at the earliest of: the policy date on or after the other
insured's 70th birthday; or the date you give us written notice to terminate it;
or the date the policy terminates.
We require an additional premium for this rider as shown on your policy
schedule.
YOU SHOULD READ THE RIDERS CAREFULLY FOR THE TERMS AND CONDITIONS OF EACH
SPECIFIC RIDER.
Settlements
When your policy becomes a claim because of the death of the insured, settlement
will be made upon due proof of death. Proceeds may be paid in a lump sum, or
under one of the optional modes of settlement described below. If no settlement
option has been chosen before the insured's death, the beneficiary may choose
one. Once the proceeds are applied under an optional mode of settlement, any
amounts payable are paid from our general account and will not be affected by
the investment experience of the investment options.
* Option 1 - Payment Certain. Under this option we pay you the cash value in
equal payments as specified. After each payment, interest of 3% compounded
annually is added to the remaining amount which has not been paid. Payments
are made until the amount applied, plus interest, is exhausted. The total
of all payments made each year must be at least 5% of the amount applied
under this option. Any outstanding balance may be withdrawn at any time.
* Option 2 - Period Certain. Under this option we pay the cash value in equal
payments over a designated period of time, as chosen by you.
* Option 3 - Life Annuity. Under this option we make monthly payments during
the lifetime of the payee.
* Option 4 - Life Annuity with a Period Certain. Under this option we make
monthly payments while the payee lives. If the payee dies before we have
made all of the payments within the selected period, the payments will
continue until the end of the specified period. If, at any age, the amount
of payments is the same for 2 or more periods certain, payment will be made
as if the longest period was selected.
* Additional Options. We may make other options available.
The portion of the payments received under a settlement option which are in
excess of the death benefit proceeds will be treated as taxable income (see "Tax
Treatment of Settlement Options" under "More Information - Federal Tax Status").
TAXES
Note: We have prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advice. You should
consult your tax adviser about your own circumstances. We have included an
additional discussion regarding taxes under the section "More Information."
Life Insurance in General
Life insurance, such as this policy, is a means of providing for death
protection and setting aside money for future needs. Congress recognized the
importance of such planning and provided special rules in the Internal Revenue
Code (Code) for life insurance.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your life insurance policy until you take the money out.
Beneficiaries generally are not taxed when they receive the death proceeds upon
the death of the insured. However, estate taxes may apply.
Taking Money Out of Your Policy
You, as the owner, will not be taxed on increases in the value of your policy
until a distribution occurs either as a surrender or as a loan. If your policy
is a MEC, any loans or surrenders from the policy will be treated as first
coming from earnings and then from your investment in the policy. Consequently,
these distributed earnings are included in taxable income.
The Code also provides that any amount received from a MEC which is included in
income may be subject to a 10% penalty. The penalty will not apply if the income
received is:
1) paid on or after the taxpayer reaches age 59 1/2 ;
2) paid if the taxpayer becomes totally disabled (as that term is defined in
the Code); or
3) in a series of substantially equal payments made annually (or more
frequently) for the life or life expectancy of the taxpayer.
If your policy is not a MEC, any surrender proceeds will be treated as first a
recovery of the investment in the policy and to that extent will not be included
in taxable income. Furthermore, any loan will be treated as indebtedness under
the policy and not as a taxable distribution. See "Federal Tax Status" in the
section "More Information" for more details including an explanation of whether
your policy is a MEC.
Diversification
The Code provides that the underlying investments for a variable life policy
must satisfy certain diversification requirements in order to be treated as a
life insurance contract. We believe that the portfolios are being managed so as
to comply with such requirements.
Under current federal tax law, it is unclear as to the circumstances under which
you, because of the degree of control you exercise over the underlying
investments, and not us would be considered the owner of the shares of the
portfolios. If you are considered the owner of the investments, it will result
in the loss of the favorable tax treatment for the policy. It is unknown to what
extent owners are permitted to select portfolios, to make transfers among the
portfolios or the number and type of portfolios owners may select from without
being considered the owner of the shares. If guidance from the Internal Revenue
Service is provided which is considered a new position, the guidance would
generally be applied prospectively. However, if such guidance is considered not
to be a new position, it may be applied retroactively. This would mean that you,
as the owner of the policy, could be treated as the owner of the portfolios. Due
to the uncertainty in this area, we reserve the right to modify the policy in an
attempt to maintain favorable tax treatment.
ACCESS TO YOUR MONEY
Policy Loans
You may obtain a loan at any time while your policy is in force. Your request
for a loan must be in writing. The amount of the loan and all existing loans may
not be more than 90% of the net cash value as of the date of the loan. The
amount of the loan may not be less than $500. A loan will only be made upon
proper assignment of your policy to us with the policy as the sole security for
the loan.
When you take a policy loan, we will transfer an amount equal to the policy loan
from the investment option(s) or Fixed Account I to the policy loan account.
Unless you state otherwise, transfers from the investment options to the policy
loan account will be on a pro-rata basis as of the loan date. If you do not have
a sufficient amount in the investment option(s), we will transfer any remaining
amount from Fixed Account I. We will also transfer any loan interest that
becomes due and unpaid in the same manner. Amounts transferred to the policy
loan account will earn interest daily from the date of transfer. Policy loans
may also have federal tax consequences (see "Federal Tax Status").
Effect of a Loan
Policy loans will have a permanent effect on any death benefit and cash
surrender value of your policy. The effect may be favorable or unfavorable. If
loans are not repaid, the debt will reduce the amount of any death proceeds.
Loans have a permanent effect on the policy because the amount transferred to
the policy loan account will not share in the investment results of the
investment options while the loan is outstanding. If the policy loan account
earnings rate is less than the performance of the selected investment options
and/or Fixed Account I, the values and benefits under the policy will be reduced
(and the policy may even terminate) as a result of the loan.
Loan Interest
The loan interest rate charged is currently 8%. The loan interest credited to
your policy is currently 6%. Interest is charged daily and is payable at the end
of each policy year. 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.
We will credit a higher effective annual interest rate in the following
circumstances;
* for amounts borrowed up to an amount equal to cash value less the aggregate
premium payments made to date (preferred loans); and
* for all loans against policies that are in the 11th policy year or later.
Preferred loans include the amount of any outstanding policy loan transferred in
a tax-free exchange.
Repaying Policy Debt
The debt, or any part, may be repaid at any time as long as the policy is in
force. Any debt outstanding will be deducted before any benefit proceeds are
paid. When you repay part or all of the loan, we will transfer an amount equal
to the amount you repay from the policy loan account to an investment option or
to any fixed account.
When there is debt outstanding, any payments received will be applied first as a
premium payment, rather than repayment of debt, unless we are instructed
otherwise. If total debt equals or exceeds the cash value less the surrender
charge, your policy will terminate without value. A termination of the policy
with a loan outstanding may have federal income tax consequences (see "More
Information - Federal Tax Status").
Partial Surrenders
You may make a partial surrender at any time after the 5th policy anniversary by
written notice.
When you make a partial surrender, we will reduce the cash value by the partial
surrender amount and any surrender charges. We will require that any partial
surrender amounts be first deducted from the cash value in the investment
options proportionately among all accounts unless the owner specifically
requests otherwise. 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.
The minimum partial surrender amount is currently $500. We may assess a
surrender charge on the amount surrendered. See "Surrender Charges" above.
Partial surrenders will be allowed only if the policy continues to qualify as a
contract of life insurance under the Code. We will also limit the maximum amount
of all partial surrenders you can make in a policy year to the greater of:
* 10% of the total premium payments; or
* cash value less total premiums paid less any policy debt.
Full Surrenders
You may completely surrender your policy and receive the net cash value at any
time while the policy is in force. If you make a full surrender, we will require
that you return 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 which
your written request is received. All coverage will end on the date of
surrender.
Partial and full surrenders may have federal tax consequences (see "Federal Tax
Status").
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, we may
require additional documentation of a customary nature.
OTHER INFORMATION
The Variable Account
We established a variable account, Valley Forge Life Insurance Company Variable
Life Separate Account (Variable Account), to hold the assets that underlie the
contracts. Our Board of Directors adopted a resolution to establish the Variable
Account under Illinois insurance law on February 12, 1996. We have registered
the Variable Account with the Securities and Exchange Commission as a unit
investment trust under the Investment Company Act of 1940.
The assets of the Variable Account are held in our name on behalf of the
Variable Account and legally belong to us. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts we may issue.
We reserve the right to modify the structure or operation of the variable
Account. However, we guarantee that a modification will not affect the value of
your contract.
Distributor
The policy is sold by licensed insurance agents, where the policy may be
lawfully sold, who are registered representatives of broker-dealers which are
registered under the Securities Exchange Act of 1934 and are members of the
National Association of Securities Dealers, Inc.
CNA Investor Services, Inc. ("CNA/ISI") serves as the distributor for the
policies. CNA/ISI is located at CNA Plaza, Chicago, Illinois 60685.
Broker-dealers will be paid commissions up to 90% of premiums paid.
Suspension of Payments or Transfers
We may be required to suspend or postpone any payments or transfers for any
period when:
1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2) trading on the New York Stock Exchange is restricted;
3) an emergency exists as a result of which disposal of shares of the
portfolios is not reasonably practicable or we cannot reasonably value
the shares of the portfolios;
4) during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We have the right to defer payment of any surrender or transfer of any fixed
account value for not more than 6 months from the date we receive your written
notice, unless otherwise provided by your state.
Ownership
Owner. You, as the owner of the policy, have all of the rights under the policy
while the insured is living. Your rights in the policy belong to your estate if
you die before the insured dies and there is no joint owner or contingent owner.
Joint Owner. The policy can be owned by joint owners. Joint owners have equal
ownership rights. Authorization of both joint owners is required for all policy
changes except for transfers and allocations.
Contingent Owner. The contingent owner, if any, is named in the application,
unless changed. You may name a contingent owner at any time while the insured is
living by providing us with 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.
The contingent owner, if any, will become the owner if the named owner dies
before the date of the insured's death. If there are joint owners, the
contingent owner will become the owner if both named joint owners die before the
insured.
