<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2 /X/
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EQUITRUST LIFE VARIABLE ACCOUNT
(Exact Name of Registrant)
EQUITRUST LIFE INSURANCE COMPANY
(Name of Depositor)
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5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Address of Principal Executive Office)
STEPHEN M. MORAIN, ESQUIRE
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(Name and Address of Agent for Service of Process)
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COPY TO:
STEPHEN E. ROTH, ESQUIRE
SUTHERLAND ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2415
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH 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.
TITLE OF SECURITIES BEING REGISTERED: FLEXIBLE PREMIUM LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICIES
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EQUITRUST LIFE VARIABLE ACCOUNT
FLEXIBLE PREMIUM LAST SURVIVOR VARIABLE LIFE INSURANCE POLICY
------------------------------------------------------------------------
PROSPECTUS
May 1, 2000
Equitrust Life Insurance Company is offering a flexible premium last survivor
variable life insurance policy (the "Policy") described in this prospectus.
Equitrust ("we," "us" or "our") designed the Policy: (1) to provide lifetime
insurance protection to age 115; and (2) to permit the purchaser of a Policy
("you," or "your") to vary premium payments and adjust the death proceeds
payable under the Policy.
Under the Policy, we will pay:
- death proceeds upon the last death of the Joint Insureds, and
- a net surrender value or net accumulated value upon complete surrender or
partial withdrawal of the Policy.
You may allocate net premiums under a Policy to one or more of the subaccounts
of Equitrust Life Variable Account (the "Variable Account"). Death proceeds may,
and accumulated value will, vary with the investment experience of the Variable
Account. Each subaccount invests exclusively in shares of the investment options
listed below. Current prospectuses that describe the investment objectives and
risks of each Investment Option must accompany or precede this prospectus.
<TABLE>
<S> <C>
EquiTrust Variable Insurance T. Rowe Price Equity Series, Inc.:
Series Fund: Equity Income Portfolio
Value Growth Portfolio Mid-Cap Growth Portfolio
High Grade Bond Portfolio New America Growth Portfolio
High Yield Bond Portfolio Personal Strategy Balanced Portfolio
Money Market Portfolio T. Rowe Price International
Blue Chip Portfolio Series, Inc.:
International Stock Portfolio
Dreyfus Variable Investment Fund:
Capital Appreciation Portfolio
Disciplined Stock Portfolio
Growth & Income Portfolio
International Equity Portfolio
Small Cap Portfolio
</TABLE>
You may also allocate net premiums to the Declared Interest Option, which is
supported by our General Account. We credit amounts allocated to the Declared
Interest Option with at least a 4% annual interest rate.
Please note that the Policies and Investment Options are not bank deposits, are
not federally insured, are not guaranteed to achieve their goals and are subject
to risks, including loss of the amount invested.
Please carefully consider replacing any existing insurance with the policy.
EquiTrust does not claim that investing in the policy is similar or comparable
to investing in a mutual fund.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES
OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and retain it for future reference.
Issued By:
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS................................................. 3
SUMMARY OF THE POLICY....................................... 5
EQUITRUST LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT... 9
EquiTrust Life Insurance Company...................... 9
The Variable Account.................................. 9
Investment Options.................................... 10
Addition, Deletion or Substitution of Investments..... 13
THE POLICY.................................................. 14
Purchasing the Policy................................. 14
Premiums.............................................. 14
Examination of Policy (Cancellation Privilege)........ 16
Policy Lapse and Reinstatement........................ 16
Special Transfer Privilege............................ 17
POLICY BENEFITS............................................. 17
Accumulated Value Benefits............................ 17
Transfers............................................. 20
Loan Benefits......................................... 20
Death Proceeds........................................ 22
Benefits at Maturity.................................. 24
Payment Options....................................... 25
CHARGES AND DEDUCTIONS...................................... 26
Premium Expense Charge................................ 26
Monthly Deduction..................................... 27
Transfer Charge....................................... 29
Partial Withdrawal Fee................................ 29
Surrender Charge...................................... 29
Variable Account Charges.............................. 29
THE DECLARED INTEREST OPTION................................ 30
General Description................................... 30
Declared Interest Option Accumulated Value............ 30
Transfers, Partial Withdrawals, Surrenders and Policy
Loans................................................ 31
GENERAL PROVISIONS.......................................... 31
The Contract.......................................... 31
Incontestability...................................... 31
Change of Provisions.................................. 31
Misstatement of Age or Sex............................ 32
Suicide Exclusion..................................... 32
Annual Report......................................... 32
Non-Participation..................................... 32
Ownership of Assets................................... 32
Written Notice........................................ 32
Postponement of Payments.............................. 32
Continuance of Insurance.............................. 33
Ownership............................................. 33
The Beneficiary....................................... 33
Changing the Policyowner or Beneficiary............... 34
Additional Insurance Benefits......................... 34
Policy Split Option................................... 34
</TABLE>
1
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
DISTRIBUTION OF THE POLICIES................................ 35
FEDERAL TAX MATTERS......................................... 35
Introduction.......................................... 35
Tax Status of the Policy.............................. 35
Tax Treatment of Policy Benefits...................... 36
Possible Tax Law Changes.............................. 37
Taxation of the Company............................... 38
Employment-Related Benefit Plans...................... 38
ADDITIONAL INFORMATION...................................... 38
FINANCIAL STATEMENTS........................................ 42
Appendix
ILLUSTRATIONS OF DEATH BENEFITS AND ACCUMULATED VALUES...... A
Appendix
DEATH BENEFIT OPTIONS....................................... B
Appendix
MAXIMUM SURRENDER CHARGES................................... C
</TABLE>
The Policy is not available in all States.
This prospectus constitutes an offering only in those jurisdictions where such
offering may lawfully be made.
EquiTrust has not authorized any dealer, salesman or other person to give any
information or make any representations in connection with this offering other
than those contained in this prospectus. Do not rely on any such other
information or representations.
2
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DEFINITIONS
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ACCUMULATED VALUE: The total amount invested under the Policy. It is the sum of
the values of the Policy in each subaccount of the Variable Account, the value
of the Policy in the Declared Interest Option and any outstanding Policy Debt.
BENEFICIARY: The person or entity the Policyowner named in the application, or
by later designation, to receive the death proceeds upon the Insured's death.
BUSINESS DAY: Each day that the New York Stock Exchange is open for trading,
except the day after Thanksgiving, the Tuesday after Christmas (in 2000) and any
day on which the Home Office is closed because of a weather-related or
comparable type of emergency and is unable to segregate orders and redemption
requests received on that day.
COMPANY, WE, US, OUR: EquiTrust Life Insurance Company.
DECLARED INTEREST OPTION: A part of the Company's General Account. Policyowners
may allocate Net Premiums and transfer Accumulated Value to the Declared
Interest Option. The Company credits Accumulated Value in the Declared Interest
Option with interest at an annual rate guaranteed to be at least 4%.
DELIVERY DATE: The date when the Company issues the Policy and mails it to the
Policyowner.
DUE PROOF OF DEATH: Proof of death that is satisfactory to the Company. Such
proof may consist of the following:
(a) A certified copy of the death certificate;
(b) A certified copy of a court decree reciting a finding of death; or
(c) Any other proof satisfactory to the Company.
FUND: An open-end, diversified management investment company in which the
Variable Account invests.
GENERAL ACCOUNT: The assets of the Company other than those allocated to the
Variable Account or any other separate account.
GRACE PERIOD: The 61-day period beginning on the date we send notice to the
Policyowner that Net Accumulated Value or Net Surrender Value is insufficient to
cover the monthly deduction.
HOME OFFICE: The Company's principal offices at 5400 University Avenue, West Des
Moines, Iowa 50266.
INVESTMENT OPTION: A separate investment portfolio of a Fund.
JOINT EQUAL AGE: The age on which premium and Accumulated Value are based. It is
an actuarial equivalent and is determined by the age and sex of the Joint
Insureds. The current Joint Equal Age on any Policy Anniversary will equal the
Joint Equal Age on the Policy Date plus the number of years since the Policy
Date.
JOINT EQUAL ATTAINED AGE: The Joint Equal Age at the Policy Date plus the number
of Policy Years since the Policy Date.
JOINT INSUREDS: The persons upon whose lives the Company issues a Policy.
MATURITY DATE: The Joint Equal Attained Age 115. It is the date when the Policy
terminates and the Policy's Accumulated Value less Policy Debt becomes payable
to the Policyowner or the Policyowner's estate.
MONTHLY DEDUCTION DAY: The same date in each month as the Policy Date. The
Company makes the monthly deduction on the Business Day coinciding with or
immediately following the Monthly Deduction Day. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction.")
NET ACCUMULATED VALUE: The Accumulated Value of the Policy reduced by any
outstanding Policy Debt and increased by any unearned loan interest.
NET ASSET VALUE: The total current value of each Subaccount's securities, cash,
receivables and other assets less liabilities.
3
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NET PREMIUM: The amount of premium remaining after we deduct the premium expense
charge (see "CHARGES AND DEDUCTIONS--Premium Expense Charge"). The Company will
allocate this amount, according to the Policyowner's instructions, among the
Subaccounts of the Variable Account and the Declared Interest Option.
NET SURRENDER VALUE: The Surrender Value minus any Policy Debt plus any unearned
loan interest.
PARTIAL WITHDRAWAL FEE: A fee we assess at the time of any partial withdrawal
equal to the lesser of $25 or 2% at the amount withdrawn.
POLICY: The flexible premium last survivor variable life insurance policy we
offer and describe in this prospectus, which term includes the Policy described
in this prospectus, the Policy application, any supplemental applications and
any endorsements or additional benefit riders or agreements.
POLICY ANNIVERSARY: The same date in each year as the Policy Date.
POLICY DATE: The date set forth on the Policy data page which we use to
determine Policy Years, Policy Months and Policy Anniversaries. The Policy Date
may, but will not always, coincide with the effective date of insurance coverage
under the Policy. (See "THE POLICY--Purchasing the Policy.")
POLICY DEBT: The sum of all outstanding Policy Loans and any due and unpaid
Policy Loan interest.
POLICY LOAN: An amount the Policyowner borrows from the Company using the Policy
as the sole security. Interest on Policy Loans is payable in advance (for the
remainder of the Policy Year) upon taking a Policy Loan and upon each Policy
Anniversary thereafter (for the following Policy Year) until the Policy Loan is
repaid.
POLICY MONTH: A one-month period beginning on a Monthly Deduction Day and ending
on the day immediately preceding the next Monthly Deduction Day.
POLICYOWNER, YOU, YOUR: The person who owns a Policy. The Policyowner is named
in the application.
POLICY YEAR: A twelve-month period that starts on the Policy Date or on a Policy
Anniversary.
SPECIFIED AMOUNT: The minimum death benefit payable under a Policy so long as
the Policy remains in force. The Specified Amount as of the Policy Date is set
forth on the data page in each Policy.
SUBACCOUNT: A subdivision of the Variable Account which invests exclusively in
shares of a designated Investment Option of a Fund.
SURRENDER CHARGE: A charge we assess at the time of any surrender during the
first ten Policy Years and for ten years following an increase in Specified
Amount.
SURRENDER VALUE: The Accumulated Value minus the Surrender Charge.
TARGET PREMIUM: A premium amount specified by the Company. We use this amount to
calculate the premium expense charge during periods when we declare a premium
expense charge less than the 7% guaranteed premium expense charge. We may
declare a lower percentage of premium expense charge on premiums paid in excess
of the Target Premium during a Policy Year. We also use Target Premium to
calculate registered representatives' compensation. Your Target Premium is
influenced by your guaranteed mortality basis and a 4% net return to carry your
Policy to the later of age 80 or 15 years.
UNIT VALUE: The value determined by dividing each Subaccount's Net Asset Value
by the number of units outstanding at the time of calculation.
VALUATION PERIOD: The period between the close of business (3:00 p.m. central
time) on a Business Day and the close of business on the next Business Day.
VARIABLE ACCOUNT: EquiTrust Life Variable Account, a separate investment account
the Company established to receive and invest the Net Premiums paid under the
Policies.
4
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SUMMARY OF THE POLICY
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The following is a summary of the Policy's features. Please read the entire
Prospectus and the Policy for more detailed information. Unless otherwise
indicated, the description of the Policy contained in this Prospectus
assumes that the Policy is in force and that there is no outstanding Policy
Debt.
THE POLICY
- The Policy is a flexible premium last survivor variable life insurance
policy providing for:
- death proceeds payable to the Beneficiary upon the last death of
the Joint Insureds,
- the accumulation of Accumulated Value,
- withdrawal and surrender options, and
- loan privileges.
- We normally issue a Policy for a minimum Specified Amount of $100,000,
but we may issue Policies for lower Specified Amounts.
- You have flexibility in determining the frequency and amount of
premiums. (See "THE POLICY--Premiums.")
- We do not guarantee the amount and/or duration of the life insurance
coverage.
- Accumulated Value may increase or decrease, depending upon the
investment experience of the assets supporting the Policy. You bear the
investment risk of any depreciation of, and reap the benefit of any
appreciation in, the value of the underlying assets.
- If either Joint Insured is alive and the Policy is in force on the
Maturity Date, we will pay you the Accumulated Value as of the end of
the Business Day coinciding with or immediately following the Maturity
Date, reduced by any outstanding Policy Debt.
- CANCELLATION PRIVILEGE. You may examine and cancel the Policy by
returning it to us before midnight of the 20th day after you receive it.
We will refund you the greater of:
- premiums paid, or
- the Accumulated Value on the Business Day we receive the Policy
plus any charges we deducted. (See "THE POLICY--Examination of
Policy (Cancellation Privilege).")
THE VARIABLE ACCOUNT
- The Variable Account has 15 Subaccounts, each of which invests
exclusively in one of the following Investment Options offered by the
Funds:
<TABLE>
<S> <C>
- Value Growth Portfolio - Personal Strategy Balanced Portfolio
- High Grade Bond Portfolio - International Stock Portfolio
- High Yield Bond Portfolio - Capital Appreciation Portfolio
- Money Market Portfolio - Disciplined Stock Portfolio
- Blue Chip Portfolio - International Equity Portfolio
- Equity Income Portfolio - Index 500 Portfolio
- Mid-Cap Growth Portfolio - Growth & Income Portfolio
- New America Growth Portfolio
</TABLE>
- You may instruct us to allocate Net Premiums and transfer Accumulated
Value to any of the Subaccounts.
5
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- We will allocate your initial premium to the Declared Interest Option.
- We will automatically allocate, without charge, your Accumulated Value
in the Declared Interest Option according to your allocation
instructions upon the earlier of:
(1) the date we receive a signed notice that you have received the
Policy, or
(2) 25 days after the Delivery Date.
- If we receive Net Premiums before (1) or (2) above, we will allocate
those monies to the Declared Interest Option.
- We will allocate Net Premiums received after (1) or (2) above according
to your allocation instructions.
THE DECLARED INTEREST OPTION
- You may allocate or transfer all or a portion of the Accumulated Value
to the Declared Interest Option, which guarantees a specified minimum
rate of return (at least 4% annually). (See "THE DECLARED INTEREST
OPTION.")
PREMIUMS
- You choose when to pay and how much to pay.
- You must pay an initial premium that (when reduced by the premium
expense charge) is enough to pay the first monthly deduction.
- We deduct a premium expense charge from each payment. (See "CHARGES and
DEDUCTIONS--Premium Expense Charge.")
POLICY BENEFITS
ACCUMULATED VALUE BENEFITS (SEE "POLICY BENEFITS--ACCUMULATED VALUE BENEFITS.")
- Your Policy provides for a Accumulated Value. A Policy's Accumulated
Value varies to reflect
- the amount and frequency of premium payments,
- the investment experience of the Subaccounts,
- interest earned on Accumulated Value in the Declared Interest
Option,
- Policy Loans,
- partial withdrawals and
- charges we assess under the Policy.
- You may fully surrender your Policy and receive the Net Surrender Value.
- You may obtain a partial withdrawal of your Net Accumulated Value
(minimum $500) at any time before the Maturity Date.
- A partial withdrawal or surrender may have federal income tax
consequences. (See "FEDERAL TAX MATTERS".)
TRANSFERS (SEE "POLICY BENEFITS--TRANSFERS.")
- You may transfer amounts (minimum $100) among the Subaccounts an
unlimited number of times in a Policy Year.
- You may make one transfer per Policy Year between the Subaccounts and
the Declared Interest Option.
- The first transfer in a Policy Year is free. We may deduct a $25 charge
from the amount transferred on subsequent transfers in that Policy Year.
6
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- We do not count certain transfers for purposes of the one free transfer
limit. (See "THE POLICY--Special Transfer Privilege"; and "THE
POLICY--Premiums--Allocating Net Premiums.")
LOANS (SEE POLICY BENEFITS--"LOAN BENEFITS.")
- You may borrow up to 90% of the Policy's Net Surrender Value as of the
date of the most recent loan.
- We charge you a maximum annual interest rate of 5.5%.
- We secure your loan by segregating in the Declared Interest Option an
amount equal to the Policy Loan. We credit this amount with an effective
annual rate of interest equal to at least 4%.
- Policy Loans may have federal income tax consequences. (See "FEDERAL TAX
MATTERS.")
DEATH PROCEEDS (SEE "POLICY BENEFITS--DEATH PROCEEDS.")
- The Policy contains two death benefit options:
- Option A--the death benefit is the greater of the sum of the
Specified Amount and the Policy's Accumulated Value, or the
Accumulated Value multiplied by the specified amount factor for the
Joint Equal Attained Age, as set forth in the Policy.
- Option B--the death benefit is the greater of the Specified Amount,
or the Accumulated Value multiplied by the specified amount factor
for the Joint Equal Attained Age, as set forth in the Policy.
- Under either death benefit option, so long as the Policy remains in
force, the death benefit will not be less than the Specified Amount of
the Policy on the last death of the Joint Insureds.
- To determine the death proceeds, we reduce the death benefit by any
outstanding Policy Debt and increase the death benefit by any unearned
loan interest and any premiums paid after the date of death. We may pay
the proceeds in a lump sum or in accordance with a payment option.
- You may change the Specified Amount or the death benefit option.
CHARGES (SEE "CHARGES AND DEDUCTIONS")
PREMIUM EXPENSE CHARGE
- We deduct a Premium Expense Charge equal to 7% of each premium up to the
Target Premium and 2% of each premium in excess of the Target Premium.
The remaining amount is the Net Premium.
ACCUMULATED VALUE CHARGES
- Each month, we make a monthly deduction (that varies from month to
month) equal to the sum of:
- a cost of insurance charge, plus
- the cost of any additional insurance benefits added by rider, plus
- a $10 policy expense charge, plus
- a monthly charge of $0.03 per $1,000 of Specified Amount.
- During the first 12 Policy Months and during the 12 Policy Months
immediately following an increase in Specified Amount, the monthly
deduction will include a first year monthly administrative charge of
$0.10 per $1,000 of Specified Amount.
- We apply a $10 first year monthly expense charge during the first 12
Policy Months.
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- Upon partial withdrawal of a Policy we assess a charge equal to the
lesser of $25 or 2% of the amount withdrawn.
- We apply a charge upon surrender during the first ten Policy Years, as
well as during the first ten Policy Years following an increase in
Specified Amount (see "APPENDIX C--Maximum Surrender Charges").
- We may deduct a $25 charge from the amount transferred on the second and
subsequent transfers in a Policy Year.
CHARGES AGAINST THE VARIABLE ACCOUNT
- We deduct a daily mortality and expense risk charge from the average
daily net assets of each Subaccount. The charge equals an effective
annual rate of .90%.
- We may assess a charge against the Variable Account for federal income
taxes that may be attributable to the Variable Account.
- Because the Variable Account purchases shares of the Investment Options,
the value of the average net assets of the Variable Account will reflect
the investment advisory fee and other expenses incurred by each
Investment Option. The following table indicates the Investment Options'
fees and expenses for 1999.
<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
INVESTMENT OPTION FEE EXPENSES EXPENSES
<S> <C> <C> <C>
EquiTrust Variable Insurance Series Fund
Value Growth 0.45% % %
High Grade Bond 0.30% % %
High Yield Bond 0.45% % %
Money Market 0.25% % %
Blue Chip 0.20% % %
T. Rowe Price Equity Series, Inc.
Equity Income 0.85% 0.00% 0.85%(1)
Mid-Cap Growth 0.85% 0.00% 0.85%(1)
New America Growth 0.85% 0.00% 0.85%(1)
Personal Strategy Balanced 0.90% 0.00% 0.90%(1)
T. Rowe Price International Series, Inc.
International Stock 1.05% 0.00% 1.05%(1)
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio 0.75% % %
Disciplined Stock Portfolio 0.75% % %
Growth & Income Portfolio 0.75% % %
International Equity Portfolio 0.75% % %
Small Cap Portfolio 0.75% % %
</TABLE>
(1) Total annual investment option expenses are an all-inclusive fee and
pay for investment management services and other operating costs.
[Expense figures to be filed by amendment.]
8
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OTHER POLICIES
- We offer other variable life insurance policies (through this Variable
Account and other variable accounts we establish) that invest in the
same Investment Options of the Funds. These policies may have different
charges that could affect Subaccount performance, and may offer
different benefits more suitable to your needs. You may contact us to
obtain more information about these policies.
TAX TREATMENT (SEE "FEDERAL TAX MATTERS")
- We believe that it is reasonable to conclude that the Policy qualifies
as a life insurance contract for federal income tax purposes.
- If a Policy qualifies as a life insurance contract for federal income
tax purposes, the Accumulated Value under a Policy should be subject to
the same federal income tax treatment as accumulated value under a
conventional fixed-benefit Policy--the Policyowner is not deemed to be
in constructive receipt of Accumulated Values under a Policy until there
is a distribution from the Policy.
- Death proceeds payable under a Policy should be completely excludable
from the gross income of the Beneficiary. As a result, the Beneficiary
generally will not be taxed on these proceeds.
- Depending on the total amount of premiums you pay, the Policy may be
treated as a modified endowment contract ("MEC") under Federal tax laws.
If a Policy is treated as a MEC, then complete surrenders, partial
withdrawals and loans under the Policy will be taxable as ordinary
income to the extent there are earnings in the Policy. In addition, a
10% penalty tax may be imposed on complete surrenders, partial
withdrawals and loans taken before you reach age 59 1/2. If the Policy
is not a MEC, distributions generally will be treated first as a return
of basis or investment in the Policy and then as taxable income.
Moreover, loans will not be treated as distributions. Finally, neither
distributions nor loans from a Policy that is not a MEC are subject to
the 10% penalty tax.
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EQUITRUST LIFE INSURANCE COMPANY AND THE VARIABLE ACCOUNT
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EQUITRUST LIFE INSURANCE COMPANY
EquiTrust Life Insurance Company is a stock life insurance company which was
incorporated in the State of Iowa on June 3, 1966. Our principal business is
offering life insurance policies and annuity contracts. Our principal
offices are at 5400 University Avenue, West Des Moines, Iowa 50266. We are
admitted to do business in 41 states and the District of Columbia--Alabama,
Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia,
Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maryland,
Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania,
South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington,
West Virginia, Wisconsin and Wyoming.
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THE VARIABLE ACCOUNT
We established the Variable Account as a separate account on January 6,
1998. The Variable Account receives and invests the Net Premiums under the
Policy, and may receive and invest net premiums for any other variable life
insurance policies we issue.
The Variable Account's assets are our property, and they are available to
cover our general liabilities only to the extent that the Variable Account's
assets exceed its liabilities arising under the Policies and any other
policies it supports. The portion of the Variable Account's assets
attributable to the Policies generally are not chargeable with liabilities
arising out of any other business that we may
9
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conduct. We may transfer to the General Account any Variable Account assets
which are in excess of such reserves and other Policy liabilities.
The Variable Account currently has 15 Subaccounts but may, in the future,
include additional subaccounts. Each Subaccount invests exclusively in
shares of a single corresponding Investment Option. Income and realized and
unrealized gains or losses from the assets of each Subaccount are credited
to or charged against, that Subaccount without regard to income, gains or
losses from any other Subaccount.
We registered the Variable Account as a unit investment trust with the
Securities and Exchange Commission under the Investment Company Act of 1940.
