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. Cova Variable Life Account Five
(Exact Name of Trust)
B. Cova Financial Life Insurance Company
(Name of Depositor)
C. 573 Anton Boulevard
Costa Mesa, California 92626
(Complete address of depositor's principal executive offices)
D. Name and complete address of agent for service:
Lorry J. Stensrud, President
Cova Financial Life Insurance Company
One Tower Lane, Suite 3000
Oakbrook Terrace, Illinois 60181-4644
(800) 523-1661
Copies to:
Judith A. Hasenauer and Frances S. Cook
Blazzard, Grodd & Hasenauer, P.C. First Vice President and
P.O. Box 5108 Associate Counsel
Westport, CT 06881 Cova Financial Life Insurance
(203) 226-7866 Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
E. Modified Single Premium Variable Life Insurance Policies
(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.
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 The Variable Insurance Policy
2 Other Information; The Company
3 Not Applicable
4 Other Information
5 The Separate Account
6(a) Not Applicable
(b) Not Applicable
7 Not Applicable
8 Not Applicable
9 Legal Proceedings
10 Purchases
11 Investment Options
12 Investment Options
13 Expenses
14 Purchases
15 Purchases
16 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 Ownership
25 The Company
26 Expenses
27 The Company
28 The Company
29 The Company
30 The Company
31 Not Applicable
32 Not Applicable
33 Not Applicable
34 Not Applicable
35 The Company; 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 Other Information
46 Access to Your Money
47 Not Applicable
48 Not Applicable
49 Not Applicable
50 Not Applicable
51 The Company; Purchases
52 Investment Options
53 The Separate Account
54 Not Applicable
55 Not Applicable
56 Not Applicable
57 Not Applicable
58 Not Applicable
59 Financial Statements
THE MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY
COVA VARIABLE LIFE ACCOUNT FIVE
AND
COVA FINANCIAL LIFE INSURANCE COMPANY
This prospectus describes the Modified Single Premium Variable Life Insurance
Policy (Policy) offered by Cova Financial Life Insurance Company (Cova).
The Policy has been designed to be used for estate and retirement planning
and other insurance needs of individuals.
The Policy offers you twelve (12) investment portfolios listed below. The
investment portfolios are part of Cova Series Trust, Lord Abbett Series Fund,
Inc. and General American Capital Company. When you buy a Policy, you bear the
complete investment risk. Your Account Value and, under certain circumstances,
the death benefit under the Policy may increase or decrease or the duration of
the death benefit may vary depending on the investment experience of the
investment portfolio(s) you select.
<TABLE>
<CAPTION>
<S> <C>
COVA SERIES TRUST
Managed by J.P. Morgan
Investment Management Inc.
Select Equity
Small Cap Stock GENERAL AMERICAN CAPITAL COMPANY
Large Cap Stock Managed by Conning Asset Management
International Equity Company
Quality Bond Money Market
Managed by Lord, Abbett & Co.
Bond Debenture
Growth and Income
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
</TABLE>
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Cova Modified Single
Premium Variable Life Insurance Policy.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE PRODUCTS DESCRIBED HEREIN ARE NOT DEPOSITS OF, OR GUARANTEED BY ANY BANK,
NOR INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
_____ __, 1997
TABLE OF CONTENTS
PAGE
SPECIAL TERMS
SUMMARY
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
2. PURCHASES
PREMIUMS
APPLICATION FOR A POLICY
ALLOCATION OF PREMIUMS
GRACE PERIOD
ACCUMULATION UNIT VALUES
3. INVESTMENT OPTIONS
COVA SERIES TRUST
LORD ABBETT SERIES FUND, INC.
GENERAL AMERICAN CAPITAL COMPANY
TRANSFERS
DOLLAR COST AVERAGING PROGRAM
AUTOMATIC REBALANCING PROGRAM
APPROVED ASSET ALLOCATION PROGRAM
SUBSTITUTION
4. EXPENSES
INSURANCE CHARGES
MORTALITY AND EXPENSE RISK CHARGE
ADMINISTRATIVE CHARGE
TAX EXPENSE CHARGE
COST OF INSURANCE CHARGE
ANNUAL POLICY MAINTENANCE FEE
ANNUAL WITHDRAWAL AMOUNT
SURRENDER CHARGE
NURSING HOME WAIVER
DEFERRED PREMIUM TAX CHARGE
TRANSFER FEE
TAXES
INVESTMENT PORTFOLIO EXPENSES
5. DEATH BENEFIT
ACCELERATED DEATH BENEFIT
JOINT LIVES
6. TAXES
LIFE INSURANCE IN GENERAL
TAKING MONEY OUT OF YOUR POLICY
DIVERSIFICATION
7. ACCESS TO YOUR MONEY
LOANS
LOAN AMOUNT
LOAN ACCOUNT
LOAN INTEREST
INTEREST CREDITED
PREFERRED LOAN
EFFECT OF LOAN
LOAN REPAYMENTS
TOTAL SURRENDER
PARTIAL SURRENDERS
TERMINATION OF THE POLICY
REINSTATEMENT
8. OTHER INFORMATION
COVA
THE SEPARATE ACCOUNT
DISTRIBUTOR
SUSPENSION OF PAYMENTS OR TRANSFERS
OWNERSHIP
OWNER
JOINT OWNER
BENEFICIARY
ASSIGNMENT
PART II
THE COMPANY
VOTING
DISREGARD OF VOTING INSTRUCTIONS
THE SEPARATE ACCOUNT
LEGAL OPINIONS
REDUCTION OR ELIMINATION OF SURRENDER CHARGE
MISSTATEMENT OF AGE OR SEX
COVA'S RIGHT TO CONTEST
SETTLEMENT OPTIONS
TAX STATUS
INTRODUCTION
DIVERSIFICATION
TAX TREATMENT OF THE POLICY
POLICY PROCEEDS
JOINT LIVES
TAX TREATMENT OF LOANS AND SURRENDERS
MULTIPLE POLICIES
TAX TREATMENT OF ASSIGNMENTS
QUALIFIED PLANS
INCOME TAX WITHHOLDING
REPORTS TO OWNERS
LEGAL PROCEEDINGS
EXPERTS
FINANCIAL STATEMENTS
APPENDIX A
ILLUSTRATION OF POLICY VALUES
SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the Policy, however, certain technical words or
terms are unavoidable. We have identified some of those words or terms. For
several of these terms we have provided a definition. For the remainder, we
believe that you will find an adequate discussion in the text. For those terms,
we have identified them in the text in italic and the page number that is
indicated here is where we believe you will find the best explanation for the
word or term.
ACCOUNT VALUE - The total value of your policy. It is equal to the sum of the
Policy values allocated to the investment portfolios and the Policy values
allocated to the Loan Account.
ACCUMULATION UNIT - An accounting unit used to calculate Policy values when they
are allocated to the investment portfolios.
CASH VALUE - Your Policy's account value less any Surrender Charge and less any
deferred premium tax charge and less any policy maintenance fee.
CASH SURRENDER VALUE - Your Policy's cash value less any outstanding loans and
accrued loan interest.
COVERAGE AMOUNT - The coverage amount is used to determine the cost of insurance
charges. It is the difference between the death benefit and the account value.
FACE AMOUNT - The amount of coverage that you have chosen (unless later reduced
by a partial surrender) and which will be used to determine the death benefit.
MAXIMUM PREMIUM LIMIT - This is the maximum amount of premium that Cova will
accept under a Policy. We can also refer to this as MPL. Cova's MPL has been
designed not to exceed the maximum premium allowed under the Internal Revenue
Code for a specified face amount of Insurance for a given age.
POLICY DATE, POLICY ANNIVERSARY, POLICY YEAR - The Policy Date is the day your
premium was initially invested in the Money Market Portfolio which may be before
we actually issue the Policy. It is the date from which Policy Anniversaries and
Policy Years are determined.
PAGE
Annual Withdrawal Amount
Beneficiary
Business Day
Death Benefit
Insured
Investment Portfolio
Issue Date
Joint Owner
Loan Account
Monthly Deduction
Owner
Net Death Benefit or Death Proceeds
Premium
Processing Date
Right to Examine Period
Surrender Charge
SUMMARY
The Prospectus is divided into three sections: Summary, Part I and Part II. The
sections in this Summary correspond to sections in Part I of this Prospectus
which discuss the topics in more detail. Even more detailed information is
contained in Part II.
1. THE VARIABLE LIFE INSURANCE POLICY
The variable life insurance policy offered by Cova is a contract between you,
the owner, and Cova, an insurance company.
The Policy provides for the payment of death proceeds to your selected
beneficiary upon the death of the insured which are free from federal income
taxes. The Policy can be used as part of your estate planning or to save for
retirement. The insured is the person whose life is insured under the Policy.
The insured can be the same as the owner but does not have to be.
You can choose among twelve (12) investment portfolios which are listed
in Item 3. The investment portfolios are the investment options available under
the Policy. You can allocate your unloaned account value to any or all of the
investment portfolios. You can transfer between investment portfolios up to 12
times a year without charge and without being taxed. If you make more than 12
transfers in a year, we will charge $25 or 2% of the amount transferred,
whichever is less. While the Policy is in force, the account value And,
under certain circumstances, the death benefit, will vary, up or down, or the
duration of the death benefit may vary with the investment performance of
the investment portfolios you choose. You are not taxed on the earnings until
you surrender or borrow from your Policy.
2. PURCHASES
You can buy the Policy with a single premium and, under certain conditions, you
can make additional premiums. Your registered representative can help you fill
out the proper forms. The minimum initial premium we will accept is generally
$10,000. There is no minimum required for additional premiums. However, the
total of all premiums paid will be limited to that which is required to qualify
the Policy as life insurance under the Internal Revenue Code. We call this the
Maximum Premium Limit. We may also require additional information. In some
circumstances, the insured may be required to provide us with medical records or
a complete paramedical examination.
3. INVESTMENT OPTIONS
You can put your money in any or all of these investment portfolios which are
described in the prospectuses for the funds:
MANAGED BY J.P. MORGAN INVESTMENT MANAGEMENT INC.
Select Equity
Small Cap Stock
Large Cap Stock
International Equity
Quality Bond
MANAGED BY LORD, ABBETT & CO.
Bond Debenture
Growth and Income
Mid-Cap Value
Large Cap Research
Developing Growth
Lord Abbett Growth and Income
MANAGED BY CONNING ASSET MANAGEMENT COMPANY
Money Market
Depending upon market conditions, you can make or lose money in any of these
portfolios.
4. EXPENSES
The Policy has both insurance features and investment features, and there are
costs related to each that reduce the return on your investment.
Each year Cova deducts a $30 policy maintenance fee from your Policy. Cova will
not deduct this charge if the account value of your Policy is at least $50,000
at the time the deduction is to be made. If you make a complete surrender of
your Policy, the policy maintenance fee will be deducted, regardless of your
account value at that time.
Cova also deducts insurance charges on a monthly basis. For the first ten years,
the total charges are equal, on an annual basis, to 1.70% of the value of your
Policy, with 1/12 of that amount charged monthly. After the tenth year, the
total for insurance charges is 1.15% annually, with 1/12 of that amount charged
monthly.
Each month Cova will also deduct an additional insurance charge to cover the
cost of insurance. This charge will depend upon the sex, age and rating
classification of the insured and whether your initial premium was 100% of the
Maximum Premium Limit.
There are also daily investment charges which apply to the average daily
value of the investment portfolio and vary depending upon the investment
portfolio. These annual charges range from .205% to 1.10%.
If you take out more than the annual withdrawal amount, Cova may assess a
surrender charge which ranges from 7.5% of the premium surrendered in the first
year to 0% in the tenth year. Each year you may withdraw up to that sum of the
excess of your account value over premiums paid which have not been previously
surrendered; plus 10% of premiums without incurring this surrender charge. We
call this amount the annual withdrawal amount. If you take your money out before
the tenth year, Cova will assess a deferred premium tax charge which ranges from
2.25% of premium surrendered in the first year to 0% in the tenth year. After
the tenth year there is no surrender charge or deferred premium tax when
you withdraw your money.
Your Policy could lapse if your Cash Surrender Value is insufficient to cover
any charges due.
5. DEATH BENEFIT/DEATH PROCEEDS
The Policy provides for a Face Amount of insurance. The actual amount payable to
your beneficiary is the death benefit less any loans plus accrued loan interest
under the Policy. This amount is called the death proceeds. It may also be
called the net death benefit.
The death benefit will be the greater of (1) your Face Amount or (2) your
Account Value multiplied by a specified percentage. These percentages vary by
the age of the insured and are shown in your Policy. Therefore, increases in
your Account Value may increase the death benefit. However, because the death
benefit will never be less than the Face Amount (so long as the Policy remains
in force) a decrease in account value may decrease the death benefit, but never
below the Face Amount. Also, a partial surrender will reduce the Face Amount in
the same proportion as the Account Value was reduced.
All or part of the death proceeds may be paid in a lump sum or applied under one
of the Settlement Options contained in the Policy.
The Policy is offered on a single life or on a "joint life" basis. Under "joint
life" coverage, death proceeds are paid after the second insured's death.
At the time of application for a Policy, you designate a beneficiary who is
the person or persons who will receive the death proceeds. You can change your
beneficiary unless you have a designated an irrevocable beneficiary. The
beneficiary does not have to be a natural person.
6. TAXES
Your earnings are not taxed until you take them out. In most cases, your Policy
will be a modified endowment contract unless it was exchanged for a contract
issued before June 21, 1988. Money taken out of a modified endowment contract is
considered to come from earnings first and is taxed as income. Also, if you are
younger than 59 1/2 when you take money out, you may be charged a 10% federal
tax penalty on the earnings withdrawn. Death proceeds are paid to your
beneficiary tax free.
7. ACCESS TO YOUR MONEY
Under the Policy you have access to a portion of your Account Value equal to
earnings without charge. You may also withdraw up to 10% of premium each year,
without incurring the Surrender Charge. Premiums withdrawn in excess of this 10%
will incur a Surrender Charge during the first 10 years. However, a Deferred
Premium Tax Charge will be assessed on all premiums surrendered during the first
ten years. The minimum partial surrender that you can make is $500. You can also
borrow some of your Cash Value. The minimum loan amount is $500.
8. OTHER INFORMATION
RIGHT TO EXAMINE
If you cancel your Policy within ten days after you receive it (or whatever
period is required in your state), we will return to you the greater of (1) the
premium(s) you paid or (2) your Account Value on the day we, or the agent
through whom it was purchased, received the returned Policy. Until the end of
the time you are allowed to examine your Policy (10 days or the required period
in your state) plus five days, your premium will remain in the Money Market
Portfolio. After that, we will invest your Account Value as you requested.
WHO SHOULD PURCHASE THE POLICY?
The Policy is designed for an individual who wants:
-- to create or conserve his/her estate;
-- to supplement retirement income; and
-- to retain access to cash 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 is appropriate.
Also, you should carefully consider whether the Policy should be used to replace
an existing Policy on the life of an insured.
Cova will not issue a Policy on insureds older than 90.
ADDITIONAL FEATURES
-- You can arrange to have a regular amount of money automatically
invested in selected investment portfolios each month, theoretically giving you
a lower average cost per unit over time than a single one time purchase. The
amount you selected will be placed in the Money Market Portfolio and will be
transferred to the selected investment portfolios monthly. We call this feature
Dollar Cost Averaging. There is no additional charge for this feature.
-- You can arrange to automatically readjust your unloaned account value
between investment portfolios periodically to keep the allocation you select. We
call this feature Automatic Rebalancing. There is no additional charge for this
feature.
-- In the event the insured is terminally ill, you can request to
receive up to 50% of the death benefit up to a maximum of $500,000. If you have
selected the Joint Life option, the provision will only be available on the
second life after the death of the first. We call this feature the Accelerated
Death Benefit. There is no additional charge for this feature.
-- If you or the joint owner are confined in a qualifying facility for
90 days or more and if the confinement begins after the first policy year, you
can make a full or partial surrender and we will waive the Surrender Charge. We
call this feature the Nursing Home Waiver. There is no additional charge for
this feature.
-- You can elect to have the death benefit payable upon the death of a
second person. This benefit is written on spouses only. We call this option the
Joint Life Option.
These features may not be suitable for your particular situation.
9. INQUIRIES
If you need more information, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
If you need policy owner service (such as changes in policy information, inquiry
into policy values, or to make a loan), please contact us at:
Cova Financial Life Insurance Company
P.O. Box 10366
Des Moines, IA 50306
515-243-5834
800-343-8496
PART I
1. THE VARIABLE LIFE INSURANCE POLICY
This variable life insurance policy is a contract between you, the owner, and
Cova, an insurance company. This kind of policy is most commonly used for
retirement and/or estate planning.
During the insured's lifetime, you can select among the investment portfolios
offered in the Policy. (There are currently twelve (12) investment
portfolios offered. They are listed in Item 3.) You can transfer between them up
to 12 times a year without charge. The Account Value and, under some
circumstances, the death benefit will go up or down or the duration of the death
benefit may vary depending upon the investment experience of the investment
portfolio(s) you select. This gives you the opportunity to capture the upside
potential of the market. It also means you could lose money.
While your money remains in the Policy, you pay no current income taxes on
earnings or gains. This is called tax-deferred accumulation. It helps your money
grow faster. Subject to some limitations, you may take money out at any time
through loans or partial surrenders. Any money you take out, however, is taxed
as earnings until all earnings have been removed from the Policy. If you are
younger than age 59 1/2 when you take money out, you may also incur an
additional 10% federal tax penalty. If you purchased a Policy in exchange for a
policy issued prior to June 21, 1988, different tax rules may apply. (See
Section 6. Taxes. Part II also contains more detailed information regarding
taxes.)
Because this is a life insurance policy, it provides a death benefit, which is
an amount greater than your Account Value. When the insured dies, the death
benefit (minus any loans and any accrued loan interest) is paid to your
beneficiary free from federal income tax. The tax-free death benefit combined
with the ability to use your money while you're alive, makes this an excellent
way to accumulate money you don't think you'll use in your lifetime and a
tax-efficient way to provide for those you leave behind.
2. PURCHASES
PREMIUMS
Premiums are the monies you give us to buy the Policy. The minimum initial
premium we will accept is generally $10,000. When you apply for the Policy, you
request a specific amount of insurance. We call this amount the Face Amount of
the Policy. Your initial premium must be 80%, 90% or 100% of the Maximum Premium
Limit (MPL). The Internal Revenue Code (Code) has established certain criteria
which must be met in order for a life insurance policy to qualify as life
insurance under the Code. The MPL satisfies one of the criteria. Cova's MPL has
been designed not to exceed the Maximum Premium Limit allowed under the Code for
a specified Face Amount of insurance for a given age.
You can invest additional premiums up to the MPL. However, if the additional
premium increases the amount of insurance, we will require evidence of the
insurability of the insured. If all of your premiums totaled $1,000,000 or more,
you will need Cova's prior approval before you add premiums. If the additional
premium would cause the Policy to fail to meet the criteria established by the
Code to qualify as life insurance, Cova will send the premium back within 60
days of the anniversary of the Policy Date (Policy Anniversary). The amount and
frequency of additional premiums will affect the Account Value of your Policy
and may affect the amount or duration of your insurance.
APPLICATION FOR A POLICY
In order to purchase a Policy, you must submit an application to Cova which
requests some information regarding the proposed insured. In some cases, we will
ask for additional information. We may request that the insured provide us with
medical records or possibly require other medical tests.
Cova will not issue a Policy if the insured is over age 90.
Cova will review all the information it has about the insured and determine
whether or not the insured meets Cova's standards for issuing the Policy. This
process is called underwriting. If the insured meets all of Cova's underwriting
requirements, we will issue a Policy. There are several underwriting classes
under which the Policy may be issued.
During the underwriting period, which could be up to 60 days or longer from the
time the application is signed, we offer fixed insurance called conditional
insurance. The initial premium must be submitted with the application before the
conditional insurance is provided. The conditional insurance is effective up to
60 days from when the application was signed. For applicants 65 or younger,
conditional insurance will be for the lesser of $500,000 plus the initial
premium paid or the amount of insurance applied for. If the applicant is 66 or
older, the conditional insurance will be the lesser of $200,000 plus the initial
premium paid or the amount of insurance applied for. The conditional insurance
is subject to a number of restrictions and is only applicable if the proposed
insured was an acceptable risk for the insurance applied for.
ALLOCATION OF PREMIUMS
When you purchase a Policy, we will initially invest your money in the Money
Market Portfolio. After 15 days from the issue date (or the period required in
your state plus five days), we will allocate your Account Value to the
investment portfolios as you requested in the application. All allocation
directions must be in whole percentages. If you make additional premiums, we
will allocate them in the same way as your first premium unless you tell us
otherwise.
If you change your mind about owning a Policy, you can cancel it within 10 days
after receiving it (or the period required in your state (Right to Examine
Period)). When you cancel the Policy within this time period, Cova will not
assess a Surrender Charge or a deferred premium tax charge. Cova will give you
back the greater of your premium payment or your Account Value.
If your application for the Policy is in good order, Cova will invest your first
premium in the Money Market Portfolio two days after it is received, EVEN IF OUR
UNDERWRITING IS NOT YET COMPLETE AND THE POLICY IS NOT YET ISSUED. The day we
invest your premium in the Money Market Portfolio is called the Policy Date. The
money will stay in the Money Market Portfolio for 15 days after the issue date.
(In some states, the period may be longer.) At the end of that period, we will
re-allocate those funds as you selected in the application.
If as a result of underwriting review, Cova does not issue you a Policy, we will
return to you your premium, plus interest required by your state.
If we do issue a Policy, on the issue date, we will deduct the monthly
deductions for the period from the Policy Date through the next processing date.