Beneficiary. The beneficiary is the person or entity you name to receive any
death proceeds. The primary beneficiary is the person who will be paid death
proceeds when the insured dies. The contingent beneficiary, if any, will become
the beneficiary if no primary beneficiary is living on the date of the insured's
death. More than one primary and contingent beneficiary can be named. If there
is more than one primary beneficiary alive when the insured dies, we will pay
the primary beneficiaries in equal shares unless you provide otherwise.
The primary beneficiary and contingent beneficiary on the policy date are named
in the application. While the 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.
If any beneficiary dies before the insured, that beneficiaries interest in the
death benefit will end. If any beneficiary dies at the same time as the insured,
or within 30 days of the insured, that beneficiary's interest in the death
benefit will end if no benefits have been paid to that beneficiary. If the
interest of all designated beneficiaries has ended when the insured dies, we
will pay the death benefit to you, or your estate if you are not living.
Assignment
You can assign any or all rights under your policy while the insured is living.
Assignment of all rights is a change of ownership. An irrevocable beneficiary
must consent in writing to any assignment. We are not responsible for the
sufficiency or validity of any assignment. An assignment will not affect any
payments we made or actions we have taken before we receive notice of the
assignment.
An assignment may be a taxable event. You should consult a tax adviser if you
want to assign the policy.
MORE INFORMATION
Executive Officers and Directors
As of September 30, 1999, the directors and executive officers of Valley Forge
Life Insurance Company (Valley Forge) and their principal occupations for the
past 5 years are as follows:
<TABLE>
<CAPTION>
Name Principal Occupations During the Past Five Years
<S> <C>
Bernard L. Hengesbaugh Chairman of the Board and Chief Executive
CNA Plaza Officer of CNA since February, 1999. Prior
Chicago, IL 60685 thereto, Mr. Hengesbaugh served as Executive
Vice President and Chief Operating Officer of
CNA since February, 1998. Prior thereto, Mr.
Hengesbaugh was Senior Vice President of CNA
since November, 1990. Mr. Hengesbaugh has
served as Director since February, 1999.
Peter E. Jokiel Senior Vice President of CNA since November,
CNA Plaza 1990. Chief Financial Officer of CNA from
Chicago, IL 60685 November, 1990 through October, 1997. Mr.
Jokiel served as a Director of Valley Forge from
July, 1992 through October, 1997.
Jonathan D. Kantor Senior Vice President, Secretary and General
CNA Plaza Counsel of CNA since April, 1997. Group Vice
Chicago, IL 60685 President of CNA since April, 1994. Prior
thereto, Mr. Kantor was a partner at the law
firm of Shea & Gould.* Mr. Kantor has served
as a Director of Valley Forge since April, 1997.
Robert V. Deutsch** Senior Vice President, Chief Financial Officer
CNA Plaza and Director since August 16, 1999. Prior
Chicago, IL 60685 thereto, Chief Financial Officer for Executive
Risk, Inc.
Tom Taylor Executive Vice President, Underwriting Policy
CNA Plaza Group since June 1999. Specialty Operations,
Chicago, IL 60685 1998-1999. President and Chief Operating
Officer, Financial Insurance, 1992-1998.
Carol Dubnicki Senior Vice President, Human Resources since
CNA Plaza May, 1998. Prior thereto, Senior Vice
Chicago, IL 60685 President, Human Resources, Amoco, 1993-1998.
Donald P. Lofe, Jr. Group Vice President, Corporate Finance
CNA Plaza Department since October 1998. Prior thereto,
Chicago, IL 60685 partner-in-charge of PricewaterhouseCoopers LLP.
John M. Squarok Group Vice President of CNA since July 1998.
CNA Plaza Prior thereto, Mr. Squarok was Chief Financial
Chicago, IL 60685 Officer of various businesses of GE Capital from
August 1988 until July 1998. Director since
August 1998.
</TABLE>
Each director is elected to serve until the next annual meeting of stockholders
or until his or her successor is elected and shall have qualified. Some
directors hold various executive positions with insurance company affiliates of
Valley Forge. Executive officers serve at the discretion of the Board of
Directors.
* Shea & Gould declared bankruptcy in 1995.
** Mr. Deutsch became acting Chief Financial Officer on August 16, 1999.
Voting
Pursuant to our view of present applicable law, we will vote the shares of the
portfolios at special meetings of shareholders in accordance with instructions
received from all owners having a voting interest. We will vote shares for which
we have not received instructions. We will vote all shares in the same
proportion as the shares for which we have received instructions. We will vote
our shares in the same manner.
If the Investment Company Act of 1940 or any regulation thereunder is amended or
if the present interpretation of the Act changes so as to permit us to vote the
shares in our own right, we may elect to do so.
Disregard of Voting Instructions
We may, when required to do so by state insurance authorities, vote shares of
the portfolios without regard to instructions from owners. We will do this if
such instructions would require the shares to be voted to cause a portfolio to
make, or refrain from making, investments which would result in changes in the
sub-classification or investment objectives of the portfolio. We may also
disapprove changes in the investment policy initiated by owners or
trustees/directors of the portfolios, if such disapproval:
* is reasonable and is based on a good faith determination by us that
the change would violate state or federal law;
* the change would not be consistent with the investment objectives of
the portfolios; or
* varies from the general quality and nature of investments and
investment techniques used by other portfolios with similar investment
objectives underlying other variable contracts offered by us or of an
affiliated company.
In the event we do disregard voting instructions, a summary of this action and
the reasons for such action will be included in the next semi-annual report to
owners.
Legal Opinions
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the policies.
Our Right to Contest
Except for accidental death and disability benefits, we cannot contest your
policy after it has been in force during the lifetime of the insured for two
years from the policy date; nor can we contest any increased benefit or
reinstatement after it has been in force, while the insured is alive, for two
years after the effective date of such increase or reinstatement.
We cannot contest your policy, any reinstatement or any increase in benefits
after the policy date of the policy, reinstatement, or increase in benefits
unless:
* an answer in the application for the policy, reinstatement or increase
in benefits was not true or correct; and
* if we had known the truth, we would not have issued the policy as we
did or increased the benefits.
Any statement made by the insured will not be used in any contest unless a copy
is furnished to the beneficiary.
Federal Tax Status
Note: The following description is based upon our understanding of current
federal income tax law applicable to life insurance in general. We cannot
predict the probability that any changes in such laws will be made. Purchasers
are cautioned to seek competent tax advice regarding the possibility of such
changes. Section 7702 of the Internal Revenue Code of 1986, as amended ("Code"),
defines the term "life insurance contract" for purposes of the Code. We believe
that the policies to be issued will qualify as "life insurance contracts" under
section 7702. We do not guarantee the tax status of the policies. Purchasers
bear the complete risk that the policies may not be treated as "life insurance"
under federal income tax laws. Purchasers should consult their own tax advisers.
It should be further understood that the following discussion is not exhaustive
and that special rules not described in this prospectus may be applicable in
certain situations.
Introduction. The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion herein is based upon our understanding of current
federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of those current federal income
tax laws or of the current interpretations by the Internal Revenue Service.
We are taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from us and its
operations form a part of us.
Diversification. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance policy will not be treated as life
insurance for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the policy as a life insurance contract would result in imposition of federal
income tax to the owner with respect to earnings allocable to the policy prior
to the receipt of payments under the policy. The Code contains a safe harbor
provision which provides that life insurance policies, such as these policies,
will meet the diversification requirements if, as of the close of each quarter,
the underlying assets meet the diversification standards for a regulated
investment company and no more than fifty-five (55%) percent of the total assets
consist of cash, cash items, U.S. Government securities and securities of other
regulated investment companies. There is an exception for securities issued by
the U.S. Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment portfolios underlying variable contracts such as the policies. The
regulations amplify the diversification requirements for variable contracts set
forth in the Code and provide an alternative to the safe harbor provision
described above. Under the Regulations, an investment portfolio will be deemed
adequately diversified if: (i) no more than 55% of the value of the total assets
of the portfolio is represented by any one investment; (ii) no more than 70% of
the value of the total assets of the portfolio is represented by any two
investments; (iii) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (iv) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments. For purposes of these regulations, all securities of the same
issuer are treated as a single investment. The Code provides that, for purposes
of determining whether or not the diversification standards imposed on the
underlying assets of variable contracts by Section 817(h) of the Code have been
met, "each United States government agency or instrumentality shall be treated
as a separate issuer." We intend that each portfolio underlying the policies
will be managed by the investment managers in such a manner as to comply with
these diversification requirements.
The Treasury Department has indicated that the diversification regulations do
not provide guidance regarding the circumstances in which owner control of the
investments of the separate account will cause the owner to be treated as the
owner of the assets of the separate account, thereby resulting in the loss of
favorable tax treatment for the policy. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of owner control which may be exercised under the policy is different
in some respects from the situations addressed in published rulings issued by
the Internal Revenue Service in which it was held that the policyowner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the owner to be
considered the owner of the assets of the separate account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in you being retroactively
determined to be the owner of the assets of the separate account.
Due to the uncertainty in this area, we reserve the right to modify the policy
in an attempt to maintain favorable tax treatment.
Tax Treatment of the Policy. The policy has been designed to comply with the
definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, we have relied on the interim guidance provided in
IRS Notice 88-128 and proposed regulations issued on July 5, 1991. Currently,
there is even less guidance as to a policy issued on a substandard risk basis
and thus it is even less clear whether a policy issued on such basis would meet
the requirements of Section 7702 of the Code.
While we have attempted to comply with Section 7702, the law in this area is
very complex and unclear. There is a risk, therefore, that the Internal Revenue
Service will not concur with our interpretations of Section 7702 that were made
in determining such compliance. In the event the policy is determined not to so
comply, it would not qualify for the favorable tax treatment usually accorded
life insurance policies. You should consult your own tax advisers with respect
to the tax consequences of purchasing the policy.
