STATE FARM LIFE & ACCIDENT ASSUR CO VAR LIFE SEP ACCT, S-6, 1998-09-25

STATE FARM LIFE & ACCIDENT ASSUR CO VAR LIFE SEP ACCT
S-6, 1998-09-25

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1998

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

------------------------

FORM S-6

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF
UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2

------------------------

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
(Exact name of trust)

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(Name of Depositor)

ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710-0001
(Complete address of depositor's principal executive offices)

LAURA P. SULLIVAN, ESQ.
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710-0001
(Name and complete address of agent for service)

------------------------

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

SECURITIES BEING OFFERED:
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES

------------------------

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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2

<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Cover Page
2 Cover Page
3 Not applicable
4 Sale of the Policies
5 The Variable Account
6 The Variable Account
7 Not applicable
8 The Variable Account
9 Litigation
10 Summary and Diagram of the Policy; Premiums; Allocation Options; Death Benefits; Other Policy
Benefits and Provisions; Surrender Benefits; Loan Benefits; The Variable Account and State Farm
Fund; Voting of Fund Shares
11 The Variable Account and State Farm Fund; Allocation Options
12 The Variable Account and State Farm Fund; Allocation Options
13 Charges and Deductions
14 Premiums
15 Premiums; Allocation Options
16 Allocation Options
17 Premiums; Surrender Benefits; Loan Benefits; Requesting Payments and Telephone Transactions
18 The Variable Account and State Farm Fund; Other Policy Benefits and Provisions
19 Reports to Policy Owners
20 The Variable Account
21 Loan Benefits
22 Not applicable
23 State Farm and the Fixed Account
24 Not applicable
25 State Farm and the Fixed Account
26 Charges and Deductions
27 State Farm and the Fixed Account
28 State Farm and the Fixed Account
29 State Farm and the Fixed Account
30 Not applicable
31 Not applicable
32 Not applicable
33 Not applicable
34 Not applicable
35 State Farm and the Fixed Account
36 Not applicable
37 Not applicable
38 Sale of the Policies
39 Sale of the Policies
40 Not Applicable
41 Sale of the Policies
42 Not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------------- -----------------------------------------------------------------------------------------------------
<C> <S>
43 Not applicable
44 How Your Policy Account Values Vary
45 Not applicable
46 How Your Policy Account Values Vary
47 Allocation Options
48 State Farm and the Fixed Account; The Variable Account and State Farm Fund
49 Not applicable
50 The Variable Account and State Farm Fund
51 Premiums; Allocation Options; Charges and Deductions; Surrender Benefits
52 The Variable Account and State Farm Fund; Other Policy Benefits and Provisions
53 Tax Considerations
54 Not applicable
55 Hypothetical Illustrations
56 Not applicable
57 Not applicable
58 Not applicable
59 Financial Statements
</TABLE>

<PAGE>

XXX, 1998

VARIABLE
UNIVERSAL LIFE

State Farm Life and Accident Assurance Company

Variable Universal Life Prospectus

[LOGO]

<PAGE>
PROSPECTUS DATED , 1998
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY VARIABLE LIFE SEPARATE ACCOUNT
OF STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
P.O. BOX 2307
BLOOMINGTON, ILLINOIS 61702-2307
TELEPHONE (888) 702-2307

This prospectus describes a variable universal life insurance policy (the
"Policy") offered by State Farm Life and Accident Assurance Company ("State
Farm," "we," "us," or "our"). The Policy is designed to provide lifetime
insurance protection on the insured named in the Policy (the "Insured") and at
the same time provide flexibility to vary the amount and timing of premiums and
to change the amount of death benefits payable under the Policy. This
flexibility allows the purchaser of a Policy (the "Owner," "you," or "your") to
provide for changing insurance needs under a single insurance policy.

The Owner may allocate net premiums and Policy Account Value to the State Farm
Life and Accident Assurance Company Variable Life Separate Account (the
"Variable Account") and also to State Farm's general account (the "Fixed
Account"), within certain limits. The Variable Account is divided into
subaccounts (each, a "Subaccount"). Each Subaccount invests in a corresponding
investment portfolio (each, a "Fund") of State Farm Variable Product Trust (the
"Trust"). The Funds currently available are the Large Cap Equity Index Fund,
Small Cap Equity Index Fund, International Equity Index Fund, Stock and Bond
Balanced Fund, Bond Fund, and Money Market Fund. The accompanying prospectus for
the Trust describes each of the Funds, including the risks of investing in each
Fund, and provides other information about the Trust.

An Owner can select from two death benefit options available under the Policy: a
level insurance amount or "Basic Amount" ("Option 1"), and a level insurance
amount (or Basic Amount) plus Policy Account Value ("Option 2"). State Farm
guarantees that the death benefit will never be less than the Basic Amount (less
any unrepaid Policy loans and past due charges) so long as the Policy is in
force. For Policies issued in New York, if the Insured is alive on the Maturity
Date, the Cash Surrender Value on the Maturity Date will be paid to the Owner
and the Policy will terminate.

The Policy provides for a Cash Surrender Value. Because this value is based on
the performance of the Funds, to the extent of allocations to the Variable
Account, there is no guaranteed Cash Surrender Value or guaranteed minimum Cash
Surrender Value. On any given day, the Cash Surrender Value could be more or
less than the premiums paid. If the Cash Surrender Value is insufficient to
cover the charges due under the Policy, the Policy will lapse without value.
However, the Policy will not lapse during the Death Benefit Guarantee Period,
regardless of the sufficiency of the Cash Surrender Value, so long as the
minimum premiums for the Death Benefit Guarantee have been paid. The Policy also
provides for Policy loans and permits withdrawals within limits. In addition,
Owners can elect dollar-cost averaging or portfolio rebalancing programs.

This prospectus should be read carefully and retained for future reference. A
prospectus or prospectus profile for State Farm Variable Product Trust must
accompany this prospectus and should be read in conjunction with this
prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE POLICIES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THE POLICIES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY AND DIAGRAM OF THE POLICY 2
INDEX OF TERMS 5
PREMIUMS 6
Applying for a Policy 6
Exchanges from State Farm Universal Life and State Farm
Traditional Ordinary Whole Life 6
Free Look Right to Cancel Policy 6
Premiums 6
Planned Premiums 7
Premiums to Prevent Lapse 7
Death Benefit Guarantee 7
Crediting Premiums to the Policy 7
ALLOCATION OPTIONS 7
Net Premium Allocations 7
Subaccount Options 8
Fixed Account Option 8
Transfers 8
Dollar-Cost Averaging 9
Portfolio Rebalancing Program 9
CHARGES AND DEDUCTIONS 10
HOW YOUR POLICY ACCOUNT VALUES VARY 11
Policy Account Value 11
Cash Value 11
Cash Surrender Value 11
Subaccount Policy Value 11
Fixed Policy Account Value 12
DEATH BENEFITS 13
Amount of Death Benefit Payable 13
Death Benefit Options 13
Changing the Death Benefit Option 13
Changing the Basic Amount 13
Effect of Withdrawals on the Death Benefit 14
Changing the Beneficiary 14
LOAN BENEFITS 14
Loan Account 14
Interest 14
Loan Repayment 14
Effect of Policy Loan 14
SURRENDER BENEFITS 15
Full Surrender 15
Withdrawals 15
HYPOTHETICAL ILLUSTRATIONS OF
ACCUMULATED PREMIUMS, POLICY ACCOUNT VALUES, CASH SURRENDER
VALUES AND DEATH BENEFITS 16
REQUESTING PAYMENTS AND
TELEPHONE TRANSACTIONS 25
Requesting Payments 25
Telephone Transactions 25
OTHER POLICY BENEFITS AND PROVISIONS 25
Exchange Provision 25
Other Policy Provisions 26
Beneficiary 26
Reinstatement 26
Other Changes 26
Reports to Policy Owners 26
Assignment and Change of Owner 26
Supplemental Benefits 26
STATE FARM AND THE FIXED ACCOUNT 27
THE VARIABLE ACCOUNT AND THE TRUST 30
TAX CONSIDERATIONS 31
ADDITIONAL INFORMATION 32
APPENDIX A A-1
APPENDIX B B-1
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING
IN ANY JURISDICTION IN WHICH SUCH OFFERING
MAY NOT BE LAWFULLY MADE.