The Variable Account meets the definition of a separate account under the
federal securities laws. Registration with the Securities and Exchange
Commission does not mean that the SEC supervises the management or
investment practices or policies of the Variable Account or the Company. The
Variable Account is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies domiciled in Iowa.
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INVESTMENT OPTIONS
The Variable Account invests in shares of the Investment Options described
below. Each of these Investment Options was formed as an investment vehicle
for insurance company separate accounts. Each Investment Option has its own
investment objectives and separately determines the income and losses for
that Investment Option. While you may be invested in all Subaccounts, we
only permit you to "actively participate" in a maximum of 10 Investment
Options at any one time.
The investment objectives and policies of certain Investment Options are
similar to the investment objectives and policies of other portfolios that
the same investment adviser, investment sub-adviser or manager may manage.
The investment results of the Investment Options, however, may be higher or
lower than the results of such other portfolios. There can be no assurance,
and no representation is made, that the investment results of any of the
Investment Options will be comparable to the investment results of any other
portfolio, even if the other portfolio has the same investment adviser,
investment sub-adviser or manager.
The paragraphs below summarize each Investment Option's investment
objectives and policies. There is no assurance that any Investment Option
will achieve its stated objectives. Please refer to the prospectus for each
Investment Option for more detailed information, including a description of
risks, for each Investment Option. The Investment Option prospectuses must
accompany or precede this Prospectus and you should read them carefully and
retain them for future reference.
EQUITRUST VARIABLE INSURANCE SERIES FUND. Equitrust Investment Management
Services, Inc. is this Fund's investment adviser. The fund is comprised of six
portfolios, the following five of which are available under the Policy:
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Value Growth Portfolio - This Portfolio seeks long-term capital appreciation.
Portfolio pursues its objective by investing primarily in
equity securities of companies that the investment
adviser believes have a potential to earn a high return
on equity, and/or in equity securities that the
investment adviser believes are undervalued by the market
place. Such equity securities may include common stock,
preferred stock and securities convertible or
exchangeable into common stock.
High Grade Bond Portfolio - This Portfolio seeks as high a level of current income as
is consistent with a high grade portfolio of debt
securities. Portfolio pursues this objective by investing
primarily in debt securities rated AAA, AA or A by
Standard & Poor's, and/or Aaa, Aa or A by Moody's
Investors Service, Inc., and in securities issued or
guaranteed by the United States government or its
agencies or instrumentalities.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
High Yield Bond Portfolio - This Portfolio seeks, as a primary objective, as high a
level of current income as is consistent with investment
in a portfolio of fixed-income securities rated in the
lower categories of established rating services (commonly
known as "junk bonds"). As a secondary objective, the
Portfolio seeks capital appreciation when consistent with
its primary objective. The Portfolio pursues these
objectives by investing primarily in fixed-income
securities rated Baa or lower by Moody's Investors
Service, Inc., and/or BBB or lower by Standard & Poor's,
or in unrated securities of comparable quality. AN
INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN
ORDINARY FINANCIAL RISK. (See the Fund Prospectus "HIGHER
RISK SECURITIES AND INVESTMENT STRATEGIES--Lower Rated
Debt Securities.")
Money Market Portfolio - This Portfolio seeks maximum current income consistent
with liquidity and stability of principal. Portfolio
pursues this objective by investing in high quality
short-term money market instruments. AN INVESTMENT IN THE
MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED
BY THE F.D.I.C. OR ANY GOVERNMENT AGENCY. THERE IS NO
ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Blue Chip Portfolio - This Portfolio seeks growth of capital and income.
Portfolio pursues this objective by investing primarily
in common stocks of well-capitalized, established
companies. Because this Portfolio may be invested heavily
in particular stocks or industries, an investment in this
Portfolio may entail relatively greater risk of loss.
</TABLE>
T. ROWE PRICE EQUITY SERIES, INC. T. Rowe Price Associates, Inc. is the
investment adviser to the Fund.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Equity Income Portfolio - This Portfolio seeks to provide substantial dividend
income and long-term capital appreciation by investing
primarily in established companies considered by the
adviser to have favorable prospects for both increasing
dividends and capital appreciation.
Mid-Cap Growth Portfolio - This Portfolio seeks to provide long-term capital
appreciation by investing primarily in mid-cap common
stocks with the potential for above-average earnings
growth. The investment adviser defines mid-cap companies
as those whose market capitalization falls within the
range of companies in the Standard & Poor's Mid-Cap 400
Index.
New America Growth Portfolio - This Portfolio seeks long-term capital growth by
investing primarily in common stocks of U.S. growth
companies operating in service industries.
Personal Strategy Balanced Portfolio - This Portfolio seeks the highest total return over time
consistent with an emphasis on both capital appreciation
and income.
</TABLE>
11
<PAGE>
T. ROWE PRICE INTERNATIONAL SERIES, INC. Rowe Price-Fleming International, Inc.
is the investment adviser to the Fund.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
International Stock Portfolio - This Portfolio seeks to provide capital appreciation
through investments primarily in established companies
based outside the United States.
</TABLE>
DREYFUS VARIABLE INVESTMENT FUND. The Dreyfus Corporation serves as the
investment adviser to the Fund. Fayez Sarofim and Co. serves as the
sub-investment adviser to the Dreyfus Variable Investment Fund: Capital
Appreciation Portfolio. The following Fund portfolios are available under the
Contract.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
<S> <C>
Dreyfus Variable Investment Fund: - This Portfolio primarily seeks long-term capital growth,
Capital Appreciation Portfolio consistent with the preservation of capital; current
income is a secondary investment objective. This
Portfolio invests primarily in the common stocks of
domestic and foreign issuers.
Dreyfus Variable Investment Fund: - This Portfolio seeks to provide investment results that
Disciplined Stock Portfolio are greater than the total return performance of
publicly-traded common stocks in the aggregate, as
represented by the Standard & Poor's 500 Composite Stock
Price Index. The Portfolio will use quantitative
statistical modeling techniques to construct a portfolio
in an attempt to achieve its investment objective,
without assuming undue risk relative to the broad stock
market.
Dreyfus Variable Investment Fund: - This Portfolio seeks to provide long-term capital growth,
Growth and Income Portfolio current income and growth of income, consistent with
reasonable investment risk by investing primarily in
equity securities, debt securities and money market
instruments of domestic and foreign issuers.
Dreyfus Variable Investment Fund: - This Portfolio seeks to maximize capital growth through
International Equity Portfolio investments in equity securities of foreign issuers
located throughout the world.
Dreyfus Variable Investment Fund: - This Portfolio seeks maximum capital appreciation by
Small Cap Portfolio investing primarily in common stocks of domestic and
foreign issuers. The Portfolio will be particularly alert
to companies considered by the adviser to be emerging
smaller-sized companies which are believed to be
characterized by new or innovative products, services or
processes which should enhance prospects for growth in
future earnings.
</TABLE>
The Funds currently sell shares: (1) to the Variable Account as well as to
separate accounts of insurance companies that may or may not be affiliated
with the Company or each other; and (2) to separate accounts to serve as the
underlying investment for both variable life insurance policies and variable
annuity contracts. We currently do not foresee any disadvantage to
Policyowners arising from the sale of shares to support variable life
insurance policies and variable annuity contracts, or from shares being sold
to separate accounts of insurance companies that may or may not be
affiliated with the Company. However, we will monitor events in order to
identify any material irreconcilable conflicts that might possibly arise. In
that event, we would determine what action, if any, should be taken in
response to those events or conflicts. In addition, if we believe that a
Fund's response to any of those events or conflicts insufficiently protects
Policyowners, we will take appropriate action on our
12
<PAGE>
own, including withdrawing the Variable Account's investment in that Fund.
(See the Fund prospectuses for more detail.)
We may receive compensation from an affiliate(s) of one or more of the Funds
based upon an annual percentage of the average assets we hold in the
Investment Options. These amounts are intended to compensate us for
administrative and other services we provide to the Funds and/or
affiliate(s).
Each Fund is registered with the Securities and Exchange Commission as an
open-end, diversified management investment company. Such registration does
not involve supervision of the management or investment practices or
policies of the Fund by the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to compliance with applicable law, to make
additions to, deletions from or substitutions for the shares of the
Investment Options that the Variable Account holds or that the Variable
Account may purchase. If the shares of an Investment Option are no longer
available for investment or if, in our judgment, further investment in any
Investment Option should become inappropriate in view of the purposes of the
Variable Account, we reserve the right to dispose of the shares of any
Investment Option and to substitute shares of another Investment Option. We
will not substitute any shares attributable to a Policyowner's Accumulated
Value in the Variable Account without notice to and prior approval of the
Securities and Exchange Commission, to the extent required by the Investment
Company Act of 1940 or other applicable law. In the event of any such
substitution or change, we may, by appropriate endorsement, make such
changes in these and other policies as may be necessary or appropriate to
reflect such substitution or change. Nothing contained in this Prospectus
shall prevent the Variable Account from purchasing other securities for
other series or classes of policies, or from permitting a conversion between
series or classes of policies on the basis of requests made by Policyowners.
We also reserve the right to establish additional subaccounts of the
Variable Account, each of which would invest in shares of a new Investment
Option, with a specified investment objective. We may establish new
subaccounts when, in our sole discretion, marketing, tax or investment
conditions warrant, and we may make any new subaccounts available to
existing Policyowners on a basis we determine. Subject to obtaining any
approvals or consents required by applicable law, we may transfer the assets
of one or more Subaccounts to any other Subaccount(s), or one or more
Subaccounts may be eliminated or combined with any other Subaccount(s) if,
in our sole discretion, marketing, tax or investment conditions warrant.
If we deem it to be in the best interests of persons having voting rights
under the Policies, we may
- operate the Variable Account as a management company under the
Investment Company Act of 1940,
- deregister the Variable Account under that Act in the event such
registration is no longer required, or,
- subject to obtaining any approvals or consents required by
applicable law, combine the Variable Account with other Company
separate accounts.
To the extent permitted by applicable law, we may also transfer the Variable
Account's assets associated with the Policies to another separate account.
In addition, we may, when permitted by law, restrict or eliminate any voting
rights of Policyowners or other persons who have voting rights as to the
Variable Account. (See "ADDITIONAL INFORMATION--Voting Rights.")
13
<PAGE>
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
PURCHASING THE POLICY
In order to issue a Policy, we must receive a completed application,
including payment of the initial premium, at our Home Office. We ordinarily
will issue a Policy only for Joint Insureds who have a Joint Equal Age of 18
to 85 years of age at their last birthday and who supply satisfactory
evidence of insurability to the Company. Acceptance is subject to our
underwriting rules and we may, in our sole discretion, reject any
application or premium for any lawful reason. The minimum Specified Amount
for which we will issue a Policy is normally $100,000, although we may, in
our discretion, issue Policies with Specified Amounts of less than $100,000.
The effective date of insurance coverage under the Policy will be the later
of:
- the Policy Date,
- the date the Joint Insureds sign the last of any amendments to the
initial application required by our underwriting rules, or
- the date when we receive the full initial premium at the Home
Office.
The Policy Date will be the later of:
(1) the date of the initial application, or
(2) the date we receive any additional information at the Home Office
if our underwriting rules require additional medical or other
information.
The Policy Date may also be any other date mutually agreed to by you and the
Company. If the later of (1) or (2) above is the 29th, 30th or 31st of any
month, the Policy Date will be the 28th of such month. We use the Policy
Date to determine Policy Years, Policy Months and Policy Anniversaries. The
Policy Date may, but will not always, coincide with the effective date of
insurance coverage under the Policy.
- --------------------------------------------------------------------------------
PREMIUMS
Subject to certain limitations, you have flexibility in determining the
frequency and amount of premiums.
PREMIUM FLEXIBILITY. We do not require you to pay premiums in accordance
with a rigid and inflexible premium schedule. We may require you to pay an
initial premium that, when reduced by the premium expense charge, will be
sufficient to pay the monthly deduction for the first Policy Month.
Thereafter, subject to the minimum and maximum premium limitations described
below, you may also make unscheduled premium payments at any time prior to
the Maturity Date.
PLANNED PERIODIC PREMIUMS. Each Policyowner will determine a planned
periodic premium schedule that provides for the payment of a level premium
over a specified period of time on a quarterly, semi-annual or annual basis.
We may, at our discretion, permit you to make planned periodic premium
payments on a monthly basis. We ordinarily will send periodic reminder
notices to the Policyowner for each planned periodic premium. Depending on
the duration of the planned periodic premium schedule, the timing of planned
payments could affect the tax status of the Policy. (See "FEDERAL TAX
MATTERS.")
You are not required to pay premiums in accordance with the planned periodic
premium schedule. Furthermore, you have considerable flexibility to alter
the amount, frequency and the time period over which you pay planned
periodic premiums; however, we must consent to any planned periodic payment
less than $100. Changes in the planned premium schedule may have federal
income tax consequences. (See "FEDERAL TAX MATTERS.")
14
<PAGE>
Paying a planned periodic premium will not guarantee that the Policy remains
in force. Instead, the duration of the Policy depends upon the Policy's
Accumulated Value. Thus, even if you do pay planned periodic premiums, the
Policy will nevertheless lapse if, during the first three Policy Years, the
Net Accumulated Value (Net Surrender Value if you have taken a policy loan)
or, after three Policy Years, the Net Surrender Value, is insufficient on a
Monthly Deduction Day to cover the monthly deduction (see "CHARGES AND
DEDUCTIONS--Monthly Deduction") and a Grace Period expires without a
sufficient payment (see "THE POLICY--Policy Lapse and Reinstatement--
LAPSE").
UNSCHEDULED PREMIUMS. Each unscheduled premium payment must be at least
$100; however, we may, in our discretion, waive this minimum requirement. We
reserve the right to limit the number and amount of unscheduled premium
payments. An unscheduled premium payment may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
PREMIUM LIMITATIONS. In no event may the total of all premiums paid, both
planned periodic and unscheduled, exceed the applicable maximum premium
limitation imposed by federal tax laws. Because the maximum premium
limitation is in part dependent upon the Specified Amount for each Policy,
changes in the Specified Amount may affect this limitation. If at any time
you pay a premium that would result in total premiums exceeding the
applicable maximum premium limitation, we will accept only that portion of
the premium which will make total premiums equal the maximum. We will return
any part of the premium in excess of that amount and we will not accept
further premiums until allowed by the applicable maximum premium limitation.
PAYMENT OF PREMIUMS. We will treat any payments you make first as payment of
any outstanding Policy Debt unless you indicate that the payment should be
treated otherwise. Where you make no indication, we will treat any portion
of a payment that exceeds the amount of any outstanding Policy Debt as a
premium payment.
NET PREMIUMS. The Net Premium is the amount available for investment. The
Net Premium equals the premium paid less the premium expense charge. (See
"CHARGES AND DEDUCTIONS--Premium Expense Charge.")
ALLOCATING NET PREMIUMS. In your application for a Policy, you can allocate
Net Premiums or portions thereof to the Subaccounts, to the Declared
Interest Option, or both. We will allocate Net Premiums to the Declared
Interest Option if we receive them either
(1) before the date we obtain a signed notice from you that you
have received the Policy, or
(2) before the end of 25 days after the Delivery Date (the date we
issue and mail the Policy to you).
Upon the earlier of (1) or (2) above, we will automatically allocate the
Accumulated Value in the Declared Interest Option, without charge, among the
Subaccounts and Declared Interest Option in accordance with your allocation
instructions.
We allocate Net Premiums received on or after (1) or (2) above in accordance
with your instructions, to the Variable Account, the Declared Interest
Option, or both. You do not waive your cancellation privilege by sending us
the signed notice of receipt of the Policy (see "THE POLICY--Examination of
Policy (Cancellation Privilege)").
The following additional rules apply to Net Premium allocations:
- You must allocate at least 10% of each premium to any subaccount of
the Variable Account or to the Declared Interest Option.
- Your allocation percentages must be in whole numbers (we do not
permit fractional percentages).
- You may change the allocation percentages for future Net Premiums
without charge, at any time while the Policy is in force, by
providing us with a written notice signed by you on a form we
accept. The change will take effect on the date we receive the
written notice at the Home Office and will have no effect on prior
Accumulated Values.
15
<PAGE>
- --------------------------------------------------------------------------------
EXAMINATION OF POLICY (CANCELLATION PRIVILEGE)
You may cancel the Policy by delivering or mailing written notice or sending
a telegram to us at the Home Office, and returning the Policy to us at the
Home Office before midnight of the 20th day you receive the Policy. (Certain
states may provide a 30 day free-look period in a replacement situation.)
Notice given by mail and return of the Policy by mail are effective on being
postmarked, properly addressed and postage prepaid.
With respect to all Policies, we will refund, within seven days after
receipt of satisfactory notice of cancellation and the returned Policy at
our Home Office, an amount equal to the greater of premiums paid, or:
- the Accumulated Value on the Business Day on or next following the
date we receive the Policy at the Home Office, plus
- any premium expense charges we deducted, plus
- monthly deductions made on the Policy Date and any Monthly Deduction
Day, and
- amounts approximating the daily mortality and expense risk charges
against the Variable Account.
- --------------------------------------------------------------------------------
POLICY LAPSE AND REINSTATEMENT
LAPSE. Your Policy may lapse (terminate without value) during the first
three Policy Years if the Net Accumulated Value (Net Surrender Value if you
take a policy loan), or after three Policy Years if the Net Surrender Value,
is insufficient on a Monthly Deduction Day to cover the monthly deduction
(see "CHARGES AND DEDUCTIONS--Monthly Deduction") AND a Grace Period expires
without a sufficient payment. Insurance coverage will continue during the
Grace Period, but we will deem the Policy to have no Accumulated Value for
purposes of Policy Loans and surrenders during such Grace Period. The death
proceeds payable during the Grace Period will equal the amount of the death
proceeds payable immediately prior to the commencement of the Grace Period,
reduced by any due and unpaid monthly deductions.
A Grace Period of 61 days will commence on the date we send you a notice of
any insufficiency, at which time the Accumulated Value in each Subaccount
will be automatically transferred without charge to the Declared Interest
Option.
To avoid lapse and termination of the Policy without value, we must receive
from you during the Grace Period a premium payment that, when reduced by the
premium expense charge (see "CHARGES AND DEDUCTIONS--Premium Expense
Charge"), will be at least equal to three times the monthly deduction due on
the Monthly Deduction Day immediately preceding the Grace Period (see
"CHARGES AND DEDUCTIONS--Monthly Deduction"). If your Policy enters a Grace
Period, the amount transferred to the Declared Interest Option will remain
there unless and until you provide us with allocation instructions.
REINSTATEMENT. Prior to the Maturity Date, you may reinstate a lapsed Policy
at any time within five years of the Monthly Deduction Day immediately
preceding the Grace Period which expired without payment of the required
premium. You must submit the following items to us:
- A written application for reinstatement signed by the Policyowner
and the Joint Insureds;
- Evidence of insurability we deem satisfactory;
- A premium that, after the deduction of the premium expense charge,
is at least sufficient to keep the Policy in force for three months;
and
- An amount equal to the monthly cost of insurance for the two Policy
Months prior to lapse.
State law may limit the premium to be paid on reinstatement to an amount
less than that described. To the extent that we did not deduct the first
year monthly administrative charge for a total of twelve
16
<PAGE>
Policy Months prior to lapse, we will continue to deduct such charge
following reinstatement of the Policy until we have assessed such charge,
both before and after the lapse, for a total of 12 Policy Months. (See
"CHARGES AND DEDUCTIONS--Monthly Deduction.") We will not reinstate a Policy
surrendered for its Net Surrender Value. The lapse of a Policy with loans
outstanding may have adverse tax consequences (see "FEDERAL TAX
MATTERS--Policy Proceeds.")
The effective date of the reinstated Policy will be the Monthly Deduction
Day coinciding with or next following the date we approve the application
for reinstatement. Upon reinstatement of your Policy, the amount tranferred
to the Declared Interest Option during the Grace Period will remain there
unless and until you provide us with allocation instructions.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER PRIVILEGE
You may, at any time prior to the Maturity Date while the Policy is in
force, operate the Policy as a flexible premium fixed-benefit last survivor
life insurance policy by requesting that we transfer all of the Accumulated
Value in the Variable Account to the Declared Interest Option. You may
exercise this special transfer privilege once each Policy Year. Once you
exercise the special transfer privilege, we automatically will credit all
future premium payments to the Declared Interest Option, until you request a
change in allocation to convert the Policy back to a flexible premium
variable life insurance policy. The Company will not impose any charge for
transfers resulting from the exercise of the special transfer privilege.
- --------------------------------------------------------------------------------
POLICY BENEFITS
- --------------------------------------------------------------------------------
While a Policy is in force, it provides for certain benefits prior to the
Maturity Date. Subject to certain limitations, you may at any time obtain
all or a portion of the Net Accumulated Value by surrendering or taking a
partial withdrawal from the Policy. (See "POLICY BENEFITS--Accumulated Value
Benefits--SURRENDER AND WITHDRAWAL PRIVILEGES.") In addition, you have
certain policy loan privileges under the Policies. (See "POLICY
BENEFITS--Loan Benefits--POLICY LOANS.") The Policy also provides for the
payment of death proceeds upon the last death of the Joint Insureds under
one of two death benefit options selected by you (see "POLICY BENEFITS--
Death Proceeds--DEATH BENEFIT OPTIONS"), and benefits upon the maturity of a
Policy (see "POLICY BENEFITS--Benefits at Maturity").
- --------------------------------------------------------------------------------
ACCUMULATED VALUE BENEFITS
SURRENDER AND WITHDRAWAL PRIVILEGES. At any time prior to the Maturity Date
while the Policy is in force, you may surrender the Policy or make a partial
withdrawal by sending a written request to the Company at our Home Office. A
Surrender Charge will apply to any surrender during the first ten Policy
Years, as well as during the first ten years following an increase in
Specified Amount. A Partial Withdrawal Fee equal to the lesser of $25 or 2%
of the amount withdrawn will be payable upon each partial withdrawal. (See
"CHARGES AND DEDUCTIONS--Surrender Charge, and --Partial Withdrawal Fee").
We ordinarily mail surrender and withdrawal proceeds to the Policyowner
within seven days after we receive a signed request at our Home Office,
although we may postpone payments under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.")
SURRENDERS. The amount payable upon surrender of the Policy is the Net
Surrender Value at the end of the Valuation Period when we receive the
request. We may pay this amount in a lump sum or under one of the payment
options specified in the Policy, as requested by the Policyowner. (See
"POLICY BENEFITS--Payment Options"). If you surrender the Policy, all
insurance in force will terminate. See "FEDERAL TAX MATTERS" for a
discussion of the tax consequences associated with complete surrenders.
PARTIAL WITHDRAWALS. A Policyowner may obtain a portion of the Policy's Net
Accumulated Value upon partial withdrawal of the Policy.
- A partial withdrawal must be at least $500.
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<PAGE>
- A partial withdrawal cannot exceed the lesser of (1) the Net
Surrender Value less $500 or (2) 90% of the Net Surrender Value.
We deduct the Partial Withdrawal Fee from the remaining Accumulated Value.
You may request that we pay the proceeds of a partial withdrawal in a lump
sum or under one of the payment options specified in the Policy. (See
"POLICY BENEFITS--Payment Options").
We will allocate a partial withdrawal (together with the Partial Withdrawal
Fee) among the Subaccounts and the Declared Interest Option in accordance
with the Policyowner's written instructions. If we do not receive any such
instructions with the request for partial withdrawal, we will allocate the
partial withdrawal among the Subaccounts and the Declared Interest Option in
the same proportion that the Accumulated Value in each of the Subaccounts
and the Accumulated Value in the Declared Interest Option, reduced by any
outstanding Policy Debt, bears to the total Accumulated Value on the date we
receive the request at the Home Office.
Partial withdrawals will affect both the Policy's Accumulated Value and the
death proceeds payable under the Policy. (See "POLICY BENEFITS--Death
Proceeds.")
- The Policy's Accumulated Value will be reduced by the amount of the
partial withdrawal and Partial Withdrawal Fee.