Policy Proceeds. The tax treatment accorded to loan proceeds and/or surrender
payments from the policies will depend on whether the policy is considered to be
a MEC. (See "Tax Treatment of Loans and Surrenders.") Otherwise, we believe that
the policy should receive the same federal income tax treatment as any other
type of life insurance. As such, the death benefit thereunder is excludable from
the gross income of the beneficiary under Section 101(a) of the Code. Also, you
are not deemed to be in constructive receipt of the Net Cash Value, including
increments thereon, under a policy until there is a distribution of such
amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of policy proceeds, depend on the circumstances of each
owner or beneficiary.
Tax Treatment of Loans And Surrenders. Section 7702A of the Code sets forth the
rules for determining when a life insurance policy will be deemed to be a MEC. A
MEC is a contract which is entered into or materially changed on or after June
21, 1988 and fails to meet the 7-pay test. A policy fails to meet the 7-pay test
when the cumulative amount paid under the policy at any time during the first 7
policy years exceeds the sum of the net level premiums which would have been
paid on or before such time if the policy provided for paid-up future benefits
after the payment of seven (7) level annual premiums. A material change would
include any increase in the future benefits or addition of qualified additional
benefits provided under a policy unless the increase is attributable to: (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first seven policy years; or (2) the
crediting of interest or other earnings (including policyholder dividends) with
respect to such premiums.
Furthermore, any policy received in exchange for a policy classified as a MEC
will be treated as a MEC regardless of whether it meets the 7-pay test. However,
an exchange under Section 1035 of the Code of a life insurance policy entered
into before June 21, 1988 for the policy will not cause the policy to be treated
as a MEC if no additional premiums are paid.
Due to the flexible premium nature of the policy, the determination of whether
it qualifies for treatment as a MEC depends on the individual circumstances of
each policy.
If the policy is classified as a MEC, then surrenders and/or loan proceeds are
taxable to the extent of income in the policy. Such distributions are deemed to
be on a last-in, first-out basis, which means the taxable income is distributed
first. Loan proceeds and/or surrender payments, including those resulting from
the lapse of the policy, may also be subject to an additional 10% federal income
tax penalty applied to the income portion of such distribution. The penalty
shall not apply, however, to any distributions: (1) made on or after the date on
which the taxpayer reaches age 59 1/2; (2) which is attributable to the taxpayer
becoming disabled (within the meaning of Section 72(m)(7) of the Code); or (3)
which is part of a series of substantially equal periodic payments made not less
frequently than annually for the life (or life expectancy) of the taxpayer or
the joint lives (or joint life expectancies) of such taxpayer and his
beneficiary.
If a policy is not classified as a MEC, then any surrenders shall be treated
first as a recovery of the investment in the policy which would not be received
as taxable income. However, if a distribution is the result of a reduction in
benefits under the policy within the first fifteen years after the policy is
issued in order to comply with Section 7702, such distribution will, under rules
set forth in Section 7702, be taxed as ordinary income to the extent of income
in the policy.
Any loans from a policy which is not classified as a MEC, will be treated as
indebtedness of the owner and not a distribution. Upon complete surrender or
lapse of the policy, if the amount received plus loan indebtedness exceeds the
total premiums paid that are not treated as previously surrendered by the policy
owner, the excess generally will be treated as ordinary income.
Personal interest payable on a loan under a policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Policy owners should seek competent tax advice on the tax consequences of taking
loans, distributions, exchanging or surrendering any policy.
Tax Treatment of Settlement Options. Under the Code, a portion of the settlement
option payments which are in excess of the death benefit proceeds are included
in the beneficiary's taxable income. Under a settlement option payable for the
lifetime of the beneficiary, the death benefit proceeds are divided by the
beneficiary's life expectancy and proceeds received in excess of these prorated
amounts are included in taxable income. The value of the death benefit proceeds
is reduced by the value of any period certain or refund guarantee. Under a fixed
payment or fixed period option, the death benefit proceeds are prorated by
dividing the proceeds over the payment period under the option. Any payments in
excess of the prorated amount will be included in taxable income.
Multiple Policies. The Code further provides that multiple MEC which are issued
within a calendar year period to the same owner by one company or its affiliates
are treated as one MEC for purposes of determining the taxable portion of any
loans or distributions. Such treatment may result in adverse tax consequences
including more rapid taxation of the loans or distributed amounts from such
combination of contracts. You should consult a tax adviser prior to purchasing
more than one MEC in any calendar year period.
Tax Treatment of Assignments. An assignment of a policy or the change of
ownership of a policy may be a taxable event. You should therefore consult a
competent tax adviser should you wish to assign or change the owner of your
policy.
Qualified Plans. The policies may be used in conjunction with certain Qualified
Plans. Because the rules governing such use are complex, you should not do so
until you have consulted a competent Qualified Plans consultant.
Income Tax Withholding. All distributions or the portion thereof which is
includible in gross income of the policy owner are subject to federal income tax
withholding. However, in most cases you may elect not to have taxes withheld.
You may be required to pay penalties under the estimated tax rules, if
withholding and estimated tax payments are insufficient.
Reports to Owners
At least once every policy year, we will send you a report showing current cash
values and other information required by laws and regulations. We will mail this
report to you at your last known address.
Legal Proceedings
There are no legal proceedings to which the Separate Account or the Distributor
is a party or to which the assets of the Separate Account are subject. We are
not involved in any litigation that is of material importance in relation to our
total assets or that relates to the Separate Account.
Experts
The financial statements of Valley Forge Life Insurance Company Variable Life
Separate Account and our consolidated financial statements as of and for the
year ended December 31, 1998 included in this prospectus have been audited by
______, independent auditors, as indicated in their reports included in this
prospectus, and are included herein, in reliance upon such reports and upon the
authority of said firm as experts in accounting and auditing.
Financial Statements
Our consolidated financial statements included herein should be considered only
as bearing upon our ability to meet our obligations under the policies.
(Financial Statements will be filed by Amendment)
APPENDIX
ILLUSTRATIONS OF POLICY VALUES
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, cash surrender values and
death benefits under a policy covering an insured of a given age on the policy
date, would vary over time if the planned premiums were paid annually and the
return on the assets in each portfolio 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 premiums accumulated at 5%
interest compounded annually. The hypothetical investment rates of return are
illustrative only and should not be considered 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
illustrated and will depend on a number of factors including the investment
allocations you make and prevailing rates. These illustrations assume that the
premiums are allocated equally among the 23 investment options available under
the policy, and that no amounts are allocated to the fixed account options.
The illustrations reflect the fact that the net investment returns on the assets
held in the investment options is lower than the gross after tax return of the
selected underlying portfolios. The tables assume an average annual expense
ratio of 0.86% of the average daily net assets of the portfolio available. The
following information summarizes the expenses by portfolio: Alger American
Growth (0.79%), Alger American MidCap Growth (0.84%), Alger American Small
Capitalization (0.89%), Federated High Income Bond II (0.78%), Federated Prime
Money Fund II (0.80%), Federated Utility Fund II (0.93%), VIP II Asset Manager
Portfolio (0.64%), VIP II Contrafund Portfolio (0.70%), VIP Equity-Income
Portfolio (0.58%), VIP II Index 500 Portfolio (0.35%), MFS Emerging Growth
Series (.85%), MFS Growth With Income Series (0.88%), MFS Research Series
(.86%), SoGen Overseas Portfolio (1.50%), Worldwide Emerging Markets (1.50%),
Worldwide Hard Assets Fund (1.16%) and Janus Aspen Capital Appreciation
Portfolio (0.92%), Janus Asepn Growth Portfolio (0.68%), Janus Aspen Balanced
Portfolio (0.74%), Janus Aspen Flexible Income Portfolio (0.73%), Janus Aspen
International Growth Portfolio (0.86%), and Janus Aspen Worldwide Growth
Portfolio (0.72%).
In addition, the illustrations reflect a daily charge assessed against the
investment options for assuming certain mortality and expense risks (expense
charges), which are equivalent to an effective annual charge of 0.90% during
policy years 1-10 and 0.45% during policy years 11 and later. After deduction of
portfolio expenses and the mortality and expense charges, the illustrated gross
annual investment rates of return of 0%, 6% and 12% would correspond to
approximate net annual rates of _____%, ____% and ____% , respectively during
Policy Years 1-10 and ____% , ____% and ____% during Policy Years 11 and later.
The illustrations also reflect the deduction of the premium charge and monthly
deduction for the hypothetical insured. The surrender charge is reflected in the
cash surrender value column. Our current cost of insurance charges and the
guaranteed maximum cost of insurance charges that we have a 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 assumes no loan
amount or partial withdrawals/surrenders or charges for supplemental and/or
rider benefits.
The illustrations are based on our Preferred Nonsmoker risk class. Upon request,
you will be furnished with a comparable illustration based on the proposed
insured's individual circumstances. Such illustrations may assume different
hypothetical rates of return than those illustrated in the following tables.
Because the death benefit values vary depending on the death benefit option in
effect, benefit options are illustrated separately.
The illustrations show contract values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated and
all net premiums are allocated to subaccounts.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ------------------ ---------------- ------------ --------------- -------------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
40
January 12, 2000
28
29
30
</TABLE>
-------------------------
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- --------------- ---------------- ------------ --------------- ------------- -------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ------------------ ---------------- ------------ --------------- ------------- ----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ------------------ --------------- ------------ --------------- ------------- --------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ------------------ ---------------- ------------ --------------- ------------- ----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ----------------- --------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ----------------- ---------------- ------------ --------------- ------------- ---------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ----------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ----------------- ---------------- ------------ --------------- ------------- ----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
ILLUSTRATION OF POLICY VALUES
<TABLE>
<CAPTION>
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ------------------ -------------- ------------ --------------- ------------- --------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
MALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ----------------- ---------------- ------------ --------------- ------------- ---------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values for a policy would bedifferent 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
individualpolicy years. No representation can be made by us or the funds
that these hypothetical rates of return can be achieved for any one year or
sustained over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE 45, PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
</TABLE>
- - -------------------------
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planned premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 6%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planed premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
<TABLE>
<CAPTION>
ILLUSTRATION OF POLICY VALUES
VALLEY FORGE LIFE INSURANCE COMPANY
FEMALE AGE 45 PREFERRED NON-SMOKER
$______________ ANNUAL PLANNED PREMIUM
$100,000 SPECIFIED AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE
HYPOTHETICAL GROSS INVESTMENT RETURN OF 12%
PREMIUMS
ACCUMULATED CASH
AT 5% INTEREST CASH SURRENDER DEATH
END OF POLICY YEAR PER YEAR VALUE VALUE BENEFIT
- ---------------- ---------------- ------------ --------------- ------------- -----------
<S> <C>
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
- - -------------------------
</TABLE>
* In the absence of additional premium, the policy would lapse
(1) Assumes that no policy loans have been made and no withdrawals have been
made.
