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. 4100 Newport Place Drive, Suite 840
Newport Beach, CA 92600
(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 Bernard J. Spaulding
Blazzard, Grodd & Hasenauer, P.C. Senior Vice President and
P.O. Box 5108 General Counsel
Westport, CT 06881 Cova Financial Life Insurance
(203) 226-7866 Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181-4644
E. Flexible Premium Variable Life Insurance Policy
(Title and amount of securities being registered)
F. Proposed maximum aggregate offering price to the public of the
securities being registered:
Continuous offering
G. Amount of Filing Fee: Not Applicable
H. Approximate date of proposed public offering:
As soon as practicable after the effective date of this filing.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 Item Caption in Prospectus
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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 Cova; 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 Cova; 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
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EXPLANATORY NOTE
This Registration Statement contains 46 portfolios of the various underlying
investment options. Two versions (Version A and Version B) of the Prospectus
will be created from this Registration Statement. The only differences between
the two versions are the underlying investment options and the Illustrations.
One version will contain 41 portfolios (Version A) and the other version will
contain 6 portfolios (Version B). The distribution system for each version of
the Prospectus will be different. The Prospectus contained in this Registration
Statement will contain two sets of Illustrations - one for Version A of the
Prospectus and the other for Version B. The Prospectuses will be filed with the
Commission pursuant to Rule 497 under the Securities Act of 1933. The Registrant
undertakes to update this Explanatory Note, as needed, each time a
Post-Effective Amendment is filed.
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FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICY
ISSUED BY
COVA FINANCIAL LIFE INSURANCE COMPANY
COVA VARIABLE LIFE ACCOUNT FIVE
This prospectus describes the Flexible Premium Variable Life Insurance Policy
that we are offering.
We have designed the Policy for use in estate and retirement planning and other
insurance needs of individuals. The Policy provides for maximum flexibility by
allowing you to vary your premium payments and to change the level of death
benefits payable.
You, the policyowner, have a number of investment choices in the Policy. These
investment choices include a General Account as well as the following 46
Investment Funds listed below which are offered through our Separate Account.
When you purchase a Policy, you bear the complete investment risk. This means
that the Accumulation Account Value of your Policy may increase and decrease
depending upon the investment performance of the Investment Fund(s) you select.
The duration of the Policy and, under some circumstances, the death benefit will
increase and decrease depending upon investment performance.
AIM Variable Insurance Funds, Inc.
Advisor: A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.
Advisor: Alliance Capital Management L.P.
Premier Growth Fund
Real Estate Investment Fund
Cova Series Trust
Advisor: J.P. Morgan Investment Management Inc.
Select Equity Fund
Small Cap Stock Fund
International Equity Fund
Quality Bond Fund
Large Cap Stock Fund
Advisor: Lord, Abbett & Co.
Bond Debenture Fund
Mid-Cap Value Fund
Large Cap Research Fund
Developing Growth Fund
Lord Abbett Growth and Income Fund
General American Capital Company
Advisor: Conning Asset Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust
Advisor: Goldman Sachs Asset Management
Goldman Sachs Growth and Income
Fund
Advisor: Goldman Sachs Asset Management
International
Goldman Sachs International Equity
Fund
Goldman Sachs Global Income Fund
Kemper Variable Series
Advisor: Scudder Kemper Investments, Inc.
Kemper Small Cap Value Fund
Kemper Government Securities Fund
Kemper Small Cap Growth Fund
Liberty Variable Investment Trust
Advisor: Newport Fund Management Inc.
Newport Tiger, Variable Series
MFS(R) Variable Insurance Trust(SM)
Advisor: MFS Investment Management(R)
MFS Emerging Growth Fund
MFS Research Fund
MFS Growth With Income Fund
MFS High Income Fund
MFS Global Governments Fund
Oppenheimer Variable Account Funds
Advisor: OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Main Street Growth & Income
Fund/VA
Oppenheimer Strategic Bond Fund/VA
Putnam Variable Trust
Advisor: Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund-Class IA
Shares
Putnam VT International Growth Fund-Class IA
Shares
Putnam VT International New Opportunities
Fund-Class IA Shares
Putnam VT New Value Fund-Class IA Shares
Putnam VT Vista Fund-Class IA Shares
Templeton Variable Products Series Fund
Advisor: Templeton Asset Management Ltd.
Templeton Developing Markets Fund-
Class 1
Advisor: Templeton Investment Counsel, Inc.
Templeton International Fund-Class 1
Advisor: Franklin Mutual Advisers LLC
Mutual Shares Investments Fund-
Class 1
Russell Insurance Funds
Advisor: Frank Russell Investment
Management Company
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
Core Bond Fund
Please read this prospectus before investing and keep it on file for future
reference. It contains important information about the Flexible Premium Variable
Life Insurance Policy. The Securities and Exchange Commission maintains a Web
site (http://www.sec.gov) that contains information regarding registrants that
file electronically with the Commission.
The Policy:
* is not a bank deposit.
* is not federally insured.
* is not endorsed by any bank or government agency.
The Policy is subject to investment risk. You may be subject to loss of
principal.
The SEC has not approved the Policy or determined that this prospectus is
accurate or complete. Any representation that it has is a criminal offense.
DATE:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SPECIAL TERMS.....................................................................................................2
SUMMARY .........................................................................................................5
The Variable Life Insurance Policy.......................................................................5
Purchases................................................................................................5
Investment Choices.......................................................................................6
Expenses ................................................................................................9
Death Benefit...........................................................................................11
Taxes ...............................................................................................11
Access to Your Money....................................................................................12
Other Information.......................................................................................12
Inquiries...............................................................................................13
PART I ........................................................................................................14
The Variable Life Insurance Policy......................................................................14
Purchases...............................................................................................14
Application For a Policy.......................................................................14
Premiums ......................................................................................14
Unscheduled Premiums...........................................................................15
Lapse and Grace Period.........................................................................15
Reinstatement..................................................................................16
Allocation of Premium..........................................................................16
Accumulation Account Value of your Policy......................................................17
Method of Determining Accumulation Account Value of an Investment
Fund..................................................................................17
Net Investment Factor..........................................................................18
Our Right to Reject or Return a Premium Payment................................................19
Investment Funds........................................................................................19
Substitution and Limitations on Further Investments............................................22
Transfers......................................................................................22
Dollar Cost Averaging..........................................................................23
Portfolio Rebalancing..........................................................................24
Expenses ...............................................................................................25
Tax Charges....................................................................................25
Sales Charge...................................................................................25
Selection and Issue Expense Charge.............................................................26
Monthly Policy Charge..........................................................................26
Monthly Cost of Insurance......................................................................26
Charges for Additional Benefit Riders..........................................................28
Mortality and Expense Risk Charge..............................................................28
Surrender Charge...............................................................................28
Transaction Charges............................................................................29
Investment Fund Expenses.......................................................................29
DEATH BENEFIT...........................................................................................33
Change in Death Benefit........................................................................35
Change in Face Amount..........................................................................35
TAXES ...............................................................................................36
Life Insurance in General......................................................................36
Taking Money out of Your Policy................................................................36
Diversification................................................................................37
ACCESS TO YOUR MONEY....................................................................................37
Policy Loans...................................................................................37
Loan Interest Charged..........................................................................38
Security ......................................................................................38
Repaying Policy Debt...........................................................................39
Partial Withdrawals............................................................................39
Pro-Rata Surrender.............................................................................40
Full Surrenders................................................................................41
OTHER INFORMATION.......................................................................................41
Cova ......................................................................................41
Distribution...................................................................................41
Year 2000......................................................................................42
The Separate Account...........................................................................42
Suspension of Payments or Transfers............................................................42
Ownership......................................................................................43
Adjustment of Charges..........................................................................44
PART II.................................................................................................44
Voting ...............................................................................................49
Disregard of Voting Instructions......................................................................50
Legal Opinions..........................................................................................50
Our Right to Contest....................................................................................50
Federal Tax Status......................................................................................51
Introduction...................................................................................51
Diversification................................................................................51
Tax Treatment of the Policy....................................................................53
Policy Proceeds................................................................................53
Tax Treatment of Loans And Surrenders..........................................................53
Multiple Policies..............................................................................55
Tax Treatment of Assignments...................................................................55
Qualified Plans................................................................................55
Reports to Owners.......................................................................................55
Legal Proceedings.......................................................................................55
Experts ...............................................................................................55
Financial Statements....................................................................................56
Appendix ...............................................................................................56
</TABLE>
SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. However, by the very nature of the Policy certain technical words or
terms are unavoidable. We have identified some of these terms and provided you
with a definition.
Accumulation Account Value - The total of the amounts credited to the Owner in
the Separate Account, the General Account and the Loan Account.
Attained Age - The Issue Age of the Insured plus the number of completed Policy
years.
Beneficiary - The person(s) named in the application or by later designation to
receive Policy proceeds in the event of the Insured's death. A Beneficiary may
be changed as set forth in the Policy and this prospectus.
Cash Surrender Value - The Accumulation Account Value of a Policy on the date of
surrender, less any Indebtedness, less any unpaid selection and issue expense
charge due for the remainder of the first Policy year, less any unpaid monthly
Policy charge due for the remainder of the first Policy year, and less any
surrender charge.
Face Amount - The minimum death benefit under the Policy so long as the Policy
remains in force before the Insured's Attained Age 100.
General Account - Our assets other than those allocated to the Separate Account
or any other separate account.
Indebtedness - The sum of all unpaid Policy loans and accrued interest on loans.
Insured - The person whose life is insured under the Policy.
Investment Funds - Investments within the Separate Account which we make
available under the Policy.
Investment Start Date - The date the initial premium is applied to the General
Account and/or the Investment Funds. This date is the later of the Issue Date or
the date the initial premium is received at our Service Office.
Issue Age - The age of the Insured at his or her nearest birthday as of the
Issue Date.
Issue Date - The date as of which insurance coverage begins under a Policy. It
is also the date from which Policy anniversaries, Policy years, and Policy
months are measured. It is the Effective Date of coverage under the Policy.
Loan Account - The account of Cova to which amounts securing Policy Loans are
allocated. The Loan Account is part of Cova's General Account.
Loan Subaccount - A Loan Subaccount has been established for the General Account
and for each Investment Fund. Any Accumulation Account Value transferred to the
Loan Account will be allocated to the appropriate Loan Subaccount to reflect the
origin of the Accumulation Account Value. At any point in time, the Loan Account
will equal the sum of all the Loan Subaccounts.
Monthly Anniversary - The same date in each succeeding month as the Issue Date
except that whenever the Monthly Anniversary falls on a date other than a
Valuation Date, the Monthly Anniversary will be deemed the next Valuation Date.
If any Monthly Anniversary would be the 29th, 30th, or 31st day of a month that
does not have that number of days, then the Monthly Anniversary will be the last
day of that month.
Net Premium - The premium paid, less the premium tax charge, less the Federal
tax charge, less the sales charge.
Owner - The owner of a Policy, as designated in the application or as
subsequently changed.
Policy - The flexible premium variable life insurance Policy offered by us and
described in this prospectus.
Pro-Rata Surrender - A requested reduction of both the Face Amount and the
Accumulation Account Value by a given percentage.
Separate Account - Cova Variable Life Account Five, a separate investment
account established by Cova to receive and invest the Net Premiums paid under
the Policy, and certain other variable life policies, and allocated by you to
provide variable benefits.
Service Office - Cova Financial Life Insurance Company, P.O. Box 66757, St.
Louis, MO 63166-6757.
Target Premium - A premium calculated when a Policy is issued, based on the
Insured's age, sex (except in unisex policies) and risk class. The Target
Premium is used to calculate the first year's premium expense charge, the
surrender charge, and agent compensation under the Policy.
Valuation Date - Each day that the New York Stock Exchange is open for trading
and Cova is open for business.
Valuation Period - The period between two successive Valuation Dates, commencing
at the close of the New York Stock Exchange (usually 4:00 p.m. Eastern Standard
Time) on a Valuation Date and ending with the close of the New York Stock
Exchange on the next succeeding Valuation Date.
The prospectus is divided into three sections: the Summary, Part I and Part II.
The sections in the Summary correspond to sections in Part I of this prospectus
which discuss the topics in more detail. Part II contains even more detailed
information.
SUMMARY
The Variable Life Insurance Policy
The variable life insurance Policy is a contract between you, the owner, and us,
an insurance company. The Policy provides for the payment of a death benefit to
your selected Beneficiary upon the death of the person Insured. This death
benefit is distributed free from Federal income taxes. The Policy can be used as
part of your estate planning or used to save for retirement. The Insured is the
person you choose to have insured under the Policy. You, the owner, can be the
Insured, but you do not have to be.
The Policy described in this prospectus is a flexible premium variable life
insurance Policy. The Policy is "flexible" because:
* the frequency and amount of premium payments can vary;
* you can choose between death benefit options; and
* you can change the amount of insurance coverage.
The Policy is "variable" because the Accumulation Account Value of your Policy,
when allocated to the Investment Funds, may increase or decrease depending upon
the investment results of the selected Investment Funds. The duration of your
Policy may vary and, under certain circumstances, so may your death benefit.
So long as the Insured is alive, you can surrender the Policy for all or part of
its Cash Surrender Value. You may also obtain a Policy loan, using the Policy as
security. We will pay a death benefit when the Insured dies.
We make available a number of riders to meet a variety of your estate planning
needs. The minimum face amount of insurance that we offer is $50,000.
Purchases
You purchase the Policy by completing the proper forms. Your registered
representative can help you. In some circumstances, we may contact you for
additional information regarding the Insured. We may require the Insured to
provide us with medical records, physician's statement or a complete paramedical
examination.
The minimum initial premium we accept is computed for you based on the Face
Amount you request. The Policy is designed for the payment of subsequent
premiums. You can establish planned annual premiums. The minimum subsequent
premium that we accept is $10.
Investment Choices
You can put your money in our General Account or in any or all of the Investment
Funds listed below. A more detailed description of the Investment Funds, their
investment policies, restrictions, risks, and charges is contained in the
prospectuses for each Investment Fund, which accompany this prospectus. You
should read the prospectuses carefully.
The following is a list of the Investment Funds available under the Policy:
AIM Variable Insurance Funds, Inc.
Advisor: A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Alliance Variable Products Series Fund, Inc.
Advisor: Alliance Capital Management L.P.
Premier Growth Fund
Real Estate Investment Fund
Cova Series Trust
Advisor: J.P. Morgan Investment Management
Inc.
Select Equity Fund
Small Cap Stock Fund
International Equity Fund
Quality Bond Fund
Large Cap Stock Fund
Advisor: Lord, Abbett & Co.
Bond Debenture Fund
Mid- Cap Value Fund
Large Cap Research Fund
Developing Growth Fund
Lord Abbett Growth and Income Fund
General American Capital Company
Advisor: Conning Asset Management Company
Money Market Fund
Goldman Sachs Variable Insurance Trust
Advisor: Goldman Sachs Asset Management
Goldman Sachs Growth and Income
Fund
Advisor: Goldman Sachs Asset Management International
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
Kemper Variable Series
Advisor: Scudder Kemper Investments, Inc.
Kemper Small Cap Value Fund
Kemper Government Securities Fund
Kemper Small Cap Growth Fund
Liberty Variable Investment Trust
Advisor: Newport Fund Management Inc.
Newport Tiger, Variable Series
MFS(R) Variable Insurance Trust(SM)
Advisor: MFS Investment Management(R)
MFS Emerging Growth Fund
MFS Research Fund
MFS Growth With Income Fund
MFS High Income Fund
MFS Global Governments Fund
Oppenheimer Variable Account Funds
Advisor: OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Main Street Growth & Income
Fund/VA
Oppenheimer Strategic Bond Fund/VA
Putnam Variable Trust
Advisor: Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund-Class IA Shares
Putnam VT International Growth Fund-Class IA Shares
Putnam VT International New
Opportunity Fund-Class IA Shares
Putnam VT New Value Fund-Class IA Shares
Putnam VT Vista Fund-Class IA Shares
Templeton Variable Products Series Fund
Advisor: Templeton Asset Management Ltd.
Templeton Developing Markets Fund-Class 1
Advisor: Templeton Investment Counsel, Inc.
Templeton International Fund-Class 1
Advisor: Franklin Mutual Advisers LLC
Mutual Shares Investments Fund-Class 1
Russell Insurance Funds
Advisor: Frank Russell Investment Management Company
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
Core Bond Fund
Expenses
We make certain deductions from your premiums, your Accumulation Account Value
and from the Investment Funds. These deductions are made for taxes, mortality
and expense risks, administrative expenses, sales charges, the cost of providing
life insurance protection and for the cost associated with the management and
investment operations of the Investment Funds. These deductions are summarized
as follows:
* Deductions from each premium payment.
Tax Charges. We currently deduct 1.3% of each premium payment to pay the
Federal Tax Charge. We also deduct a Premium Tax Charge to pay the state
and local premium taxes. The Premium Tax Charge ranges from 0% to 3.5%,
depending on the state.
Sales Charge. The Sales Charge, which is also referred to as the percent of
premium charge, is determined as follows:
(1) in the first Policy year, 15% of the amount you pay up to the Target
Premium, and 5% of the amount you pay over the Target Premium;
(2) in the 2nd through 10th Policy years, 5% of the actual premium you
pay; and
(3) in the 11th Policy year and later, 2% of the actual premium you pay.
* Monthly deductions from your Accumulation Account Value.
Selection and Issue Expense Charge. During the first 10 Policy years, we
assess a charge of up to 1% per $1000 of Face Amount. This charge varies by
Issue Age, risk class and sex (except in unisex policies) of the Insured.
Monthly Policy Charge. This charge is equal to $25 per month for the first
policy year, and $6 per policy month thereafter. This amount is deducted
from the Accumulation Account Value of your Policy on the Investment Start
Date and each Monthly Anniversary Date.
Monthly Cost of Insurance. This amount is deducted monthly from your
Accumulation Account Value on the Investment Start Date and each Monthly
Anniversary date. The amount of the deduction varies with the age, sex
(except in unisex policies), risk class of the Insured, duration and the
amount of death benefit at risk.
Charges for Additional Benefit Riders. On each Monthly Anniversary date,
the amount of the charge, if any, for additional benefit riders is
determined in accordance with the rider and is shown on the specifications
page of your Policy.
* Deductions from the Investment Funds.
Mortality and Expense Risk Charge. This risk charge is guaranteed not to
exceed, on an annual basis, 0.55% of the average value of each of your
Investment Funds and is deducted each Valuation Date. The current risk
charge depends on the number of years your Policy has been in force and is
as follows:
<TABLE>
<CAPTION>
Years Daily Charge Factor Annual Equivalent
<S> <C> <C> <C>
1-10 .0015027% 0.55%
11-20 .0012301% 0.45%
21+ .0009572% 0.35%
</TABLE>
This deduction is guaranteed not to increase while the Policy is in force.
Other Expenses. There are deductions from and expenses paid out of the
assets of the Investment Funds.
* Deductions for surrenders, partial withdrawals and transfers.
Surrender Charge. A Surrender Charge may be deducted in the event you make
a full or partial withdrawal of your Policy. If you surrender your Policy
or let it lapse during the first ten Policy years, we will keep part of the
Accumulation Account Value of your Policy to help us recover the costs of
selling and issuing the Policy.
The Surrender Charge is 45% of the Target Premium if you surrender the
Policy or let it lapse during the first five Policy years. Afterwards, the
amount of the Surrender Charge goes down each month. After the 10th Policy
year there is no charge. A Surrender Charge will apply to any decrease in
Face Amount.
There is a table in your Policy that shows the amount of the Target Premium
and the percentage of the Surrender Charge for each month.
If you make a partial withdrawal from your Policy, we will charge a
pro-rated portion of the Surrender Charge. There may also be a Partial
Withdrawal Fee charged.
Partial Withdrawal Fee and Transfer Fee. The first 12 requested transfers
or partial withdrawals in a Policy year are free. For each partial
withdrawal or transfer in excess of 12 in a Policy year, there is a fee
assessed which is currently equal to $25.
Death Benefit
The amount of the death benefit depends on:
* the Face Amount of your Policy;
* the death benefit option in effect at the time of the Insured's death;
and
* under some circumstances the Accumulation Account Value of your
Policy.
There are three death benefit options: Option A, Option B and Option C. If death
benefit Option A is in effect, the death benefit is the greater of your total
Face Amount in effect or the Accumulation Account Value of your Policy on the
date of the Insured's death multiplied by the applicable factor. Under this
option, the amount of the death benefit is fixed, except when we use the factor
to determine the benefit percentage.
If death benefit Option B is in effect, the death benefit is the greater of your
total Face Amount in effect plus the Accumulation Account Value of your Policy,
or the Accumulation Account Value of your Policy multiplied by the applicable
factor. Under this option, the amount of the death benefit is variable (but will
never be less than the Face Amount).
If death benefit Option C is in effect, the death benefit is the greater of your
total Face Amount in effect or the Accumulation Account Value multiplied by an
Attained Age factor.
So long as the Policy remains in force, prior to the Insured's Attained Age 100,
the minimum death benefit will be at least the current Face Amount.
Under certain circumstances you can change death benefit options. You can also
change the Face Amount under certain circumstances.
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 designated an irrevocable Beneficiary. The
Beneficiary does not have to be a natural person.
Taxes
Your Policy has been designed to comply with the definition of life insurance in
the Internal Revenue Code. As a result, the death proceeds paid under the Policy
should be excludable from the gross income of your Beneficiary. Any earnings in
your Policy are not taxed until you take them out. The tax treatment of the loan
proceeds and surrender proceeds will depend on whether the Policy is considered
a Modified Endowment Contract (MEC). Proceeds taken out of a MEC are considered
to come from earnings first and are includible in taxable income. If you are
younger than 59 1/2 when you take money out of a MEC, you may also be subject to
a 10% federal tax penalty on the earnings withdrawn.
Access to Your Money
You can terminate your Policy at any time during the lifetime of the Insured and
we will pay you the Cash Surrender Value of your Policy. At any time during the
Insured's lifetime and before the Policy has terminated, you may withdraw a part
of your Accumulation Account Value subject to the requirements of the Policy.
When you terminate your Policy or make a partial withdrawal, a surrender charge
and partial withdrawal fee may be assessed.
You can also borrow against the Accumulation Account Value of your Policy.
Other Information
Free Look. You can cancel the Policy within 20 days after you receive it (or
whatever period is required in your state) or the 45th day after you sign your
application, whichever period ends later. We will refund all premiums paid. In
the state of California, if you are 60 years or older on the Issue Date, you can
cancel your Policy within 30 days after you receive it in which case we will
refund your Policy's Account value as of the day we receive your returned
Policy. Upon completion of the underwriting process, we will allocate your
initial Net Premium to the Money Market Fund until the reallocation date, which
occurs upon the expiration of the free look period. After that, we will invest
your Policy's Accumulation Account Value and any subsequent premiums as you
requested.
Who Should Purchase the Policy? The Policy is designed for individuals and
businesses that have a need for death protection but who also desire to
potentially increase the values in their policies through investment in the
Investment Funds. The Policy offers the following to individuals:
* create or conserve one's estate;
* supplement retirement income; and
* access to funds through loans and surrenders.
If you currently own a variable life insurance policy on the life of the
Insured, you should consider whether the purchase of the Policy is appropriate.
Also, you should carefully consider whether the Policy should be used to replace
an existing Policy on the life the Insured.
Additional Features. The following additional features are offered:
* you can arrange to have a regular amount of money automatically
transferred from the Money Market Fund to selected Investment Funds
each month, theoretically giving you a lower average cost per unit
over time than a single one time purchase. We call this feature Dollar
Cost Averaging.
* you can arrange to automatically readjust your Accumulation Account
Value between Investment Funds periodically to keep the allocation you
select. We call this feature Portfolio Rebalancing.
* we also offer a number of additional riders that are common to life
insurance policies.
These features and riders may not be available in your state and may not be
suitable for your particular situation.
Inquiries
If you need more information about purchasing a Policy, please contact us at:
Cova Life Sales Company
One Tower Lane, Suite 3000
Oakbrook Terrace, IL 60181
800-523-1661
If you need Policyowner service (such as changes in Policy information, inquiry
into Policy values, or to make a loan), please contact us at our service center:
Cova Financial Life Insurance Company
P.O. Box 66757
St. Louis, MO 63166-6757
800-XXX-XXXX
PART I
1. The Variable Life Insurance Policy
The variable life insurance Policy is a contract between you, the owner, and us,
an insurance company. This kind of Policy is most commonly used for retirement
planning and/or estate planning.
The Policy provides for life insurance coverage on the Insured. It has an
Accumulation Account Value, a death benefit, surrender rights, loan privileges
and other characteristics associated with traditional and universal life
insurance. However, since the Policy is a variable life insurance Policy, the
value of your Policy will increase or decrease depending upon the investment
experience of the Investment Funds you choose. The duration or amount of the
death benefit may also vary based on the investment performance of the
underlying Investment Funds. To the extent you select any of the Investment
Funds, you bear the investment risk. If your Accumulation Account Value less any
loans, loan interest accrued, unpaid selection and issue charge due for the
remainder of the first Policy year and, if surrender charges and any Partial
Withdrawal Fee is insufficient to pay the monthly deductions, the Policy may
terminate.
Because the Policy is like traditional and universal life insurance, it provides
a death benefit which is paid to your named Beneficiary. When the Insured dies,
the death proceeds are paid to your Beneficiary which should be excludable from
the gross income of the Beneficiary. The tax-free death proceeds make this an
excellent way to accumulate money you do not think you will use in your
lifetime. It is also a tax-efficient way to provide for those you leave behind.
If you need access to your money, you can borrow from the Policy, make a total
surrender or a partial withdrawal.
2. Purchases
Application for a Policy
In order to purchase a Policy, you must submit an application to us that
requests information about the proposed Insured. In some cases, we will ask for
additional information. We may request that the proposed Insured provide us with
medical records, a physician's statement or possibly require other medical
tests.
Premiums
Before coverage begins under a Policy, the application and the premium must be
in good order as determined by our administrative rules. You may receive a copy
of a Policy before that time for examination but there will be no coverage. Each
premium after the initial premium must be at least $10. The Policy is not
designed for professional market timing organizations, other entities, or
persons using programmed, large, or frequent transfers.
You can establish a schedule of planned premiums. We will send you billing
notices for these premium payments. A failure to pay such a premium payment will
not itself cause the Policy to lapse.
Unscheduled Premiums
You can make additional unscheduled premium payments at any time while the
Policy is in force. However, in order to preserve the favorable tax status of
the Policy, we may limit the amount of the premiums and may return any premiums
that exceed the limits stated under the Internal Revenue Code.
If Cova receives a premium payment which would cause the death benefit to
increase by an amount that exceeds the Net Premium portion of the payment, then
Cova reserves the right to :
(1) refuse that premium payment; or
(2) require additional evidence of insurability before it accepts the
premium.
Lapse and Grace Period
During the first 5 Policy years, your Policy will not lapse if the Cash
Surrender Value of your Policy is insufficient to pay for the monthly deductions
when:
* the sum of all premiums paid on the Policy (reduced by any partial
withdrawals and any outstanding loan balance) is at least equal to the
sum of the No Lapse Monthly Premiums for the elapsed months since the
Issue Date.
The No Lapse Monthly Premium amount is found on the specifications page of your
Policy. This amount may be modified if you change your Face Amount, make a
change in the premium class of the Insured within 5 years of the Issue Date, or
if there is an addition or deletion of a rider.
Lapse will occur if:
* the Cash Surrender Value is not sufficient to cover the monthly
deduction (except for reasons stated above);
* the sum of all the premiums you paid into the Policy (reduced by any
partial withdrawal or any outstanding loan balance) is less than the
No Lapse Monthly Premium; and
* a grace period expires without a sufficient premium payment.
When a Policy is about to terminate, the Policy provides a grace period in order
for you to make a premium payment or a loan repayment to keep your Policy in
force. The grace period, which is 62 days, begins on the Monthly Anniversary on
which the Cash Surrender Value is insufficient to meet the next monthly
deduction. We will notify you by mail of the amount of additional premium that
must be paid to keep the Policy from terminating. If we do not receive the
required amount within the grace period, the Policy will lapse and terminate
without Accumulation Account Value.
If the Insured dies during the grace period, any overdue monthly deductions will
be deducted from the death benefit otherwise payable.
Reinstatement
If your Policy terminated at the end of a grace period, you can request that we
reinstate it (restore your insurance coverage) anytime within 5 years after its
termination. To reinstate your Policy you must:
* submit a written request for reinstatement;
* submit proof satisfactory to us that the Insured is still insurable at
the risk class that applies for the latest Face Amount portion then in
effect;
* pay a Net Premium large enough to cover the monthly deductions that
were due at the time of lapse and 2 times the monthly deduction due at
the time of reinstatement; and
* pay an amount large enough to cover any loan interest due and unpaid
at the time of lapse.
The reinstatement date is the date on or following the day we approve the
application for reinstatement. The Accumulation Account Value of your Policy on
the reinstatement date is equal to:
* the amount of any Policy loan reinstated;
* increased by the Net Premiums paid at reinstatement, any Policy loan
paid at the time of reinstatement, and the amount of any surrender
charge paid at the time of lapse.
The Policy may not be reinstated if it has been surrendered or if the Insured
dies before the reinstatement date. There will be a full monthly deduction for
the Policy month which includes the reinstatement date.
Allocation of Premium
When we receive a premium from you, we deduct:
* a Tax Charge for premium taxes and Federal taxes; and
* a Sales Charge.
The premium less these charges is referred to as the Net Premium. Your Net
Premium is allocated to the General Account or one or more of the Investment
Funds, as selected by you.
When we issue you a Policy, we automatically allocate your initial premium to
the Money Market Fund. Once the free look period expires, the Accumulation
Account Value of your Policy is allocated to the General Account and/or the
Investment Funds in accordance with your selections requested in the
application. For any chosen allocation, the minimum percentage that may be
allocated is 5% of the Net Premium and the percentages must be in whole numbers.