1 -------
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY

The following summary of prospectus information and diagram of the important
features of the Policy should be read in conjunction with the more detailed
information appearing elsewhere in this prospectus. Unless otherwise indicated,
the description of the Policy in this prospectus assumes that the Policy is in
force and there is no outstanding Loan Amount. Definitions of certain terms used
in this prospectus may be found by referring to the Index of Terms immediately
following the diagram.

Purpose of the Policy. The Policy is designed to provide insurance benefits with
a long-term investment element. The Policy should be considered in conjunction
with other insurance owned by the Owner. It may not be advantageous to replace
existing insurance with the Policy.

Comparison with Universal Life Insurance. The Policy is similar in many ways to
universal life insurance. As with universal life insurance: the Owner pays
premiums for insurance coverage on the Insured; the Policy provides for the
accumulation of a Cash Surrender Value that is payable if the Policy is
surrendered during the Insured's lifetime; and the Cash Surrender Value may be
substantially lower than the premiums paid. However, the Policy differs
significantly from universal life insurance in that the Policy Account Value may
decrease if the investment performance of the Subaccounts to which Policy
Account Value is allocated is sufficiently adverse. If the Cash Surrender Value
becomes insufficient to cover charges when due and the Death Benefit Guarantee
is not in effect, the Policy will lapse without value after a grace period. See
"Premiums to Prevent Lapse," page 7.

Tax Considerations. State Farm intends for the Policy to satisfy the definition
of a life insurance contract under section 7702 of the Internal Revenue Code of
1986, as amended (the "Code"). Under certain circumstances, a Policy could be
treated as a "modified endowment contract." State Farm will monitor Policies and
will attempt to notify an Owner on a timely basis if his or her Policy is in
jeopardy of becoming a modified endowment contract. For further discussion of
the tax status of a Policy and the tax consequences of being treated as a life
insurance contract or a modified endowment contract, see "Tax Considerations,"
page 31.

Free Look Right to Cancel Policy. For a limited time after the Policy is issued,
you have the right to cancel your Policy and receive a full refund of all
premiums paid. See "Free Look Right to Cancel Policy," page 6. During this
limited period, Net Premiums paid will be allocated to the Fixed Account. See
"Net Premium Allocations," page 7.

Owner Inquiries. If you have any questions, you may write or call our Home
Office at P.O. Box 2307, Bloomington, IL 61702-2307, (888) 702-2307.

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2
<PAGE>
DIAGRAM OF POLICY

PREMIUMS

- - You select a payment plan but are not required to pay premiums according to
the plan. You can vary the frequency and amount, within limits, and can skip
planned premiums. See "Planned Premiums," page 7.

- - Minimum initial premium and planned premium depend on the Insured's Age, sex,
rate class, Basic Amount selected, and any supplemental riders. See
"Premiums," page 6.

- - Unplanned premiums may be made, within limits. See "Premiums," page 6.

- - Under certain circumstances, extra premiums may be required to prevent lapse.
See "Premiums to Prevent Lapse," page 7.

ALLOCATION OF NET PREMIUMS

- - A 5% premium charge is deducted from each premium before allocation resulting
in a net premium.

- - You direct the allocation of Net Premiums among six Subaccounts and the Fixed
Account. See "Net Premium Allocations," page 7, for rules and limits.

- - Interest is credited on amounts allocated to the Fixed Account at a rate
determined by State Farm, but not less than an annual effective rate of 4%.
See "Transfers," page 8, for rules and limits on Fixed Account allocations.

FUNDS AVAILABLE THROUGH SUBACCOUNTS

- - The Subaccounts invest in corresponding portfolios of State Farm Variable
Product Trust. See "The Trust," page 30.

- - The current Funds available and their investment advisory fees and other
expenses are as follows:

<TABLE>
<CAPTION>
LARGE CAP SMALL CAP INTERNATIONAL STOCK AND MONEY
EQUITY INDEX EQUITY INDEX EQUITY INDEX BOND BALANCED BOND MARKET

<S> <C> <C> <C> <C> <C> <C>
Advisory Fees(1) .26% .40% .55% .36% .50% .40%

Other Expenses (after expense
limitation)(2) .10% .10% .20% .10% .10% .10%
--- --- --- --- ---- ------

Total Annual Expenses (after expense
limitation) .36% .50% .75% .46% .60% .50%
--- --- --- --- ---- ------
--- --- --- --- ---- ------
</TABLE>

(1) For each of the Funds other than the Stock and Bond Balanced Fund, the
investment advisory fees shown above are the actual amounts expected to be
incurred in the current fiscal year for such Funds. The Stock and Bond
Balanced Fund, which invests in the Large Cap Equity Index Fund and the Bond
Fund, will not pay investment advisory fees directly, but will indirectly
bear its share of the investment advisory fees incurred by the Large Cap
Equity Index Fund and the Bond Fund. Therefore, the investment results of the
Stock and Bond Balanced Fund will be net of these fees. The relative amounts
that the Stock and Bond Balanced Fund invests in the Large Cap Equity Index
Fund and the Bond Fund at any one time will fluctuate, but under normal
circumstances, the Stock and Bond Balanced Fund will attempt to maintain
approximately 60% of its net assets in shares of the Large Cap Equity Index
Fund and approximately 40% of its net assets in the Bond Fund. Based on these
percentages, an approximate investment advisory fee can be derived for the
Stock and Bond Balanced Fund. This derived fee is used for the purpose of
showing the Stock and Bond Balanced Fund's annual expenses in the table
above.

(2) For each of the Funds other than the Stock and Bond Balanced Fund, "other
expenses" are based on estimated amounts for the current fiscal year. The
amounts shown for such Funds' "other expenses" reflect the fact that the
investment adviser to the Funds has agreed to bear the expenses incurred by
each Fund (other than the International Equity Index Fund), other than the
investment advisory fee, that exceed 0.10% of such Fund's average daily net
assets. The investment adviser to the Funds has agreed to bear the expenses
incurred by the International Equity Index Fund, other than the investment
advisory fee, that exceed 0.20% of that Fund's average daily net assets. By
investing in the Large Cap Equity Index Fund and the Bond Fund, the Stock and
Bond Balanced Fund will indirectly bear its share of those underlying Funds'
"other expenses" and will incur its own "other expenses." The amount shown
for the Stock and Bond Balanced Fund's "other expenses" reflects the fact
that the investment adviser to the Funds has agreed to bear the expenses
incurred by each underlying Fund, other than the investment advisory fee,
that exceed 0.10% of each such Fund's average daily net assets, and that the
investment adviser to the Funds has agreed to bear all of the Stock and Bond
Balanced Fund's own "other expenses." These expense limitation arrangements
are voluntary and can be eliminated by the investment adviser at any time.
Absent these expense limitations, estimated "other expenses" for the Large
Cap Equity Index Fund, Small Cap Equity Index Fund, International Equity
Index Fund, Stock and Bond Balanced Fund, Bond Fund, and Money Market Fund
would have been 0.11%, 0.13%, 0.28%, 0.43%, 0.25%, and 0.35%, respectively.

3 -------
<PAGE>
DEDUCTIONS FROM ASSETS

- - A monthly deduction is made for cost of insurance, $6 current monthly expense
charge (maximum of $8 per month), and supplemental benefit charges. See
"Charges and Deductions -- Monthly Deduction," page 10.