(2) Assumes that the planed premium is paid in the beginning of each year.
Values would be different if premiums are paid with a different frequency
or in different amounts.
The hypothetical investment rates shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation
of past or future investment results. Actual rates of return may be more or
less than those shown and will depend on a number of factors including the
investment allocations by you, prevailing rates and rates of inflation. The
death benefit and cash values 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 us or the funds that these
hypothetical rates of return can be achieved for any one year or sustained
over any period of years.
PART II
UNDERTAKING TO FILE REPORTS
a. Subject to the terms and conditions of Section 15(d) of the Securities and
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 confined in that section.
b. Pursuant to Investment Company Act Section 26(e), Valley Forge Life Insurance
Company ("Company") hereby represents that the fees and charges deducted under
the Policy described in the Prospectus, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by the Company.
INDEMNIFICATION
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") 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 is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the 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, 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.
The registrant has no officers, directors or employees. The depositor and the
registrant do not indemnify the officers, directors of employees of the
depositor. CNA Financial Corporation, ("CNAFC") a parent of the depositor,
indemnifies the depositor's officers, directors and employees in their capacity
as such.
CNAFC indemnifies any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of CNAFC) by reason of the fact that he is or was a director,
officer, employee or agent of CNAFC, or was serving at the request of CNAFC as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such 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 CNAFC, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
CNAFC indemnifies any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of CNAFC to procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of CNAFC, or was serving at the
request of CNAFC as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's 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 CNAFC. No indemnification is made, however, 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 CNAFC
unless and only to the extent that a court determines that, despite the
adjudication of liability but in view of all of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court deems proper.
To the extent that any person referred to above is successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter, therein, CNAFC will indemnify such person
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith. CNAFC may advance to such a person, expenses
incurred in defending a civil or criminal action, suit or proceeding as
authorized by CNAFC's board of directors upon receipt of an undertaking by (or
on behalf of) such person to repay the amount advanced unless it is ultimately
determined that he is entitled to be indemnified.
Indemnification and advancement of expenses described above (unless pursuant to
a court order) is only made as authorized in the specific case upon a
determination that such indemnification or advancement of expenses is proper in
the circumstances because he has met the applicable standard of conduct. Such
determination must be made by a majority vote of a quorum of CNAFC's board of
directors who are not parties to the action, suit or proceeding or by
independent legal counsel in a written opinion or by CNAFC's stockholders.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the papers and documents:
The facing sheet
The Prospectus consisting of 81 pages.
Undertakings to file reports.
The signatures.
The following exhibits.
1.A. Copies of all exhibits required by paragraph A of instructions for Exhibits
in Form N-8B-2.
1. Resolution of the Board of Directors of Valley Forge Life Insurance
Company (the "Company") establishing Valley Forge Life Insurance
Company Variable Life Separate Account (the "Variable Account")**
2. Copy of Agreement for Lockbox Services*
3.(a) Not Applicable
(b) Form of underwriting/distribution agreement between the Company
and CNA Investor Services, Inc. (to be filed by amendment)
(c) Schedule of Sales Commissions (to be filed by amendment)
4. Not applicable
5. Flexible Premium Variable Insurance Policy (the "Policy")
(a) Form of Waiver of Monthly Deduction Rider
(b) Form of Right to Convert Rider
(c) Form of Accelerated Benefit Rider
(d) Form of Total Disability Waiver of Premium Rider
(e) Form of Accidental Death Benefit Rider
(f) Form of Additional Insurance Rider
(g) Form of Automatic Transfer Rider
(h) Form of Dollar Cost Averaging Rider
(i) Form of Term Insurance on Childen Rider
(j) Form of Other Insured Term Insurance Rider
6.(a)Amended and restated Articles of Incorporation of the Company**
(b) By-laws of the Company**
7. Not applicable
8.(a)Form of participation agreement between The Alger American Fund and
the Company*
(b) Form of participation agreement between Variable Insurance
Products Fund and the Company*
(c) Form of participation agreement between Variable Insurance
Products Fund II and the Company*
(d) Form of participation agreement between MFS Variable Insurance
Trust and the Company*
(e) Form of participation agreement between SoGen Variable Funds,
Inc. and the Company*
(f) Form of participation agreement between Van Eck Worldwide
Insurance Trust and the Company*
(g) Form of participation agreement between Federated Insurance
Management Series and the Company*
(h) Form of participation agreement between Janus Aspen Series and
the Company****
9. Not applicable
10. Form of Policy Application (to be filed by amendment)
11. Description of issuance, transfer and redemption procedures***
B. Not applicable
C. Not applicable
2. Opinion and Consent of Counsel (to be filed by Amendment)
3. Not applicable
4. Not applicable
5. Not Applicable
6. Consent of Actuary (to be filed by Amendment)
7. Consent of Independent Auditors (to be filed by Amendment)
* Incorporated by reference to the Form N-4 Registration Statement filed
electronically with the Securities and Exchange Commission on September 4,
1996 (File No.333-1087).
** Incorporated by reference to the N-4 Registration Statement filed
electronically with the Securities and Exchange Commission on February 20,
1996 (File No. 333-1087)
*** Incorporated by reference to the registrant's Pre-effective Amendment No.1
filing electronically on Form S-6 on September 4, 1996 (File No.
333-01949).
****Incorporated by reference to the registrant's Post-effective Amendment No.6
filing on Form S-6 on September 2, 1999 (File No. 333-01949).
SIGNATURES
As required by the Securities Act of 1933, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the in the City of Chicago, State of Illinois, on this 12th
day of January, 2000.
VALLEY FORGE LIFE INSURANCE COMPANY
(Registrant)
Attest: /s/ MARY RIBAKAWSKIS By:/s/DAVID L. STONE
------------------------------ ------------------------------
Assistant Secretary Group Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/BERNARD L. HENGESBAUGH Chairman of the Board, 1/12/00
- - ---------------------------- Chief Executive Officer and ---------
Bernard L. Hengesbaugh Director
/s/ROBERT V. DEUTSCH Chief Financial Officer and 1/12/00
- - --------------------------- Director ---------
Robert V. Deutsch
/S/CAROL DUBNICKI Director and Senior Vice President 1/12/00
- ----------------------------- ---------
Carol Dubnicki
/s/JONATHAN D. KANTOR Senior Vice President, General 1/12/00
- - ---------------------------- Counsel, Secretary, ---------
Jonathan D. Kantor Director
/S/DONALD P. LOFE, JR. Director 1/7/00
- ---------------------------- ---------
Donald P. Lofe, Jr.
/s/JOHN M. SQUAROK Director 1/12/00
- ---------------------------- ---------
John M. Squarok
</TABLE>
INDEX TO EXHIBITS
EX-99.A.5. Flexible Premium Variable Life Insurance Policy
EX-99.A.5.a. Form of Waiver of Monthly Deduction Rider
EX-99.A.5.b. Form of Right to Convert Rider
EX-99.A.5.c. Form of Accelerated Benefit Rider
EX-99.A.5.d. Form of Total Disability Waiver of Premium Rider
EX-99.A.5.e. Form of Accidental Death Benefit Rider
EX-99.A.5.f. Form of Additional Insurance Rider
EX-99.A.5.g. Form of Automatic Transfer Rider
EX-99.A.5.h. Form of Dollar Cost Averaging Rider
EX-99.A.5.i. Form of Term Insurance on Children Rider
EX-99.A.5.j. Form of Other Insured Term Insurance Rider
VALLEY FORGE LIFE INSURANCE COMPANY
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn Street
Chicago, Illinois 60685 Reading, Pennsylvania 19601
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
the Insured's death while this policy is in force.
Premiums are payable during the lifetime of the Insured or until the Insured's
age 95.
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
premiums less any debt.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685 on the policy date.
Chief Executive Officer Group Vice President
- --------------------------------------------------------------------------------
CASH VALUE BENEFITS PROVIDED BY THIS POLICY ARE BASED ON THE INVESTMENT
PERFORMANCE OF THE SUBACCOUNTS OF THE VARIABLE ACCOUNT AND 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.
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ADJUSTABLE DEATH BENEFIT
DEATH PROCEEDS PAYABLE AT INSURED'S DEATH
NON-PARTICIPATING
INVESTMENT EXPERIENCE REFLECTED IN BENEFITS
POLICY SCHEDULE
OWNER: [John Doe]
INSURED: [John Doe] INSURED'S AGE: [45]
INSURED'S SEX: [Male] POLICY DATE: [July 1, 1999]
POLICY NUMBER: [1234567]
RISK CLASS: [Preferred - Nonsmoker]
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]
DEATH BENEFIT OPTION: [1]
MONTHLY DATE: [1st] Day Of Each Month
SPECIFIED AMOUNT: [$100,000]
MINIMUM SPECIFIED AMOUNT $100,000
MINIMUM CHANGE IN SPECIFIED AMOUNT: $ 25,000
MINIMUM MONTHLY PREMIUM PAYMENT: [$ 50.00]
INITIAL PREMIUM: [$673.00 Annually]
PLANNED PREMIUM [$1,100.00 Annually]
TARGET PREMIUM PAYMENT: [$1,400.00 Annually]
MINIMUM ADDITIONAL PREMIUM PAYMENT: [$50.00]
GUIDELINE ANNUAL PREMIUM PAYMENT: [$2,006.00 Annually]
LAPSE PREVENTION PREMIUM [$673.00 Annually]
LAPSE PREVENTION GUARANTEE PERIOD [5 years]
MINIMUM PARTIAL SURRENDER AMOUNT: [$500.00]
MINIMUM LOAN AMOUNT: [$500.00]
POLICY LOAN INTEREST RATE: [8%]
PREFERRED POLICY LOAN CREDITED RATE: [8%]
POLICY LOAN CREDITED RATE: [6%]
<TABLE>
<CAPTION>
CHARGES AND FEES
(MAXIMUM CHARGES)
<S> <C>
PREMIUM CHARGES:
Policy Years 1 - 10: [7.5%] of premium payments up to the target
premium payment
Policy Years 11+: [5.5%] of premium payments up to the target
premium payment
All Years: [3.5%] of premium payments in excess of the
target premium payment
EXPENSE CHARGES:
Policy Years 1 - 10: [.002477%] (Daily Factor);
([0.90%] Approximate Annual Rate)
Policy Years 11+: [.001236%] (Daily Factor);
([0.45%] Approximate Annual Rate)
POLICY CHARGES
MONTHLY POLICY FEE: FIRST POLICY YEAR [$ 26.00]
THEREAFTER [$ 6.00]
COST OF INSURANCE: See Cost of Insurance Provision
TRANSACTIONAL CHARGES
MONTHLY SPECIFIED AMOUNT INCREASE FEE
(FOR FIRST 12 MONTHS AFTER INCREASE): [$10.00]
TRANSFER PROCESSING FEE: [$25] Each After First [12] In A Policy Year (Assessed
After The First [12] Transfers In A Policy Year)
</TABLE>
SURRENDER CHARGE
The Surrender Charge Is [$ 16.00] Per Thousand Dollars Of Specified Amount.