This allocation is not subject to the transfer fee provision. However, we
reserve the right to limit the number of selections that you may invest in at
any one time.
Accumulation Account Value of your Policy
The Accumulation Account Value equals the sum of the amounts in the General
Account, the Investment Funds you have selected, and the Loan Account.
Method of Determining Accumulation Account Value of an Investment Fund
The value of your Policy will go up or down depending upon the investment
performance of the Investment Fund(s) you choose and the charges and deductions
made against your Policy.
The Accumulation Account Value of the Investment Funds is determined for each
Valuation Period. When we apply your initial premium to an Investment Fund, the
Accumulation Account Value equals the Net Premium allocated to the Investment
Fund, minus the monthly deduction(s) due from the Issue Date through the
Investment Start Date. Thereafter, on each Valuation Date, the Accumulation
Account Value in an Investment Fund will equal:
(1) The Accumulation Account Value in the Investment Fund on the preceding
Valuation Date, multiplied by the Investment Fund's Net Investment
Factor (defined below) for the current Valuation Period; plus
(2) Any Net Premium payments received during the current Valuation Period
which are allocated to the Investment Fund; plus
(3) Any loan repayments allocated to the Investment Fund during the
current Valuation Period; plus
(4) Any amounts transferred to the Investment Fund from the General
Account or from another Investment Fund during the current Valuation
Period; plus
(5) That portion of the interest credited on outstanding loans which is
allocated to the Investment Fund during the current Valuation Period;
minus
(6) Any amounts transferred from the Investment Fund to the General
Account, Loan Account, or to another Investment Fund during the
current Valuation Period (including any transfer charges); minus
(7) Any partial withdrawals from the Investment Fund during the current
Valuation Period; minus
(8) Any withdrawal due to a pro-rata surrender from the Investment Fund
during the current Valuation Period; minus
(9) Any withdrawal or surrender charges incurred during the current
Valuation Period attributed to the Investment Fund in connection with
a partial withdrawal or pro-rata surrender; minus
(10) If a Monthly Anniversary occurs during the current Valuation Period,
the portion of the monthly deduction allocated to the Investment Fund
during the current Valuation Period to cover the Policy month which
starts during that Valuation Period.
Net Investment Factor
The Net Investment Factor measures the investment performance of an Investment
Fund during a Valuation Period. The Net Investment Factor for each Investment
Fund for a Valuation Period is calculated as follows:
(1) The value of the assets at the end of the preceding Valuation Period;
plus
(2) The investment income and capital gains, realized or unrealized,
credited to the assets in the Valuation Period for which the Net
Investment Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged against those
assets during the Valuation Period; minus
(4) Any amount charged against each Investment Fund for taxes, including
any tax or other economic burden resulting from the application of the
tax laws determined by us to be properly attributable to the
Investment Funds, or any amount set aside during the Valuation Period
as a reserve for taxes attributable to the operation or maintenance of
each Investment Fund; minus
(5) The mortality and expense risk charge equal to a percentage of the
average net assets for each day in the Valuation Period. This charge,
for mortality and expense risks, is determined by the length of time
the Policy has been in force. It will not exceed the amounts shown in
the following table:
<TABLE>
<CAPTION>
Policy Percentage of Effective
<S> <C> <C> <C> <C> <C> <C>
Years Avg. Net Assets Annual Rate
1-10 0.0015027 0.55%
11-20 0.0012301 0.45%
21+ 0.0009572 0.35%;
</TABLE>
divided by
(6) The value of the assets at the end of the preceding Valuation Period.
Our Right to Reject or Return a Premium Payment
In order to receive the tax treatment for life insurance under the Internal
Revenue Code (Code), a Policy must initially qualify and continue to qualify as
life insurance under the Code. To maintain this qualification, we have reserved
the right under the Policy to return any premiums paid which we have determined
will cause the Policy to fail as life insurance. We also have the right to make
changes in the Policy or to make a distribution to the extent we determine this
is necessary to continue to qualify the Policy as life insurance. Such
distributions may have current income tax consequences to you.
If subsequent premiums will cause your Policy to become a Modified Endowment
Contract (MEC) we will contact you prior to applying the premium to your Policy.
If you elect to have the premium applied, we require that you acknowledge in
writing that you understand the tax consequences of a MEC before we will apply
the premiums.
3. Investment Funds
There are currently 46 Investment Funds available in connection with the Policy
we are offering here. The Investment Funds are offered through one of twelve
open-end, diversified management investment companies: (1) AIM Variable
Insurance Funds, Inc., (2) Alliance Variable Products Series Fund, Inc., (3)
Cova Series Trust, (4) General American Capital Company, (5) Goldman Sachs
Variable Insurance Trust, (6) Kemper Variable Series, (7) Liberty Variable
Investment Trust, (8) MFS Variable Insurance Trust, (9) Oppenheimer Variable
Account Funds, (10) Putnam Variable Trust, (11) Templeton Variable Product
Series Fund, and (12) Russell Insurance Funds.
Purchasers should read this prospectus and the accompanying prospectuses for the
above listed investment companies carefully before investing.
The following is a list of the Investment Funds and investment managers
available under the Policy:
AIM VARIABLE INSURANCE FUNDS, INC.
Advisor: A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC
Advisor: Alliance Capital Management, L.P.
Premier Growth Portfolio
Real Estate Investment Portfolio
COVA SERIES TRUST
Advisor: J.P. Morgan Investment Management, Inc.
Select Equity Portfolio
Small Cap Stock Portfolio
International Equity Portfolio
Quality Bond Portfolio
Large Cap Stock Portfolio
Advisor: Lord, Abbett & Co.
Bond Debenture Portfolio
Mid-Cap Value Portfolio
Large Cap Research Portfolio
Developing Growth Portfolio
Lord Abbett Growth & Income Portfolio
GENERAL AMERICAN CAPITAL COMPANY
Advisor: Conning Asset Management Company
Money Market Fund
GOLDMAN SACHS VARIABLE INSURANCE TRUST
Advisor: Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund
Advisor: Goldman Sachs Asset Management International
Goldman Sachs International Equity Fund
Goldman Sachs Global Income Fund
KEMPER VARIABLE SERIES
Advisor: Scudder Kemper Investments, Inc.
Kemper Small Cap Value Portfolio
Kemper Government Securities Portfolio
Kemper Small Cap Growth Portfolio
LIBERTY VARIABLE INVESTMENT TRUST
Advisor: Newport Fund Management, Inc.
Newport Tiger, Variable Series (a portfolio investing in equity securities
of companies located in certain countries of Asia)
MFS(R) VARIABLE INSURANCE TRUST(SM)
Advisor: MFS Investment Management (R)
MFS Emerging Growth Series
MFS Research Series
MFS Growth With Income Series
MFS High Income Series
MFS Global Governments Series
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Advisor: OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Strategic Bond Fund/VA
PUTNAM VARIABLE TRUST
Advisor: Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund - Class IA Shares
Putnam VT International Growth Fund - Class IA Shares
Putnam VT International New Opportunities Fund - Class IA Shares
Putnam VT New Value Fund - Class IA Shares
Putnam VT Vista Fund - Class IA Shares (a stock portfolio)
TEMPLETON VARIABLE PRODUCTS SERIES FUND, Class 1 Shares
Advisor: Templeton Asset Management Ltd.
Templeton Developing Markets Fund
Advisor: Templeton Investment Counsel, LLC
Templeton International Fund
Advisor: Franklin Mutual Advisers LLC
Mutual Shares Investments Fund
RUSSELL INSURANCE FUNDS
Advisor: Frank Russell Investment Management Company
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Real Estate Securities Fund
Core Bond Fund
The investment objectives and policies of certain of the Investment Funds are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisers manage. Although the objectives and policies
may be similar, the investment results of the Investment Funds may be higher or
lower than the results of such other mutual funds. The investment advisers
cannot guarantee, and make no representation, that the investment results of
similar funds will be comparable even though the funds have the same investment
advisers.
Shares of the Investment Funds may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with us. Certain
Investment Funds may also be sold directly to qualified plans. The Funds believe
that offering their shares in this manner will not be disadvantageous to you.
We may enter into certain arrangements under which we are reimbursed by the
Investment Funds' advisers, distributors and/or affiliates for the
administrative services which we provide to the Funds.
Substitution and Limitations on Further Investments
We may substitute one of the Investment Funds you have selected with another
Investment Fund. We will not do this without the prior approval of the
Securities and Exchange Commission. We may also limit further investment in an
Investment Fund. We will give you notice of our intention to do this.
Transfers
At your request, we will transfer amounts in your Policy from any Investment
Fund to another Investment Fund, or to and from the General Account (subject to
restrictions). The minimum amount that can be transferred is the lesser of the
minimum transfer amount (currently $500), or the total value in an Investment
Fund or the General Account. You can make twelve transfers or partial
withdrawals in a Policy year without charge. We currently charge a transfer fee
of $25 for additional transfers in a Policy year.
You cannot make a transfer out of our General Account in the first Policy year.
The maximum amount you can transfer from the General Account in any Policy year
after the 1st is the greater of:
(a) 25% of a Policy's Cash Surrender Value in the General Account at the
beginning of the Policy year, or
(b) the previous Policy year's General Account maximum withdrawal amount
not to exceed the total Cash Surrender Value of the Policy.
Transfers resulting from Policy loans will not be counted for purposes of the
limitations on the amount or frequency of transfers allowed in each Policy year.
We have not designed this Policy or the underlying Investment Funds for use by
professional market timing organizations, other entities, or persons using
programmed, large, or frequent transfers. If it appears that there is a pattern
of exchanges that coincides with a "market timing" strategy and are disruptive
to the Investment Funds, the transfer will be refused. Policies under common
ownership or control may be aggregated for purposes of transfer limits. We will
coordinate with the Fund managers to restrict the transfer privilege or reject
any specific premium allocation request for any person, if, in the Investment
Fund manager's judgment, the Investment Fund would be unable to invest
effectively in accordance with its investment objectives and policies, or would
otherwise potentially be adversely affected.
Although we currently intend to continue to permit transfers for the foreseeable
future, the Policy provides that we may at any time revoke, modify, or limit the
transfer privilege.
Dollar Cost Averaging
Dollar cost averaging is a program which enables you to allocate specified
dollar amounts from the Money Market Fund to other Investment Funds on a monthly
basis. By allocating amounts on a monthly basis, you may be less susceptible to
the impact of market fluctuations.
Dollar cost averaging may be selected by completing the proper forms. The
minimum transfer amount is $100. The minimum amount that can be allocated to an
Investment Fund is 5% of the amount transferred. You can elect to participate in
this program at any time by properly completing the dollar cost averaging
election form.
Dollar cost averaging will terminate when any of the following occurs:
1) the value of the Money Market Fund is completely depleted; or
2) you request termination in writing.
There is no current charge for dollar cost averaging but we reserve the right to
charge for this program in the future. Transfers made under dollar cost
averaging do not count against the total of 12 transfers allowed without charge
in a Policy year. Dollar cost averaging cannot be used simultaneously with the
portfolio rebalancing program.
Portfolio Rebalancing
Over time, the funds in the General Account and the Investment Funds will
accumulate at different rates as a result of different investment returns. You
may direct us to automatically restore the balance of the Accumulation Account
Value in the General Account and in the Investment Funds to the percentages
determined in advance. There are two methods of rebalancing available - periodic
and variance.
Periodic Rebalancing. Under this option you elect a frequency (monthly,
quarterly, semiannually or annually), measured from the Policy Anniversary.
On each date elected, we will rebalance the Investment Funds and/or General
Account to reallocate the Accumulation Account Value according to the
investment percentages you elected.
Variance Rebalancing. Under this option you elect a specific allocation
percentage for the General Account and each Investment Fund. For each such
account, the allocation percentage (if not zero) must be a whole percentage
and must not be less than five percent. You also elect a maximum variance
percentage (5%, 10%, 15%, or 20% only), and can exclude specific Investment
Funds and/or the General Account from being rebalanced. On each Monthly
Anniversary we will review the current balances to determine whether any
Investment Fund balance is outside of the variance range (either above or
below) as a percentage of the specified allocation percentage. If any
Investment Fund is outside of the variance range, we will generate
transfers to rebalance all of the specified Investment Funds and/or the
General Account back to the predetermined percentages.
Transfers resulting from portfolio rebalancing will not be counted against the
total number of transfers allowed in a Policy year before a charge is applied.
You may elect either method of portfolio rebalancing by specifying it on the
Policy application, or may elect it later for an in force Policy, or may cancel
it, by submitting a change form acceptable to us.
We reserve the right to suspend portfolio rebalancing at any time on any class
of policies on a nondiscriminatory basis, or to charge an administrative fee for
election changes in excess of a specified number in a Policy year in accordance
with our administrative rules. Portfolio rebalancing cannot be used
simultaneously with the dollar cost averaging program.
4. Expenses
There are charges and other expenses associated with the Policy that reduce the
return on your investment in the Policy. The charges and expenses are:
Tax Charges
There are charges for Federal taxes, and state and local premium taxes which are
deducted from each premium payment. The Federal tax charge is currently 1.3% of
each premium. The premium tax charge currently ranges from 0% to 3.5% of premium
payments, depending on the state. The premium tax charge does not apply in
states that do not charge a premium tax. If the tax rates change, we may change
the amount of the deduction to cover the new rate.
Sales Charge
A sales charge will be deducted from each premium payment to partially
compensate us for expenses incurred in distributing the Policy and any
additional benefits provided by riders. We currently intend to deduct a sales
charge determined according to the following schedule:
<TABLE>
<CAPTION>
<S> <C>
Policy Year 1 : 15% of premium up to Target Premium; 5% of
premium above Target Premium
Policy Years 2-10 : 5% of all premium paid
Policy Years 11+ : 2% of all premium paid
</TABLE>
The expenses covered by the sales charge include agent sales commissions, the
cost of printing prospectuses and sales literature, and any advertising costs.
Where policies are issued to Insureds with higher mortality risks or to Insureds
who have selected additional insurance benefits, a portion of the amount
deducted for the sales charge is used to pay distribution expenses and other
costs associated with these additional coverages.
To the extent that sales expenses are not recovered from the sales charge and
the surrender charge, those expenses may be recovered from other sources,
including the mortality and expense risk charge described below.
Selection and Issue Expense Charge
During the first ten Policy years, we generally assess a monthly selection and
issue expense charge to cover the costs associated with the underwriting and
issue of the Policy. The monthly charge per $1,000 of Face Amount ranges from
approximately 4 cents to one dollar, and varies by Issue Age, risk class, and
(except on unisex Policies) sex of the Insured.
Monthly Policy Charge
We deduct a monthly Policy charge on the Investment Start Date and each Monthly
Anniversary date. The charge is equal to $25 per Policy month for the first
Policy year. Thereafter, it is $6 per Policy month guaranteed not to increase
while the Policy is in force.
The charge reimburses us for expenses incurred in the administration of the
Policies. Such expenses include: confirmations, annual reports and account
statements, maintenance of Policy records, maintenance of separate account
records, administrative personnel costs, mailing costs, data processing costs,
legal fees, accounting fees, filing fees, the costs of other services necessary
for policyowner servicing and all accounting, valuation, regulatory and updating
requirements.
Monthly Cost of Insurance Charge
This charge compensates us for the insurance coverage we provide in the month
following the charge. The monthly cost of insurance charge for each Policy month
equals the total of the insurance risk charges for the Policy month for each
Face Amount portion then in effect.
The monthly cost of insurance charge is deducted on each Monthly Anniversary for
the following Policy month. The monthly cost of insurance charge is determined
in a manner that reflects the anticipated mortality of the Insured and the fact
that the death benefit is not payable until the death of the Insured. Because
the monthly cost of insurance charge depends upon a number of variables, the
charge will vary for each Policy month. We will determine the cost of insurance
charge by multiplying the applicable cost of insurance rate or rates by the net
amount at risk (defined below) for each Policy month.
The monthly cost of insurance rates are determined at the beginning of each
Policy year. The rates will be based on the Attained Age, duration, rate class,
and (except for unisex policies) sex of the Insured at issue. The monthly cost
of insurance rates generally increase as the Insured's Attained Age increases.
The rate class of an Insured also will affect the cost of insurance rate. For
the initial Face Amount, we will use the rate class on the Issue Date. If the
death benefit equals a percentage of Accumulation Account Value, an increase in
Accumulation Account Value will cause an automatic increase in the death
benefit. The rate class for such increase will be the same as that used for the
initial Face Amount.
We currently place the Insured into a preferred rate class, a standard rate
class, or into rate classes involving a higher mortality risk.
Actual monthly cost of insurance rates may change, and the actual monthly cost
of insurance charge will be determined by us based on our expectations as to
future mortality experience. However, the actual monthly cost of insurance rates
will not be greater than the guaranteed cost of insurance rates set forth in the
Policy. For Policies which are not in a substandard risk class, the guaranteed
cost of insurance rates are equal to 100% of the rates set forth in the
male/female smoker/non-smoker 1980 CSO Mortality Tables (1980 CSO Tables NA and
SA and 1980 CSO Tables NG and SG for sex distinct policies and policies issued
in qualified pension plans). All Policies are based on the Attained Age of the
Insured. Higher rates apply if the Insured is determined to be in a substandard
risk class.
In two otherwise identical policies, an Insured in the preferred rate class will
have a lower cost of insurance than an Insured in a rate class involving higher
mortality risk. Each rate class is also divided into two categories: smokers and
nonsmokers. Non- smoker Insureds will generally incur a lower cost of insurance
than similarly situated Insureds who smoke. (Insureds under Attained Age 20 are
automatically assigned to the non-smoker rate class.)
The net amount at risk for a Policy month is:
(1) the death benefit at the beginning of the Policy month divided by
1.0032737 (which reduces the net amount at risk, solely for purposes
of computing the cost of insurance, by taking into account assumed
monthly earnings at an annual rate of 4%); less
(2) the Accumulation Account Value at the beginning of the Policy month.
In calculating the monthly cost of insurance charges, the cost of insurance rate
for a Face Amount is applied to the net amount at risk for that Face Amount.
Charges for Additional Benefit Riders
The amount of the charge, if any, each Policy month for additional benefit
riders is determined in accordance with the rider and is shown on the
specifications page of your Policy.
Mortality and Expense Risk Charge
We will deduct a daily charge from the Investment Funds. The amount of the
deduction is determined as a percentage of the average net assets of each
Investment Fund. The current daily deduction percentages, and the equivalent
effective annual rates, are:
Daily
Policy Charge Annual
Years Factor Equivalent
- ------------------- ------------------- -------------------
1-10 .0015027% 0.55%
11-20 .0012301% 0.45%
21+ .0009572% 0.35%
This deduction is guaranteed not to increase while the Policy is in force. This
risk charge compensates us for assuming the mortality and expense risks under
the Policy. The mortality risk assumed by us is that the Insureds, as a group,
may not live as long as expected. The expense risk assumed by us is that actual
expenses may be greater than those assumed. We expect to profit from this
charge.
Surrender Charge
For up to 10 years after the Issue Date, we will impose a contingent deferred
sales charge, also referred to as a surrender charge, when the following occur:
* upon surrender or lapse of the Policy;
* upon a partial withdrawal; or
* upon a Pro-Rata Surrender.
The amount of the charge assessed will depend upon a number of factors,
including the type of event (a full surrender, lapse, or partial withdrawal),
the amount of any premium payments made under the Policy prior to the event, and
the number of Policy years having elapsed since the Policy was issued.
The surrender charge compensates us for expenses relating to the distribution of
the Policy, including agents' commissions, advertising, and the printing of the
Prospectus and sales literature.
The surrender charge percentage is shown in the following table.
If surrender or lapse occurs in The percentage of the annual
the last month of Policy Year: Target Premium payable is:
- ----------------------------------------------- --------------------------------
1 through 5 45%
6 40%
7 30%
8 20%
9 10%
10 and later 0%
In addition, the percentages are reduced equally for each Policy month during
the years shown. For example, during the seventh year, the percentage is reduced
equally each month from 40% at the end of the sixth year to 30% at the end of
the seventh year. This table may be modified if required by law or regulation of
the governing jurisdiction.
The amount of the surrender charge deducted upon a partial withdrawal or
Pro-Rata Surrender will equal a fraction of the charge that would be deducted if
the Policy were surrendered at that time. The fraction will be determined by
dividing the amount of the withdrawal by the Accumulation Account Value before
the withdrawal and multiplying the result by the surrender charge. Immediately
after a withdrawal, the Policy's remaining surrender charge will equal the
amount of the surrender charge immediately before the withdrawal less the amount
deducted in connection with the withdrawal.
Transaction Charges
There is no transaction charge for the first twelve partial withdrawals or
requested transfers in a Policy year. We will impose a charge of $25 for each
partial withdrawal or requested transfer in excess of twelve in a Policy year.
We may revoke or modify the privilege of transferring amounts to or from the
General Account at any time. Partial withdrawals and Pro-Rata Surrenders will
result in the imposition of the applicable surrender charge. Investment Fund
Expenses
The value of the net assets of the Investment Funds will reflect the investment
advisory fee and other expenses incurred by the underlying investment companies.
The Investment Fund expenses shown below are collected from the underlying
Investment Fund, and are not direct charges against the Separate Account assets
or reductions from the Policy's Accumulation Account Value. Expenses of the
Funds are not fixed or specified under the terms of the Policy, and actual
expenses may vary. These underlying Investment Fund expenses are taken into
consideration in computing each Investment Fund's net asset value, which is used
to calculate the unit values in the Separate Account. The management fees and
other expenses are more fully described in the prospectus of each individual
Investment Fund. The information relating to the Investment Fund expenses was
provided by the Investment Fund and was not independently verified by us. Except
as otherwise specifically noted, the management fees and other expenses are not
currently subject to fee waivers or expense reimbursements.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Other Fund
Expenses
(after Total
reimbursement Annual
Management and/or waivers Fund
Investment Funds Fees as noted) Expenses
AIM VARIABLE INSURANCE FUNDS, INC.
Advisor: A I M Advisors, Inc
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67%
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
ALLIANCE VARIABLE PRODUCTS SERIES FUND, INC
Advisor: Alliance Capital Management, L.P.
Premier Growth Fund(1) 1.00% 0.06% 1.06%
Real Estate Investment Fund(2) 0.08% 0.87% 0.95%
COVA SERIES TRUST(3)
Advisor: J.P. Morgan Investment Management, Inc.
Select Equity Fund 0.68% 0.18% 0.86%
Small Cap Stock Fund 0.85% 0.27% 1.12%
International Equity Fund 0.80% 0.28% 1.08%
Quality Bond Fund 0.55% 0.10% 0.65%
Large Cap Stock Fund 0.65% 0.10% 0.75%
Advisor: Lord, Abbett & Co.
Bond Debenture Fund 0.75% 0.10% 0.85%
Mid-Cap Value Fund 1.00% 0.30% 1.30%
Large Cap Research Fund 1.00 % 0.30% 1.30%
Developing Growth Fund 0.90 % 0.30% 1.20%
Lord Abbett Growth & Income Fund(4) 0.65 % 0.07% 0.72%
GENERAL AMERICAN CAPITAL COMPANY
Advisor: Conning Asset Management Company
Money Market Fund 0.125% 0.08% 0.205%
GOLDMAN SACHS VARIABLE INSURANCE TRUST(5)
Advisor: Goldman Sachs Asset Management
Goldman Sachs Growth and Income Fund 0.75% 0.15% 0.90%
Advisor: Goldman Sachs Asset Management International
Goldman Sachs International Equity Fund 1.00% 0.25% 1.25%
Goldman Sachs Global Income Fund 0.90% 0.15% 1.05%
KEMPER VARIABLE SERIES
Advisor: Scudder Kemper Investments, Inc.
Kemper Small Cap Value Fund(6) 0.75% 0.05% 0.80%
Kemper Government Securities Fund 0.55% 0.11% 0.66%
Kemper Small Cap Growth Fund 0.65% 0.05% 0.70%
LIBERTY VARIABLE INVESTMENT TRUST
Advisor: Newport Fund Management, Inc.
Newport Tiger, Variable Series 0.90% 0.40% 1.30%
MFS(R) VARIABLE INSURANCE TRUST(SM)(7)
Advisor: MFS Investment Management(R)
MFS Emerging Growth Fund 0.75% 0.10% 0.85%
MFS Research Fund 0.75% 0.11% 0.86%
MFS Growth With Income Fund 0.75% 0.13% 0.88%
MFS High Income Fund 0.75% 0.28% 1.03%
MFS Global Governments Fund(8) 0.75% 0.26% 1.01%
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Advisor: OppenheimerFunds, Inc.
Oppenheimer High Income Fund/VA 0.74% 0.04% 0.78%
Oppenheimer Bond Fund/VA 0.72% 0.02% 0.74%
Oppenheimer Capital Appreciation Fund/VA 0.72% 0.03% 0.75%
Oppenheimer Main Street Growth and Income Fund/VA 0.74% 0.05% 0.79%
Oppenheimer Strategic Bond Fund/VA 0.74% 0.06% 0.80%
PUTNAM VARIABLE TRUST
Advisor: Putnam Investment Management, Inc.
Putnam VT Growth and Income Fund-Class IA Shares 0.46% 0.04% 0.50%
Putnam VT International Growth Fund-Class IA Shares 0.80% 0.27% 1.07%
Putnam VT International New Opportunity Fund-
Class IA Shares(9) 1.18% 0.42% 1.60%
Putnam VT New Value Fund-Class IA Shares 0.70% 0.11% 0.81%
Putnam VT Vista Fund-Class IA Shares 0.65% 0.12% 0.77%
TEMPLETON VARIABLE PRODUCTS SERIES FUND, Class 1 Shares
Advisor: Templeton Asset Management Ltd.
Templeton Developing Markets Fund 1.25% 0.41% 1.66%
Advisor: Templeton Investment Counsel, Inc
Templeton International Fund 0.69% 0.17% 0.86%
Advisor: Franklin Mutual Advisers LLC
Mutual Shares Investments Fund(10) 0.00% 1.00% 1.00%
RUSSELL INSURANCE FUNDS(11)
Advisor: Frank Russell Investment Management Company
Multi-Style Equity Fund 0.49% 0.43% 0.92%
Aggressive Equity Fund 0.51% 0.74% 1.25%
Non-U.S. Fund 0.00% 1.30% 1.30%
Real Estate Securities Fund 0.85% 0.30% 1.15%
Core Bond Fund 0.12% 0.68% 0.80%
</TABLE>
(1) The adviser to the Fund discontinued the expense reimbursement with respect
to the Premier Growth Portfolio effective May 1, 1998.
(2) The expenses shown with respect to the Real Estate Investment Portfolio are
net of voluntary reimbursements. Expenses have been capped at .95% annually
and the adviser to the Fund intends to continue such reimbursements for the
foreseeable future. The estimated expenses for the Real Estate Investment
Portfolio, before reimbursement, are: .90% management fees and 1.41% for
other expenses.
(3) Since May 1, 1996, Cova has been reimbursing the Investment Funds of Cova
Series Trust for all operating expenses (exclusive of the management fees)
in excess of approximately .10%. Effective May 1, 1999, Cova discontinued
this reimbursement arrangement for the Select Equity, Small Cap Stock and
International Equity Portfolios. Therefore, the amounts shown above under
"Other Expenses" have been restated to reflect the actual expenses for
these Portfolios for the year ended December 31, 1998. Also beginning May
1, 1999, Cova is reimbursing the Mid-Cap Value, Large Cap Research and
Developing Growth Portfolios for all operating expenses (exclusive of the
management fees) in excess of approximately .30%, instead of .10%. This
change is reflected above under "Other Expenses" for these three
Portfolios. Absent the expense reimbursement, the percentages shown for
total annual portfolio expenses for the year ended December 31, 1998 would
have been .86% for the Quality Bond Portfolio, .94% for the Large Cap Stock
Portfolio, .93% for the Bond Debenture Portfolio, 1.68% for the Mid-Cap
Value Portfolio, 1.95% for the Large Cap Research Portfolio and 1.70% for
the Developing Growth Portfolio.
(4) Estimated. The Portfolio commenced investment operations on January 8,
1999.
(5) The investment advisers to the Goldman Sachs Growth and Income,
International Equity and Global Income Funds have voluntarily agreed to
reduce or limit certain "Other Expenses" of such Funds (excluding
management fees, taxes, interest and brokerage fees and litigation,
indemnification and other extraordinary expenses) to the extent such
expenses exceed 0.15%, 0.25% and 0.15% per year of such Funds' average
daily net assets, respectively. The expenses shown include this
reimbursement. If not included, the "Other Expenses" and "Total Annual Fund
Expenses" for the Goldman Sachs Growth and Income, International Equity and
Global Income Funds would be 1.94% and 2.69%, 1.97% and 2.97% and 2.40% and
3.30%, respectively. The reductions or limitations may be discontinued or
modified by the investment advisers in their discretion at any time.
(6) Pursuant to its agreement with Kemper Variable Series, the investment
manager and the accounting agent have agreed, for the one year period
commencing on May 1, 1999, to limit their respective fees and to reimburse
other operating expenses, in a manner communicated to the Board of the
Fund, to the extent necessary to limit total operating expenses of the
Kemper Small Cap Value Portfolio to .84%. The amounts set forth in the
table above reflect actual expenses for the past fiscal year, which were
lower than these expense limits.
(7) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. Expenses do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series.