- If the death benefit payable under either death benefit option both
before and after the partial withdrawal is equal to the Accumulated
Value multiplied by the specified amount factor set forth in the
Policy, a partial withdrawal will result in a reduction in death
proceeds equal to the amount of the partial withdrawal, multiplied
by the specified amount factor then in effect.
- If the death benefit is not so affected by the specified amount
factor, the reduction in death proceeds will be equal to the partial
withdrawal.
If Option B is in effect at the time of partial withdrawal, the partial
withdrawal will reduce the Policy's Specified Amount by the amount of
Accumulated Value withdrawn. If Option A is in effect at the time of the
partial withdrawal, there will be no effect on Specified Amount. (See
"POLICY BENEFITS--Death Proceeds--DEATH BENEFIT OPTIONS.") The Specified
Amount remaining in force after a partial withdrawal may not be less than
the minimum Specified Amount for the Policy in effect on the date of the
partial withdrawal, as published by the Company. As a result, we will not
process any partial withdrawal that would reduce the Specified Amount below
this minimum.
If increases in the Specified Amount previously have occurred, a partial
withdrawal will first reduce the Specified Amount of the most recent
increase, then the next most recent increases successively, then the
coverage under the original application. Thus, a partial withdrawal may
either increase or decrease the amount of the cost of insurance charge,
depending upon the particular circumstances. (See "CHARGES AND
DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.") For a discussion of the
tax consequences associated with partial withdrawals, see "FEDERAL TAX
MATTERS."
NET ACCUMULATED VALUE. Net Accumulated Value equals the Policy's Accumulated
Value reduced by any outstanding Policy Debt and increased by any unearned
loan interest.
CALCULATING ACCUMULATED VALUE. The Policy provides for the accumulation of
Accumulated Value. The Accumulated Value of the Policy is equal to the sum
of the Accumulated Values in each Subaccount, plus the Accumulated Value in
the Declared Interest Option, including amounts transferred to the Declared
Interest Option to secure outstanding Policy Debt. We determine Accumulated
Value on each Business Day, and there is no guaranteed minimum Accumulated
Value.
- Accumulated Value will reflect a number of factors, including
- Net Premiums paid,
- partial withdrawals,
- Policy Loans,
- charges assessed in connection with the Policy,
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<PAGE>
- interest earned on the Accumulated Value in the Declared
Interest Option, and
- investment performance of the Subaccounts to which the
Accumulated Value is allocated.
As of the Policy Date, the Accumulated Value equals the initial Net Premium
less the monthly deduction made on the Policy Date.
On the Business Day coinciding with or immediately following the date we
receive notice that the Policyowner has received the Policy, but no later
than 25 days after the Delivery Date, we will automatically transfer the
Accumulated Value (all of which is in the Declared Interest Option) among
the Subaccounts and the Declared Interest Option in accordance with your
percentage allocation instructions. At the end of each Valuation Period
thereafter, the Accumulated Value in a Subaccount will equal:
- The total Subaccount units represented by the Accumulated Value at
the end of the preceding Valuation Period, multiplied by the
Subaccount's unit value for the current Valuation Period; PLUS
- Any Net Premiums received during the current Valuation Period which
are allocated to the Subaccount; PLUS
- All Accumulated Values transferred to the Subaccount from the
Declared Interest Option or from another Subaccount during the
current Valuation Period; MINUS
- All Accumulated Values transferred from the Subaccount to another
Subaccount or to the Declared Interest Option during the current
Valuation Period, including amounts transferred to the Declared
Interest Option to secure Policy Debt; MINUS
- All partial withdrawals (and any portion of the Partial Withdrawal
Fee) from the Subaccount during the current Valuation Period; MINUS
- The portion of any monthly deduction charged to the Subaccount
during the current Valuation Period to cover the Policy Month
following the Monthly Deduction Day.
The Policy's total Accumulated Value in the Variable Account equals the sum
of the Policy's Accumulated Value in each Subaccount.
UNIT VALUE. Each Subaccount has a Unit Value. When you allocate Net Premiums
or transfer other amounts into a Subaccount, we purchase a number of units
based on the Unit Value of the Subaccount as of the end of the Valuation
Period during which the allocation or transfer is made. Likewise, when
amounts are transferred out of a Subaccount, units are redeemed on the same
basis. On any day, a Policy's Accumulated Value in a Subaccount is equal to
the number of units held in such Subaccount, multiplied by the Unit Value of
such Subaccount on that date.
For each Subaccount, we initially set the Unit Value set at $10 when the
Subaccount first purchased shares of the designated Investment Option. We
calculate the Unit Value for each subsequent valuation period by dividing
(a) by (b) where:
(a) is (1) the Net Asset Value of the net assets of the Subaccount at
the end of the preceding Valuation Period, plus
(2) the investment income and capital gains, realized or
unrealized, credited to the net assets of that Subaccount
during the Valuation Period for which the Unit Value 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 the Subaccount for taxes, or any
amount we set aside during the Valuation Period as a provision
for taxes attributable to the operation or maintenance of that
Subaccount, minus
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(5) a charge no greater than 0.0024548% of the average daily net
assets of the Subaccount for each day in the Valuation Period.
This corresponds to an effective annual rate of .90% of the
average daily net assets of the Subaccount for mortality and
expense risks incurred in connection with the Policies.
(b) is the number of units outstanding at the end of the preceding
Valuation Period.
The Unit Value for a Valuation Period applies for each day in the period. We
value the assets in the Variable Account at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
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TRANSFERS
The following features apply to transfers under the Policy:
- You may transfer amounts among the Subaccounts an unlimited number
of times in a Policy Year.
- You may only make one transfer per Policy Year between the Declared
Interest Option and the Variable Account.
- You may make transfers by written request to the Home Office or, if
you elected the "Telephone Transfer Authorization" on the
supplemental application, by calling the Home Office toll-free at
the phone number shown on the cover of the Prospectus.
- The amount of the transfer must be at least $100, or if less than
$100, the total Accumulated Value in the Subaccount or in the
Declared Interest Option (reduced, in the case of the Declared
Interest Option, by any outstanding Policy Debt). The Company may,
at its discretion, waive the $100 minimum requirement.
- The transfer will be effective as of the end of the Valuation Period
during which we receive the request at the Home Office.
- The first transfer in each Policy Year is free. Each time you
subsequently transfer amounts in that Policy Year, we may assess a
transfer charge of $25. We will deduct the transfer charge from the
amount transferred unless you submit payment for the charge at the
time of your request. Once we issue a Policy, we will not increase
this charge. (See "CHARGES AND DEDUCTIONS--Transfer Charge.")
- For purposes of these limitations and charges, we consider all
transfers effected on the same day as a single transfer.
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LOAN BENEFITS
POLICY LOANS. So long as the Policy remains in force and has a positive Net
Surrender Value, you may borrow money from the Company at any time using the
Policy as the sole security for the Policy Loan. A loan taken from, or
secured by, a Policy may have federal income tax consequences. (See "FEDERAL
TAX MATTERS.")
The maximum amount that you may borrow at any time is 90% of the Net
Surrender Value as of the end of the Valuation Period during which we
receive the request for the Policy Loan at our Home Office, less any
previously outstanding Policy Debt. The Company's claim for repayment of
Policy Debt has priority over the claims of any assignee or other person.
During any time that there is outstanding Policy Debt, we will treat
payments you make first as payment of outstanding Policy Debt, unless you
indicate that we should treat the payment otherwise. Where no indication is
made, we will treat as a premium payment any portion of a payment that
exceeds the amount of any outstanding Policy Debt.
ALLOCATION OF POLICY LOAN. When you take a Policy Loan, we segregate an
amount equal to the Policy Loan within the Declared Interest Option as
security for the Policy Loan. If, immediately prior to the
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<PAGE>
Policy Loan, the Accumulated Value in the Declared Interest Option less
Policy Debt outstanding is less than the amount of such Policy Loan, we will
transfer the difference from the subaccounts of the Variable Account, which
have Accumulated Value, in the same proportions that the Policy's
Accumulated Value in each Subaccount bears to the Policy's total Accumulated
Value in the Variable Account. We will determine Accumulated Values as of
the end of the Valuation Period during which we receive the request for the
Policy Loan at the Home Office.
We normally will mail loan proceeds to you within seven days after receipt
of a written request. Postponement of a Policy Loan may take place under
certain circumstances. (See "GENERAL PROVISIONS--Postponement of Payments.")
Amounts segregated within the Declared Interest Option as security for
Policy Debt will bear interest at an effective annual rate set by the
Company. (See "POLICY BENEFITS--Loan Benefits--EFFECT ON INVESTMENT
PERFORMANCE.")
LOAN INTEREST CHARGED. The interest rate charged on Policy Loans is not
fixed. The maximum annual loan interest rate we charge will be the higher of
the "Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds" as published by Moody's Investors Service, Inc. (or any successor
thereto) for the calendar month ending two months before the date on which
the rate is determined; or 5.5%. We may elect to change the interest rate at
any time, of which you will be notified. The new rate will take effect on
the Policy Anniversary coinciding with, or next following, the date the rate
is changed.
Interest is payable in advance at the time you make any Policy Loan (for the
remainder of the Policy Year) and on each Policy Anniversary thereafter (for
the entire Policy Year) so long as there is Policy Debt outstanding. We will
subtract interest payable at the time you make a Policy Loan from the loan
proceeds. Thereafter, we will add interest not paid when due to the existing
Policy Debt and it will bear interest at the same rate charged for Policy
Loans. We will segregate the amount equal to unpaid interest within the
Declared Interest Option in the same manner that amounts for Policy Loans
are segregated within the Declared Interest Option. (See "POLICY
BENEFITS--Loan Benefits--ALLOCATION OF POLICY LOAN.")
Because we charge interest in advance, we will add any interest that has not
been earned to the death benefit payable at the last Joint Insureds' death
and to the Accumulated Value upon surrender, and we will credit it to the
Accumulated Value in the Declared Interest Option upon repayment of Policy
Debt.
EFFECT ON INVESTMENT PERFORMANCE. Amounts transferred from the Variable
Account as security for Policy Debt will no longer participate in the
investment performance of the Variable Account. We will credit all amounts
held in the Declared Interest Option as security for Policy Debt with
interest on each Monthly Deduction Day at an effective annual rate equal to
the greater of 4% or the current effective loan interest rate minus no more
than 3%, as determined and declared by the Company. We will not credit
additional interest to these amounts. The interest credited will remain in
the Declared Interest Option unless and until transferred by the Policyowner
to the Variable Account, but will not be segregated within the Declared
Interest Option as security for Policy Debt.
From time to time, we may allow a loan spread of 0% on the gain in a Policy
in effect a minimum of ten years. When we do so, the federal income tax
treatment of the loan is unclear. You should consult a tax adviser before
taking a loan.
Even though you may repay Policy Debt in whole or in part at any time prior
to the Maturity Date if the Policy is still in force, Policy Loans will
affect the Accumulated Value of a Policy and may affect the death proceeds
payable. The effect could be favorable or unfavorable depending upon whether
the investment performance of the Subaccount(s) from which the Accumulated
Value was transferred is less than or greater than the interest rates
actually credited to the Accumulated Value segregated within the Declared
Interest Option as security for Policy Debt while Policy Debt is
outstanding. In comparison to a Policy under which no Policy Loan was made,
Accumulated Value will be lower where such interest rates credited were less
than the investment performance of the Subaccount(s), but will be higher
where such interest rates were greater than the performance of the
Subaccount(s).
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<PAGE>
In addition, death proceeds will reflect a reduction of the death benefit by
any outstanding Policy Debt.
POLICY DEBT. Policy Debt equals the sum of all unpaid Policy Loans and any
due and unpaid policy loan interest. Policy Debt is not included in Net
Accumulated Value, which is equal to Accumulated Value less Policy Debt. If,
during the first three Policy Years, the Net Accumulated Value (Net
Surrender Value if you take a policy loan) or, after three Policy Years, the
Net Surrender Value, is insufficient on a Monthly Deduction Day to cover the
monthly deduction (see "CHARGES AND DEDUCTIONS--Monthly Deduction"), we will
notify you. To avoid lapse and termination of the Policy without value (see
"THE POLICY--Policy Lapse and Reinstatement--Lapse"), you must, during the
Grace Period, make a premium payment that, when reduced by the premium
expense charge (see "CHARGES AND DEDUCTIONS--Premium Expense Charge"), will
be at least equal to three times the monthly deduction due on the Monthly
Deduction Day immediately preceding the Grace Period (see "CHARGES AND
DEDUCTIONS--Monthly Deduction"). Therefore the greater the Policy Debt under
a Policy, the more likely it would be to lapse.
REPAYMENT OF POLICY DEBT. You may repay Policy Debt in whole or in part any
time during the Joint Insureds' lifetimes and before the Maturity Date so
long as the Policy is in force. We subtract any Policy Debt not repaid from
the death benefit payable at the last Joint Insureds' death, from
Accumulated Value upon complete surrender or from the maturity benefit. Any
payments made by a Policyowner will be treated first as the repayment of any
outstanding Policy Debt, unless the Policyowner indicates otherwise. Upon
partial or full repayment of Policy Debt, we will no longer segregate within
the Declared Interest Option the portion of the Accumulated Value securing
the repaid portion of the Policy Debt, but that amount will remain in the
Declared Interest Option unless and until transferred to the Variable
Account by the Policyowner. We will notify you when your Policy Debt is
repaid in full.
For a discussion of the tax consequences associated with Policy Loans and
lapses, see "FEDERAL TAX MATTERS."
- --------------------------------------------------------------------------------
DEATH PROCEEDS
So long as the Policy remains in force, the Policy provides for the payment
of death proceeds upon the last death of the Joint Insureds.
- You may name one or more primary Beneficiaries or contingent
Beneficiaries and we will pay proceeds to the primary Beneficiary or
a contingent Beneficiary.
- If no Beneficiary survives the Joint Insureds, we will pay the death
proceeds to you or your estate. We may pay death proceeds in a lump
sum or under a payment option. (See "POLICY BENEFITS--Payment
Options.")
- If the Joint Insureds die simultaneously, we will pay an equal
portion of the death proceeds to each beneficiary.
To determine the death proceeds, we will reduce the death benefit by any
outstanding Policy Debt and increase it by any unearned loan interest and
any premiums paid after the date of death. We will ordinarily mail proceeds
within seven days after receipt by the Company of Due Proof of Death. We may
postpone payment, however, under certain circumstances. (See "GENERAL
PROVISIONS--Postponement of Payments.") We pay interest on those proceeds,
at an annual rate of no less than 3.0% or any rate required by law, from the
date of death to the date payment is made.
DEATH BENEFIT OPTIONS. Policyowners designate in the initial application one
of two death benefit options offered under the Policy. The amount of the
death benefit payable under a Policy will depend upon the option in effect
at the time of the last Joint Insureds' death.
Under Option A, the death benefit will be equal to the greater of:
(1) the sum of the current Specified Amount and the Accumulated Value,
or
(2) the Accumulated Value multiplied by the specified amount factor.
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<PAGE>
We will determine Accumulated Value as of the end of the Business Day coinciding
with or immediately following the last death of the Joint Insureds. The
specified amount factor is 2.50 for a Joint Insureds' Joint Equal Attained Age
40 or below on the date of death. For Joint Insureds with a Joint Equal Attained
Age over 40 on the date of death, the factor declines with age as shown in the
Specified Amount Factor Table in Appendix B. Accordingly, under Option A, the
death proceeds will always vary as the Accumulated Value varies (but will never
be less than the Specified Amount). If you prefer to have favorable investment
performance and additional premiums reflected in increased death benefits,
Policyowners generally should select Option A.
Under Option B, the death benefit will be equal to the greater of:
- the current Specified Amount, or
- the Accumulated Value (determined as of the end of the Business Day
coinciding with or immediately following the last death of the Joint
Insureds) multiplied by the specified amount factor.
The specified amount factor is the same as under Option A. Accordingly, under
Option B the death benefit will remain level at the Specified Amount unless the
Accumulated Value multiplied by the specified amount factor exceeds the current
Specified Amount, in which case the amount of the death benefit will vary as the
Accumulated Value varies. If you are satisfied with the amount of your insurance
coverage and prefer to have favorable investment performance and additional
premiums reflected in higher Accumulated Value, rather than increased death
benefits, Policyowners generally should select Option B.
Appendix B shows examples illustrating Option A and Option B.
CHANGING THE DEATH BENEFIT OPTION. You may change the death benefit option in
effect at any time by sending a written request to us at our Home Office. The
effective date of such a change will be the Monthly Deduction Day coinciding
with or immediately following the date we approve the change. A change in death
benefit options may have federal income tax consequences. (See "FEDERAL TAX
MATTERS.")
If you change the death benefit option from Option A to Option B, the death
benefit will not change and the current Specified Amount will be increased by
the Accumulated Value on the effective date of the change. If you change the
death benefit option from Option B to Option A, we will reduce the current
Specified Amount by an amount equal to the Accumulated Value on the effective
date of the change. You may not make a change in the death benefit option if it
would result in a Specified Amount which is less than the minimum Specified
Amount in effect on the effective date of the change, or if after the change the
Policy would no longer qualify as life insurance under federal tax law.
We impose no charges in connection with a change in death benefit option;
however, a change in death benefit option will affect the cost of insurance
charges. (See "CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF INSURANCE.")
CHANGE IN EXISTING COVERAGE. After a Policy has been in force for one Policy
Year, you may adjust the existing insurance coverage by increasing or decreasing
the Specified Amount. To make a change, you must send us a written request at
our Home Office. Any change in the Specified Amount may affect the cost of
insurance rate and the net amount at risk, both of which will affect your cost
of insurance charge. (See "CHARGES AND DEDUCTIONS--Monthly Deduction--COST OF
INSURANCE RATE, and--NET AMOUNT AT RISK.") If decreases in the Specified Amount
cause the premiums paid to exceed the maximum premium limitations imposed by
federal tax law (see "THE POLICY--Premiums--PREMIUM LIMITATIONS"), the decrease
will be limited to the extent necessary to meet these requirements. A change in
existing coverage may have federal income tax consequences. (See "FEDERAL TAX
MATTERS.")
Any decrease in the Specified Amount will become effective on the Monthly
Deduction Day coinciding with or immediately following the date we approve the
request. The decrease will first reduce the Specified Amount provided by the
most recent increase, then the next most recent increases successively, then the
Specified Amount under the original application. The Specified Amount following
a decrease can
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never be less than the minimum Specified Amount for the Policy in effect on the
date of the decrease. A Specified Amount decrease will not reduce the Surrender
Charge.
To apply for an increase, you must provide us with evidence of insurability we
deem satisfactory. Any approved increase will become effective on the Monthly
Deduction Day coinciding with or immediately following the date we approve the
request. An increase will not become effective, however, if the Policy's
Accumulated Value on the effective date would not be sufficient to cover the
deduction for the increased cost of the insurance for the next Policy Month.
CHANGES IN INSURANCE PROTECTION. You may increase or decrease the pure insurance
protection provided by a Policy--the difference between the death benefit and
the Accumulated Value--in one of several ways as insurance needs change. These
ways include increasing or decreasing the Specified Amount of insurance,
changing the level of premium payments and, to a lesser extent, partially
withdrawing Accumulated Value.
Although the consequences of each of these methods will depend upon the
individual circumstances, they may be summarized as follows:
- A decrease in the Specified Amount will, subject to the applicable
specified amount factor limitations (see "POLICY BENEFITS--Death
Proceeds--DEATH BENEFIT OPTIONS"), decrease the pure insurance
protection and the cost of insurance charges under the Policy without
generally reducing the Accumulated Value.
- An increase in the Specified Amount may increase the amount of pure
insurance protection, depending on the amount of Accumulated Value and
the resultant applicable specified amount factor. If the insurance
protection is increased, the cost of insurance charge generally will
increase as well.
- If you elect Option B, an increased level of premium payments will
increase the Accumulated Value and reduce the pure insurance protection,
until the Accumulated Value multiplied by the applicable specified
amount factor exceeds the Specified Amount. Increased premiums should
also increase the amount of funds available to keep the Policy in force.
- If you elect Option B, a reduced level of premium payments generally
will increase the amount of pure insurance protection, depending on the
applicable specified amount factor. It also will result in a reduced
amount of Accumulated Value and will increase the possibility that the
Policy will lapse.
- A partial withdrawal will reduce the death benefit. (See "POLICY
BENEFITS--Accumulated Value Benefits--SURRENDER PRIVILEGES.") However,
it only affects the amount of pure insurance protection if the death
benefit payable is based on the specified amount factor, because
otherwise the decrease in the benefit is offset by the amount of
Accumulated Value withdrawn. The primary use of a partial withdrawal is
to withdraw cash and reduce Accumulated Value.
In comparison, an increase in the death benefit due to the operation of the
specified amount factor occurs automatically and is intended to help assure that
the Policy remains qualified as life insurance under federal tax law. The
calculation of the death benefit based upon the specified amount factor occurs
only when the Accumulated Value of a Policy reaches a certain proportion of the
Specified Amount (which may or may not occur). Additional premium payments,
favorable investment performance and large initial premiums tend to increase the
likelihood of the specified amount factor becoming operational after the first
few Policy Years. Such increases will be temporary, however, if the investment
performance becomes unfavorable and/or premium payments are stopped or
decreased. A change in insurance protection may have federal income tax
consequences. (See "FEDERAL TAX MATTERS.")
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BENEFITS AT MATURITY
If either Joint Insured is alive and the Policy is in force on the Maturity
Date, we will pay to you the Policy's Accumulated Value as of the end of the
Business Day coinciding with or immediately following the Maturity Date,
reduced by any outstanding Policy Debt. (See "POLICY BENEFITS--
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Loan Benefits--REPAYMENT OF POLICY DEBT.") We may pay benefits at maturity
in a lump sum or under a payment option. The Maturity Date is Joint Equal
Attained Age 115.
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PAYMENT OPTIONS
We may pay death proceeds and Accumulated Value due at maturity, or upon
surrender or partial withdrawal of a Policy, in whole or in part under a
payment option. In any case, a supplemental agreement will be issued for the
payment option. Under a supplemental agreement, the Effective Date is the
date on which death proceeds and Accumulated Value are applied to a payment
option.
You may designate an option in your application or notify us in writing at
our Home Office. During the lives of the Joint Insureds, you may select a
payment option; in addition, during that time you may change a previously
selected option by sending written notice to us requesting the cancellation
of the prior option and the designation of a new option. If you have not
chosen an option prior to the last Joint Insureds' death, the Beneficiary
may choose an option. The Beneficiary may change a payment option by sending
a written request to us, provided that a prior option chosen by you is not
in effect.
If you have not elected a payment option, we will pay the proceeds of the
Policy in one sum. The Company will also pay the proceeds in one sum if,
(1) the proceeds are less than $2,000;
(2) periodic payments would be less than $20; or
(3) the payee is an assignee, estate, trustee, partnership, corporation
or association.
Amounts paid under a payment option are paid pursuant to a payment contract
and will not vary. Proceeds applied under a payment option earn interest at
a rate guaranteed to be no less than 3% compounded yearly. The Company may
be crediting higher interest rates on the Effective Date, but is not
obligated to declare that such additional interest be applied to such funds.
If a payee dies, any remaining payments will be paid to a contingent payee.
At the death of the last payee, the commuted value of any remaining payments
will be paid to the last payee's estate. A payee may not withdraw funds
under a payment option unless the Company has agreed to such withdrawal in
the payment contract. We reserve the right to defer a withdrawal for up to
six months and to refuse to allow partial withdrawals of less than $250.
We have provided a description of the available payment options below.
Payments under Options 2, 3, 4 or 5 will begin as of the date of the last
Joint Insureds' death, on partial withdrawal or surrender, or on the
Maturity Date. Payments under Option 1 will begin at the end of the first
interest period after the date proceeds are otherwise payable.
OPTION 1--INTEREST INCOME. Periodic payments of interest earned from the
proceeds will be paid. Payments can be annual, semi-annual, quarterly or
monthly, as selected by the payee, and will begin at the end of the first
period chosen. Proceeds left under this plan will earn interest at a rate
determined by the Company, in no event less than 3% compounded yearly. The
payee may withdraw all or part of the proceeds at any time.