The Surrender Charge Grades Off As Follows:
100% Of The Surrender Charge In Policy Years 1-6
80% Of The Surrender Charge In Policy Year 7
70% Of The Surrender Charge In Policy Year 8
60% Of The Surrender Charge In Policy Year 9
50% Of The Surrender Charge In Policy Year 10
40% Of The Surrender Charge In Policy Year 11
30% Of The Surrender Charge In Policy Year 12
20% Of The Surrender Charge In Policy Year 13
10% Of The Surrender Charge In Policy Year 14
No Surrender Charge In Policy Years 15 And Later FIXED ACCOUNT
Fixed Account I:
Minimum Guaranteed Interest Rate: 3.00%
Current Interest Rate as of Effective Date: [x%.] The current
interest rate applies only to premium payments allocated or
transferred to Fixed Account I during the calendar month
following the Policy Date. This rate is guaranteed for one
policy year.
ALLOCATION GUIDELINES:
1. Currently, you may select as many investment options as you wish. We
reserve the right to limit this in the future.
2. Currently, you may also select any fixed account which is available at the
time the premium payment or transfer is made.
3. The initial premium payment will be credited on the policy date. The
initial 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 initial 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:
Number of Free Transfers: Currently, you are allowed [12] free transfers
each policy year.
Transfer Fee: For each transfer in excess of the free transfers permitted,
the transfer fee is [$25.00]. Transfers made pursuant to a prescheduled
transfer will not be counted in determining the application of the transfer
fee.
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, that portion of the cash value held
in Fixed Account I is included in any prescheduled transfer option. We
reserve the right to limit the availability of any fixed account option or
subaccount for a prescheduled transfer.
<TABLE>
<CAPTION>
INVESTMENT OPTIONS
<S> <C>
[Federated High Income Bond] [Fidelity Asset Manager]
[Federated Prime Money] [Fidelity Contrafund]
[Federated Utility] [Fidelity Equity-Income]
[Fidelity Index 500]
[Alger Growth]
[Alger Mid-Cap Growth] [MFS Emerging Growth]
[Alger Small Capitalization] [MFS Growth With Income]
[SoGen Overseas] [MFS Research]
[MFS Total Return]
[Van Eck Emerging Markets]
[Van Eck Gold And Natural Resources] [Janus Twenty]
[Janus Growth]
[Janus Balanced]
[Janus Flexible Income]
[Janus International Growth]
[Janus Worldwide Growth]
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL BENEFITS PROVIDED BY RIDER
MONTHLY COST
BENEFIT DESCRIPTION EXPIRY DATE OF RIDER
- ------------------- ----------- --------
<S> <C> <C>
[Additional Insurance Rider July 1, 2024 [$15.00]
[$100,000]]
[Term Insurance On Children - [10-] Units July 1, 2019 [$4.75]
Each Unit Provides $1,000 Of Coverage For Each Child]]
[Other Insured Term Rider July 1, 2024 [$17.50]
[$100,000]]
[Accidental Death Benefit July 1, 2024 [$9.00]
[$100,000]]
</TABLE>
<TABLE>
<CAPTION>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
ATTAINED ATTAINED ATTAINED
AGE COST AGE COST AGE COST
- --- ---- --- ---- --- ----
<S> <C> <C> <C> <C> <C>
0 0.2192 33 0.1317 66 2.0559
1 0.0858 34 0.1375 67 2.2685
2 0.0825 35 0.1442 68 2.4996
3 0.0808 36 0.1517 69 2.7559
4 0.0775 37 0.1617 70 3.0459
5 0.0733 38 0.1725 71 3.3772
6 0.0692 39 0.1842 72 3.7599
7 0.0650 40 0.1984 73 4.1933
8 0.0625 41 0.2134 74 4.6700
9 0.0617 42 0.2292 75 5.1800
10 0.0625 43 0.2467 76 5.7192
11 0.0675 44 0.2659 77 6.2834
12 0.0767 45 0.2876 78 6.8761
13 0.0892 46 0.3109 79 7.5161
14 0.1033 47 0.3359 80 8.2237
15 0.1133 48 0.3635 81 9.0181
16 0.1233 49 0.3935 82 9.9157
17 0.1309 50 0.4277 83 10.9128
18 0.1359 51 0.4669 84 11.9904
19 0.1392 52 0.5119 85 13.1242
20 0.1400 53 0.5637 86 14.2999
21 0.1384 54 0.6212 87 15.4999
22 0.1359 55 0.6855 88 16.7191
23 0.1325 56 0.7556 89 17.9749
24 0.1292 57 0.8299 90 19.2857
25 0.1250 58 0.9125 91 20.6824
26 0.1225 59 1.0052 92 22.2179
27 0.1208 60 1.1087 93 24.0437
28 0.1200 61 1.2240 94 26.5035
29 0.1200 62 1.3568
30 0.1208 63 1.5073
31 0.1233 64 1.6745
32 0.1267 65 1.8576
</TABLE>
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 LAST BIRTHDAY.
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
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
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>
SUPPLEMENTAL SCHEDULE
SCHEDULE OF MONTHLY COST OF INSURANCE RATES
WAIVER OF MONTHLY DEDUCTION
RATES PER $1 OF MONTHLY DEDUCTION
ATTAINED
AGE COST
[
45 0.13440
46 0.14250
47 0.15300
48 0.16520
49 0.17820
50 0.19120
51 0.20360
52 0.21440
53 0.22290
54 0.22830
55 0.23200
56 0.23430
57 0.23520
58 0.23570
59 0.23570
60 0.22490
61 0.21000
62 0.19100
63 0.16790
64 0.14070]
TABLE OF CONTENTS
POLICY SCHEDULE
DEFINITIONS
OWNER, BENEFICIARY AND ASSIGNMENT PROVISIONS
Owner
Contingent Owner
Beneficiary
Assignment
PREMIUM PROVISIONS
Premium Payments
Right to Refund
Grace Period
Reinstatement
Lapse Prevention Guarantee
DEATH BENEFIT PROVISIONS
Death Benefit
Death Benefit Charges
Death Proceeds
Payment of Claims
POLICY VALUE PROVISIONS
Cash Value
Subaccount
Policy Loan Account
Fixed Account I
Interest Crediting
Minimum Values
Basis of Computations
POLICY COST FACTORS
Monthly Deduction
Monthly Cost of Insurance
Monthly Policy Fees
Expense Charge
Premium Charges
Surrender Charge
Transfer Fee
Changes in Policy Cost Factors
Charges after the Insured's 95th Birthday
TABLE OF CONTENTS - CONTINUED
SURRENDER PROVISIONS
Total Surrender
Partial Surrenders
LOAN PROVISIONS
Maximum Loan Value
Policy Loan
Loan Interest
Loan Repayment
Termination of Policy
Effect of Loan
THE VARIABLE ACCOUNT
Variable Account
Investments of the Variable Account
Valuation of Assets
Change in Operation of the Variable Account
Accumulation Units
Accumulation Unit Value
Net Investment Factor
FIXED ACCOUNT I
TRANSFER PROVISIONS
Transfer Rules
Transfer Processing Fee
GENERAL POLICY PROVISIONS
Entire Contract
Incontestability
Suicide
Error in Age, Sex or Tobacco Use
Payment of Proceeds
Right to Defer Payments or Transfers from any fixed account
Termination
Annual Report
Non-Participating
Currency
Signature Guarantee
OPTIONAL MODES OF SETTLEMENT
DEFINITIONS
ATTAINED AGE: The issue age plus the number of full policy years since your
policy was issued.
BUSINESS DAY: Any day that Valley Forge Life Insurance Company and the New York
Stock Exchange are 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, the 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 Insured
dies 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: The person, 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 Incontestibility and Suicide provisions are determined.
POLICY LOAN ACCOUNT: That portion of the cash value resulting from a policy
loan.
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.
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.
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 the Insured is living. Your rights in this policy
belong to your estate if you die before the Insured dies 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 Insured's death. In the event of Joint
Owners, the contingent owner will become the owner if both named joint owners
die before the Insured. The contingent owner, if any, is as named in the
application, unless changed. You may name a contingent owner at any time while
the Insured 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 Insured dies. The contingent beneficiary, if any, will become the
beneficiary if no primary beneficiary is living on the date of the Insured's
death. 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 Insured dies,
we will pay such primary beneficiaries in equal shares unless you have provided
otherwise.
If any beneficiary dies before the Insured, that beneficiary's interest in the
death benefit will end.
If any beneficiary dies at the same time as the Insured, or within 30 days after
the Insured, that beneficiary's interest in the death benefit will end if no
benefits have been paid to that beneficiary. If the interest of all designated
beneficiaries has ended when the Insured dies, 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 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 the 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 PAYMENTS: The initial premium is due on the policy date. Other premiums
may be required as described below. Unless specified, any payments received will
be considered premiums and not loan repayments.