GRACE PERIOD
Your Policy will stay in effect as long as your Cash Surrender Value is
sufficient to cover the Monthly Deductions. If the Cash Surrender Value of your
Policy is not enough to cover these deductions to be made from the Policy, Cova
will mail you a notice. You will have 61 days from the time the notice is mailed
to you to send to Cova the required premium payment. This is called the Grace
Period. If the premium is not paid by the end of the Grace Period, the Policy
will terminate without value.
ACCUMULATION UNIT VALUES
The value of your Policy that is invested in the investment portfolios will go
up or down depending upon the investment performance of the investment
portfolio(s) you choose. In order to keep track of the value of your Policy, 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 for each of
the investment portfolios. The value of an Accumulation Unit for any given
business day is determined by multiplying a factor we call the net investment
factor times the value of an Accumulation Unit for the previous business day. We
do this for each investment portfolio. The net investment factor is a number
that reflects the change (up or down) in an underlying investment portfolio
share. Our business days are each day that the New York Stock Exchange is open
for business. Our business day closes when the New York Stock Exchange closes,
usually 4:00 P.M. Eastern time.
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 an investment portfolio divided by the value of the
Accumulation Unit for that investment portfolio.
We calculate the value of an Accumulation Unit for each investment portfolio
after the New York Stock Exchange closes each day and then apply it to your
Policy.
When Cova assesses the monthly deductions and for the annual policy maintenance
fee we do so by deducting Accumulation Units from your Policy. When you have
selected more than one investment portfolio, we make the deductions pro rata
from all of the investment portfolios.
3. INVESTMENT OPTIONS
The Policy offers twelve (12) investment portfolios which are listed
below. Additional investment portfolios may be available in the future.
YOU SHOULD READ THE PROSPECTUSES FOR THESE FUNDS CAREFULLY BEFORE INVESTING.
COPIES OF THESE FUND PROSPECTUSES ARE ATTACHED TO THIS PROSPECTUS.
COVA SERIES TRUST
Cova Series Trust is managed by Cova Investment Advisory Corporation, which is
an indirect subsidiary of Cova. Cova Series Trust is a mutual fund with multiple
portfolios. Each investment portfolio has a different investment objective. Cova
Investment Advisory Corporation has engaged subadvisers to provide investment
advice for the individual investment portfolios. The following investment
portfolios are available under the Policy:
J.P. MORGAN INVESTMENT MANAGEMENT INC. IS THE SUB-ADVISER TO THE
FOLLOWING PORTFOLIOS:
Select Equity Portfolio
Small Cap Stock Portfolio
Large Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
LORD, ABBETT & CO. IS THE SUB-ADVISER TO THE FOLLOWING PORTFOLIOS:
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth and Income Portfolio
LORD ABBETT SERIES FUND, INC.
Lord Abbett Series Fund, Inc. is a mutual fund with multiple portfolios. Each
portfolio is managed by Lord, Abbett & Co. Only the following portfolio is
available under the Policy:
Growth and Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
General American Capital Company is a mutual fund with multiple portfolios. Only
the following portfolio is available under the Policy and is managed by Conning
Asset Management Company:
Money Market Fund
TRANSFERS
You can transfer money among the twelve (12) investment portfolios.
You can make 12 transfers every Policy Year without charge while the insured is
alive. If you make more than 12 transfers in a year, there is a transfer fee
deducted. (We measure years from your Policy Date.) The fee is $25 per transfer
or, if less, 2% of the amount transferred. The following apply to any transfer:
1. the minimum amount which you can transfer is $500 or your entire
value in the investment portfolio.
2. your request for transfer must clearly state the amount to be
transferred and which investment portfolios are involved in the transfer.
3. if a transfer fee applies, the charge will be deducted from the
amount transferred.
You can make transfers by telephone. Prior to making a transfer by telephone,
you will need to complete a written pre-authorization form. If you own
the Policy with a joint owner, unless Cova is instructed otherwise, Cova will
accept instructions from either you or the other owner. Cova will use reasonable
procedures to confirm that instructions given to us by telephone are genuine. If
Cova fails to use such procedures, we may be liable for any losses due to
unauthorized or fraudulent instructions. Cova records all telephone
instructions.
We have reserved the right to modify your transfer rights if we decide that the
exercise of this right by you, your authorized agent, or any owner is or would
be disadvantageous to other owners. We have also reserved the right to restrict
transfers to a maximum of 12 per year and to restrict transfers from being made
on consecutive business days.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from the Money Market Fund to any of the other investment
portfolio(s). By allocating amounts on a regular schedule as opposed to
allocating the total amount at one particular time, you may be less susceptible
to the impact of market fluctuations.
You must have at least $5,000 in the Money Market Portfolio (or the amount
required to complete your program, if more) in order to participate in the
Dollar Cost Averaging Program. There is no additional charge for this feature.
All Dollar Cost Averaging transfers will be made on the 15th day of the month
unless you indicated otherwise on the application. If this is not a business
day, then the transfer will be made the next business day.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee.
AUTOMATIC REBALANCING PROGRAM
Once your money has been allocated among the investment portfolios, the
performance of each portfolio may cause your allocation to shift. You can direct
us to automatically readjust your non-loaned Account Value between investment
portfolios to keep the blend you selected. You can tell us whether to rebalance
quarterly, semi-annually or annually. We will measure these periods from the
Policy Date. There is no additional charge for this feature. The transfer date
will be the 1st business day after the end of the period you selected. If you
participate in the Automatic Rebalancing Program, the transfers made under
the program are not taken into account in determining any transfer fee.
You cannot participate in both the Dollar Cost Averaging and Automatic
Rebalancing Programs at the same time.
APPROVED ASSET ALLOCATION PROGRAM
Cova recognizes the value to certain owners of having available, on a continuous
basis, advice for the allocation of your money among the investment portfolios
available under the Policy. Certain providers of these types of services have
agreed to provide such services to owners in accordance with Cova's
administrative rules regarding such programs.
Cova has made no independent investigation of these programs. Cova has only
established that these programs are compatible with our administrative systems
and rules.
Even though Cova permits the use of approved asset allocation programs, the
Policy was not designed for professional market timing organizations. Repeated
patterns of frequent transfers are disruptive to the operations of the
investment portfolios, and should Cova become aware of such disruptive
practices, we may modify the transfer privilege either on an individual or class
basis.
If you participate in an Approved Asset Allocation Program, the transfers made
under the program are not taken into account in determining any transfer fee.
SUBSTITUTION
Cova may elect to substitute one of the investment portfolios you have selected
with another portfolio. We would not do this without the prior approval of the
Securities and Exchange Commission. We will give you notice of our intent to do
this. Cova may also limit further investment in an investment portfolio if it
deems it inappropriate.
4. EXPENSES
There are charges and other expenses associated with the Policy that reduce the
return on your investment in the Policy. These charges and expenses are:
INSURANCE CHARGES
Each month, Cova will make certain deductions from your Policy on the processing
date. The processing date is the day each month that we deduct certain charges
from your Policy. The first processing date is the issue date. The issue date is
the date on which we issue you a Policy. After that, it is the same day each
month as the Policy Date.
The insurance charges are: (1) mortality and expense risk charge; (2)
administrative charge; (3) tax expense charge; and (4) cost of insurance charge.
Collectively, we refer to these charges as the monthly deduction. When you
have selected more than one investment portfolio, we make the deduction pro rata
from all of the investment portfolios you have selected.
MORTALITY AND EXPENSE RISK CHARGE. For the first ten years, this charge is
equal, on an annual basis, to .90%, 1/12 of which is charged each month, of the
Account Value of your Policy invested in the investment portfolios. For the
eleventh year and after, the charge is .75%, 1/12 of which is charged each
month. This charge cannot be increased.
ADMINISTRATIVE CHARGE. This charge is equal, on an annual basis, to .40%, 1/12
of which is charged each month, of the Account Value of your Policy. This
charge cannot be increased.
TAX EXPENSE CHARGE. This deduction is the sum of the premium tax charge and the
federal tax charge. It is deducted monthly for the first ten years. It is equal,
on an annual basis, to .40% (.15% for federal tax charge and .25% for premium
tax charge), 1/12 of which is charged each month, of the Account Value of your
Policy.
This charge compensates Cova for its expenses incurred for federal taxes
incurred as a result of issuing the Policy. It also compensates Cova for the
state and local premium taxes it incurred as a result of issuing the Policy.
Premium taxes range from 0% to 4%. You will be assessed the premium tax charge
regardless of what the total actual premium tax is in your state or local
jurisdiction. If you surrender all or part of your Policy during the first 10
years, Cova will charge a deferred premium tax charge. See below.
COST OF INSURANCE CHARGE. This charge provides the death benefit for the
month.
The cost of insurance charge is determined by multiplying the Coverage Amount by
the cost of insurance rate. The Coverage Amount is the difference between the
death benefit and the Account Value. The cost of insurance rate is based upon
the sex, age, rate classification of the insured and whether you paid 100%, or
90%, or 80% of the MPL. The rate classification of the insured is determined
through our underwriting process.
The Policy provides that for standard risks, the guaranteed cost of insurance
rate is based on the 1980 Commissioners Standard Ordinary Mortality Table, age
last birthday (1980 CSO Table). For substandard risks, the guaranteed cost of
insurance rate will be higher and will be based upon a multiple of the 1980 CSO
Table. The multiple will be based on the insured's substandard rating. Tables
setting forth the guaranteed cost of insurance rates are included in each
Policy.
Cova can use rates that are less than the guaranteed cost of insurance rates
shown in the Policy. Cova refers to these as the current cost of insurance
rates.
If 100% of the MPL is paid, Cova's current cost of insurance rate is a
percentage of the Account Value. The basis and amount of this charge may change
in the future, but can never be more than the guaranteed cost of insurance rates
contained in the Policy. For a better understanding of how the cost of insurance
rate and the other charges affect policy values, you should request personalized
illustrations from your registered representative.
ANNUAL POLICY MAINTENANCE FEE
Every year on the Policy Anniversary, currently Cova deducts $30 as a policy
maintenance fee. This charge cannot be increased once the Policy is issued. Cova
will not deduct this charge, if when the deduction is to be made, your Account
Value is $50,000 or more. Cova may some time in the future discontinue this
practice for new policies issued and deduct the charge. If you make a complete
surrender of your Policy, the policy maintenance fee will be deducted,
regardless of your Account Value at that time. When you have selected more than
one investment portfolio, we make the deduction prorata from all of the
investment portfolios you have selected.
ANNUAL WITHDRAWAL AMOUNT
While the Policy is in force, prior to the death of the insured and after the
expiration of the Right to Examine Period, you can make a total or partial
surrender of the Account Value of your Policy up to the Cash Surrender Value. A
surrender may be subject to a surrender charge and a deferred premium tax
charge.
When you request a surrender, we will determine what portion, if any, is part of
your annual withdrawal amount. The annual withdrawal amount is equal to:
1. the excess of the Account Value over premiums paid which have not
been previously surrendered. Neither the surrender charge nor deferred premium
tax charge are assessed on this amount; and
2. on a non-cumulative basis, 10% of your premium payments each year.
This portion of the annual withdrawal amount is subject to the deferred
premium tax charge.
SURRENDER CHARGE
During the first 10 years, the surrender charge is assessed against any premium
surrendered, which is not part of the annual withdrawal amount. The surrender
charge, which is a percent of premiums surrendered, is shown in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Policy Year Surrender Charge Policy Year Surrender Charge
----------- ---------------- ----------- ----------------
1 7.5% 6 4.0%
2 7.5% 7 3.0%
3 7.5% 8 2.0%
4 6.0% 9 1.0%
5 5.0% 10+ 0%
</TABLE>
NURSING HOME WAIVER
If you or the joint owner, if any, are confined in a qualifying facility for 90
days or more and if the confinement begins during the first ten years, under the
Nursing Home Waiver rider, you can make a full or partial surrender and we will
waive the surrender charge. The Nursing Home Waiver goes into effect after the
first Policy Anniversary. There is no additional charge for this feature.
DEFERRED PREMIUM TAX CHARGE
When you purchase a Policy there are various premium taxes assessed by state and
local governmental entities that we must pay on the Policy. You are charged a
portion of that each month for the first ten years as part of the tax expense
charge. (See the discussion of the Tax Expense Charge in Section 4 above.) The
deferred premium tax charge enables Cova to collect that portion of the premium
tax charge it has not collected when you surrender all or part of your Policy.
The deferred premium tax charge is assessed only on premiums surrendered from
the Policy during the first ten years. The deferred premium tax charge, which is
a percent of premiums surrendered, is shown in the table below:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Deferred Premium Deferred Premium
Policy Year Tax Charge Policy Year Tax Charge
----------- ---------------- ----------- -------------
1 2.25% 6 1.00%
2 2.00% 7 .75%
3 1.75% 8 .50%
4 1.50% 9 .25%
5 1.25% 10+ 0%
</TABLE>
TRANSFER FEE
You can make 12 free transfers every year. We measure a year from the Policy
Date. If you make more than 12 transfers a year, we will deduct a transfer fee
of $25 or 2% of the amount that is transferred, whichever is less. If we do
assess a transfer fee, it will be deducted from the amount transferred.
If the transfer is part of the Dollar Cost Averaging Program, the Automatic
Rebalancing Program or an Approved Asset Allocation Program, it will not count
in determining the transfer fee.
TAXES
Cova may assess a charge against a Policy for any taxes attributable to the
Separate Account. Cova does not expect to incur such taxes.
INVESTMENT PORTFOLIO EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment portfolios, which are summarized below. See the fund prospectuses for
a complete description.
INVESTMENT PORTFOLIO EXPENSES
(as a percentage of the average daily net assets of an investment portfolio)
<TABLE>
<CAPTION>
Other Expenses
(after expense
reimbursement for
Management 12b-1 certain Portfolios - Total Portfolio
Fees Fees see Note 1 below) Annual Expenses
---- ---- ----------------- ---------------
<S> <C> <C> <C> <C>
COVA SERIES TRUST (1)
Managed by J.P. Morgan
Investment Management Inc.
Select Equity (2) .75% - - .10% .85%
Small Cap Stock (2) .85% - - .10% .95%
Large Cap Stock (2) .65% .10% .75%
International Equity (2) .85% - - .10% .95%
Quality Bond (2) .55% - - .10% .65%
Managed by Lord, Abbett & Co.
Bond Debenture (2) .75% - - .10% .85%
Mid-Cap Value (3) 1.00% - - .10% 1.10%
Large Cap Research (3) 1.00% .10% 1.10%
Developing Growth (3) .90% - - .10% 1.00%
Lord Abbett Growth and Income (3) .65% - - .10% .75%
LORD ABBETT SERIES FUND, INC.
Managed by Lord, Abbett & Co.
Growth and Income (4) .50% .07% .02% .59%
GENERAL AMERICAN CAPITAL COMPANY
Managed by Conning Asset Management
Company
Money Market .205% - - .00% .205%
</TABLE>
(1) Since August 20, 1990, Cova has been reimbursing the investment portfolios
of Cova Series Trust for all operating expenses (exclusive of the management
fees) in excess of approximately .10%. Absent the expense reimbursement, the
percentages shown for total portfolio annual expenses (on an annualized basis)
for the period ended December 31, 1996 would have been: 1.70% for the Select
Equity Portfolio; 2.68% for the Small Cap Stock Portfolio; 1.23% for the Large
Cap Stock Portfolio; 3.80% for the International Equity Portfolio; 1.52% for the
Quality Bond Portfolio; and 2.05% for the Bond Debenture Portfolio.
(2) Annualized. The Portfolio commenced regular investment operations on April
2, 1996.
(3) Estimated. The Portfolio has not yet commenced regular investment
operations.
(4) The Growth and Income Portfolio of Lord Abbett Series Fund, Inc. has a
12b-1 plan which provides for payments to Lord, Abbett & Co. for remittance
to a life insurance company for certain distribution expenses (see the Fund
Prospectus). The 12b-1 plan provides that such remittances, in the
aggregate, will not exceed .15% on an annual basis, of the daily net asset
value of shares of the Growth and Income Portfolio. As of May 1, 1997,
no payments had been made under the 12b-1 plan. For the year
ending December 31, 1997, the 12b-1 fees are estimated to be .07%.
5. DEATH BENEFIT
The primary purpose of the Policy is to provide death benefit protection on the
life of the insured. While the Policy is in force, if the insured dies, the
beneficiary(ies) will receive the death proceeds. The death proceeds equal the
death benefit under the Policy less any loans and accrued loan interest.
The death benefit is the greater of: (1) the Face Amount of the Policy; and (2)
the minimum death benefit. The minimum death benefit is the Account Value
multiplied by a percentage. Cova has included the minimum death benefit in order
to assure that the Policy will continue to qualify as life insurance under the
Internal Revenue Code.
You can choose to have the death proceeds paid in a lump sum or under a
Settlement Option. If you have not made a choice before the insured dies, the
beneficiary will choose the method of payment. If a method of payment has not
been chosen within 90 days after receiving proof of death, Cova may pay the
death proceeds in a lump sum.
The death benefit payable during the grace period is the death benefit in effect
immediately prior to the start of the grace period less any loans, accrued loan
interest and any overdue deductions. See discussion of grace period above.
ACCELERATED DEATH BENEFIT
If the insured is terminally ill, under the Accelerated Death Benefit rider,
Cova will pre-pay a portion of the death benefit. You may elect to have an
Accelerated Death Benefit of up to 50% of the death benefit but no greater than
$500,000.
You can only elect to receive an Accelerated Death Benefit once. The Accelerated
Death Benefit must first be used to repay any outstanding loans and accrued loan
interest. After repayment of the outstanding loans and accrued loan interest,
any remaining amount will be paid as a lump sum or under a payment plan. The
subsequent amount available for loans or surrenders or as a death benefit will
be reduced by the amount of the Accelerated Death Benefit, plus interest
accrued at the Policy loan interest rate.
This benefit may not be available in your state or may have different
provisions in your state.
JOINT LIVES
Cova offers a rider to the Policy that provides that the death benefit will be
paid only upon the death of a second person. This option is only available to
spouses.
The cost of insurance charge reflects the anticipated life expectancy of both
insureds. It also reflects the fact that the death benefit is payable at the
death of the last surviving insured.
If you wish to reinstate a lapsed Policy with a Joint Life rider attached, both
insureds must be alive and provide satisfactory evidence of insurability.
The Policy provisions regarding misstatement of age or sex, suicide and
incontestability apply to both insureds.
If a Joint Life rider is issued in conjunction with the Policy, the Accelerated
Death Benefit will only be payable on the terminal illness of the last surviving
insured.
This benefit may not be available in your state.
6. TAXES
NOTE: COVA HAS PREPARED THE FOLLOWING INFORMATION ON TAXES AS A GENERAL
DISCUSSION OF THE SUBJECT. IT IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. YOU
SHOULD CONSULT YOUR OWN TAX ADVISER ABOUT YOUR OWN CIRCUMSTANCES. COVA HAS
INCLUDED IN PART II AN ADDITIONAL DISCUSSION REGARDING TAXES.
LIFE INSURANCE IN GENERAL
Life insurance, such as the 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 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. The
beneficiaries are not taxed when they receive the death proceeds upon the death
of the insured.
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. When you
receive a distribution, you are taxed on the amount of the withdrawal that is
earnings.
TAKING MONEY OUT OF YOUR POLICY
For tax purposes, your Policy will be treated as a modified endowment contract,
unless under certain circumstances it was exchanged for a policy issued before
June 21, 1988. Consequently if you make a withdrawal or a loan from your Policy,
the Code treats it as first coming from earnings and then from your premiums.
These earnings are included in taxable income.
The Code also provides that any amount received from an insurance policy 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 you purchased a Policy in exchange for a policy issued prior to June 21,
1988, different tax rules may apply. See "Tax Status" in Part II for more
details.
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. Cova believes that the investment portfolios are being
managed so as to comply with the 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 Cova would be considered the owner of the shares of the
investment 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 investment portfolios, to
make transfers among the investment portfolios or the number and type of
investment portfolios owners may select from. If guidance from the Internal
Revenue Service is provided which is considered a new position, then 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
investment portfolios. Due to the uncertainty in this area, Cova reserves the
right to modify the Policy in an attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
The Cash Surrender Value in your Policy is available: (1) by making a surrender
(either a partial or a complete surrender) or (2) by taking a loan from your
Policy.
LOANS
You may borrow money from Cova while the Policy is still in force. The Policy
will be the only security Cova will require for a Policy loan. You cannot borrow
against your Policy until the end of the Right to Examine Period and you cannot
borrow if the Policy is in a grace period. Loans are considered distributions
from the Policy for tax purposes and the portion of the loan that has come from
earnings will be taxable to you and may be subject to a 10% penalty tax. See
"Tax Status" in Part II for more details.
LOAN AMOUNT. The maximum loan amount is equal to: 90% of the Account Value,
less loan interest due on the next Policy Anniversary, the surrender charge,
the policy maintenance fee, if any, and the deferred premium tax charge, if
any.
The minimum loan amount is $500. If total loans equal or exceed the Cash Value,
the Policy will terminate at the end of the grace period if an appropriate loan
repayment is not received by Cova.
LOAN ACCOUNT. When you make a loan, a portion of your Account Value equal to the
loan will be transferred on a pro rata basis from the investment portfolios to
the loan account. The loan account is a portion of Cova's general account that
contains Account Values attributable to Policy loans.
LOAN INTEREST. Loan interest due on the Policy loan will accrue daily at a
current rate of 6.0% per annum. The loan interest is due each Policy Anniversary
and if not paid will become part of the loan. When that happens, a portion of
the account value equal to the loan interest due is transferred, on a pro rata
basis, from the investment portfolios to the loan account.
INTEREST CREDITED. Amounts held in the loan account will be credited daily
with interest, at a current rate of 4.0% per annum.
PREFERRED LOAN. The part of your loan equal to earnings is the Preferred
Loan. A preferred loan will be credited interest daily at a current rate of
6.0% per annum. It will accrue loan interest daily at a current rate of 6.0%
per annum.