- - A daily charge at a current annual rate of 0.80% (maximum annual rate of
0.90%) is deducted from assets in the Subaccounts. See "Charges and Deductions
-- Mortality and Expense Risk Charge," page 10. This charge is not deducted
from assets in the Fixed Account.

POLICY ACCOUNT VALUE

- - Policy Account Value is the amount in the Subaccounts and in the Fixed Account
credited to your Policy plus the value held in the general account to secure
the Loan Amount. See "Policy Account Value," page 11, "Fixed Policy Account
Value," page 12, and "Subaccount Policy Value," page 11.

- - Policy Account Value varies from day to day to reflect Subaccount investment
experience, interest credited on any Fixed Account allocations, charges
deducted and other Policy transactions (such as Policy loans, transfers and
withdrawals).

- - Policy Account Value can be transferred among the Subaccounts and the Fixed
Account. A $25 transfer processing fee may apply to transfers made after the
12th transfer in a Policy Year. See "Transfers" for rules and limits. Policy
loans reduce the amount available for allocations and transfers.

- - Policy Account Value serves as the starting point for calculating certain
values under a Policy, such as the Cash Surrender Value and the Death Benefit.

- - There is no minimum guaranteed Policy Account Value. The Policy may lapse on a
Deduction Date if the Cash Surrender Value is insufficient to cover the
Monthly Deduction then due and the Death Benefit Guarantee is not in effect.

CASH BENEFITS

- - Loans may be taken for amounts up to 90% of Cash Value, at a net interest rate
of 2%. See "Loan Benefits," page 14, and "Tax Treatment of Policy Benefits,"
page 31.

- - Withdrawals generally can be made up to 4 times each Policy Year provided
there is sufficient remaining Cash Surrender Value. A withdrawal processing
fee equal to the lesser of $25 or 2% of the amount requested for withdrawal
will apply to each withdrawal. See "Withdrawals," page 15, for rules and
limits.

- - The Policy can be surrendered at any time for its Cash Surrender Value (Policy
Account Value minus Loan Amount and minus any applicable surrender charge).
See "Full Surrender," page 15.

- - A surrender charge will be deducted from the Policy Account Value upon a full
surrender of the Policy during the first 10 Policy Years or the first 10 years
after an increase in Basic Amount. See "Surrender Charge," page 10.

- - A variety of payment options are available.

DEATH BENEFITS

- - Death Benefits are available as a lump sum or under a variety of payment
options.

- - The minimum Basic Amount available is $50,000.

- - Death Benefits are available in two death benefit options: Option 1 (greater
of Basic Amount plus any Net Premium payment received since the last Deduction
Date, or a specified percentage of Policy Account Value); or Option 2 (greater
of Basic Amount plus the Policy Account Value, or a specified percentage of
Policy Account Value). See "Death Benefits," page 13.

- - There is flexibility to change the Basic Amount and to change the Death
Benefit option. See "Changing the Basic Amount" and "Changing the Death
Benefit Option," page 13, for rules and limits.

- - The Death Benefit Guarantee keeps the Policy in force regardless of
sufficiency of Cash Surrender Value so long as cumulative premiums paid on the
Policy, less any withdrawals and less the Loan Policy Account Value, are at
least equal to the Minimum Premium. See "Death Benefit Guarantee," page 7.

- - The Death Benefit should be excludible from the gross income of the
Beneficiary. See "Tax Treatment of Policy Benefits," page 31.

- ---------
4
<PAGE>
INDEX OF TERMS

AGE -- Age means the age on the Insured's last birthday as of the Policy Date
and each Policy Anniversary. If the Policy Date falls on the birthday of the
Insured, the Age will be the age attained by the Insured on the Policy Date.

CASH VALUE -- Policy Account Value less any applicable surrender charge.

CASH SURRENDER VALUE -- Cash Value less any Loan Amount.

DEATH BENEFIT -- The amount of insurance provided under the Policy determined by
the Death Benefit Option and any insurance amounts provided by riders. The
amount payable on the death of the Insured will be reduced by any Loan Amount
and any unpaid Monthly Deductions.

DEDUCTION DATE -- The Policy Date and each monthly anniversary of the Policy
Date.

HOME OFFICE -- P.O. Box 2307, Bloomington, IL 61702-2307, 1-888-702-2307.

ISSUE DATE -- The date the Policy is issued.

LOAN ACCOUNT -- A part of our general account to which Policy Account Value in
the Variable Account and the Fixed Account is transferred to provide collateral
for any loan taken under the Policy.

LOAN POLICY ACCOUNT VALUE -- The value of the Loan Account for this Policy.

LOAN AMOUNT -- The sum of all outstanding Policy loans including both principal
plus accrued interest.

MATURITY DATE -- For policies issued in New York, the Policy Anniversary when
the Insured is Age 100.

MINIMUM PREMIUM -- For any Policy Month during the first 10 Policy Years the
cumulative minimum monthly premium required to keep the Death Benefit Guarantee
in effect.

POLICY -- The Policy contains the Basic Plan, any amendments, endorsements, and
riders, and a copy of the application. The Policy is the entire contract.

POLICY ANNIVERSARY -- The same day and month as the Policy Date each year that
the Policy remains in force.

POLICY DATE -- If the Policy is issued as applied for and we receive the premium
before the Issue Date, the Policy Date is the later of the application date or
the date we receive the premium. Otherwise, the Policy Date is the Issue Date.
Policy Months, Years and Anniversaries are measured from the Policy Date. The
Policy Date cannot be the 29th, 30th, or 31st day of any month.

POLICY ACCOUNT VALUE -- The combined value of your Policy in all of the
Subaccounts of the Variable Account, the Fixed Account, and the values held in
our general account to secure Policy loans.

POLICY YEAR -- Any period of twelve months starting with the Policy Date or a
Policy Anniversary.

VALUATION DAY -- Each day on which both the New York Stock Exchange and the Home
Office are open for business except for a day that a Subaccount's corresponding
Fund does not value its shares. The New York Stock Exchange is currently closed
on weekends and on the following holidays: New Year's Day; Reverend Dr. Martin
Luther King, Jr. Holiday; Presidents' Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day. During 1998,
the Home Office is closed on the above-listed holidays and on the Friday after
Thanksgiving and the day before Christmas Day.

VALUATION PERIOD -- The period that starts at the close of regular trading on
the New York Stock Exchange on any Valuation Day and ends at the close of
regular trading on the next succeeding Valuation Day.

5 -------
<PAGE>
PREMIUMS

Applying for a Policy. To purchase a Policy, you must complete an application
and submit it to an authorized State Farm agent. You also must pay an initial
premium of a sufficient amount. See "Premiums," below. Your initial premium can
be submitted with your application or at a later date. Coverage becomes
effective as of the date we receive the premium, but is limited to $300,000
(unless the Insured is under 15 days old in which case coverage will not exceed
$3,000) until the application is approved.

Generally, State Farm will issue a Policy covering an Insured up to age 80 (age
70 in New York) if evidence of insurability satisfies our underwriting rules and
an initial premium of sufficient amount has been received. This amount must be
at least equal to the minimum monthly premium if the mode of the Policy is
monthly, and 12 times the minimum monthly premium if the mode of the Policy is
annual. Evidence of insurability may include, among other things, a medical
examination of the Insured. We reserve the right not to accept an application
for any lawful reason.

Exchanges from State Farm Universal Life and State Farm Traditional Ordinary
Whole Life. State Farm will permit the owner of a State Farm Universal Life
policy or a State Farm Traditional Ordinary whole life policy to exchange such
policy for a Policy subject to the following conditions: (1) the initial Basic
Amount for the Policy must equal or exceed the Basic Amount less any policy loan
and accrued loan interest for the original policy; (2) State Farm will waive
evidence of insurability where the initial Basic Amount of the Policy is equal
to the Basic Amount less any policy loan and accrued loan interest for the
original policy, and where the death benefit options are the same for exchanges
from a Universal Life policy or where the death benefit option is Option 1 for
exchanges from a Traditional Ordinary whole life policy; and (3) the original
policy must be terminated. State Farm can change this program at any time.