All premiums must be sent to us at our Administrative Office. A receipt signed
by one of our authorized officers will be furnished upon request.
You may change the allocation for future premiums at any time while your policy
is in force by written notice. The change will take effect on the date we
receive your request at our Administrative Office. Future premium payments will
be required if additional premium payments are necessary to keep the policy in
force in accordance with the grace period provision.
Premiums are allocated to one or more subaccounts of the Variable Account or to
any fixed account in accordance with your election. We will accept subsequent
premiums at any time. All subsequent premiums are allocated in the same manner
as the initial premium payment unless you direct us otherwise. Allocations of
premiums are subject to the allocation guidelines shown on the Policy Schedule.
RIGHT TO REFUND: We reserve the right to return any premium that would cause the
policy to be disqualified 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.
If sufficient premium is not paid by the end of the grace period, the policy
will terminate without value. If the Insured dies 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 until the beginning of the policy year following the lapse
prevention guarantee period shown on the Policy Schedule.
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
lapse during the lapse prevention guarantee period shown on the Policy Schedule
if, throughout that period, (a) equals or exceeds (b) where:
(a) is the aggregate premium payments made less the amount of any surrenders
(including applicable surrender charges) less any loan amount; and
(b) is the minimum monthly lapse prevention guarantee premium multiplied by the
number of complete months since the policy date, including the current
month.
DEATH BENEFIT PROVISIONS
DEATH BENEFIT:
We will pay the death benefit as soon as we receive due written proof that the
Insured has died while this policy is in force.
If death benefit option 1 is shown on the policy schedule, the death benefit
will be the greater of:
1. The specified amount; or
2. The applicable percentage of the cash value on the date of death.
If death benefit option 2 is shown on the policy schedule, the death benefit
will be the greater of: 1. The specified amount plus the cash value on the date
of death; or 2. The applicable percentage of cash value on the date of death.
DEATH BENEFIT CHANGES:
Death benefit changes are made only by written notice. You may change the
specified amount after this policy has been force for one year. A change will be
effective on the monthly date following our approval or recording of the change.
Any change is subject to the following:
1. a decrease will be applied first against prior increases, if any, on a
last-in, first-out basis, then against the initial specified amount. A
decrease in specified amount shall not reduce the specified amount lower
than the minimum specified amount shown on the Policy Schedule. A pro rata
share of any applicable surrender charge may apply;
2. an increase will require proof of insurability.
We will show the effective date of any change in specified amount in a
Supplemental Policy Schedule we will send you. Any changes are subject to the
minimum specified amount and the minimum change in specified amount shown on the
Policy Schedule.
You may change the death benefit from Option 2 to Option 1. This will increase
the Specified Amount by the amount of cash value.
You may change the death benefit from Option 1 to Option 2. Proof of
insurability satisfactory to us is required. In such case, the Specified Amount
will be reduced by the amount of cash value so that the death benefit is not
increased as of the date of change.
DEATH PROCEEDS: The death proceeds equals:
1. the death benefit provided by your policy; plus
2. any insurance on the Insured's life that may be provided by riders to your
policy; less
3. any debt; less
4. any due and unpaid premiums.
We will pay the death proceeds after we receive due proof of death and such
other information as we may reasonably require at our Administrative Office. The
death proceeds will be adjusted under certain conditions. Refer to the
Incontestability, Suicide, and Error in Age, Sex or Tobacco Use Provision.
PAYMENT OF CLAIMS: When this policy becomes a claim by the death of the Insured,
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 Insured 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.
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 the 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 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.
BASIS OF COMPUTATION: All values are based on the applicable (male or female,
smoker or non-smoker) Commissioners 1980 Standard Ordinary Mortality Table, Age
Last 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:
1. Cost of insurance for the following month;
2. The monthly cost of any rider attached to this policy; and
3. The monthly policy fee.
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.
MONTHLY COST OF INSURANCE RATE: 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.
MONTHLY POLICY FEE: The monthly policy fee is shown on the Policy Schedule.
EXPENSE CHARGE: We deduct an expense charge daily from each subaccount of the
Variable Account. The expense charge is shown on the Policy Schedule.
PREMIUM CHARGES: Premium charges are levied on premiums received as shown on the
Policy Schedule
SURRENDER CHARGE: The surrender charge is levied when you make a partial or
total surrender of the cash value. It is shown on the Policy Schedule.
TRANSFER FEE: Transfer 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 fee 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.
CHARGES AFTER THE INSURED'S 95TH BIRTHDAY: Policy Charges as shown on the Policy
Schedule will not apply on and after the policy anniversary on or next following
the Insured's 95th birthday.
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 fifth
policy anniversary by written notice.
When you make a partial surrender, we will reduce the cash value by the partial
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 amount 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
contract of life insurance under IRC Section 7702. We may limit the maximum
amount of all partial surrenders in each policy year to the greater of:
1) 10% of the total premium payments; or
2) cash value less total premiums paid less any debt.
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. The minimum loan
amount is 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. 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 aggregate premium payments
made to date (preferred loans); and (2) all loans against policies in the 11th
policy year or later. Preferred loans also include the amount of any outstanding
policy loan transferred in a tax-free exchange.
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.
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 amount you repay from the policy loan account 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 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).
However, the right to make any transfer will be limited by any terms and
conditions in effect at the time of transfer.
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.
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.
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
arbitrarily set at $10 when the Variable Account began operations. 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 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
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.
TRANSFERS
TRANSFER RULES: A transfer is subject to the following:
1) The maximum number of transfers without a transfer fee is shown on the
Policy Schedule;
2) We reserve the right to assess a transfer fee if the number transfers
exceeds the maximum number of free transfers shown on the Policy Schedule.
We will notify you if we deduct a transfer 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 is, or would be, to
the disadvantage of other owners. 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. A modification could be
applied to transfers to or from one or more of the subaccounts and could
include, but is not limited to:
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
payments;
10) You may elect to make transfers by telephone. However, to elect this option
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 one 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 the Insured in the application or any supplemental application will be
considered representations and not warranties. We will not use any statement
made by or for the 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.
INCONTESTABILITY: Except for accidental death and disability benefits, we cannot
contest this policy after it has been in force during the lifetime of the
Insured for two years from the policy date; nor can we contest any increased
benefit or reinstatement after it has been in force, while the Insured is alive,
for two years after the effective date of such increase or reinstatement.
We cannot contest this policy, any reinstatement or any increase in benefits
after the policy date of the policy, reinstatement, or increase in benefits
unless:
1) An answer in the application for the policy, reinstatement or increase in
benefits was not true or complete; and
2) If we had known the truth, we would not have issued the policy as we did or
increased the benefits.
Any statement made by the Insured will not be used in any contest unless a copy
is furnished to the beneficiary.
SUICIDE: If the Insured commits suicide, while sane or insane, within two years
from the policy date, our liability shall be limited to the premiums paid prior
to death, less any debt and less any partial surrenders.
If the Insured commits suicide, while sane or insane, within two years from the
effective date of any increase in the specified amount, the total liability with
respect to such increase shall be limited to the monthly deductions for such
increase.
ERROR IN AGE, SEX OR TOBACCO USE: If the age, sex or tobacco use of the Insured
has been misstated, all payments and benefits under the policy will be those
which the premiums paid would have purchased at the Insured's correct age, sex
or tobacco use.
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: 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 Insured dies; 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.
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.
OPTIONAL MODES OF SETTLEMENT
Proceeds may be paid in a lump sum, or in one of the optional modes of
settlement. Once the proceeds are applied under an optional mode, any amounts
payable are paid from our general account and will not be affected by the
investment experience of any variable account.
While this policy is in force, you may choose or change settlement options at
any time. If no settlement option has been chosen before the Insured's death,
the beneficiary may choose one.
When proceeds become payable under any option, a settlement contract is issued
in exchange for this policy. The new contract's effective date is the date of
the Insured's death or the date this policy is surrendered.
OPTION 1 - PAYMENT CERTAIN - We pay the cash value in equal payments as
specified. After each payment, interest of 3% compounded annually is added to
the remaining amount which has not been paid. Payments are made until the amount
applied, plus interest, is exhausted. The total of all payments made each year
must be at least 5% of the amount applied under this option. Any outstanding
balance may be withdrawn at any time.
OPTION 2 - PERIOD CERTAIN - We pay the cash value in equal installments over a
designated period of time.
OPTION 3 - LIFE ANNUITY -- We make monthly payments for the lifetime of the
payee.
OPTION 4 - LIFE ANNUITY WITH PERIOD CERTAIN - We make monthly payments while the
payee lives. If the payee dies before the specified period ends, the payments
will continue until the end of the specified period. If, at any age, the amount
of payments is the same for two or more periods certain, payment will be made as
if the longest period certain was selected.
ADDITIONAL OPTIONS: We may make other options available.
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ADJUSTABLE DEATH BENEFIT
DEATH PROCEEDS PAYABLE AT INSURED'S DEATH
NON-PARTICIPATING
INVESTMENT EXPERIENCE REFLECTED IN BENEFITS
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
WAIVER OF MONTHLY DEDUCTION RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid. If this rider is issued with
the policy, its effective date is the policy date shown on the Policy Schedule.
If this rider is issued after the policy date, or if coverage is increased,
decreased or reinstated, its effective date is shown in a Supplemental Policy
Schedule.
BENEFIT
During a period of total disability we will waive monthly deductions under this
policy.
Benefits will begin on the latest date when:
1. we have been notified of the onset of total disability; and
2. we have received due proof of total disability; and
3. total disability has continued for six consecutive months.
No benefits will be paid after the Insured ceases to be totally disabled or
after the policy has terminated.
TOTAL DISABILITY
The Insured is totally disabled:
1. if the cause is an injury which occurs or sickness which begins after the
effective date of this rider;
2. if the disablement occurs after age 15 and before the policy anniversary on
or after the Insured attains age 65;
3. if the Insured:
a. during the first two years of total disability, cannot do the material
and substantial duties of his or her occupation;
b. after two years from onset of disability, cannot do the material and
substantial duties of an occupation for which he or she is reasonably
suited by education, training or experience; or
c. cannot return to school if the Insured is a student.