EFFECT OF LOAN. When you make a loan against your Policy, Cova will redeem
Accumulation Units from the investment portfolios equal to the loan request and
transfer that amount to the loan account.
A Policy loan, whether or not repaid, will have a permanent effect on the
Policy. This is because the loan account does not share in the investment
results of the investment portfolio(s). If it is not repaid, the Policy loan
will reduce the amount of death benefit and Cash Value.
LOAN REPAYMENTS. You can repay all or part of a loan at any time while your
Policy is in force and the insured is alive. There is no minimum loan repayment
amount. If you want to repay a loan in full, the loan repayment must equal the
loan plus all the accrued loan interest.
When you repay a loan, Cova will transfer the amount held in the loan account to
the investment portfolios according to your most recent instructions.
Unless you tell Cova otherwise, any payment Cova receives from you will go first
to pay any interest due, then to repay any loan, and then will be considered a
premium payment.
TOTAL SURRENDER
You can terminate your Policy by telling Cova in writing. Cova will pay you the
Cash Surrender Value. When that happens, the Policy will be terminated and there
will be no other benefits. When you make a total surrender there may be
surrender charges and deferred premium tax charges and the policy maintenance
fee will be deducted.
PARTIAL SURRENDERS
You can surrender some of the Cash Surrender Value by making a request in
writing to Cova. The minimum amount you can surrender is $500, unless your Cash
Surrender Value is less. Cova requires that you maintain a minimum Account Value
in your Policy of at least $5,000 after you make a partial surrender. If you do
not, the Policy will terminate and Cova will send you the entire Cash Surrender
Value. When you make a surrender, there may be surrender charges and deferred
premium tax charges.
When you make a partial surrender, the Face Amount of your Policy will be
reduced. The Face Amount is reduced in the same proportion that the Account
Value is reduced by the partial surrender. When you make a partial surrender,
the amount of the surrender is deducted on a pro rata basis from Account Value
allocated to the investment portfolios.
TERMINATION OF THE POLICY
Your Policy will terminate if (1) you make a total surrender of the Policy, (2)
the grace period has ended, or (3) the insured has died.
REINSTATEMENT
If your Policy terminates while the insured is still alive you can have it
reinstated provided the Policy did not terminate because you made a total
surrender. You can only reinstate your Policy within 5 years after the end of
the grace period.
When you reinstate your Policy you must provide Cova with satisfactory evidence
of insurability and you must either repay any outstanding loan and
accrued interest or you must reinstate the loan along with any accrued interest.
You must also pay a sufficient premium to (1) cover all the monthly deductions
and any policy maintenance fee that were unpaid during the grace period and (2)
be sufficient to keep the Policy in force for at least 2 months after the date
of reinstatement.
When you reinstate your Policy, the Face Amount of the reinstated Policy will be
the Face Amount of your original Policy at the time the Policy terminated,
unless you direct Cova otherwise. You cannot select a Face Amount that is larger
than that. The Account Value adjusted for the past due charges of your Policy
when you reinstate it will be the Account Value at the time of termination plus
the additional premium paid at the time of reinstatement. The past due monthly
deductions and policy maintenance fee, if any, will be deducted from this
amount. The surrender charge, if any, and the deferred premium tax charge, if
any, are based on the number of policy years from the original Policy Date.
The effective date of the reinstated Policy is the next processing date
following Cova's approval of your application for reinstatement.
8. OTHER INFORMATION
COVA
Cova Financial Life Insurance Company ("Cova") was originally incorporated on
September 6, 1972 as Industrial Indemnity Life Insurance Company, a California
corporation and changed its name to Xerox Financial Life Insurance Company in
1986. On June 1, 1995, a wholly-owned subsidiary of General American Life
Insurance Company purchased Cova which on that date changed its name to Cova
Financial Life Insurance Company.
Cova is presently licensed to do business in the state of California.
THE SEPARATE ACCOUNT
Cova has established a separate account, Cova Variable Life Account Five
(Separate Account), to hold the assets that underlie the Policies.
The assets of the Separate Account are held in Cova's name on behalf of the
Separate Account and legally belong to Cova. However, those assets that underlie
the Policies, are not chargeable with liabilities arising out of any other
business Cova may conduct. All the income, gains and losses (realized or
unrealized) resulting from those assets are credited to or against the Policies
and not against any other Policies Cova may issue.
DISTRIBUTOR
Cova Life Sales Company (Life Sales), One Tower Lane, Suite 3000, Oakbrook
Terrace, Illinois 60181-4644, acts as the distributor of the Policies. Life
Sales is an affiliate of Cova.
Commissions will be paid to broker-dealers who sell the Policies. Broker-dealers
will be paid commissions up to 5.5% of premiums and a trail commission equal to
.25% for years two through nine which increases to .40% in year 10. Sometimes,
Cova enters into an agreement with the broker-dealer to pay the broker-dealer
persistency bonuses, in addition to the standard commission.
SUSPENSION OF PAYMENTS OR TRANSFERS
Cova 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
investment portfolios not reasonably practicable or Cova cannot reasonably
value the shares of the investment portfolios;
4. during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
OWNERSHIP
OWNER. You, as the owner of the Policy, have all of the rights under the Policy.
If you die while the Policy is still in force and the insured is living,
ownership passes to a successor owner or if none, then your estate becomes the
owner.
JOINT OWNER. The Policy can be owned by joint owners. Authorization of both
joint owners is required for all Policy changes except for telephone
transfers.
BENEFICIARY. The beneficiary is the person(s) or entity you name to receive any
death benefit. The beneficiary is named at the time the Policy is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before the insured dies. If there is an
irrevocable beneficiary, all Policy changes except premium allocations and
transfers require the consent of the beneficiary.
ASSIGNMENT. You can assign the Policy.
PART II
MORE INFORMATION
THE COMPANY
Cova Financial Life Insurance Company (the "Company") was originally
incorporated on September 6, 1972 as Industrial Indemnity Life Insurance
Company, a California corporation and changed its name on January 1, 1986 to
Xerox Financial Life Insurance Company. The Company presently is licensed to do
business in the state of California. On June 1, 1995, a wholly-owned subsidiary
of General American Life Insurance Company ("General American") purchased Xerox
Financial Services Life Insurance Company ("Xerox Life"), an affiliate of the
Company, from Xerox Financial Services, Inc. The acquisition of Xerox Life
included related companies, including the Company. On June 1, 1995 the Company
changed its name to Cova Financial Life Insurance Company.
General American is a St. Louis-based mutual company with more than $250 billion
of life insurance in force and approximately $19 billion in assets. It provides
life and health insurance, retirement plans, and related financial services to
individuals and groups.
On April 1, 1996, Cova contributed initial capital to the Large Cap Stock and
Quality Bond Portfolios, by making a capital contribution through another
Separate Account. As of December 31, 1996, the capital contributed to the
Quality Bond Portfolio represented approximately 36% of the total assets of such
Portfolio and the capital contributed to the Large Cap Stock Portfolio by Cova
represented approximately 75% of the total assets of such Portfolio. Cova
currently intends to remove these assets from the Portfolios on a pro rata basis
in proportion to money invested in the Portfolios by both variable annuity and
variable life contract owners.
Executive Officers and Directors of Cova
The directors and executive officers of Cova and their principal
occupations for the past five years are as follows:
<TABLE>
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<S> <C>
Name Principal Occupation During the Past Five Years
- --------------------------- -----------------------------------------------
John W. Barber*** Director of Cova-June, 1995 to present;
Director of First Cova Life Insurance Company
(FCLIC)-June, 1995 to present; Director of
CFLIC June, 1995 to present; Vice President
and Controller of General American Life Insurance
Company-December, 1984 to present; President
and Director of Equity Intermediary Company-
October, 1988 to present.
Jerome P. Darga* Vice President and
Assistant Secretary of Cova-1992
to present; Vice President and
Assistant Secretary of CFLIC-1992
to present; Vice President and
Assistant Secretary of CLMC-1992
to present.
Connie A. Doern**** Vice President of Cova-1997 to Present, prior thereto
Assistant Vice President from 1990 to 1995; Vice
President of CFLIC- 1997 to Present, prior
thereto Assistant Vice President from 1990
to 1995; Vice President of FCLIC-1997 to
Present, prior thereto Assistant Vice
President from 1993 to 1995; Vice President
of J&H/KVI-1989 to Present.
Judy M. Drew* Vice President of Cova-1988 to present;
Vice President of CFLIC-1988 to present;
Vice President of FCLIC-1992 to present;
Senior Vice President of CLMC-1996 to
present, prior thereto Vice President from 1989
to 1996; President, COO and Director of Cova
Life Sales Company (CLSC)-1988 to present.
Patricia E. Gubbe* Vice President of Cova-1989 to present;
Vice President of CFLIC-1989 to present;
Vice President of FCLIC-1992 to present;
First Vice President of CLMC-1996 to
present, prior thereto Vice President from 1989
to 1996; Vice President and Chief Compliance
Officer of CLSC-1989 to present.
Philip A. Haley* Executive Vice President of Cova-May 1997 to
present, prior thereto Vice President from 1990
to 1997 and Assistant Vice President from 1989
to 1990; Executive Vice President of FCLIC-
May, 1997 to present, prior thereto Vice
President from 1995 to 1997; Executive Vice
President of CFLIC-May 1997 to present,
prior thereto Vice President from 1990 to
1997 and Assistant Vice President from 1989
to 1990; Executive Vice President of CLMC from
May, 1997 to present, prior thereto Senior
Vice President from 1996 to 1997 and Vice
President from 1990 to 1996 and Assistant Vice
President from 1989 to 1990; Vice President of
CLSC from 1991 to present, prior thereto
Assistant Vice President from 1989 to 1991.
Christopher S. Harden* Vice President of Cova-
1991 to present; Vice President of
CFLIC-1991 to present; First Vice
President of CLMC-1996 to
present, prior thereto Vice
President-1991 to 1996.
J. Robert Hopson* Vice President, Chief Actuary and Director of
Cova-1991 to present; Vice President, Chief
Actuary and Director of CFLIC-1991 to
present; Vice President, Chief Actuary and
Director of FCLIC-1992 to present;
Senior Vice President, Chief Actuary and Director
of CLMC-1996 to present, prior thereto Vice
President and Director from 1993 to 1996 and Vice
President from 1991 to 1993.
Thomas E. Hughes, Jr.** Treasurer and Director of Cova-June, 1995 to
present; Treasurer and Director of CFLIC-June,
1995 to present; Treasurer of FCLIC-June, 1995
to present; Corporate Actuary and Treasurer of
General American Life Insurance Company-
October, 1994 to present. Formerly, Executive
Vice President-Group Pensions General
American Life Insurance Company-March, 1990 to
October, 1994. In addition to the Cova companies,
Director of the following General American
subsidiary companies: Paragon Life Insurance
Company and RGA Reinsurance Company-October,
1994 to present. Treasurer of the following
General American subsidiary companies: Paragon
Life Insurance Company, General Life Insurance
Company of America, General Life Insurance
Company, General American Holding Company, Red
Oak Realty Company, Gen Mark Incorporated,
Walnut Street Securities, Inc., Walnut Street
Adviser's Inc., White Oak Royalty Company,
Walnut Street Funds, Inc., and RGA Reinsurance
Company-October, 1994 to present.
Lisa O. Kirchner**** Vice President of Cova-1997 to present, prior
thereto Assistant Vice President from 1990 to
1995; Vice President of CFLIC-1997 to present,
prior thereto Assistant Vice President from
1988 to 1995; Vice President of FCLIC-1997 to
present, prior thereto Assistant Vice
President from 1993 to 1995; Vice President
of J&H/KVI-1985 to present.
Douglas E. Jacobs* Vice President of Cova-
1985 to present; Vice President of
CFLIC-1985 to present; Vice
President of CLMC-1985 to
present.
Richard A. Liddy** Chairman of the Board of Directors of Cova,
CFLIC, FCLIC, CLMC, Advisory and Allocation-
April, 1997 to present; Chairman of the Board,
President and Chief Executive Officer of
General American Life Insurance Company-May,
1992 to present; Mr. Liddy also holds various
positions with the General American
subsidiaries as follows: Chairman of the Board
and President of General American Mutual
Holding Company, GenAmerica Corporation and
General American Holding Company; Chairman of
the Board of Security Equity Life Insurance
Company, Conning Corporation, The Walnut Street
Funds, Inc., General American Capital Company,
Reinsurance Group of America, Inc., RGA Life
Reinsurance Company of Canada, and RGA
Reinsurance Company.
William C. Mair* Vice President, Controller and Director of Cova
since 1995 to present, prior thereto Vice
President, Controller, Treasurer and Director.
Vice President, Controller and Director of CFLIC
since 1995 to present, prior thereto Vice
President, Controller, Treasurer and Director;
Vice President, Controller and Director of FCLIC-
from 1992 to present; Vice President, Treasurer,
Controller and Director of Advisory-1993 to
present; Vice President, Treasurer, Controller
and Director of Allocation-1994 to present;
Director of CLSC-1992 to present; Senior Vice
President, Treasurer, Controller and Director of
CLMC-1989 to present; Vice President,
Treasurer, Controller, Chief Financial Officer,
Chief Accounting Officer and Director of Trust-
1996 to present.
Matthew P. McCauley** Assistant Secretary and Director of Cova-June,
1995 to present; Assistant Secretary and Director
of CFLIC-June, 1995 to present; Assistant
Secretary and Director of FCLIC-June, 1995 to
present; Associate General Counsel and Vice
President of General American Life Insurance
Company-1973 to present; Also, Director, Vice
President, General Counsel and Secretary for
several other General American subsidiaries;
including Equity Intermediary Company, Red Oak
Realty Company, and White Oak Royalty Company;
General American Holding Company and Paragon
Life Insurance Company. General Counsel and
Secretary, Reinsurance Group of America,
Incorporated. Director and Secretary, General
American Capital Company. General Counsel and
Secretary, Conning Corporation. General Counsel,
Conning Asset Management Company. Director of
RGA Reinsurance Company, Walnut Street
Securities, Inc. Secretary to the Walnut Street
Funds, Inc.
Mark E. Reynolds* Executive Vice President of Cova-May, 1997 to
present; Executive Vice President of CFLIC-May,
1997 to present; Executive Vice President of
CFSLIC-May, 1997 to present; Executive Vice
President of CLMC-May, 1997 to present;
Executive Vice President and Director of Cova
Investment Advisory Corporation-December, 1996
to present; Executive Vice President and
Director of Cova Investment Allocation
Corporation-December, 1996 to present.
Leonard M. Rubenstein** Director of Cova, CFLIC, FCLIC, and CLMC-January,
1996 to present; Director of Advisory and
Allocation from 1995 to present; Executive Vice
President and Director of General American Life
Insurance Company-1992 to present. Mr.
Rubenstein also holds various positions with the
General American subsidiaries as follows:
Director and Treasurer of General American
Capital Company; Senior Vice President
Investments, Treasurer and Director of
Reinsurance Group of America, Incorporated;
Director of Paragon Life Insurance Company;
Director of General American Holding Company;
Chief Executive Officer, Chairman and Director
for Conning Corporation; Director of the
following: General Life Insurance Company,
Security Equity Life Insurance Company, BHIF
America de Vida Seguros S.A. (Chile), Manatial
Seguros de Vida, S.A. (Argentina), Red Oak
Realty Company, General Life Insurance Company
of America; RGA Reinsurance Company;
Secretary and Director for RGA Sud America S.A.
Myron H. Sandberg* Vice President of Cova-1985 to present; Vice
President of CFLIC-1985 to present; and CLMC
1989 to present.
John W. Schaus* Vice President of Cova-
1988 to present; Vice President of
CFLIC-1988 to present; and CLMC-
1989 to present.
Norman A. Skinrood Jr.**** Vice President of Cova-1997 to present; Vice
President of CFLIC-1997 to present; Vice
President of FCLIC-1997 to present;
Vice President of J&H/KVI-1996 to present,
Director/PH Manager of DST, Kansas City,
Missouri from 1993-1996.
Lorry J. Stensrud* President and Director of Cova from June, 1995
to present, prior thereto Executive Vice
President; President and Director of CFLIC from
June, 1995 to present, prior thereto Executive
Vice President; President and Director of FCLIC
from June, 1995 to present, prior thereto
Executive Vice President; President and Director
of CLMC from June, 1995 to present, prior thereto
Executive Vice President only; President and
Director of Advisory from 1993 to present;
President and Director of Allocation from 1994 to
present. Director of CLSC from 1989 to
present; President, Chief Executive Officer and
Director of Trust-1996 to present.
Peter L. Witkewicz***** Vice President of Cova-1997 to present; Vice
President of CFLIC-1997 to present; Vice
President of FCLIC-1997 to present, prior
thereto from 1995 to 1996.
Kent R. Zimmerman** Assistant Treasurer of Cova-May, 1996 to
present; Assistant Treasurer of CFLIC-May,
1996 to present; Assistant Treasurer of CLMC-
1996 to present. Second Vice President of
General American Life Insurance Company-
1997 to present, prior thereto Vice President
1992 to 1997. Mr. Zimmerman holds various
positions with the General American
subsidiaries - Assistant Treasurer, Security
Equity Life Insurance Company, Paragon Life
Insurance Company, General Life Insurance
Company of America and RGA Reinsurance Co.
* Business Address: Cova, One Tower Lane, Suite 3000, Oakbrook
Terrace, IL 60181
** Business Address: General American, 700 S. Market Street, St. Louis,
MO 63101
*** Business Address: General American, 13045 Tesson Ferry Road,
St. Louis, MO 63128
**** Business Address: J&H/KVI, 1776 West Lakes Parkway,
West Des Moines, IA 50266
</TABLE>
VOTING
In accordance with its view of present applicable law, Cova will vote the shares
of the investment portfolios at special meetings of shareholders in accordance
with instructions received from owners having a voting interest. Cova will vote
shares for which it has not received instructions in the same proportion as it
votes shares for which it has received instructions. Cova will vote shares it
owns in the same proportion as it votes shares for which it has received
instructions. The funds do not hold regular meetings of shareholders.
If the Investment Company Act of 1940 or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result
Cova determines that it is permitted to vote the shares of the funds in its own
right, it may elect to do so.
The voting interests of the owner in the funds will be determined as follows:
owners may cast one vote for each $100 of Account Value of a Policy which is
allocated to an investment portfolio on the record date. Fractional votes are
counted.
The number of shares which a person has a right to vote will be determined as of
the date to be chosen by Cova not more than sixty (60) days prior to the meeting
of the fund. Voting instructions will be solicited by written communication at
least fourteen (14) days prior to such meeting.
Each owner having such a voting interest will receive periodic reports relating
to the investment portfolios in which he or she has an interest, proxy material
and a form with which to give such voting instructions.
DISREGARD OF VOTING INSTRUCTIONS. Cova may, when required to do so by state
insurance authorities, vote shares of the funds without regard to instructions
from owners if such instructions would require the shares to be voted to cause
an investment portfolio to make, or refrain from making, investments which would
result in changes in the sub-classification or investment objectives of the
investment portfolio. Cova may also disapprove changes in the investment policy
initiated by owners or trustees of the funds, if such disapproval is reasonable
and is based on a good faith determination by Cova that the change would violate
state or federal law or the change would not be consistent with the investment
objectives of the investment portfolios or which varies from the general quality
and nature of investments and investment techniques used by other funds with
similar investment objectives underlying other variable contracts offered by
Cova or of an affiliated company. In the event Cova does 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.
THE SEPARATE ACCOUNT
Cova has established the separate account, Cova Variable Life Account Five
(Separate Account), to hold the assets that underlie the Policies. The Board of
Directors of Cova adopted a resolution to establish the Separate Account under
California insurance law on March 24, 1992. The Separate Account has not yet
commenced operations. Cova has registered the Separate Account with the
Securities Exchange Commission as a unit investment trust under the Investment
Company Act of 1940.
The investment program of the Separate Account will not be changed without the
approval by the Insurance Commissioner of the state of California. If required,
the approval process is on file with the Commissioner of the state in which this
Policy is issued.
If the New York Stock Exchange is closed (except for holidays and weekends) or
trading is restricted due to an emergency as defined by the Securities and
Exchange Commission so that Cova cannot value Accumulation Units, Cova may
postpone all procedures which require valuation of the Accumulation Units
until valuation is possible.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
REDUCTION OR ELIMINATION OF SURRENDER CHARGE
The amount of the surrender charge on the Policies may be reduced or eliminated
when sales of the Policies are made to individuals or to a group of individuals
in a manner that results in savings of sales expenses. The entitlement to a
reduction of the surrender charge will be determined by Cova after examination
of all the relevant factors such as:
1. The size and type of group to which sales are to be made will be
considered. Generally, the sales expenses for a larger group are less than for a
smaller group because of the ability to implement large numbers of Policies with
fewer sales contacts.
2. The total amount of purchase payments to be received will be considered.
Per Policy sales expenses are likely to be less on larger purchase payments than
on smaller ones.
3. Any prior or existing relationship with Cova will be considered. Per
Policy sales expenses are likely to be less when there is a prior existing
relationship because of the likelihood of implementing the Policy with fewer
sales contacts.
4. There may be other circumstances, of which Cova is not presently aware,
which could result in reduced sales expenses.
If, after consideration of the foregoing factors, Cova determines that there
will be a reduction in sales expenses, Cova may provide for a reduction or
elimination of the surrender charge.
The surrender charge may be eliminated when the Policies are issued to an
officer, director or employee of Cova or any of its affiliates. In no event will
any reduction or elimination of the surrender charge be permitted where the
reduction or elimination will be unfairly discriminatory to any person.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured(s) has been incorrectly stated, the death
benefit will be adjusted to reflect the death benefit that would have been
provided by the last cost of insurance at the correct age and/or sex of the
insured.