(8) MFS has agreed to bear expenses for the MFS Global Governments Series,
subject to reimbursement by the series, such that the series' "Other
Expenses" do not exceed 0.25% of the average daily net assets of the series
during the current fiscal year. Absent the expense reimbursement, the Total
Annual Fund Expenses for the year ended December 31, 1998, would have been
1.11% for the MFS Global Governments Series. The payments made by MFS on
behalf of the series under this arrangement are subject to reimbursement by
the series to MFS, which will be accomplished by the payment of an expense
reimbursement fee by the series to MFS computed and paid monthly at a
percentage of the series' average daily net assets for its then current
fiscal year, with a limitation that immediately after such payment, the
series' "Other Expenses" will not exceed the percentage set forth above for
the series. The obligation of MFS to bear a series' "Other Expenses"
pursuant to this arrangement, and the series' obligation to pay the
reimbursement fee to MFS, terminates on the earlier of the date on which
payments made by the series equal the prior payment of such reimbursable
expenses by MFS or December 31, 2004. MFS may, in its discretion, terminate
this arrangement at an earlier date provided that the arrangement will
continue for the series until at least May 1, 2000, unless terminated with
the consent of the board of trustees which oversees the series.
(9) The Management Fees and Total Annual Portfolio Expenses reflect an expense
limitation. In the absence of the expense limitation, the Management Fees
and Total Annual Fund Expenses would have been 1.20% and 1.62%,
respectively.
(10) Figures reflect expenses from the Fund's inception on May 1, 1998 and are
annualized. The manager agreed in advance to limit management fees and make
certain payments to reduce Fund expenses as necessary so that Total Annual
Fund Expenses did not exceed 1.00% of the Fund's Class 1 net assets in
1998. The manager is contractually obligated to continue this arrangement
through 1999. Management Fees, Other Expenses and Total Annual Fund
Expenses in 1998 before any waivers were as follows: 0.60%, 2.27% and 2.87%
for the Mutual Shares Investments Fund.
(11) The manager of Russell Insurance Funds, Frank Russell Investment Management
Company, contractually agreed, at least until April 30, 2000, to waive a
portion of the management fee, up to the full amount of the fee, equal to
the amount by which the Fund's total operating expenses exceed the amounts
set forth above under "Total Annual Fund Expenses." Additionally, the
manager has contractually agreed, at least until April 30, 2000, to
reimburse the Fund for all remaining expenses after fee waivers which
exceed the amount set forth above for each Fund under "Total Annual Fund
Expenses." Absent such waiver and reimbursement, the management fees and
total operating expenses would be .78% and 1.21% for the Multi-Style Equity
Fund; .95% and 1.67% for the Aggressive Equity Fund; .95% and 2.37% for the
Non-U.S. Fund; and .60% and 1.28% for the Core Bond Fund.
5. DEATH BENEFIT
The amount of the death benefit depends on the total Face Amount, the
Accumulation Account Value of your Policy on the date of death and the death
benefit option (Option A, Option B, or Option C) in effect at that time. The
actual amount we will pay the Beneficiary will be reduced by any Indebtedness.
The initial Face Amount and the death benefit option in effect on the Issue Date
are shown on the specifications page of your Policy.
Option A. The amount of the death benefit under Option A is the greater of:
* the Face Amount; or
* the Accumulation Account Value of your Policy on the date of death
multiplied by the applicable multiple percentage shown in the
"Applicable Percentage of Accumulation Account Value Table For
Insureds Less than Age 100" shown below.
Option B. The amount of the death benefit under Option B is the greater of:
* the Face Amount plus the Accumulation Account Value of your Policy on
the date of death; or
* the Accumulation Account Value of your Policy on the date of death
multiplied by the applicable multiple percentage shown in the
"Applicable Percentage of Accumulation Account Value Table For
Insureds Less than Age 100" shown below.
Applicable Percentage of Accumulation Account Value Table
For Insureds Less Than Age 100
Insured Person's Age Policy Accumulation Account Value
Multiple Percentage
40 or under 250%
45 215%
50 185%
55 150%
60 130%
65 120%
70 115%
78 to 90 105%
95 to 99 101%
For ages that are not shown on this table the applicable percentage multiples
will decrease by a ratable portion for each full year.
Option C. The amount of the death benefit under Option C is the greater of:
* the Face Amount; or
* the Accumulation Account Value of your Policy on the date of the
Insured's death multiplied by the applicable factor from the Table of
Attained Age Factors shown in your Policy.
If your Policy is in force after the Insured's Attained Age is 100, then the
Death Benefit will be 101% of the Policy's Accumulation Account Value.
Change in Death Benefit
If the Policy was issued with either death benefit Option A or death benefit
Option B, the death benefit option may be changed. A Policy issued under death
benefit Option C may not be changed for the entire lifetime of the Policy.
Similarly, a Policy issued under either death benefit Option A or B may not
change to death benefit Option C for the lifetime of the Policy. A request for
change must be made to us in writing. The Effective Date of such a change will
be the Monthly Anniversary on or following the date we receive the change
request.
A death benefit Option A Policy may be changed to have death benefit Option B.
The Face Amount will be decreased to equal the death benefit less the
Accumulation Account Value on the Effective Date of the change. Satisfactory
evidence of insurability must be submitted to us in connection with a request
for a change from death benefit Option A to death benefit Option B. A change may
not be made if it would result in a Face Amount of less than the minimum Face
Amount.
A death benefit Option B Policy may be changed to have death benefit Option A.
The Face Amount will be increased to equal the death benefit on the Effective
Date of the change.
A change in death benefit option may have Federal income tax consequences.
Change in Face Amount
Subject to certain limitations set forth below, you may decrease or increase the
Face Amount of a Policy once each Policy year after the first Policy year. A
written request is required for a change in the Face Amount. A change in Face
Amount may affect the cost of insurance rate and the net amount at risk, both of
which affect your cost of insurance charge. A reduction in the Face Amount of a
Policy may have Federal income tax consequences.
Any decrease in the Face Amount will become effective on the Monthly Anniversary
on or following receipt of the written request by us. The amount of the
requested change must be at least $5,000 ($2,000 for Policies issued in
qualified pension plans) and the Face Amount remaining in force after any
requested decrease may not be less than the minimum Face Amount. If you decrease
the Face Amount and the Policy does not comply with the maximum premium
limitations required by Federal tax law, the decrease may be limited or the
Accumulation Account Value may be returned to you (at your election), to the
extent necessary to meet these requirements. If you want to increase the Face
Amount, you must submit proof that the Insured is insurable by our standards on
the date the requested increase is submitted and the Insured must have an
Attained Age not greater than age 80 on the Policy Anniversary that the increase
will become effective.
6. TAXES
NOTE: We have prepared the following information on federal income taxes as a
general discussion of the subject. It is not intended as tax advice to anyone.
You should consult your own tax adviser about your own circumstances. We have
included an additional discussion regarding taxes in Part II.
Life Insurance in General
Life insurance, such as this Policy, is a means of providing for death
protection and setting aside money for future needs. Congress recognized the
importance of such planning and provided special rules in the Internal Revenue
Code for life insurance.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your life insurance Policy until you take the money out.
Beneficiaries generally are not taxed when they receive the death proceeds upon
the death of the Insured.
Taking Money out of Your Policy
You, as the owner, will not be taxed on increases in the value of your Policy
until a distribution occurs either as a surrender or as a loan. If your Policy
is a MEC, any loans or surrenders from the Policy will be treated as first
coming from earnings and then from your investment in the Policy. Consequently,
these earnings are included in taxable income.
The Internal Revenue Code (Code) also provides that any amount received from a
MEC which is included in income may be subject to a 10% penalty. The penalty
will not apply if the income received is: (1) paid on or after the taxpayer
reaches age 59 1/2 ; (2) paid if the taxpayer becomes totally disabled (as that
term is defined in the Code); or (3) in a series of substantially equal payments
made annually (or more frequently) for the life (or life expectancy) of the
taxpayer.
If your Policy is not a MEC, any surrender proceeds will be treated as first a
recovery of the investment in the Policy and to that extent will not be included
in taxable income. Furthermore any loan will be treated as Indebtedness under
the Policy and not as a taxable distribution. See "Tax Status" in Part II for
more details.
Diversification
The Internal Revenue Code provides that the underlying investments for a
variable life insurance Policy must satisfy certain diversification requirements
in order to be treated as a life insurance contract. We believe that the
Investment Funds are being managed so as to comply with such requirements.
Under current federal tax law, it is unclear as to the circumstances under which
you, because of the degree of control you exercise over the underlying
investments, and not us would be considered the owner of the shares of the
Investment Funds. 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 Funds, to make
transfers among the Investment Funds or the number and type of Investment Funds
owners may select from. If guidance from the Internal Revenue Service is
provided which is considered a new position, the guidance would generally be
applied prospectively. However, if such guidance is considered not to be a new
position, it may be applied retroactively. This would mean that you, as the
owner of the Policy, could be treated as the owner of the Investment Funds. Due
to the uncertainty in this area, we reserve the right to modify the Policy in an
attempt to maintain favorable tax treatment.
7. ACCESS TO YOUR MONEY
Policy Loans
We will loan money to you at the loan interest rate we establish. The request by
you for a loan must be in writing.
You may borrow an amount up to the loan value of the Policy. The loan value is:
* the Accumulation Account Value of the Policy on the date the loan
request is received; less
* interest to the next loan interest due date; less
* anticipated monthly deductions to the next loan interest due date;
less
* any existing loan; less
* any surrender charge; plus
* interest expected to be earned on the loan balance to the next loan
interest due date.
Policy loan interest is payable on each Policy anniversary. The minimum amount
that you can borrow is $500. The loan may be completely or partially repaid at
any time while the Insured is living. When a Policy loan is made, we will deduct
Accumulation Account Value from your Policy equal to the amount of the loan,
plus interest due and place it in the Loan Subaccount as security for the loan.
This Accumulation Account Value amount is expected to earn interest at a rate
("the earnings rate") which is lower than the rate charged on the Policy loan
("the borrowing rate"). The Accumulation Account Value that we use as security
will accrue interest daily at an annual earnings rate of 4%.
Unless the Owner requests a different allocation, the Accumulation Account Value
amount used as security for the loan will be transferred from the Investment
Funds and the General Account on a pro-rata basis to the Loan Account. This will
reduce the Policy's Accumulation Account Value in the General Account and the
Investment Fund(s). These transactions will not be considered transfers for
purposes of the limitations on transfers between Investment Funds or to or from
the General Account.
Interest credited to the Accumulation Account Value held in the Loan Subaccount
as security for the loan will be allocated on Policy anniversaries to the
General Account and the Investment Funds. The interest credited will also be
transferred: (1) when a new loan is made; (2) when a loan is partially or fully
repaid; and (3) when an amount is needed to meet a monthly deduction.
Policy loans may have Federal income tax consequences (see "Federal Tax
Status").
Loan Interest Charged
The borrowing rate we charge for Policy loan interest will be based on the
following schedule:
For Loans Annual
Outstanding During Interest Rate
Policy Years 1-10 4.50%
Policy Years 11-20 4.25%
Policy Years 21+ 4.15%
We will inform you of the current borrowing rate when a Policy loan is
requested.
Policy loan interest is due and payable annually on each Policy anniversary. If
you do not pay the interest when it is due, the unpaid loan interest will be
added to the outstanding Indebtedness as of the due date and you will be charged
interest at the same rate as the rest of the Indebtedness.
Security
The Policy will be the only security for the loan.
Repaying Policy Debt
You may repay the loan at any time prior to the death of the Insured and as long
as the Policy is in force. Any Indebtedness outstanding will be deducted before
any benefit proceeds are paid or applied under a payment option.
Repayments will be allocated to the General Account and the Investment Funds
based on how the Accumulation Account Value used for security was allocated.
Unpaid loans and loan interest will be deducted from any settlement of your
Policy.
Any payments received from you will be applied as premiums, unless you clearly
request in writing that it be used as repayment of Indebtedness.
Partial Withdrawals
After the first Policy year, you may make partial withdrawals from the Policy's
Cash Surrender Value. Each Policy year you are allowed 12 free partial
withdrawals. For each partial withdrawal after 12, we impose a $25 fee. A
partial withdrawal may be subject to a surrender charge and have Federal income
tax consequences.
The minimum amount of a partial withdrawal request, net of any applicable fees
and surrender charges, is the lesser of:
(1) $500 from an Investment Fund or the General Account; or
(2) the Policy's Accumulation Account Value in an Investment Fund.
Partial withdrawals made during a Policy year are subject to the following
limitations. The maximum amount that may be withdrawn from an Investment Fund is
the Policy's Accumulation Account Value net of any applicable surrender charges
and fees in that Investment Fund. The total partial withdrawals and transfers
from the General Account over the Policy year may not exceed a maximum amount
equal to the greater of the following:
(1) 25% of the Cash Surrender Value in the General Account at the
beginning of the Policy year, multiplied by the withdrawal percentage
limit shown in the Policy; or
(2) the previous Policy year's maximum amount.
You may allocate the amount withdrawn plus any applicable surrender charges and
fees, subject to the above conditions, among the Investment Funds and the
General Account. If no allocation is specified, then the partial withdrawal will
be allocated among the Investment Funds and the General Account in the same
proportion that the Policy's Accumulation Account Value in each Investment Fund
and the General Account bears to the total Accumulation Account Value of the
Policy, less the Accumulation Account Value in the Loan Account, on the date the
request was received. If the limitations on withdrawals from the General Account
will not permit this pro-rata allocation, you will be requested to provide an
alternate allocation.
No amount may be withdrawn that would result in there being insufficient
Accumulation Account Value to meet any surrender charge and applicable fees that
would be payable immediately following the withdrawal upon the surrender of the
remaining Accumulation Account Value.
The death benefit will be affected by a partial withdrawal, unless death benefit
Option A or Option C is in effect and the withdrawal is made under the terms of
an anniversary partial withdrawal rider. If death benefit Option A or death
benefit Option C is in effect and the death benefit equals the Face Amount, then
a partial withdrawal will decrease the Face Amount by an amount equal to the
partial withdrawal plus the applicable surrender charge resulting from that
partial withdrawal. If the death benefit is based on a percentage of the
Accumulation Account Value, then a partial withdrawal will decrease the Face
Amount by an amount by which the partial withdrawal plus the applicable
surrender charge and fees exceeds the difference between the death benefit and
the Face Amount. If death benefit Option B is in effect, the Face Amount will
not change.
The Face Amount remaining in force after a partial withdrawal may not be less
than the minimum Face Amount. Any request for a partial withdrawal that would
reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance charge is
calculated and the amount of pure insurance protection afforded under a Policy.
We may change the minimum amount required for a partial withdrawal or the number
of times partial withdrawals may be made.
Pro-Rata Surrender
After the first Policy year, you can make a Pro-Rata Surrender of the Policy.
The Pro- Rata Surrender will reduce the Face Amount and the Accumulation Account
Value by a percentage chosen by you. This percentage must be any whole number. A
Pro-Rata Surrender may have Federal income tax consequences. The percentage will
be applied to the Face Amount and the Accumulation Account Value on the Monthly
Anniversary on or following our receipt of the request.
You may allocate the amount of decrease in Accumulation Account Value plus any
applicable surrender charge and fees among the Investment Funds and the General
Account. If no allocation is specified, then the decrease in Accumulation
Account Value and any applicable surrender charge and fees will be allocated
among the Investment Funds and the General Account in the same proportion that
the Policy's Accumulation Account Value in each Investment Fund and the General
Account bears to the total Accumulation Account Value of the Policy, less the
Accumulation Account Value in the Loan Account, on the date the request for
Pro-Rata Surrender is received.
A Pro-Rata Surrender cannot be processed if it will reduce the Face Amount below
the minimum Face Amount of the Policy. No Pro-Rata Surrender will be processed
for more Cash Surrender Value than is available on the date of the Pro-Rata
Surrender. A cash payment will be made to you for the amount of Accumulation
Account Value reduction less any applicable surrender charges and fees.
Pro-Rata Surrenders may affect the way in which the cost of insurance charge is
calculated and the amount of the pure insurance protection afforded under the
Policy.
Full Surrenders
To effect a full surrender, either the Policy must be returned to us along with
the request, or the request must be accompanied by a completed affidavit of
loss, which is available from us. Upon surrender, we will pay the Cash Surrender
Value to you in a single sum. We will determine the Cash Surrender Value as of
the date that we receive your written request at our Service Office. If the
request is received on a Monthly Anniversary, the monthly deduction otherwise
deductible will be included in the amount paid. Coverage under a Policy will
terminate as of the date of surrender. The Insured must be living at the time of
a surrender. A surrender may have Federal income tax consequences.
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.
Distribution
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 our affiliate.
[Commissions will be described in the Pre-Effective Amendment.]
The general agent commission schedules and rules differ for different types of
agency contracts.
Year 2000
We have developed and initiated plans to assure that our computer systems will
function properly in the year 2000 and later years. These efforts have included
receiving assurances from outside service providers that their computer systems
will also function properly in this context. Included within these plans are the
computer systems of the advisers and sub-advisers of the various Investment
Funds underlying the Separate Account.
Although an assessment of the total cost of implementing these plans has not
been completed, the total amounts to be expended are not expected to have a
material effect on our financial position or results of operations. We believe
that we have taken all reasonable steps to address these potential problems.
There can be no guarantee, however, that the steps taken will be adequate to
avoid any adverse impact.
The Separate Account
We 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 our name on behalf of the
Separate Account and legally belong to us. However, those assets that underlie
the Policies, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses (realized or
unrealized) resulting from those assets are credited to or against the Policies
and not against any other policies we may issue.
Suspension of Payments or Transfers
We may be required to suspend or postpone any payments or transfers for any
period when:
1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings);
2) trading on the New York Stock Exchange is restricted;
3) an emergency exists as a result of which disposal of shares of the
Investment Funds is not reasonably practicable or we cannot reasonably
value the shares of the Investment Funds;
4) during any other period when the Securities and Exchange Commission,
by order, so permits for the protection of owners.
We may defer the portion of any transfer, amount payable or surrender, or Policy
Loan from the General Account for not more than 6 months.
Ownership
Owner. The Insured is the Owner of the Policy unless another person or entity is
shown as the Owner in the application. The Owner is entitled to all rights
provided by the Policy. If there is more than one Owner at a given time, all
owners must exercise the rights of ownership by joint action. If the Owner dies,
and the Owner is not the Insured, the Owner's interest in the Policy becomes the
property of his or her estate unless otherwise provided. Unless otherwise
provided, the Policy is jointly owned by all Owners named in the Policy or by
the survivors of those joint Owners. Unless otherwise stated in the Policy, the
final Owner is the estate of the last joint Owner to die.
Beneficiary. The Beneficiary is the person(s) or entity you name to receive any
death proceeds. The Beneficiary is named at the time the Policy is issued unless
changed at a later date. You can name a contingent Beneficiary prior to the
death of the Insured. 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.
Primary and contingent Beneficiaries are as named in the application, unless you
make a change. To change a Beneficiary, you must submit a written request to us.
We may require the Policy to record the change. The request will take effect
when signed, subject to any action we may take before receiving it.
One or more irrevocable Beneficiaries may be named.
If a Beneficiary is a minor, we will make payment to the guardian of his or her
estate. We may require proof of age of any Beneficiary.
Proceeds payable to a Beneficiary will be free from the claims of creditors, to
the extent allowed by law.
Assignment. You can assign the Policy. A copy of any assignment must be filed
with our Service Office. We are not responsible for the validity of any
assignment. If you assign the Policy, your rights and those of any
revocably-named person will be subject to the assignment. An assignment will not
affect any payments we may make or actions we may take before such assignment
has been recorded at our Service Office. This may be a taxable event. You should
consult a tax adviser if you wish to assign the Policy.
Adjustment of Charges
The Policy is available for purchase by individuals, corporations, and other
institutions. For certain individuals and certain corporate or other groups or
sponsored arrangements purchasing one or more policies, we may waive or adjust
the amount of the sales charge, contingent deferred sales charge, monthly
administrative charge, or other charges where the expenses associated with the
sale of the Policy or policies or the underwriting or other administrative costs
associated with the Policy or policies warrant an adjustment.
Sales, underwriting, or other administrative expenses may be reduced for reasons
such as expected economies resulting from a corporate purchase or a group or
sponsored arrangement; from the amount of the initial premium payment or
payments; or from the amount of projected premium payments. We will determine in
our discretion if, and in what amount, an adjustment is appropriate. We may
modify the criteria for qualification for adjustment of charges as experience is
gained, subject to the limitation that such adjustments will not be unfairly
discriminatory against the interests of any owner.
PART II
Executive Officers and Directors
<TABLE>
<CAPTION>
The directors and executive officers of Cova and their principal occupations for the past five years are as
follows:
Principal Occupation During
Name the Past 5 Years
- ---- ----------------
<S> <C>
John W. Barber*** Director of Cova - June, 1995 to present; Director of First Cova Life Insurance
Company (FCLIC) - June, 1995 to present; Director of Cova Financial Services Life
Insurance Company (CFSLIC) - 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.
William P. Boscow* Vice President of Cova and CFSLIC - 1996 to present; Senior Vice President of
Cova Life Management (CLMC), February, 1999 to present; First Vice President
of CLMC, 1996 - January 1999.
Constance A. Doern**** Vice President of Cova - 1997 to present, prior thereto Assistant Vice President
from 1990 to 1995; Vice President of CFSLIC - 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.
Patricia E. Gubbe* Vice President of Cova - 1989 to present; Vice President of CFSLIC - 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; President and
Chief Compliance Officer of CLSC from February, 1999 to present; Vice President
and Chief Compliance Officer of CLSC -1989 to January, 1999.
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 CFSLIC - 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.
J. Robert Hopson* Vice President, Chief Actuary and Director of Cova - 1991 to present; Vice
President, Chief Actuary and Director of CFSLIC - 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
CFSLIC - 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 Advisers Inc., White Oak Royalty Company, Walnut Street Funds, Inc., and
RGA Reinsurance Company -October, 1994 to present.
Douglas E. Jacobs* Vice President of Cova - 1985 to present; Vice President of CFSLIC - 1985 to
present; Vice President of CLMC - 1985 to present.
Lisa O. Kirchner**** Vice President of Cova - 1997 to present, prior thereto Assistant Vice President
from 1990 to 1995; Vice President of CFSLIC - 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.
Richard A. Liddy** Chairman of the Board of Directors of Cova, CFSLIC, FCLIC, CLMC, Advisory and Cova
Investment Allocation Corporation (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 and Director of Cova, CFSLIC and FCLIC from 1995 to present;
Vice President, Controller and Director of Cova from 1995 to 1998, prior
thereto Vice President, Controller, Treasurer and Director. Vice President,
Controller and Director of CFSLIC from 1995 to 1998, prior thereto Vice
President, Controller, Treasurer and Director; Director of FCLIC from 1993 to
present; Vice President, Controller and Director of FCLIC from 1992 to 1998;
Secretary of FCLIC from 1992 to 1995; 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 Trustee of Cova Series Trust (Trust) - 1996 to present.
Matthew P. McCauley** Assistant Secretary and Director of Cova - June, 1995 to present; Assistant
Secretary and Director of CFSLIC - 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 and Director of Cova - May, 1997 to present; Executive
Vice President and Director of CFSLIC - May, 1997 to present; Executive Vice
President and Director of FCLIC - May, 1997 to present; Executive Vice
President of CLMC - May, 1997 to present; Executive Vice President and
Director of Advisory - December, 1996 to present; Executive Vice President,
Chief Financial Officer and Director of FCLIC - May, 1997 to present,
Executive Vice President and Director of Allocation - December, 1996 to present.
Leonard M. Rubenstein** Director of Cova, CFSLIC, 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 CFSLIC - 1985 to
present; and CLMC - 1989 to present.
John W. Schaus* Vice President of Cova and CFSLIC - 1988 to present; First Vice President of
CLMC from January, 1999 to present; prior thereto, Vice President of CLMC -
1989 to 1998.
Bernard J. Spaulding* Senior Vice President and General Counsel of Cova, CFSLIC, FCLIC and CLMC since
March, 1999.
Lorry J. Stensrud* President and Director of Cova from June, 1995 to present, prior thereto Executive
Vice President; President and Director of CFSLIC 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 Trustee of Trust - 1996 to present.
Joann T. Tanaka* Senior Vice President of Cova and CFSLIC - January, 1999 to present; prior thereto,
Vice President of Cova and CFSLIC from July, 1998 to December, 1998; Senior Vice
President, Conning Asset Management, General American - June, 1987 to June, 1998.
Peter L. Witkewiz* Vice President and Controller of Cova, CFSLIC and FCLIC - July 1998 to present;
Vice President of Cova, CFSLIC and FCLIC - 1993 to June, 1998.
<FN>
* 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
</FN>
</TABLE>
Voting
In accordance with our view of present applicable law, we will vote the shares
of the Investment Funds at special meetings of shareholders in accordance with
instructions received from Owners having a voting interest. We will vote shares
for which we have not received instructions in the same proportion as we vote
shares for which we have received instructions. We will vote shares we own in
the same proportion as we vote shares for which we have 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
we determine that we are permitted to vote the shares of the funds in our own
right, we 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 Fund 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 us 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 Funds in which he or she has an interest, proxy material and a
form with which to give such voting instructions.
Disregard of Voting Instructions
We 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 Fund to make, or refrain
from making, investments which would result in changes in the sub-classification
or investment objectives of the investment fund. We may also disapprove changes
in the investment Policy initiated by owners or trustees/directors of the funds,
if such disapproval is reasonable and is based on a good faith determination by
us that the change would violate state or federal law or the change would not be
consistent with the investment objectives of the Investment Funds 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 us or of an affiliated company. In the event
we disregard voting instructions, a summary of this action and the reasons for
such action will be included in the next annual report to owners.
Legal Opinions
Blazzard, Grodd & Hasenauer, P.C., Westport, Connecticut has provided advice on
certain matters relating to the federal securities and income tax laws in
connection with the policies.
Our Right to Contest
We 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. 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 Indebtedness and less any surrenders. We also have the right
to adjust any benefits under the Policy if the answers in the application
regarding the use of tobacco are not correct.
Federal Tax Status
NOTE: The following description is based upon our understanding of current
federal income tax law applicable to life insurance in general. We cannot
predict the probability that any changes in such laws will be made. Purchasers
are cautioned to seek competent tax advice regarding the possibility of such
changes. Section 7702 of the Internal Revenue Code of 1986, as amended ("Code"),
defines the term "life insurance contract" for purposes of the Code. We believe
that the Policies to be issued will qualify as "life insurance contracts" under
section 7702. We do not guarantee the tax status of the Policies. Purchasers
bear the complete risk that the policies may not be treated as "life insurance"
under federal income tax laws. Purchasers should consult their own tax advisers.
It should be further understood that the following discussion is not exhaustive
and that special rules not described in this prospectus may be applicable in
certain situations.
Introduction. The discussion contained herein is general in nature and is not
intended as tax advice. Each person concerned should consult a competent tax
adviser. No attempt is made to consider any applicable state or other tax laws.
Moreover, the discussion herein is based upon our understanding of current
federal income tax laws as they are currently interpreted. No representation is
made regarding the likelihood of continuation of those current federal income
tax laws or of the current interpretations by the Internal Revenue Service.
We are taxed as a life insurance company under the Code. For federal income tax
purposes, the Separate Account is not a separate entity from us and its
operations form a part of us.
Diversification. Section 817(h) of the Code imposes certain diversification
standards on the underlying assets of variable life insurance policies. The Code
provides that a variable life insurance Policy will not be treated as life
insurance for any period (and any subsequent period) for which the investments
are not, in accordance with regulations prescribed by the United States Treasury
Department ("Treasury Department"), adequately diversified. Disqualification of
the Policy as a life insurance contract would result in imposition of federal
income tax to the owner with respect to earnings allocable to the Policy prior
to the receipt of payments under the Policy. The Code contains a safe harbor
provision which provides that life insurance policies, such as these policies,
will meet the diversification requirements if, as of the close of each quarter,
the underlying assets meet the diversification standards for a regulated
investment company and no more than fifty-five (55%) percent of the total assets
consist of cash, cash items, U.S. Government securities and securities of other
regulated investment companies. There is an exception for securities issued by
the U.S. Treasury in connection with variable life insurance policies.
On March 2, 1989, the Treasury Department issued regulations (Treas. Reg.
Section 1.817-5), which established diversification requirements for the
investment funds 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 fund will be deemed
adequately diversified if: (i) no more than 55% of the value of the total assets
of the fund is represented by any one investment; (ii) no more than 70% of the
value of the total assets of the fund is represented by any two investments;
(iii) no more than 80% of the value of the total assets of the fund is
represented by any three investments; and (iv) no more than 90% of the value of
the total assets of the fund is represented by any four investments. For
purposes of these regulations, all securities of the same issuer are treated as
a single investment. The Code provides that, for purposes of determining whether
or not the diversification standards imposed on the underlying assets of
variable contracts by Section 817(h) of the Code have been met, "each United
States government agency or instrumentality shall be treated as a separate
issuer."
We intend that each Investment Fund 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 Policyowner was not
the owner of the assets of the separate account. It is unknown whether these
differences, such as the owner's ability to transfer among investment choices or
the number and type of investment choices available, would cause the owner to be
considered the owner of the assets of the Separate Account.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in you being retroactively
determined to be the owner of the assets of the Separate Account.
Due to the uncertainty in this area, we reserve the right to modify the Policy
in an attempt to maintain favorable tax treatment.
Tax Treatment of the Policy. The Policy has been designed to comply with the
definition of life insurance contained in Section 7702 of the Code. Although
some interim guidance has been provided and proposed regulations have been
issued, final regulations have not been adopted. Section 7702 of the Code
requires the use of reasonable mortality and other expense charges. In
establishing these charges, we have relied on the interim guidance provided in
IRS Notice 88-128 and proposed regulations issued on July 5, 1991. Currently,
there is even less guidance as to a Policy issued on a substandard risk basis
and thus it is even less clear whether a Policy issued on such basis would meet
the requirements of Section 7702 of the Code.
While we have attempted to comply with Section 7702, the law in this area is
very complex and unclear. There is a risk, therefore, that the Internal Revenue
Service will not concur with our interpretations of Section 7702 that were made
in determining such compliance. In the event the Policy is determined not to so
comply, it would not qualify for the favorable tax treatment usually accorded
life insurance policies. You should consult your own tax advisers with respect
to the tax consequences of purchasing the Policy.