Total disability is considered to exist if the Insured, as the result of
accidental injury which occurs while this rider is in force:
1. has lost the use of both legs;
2. has lost the use of both arms;
3. has lost the use of one leg and one arm;
4. has lost the sight of both eyes.
EXCLUSIONS
Total disability which results from war or act of war, declared or undeclared,
or from intentionally self-inflicted injury is not covered.
NOTICE OF TOTAL DISABILITY
We must be notified of the onset of total disability during the first six months
of disability or as soon after that as is reasonably possible.
PROOF
Unless it is not possible to send proof earlier, we must receive initial proof
of disability:
1. within eighteen months of the onset of total disability;
2. during the lifetime of the Insured; and
3. while total disability continues.
We may, from time to time, request proof of the continuance of total disability.
After disability has continued for two years, we may not request proof more than
once each year.
COST
The monthly cost for this rider is shown on the Schedule. We reserve the right
to change the premium for this rider if we change the premiums for all riders of
this class.
TERMINATION
This rider terminates:
1. on the first policy anniversary on or after the Insured attains age 65;
2. if you give us written notice to terminate it; or
3. when the policy terminates.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
RIGHT TO CONVERT
At any time during the first 18 months this policy is in force, you have the
right to convert this policy to any permanent non-variable policy offered by us
in your state.
The original policy date will be used to determine incontestability and suicide
provisions.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ACCELERATED BENEFIT RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application.
We will pay a benefit advance to the owner during the lifetime of the Insured.
The benefit will be paid upon written election of the owner. The payment of the
death benefit to the beneficiary will be reduced by the sum of
1.) any benefit advance paid under this rider;
2.) any interest charged on the benefit advance; and
3.) any other debt on the policy.
ACCELERATED BENEFITS
We will provide a benefit advance if the Insured has a terminal condition,
subject to the provisions of this rider. The maximum benefit advance will be the
lesser of:
(1) 75% of the policy death benefit on the day we receive the request; or
(2) $250,000 from all policies in force with us.
We will pay the benefit advance in a lump sum. Payments in other than a lump sum
may be made at the owner's request, subject to our approval. The minimum amount
of any payment will be $500. Once you exercise this rider, we will send you a
periodic report concerning the effect of this rider on policy values. Surrender
charges will not be assessed against any benefits paid under this rider.
We will charge interest on the amount of the benefit advance. Interest accrues
daily at an interest rate which is not greater than the greatest of:
1. The yield of a 90-day Treasury Bill as of the latest quote on such bills;
or
2. The maximum adjustable loan rate allowed by law; or
3. 6%.
On each policy anniversary, the accrued interest will be added to the benefit
advance and bear interest at the rate then in effect. Additional interest will
not accrue if the benefit advance plus accrued interest equals the policy death
benefit less any debt. At such time this policy will terminate.
- --------------------------------------------------------------------------------
RECEIPT OF AN ACCELERATED BENEFIT MAY BE A TAXABLE EVENT. PLEASE CONSULT YOUR
TAX ADVISOR BEFORE YOU EXERCISE THE ACCELERATED BENEFIT. CASH VALUES, LOAN VALUE
AND THE POLICY DEATH BENEFIT WILL BE REDUCED IF YOU RECEIVE AN ACCELERATED
BENEFIT.
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IMPACT ON POLICY
The benefit advance plus accrued interest will be treated as a lien against the
policy values and policy death benefit. Access to the surrender value through
policy loans or partial or full surrender is limited to the excess of the
surrender value over the benefit advance and the accrued interest on the benefit
advance. The death benefit will be reduced by the amount of the benefit advance
plus any accrued interest. Any other benefits payable under other riders
attached to this policy are not affected by any benefit paid under this rider.
QUALIFYING EVENT FOR A BENEFIT ADVANCE
The qualifying event for the benefit advance is the terminal condition of the
Insured. A terminal condition is an illness or physical condition or accidental
injury from which the Insured:
(1) is not expected to recover; and
(2) is expected to die within twelve months after the date we receive the
request for the benefit advance.
Before payment of a benefit advance is made, we will require that we be given
satisfactory proof that the Insured's life expectancy is twelve months or less
from the date we receive the request for a benefit advance. Satisfactory proof
will include the certification of a licensed physician who is not the Insured,
the owner nor a member of the immediate family of either. (Immediate family
includes parents, parents-in-law, siblings, siblings-in-law, or children.) We
reserve the right to obtain a second medical opinion at our expense.
PAYMENT CONDITIONS
The payment of any benefit advance is subject to the following conditions:
(1) The policy must be in force.
(2) The policy must not be assigned except to us as security for a policy loan.
(3) The payment of a benefit advance must be approved by any irrevocable
beneficiary.
INVOLUNTARY ACCESS
This rider provides for the accelerated payment of the death benefit of this
policy. This rider is not meant to cause you to involuntarily access proceeds
ultimately payable to the beneficiary. A benefit advance will not be paid if:
(a) the owner is required by law to use this benefit to meet the claims of
creditors, whether in bankruptcy or otherwise; or
(b) the owner is required by a government agency to use this benefit in order
to apply for, obtain, or otherwise keep a government benefit or
entitlement.
OWNERSHIP
The owner of this policy is the owner of this rider.
RIDER TERMINATION
This rider will terminate on the earliest of:
(1) the date the policy terminates; or
(2) the date you give us written notice to terminate this rider; or
(3) the date that the benefit advance plus accrued interest equals the policy
death benefit less all debt.
This rider may be reinstated as part of the policy if the policy is reinstated.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685 on the policy date.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
TOTAL DISABILITY WAIVER OF PREMIUM RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid. If this rider is issued with
the policy, its effective date is the policy date shown on the Policy Schedule.
If this rider is issued after the policy date, or if coverage is increased,
decreased or reinstated, its effective date is shown in a Supplemental Policy
Schedule.
BENEFIT
During a period of total disability we will credit a premium to this policy. The
amount of monthly premium to be credited will be the lesser of:
1. one-twelfth of the waiver of premium amount shown in the Policy Schedule;
or
2. the monthly average of premiums paid on this policy over the last
thirty-six policy months.
Benefits will begin on the latest date when:
1. we have been notified of the onset of total disability; and
2. we have received due proof of total disability;
3. total disability has continued for six consecutive months.
No benefits will be paid after the Insured ceases to be totally disabled or
after the policy has terminated.
TOTAL DISABILITY
The Insured is totally disabled:
1. if the cause is an injury which occurs or sickness which begins after the
effective date of this rider;
2. if the disablement occurs after age 15 and before the policy anniversary on
or after the Insured attains age 65;
3. if the Insured:
a. during the first two years of total disability, cannot do the material
and substantial duties of his or her occupation;
b. after two years from onset of disability, cannot do the material and
substantial duties of an occupation for which he or she is reasonably
suited by education, training or experience; or
c. cannot return to school if the Insured is a student.
Total disability is considered to exist if the Insured, as the result of
accidental injury which occurs while this rider is in force:
1. has lost the use of both legs;
2. has lost the use of both arms;
3. has lost the use of one leg and one arm;
4. has lost the sight of both eyes.
EXCLUSIONS
Total disability which results from war or act of war, declared or undeclared,
or from intentionally self-inflicted injury is not covered.
NOTICE OF TOTAL DISABILITY
We must be notified of the onset of total disability during the first six months
of disability or as soon after that as is reasonably possible.
PROOF
Unless it is not possible to send proof earlier, we must receive initial proof
of disability:
1. within eighteen months of the onset of total disability;
2. during the lifetime of the Insured; and
3. while total disability continues.
We may, from time to time, request proof of the continuance of total disability.
After disability has continued for two years, we may not request proof more than
once each year.
COST
The monthly cost for this rider is shown on the Policy Schedule. We reserve the
right to change the premium for this rider if we change the premiums for all
riders of this class.
TERMINATION
This rider terminates:
1. on the first policy anniversary on or after the Insured attains age 65;
2. if you give us written notice to terminate it; or
3. when the policy terminates.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ACCIDENTAL DEATH BENEFIT RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid.
BENEFIT
We will pay the accidental benefit amount shown in the Policy Schedule as soon
as we receive due written proof that the Insured's death was accidental. The
injury that caused death must occur after attained age one and before the policy
anniversary on or next following the Insured's age 70.
ACCIDENTAL DEATH
Accidental death means death that results from injury (not sickness). The
accidental injury must cause death, independently of all other causes.
EXCLUSIONS
We will not pay the accidental death benefit if death is the result of:
(1) suicide (while sane or insane);
(2) voluntarily taking poison;
(3) voluntarily inhaling gas or fumes, except while conducting one's duties
during the course of employment;
(4) voluntarily taking drugs, narcotics or hallucinogens except as prescribed
by a physician;
(5) illness or disease or medical treatment thereof;
(6) injury during the commission of a crime;
(7) aircraft accident (unless the Insured is a passenger with no duties on the
aircraft);
(8) participation in a hazardous sport such as parachuting, hang gliding,
motorcycle racing, automobile racing, etc. where the Insured should have
known the sport could result in death;
(9) war (declared or not) or acts of war; or
(10) the Intoxication of the Insured. Intoxication means a blood alcohol level
of .1% by weight, unless the state of residence of the Insured has a lower
standard, in which case the standard of the Insured's state of residence
shall apply.
COST
The monthly cost for this rider is shown in the Policy Schedule.
RIDER TERMINATION
This rider terminates:
(1) on the policy anniversary on or next following the Insured's age 70;
(2) if you give us written notice to terminate it; or
(3) when the policy terminates.
This rider may be reinstated as part of the policy if the policy is reinstated
unless this rider was terminated because of age or at your request.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider. If this rider is issued with the policy, its effective date is the policy
date shown on the Policy Schedule. If this rider is issued after the policy
date, or if coverage is increased, decreased or reinstated, its effective date
is shown in a Supplemental Policy Schedule.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
ADDITIONAL INSURANCE RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid.