COVA'S RIGHT TO CONTEST
Cova cannot contest the validity of the Policy except in the case of fraud after
it has been in effect during the insured's lifetime for two years from the
Policy Date. If the Policy is reinstated, the two-year period is measured from
the date of reinstatement. In addition, if the insured commits suicide in the
two-year period, or such period as specified in state law, the benefit payable
will be limited to premiums paid less Debt and less any surrenders.
SETTLEMENT OPTIONS
The Cash Surrender Value or the death proceeds may be paid in a lump sum or
may be applied to one of the Settlement Options. The Settlement Options are:
Option 1: Life Annuity
Option 2: Life Annuity with 5, 10 or 20 years guaranteed
Option 3: Joint and Last Survivor Annuity
Option 4: Payments for a Designated Period
You or the beneficiary can select to have the Settlement Options payable on
either a fixed or variable basis.
TAX STATUS
NOTE: THE FOLLOWING DESCRIPTION IS BASED UPON COVA'S UNDERSTANDING OF CURRENT
FEDERAL INCOME TAX LAW APPLICABLE TO LIFE INSURANCE IN GENERAL. COVA 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. COVA
BELIEVES THAT THE POLICIES TO BE ISSUED WILL QUALIFY AS "LIFE INSURANCE
CONTRACTS" UNDER SECTION 7702. COVA DOES 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 Cova's 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.
Cova is taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from Cova and its
operations form a part of Cova.
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 the Policies 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".
Cova intends that each investment portfolio underlying the Policies will be
managed by the 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 policy owner 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 as 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 the owner being
retroactively determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, Cova reserves 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, Cova has 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 Cova has 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 Cova's 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. Owners should consult their tax advisers with
respect to the tax consequences of purchasing the Policy.
POLICY PROCEEDS. Loan proceeds and/or surrender payments from the Policies are
fully taxable to the extent of income in the Policy and may further be subject
to an additional 10% federal income tax penalty. (See "Tax Treatment of Loans
and Surrenders".) Otherwise, 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 and any benefits paid under the Accelerated Death Benefit
Rider shall be excludable from gross income under Section 101(g) of the Code.
Furthermore, the owner is not deemed to be in constructive receipt of the
account value or Cash Surrender Value, including increments thereon, under a
Policy until surrender thereof. If the death proceeds are to be paid under one
of the Settlement Options, the payments will be prorated between the amount
attributable to the death benefit which will be excludable from the
beneficiary's income and the amount attributable to interest which will be
includable in the beneficiary's income.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
Policy owner or beneficiary. Owners and beneficiaries should consult their tax
adviser.
JOINT LIVES. The Policy may be issued with a Joint Life Rider providing for the
payment of the death benefit upon the death of the last surviving insured. While
Cova believes that a Policy issued on this basis complies with Section 7702 of
the Code, such circumstances are not directly addressed in either Section 7702
or the regulations issued thereunder. In the absence of regulation or other
guidelines, there is some uncertainty as to whether a Policy with such a joint
life feature meets the requirements of Section 7702 of the Code.
TAX TREATMENT OF LOANS AND SURRENDERS. The Code alters the tax treatment
accorded to loans and certain distributions from life insurance policies which
are deemed to be "modified endowment contracts". The Policy's premium
requirements are such that Policies issued on or after June 21, 1988 will be
treated as modified endowment contracts. A Policy received in exchange for a
modified endowment contract is also a modified endowment contract 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 modified endowment contract if no additional premiums are paid.
A Policy that was entered into prior to June 21, 1988 may be deemed to be a modi
fied endowment contract if it is materially changed 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 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.
Assuming that the Policy will be treated as a modified endowment contract,
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 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 distribution: (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. Furthermore, only under limited circumstances will interest paid on
Policy loans be tax deductible.
Policy owners should seek competent tax advice on the tax consequences of taking
loans, making a partial or total surrender or making any material modifications
to their Policies.
MULTIPLE POLICIES. The Code further provides that multiple modified endowment
contracts that are issued within a calendar year period to the same owner by one
company or its affiliates are treated as one modified endowment contract 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. Policy
owners should consult a tax adviser prior to purchasing more than one modified
endowment contract 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. Policy owners should therefore
consult competent tax advisers should they wish to assign or change the owner of
their Policies.
QUALIFIED PLANS. The Policies may be used in conjunction with certain qualified
plans. Because the rules governing such use are complex, a purchaser should not
do so until he has consulted a competent qualified plans consultant.
INCOME TAX WITHHOLDING
All distributions or the portion thereof which is includable in gross income
of the Policy owner are subject to federal income tax withholding. However,
the Policy owner in most cases may elect not to have taxes withheld. The
Policy owner may be required to pay penalties under the estimated tax rules, if
the Policy owner's withholding and estimated tax payments are insufficient.
REPORTS TO OWNERS
Cova will send to each owner semi-annual and annual reports of the Separate
Account. Within 30 days after each Policy Anniversary, an annual statement will
be sent to each owner. The statement will show the current amount of death
benefit payable under the Policy, the current Account Value, the current Cash
Surrender Value, current debt and will show all transactions previously
confirmed. The statement will also show premiums paid and all charges deducted
during the Policy Year.
Confirmations will be mailed to Policy owners within seven days of the
transaction of: (a) the receipt of premium; (b) any transfer between investment
portfolios; (c) any loan, interest repayment, or loan repayment; (d) any
surrender; (e) exercise of the free look privilege; and (f) payment of the death
benefit under the Policy. Upon request a Policy owner shall be entitled to a
receipt of premium payment.
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. Cova is
not involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
EXPERTS
The Balance Sheet of the Company as of December 31, 1996 and 1995 and the
related consolidated Statements of Income, Shareholder's Equity and Cash Flows
for the year ended December 31, 1996 and the periods from June 1, 1995 through
December 31, 1995 and January 1, 1995 through May 31, 1995 and for the year
ended December 31, 1994 and the Statements of Assets and Liabilities and
Contract Owners' Equity of the Separate Account as of December 31, 1996 and the
related Statement of Operations for the year then ended and the Statement of
Change in Contract Owners' Equity for the year ended December 31, 1996 and the
period from June 19, 1995 through December 31, 1995, included herein, have been
included herein in reliance upon the reports of ________________________,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
There are no financial statements for the Separate Account because it has not
yet commenced operations.
Financial Statements of Cova will be filed by Amendment.
APPENDIX A
ILLUSTRATION OF POLICY VALUES
In order to show you how the Policy works, we created some hypothetical
examples. We chose two males ages 55 and 70 and a husband and wife age 65. Our
hypothetical insureds are in good health which means the Policy would be issued
with standard rates. The initial premium was $10,000 and is 100% of the Maximum
Premium Limit.
There are three illustrations -- all of which are based on the above. We also
assumed that the underlying investment portfolio had gross rates of return of
0%, 6%, 12%. This means that the underlying investment portfolio would earn
these rates of return before the deduction of the advisory fee and operating
expenses. When these costs are taken into account, the net annual investment
return rates (net of an average of 0.83% for these charges) are approximately
- -0.83%, 5.17% and 11.17%.
It is important to be aware that this illustration assumes a level rate of
return for all years. If the actual rate of return moves up and down over the
years instead of remaining level, this may make a big difference in the
long-term investment results of your Policy. In order to properly show you
how the Policy actually works, we calculated values for the Account Value, Cash
Surrender Value and the net death benefit. The net death benefit is the death
benefit minus any outstanding loans and loan interest accrued. We used the
charges we described in the Expenses Section of the Prospectus. These charges
are: (1) mortality and expense risk charge equal to an annual rate of 0.90% of
the Account Value in the investment portfolios for the first ten years and 0.75%
after that; (2) an administrative charge equal to an annual rate of 0.40% of the
Account Value; (3) a tax expense charge equal to an annual rate of 0.40% of the
Account Value for the first 10 years; (4) any surrender charges or deferred
premium tax charge which may be applicable in determining the Cash Surrender
Values; and (5) the policy maintenance charge. We also deducted for the cost of
insurance based on both the current charges and the guaranteed charges.
There is also a column labeled "Premiums Accumulated at 5% Interest Per Year."
This shows how $10,000 grows if it was invested at 5% per year.
We will furnish you, upon request, a comparable personalized illustration
reflecting the proposed insured's age, risk classification, Face Amount, the
proposed initial premium, and reflecting both the current cost of insurance and
the guaranteed cost of insurance.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 55, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $27,290
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,657 8,790 27,290 9,530 8,676 27,290
- ------ ----- ----- ------ ----- ----- ------
2 11,025 9,324 8,513 27,290 9,050 8,265 27,290
- ------ ----- ----- ------ ----- ----- ------
3 11,576 9,002 8,244 27,290 8,556 7,839 27,290
- ------ ----- ----- ------ ----- ----- ------
4 12,155 8,690 8,098 27,290 8,046 7,502 27,290
- ------ ----- ----- ------ ----- ----- ------
5 12,763 8,387 7,913 27,290 7,518 7,098 27,290
- ------ ----- ----- ------ ----- ----- ------
6 13,401 8,094 7,730 27,290 6,968 6,659 27,290
- ------ ----- ----- ------ ----- ----- ------
7 14,071 7,811 7,548 27,290 6,390 6,181 27,290
- ------ ----- ----- ------ ----- ----- ------
8 14,775 7,536 7,367 27,290 5,780 5,655 27,290
- ------ ----- ----- ------ ----- ----- ------
9 15,513 7,269 7,189 27,290 5,130 5,075 27,290
- ------ ----- ----- ------ ----- ----- ------
10 16,289 7,012 7,012 27,290 4,433 4,433 27,290
-- ------ ----- ----- ------ ----- ----- ------
15 20,789 6,004 6,004 27,290 44 44 27,290
-- ------ ----- ----- ------ ----- ----- ------
20 26,533 5,121 5,121 27,290 0 0 0
-- ------ ----- ----- ------ ----- ----- ------
25 33,864 4,347 4,347 27,290 0 0 0
-- ------ ----- ----- ------ ----- ----- ------
30 43,219 3,668 3,668 27,290 0 0 0
-- ------ ----- ----- ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 55, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $27,290
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
<S>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,238 9,338 27,290 10,112 9,212 27,290
- - ------ ------ ----- ------ ------ ----- ------
2 11,025 10,482 9,607 27,290 10,212 9,337 27,290
- - ------ ------ ----- ------ ------ ----- ------
3 11,576 10,732 9,882 27,290 10,298 9,448 27,290
- - ------ ------ ----- ------ ------ ----- ------
4 12,155 10,990 10,300 27,290 10,367 9,677 27,290
- - ------ ------ ------ ------ ------ ----- ------
5 12,763 11,254 10,679 27,290 10,419 9,844 27,290
- - ------ ------ ------ ------ ------ ----- ------
6 13,401 11,525 11,065 27,290 10,449 9,989 27,290
- - ------ ------ ------ ------ ------ ------ ------
7 14,071 11,804 11,459 27,290 10,454 10,109 27,290
- - ------ ------ ------ ------ ------ ------ ------
8 14,775 12,090 11,860 27,290 10,429 10,199 27,290
- - ------ ------ ------ ------ ------ ------ ------
9 15,513 12,384 12,269 27,290 10,368 10,253 27,290
- - ------ ------ ------ ------ ------ ------ ------
10 16,289 12,685 12,685 27,290 10,266 10,266 27,290
- -- ------ ------ ------ ------ ------ ------ ------
15 20,789 14,721 14,721 27,290 9,219 9,219 27,290
- -- ------ ------ ------ ------ ----- ----- ------
20 26,533 17,110 17,110 27,290 5,561 5,561 27,290
- -- ------ ------ ------ ------ ----- ----- ------
25 33,864 19,912 19,912 27,290 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
30 43,219 23,199 23,199 27,290 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 55, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $27,290
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,819 9,919 27,290 10,694 9,794 27,290
- ------ ------ ----- ------ ------ ----- ------
2 11,025 11,707 10,832 27,290 11,444 10,569 27,290
- ------ ------ ------ ------ ------ ------ ------
3 11,576 12,671 11,821 27,290 12,254 11,404 27,290
- ------ ------ ------ ------ ------ ------ ------
4 12,155 13,717 13,027 27,290 13,134 12,444 27,290
- ------ ------ ------ ------ ------ ------ ------
5 12,763 14,851 14,276 27,290 14,089 13,514 27,290
- ------ ------ ------ ------ ------ ------ ------
6 13,401 16,082 15,622 27,290 15,131 14,671 27,290
- ------ ------ ------ ------ ------ ------ ------
7 14,071 17,418 17,073 27,290 16,268 15,923 27,290
- ------ ------ ------ ------ ------ ------ ------
8 14,775 18,866 18,636 27,290 17,513 17,283 27,290
- ------ ------ ------ ------ ------ ------ ------
9 15,513 20,438 20,323 27,290 18,881 18,766 27,290
- ------ ------ ------ ------ ------ ------ ------
10 16,289 22,146 22,146 27,290 20,391 20,391 27,290
-- ------ ------ ------ ------ ------ ------ ------
15 20,789 34,213 34,213 39,687 31,402 31,402 36,426
-- ------ ------ ------ ------ ------ ------ ------
20 26,533 53,122 53,122 56,841 48,715 48,715 52,125
-- ------ ------ ------ ------ ------ ------ ------
25 33,864 83,370 83,370 87,538 76,453 76,453 80,276
-- ------ ------ ------ ------ ------ ------ ------
30 43,219 129,690 129,690 136,175 118,921 118,921 124,867
-- ------ ------- ------- ------- ------- ------- -------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 70, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $17,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,657 8,790 17,020 9,423 8,578 17,020
- - ------ ----- ----- ------ ----- ----- ------
2 11,025 9,324 8,513 17,020 8,804 8,043 17,020
- - ------ ----- ----- ------ ----- ----- ------
3 11,576 9,002 8,244 17,020 8,133 7,455 17,020
- - ------ ----- ----- ------ ----- ----- ------
4 12,155 8,690 8,098 17,020 7,396 6,901 17,020
- - ------ ----- ----- ------ ----- ----- ------
5 12,763 8,387 7,913 17,020 6,578 6,217 17,020
- - ------ ----- ----- ------ ----- ----- ------
6 13,401 8,094 7,730 17,020 5,663 5,420 17,020
- - ------ ----- ----- ------ ----- ----- ------
7 14,071 7,811 7,548 17,020 4,631 4,488 17,020
- - ------ ----- ----- ------ ----- ----- ------
8 14,775 7,536 7,367 17,020 3,461 3,394 17,020
- - ------ ----- ----- ------ ----- ----- ------
9 15,513 7,269 7,189 17,020 2,123 2,107 17,020
- - ------ ----- ----- ------ ----- ----- ------
10 16,289 7,012 7,012 17,020 581 581 17,020
- -- ------ ----- ----- ------ ----- ----- ------
15 20,789 6,004 6,004 17,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
20 26,533 5,121 5,121 17,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
25 33,864 4,347 4,347 17,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
30 43,219 3,668 3,668 17,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 70, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $17,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,238 9,338 17,020 10,010 9,110 17,020
- - ------ ------ ----- ------ ------ ----- ------
2 11,025 10,482 9,607 17,020 9,990 9,116 17,020
- - ------ ------ ----- ------ ------ ----- ------
3 11,576 10,732 9,882 17,020 9,935 9,091 17,020
- - ------ ------ ----- ------ ----- ----- ------
4 12,155 10,990 10,300 17,020 9,836 9,159 17,020
- - ------ ------ ------ ------ ----- ----- ------
5 12,763 11,254 10,679 17,020 9,685 9,129 17,020
- - ------ ------ ------ ------ ----- ----- ------
6 13,401 11,525 11,065 17,020 9,471 9,037 17,020
- - ------ ------ ------ ------ ----- ----- ------
7 14,071 11,804 11,459 17,020 9,182 8,867 17,020
- - ------ ------ ------ ------ ----- ----- ------
8 14,775 12,090 11,860 17,020 8,804 8,604 17,020
- - ------ ------ ------ ------ ----- ----- ------
9 15,513 12,384 12,269 17,020 8,320 8,226 17,020
- - ------ ------ ------ ------ ----- ----- ------
10 16,289 12,685 12,685 17,020 7,702 7,702 17,020
- -- ------ ------ ------ ------ ----- ----- ------
15 20,789 14,721 14,721 17,020 1,033 1,033 17,020
- -- ------ ------ ------ ------ ----- ----- ------
20 26,533 17,110 17,110 17,965 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
25 33,864 20,043 20,043 20,243 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
30 43,219 23,685 23,685 23,922 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
SINGLE LIFE OPTION
MALE, ISSUE AGE 70, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $17,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,819 9,919 17,020 10,597 9,697 17,020
------ ------ ----- ------ ------ ----- ------
2 11,025 11,707 10,832 17,020 11,249 10,374 17,020
- - ------ ------ ------ ------ ------ ------ ------
3 11,576 12,671 11,821 17,020 11,967 11,117 17,020
- - ------ ------ ------ ------ ------ ------ ------
4 12,155 13,717 13,027 17,020 12,766 12,076 17,020
- - ------ ------ ------ ------ ------ ------ ------
5 12,763 14,851 14,276 17,020 13,663 13,088 17,020
- - ------ ------ ------ ------ ------ ------ ------
6 13,401 16,091 15,631 17,020 14,685 14,225 17,020
- - ------ ------ ------ ------ ------ ------ ------
7 14,071 17,485 17,140 18,359 15,866 15,521 17,020
- - ------ ------ ------ ------ ------ ------ ------
8 14,775 18,999 18,769 19,949 17,229 16,999 18,090
- - ------ ------ ------ ------ ------ ------ ------
9 15,513 20,641 20,526 21,673 18,715 18,600 19,651
- - ------ ------ ------ ------ ------ ------ ------
10 16,289 22,421 22,421 23,542 20,326 20,326 21,342
- -- ------ ------ ------ ------ ------ ------ ------
15 20,789 34,698 34,698 36,433 31,436 31,436 33,008
- -- ------ ------ ------ ------ ------ ------ ------
20 26,533 53,455 53,455 56,128 48,085 48,085 50,489
- -- ------ ------ ------ ------ ------ ------ ------
25 33,864 83,412 83,412 84,246 74,706 74,706 75,453
- -- ------ ------ ------ ------ ------ ------ ------
30 43,219 132,389 132,989 133,713 118,527 118,527 119,712
- -- ------ ------- ------- ------- ------- ------- -------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
JOINT LIFE OPTION
MALE, ISSUE AGE 65, FEMALE, ISSUE AGE 65, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $28,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 0%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,713 8,841 28,020 9,713 8,841 28,020
- - ------ ----- ----- ------ ----- ----- ------
2 11,025 9,415 8,596 28,020 9,415 8,596 28,020
- - ------ ----- ----- ------ ----- ----- ------
3 11,576 9,122 8,353 28,020 9,104 8,337 28,020
- - ------ ----- ----- ------ ----- ----- ------
4 12,155 8,837 8,234 28,020 8,776 8,178 28,020
- - ------ ----- ----- ------ ----- ----- ------
5 12,763 8,560 8,075 28,020 8,425 7,949 28,020
- - ------ ----- ----- ------ ----- ----- ------
6 13,401 8,291 7,917 28,020 8,046 7,684 28,020
- - ------ ----- ----- ------ ----- ----- ------
7 14,071 8,029 7,758 28,020 7,630 7,374 28,020
- - ------ ----- ----- ------ ----- ----- ------
8 14,775 7,775 7,601 28,020 7,167 7,007 28,020
- - ------ ----- ----- ------ ----- ----- ------
9 15,513 7,528 7,444 28,020 6,642 6,569 28,020
- - ------ ----- ----- ------ ----- ----- ------
10 16,289 7,287 7,287 28,020 6,039 6,039 28,020
- -- ------ ----- ----- ------ ----- ----- ------
15 20,789 6,358 6,358 28,020 1,232 1,232 28,020
- -- ------ ----- ----- ------ ----- ----- ------
20 26,533 5,529 5,529 28,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
25 33,864 4,789 4,789 28,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
30 43,219 4,129 4,129 28,020 0 0 0
- -- ------ ----- ----- ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
JOINT LIFE OPTION
MALE, ISSUE AGE 65, FEMALE, ISSUE AGE 65, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $28,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 6%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 10,500 10,297 9,397 28,020 10,297 9,397 28,020
- - ------ ------ ----- ------ ------ ----- ------
2 11,025 10,588 9,713 28,020 10,588 9,713 28,020
- - ------ ------ ----- ------ ------ ----- ------
3 11,576 10,880 10,030 28,020 10,870 10,020 28,020
- - ------ ------ ------ ------ ------ ------ ------
4 12,155 11,181 10,491 28,020 11,138 10,448 28,020
- - ------ ------ ------ ------ ------ ------ ------
5 12,763 11,490 10,915 28,020 11,391 10,816 28,020
- - ------ ------ ------ ------ ------- ------ ------
6 13,401 11,809 11,349 28,020 11,623 11,163 28,020
- - ------ ------ ------ ------ ------ ------ ------
7 14,071 12,138 11,793 28,020 11,828 11,483 28,020
- - ------ ------ ------ ------ ------ ------ ------
8 14,775 12,477 12,247 28,020 11,999 11,769 28,020
- - ------ ------ ------ ------ ------ ------ ------
9 15,513 12,826 12,711 28,020 12,124 12,009 28,020
- - ------ ------ ------ ------ ------ ------ ------
10 16,289 13,185 13,185 28,020 12,192 12,192 28,020
- -- ------ ------ ------ ------ ------ ------ ------
15 20,789 15,580 15,580 28,020 11,569 11,569 28,020
- -- ------ ------ ------ ------ ------ ------ ------
20 26,533 18,439 18,439 28,020 5,958 5,958 28,020
- -- ------ ------ ------ ------ ----- ----- ------
25 33,864 21,853 21,853 28,020 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
30 43,219 25,927 25,927 28,020 0 0 0
- -- ------ ------ ------ ------ ----- ----- ------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
COVA FINANCIAL LIFE INSURANCE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATION
JOINT LIFE OPTION
MALE, ISSUE AGE 65, FEMALE, ISSUE AGE 65, STANDARD RATE CLASS
$10,000 SINGLE PREMIUM FACE AMOUNT OF $28,020
ASSUMING HYPOTHETICAL GROSS ANNUAL INVESTMENT RETURN OF 12%
<TABLE>
<CAPTION>
CURRENT CHARGES* GUARANTEED CHARGES**
Premiums
End of Accumulated Cash Net Cash Net
Policy at 5% Interest Account Surrender Death Account Surrender Death
Year Per Year Value Value Benefit Value Value Benefit
---- -------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C>
1 10,500 10,882 9,982 28,020 10,882 9,982 28,020
- - ------ ------ ----- ------ ------ ----- ------
2 11,025 11,830 10,955 28,020 11,830 10,955 28,020
- - ------ ------ ------ ------ ------ ------ ------
3 11,576 12,849 11,999 28,020 12,847 11,997 28,020
- - ------ ------ ------ ------ ------ ------ ------
4 12,155 13,959 13,269 28,020 13,941 13,251 28,020
- - ------ ------ ------ ------ ------ ------ ------
5 12,763 15,167 14,592 28,020 15,119 14,544 28,020
- - ------ ------ ------ ------ ------ ------ ------
6 13,401 16,483 16,023 28,020 16,387 15,927 28,020
- - ------ ------ ------ ------ ------ ------ ------
7 14,071 17,915 17,570 28,020 17,757 17,412 28,020
- - ------ ------ ------ ------ ------ ------ ------
8 14,775 19,474 19,244 28,020 19,240 19,010 28,020
- - ------ ------ ------ ------ ------ ------ ------
9 15,513 21,171 21,056 28,020 20,852 20,737 28,020
- - ------ ------ ------ ------ ------ ------ ------
10 16,289 23,019 23,019 28,020 22,612 22,612 28,020
- -- ------ ------ ------ ------ ------ ------ ------
15 20,789 36,188 36,188 37,997 35,472 35,472 37,245
- -- ------ ------ ------ ------ ------ ------ ------
20 26,533 56,832 56,832 59,674 55,592 55,592 58,372
- -- ------ ------ ------ ------ ------ ------ ------
25 33,864 89,353 89,353 93,820 86,049 86,049 90,351
- -- ------ ------ ------ ------ ------ ------ ------
30 43,219 140,832 140,832 142,240 134,063 134,063 135,404
- -- ------ ------- ------- ------- ------- ------- -------
<FN>
* These values reflect investment results using current cost of insurance
rates.