Policy Proceeds. The tax treatment accorded to loan proceeds and/or surrender
payments from the policies will depend on whether the Policy is considered to be
a MEC. (See "Tax Treatment of Loans and Surrenders.") Otherwise, we believe that
the Policy should receive the same federal income tax treatment as any other
type of life insurance. As such, the death benefit thereunder is excludable from
the gross income of the Beneficiary under Section 101(a) of the Code. Also, you
are not deemed to be in constructive receipt of the Cash Surrender Value,
including increments thereon, under a Policy until there is a distribution of
such amounts.
Federal, state and local estate, inheritance and other tax consequences of
ownership, or receipt of Policy proceeds, depend on the circumstances of each
owner or Beneficiary.
Tax Treatment of Loans And Surrenders. Section 7702A of the Code sets forth the
rules for determining when a life insurance Policy will be deemed to be a MEC. A
MEC is a contract which is entered into or materially changed on or after June
21, 1988 and fails to meet the 7-pay test. A Policy fails to meet the 7-pay test
when the cumulative amount paid under the Policy at any time during the first 7
Policy years exceeds the sum of the net level premiums which would have been
paid on or before such time if the Policy provided for paid-up future benefits
after the payment of seven (7) level annual premiums. A material change would
include any increase in the future benefits or addition of qualified additional
benefits provided under a Policy unless the increase is attributable to: (1) the
payment of premiums necessary to fund the lowest death benefit and qualified
additional benefits payable in the first seven Policy years; or (2) the
crediting of interest or other earnings with respect to such premiums.
Furthermore, any Policy received in exchange for a Policy classified as a MEC
will be treated as a MEC regardless of whether it meets the 7-pay test. However,
an exchange under Section 1035 of the Code of a life insurance Policy entered
into before June 21, 1988 for the Policy will not cause the Policy to be treated
as a MEC if no additional premiums are paid.
Due to the flexible premium nature of the Policy, the determination of whether
it qualifies for treatment as a MEC depends on the individual circumstances of
each Policy.
If the Policy is classified as a MEC, then surrenders and/or loan proceeds are
taxable to the extent of income in the Policy. Such distributions are deemed to
be on a last-in, first-out basis, which means the taxable income is distributed
first. Loan proceeds and/or surrender payments may also be subject to an
additional 10% federal income tax penalty applied to the income portion of such
distribution. The penalty shall not apply, however, to any distributions: (1)
made on or after the date on which the taxpayer reaches age 59 1/2; (2) which is
attributable to the taxpayer becoming disabled (within the meaning of Section
72(m)(7) of the Code); or (3) which is part of a series of substantially equal
periodic payments made not less frequently than annually for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies) of
such taxpayer and his Beneficiary.
If a Policy is not classified as a MEC, then any surrenders shall be treated
first as a recovery of the investment in the Policy which would not be received
as taxable income. However, if a distribution is the result of a reduction in
benefits under the Policy within the first fifteen years after the Policy is
issued in order to comply with Section 7702, such distribution will, under rules
set forth in Section 7702, be taxed as ordinary income to the extent of income
in the Policy.
Any loans from a Policy which is not classified as a MEC, will be treated as
Indebtedness of the owner and not a distribution. Upon complete surrender, if
the amount received plus loan Indebtedness exceeds the total premiums paid that
are not treated as previously surrendered by the Policy owner, the excess
generally will be treated as ordinary income.
Personal interest payable on a loan under a Policy owned by an individual is
generally not deductible. Furthermore, no deduction will be allowed for interest
on loans under policies covering the life of any employee or officer of the
taxpayer or any person financially interested in the business carried on by the
taxpayer to the extent the Indebtedness for such employee, officer or
financially interested person exceeds $50,000. The deductibility of interest
payable on Policy loans may be subject to further rules and limitations under
Sections 163 and 264 of the Code.
Policyowners should seek competent tax advice on the tax consequences of taking
loans, distributions, exchanging or surrendering any Policy.
Multiple Policies. The Code further provides that multiple MECs that are issued
within a calendar year period to the same owner by one company or its affiliates
are treated as one MEC for purposes of determining the taxable portion of any
loans or distributions. Such treatment may result in adverse tax consequences
including more rapid taxation of the loans or distributed amounts from such
combination of policies. You should consult a tax adviser prior to purchasing
more than one MEC in any calendar year period.
Tax Treatment of Assignments. An assignment of a Policy or the change of
ownership of a Policy may be a taxable event. You should therefore consult a
competent tax adviser should you wish to assign or change the owner of your
Policy.
Qualified Plans. The Policies may be used in conjunction with certain Qualified
Plans. Because the rules governing such use are complex, you should not do so
until you have consulted a competent Qualified Plans consultant.
Income Tax Withholding. All distributions or the portion thereof which is
includible in gross income of the Policy owner are subject to federal income tax
withholding. However, in most cases you may elect not to have taxes withheld.
You may be required to pay penalties under the estimated tax rules, if
withholding and estimated tax payments are insufficient.
Reports to Owners
Each year a report will be sent to you which shows the current Policy values,
premiums paid and deductions made since the last report, and any outstanding
loans.
Legal Proceedings
There are no legal proceedings to which the Separate Account or the Distributor
is a party or to which the assets of the Separate Account are subject. We are
not involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
Experts
(to be filed by amendment)
Financial Statements
(to be filed by amendment)
Appendix - Illustrations of Death Benefits and Accumulation Account Values
(to be filed by amendment)
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 57 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. Form of 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. Flexible Premium Variable Life Insurance Policy
5.a. Accelerated Benefit Rider
5.b. Adjustable Benefit Term Rider
5.c. Anniversary Partial Withdrawal Rider
5.d. Guaranteed Survivor Plus Purchase Option Rider
5.e. Lifetime Coverage Rider
5.f. Preliminary Term Life Insurance Rider
5.g. Secondary Guarantee Rider
5.h. Supplemental Coverage Rider
5.i. Waiver of Monthly Deduction Rider
5.j. Waiver of Specified Premium Rider
6.a. Articles of Incorporation of the Company**
6.b. Bylaws of the Company**
7. Not Applicable
8. Not Applicable
9.a. Form of Fund Participation Agreement by and among AIM Variable
Insurance Funds, Inc., A I M Distributors, Inc., Cova Financial
Life Insurance Company, on behalf of itself and its Separate
Accounts, and Cova Life Sales Company***
9.b. Form of Participation Agreement among Templeton Variable Products
Series Fund, Franklin Templeton Distributors, Inc. and Cova
Financial Life Insurance Company****
9.c. Form of Fund Participation Agreement among Oppenheimer Variable
Account Funds, OppenheimerFunds, Inc. and Cova Financial Life
Insurance Company***
9.d. Form of Fund Participation Agreement among Putnam Variable Trust,
Putnum Mutual Funds Corp. and Cova Financial Life Insurance
Company***
9.e. Form of Fund Participation Agreement among Investors Fund Series,
Zurich Kemper Investments, Inc., Zurich Kemper Distributors, Inc.
and Cova Financial Life Insurance Company***
9.f. Form of Participation Agreement by and between Goldman Sachs
Variable Insurance Trust, Goldman, Sachs & Co. and Cova Financial
Life Insurance Company***
9.g. Form of Participation Agreement among Liberty Variable
Investment Trust, Liberty Financial Investments, Inc. and Cova
Financial Life Insurance Company***
9.h. Form of Fund Participation Agreement among Cova Financial Life
Insurance Company, Cova Life Sales Company, Alliance Capital
Management LP and Alliance Fund Distributors, Inc.+
9.i. Form of Participation Agreement among Russell Insurance Funds,
Russell Fund Distributors, Inc. and Cova Financial Life Insurance
Company***
9.j. Form of Fund Participation Agreement among MFS Variable Insurance
Trust, Cova Financial Life Insurance Company and Massachusetts
Financial Services Company+
10. Application Forms
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 Auditors (to be filed by Amendment)
*Incorporated by reference to initial Form S-6 filed electronically on October
9, 1997.
**Incorporated by reference to Pre-Effective Amendment No. 1 to Form S-6 (File
No. 333-37559) electronically filed on November 13, 1997.
***Incorporated by reference to Post-Effective Amendment No. 1 to Form N-4
(File No. 333-34817) as filed electronically on February 11, 1998.
****Incorporated by reference to Post-Effective Amendment No. 2 to Form S-6
(File No. 333-37559) as filed electronically on April 30, 1999.
+Incorporated by reference to Pre-Effective Amendment No. 1 to Form N-4
(File No. 333-34817) as filed electronically on November 19, 1997.
SIGNATURES
As required by the Securities Act of 1933, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Oakbrook Terrace and State of Illinois on this
8th day of July, 1999.
COVA VARIABLE LIFE ACCOUNT FIVE
Registrant
By: COVA FINANCIAL LIFE INSURANCE COMPANY
By: /s/LORRY J. STENSRUD
______________________________
COVA FINANCIAL LIFE INSURANCE COMPANY
Attest:
/s/ MARK E. REYNOLDS /s/LORRY J. STENSRUD
________________________ By: ______________________________
Executive Vice President
- ------------------------
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 7/8/99
- -------------------- -------
Lorry J. Stensrud Date
Director
- ---------------------- -------
Leonard M. Rubenstein Date
Director
- -------------------- -------
J. Robert Hopson Date
William C. Mair* Director 7/8/99
- ----------------------- -------
William C. Mair Date
E. Thomas Hughes, Jr.* 7/8/99
- ---------------------- Treasurer and Director -------
E. Thomas Hughes, Jr. Date
Matthew P. McCauley* Director 7/8/99
- ---------------------- -------
Matthew P. McCauley Date
John W. Barber* Director 7/8/99
- ---------------------- -------
John W. Barber Date
/s/MARK E. REYNOLDS Director 7/8/99
- ---------------------- -------
Mark E. Reynolds Date
/s/PETER L. WITKEWIZ Controller 7/8/99
- ---------------------- -------
Peter L. Witkewiz Date
</TABLE>
*By: /s/LORRY J. STENSRUD
______________________________________
Lorry J. Stensrud, Attorney-in-Fact
INDEX TO EXHIBITS
EX-99.A.5. Flexible Premium Variable Life Insurance Policy
EX-99.A5.a. Accelerated Benefit Rider
EX-99.A5.b. Adjustable Benefit Term Rider
EX-99.A5.c. Anniversary Partial Withdrawal Rider
EX-99.A5.d. Guaranteed Survivor Plus Purchase Option Rider
EX-99.A5.e. Lifetime Coverage Rider
EX-99.A5.f. Preliminary Term Life Insurance Rider
EX-99.A5.g. Secondary Guarantee Rider
EX-99.A5.h. Supplemental Coverage Rider
EX-99.A5.i. Waiver of Monthly Deduction Rider
EX-99.A5.j. Waiver of Specified Premium Rider
EX-99.A.10. Application Forms
<TABLE>
<CAPTION>
COVA POLICY NUMBER:
COVA FINANCIAL LIFE 16,000,001
INSURANCE COMPANY
4100 NEWPORT PLACE DRIVE
NEWPORT BEACH, CA 92662 INSURED:
John Doe
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Non-Participating
Flexible Premiums are payable during the lifetime of the Insured to Attained Age
100. If the Insured dies while this policy is in force, we will pay the policy
proceeds to the beneficiary. We must receive proof of the Insured's death. The
policy must also be surrendered to us after death occurs. Any payment will be
subject to all of the provisions and conditions on this and the following pages
of this policy.
THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH BENEFIT MAY
INCREASE OR DECREASE UNDER THE CONDITIONS DESCRIBED ON PAGES 4.01 AND 4.02.
THE POLICY'S ACCUMULATION ACCOUNT VALUE IN EACH INVESTMENT DIVISION OF THE
SEPARATE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT INVESTMENT
DIVISION AND MAY INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR
AMOUNT. SEE THE SEPARATE ACCOUNT PROVISION.
THE POLICY'S ACCUMULATION ACCOUNT VALUE IN THE GENERAL ACCOUNT WILL BE CREDITED
WITH INTEREST AT A MINIMUM GUARANTEED RATE AS SHOWN ON THE POLICY SPECIFICATIONS
PAGE. WE MAY CREDIT ADDITIONAL INTEREST IN EXCESS OF THE GUARANTEED RATE. SEE
THE GENERAL ACCOUNT ACCUMULATION ACCOUNT PROVISION.
RIGHT TO EXAMINE POLICY
IMPORTANT
YOU HAVE PURCHASED A VARIABLE LIFE INSURANCE POLICY.
CAREFULLY REVIEW IT FOR LIMITATIONS. IF YOU ARE UNDER AGE 60, YOU MAY RETURN
THIS POLICY TO US OR TO THE AGENT THROUGH WHOM IT WAS PURCHASED WITHIN 20 DAYS
FROM THE DATE YOU RECEIVE IT. IF YOU RETURN IT WITHIN THIS PERIOD, THE POLICY
WILL BE VOID FROM THE BEGINNING. WE WILL REFUND ANY PREMIUM PAID. IF YOU ARE AGE
60 OR OVER, CALIFORNIA LAW REQUIRES THAT THIS POLICY MAY BE RETURNED WITHIN 30
DAYS FROM THE DATE YOU RECEIVE IT FOR A REFUND OF THE POLICY'S ACCOUNT VALUE ON
THE DAY THE POLICY IS RECEIVED BY US OR THE AGENT WHO SOLD YOU THIS POLICY.
AFTER 30 DAYS, CANCELLATION MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A
SURRENDER CHARGE.
This policy is a legal contract between the policyowner and Cova Financial
Services Life Insurance Company. PLEASE READ YOUR CONTRACT CAREFULLY. This cover
sheet provides only a brief outline of some of the important features of your
policy. This cover sheet is not the complete insurance contract and only the
actual policy provisions will control. The policy itself sets forth, in detail,
the rights and obligations of both you and your insurance company. It is,
therefore, important that you read your policy. Signed for the company at its
Service Center, St. Louis, Missouri 63128. [800-123-4567]
CCP00104 SECRETARY 0.01 PRESIDENT
(5/99)
ALPHABETIC GUIDE TO YOUR CONTRACT
Page Page
<S> <C> <C>
6.02 Accumulation Account Values 3.05 Misstatement of Age or Sex and
3.07 Addition, Deletion or Substitution Corrections
of Investments 6.04 Monthly Cost of Insurance
4.04 Allocation of Net Premiums 6.06 Monthly Deduction
3.04 Assignments 6.05 Monthly Policy Charge
6.09 Basis of Computation 6.04 Net Investment Factor
3.02 Beneficiary 4.03 Net Premium
6.06 Cash Surrender Value 3.02 Owner
4.02 Change in Contract Type 6.06 Partial Withdrawals
4.02 Change in Face Amount 7.01 Payment of Policy Benefits
3.05 Change of Insured 4.03 Payment of Premiums
3.04 Change of Owner or Beneficiary 4.02 Policy Changes
3.04 Claims of Creditors 4.01 Policy Proceeds
3.04 Conformity with Statutes 6.08 Postponement of Payments
4.01 Death Benefit or Transfers
3.01 Definitions 4.05 Reinstatement
6.02 General Account Accumulation 3.04 Requests for Changes and/or
Account Value Information
6.03 General Account Interest Rate 6.03 Separate Account Accumulation
4.04 Grace Period Account Value
3.05 Incontestability 3.06 Separate Account Provisions
7.01 Interest on Proceeds 3.04 Statements in Application
3.01 Issue Date 3.05 Suicide Exclusion
6.04 Loan Account Accumulation 6.06 Surrender
Account Value 3.07 Transfers
6.01 Loans
Additional Benefit Riders, Modifications and Amendments, if any, and a Copy of the Application are
found following the final section.
CCP00104 0.02
(5/99)
1. POLICY SPECIFICATIONS
GENERAL POLICY SPECIFICATIONS
INSURED [JOHN DOE] INITIAL PREMIUM PAID [$887.71]
POLICY NUMBER [16,000,001] PLANNED ANNUAL PREMIUM [$887.71]
ISSUE DATE [JANUARY 1, 1999] MINIMUM INITIAL ANNUAL
FACE AMOUNT [$50,000] PREMIUM AMOUNT [$887.71]
CONTRACT TYPE [OPTION A] QUALIFIED ROLLOVER PREMIUM [$0.00]
INSURED AGE [35] TARGET PREMIUM [$508.00]
SEX [MALE] TARGET PREMIUM (BASE ONLY) [$425.00]
RISK CLASSIFICATION [STANDARD NO LAPSE ANNUAL PREMIUM [$804.55]
SMOKER] NO LAPSE PREMIUM DATE [JANUARY 1, 2004]
PREMIUM TAX CHARGE [2.10%]
FEDERAL TAX CHARGE [1.3%]
MAXIMUM PERCENT OF PREMIUM CHARGE -
1ST YEAR: UP TO TARGET PREMIUM [15%]
ABOVE TARGET PREMIUM [5%]
QUALIFIED ROLLOVER
PREMIUM [0%]
YEARS 2-10 [5%]
YEARS 11+ [2%]
SECONDARY GUARANTEE PREMIUM [$887.71]
SECONDARY GUARANTEE DATE [JANUARY 1, 2019]
FORM BENEFITS - AS SPECIFIED IN POLICY
NUMBERS AND IN ANY RIDER
POLICY PLAN: FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE
CCP00104
CCP10004
CCPl0l
CCP102
CCP103
CCP30004
CCP40004
CCP60004
CCP700
CC-519
CCR1 ACCELERATED BENEFIT RIDER
CCR2 ADJUSTABLE BENEFIT TERM RIDER
CCR3 ANNIVERSARY PARTIAL WITHDRAWAL RIDER
CCR4 $100,000 GUARANTEED SURVIVOR PURCHASE OPTION RIDER
CCR5 LIFETIME COVERAGE RIDER
CCR6 $55,000 PRELIMINARY TERM RIDER
CCR7 SECONDARY GUARANTEE RIDER
CCR8 $5,000 SUPPLEMENTAL COVERAGE TERM RIDER
CCR10 WAIVER OF SPECIFIED PREMIUM RIDER
$91.30 MONTHLY PREMIUM WAIVED
CCP10004 1.01
2. POLICY SPECIFICATIONS
VARIABLE LIFE SEPARATE ACCOUNT [5]
GENERAL ACCOUNT ACCUMULATION ACCOUNT
VALUE GUARANTEED INTEREST RATE [4%]
GENERAL ACCOUNT MAXIMUM
ALLOCATION PERCENT [100%]
GENERAL ACCOUNT MAXIMUM
WITHDRAWAL PERCENT LIMIT [25%]
MAXIMUM MONTHLY COST OF
INSURANCE FACTOR [1.0032737]
MAXIMUM DAILY MORTALITY AND
EXPENSE RISK PERCENTAGE:
YEARS 1-10 [0.0015027%]
YEARS 11 -20 [0.0012301%]
YEARS 21+ [0.0009572%]
MAXIMUM ANNUAL MORTALITY AND EXPENSE
RISK PERCENTAGE:
YEARS 1-10 [0.55%]
YEARS 11-20 [0.45%]
YEARS 21+ [0.35%]
MAXIMUM MONTHLY POLICY CHARGE:
1ST YEAR [$25.00]
YEARS 2+ [$6.00]
MAXIMUM SELECTION AND ISSUE
EXPENSE CHARGE RATE:
YEARS 1-10 [$0.0875]
YEARS 11+ [$0]
MINIMUM FACE AMOUNT [$50,000]
MINIMUM FACE AMOUNT INCREASE [$5,000]
MINIMUM FACE AMOUNT DECREASE [$5,000]
MAXIMUM FEE FOR PROJECTION OF [$25.00]
BENEFITS AND VALUES
MAXIMUM TRANSFER/
PARTIAL WITHDRAWAL CHARGE [$25.00]
GUARANTEED INTEREST RATE ON [4.0%]
PROCEEDS
7702 TABLE [1980 CSO MORTALITY TABLE
FOR A MALE SMOKER,
AGE NEAREST BIRTHDAY]
BASIS OF COMPUTATION OF MINIMUM [1980 CSO MORTALITY TABLE
VALUES FOR A MALE SMOKER,
AGE NEAREST BIRTHDAY]
MONTHLY RIDER (CCR5) COST OF INSURANCE
RATE [0.76]
MONTHLY RIDER (CCR6) COST OF INSURANCE
RATE [0.02]
MONTHLY RIDER CHARGE FOR ADJUSTABLE
BENEFIT TERM RIDER [0.00]
CCP10004 1.02
3. POLICY SPECIFICATIONS
INSURED [JOHN DOE]
ISSUE DATE [JANUARY 1, 1999]
POLICY NUMBER [16,000,001]
DESIGNATED ISSUE RISK MONTHLY EXPENSE
INSURED AGE SEX CLASSIFICATION CHARGE RATE
[JAMES DOE] [20] [M] [STANDARD SMOKER] [.03917]
CCP10004 1.03
SURRENDER CHARGE SCHEDULE
INSURED: JOHN DOE POLICY NUMBER: 16,000,001
FACE AMOUNT: $50,000 COVERAGE: FPVL
TARGET PREMIUM (Base Only): $425.00 EFFECTIVE DATE: JANUARY 1, 1999
MAXIMUM MAXIMUM
POLICY SURRENDER POLICY SURRENDER
MONTH CHARGE MONTH CHARGE
1-60 45.00% 91 24.17%
61 44.58% 92 23.33%
62 44.17% 93 22.50%
63 43.75% 94 21.67%
64 43.33% 95 20.83%
65 42.92% 96 20.00%
66 42.50% 97 19.17%
67 42.08% 98 18.33%
68 41.67% 99 17.50%
69 41.25% 100 16.67%
70 40.83% 101 15.83%
71 40.42% 102 15.00%
72 40.00% 103 14.17%
73 39.17% 104 13.33%
74 38.33% 105 12.50%
75 37.50% 106 11.67%
76 36.67% 107 10.83%
77 35.83% 108 10.00%
78 35.00% 109 9.17%
79 34.17% 110 8.33%
80 33.33% 111 7.50%
81 32.50% 112 6.67%
82 31.67% 113 5.83%
83 30.83% 114 5.00%
84 30.00% 115 4.17%
85 29.17% 116 3.33%
86 28.33% 117 2.50%
87 27.50% 118 1.67%
88 26.67% 119 0.83%
89 25.83% 120 0.00%
90 25.00%
CCP101
TABLE OF GUARANTEED MONTHLY COST OF INSURANCE RATES
RATES ARE PER $1,000
COVERAGE: FPVL INSURED: JOHN DOE
POLICY NUMBER: 16,000,001 ISSUE DATE: JANUARY 1, 1999
ATTAINED AGE RATE ATTAINED AGE RATE ATTAINED AGE RATE
35 0.2191 57 1.5075 79 9.4575
36 0.2341 58 1.6408 80 10.1325
37 0.2533 59 1.7791 81 10.8675
38 0.2750 60 1.9325 82 11.6833
39 0.3000 61 2.1050 83 12.5858
40 0.3283 62 2.2991 84 13.5408
41 0.3616 63 2.5191 85 14.5166
42 0.3958 64 2.7616 86 15.4816
43 0.4350 65 3.0241 87 16.4216
44 0.4758 66 3.2975 88 17.4475
45 0.5225 67 3.5841 89 18.4600
46 0.5691 68 3.8791 90 19.4741
47 0.6200 69 4.1933 91 20.5100
48 0.6733 70 4.5400 92 21.6108
49 0.7333 71 4.9241 93 23.0250
50 0.7966 72 5.3608 94 24.8458
51 0.8700 73 5.8525 95 27.4966
52 0.9516 74 6.3883 96 32.0458
53 1.0450 75 6.9808 97 40.0166
54 1.1500 76 7.5916 98 54.8316
55 1.2616 77 8.2100 99 83.3333
56 1.3825 78 8.8258 100+ 0.0000
THESE RATES ARE FOR THE BASE POLICY AT ISSUE. THEY ARE BASED ON THE 1980
COMMISSIONERS STANDARD ORDINARY MORTALITY TABLE A, SMOKER.
CCP102
DEATH BENEFIT OPTION C ATTAINED AGE FACTORS
COVERAGE: FPVL INSURED: JOHN DOE
POLICY NUMBER: 16,000,001 ISSUE DATE: JAN 1, 1999
ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE
35 3.54993 57 1.868348 79 1.258853
36 3.435786 58 1.824082 80 1.245117
37 3.325754 59 1.78175 81 1.232006
38 3.219954 60 1.74117 82 1.219531
39 3.118295 61 1.702324 83 1.207765
40 3.020724 62 1.665225 84 1.196784
41 2.927158 63 1.629891 85 1.186567
42 2.837596 64 1.596361 86 1.177009
43 2.75175 65 1.564606 87 1.167922
44 2.669579 66 1.534553 88 1.159075
45 2.590837 67 1.506032 89 1.150468
46 2.515496 68 1.478903 90 1.141859
47 2.443231 69 1.452988 91 1.132984
48 2.373933 70 1.428197 92 1.123539
49 2.307409 71 1.404534 93 1.113181
50 2.243622 72 1.382011 94 1.101799
51 2.182405 73 1.360714 95 1.089164
52 2.123792 74 1.340715 96 1.07518
53 2.067728 75 1.322003 97 1.060138
54 2.014227 76 1.304624 98 1.044166
55 1.963262 77 1.288433 99 1.026482
56 1.914671 78 1.273247 100+ 1.01000
CCP103
1. DEFINITIONS IN THIS POLICY
We, Us and Our Cova Financial Life Insurance Company.
You and Your The owner of this policy. The owner may be someone other than the Insured.
In the application the words "You" and "Your" refer to the proposed Insured
person(s).
Insured The person whose life is insured under this policy. See the Policy Specifications page.
Issue Age The age of the Insured as of his or her nearest birthday to the Issue Date.
Attained Age The Issue Age plus the number of completed policy years. This includes any period
during which this policy was lapsed.
Issue Date The effective date of the coverage under this policy which is the Issue Date shown on
the Policy Specifications page. It is also the date from which policy anniversaries,
policy years, and policy months are measured.
Investment The date the first premium is applied to the General Account and/or the Divisions of
Start Date the Separate Account. This date will be the later of:
The Issue Date of the policy; or
The date we receive the first premium at our Service Center.
Monthly The same date in each succeeding month as the Issue Date except that whenever the
Anniversary Monthly Anniversary falls an a date other than a Valuation Date, the Monthly
Anniversary will be deemed the next Valuation Date. If any Monthly Anniversary would
be the 29th, 30th, or 31st day of a month that does not have that number of days, then
the Monthly Anniversary will be the last day of that month.
General Account The assets held by us, excluding any loans, other than those allocated to the Divisions
of the Separate Account or any other Separate Account.
Separate Account A separate investment account created by us to receive and invest net premiums
received for this policy or other policies. The Separate Account is listed on the Policy
Specifications page.
Loan Account The account to which we will transfer from the General Account and the Divisions of
the Separate Account the amount of any policy loan.
Loan SubAccount A Loan SubAccount exists for the General Account and each Division of the Separate
Account. Any accumulation account value transferred to the Loan Account will be
allocated to the appropriate Loan SubAccount to reflect the origin of the accumulation
account value. At any point in time, the Loan Account will equal the sum of all the
Loan SubAccounts.
Valuation Date Each day that the New York Stock Exchange is open for trading, our Service Center is
open for business and the SEC has not restricted trading or declared an emergency.
SEC The United States Securities and Exchange Commission.
Service Center P.O. Box 14490, St. Louis, Mo 63178, phone number [800-123-4567].
CCP30004 3.01
(5/99)
2. PERSONS WITH AN INTEREST IN THE POLICY
Owner The owner of this policy is as shown in the application or in any supplemental
agreement attached to this policy, unless later changed as provided in this policy. If
there is more than one owner at a given time, all must exercise the rights of ownership
by joint action. Ownership may be changed in accordance with the Change of Owner
or Beneficiary provision.
You, as owner, are entitled to exercise all ownership rights provided by this policy,
while it is in force. Any person whose rights of ownership depend upon some future
event will not possess any present rights of ownership. If the owner is a trustee(s), we
may act in reliance upon the written request of any trustee and we are not responsible
for proper administration of the trust. Unless otherwise provided, the final owner will
be the estate of the last owner to die.
Beneficiary The beneficiary to receive the proceeds in the event of the Insured's death is as shown
in the application or in any supplemental agreement attached to this policy, unless
later changed as provided in the policy. You may change the beneficiary in
accordance with the Change of Owner or Beneficiary provision. Unless otherwise
stated, the beneficiary has no rights in this policy before the death of the Insured. If
there is more than one beneficiary at the death of the Insured, each will receive equal
payments unless otherwise provided. Unless you provide otherwise, if a beneficiary
dies prior to the Insured's death, that beneficiary's share will be paid to the living
beneficiaries of that class. The deceased beneficiary's share will be paid in the same
proportion as the living beneficiaries' shares. If there are no beneficiaries living when
the Insured dies, or at the end of any Common Disaster period, the proceeds
(commuted if required) will be payable to you, it you are living, or to your estate.
Any payment we make will terminate our liability with respect to such payment. If the
Insured designates specific amounts to be paid to specific beneficiaries and the total
of those amounts is other than the amount of proceeds payable, the proceeds payable
will be adjusted and paid in the same proportion as the specific amounts were to be
paid.
Any term used in the masculine, feminine, singular or plural, will include or be the
opposite gender or number where necessary.
If any beneficiary designation in the application includes any of the following
provisions, the terms of that provision shown below will apply:
1. Per Stirpes. The share of a deceased beneficiary will be paid to that
beneficiary's surviving children, equally.
2. Common Disaster. We will not make payment until the stated number of days
after the Insured's death. If any beneficiary dies during this period, or if the order
of death of any beneficiary and the Insured cannot be determined, we will pay as
though such beneficiary died first.