OPTION 2--INCOME FOR A FIXED PERIOD. Periodic payments will be made for a
fixed period not longer than 30 years. Payments can be annual, semi-annual,
quarterly or monthly. Guaranteed amounts payable under the plan will earn
interest at a rate determined by the Company, in no event less than 3%
compounded yearly.
OPTION 3--LIFE INCOME WITH TERM CERTAIN. Equal periodic payments will be
made for a guaranteed minimum period elected. If the payee lives longer than
the minimum period, payments will continue for his or her life. The minimum
period can be 0, 5, 10, 15 or 20 years. Guaranteed amounts payable under
this plan will earn interest at a rate determined by the Company, in no
event less than 3% compounded yearly.
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OPTION 4--INCOME OF A FIXED AMOUNT. Equal periodic payments of a definite
amount will be paid. Payments can be annual, semi-annual, quarterly or
monthly. The amount paid each period must be at least $20 for each $1,000 of
proceeds. Payments will continue until the proceeds are exhausted. The last
payment will equal the amount of any unpaid proceeds. Unpaid proceeds will
earn interest at a rate determined by the Company, in no event less than 3%
compounded yearly.
OPTION 5--JOINT AND TWO-THIRDS SURVIVOR MONTHLY LIFE INCOME. Equal monthly
payments will be made for as long as two payees live. The guaranteed amount
payable under this plan will earn interest at a minimum rate of 3%
compounded yearly. When one payee dies, payments of two-thirds of the
original monthly payment will be made to the surviving payee. Payments will
stop when the surviving payee dies.
ALTERNATE PAYMENT OPTION. The Company may make available alternative payment
options.
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CHARGES AND DEDUCTIONS
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We deduct certain charges in connection with the Policy to compensate us for
(1) the services and benefits we provide; (2) the costs and expenses we
incur; and (3) the risks we assume, some of which are described below.
<TABLE>
<S> <C> <C>
SERVICES AND BENEFITS WE PROVIDE: - the death benefit, cash and loan benefits
under the Policy
- investment options, including premium
allocations
- administration of elective options
- the distribution of reports to Policyowners
COSTS AND EXPENSES WE INCUR: - costs associated with processing and
underwriting applications, issuing and
administering the Policy (including any
Policy riders)
- overhead and other expenses for providing
services and benefits
- sales and marketing expenses
- other costs of doing business, such as
collecting premiums, maintaining records,
processing claims, effecting transactions,
and paying Federal, state and local premium
and other taxes and fees
RISKS WE ASSUME: - that the cost of insurance charges we may
deduct are insufficient to meet our actual
claims because Insureds die sooner than we
estimate
- that the costs of providing the services
and benefits under the Policies exceed the
charges we deduct
</TABLE>
The nature and amount of these charges are described more fully below.
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PREMIUM EXPENSE CHARGE
Before allocating Net Premiums among the Subaccounts and the Declared
Interest Option, we reduce premiums paid by a premium expense charge. The
premium less the premium expense charge equals the Net Premium.
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The premium expense charge is 7% of each premium up to the Target Premium
(or 2% for each premium over the Target Premium) and is used to compensate
us for expenses incurred in distributing the Policy, including registered
representative sales commissions, the cost of printing prospectuses and
sales literature, advertising costs and charges we consider necessary to pay
all taxes imposed by states and subdivisions thereof (which currently range
from 1% to 3%).
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MONTHLY DEDUCTION
We deduct certain charges monthly from the Accumulated Value of each Policy
("monthly deduction") to compensate us for the cost of insurance coverage
and any additional benefits added by rider (See "GENERAL
PROVISIONS--Additional Insurance Benefits"), for underwriting and start-up
expenses in connection with issuing a Policy and for certain administrative
costs. We deduct the monthly deduction on the Policy Date and on each
Monthly Deduction Day. We deduct it from the Declared Interest Option and
each Subaccount in the same proportion that the Policy's Net Accumulated
Value in the Declared Interest Option and the Policy's Accumulated Value in
each Subaccount bear to the total Net Accumulated Value of the Policy. For
purposes of making deductions from the Declared Interest Option and the
Subaccounts, we determine Accumulated Values as of the end of the Business
Day coinciding with or immediately following the Monthly Deduction Day.
Because portions of the monthly deduction, such as the cost of insurance,
can vary from month to month, the monthly deduction itself will vary in
amount from month to month.
During the first 12 Policy Months and during the 12 Policy Months
immediately following an increase in Specified Amount, the monthly deduction
will include a first year monthly administrative charge.
We make the monthly deduction on the Business Day coinciding with or
immediately following each Monthly Deduction Day and it will equal:
- the cost of insurance for the Policy; plus
- the cost of any optional insurance benefits added by rider; plus
- the monthly policy expense charges.
COST OF INSURANCE. This charge is designed to compensate us for the
anticipated cost of paying death proceeds to Beneficiaries when the Joint
Insureds die prior to the Maturity Date. We determine the cost of insurance
on a monthly basis, and we determine it separately for the initial Specified
Amount and for any subsequent increases in Specified Amount. We will
determine the monthly cost of insurance charge by dividing the applicable
cost of insurance rate, or rates, by 1,000 and multiplying the result by the
net amount at risk for each Policy Month.
NET AMOUNT AT RISK. Under Option A the net amount at risk for a Policy Month
is equal to (a) divided by (b); and under Option B the net amount at risk
for a Policy Month is equal to (a) divided by (b), minus (c), where:
(a) is the Specified Amount;
(b) is 1.0032737(1); and
(c) is the Accumulated Value.
- ------------------------
(1) Dividing by this number reduces the net amount at risk, solely for the
purposes of computing the cost of insurance, by taking into account
assumed monthly earnings at an annual rate of 4%.
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<PAGE>
We determine the Specified Amount and the Accumulated Value as of the end of
the Business Day coinciding with or immediately following the Monthly
Deduction Day.
We determine the net amount at risk separately for the initial Specified
Amount and any increases in Specified Amount. In determining the net amount
at risk for each Specified Amount, we first consider the Accumulated Value a
part of the initial Specified Amount. If the Accumulated Value exceeds the
initial Specified Amount, we will consider it to be a part of any increase
in the Specified Amount in the same order as the increases occurred.
COST OF INSURANCE RATE. We base the cost of insurance rate for the initial
Specified Amount on the Joint Insureds' sex, premium class and Joint Equal
Age. For any increase in Specified Amount, we base the cost of insurance
rate on the Joint Insureds' sex, premium class and age at last birthday on
the effective date of the increase. Actual cost of insurance rates may
change and we will determine the actual monthly cost of insurance rates by
the Company based on its expectations as to future mortality experience.
However, the actual cost of insurance rates will never be greater than the
guaranteed maximum cost of insurance rates set forth in the Policy. These
guaranteed rates are based on the 1980 Commissioners' Standard Ordinary
Non-Smoker and Smoker Mortality Table. Current cost of insurance rates are
generally less than the guaranteed maximum rates. Any change in the cost of
insurance rates will apply to all persons of the same age, sex and premium
class whose Policies have been in force the same length of time.
The cost of insurance rates generally increase as the Joint Insureds' Joint
Equal Attained Age increases. The premium class of the Joint Insureds also
will affect the cost of insurance rate. The Company currently places Joint
Insureds into a standard premium class or into premium classes involving a
higher mortality risk. In an otherwise identical Policy, Joint Insureds in
the standard premium class will have a lower cost of insurance rate than
those in premium classes involving higher mortality risk. The standard
premium class is also divided into two categories: tobacco and non-tobacco.
(The Company may offer preferred classes in addition to the standard tobacco
and non-tobacco classes.) Non-tobacco-using Joint Insureds will generally
have a lower cost of insurance rate than similarly situated Joint Insureds
who use tobacco.
We determine the cost of insurance rate separately for the initial Specified
Amount and for the amount of any increase in Specified Amount. In
calculating the cost of insurance charge, we apply the rate for the premium
class on the Policy Date to the net amount at risk for the initial Specified
Amount; for each increase in Specified Amount, we use the rate for the
premium class applicable to the increase. However, if we calculate the death
benefit as the Accumulated Value times the specified amount factor, we will
use the rate for the premium class for the most recent increase that
required evidence of insurability for the amount of death benefit in excess
of the total Specified Amount.
ADDITIONAL INSURANCE BENEFITS. The monthly deduction will include charges
for any additional benefits provided by rider. (See "GENERAL
PROVISIONS--Additional Insurance Benefits.")
MONTHLY POLICY EXPENSE CHARGES. We have primary responsibility for the
administration of the Policy and the Variable Account. Administrative
expenses include premium billing and collection, recordkeeping, processing
death benefit claims, cash withdrawals, surrenders and Policy changes, and
reporting and overhead costs. As reimbursement for administrative expenses
related to the maintenance of each Policy and the Variable Account, we
assess a $10 monthly administrative charge against each Policy. We guarantee
this charge will not exceed $14 per Policy Month. We also apply a charge of
$0.03 per $1,000 of Specified Amount against each Policy. We guarantee this
charge will not exceed $0.05 per $1,000 of Specified Amount.
FIRST YEAR MONTHLY ADMINISTRATIVE CHARGE. We deduct monthly administrative
charges from Accumulated Value as part of the monthly deduction during the
first twelve Policy Months and during the twelve Policy Months immediately
following an increase in Specified Amount. The charge will compensate us for
first year underwriting, processing and start-up expenses incurred in
connection with the Policy and the Variable Account. These expenses include
the cost of processing applications, conducting medical examinations,
determining insurability and the Joint Insureds' premium class, and
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<PAGE>
establishing policy records. The first year monthly administrative charge is
$0.10 per $1,000 of Specified Amount or increase in Specified Amount. We
guarantee this charge will not exceed $0.14 per $1,000 of Specified Amount.
FIRST YEAR MONTHLY EXPENSE CHARGE. We will deduct a monthly expense charge
of $10 from Accumulated Value during the first twelve Policy Months. We
guarantee this charge will not exceed $14 per Policy Month.
- --------------------------------------------------------------------------------
TRANSFER CHARGE
We may impose a transfer charge of $25 for the second and each subsequent
transfer during a Policy Year to compensate us for the costs in making the
transfer.
- Unless paid in cash, we will deduct the transfer charge from the
amount transferred.
- Once we issue a Policy, we will not increase this charge for the
life of the Policy.
- We will not impose a transfer charge on transfers that occur as a
result of Policy Loans, the exercise of the special transfer
privilege or the initial allocation of Accumulated Value among the
Subaccounts and the Declared Interest Option following acceptance of
the Policy by the Policyowner.
Currently there is no charge for changing the net premium allocation
instructions.
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWAL FEE
Upon partial withdrawal of a Policy, we assess a charge equal to the lesser
of $25 or 2% of the amount withdrawn to compensate us for costs incurred in
accomplishing the withdrawal. We deduct this fee from Accumulated Value.
- --------------------------------------------------------------------------------
SURRENDER CHARGE
We apply a Surrender Charge during the first ten Policy Years, as well as
during the first ten years following an increase in Specified Amount. This
charge is an amount per $1,000 of Specified Amount which declines to $0 in
the eleventh year and varies by Joint Equal Age, underwriting category and
Policy Year. We have listed below the maximum Surrender Charge for select
ages in various underwriting categories in the first Policy Year.
<TABLE>
<CAPTION>
ISSUE AGE NON-TOBACCO TOBACCO COMBINED
<S> <C> <C> <C>
30 13.67 15.00 14.23
50 24.28 27.59 25.68
70 54.10 53.81 53.97
</TABLE>
The Surrender Charge is level within each Policy Year. (See "APPENDIX C --
Maximum Surrender Charges.")
We reserve the right to waive the Surrender Charge after the first Policy
Year if either Joint Insured is terminally ill or stays in a qualified
nursing care center for 90 days.
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VARIABLE ACCOUNT CHARGES
MORTALITY AND EXPENSE RISK CHARGE. We deduct a daily mortality and expense
risk charge from each Subaccount at an effective annual rate of .90% of the
average daily net assets of the Subaccounts. We guarantee this charge will
not exceed 1.05% of the average daily net assets of the Subaccounts. We may
realize a profit from this charge and may use such profit for any lawful
purpose, including payment of our distribution expenses.
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<PAGE>
The mortality risk we assume is that Joint Insureds may die sooner than
anticipated and therefore, we may pay an aggregate amount of life insurance
proceeds greater than anticipated. The expense risk assumed is that expenses
incurred in issuing and administering the Policies will exceed the amounts
realized from the administrative charges assessed against the Policies.
FEDERAL TAXES. Currently no charge is made to the Variable Account for
federal income taxes that may be attributable to the Variable Account. We
may, however, make such a charge in the future. Charges for other taxes, if
any, attributable to the Account may also be made. (See "FEDERAL TAX
MATTERS--Taxation of the Company.")
INVESTMENT OPTION EXPENSES. The value of net assets of the Variable Account
will reflect the investment advisory fee and other expenses incurred by each
Investment Option. The investment advisory fee and other expenses applicable
to each Investment Option are listed in the "SUMMARY OF THE POLICY" and
described in the prospectus for each Fund's Investment Option.
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THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
You may allocate Net Premiums and transfer Accumulated Value to the Declared
Interest Option. Because of exemptive and exclusionary provisions, we have
not registered interests in the Declared Interest Option under the
Securities Act of 1933 and we have not registered the Declared Interest
Option as an investment company under the Investment Company Act of 1940.
Accordingly, neither the Declared Interest Option nor any interests therein
are subject to the provisions of these Acts and, as a result, the staff of
the Securities and Exchange Commission has not reviewed the disclosures in
this Prospectus relating to the Declared Interest Option. Disclosures
regarding the Declared Interest Option may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to
the accuracy and completeness of statements made in prospectuses. Please
refer to the Policy for complete details regarding the Declared Interest
Option.
- --------------------------------------------------------------------------------
GENERAL DESCRIPTION
Our General Account supports the Declared Interest Option. The General
Account consists of all assets we own other than those in the Variable
Account and other separate accounts. Subject to applicable law, we have sole
discretion over the investment of the General Account's assets.
You may elect to allocate Net Premiums to the Declared Interest Option, the
Variable Account, or both. You may also transfer Accumulated Value from the
Subaccounts to the Declared Interest Option, or from the Declared Interest
Option to the Subaccounts. Allocating or transferring funds to the Declared
Interest Option does not entitle you to share in the investment experience
of the General Account. Instead, we guarantee that Accumulated Value in the
Declared Interest Option will accrue interest at an effective annual rate of
at least 4%, independent of the actual investment experience of the General
Account.
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DECLARED INTEREST OPTION ACCUMULATED VALUE
Net premiums allocated to the Declared Interest Option are credited to the
Policy. The Company bears the full investment risk for these amounts. We
guarantee that interest credited to each Policyowner's Accumulated Value in
the Declared Interest Option will not be less than an effective annual rate
of 4%. The Company may, in its sole discretion, credit a higher rate of
interest, although it is not obligated to credit interest in excess of 4%
per year, and might not do so. Any interest credited on the Policy's
Accumulated Value in the Declared Interest Option in excess of the
guaranteed rate of 4% per year will be determined in the sole discretion of
the Company and may be changed at any time by the Company, in its sole
discretion. The Policyowner assumes the risk that the interest credited may
not exceed the guaranteed minimum rate of 4% per year. The interest credited
to the Policy's Accumulated Value in the Declared Interest Option that
equals Policy Debt may be
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<PAGE>
greater than 4%, but will in no event be greater than the current effective
loan interest rate minus no more than 3%. From time to time, we may allow a
loan spread of 0% on the gain in a Policy in effect a minimum of 10 years.
The Accumulated Value in the Declared Interest Option will be calculated no
less frequently than each Monthly Deduction Day.
The Company guarantees that, at any time prior to the Maturity Date, the
Accumulated Value in the Declared Interest Option will not be less than the
amount of the Net Premiums allocated or Accumulated Value transferred to the
Declared Interest Option, plus interest at the rate of 4% per year, plus any
excess interest which we credit, less the sum of all policy charges
allocable to the Declared Interest Option and any amounts deducted from the
Declared Interest Option in connection with partial surrenders or transfers
to the Variable Account.
- --------------------------------------------------------------------------------
TRANSFERS, PARTIAL WITHDRAWALS, SURRENDERS AND POLICY LOANS
You may transfer amounts between the Subaccounts and the Declared Interest
Option. However, only one transfer between the Variable Account and the
Declared Interest Option is permitted in each Policy Year. We may impose a
transfer charge of $25 in connection with the transfer unless such transfer
is the first transfer requested by the Policyowner during such Policy Year.
Unless you submit the transfer charge in cash with your request, we will
deduct the charge from the amount transferred. No more than 50% of the Net
Accumulated Value in the Declared Interest Option may be transferred from
the Declared Interest Option unless the balance in the Declared Interest
Option immediately after the transfer will be less than $1,000. If the
balance in the Declared Interest Option after a transfer would be less than
$1,000, you may transfer the full Net Accumulated Value in the Declared
Interest Option. A Policyowner may also make surrenders and obtain Policy
Loans from the Declared Interest Option at any time prior to the Policy's
Maturity Date.
We may delay transfers, partial withdrawals and surrenders from, and
payments of Policy Loans allocated to, the Declared Interest Option for up
to six months. Surrenders and partial withdrawals will have tax consequences
(see "FEDERAL TAX MATTERS").
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
We issue the Policy in consideration of the statements in the application
and the payment of the initial premium. The Policy, the application, any
supplemental applications and endorsements or additional benefit riders or
agreements make up the entire contract. In the absence of fraud, we will
treat the statements made in an application or supplemental application as
representations and not as warranties. We will not use any statement to void
the Policy or in defense of a claim unless the statement is contained in the
application or any supplemental application.
- --------------------------------------------------------------------------------
INCONTESTABILITY
The Policy is incontestable, except for fraudulent statements made in the
application or supplemental applications, after it has been in force during
the lifetimes of the Joint Insureds for two years from the Policy Date or
date of reinstatement. Any increase in Specified Amount will be
incontestable only after it has been in force during the lifetimes of the
Joint Insureds for two years from the effective date of the increase.
- --------------------------------------------------------------------------------
CHANGE OF PROVISIONS
We reserve the right to change the Policy, in the event of future changes in
the federal tax law, to the extent required to maintain the Policy's
qualification as life insurance under federal tax law.
Except as provided in the foregoing paragraph, no one can change any part of
the Policy except the Policyowner and the President, a Vice President, the
Secretary or an Assistant Secretary of the
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<PAGE>
Company. Both must agree to any change and such change must be in writing.
No agent may change the Policy or waive any of its provisions.
- --------------------------------------------------------------------------------
MISSTATEMENT OF AGE OR SEX
If either Joint Insureds' age or sex was misstated in the application, we
will adjust each benefit and any amount to be paid under the Policy to
reflect the correct age and sex.
- --------------------------------------------------------------------------------
SUICIDE EXCLUSION
If the Policy is in force and the surviving Joint Insured commits suicide,
while sane or insane, within one year from the Policy Date, we will limit
life insurance proceeds payable under the Policy to all premiums paid,
reduced by any outstanding Policy Debt and any partial withdrawals, and
increased by any unearned loan interest. If the Policy is in force and the
surviving Joint Insured commits suicide, while sane or insane, within one
year from the effective date of any increase in Specified Amount, we will
not pay any increase in the death benefit resulting from the requested
increase in Specified Amount. Instead, we will refund to the Policyowner an
amount equal to the total cost of insurance applied to the increase.
- --------------------------------------------------------------------------------
ANNUAL REPORT
At least once each year, we will send an annual report to each Policyowner.
The report will show
- the current death benefit,
- the Accumulated Value in each Subaccount and in the Declared
Interest Option,
- outstanding Policy Debt, and
- premiums paid, partial withdrawals made and charges assessed since
the last report.
The report will also include any other information required by state law or
regulation. Further, the Company will send the Policyowner the reports
required by the Investment Company Act of 1940.
- --------------------------------------------------------------------------------
NON-PARTICIPATION
The Policy does not participate in the Company's profits or surplus
earnings. No dividends are payable.
- --------------------------------------------------------------------------------
OWNERSHIP OF ASSETS
The Company shall have the exclusive and absolute ownership and control over
assets, including the assets of the Variable Account.
- --------------------------------------------------------------------------------
WRITTEN NOTICE
You should send any written notice to the Company at our Home Office. The
notice should include the policy number and the Joint Insureds' full names.
Any notice we send to a Policyowner will be sent to the address shown in the
application unless you filed an appropriate address change form with the
Company.
- --------------------------------------------------------------------------------
POSTPONEMENT OF PAYMENTS
The Company will usually mail the proceeds of complete surrenders, partial
withdrawals and Policy Loans within seven days after we receive your signed
request at our Home Office. We will usually mail death proceeds within seven
days after receipt of Due Proof of Death and maturity benefits within seven
days of the Maturity Date. However, we may postpone payment of any amount
upon a
32
<PAGE>
partial withdrawal from or surrender of a Policy, payment of any Policy
Loan, and payment of death proceeds or benefits at maturity whenever:
- the New York Stock Exchange is closed other than customary weekend
and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission;
- the Securities and Exchange Commission by order permits postponement
for the protection of Policyowners; or
- an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which disposal of the securities is not
reasonably practicable or it is not reasonably practicable to
determine the value of the net assets of the Variable Account.
We also may postpone transfers under these circumstances.
Payments under the Policy which are derived from any amount paid to the
Company by check or draft may be postponed until such time as the Company is
satisfied that the check or draft has cleared the bank upon which it is
drawn.
- --------------------------------------------------------------------------------
CONTINUANCE OF INSURANCE
The insurance under a Policy will continue until the earlier of:
- the end of the Grace Period following the Monthly Deduction Day on
which the Net Accumulated Value during the first three Policy Years,
or Net Surrender Value after three Policy Years, is less than the
monthly deduction for the following Policy Month;
- the date the Policyowner surrenders the Policy for its entire Net
Accumulated Value;
- the last death of the Joint Insureds; or
- the Maturity Date.
Any rider to a Policy will terminate on the date specified in the rider.
- --------------------------------------------------------------------------------
OWNERSHIP
The Policy belongs to the Policyowner. The original Policyowner is the
person named as owner in the application. If there is more than one owner,
the Policy will be owned jointly with right of survivorship. Ownership of
the Policy may change according to the ownership option selected as part of
the original application or by a subsequent endorsement to the Policy.
During the Joint Insureds' lifetimes, all rights granted by the Policy
belong to the Policyowner, except as otherwise provided for in the Policy.
Special ownership rules may apply if the Joint Insureds are under legal age
(as defined by state law in the state in which the Policy is delivered) on
the Policy Date.
The Policyowner may assign the Policy as collateral security. The Company
assumes no responsibility for the validity or effect of any collateral
assignment of the Policy. No assignment will bind us unless in writing and
until we receive notice of the assignment at the Home Office. The assignment
is subject to any payment or action we may have taken before we received
notice of the assignment at the Home Office. Assigning the Policy may have
federal income tax consequences. [See "FEDERAL TAX MATTERS."]
- --------------------------------------------------------------------------------
THE BENEFICIARY
The Policyowner designates the primary Beneficiaries and contingent
Beneficiaries in the application. If changed, the primary Beneficiary or
contingent Beneficiary is as shown in the latest change filed with the
Company. One or more primary or contingent Beneficiaries may be named in the
application. In such case, the proceeds will be paid in equal shares to the
survivors in the appropriate beneficiary class, unless requested otherwise
by the Policyowner.
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<PAGE>
Unless a payment option is chosen, we will pay the proceeds payable at the
last Joint Insured's death in a lump sum to the primary Beneficiary. If the
primary Beneficiary dies before the last Joint Insured, we will pay the
proceeds to the contingent Beneficiary. If no Beneficiary survives the
Insured, we will pay the proceeds to the Policyowner or the Policyowner's
estate.
- --------------------------------------------------------------------------------
CHANGING THE POLICYOWNER OR BENEFICIARY
During the Joint Insureds' lives, the Policyowner and the Beneficiary may be
changed. To make a change, you must send a written request to us at our Home
Office. The request and the change must be in a form satisfactory to the
Company and we must actually receive and record the request. The change will
take effect as of the date you sign the request and will be subject to any
payment made before we recorded the change. We may require return of the
Policy for endorsement.