On exchanges from a Universal Life policy to a Policy, State Farm will waive the
surrender charge on the Universal Life policy and will waive the 5% premium
charge on the Policy for the amount transferred from the Universal Life policy
to the Policy.

On exchanges from a Traditional Ordinary whole life policy to a Policy, State
Farm will waive the 5% premium charge on the Policy for the amount transferred
from the Traditional Ordinary whole life policy to the Policy.

Free Look Right to Cancel Policy. During your "free-look" period, you may cancel
your Policy and receive a refund of all premiums paid. The free look period
expires 10 days after you receive your Policy. Some states may require a longer
period. If you decide to cancel the Policy, you must return it by mail or other
delivery to State Farm or to an authorized State Farm agent. Immediately after
mailing or delivery, the Policy will be deemed void from the beginning.

Premiums. The premium amounts sufficient to fund a Policy depend on a number of
factors, such as the Age, sex and rate class of the proposed Insured, the
desired Basic Amount, and any supplemental benefits. We reserve the right to
require evidence of insurability prior to accepting any premium payment. After
the initial premium is paid, additional premiums may be paid in any amount (of
at least $25) and at any time. However, total premiums paid in a Policy Year may
not exceed guideline premium limitations for life insurance set forth in the
Code. We reserve the right to reject any premium that would result in the Policy
being disqualified as life insurance under the Code and will refund any rejected
premium. In addition, we will monitor Policies and will attempt to notify the
Owner on a timely basis if his or her Policy is in jeopardy of becoming a
modified endowment contract under the Code. See "Tax Considerations," page 31.

State Farm allows a credit on conversions of eligible State Farm term insurance
to the Policy. The amount of the credit is based on the premiums paid on the
term coverage during the 12 months prior to conversion. The amount of the credit
will be added to the premium, if any, submitted by the Owner converting the term
coverage, and will be treated as part of the initial premium for the Policy
(except for purposes of the free look provision). Therefore, the credit will be
included in the premiums for purposes of calculating and deducting the premium
charge. See "Charges and Deductions -- Premium Charge," page 10. If the Policy
is surrendered, the credit will not be recaptured by State Farm. The amount of
the credit will not be included for purposes of calculating agent compensation.
See "Additional Information -- Sale of the Policies," page 32.

- ---------
6
<PAGE>
Planned Premiums. When you apply for a Policy, you select a monthly or annual
premium payment plan. You may arrange for monthly premiums to be paid via
automatic deduction from your checking account. You are not required to pay
premiums in accordance with this premium plan; rather, you can pay more or less
than planned (subject to the $25 minimum) or skip a planned premium entirely.
You can change the amount of planned premiums and payment arrangements, or
switch between monthly and annual frequencies, whenever you want by providing
satisfactory written or telephone instructions to the Home Office (if we have
your telephone authorization on file), which will be effective upon our receipt
of the instructions. Depending on the Policy Account Value at the time of an
increase in the Basic Amount and the amount of the increase requested, a change
in the amount of planned premiums may be advisable. See "Changing the Basic
Amount," page 13.

Premiums to Prevent Lapse. Failure to pay planned premiums will not necessarily
cause a Policy to lapse. Rather, whether a Policy lapses depends on whether its
Cash Surrender Value is insufficient to cover the Monthly Deduction when due. If
the Cash Surrender Value on a Deduction Date is less than the Monthly Deduction
to be deducted on that date and the Death Benefit Guarantee is not in effect,
the Policy will be in default and a grace period will begin. See "Monthly
Deduction," page 10 and "Death Benefit Guarantee," below. This could happen if
the Cash Surrender Value has decreased due to insufficient investment experience
or because premiums paid have been insufficient to offset the Monthly Deduction.

You have until the end of the grace period to pay the required premium. If the
grace period ends prior to the end of the Death Benefit Guarantee (See "Death
Benefit Guarantee"), the required premium must be large enough to provide the
lesser of (1) the Minimum Premium required at the end of the grace period, or
(2) an amount large enough to provide an increase in the Cash Surrender Value
sufficient to cover the Monthly Deductions for the grace period and any increase
in the surrender charges through the end of the grace period. If the grace
period ends after the end of the Death Benefit Guarantee, the required premium
must be large enough to provide an increase in the Cash Surrender Value
sufficient to cover the Monthly Deductions for the grace period and any increase
in the surrender charges through the end of the grace period. State Farm will
send notice of the amount required to be paid during the grace period to your
last known address and to any assignee of record. The grace period will end 61
days after the notice is sent and your Policy will remain in effect during the
grace period. If the Insured should die during the grace period before the
required premium is paid, the Death Benefit will still be payable to the
Beneficiary, although the amount paid will reflect a reduction for the Monthly
Deduction(s) due on or before the date of the Insured's death. See "Amount of
Death Benefit Payable," page 13. If the required premium has not been paid
before the grace period ends, your Policy will lapse. It will have no value and
no benefits will be payable. But see "Other Policy Benefits and Provisions,"
page 25 for a discussion of your reinstatement rights.

A grace period also may begin if the Cash Surrender Value is insufficient to
cover charges due to the outstanding Loan Amount. See "Effect of Policy Loan,"
page 14.

Death Benefit Guarantee. During the first 10 Policy Years (first 5 Policy Years
in New York), so long as cumulative premiums paid, less withdrawals and the Loan
Policy Account Value, are at least equal to the Minimum Premium amount for your
Policy, the Policy will remain in force, regardless of the sufficiency of Cash
Surrender Value to cover Monthly Deductions.

Crediting Premiums to the Policy. Your initial premium will be credited to the
Policy on the Policy Date. Any additional premium received after the Policy Date
will be credited to the Policy as of the end of the Valuation Period during
which it is received at our Home Office. Premiums received on a non-Valuation
Day will be deemed received on the next succeeding Valuation Day.

ALLOCATION OPTIONS

Net Premium Allocations. When you apply for a Policy, you specify the percentage
of Net Premium to be allocated to each Subaccount and the Fixed Account. You can
change the allocation percentages at any time by sending satisfactory written or
telephone instructions to the Home Office (if we have your telephone
authorization on file). The change will apply to all premiums received with or
after we receive your instructions. Net Premium allocations must be in
percentages totaling 100%, and each allocation percentage must be a whole
number.

7 -------
<PAGE>
Until the free look period expires, all Net Premiums will be allocated to the
Fixed Account. At the end of this period, the Policy Account Value is
transferred to the Subaccounts and/or remains in the Fixed Account based on the
net premium allocation percentages in effect at the time of the transfer. See
"How Your Policy Account Values Vary," page 11. For this purpose, we assume your
free look period starts 10 days after we issue your Policy.

Subaccount Options. The Variable Account has six Subaccounts, each investing in
a specific Fund of the Trust. The Trust is a series-type fund registered with
the Securities and Exchange Commission ("SEC") as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"). The investment objective(s) of each of the Funds in which
Subaccounts invest are summarized below. There is no assurance that these
objectives will be met.

The Large Cap Equity Index Fund seeks to match the performance of the Standard &
Poor's-Registered Trademark- Composite Index of 500 Stocks(1). This Fund will
pursue its objective by investing primarily on a capitalization-weighted basis
in the securities comprising the index.

The Small Cap Equity Index Fund seeks to match the performance of the Russell
2000-Registered Trademark- Small Stock Index(2). This Fund will pursue its
objective by investing primarily in a representative sample of stocks found in
the index.