BENEFIT
We will pay the Additional Insurance death benefit as soon as we receive due
written proof of the Insured's death. The additional insurance death benefit
will be the Additional Insurance specified amount shown in the Schedule less the
excess, if any, of (1) over (2) or (3), where:
(1) is the cash value on the date of death times the applicable percentage of
cash value shown on the Policy Schedule;
(2) is the specified amount, if Death Benefit Option 1 is shown on the Policy
Schedule; and
(3) is the specified amount plus the cash value, if Death Benefit Option 2 is
shown on the Policy Schedule.
PREMIUM
The premium for this rider is determined as (1) times (2) where:
(1) is the Additional Insurance death benefit; and
(2) is the monthly cost of insurance rate on the monthly date.
The monthly cost of insurance rate is based upon the sex, age nearest birthday
and rate class of the Insured. We may charge less than, but not more than, the
maximum guaranteed monthly cost of insurance rates shown in the Policy Schedule.
The rate we will charge will be determined by us on each policy anniversary and
will apply for the succeeding policy year.
CHANGE OF BENEFITS
The Additional Insurance face amount may be changed any time after this rider is
one year old by written notice to us. The following conditions may apply to any
change:
(1) The Additional Insurance specified amount may not be less than $25,000.
(2) Any increase requires proof of insurability satisfactory to us.
(3) Any change will become effective on the monthly date after we approve the
change.
(4) Changed benefits will be shown on a Supplemental Policy Schedule.
BENEFICIARY
Unless the owner gives us written notice, the beneficiary is the beneficiary of
the base policy.
OWNERSHIP
The owner of this policy is the owner of this rider.
TERMINATION
This rider terminates:
(1) when the owner gives written notice to terminate it; or
(2) when the policy terminates; or
(3) on the policy anniversary on or next following the Insured's 95th birthday.
This rider may be reinstated as part of the policy if the policy is reinstated.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider. If this rider is issued with the policy, its effective date is the policy
date shown on the Policy Schedule. If this rider is issued after the policy
date, or if coverage is increased, decreased or reinstated, its effective date
is shown in a Supplemental Policy Schedule.
Signed for the Company at its Executive Office in Chicago, Illinois.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
AUTOMATIC TRANSFER RIDER
This rider forms a part of the policy to which it is attached.
While this policy is in force, you may choose to have us automatically transfer
cash value (on a monthly, quarterly, semi-annual or annual basis) among
subaccounts and Fixed Account I to achieve a particular percentage allocation.
No such transfer may be later than the 28th of the month.
Your choice is made by giving us written notice. The allocation percentages must
be in whole numbers and are subject to the minimums on the policy schedule.
You may stop automatic transfer at any time by written notice. We must receive
your written notice at least seven days before the first business day in a new
period. Once automatic transfer has been elected, any subsequent transfer
instructions that differ from the then current instructions are treated as a
request to change the automatic transfer allocation. All changes must be by
written notice.
Automatic transfers do not count as one of the free transfers each policy year.
Signed for the Company at its Executive Offices in Chicago, Illinois on the
policy date.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
A Stock Company
Executive Office: Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
DOLLAR COST AVERAGING RIDER
This rider forms a part of the policy to which it is attached.
If you request dollar cost averaging, we will open a dollar cost averaging
account for you under this policy. All premiums applied to this option will be
allocated to the money market account. No transfers may be made into
this account.
While this policy is in force, you may choose to have us transfer a fixed dollar
amount on a monthly basis from the money market account to any of the
subaccounts or Fixed Account I for a 6 or 12 month period. The transfers will
begin when you request but no sooner than seven business days following receipt
of your written notice provided the transfers do not begin until 30 days after
the policy effective date. Transfers will terminate at the end of the 6 or 12
month period you designate or within seven business days of your written request
to terminate these transfers.
The interest rate earned on this account will be the interest rate earned in
Fixed Account I, plus any additional interest, which we may declare from time to
time.
To be eligible for dollar cost averaging the following conditions must be met:
1. The value of the dollar cost averaging account must be at least $1,000.
2. The minimum transfer amount must be at least $100 or 10% of the total
amount being transferred.
You may have only one dollar cost averaging account in operation at one time.
Transfers under the dollar cost averaging are made as of the same day every
calendar month. This day may not be later than the 28th of the month. If this
calendar day is not a business day, transfers are made as of the next business
day. There is no additional charge for this option and these transfers do not
count toward the free transfers each policy year.
We reserve the right to discontinue this option at any point in time or change
its features.
If this option is terminated, all money remaining in the dollar cost averaging
account will be transferred to Fixed Account I.
Signed for the Company at its Executive Offices in Chicago, Illinois.
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
TERM INSURANCE ON CHILDREN RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid.
BENEFIT
We agree to pay the beneficiary the following amount for each unit of coverage
if a covered child's death occurs while this rider is in force or within the
conversion period described below:
1. $250 if the covered child's death occurs after his or her 14th day of
age and before his or her age of 6 months; or
2. $1,000 if the covered child's death occurs on or after his or her age
6 months and before the policy anniversary nearest the covered child's
22nd birthday.
COVERED CHILD
Covered child means a child, stepchild or legally adopted child of the Insured
who is more than 14 days old but less than 22 years old and who is either:
1. named in the application for this rider and is under eighteen years of
age on or before the date of the application; or
2. acquired by the Insured after the date of the application but before
such child's 18th birthday and before the expiry date of this rider.
BENEFITS AFTER THE INSURED'S DEATH
If the policy terminates by the death of the Insured, existing coverage on any
child under this rider will be continued as fully paid-up insurance until the
child's 22nd birthday. At age 22, conversion will be allowed as provided below.
The paid-up insurance will have policy value based on the 1980 CSO Mortality
Table Age Nearest Birthday with interest at 5 1/2% compounded annually. The
paid-up insurance may be surrendered for its surrender value. Information about
the policy value will be furnished upon request.
COST
The cost of this rider will be added to the monthly deduction described in the
policy. Its cost is shown in the Policy Schedule.
CHANGE OF BENEFITS
The units of coverage may be changed any time after this rider is one year old
by written notice. The following conditions apply:
1. Any approved change will become effective on the business day after we
receive notice.
2. Changed benefits will be shown on a Supplemental Policy Schedule.
CONVERSION
Any covered child may convert his or her insurance to a permanent plan of
insurance then available from us at the child's attained age. The amount
converted may not be less than the amount of insurance then in force under this
rider and no more than five times that amount. No proof of insurability will be
required for the conversion policy, except for any benefits added by rider. The
suicide and incontestability provisions of the converted policy will be waived.
BENEFICIARY
Unless changed by written notice, the beneficiary of this rider will be
determined in the following order:
1. the Insured under the base policy, if living; then
2. the Insured's spouse, if living; then
3. the children, step-children and legally adopted children of the
Insured equally, if living; then
4. the estate of the deceased covered child.
ASSIGNMENT
The benefits of this rider cannot be assigned.
OWNERSHIP
The owner of this policy is the owner of this rider.
TERMINATION
This rider terminates:
1. When you give us written notice to terminate it and send us the policy
to show the change; or
2. On the policy anniversary on or nearest the Insured's age 65; or
3. When the policy terminates.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider. If this rider is issued with the policy, its effective date is the policy
date shown on the Policy Schedule. If this rider is issued after the policy
date, or if coverage is increased, decreased or reinstated, its effective date
is shown in a Supplemental Policy Schedule.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
Chief Executive Officer Group Vice President
Valley Forge Life Insurance Company
Executive Office: A Stock Company Home Office:
CNA Plaza 401 Penn St.
Chicago, Illinois 60685 Reading, Pennsylvania 19601
OTHER INSURED TERM INSURANCE RIDER
This rider forms a part of the policy to which it is attached. It is issued in
consideration of your application and premium paid.
BENEFIT
We will pay the Other Insured specified amount shown in the Schedule as soon as
we receive written proof of the Other Insured's death.
OTHER INSURED
Unless changed, the Other Insured is the individual named in the application for
this rider.
PREMIUM
The premium for this rider is determined as (1) times (2) where:
(1) is the Other Insured specified amount; and
(2) is the monthly cost of insurance rate on the monthly date.
The monthly cost of insurance rate is based on the sex, age nearest birthday and
rate classification of the Other Insured. We can charge less than, but not more
than, the maximum guaranteed mortality risk charge rates shown in the Schedule.
We determine the rate we will charge on each policy anniversary. This rate will
apply for the succeeding policy year.
CHANGE OF BENEFITS
The Other Insured face amount may be changed any time after this rider is one
year old by written notice to us. These conditions apply to any change in
coverage:
(1) The Other Insured specified amount may not be less than $50,000.
(2) Any increase requires proof of insurability satisfactory to us.
(3) Any approved change will become effective on the monthly date after we
receive written notice.
(4) Changed benefits will be shown on a Supplemental Schedule.
CONVERSION
On written request from the owner prior to the Other Insured's 65th birthday,
the Other Insured may convert to a permanent plan of insurance then available
from us at the Other Insured's then attained age. The amount converted may be no
greater than the Other Insured specified amount. No proof of insurability will
be required for the conversion policy, except for any benefits added by rider.
BENEFICIARY
Unless you give us written notice, the beneficiary is the Other Insured's
estate.
OWNERSHIP
The owner of this policy is the owner of this rider.
TERMINATION
This rider terminates on the earliest of:
(1) the policy date on or next following the Other Insured's 70th
birthday;
(2) the date you give us written notice to terminate it; or
(3) the date the policy terminates.
This rider may be reinstated as part of the policy if the policy is reinstated
unless this rider was terminated because of age or by written notice. Proof of
the Other Insured's insurability may be required for reinstatement.
GENERAL
All provisions of the policy not in conflict with this rider apply to this
rider. If this rider is issued with the policy, its issue date is the issue date
shown on the Policy Schedule. If this rider is effective after the policy issue
date, or if coverage is increased, decreased or reinstated, it's the rider issue
date is shown in a Supplemental Policy Schedule.
Signed for the Company at its Executive Office, CNA Plaza, Chicago, Illinois
60685.
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
Chief Executive Officer Group Vice President