** These values reflect investment results using guaranteed cost of insurance
rates.
</FN>
</TABLE>
THE HYPOTHETICAL INVESTMENT RESULTS SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND DO NOT REPRESENT PAST OR FUTURE INVESTMENT RESULTS.
THE NET DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY MAY
BE MORE OR LESS THAN THOSE SHOWN DEPENDING UPON ACTUAL INVESTMENT RESULTS. NO
REPRESENTATION CAN BE MADE THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE ACHIEVED
FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
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), Cova Financial 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
The Bylaws of the Company (Article V, Section 9) provide that:
This corporation shall indemnify, to the fullest extent allowed by California
law, its present and former directors and officers against expenses, judgements,
fines, settlements, and other amounts incurred in connection with and proceeding
or threatened proceeding brought against such directors or officers in their
capacity as such. Such indemnification shall be made in accordance with
procedures set forth by California Law. Sums for expenses incurred in defending
any such proceeding may also be advanced to any such director or officer to the
extent and under the conditions provided by California law.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling person of the
Company pursuant to the foregoing, or otherwise, the Company 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, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company 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
Company 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.
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement comprises the papers and documents:
The facing sheet
The Prospectus consisting of 58 pages.
Undertakings to file reports.
The signatures.
The following exhibits.
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 the Company
2. Not Applicable
3.a. Principal Underwriter's Agreement (to be filed by Amendment)
3.b. Selling Agreement (to be filed by Amendment)
3.c. Schedules of Commissions (to be filed by Amendment)
4. Not Applicable
5. Modified Single Premium Variable Life Insurance Policy
6.a. Articles of Incorporation of the Company (to be filed by
Amendment)
6.b. Bylaws of the Company (to be filed by Amendment)
7. Not Applicable
8. Not Applicable
9. Not Applicable
10. Application Form
11. Powers of Attorney
B. Opinion and Consent of Counsel (to be filed by Amendment)
C. Consent of Actuary (to be filed by Amendment)
D. Consent of Independent Accountants (to be filed by Amendment)
SIGNATURES
Pursuant to the requirements of 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 City of Oakbrook Terrace and State
of Illinois on this 3rd day of September, 1997.
COVA VARIABLE LIFE ACCOUNT FIVE
Registrant
By: COVA FINANCIAL LIFE INSURANCE COMPANY
By: /s/LORRY J. STENSRUD
______________________________
COVA FINANCIAL LIFE INSURANCE COMPANY
Attest:
/s/FRANCES S. COOK
Associate Counsel /s/J. ROBERT HOPSON
________________________ By: ______________________________
(Signature and Title)
Pursuant to 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>
<S> <C> <C>
Chairman of the Board and
- ---------------------- Director -------
Richard A. Liddy Date
/s/LORRY J. STENSRUD President and Director 9-3-97
- ------------------ -------
Lorry J. Stensrud Date
Director
- ---------------------- -------
Leonard M. Rubenstein Date
/s/J. ROBERT HOPSON Director 9-3-97
- ----------------- -------
J. Robert Hopson Date
William C. Mair* Controller and Director 9-3-97
- ----------------------- -------
William C. Mair Date
E. Thomas Hughes, Jr.* 9-3-97
- ---------------------- Treasurer and Director -------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 9-3-97
- ---------------------- -------
Matthew P. McCauley Date
John W. Barber* Director 9-3-97
- ---------------------- -------
John W. Barber Date
</TABLE>
*By: /s/LORRY J. STENSRUD
______________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
A.5. Modified Single Premium Variable Life Insurance Policy
A.10. Application Form
A.11. Powers of Attorney
COVA FINANCIAL LIFE INSURANCE COMPANY
I, FRANCES S. COOK, Secretary of Cova Financial Life Insurance Company (the
"Corporation"), do hereby certify that the attached is a true and accurate copy
of resolutions adopted by the Board of Directors of Cova Financial Life
Insurance Company dated March 24, 1992, and I do further certify that said
resolutions have not been amended or rescinded.
VARIABLE AUTHORITY
WHEREAS, the Corporation is desirous of developing and marketing certain types
of variable and fixed annuity contracts, including modified guaranteed annuity
contracts, and variable life insurance contracts, which may be required to be
registered with the Securities and Exchange Commission pursuant to the various
securities laws (collectively, the "Contracts"); and
WHEREAS, it will be necessary to take certain actions in connection with the
Contracts including, but not limited to, establishing separate accounts for
segregation of assets and seeking approval of regulatory authorities;
NOW, THEREFORE, BE IT
RESOLVED, that the Corporation is hereby authorized to develop the necessary
program in order to effectuate the issuance and sale of the Contracts, and
further
RESOLVED, that the Corporation is hereby authorized to establish and to
designate one or more separate accounts of the Corporation in accordance with
the provisions of, and for the purposes authorized by Section 10506 of the
California Insurance Code, including among their respective purposes the
provision of an investment medium for such Contracts issued by the Corporation
pursuant to such section as may be designated as participating therein; and that
any such separate account shall receive, hold, invest and reinvest only the
monies arising from (i) premiums, contributions or payments made pursuant to the
Contracts participating therein; (ii) within the limits of such section, such
assets of the Corporation as shall be deemed appropriate to be invested in the
same manner as the assets applicable to the Corporation's reserve liability
under the Contracts participating in such separate accounts, or may be necessary
for the establishment of such separate accounts; and (iii) the dividends,
interest and gains produced by the foregoing; and further
RESOLVED, that the proper officers of the Corporation are hereby authorized:
(i) to register the Contracts participating in any such separate accounts under
the provisions of the Securities Act of 1933, as amended, to the extent that it
shall be determined that such registration is necessary;
(ii) to register any such separate accounts with the Securities Exchange
Commission under the provisions of the Investment Corporation Act of 1940; as
amended, to the extent that it shall be determined that such registration is
necessary;
(iii) To prepare, execute and file such amendments to any registration
statements filed under the aforementioned Acts (including post-effective
amendments), supplements and exhibits thereto as they may be deemed necessary or
desirable;
(iv) to apply for exemption from those provisions of the aforementioned Acts as
shall be deemed necessary and to take any and all other actions which shall be
deemed necessary, desirable, or appropriate in connection with such Acts;
(v) to file the Contracts participating in any such separate accounts with the
California Insurance Department and any other appropriate state insurance
departments and to prepare and execute all necessary documents to obtain
approval of said insurance departments;
(vi) to prepare or have prepared and execute all necessary documents to obtain
approval of, or clearance with, or other appropriate actions required, of any
other regulatory authority that may be necessary; and further
RESOLVED, that for the purposes of facilitating the execution and filing of any
registration statement and of remedying any deficiencies therein by appropriate
amendments (including post-effective amendments) or supplements thereto, the
President of the Corporation and the Secretary of the Corporation, and each of
them, are hereby designated as attorneys and agents of the Corporation, and the
appropriate officers of the Corporation be, and they hereby are, authorized and
directed to grant the power of attorney of the Corporation to the President of
the Corporation and to the Secretary of the Corporation by executing and
delivering to such individuals, on behalf of the Corporation, a power of
attorney, and further
RESOLVED, that in connection with the offering and sale of the Contracts in the
various States of the United States, as and to the extent necessary, the
appropriate officers of the Corporation be, and they hereby are, authorized to
take any and all such action, including but not limited to the preparation,
execution and filing with proper state authorities, on behalf of and in the name
of the Corporation, of such applications, notices, certificates, affidavits,
powers of attorney, consents to service of process, issuer's covenants,
certified copies of minutes of shareholders' and directors' meetings, bonds,
escrow and impounding agreements and other writings and instruments, as may be
required in order to render permissible the offering and sale of the Contracts
in such jurisdictions; and further
RESOLVED, that the forms of any resolutions required by any state authority to
be filed in connection with any of the documents or instruments referred to in
any part of the preceding resolutions be, and the same hereby are, adopted as if
fully set forth herein if (1) in the opinion of the appropriate officers of the
Corporation, the adoption of the resolutions is advisable and (2) Secretary of
the Corporation evidences such adoption by inserting into these minutes copies
of such resolutions.
IN WITNESS WHEREOF, I have hereunto set my hands as of the 7th day of October,
1997.
/s/ Frances S. Cook
_____________________
FRANCES S. COOK
COVA
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
COVA FINANCIAL LIFE INSURANCE COMPANY ("Cova") will pay the Death Proceeds to
the Beneficiary upon receipt at its Policy Service Office of due proof of the
Insured's death while this Policy is in force.
This Policy is issued in return of the Application and payment of the Initial
Premium. A copy of the Application is attached to and made a part of this
Policy.
This is a legal contract between the Owner and the Company.
RIGHT TO EXAMINE
You may cancel this Policy during the Right To Examine Period. The Right To
Examine Period begins with the day You receive this Policy and continues for 10
days. During the Right To Examine Period You may return this Policy by
delivering or mailing it to Cova at its Policy Service Office or to the agent
through whom it was purchased. When this Policy is received by Cova, it will be
voided as if it had never been in force. Cova will pay an amount equal to the
greater of:
1. Premiums paid; or
2. the Account Value on the day this Policy is returned to Cova or the agent
through whom it was purchased.
ALLOCATION OF PREMIUM DURING THE RIGHT TO EXAMINE PERIOD
On the Policy Date, the Initial Premium Payment will be allocated to the Money
Market Subaccount shown on the Schedule Page. The Policy Date may be before or
the same as the Issue Date.
All Subsequent Premium Payments received by Cova before the expiration of the
Right to Examine Period will be allocated to the Money Market Subaccount. On the
expiration of 15 days from the Issue Date, the Subaccount Value of the Money
Market Subaccount will be allocated to the Subaccounts, in whole percentages, as
elected by You on the Application.
Signed for Cova.
/s/ JEFFERY K. HOELZEL /s/ LORRY J. STENSRUD
---------------------- ---------------------
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT DEATH
PERIOD OF COVERAGE NOT GUARANTEED
NONPARTICIPATING - NO DIVIDENDS
READ YOUR POLICY CAREFULLY
CASH VALUES PROVIDED BY THIS POLICY ARE BASED ON THE INVESTMENT EXPERIENCE OF
THE SEPARATE ACCOUNT AND MAY INCREASE OR DECREASE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT. THE DURATION OR AMOUNT OF THE DEATH BENEFIT MAY VARY BASED ON THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT. SEE PAGE 4 FOR A DESCRIPTION OF
THE DEATH BENEFIT.
THE VARIABLE PROVISIONS OF THIS POLICY CAN BE FOUND ON PAGES 5 AND 9.
INDEX
Page
----
Schedule Page
Definitions
Death Benefit Provisions
Premium Payment Provisions
Variable Account Provisions
Calculation of Values
Monthly Deduction Provisions
Transfer Provisions
Termination Provisions
Partial Surrenders, Annual Withdrawal Amount, Surrender Charge and Deferred
Premium Tax Charge
Policy Loans
Payment Provision
Taxes Provision
General Provisions
Ownership and Beneficiary
Settlement Options
SCHEDULE PAGE
INSURED: [JOHN DOE] POLICY NUMBER: [123]
ISSUE AGE/SEX: [35/MALE] POLICY DATE: [12/01/1996]
RATE CLASS: [STANDARD] ISSUE DATE: [12/01/1996]
OWNER: [JOHN DOE] PROCESSING DATE:[1ST]
INITIAL PREMIUM: [$10,000]
FACE AMOUNT: [$61,230]
INITIAL MAXIMUM PREMIUM LIMIT PERCENTAGE: [100%]
BENEFICIARY: As stated in the application for this Policy unless changed in
accordance with the Policy Provisions.
FEES AND CHARGES:
POLICY MAINTENANCE FEE: [ANNUAL POLICY MAINTENANCE FEE; $30 ASSESSED
ON A PRORATA BASIS FROM THE SUBACCOUNTS ON
EACH POLICY ANNIVERSARY. WAIVED IF THE ACCOUNT
VALUE ON A POLICY ANNIVERSARY IS AT LEAST
$50,000. DEDUCTED FROM A TOTAL SURRENDER
REGARDLESS OF SIZE OF ACCOUNT VALUE.]
TAX EXPENSE CHARGE: [THE FEDERAL TAX CHARGE OF .0015 IN YEARS 1-10
DIVIDED BY 12; PLUS THE PREMIUM TAX CHARGE OF
.0025 IN YEARS 1-10 DIVIDED BY 12; MULTIPLIED
BY THE ACCOUNT VALUE]
ADMINISTRATIVE CHARGE: [.0040 DIVIDED BY 12; MULTIPLIED BY THE ACCOUNT
VALUE.]
MORTALITY AND EXPENSE RISK CHARGE: [.0090 IN YEARS 1-10 (.0075 IN YEARS 11 AND
AFTER) DIVIDED BY 12; MULTIPLIED BY THE
TOTAL OF THE SUBACCOUNT VALUES.]
<TABLE>
<CAPTION>
SURRENDER CHARGE
[ASSESSED AGAINST PREMIUM SURRENDERED. NOT ASSESSED ON THE ANNUAL WITHDRAWAL AMOUNT.]
<S> <C> <C> <C>
POLICY POLICY
YEAR RATE YEAR RATE
---- ---- ---- ----
[1] [7.5%] [6] [4.0%]
[2] [7.5%] [7] [3.0%]
[3] [7.5%] [8] [2.0%]
[4] [6.0%] [9] [1.0%]
[5] [5.0%] [10+] [0%]
</TABLE>
<TABLE>
<CAPTION>
DEFERRED PREMIUM TAX CHARGE
[ASSESSED AGAINST PREMIUM SURRENDERED]
<S> <C> <C> <C>
POLICY POLICY
YEAR RATE YEAR RATE
---- ---- ---- ----
[1] [2.25%] [6] [1.00%]
[2] [2.00%] [7] [.75%]
[3] [1.75%] [8] [.50%]
[4] [1.50%] [9] [.25%]
[5] [1.25%] [10+] [0%]
</TABLE>
SCHEDULE PAGE
(continued)
ANNUAL WITHDRAWAL AMOUNT:
[THE SUM OF:
1. THE EXCESS OF THE ACCOUNT VALUE OVER PREMIUMS PAID WHICH HAVE NOT BEEN
PREVIOUSLY SURRENDERED; PLUS
2. 10% OF PREMIUMS.] AN ANNUAL WITHDRAWAL AMOUNT WHICH HAS NOT BEEN USED IN
ANY POLICY YEAR DOES NOT CARRY OVER TO FUTURE POLICY YEARS.
ORDER OF PARTIAL SURRENDERS:
[FOR PURPOSES OF DETERMINING THE CHARGES ASSESSED ON A PARTIAL SURRENDER, A
PARTIAL SURRENDER WILL BE CONSIDERED TO BE MADE FIRST FROM EARNINGS, THEN FROM
PREMIUMS.]
TRANSFER FEE:
[FOR A TRANSFER WHICH EXCEEDS 12 TRANSFERS IN A POLICY YEAR, $25 OR, IF SMALLER,
2% OF THE AMOUNT TRANSFERRED PER TRANSACTION.]
MINIMUM TRANSFER AMOUNT:
[$500 OR ENTIRE BALANCE IF LESS.]
MINIMUM PARTIAL SURRENDER AMOUNT: [$500]
REMAINING ACCOUNT VALUE AMOUNT: [$5,000]
MINIMUM LOAN AMOUNT: [$500]
LOAN ACCOUNT INTEREST RATE (CREDITED): [4%]
PREFERRED LOAN INTEREST RATE (CREDITED): [6%]
POLICY LOAN INTEREST RATE (CHARGED): [6%]
PREFERRED LOANS: DETERMINED ON THE [1ST DAY OF EACH POLICY YEAR]
ELIGIBLE INVESTMENTS:
[- COVA SERIES TRUST]
[- J.P. MORGAN INVESTMENT MANAGEMENT]
[- SELECT EQUITY PORTFOLIO]
[- SMALL CAP STOCK PORTFOLIO]
[- LARGE CAP STOCK PORTFOLIO]
[- INTERNATIONAL EQUITY PORTFOLIO]
[- QUALITY BOND PORTFOLIO]
[- LORD ABBETT ]
[- BOND DEBENTURE PORTFOLIO]
[- LORD ABBETT SERIES FUND, INC.]
[- LORD ABBETT]
[- GROWTH AND INCOME PORTFOLIO]
[- GENERAL AMERICAN CAPITAL COMPANY]
[- CONNING ]
[- MONEY MARKET PORTFOLIO]
VARIABLE ACCOUNT: [COVA VARIABLE LIFE ACCOUNT FIVE]
POLICY SERVICE OFFICE:
COVA FINANCIAL LIFE INSURANCE COMPANY
[P.O. BOX 10366]
[DES MOINES, IOWA 50306-0366]
FOR USE WITH [COVA VARIABLE LIFE ACCOUNT FIVE]
A SEPARATE INVESTMENT ACCOUNT OF
COVA FINANCIAL LIFE INSURANCE COMPANY
SCHEDULE PAGE
(continued)
<TABLE>
<CAPTION>
TABLE OF MINIMUM DEATH BENEFIT PERCENTAGES
AND MONTHLY MAXIMUM COST OF INSURANCE CHARGE PER $1,000
MONTHLY MONTHLY MONTHLY
MINIMUM MAXIMUM MINIMUM MAXIMUM MINIMUM MAXIMUM
DEATH COST OF DEATH COST OF DEATH COST OF
BENEFIT INSURANCE BENEFIT INSURANCE BENEFIT INSURANCE
AGE PERCENTAGE CHARGE AGE PERCENTAGE CHARGE AGE PERCENTAGE CHARGE
--- ---------- ------ --- ----------------- --- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35 250.0 0.1808 57 142.0 1.0867 79 105.0 7.8967
36 250.0 0.1933 58 138.0 1.1817 80 105.0 8.5783
37 250.0 0.2075 59 134.0 1.2850 81 105.0 9.3408
38 250.0 0.2233 60 130.0 1.4000 82 105.0 10.2008
39 250.0 0.2417 61 128.0 1.5300 83 105.0 11.1533
40 250.0 0.2625 62 126.0 1.6767 84 105.0 12.1767
41 243.0 0.2850 63 124.0 1.8408 85 105.0 13.2483
42 236.0 0.3092 64 122.0 2.0225 86 105.0 14.3508
43 229.0 0.3358 65 120.0 2.2183 87 105.0 15.4775
44 222.0 0.3642 66 119.0 2.4275 88 105.0 16.6275
45 215.0 0.3942 67 118.0 2.6492 89 105.0 17.8075
46 209.0 0.4267 68 117.0 2.8875 90 105.0 19.0358
47 203.0 0.4608 69 116.0 3.1508 91 104.0 20.3425
48 197.0 0.4975 70 115.0 3.4475 92 103.0 21.7858
49 191.0 0.5383 71 113.0 3.7858 93 102.0 23.5108
50 185.0 0.5833 72 111.0 4.1733 94 101.0 25.8308
51 178.0 0.6358 73 109.0 4.6117 95 101.0 29.3217
52 171.0 0.6942 74 107.0 5.0917 96 101.0 35.0825
53 164.0 0.7608 75 105.0 5.6042 97 101.0 45.0833
54 157.0 0.8342 76 105.0 6.1417 98 101.0 62.0958
55 150.0 0.9133 77 105.0 6.6975 99 101.0 83.3333
56 146.0 0.9975 78 105.0 7.2767
</TABLE>
THE MINIMUM DEATH BENEFIT PERCENTAGES ARE DETERMINED TO COMPLY WITH SECTION 7702
OF THE INTERNAL REVENUE CODE.