3. Trust for Minor Beneficiary. The original or successor trustee for a minor
beneficiary will serve without bond and exercise all rights and receive all proceeds
for the minor beneficiary. Such proceeds will be held in a separate trust and used
at the trustee's discretion for such minor's education, support, care and general
welfare. The trust will terminate at the legal age of majority or prior death of the
minor beneficiary. Any funds then held by the trustee will be paid in one sum to
such beneficiary or the beneficiary's estate. The trust can be revoked by a change
of beneficiary under the policy. Payment to any trustee will discharge us to the
extent of such payment.
CCP30004 3.02
(5/99)
4. Trust Under Will. When we receive at our Service Center:
a) Certified copies of the Last Will and Testament of the named testator; and
b) The order admitting the Will to probate; and if such Will created a trust
capable of receiving proceeds;
then we will pay the proceeds to the trustee.
If, before we receive these documents, satisfactory proof is furnished that:
a) the testator died intestate; or
b) the Will created no trust capable of receiving proceeds; or
c) the testator was not the insured, but survived the insured;
then we will pay the proceeds to you, unless otherwise provided.
If we pay under any of these conditions, we will be discharged to the extent of
such payment. We are not required to check into the validity, general terms or
proper administration of the trust. Such trustee designation will not affect your
rights under the policy, including the right to change the beneficiary.
5. Trust Under Separate Written Agreement. When we receive at our
Service Center a written statement from the trustee named in the beneficiary
designation that:
a) the trust agreement is in force; and
b) the agreement permits the trustee to receive the proceeds;
then we will pay the proceeds to the trustee.
If, before we receive the trustee's statement, satisfactory proof is furnished that:
a) the trust agreement is not in effect; or
b) the agreement does not permit the trustee to receive the proceeds;
then we will pay the proceeds to you, unless otherwise provided.
If we pay under any of these conditions, we will be discharged to the extent of
such payment. We are entitled to rely on any statements or documents furnished
to us by the trustee and are not required to check into the validity, general terms
or proper administration of the trust agreement. Such trustee designation will not
affect your rights under the policy, including the right to change the beneficiary.
6. Irrevocable Beneficiary. You cannot change an irrevocable beneficiary
without the written consent of such beneficiary. Also, you cannot exercise any
other ownership rights without the consent of such beneficiary, if the exercise of
such rights will have the effect of diminishing the rights and interest of the
irrevocable beneficiary.
7. Creditor Beneficiary. Proceeds payable to any creditor beneficiary are
limited to its provable interest. The balance of any proceeds will be paid to any
other named beneficiary. If there is no other beneficiary living, we will pay the
proceeds to you, unless otherwise provided. You cannot change a creditor
beneficiary without the written consent of the creditor or release of its interest.
Also, you cannot exercise any other ownership rights without the consent of such
beneficiary, if the exercise of such rights will have the effect of diminishing the
rights and interest of the creditor beneficiary.
CCP30004 3.03
(5/99)
Change of During the Insured's lifetime you may change the ownership and beneficiary
Owner or designations, subject to any restrictions as stated in the Owner or Beneficiary
Beneficiary provisions. You must make the change in written form satisfactory to us. If acceptable
to us the change will take effect as of the time you signed the request, whether or not
the Insured is living when we receive your request at our Service Center. The change
will be subject to any assignment of this policy or other legal restrictions. It will also be
subject to any payment we made or action we took before we received your written
notice of the change. We have the right to require the policy for endorsement before
we accept the change.
If you are also the beneficiary of the policy at the time of the Insured's death, you may
designate some other person to receive the proceeds of the policy within 60 days after
the Insured's death.
Assignments We will not be bound by an assignment of the policy or of any interest in it unless:
1. The assignment is made as a written instrument,
2. You file the original instrument or a certified copy with us at our Service Center,
and
3. We send you an acknowledged copy.
We are not responsible for determining the validity of any assignment.
If a claim is based on an assignment, we may require proof of interest of the claimant.
A valid assignment will take precedence over any claim of a beneficiary.
Requests For Submit all requests for change and/or information in writing to our Service Center.
Changes and/or
Information
3. GENERAL PROVISIONS
The Contract We have issued this policy in consideration of the application and payment of
premiums. The policy, the application for it, any riders and any application for an
increase in face amount constitute the entire contract and are attached to and made a
part of the policy when the insurance applied for is accepted. A copy of any
application for reinstatement will be sent to you for attachment to this policy and will
become part of the contract of reinstatement and of this policy. The policy may be
changed by mutual agreement. Any change must be in writing and approved by our
President, Vice-President or Secretary. Our agents have no authority to alter or modify
any terms, conditions, or agreements of this policy, or to waive any of its provisions.
Conformity with If any provision in this policy is in conflict with the laws of the state which govern this
Statutes policy, the provision will be deemed to be amended to conform with such laws. In
addition, we reserve the right to change this policy if we determine that a change is
necessary to cause this policy to comply with, or give you the benefit of, any federal or
state statute, rule, or regulation, including, but not limited to, requirements for life
insurance contracts under the Internal Revenue Code, or its regulations or published
rulings.
Statements in All statements made by the Insured or on his or her behalf, or by the applicant, will be
Application deemed representations and not warranties, except in the case of fraud. Material
misstatements will not be used to void the policy, any rider or any increase in face
amount or deny a claim unless made in the application for a policy, a rider or an
increase in face amount.
Claims of To the extent permitted by law, neither the policy nor any payment under it will be
Creditors subject to the claims of creditors or to any legal process.
CCP30004 3.04
(5/99)
Right to Examine You have the right to request us to cancel an increase in face amount and receive a
Increase in premium refund. The request must be in writing and must be made no later than:
Face Amount 20 days from the date you received the new Policy Specifications page for the
increase; or
45 days after the date you signed the application for the increase.
If you do request us to cancel the increase, the monthly deductions associated with
that increase will be restored to the policy's accumulation account value. This amount
will be allocated to the General Account and the Divisions of the Separate Account in
the same manner as it was deducted.
Conversion Rights While your policy is in force, you have a one time right during the first two policy years
to transfer all of your accumulation account value from the Divisions of the Separate
Account to the General Account.
If, at any time during the first two policy years, you request in writing the transfer of the
accumulation account value held in the Divisions of the Separate Account to the
General Account and you indicate that you are making this transfer in exercise of your
conversion rights, the transfer will not be subject to a transfer charge or transfer limits,
if any. At the time of such transfer, there will not be any effect on the policy's death
benefit, face amount, net amount at risk, rate class or Issue Age.
If you exercise your one time conversion right, we will automatically allocate all future
net premiums to the General Account.
Misstatement of If there is a misstatement of age or sex in the application, the amount of the death
Age or Sex and benefit will be that which would be purchased by the most recent monthly cost of
Corrections insurance charge at the correct age or sex.
If we make any payment or policy changes in good faith, relying on our records, or
evidence supplied to us, our duty will be fully discharged. We reserve the right to
correct any errors in the policy.
Incontestability We cannot contest this policy after it has been in force during the lifetime of the
Insured for two years from its Issue Date. We cannot contest an increase in face
amount with regard to material misstatements made concerning such increase after it
has been in force during the lifetime of the Insured for two years from its effective date.
We cannot contest any reinstatement of this policy, with regard to material
misstatements made concerning such reinstatement, after it has been in force during
the lifetime of the Insured for a period of two years from the date we approve the
reinstatement. This provision will not apply to any rider which contains its own
incontestability clause.
Suicide Exclusion If the Insured dies by suicide, while sane or insane, within two years from the Issue
Date (or within the maximum period permitted by law of the state in which this policy
was delivered, if less than two years), the amount payable will be limited to the amount
of premiums paid, less any outstanding policy loans with interest to the date of death,
and less any partial withdrawals.
If the Insured, while sane or insane, commits suicide within two years after the
effective date of any increase in face amount, the death benefit for that increase will be
limited to the monthly deductions for the increase.
Change of While this policy is in force, you may change the Insured. To do this, you must meet
Insured the requirements established by us. Any rider attached to this policy may be continued
only with our consent. We reserve the right to charge a nominal fee for processing a
change of Insured.
CCP30004 3.05
(5/99)
Annual Report Each year a report will be sent to you which shows the current policy values, premiums
paid and deductions made since the last report, and any outstanding policy loans.
Projection of You may make a written request to us for a projection of illustrative future
Benefits and accumulation account values and death benefits. It requested more than once per
Values policy year, this projection will be furnished to you for a nominal fee. This fee will not
exceed the Maximum Fee for Projection of Benefits and Values shown on the Policy
Specifications page.
4. SEPARATE ACCOUNT PROVISIONS
Separate Account The variable benefits under this policy are provided through investments in the
Separate Account. This account is used for flexible premium variable life insurance
policies and, if permitted by law, may be used for other policies or contracts as well.
We hold the assets of the Separate Account. These assets are held separately from the
assets held in the General Account. Income, gains and losses---whether or not
realized---from assets allocated to the Separate Account will be credited to or charged
against the account without regard to our other income, gains or losses.
The portion of the assets held by the Separate Account equal to the reserves and
other policy liabilities with respect to the Separate Account will not be charged with
liabilities that arise from any other business we may conduct. We have the right to
transfer to our General Account any assets of the Separate Account which are in
excess of the reserves and other policy liabilities of the Separate Account.
The Separate Account is registered with the Securities and Exchange Commission as
a unit investment trust under the Investment Company Act of 1940. The Separate
Account is also subject to the laws of the State of Missouri, which regulate the
operations of insurance companies incorporated in Missouri. The investment policy of
the Separate Account will not be changed without the approval of the Insurance
Commissioner of the State of Missouri. The approval process is on file with the
Insurance Commissioner of the state in which this policy was delivered.
Divisions The Separate Account has several Divisions. Each Division invests in a corresponding
investment portfolio from one or more registered investment companies.
Income, gains and losses --- whether or not realized --- from the assets of each Division
of the Separate Account are credited to or charged against that Division without
regard to income, gains or losses in other Divisions of the Separate Account or in the
General Account.
We will value the assets of each Division of the Separate Account at the end of each
valuation period. A valuation period is the period between two successive Valuation
Dates. A Valuation Date is any day that benefits vary and on which the New York Stock
Exchange and our Service Center are open for business or any other day that may be
required by any applicable Securities and Exchange Commission Rules and
Regulations.
CCP30004 3.06
(5/99)
Transfers You may transfer amounts as follows:
Between the General Account and the Divisions of the Separate Account; or
Among the Divisions of the Separate Account.
The first 12 requested transfers and/or partial withdrawals per policy year will be
allowed free of charge; thereafter we may impose a transfer charge not to exceed
the Maximum Transfer/Partial Withdrawal Charge shown on the Policy
Specifications page.
These transfers will be subject to the following conditions:
We must receive a request for transfer in a form acceptable to us.
Transfers from or among the Divisions of the Separate Account must be at least
$500.00 or the entire amount you have in a Division, if smaller.
Transfers and/or partial withdrawals from the General Account to the Divisions of
the Separate Account must be at least $500.00. The maximum amount of all
transfers and partial withdrawals from the General Account in any policy year will
be the greater of (1) or (2):
1. The cash surrender value of the General Account at the beginning of that
policy year multiplied by the General Account Maximum Withdrawal Percent
Limit, as shown on the Policy Specifications page.
2. The previous year's General Account maximum withdrawal amount.
The General Account Accumulation Account Value immediately after any transfer
in to the General Account cannot exceed 1., below, multiplied by 2., below:
1. The General Account Accumulation Account Value plus the Separate
Account Accumulation Account Value.
2. The General Account Maximum Allocation Percent as shown on the Policy
Specifications page.
We may revoke or modify the transfer privilege at any time, including the minimum
amount transferable, the General Account Maximum Allocation Percent, and the
transfer charge, if any.
Addition, Deletion We reserve the right, subject to compliance with applicable law, to make additions to,
or Substitution deletions from, or substitutions for the shares of a fund that are held by the Separate
of Investments Account or that the Separate Account may purchase. We reserve the right to eliminate
the shares of any of the funds of this policy and to substitute shares of another fund of
a registered investment company, if the shares or funds are no longer available for
investment or if in our judgement, further investment in any fund should become
inappropriate in view of the purpose of the policy. We will not substitute any shares
attributable to the owner's interest in a Division of the Separate Account without notice
to the owner and compliance with the Investment Company Act of 1940. This will not
prevent the Separate Account from purchasing other securities for other series or
classes of policies, or from permitting conversion between series or classes of policies
or contracts on the basis of requests made by owners.
We reserve the right to establish additional Divisions of the Separate Account which
would invest in shares of registered investment companies and to make such Divisions
available to such class or series of policies as we deem appropriate. We also reserve
the right to eliminate or combine existing Divisions of the Separate Account or to
transfer assets between Divisions.
If we consider it to be in the best interest of persons having voting rights under the
policies, the Separate Account may be operated as a management company under the
Investment Company Act of 1940; it may be deregistered under that Act in the event
registration is no longer required; it may be combined with other separate accounts; or
its assets may be transferred to other separate accounts.
CCP30004 3.07
(5/99)
5. POLICY BENEFITS
Policy Proceeds The policy proceeds are:
1. The death benefit under the Contract Type then in effect; plus
2. The monthly cost of insurance for the portion of the policy month from the date of
death to the end of the policy month of death; minus
3. Any payment due under the Grace Period provision as of the date of death; minus
4. Any loan and loan interest due.
Death Benefit Prior to the Insured's Attained Age 100, the death benefit depends upon the Contract
Type in effect on the date of the Insured's death. The Contract Type in effect is shown
on the Policy Specifications page.
Option A Contract Type:
The death benefit is the greater of:
1. The face amount; or
2. The applicable percentage of the accumulation account value on the date of
death as described in Section 7702(d) of the Internal Revenue Code of 1986 or
any applicable successor provision and modified for ages 95 and above.
Option B Contract Type:
The death benefit is the greater of:
1. The face amount plus the accumulation account value on the date of death; or
2. The applicable percentage of the accumulation account value on the date of
death as described in Section 7702(d) of the Internal Revenue Code of 1986 or
any applicable successor provision and modified for ages 95 and above.
Option C Contract Type:
The death benefit is the greater of:
1. The face amount; or
2. The accumulation account value on the date of death multiplied by the applicable
Attained Age factor as shown on the policy's Death Benefit Option C Attained Age
Factors page.
Notwithstanding anything in this policy, the death benefit will in no case be less than
the amount necessary to cause the policy to meet the requirements for the definition of
life insurance under the Internal Revenue Code of 1986 or any applicable successor
provision.
Applicable The percentages as currently described in Section 7702(d) of the Internal Revenue
Percentage: Code of 1986 and modified for ages 95 and above are as follows:
In the case of an Insured with an The applicable percentage
Attained Age as of the beginning will decrease by a ratable
of the contract year of: portion for each full year:
More than: But not more than: From: To:
0 .................... 40 250 .................... 250
40 .................... 45 250 .................... 215
45 .................... 50 215 .................... 185
50 .................... 55 185 .................... 150
55 .................... 60 150 .................... 130
60 .................... 65 130 .................... 120
65 .................... 70 120 .................... 115
70 .................... 75 115 .................... 105
75 .................... 90 105 .................... 105
90 .................... 95 105 .................... 101
95 or .................. 101
higher
CCP40004 4.01
(5/99)
Continuation If this policy is in force beyond the Insured's Attained Age 100, the Death Benefit will
of the Policy be 101% of the policy's accumulation account value.
Beyond Attained
Age 100 Please note: This policy may not qualify as life insurance after the
Insured's Attained Age 100 and may be subject to tax consequences. Please
consult a tax advisor prior to continuing the policy beyond the Insured's
Attained Age 100. It is possible that insurance coverage may not continue
even if planned premiums are paid in a timely manner.
Policy Changes You may request policy changes at any time unless we specifically indicate otherwise.
We limit the number of changes to one per policy year, and we do not permit changes
in the first policy year. The types of changes allowed are explained below.
No change will be permitted that would result in this policy not satisfying the definition
of life insurance under the Internal Revenue Code of 1986 or any applicable successor
provision.
Change In The face amount may be changed by sending us a written request.
Face Amount
Any decrease in face amount will be subject to the following conditions:
1. The decrease will become effective on the Monthly Anniversary on or following
our receipt of the request.
2. The decrease will reduce the face amount in the following order:
a. The face amount provided by the most recent increase;
b. Face amounts provided by the next most recent increases, successively; and
c. The face amount when the policy was issued.
3. The face amount remaining in force after any requested decrease may not be less
than the Minimum Face Amount shown on the Policy Specifications page.
4. Any decrease must be at least the Minimum Face Amount Decrease as shown on
the Policy Specifications page.
A surrender charge will apply to any decrease in face amount as explained in the
Surrender Charge provision.
After the first policy anniversary, you can increase the face amount subject to the
following conditions:
1. Proof that the Insured is insurable by our standards on the date of the requested
increase must be submitted.
2. The increase, if approved by us, will become effective on the Monthly Anniversary
on or following our receipt of the request.
3. Any increase must be at least the Minimum Face Amount Increase as shown on
the Policy Specifications page.
4. The Insured must have an Attained Age not greater than age 80 on the policy
anniversary that the increase will become effective.
We will amend your policy to show the effective date of the decrease or increase.
Change in If the Contract Type in effect is Option A or Option B, you may change the Contract
Contract Type Type by sending us a written request. The effective date of the change will be the
Monthly Anniversary on or following the date we receive your request. On the effective
date of this change the death benefit payable does not change, but the face amount
may change.
If the Contract Type in effect is Option B, you may change it to Option A. The face
amount will be increased to equal the death benefit on the effective date of change.
The Contract Type cannot be changed from Option B to Option C.
CCP40004 4.02
(5/99)
If the Contract Type in effect is Option A, you may change it to Option B. Proof that the
Insured is insurable by our standards on the date of the change must be submitted.
The face amount will be decreased to equal the death benefit less the accumulation
account value on the effective date of change. This change may not be made if it
would result in a face amount which is less than the Minimum Face Amount shown on
the Policy Specifications page. A surrender charge will apply to any decrease in face
amount as explained in the Surrender Charge provision. The Contract Type cannot be
changed from Option A to Option C.
If the Contract Type in effect is Option C, the Contract Type cannot be changed.
6. PREMIUMS AND GRACE PERIOD
Payment of Your first premium is due as of the Issue Date. While the Insured is living, premiums
Premiums after the first must be paid at our Service Center. A premium receipt will be furnished
upon request. If this policy is in your possession and you have not paid the first
premium, it is not in force. It will be considered that you have the policy for inspection
only.
Premiums may be paid in any amount and at any interval subject to the following
conditions:
1. At the end of the first policy year, your total premium payments for this policy
must be greater than or equal to the Minimum Initial Annual Premium Amount as
shown on the Policy Specifications page.
2. Any subsequent premium payment must be at least $10.00.
3. Total premiums paid in any policy year for policies issued with the Option A or B
Contract Type may not exceed an amount that would cause the policy to fail the
definition of life insurance as defined by Section 7702 of the Internal Revenue
Code of 1986, or any applicable successor provision thereto. The maximum
premium limit for the following policy year will be shown on your annual report.
On any date that we receive a premium which causes the Death Benefit under any of
the Contract Types to increase by an amount that exceeds that premium received, we
reserve the right to refuse that premium payment. We may require additional evidence
of insurability before we accept the premium.
Net Premium The net premium is:
1. The premium paid; minus
2. The premium paid multiplied by the Premium Tax Charge as shown on the Policy
Specifications page; minus
3. The premium paid multiplied by the Federal Tax Charge as shown on the Policy
Specifications page; minus
4. The premium paid multiplied by the Applicable Percent of Premium Charge.
Premium Tax A charge will be deducted for premium taxes from each premium submitted. The
Charge current charge, as a percent of the premium, is shown on the Policy Specifications
page. We reserve the right to change the Premium Tax Charge due to rate changes of
the governing jurisdiction. We will amend your policy to show the current premium tax
rate, if changed.
Federal Tax A charge will be deducted for federal taxes from each premium submitted. The current
Charge charge, as a percent of the premium, is shown on the Policy Specifications page. We
reserve the right to change the Federal Tax Charge to reflect a change in the federal
tax law. We will amend your policy to show the current Federal Tax Charge, if
changed.
CCP40004 4.03
(5/99)
Percent of A charge will be deducted from each premium submitted. The Maximum Percent of
Premium Charge Premium Charges are shown on the Policy Specifications page.
The Percent of Premium Charge will vary, on a non-discriminatory basis, based on the
amount of premium paid, but will never exceed the Maximum Percent of Premium
Charges shown on the Policy Specifications page.
Allocation of You determine the allocation of net premiums among the General Account and the
Net Premiums Divisions of the Separate Account. For any chosen allocation the minimum percentage
that may be allocated is 5% of the net premium. Percentages must be in whole
numbers. The General Account Accumulation Account Value immediately after
payment of the premium cannot exceed 1., below, multiplied by 2., below:
1. The General Account Accumulation Account Value plus the Separate Account
Accumulation Account Value.
2. The General Account Maximum Allocation Percent as shown on the Policy
Specifications page.
The initial allocation is shown on the application, a copy of which is attached. We may
modify the General Account Maximum Allocation Percent at any time.
For any premium received during the "right to examine policy" period, we will initially
allocate the net premium to the Division that invests exclusively in shares of our Money
Market fund unless prohibited by state law. When this period expires, accumulation
account value in that Division will be transferred to the General Account and the
Divisions of the Separate Account according to the allocation percentages shown on
the application, a copy of which is attached. For any premium received after the "right
to examine policy" period, the net premium will be allocated according to the
allocation percentages shown on the Policy Specifications page or your most recent
allocation instructions received by us.
Your Right You may change the allocation of future net premiums among the General Account
to Change and/or the Divisions of the Separate Account subject to the conditions outlined in the
Allocation Allocation of the Net Premiums Provision. The change in allocation percentages will
take effect immediately upon our receipt of your written request.
No-Lapse Period If, on a Monthly Anniversary day prior to the No Lapse Premium Date, the sum of all
premiums paid on this policy, reduced by any partial withdrawals and any outstanding
loan balance, is greater than or equal to the sum of the No Lapse Monthly Premiums
for the elapsed months since the Issue Date, this policy will not lapse as a result of a
accumulation account value less any loans, loan interest due, and any surrender
charge being insufficient to pay the monthly deduction. The No Lapse Premium Date
and the No Lapse Annual Premium are shown on the Policy Specifications page. The
No Lapse Monthly Premium is one twelfth of the No Lapse Annual Premium.
Grace Period If, on a Monthly Anniversary day prior to the No Lapse Premium Date:
1. The accumulation account value less any loans, loan interest due, and any
surrender charge is insufficient to cover the monthly deduction; and
2. The sum of all premiums paid on this policy, reduced by any partial withdrawals
and any outstanding loan balance, is less than the sum of the No Lapse Monthly
Premiums for the elapsed months since the Issue Date;
then the grace period of 62 days will be allowed for the payment of a premium
sufficient to keep your policy in force. The No Lapse Premium Date and the No Lapse
Annual Premium are shown on the Policy Specifications page.
A change in your policy's face amount, the addition or deletion of a supplemental rider
to this policy, or a change in the premium class of the Insured before the No Lapse
Premium Date shown on the Policy Specifications page may result in a change in the
No Lapse Monthly Premium. The No Lapse Premium Date will not be changed.
CCP40004 4.04
(5/99)
If, on a Monthly Anniversary day on or after the No Lapse Premium Date, the
accumulation account value less any loans, loan interest due, and any surrender
charge is insufficient to cover the next monthly deduction, a grace period of 62 days
will be allowed for the payment of a premium sufficient to pay the monthly deduction.
(Monthly deduction is defined in the Accumulation Account Values section.)
Notice of the amount of premium required to be paid to keep this policy in force will be
sent at the beginning of the grace period to your last known address and to any
assignee on record. If we do not receive a premium large enough so that the net
premium covers the monthly deduction by the end of the grace period, your policy will
lapse at the end of that 62 day period and it will then terminate without cash surrender
value. If the Insured dies during the grace period, any past due monthly deductions
will be deducted from the death benefit.
Reinstatement You may reinstate your lapsed policy within 5 years after the date of lapse. This must
be done prior to the Insured's Attained Age 100. The policy can not be reinstated if it
has been surrendered. To reinstate, you must submit the following items:
1. A written request for reinstatement.
2. Proof satisfactory to us that the Insured is insurable by our standards.
3. A net premium payment large enough to cover:
a. The monthly deductions due at the time of lapse; and
b. Two times the monthly deduction due at the time of reinstatement.
4. A payment to cover any Loan Interest due and unpaid at the time of lapse.
Upon receipt of the above payments, we will deduct any monthly deductions and loan
interest due and unpaid at the time of lapse. The Insured must be alive on the date we
approve the request for reinstatement. If the Insured is not alive, such approval is void
and of no effect.
The reinstated policy will be in force from the date we approve the reinstatement
application. There will be a full monthly deduction for the policy month which includes
this date. Any application for reinstatement becomes part of the contract of
reinstatement and of this policy.
Any loan may be paid or reinstated. Any loan reinstated will cause an accumulation
account value of an equal amount to be reinstated.
Any loan repaid at the time of reinstatement will cause an increase in accumulation
account value equal to the amount of the repaid loan.
The surrender charge at the time of reinstatement will be the surrender charge in
effect at the time of lapse. If only a portion of the coverage is reinstated then only the
applicable portion of the surrender charge will be reinstated. If only a portion of the
coverage is reinstated, the accumulation account value following reinstatement will be
increased by the applicable portion of the surrender charge imposed at the time of
lapse.
Following reinstatement, the No-Lapse Period provision will again be applicable until
the No-Lapse Premium Date, shown on the Policy Specifications page, if sufficient
premium is paid so that, as of the effective date of reinstatement, the sum of all
premiums paid, reduced by any partial withdrawals and any loans, is greater than the
No-Lapse Monthly Premiums multiplied by the number of elapsed months since the
Issue Date.
CCP40004 4.05
(5/99)
7. LOANS
Upon written request to us, you may borrow an amount not in excess of the loan value
of your policy while it is in force. The minimum amount of your net loan request at any
one time must be at least $500. Your policy will be the sole security for such loan. We
have the right to require your policy for endorsement.
The loan value is the accumulation account value of your policy at the date of the loan
request plus interest to the next policy anniversary at the General Account
Accumulation Account Value Guaranteed Interest Rate, shown on the Policy
Specifications page, reduced by:
1. Any existing loans; and
2. Loan interest to the next loan interest due date; and
3. Every monthly deduction due to the next loan interest due date; and
4. Any surrender charges.
You may allocate the policy loan among the General Account and the Divisions of the
Separate Account. If you do not specify the allocation, then the policy loan will be
allocated among the General Account and the Divisions of Separate Account Eleven in
the same proportion that the accumulation account value in the General Account, and
the accumulation account value in each Division bears to the total accumulation
account value of the policy, minus the accumulation account value in the Loan
Account, on the date of the policy loan.
Accumulation account value equal to the policy loan allocated to the General Account
and each Division of the Separate Account will be transferred to the Loan Account,
reducing the accumulation account value accordingly. Any accumulation account
value transferred to the Loan Account will be allocated to the appropriate Loan
SubAccount.
Loan Interest The accrued loan interest will be due the earliest of:
Due Date 1. The next policy anniversary date.
2. The date of termination of the policy.
3. The date the loan is repaid in full.
4. The date the loan plus loan interest accrued exceeds the accumulation account
value less any surrender charges.
Interest will be payable annually on each policy anniversary. If you do not pay the
interest when it is due on a policy anniversary, an amount of accumulation account
value equal to the loan interest will also be transferred to the Loan Account. We will
charge the same rate of interest on this amount as on the policy loan. The amount
transferred will be deducted from the General Account and the Divisions of the
Separate Account in the same proportion that the accumulation account value in the
General Account and the accumulation account value in each Division bears to the
total accumulation account value of the policy, minus the accumulation account value
in the Loan Account.
Fixed Loan The fixed loan interest rate is 4.5% for policy years 1 through 10, 4.25% for policy years
Interest Rates 11 through 20 and 4.15% for policy years 21 and later. Loan interest is payable in
arrears.
CCP60004 6.01
(5/99)
Loan All funds received will be credited to your policy as a premium unless clearly marked
Repayments for loan repayment.
You may repay your loan in whole or in part at any time before the death of the
Insured while the policy is in force. When a loan repayment is made, accumulation
account value securing the debt in the Loan Account equal to the loan repayment will
be repaid to the General Account and the Divisions of the Separate Account in the
same proportion that the accumulation account value in the Loan Account bears to
the accumulation account value in each Loan SubAccount. Unpaid loans and loan
interest will be deducted from any settlement of your policy.
If you fail to make repayments when the total loan and loan interest due would exceed
the accumulation account value, less any surrender charges, your policy will
terminate. We will allow you a grace period for such payment of loans and loan interest
due. In such event the policy becomes void at the end of the grace period. We will mail
notice to your last known address, and that of any assignee of record. This grace
period will expire 62 days from the Monthly Anniversary immediately before the date
the total loan and loan interest exceeds the accumulation account value less any
surrender charges; or 31 days after such notice has been mailed, if later.
8. ACCUMULATION ACCOUNT VALUES
Accumulation The accumulation account value of your policy is equal to the total of:
Account Value The accumulation account value in the General Account; plus
The accumulation account value in the Divisions of the Separate Account; plus
The accumulation account value in the Loan Account.
Accumulation If this policy is in force beyond the Insured's Attained Age 100, the accumulation
Account Value account value of your policy will be determined in the same manner as described
After Attained below; except no deductions will be made for monthly cost of insurance charges.
Age 100 There will be no monthly policy charge or selection and issue expense charge after the
Insured attains age 100. Premiums can not be paid after the Insured Attains Age 100.