The International Equity Index Fund seeks to match the performance of the Morgan
Stanley Capital International Europe, Australia and Far East Free
(EAFE-Registered Trademark- Free) Index(3). This Fund will pursue its objective
by investing primarily in a representative sample of stocks found in the index.

The Bond Fund seeks to realize over a period of years the highest yield
consistent with prudent investment management through current income and capital
gains. This Fund will pursue its objective by investing primarily in high
quality debt securities.

The Stock and Bond Balanced Fund seeks long-term growth of capital, balanced
with current income. This Fund will pursue its objective by investing primarily
in the Trust's Large Cap Equity Index Fund and the Bond Fund.

The Money Market Fund seeks to maximize current income to the extent consistent
with the preservation of capital and maintenance of liquidity. This Fund will
pursue its objective by investing exclusively in high quality money market
instruments. AN INVESTMENT IN THE MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. This Fund will attempt to maintain a stable
net asset value of $1.00 per share, BUT THERE CAN BE NO ASSURANCE THAT THE FUND
WILL BE ABLE TO DO SO.

Further information about the Funds is contained in the accompanying prospectus
for the Trust, which you should read in conjunction with this prospectus. See
also "The Trust," page 30.

Fixed Account Option. The Fixed Account is part of our general account. It is
not a separate account. Amounts allocated to the Fixed Account are credited with
interest for the period of allocation at rates determined in our sole
discretion, but in no event will interest credited on these amounts be less than
an effective annual rate of 4%. The current interest rate is the guaranteed
interest rate plus any excess interest rate. The current interest rate is
determined periodically. You assume the risk that interest credited may not
exceed the guaranteed minimum rate of 4% per year. Except for surrender charges
allocated to and monthly deductions taken from the Fixed Account, once interest
is credited to the Fixed Account, that interest becomes part of the Fixed
Account and is nonforfeitable. See "State Farm's Fixed Account Option," page 30.
There are significant limits on your right to transfer Policy Account Value from
the Fixed Account. See "Transfers," below.

Transfers. You may transfer Policy Account Value from and among the Subaccounts
at any time after the end of the free look period. The minimum amount of Policy
Account Value that may be transferred from a Subaccount is $250, or, if less,
the Policy Account Value held in the Subaccount. Policy Account

- ------------------------------

(1) Standard & Poor's-Registered Trademark-, S&P-Registered Trademark-, S&P
500-Registered Trademark-, Standard & Poor's 500 and 500 are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by State Farm
and the Trust. Neither the State Farm Variable Universal Life Policy, the
Large Cap Equity Index Fund, nor the Stock and Bond Balanced Fund (the
"Product and the Funds") is sponsored, endorsed, sold or promoted by Standard
& Poor's, and Standard & Poor's makes no representation regarding the
advisability of investing in the Product and the Funds. (For more information
regarding the S&P 500 Index, see "Relationships with the Companies that
Maintain the Benchmark Indices" in this prospectus.)

(2) The Russell 2000-Registered Trademark- Index is a trademark/service mark of
the Frank Russell Company. Russell(-TM-) is a trademark of the Frank Russell
Company. The Small Cap Equity Index Fund (the "Fund") is not sponsored,
endorsed, sold or promoted by the Frank Russell Company, and the Frank
Russell Company makes no representation regarding the advisability of
investing in the Fund. (For more information regarding the Russell 2000
Index, see "Relationships with the Companies that Maintain the Benchmark
Indices" in this prospectus.)

(3) The Morgan Stanley Capital International Europe, Australia and Far East Free
(EAFE-Registered Trademark- Free) Index is the exclusive property of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"). Morgan Stanley Capital
International is a service mark of Morgan Stanley and has been licensed for
use by the Trust. The International Equity Index Fund (the "Fund") is not
sponsored, endorsed, sold or promoted by Morgan Stanley and Morgan Stanley
makes no representation regarding the advisability of investing in the Fund.
(For more information regarding the Morgan Stanley Capital International EAFE
Free Index, see "Relationships with the Companies that Maintain the Benchmark
Indices" in this prospectus.)

- ---------
8
<PAGE>
Value held in the Fixed Account may be transferred from the Fixed Account to a
Subaccount or Subaccounts only once each Policy Year and only during the 30-day
period following the end of each Policy Year. Unused transfers do not carry over
to the next year. The maximum transfer amount is the greater of 25% of the
Policy Account Value held in the Fixed Account on the date of the transfer or
$1,000, unless waived by us. The amount transferred must be at least $250, or,
if less, the Policy Account Value held in the Fixed Account.

Transfer requests may be made by satisfactory written or telephone request (if
we have your telephone authorization on file). A transfer will take effect at
the end of the Valuation Period during which the request is received at the Home
Office. State Farm may, however, defer transfers under the same conditions that
we may delay paying proceeds. See "Requesting Payments," page 25. There is no
limit on the number of transfers from and among the Subaccounts. However, State
Farm reserves the right to impose a $25 per transfer processing fee on each
transfer in a Policy Year in excess of 12. For purposes of assessing this fee,
each transfer request is considered one transfer, regardless of the number of
Subaccounts affected by the transfer. Any unused "free" transfers do not carry
over to the next year. State Farm reserves the right to modify, restrict,
suspend or eliminate the transfer privileges, including telephone transfer
privileges, at any time, for any reason.

Dollar-Cost Averaging. The dollar-cost averaging program permits you to
systematically transfer on a monthly, quarterly, semi-annual or annual basis a
set dollar amount from either the Subaccount investing in the Money Market Fund
(the "Money Market Subaccount") or the Subaccount investing in the Bond Fund
(the "Bond Subaccount") to any combination of Subaccounts and/or the Fixed
Account. If the Money Market Subaccount or the Bond Subaccount is the Subaccount
from which the transfer is made, it cannot also be used as one of the
Subaccounts in this combination. The dollar-cost averaging method of investment
is designed to reduce the risk of making purchases only when the price of units
is high, but you should carefully consider your financial ability to continue
the program over a long enough period of time to purchase units when their value
is low as well as when it is high. Dollar-cost averaging does not assure a
profit or protect against a loss.

You may elect to participate in the dollar-cost averaging program at any time by
sending us a written request. To use the dollar-cost averaging program, you must
transfer at least $100 from the Money Market Subaccount or Bond Subaccount, as
applicable. Once elected, dollar-cost averaging remains in effect from the date
we receive your request until the value of the Subaccount from which transfers
are being made is depleted, or until you cancel the program by written request
or by telephone if we have your telephone authorization on file. There is no
additional charge for dollar-cost averaging. A transfer under this program is
not considered a transfer for purposes of assessing a transfer processing fee.
We reserve the right to discontinue offering the dollar-cost averaging program
at any time and for any reason. Dollar-cost averaging is not available while you
are participating in the portfolio rebalancing program.

Portfolio Rebalancing Program. Once your money has been allocated among the
Subaccounts, the performance of each Subaccount may cause your allocation to
shift. You may instruct us to automatically rebalance (on a monthly, quarterly,
semi-annual or annual basis) the value of your Policy in the Subaccounts to
return to the percentages specified in your allocation instructions. You may
elect to participate in the portfolio rebalancing program at any time by sending
us a written request at the Home Office. Your percentage allocations must be in
whole percentages. Subsequent changes to your percentage allocations may be made
at any time by written or telephone instructions to the Home Office (if we have
your telephone authorization on file). Once elected, portfolio rebalancing
remains in effect from the date we receive your written request until you
instruct us to discontinue portfolio rebalancing. There is no additional charge
for using portfolio rebalancing, and a portfolio rebalancing transfer is not
considered a transfer for purposes of assessing a transfer processing fee. We
reserve the right to discontinue offering the portfolio rebalancing program at
any time and for any reason. Portfolio rebalancing does not guarantee a profit
or protect against loss. Amounts in the Fixed Account may not be used in
connection with the portfolio rebalancing program. Portfolio

9 -------
<PAGE>
rebalancing is not available while you are participating in the dollar-cost
averaging program.