THE MAXIMUM COST OF INSURANCE CHARGES DO NOT EXCEED THE COST OF INSURANCE
CHARGES BASED ON THE 1980 COMMISSIONERS STANDARD ORDINARY TABLE, AGE LAST
BIRTHDAY.
DEFINITIONS
ACCOUNT -- One or more of the Subaccount(s) of the Variable Account.
ACCOUNT VALUE -- The value of the Subaccount(s) and the Loan Account.
ACCUMULATION UNIT -- An accounting unit used to calculate the value of a
Subaccount.
AGE -- The Insured's Issue Age plus the number of full Policy Years elapsed
since the Policy Date.
ANNUITY UNIT -- An accounting unit used to calculate the amount of Variable
Payments.
BENEFICIARY -- The person(s) or entity(ies) who/ which will receive the Death
Proceeds upon the death of the Insured.
CASH SURRENDER VALUE -- The Cash Value less Debt.
CASH VALUE -- The Account Value less any applicable Surrender Charge, Deferred
Premium Tax Charge and Policy Maintenance Fee.
COVA -- Cova Financial Life Insurance Company.
COVERAGE AMOUNT -- The Death Benefit less the Account Value.
DEATH PROCEEDS -- The amount Cova will pay upon death of the Insured.
DEBT -- Any outstanding Loans plus accrued Loan Interest.
DUE PROOF OF DEATH -- One of the following:
1 a certified death certificate;
2. a certified decree of a court or competent jurisdiction as to the finding
of death;
3. a written statement by a medical doctor who attended the deceased; or
4. any other proof satisfactory to Cova.
ELIGIBLE INVESTMENT(S) -- An investment entity which comprises the Portfolios of
this Policy.
FACE AMOUNT -- The Face Amount on the Issue Date is shown on the Schedule Page.
The Face Amount may change in accordance with the terms of the Partial Surrender
provision.
INCOME DATE -- The date payments under a Settlement Option begin.
INSURED -- The person whose life is insured under this Policy.
ISSUE AGE -- On the Policy Date, the Insured's age on his/her last birthday.
ISSUE DATE -- The date this Policy is issued.
LOAN -- The amount which is borrowed.
LOAN ACCOUNT -- An account established for any amounts transferred from the
Subaccounts as a result of a loan. The Loan Account is credited with interest
and is not based on the investment experience of any Subaccount.
MAXIMUM PREMIUM LIMIT -- The maximum total premiums that Cova permits to be paid
for this Policy. Cova sets this limit to be less than or equal to the limit
required to qualify this Policy as life insurance under the Internal Revenue
Code.
MONTHLY ANNIVERSARY -- An anniversary of the Policy Date which is the same day
each month as the Policy Date or the first day of the next month if that day
occurs on a day beyond the end of any month. If a Monthly Anniversary falls on a
date which is not a Valuation Date, the Monthly Anniversary will be the next
Valuation Date.
OWNER -- You as the person named on the Schedule Page who has all rights under
this Policy.
PAYEE -- The natural person receiving payments under a Settlement Option.
POLICY ANNIVERSARY -- An anniversary of the Policy Date.
POLICY DATE -- The Policy Date is the date from which Policy Anniversaries and
Policy Years are determined. The Policy Date is shown on the Schedule Page.
POLICY LOAN INTEREST RATE -- The interest rate charged on a Loan under this
Policy.
POLICY YEAR -- One year from the Policy Date and from each Policy Anniversary.
PORTFOLIO -- A segment of an Eligible Investment which constitutes a separate
and distinct class of shares.
PREMIUM TAX CHARGE -- The amount of tax charged due to assessment to Cova of
taxes by a state or municipal entity.
PROCESSING DATE -- The monthly date when certain charges are deducted from the
Account Value. The first Processing Date is the Issue Date. Thereafter, it is
the same day each month as the Policy Date or the first day of the next month if
that day occurs on a day beyond the end of any month. If a Processing Date falls
on a date which is not a Valuation Date, the Processing Date will be the next
Valuation Date.
PRORATA BASIS -- An allocation method based on the proportion of the Account
Value in each Subaccount.
SUBACCOUNT -- A segment of the Variable Account. Each Subaccount is invested in
a different Portfolio.
SUBACCOUNT VALUE -- The value of a Subaccount.
VALUATION DATE -- The Variable Account will be valued each day that the New York
Stock Exchange is open for trading.
VALUATION PERIOD -- The period of time beginning at the close of business of the
New York Stock Exchange and ending at the close of business for the next
succeeding Valuation Date. Values are determined at the end of a Valuation
Period.
VARIABLE ACCOUNT -- A separate investment account of Cova designated on the
Schedule Page.
WRITTEN REQUEST -- A request made in writing and received by Cova. YOU -- The
person named in the Application who as Owner has all rights under this policy.
DEATH BENEFIT PROVISIONS
DEATH BENEFIT -- While this Policy is in force, the Death Benefit is the greater
of:
1. the Face Amount; or
2. the Minimum Death Benefit.
MINIMUM DEATH BENEFIT -- To ensure that this Policy continues to qualify as life
insurance under the Internal Revenue Code, Cova will automatically increase the
Death Benefit so that it will never be less than the Minimum Death Benefit. The
Minimum Death Benefit is the Account Value as of the end of the Valuation Period
multiplied by the applicable percent shown in the Table of Minimum Death Benefit
Percentages.
PAYMENT OF DEATH BENEFIT -- The Death Proceeds equal the Death Benefit on the
date of the Insured's death less any Debt. Cova will pay the Death Proceeds to
the Beneficiary upon receipt at its Policy Service Office of due proof of the
Insured's death while this Policy is in force.
You may choose to have the Death Proceeds paid in a lump sum or under a
Settlement Option. If You have not made a choice before the Insured dies, the
Beneficiary may choose the manner in which the Death Proceeds are to be paid.
Unless chosen otherwise by You or the Beneficiary, if applicable, Cova reserves
the right to pay the Death Proceeds in a lump sum within 90 days of receipt of
due proof of death.
Interest at an annual rate of 3% or as required by law will be payable on the
Death Proceeds from the date of the Insured's death to:
1. if payment is made in a single sum, the date payment is made; or
2. if payment is made under a Settlement Option, the Income Date.
The Death Benefit payable during the Grace Period is equal to the Death Benefit
in effect immediately prior to the start of the Grace Period less any Debt and
any unpaid Monthly Deduction Amounts.
PREMIUM PAYMENT PROVISIONS
INITIAL PREMIUM -- The Initial Premium is due on the Policy Date. No insurance
is effective until Cova receives the Initial Premium. The Initial Maximum
Premium Limit Percentage is shown on the Schedule Page.
SUBSEQUENT PREMIUMS -- Subject to the Maximum Premium Limit, Cova will accept
Subsequent Premium Payments at any time. If the total of all Premium Payments
under this Policy exceed $1,000,000, You must obtain prior approval from Cova to
make a Subsequent Premium Payment. The amount and frequency of any Subsequent
Premium Payment made will affect the Account Value and the amount or duration of
insurance under this Policy.
A Subsequent Premium Payment that results in an increase in the Death Benefit
will be accepted only after Cova approves evidence of insurability.
A Subsequent Premium Payment must be made to Cova's Policy Service Office.
PREMIUM ALLOCATION -- The Allocation of Premium during the Initial Premium
Payment is allocated as stated in the Right to Examine Period Provision.
Upon written request, You may change the premium allocation. A Subsequent
Premium Payment received after the expiration of the Right to Examine Period
will be allocated to the Subaccounts according to Your most recent instructions.
GRACE PERIOD -- The Grace Period is the 61 days after a Processing Date on which
the Cash Surrender Value is not sufficient to cover any overdue Monthly
Deduction Amounts and the Policy Maintenance Fee. If sufficient Premium is not
paid by the end of the Grace Period, this Policy will terminate without value.
At least 61 days before the end of the Grace Period, Cova will mail to You at
your last known address and any assignee of record written notice of the length
of the Grace Period and the amount of Premium required to continue this Policy
in force.
The Premium required is the amount required to continue this Policy in force to
the end of the Grace Period.
VARIABLE ACCOUNT PROVISIONS
VARIABLE ACCOUNT -- The Variable Account is a separate investment account of
Cova. It is shown on the Schedule Page. Cova has allocated a part of its assets
for this and certain other contracts to the Variable Account. The assets of the
Variable Account are the property of Cova. However, assets equal to liabilities
are not chargeable with the liabilities arising out of any other business Cova
may conduct. The investment policy of the Variable Account will not be changed
without approval by the Insurance Commissioner of the state of California. If
required, the approval process is on file with the Commissioner of the state in
which this Policy is issued.
INVESTMENTS OF THE VARIABLE ACCOUNT -- Premium Payments applied to the Variable
Account are allocated to a Subaccount of the Variable Account. The assets of the
Subaccount are allocated to the Eligible Investment(s) and the Portfolio(s), if
any, within an Eligible Investment shown on the Schedule Page. Cova may, from
time to time, add additional Eligible Investments or Portfolios to those shown
on the Schedule Page. You may be permitted to transfer Account Values to the
additional Eligible Investments or Portfolios. However, the right to make any
transfer will be limited by the terms and conditions imposed by Cova.
If the shares of any of the Eligible Investment(s) or any Portfolio(s) within
the Eligible Investments become unavailable for investment by the Variable
Account, or the Board of Directors deems further investment in these shares
inappropriate, Cova may limit further investment in the shares or may substitute
shares of another Eligible Investment 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 procedures of Cova.
ACCUMULATION UNIT -- An amount allocated to the Variable Account is converted
into Accumulation Units for each elected Subaccount. The number of Accumulation
Units credited to a Subaccount under this Policy is determined by dividing the
amount allocated to the Subaccount by the dollar value of one Accumulation Unit
for that Subaccount as of the Valuation Period during which the amount is
allocated to the Subaccount. The number of Accumulation Units will not be
affected by a subsequent change in the value of the units. The Accumulation Unit
Value in a Subaccount may increase or decrease daily.
The Account Value attributable to a Subaccount of the Variable Account is
determined by multiplying the number of Accumulation Units attributable to the
Subaccount by the Accumulation Unit Value for that Subaccount.
ACCUMULATION UNIT VALUE -- The Accumulation Unit Value for each Subaccount will
vary to reflect the investment experience of the applicable Portfolio and will
be determined on each Valuation Date by multiplying the Accumulation Unit Value
of the Subaccount on the preceding Valuation Date by a Net Investment Factor for
that Subaccount for the Valuation Period then ended. The Net Investment Factor
for each Subaccount is equal to the net asset value per share of the applicable
Portfolio at the end of the Valuation Period (plus the per share amount of any
divided or capital gains distribution paid by that Portfolio in the Valuation
Period then ended) divided by the net asset value per share of the corresponding
Portfolio at the beginning of the Valuation Period.
CALCULATION OF VALUES The Account Value reflects the Premiums Paid, the Monthly
Deductions, deduction of the Policy Maintenance Fee, the investment experience
of the Subaccounts, the value of amounts allocated to the Loan Account and
deductions due to a Partial Surrender in the following manner:
Premiums Paid are converted to Accumulation Units. The Initial Premium Payment
is allocated to the Policy on the Policy Date. On each Processing Date,
Accumulation Units are cancelled to reflect the deduction of the Monthly
Deduction Amount.
On each Policy Anniversary, Accumulation Units are cancelled to reflect the
deduction of the Policy Maintenance Fee.
The Accumulation Unit Value for a Subaccount is a result of the investment
experience of the Subaccount. A Subaccount Value is determined by multiplying
the number of Accumulation Units in the Subaccount by the Accumulation Unit
Value of the Subaccount.
Accumulation Units are cancelled to reflect loans and a Loan Account is
established. Accumulation Units are cancelled to reflect Partial Surrenders and
the Surrender Charge and Deferred Premium Tax Charge, if any.
CASH VALUE -- The Cash Value equals:
1. the Account Value; less
2. the Surrender Charge, if any; less
3. the Deferred Premium Tax Charge if any; less
4. the Policy Maintenance Fee.
CASH SURRENDER VALUE -- The Cash Surrender Value equals:
1. the Cash Value; less
2. Debt, if any.
POLICY MAINTENANCE FEE -- The Policy Maintenance Fee is shown on the Schedule
Page.
SURRENDER CHARGE -- The Surrender Charge is shown on the Schedule Page. DEFERRED
PREMIUM TAX CHARGE -- The Deferred Premium Tax Charge is shown on the Schedule
Page.
MONTHLY DEDUCTION PROVISIONS
MONTHLY DEDUCTION AMOUNT -- The Monthly Deduction Amount equals:
1. the Administrative Charge; plus
2. the Mortality and Expense Risk Charge; plus
3. the Tax Expense Charge; plus
4. the Cost of Insurance Charge.
The Monthly Deduction is determined on the Policy Date and
each Monthly Anniversary of the Policy Date. The Monthly Deduction is deducted
Prorata from the Subaccount Values on each Processing Date.
ADMINISTRATIVE CHARGE -- The Administrative Charge is shown on the Schedule
Page.
MORTALITY AND EXPENSE RISK CHARGE -- The Mortality and Expense Risk Charge is
shown on the Schedule Page.
TAX EXPENSE CHARGE -- The Tax Expense Charge is shown on the Schedule Page.
COST OF INSURANCE CHARGE -- The Monthly Maximum Cost of Insurance Charge is
equal to:
1. the Maximum Cost of Insurance Charge Rate per $1,000 shown on the Schedule
Page; multiplied by
2. the Coverage Amount; divided by
3. $1,000.
The Coverage Amount equals:
1. the Death Benefit; less
2. the Account Value.
The actual Cost of Insurance Charge assessed by Cova may be less than the
Maximum Cost of Insurance Charge shown on the Schedule Page. Cova will determine
the actual Cost of Insurance Charge based on its expectation of future
experience.
Any change Cova makes to the actual Cost of Insurance Charge will be made on a
uniform basis for Insureds of the same age, sex and rate class whose coverage
has been in force for the same length of time. No change in insurance class or
cost will be made due to deterioration of the Insured's health.
TRANSFER PROVISIONS Upon request while this Policy is in effect after the end of
the Right To Examine Period, You may make transfers between the Subaccounts.
A transfer is subject to the following:
1. The maximum number of transfers which may be made which are not subject to
a Transfer Fee is shown on the Schedule Page.
2. A Transfer Fee is deducted if a transfer exceeds the maximum number of
transfers not subject to a Transfer Fee. The Transfer Fee is shown on the
Schedule Page. The Transfer Fee is deducted from the amount which is
transferred.
3. The minimum amount which may be transferred is shown on the Schedule Page.
4. A transfer will be effected as of the end of the Valuation Period when Cova
receives an acceptable transfer request containing all required information
including the amount which is to be transferred and the Subaccount(s)
affected.
5. Neither Cova nor its Policy Service Office are liable for a transfer made
in accordance with Your instructions.
6. Cova reserves the right to restrict transfers to a maximum of 12 per year and
to restrict transfers from being made on consecutive Valuation Dates.
7. Your right to make transfers between the Subaccounts is subject to
modification if Cova determines, in its 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 Cova to be 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 not be limited to:
a) the requirement of a minimum time period between each transfer;
b) not accepting transfer requests of 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
by an Owner at any one time.
8. Under a Settlement Option, only one transfer may be made per Policy Year. A
transfer may be made from Variable Payments to Fixed Payments. No transfer
may be made from Fixed Payments to the Variable Payments.
TRANSFERS TO OR FROM SUBACCOUNTS -- A transfer from a Subaccount will result in
a reduction of the number of Accumulation Units credited to the Subaccount from
which the transfer is made. The reduction will equal:
1. the amount transferred; divided by
2. the value of an Accumulation Unit for the Subaccount as of the Valuation
Date on which the transfer is made.
A transfer to a Subaccount will result in an increase in the number of
Accumulation Units credited to the Subaccount to which the transfer is made. The
increase will equal:
1. the amount transferred; divided by
2. the value of an Accumulation Unit for the Subaccount as of the Valuation
Date on which the transfer is made.
TERMINATION PROVISIONS TERMINATION -- This Policy will terminate on the earliest
of the following:
1. Total Surrender of this Policy;
2. the end of the Grace Period; or
3. the death of the Insured.
REINSTATEMENT -- If this Policy is terminated prior to the death of the Insured,
this Policy may be reinstated if:
1. a Total Surrender was not made for cash;
2. Your reinstatement request is made within 5 years of the end of the Grace
Period;
3. satisfactory evidence of insurability is provided to Cova;
4. any Debt is repaid or reinstated;
5. sufficient premium must be paid to:
a) cover all Monthly Deduction Amounts and the Policy Maintenance Fee
that are due and unpaid during the Grace Period; and
b) continue this Policy in force for 2 months after the date of
reinstatement. The Face Amount of the reinstated policy cannot exceed
the Face Amount at the time of termination. After adjusting for past
due charges, the Account Value on the reinstatement date will equal:
1. the Account Value at the time of termination; plus
2. premium paid at the time of reinstatement.
The Surrender Charge, if any, and the Deferred Premium Tax Charge, if any, are
based on the number of Policy Years from the original Policy Date. The effective
date of the reinstatement is the next Processing Date following approval by Cova
of the application for reinstatement.
TOTAL SURRENDER -- You may terminate this Policy at any time by submitting a
written request to Cova. Cova will pay the Cash Surrender Value to You at the
time of surrender and Cova's liability under this Policy will cease.
PARTIAL SURRENDERS, ANNUAL WITHDRAWAL AMOUNT, SURRENDER CHARGE AND DEFERRED
PREMIUM TAX CHARGE
PARTIAL SURRENDERS -- At any time after
the Right to Examine Period expires, You may, upon written request to Cova, make
a Partial Surrender of the Cash Surrender Value subject to the following:
1. A Partial Surrender must be for an amount at least equal to the Minimum
Partial Surrender Amount shown on the Schedule Page or, if smaller, the
remaining Cash Surrender Value.
2. The Account Value remaining after the Partial Surrender is completed must
be at least equal to the Remaining Account Value Amount shown on the
Schedule Page or Cova will terminate this Policy and pay the Cash Surrender
Value.
3. Unless You specify otherwise, the Partial Surrender will be deducted on a
Prorata basis from the Subaccounts.
4. The Face Amount will be reduced proportional to the reduction in the
Account Value resulting from the Partial Surrender.
ANNUAL WITHDRAWAL AMOUNT -- On a non-cumulative basis, You may make one or more
Partial Surrenders during any Policy Year equal to the Annual Withdrawal Amount
shown on the Schedule Page. The Deferred Premium Tax Charge is assessed against
the portion of the Annual Withdrawal Amount attributable to premiums
surrendered.
SURRENDER CHARGE AND DEFERRED PREMIUM TAX CHARGE -- A Total or Partial Surrender
of the Account Value may be subject to the Surrender Charge and Deferred Premium
Tax Charge. The Surrender Charge and the Deferred Premium Tax Charge are shown
on the Schedule Page.
The Policy Maintenance Fee is assessed against a Total Surrender.
No Surrender Charge or Deferred Premium Tax Charge is assessed if this Policy
terminates due to the death of the Insured.
POLICY LOANS
GENERAL -- At any time after the Right to Examine Period expires
and while this Policy is in force and not in the Grace Period, you may borrow
against this Policy by assigning it to Cova as sole security.
LOAN AMOUNTS -- The Maximum Loan Amount is equal to:
1. 90% of the Account Value; less
2. Loan Interest due on the next Policy Anniversary; less
3. the Surrender Charge, if any; less
4. the Policy Maintenance Fee, if any; less
5. the Deferred Premium Tax Charge, if any.
No new loan may be taken which, in combination with existing loans and accrued
interest, is greater than the Maximum Loan Amount. A loan amount will be
transferred from the Subaccounts to the Loan Account on a Prorata basis. The
Minimum Loan Amount for each new loan is shown on the Schedule Page. If total
loans equal or exceed the Cash Value, and sufficient loan repayment is not
received by Cova by the end of the Grace Period, this Policy will terminate
without value.
PREFERRED LOAN -- The amount available for a Preferred Loan is the amount by
which the Account Value exceeds the total Premiums paid which have not been
previously surrendered. The amount of the Loan Account equal to a Preferred Loan
will be credited with interest at the Preferred Loan Interest Rate. The
Preferred Loan Interest Rate is shown on the Schedule Page. The Preferred Loan
Amount will be determined at the intervals shown on the Schedule Page.
INTEREST CREDITED -- The amount of the Loan Account in excess of the Preferred
Loan will be credited daily with interest at the Loan Account Interest Rate. The
Loan Account Interest Rate is shown on the Schedule Page.
LOAN REPAYMENTS -- All or part of a Loan may be repaid at any time that:
1. this Policy is in force; and
2. the Insured is alive.
There is no minimum loan repayment amount. To repay a loan in full, the loan
repayment must equal the Debt.
The amount equivalent to a loan repayment will be deducted from the Loan Account
and allocated to the Subaccounts in the same percentage as premiums are
currently allocated to the Subaccounts.
Unless You request otherwise, all funds received while a loan is outstanding
will first be considered as a payment of any loan interest due, then as a loan
repayment, then as Premium paid.
LOAN INTEREST -- Loan Interest due Cova will accrue daily at a rate which does
not exceed the Policy Loan Interest Rate shown on the Schedule Page. Loan
Interest is due on each Policy Anniversary. If Loan Interest is not paid, the
difference between the value of the Loan Account and Debt will be transferred
from the Subaccounts on a Prorata Basis to the Loan Account.