- --------------------------------------------------------------------------------
ADDITIONAL INSURANCE BENEFITS
Subject to certain requirements, you may add one or more of the following
additional insurance benefits to a Policy by rider:
- Last Survivor Universal Cost of Living Increase;
- Universal Term Life Insurance; and
- Estate Protector 4-Year Non-Renewable Last Survivor Term.
We will deduct the cost of any additional insurance benefits as part of the
monthly deduction. (See "CHARGES AND DEDUCTIONS--Monthly Deduction.") You
may obtain detailed information concerning available riders, and their
suitability for inclusion to your Policy, from the registered representative
selling the Policy.
- --------------------------------------------------------------------------------
POLICY SPLIT OPTION
You may split the Policy into two single-life policies, one on each of the
Joint Insureds, upon the occurrence of the following events:
- divorce or annulment with respect to the marriage of the Joint
Insureds, or
- certain changes in the Federal Estate Tax Law resulting in reductions
in the Unlimited Martial Deduction, the Federal Unified Credit or the
Federal Estate Tax.
You may elect this option subject to the following provisions:
- you must provide us with written notification within 90 days after
the effective date of one of the events listed above;
- each new policy will be issued for no more than one-half the
Specified Amount of this Policy;
- the Net Surrender Value will be divided and allocated in proportion
to the Specified Amount of each new policy;
- the Beneficiary of this Policy will be the beneficiary of each new
policy;
- if the Joint Insureds are the owners of this Policy, each will be the
owner of their new policy; if the Joint Insureds are not the owners
of this Policy, then the owners will be the owners of each new policy
(in this case, there will be a taxable event);
- the new policies will be issued based on the age and premium class
for each Joint Insured on the effective date of the election of this
option;
- the new policies must fit our single-life issue limits in effect at
the time you elect the option. The new policies will be subject to
the same charges as those in effect for regularly underwritten
polices;
- this option will not be available after the date of first death of
the Joint Insureds;
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<PAGE>
- the two single-life policies may be any permanent single life
policies currently offered by the Company at the time this option is
elected; and
- any assignments of this Policy will apply to each new policy.
Please consult your registered representative for more information on this
option.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICIES
- --------------------------------------------------------------------------------
The Policies will be sold by individuals who in addition to being licensed
as life insurance agents for the Company, are also registered
representatives of the principal underwriter of the Policies, EquiTrust
Marketing Services, LLC ("EquiTrust Marketing"), a broker-dealer having a
selling agreement with EquiTrust Marketing or a broker-dealer having a
selling agreement with such broker-dealer. EquiTrust Marketing, a
corporation organized on May 7, 1970, under the laws of the State of
Delaware, is registered with the Securities and Exchange Commission under
the Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc.
The maximum sales commission payable to broker-dealers will be 115% of
premiums up to the first-year Target Premium and 3% of excess premium in the
first year and renewal premiums. These commissions (and other distribution
expenses, such as production incentive bonuses, agent's insurance and
pensions benefits, agency management compensation and bonuses and expense
allowances) are paid by the Company. They do not result in any additional
charges against the Policy that are not described above under "CHARGES AND
DEDUCTIONS."
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
- --------------------------------------------------------------------------------
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as
tax advice. Counsel or other competent tax advisors should be consulted for
more complete information. This discussion is based upon our understanding
of the present Federal income tax laws. No representation is made as to the
likelihood of continuation of the present Federal income tax laws or as to
how they may be interpreted by the Internal Revenue Service.
- --------------------------------------------------------------------------------
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a life insurance policy must satisfy
certain requirements which are set forth in the Internal Revenue Code.
Guidance as to how these requirements are to be applied is limited
especially with regard to policies issued on joint lives. While, we believe
that it is reasonable to conclude that a Policy should satisfy the
applicable requirements of the Code, certain features of the Policy are not
addressed in the relevant authorities. For example, the relevant authorities
do not address the Policy's use of Joint Equal Age calculations to test for
compliance with the requirements of the Code. If it is subsequently
determined that a Policy does not satisfy the applicable requirements to be
treated as a life insurance contract, we may take appropriate steps to bring
the Policy into compliance with such requirements and we reserve the right
to modify the Policy as necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have
been considered for Federal income tax purposes to be the owners of the
assets of variable account supporting their contracts due to their ability
to exercise investment control over those assets. Where this is the case,
the policyowners have been currently taxed on income and gains attributable
to variable account assets. There is little guidance in this area, and some
features of the Policy, such as the flexibility to allocate premium payments
and Accumulated Values, have not been explicitly addressed in published
rulings.
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<PAGE>
While we believe that the Policy does not give the Policyowner investment
control over Variable Account assets, we reserve the right to modify the
Policy as necessary to prevent the Policyowner from being treated as the
owner of the Variable Account assets supporting the Policy.
In addition, the Code requires that the investments of the Subaccounts be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that the
Subaccounts, through the funds, will satisfy these diversification
requirements.
THE FOLLOWING DISCUSSION ASSUMES THAT THE POLICY WILL QUALIFY AS A LIFE
INSURANCE CONTRACT FOR FEDERAL INCOME TAX PURPOSES.
- --------------------------------------------------------------------------------
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. The Company believes that the death benefit under a Policy
should be excludible from the gross income of the beneficiary. Federal,
state and local estate, inheritance, transfer, and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
Policyowner or beneficiary. A tax adviser should be consulted on these
consequences.
Generally, a Policyowner will not be deemed to be in constructive receipt of
the Accumulated Value until there is a distribution. When distributions from
a Policy occur, or when loans are taken out from or secured by a Policy, the
tax consequences depend on whether the Policy is classified as a "modified
endowment contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain life
insurance contracts are classified as "modified endowment contracts," with
less favorable tax treatment than other life insurance contracts. Due to the
flexibility of the Policy as to premium payments and benefits, the
individual circumstances of each Policy will determine whether it is
classified as a modified endowment contract. The rules are too complex to be
summarized here, but generally depend on the amount of premium payments made
during the first seven Policy years. Certain changes in a Policy after it is
issued (including a reduction in benefits anytime after issuance) could also
cause it to be classified as a modified endowment contract. You should
consult with a competent tax adviser to determine whether a Policy
transaction will cause the Policy to be classified as a modified endowment
contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as modified endowment contracts are subject
to the following tax rules:
(1) All distributions other than death benefits from a modified
endowment contract, including distributions upon surrender and
withdrawals, will be treated first as distributions of gain taxable
as ordinary income and as tax-free recovery of the Policyowner's
investment in the Policy only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a modified
endowment contract are treated as distributions and taxed
accordingly.
(3) A 10 percent additional income tax is imposed on the amount subject
to tax except where the distribution or loan is made when the
Policyowner has attained age 59 1/2 or is disabled, or where the
distribution is part of a series of substantially equal periodic
payments for the life (or life expectancy) of the Policyowner or
the joint lives (or joint life expectancies) of the Policyowner and
the Policyowner's beneficiary or designated beneficiary.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy
that is not classified as a modified endowment contract are generally
treated first as a recovery of the Policyowner's investment in the Policy,
and only after the recovery of all investment in the Policy, as taxable
income. However, certain
36
<PAGE>
distributions which must be made in order to enable the Policy to continue
to qualify as a life insurance contract for Federal income tax purposes if
Policy benefits are reduced during the first 15 Policy years may be treated
in whole or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a modified endowment contract
will generally not be treated as taxable distributions. However, the tax
treatment of loans available after the tenth Policy Year where there is a
minimal spread between the interest rate charged and the interest rate
credited on the loaned amount is unclear. You should consult a tax adviser
before taking out such a loan.
Finally, neither distributions from, nor loans from or secured by, a Policy
that is not a modified endowment contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that
is tax-free.
POLICY LOAN INTEREST. In general, interest on a Policy Loan will not be
deductible.
MULTIPLE POLICIES. All modified endowment contracts that are issued by the
Company (or its affiliates) to the same Policyowner during any calendar year
are treated as one modified endowment contract for purposes of determining
the amount includible in the Policyowner's income when a taxable
distribution occurs.
ACCELERATED DEATH BENEFITS. The Company believes that for federal income tax
purposes, an accelerated death benefit payment received under an accelerated
death benefit endorsement should be fully excludable from the gross income
of the beneficiary, as long as the beneficiary is the insured under the
Policy. However, you should consult a qualified tax adviser about the
consequences of adding this Endorsement to a Policy or requesting an
accelerated death benefit payment under this Endorsement.
EXCHANGES. The Company believes that an exchange of a fixed-benefit policy
issued by the Company for a Policy as provided under "THE POLICY--Exchange
Privilege" generally should be treated as a non-taxable exchange of life
insurance policies within the meaning of section 1035 of the Code. However,
in certain circumstances, the exchanging owner may receive a cash
distribution that might have to be recognized as income to the extent there
was gain in the fixed-benefit policy. Moreover, to the extent a
fixed-benefit policy with an outstanding loan is exchanged for an
unencumbered Policy, the exchanging owner could recognize income at the time
of the exchange up to an amount of such loan (including any due and unpaid
interest on such loan). An exchanging Policyowner should consult a tax
adviser as to whether an exchange of a fixed-benefit policy for the Policy
will have adverse tax consequences.
POLICY SPLIT OPTION. The policy split option permits a Policy to be split
into two single life insurance policies. It is not clear whether exercising
the policy split option will be treated as a taxable transaction or whether
the individual policies that result would be modified endowment contracts.
Consult a tax adviser before exercising the policy split option.
OTHER POLICYOWNER TAX MATTERS. Businesses can use the Policy in various
arrangements, including nonqualified deferred compensation or salary
continuance plans, split dollar insurance plans, executive bonus plans, tax
exempt and nonexempt welfare benefit plans, retiree medical benefit plans
and others. The tax consequences of such plans may vary depending on the
particular facts and circumstances. If you are purchasing the Policy for any
arrangement the value of which depends in part on its tax consequences, you
should consult a qualified tax adviser. In recent years, moreover, Congress
has adopted new rules relating to life insurance owned by businesses. Any
business contemplating the purchase of a new Policy or a change in an
existing Policy should consult a tax adviser.
- --------------------------------------------------------------------------------
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the Policy could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Policy.
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<PAGE>
- --------------------------------------------------------------------------------
TAXATION OF THE COMPANY
At the present time, the Company makes no charge for any Federal, state or
local taxes (other than the charge for state premium taxes) that may be
attributable to the Variable Account or to the policies. The Company
reserves the right to charge the Subaccounts of the Variable Account for any
future taxes or economic burden the Company may incur.
- --------------------------------------------------------------------------------
EMPLOYMENT-RELATED BENEFIT PLANS
The Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employer's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary
between men and women on the basis of sex. In addition, legislative,
regulatory or decisional authority of some states may prohibit use of
sex-distinct mortality tables under certain circumstances. The Policy
described in this Prospectus contains guaranteed cost of insurance rates and
guaranteed purchase rates for certain payment options that distinguish
between men and women. Accordingly, employers and employee organizations
should consider, in consultation with legal counsel, the impact of Norris,
and Title VII generally, on any employment-related insurance or benefit
program for which a Policy may be purchased.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
The Company holds the assets of the Variable Account. The assets are kept
physically segregated and held separate and apart from the General Account.
We maintain records of all purchases and redemptions of shares by each
Investment Option for each corresponding Subaccount. Additional protection
for the assets of the Variable Account is afforded by a blanket fidelity
bond issued by Chubb Insurance Group in the amount of $5,000,000 covering
all the officers and employees of the Company.
- --------------------------------------------------------------------------------
VOTING RIGHTS
To the extent required by law, the Company will vote the Fund shares held in
the Variable Account at regular and special shareholder meetings of the
Funds in accordance with instructions received from persons having voting
interests in the corresponding Subaccounts. If, however, 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 it is permitted to vote the Fund shares in its own right, we may elect
to do so.
The number of votes which a Policyowner has the right to instruct are
calculated separately for each Subaccount and are determined by dividing a
Policy's Accumulated Value in a Subaccount by the net asset value per share
of the corresponding Investment Option in which the Subaccount invests.
Fractional shares will be counted. The number of votes of the Investment
Option which you have the right to instruct will be determined as of the
date coincident with the date established by that Investment Option for
determining shareholders eligible to vote at such meeting of the Fund.
Voting instructions will be solicited by written communications prior to
such meeting in accordance with procedures established by each Fund. Each
person having a voting interest in a Subaccount will receive proxy
materials, reports and other materials relating to the appropriate
Investment Option.
The Company will vote Fund shares attributable to Policies as to which no
timely instructions are received (as well as any Fund shares held in the
Variable Account which are not attributable to Policies) in proportion to
the voting instructions which are received with respect to all Policies
participating in each Investment Option. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast on a matter.
38
<PAGE>
Fund shares may also be held by separate accounts of other affiliated and
unaffiliated insurance companies. The Company expects that those shares will
be voted in accordance with instructions of the owners of insurance policies
and contracts issued by those other insurance companies. Voting instructions
given by owners of other insurance policies will dilute the effect of voting
instructions of Policyowners.
DISREGARD OF VOTING INSTRUCTIONS. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
sub-classification or investment objective of an Investment Option or to
approve or disapprove an investment advisory contract for an Investment
Option. In addition, the Company itself may disregard voting instructions in
favor of changes initiated by a Policyowner in the investment policy or the
investment adviser of an Investment Option if the Company reasonably
disapproves of such changes. A change would be disapproved only if the
proposed change is contrary to state law or prohibited by state regulatory
authorities, or the Company determined that the change would have an adverse
effect on the General Account in that the proposed investment policy for an
Investment Option may result in overly speculative or unsound investments.
In the event the Company does disregard voting instructions, a summary of
that action and the reasons for such action will be included in the next
annual report to Policyowners.
- --------------------------------------------------------------------------------
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws of
Iowa, is subject to regulation by the Iowa Insurance Department. An annual
statement is filed with the Iowa Insurance Department on or before
March lst of each year covering the operations and reporting on the
financial condition of the Company as of December 31st of the preceding
year. Periodically, the Iowa Insurance Department examines the liabilities
and reserves of the Company and the Variable Account and certifies their
adequacy, and a full examination of operations is conducted periodically by
the National Association of Insurance Commissioners.
In addition, the Company is subject to the insurance laws and regulations of
other states within which it is licensed or may become licensed to operate.
Generally, the insurance department of any other state applies the laws of
the state of domicile in determining permissible investments.
One hundred percent of our outstanding voting shares are owned by Farm
Bureau Life Insurance Company which is 100% owned by FBL Financial Group,
Inc. At December 31, 1999, Iowa Farm Bureau Federation owned 56.47% of the
outstanding voting shares of FBL Financial Group, Inc.
Iowa Farm Bureau Federation is an Iowa not-for-profit corporation, the
members of which are county Farm Bureau organizations and their individual
members. Iowa Farm Bureau Federation is primarily engaged, through various
divisions and subsidiaries, in the formulation, analysis and promotion of
programs (at local, state, national and international levels) that are
designed to foster the educational, social and economic advancement of its
members. The principal offices of Iowa Farm Bureau Federation are at 5400
University Avenue, West Des Moines, Iowa 50266.
39
<PAGE>
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS OF EQUITRUST LIFE INSURANCE COMPANY
The principal business address of each person listed, unless otherwise
indicated, is 5400 University Avenue, West Des Moines, Iowa 50266. The
principal occupation shown reflects the principal employment of each
individual during the past five years.
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Edward M. Wiederstein Farmer; Chairman and Director, FBL Financial Group, Inc.; President
President and Director and Director, Iowa Farm Bureau Federation, FBL Insurance
Brokerage, Inc., Farm Bureau Mutual Insurance Company, Utah Farm
Bureau Insurance Company, FBL Financial Services, Inc., Universal
Assurors Life Insurance Company and Farm Bureau Agricultural
Business Corporation; Director, Multi-Pig Corporation, Western
Agricultural Insurance Company, Western Ag Insurance
Agency, Inc., Western Farm Bureau Life Insurance Company and
American Ag Insurance Company
Richard D. Harris Senior Vice President and Secretary-Treasurer, Farm Bureau Mutual
Senior Vice President, Insurance Company, FBL Insurance Brokerage, Inc., Universal
Secretary-Treasurer and Assurors Life Insurance Company, Utah Farm Bureau Insurance
Director Company, Western Farm Bureau Life Insurance Company, FBL Financial
Services, Inc. and FBL Financial Group, Inc.; Senior Vice
President and Assistant Secretary-Treasurer, South Dakota Farm
Bureau Mutual Insurance Company
Stephen M. Morain Senior Vice President, General Counsel and Management Director, FBL
Senior Vice President, General Financial Group, Inc.
Counsel and Director
Thomas R. Gibson Chief Executive Officer and Management Director, FBL Financial
Chief Executive Officer and Group, Inc.
Director
William J. Oddy Chief Operating Officer, FBL Financial Group, Inc.
Executive Vice President,
General Manager and Director
Timothy J. Hoffman Vice President, Chief Property/Casualty Officer, FBL Financial
Vice President and Director Group, Inc.
James W. Noyce Chief Financial Officer, FBL Financial Group, Inc.
Chief Financial Officer and
Director
Barbara J. Moore Vice President-Market Development, FBL Financial Group, Inc.
Vice President
JoAnn W. Rumelhart Vice President-Life Operations, FBL Financial Group, Inc.
Vice President-Life Operations
John M. Paule Vice President-Corporate Administration, FBL Financial Group, Inc.
Vice President-Corporate
Administration
Lynn E. Wilson Vice President-Life Sales, FBL Financial Group, Inc.
Vice President-Life Sales
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION
WITH THE COMPANY PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
F. Walter Tomenga Vice President-Corporate Affairs and Marketing Services, FBL
Vice President - Corporate Financial Group, Inc.
Affairs and Marketing Services
Robert L. Tatge Vice President-Property/Casualty Operations, FBL Financial
Vice President Group, Inc.
LouAnn Sandburg Vice President-Investments and Assistant Treasurer, FBL Financial
Vice President - Investments Group, Inc.
and Assistant Treasurer
Thomas E. Burlingame Vice President-Associate General Counsel, FBL Financial Group, Inc.
Vice President - Associate
General Counsel
Kathryn Coleson Horner Accounting Vice President, FBL Financial Group, Inc.
Accounting Vice President
Dennis M. Marker Investment Vice President, Administration, FBL Financial Group, Inc.
Investment Vice President,
Administration
Paul Grinvalds Variable Operations Vice President, Appointed Actuary, FBL Financial
Variable Operations Vice Group, Inc.
President
James P. Brannen Controller and Vice President, FBL Financial Group, Inc.
Controller and Vice President
Christopher G. Daniels Life Product Development and Pricing Vice President, FBL Financial
Life Product Development and Group, Inc.
Pricing Vice President
Don Seibel GAAP Accounting Vice President, FBL Financial Group, Inc.
GAAP Accounting Vice President
James E. McCarthy Trust Sales Vice President, FBL Financial Group, Inc.
Trust Sales Vice President
James M. Mincks Human Resources Vice President, FBL Financial Group, Inc.
Human Resources Vice President
Scott Shuck Marketing Services Vice President, FBL Financial Group, Inc.
Marketing Services Vice
President
Jim Streck Traditional Operations Vice President, FBL Financial Group, Inc.
Traditional Operations Vice
President
Blake D. Weber Sales Services Vice President, FBL Financial Group, Inc.
Sales Services Vice President
</TABLE>
- --------------------------------------------------------------------------------
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to federal securities laws applicable to the
issuance of the flexible premium variable life insurance policy described in
this Prospectus. All matters of Iowa law pertaining to the Policy, including
the validity of the Policy and the Company's right to issue the Policy under
Iowa Insurance Law, have been passed upon by Stephen M. Morain, Senior Vice
President and General Counsel of the Company.
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
The Company, like other insurance companies, is involved in lawsuits.
Currently, there are no class action lawsuits naming us as a defendant or
involving the Variable Account. In some lawsuits involving other insurers,
substantial damages have been sought and/or material settlement payments
41
<PAGE>
have been made. Although the outcome of any litigation cannot be predicted
with certainty, we believe that at the present time, there are no pending or
threatened lawsuits that are reasonably likely to have a material adverse
impact on the Variable Account or the Company.
- --------------------------------------------------------------------------------
EXPERTS
The financial statements of the Variable Account at December 31, 1999 and
for the period from October 22, 1998 (date operations commenced) through
December 31, 1999, and the statutory-basis financial statements of the
Company at December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999, appearing herein, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their respective
reports thereon appearing elsewhere herein and are included in reliance upon
such reports given upon the authority of such firms as experts in accounting
and auditing.
Actuarial matters included in this Prospectus have been examined by
Christopher G. Daniels, FSA, MAAA, Life Product Development and Pricing Vice
President, as stated in the opinion filed as an exhibit to the registration
statement.
- --------------------------------------------------------------------------------
OTHER INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits to
the registration statement, to all of which reference is made for further
information concerning the Variable Account, the Company and the Policy
offered hereby. Statements contained in this Prospectus as to the contents
of the Policy and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Variable Account's statement of net assets as of December 31, 1999 and
the related statements of operations and changes in net assets for the
period from October 22, 1998 (date operations commenced) through
December 31, 1998, and the statutory-basis balance sheets of the Company at
December 31, 1999 and 1998 and the related statutory-basis statements of
operations, changes in net worth and cash flow for each of the three years
in the period ended December 31, 1999, appearing herein, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their respective
reports thereon appearing elsewhere herein. This Policy was not offered
through the Variable Account prior to May 1, 2000.
[Financial Statements to be filed by amendment.]
42
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS AND ACCUMULATED VALUES
The following tables illustrate how the death benefits, Accumulated Values
and Surrender Values of a Policy may vary over an extended period of time at
certain ages, assuming hypothetical gross rates of investment return for the
Investment Options equivalent to constant gross annual rates of 0%, 4%, 8%
and 12%. The hypothetical rates of investment return are for purposes of
illustration only and should not be deemed a representation of past or
future rates of investment return. Actual rates of return for a particular
Policy may be more or less than the hypothetical investment rates of return
and will depend on a number of factors including the investment allocations
made by a Policyowner. Also, values would be different from those shown if
the gross annual investment returns averaged 0%, 4%, 8% and 12% over a
period of years but fluctuated above and below those averages for individual
Policy Years.
The amounts shown are as of the end of each Policy Year. The tables assume
that the assets in the Investment Options are subject to an annual expense
ratio of % of the average daily net assets. This annual expense ratio is
based on the average of the expense ratios of each of the Investment Options
available under the Policy for the last fiscal year and takes into account
current expense reimbursement arrangements. The fees and expenses of each
Investment Option vary, and in 1999 the total fees and expenses ranged from
an annual rate of % to an annual rate of % of average daily net
assets. For information on Investment Option expenses, see "SUMMARY AND
DIAGRAM OF THE POLICY" and the prospectuses for the Investment Options.
The tables reflect deduction of the premium expense charge, the monthly
Policy expenses charge, the first-year monthly administrative charge, the
first-year monthly expense charge, the daily charge for the Company's
assumption of mortality and expense risks, and cost of insurance charges for
the hypothetical Joint Insureds. The surrender values illustrated in the
tables also reflect deduction of applicable surrender charges. The current
charges and the higher guaranteed maximum charges the Company may charge are
reflected in separate tables on each of the following pages.
Applying the current charges and the average Investment Option fees and
expenses of % of average net assets, the gross annual rates of
investment return of 0%, 4%, 8% and 12% would produce net annual rates of
return of %, %, % and %, respectively, on a guaranteed
basis, and %, %, % and %, respectively, on a current
basis.
The hypothetical values shown in the tables do not reflect any charges for
federal income taxes against the Variable Account since the Company is not
currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would
have to exceed 0%, 4%, 8% or 12% by an amount sufficient to cover tax
charges in order to produce the death benefits and Accumulated Values
illustrated. (See "FEDERAL TAX MATTERS--Taxation of the Company.")
The tables illustrate the Policy values that would result based upon the
hypothetical investment rates of return if premiums are paid as indicated,
if all Net Premiums are allocated to the Variable Account and if no Policy
Loans have been made. The tables are also based on the assumptions that the
Policyowner has not requested an increase or decrease in Specified Amount,
and that no partial withdrawals or transfers have been made.