General Account The accumulation account value in the General Account as of the Investment Start
Accumulation Date is equal to:
Account Value The portion of the initial net premium received and allocated to the General
Account; minus
The portion of the monthly deductions due from the Issue Date through the
Investment Start Date charged to the General Account.
The accumulation account value in the General Account on any day after the
Investment Start Date is equal to:
The accumulation account value on the preceding Valuation Date, with interest on
such value at the current rate; plus
Any portion of net premium received and allocated to the General Account on that
day; plus
Any amounts transferred to the General Account on that day; plus
Any loan repayments allocated to the General Account on that day; plus
That portion of any interest credited on outstanding loans which is allocated to
the General Account on that day; minus
Any amount transferred plus any transfer charge from the General Account to the
Divisions of the Separate Account on that day; minus
CCP60004 6.02
(5/99)
Any partial withdrawal plus any withdrawal transaction charge made from the
General Account on that day; minus
Any portion of the surrender charge incurred on that day attributed to the General
Account; minus
Any amount transferred from the General Account to the Loan Account on that
day; minus
If that day is a Monthly Anniversary, any withdrawal due to a pro rata
surrender plus any withdrawal transaction charge made from the General
Account on that day; minus
If that day is a Monthly Anniversary, the portion of the monthly deduction
charged to the General Account, to cover the policy month which starts on that
day.
General Account The interest credited to the General Account accumulation account value for a specific
Interest Rate day will be at an effective annual rate not less than the General Account Accumulation
Account Value Guaranteed Interest Rate shown on the Policy Specifications page.
Separate Account The accumulation account value in each Division of the Separate Account on the
Accumulation Investment Start Date is equal to:
Account Value - The portion of the initial net premium received and allocated to the Division; minus
- The portion of the monthly deductions due from the Issue Date through the
Investment Start Date charged to the Division.
The accumulation account value in each Division of the Separate Account on
subsequent Valuation Dates is equal to:
The accumulation account value in the Division on the preceding Valuation Date
multiplied by that Division's net investment factor for the current valuation period;
plus
- Any portion of net premium received and allocated to the Division during the
current valuation period; plus
- Any amounts transferred to the Division from the General Account or from
another Division during the current valuation period; plus
- Any loan repayments allocated to the Division during the current valuation period;
plus
That portion of any interest credited on outstanding loans which is allocated to
the Division during the current valuation period; minus
Any amounts transferred plus any transfer charge from the Division during the
current valuation period; minus
Any partial withdrawal plus any withdrawal transaction charge from the Division
during the current valuation period; minus
Any portion of the surrender charge incurred during the current valuation period
attributed to the Division; minus
Any amount transferred from the Division to the Loan Account during that
valuation period; minus
If a Monthly Anniversary occurs during the current valuation period, any
withdrawal due to a pro rata surrender plus any withdrawal transaction charge
from the Division during the current valuation period; minus
If a Monthly Anniversary occurs during the current valuation period, the
portion of the monthly deduction charged to the Division during the current
valuation period to cover the policy month which starts during that valuation
period.
CCP60004 6.03
(5/99)
Net Investment The Net Investment Factor measures the investment performance of a Division during
Factor a valuation period. The Net Investment Factor for each Division for a valuation period
is calculated as follows:
The value of the assets at the end of the preceding valuation period; plus
- The investment income and capital gains --- realized or unrealized --- credited to the
assets in the valuation period for which the net investment factor is being
determined; minus
- The capital losses - - - realized or unrealized.- - - charged against those assets during
the valuation period; minus
- Any amount charged against each Division for taxes, including any tax or other
economic burden resulting from the application of tax laws that we determine to
be properly attributable to the Divisions of the Separate Account, or any amount
we set aside during the valuation period as a reserve for taxes attributable to the
operation or maintenance of each Division; minus
- A charge not to exceed the daily investment percentage shown on the Policy
Specifications page for each day in the valuation period. This corresponds to an
annual investment percentage of the mortality and expense risk percentage
shown on the Policy Specifications page; divided by
- The value of the assets at the end of the preceding valuation period.
Loan Account The accumulation account value in the Loan Account as of the Investment Start Date
Accumulation is zero.
Account Value The accumulation account value in the Loan Account on any day after the Investment
Start Date is equal to:
The accumulation account value in the Loan Account on the preceding Valuation
Date, with interest; plus
Any amount transferred to the Loan Account from the General Account on that
day; plus
Any amount transferred to the Loan Account from the Divisions of the Separate
Account on that day; minus
Any loan repayments on that day; plus
If that day is a policy anniversary, an amount due to cover the loan interest, if
not paid by you.
Accumulation account value held in the Loan Account for loan collateral will earn
interest daily at an annual rate of not less than the General Account Accumulation
Account Value Guaranteed Interest Rate shown on the Policy Specifications page.
Interest credited on the accumulation account value held in the Loan Account will be
allocated at least once a year to the General Account and the Divisions of the Separate
Account in the same proportion that the accumulation account value in each Loan
SubAccount bears to the accumulation account value in the Loan Account.
Monthly Cost The monthly cost of insurance for the following month is deducted on the monthly
of Insurance anniversary date. The monthly cost of insurance is 1, below, multiplied by the
difference between 2 and 3 below:
1. The monthly cost of insurance rate divided by 1,000.
2. An amount as follows:
Option A Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of Insurance Factor shown on
the Policy Specifications page; or
b. The accumulation account value at the beginning of the policy month
multiplied by the applicable percentage of the accumulation account value as
described in Section 7702(d) of the Internal Revenue Code of 1986 and
modified for ages 95 and above.
CCP60004 6.04
(5/99)
Option B Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of Insurance Factor shown on
the Policy Specifications page plus the accumulation account value at the
beginning of the policy month; or
b. The accumulation account value at the beginning of the policy month
multiplied by the applicable percentage of the accumulation account value as
described in Section 7702(d) of the Internal Revenue Code of 1986 and
modified for ages 95 and above.
Option C Contract Type: The greater of:
a. The face amount divided by the Monthly Cost of Insurance Factor shown on
the Policy Specifications page; or
b. The accumulation account value at the beginning of the policy month
multiplied by the Insured's attained age factor as shown on the policy's Death
Benefit Option C Attained Age Factors page.
3. The accumulation account value at the beginning of the policy month, before the
deduction of the monthly cost of insurance.
If the Contract Type is Option A or Option C and if there has been an increase in the
face amount, then the accumulation account value will first be considered a part of the
face amount when the policy was issued. If the accumulation account value is greater
than the initial face amount, the excess accumulation account value will then be
considered a part of each increase in order, starting with the first increase.
Monthly Cost At the beginning of each policy year, the monthly cost of insurance rate is determined
of Insurance for the initial face amount and each increase in face amount. The monthly cost of
Rates insurance rate is based on the Attained Age, risk classification, sex and completed
policy years from the effective date of the initial face amount and each increase in face
amount. For the initial face amount, we will use the risk classification as of the Issue
Date. For each increase, we will use the risk classification applicable to the increase. If
the death benefit equals a percentage of the accumulation account value, any increase
in accumulation account value will cause an automatic increase in the death benefit.
The risk classification for such increase will be the same as that used for the most
recent increase, excluding any riders, that required proof that the Insured was
insurable by our standards.
The monthly cost of insurance rates will never exceed the rates shown on the Table of
Guaranteed Monthly Cost of Insurance Rates page. Any change in the cost of
insurance rates will apply to all persons of the same age, sex, and classification whose
initial face amounts or increases in face amount have been in force for the same length
of time.
Selection and The selection and issue expense charge for the initial face amount or for any increase
Issue Expense in face amount is a monthly charge for the first 10 policy years or for the first 10 policy
Charge years following any increase in face amount. This charge equals the applicable face
amount times a selection and issue expense charge rate, divided by 1,000. The
selection and issue expense charge is based on the Insured's Issue Age, sex and risk
classification on the effective date of the initial face amount or any increase in face
amount. The selection and issue expense charge rate for the initial face amount of the
policy will never exceed the Maximum Selection and Issue Expense Charge Rate
shown on the Policy Specifications page for the initial face amount. A selection and
issue expense charge will also be applied to any increase in face amount. This charge
will never exceed the Maximum Selection and Issue Expense Charge Rate shown on
the Policy Specifications page for that increase.
Monthly Policy A policy charge will be deducted each policy month from the accumulation account
Charge value. The amount of the monthly policy charge will never exceed the amount shown
on the Policy Specifications page.
CCP60004 6.05
(5/99)
Monthly The monthly deduction is:
Deduction 1. The monthly cost of insurance; plus
2. The selection and issue expense charge multiplied by the face amount divided by
1,000; plus
3. The monthly policy charge; plus
4. The monthly cost, if any, for any rider included with this policy.
The monthly deduction for a policy month will be allocated among the General
Account and the Divisions of the Separate Account in the same proportion that the
accumulation account value in the General Account and the accumulation account
value in each Division bears to the total accumulation account value of the policy,
minus the accumulation account value in the Loan Account an the Monthly
Anniversary.
Cash Surrender The cash surrender value of this policy is:
Value 1. The accumulation account value at the time of surrender; minus
2. Any loan and loan interest accrued; minus
3. Any unpaid selection and issue expense charge due for the remainder of the first
policy year for the initial face amount and any increase in face amount; minus
4. Any unpaid monthly policy charge due for the remainder of the first policy year;
minus
5. Any surrender charge.
Surrender You may surrender your policy for its cash surrender value at any time during the
lifetime of the Insured. We will determine the cash surrender value as of the date we
receive your written request at our Service Center. The cash surrender value will not
be reduced by any monthly deduction due on that date for a subsequent policy month.
To cancel or surrender your life insurance policy you must provide written notice to us
or the servicing agent if authorized by us to receive these requests. The request must
contain the items listed below: (We will not request additional information.)
1. A definite request to cancel or surrender.
2. The policy number to be canceled or surrendered.
3. The insured's name on the policy to be canceled or surrendered.
4. The policyowner's signature and, if required by the policy or by a legally binding
document of which we have actual notice, the signature of a collateral assignee,
irrevocable beneficiary, or other person having an interest in the policy through
the legally binding document.
5. Either the policy itself, or, in lieu of the policy, a statement that the policy itself has
been lost or destroyed.
Partial After the first policy year, upon written request to us, you can make a partial
Withdrawals withdrawal of cash subject to the conditions listed below. The first 12 requested partial
withdrawals or transfers per policy year will be allowed free of charge; thereafter we
may impose a transfer charge not to exceed the Maximum Transfer/Partial Withdrawal
Charge shown on the Policy Specifications page.
No partial withdrawal will be processed which will result in the face amount, excluding
riders, being decreased below the Minimum Face Amount shown on the Policy
Specifications page.
We reserve the right to change the minimum amount or the number of times you may
make a partial withdrawal. We also may assess a transaction charge for a withdrawal.
This charge will not exceed the Maximum Transfer/Partial Withdrawal Charge shown
on the Policy Specifications page.
CCP60004 6.06
(5/99)
if the Contract Type is Option A or Option C and the death benefit equals the face
amount, then a partial withdrawal will decrease the face amount by an amount equal to
the partial withdrawal plus the applicable surrender charge. This surrender charge will
be allocated among the General Account and the Divisions of the Separate Account in
the same proportion that the partial withdrawal was allocated among the General
Account and the Divisions of the Separate Account. If the death benefit equals a
percentage of the accumulation account value then a partial withdrawal will decrease
the face amount by any amount by which the partial withdrawal plus the applicable
surrender charge exceeds the difference between the death benefit and the face
amount. The face amount will be decreased in the following order:
1. The face amount at issue, excluding riders; and
2. Any increases in the same order in which they were issued.
General Account The minimum amount of your partial withdrawal request at any one time must be at
Partial least $500 of your account.
Withdrawals - The maximum amount of all partial withdrawals and transfers from the General
Account in a policy year will be the greater of (1) or (2):
1. The cash surrender value of the General Account at the beginning of that
policy year multiplied by the withdrawal percentage limit, as shown on the
Policy Specifications page.
2. The previous year's General Account maximum withdrawal amount.
Separate Account The minimum amount of your partial withdrawal request at any one time must be
Partial the lesser of $500 of a Division or your entire balance in that Division.
Withdrawals The maximum amount of your partial withdrawal from any one of the Divisions of
the Separate Account in a policy year will be the cash surrender value of that
Division.
Allocation You may allocate the partial withdrawal plus any applicable surrender charge, subject
of Partial to the above conditions, among the General Account and the Divisions of the Separate
Withdrawals Account. If you do not specify the allocation, then the partial withdrawal will be
allocated among the General Account and the Divisions of the Separate Account in the
same proportion that the accumulation account value in the General Account and the
accumulation account value in each Division bears to the total accumulation account
value of the policy, minus the accumulation account value in the Loan Account on the
date of the partial withdrawal. If the General Account conditions will not allow this
proportionate allocation, we will request that you specify an acceptable allocation.
Pro Rata After the first policy year, upon written request to us, you can make a pro rata
Surrender surrender of your policy. The pro rata surrender can be any whole number percentage
of your policy. The pro rata surrender will reduce the face amount and the
accumulation account value by the percentage chosen. The face amount decrease will
be subject to the following conditions:
1. The decrease will become effective on the monthly anniversary on or following
our receipt of the request.
2. The decrease will reduce the face amount in the following order:
a. The face amount provided by the most recent increase;
b. Face amounts provided by the next most recent increases, successively; and
c. The face amount when the policy was issued.
3. You may allocate the decrease in accumulation account value due to the pro rata
surrender plus any applicable surrender charge among the General Account and
the Divisions of the Separate Account. If you do not specify the allocation, then
the decrease in accumulation account value plus any applicable surrender charge
will be allocated among the General Account and the Divisions of the Separate
Account in the same proportion that the accumulation account value in the
General Account and the accumulation account value in each Division bears to
the total accumulation account value of the policy, minus the accumulation
account value in the Loan Account on the date of the pro rata surrender.
CCP60004 6.07
(5/99)
A pro rata surrender can not be processed if it will reduce the face amount below the
Minimum Face Amount shown on the Policy Specifications page. No pro rata
surrender will be processed for more cash surrender value than is available on the
date of the pro rata surrender. A cash payment will be made to you for the amount of
accumulation account value reduction less any applicable surrender charges.
Surrender Charge A surrender charge will apply upon surrender, upon lapse, upon a partial withdrawal
that reduces the face amount, or upon a decrease in face amount for up to 10 years
from the policy's Issue Date or for up to 10 years following the effective date of any
increase in face amount.
The surrender charge for the initial face amount is the Target Annual Premium (Base
only), shown on the Policy Specifications page, multiplied by the applicable surrender
charge percentage, plus the surrender charge for any increase in face amount. The
surrender charge for any increase in face amount is the Target Annual Premium (Base
only) for that increase, shown on the Policy Specifications page for that increase,
multiplied by the applicable surrender charge percentage. The surrender charge
percentage will never exceed the Maximum Surrender Charge Percentage shown on
the Surrender Charge Schedule page, for the initial face amount and for any increase.
The surrender charges for this policy will vary on a non-discriminatory basis, based on
the amount of premium paid, but will never exceed the Maximum Surrender Charge
Percentage shown on the Surrender Charge Schedule page.
A surrender charge will apply to any decrease in face amount. A decrease in face
amount may decrease some or all of the initial face amount and increases in face
amount as provided in Section 5. A partial withdrawal may cause a decrease in face
amount as provided above and, therefore, a surrender charge may be taken. If the face
amount is decreased by some fraction of any previous increases in face amount
and/or the face amount at issue, the surrender charge deducted will be the previously
defined surrender charge multiplied by the fraction.
The surrender charge will be allocated among the General Account and the Divisions
of the Separate Account in the same proportion that the accumulation account value
in the General Account and the accumulation account value in each Division bears to
the total accumulation account value of the policy minus the accumulation account
value in the Loan Account.
Postponement We will usually pay any amounts payable on surrender, partial withdrawal, or policy
of Payments loan allocated to the Divisions of the Separate Account within seven days after written
or Transfers notice is received. We will usually pay any death benefit proceeds within seven days
after we receive due proof of claim. Payment of any amount payable, from the
Divisions of the Separate Account, on surrender, partial withdrawal, policy loan or
death may be postponed whenever:
1. The New York Stock Exchange is closed (other than customary weekend and
holiday closing) or trading on the New York Stock Exchange is restricted as
determined by the SEC;
2. The SEC, by order, permits postponement for the protection of policy owners; or
3. An emergency exists as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Separate Account.
We may defer payment of the portion of any amount payable from the General
Account on surrender or partial withdrawal for not more than six months. If we defer
payment for 30 days or more, we will pay interest at the rate of 2 1/2% per year for the
period of deferment.
Transfers may also be postponed under the circumstances listed above.
We may defer payment of the portion of any policy loan from the General Account for
not more than six months. No payment from the General Account to pay premiums on
this policy will be deferred.
Continuation If all premium payments cease, the insurance provided under this policy, including
of Insurance benefits provided by any rider attached to this policy, will continue in accordance with
the provisions of this policy for as long as the accumulation account value less any
loans, loan interest accrued and any surrender charge is sufficient to cover the
monthly deductions.
CCP60004 6.08
(5/99)
Basis of The minimum accumulation account values are based on 1) the Minimum
Computation Accumulation Account Value Mortality Table shown on the Policy Specifications page;
and 2) for amounts allocated to the General Account, compound interest at an annual
rate of not less than the General Account Accumulation Account Value Guaranteed
Interest Rate shown on the Policy Specifications page. There is no minimum
accumulation account value guaranteed interest rate for amounts allocated to the
Divisions of the Separate Account.
Net single premiums are based on 1) the 7702 Table as shown on the Policy
Specifications page; and 2) the General Account Accumulation Account Value
Guaranteed Interest Rate as shown on the Policy Specifications page.
All values are at least equal to those required by any applicable law of the state that
governs your policy. We have filed a detailed statement of the method of calculating
accumulation account values and reserves with the insurance supervisory official of
that state.
CCP60004 6.09
(5/99)
9. PAYMENT OF POLICY BENEFITS
Payment A lump sum payment will be made as provided on the face page.
Interest on We will pay interest on proceeds from the date of the Insured's death to the date of
Proceeds payment. Interest will be at an annual rate determined by us, but never less than the
Guaranteed Interest Rate, shown on the Policy Specifications page.
Extended Provisions for settlement of proceeds different from a lump sum payment may only be
Provisions made upon written agreement with us.
CCP700 7.01
(5/99)
COVA Service Center
P.O. Box 14490
St. Louis, MO 63178
Cova Financial Life Insurance Company 1-800-638-9294
4100 Newport Place Drive
Newport Beach, California 92662
STATE OF CALIFORNIA CONSUMER NOTICE
The following is the address and phone number of the California Insurance Department:
Department of Insurance
Consumer Services Division
300 S. Spring Street
South Tower, Suite 210
Los Angeles, CA 90013
1-800-927-9045
213-897-8921
The Department of Insurance should be contacted only after the contacts between you and Cova
Financial Life Insurance Company or its agent or other representative have failed to produce a
satisfactory solution to the problem.
CC-519 (10/98)
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Non-Participating
COVA
COVA FINANCIAL LIFE
INSURANCE COMPANY
4100 NEWPORT PLACE DRIVE
NEWPORT BEACH, CA 92662
CCP00104
(5/99)
COVA
Cova Financial Life Insurance Company
4100 Newport Place Drive
Newport Beach, California 92662
CALIFORNIA LIFE AND HEALTH INSURANCE
GUARANTEE ASSOCIATION ACT
SUMMARY DOCUMENT AND DISCLAIMER
Residents of California who purchase life and health insurance and annuities
should know that the insurance companies licensed in this state to write these
types of insurance are members of the California Life and Health Insurance
Guarantee Association ("CLHIGA"). The purpose of this Association is to assure
that policyholders will be protected, within limits, in the unlikely event that
a member insurer becomes financially unable to meet its obligations. It this
should happen, the Guarantee Association will assess its other member insurance
companies for the money to pay the claims of insured persons who live in this
state and, in some cases, to keep coverage in force. The valuable extra
protection provided through the Association is not unlimited, as noted in the
box below, and is not a substitute for consumers' care in selecting insurers.
THE CALIFORNIA LIFE AND HEALTH INSURANCE GUARANTEE ASSOCIATION MAY NOT
PROVIDE COVERAGE FOR THIS POLICY. IF COVERAGE IS PROVIDED, IT MAY BE SUBJECT TO
SUBSTANTIAL LIMITATIONS OR EXCLUSIONS, AND REQUIRE CONTINUED RESIDENCY IN
CALIFORNIA. YOU SHOULD NOT RELY ON COVERAGE BY THE ASSOCIATION IN SELECTING AN
INSURANCE COMPANY OR IN SELECTING AN INSURANCE POLICY.
COVERAGE IS NOT PROVIDED FOR YOUR POLICY OR ANY PORTION OF IT THAT IS NOT
GUARANTEED BY THE INSURER OR FOR WHICH YOU HAVE ASSUMED THE RISK, SUCH AS A
VARIABLE CONTRACT SOLD BY PROSPECTUS.
INSURANCE COMPANIES OR THEIR AGENTS ARE REQUIRED BY LAW TO GIVE OR SEND YOU
THIS NOTICE. HOWEVER, INSURANCE COMPANIES AND THEIR AGENTS ARE PROHIBITED BY LAW
FROM USING THE EXISTENCE OF THE GUARANTEE ASSOCIATION TO INDUCE YOU TO PURCHASE
ANY KIND OF INSURANCE POLICY.
POLICYHOLDERS WITH ADDITIONAL QUESTIONS SHOULD FIRST CONTACT THEIR INSURER
OR AGENT OR MAY THEN CONTACT
Executive Director or Allegra Willison, Staff Counsel
California Life and Health Insurance California Department of Insurance
Guarantee Association 45 Fremont Street, 24th Floor
P.O. Box 70069 San Francisco, CA 94105
Los Angeles, CA 90070
The state law that provides for this safety-net coverage is called the
California Life and Health Guarantee Association Act. Below is a brief summary
of this law's coverages, exclusions and limits. This summary does not cover all
provisions of the law; nor does it in any way change anyone's rights or
obligations under the Act or the rights or obligations of the Association.
CC-88 (10/98) (please turn over)
COVERAGE
Generally, individuals will be protected by the California Life and Health Insurance Guarantee Association if
they live in this state and hold a life or health insurance contract, or an annuity, or if they are insured under a
group insurance contract, issued by a member insurer. The beneficiaries, payees or assignees of insured
persons are protected as well, even if they live in another state.
EXCLUSIONS FROM COVERAGE
However, persons holding such policies are not protected by this Guarantee Association if:
Their insurer was not authorized to do business in this state when it issued the policy or contract;
Their policy was issued by a health care service plan (HMO, Blue Cross, Blue Shield), a charitable
organization, a fraternal benefit society, a mandatory state pooling plan, a mutual assessment
company, an insurance exchange, or a grants and annuities society;
They are eligible for protection under the laws of another state. This may occur when the insolvent
insurer was incorporated in another state whose guaranty association protects insureds who live
outside that state.
The Guarantee Association also does not provide coverage for:
Unallocated annuity contracts; that is, contracts which are not issued to and owned by an individual
and which guarantee rights to group contract holders, not individuals:
Employer and association plans, to the extent they are self-funded or uninsured;
Any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has
assumed the risk, such as a variable contract sold by prospectus;
Any policy of reinsurance unless an assumption certificate was issued;
Interest rate yields that exceed an average rate;
Any portion of a contract that provides dividends or experience rating credits.
LIMITS ON AMOUNT OF COVERAGE
The Act limits the Association to pay benefits as follows:
LIFE AND ANNUITY BENEFITS
80% of what the life insurance company would owe under a life policy or annuity contract up to
$100,000 in cash surrender values,
$100,000 in present value of annuities, or
$250,000 in life insurance death benefits.
A maximum of $250,000 for any one insured life no matter how many policies and contracts there were
with the same company, even if the policies provided different types of coverages.
HEALTH BENEFITS
A maximum of $200,000 of the contractual obligations that the health insurance company would owe
were it not insolvent. The maximum may increase or decrease annually based upon changes in the
health care cost component of the consumer price index.
PREMIUM SURCHARGE
Member insurers are required to recoup assessments paid to the Association by way of a surcharge on
premiums charged for health insurance policies to which the Act applies.
CC-888 (10/98)
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ACCELERATED BENEFIT RIDER
Issued by Cova Financial Life Insurance Company
Please Read This Rider Carefully
Subject to all the provisions of this rider and the policy to which it is attached, we will make the payments
described below if the insured is terminally ill. "You" and "your" refer to the owner of the policy to which this rider
is attached. Death benefits, cash values, and loan values will be reduced if an accelerated benefit is paid.
This rider is non-participating. There is no premium charge for this rider.
Receipt of an accelerated benefit payment may adversely affect your eligibility for Medicaid or other
government benefits or entitlements. Exercising this option may not qualify the benefits as life
insurance proceeds for tax purposes. Therefore, assistance should be sought from a personal tax
advisor.
<S> <C>
Eligible Eligible Proceeds under this rider means the death benefit payable if the insured would
Proceeds have died on the date this rider is exercised, according to the terms of the policy to which
this rider is attached, without reduction for indebtedness. Eligible Proceeds will not include
any accidental death benefits, decreasing term benefits, or benefits that would expire in
less than three years from the date of election of the benefit.
You must select the amount of Eligible Proceeds to be used in computing the Accelerated
Payment. You may choose an acceleration percentage of 25%, 50% or 75%. The Eligible
Proceeds multiplied by the acceleration percentage cannot be less than the lower of 25% of
the policy's face amount or $50,000. The Eligible Proceeds multiplied by the acceleration
percentage cannot exceed $250,000. If this amount exceeds $250,000 the acceleration
percentage must be decreased.
Accelerated We will compute the Accelerated Payment based on the following:
Payment 1. The amount of Eligible Proceeds multiplied by the acceleration percentage.
2. Reduced life expectancy.
3. Interest Rate. The interest rate used in the calculation of the accelerated payment will
be no greater than the greater of:
a. The current yield on 90 day treasury bills; or
b. The current maximum statutory adjustable policy loan interest rate.
4. A processing charge not to exceed $150.
5. A reduction equal to the acceleration percentage multiplied by any indebtedness.
The method of computation has been filed with the insurance supervisory official of the
state that governs your policy. We may change the assumptions we use from time to time.
The Accelerated Payment will be made to you in a lump sum. We will make an
Accelerated Payment only once per insured.
Terminal Before we make an Accelerated Payment, you must give us satisfactory evidence that a
Illness medical condition exists that would result in the Insured's life expectancy to be 12 months
or less. This evidence must be a certification by a licensed physician. The physician may
not be you, the Insured, or a member of the Insured's family.
We reserve the right to require, at our own expense, another examination of the Insured by
a physician of our choice, or any other evidence we deem necessary. If there is a conflict of
medical opinion as to the life expectancy of the Insured, the opinion of the physician of our
choice will govern.
CCR1 1
(5/99)
Conditions Your right to receive an Accelerated Payment under this rider is subject to the following
conditions:
1. The policy must be inforce.
2. If the policy is in force as extended term insurance, you must apply for this benefit at
least one year prior to the insurance termination date.
3. The face amount of the policy must be at least $25,000.00.
4. You must make a written request for payment in a form satisfactory to us.
5. You must send us the policy and this rider for endorsement.
6. Any irrevocable beneficiary must give written consent for payment.
7. Any assignee must give written consent for payment.
8. This benefit provides for the accelerated payment of a portion of life insurance
proceeds. It is not meant to cause you to involuntarily invade proceeds ultimately
payable to the named beneficiary. Accelerated benefits will be made available to you
on a voluntary basis only. Therefore:
a. If you are required by law to use this payment to meet the claims of creditors,
whether in bankruptcy or otherwise, you are not eligible for this benefit.
b. If you are required by a government agency to use this payment in order to apply
for, obtain, or keep a government benefit or entitlement, you are not eligible for
this benefit.
Effect on Policy All policy values, face amounts and loan values on the remaining policy, if any, will be
reduced by the acceleration percentage. Upon acceleration, premiums will be based on the
reduced face amount of the policy. Insurance not included in eligible proceeds will not be
affected.
Termination This rider will terminate at the earliest of the following:
1. When you make a written request to terminate it and return the policy to us, or
2. When an Accelerated Payment is made, or
3. When the policy to which this rider is attached terminates.
The issue date and effective date of this rider and the policy are the same unless another effective date of this rider
is shown below.
___________________________________
DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR1 2
(5/99)
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ADJUSTABLE BENEFIT TERM RIDER
Issued by Cova Financial Life Insurance Company
Please Read This Rider Carefully.
This rider is a part of the policy to which it is attached and is subject to all applicable terms and provisions of that
policy; except as modified herein. This rider is indicated on the Policy Specifications page.
<S> <C>
Life Insurance This rider provides non-convertible term life insurance on the life of the insured shown on
Benefit the policy specifications page. We will pay the face amount of this rider to the beneficiary if
this rider is in force upon the insured's death.
Adjustable On any monthly policy anniversary, while this rider is in force an adjustment in the face
Benefit Term amount of this rider equal to the Adjustable Benefit Term Amount may be requested.
Dates
Adjustable The Adjustable Benefit Term Amount is the amount necessary to conform the total of the
Benefit Term death benefit of the policy and this rider to the benefit provided under your employee
Amount benefit plan. (The policy to which this rider is attached has been issued in conjunction with
an employee benefit plan.) The Adjustable Benefit Term Amount could be an increase, as
well as a decrease.
Each Adjustable Benefit Term Amount that is an increase will be subject to the following
conditions:
1. It must adjust the face amount at least $1,000. If the Adjustable Benefit Term Amount is
less than $1,000, no adjustment will occur.