PAYMENT PROVISION
PAYMENTS
BY COVA -- Cova will pay the Death Proceeds, Total and Partial Surrenders and
Loans attributable to the Subaccounts within 7 days of receipt of all
information needed to process the payment unless:
1. the New York Stock Exchange is closed on 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 securities held in the
Variable Account is not reasonably practicable or it is not reasonably
practicable to determine the value of the net assets of the Variable
Account; or
during any other period when the Securities and Exchange Commission, by order,
so permits for the protection of Owners; provided that applicable rules and
regulations of the Securities and Exchange Commission will govern as to whether
the conditions described in (2) and (3) exist.
TAXES PROVISION
TAXES -- Cova may assess a charge against this Policy for any taxes attributable
to the Variable Account. Cova does not expect to incur such taxes.
GENERAL PROVISIONS
THE CONTRACT -- The entire contract consists of:
1. this Policy;
2. the Application which is attached to this Policy; and
3. any riders or endorsements attached to this Policy.
This Policy may be changed or altered only by the President or Secretary of
Cova. A change or alteration must be in writing.
RELIANCES -- This Policy has been issued based on the answers in the
Application. All statements in the Application will, in the absence of fraud, be
deemed representations and not warranties. Neither Cova nor its Policy Service
Office are liable for a request made in accordance with Your instructions.
SUICIDE -- If, within 2 years from the Policy Date, the Insured dies by suicide,
while sane or insane, Cova's liability will be limited to Premiums paid less
Debt and less Partial Surrenders.
INCONTESTABILITY -- Cova cannot contest this Policy after it has been in force,
during the Insured's lifetime, for 2 years from the Policy Date except in the
case of fraud. If this Policy is reinstated, Cova may contest this Policy for 2
years after the date of reinstatement or for any statements made in the
Application for reinstatement.
MISSTATEMENT OF AGE AND/OR SEX -- If it is determined that the age and/or sex of
the Insured was misstated, on the date of death of the Insured, the Death
Benefit will be reduced or increased by the difference between the Death Benefit
at the misstated age and/or sex of the Insured and the Death Benefit that would
have been provided by the last Cost of Insurance Charge at the correct age
and/or sex of the Insured.
NON-PARTICIPATING -- This Policy is non-participating. It does not share in
Cova's surplus.
REPORTS -- At least once each calendar year, Cova will provide You with a report
showing:
1. the amount of Death Benefit;
2. the Account Value, Cash Value, Cash Surrender Value and Face Amount;
3. Premiums paid, Monthly Deduction Amounts and Loans since the last report;
4. the amount of any Debt;
5. notifications required by the provisions of this Policy; and
6. any other information required by the state where this Policy was
delivered.
Cova will also send You any shareholder reports of the Portfolios and any other
notices, reports or documents as required by law. Reports will be sent to Your
last known address.
POLICY CHANGES -- To receive the tax treatment accorded life insurance under
Federal laws, insurance under this Policy must initially qualify and continue to
qualify as life insurance under the Internal Revenue Code. To maintain
qualification to the maximum extent permitted by law, Cova reserves the right to
return Premiums paid with interest which Cova determines will cause any coverage
under this Policy to fail to qualify as life insurance under applicable tax
laws. Additionally, Cova reserves the right to make changes in this Policy or to
make distributions to the extent Cova determines necessary to continue to
qualify this Policy as life insurance and to comply with applicable laws. Cova
will provide advance written notice of a change.
CLAIMS OF CREDITORS -- Proceeds described in this Policy will be free from
creditors' claims to the extent allowed by law.
ASSIGNMENT -- No assignment of this Policy by You will be binding on Cova until
it is filed with Cova. Cova assumes no responsibility for the validity of any
assignment. Any claim under an assignment will be subject to proof of the extent
of interest. If this Policy is assigned, Your rights and Beneficiary's rights
are subject to the rights of the assignee of record.
BASIS OF VALUES -- All values available under this Policy are at least equal to
those required by law. Where required, a detailed statement of the method of
computations has been filed with the insurance department of the state where
this Policy was delivered. Mortality and expense risks under this Policy are
borne by Cova.
OWNERSHIP AND BENEFICIARY
CHANGE OF OWNER OR BENEFICIARY -- The Owner and Beneficiary are named in the
Application unless changed by You. To change the Owner or Beneficiary, You must
notify Cova in writing while the Insured is alive. After Cova receives written
notice, the change will be effective as of the date You signed the notice,
whether or not the Insured is living when Cova receives it. However, the change
will be subject to any payment Cova made or actions Cova may have taken before
Cova received the request.
You may not change an irrevocable Beneficiary. If there is an irrevocable
Beneficiary, all policy changes except premium allocations and transfers require
the consent of the Beneficiary.
OWNERSHIP -- If the Owner dies while this Policy is in force and the Insured is
living, ownership rights pass to a successor owner, if any, or to the estate of
the Owner.
This Policy can be owned by joint owners. Authorization of the joint owners is
required for all policy changes except for telephone transfers.
NO NAMED BENEFICIARY -- If no named Beneficiary survives the Insured, then,
unless this Policy provides otherwise:
1. You will be the Beneficiary; or
2. if You are the Insured, Your estate will be the Beneficiary.
SETTLEMENT OPTIONS
GENERAL -- The Cash Surrender Value or the Death Proceeds may be paid in a lump
sum or may be applied to one of the following Settlement Options. No Total
Surrender or Partial Surrenders are permitted after payments begin. If the
amount applied under a Settlement Option is less than $5,000, Cova reserves the
right to make one lump sum payment in lieu of payments under the Settlement
Option. If the amount of a Settlement Option Payment would be or become less
than $100, Cova will reduce the frequency of payments to an interval which will
result in each payment being at least $100. The adjusted age of the Payee used
to determine payments under a Settlement Option is the Payee's age less one year
for every eight years elapsed between January 1, 1983 and the Income Date.
Cova may require proof of age of a Payee before making any payments under a life
Settlement Option under this Policy. If the age of the Payee has been misstated,
the amount payable will be the amount that the Cash Surrender Value would have
provided at the correct age.
After the Income Date, any under payments will be made up in one sum with the
next Payment. Any overpayments will be deducted from future Payments until the
total is repaid.
SETTLEMENT OPTIONS -- The following
Settlement Options or any other option acceptable to Cova may be elected.
OPTION 1: LIFE ANNUITY -- A life annuity is an annuity payable during the
lifetime of the Payee and terminating with the last payment preceding the death
of the Payee.
OPTION 2: LIFE ANNUITY WITH 5, 10 OR 20 YEARS GUARANTEED -- A life annuity with
a guaranteed period is an annuity payable monthly during the lifetime of the
Payee with the guarantee that payments will be made for a minimum of 5, 10 or 20
years, as elected. If, at the death of the Payee, payments have been made for
less than the guaranteed period elected, payments will continue to the
Beneficiary for the remainder of the guaranteed period.
OPTION 3: JOINT AND LAST SURVIVOR ANNUITY -- A joint and last survivor annuity
is an annuity payable monthly during the joint lifetime of the Payee and a
designated second person, and thereafter during the remaining lifetime of the
survivor, ceasing with the last payment prior to the death of the survivor.
Based on the options currently offered Cova, the Payee may elect that the
payment to the survivor be less than the payment made during the joint lifetime
of the Payee and the designated second person.
OPTION 4: PAYMENTS FOR A DESIGNATED PERIOD -- An amount payable monthly for the
number of years elected which may be from 5 to 30 years. If the Payee dies
before the end of the designated period, payments will continue to the
Beneficiary for the remainder of the designated period.
ALLOCATION OF SETTLEMENT OPTION -- If a Settlement Option is elected, unless
otherwise specified, the Cash Surrender Value or Death Proceeds held in the
Subaccounts will be applied to provide Variable Payments based on the Prorata
amount in the applicable Subaccounts. Fixed Payments are also available.
VARIABLE PAYMENTS -- Variable Payments are payments which increase or decrease
in amount in accordance with the investment experience of the Subaccounts. After
the first monthly Variable Payment has been determined by using the appropriate
Annuity Table, the number of Subaccount Annuity Units is determined by dividing
the first monthly payment by the appropriate Subaccount Annuity Unit Value on
the effective date of the payments. The Annuity Unit Value for each Subaccount
will depend on the investment experience of the applicable Portfolio.
The number of Annuity Units remains fixed with respect to a particular
Subaccount. If You make a transfer between Subaccounts, the number of Annuity
Units will change when the transfer is made and will then remain fixed in number
following the election. Only one transfer may be made per Policy Year between
the Subaccounts.
The dollar amount of the second and subsequent Variable Payments is not
predetermined and may increase or decrease from month to month. The actual
amount of each Variable Payment after the first is determined by multiplying the
number of Subaccount Annuity Units by the Subaccount Annuity Unit Value. The
Subaccount Annuity Unit Value will be determined on the date the Variable
Payment is due. The Subaccount Annuity Unit Value is adjusted for an assumed
investment rate of 3%.
ANNUITY UNIT -- The value of an Annuity Unit for each Subaccount of the Variable
Account was arbitrarily set initially at $10. This was done when the first
Eligible Investment shares were purchased.
The Subaccount Annuity Unit Value at the end of any subsequent Valuation Period
is determined by multiplying the Subaccount Annuity Unit Value for the
immediately preceding Valuation Period by the net investment factor for the day
for which the Annuity Unit Value is being calculated.
NET INVESTMENT FACTOR -- The Net Investment Factor for any Subaccount of the
Variable Account for any Valuation Period is determined by dividing:
1. the Accumulation Unit Value as of the close of the current Valuation
Period; by
2. the Accumulation Unit Value as of the close of the immediately preceding
Valuation Period.
The Net Investment Factor
may be greater or less than one, as the Annuity Unit Value may increase or
decrease.
FIXED PAYMENTS -- Fixed Payments are payments for which the amount is
predetermined on the date the first payment is made. Fixed Payments are
determined by multiplying the amount applied to the Settlement Option by a rate
which is not less than the rate specified in the Settlement Option Tables.
DESCRIPTION OF TABLES -- The Settlement Option Tables show the minimum dollar
amount of the first monthly payment for each $1,000 applied under an option.
Under Option 1 and 2, the amount of each payment will depend upon the Adjusted
Age and sex of the Payee at the time the first payment is due. Under Option 3,
the amount of each payment will depend upon the Adjusted Age and sex of both
Payees at the time the first payment is due.
The Settlement Option Tables are based on the 1983 Individual Annuity Mortality
Tables, Male/Female, with interest at an effective annual rate of 3%.
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLE FOR OPTION 1
Life Annuity
Monthly Annuity Payment Under Option 1
For Each $1,000 Of Amount Applied
Male Female Male Female Male Female
Monthly Monthly Monthly Monthly Monthly Monthly
Age Payment Payment Age Payment Payment Age Payment Payment
--- ------- ------- --- ------- ------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 2.82 2.76 32 3.35 3.19 59 5.18 4.63
6 2.83 2.77 33 3.38 3.21 60 5.31 4.74
7 2.85 2.78 34 3.42 3.24 61 5.45 4.85
8 2.86 2.79 35 3.46 3.27 62 5.61 4.97
9 2.87 2.80 36 3.50 3.30 63 5.77 5.10
10 2.88 2.81 37 3.54 3.33 64 5.95 5.24
11 2.90 2.82 38 3.58 3.37 65 6.13 5.38
12 2.91 2.83 39 3.62 3.40 66 6.34 5.54
13 2.93 2.84 40 3.67 3.44 67 6.55 5.71
14 2.94 2.85 41 3.72 3.48 68 6.78 5.89
15 2.96 2.87 42 3.77 3.52 69 7.02 6.08
16 2.97 2.88 43 3.83 3.56 70 7.29 6.29
17 2.99 2.90 44 3.88 3.60 71 7.57 6.51
18 3.01 2.91 45 3.94 3.65 72 7.87 6.76
19 3.03 2.93 46 4.01 3.70 73 8.19 7.02
20 3.05 2.94 47 4.07 3.75 74 8.53 7.31
21 3.07 2.96 48 4.14 3.80 75 8.90 7.62
22 3.09 2.97 49 4.21 3.86 76 9.30 7.96
23 3.11 2.99 50 4.29 3.92 77 9.72 8.33
24 3.13 3.01 51 4.36 3.98 78 10.18 8.73
25 3.15 3.03 52 4.45 4.05 79 10.67 9.16
26 3.18 3.05 53 4.53 4.12 80 11.19 9.63
27 3.20 3.07 54 4.63 4.19 81 11.75 10.14
28 3.23 3.09 55 4.72 4.27 82 12.35 10.69
29 3.26 3.11 56 4.83 4.36 83 12.99 11.29
30 3.29 3.14 57 4.94 4.44 84 13.66 11.94
31 3.32 3.16 58 5.05 4.54 85+ 14.37 12.64
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLE FOR OPTION 2
Life Annuity With 5, 10 or 20 Years Guaranteed
Monthly Annuity Payment Under Option 2
For Each $1,000 Of Amount Applied
Male 5 Years 10 Years 20 Years Male 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
--- --------------------- ---------- --- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
5 2.82 2.82 2.82 46 4.00 3.98 3.88
6 2.83 2.83 2.83 47 4.06 4.04 3.94
7 2.84 2.84 2.84 48 4.13 4.10 3.99
8 2.86 2.86 2.85 49 4.20 4.17 4.04
9 2.87 2.87 2.86 50 4.27 4.27 4.10
10 2.88 2.88 2.88 51 4.35 4.31 4.16
11 2.90 2.89 2.89 52 4.43 4.39 4.22
12 2.91 2.91 2.90 53 4.52 4.47 4.28
13 2.92 2.92 2.92 54 4.61 4.56 4.34
14 2.94 2.94 2.93 55 4.70 4.65 4.40
15 2.96 2.95 2.95 56 4.80 4.74 4.47
16 2.97 2.97 2.96 57 4.91 4.84 4.53
17 2.99 2.99 2.98 58 5.03 4.94 4.60
18 3.01 3.00 3.00 59 5.15 5.05 4.66
19 3.03 3.02 3.02 60 5.28 5.17 4.73
20 3.04 3.04 3.04 61 5.41 5.29 4.79
21 3.06 3.06 3.05 62 5.56 5.42 4.86
22 3.09 3.08 3.07 63 5.72 5.55 4.92
23 3.11 3.10 3.10 64 5.88 5.69 4.98
24 3.13 3.13 3.12 65 6.06 5.84 5.04
25 3.15 3.15 3.14 66 6.25 5.99 5.10
26 3.18 3.17 3.16 67 6.45 6.15 5.15
27 3.20 3.20 3.19 68 6.66 6.31 5.20
28 3.23 3.23 3.21 69 6.88 6.48 5.24
29 3.26 3.25 3.24 70 7.12 6.65 5.29
30 3.29 3.28 3.27 71 7.37 6.82 5.32
31 3.32 3.31 3.30 72 7.63 7.00 5.36
32 3.34 3.34 3.33 73 7.91 7.18 5.39
33 3.38 3.38 3.36 74 8.20 7.36 5.41
34 3.42 3.41 3.39 75 8.51 7.53 5.43
35 3.45 3.45 3.42 76 8.83 7.71 5.45
36 3.49 3.49 3.46 77 9.16 7.88 5.47
37 3.53 3.53 3.49 78 9.51 8.05 5.48
38 3.58 3.57 3.53 79 9.88 8.21 5.49
39 3.62 3.61 3.57 80 10.25 8.37 5.50
40 3.67 3.66 3.61 81 10.64 8.51 5.51
41 3.72 3.71 3.65 82 11.03 8.65 5.51
42 3.77 3.76 3.70 83 11.42 8.78 5.52
43 3.82 3.81 3.74 84 11.82 8.90 5.52
44 3.88 3.86 3.79 85+ 12.21 9.00 5.52
45 3.91 3.92 3.84
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLE FOR OPTION 2
Life Annuity With 5, 10 or 20 Years Guaranteed
Monthly Annuity Payment Under Option 2
For Each $1,000 Of Amount Applied
Female 5 Years 10 Years 20 Years Female 5 Years 10 Years 20 Years
Age Guaranteed Guaranteed Guaranteed Age Guaranteed Guaranteed Guaranteed
--- -------------------------------- --- --------------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
5 2.76 2.76 2.75 46 3.70 3.69 3.65
6 2.77 2.77 2.76 47 3.75 3.74 3.69
7 2.78 2.78 2.77 48 3.80 3.79 3.74
8 2.79 2.79 2.78 49 3.86 3.84 3.79
9 2.80 2.80 2.79 50 3.92 3.90 3.84
10 2.81 2.81 2.80 51 3.98 3.96 3.89
11 2.82 2.82 2.82 52 4.04 4.03 3.94
12 2.83 2.83 2.83 53 4.11 4.09 4.00
13 2.84 2.84 2.84 54 4.19 4.16 4.06
14 2.85 2.85 2.85 55 4.26 4.24 4.12
15 2.87 2.87 2.86 56 4.35 4.32 4.18
16 2.88 2.88 2.88 57 4.43 4.40 4.25
17 2.90 2.90 2.89 58 4.53 4.49 4.31
18 2.91 2.91 2.91 59 4.62 4.58 4.38
19 2.92 2.92 2.92 60 4.73 4.68 4.45
20 2.94 2.94 2.94 61 4.84 4.78 4.52
21 2.96 2.96 2.95 62 4.95 4.89 4.60
22 2.97 2.97 2.97 63 5.08 5.00 4.67
23 2.99 2.99 2.99 64 5.21 5.12 4.74
24 3.01 3.01 3.00 65 5.35 5.25 4.81
25 3.03 3.03 3.02 66 5.50 5.38 4.88
26 3.05 3.05 3.04 67 5.66 5.53 4.95
27 3.07 3.07 3.06 68 5.83 5.68 5.02
28 3.09 3.09 3.08 69 6.02 5.83 5.08
29 3.11 3.11 3.10 70 6.22 6.00 5.14
30 3.14 3.14 3.13 71 6.43 6.17 5.20
31 3.16 3.16 3.15 72 6.66 6.35 5.25
32 3.19 3.19 3.17 73 6.90 6.54 5.29
33 3.21 3.21 3.20 74 7.17 6.73 5.33
34 3.24 3.24 3.23 75 7.45 6.93 5.37
35 3.27 3.27 3.25 76 7.75 7.13 5.40
36 3.30 3.30 3.28 77 8.06 7.33 5.43
37 3.33 3.33 3.31 78 8.40 7.53 5.45
38 3.36 3.36 3.34 79 8.76 7.73 5.47
39 3.40 3.40 3.38 80 9.14 7.93 5.48
40 3.44 3.44 3.41 81 9.54 8.12 5.49
41 3.47 3.47 3.45 82 9.95 8.30 5.50
42 3.51 3.51 3.48 83 10.39 8.47 5.51
43 3.56 3.56 3.52 84 10.83 8.63 5.51
44 3.60 3.60 3.56 85+ 11.29 8.78 5.52
45 3.65 3.65 3.60
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLE FOR OPTION 3
Joint and Last Survivor Annuity
Monthly Annuity Payment Under Option 3
For Each $1,000 Of Amount Applied
Joint And 50% Survivor Annuity
Female
Age Male Age
--- --------
50 55 60 65 70 75
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
50 4.03 4.21 4.42 4.68 4.98 5.32
55 4.20 4.40 4.63 4.92 5.25 5.62
60 4.41 4.63 4.89 5.21 5.58 6.01
65 4.67 4.91 5.21 5.57 6.00 6.49
70 4.97 5.25 5.59 6.01 6.52 7.10
75 5.34 5.67 6.06 6.56 7.17 7.87
</TABLE>
<TABLE>
<CAPTION>
Joint And 66 2/3% Survivor Annuity
Female
Age Male Age
--- --------
50 55 60 65 70 75
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
50 3.86 4.00 4.16 4.33 4.51 4.70
55 4.02 4.19 4.38 4.58 4.79 5.02
60 4.20 4.40 4.63 4.87 5.14 5.41
65 4.40 4.64 4.91 5.22 5.55 5.89
70 4.61 4.90 5.23 5.62 6.04 6.49
75 4.85 5.18 5.58 6.06 6.62 7.22
</TABLE>
<TABLE>
<CAPTION>
Joint And 100% Survivor Annuity
Female
Age Male Age
--- --------
50 55 60 65 70 75
-- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
50 3.57 3.65 3.72 3.76 3.80 3.82
55 3.71 3.83 3.94 4.02 4.08 4.13
60 3.83 4.01 4.17 4.31 4.42 4.50
65 3.94 4.17 4.41 4.64 4.83 4.98
70 4.02 4.31 4.63 4.96 5.28 5.54
75 4.09 4.42 4.82 5.27 5.74 6.19
</TABLE>
Information about different age combinations will be furnished upon request.
<TABLE>
<CAPTION>
SETTLEMENT OPTION TABLE FOR OPTION 4
Payments For Designated Period
Monthly Annuity Payment Under Option 4
For Each $1,000 Of Amount Applied
Monthly Monthly Monthly
Years Payment Years Payment Years Payment
----- ------- ----- ------------- -------
<S> <C> <C> <C> <C> <C>
5 17.91 14 7.26 23 4.99
6 15.14 15 6.87 24 4.84
7 13.16 16 6.53 25 4.71
8 11.68 17 6.23 26 4.59
9 10.53 18 5.96 27 4.47
10 9.61 19 5.73 28 4.37
11 8.86 20 5.51 29 4.27
12 8.24 21 5.32 30 4.18
13 7.71 22 5.15
</TABLE>
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT DEATH
PERIOD OF COVERAGE NOT GUARANTEED
NONPARTICIPATING - NO DIVIDENDS
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
JOINT LIFE RIDER
This Rider forms a part of the Policy to which it is attached. The effective
date of this Rider is the Issue Date shown on the Schedule Page. If spouses are
named as Joint Insureds under the Policy, the Death Benefit provision of the
Policy is amended to provide that the Death Benefit is payable on the death of
the last surviving Insured subject to the following:
1. The actual Cost of Insurance Charge assessed by Cova is determined
reflecting:
a) the anticipated life expectancy of both Insureds; and
b) that the Death Benefit is payable at the death of the last surviving
Insured.