For comparative purposes, the second column of each table shows the amount
to which the premiums would accumulate if an amount equal to those premiums
were invested to earn interest at 5% compounded annually.
* * *
Upon request, the Company will provide a comparable illustration based upon
the proposed Joint Insureds' age, sex and premium class, the Specified
Amount or premium requested, and the proposed frequency of premium payments.
[UPDATED ILLUSTRATIONS TO BE FILED BY AMENDMENT.]
A-1
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS
OPTION A EXAMPLE. For purposes of this example, assume that the Joint
Insureds' Joint Equal Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option A, a Policy with a Specified Amount of
$50,000 will generally provide a death benefit of $50,000 plus Accumulated
Value. Thus, for example, a Policy with a Accumulated Value of $5,000 will
have a death benefit of $55,000 ($50,000 + $5,000); a Accumulated Value of
$10,000 will provide a death benefit of $60,000 ($50,000 + $10,000). The
death benefit, however, must be at least 2.50 multiplied by the Accumulated
Value. As a result, if the Accumulated Value of the Policy exceeds $33,333,
the death benefit will be greater than the Specified Amount plus Accumulated
Value. Each additional dollar of Accumulated Value above $33,333 will
increase the death benefit by $2.50. A Policy with a Specified Amount of
$50,000 and a Accumulated Value of $40,000 will provide a death benefit of
$100,000 ($40,000 x 2.50); a Accumulated Value of $60,000 will provide a
death benefit of $150,000 ($60,000 x 2.50).
Similarly, any time Accumulated Value exceeds $33,333, each dollar taken out
of Accumulated Value will reduce the death benefit by $2.50. If, for
example, the Accumulated Value is reduced from $40,000 to $35,000 because of
partial surrenders, charges, or negative investment performance, the death
benefit will be reduced from $100,000 to $87,500. If at any time, however,
Accumulated Value multiplied by the specified amount factor is less than the
Specified Amount plus the Accumulated Value, then the death benefit will be
the current Specified Amount plus Accumulated Value of the Policy.
The specified amount factor becomes lower as the Joint Insureds' Joint Equal
Attained Age increases. If the Joint Equal Attained Age of the Joint
Insureds' in the example above were, for example, 50 (rather than under 40),
the specified amount factor would be 1.85. The amount of the death benefit
would be the sum of the Accumulated Value plus $50,000 unless the
Accumulated Value exceeded $58,824 (rather than $33,333), and each dollar
then added to or taken from the Accumulated Value would change the death
benefit by $1.85 (rather than $2.50).
OPTION B EXAMPLE. For purposes of this example, assume that the Joint
Insureds' Joint Equal Attained Age is between 0 and 40 and that there is no
outstanding Policy Debt. Under Option B, a Policy with a $50,000 Specified
Amount will generally pay $50,000 in death benefits. However, because the
death benefit must be equal to or be greater than 2.50 multiplied by the
Accumulated Value, any time the Accumulated Value of the Policy exceeds
$20,000, the death benefit will exceed the $50,000 Specified Amount. Each
additional dollar added to Accumulated Value above $20,000 will increase the
death benefit by $2.50. A Policy with a $50,000 Specified Amount and a
Accumulated Value of $30,000 will provide death proceeds of $75,000 ($30,000
x 2.50); a Accumulated Value of $40,000 will provide a death benefit of
$100,000 ($40,000 x 2.50); a Accumulated Value of $50,000 will provide a
death benefit of $125,000 ($50,000 x 2.50).
Similarly, so long as Accumulated Value exceeds $20,000, each dollar taken
out of Accumulated Value will reduce the death benefit by $2.50. If, for
example, the Accumulated Value is reduced from $25,000 to $20,000 because of
partial surrenders, charges, or negative investment performance, the death
benefit will be reduced from $62,500 to $50,000. If at any time, however,
the Accumulated Value multiplied by the specified amount factor is less than
the Specified Amount, the death benefit will equal the current Specified
Amount of the Policy.
The specified amount factor becomes lower as the Joint Insureds' Joint Equal
Attained Age increases. If the Joint Equal Attained Age of the Joint
Insureds in the example above were, for example, 50 (rather than between 0
and 40), the specified amount factor would be 1.85. The death proceeds would
not exceed the $50,000 Specified Amount unless the Accumulated Value
exceeded
B-1
<PAGE>
approximately $27,028 (rather than $20,000), and each dollar then added to
or taken from the Accumulated Value would change the life insurance proceeds
by $1.85 (rather than $2.50).
<TABLE>
<CAPTION>
JOINT EQUAL
ATTAINED AGE SPECIFIED AMOUNT FACTOR
<S> <C>
40 or younger 2.50
41 2.43
42 2.36
43 2.29
44 2.22
45 2.15
46 2.09
47 2.03
48 1.97
49 1.91
50 1.85
51 1.78
52 1.71
53 1.64
54 1.57
55 1.50
56 1.46
57 1.42
58 1.38
59 1.34
60 1.30
61 1.28
62 1.26
63 1.24
64 1.22
65 1.20
66 1.19
67 1.18
68 1.17
69 1.16
70 1.15
71 1.13
72 1.11
73 1.09
74 1.07
75 to 90 1.05
91 1.04
92 1.03
93 1.02
94 to 114 1.01
115 1.00
</TABLE>
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
- --------------------------------------------------------------------------------
MAXIMUM SURRENDER CHARGES
The chart below reflects the maximum surrender charge per $1,000 of
Specified Amount for selected issue ages as policy years increase.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NON-TOBACCO
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
20 11.25 10.35 9.37 8.35 7.30 6.20 5.05 3.86 2.63 1.34 0.00
30 13.67 12.61 11.42 10.18 8.89 7.55 6.15 4.71 3.20 1.63 0.00
40 17.62 16.30 14.76 13.16 11.50 9.76 7.96 6.09 4.14 2.11 0.00
50 24.28 22.58 20.45 18.23 15.92 13.52 11.03 8.43 5.73 2.92 0.00
60 36.13 33.88 30.66 27.33 23.87 20.28 16.55 12.68 8.64 4.42 0.00
70 54.10 51.00 46.06 41.01 35.84 30.54 25.07 19.37 13.36 6.95 0.00
80 51.96 47.73 43.12 38.44 33.91 29.44 24.86 19.97 14.49 8.04 0.00
TOBACCO
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
20 12.10 11.14 10.09 8.99 7.86 6.67 5.44 4.16 2.83 1.44 0.00
30 15.00 13.84 12.53 11.17 9.76 8.29 6.76 5.17 3.51 1.79 0.00
40 19.74 18.29 16.56 14.76 12.90 10.95 8.93 6.83 4.64 2.37 0.00
50 27.59 25.71 23.28 20.75 18.12 15.40 12.56 9.61 6.54 3.34 0.00
60 41.03 38.50 34.83 31.04 27.12 23.06 18.85 14.47 9.89 5.08 0.00
70 53.81 50.57 45.64 40.67 35.62 30.45 25.11 19.51 13.55 7.10 0.00
80 51.77 47.50 42.93 38.42 34.07 29.74 25.27 20.42 14.91 8.31 0.00
COMBINED
POLICY YEAR
ISSUE AGE 1 2 3 4 5 6 7 8 9 10 11+
--------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
20 11.61 10.69 9.68 8.63 7.53 6.40 5.22 3.99 2.71 1.38 0.00
30 14.23 13.13 11.89 10.60 9.26 7.86 6.41 4.90 3.33 1.70 0.00
40 18.52 17.14 15.52 13.84 12.09 10.26 8.37 6.40 4.35 2.22 0.00
50 25.68 23.91 21.65 19.30 16.85 14.32 11.68 8.93 6.07 3.10 0.00
60 38.26 35.88 32.47 28.94 25.28 21.49 17.55 13.45 9.17 4.70 0.00
70 53.97 50.81 45.87 40.85 35.74 30.49 25.08 19.42 13.44 7.01 0.00
80 51.87 47.62 43.02 38.42 33.98 29.58 25.05 20.18 14.69 8.16 0.00
</TABLE>
C-1
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents and reports as may be prescribed by any rule or regulation of the
Commission heretofore, or hereafter duly adopted pursuant to authority conferred
in that section.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
REPRESENTATIONS PURSUANT TO SECTION 26(e)(2)A
EquiTrust Life Insurance Company represents that the aggregate charges under the
Policies are reasonable in relation to the services rendered, the expenses to be
incurred and the risks assumed by the Company.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of information shown in the Prospectus with the
items of Form N-8B-2.
The Prospectus consisting of 46 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
Representations pursuant to Section 26(e)(2)(A)
The signatures.
Written consents of the following persons:
Stephen M. Morain, Esquire.
Messrs. Sutherland Asbill & Brennan LLP.
Ernst & Young LLP, Independent Auditors.
Christopher G. Daniels, FSA, MSAA, Life Product Development and Pricing Vice
President.
The following exhibits:
<TABLE>
<C> <C> <S>
1.A. 1. Certified Resolution of the Board of Directors of the Company
establishing the Variable Account. (1)
2. None.
3. (a) Form of Principal Underwriting Agreement. (1)
(b) Form of Sales Agreement. (1)
(c) Form of Wholesaling Agreement. (1)
4. None.
5. *(a) Policy Form.
(b) Application Form. (1)
6. (a) Articles of Incorporation of the Company. (1)
(b) By-Laws of the Company. (1)
7. None.
8. None.
9. (a) Participation Agreement relating to EquiTrust Variable Insurance
Series Fund. (1)
(b) Participation Agreement relating to Dreyfus Variable Investment
Fund. (1)
(c) Participation Agreement relating to T. Rowe Price Equity Series,
Inc. and T. Rowe Price International Series, Inc. (1)
10. Form of Application (see Exhibit 1.A.(5)(c) above.)
2. *Opinion and Consent of Stephen M. Morain.
3. None.
4. Not applicable.
5. Not applicable.
6. *Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Life Product
Development and Pricing Vice President.
7. (a) Consent of Ernst & Young LLP. (to be filed by amendment)
(b) Consent of Messrs. Sutherland Asbill & Brennan LLP. (to be filed by
amendment)
8. Memorandum describing the Company's conversion procedure (included in
Exhibit 9 hereto). (1)
9. Revised Memorandum describing the Company's issuance, transfer and
redemption procedures for the Policy. (to be filed by amendment)
10. Powers of Attorney. (1)
</TABLE>
- ------------------------
* Attached as an exhibit.
(1) Incorporated herein by reference to the initial filing of the Registration
Statement on Form S-6 (File No. 333-62221) on August 25, 1998.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
EquiTrust Life Variable Account, has duly caused this Registration Statement to
be signed on its behalf by the undersigned thereunto duly authorized in the City
of West Des Moines, State of Iowa, on the 25th day of February, 2000.
EquiTrust Life Insurance Company
EquiTrust Life Variable Account
By: /s/ EDWARD M. WIEDERSTEIN
-----------------------------------
Edward M. Wiederstein
PRESIDENT
EquiTrust Life Insurance Company
Attest: /s/ RICHARD D. HARRIS
---------------------------------
Richard D. Harris
SENIOR VICE PRESIDENT AND
SECRETARY-TREASURER
EquiTrust Life Insurance Company
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the dates set forth below.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ EDWARD M. WIEDERSTEIN President & Director
- ----------------------------------- [Principal Executive February 25,
Edward M. Wiederstein Officer] 2000
Senior Vice President &
/s/ RICHARD D. HARRIS Secretary-Treasurer February 25,
- ----------------------------------- [Principal Financial 2000
Richard D. Harris Officer]
/s/ JAMES W. NOYCE Chief Financial Officer
- ----------------------------------- [Principal Accounting February 25,
James W. Noyce Officer] 2000
- ----------------------------------- Director February 25,
Thomas R. Gibson* 2000
- ----------------------------------- Director February 25,
Timothy J. Hoffman* 2000
- ----------------------------------- Director February 25,
Stephen M. Morain* 2000
- ----------------------------------- Director February 25,
William J. Oddy* 2000
* By /s/ STEPHEN M. MORAIN
-----------------------
Stephen M. Morain
Attorney-In-Fact,
pursuant to Power of Attorney.
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM
LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
DEATH PROCEEDS PAYABLE AT THE LAST DEATH OF JOINT INSUREDS PRIOR TO THE MATURITY
DATE. FLEXIBLE PREMIUMS PAYABLE UNTIL THE LAST DEATH OF JOINT INSUREDS OR UNTIL
THE MATURITY DATE. THE AMOUNT OF THE DEATH BENEFIT OR THE DURATION OF THE DEATH
BENEFIT MAY VARY UNDER THE CONDITIONS DESCRIBED IN THE DEATH BENEFIT PROVISIONS.
THE ACCUMULATED VALUE IN THE VARIABLE ACCOUNT IS BASED ON THE INVESTMENT
EXPERIENCE OF THAT ACCOUNT AND MAY INCREASE OR DECREASE DAILY. IT IS NOT
GUARANTEED AS TO DOLLAR AMOUNT. THE VARIABLE FEATURES OF THIS POLICY ARE
DESCRIBED ON PAGES 16 THROUGH 18.
EquiTrust Life Insurance Company will pay the benefits of this policy subject to
all of its terms.
RIGHT TO EXAMINE POLICY
THE OWNER MAY CANCEL THIS POLICY BY DELIVERING OR MAILING A WRITTEN NOTICE OR
SENDING A TELEGRAM OR FAX TO THE AGENT THROUGH WHOM IT WAS PURCHASED OR THE
EQUITRUST LIFE INSURANCE COMPANY, 5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA
50266-5997 AND BY RETURNING THE POLICY OR CONTRACT BEFORE MIDNIGHT OF THE
TWENTIETH DAY AFTER THE DATE YOU RECEIVE THE POLICY. NOTICE GIVEN BY MAIL AND
RETURN OF THE POLICY OR CONTRACT BY MAIL ARE EFFECTIVE ON BEING POSTMARKED,
PROPERLY ADDRESSED AND POSTAGE PREPAID. EQUITRUST LIFE WILL REFUND WITHIN SEVEN
DAYS AFTER IT RECEIVES NOTICE OF CANCELLATION AND THE RETURNED POLICY AN AMOUNT
EQUAL TO THE GREATER OF THE PREMIUMS PAID OR THE SUM OF:
a) THE ACCUMULATED VALUE OF THE POLICY ON THE DATE THE POLICY IS RECEIVED AT OUR
HOME OFFICE;
b) ANY PREMIUM EXPENSE CHARGES WHICH WERE DEDUCTED FROM PREMIUMS;
c) MONTHLY DEDUCTIONS MADE ON THE POLICY DATE AND ANY MONTHLY DEDUCTION DAY; AND
d) AMOUNTS EQUAL TO DAILY CHARGES AGAINST THE VARIABLE ACCOUNT.
SIGNED FOR AND ON BEHALF OF EQUITRUST LIFE INSURANCE COMPANY AT ITS HOME OFFICE
AT 5400 UNIVERSITY AVENUE, WEST DES MOINES, IOWA 50266-5997, EFFECTIVE AS OF THE
DATE OF ISSUE OF THIS POLICY.
/s/ Edward M. Wiederstein Richard D. Harris
President Secretary
EQUITRUST LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997
<PAGE>
Form #: 436-159(05-00)
This policy is a legal contract between the owner and EquiTrust Life Insurance
Company.
READ YOUR POLICY CAREFULLY
INDEX OF MAJOR POLICY PROVISIONS
POLICY DATA ..............................................................Page 3
Insured; Insuring Age; Sex; Policy Number; Policy Date; Owner(s); Date of Issue;
Death Benefit Option; Maturity Date; Specified Amount at Issue; Schedule of
Forms and Premiums; Schedule of Current Charges; Schedule of Current Surrender
Charges.
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1000.............Page 6
SPECIFIED AMOUNT FACTORS..................................................Page 7
SECTION 1 - DEFINITIONS ..................................................Page 8
1.1 You, Your or Joint Insureds; 1.2 Accumulated Value; 1.3 Net Accumulated
Value; 1.4 Age; 1.5 Joint Equal Attained Age; 1.6 Joint Equal Age; 1.7 Business
Day; 1.8 Declared Interest Option; 1.9 Eligible for Waiver of Surrender Charge;
1.10 Fund; 1.11 General Account; 1.12 Home Office; 1.13 Monthly Deduction Day;
1.14 Net Premium; 1.15 Partial Withdrawal Fee; 1.16 Policy Anniversary; 1.17
Policy Date; 1.18 Policy Year; 1.19 Premium Expense Charge; 1.20 Qualified
Physician; 1.21 Qualified Nursing Care Center; 1.22 SEC; 1.23 Surrender Charge;
1.24 Surrender Value; 1.25 Net Surrender Value; 1.26 Valuation Period; 1.27
Variable Account; 1.28 We, Our, Us or the Company.
SECTION 2 - THE CONTRACT.................................................Page 10
2.1 Death Proceeds 2.2 Death Benefit Options; 2.3 Contract; 2.4 Modification;
2.5 Incontestable Clause; 2.6 Misstatement of Age or Sex; 2.7 Suicide; 2.8
Return of Policy and Policy Settlement; 2.9 Maturity Proceeds; 2.10 Policy Split
Option; 2.11 Termination; 2.12 Non-Participation.
SECTION 3 - OWNERSHIP AND BENEFICIARIES .................................Page 12
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or Beneficiary; 3.4
Assignment.
SECTION 4 - PREMIUMS AND REINSTATEMENT ..................................Page 13
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Grace Period; 4.4 Reinstatement;
4.5 Unscheduled Premiums; 4.6 Premium Limitations; 4.7 Premium Application;
4.8 Allocation of Premium.
SECTION 5 - POLICY CHANGE................................................Page 15
5.1 Change of Specified Amount; 5.2 Specified Amount Decrease; 5.3 Specified
Amount Increase; 5.4 Change of Death Benefit Option; 5.5 Life Insurance
Qualification.
SECTION 6 - VARIABLE ACCOUNT.............................................Page 16
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios; 6.4 Transfers;
6.5 Special Transfer Privilege.
SECTION 7 - ACCUMULATED VALUE BENEFITS...................................Page 18
7.1 Accumulated Value Determination; 7.2 Net Accumulated Value Determination;
7.3 Surrender Value; 7.4 Net Surrender Value; 7.5 Variable Accumulated Value;
7.6 Account Units; 7.7 Unit Value; 7.8 Declared Interest Option Accumulated
Value; 7.9 Declared Interest Option Interest; 7.10 Monthly Deduction; 7.11 Cost
of Insurance; 7.12 Cost of Insurance Rate; 7.13 Basis of Values; 7.14 Surrender;
7.15 Waiver of Surrender Charge; 7.16 Partial Withdrawal; 7.17 Use of Payment
Option; 7.18 Delay of Payment; 7.19 Continuance of Insurance; 7.20 Annual
Report.
SECTION 8 - POLICY LOANS.................................................Page 23
8.1 Cash Loan; 8.2 Loan Value; 8.3 Loan Interest; 8.4 Loan Allocation; 8.5 Loan
Repayment.
SECTION 9 - PAYMENT OF PROCEEDS..........................................Page 24
9.1 Choice of Options; 9.2 Payment Options; 9.3 Interest and Mortality; 9.4
Requirements; 9.5 Effective Date; 9.6 Death of Payee; 9.7 Withdrawal of
Proceeds; 9.8 Claims of Creditors.
PAYMENT OPTION TABLES....................................................Page 26
Any additional benefits and endorsements which apply to this policy are listed
on page 3 and are described in the forms which follow page 26 of this policy.
436-159(05-00)
<PAGE>
POLICY DATA
Joint Insured(s) John Doe
Jane Doe
Joint Equal Age 35
Policy Number 000123456
Policy Date 09-01-1999
Owner(s) John Doe
Date of Issue 09-01-1999
Death Benefit Option Option A
Maturity Date 09-01-2079
Specified Amount at Issue $1,000,000.00
Summary of Current Specified Amount
Description Specified Amount Effective Date Premium Class
AT ISSUE $1,000,000.00 09-01-1999 TOBACCO
Universal Term Rider - Covered Person John Doe
Current face amount of $25,000 consisting of:
Description Face Amount Effective Date Premium Class
At Issue $25,000.00 09-01-1999 TOBACCO
Schedule of Forms and Premiums
<TABLE>
<CAPTION>
Current Original Target
Form No. Description Amount or No. of Units Effective Date Premium
<S> <C> <C> <C> <C>
436-159(05-00) Non-Par Last Survivor $1,000,000.00 09-01-1999 $XXX.XX
Flexible Premium Variable
Universal Life
436-871(05-00) Universal Term Rider $25,000.00 09-01-1999
436-870(05-00) Estate Protector Rider $100,000.00 09-01-1999
436-093(05-00) Cost of Living Increase Rider
</TABLE>
Form Number 436-159(05-00)
Policy Number 000123456
3
<PAGE>
POLICY DATA
Schedule of Current Charges
<TABLE>
<S> <C>
Premium Expense Charge 7% of each premium up to Target Premium
2% of each premium over Target Premium
Policy Expense Charge $10.00 per month
Per $1,000 Expense Charge $.03 per $1,000 of specified amount per month
First Year Per $1,000 Policy Expense Charge $0.10 per $1,000 of specified amount per month
First Year Policy Expense Charge $10.00 per month
Partial Withdrawal Fee Lesser of $25.00 per withdrawal or 2% of accumulated value
withdrawn
Transfer Charge $25.00 per transfer
Mortality and Expense Risk Charge 0.0028618% of the variable accumulated value per day
(equivalent to 1.05% per year)
Monthly Deduction Day 20th of each month
Policy Loan Interest Rate Adjustable Loan Rate (as described in Section 8.3 of
your policy)
</TABLE>
SCHEDULE OF INVESTMENT OPTIONS
General Account: The general assets of EquiTrust Life Insurance Company
Separate Account: EquiTrust Life Variable Account
Subaccounts: Fund:
Blue Chip EquiTrust Variable Insurance Series Fund
Value Growth EquiTrust Variable Insurance Series Fund
High Grade Bond EquiTrust Variable Insurance Series Fund
High Yield Bond EquiTrust Variable Insurance Series Fund
Money Market EquiTrust Variable Insurance Series Fund
T. Rowe Price - Equity Income T. Rowe Price Equity Series, Inc.
T. Rowe - Intl Stock T. Rowe Price International Series, Inc.
T. Rowe - MidCap Growth T. Rowe Price Equity Series, Inc.
T. Rowe - New America Growth T. Rowe Price Equity Series, Inc.
T. Rowe - Pers Strategy Bal T. Rowe Price Equity Series, Inc.
Dreyfus - Cap. Appreciation Dreyfus Variable Investment Fund
Dreyfus - Disciplined Stock Dreyfus Variable Investment Fund
Dreyfus - Growth/Income Dreyfus Variable Investment Fund
Dreyfus - Int'l Equity Dreyfus Variable Investment Fund
Dreyfus - Small Cap Dreyfus Variable Investment Fund
Net premiums will be allocated to the subaccounts or the declared interest
option in accordance with the net premium allocation percentages shown in the
application or in the most recent written instructions of the owner. For a full
description of the Separate Account and the designated subaccounts, please refer
to the current prospectus.