2. The maximum annual Adjustable Benefit Term Amount, available without evidence of
insurability, is 20% of the total death benefit of the base policy and this rider on the
prior policy anniversary. Depending on our company rules at the time this rider is
issued, we may include the face amounts of other riders attached to the policy when
determining the maximum annual Adjustable Benefit Term Amount.
Face Amount When an adjustment under this rider is made, the face amount of this rider will increase or
decrease accordingly. The face amount of this rider will expire at age 100.
Monthly Cost The monthly cost of insurance for the following month is deducted on the monthly
of Insurance anniversary date. The monthly cost of insurance is the monthly cost of insurance rate for
this rider divided by 1,000 times the face amount of this rider.
Monthly Cost The monthly cost of insurance rate for this benefit is based on the attained age, risk
of Insurance classification, (in a non-unisex policy) sex of the insured and the completed policy years
Rates from the issue date. Monthly cost of insurance rates will be determined by us based on
expectations as to future experience. However, these rates will not exceed those shown in
the Table of Guaranteed Monthly Cost of Insurance Rates for the Adjustable Benefit Term
Rider.
Each monthly anniversary this rider is in force, the monthly cost of insurance for this rider
(as determined above) will be added to the monthly deductions as defined in the Cash
Values section of the policy. This increased monthly deduction will be used to determine
the cash value of the policy on such monthly anniversary.
Monthly Rider Each monthly anniversary this rider is in force, a monthly rider charge will be added to the
Charge monthly deductions of the policy. This increased monthly deduction will be used to
determine the cash value of the policy on such monthly anniversary. The monthly rider
charge will never exceed the Monthly Rider Charge for the Adjustable Benefit Term Rider
shown on the policy specifications page.
Rejection of You will be notified of each adjustment requested under this rider. Each adjustment will be
Adjustment automatic. However, you may reject an increase by notifying us in writing within 30 days
after the policy anniversary on which the increase is made. If you reject two consecutive
increases, no further increases will be made under this rider. You may not reject an
adjustment which is a decrease.
CCR2 1
(5/99)
Evidence of Evidence of insurability satisfactory to us may be required for an adjustment that would
Insurability result in an increase after the insured attains age 65. Evidence of insurability satisfactory to
us may also be required for an increase which results in a face amount that exceeds our
maximum company limits. Failure to provide such evidence will result in the increase being
declined and no further increases under this rider will be made. Evidence of insurability
may also be required for any Adjustable Benefit Term Amount increase that exceeds 20% of
the total face amount of the policy and this rider on the prior policy anniversary.
Partial If a partial withdrawal of cash from the policy to which this rider is attached is required to
Withdrawal conform to the terms of the employee benefit plan, the maximum withdrawal limits in the
policy will not apply to such partial withdrawal. Any decrease in face amount due to the
partial withdrawal will reduce the face amount of the rider first.
Termination No adjustments that result in an increase under this rider will be made after any of the
following events first occurs:
a) the second consecutive rejection of an increase; or
b) the receipt of your request to decrease the base policy's face amount; or
c) any partial withdrawal not required to conform to the terms of the employee benefit
plan that reduces the face amount.
No adjustments will be made under this rider once you are no longer eligible for
adjustments according to your employee benefit plan.
The issue date and effective date of this rider and the policy are the same.
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR2 2
(5/99)
</TABLE>
ANNIVERSARY PARTIAL WITHDRAWAL RIDER
Variable Life
Issued by Cova Financial Life Insurance Company
This rider is a part of the policy and is subject to all applicable terms and
provisions of the policy; except as modified herein.
Prior to the Insured's Attained Age 95, this rider replaces the Partial
Withdrawals, the General Account Partial Withdrawals and the Separate Account
Partial Withdrawals provisions with the following:
You can make a partial withdrawal of cash on any policy anniversary date prior
to the Insured's Attained Age 95. The amount of the partial withdrawal may not
exceed the greater of:
1. The increase in cash surrender value since the preceding policy
anniversary; or
2. The cash surrender value at the beginning of that policy year multiplied by
the Anniversary Partial Withdrawal Percentage Limit, shown on the Policy
Specifications page.
A partial withdrawal will not be processed for more cash than is available in
the cash surrender value on the date of the partial withdrawal.
The minimum amount for a partial withdrawal request from the General Account
must be at least $500.00.
The minimum amount for a partial withdrawal request from the Separate Account
must be the lesser of $500.00 of a Division; or your entire balance in that
Division.
When the Insured reaches Attained Age 95, this rider will terminate and the
Partial Withdrawals, the General Account Partial Withdrawals and the Separate
Account Partial Withdrawals provisions as described in the policy will become
effective. You may terminate this rider prior to the Insured's Attained Age 95,
by sending us a written request.
The Issue Date and the effective date of this rider and the policy are the same
unless another effective date is shown below.
_________________________________
DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR3
(5/99)
<TABLE>
<CAPTION>
GUARANTEED SURVIVOR PLUS PURCHASE OPTION RIDER
Issued by Cova Financial Life Insurance Company
Please Read This Rider Carefully
The waiting periods for suicide and incontestability are different from those in the policy and begin on
the effective date of the rider.
This rider is a part of the policy to which it is attached and is subject to all applicable terms and provisions of the
policy; except as modified herein. The Policy Specifications page or, if this rider is added after issue, the Policy
Specifications page for the Policy Change shows the Option Amount and the Monthly Expense Charge Rate.
<S> <C>
Designated Life The Designated Life is named in the application for this rider. The Designated Life may not
be changed.
Option Periods The Option Periods for this rider are elected at the time of application. An Option Period
that starts on the date of death of the Insured will always be provided. Unless the Owner
elects otherwise, Option Periods will also start on the tenth anniversary of the rider and on
the rider anniversary nearest the Designated Life's 65th birthday.
The Option Period ends on the earlier of the following dates:
1. 270 days after the Option Period begins if the Option Period begins on the date of the
death of the Insured; otherwise 30 days after the Option Period begins.
2. The date when the current option or any portion of it is exercised. We must be notified
of this date.
Total Option The Total Option Amount is the amount shown on the Policy Specifications page as
Amount "Guaranteed Survivor Plus Purchase Option Rider" or, if this rider is added after issue, on
the Policy Specifications page for Policy Change as "Guaranteed Survivor Plus Purchase
Option Rider".
Current Option The Current Option Amount is the Total Option Amount divided by the number of Option
Amount Periods elected in the application for this rider. In the case of an Option Period that begins
on the date of death of the Insured, the Current Option Amount is the Total Option Amount
reduced by the face amount of any option policies previously purchased.
Option to The Owner may purchase an option policy on the Designated Life during an Option Period
Purchase that begins during the lifetime of the Insured. The Insured's Beneficiary may purchase an
Insurance option policy on the Designated Life during the Option Period that begins on the date of
death of the Insured. The Owner or Beneficiary may transfer to any person or entity its right
to buy the option policy on the Designated Life. However, we must receive written notice, in
a form satisfactory to us, at our Home Office before such transfer will take effect.
No evidence of insurability will be required for this option policy. The face amount of this
option policy will not be more than the Current Option Amount.
This option policy will be subject to the following:
1. We must receive written application for the option policy in our Home Office during the
Option Period. The Designated Life must consent to the insurance by signing the
application for the option policy.
2. This rider must be in force at the beginning of the Option Period.
3. The Designated Life must be living at the end of the Option Period.
4. The person who exercises the option will be the owner of the new policy.
5. The coverage of the new policy will start on the day after the end of the Option Period.
CCR4 1
(5/99)
Features of At the request of the person authorized to purchase the option policy, the option policy
Option Policy may be any permanent, non-variable individual life plan offered by us on the date of issue
of the option policy, or a level premium, level death benefit whole life plan offered by us on
the date of this rider.
1. If the option policy is a permanent, non-variable individual life plan offered by us on
the date of issue of the option policy, it will be subject to the rules in effect at the time
the option is exercised. The premiums or charges for the policy will be based on the
following:
a. The insurance age and (in a non-unisex policy) sex of the Designated Life on the
date of issue of the option policy; and
b. The risk class of the Designated Life as of the date of issue of this rider. (This will
be determined and set forth on the Policy Specifications page or, if this rider is
added after issue, on the Policy Specifications page for Policy Change.)
2. If the option policy is a level premium, level death benefit whole life plan offered by us
on the date of issue of this rider, the following conditions apply:
a. The premium rate for the policy will be based on the following:
1. The age nearest birthday of the Designated Life on the date of issue of this
rider; and
2. The rate class of the Designated Life as of the date of issue of this rider. (This
will be determined and set forth on the Policy Specifications page); and
3. The rates in use by us on the date of issue of the new policy.
b. The Initial Payment for the new policy will be:
1. The interpolated cash value of the new policy as of the end of this Option
Period; plus
2. A pro rata premium for the new policy, if any, for the period from the end of the
Option Period to the next anniversary of the new policy.
All references to cash value refer to the guaranteed cash value of the new policy.
c. The first regular premium payable under the new policy, if any, is due on the first
policy anniversary following the end of the Option Period. If any premium remains
unpaid at the end of the grace period as described in the new policy, then the
nonforfeiture option as defined in the new policy will apply unless another option
has been elected.
d. No dividends will have been earned by the new policy prior to the date of
coverage of the new policy.
3. The face amount of the option policy:
a. May not be less than the minimum required amount for the plan requested; and
b. May not exceed the Current Option Amount.
4. Riders for extra benefits may be added to the option policy with our consent. We may
require satisfactory proof that the Designated Life is insurable for the riders at the time
this option is exercised.
Temporary We will pay the Current Option Amount to the Beneficiary upon the death of the Designated
Insurance Life during the Option Period except for simultaneous death of the Insured and Designated
Life. If both the Insured and the Designated Life die and it is not possible to determine the
sequence of deaths, then we will provide such temporary insurance for one-half of the
Current Option Amount available at the date of death of the Insured. If payable, the benefit
will become part of the proceeds of the policy.
CCR4 2
(5/99)
Reinstatement This rider may be reinstated within five years after the date of policy lapse if:
1. The policy is also being reinstated; and
2. You submit proof satisfactory to us that the Designated Life is insurable by our
standards; and
3. The Designated Life is alive on the date we approve the request for reinstatement. If
the Designated Life is not alive, such approval is void and of no effect.
Monthly Expense The Monthly Expense Charge for this rider is deducted from the policy's cash value on the
Charge monthly anniversary. The Monthly Expense Charge is determined by the Total Option
Amount for this rider, divided by 1,000 and multiplied by the Monthly Expense Charge Rate
shown on the Policy Specifications page or, if this rider is added after issue, the Policy
Specifications page for Policy Change.
Incontestability This rider will be incontestable after it has been in force during the lifetime of the
Designated Life for a period of two years from its effective date. We cannot contest any
reinstatement of this rider after it has been in force during the lifetime of the Designated
Life for a period of two years from the date we approve a reinstatement.
Suicide Exclusion If the Designated Life dies by suicide, while sane or insane, during the Option Period and
within two years from the effective date of this rider (or within the maximum period
permitted by laws of the state in which this policy was delivered, if less than two years), the
amount payable under this rider will be limited to the amount paid for this rider. This
amount will be paid according to the provisions of the policy to which this rider is attached
for the payment of death claim benefits on any such person.
Misstatement of If the face amount of the policy to which this rider is attached is decreased due to the
Age and/or Sex misstatement of age and/or (in a non-unisex policy) sex of the Insured, then the Option
of the Insured Amount stated on the Policy Specifications page will also be decreased. The decreased
Option Amount will bear the same ratio to the adjusted face amount of this policy as the
original Option Amount bore to the original face amount.
Misstatement of If the age and/or (in a non-unisex policy) sex has been misstated on the application, we will
Age and/or Sex adjust the Total Option Amount to be the Total Option Amount that would have been
of the Designated provided had this information been correctly stated.
Life and/or the
Insured
Termination The right to buy insurance will not extend beyond an Option Period. This rider will
terminate on the date any of the following events first occurs:
1. Upon our receipt of your written request for termination. We may require the policy
and this rider for endorsement; or
2. The date the policy terminates for reasons other than the death of the Insured; or
3. The date of death of the Designated Life; or
4. The date the Option Period that begins on the date of death of the Insured ends.
When this rider terminates:
1. All rights under this rider will cease;
2. No further monthly expense charges will be due for this rider; and
3. The policy will be considered as separate and complete without this rider.
CCR4 3
(5/99)
The issue date and effective date of this rider and the policy are the same unless another effective date is shown
below.
_________________________________________
EFFECTIVE DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life insurance Company
Newport Beach, California
CCR4 4
(5/99)
</TABLE>
<TABLE>
<CAPTION>
LIFETIME COVERAGE RIDER
Issued by Cova Financial Life Insurance Company
This rider is a part of the policy to which it is attached and is subject to all applicable terms and provisions of the
policy; except as modified herein. The Policy Specifications page, or if this rider is added after issue, the Policy
Specifications page for Policy Change, shows the rider information.
<S> <C>
Cost of The monthly rider cost of insurance is the Lifetime Coverage Rider Cost of Insurance Rate
between:
1. the Death Benefit, as defined in the policy, divided by the Monthly Cost of Insurance
Factor shown on the Policy Specifications page; and
2. the Cash Value of the policy at the beginning of the policy month, before the deduction
of the Monthly Cost of Insurance.
The monthly charge will be deducted from the policy's Cash Value. Deduction will start at
Attained Age 80 and continue through age 99.
Death Benefit If this rider is in force, the Death Benefit, after the Insured's Attained Age 100, is the greater
of:
1. The Face Amount of the base policy; or
2. 101% of the Cash Value.
Reinstatement If this rider terminates after Attained Age 80, it may not be reinstated.
Termination This rider will terminate upon the earlier of:
a. a written request to us for termination;
b. the date of termination of the policy to which this rider is attached.
Continuation Once this rider has terminated, the base policy may continue in accordance with the
of Insurance provisions of the base policy but without the benefit provided by this rider.
The issue date and effective date of this rider and the policy are the same unless another effective date of this rider
is shown below.
________________________________
DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
CCR5 Newport Beach, California
(5/99)
</TABLE>
<TABLE>
<CAPTION>
PRELIMINARY TERM LIFE INSURANCE RIDER
Issued by Cova Financial Life Insurance Company
Please Read This Rider Carefully
The waiting periods in the suicide and incontestability are different from those in the policy and begin on the
effective date of the rider.
If the rider premium has been paid, this rider will become a part of the policy. This rider is subject to all applicable
terms and provisions of the policy; except as modified herein. The Policy Specifications page shows the rider
premium.
<S> <C>
Preliminary If any person to be insured under the policy should die while this rider is in effect, we will
Term Insurance pay the death claim as if such death occurred on the issue date of the policy. The amount
Benefit payable as a death claim will be the same amount which would have been payable under
the policy. Any other supplemental rider included with the policy when issued will be
deemed effective while this rider is in force.
The policy will take effect on its issue date if prior to that date:
1. The premium due has been paid; and
2. This rider has been made effective according to its terms.
When Rider This rider will not take effect until the policy is delivered and accepted by you. Payment of
is Effective the full premium for this rider must then be paid to us. All of this must occur during the
lifetime and sound health of each person to be insured under the policy.
However, if you pay the full premium for this rider with the application and a Temporary
Insurance Receipt bearing the same proposed Insured's name as the application has been
given to you, then the effective date of this rider will be the latest of:
1. The date of the application part I; or
2. The date of the last dated application part II; or
3. The date of the last of any medical test required under our rules and practices.
The rider will then become effective if on the latest of these dates:
1. The person to be insured under the policy is in sound health; and
2. The application is approved by us according to our rules, limits and practices; and
3. The person to be insured qualifies for the exact plan, the amount, and any additional
benefit riders applied for; and
4. The person is insurable at least at standard rates.
Incontestability We cannot contest this rider, except for nonpayment of premium, after it has been in force
during the lifetime of the insured for a period of two years from its date of issue.
Suicide If the insured dies by suicide, while sane or insane, within two years from the date of issue
Exclusion of this rider (or within the maximum period permitted by laws of the state in which this
policy was delivered if less than two years), the amount payable under this rider will be
limited to the amount of premiums paid for this rider. This amount will be paid according to
the provisions of the policy to which this rider is attached for the payment of death claim
benefits on any such person.
CCR6 1
(5/99)
General Neither this rider nor payment of any premium for it will affect any loan or other values, or
Provisions dividends on the policy. Should the premium due on the policy be paid before the issue
date, and while this rider is in effect, the policy will still be treated as if it goes into effect as
of the issue date. No grace period is granted for payment of the premium due on the issue
date of the policy. Failure to pay such premium before such date will cause the policy to be
null and void.
The issue date and effective date of this rider and the policy are the same unless another effective date is shown
below.
___________________________________
DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR6 2
(5/99)
</TABLE>
<TABLE>
<CAPTION>
SECONDARY GUARANTEE RIDER
Issued by Cova Financial Life Insurance Company
It this rider is listed on the Policy Specifications page, it is part of the policy. This rider is subject to all applicable
terms and provisions of the policy, except as modified herein.
<S> <C>
Cost of The monthly rider cost of insurance is the Secondary Guarantee Rider Cost of Insurance
Insurance Rate shown on the Policy Specifications page, divided by 1000, multiplied by the difference
between:
1. the Death Benefit divided by the Monthly Cost of Insurance Factor shown on the Policy
Specifications page; and
2. the Cash Value of the base policy at the beginning of the policy month, before the
deduction of the Monthly Cost of Insurance.
Death Benefit The Death Benefit is the greater of:
1. The Face Amount of the base policy; or
2. The Death Benefit otherwise provided by the base policy.
Notwithstanding anything in this policy, the Death Benefit will in no case be less than the
amount necessary to cause the policy to meet the requirements for the definition of life
insurance under the Internal Revenue Code of 1986 or any applicable successor.
Guarantee If, on a Monthly Anniversary day prior to the Secondary Guarantee Date, shown on the
Death Benefit Policy Specifications page:
Period a. the sum of all premiums paid on this policy; less
b. any Partial Withdrawals; less
c. any outstanding loan balance;
is greater than or equal to the sum of the Secondary Guarantee Premium for the elapsed
months since the Issue Date, this policy will not lapse even if your Cash Surrender Value is
not sufficient to cover the Monthly Deduction on a Monthly Anniversary day.
Policy Changes If there is a decrease in Face Amount prior to the tenth policy anniversary the Secondary
Guarantee Premium will not be changed. If there is a decrease after the tenth policy
anniversary, we will reduce the future Secondary Guarantee Premium by an amount
proportionate to the decrease in Face Amount. We will provide you with a new Policy
Specifications page.
If there is an increase in Face Amount, the Secondary Guarantee Premium will be
increased based on the amount of the increase, the Attained Age, sex, and underwriting
classifications of the Insured at the time of the increase. The policy will be amended at the
time of the increase to reflect any changes to the Secondary Guarantee Premium.
If additional riders are added or cancelled we may adjust the Secondary Guarantee
Premium. We will provide you with a new Policy Specifications page.
Guarantee If on a Monthly Anniversary day prior to the Secondary Guarantee Date, the sum of all
balance, is less than the sum of the Secondary Guarantee Premiums for the elapsed
months since the Issue Date, then the Guarantee Grace Period of 62 days will be allowed
for the payment of a premium sufficient to keep this rider in force. The Secondary
Guarantee Date and the Secondary Guarantee Premium are shown on the Policy
Specifications page.
Notice of the amount of premium required to be paid to keep this rider in force will be sent
at the beginning of the Guarantee Grace Period to the last known address of the Owner
and of any assignee of record. If we do not receive the premium required by the end of the
Guarantee Grace Period this rider will terminate and the guarantee provided by this rider
will no longer be in effect. If the premium requirement is not met and death occurs during
the Guarantee Grace Period, there is no deduction of the rider premium required from the
Death Benefit.
CCR7 1
(5/99)
Misstatement If there is a Misstatement of Age or Sex in the application and such determination is made
of Age or prior to the death of the Insured and while this rider is in effect, then the Secondary
Sex Guarantee Premium will be that amount which corresponds to the Face Amount, as
adjusted under the policy, using the correct age and/or sex. The Account Value and the
Surrender Charges will not change at the point of correction.
Secondary The date the Secondary Guarantee Rider expires. This date is shown on the Policy
Guarantee Specifications page.
Date
Secondary The premium required to keep the Secondary Guarantee Rider in force. This premium is
Guarantee shown on the Policy Specifications page.
Premium
Premium We will not restrict payment of any premium which is required to maintain this rider in force
Limitations because such payment will cause the Death Benefit to increase by an amount that exceeds
the premium received. We will restrict any premium payment that would cause the policy to
fail the definition of life insurance as defined by Section 7702 of the Internal Revenue Code
of 1986 or any applicable successor.
Reinstatement If this rider terminates it may not be reinstated.
Termination This rider will terminate as of any Monthly Anniversary following a written request to us or
upon the earlier of:
a. the death of the Insured;
b. the date of termination of the policy to which this rider is attached;
c. the end of the Guarantee Grace Period following our notice to you that the premium
requirement was not met;
d. the Secondary Guarantee Date shown on the Policy Specifications page;
e. the date a Change of Insured, on the policy to which this rider is attached, is executed.
Continuation Once this rider has terminated, the base policy may continue in accordance with the
of Insurance provisions of the base policy but without the benefit provided by this rider.
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR7 2
(5/99)
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL COVERAGE RIDER
Issued by Cova Financial Life Insurance Company
Term Insurance Involved
This rider is a part of the policy to which it is attached and is subject to all applicable terms and provisions of the
policy; except as modified herein. The Policy Specifications page shows the rider amount.
<S> <C>
Face Amount The face amount of this rider is shown on the Policy Specifications page.
Life Insurance This rider provides term life insurance on the life of the insured shown on the Policy
Benefit Specifications page. We will pay the death benefit of this rider to the beneficiary if the
insured dies while this rider is in force.
The Death Benefit provision in the policy is modified so that where it states "face amount"
it means the policy's face amount plus this rider's face amount.
Decreases in This rider's face amount will be considered an increase to the policy's face amount when
Rider Face determining the order in which a decrease in face amount will be processed:
Amount Under the Change in Face Amount provision in the policy, if a decrease in face amount
is requested, the rider's face amount will be decreased before the policy's face
amount.
Under the Allocation of Partial Withdrawals provision in the policy, if a partial
withdrawal reduces the face amount, the policy's face amount will be decreased before
the rider's face amount.
Monthly Cost The monthly cost of insurance for the following month is deducted on the monthly
of Insurance anniversary date. The monthly cost of insurance is 1, below, multiplied by the excess, if
any, of 2 over 3 below:
1. The monthly cost of insurance rate for this rider divided by 1,000.
2. The face amount of this rider divided by the monthly cost of insurance factor shown on
the policy specifications page.
3. Any excess of the policy's cash value over the base policy's death benefit at the
beginning of the policy month.
This rider will be considered an increase to the policy's face amount when determining the
monthly cost of insurance for the policy.
The actual cash value for a policy with this rider will be less than the actual cash value for a
policy without this rider assuming identical premiums are paid. If the policy's cash value is
insufficient to cover the total monthly deduction for the policy and this rider, it is possible
that the rider will terminate prior to maturity.
Monthly Cost The monthly cost of insurance rate for this benefit is based on the attained age, risk
of Insurance classification and sex of the insured. Monthly cost of insurance rates will be determined by
Rates us based on expectations as to future experience.
Each monthly anniversary this rider is in force, the monthly cost of insurance for this rider
(as determined above) will be added to the monthly deductions as defined in the Cash
Values section of the policy. This increased monthly deduction will be used to determine
the cash value of the policy on such monthly anniversary.
Selection and The selection and issue expense charge for this rider is a monthly charge which equals the
Issue Expense rider's face amount times a selection and issue expense charge rate, divided by 1,000. The
Charge selection and issue expense charge rate for this rider will never exceed the rates shown on
the policy specifications page for the policy's face amount.
CCR8 1
(5/99)
Termination You may terminate this rider as of any monthly anniversary following a written request to
us. We may require the policy and the rider for endorsement. This rider will terminate when
any of the following events first occurs:
1. the lapse of the policy; or
2. the surrender of the policy; or
3. the insured's date of death.
4. a requested decrease in face amount which results in this rider's face amount being
decreased to zero.
Reinstatement This rider may be reinstated within five years after the date of policy lapse if:
1. The policy is also being reinstated; and
2. We receive satisfactory proof that the insured is insurable by our standards; and
3. The insured is alive on the date we approve the request for reinstatement. If the
insured is not alive, such approval is void and of no effect.
We have the right to approve the reinstatement of the policy with or without this rider.
The date of issue and effective date of this rider and the policy are the same.
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR8 2
(5/99)
</TABLE>
July 16, 1999
<TABLE>
<CAPTION>
WAIVER OF MONTHLY DEDUCTION RIDER
Issued by Cova Financial Life Insurance Company
This rider is a part of the policy to which it is attached and is subject to all applicable terms and provisions of the
policy; except as modified herein.
<S> <C>
Waiver of If you furnish us with due written proof that the insured is totally disabled, as defined in this
Monthly rider, we will waive the monthly deductions for this policy. This insured must have become
Deduction Benefit disabled after age 5 and before age 65. The disability must have continued without
interruption for at least six months. This rider must be in force. Monthly deductions for this
policy will be waived as follows:
Disability Beginning Before Age 60. If the insured's disability begins before age 60, we will
waive monthly deductions which were due during the six months of uninterrupted disability.
We will continue to waive monthly deductions after that. However, the insured must
continue to be totally disabled.
Disability Beginning Between Ages 60 and 65. If the insured's disability begins on or after
age 60 but before age 65, we will waive monthly deductions which were due during the six
months of uninterrupted disability. We will continue to waive monthly deductions after that,
but no later than age 65. However, the insured must continue to be totally disabled.
Definition of "Age 5," "age 60," and "age 65" begin on the policy anniversaries nearest the Insured's
Age 5, Age 60, 5th, 60th, and 65th birthdays, respectively.
and Age 65
Total Disability "Total Disability" means the inability of the insured to perform the substantial and material
duties of his regular occupation. Such disability must be the result of an injury or a
sickness. The injury or sickness must originate after this rider became effective.
However, after this period of disability has continued for 60 months, the insured will be
considered to be totally disabled only if he is unable to perform the substantial and material
duties of any occupation for which he is reasonably fitted by education, training or
experience. Such disability must be the result of an injury or a sickness.
If after this rider becomes effective, the insured suffers the total and irrecoverable loss of
sight in both eyes, or of the use of both hands or both feet, or of one hand and one foot,
this will be considered total disability as defined in this rider. On such a loss the insured will
still be considered disabled even though working.
Recurrent Total If, while this policy is in force, the insured becomes disabled again after having been totally
Disability disabled before, the new disability will be considered a continuation of the previous period
unless:
1. It is due to an entirely different cause; or
2. The insured has performed the material and substantial duties of a gainful occupation.
These duties must be performed for a continous period of 6 months or more between
such periods of total disability.
Risks Not We will not waive monthly deductions under this rider if disability results from war or any
Assumed act of war while the insured is in the military, naval or air forces of any country at war. We
will also not waive monthly deductions if the insured becomes disabled as a result of war or
any act of war while in a civilian non-combatant unit serving with such forces. "War"
includes undeclared war and "any country" includes any international organization or
combination of countries.
We will not waive monthly deductions under this rider if disability results from intentionally
self-inflicted injury.
CCR9 1
(5/99)
Termination You may terminate this rider as of any monthly anniversary following a proper written
request. If this rider is not already terminated, it will terminate on the date any of the
following event first occurs:
1. When the insured attains age 65. This will be without prejudice to any benefits granted
for total disability occurring before age 65; or
2. The lapse of the policy; or
3. The surrender of the policy; or
4. The maturity of the policy; or
5. The date of death of the insured.
Notice of Before we waive any monthly deduction, we must be given:
Claim and 1. Written notice of claim for this benefit during the lifetime of the insured. This notice
Proof of must be submitted during the continuance of total disability. This notice cannot be
Disability submitted later than six months after age 65 of the insured; and
2. Written proof of total disability within six months after we receive written notice of
claim. In no event shall this proof be submitted later than the date when any of the
following events first occurs:
a. One year after age 65 of the insured;
b. Prior maturity of the policy;
c. Surrender of the policy for its net cash value;
d. One year from the due date of the first unpaid monthly deduction.
Failure to give such notice and proof within the time allowed will not always invalidate a
claim. We will consider the claim if you show us that it was not reasonably possible to file
notice and proof on time. However, you must file notice and proof as soon as it is
reasonably possible. In no event will any monthly deduction be waived or refunded if its
due date was more than one year before we were given notice of claim at our home office.
We will require no further proof of disability and we will automatically waive all further
monthly deductions if:
1. The insured is totally disabled at age 65; and
2. All monthly deductions for at least the five years preceding age 65 have been waived.
Examination We have the right to have the insured examined by our appointed examiner. We will pay for
of the Insured examination.
and Proof of We also have the right to receive written proof of continuance of disability from the insured
Continued at the following times:
Disability
1. After receipt at such notice of claim;
2. At any time with in two years after we receive proof of total disability;
3. Not more than once each year after the first two years.
We will not waive any further monthly deductions if the insured refuses to be medically
examined. Nor will we waive further monthly deductions if proof of continuance of disability
is not furnished when we request it.
Incontestablity We cannot contest this rider after a period of two years from its date of issue if:
1. This rider shall have been in force during the lifetime of the insured; and
2. The insured does not become totally disabled within this period.
CCR9 2
(5/99)
Cost of The cost of insurance for the Waiver of Monthly Deduction Rider is determined on a
Insurance monthly basis. The cost of insurance for a policy month is calculated as (a) multiplied by (b)
where:
a. is the cost of insurance rate for this rider; and
b. is the sum of items i, ii, iii and iv where;
i. is the cost of insurance for the basic policy for the policy month
ii. is the first year monthly policy charge, where applicable
iii. is the monthly expense charge, when applicable
iv. is any cost of insurance for the policy month for any benefit provided by a
supplemental rider (other than Waiver of Monthly Deduction Rider) made a part of
the basic policy.