CHARGES AND DEDUCTIONS

State Farm deducts the charges described below. Certain of the charges depend on
a number of variables, and are illustrated in the hypothetical illustrations
beginning on page 17. The charges are for the services and benefits provided,
costs and expenses incurred and risks assumed by State Farm under or in
connection with the Policies. Services and benefits provided by State Farm
include: the death, cash and loan benefits provided by the Policy; investment
options, including Net Premium allocations, dollar-cost averaging and portfolio
rebalancing programs; administration of various elective options under the
Policy; and the distribution of various reports to Owners. Costs and expenses
incurred by State Farm include those associated with underwriting applications,
increases in Basic Amount, and riders, various overhead and other expenses
associated with providing the services and benefits provided by the Policy,
sales and marketing expenses, and other costs of doing business, such as
federal, state and local premium and other taxes and fees. Risks assumed by
State Farm include the risks that Insureds may live for a shorter period of time
than estimated, therefore resulting in the payment of greater death benefits
than expected, and that the costs of providing the services and benefits under
the Policies will exceed the charges deducted.

- PREMIUM CHARGE. State Farm deducts a 5% charge from each premium before
allocating the resulting Net Premium to the Policy Account Value.

- MORTALITY AND EXPENSE RISK CHARGE. State Farm currently deducts a daily
charge from assets in the Subaccounts attributable to the Policies at an
annual rate of 0.80% of net assets. This charge is guaranteed not to
exceed an annual rate of 0.90% of net assets. This charge does not apply
to Fixed Account assets attributable to the Policies. This charge is
factored into the net investment factor (see page 11). State Farm may
profit from this charge.

- MONTHLY DEDUCTION. State Farm deducts the Monthly Deduction on each
Deduction Date from Policy Account Value in the Variable Account and the
Fixed Account on a pro rata basis. The Monthly Deduction for each Policy
consists of (1) the cost of insurance charge discussed below, (2) a
current monthly expense charge of $6 (it cannot exceed $8 per month), and
(3) any charges for additional benefits added by riders to the Policy (see
"Supplemental Benefits").

- SURRENDER CHARGE. If the Policy is surrendered during the first 10 Policy
Years or the first 10 years after an increase in Basic Amount, State Farm
will deduct a surrender charge based on the Basic Amount at issue, or
increase, as applicable. The surrender charge will be deducted before any
surrender proceeds are paid. The surrender charge depends on the Insured's
Age at issue, or on the Policy Anniversary preceding an increase. It is
calculated based on an amount per $1,000 of the Basic Amount at issue (or
increase). During the 10-year period a surrender charge is in effect, it
increases monthly in the first two years, remains level for the next four
years, then decreases by 1/5 each year for the next five years to zero.
See Appendix A for sample surrender charges. The surrender charge for your
Policy will be stated in your Policy.

- OTHER CHARGES. State Farm reserves the right to impose a $25 transfer
processing fee on each transfer in a Policy Year in excess of 12. See
"Transfers," page 8, for a discussion of the transfer processing fee. On
each withdrawal, State Farm will assess a withdrawal processing fee equal
to the lesser of $25 or 2% of the amount withdrawn. See "Withdrawals,"
page 15, for a discussion of the withdrawal processing fee. There are Fund
expenses that range on an annual basis from 0.36% to 0.75% of the average
daily value of your money invested in the Funds. See "Diagram of Policy,"
page 3, and the prospectus for the Trust for a description of the
investment advisory fees and other expenses incurred by the Funds.

Comment on Cost of Insurance. The cost of insurance is a significant charge
under your Policy because it is the primary charge for the death benefit
provided by your Policy. The cost of insurance charge depends on a number of
variables that cause the charge to vary from Policy to Policy and from Deduction
Date to Deduction Date. It is calculated for the Basic Amount at issue and for
any increase in the Basic Amount. The cost of insurance charge is equal to the
Company's current monthly cost of insurance rate for the Insured multiplied by
the net amount at risk under the Policy for the Basic Amount at issue or as
increased. The net amount at risk is equal to the difference between (1) the
amount of insurance attributable to the Basic Amount at issue or as increased,
as applicable, on the Deduction Date at the start of the month divided by
1.0032737, and (2) the Policy Account Value attributable to the Basic Amount at
issue or as increased, as applicable, on the Deduction Date at the start of the
month after the deduction of the part of the Monthly Deduction that does not
include the cost

- ---------
10
<PAGE>
of insurance and the monthly charge for any Waiver of Monthly Deduction rider.
Your Policy describes more specifically how this amount is calculated.

The cost of insurance rate for the Insured is based on his or her Age, sex and
applicable rate class. We currently place Insureds in the following rate classes
when we issue the Policy, based on our underwriting: a male or female or unisex
rate class where appropriate under applicable law (currently including the state
of Montana); and a tobacco or non-tobacco rate class. Juveniles are placed in a
male or female or unisex rate class. The original rate class applies to the
initial Basic Amount. If an increase in Basic Amount is approved, a different
rate class may apply to the increase, based on the Insured's circumstances at
the time of the increase. We guarantee that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the maximum cost
of insurance rates set forth in the Policy. The maximum cost of insurance rates
are based on the Insured's age last birthday at the start of the Policy Year,
sex, and, for issue ages 20 and over, tobacco use. If the Insured is age 20 and
over on the Policy Date or the effective date of any increase in Basic Amount,
the Commissioners 1980 Standard Ordinary Non-Smoker Table applies if the Insured
is classified as non-tobacco; otherwise, the Commissioners 1980 Standard
Ordinary Smoker Mortality Table applies. If the Insured is under age 20 on the
Policy Date or the effective date of any increase in Basic Amount, the
Commissioners 1980 Standard Ordinary Mortality Table applies. Modifications are
made for rate classes other than standard. See "Hypothetical Illustrations of
Accumulated Premiums, Policy Account Values, Cash Surrender Values, and Death
Benefits" page 16 for examples showing the effects of the cost of insurance
charge.

HOW YOUR POLICY ACCOUNT VALUES VARY

Policy Account Value. The Policy Account Value serves as a starting point for
calculating certain values under a Policy. It is the aggregate of the value of
your Policy in all of the Subaccounts of the Variable Account, the Fixed
Account, and values held in our general account to secure Policy loans. See
"Loan Benefits," page 14. The Policy Account Value is determined first on the
Policy Date and thereafter on each Valuation Day. The Policy Account Value will
vary to reflect the performance of the Subaccounts to which amounts have been
allocated, interest credited on amounts allocated to the Fixed Account and Loan
Account, charges, transfers, withdrawals, Policy loans, Policy loan interest,
and Policy loan repayments. It may be more or less than premiums paid.

Cash Value. The Cash Value on a Valuation Day is the Policy Account Value
reduced by any surrender charge that would be deducted if the Policy were
surrendered that day.

Cash Surrender Value. The Cash Surrender Value on a Valuation Day is the Cash
Value reduced by any Loan Amount. For Policies issued in New York, if the
Insured is alive on the Maturity Date, we will pay the Cash Surrender Value to
the Owner and the Policy will terminate.

Subaccount Policy Value. On any Valuation Day, for each Subaccount the
Subaccount Policy Value is equal to the number of Subaccount units credited to
the Policy multiplied by their unit value for that Valuation Day. When you
allocate an amount to a Subaccount, either by Net Premium allocation, transfer
of Policy Account Value or repayment of a Policy loan, your Policy is credited
with units in that Subaccount. The number of units is determined by dividing the
dollar amount allocated, transferred or repaid to the Subaccount by the
Subaccount's unit value for the Valuation Day when the allocation, transfer or
repayment is effected. The number of Subaccount units credited to a Policy will
decrease when the allocated portion of the Monthly Deduction is taken from the
Subaccount, a Policy loan is taken from the Subaccount, an amount is transferred
from the Subaccount, a withdrawal is taken from the Subaccount, or the Policy is
surrendered.