Form Number 436-159(05-00)
Policy Number 000123456
4
<PAGE>
POLICY DATA
Schedule of Current Surrender Charges
SURRENDER DATE SURRENDER CHARGE
January 1, 1999-December 31, 1999 $17,070.00
January 1, 2000-December 31, 2000 $15,790.00
January 1, 2001-December 31, 2001 $14,290.00
January 1, 2002-December 31, 2002 $12,740.00
January 1, 2003-December 31, 2003 $ 9,450.00
January 1, 2004-December 31, 2004 $ 7,710.00
January 1, 2005-December 31, 2005 $ 5,890.00
January 1, 2006-December 31, 2006 $ 4,010.00
January 1, 2007-December 31, 2007 $ 2,040.00
January 1, 2008-December 31, 2008 $ 0.00
January 1, 2009 and thereafter
Form Number 436-159(05-00)
Policy Number 000123456
5
<PAGE>
<TABLE>
<CAPTION>
POLICY DATA
TABLE OF GUARANTEED MAXIMUM MONTHLY INSURANCE RATES PER $1,000
Joint Equal Age Rate Joint Equal Age Rate
<S> <C> <C> <C>
35 0.000334 76 3.433919
36 0.001084 77 3.924089
37 0.001917 78 4.456523
38 0.003001 79 5.043476
39 0.004417 80 5.703681
40 0.006084 81 6.45338
41 0.008084 82 7.310219
42 0.010584 83 8.279403
43 0.013501 84 9.341795
44 0.016917 85 10.483004
45 0.021084 86 11.690421
46 0.025918 87 12.957158
47 0.031501 88 14.283993
48 0.038085 89 15.669582
49 0.045836 90 17.146893
50 0.055004 91 18.734528
51 0.066005 92 20.498846
52 0.079173 93 22.58019
53 0.094926 94 25.306794
54 0.113347 95 29.300056
55 0.134852 96 35.747711
56 0.159526 97 46.886012
57 0.187286 98 66.09363
58 0.218882 99 90.909091
59 0.255316 100 90.909091
60 0.298339 101 90.909091
61 0.349539 102 90.909091
62 0.411586 103 90.909091
63 0.48657 104 90.909091
64 0.57458 105 90.909091
65 0.676041 106 90.909091
66 0.790458 107 90.909091
67 0.917174 108 90.909091
68 1.05862 109 90.909091
69 1.219152 110 90.909091
70 1.409651 111 90.909091
71 1.632495 112 90.909091
72 1.893914 113 90.909091
73 2.207948 114 90.909091
74 2.571345
75 2.98153
</TABLE>
Form Number 436-159(05-00)
Policy Number 000123456
6
<PAGE>
POLICY DATA
SPECIFIED AMOUNT FACTORS
<TABLE>
<CAPTION>
Attained Age Attained Age Attained Age
At Date of Factor At Date of Factor At Date of Factor
Death Death Death
<S> <C> <C> <C> <C> <C>
0-40 2.50 59 1.34 78 1.05
41 2.43 60 1.30 79 1.05
42 2.36 61 1.28 80 1.05
43 2.29 62 1.26 81 1.05
44 2.22 63 1.24 82 1.05
45 2.15 64 1.22 83 1.05
46 2.09 65 1.20 84 1.05
47 2.03 66 1.19 85 1.05
48 1.97 67 1.18 86 1.05
49 1.91 68 1.17 87 1.05
50 1.85 69 1.16 88 1.05
51 1.78 70 1.15 89 1.05
52 1.71 71 1.13 90 1.05
53 1.64 72 1.11 91 1.04
54 1.57 73 1.09 92 1.03
55 1.50 74 1.07 93 1.02
56 1.46 75 1.05 94 1.01
57 1.42 76 1.05 94-114 1.01
58 1.38 77 1.05 115 1.00
</TABLE>
Form Number 436-159(05-00)
Policy Number 000123456
7
<PAGE>
POLICY DATA
FOR UNIVERSAL TERM RIDER
Covered Person John Doe
Age 35
Sex MALE
Effective Date 09-01-1999
Expiration Date 09-01-2064
Face Amount $25,000.00
Premium Class TOBACCO
Form Number 436-159(05-00)
Policy Number 000123456
7A
<PAGE>
POLICY DATA
GUARANTEED MONTHLY COST OF INSURANCE RATES PER 1,000
FOR UNIVERSAL TERM RIDER
<TABLE>
<CAPTION>
Covered Person Guaranteed Maximum Covered Person Guaranteed Maximum
Attained Age Monthly Insurance Rates Attained Age Monthly Insurance Rates
<S> <C> <C> <C>
35 0.294500 71 5.162350
36 0.294500 72 5.629850
37 0.294500 73 6.148410
38 0.294500 74 6.717320
39 0.294500 75 7.325780
40 0.294500 76 7.948510
41 0.294500 77 8.574560
42 0.294500 78 9.208180
43 0.294500 79 9.871490
44 0.294500 80 10.58674
45 0.546130 81 11.37459
46 0.594520 82 12.24906
47 0.647090 83 13.19603
48 0.703830 84 14.18421
49 0.765590 85 15.18033
50 0.834030 86 16.16034
51 0.911660 87 17.16810
52 0.999330 88 18.22020
53 1.098710 89 19.26842
54 1.207290 90 20.32834
55 1.323420 91 21.43307
56 1.446260 92 22.71710
57 1.575810 93 24.36888
58 1.712090 94 26.62992
59 1.858450 95 30.20740
60 2.021580 96 36.35803
61 2.205690 97 47.21180
62 2.413310 98 66.20701
63 2.645310 99 99.90909
64 2.899210
65 3.168340
66 3.450200
67 3.742290
68 4.048830
69 4.381610
70 4.749110
</TABLE>
Form Number 436-159(05-00)
Policy Number 000123456
7B
<PAGE>
- -----------------------------------
SECTION 1 - DEFINITIONS
- -----------------------------------
1.1 YOU, YOUR OR JOINT INSUREDS
means the persons whose lives are insured.
1.2 ACCUMULATED VALUE
means the policy's accumulated value which is calculated as:
a) the variable accumulated value, which is defined in section 7.5; plus
b) the declared interest option accumulated value which is defined in
section 7.8.
1.3 NET ACCUMULATED VALUE
means the policy's net accumulated value which is calculated as:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
1.4 AGE
means age at the last birthday for each joint insured.
1.5 JOINT EQUAL ATTAINED AGE
means your joint equal age at issue plus the number of policy years since the
policy date.
1.6 JOINT EQUAL AGE
means the age on which premium and policy values are based. It is an actuarial
equivalent based upon the age and sex of both persons insured. The current joint
equal age on any anniversary will equal the joint equal age on the policy date
plus the number of years since the policy date.
1.7 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.
1.8 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.
1.9 ELIGIBLE FOR WAIVER OF SURRENDER CHARGE
means the insured:
a) is diagnosed by a Qualified Physician as having a terminal illness. A
terminal illness is any disease or medical condition which the Qualified
Physician expects will result in death within one year; or
b) stays in a Qualified Nursing Care Center for 90 days.
1.10 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.
1.11 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.
1.12 HOME OFFICE
means EquiTrust Life Insurance Company at 5400 University Avenue, West Des
Moines, Iowa, 50266-5997.
1.13 MONTHLY DEDUCTION DAY
436-159(05-00) 8
<PAGE>
means the same date in each month as the policy date. The charges for this
policy are deducted on the business day on or next following the monthly
deduction day.
1.14 NET PREMIUM
means the amount of premium remaining after the premium expense charge has been
deducted. This amount will be allocated among the subaccounts of the variable
account and the declared interest option according to the allocations shown on
the policy data page or the most recent instructions received from the owner.
1.15 PARTIAL WITHDRAWAL FEE
means a fee equal to the lesser of $25 or 2% of the accumulated value that is
applied at the time of any partial withdrawal.
1.16 POLICY ANNIVERSARY
means the same date in each year as the policy date.
1.17 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and any policy anniversaries.
1.18 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.
1.19 PREMIUM EXPENSE CHARGE
means the premium expense charge shown on the policy data page. This amount may
go up or down, but is guaranteed to never exceed 7 percent.
1.20 QUALIFIED PHYSICIAN:
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the insured, or a member of
the immediate family of either you or the insured.
1.21 QUALIFIED NURSING CARE CENTER:
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
a) Skilled Nursing Center - means a center:
1) That provides skilled nursing care supervised by a licensed physician;
2) That provides 24-hour nursing care by, or supervised by, an R.N.; and
3) That keeps daily medical record of each patient.
b) Intermediate Care Center - means a center:
1) That provides 24-hour nursing care by, or supervised by, an R.N. or an
L.P.N.; and
2) That keeps a daily medical record of each patient.
c) Hospital - means a center:
1) That operates for the care and treatment of sick or injured persons as
inpatients;
2) That provides 24-hour nursing care by, or supervised by, an
R.N.;
3) That is supervised by a staff of licensed physicians; and
4) That has medical, diagnostic, and major surgery capabilities or access
to such capabilities.
Qualified Nursing Care Center does not include:
a) Drug or alcohol treatment centers;
b) Home for the aged or mentally ill, community living centers, or places that
primarily provide domiciliary, residency or retirement care;
c) Places owned or operated by a member of the annuitant's immediate family.
436-159(05-00) 9
<PAGE>
1.22 SEC
means the Securities and Exchange Commission, a U.S. government agency.
1.23 SURRENDER CHARGE
means a fee that is applied at the time of a surrender. The surrender charge
will be the amount shown on the policy data page.
A specified amount increase has its own surrender charge period which begins on
the date of the increase. If a specified amount increase is made, the surrender
charges will be a composite of all charges which apply for each year.
1.24 SURRENDER VALUE
means the policy's surrender value which is calculated as:
a) the accumulated value; minus
b) the surrender charge.
1.25 NET SURRENDER VALUE
means the policy's net surrender value which is calculated as:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
1.26 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.
1.27 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit
investment trust registered with the SEC under the Investment Company Act of
1940.
1.28 WE, OUR, US OR THE COMPANY
means the EquiTrust Life Insurance Company.
- -----------------------------------
SECTION 2 - THE CONTRACT
- -----------------------------------
2.1 DEATH PROCEEDS
We will pay the death proceeds to the beneficiary on the last death of the joint
insureds:
a) within seven days after receipt by us of due proof of death of both joint
insureds;
b) if the policy is in force on the date of the last joint insured's death;
and
c) subject to the terms and conditions of this policy.
If you both die simultaneously, we will pay a death benefit to each joint
insured's beneficiary. In such an event, the benefit payment to the beneficiary
of each joint insured will be one half of the amount determined under death
proceeds.
The death proceeds will be the sum of:
a) the death benefit; and
b) any premiums paid after the date of death; and
c) any unearned policy loan interest on the date of death;
less:
a) any policy loan; and
b) any policy loan interest due;
plus any interest credited on this amount from the date of death to the
date of payment, the rate to be set by us but not less than 3% per year or
any rate required by law.
2.2 DEATH BENEFIT OPTIONS
The death benefit option in effect for this policy is shown on the policy data
page and is one of the following:
Option A -- The death benefit will be the greater of a) or b) where:
a) is the sum of the specified amount shown on the policy data page and the
accumulated value; and
436-159(05-00) 10
<PAGE>
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your joint equal age.
Option B -- The death benefit will be the greater of a) or b) where:
a) is the specified amount shown on the policy data page; and
b) is the accumulated value multiplied by the specified amount factor from the
table on the policy data page for your joint equal age.
All values are determined as of the end of the business day on or next following
the date of death.
2.3 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) this basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.
We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.
2.4 MODIFICATION
No one can change any part of this policy except the owner and one of our
officers. Both must agree to a change, and it must be in writing. No agent may
change this policy or waive any of its provisions.
2.5 INCONTESTABLE CLAUSE
We will not contest payment of the death benefit for any reason other than fraud
after this policy has been in force during your lifetime for two years from the
date of issue shown on the policy data page.
Any requested increase in the specified amount will be incontestable only after
such increase has been in force during your lifetime for two years from the
effective date of such increase.
2.6 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.
2.7 SUICIDE
If, within one year of the policy date, the last death of the joint insureds is
by suicide, whether this person is sane or insane, our total liability under
this policy is limited to the premium paid plus any unearned loan interest at
the date of death, less any policy loan, any loan interest due and any partial
withdrawals.
Any increase in death benefits resulting from a requested increase in specified
amount will not be paid if the insured dies by suicide, while sane or insane,
within one year of the date of such increase. Instead, we will return to the
owner an amount equal to the cost of insurance for such increase in specified
amount.
2.8 RETURN OF POLICY AND POLICY SETTLEMENT
436-159(05-00) 11
<PAGE>
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c)surrender; d) assignment; e) change
of owner or beneficiary; f) election; or g) exercise of any policy privilege.
We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.
2.9 MATURITY PROCEEDS
If either joint insured is living on the maturity date and this policy is in
force, we will pay the proceeds to the owner. Such proceeds will be:
a) the accumulated value; less
b) any policy loan.
The maturity date will be your joint equal attained age 115.
All values are determined as of the end of the business day on or next following
the maturity date.
2.10 POLICY SPLIT OPTION
This policy may be exchanged for two single-life policies, one on each of the
joint insureds, upon occurrence of one of the following events:
a) Entry of a divorce or annulment decree with respect to the marriage of the
joint insureds.
b) A change in the Federal Estate Tax Law was implemented that results in:
1) a reduction of the Unlimited Marital Deduction to 50% or less of the
value of the joint insured's estate; or
2) a reduction of the Federal Unified Credit to 50% or less of the amount in
effect at the date of issue of this policy; or
3) a reduction in the Federal Estate Tax rate to 50% or less of the rate in
effect at the date of issue of this policy.
Election of this option is subject to the following provisions:
a) Each new policy will be for up to one-half of the specified amount of this
policy.
b) The owner must notify us in writing at our home office within 90 days after
the effective date of one of the above events. The date that we receive the
written notification will be the effective date of the new policies.
c) The net surrender value will be divided and allocated in proportion to the
specified amount of each new policy.
d) Any assignments of this policy will apply to each new policy.
e) The beneficiary of this policy will be the beneficiary of each new policy.
f) If the joint insureds are the owners of this policy, each will be the owner
of his or her new policy. If the owner of this policy is other than the
joint insureds, the owner of this policy will be the owner of each new
policy.
g) The new policies will be issued based on the age and premium class for each
joint insured on the effective date of election of this option. The new
policies must fit the single-life issue limits in effect at the time of
election of this option. The new policies will be subject to the same
charges as those in effect for regularly-underwritten policies.
h) This option will not be available after the date of the first death of the
joint insureds.
i) The two single life policies may be any single life permanent policies being
offered
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by the company at the time of election of this option.
2.11 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) you die;
c) the policy matures;
d) the policy is surrendered; or
e) the grace period ends without payment of the premium.
2.12 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.
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SECTION 3 - OWNERSHIP AND
BENEFICIARIES
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3.1 OWNERSHIP
The original owner of this policy is shown on the policy data page. If there is
more than one owner, the policy will be owned jointly with right of
survivorship. Ownership of the policy may change according to the provisions
indicated in the original application or by a subsequent endorsement to the
policy.
3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
beneficiaries shown on our records on the date of the last joint insured's death
will receive the death benefit. The interests of any beneficiary in a class who
dies before you will pass to any survivors of the class, unless the policy
provides otherwise. Secondary beneficiaries will have the right to receive the
proceeds only if no primary beneficiary survives. If no beneficiary survives
you, we will pay the proceeds to the owner or the owner's estate.
In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.
3.3 CHANGE OF OWNER OR BENEFICIARY
While you live, a change of owner or beneficiary can be made at any time,
subject to the following rules:
a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
c) the form must be sent to our home office and recorded by us; and
d) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.
3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.
We will not be responsible for the validity of an assignment.
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SECTION 4 - PREMIUMS AND
REINSTATEMENT
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4.1 PREMIUM PAYMENT
Premium payments are flexible as to both timing and amount. Each premium is to
be paid at our home office.
4.2 PAYMENT FREQUENCY
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The first premium is due on or prior to the policy date. We will send periodic
reminder notices to the owner upon request. The minimum amount for which such
notice will be sent will be $100. A reminder notice may be sent for different
periods, which may be 12, 6, 3 or 1-month intervals. The reminder notice period
may be changed upon request.
4.3 GRACE PERIOD
A grace period of 61 days will be allowed for payment of a premium that, when
reduced by the premium expense charge, is at least equal to three times the
monthly deduction charge due on such date. The grace period applies:
a) During the first three policy years, if the net accumulated value is not
large enough on any monthly deduction day to cover the monthly deduction
due; and
b) During the first three policy years, if you have taken out a policy loan
and during this period, the net surrender value is not large enough to
cover the monthly deduction due; and
c) During subsequent years, if the net surrender value is not large enough on
any monthly deduction day to cover the monthly deduction due.
The grace period begins on the date we send the owner of record written notice
of the required payment. Such premium shall be due on such monthly deduction day
and if not received by us within the grace period, all coverage under this
policy will terminate without value at the end of the 61-day period. If a claim
by death during the grace period becomes payable under the policy, any due and
unpaid monthly deductions will be deducted from the proceeds.
4.4 REINSTATEMENT
Prior to the maturity date, a lapsed policy which has not been surrendered for
its accumulated value may be reinstated at any time within 5 years of the
monthly deduction day immediately preceding the grace period which expired
without payment of the required premium, subject to the following rules:
a) You and the owner must send a written request to us.
b) You must provide proof of your good health and insurability satisfactory to
us.
c) A premium sufficient to keep the policy in force for three months must be
paid.
d) The owner must pay a charge equal to the cost of insurance for the coverage
provided during the 61-day grace period which was in effect prior to the
termination of this policy.
e) The effective date of the reinstated policy will be the monthly deduction
day on or next following the date we approve reinstatement.
4.5 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $100 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $100 minimum
requirements. The Company reserves the right to limit the number and amount of
unscheduled premium payments.
4.6 PREMIUM LIMITATIONS
The company reserves the right to limit the number and amount of premium
payments in order to maintain this policy's qualifications under federal tax
law. We will refund any portion of a premium payment that would cause the policy
to lose such qualification.
4.7 PREMIUM APPLICATION
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While any policy loan is outstanding, unless the owner requests otherwise,
premium payments will be applied as a payment to reduce the outstanding balance
of the loan. When such loan has been repaid, the balance of any premium payment
remaining after payment of the loan, plus any subsequent payments, will be
allocated as described in the following provision.
4.8 ALLOCATION OF PREMIUM
The owner will determine the percentage of net premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the net premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the net premium. A fractional percent may not be chosen.
Net premiums will be allocated to the declared interest option if they are
received either before the date the company obtains a signed notice from the
owner that the policy has been received, or before the end of 25 days after the
delivery date. Upon the earlier of (i) the date the company obtains a notice
signed by the owner that the policy has been received, or (ii) 25 days after the
delivery date, we will transfer part or all of the accumulated value in the
declared interest option to the subaccounts in accordance with the owner's
allocation instructions. Net premiums received on or after (i) or (ii) above
will be allocated in accordance with the net premium allocation percentages
shown in the application or the most recent written instructions of the owner.
The owner may change the allocation for future net premiums at any time, subject
to the following rules:
a) The policy must be in force;
b) There must be a net accumulated value;
c) The change must be in writing on a form acceptable to us;
d) The form must be signed by the owner; and
e) The change will take effect on the business day on or next following the
date we receive the signed form at our home office.
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SECTION 5 - POLICY CHANGE
- -----------------------------------
5.1 CHANGE OF SPECIFIED AMOUNT
The owner may change the specified amount at any time after the policy has been
in effect for one policy year, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) It must be signed by the owner.
c) The change will take effect on the monthly deduction day coinciding with or
next following the date the request is approved by us.
d) We will issue a new policy data page for any change in specified amount.
5.2 SPECIFIED AMOUNT DECREASE
Any decrease in specified amount will reduce such amount in the following order:
a) the specified amount provided by the most recent increase will be reduced;
then
b) the next most recent increases will be reduced in succession; and
c) the initial specified amount will be reduced last.
A specified amount decrease will not reduce the surrender charge.
The total specified amount which remains in force after a requested decrease may
not be
436-159(05-00) 15
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less than the minimum specified amount in effect for the policy on the date of
decrease, as published by us.
5.3 SPECIFIED AMOUNT INCREASE
In addition to the rules for change in specified amount, an increase in
specified amount is subject to the following:
a) proof of insurability acceptable to us; and
b) payment of the first month's cost of insurance or sufficient accumulated
value for deduction of such cost of insurance.
5.4 CHANGE OF DEATH BENEFIT OPTION
The owner may request to change the death benefit option. The change will take
effect on the monthly deduction day coinciding with or next following the date
we approve the request.
If Option A is changed to Option B, the current specified amount will not
change.
If Option B is changed to Option A, the current specified amount will be reduced
by an amount equal to the accumulated value on the effective date of the change.
5.5 LIFE INSURANCE QUALIFICATION
If following a requested change of specified amount or a change of death benefit
option, this policy would no longer qualify as life insurance under federal tax
law, we will limit the change to an amount that would maintain such
qualification. The Company reserves the right to change the policy, in the event
of future changes in the federal tax law, to the extent required to maintain the
policy's qualification as life insurance under federal tax law.
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SECTION 6 - VARIABLE ACCOUNT
- -----------------------------------
6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.
That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.
While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa.
We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy shall then mean the variable account
to which the assets were transferred.
When permitted by law, we also reserve the right to:
436-159(05-00) 16
<PAGE>
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction of a committee;
c) restrict or eliminate any voting rights of owners, or other persons who
have voting rights as to the variable account; and
d) combine the variable account with other separate accounts.
6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
the policy data page. Subject to obtaining any approvals or consents required by
applicable law, we reserve the right to eliminate or combine any subaccounts and
the right to transfer the assets of one or more subaccounts to any other
subaccount. We also reserve the right to add new subaccounts and make such
subaccounts available to any class or series of policies as we deem appropriate.
Each new subaccount would invest in a new investment option of the Fund, or in
shares of another investment company. The owner will determine the percentage of
net premium that will be allocated to each subaccount in accordance with the
allocation of premium provision.
6.3 FUND INVESTMENT OPTIONS
The fund has several investment options, each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Net premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
to which net premiums have been allocated through the subaccounts.
We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for
the shares of a fund investment option that are held by the variable
account or that the account may purchase.
We also reserve the right to dispose of the shares of an investment option of
the fund listed on the policy data page and to substitute shares of another
investment option of such fund or another mutual fund investment option, if:
a) the shares of the investment option are no longer available for investment;
or
b) if in our judgment further investment in the investment option should
become inappropriate in view of the purposes of the variable account.
In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.
6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and the declared
interest option, subject to the following rules:
a) The change must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our Home office.
d) The owner may transfer amounts among the subaccounts of the variable
account an
436-159(05-00) 17
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unlimited number of times in a policy year.
e) The owner may transfer amounts between the declared interest option and the
variable account only once in a policy year.
f) The first transfer in each policy year will be made without a transfer
charge. Thereafter, each time amounts are transferred a transfer charge
will be imposed. This transfer charge is shown on the policy data page.
g) The accumulated value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. Unless paid in
cash, the transfer charge will be deducted on a pro rata basis from the
declared interest option and/or the subaccounts to which the transfer is
made.
h) The owner must transfer at least:
1) a total of $100; or
2) the total accumulated value in the subaccount or the total accumulated
value in the declared interest option less any policy loan, if the
total amount transferred is less than $100.
The following additional rules apply to transfers from the declared interest
option:
a) The accumulated value in the declared interest option after a transfer from
such option must at least equal the amount of all policy loans.
b) No more than 50% of the net accumulated value in the declared interest
option may be transferred unless the balance in the declared interest
option after the transfer, would be less than $1,000. If the balance in the
declared interest option would fall below $1,000, the full net accumulated
value in the declared interest option may be transferred.
6.5 SPECIAL TRANSFER PRIVILEGE
The owner may transfer, at any time, all of the amounts in the subaccounts to
the declared interest option. This policy will then become one in which the
benefits do not vary with the investment performance of the variable account.
The owner must tell us this special transfer privilege is being exercised. We
will then waive the transfer charge. The owner may exercise this special
transfer privilege once per policy year.
If the owner exercises this special transfer privilege, we will automatically
credit all future premium payments to the declared interest option until the
owner requests a change in the allocation. At the time of the transfer, there is
no effect on the policy's death benefit, accumulated value, specified amount, or
net amount at risk, or on your premium class or joint equal age.
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SECTION 7 - ACCUMULATED VALUE
BENEFITS
- -----------------------------------
7.1 ACCUMULATED VALUE DETERMINATION
The accumulated value in the policy is equal to:
a) the variable accumulated value; plus
b) the declared interest option accumulated value.
7.2 NET ACCUMULATED VALUE DETERMINATION
The net accumulated value of this policy will be:
a) the accumulated value; less
b) the amount of any policy loan; less
c) any policy loan interest due; plus
d) any unearned loan interest.
7.3 SURRENDER VALUE
The surrender value of this policy will be:
436-159(05-00) 18
<PAGE>
a) the accumulated value; minus
b) the surrender charge.