The cost of insurance rate for this benefit is based on the attained age, sex and rate class
of the insured. Cost of insurance rates will be determined by us based on expectations as
to future experience. However, these rates will not exceed those shown in the Guaranteed
Cost of Insurance Rates for Waiver of Monthly Deduction Rider.
Each monthly anniversary this rider is in force, the cost of insurance for the rates (as
determined above) will be added to the monthly deduction as defined in the Cash Values
section of the basic policy. This increased monthly deduction will be used to determine the
cash value of the policy on such monthly anniversary.
General We will pay dividends and all other amounts payable under the policy the same as if
Provisions monthly deductions had not been waived.
If the insured becomes disabled during the grace period of the first monthly deduction in
default, we will allow this waiver of monthly deduction as if default had not occurred.
However, you will be liable for the monthly deduction in default. Interest compounded at 6%
per year will be charged on this monthly deduction.
You may apply for reinstatement of this policy with or without this rider. We have the right
to decide whether to approve the reinstatement of this policy with or without this rider.
Date of The issue date of the rider is the same as the date of issue of this policy unless another
Issue date of issue is shown below.
__________________________________
DATE
SECRETARY PRESIDENT
COVA
Cova Financial Life Insurance Company
Newport Beach, California
CCR9 3
(5/99)
</TABLE>
COVA
Cova Financial Life Insurance Company
Newport Beach, California
APPLICATION PART I:
1. PROPOSED INSURED(S)
- --------------------------------------------------------------------------------
Proposed Insured
First Name Initial Last Name
John J. Doe
- --------------------------------------------------------------------------------
Date of Birth State of Birth Sex
5 / 1 /64 Missouri |X| Male || Female
- --------------------------------------------------------------------------------
Social Security Number
123-45-6789
-----------
123 Main Street
- --------------------------------------------------------------------------------
Home Address (Number, Street, Apt. #)
St. Louis Missouri 11111
- --------------------------------------------------------------------------------
City State Zip
Occupation Earned Income Net Worth
Ironworker $50,000 $175,000
- --------------------------------------------------------------------------------
Proposed Joint Insured (If applicable)
First Name Initial Last Name
Date of Birth State of Birth Sex
/ / [ ]Male [ ]Female
Social Security Number
- -
- --------------------------------------------------------------------------------
Home Address (Number, Street, Apt. #)
- --------------------------------------------------------------------------------
City State Zip
Occupation Earned Income Net Worth
2. REPLACEMENT
- --------------------------------------------------------------------------------
Will the insurance being applied for replace or
change any existing life insurance or annuity? || Yes |X| No
- --------------------------------------------------------------------------------
Will the insurance being applied for receive any
values (to pay premiums/additional payments)
from another policy/contract? || Yes |X| No
3. BENEFICIARY
- --------------------------------------------------------------------------------
Provide Full Name and Relationship of each to Proposed Insured.
Primary
Jane Doe, Wife
- --------------------------------------------------------------------------------
Contingent
James Doe, Son
- --------------------------------------------------------------------------------
Application for Life Insurance
(TeleApplication)
4. OWNER (If other than Proposed Insured(s))
Provide Full Name, Address, and Relationship to Proposed
- --------------------------------------------------------------------------------
Original Owner(s)
Social Security or Tax Number(s)
Of Original Owner(s) (REQUIRED BY LAW)_____________
123-45-6789
- --------------------------------------------------------------------------------
Contingent
- --------------------------------------------------------------------------------
5. PLAN, BENEFITS, RIDERS, & BILLING
- --------------------------------------------------------------------------------
Plan Name Face Amount
VUL $50,000
- --------------------------------------------------------------------------------
Contract Type
|X| Option A || Option B || Option C
- --------------------------------------------------------------------------------
Benefit Riders (If available on plan selected)
|_| Adjustable Benefit Rider
|_| Anniversary Partial Withdrawal Rider
|_| Lifetime Coverage Rider
|_| Secondary Guarantee Rider
|_| Supplemental Coverage Rider
|_| Other ___________________
|_| Other ___________________
|_| Other ___________________
- --------------------------------------------------------------------------------
Billing Mode & Premium Amount $
- --------------------------------------------------------------------------------
6. HEALTH STATUS
a. Within the past 90 days, have you been diagnosed or
treated for: cancer, heart disease, chest pain, stroke, or
diabetes?
Proposed Insured |X| Yes || No
Proposed Joint Insured || Yes || No
b. Have you used tobacco or nicotine products within the last
24 months?
Proposed Insured || No
|X| Yes Type: Amount/Frequency: Date Last Used:
Cigarettes 1 pack daily Today
Proposed Joint Insured || No
||Yes Type: Amount/Frequency: Date Last Used:
CC9442TEL-CS
(5/99)
<TABLE>
<CAPTION>
<S> <C>
7. UNDERWRITING CONTACT INFORMATION
PROPOSED INSURED PROPOSED JOINT INSURED
Contact at: |X| Home (314) 525-2211 Contact at: |_| Home ___________________________
(Phone Number) (Phone Number)
|_| Business _________________________ |_| Business ________________________
(Phone Number) (Phone Number)
Best days and time M-F after 5:00 p.m. Best days and time ______________________________
Special Remarks ___________________________________ Special Remarks _________________________________
</TABLE>
8. ADDITIONAL INSTRUCTIONS/HOME OFFICE ENDORSEMENT [(Not applicable in
Kentucky, Maryland, Minnesota, Missouri, New Hampshire, Pennsylvania, West
Virginia or Wisconsin)]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. NET PREMIUM ALLOCATION
- --------------------------------------------------------------------------------
(Minimum of 5%. Percentages must be in whole numbers and total 100%. Unless
otherwise directed, subsequent net premiums
<TABLE>
<CAPTION>
<S> <C>
____% General Account
[AIM Advisors Inc.] [Massachusetts Financial Services Company]
____% [AIM V.I. Value] ____% [MFS Research]
____% [AIM V.I. Capital Appreciation] ____% [MFS Emerging Growth]
____% [AIM V.I. International Equity] ____% [MFS Global Governments]
____% [MFS High Income]
[Alliance Capital] ____% [MFS Growth with Income]
____% [Premier Growth]
____% [Real Estate Investment] [Newport Fund Management, Inc.]
____% [Newport Tiger]
[Conning Asset Management Company]
____% [Money Market] [Oppenheimer Funds, Inc.]
____% [High Income/VA]
[Goldman Sachs Asset Management] ____% [Bond/VA]
____% [Growth & Income] ____% [Capital Appreciation/VA]
____% [Main Street Growth & Income/VA]
[Goldman Sachs Asset Management International] ____% [Strategic Bond/VA]
____% [International Equity]
____% [Global Income] [Putnam Investments Management, Inc.]
____% [VT Growth & Income Class 1A Shares]
[Scudder Kemper Investments] ____% [VT International Growth Class 1A Shares]
____% [Kemper Government Securities] ____% [VT International New Opportunity Class 1A Shares]
____% [Kemper Small Cap Growth] ____% [VT New Value Class 1A Shares]
____% [Kemper Small Cap Value] ____% [VT Vista Class 1A Shares]
____% [KemperDreman High Return Equity]
[Templeton Asset Management, Ltd.]
[J.P. Morgan Investment Management] ____% [Developing Markets]
____% [Select Equity]
____% [Large Cap Stock] [Templeton Investment Counsel, Inc.]
____% [Small Cap Stock] ____% [International]
____% [International Equity]
____% [Quality Bond] [Franklin Mutual Advisors]
____% [Mutual Shares Investments]
[Lord, Abbett & Company]
____% [MidCap Value] ____% Other [ ]
____% [Large Cap Research] ____% Other [ ]
____% [Developing Growth]
____% [Bond Debenture]
____% [Growth & Income]
===========================================
TOTAL ALLOCATION ______%
</TABLE>
CC9442TEL-CS
(5/99)
<TABLE>
<CAPTION>
10. DOLLAR COST AVERAGING AND PORTFOLIO REBALANCING
If desired, choose either Dollar Cost Averaging or Portfolio Rebalancing.
These options are not available simultaneously. (5% minimum to each chosen
subaccount below. Percentages must be in whole numbers and total 100%.)
|_| Dollar Cost Averaging: I/We authorize Dollar Cost Averaging transfers
of $_________________ per month from the
|_| Portfolio Rebalancing: I/We authorize Portfolio Rebalancing transfers
according to the Net Premium Allocation, unless otherwise noted
below. Choose either 1 or 2 below.
|_| 1. Periodic Rebalancing
<S> <C> <C> <C>
|_| Monthly |_| Quarterly |_| Semi-Annually |_| Annually
|_| 2. Variance Rebalancing
Maximum Variance (%) |_| 5% |_| 10% |_| 15% |_| 20%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
____% General Account
[AIM Advisors Inc.] [Massachusetts Financial Services Company]
____% [AIM V.I. Value] ____% [MFS Research]
____% [AIM V.I. Capital Appreciation] ____% [MFS Emerging Growth]
____% [AIM V.I. International Equity] ____% [MFS Global Governments]
____% [MFS High Income]
[Alliance Capital] ____% [MFS Growth with Income]
____% [Premier Growth]
100 % [Real Estate Investment] [Newport Fund Management, Inc.]
____% [Newport Tiger]
[Conning Asset Management Company]
____% [Money Market] [Oppenheimer Funds, Inc.]
____% [High Income/VA]
[Goldman Sachs Asset Management] ____% [Bond/VA]
____% [Growth & Income] ____% [Capital Appreciation/VA]
____% [Main Street Growth & Income/VA]
[Goldman Sachs Asset Management International] ____% [Strategic Bond/VA]
____% [International Equity]
____% [Global Income] [Putnam Investments Management, Inc.]
____% [VT Growth & Income Class 1A Shares]
[Scudder Kemper Investments] ____% [VT International Growth Class 1A Shares]
____% [Kemper Government Securities] ____% [VT International New Opportunity Class 1A Shares]
____% [Kemper Small Cap Growth] ____% [VT New Value Class 1A Shares]
____% [Kemper Small Cap Value] ____% [VT Vista Class 1A Shares]
____% [KemperDreman High Return Equity]
[Templeton Asset Management, Ltd.]
[J.P. Morgan Investment Management] ____% [Developing Markets]
____% [Select Equity]
____% [Large Cap Stock] [Templeton Investment Counsel, Inc.]
____% [Small Cap Stock] ____% [International]
____% [International Equity]
____% [Quality Bond] [Franklin Mutual Advisors]
____% [Mutual Shares Investments]
[Lord, Abbett & Company]
____% [MidCap Value] ____% Other [ ]
____% [Large Cap Research] ____% Other [ ]
____% [Developing Growth]
____% [Bond Debenture]
____% [Growth & Income]
===========================================
===========================================
TOTAL ALLOCATION 100%
</TABLE>
CC9442TEL-CS
(5/99)
<TABLE>
<CAPTION>
11. SUITABILITY INFORMATION (To be answered by Owner(s).)
<S> <C>
Have you received a Prospectus/Memorandum of Understanding for the policy applied for? |X| Yes |_| No
Date of Prospectus/Memorandum of Understanding 5/1/98
Date of any supplement______________
Do you understand that:
- The death benefit and cash surrender value will increase or decrease
depending on the investment experience? |X| Yes |_| No
- There is no guaranteed minimum death benefit or cash surrender value? |X| Yes |_| No
Do you believe that the policy applied for meets your insurance needs and
your anticipated financial needs? |X| Yes |_| No
I request a copy of the Statement of Additional Information for the
following Investment Company(ies):
12. TELEPHONE TRANSFER
I/We authorize Cova Financial Life Insurance Company (Cova) or any person
authorized by Cova to accept telephone transfer instructions and/or net
premium payment allocation changes from me/us and my Registered
Representative/Agent. Telephone transfers will be automatically permitted
unless you check one or both of the boxes below indicating that you do not
wish to authorize telephone transfers. Cova will use reasonable procedures
to confirm that instructions communicated by telephone are genuine. If Cova
fails to use such procedures, Cova may be liable for any losses due to
unauthorized or fraudulent instructions.
I/We DO NOT wish to authorize telephone transfers for the following (check
applicable boxes):
|_| Owner(s) |_| Registered Representative/Agent
13. [ELECTRONIC PROSPECTUS OPTION
In the future, Cova may deliver prospectus updates, semi-annual and annual
reports to consenting policy owners electronically by the delivery methods
listed below. If you wish to receive future updates in this manner, check
your choice below.
<S> <C>
[ ] 1) mailing a diskette containing the document;
[ ] 2) mailing a CD-ROM containing the document;
[ ] 3) e-mailing the document; or
[ ] 4) e-mailing a notice identifying an Internet site where the document can be viewed and downloaded.
Whichever option you choose, Cova will supply the documents in a format
compatible with one of the following (please choose one):
[ ] Microsoft Windows
[ ] Macintosh
Please indicate your consent by checking the appropriate boxes.
You may incur normal and customary online usage charges to receive a
document under Option 3 or 4. If you would like to receive these documents
in electronic format when available, please check the box and insert your
e-mail address here (___________________________________). This consent
will be in effect until you revoke it. You can revoke your consent by
calling Cova's Service Center at: [1-800-123-4567] or writing to [P.O. Box
104490, St. Louis, MO 63178]. You may revoke it at any time. If you consent
to electronic delivery, at any time you also may request that we send you a
paper copy.]
</TABLE>
CC9442TEL-CS
(5/99)
DECLARATIONS
I/We agree that all the statements and answers in this application and any
amendments to it, including any supplements, are true, complete and
correctly recorded. I/We also agree that this application, any required
medical examination, and any supplement or amendment to either will be part
of the policy issued. If a premium payment is given in exchange for a
Temporary Insurance Agreement (TIA), the Company will be liable only as set
forth in that Agreement. If a premium payment is not given, then insurance
will take effect when a policy is approved by the Company for issue as
applied for, the first full premium is paid, and the health and
insurability of any person proposed for insurance have not changed since
the date of this application. If a policy is issued other than as applied
for, insurance will take effect under the policy only when a policy issued
by the Company is delivered to and accepted by me, the first full premium
is paid, and the health and insurability of any person proposed for
insurance have not changed since the date of this application.
PROPOSED INSURED'S AUTHORIZATION
I/We authorize any physician, medical practitioner, hospital, clinic, other
medical or medically related facility, insurance company, the Medical
Information Bureau (MIB), consumer reporting agency or employer to release
to Cova Financial Life Insurance Company, its subsidiaries, its reinsurers
diagnosis, treatment and prognosis of any physical or mental condition
including drug and/or alcohol abuse and/or any other information about me.
I/We understand that any information obtained will be used to determine
eligibility for insurance and will not be released to any person or
organization except reinsurers, the MIB, other persons or organizations
performing business or legal services in connection with my application,
and other insurance companies to whom I/We have applied or to whom a claim
has been made, or as may be otherwise lawfully required, or as I/We may
further authorize. I/We know that I/We may request a copy of this
authorization. I/We also acknowledge receipt of the Notice of Information
Practices. I/We understand that if an investigative consumer report is
ordered in connection with this application, I/We may be interviewed in
connection with the preparation of the report and, upon request, I/We will
be provided with a copy of the report. A photographic copy of this
authorization will be as valid as the original. This authorization will be
valid for 30 months from the date shown below.
OWNER'S CERTIFICATION: Under the penalties of perjury, I/We certify that: 1) The
number(s) shown on this form is my/our correct Taxpayer Identification Number(s)
(or, if no number(s) is shown, I/We am waiting for a number to be issued to
me/us); and 2) I/We am not subject to backup withholding either because I/We
have not been notified by the Internal Revenue Service (IRS) that I/We am
subject to backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me/us that I/We am no longer subject to
backup withholding.
PLEASE NOTE: Cross out and initial #2) above if you have been notified by the
IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
The IRS does not require consent to any provision of this document other than
the certifications required to avoid backup withholding.
<TABLE>
<CAPTION>
<S> <C>
AGENT: Do you certify that you have truly and accurately recorded on this application the information supplied
by the applicant? |X| Yes || No
To the best of your knowledge, is this a replacement? (If "Yes", complete and submit required replacement
forms.)
|| Yes |X| No
Did you deliver the current prospectus and were all of the written sales materials used printed by Cova
Financial Life Insurance Company? |X| Yes || No
[Home Office Program Information:
Select one of the options listed below. Once selected, the option may not be changed. If no selection is
made, Option T will apply.
Option T
Option N/T ]
In light of the financial need of the Proposed Insured(s) and Owner(s), the purpose of this sale has been
discussed with the Owner(s), and I believe this application to be a suitable recommendation.
X ____________________________
Signature of Licensed Agent
Missouri
- --------------------------------------------------------------------------------
State Where Signed Date (MM/DD/YY)
X
- --------------------------------------------------------------------------------
Signature of Proposed Insured (Parent or Guardian
if Proposed Insured under age 18.)
Missouri
- --------------------------------------------------------------------------------
State Where Signed Date (MM/DD/YY)
X
- --------------------------------------------------------------------------------
Signature of Proposed Joint Insured (If applicable. Parent
or Guardian if Proposed Insured under age 18.)
X
- --------------------------------------------------------------------------------
Signature of Owner (If other than Proposed Insured(s).)
X
- --------------------------------------------------------------------------------
Signature of Joint Owner (If applicable and other
than Proposed Insured(s))
</TABLE>
CC9442TEL-CS
(5/99)
COVA
Cova Financial Life Insurance Company
Newport Beach, California
APPLICATION PART I:
1. PROPOSED INSURED(S)
- --------------------------------------------------------------------------------
Proposed Insured
First Name Initial Last Name
John J. Doe
- --------------------------------------------------------------------------------
Date of Birth State of Birth Sex
5 / 1 /64 Missouri |X| Male || Female
- --------------------------------------------------------------------------------
Social Security Number
123-45-6789
-----------
123 Main Street
- --------------------------------------------------------------------------------
Home Address (Number, Street, Apt. #)
St. Louis Missouri 11111
- --------------------------------------------------------------------------------
City State Zip
Occupation Earned Income Net Worth
Ironworker $50,000 $175,000
- --------------------------------------------------------------------------------
Proposed Joint Insured (If applicable)
First Name Initial Last Name
Date of Birth State of Birth Sex
/ / [ ]Male [ ]Female
Social Security Number
- -
- --------------------------------------------------------------------------------
Home Address (Number, Street, Apt. #)
- --------------------------------------------------------------------------------
City State Zip
Occupation Earned Income Net Worth
2. REPLACEMENT
- --------------------------------------------------------------------------------
Will the insurance being applied for replace or
change any existing life insurance or annuity? || Yes |X| No
- --------------------------------------------------------------------------------
Will the insurance being applied for receive any
values (to pay premiums/additional payments)
from another policy/contract? || Yes |X| No
3. BENEFICIARY
- --------------------------------------------------------------------------------
Provide Full Name and Relationship of each to Proposed Insured.
Primary
Jane Doe, Wife
- --------------------------------------------------------------------------------
Contingent
James Doe, Son
- --------------------------------------------------------------------------------
Application for Life Insurance
(TeleApplication)
4. OWNER (If other than Proposed Insured(s))
Provide Full Name, Address, and Relationship to Proposed
- --------------------------------------------------------------------------------
Original Owner(s)
Social Security or Tax Number(s)
Of Original Owner(s) (REQUIRED BY LAW)_____________
123-45-6789
- --------------------------------------------------------------------------------
Contingent
- --------------------------------------------------------------------------------
5. PLAN, BENEFITS, RIDERS, & BILLING
- --------------------------------------------------------------------------------
Plan Name Face Amount
VUL $50,000
- --------------------------------------------------------------------------------
Contract Type
|X| Option A || Option B || Option C
- --------------------------------------------------------------------------------
Benefit Riders (If available on plan selected)
|_| Adjustable Benefit Rider
|_| Anniversary Partial Withdrawal Rider
|_| Lifetime Coverage Rider
|_| Secondary Guarantee Rider
|_| Supplemental Coverage Rider
|_| Other ___________________
|_| Other ___________________
|_| Other ___________________
- --------------------------------------------------------------------------------
Billing Mode & Premium Amount $
- --------------------------------------------------------------------------------
6. HEALTH STATUS
a. Within the past 90 days, have you been diagnosed or
treated for: cancer, heart disease, chest pain, stroke, or
diabetes?
Proposed Insured |X| Yes || No
Proposed Joint Insured || Yes || No
b. Have you used tobacco or nicotine products within the last
24 months?
Proposed Insured || No
|X| Yes Type: Amount/Frequency: Date Last Used:
Cigarettes 1 pack daily Today
Proposed Joint Insured || No
||Yes Type: Amount/Frequency: Date Last Used:
CC9442TEL-FR
(5/99)
<TABLE>
<CAPTION>
<S> <C>
7. UNDERWRITING CONTACT INFORMATION
PROPOSED INSURED PROPOSED JOINT INSURED
Contact at: |X| Home (314) 525-2211 Contact at: |_| Home ___________________________
(Phone Number) (Phone Number)
|_| Business _________________________ |_| Business ________________________
(Phone Number) (Phone Number)
Best days and time M-F after 5:00 p.m. Best days and time ______________________________
Special Remarks ___________________________________ Special Remarks _________________________________
</TABLE>
8. ADDITIONAL INSTRUCTIONS/HOME OFFICE ENDORSEMENT [(Not applicable in
Kentucky, Maryland, Minnesota, Missouri, New Hampshire, Pennsylvania, West
Virginia or Wisconsin)]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9. NET PREMIUM ALLOCATION
- --------------------------------------------------------------------------------
(Minimum of 5%. Percentages must be in whole numbers and total 100%. Unless
otherwise directed, subsequent net premiums will be allocated as shown.)
(Minimum of 5%. Percentages must be in whole numbers and total 100%. Unless otherwise directed, subsequent net premiums will
<S> <C>
____% General Account
[Frank Russell Company] [Conning Asset Management Company]
____% [Multi-Style Equity] ____% [Money Market]
100 % [Aggressive Equity]
____% [Non-U.S.]
____% [Core Bond]
============================
TOTAL ALLOCATION 100%
</TABLE>
<TABLE>
<CAPTION>
10. DOLLAR COST AVERAGING AND PORTFOLIO REBALANCING
If desired, choose either Dollar Cost Averaging or Portfolio Rebalancing.
These options are not available simultaneously. (5% minimum to each chosen
subaccount below. Percentages must be in whole numbers and total 100%.)
|_| Dollar Cost Averaging: I/We authorize Dollar Cost Averaging transfers
of $_________________ per month from the
|_| Portfolio Rebalancing: I/We authorize Portfolio Rebalancing transfers
according to the Net Premium Allocation, unless otherwise noted
below. Choose either 1 or 2 below.
|_| 1. Periodic Rebalancing
<S> <C> <C> <C>
|_| Monthly |_| Quarterly |_| Semi-Annually |_| Annually
|_| 2. Variance Rebalancing
Maximum Variance (%) |_| 5% |_| 10% |_| 15% |_| 20%
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
____% General Account
[Frank Russell Company] [Conning Asset Management Company]
____% [Multi-Style Equity] ____% [Money Market]
____% [Aggressive Equity]
____% [Non-U.S.]
____% [Core Bond]
===========================================
TOTAL ALLOCATION _____%
</TABLE>
CC9442TEL-FR
(5/99)
<TABLE>
<CAPTION>
11. SUITABILITY INFORMATION (To be answered by Owner(s).)
<S> <C>
Have you received a Prospectus/Memorandum of Understanding for the policy applied for? |X| Yes |_| No
Date of Prospectus/Memorandum of Understanding 5/1/98
Date of any supplement______________
Do you understand that:
- The death benefit and cash surrender value will increase or decrease
depending on the investment experience? |X| Yes |_| No
- There is no guaranteed minimum death benefit or cash surrender value? |X| Yes |_| No
Do you believe that the policy applied for meets your insurance needs and
your anticipated financial needs? |X| Yes |_| No
I request a copy of the Statement of Additional Information for the
following Investment Company(ies):
12. TELEPHONE TRANSFER
I/We authorize Cova Financial Life Insurance Company (Cova) or any person
authorized by Cova to accept telephone transfer instructions and/or net
premium payment allocation changes from me/us and my Registered
Representative/Agent. Telephone transfers will be automatically permitted
unless you check one or both of the boxes below indicating that you do not
to confirm that instructions communicated by telephone are genuine. If Cova
fails to use such procedures, Cova may be liable for any losses due to
unauthorized or fraudulent instructions.
I/We DO NOT wish to authorize telephone transfers for the following (check
applicable boxes):
|_| Owner(s) |_| Registered Representative/Agent
13. [ELECTRONIC PROSPECTUS OPTION
In the future, Cova may deliver prospectus updates, semi-annual and annual
reports to consenting policy owners electronically by the delivery methods
listed below. If you wish to receive future updates in this manner, check
your choice below.
<S> <C>
[ ] 1) mailing a diskette containing the document;
[ ] 2) mailing a CD-ROM containing the document;
[ ] 3) e-mailing the document; or
[ ] 4) e-mailing a notice identifying an Internet site where the document can be viewed and downloaded.
Whichever option you choose, Cova will supply the documents in a format
compatible with one of the following (please choose one):
[ ] Microsoft Windows
[ ] Macintosh
Please indicate your consent by checking the appropriate boxes.
You may incur normal and customary online usage charges to receive a
document under Option 3 or 4. If you would like to receive these documents
in electronic format when available, please check the box and insert your
e-mail address here (___________________________________). This consent
will be in effect until you revoke it. You can revoke your consent by
calling Cova's Service Center at: [1-800-123-4567] or writing to [P.O. Box
104490, St. Louis, MO 63178]. You may revoke it at any time. If you consent
to electronic delivery, at any time you also may request that we send you a
paper copy.]
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CC9442TEL-FR
(5/99)
DECLARATIONS
I/We agree that all the statements and answers in this application and any
amendments to it, including any supplements, are true, complete and
correctly recorded. I/We also agree that this application, any required
medical examination, and any supplement or amendment to either will be part
of the policy issued. If a premium payment is given in exchange for a
Temporary Insurance Agreement (TIA), the Company will be liable only as set
forth in that Agreement. If a premium payment is not given, then insurance
will take effect when a policy is approved by the Company for issue as
applied for, the first full premium is paid, and the health and
insurability of any person proposed for insurance have not changed since
the date of this application. If a policy is issued other than as applied
for, insurance will take effect under the policy only when a policy issued
by the Company is delivered to and accepted by me, the first full premium
is paid, and the health and insurability of any person proposed for
insurance have not changed since the date of this application.
PROPOSED INSURED'S AUTHORIZATION
I/We authorize any physician, medical practitioner, hospital, clinic, other
medical or medically related facility, insurance company, the Medical
Information Bureau (MIB), consumer reporting agency or employer to release
to Cova Financial Life Insurance Company, its subsidiaries, its reinsurers
or its legal representatives any information they may have relative to
diagnosis, treatment and prognosis of any physical or mental condition
including drug and/or alcohol abuse and/or any other information about me.
I/We understand that any information obtained will be used to determine
eligibility for insurance and will not be released to any person or
organization except reinsurers, the MIB, other persons or organizations
performing business or legal services in connection with my application,
and other insurance companies to whom I/We have applied or to whom a claim
has been made, or as may be otherwise lawfully required, or as I/We may
further authorize. I/We know that I/We may request a copy of this
authorization. I/We also acknowledge receipt of the Notice of Information
Practices. I/We understand that if an investigative consumer report is
ordered in connection with this application, I/We may be interviewed in
connection with the preparation of the report and, upon request, I/We will
be provided with a copy of the report. A photographic copy of this
authorization will be as valid as the original. This authorization will be
valid for 30 months from the date shown below.
OWNER'S CERTIFICATION: Under the penalties of perjury, I/We certify that: 1) The
number(s) shown on this form is my/our correct Taxpayer Identification Number(s)
(or, if no number(s) is shown, I/We am waiting for a number to be issued to
me/us); and 2) I/We am not subject to backup withholding either because I/We
have not been notified by the Internal Revenue Service (IRS) that I/We am
subject to backup withholding as a result of a failure to report all interest or
dividends, or the IRS has notified me/us that I/We am no longer subject to
backup withholding.
PLEASE NOTE: Cross out and initial #2) above if you have been notified by the
IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
The IRS does not require consent to any provision of this document other than
the certifications required to avoid backup withholding.
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<CAPTION>
<S> <C>
AGENT: Do you certify that you have truly and accurately recorded on this application the information supplied
by the applicant? |X| Yes || No
To the best of your knowledge, is this a replacement? (If "Yes", complete and submit required replacement
forms.)
|| Yes |X| No
Did you deliver the current prospectus and were all of the written sales materials used printed by Cova
Financial Life Insurance Company? |X| Yes || No
[Home Office Program Information:
Select one of the options listed below. Once selected, the option may not be changed. If no selection is
made, Option T will apply.
Option T
Option N/T ]
In light of the financial need of the Proposed Insured(s) and Owner(s), the purpose of this sale has been
discussed with the Owner(s), and I believe this application to be a suitable recommendation.
X ____________________________
Signature of Licensed Agent
Missouri
- --------------------------------------------------------------------------------
State Where Signed Date (MM/DD/YY)
X
- --------------------------------------------------------------------------------
Signature of Proposed Insured (Parent or Guardian
if Proposed Insured under age 18.)
Missouri
- --------------------------------------------------------------------------------
State Where Signed Date (MM/DD/YY)
X
- --------------------------------------------------------------------------------
Signature of Proposed Joint Insured (If applicable. Parent
or Guardian if Proposed Insured under age 18.)
X
- --------------------------------------------------------------------------------
Signature of Owner (If other than Proposed Insured(s).)
X
- --------------------------------------------------------------------------------
Signature of Joint Owner (If applicable and other
than Proposed Insured(s))
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CC9442TEL-FR
(5/99)