UNIT VALUES. A Subaccount's unit value varies to reflect the investment
experience of the underlying Fund, and may increase or decrease from one
Valuation Day to the next. The unit value for each Subaccount was
arbitrarily set at $10 when the Subaccount was established. For each
Valuation Period after the date of establishment, the unit value is
determined by multiplying the value of a unit for a Subaccount for the prior
Valuation Period by the net investment factor for the Subaccount for the
current valuation period.

NET INVESTMENT FACTOR. The net investment factor is an index used to
measure the investment performance of a

11-------
<PAGE>
Subaccount from one Valuation Period to the next. The net investment factor
for any Subaccount for any Valuation Period reflects the change in the net
asset value per share of the Fund held in the Subaccount from one Valuation
Period to the next, adjusted for the daily deduction of the mortality and
expense risk charge from assets in the Subaccount. If any "ex-dividend" date
occurs during the Valuation Period, the per share amount of any dividend or
capital gain distribution is taken into account. Also, if any taxes need to
be reserved, a per share charge or credit for any taxes reserved for, which
is determined by us to have resulted from the operations of the Subaccount,
is taken into account.

Fixed Policy Account Value. The Fixed Policy Account Value on any date on or
after the Issue Date is equal to: (1) the sum of the following amounts in the
Fixed Account: Net Premium allocations, Policy Account Value transfers, and
interest accruals (if the date is a Policy Anniversary it also includes any
dividend payments); minus (2) the sum of any Monthly Deductions attributed to
the Fixed Account, any withdrawals or transfers (including any transfer
processing fee or withdrawal processing fee) from the Fixed Account, and Policy
loans taken from the Fixed Account.

- ---------
12
<PAGE>
DEATH BENEFITS

As long as the Policy remains in force, we will pay the Death Benefit upon
receipt at our Home Office of due proof of the Insured's death. See "Requesting
Payments," page 25. The Death Benefit will be paid to the Beneficiary.

Amount of Death Benefit Payable. The amount of Death Benefit payable is the
amount of insurance determined under the Death Benefit Option in effect on the
date of the Insured's death, plus any supplemental Death Benefit provided by
riders, minus any Loan Amount on that date and, if the date of death occurred
during a grace period, minus the past due Monthly Deductions. Under certain
circumstances, the amount of the Death Benefit may be further adjusted. See
"Incontestability," "Limited Death Benefit" and "Misstatement of Age or Sex,"
page 26. If the Insured dies before a Policy is issued, the Death Benefit
payable is limited to $300,000, unless the insured is under 15 days old in which
case the Death Benefit payable will not exceed $3,000.

Death Benefit Options. The Policy Account Value on the date of death of the
Insured is used in determining the amount of insurance. Under Option 1, the
Death Benefit is the greater of (1) the Basic Amount plus any Net Premiums
received since the last Deduction Date, or (2) the applicable percentage amount
of the Policy Account Value based on the Insured's Age at the start of the
current Policy Year, as determined using the table of percentages prescribed by
federal income tax law. Under Option 2, the Death Benefit is the greater of (1)
the Basic Amount plus the Policy Account Value, or (2) the applicable percentage
amount of the Policy Account Value based on the Insured's Age at the start of
the current Policy Year, as determined using the table of percentages prescribed
by federal income tax law. The percentage is 250% to Age 40 and declines
thereafter as the Insured's Age increases. The table of percentages is shown
below. If the table of percentages currently in effect becomes inconsistent with
any federal income tax laws and/or regulations, we reserve the right to change
the table.

Under Option 1, the Death Benefit ordinarily will not change. Under Option 2,
the Death Benefit will vary directly with the investment performance of the
Policy Account Value. To see how and when investment performance may begin to
affect the Death Benefit, please see the hypothetical illustrations beginning on
page 16.

Changing the Death Benefit Option. You select the Death Benefit Option when you
apply for the Policy. You may change the Death Benefit Option on your Policy
subject to the following rules. Each change must be submitted by written request
received by our Home Office and no more than one change in the Death Benefit
Option may be made in any Policy Year. The effective date of the change will be
the date at the end of the Valuation Period during which we receive the request
for the change. We will send you revised Policy schedule pages reflecting the
new Death Benefit Option and the effective date of the change. If you request a
change from Option 1 to Option 2, the Basic Amount will be decreased by the
Policy Account Value on the effective date of the change. When a change from
Option 2 to Option 1 is made, the Basic Amount after the change will be
increased by the Policy Account Value on the effective date of the change. The
minimum monthly premium for the Death Benefit Guarantee will also change when a
Death Benefit Option change is made.

Changing the Basic Amount. You select the Basic Amount when you apply for the
Policy. You may change the Basic Amount, subject to the following conditions. No
change will be permitted that may result in your Policy being disqualified as a
life insurance contract under Section 7702 of the Code. Only one change
(increase or decrease) may be made during a Policy Year. To increase the Basic
Amount, contact an authorized State Farm agent. To decrease the Basic Amount,
submit a written

<TABLE>
<CAPTION>
TABLE OF PERCENTAGES OF POLICY ACCOUNT VALUE
- ------------------------------------------------------------------------------------
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C> <C> <C>
0 - 40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75 - 90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94 101%
52 171% 66 119% 95+ 100%
53 164% 67 118%
</TABLE>

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<PAGE>
request to our Home Office. Any increase in the Basic Amount must be at least
$25,000 and an application must be submitted, along with evidence of
insurability satisfactory to State Farm. There must be enough Cash Surrender
Value to make a Monthly Deduction that includes the cost of insurance for the
increase.

A change in planned premiums may be advisable based on the increase in Basic
Amount. See "Planned Premiums," page 7. Also, the minimum monthly premium for
the Death Benefit Guarantee will increase. The increase in Basic Amount, if
approved by us, will become effective on the date the increase is applied for
and the Policy Account Value will be adjusted to the extent necessary to reflect
a portion of the Monthly Deduction attributable to the increase as of the
effective date and any intervening Deduction Date based on the increase in Basic
Amount. The surrender charge will increase upon an increase in Basic Amount. No
increases will be allowed after the Policy Anniversary when the Insured is age
80 (age 70 in New York).

Any decrease in the Basic Amount must be at least $10,000, and the Basic Amount
after the decrease must be at least $50,000. A decrease in Basic Amount will
become effective on the date at the end of the Valuation Period during which we
receive a written request at our Home Office. Also, the minimum monthly premium
for the Death Benefit Guarantee will decrease. Any decrease will first be used
to reduce the most recent increase, then the next most recent increases, then
the initial Basic Amount. No surrender charge will be deducted upon a decrease
in Basic Amount. The surrender charge will not be reduced upon a decrease in
Basic Amount.

Effect of Withdrawals on the Death Benefit. A withdrawal will affect your Death
Benefit in the following respects. If Death Benefit Option 1 is in effect, the
Basic Amount will also be reduced by the withdrawal amount dollar-for-dollar. If
the Basic Amount reflects increases in the Initial Basic Amount, the withdrawal
will reduce first the most recent increase, and then the next most recent
increase, if any, in reverse order, and finally the Initial Basic Amount. If
Death Benefit Option 2 is in effect, the Basic Amount is unaffected by the
withdrawal.

Changing the Beneficiary. You designate the Beneficiary(ies) when you apply for
the Policy. You may change the designated Beneficiary by submitting a
satisfactory written request received by us. If the Insured dies and there is no
surviving Beneficiary, the Insured's estate will be the Beneficiary.