7.4 NET SURRENDER VALUE
The net surrender value of this policy will be:
a) the surrender value; minus
b) any policy loan; minus
c) any policy loan interest due; plus
d) any unearned loan interest.
7.5 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive notice that the
owner has received and accepted the policy, the variable accumulated value is
the total amount of net premium, if any, credited to the subaccounts of the
variable account, minus the monthly deduction applicable to those subaccounts if
the net premium is allocated on a monthly deduction day. After such date, the
policy's variable accumulated value is equal to the sum of the policy's
accumulated value in each subaccount. The accumulated value in a subaccount is
equal to a) multiplied by b) where:
a) is the current number of account units; and
b) is the current unit value.
The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.
7.6 ACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to account units. The number of account units for a
transaction is found by dividing the dollar amount of the transaction by the
current unit value.
The number of account units for a subaccount increases when:
a) net premiums are credited to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited to that subaccount.
The number of account units for a subaccount decreases when:
a) the owner takes out a policy loan from that subaccount;
b) the owner makes a partial withdrawal from that subaccount;
c) we take a portion of the monthly deduction from that subaccount; or
d) transfers are made from that subaccount to the declared interest option or
other subaccounts.
7.7 UNIT VALUE
The unit value for each subaccount was set initially at $10.00 when the
subaccounts first purchased fund shares. The unit value for each subsequent
valuation period is calculated by dividing a) by b), where:
a) is:
1) the net asset value of the net assets of the subaccount at the end of
the preceding valuation period; plus
2) the investment income and capital gains, realized or unrealized,
credited to the net assets of that subaccount during the valuation
period for which the unit value is being determined; minus
3) the capital losses, realized or unrealized, charged against those net
assets during the valuation period; minus
4) any amount charged against the subaccount for taxes, or any amount set
aside during the valuation period
436-159(05-00) 19
<PAGE>
by the Company as a provision for taxes attributable to the operation
or maintenance of that subaccount; minus
5) the mortality and expense risk charge shown on the policy data page.
This charge may go up or down but will never exceed 0.0028618% of the
daily net assets in that subaccount for each day in the valuation
period. The maximum charge corresponds to a charge of 1.05% per year of
the average daily net assets of the subaccount for mortality and
expense risks.
b) is the number of units outstanding at the end of the preceding valuation
period.
The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.
7.8 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the policy date is the net
premium credited to the declared interest option as of that date minus the
monthly deduction applicable to the declared interest option for the first
policy month.
After the policy date, the declared interest option accumulated value is
computed as a) + b) + c) + d) - e) - f), where:
a) is the declared interest option value on the preceding monthly deduction
day plus any interest from the preceding monthly deduction day to the date
of calculation;
b) is the total of net premiums credited to the declared interest option since
the preceding monthly deduction day, plus interest from the date premiums
are credited to the date of calculation;
c) is the total of the transfers from the variable account to the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of calculation;
d) is the total amount transferred from the variable account to the declared
interest option to secure policy loans since the preceding monthly
deduction day, plus interest from the date of transfer to the date of
calculation;
e) is the total of the transfers to the variable account from the declared
interest option since the preceding monthly deduction day, plus interest
from the date of transfer to the date of the calculation; and
f) is the total of partial withdrawals from the declared interest option since
the preceding monthly deduction day, plus interest from the date of
withdrawal to the date of calculation.
If the date of calculation is a monthly deduction day, we also reduce the
declared interest option accumulated value by the applicable monthly deduction
for the policy month following the monthly deduction day.
7.9 DECLARED INTEREST OPTION INTEREST
The minimum interest rate applied to the declared interest option accumulated
value is an effective rate of 4.00% per year. Interest in excess of the minimum
rate may be applied. The amount of the excess interest and the manner in which
it is determined will be set by us.
The interest credited on the portion of the declared interest option accumulated
value which equals any policy loan will be equal to the greater of 4.00% or:
436-159(05-00) 20
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a) the current effective loan interest rate; minus
b) no more than 3.00%.
Interest will be credited to the declared interest option accumulated value on
each monthly deduction day.
7.10 MONTHLY DEDUCTION
The monthly deduction is a charge made each monthly deduction day from the
declared interest option accumulated value and the variable accumulated value on
a proportionate basis as of the close of business on the monthly deduction day.
For the purpose of determining the proportion of the deduction, the declared
interest option accumulated value is reduced by the amount of any policy loans.
We make the deduction from each subaccount of the variable account based on each
subaccount's proportional percentage of the variable accumulated value.
The monthly deduction for a policy month will be computed as a) plus b) plus
c) plus d) plus e) plus f) where:
a) is the cost of insurance as described in the cost of insurance provision;
b) is the charge for all additional benefit riders attached to this policy;
c) is the monthly policy expense charge shown on the policy data page. This
amount may go up or down, but is guaranteed never to exceed $14; and
d) is the monthly per $1,000 charge shown on the policy data page. This amount
may go up or down, but is guaranteed never to exceed $0.05 per $1,000; and
e) is the first year monthly per $1,000 charge shown on the policy data page
This charge may go up or down, but is guaranteed not to exceed $0.14 per
$1,000.
This charge will be deducted for 12 months following issue of this policy
and during the 12 months following the effective date of an increase in the
specified amount. Should this policy lapse and later be reinstated, to the
extent that the monthly per $1,000 charge was not deducted for a total of
twelve policy months prior to lapse, the charges will continue to be
deducted following reinstatement of the policy until such charge has been
assessed, both before and after the lapse, for a total of 12 policy months.
f) is the first year monthly policy expense charge shown on the policy data
page. This amount may go up or down, but is guaranteed never to exceed $14
per month.
7.11 COST OF INSURANCE
If the owner chooses death benefit option B, the cost of insurance is computed
as a) multiplied by the result of b) minus c). If death benefit option A is
chosen, the cost of insurance is computed as a) multiplied by b). In either
case:
a) is the cost of insurance rate as described in the cost of insurance rate
provisions, divided by 1000;
b) is the specified amount as described in the death benefit provisions as
of the close of business on the monthly deduction day, divided by 1.0032737;
and
c) is the accumulated value as of the close of business on the monthly
deduction day.
The cost of insurance is determined separately for the initial specified amount
and any increases made later. If the premium class for the initial specified
amount is different from that of any increases, the accumulated value will first
be considered a part of the initial specified amount. If the
436-159(05-00) 21
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accumulated value as of the close of business on the monthly deduction day
exceeds the initial specified amount, it will be considered to be a part of any
increase in the specified amount in the same order as the increases occurred.
7.12 COST OF INSURANCE RATE
The cost of insurance rate is subject to the following rules:
a) The rate for the initial specified amount is based on your sex, premium
class and joint equal age. For any increase in the specified amount, age
will be determined from your age as of your last birthdate on the effective
date of the increase.
b) The monthly rates will be determined by us based on our expectation as to
future mortality experience.
c) If we change the rates, we will change them for everyone in your premium
class.
d) The monthly guaranteed rates shown on the policy data page are based on the
1980 Commissioners' Standard Ordinary Smoker and Nonsmoker Mortality Table.
The monthly rate will never be more than the rates shown on the policy data
page.
7.13 BASIS OF VALUES
All reserves for the policy are based on the 1980 Commissioners' Standard
Ordinary Smoker and Non-Smoker Mortality Table.
All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered. We have filed a detailed statement of the
way these values are determined with the insurance department in that state. It
shows the figures and methods used.
7.14 SURRENDER
While either of you live and prior to the maturity date, the owner may surrender
the policy subject to the following rules:
a) The request must be in writing to us.
b) The amount of any such surrender may be paid in cash or we will apply part or
all of it under a payment option.
c) We have the right to defer payment of a surrender from the declared interest
option for up to 6 months.
d) A surrender charge may apply. If the surrender charge is not paid in cash,
such charge will be deducted from the amount surrendered.
e) Upon surrender, all insurance in force will terminate.
7.15 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the insured becomes eligible for waiver of the surrender charge.
The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve the
right to seek a second medical opinion or have an examination performed at
our expense by a physician we choose.
d) The insured must become eligible for waiver of surrender charge after the
first policy year ends.
7.16 PARTIAL WITHDRAWAL
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While either of you live and prior to the maturity date, the owner may obtain a
partial withdrawal of the net surrender value, subject to the following rules:
a) The amount of any partial withdrawal must be at least $500 and may not exceed
the lesser of:
1) the net surrender value less $500; or
2) 90% of the net surrender value.
b) The death benefit will be reduced as a result of any partial withdrawal.
c) At the time of the partial withdrawal, if the death benefit option in effect
is:
1) Option A: there will be no effect on the specified amount.
2) Option B: the specified amount will be reduced by the amount of
accumulated value withdrawn.
d) The specified amount remaining in force after a partial withdrawal may not be
less than the minimum specified amount for the policy in effect on the date
of the partial withdrawal, as published by the Company.
e) The accumulated value will be reduced by the amount of any partial withdrawal
and any partial withdrawal fee. The owner may tell us how to allocate a
partial withdrawal among the subaccounts and the declared interest option. If
the owner does not so instruct, we will allocate the partial withdrawal among
the subaccounts and the declared interest option in the same proportion that
the accumulated value in each of the subaccounts and the accumulated value of
the declared interest option reduced by any outstanding policy loans bears to
the total accumulated value reduced by any outstanding policy loans on the
date we receive the request.
7.17 USE OF PAYMENT OPTION
If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the surrender charge will be determined by adding the fixed number of years
for which payment will be made to the Surrender Date shown on the policy
data page.
7.18 DELAY OF PAYMENT
Proceeds from surrenders, partial withdrawals, and policy loans will usually be
mailed to the owner within seven days after the owner's signed request is
received in our home office. We will usually mail any death claim proceeds
within seven days after we receive due proof of death. We will usually mail the
maturity proceeds within seven days after the maturity date. We have the right
to delay any payment whenever:
a) the New York Stock Exchange is closed other than on customary weekend and a
holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by the
SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities; or
e) it is not reasonably possible to determine the value of the net assets of the
variable account.
We have the right to defer payment which is derived from any
amount paid to us by check or draft until we are satisfied the check or draft
has been paid by the bank on which it is drawn.
436-159(05-00) 23
<PAGE>
We also have the right to delay making a surrender, partial withdrawal, or
policy loan from the declared interest option for up to six months from the date
we receive the owner's request.
7.19 CONTINUANCE OF INSURANCE
The insurance under this policy will continue until the earlier of:
a) the end of any grace period during which a required premium payment is not
made;
b) the date the owner surrenders this policy for its entire net accumulated
value;
c) the date of the last joint insured's death; or
d) the date the policy matures.
This provision will not continue the policy beyond the maturity date or continue
any rider beyond its termination date as specified in the rider.
7.20 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current accumulated value including the value in each subaccount and
the declared interest option;
c) any partial withdrawals since the last report;
d) any policy loans; and
e) the current death benefit.
An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.
- -----------------------------------
SECTION 8 - POLICY LOANS
- -----------------------------------
8.1 CASH LOAN
The owner may obtain a cash loan at any time on the sole security of this
policy, if:
a) the policy is in force;
b) there is a net surrender value.
We have the right to delay making a policy loan from the declared interest
option for up to six months from the date we receive the owner's request.
8.2 LOAN VALUE
The total of all loans may not exceed 90% of the net surrender value as of the
date of the most recent loan. For any loan that is made we will deduct interest
in advance on the requested loan to the next policy anniversary.
8.3 LOAN INTEREST
The loan interest rate is an annual rate. We may change this rate at the
beginning of each policy year. The annual loan interest is to be paid in advance
on each policy anniversary. Interest not paid when due will be added to the loan
and will bear interest at the same rate. Any change in the interest rate will
apply to any existing or new policy loans on this policy.
The maximum annual loan interest rate will be the higher of:
a) The Published Monthly Average of the Composite Yield on Seasoned Corporate
Bonds as published by Moody's Investors Service, Inc. or any successor
thereto, for the calendar month ending two months before the date on which
the rate is determined; or
b) 5.50%; but
it will never exceed the usury rate, if applicable.
436-159(05-00) 24
<PAGE>
If the Monthly Average is no longer published, we will use a substantially
similar average which will be substituted by the insurance supervisory official
of the state in which this policy was delivered.
We will not make a change of less than 0.5% in this policy's loan interest rate.
We will inform you of the loan interest rate at the time a loan is made. Notice
of any loan interest rate change on existing loans will be made in advance of
the policy anniversary on which the change becomes effective.
8.4 LOAN ALLOCATION
When the owner takes out a policy loan, an amount equal to the loan will be
segregated within the declared interest option as security for the loan. Amounts
held as security for the loan will first be allocated to the accumulated value
in the declared interest option. If the accumulated value in the declared
interest option less any existing policy loan is not sufficient to cover the
amount of the policy loan, the balance necessary will be transferred from the
subaccounts on a proportional basis. This transfer is not treated as a transfer
for the purpose of the transfer charge or the limit of one transfer in a policy
year.
A transfer will also be made from the subaccounts on a proportional basis for
any due and unpaid loan interest if the accumulated value in the declared
interest option is not sufficient to cover such interest.
8.5 LOAN REPAYMENT
All or part of any policy loan may be repaid at any time while the policy is
still in force. Loan amounts repaid will be allocated to the declared interest
option. The portion of the accumulated value in the declared interest option
securing the repaid portion of the loan will no longer be segregated within the
declared interest option as security for the loan, but will remain in the
declared interest option until transferred to the subaccounts by the owner.
Any outstanding policy loans will be deducted from the proceeds at death,
maturity or surrender.
- -----------------------------------
SECTION 9 - PAYMENT OF PROCEEDS
- -----------------------------------
9.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After the death of the last joint insured, that joint insured's
beneficiary may choose an option if the owner had not done so before your death.
If no payment option is chosen, we will pay the proceeds of this policy in one
sum. We may also fulfill our obligation under this policy by paying the proceeds
in one sum if:
a) the proceeds are less than $2,000;
b) periodic payments become
less than $20; or
c) the payee is an assignee, estate, trustee, partnership, corporation, or
association.
9.2 PAYMENT OPTIONS
The payment options choices are:
1) INTEREST INCOME - The proceeds will be left with us to earn interest.
The interest will be paid every 1, 3, 6 or 12 months as the payee
chooses. The rate of interest will be determined by us. The payee may
withdraw all or part of the proceeds at any time.
436-159(05-00) 25
<PAGE>
2) INCOME FOR FIXED TERM - The proceeds will be paid out in equal
installments for a fixed term of years.
3) LIFE INCOME WITH TERM CERTAIN - The proceeds will be paid out in equal
installments for as long as the payee lives, but for not less than a
term certain. The owner or payee may choose one of the terms certain
shown in the payment option tables.
4) INCOME FOR FIXED AMOUNT - The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until
all proceeds plus interest have been paid out.
5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME - The proceeds
will be paid out in equal monthly installments for as long as two joint
payees live. When one payee dies, installments of two-thirds of the
first installment will be paid to the surviving payee. Payments will
stop when the surviving payee dies.
The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.
9.3 INTEREST AND MORTALITY
Proceeds applied under a payment option no longer earn interest at the rate
applied to the declared interest option or participate in the investment
experience of the variable account. The minimum interest rate used in computing
any payment option is 3% per year. Higher interest rates may be used on the
effective date of the payment contract. We may at any time declare additional
interest on these funds. The amount of additional interest and how it is
determined will be set by us.
The mortality table which is used for options 3) and 5) is the "Annuity 2000"
individual annuity mortality table.
9.4 REQUIREMENTS
For the owner to choose or change a payment option:
a) this contract must be in force;
b) the request must be in writing to us at our home office; and
c) any prior option must be canceled.
After the death of the last joint insured, and before this contract is settled,
for a beneficiary to choose or change a payment option:
a) a prior option by the owner cannot be in effect;
b) the request must be in writing to us at our home office; and
c) any prior option must be canceled.
9.5 EFFECTIVE DATE
If a payment option has been chosen by the owner, it is effective on the date
the proceeds of this policy are due. If a beneficiary chooses a payment option,
it is effective on the date of election. The first payment under options 2, 3,
4, or 5 is due on the effective date. The first payment under payment option 1
is due at the end of the period chosen.
9.6 DEATH OF PAYEE
If a payee dies, any remaining payments will be paid to a contingent payee. If
no payee survives, we will pay the commuted value of any remaining payments to
the last payee's estate.
9.7 WITHDRAWAL OF PROCEEDS
436-159(05-00) 26
<PAGE>
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.
9.8 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors to
the maximum extent allowed by law.
Payment Option Tables
(per $1,000 of proceeds)
<TABLE>
<CAPTION>
- -----------------------------------------
Option 2 - Income for Fixed Term
Installments per $1,000 of Proceeds
- -----------------------------------------
Number of
Years Annual Monthly
- --------------- ------------ ------------
<S> <C> <C>
5 211.99 17.91
- --------------- ------------ ------------
10 113.82 9.61
- --------------- ------------ ------------
15 81.33 6.87
- --------------- ------------ ------------
20 65.26 5.51
- --------------- ------------ ------------
25 55.76 4.71
- --------------- ------------ ------------
30 49.53 4.18
- --------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------
Guaranteed Settlement Option 5
Joint and Two-thirds to Survivor Monthly Life Income
Monthly Installments per $1,000 of Proceeds
- -----------------------------------------------------
Male Female Age
Age
55 60 62 65 70
- ---------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
60 4.33 4.58 4.68 4.85 5.16
62 4.41 4.67 4.79 4.97 5.31
65 4.53 4.82 4.95 5.16 5.54
70 4.75 5.09 5.24 5.49 5.97
75 4.97 5.35 5.53 5.83 6.42
- ---------- -------- -------- ------- -------- -------
<CAPTION>
Unisex Unisex Age
Age
55 60 62 65 70
- ---------- ------------------------------------------
<S> <C> <C> <C> <C> <C>
60 4.35 4.58 4.68 4.84 5.13
62 4.43 4.68 4.79 4.97 5.28
65 4.56 4.84 4.97 5.16 5.52
70 4.79 5.13 5.28 5.52 5.97
75 5.04 5.43 5.60 5.90 6.47
- ---------- -------- -------- ------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
GUARANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTHLY INSTALLMENTS PER $1,000 OF PROCEEDS
- ----------------------------------------------------------------------------------------------
Male Female Unisex
- ----------------------------------------------------------------------------------------------
AGE 0 5 10 15 20 0 5 10 15 20 0 5 10 15 20
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 4.51 4.49 4.45 4.38 4.27 4.19 4.19 4.16 4.12 4.06 4.35 4.34 4.30 4.25 4.16
56 4.60 4.59 4.54 4.46 4.33 4.27 4.26 4.24 4.19 4.12 4.43 4.42 4.39 4.32 4.22
57 4.70 4.68 4.63 4.54 4.39 4.35 4.35 4.32 4.27 4.19 4.52 4.51 4.47 4.40 4.29
58 4.81 4.79 4.73 4.62 4.46 4.44 4.43 4.40 4.34 4.25 4.62 4.61 4.56 4.48 4.35
59 4.92 4.90 4.83 4.70 4.52 4.54 4.53 4.49 4.42 4.32 4.72 4.71 4.65 4.56 4.42
60 5.04 5.01 4.93 4.79 4.59 4.64 4.63 4.58 4.51 4.39 4.83 4.81 4.75 4.65 4.49
- ----------------------------------------------------------------------------------------------
61 5.16 5.14 5.05 4.88 4.66 4.75 4.73 4.68 4.59 4.46 4.95 4.93 4.86 4.74 4.55
62 5.30 5.27 5.16 4.98 4.72 4.86 4.84 4.79 4.68 4.53 5.07 5.05 4.97 4.83 4.62
63 5.45 5.41 5.29 5.08 4.79 4.98 4.96 4.90 4.78 4.60 5.20 5.18 5.08 4.92 4.69
64 5.60 5.56 5.42 5.17 4.85 5.11 5.09 5.01 4.88 4.67 5.35 5.31 5.21 5.02 4.76
65 5.77 5.72 5.55 5.27 4.91 5.25 5.22 5.14 4.98 4.75 5.50 5.46 5.34 5.12 4.83
- ----------------------------------------------------------------------------------------------
66 5.95 5.89 5.69 5.38 4.97 5.40 5.36 5.26 5.08 4.82 5.66 5.61 5.47 5.23 4.89
67 6.14 6.06 5.84 5.48 5.03 5.55 5.52 5.40 5.19 4.89 5.83 5.78 5.61 5.33 4.96
68 6.34 6.25 5.99 5.58 5.09 5.73 5.68 5.55 5.30 4.95 6.01 5.95 5.76 5.44 5.02
69 6.55 6.45 6.15 5.68 5.14 5.91 5.86 5.70 5.41 5.02 6.21 6.14 5.91 5.54 5.08
70 6.78 6.66 6.31 5.78 5.19 6.11 6.05 5.86 5.53 5.08 6.42 6.34 6.07 5.65 5.13
- ----------------------------------------------------------------------------------------------
71 7.03 6.89 6.47 5.88 5.23 6.32 6.25 6.02 5.64 5.14 6.65 6.55 6.24 5.75 5.19
72 7.29 7.12 6.64 5.97 5.27 6.55 6.47 6.20 5.75 5.19 6.89 6.77 6.41 5.86 5.23
73 7.56 7.37 6.81 6.07 5.31 6.80 6.70 6.38 5.86 5.24 7.15 7.01 6.59 5.96 5.28
74 7.86 7.63 6.99 6.15 5.34 7.07 6.95 6.57 5.97 5.29 7.44 7.26 6.77 6.06 5.31
75 8.18 7.90 7.16 6.24 5.37 7.37 7.22 6.76 6.08 5.33 7.74 7.53 6.95 6.15 5.35
- ----------------------------------------------------------------------------------------------
</TABLE>
436-159(05-00) 27
<PAGE>
NON-PARTICIPATING
FLEXIBLE PREMIUM
LAST SURVIVOR
VARIABLE LIFE INSURANCE POLICY
If you have any questions concerning this policy or if
anyone suggests that you change or replace this policy,
please contact your EquiTrust Life agent or our home
office. [888-349-4656]
EQUITRUST LIFE INSURANCE COMPANY
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997
- -------------------------------------------------------------------------------
436-159(05-00)
<PAGE>
February 14, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen,
With reference to the Registration Statement on Form S-6 filed by EquiTrust Life
Insurance Company ("Company") and its EquiTrust Life Variable Account with the
Securities and Exchange Commission covering certain variable universal life
insurance policies, I have examined such documents and such law as I considered
necessary and appropriate, and on the basis of such examinations, it is my
opinion that:
(1) Company is duly organized and validly existing under the laws of the State
of Iowa.
(2) The variable universal life policies, when issued as contemplated by the
said Form S-6 Registration Statement will constitute legal, validly issued
and binding obligations of EquiTrust Life Insurance Company.
I hereby consent to the filing of this opinion as an exhibit to the said Form
S-6 Registration Statement and to the reference to my name under the caption
"Legal Matters" in the Prospectus contained in the said Registration Statement.
In giving this consent, I am not admitting that I am in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Stephen M. Morain
Stephen M. Morain
Senior Vice President
& General Counsel
<PAGE>
February 14, 2000
EquiTrust Life Insurance Company
5400 University Avenue
West Des Moines, Iowa 50266
Gentlemen:
This opinion is furnished in connection with the registration by EquiTrust Life
Insurance Company of a flexible premium last survivor variable life insurance
policy ("Policy") under the Securities Act of 1933, as amended. The prospectus
included in this initial filing to the Registration Statement on Form S-6
describes the Policy. I have provided actuarial advice concerning the
preparation of the policy form described in the Registration Statement, and I am
familiar with the Registration Statement and exhibits thereto.
It is my professional opinion that:
(1) The information contained in the examples set forth in Appendix B of the
Prospectus, based on the assumptions stated in the examples, is consistent
with the provisions of the Policy.
(2) The fees and charges deducted under the Policy, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.
I hereby consent to the use of this opinion as an exhibit to this initial filing
to the Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus.
Sincerely,
/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MSAA
Life Product Development and Price Vice
President
EquiTrust Life Insurance Company