2. The Policy may be reinstated only if both Insureds are living.
3. The Suicide, Incontestability and Misstatement of Age and/or Sex provisions
apply to both Insureds.
This Rider will terminate on the date the Policy terminates. All other terms and
conditions of the Policy remain unchanged.
Cova Financial Life Insurance Company has caused this Rider to be signed by its
President and Secretary.
/s/ JEFFERY K. HOELZEL /s/ LORRY J. STENSRUD
______________________Secretary _____________________President
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
NURSING HOME RIDER
This Rider forms a part of the Policy to which it is attached. The effective
date of this Rider is the Issue Date shown on the Schedule Page.
While the Policy is in force after the first Policy Anniversary, You may, upon
written request received by Cova, request that Cova waive the Surrender Charge
upon the request for a Total or Partial Surrender of the Cash Surrender Value
if:
1. You or a joint owner are confined to a Nursing Home and/or Hospital for at
least 90 consecutive days or confined for a total of at least 90 days if
there is no more than a 6-month break in the confinement and the
confinements are for related causes; and
2. The confinement begins after the first Policy Anniversary;
3. A Total or Partial Surrender request and adequate proof of confinement are
received by Cova while You are confined or within 90 days after the
confinement ends; and
4. Confinement in a Nursing Home and/or Hospital is prescribed by a Physician
and is Medically necessary.
If ownership of the Policy is changed to an Owner who is a natural person, this
Rider will continue in effect. A request to waive the Surrender Charge may not
be made by the new Owner until one year following the effective date of the
change in ownership.
DEFINITIONS
Hospital - A facility which:
1. Is located in the United States or its territories;
2. Is licensed as a hospital by the jurisdiction in which it is located;
3. Is supervised by a staff of licensed physicians;
4. Provides nursing services 24 hours a day by, or under the supervision of, a
registered nurse (R.N.);
5. Operates primarily for the care and treatment of sick and injured persons
as inpatients for a charge; and
6. Has access to medical and diagnostic facilities.
Intermediary Care Facility - A facility which:
1. Is located in the United States or its territories;
2. Is licensed and operated as an Intermediate Care Facility according to the
laws of the jurisdiction in which it is located;
3. Provides continuous 24 hours a day nursing service by or under the
supervision of a registered graduate professional nurse (R.N.) or a
licensed practical nurse (L.P.N.); and
4. Maintains a daily medical record of each patient.
Medically Necessary - Appropriate and consistent with the diagnosis in
accordance with accepted standards of practice and which could not have been
omitted without adversely affecting the individual's condition.
Nursing Home - A Skilled Nursing Facility, an Intermediary Care Facility or a
Residential Care Facility. Nursing Home does not mean:
1. A home for the aged, a community living center or a place that primarily
provides domiciliary, residency or retirement care; or
2. A place owned or operated by a member of the Owner's immediate family.
Immediate family members include the Owner's spouse, children, parents,
grandparents, grandchildren, siblings and in-laws.
Physician - A doctor of medicine legally authorized to practice medicine and
surgery by the state in which he/she performs the examination and certification,
including a doctor of osteopathy practicing within the scope of his/her practice
under state law. A Physician may not be a family member of the Owner or the
Insured.
Residential Care Facility - A facility which:
1. Is located in the United States or its territories;
2. Is licensed and operated as a Residential Care Facility according to the
laws of the jurisdiction in which it is located; and
3. Provides nursing care under the supervision of a registered graduate
professional nurse (R.N.).
Skilled Nursing Facility - A facility which:
1. Is located in the United States or its territories;
2. Is licensed and operated as a Skilled Nursing Facility according to the
laws of the jurisdiction in which it is located;
3. Provides skilled nursing care under the supervision of a licensed
physician;
4. Provides continuous 24 hours a day nursing services by or under the
supervision of a registered graduate professional nurse (R.N.); and
5. Maintains a daily medical record of each patient.
This Rider will terminate on the date the Policy terminates.
All other terms and conditions of the Policy remain unchanged. Cova Financial
Life Insurance Company has caused this Rider to be signed by its President and
Secretary.
/s/ JEFFERY K. HOELZEL /s/ LORRY J. STENSRUD
______________________Secretary _____________________President
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
ACCELERATED DEATH BENEFIT RIDER
This Rider forms a part of the Policy to which it is attached. The effective
date of this Rider is the Issue Date shown on the Schedule Page.
Cova will pay a portion of the Death Proceeds upon receipt of proof that the
Insured is Terminally Ill, subject to the following:
1. The Accelerated Death Benefit is payable once under this Rider.
2. You may elect to receive the Accelerated Death Benefit of up to 50% of the
Death Benefit but no greater than $500,000.
3. An Accelerated Death Benefit request and certification by a Physician that
the Insured is Terminally Ill must be received by Cova in a manner
satisfactory to Cova. Cova may require a second certification by a
Physician chosen by Cova. In the event of a conflict of opinion between
Physicians, Cova reserves the right to make the final determination.
4. The Accelerated Death Benefit will be used first to repay any outstanding
Debt. After repayment of the outstanding Debt, any remaining amount will be
paid to You as a lump sum or under a payment plan. Subsequent amounts
available for Loans or Partial Surrenders or as Death Proceeds will be
reduced by the amount of the Accelerated Death Benefit plus interest
accrued at the Policy Loan Interest Rate.
5. If the Policy is issued to Joint Insureds, an Accelerated Death Benefit
will only be payable upon the Terminal Illness of the last surviving
Insured.
DEFINITIONS
PHYSICIAN - A doctor of medicine legally authorized to practice medicine and
surgery by the state in which he performs the examination and certification,
including a doctor of osteopathy practicing within the scope of his practice
under the state law. A Physician may not be a family member of the Owner or the
Insured.
TERMINALLY ILL - Certification by a Physician that an individual has an illness
or physical condition which can reasonably be expected to result in death in 12
months or less after the date of the certification.
This Rider will terminate on the date the Policy terminates. All other terms and
conditions of the Policy remain unchanged. Cova Financial Life Insurance Company
has caused the Rider to be signed by its President and Secretary.
/s/ JEFFERY K. HOELZEL /s/ LORRY J. STENSRUD
______________________Secretary _____________________President
Send application and check to:
Cova Financial Life
Insurance Company
P. O. Box 10366
Des Moines, Iowa 50306-0366
Cova Financial Life Insurance Company
1. OWNER (If different than Proposed Insured named in Item 3)
Name___________________________________________________________________
(First) (Middle) (Last)
Address________________________________________________________________
(Street)
________________________________________________________________
(City) (State) (Zip)
Soc. Sec. or Tax I.D. Number_____________________
Phone Number_________________________
2. JOINT OWNER (If applicable)
Name___________________________________________________________________
(First) (Middle) (Last)
Address________________________________________________________________
(Street)
________________________________________________________________
(City) (State) (Zip)
Soc. Sec. or Tax I.D. Number_____________________
Phone Number_________________________
3. PROPOSED INSURED
Name___________________________________________________________________
(First) (Middle) (Last)
Address________________________________________________________________
(Street)
_______________________________________________________________________
(City) (State) (Zip)
Occupation______________________
Sex [ ] M [ ] F Age_______
Birthdate____________/___________/___________
(Month) (Day) (Year)
Place of Birth_______________________________
(City) (State) (Country)
Soc. Sec. No.________________________________
Phone Number_________________________________
4. PROPOSED JOINT INSURED (If applicable. Must be spouse of Proposed
Insured named in Item 3)
Name___________________________________________________________________
(First) (Middle) (Last)
Address________________________________________________________________
(Street)
________________________________________________________________
(City) (State) (Zip)
Occupation______________________
Sex [ ] M [ ] F Age________________
Birthdate____________/___________/___________
(Month) (Day) (Year)
Place of Birth_______________________________
(City) (State) (Country)
Soc. Sec. No.__________________
Phone Number___________________
5. Has the Proposed Insured ever been diagnosed or treated for: cancer, heart
attack, chest pain, stroke or insulin dependent diabetes? [ ] Yes [ ] No
Proposed Joint Insured? [ ] Yes [ ] No
6. AMOUNT OF INSURANCE/PREMIUM
Initial Premium $________________
I (We) (Owner) acknowledge that it is my (our) intention that the policy be
issued at the face amount corresponding to the maximum premium limit percentage.
If not, choose one: [ ] 80% [ ] 90%
Face Amount $_____________________
7.PREMIUM ALLOCATION
(Must be whole percentages. Must equal 100%)
J.P. Morgan Investment Management
____% Select Equity Portfolio
____% Large Cap Stock Portfolio
____% Small Cap Stock Portfolio
____% International Equity Portfolio
____% Quality Bond Portfolio
Lord Abbett
____% Growth & Income Portfolio
____% Bond Debenture Portfolio
Conning
____% Money Market Portfolio
8. ALLOCATION DURING RIGHT TO EXAMINE
As described in the accompanying Prospectus, the initial premium will be
allocated to the Money Market Portfolio during the Right to Examine Period.
Thereafter, the premiums will be allocated as directed in the Premium Allocation
Section.
CONDITIONAL RECEIPT
* A premium check must be made payable to the Company.
* Do not make the check payable to the agent.
* Do not leave the payee blank.
A payment of $________ in the form of a check made payable to Cova Financial
Life Insurance Company was received from __________________ for the insurance
applied for in the application which bears the same date as this Conditional
Receipt.
Signature of Agent_____________________ Date________________
This receipt is not valid unless it is signed by an agent of Cova. This receipt
is not valid unless the required premium has been received by Cova and, when
paid by check, is honored on its first presentation for payment.
* No agent can change the terms of this conditional receipt.
If you do not hear from Cova about the proposed insurance within 60 days after
the date of this Conditional Receipt, please call Cova at its toll free
telephone number: 1-800-343-8496.
Insurance In Force - Insurance under this Conditional Receipt will be in force
starting on the Start Date only. If each person proposed for insurance is a risk
acceptable to Cova for the policy exactly as applied for, Cova will make its
decision according to its current rules and practices.
(See other side)
9. UNDERWRITING CONTACT INFORMATION PROPOSED INSURED
Contact at:________________________ [ ] Home
(Phone Number)
[ ] Business_____________________
(Phone Number)
Best days and time________________________
Special Remarks___________________________
PROPOSED JOINT INSURED
Contact at: [ ] Home_________________________
(Phone Number)
[ ] Business______________________
(Phone Number)
Best days and time__________________________________
Special Remarks_____________________________________
10. SUITABILITY
A. Is the policy applied for consistent with your insurance needs and
financial objectives?
B. Do you understand that the amount and duration of the death benefit may
vary, depending on the investment performance of the portfolios?
C. Do you understand that the policy values may increase or decrease,
depending on the investment performance of the portfolios?
D. Did you receive the current prospectus for the policy applied for?
E. Do you understand that the initial premium will be allocated to the Money
Market Portfolio during the Right to Examine Period?
F. Will the policy applied for replace or change any existing life insurance
or annuity?
[ ] Yes [ ] No
[ ] Yes [ ] No
[ ] Yes [ ] No
[ ] Yes [ ] No
[ ] Yes [ ] No
[ ] Yes [ ] No
11. SPECIAL REQUESTS
12. TRANSFER AUTHORIZATIONS
I (We) acknowledge that neither Cova Financial Life Insurance Company (Cova) nor
any person authorized by Cova will be responsible for any claim, loss, liability
or expense in connection with a telephone transfer if Cova or such other person
acted on telephone transfer instructions in good faith in reliance on this
authorization.
Check here if you wish to authorize telephone transfer instructions. [ ]
Check here if you wish to authorize your Registered Representative/Agent to make
transfers. [ ]
13. DOLLAR COST AVERAGING TRANSFERS
I (We) authorize Dollar Cost Averaging Transfers of $______ to be transferred
each month from the Conning Money Market Portfolio ($5,000 minimum or amount
needed to complete all transfers.)
TO
J.P. Morgan Investment Management
_______% Select Equity Portfolio
_______% Large Cap Stock Portfolio
_______% Small Cap Stock Portfolio
_______% International Equity Portfolio
_______% Quality Bond Portfolio
Lord Abbett
_______% Growth and Income Portfolio
_______% Bond Debenture Portfolio
_______
_______
100 % Total
I (We) authorize transfers to be made for: [ ] 12 months [ ] 24 months [ ] 36
months [ ] 48 months [ ] 60 months Other _______ months
Dollar Cost Averaging Transfers and Rebalancing Transfers are not available
simultaneously.
14. REBALANCING TRANSFERS - I (We) authorize Rebalancing Transfers to be made in
the applicable percentages elected in the Premium Payment Allocation section.
Transfers are to be made: [ ] quarterly [ ] semi-annually [ ] annually.
Dollar Cost Averaging Transfers and Rebalancing Transfers are not available
simultaneously.
CONDITIONAL RECEIPT
Start Date - For acceptable risks, any insurance under the terms of this
Conditional Receipt begins on the Start Date, which is the latest of:
a) The date of completion of all parts of the application; or
b) The date of completion of all medical or paramedical exams, tests, x-rays,
and EKGs required by Cova; or
c) The date of Cova's receipt of all of the attending physician's statements
and medical reports required by Cova; or
d) A later date, if any, requested in the application; or
e) The date of Cova's receipt of the initial premium.
Amount - The amount of insurance provided by this Conditional Receipt is the
lesser of:
a) The face amount of insurance applied for in the application; or
b) For a Proposed Insured up to age 65: the initial premium plus $500,000; or
c) For a Proposed Insured over age 65: the initial premium plus $200,000.
This amount includes any life insurance and accidental death benefits applied
for or in force with Cova. The amount of insurance is subject to the Limitations
Section.
Limitations - If a person proposed for insurance dies and insurance is in force
under this Conditional Receipt, the benefits will be limited to a return of the
premium paid for this Conditional Receipt if:
a) The death is a result of suicide while sane or self-destruction while
insane; or
b) All questions in the application have not been answered; or
c) All answers in the application are not true and correct; or
d) The person proposed for insurance is not a risk acceptable to Cova for the
policy as exactly applied.
End of Insurance - Once started, insurance under this Conditional Receipt will
end at the earliest of:
a) 60 days after the date of the application; or
b) When Cova sends notice that the insurance cannot be issued for the policy
exactly as applied for; or
c) The date any policy issued goes into effect.
(See other side)
15. ACKNOWLEDGMENT AND AUTHORIZATION - Any person who, with intent to
defraud or knowing that he/she is facilitating a fraud against an insurer,
submits an application or files a claim containing false or deceptive statement
is guilty of insurance fraud.
I (we) have read all the questions and answers in this application. All
responses are true and complete to the best of my (our) knowledge and belief. No
coverage will be in effect until: a full application has been signed by the
proposed insured(s); and a policy has been issued; and the full first premium
has been received by Cova. Any coverage will be subject to the terms and
conditions of the policy.
I (we) have received the notification about the Federal Fair Credit
Reporting Act and the Medical Information Bureau.
I (we) hereby authorize: any licensed physician or medical practitioner;
any hospital, clinic or other medical or medically related facility; any
insurance company; the Medical Information Bureau; and any other organization,
institution or person, that has any records or knowledge of me (us) or my (our)
health, to give to Cova Financial Life Insurance Company, its Underwriters, or
its reinsurers, or the Medical Information Bureau, any such information. This
authorization is valid for two and one-half years from the date this form is
signed. An exact copy of this authorization is as valid as the original.
I (We) agree that the information and statements made on this application
are true and correct to the best of my (our) knowledge and belief and are made
as the basis of my (our) application.
I (We) acknowledge receipt of the current prospectus(es) of Cova Variable
Annuity Account One, Cova Series Trust and Lord Abbett Series Fund, Inc.
PAYMENTS AND VALUES PROVIDED BY THE POLICY FOR WHICH APPLICATION IS MADE ARE
VARIABLE AND ARE NOT GUARANTEED AS TO DOLLAR AMOUNT. Complete Form W-9.
16. SIGNATURES
______________________________________________________________
City State Date
______________________________________________________________
Signature of Proposed Insured
______________________________________________________________
Signature of Proposed Joint Insured, if applicable
______________________________________________________________
Signature of Owner if other than Proposed Insured
______________________________________________________________
Signature of Joint Owner if applicable
17. AGENT'S REPORT Will the life insurance replace or change any existing life
insurance or annuity?
[ ] No [ ] Yes (Indicate type and cost basis information.)
Type Cost Basis
[ ] Life Pre-TEFRA $____________ $______________
(Cost Basis) (Gain)
[ ] Annuity Post-TEFRA $____________ $______________
(Cost Basis) (Gain)
Complete any required replacement forms.
Agent's Signature_________________________________
Phone_____________________________________________
Agent's Name and Number___________________________
Name and Address of Firm__________________________
Notice of Insurance Information Practices
* This notice must be detached and given to the Proposed Insured
Medical Information Bureau (Bureau) Notice - Information provided to Cova will
be treated as confidential. But Cova or its reinsurers may make a brief report
thereon to the Bureau. This is a non-profit membership organization of life
insurance companies that operates an information exchange for its members. If
you apply to a member company for life or health insurance or submit a claim for
benefits, the Bureau, on request, will supply the member company with the
information it may have in its file.
On request from you, the Bureau will arrange to disclose to you any information
it may have in your file. If you question the accuracy of the contents of your
file, you may contact the Bureau and seek a correction. Your request will be
handled as provided for in the Fair Credit Reporting Act. The address of the
Bureau's information office is: P.O. Box 105, Essex Station, Boston,
Massachusetts 02212; Telephone Number: (617) 426-3680.
Cova or its reinsurers also may release information to those other life
insurance companies to which you may apply for life or health insurance or
submit a claim for benefits.
(See other side)
Notice of Insurance Information Practices
* This notice must be detached and given to the Proposed Insured
General Information Practices - As authorized by you when you complete the
application, Cova may get information from sources other than the persons
proposed for insurance. In certain circumstances Cova may give information it
has gathered to third parties without your further authorization. Cova shares
only as much information as is needed to accomplish the purpose of the
disclosure. Cova discloses Medical Information Bureau information only to its
reinsurers. Persons who are the subject of information Cova collects may have
the right to access and correction. Cova may be required by law to furnish you
with a detailed description of our information practices upon receipt of a
request from you in writing.
Fair Credit Reporting Act Notice - As part of its regular procedures, Cova may
get an investigative consumer report. This report may concern each person
proposed for insurance. It may deal with character, general reputation, personal
traits and mode of living. It may involve personal interviews with friends,
neighbors, associates or other persons. You have the right to make, within a
reasonable amount of time, a written request for details on the nature and scope
of this report. You may have the right to ask to be interviewed in connection
with the making of the report and, contact the consumer reporting agency to
review a copy of the report. If you write to Cova, we will let you know whether
Cova has in fact obtained a report, and if so, the name and address of the
agency making the report.
(See other side)
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, E. Thomas Hughes, Jr., a Director
of Cova Financial Life Insurance Company, a corporation duly organized under
the laws of the State of California, do hereby appoint Lorry J. Stensrud
and/or Jeffery K. Hoelzel, or either one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of April, 1996.
WITNESS:
/S/DEBRA J. FERGUSON /S/E. THOMAS HUGHES, JR.
________________________________ ______________________________________
E. Thomas Hughes, Jr.
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, William C. Mair, Sr. Vice
President, Controller and a Director of Cova Financial Life Insurance Company,
a corporation duly organized under the laws of the State of California, do
hereby appoint Lorry J. Stensrud and/or Jeffery K. Hoelzel, or either one of
the foregoing individually, as my attorney and agent, for me, and in my name
as Sr. Vice President, Controller and a Director of this Company on behalf of
the Company or otherwise, with full power to execute, deliver and file with
the Securities and Exchange Commission all documents required for registration
of variable annuity and variable life insurance contracts under the Securities
Act of 1933, as amended, and the registration of unit investment trusts under
the Investment Company Act of 1940, as amended, and to do and perform each and
every act that said attorney may deem necessary or advisable to comply with
the intent of the aforesaid Acts.
WITNESS my hand this 11th day of April, 1996.
WITNESS:
/S/DOLORES DELGADO /S/WILLIAM C. MAIR
________________________________ ______________________________________
William C. Mair
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Matthew P. McCauley, a Director
of Cova Financial Life Insurance Company, a corporation duly organized under
the laws of the State of California, do hereby appoint Lorry J. Stensrud
and/or Jeffery K. Hoelzel, or either one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 12th day of April, 1996.
WITNESS:
/S/VICTORIA A. QUINT /S/MATTHEW P. McCAULEY
________________________________ ______________________________________
Matthew P. McCauley
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, John W. Barber, a Director of
Cova Financial Life Insurance Company, a corporation duly organized under the
laws of the State of California, do hereby appoint Lorry J. Stensrud and/or
Jeffery K. Hoelzel, or either one of the foregoing individually, as my
attorney and agent, for me, and in my name as a Director of this Company on
behalf of the Company or otherwise, with full power to execute, deliver and
file with the Securities and Exchange Commission all documents required for
registration of variable annuity and variable life insurance contracts under
the Securities Act of 1933, as amended, and the registration of unit
investment trusts under the Investment Company Act of 1940, as amended, and to
do and perform each and every act that said attorney may deem necessary or
advisable to comply with the intent of the aforesaid Acts.
WITNESS my hand this 15th day of April, 1996.
WITNESS:
/S/DOLORES DELGADO /S/JOHN W. BARBER
________________________________ ______________________________________
John W. Barber