LOAN BENEFITS

You may borrow an amount(s) up to 90% of your Cash Value at any time but you
should consider the possible tax consequences of doing this. See "Requesting
Payments," page 25. Requests for Policy loans may be made in writing or by
telephone (if we have your telephone authorization on file). See "Requesting
Payments," page 25. Outstanding Policy loans, including accrued interest, reduce
the amount available for new loans.

Loan Account. The Policy Account Value is not affected when a loan is made.
However, an amount equal to the loan proceeds is transferred from the Policy
Account Value in the Variable Account and Fixed Account to the Loan Account, and
is held as "collateral" for the loan. If you do not direct an allocation for
this transfer when requesting the loan we will take it on a pro rata basis. When
a loan is repaid, an amount equal to the repayment is transferred from the Loan
Account to the Variable Account and Fixed Account and allocated as you direct
when submitting the repayment. If you provide no direction, the amount will be
allocated in accordance with your standing instructions for Net Premium
allocations.

Interest. We will charge interest daily on any outstanding Policy loan at an
effective annual rate of 8.0%. Interest is due and payable at the end of each
Policy Year while a Policy loan is outstanding. On each Policy Anniversary, any
unpaid amount of loan interest accrued since the last Policy Anniversary becomes
part of the outstanding loan. An amount equal to the unpaid amount of interest
is transferred to the Loan Account from each Subaccount and the Fixed Account on
a pro-rata basis according to the respective values in each Subaccount and the
Fixed Account. On each Deduction Date, the amount in the Loan Account will be
credited with interest at a minimum guaranteed annual effective rate of 6.0%. On
each Deduction Date, the interest so earned is transferred to the Subaccounts
and the Fixed Account in accordance with the instructions for Net Premium
allocations then in effect.

Loan Repayment. You may repay all or part of your Loan Amount at any time while
the Insured is living and the Policy is in force. Loan repayments must be sent
to our Home Office and will be credited at the end of the Valuation Period
during which they are received. A Policy loan repayment is not treated as a
premium payment and is not subject to the 5% premium charge.

Effect of Policy Loan. A Policy loan, whether or not repaid, will affect Policy
values over time because the investment results of the Subaccounts and current
interest rates credited on Policy Account Value in the Fixed Account will apply
only to the non-loaned portion of the Policy Account Value. The longer the loan
is outstanding, the greater the effect is likely to be. Depending on the
investment results of the Subaccounts or credited interest rates for the Fixed
Account while the Policy loan is outstanding, the effect could be favorable or
unfavorable. Policy loans, particularly if not repaid, could make it more likely
than otherwise for a Policy to terminate. See "Tax Considerations,"

- ---------
14
<PAGE>
page 31, for a discussion of adverse tax consequences if a Policy lapses with
Policy loans outstanding. If the Death Benefit becomes payable while a Policy
loan is outstanding, the Loan Amount will be deducted in calculating the Death
Benefit. If the Loan Amount exceeds the Cash Value on any Deduction Date and the
Death Benefit Guarantee is not in effect, the Policy will be in default. We will
send you, and any assignee of record, notice of the default. You will have a
61-day grace period to submit a sufficient payment to avoid lapse.

SURRENDER BENEFITS

Full Surrender. You may surrender your Policy at any time for its Cash Surrender
Value. See "Requesting Payments," page 25. A surrender charge may apply. See
"Surrender Charge," page 10. Your Policy will terminate and cease to be in force
if it is surrendered for a lump sum. It cannot later be reinstated.

Withdrawals. You may make withdrawals under your Policy. See "Requesting
Payments," page 25. Requests for withdrawals may be made in writing or by
telephone (if we have your telephone authorization on file). See "Requesting
Payments and Telephone Transactions," page 25. The minimum withdrawal amount is
$500. A withdrawal must be less than the Cash Surrender Value on the day the
request for withdrawal is effective. No more than four withdrawals may be made
during a Policy Year. A withdrawal processing fee equal to the lesser of $25 or
2% of the amount withdrawn will be assessed on a withdrawal. This charge will be
deducted from your Policy Account Value along with the amount requested to be
withdrawn. When you request a withdrawal, you can direct how the withdrawal will
be deducted from your Policy Account Value. If you provide no directions, the
withdrawal will be deducted from your Policy Account Value in the Subaccounts
and Fixed Account on a pro-rata basis.

15-------
<PAGE>
HYPOTHETICAL ILLUSTRATIONS OF ACCUMULATED PREMIUMS, POLICY ACCOUNT VALUES, CASH
SURRENDER VALUES, AND DEATH BENEFITS

The following illustrations show how certain values under a sample Policy change
with assumed investment performance over an extended period of time. In
particular, they illustrate how Policy Account Values, Cash Surrender Values and
Death Benefits under a Policy covering an Insured of a given Age on the Policy
Date would vary over time if planned premiums were paid annually at the
beginning of each Policy Year and the return on the assets in the Subaccounts
was a uniform gross annual rate of 0%, 6% or 12%, before deduction of any fees
and charges, including Fund fees and charges. The tables also show planned
premiums accumulated at 5% interest. The values under a Policy would be
different from those shown if the returns averaged 0%, 6% or 12% but fluctuated
over and under those averages throughout the years shown. The hypothetical
investment rates of return are illustrative only and should not be deemed a
representation of past or future investment rates of return. Actual rates of
return for a particular Policy may be more or less than the hypothetical
investment rates of return used in the illustrations.

The illustrations assume an average annual expense ratio of .53% of the average
daily net assets of the Funds available under the Policies, based on the
estimated expense ratios for the Fund expenses and fees for the first year of
operations, as shown in the table appearing above under "Summary and Diagram of
the Policy." For information on Fund expenses and fees, see the prospectus for
the Funds accompanying this prospectus. The current charge illustrations also
reflect the 0.80% mortality and expense risk charge to the Variable Account. The
maximum charge illustrations reflect the maximum 0.90% mortality and expense
risk charge to the Variable Account. After deduction of Fund expenses and fees
and the mortality and expense risk charge, the illustrated gross annual
investment rates of return of 0%, 6% and 12% would correspond to approximate net
annual rates of return for the Subaccounts of -1.32%, 4.60% and 10.52%,
respectively, for the current charge illustrations, and -1.42%, 4.49%, and
10.41% respectively, for the maximum charge illustrations.

The illustrations also reflect the Monthly Deduction for the hypothetical
Insured. Our current charges and the higher maximum charges we have the
contractual right to charge are reflected in separate illustrations on each of
the following pages. All the illustrations reflect the fact that no charges for
Federal or state income taxes are currently made against the Variable Account
and assume no Loan Amount or charges for supplemental benefits.

The illustrations are based on our sex distinct rates for non-tobacco users.
Upon request, we will furnish a comparable illustration based upon the proposed
Insured's individual circumstances. Such illustrations may assume different
hypothetical rates of return than those illustrated in the following tables.

- ---------
16
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 35 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $1,250 ANNUAL PREMIUM
DEATH BENEFIT OPTION 1
VALUES BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS (AND NET) GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED --------------------------------------------- ---------------------------------------------
END OF AT 5% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.32% NET) (4.60% NET) (10.52% NET) (-1.32%) (4.60% NET) (10.52% NET)
- --------- --------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,313 961 1,024 1,088 703 766 830
2 2,691 1,904 2,091 2,286 1,388 1,575 1,770
3 4,138 2,829 3,201 3,604 2,313 2,685 3,088
4 5,657 3,734 4,355 5,053 3,218 3,839 4,537
5 7,252 4,619 5,553 6,648 4,103 5,037 6,132
6 8,928 5,483 6,798 8,401 4,967 6,282 7,885
7 10,686 6,325 8,090 10,331 5,912 7,677 9,918
8 12,533 7,143 9,430 12,453 6,834 9,120 12,144
9 14,472 7,939 10,821 14,790 7,732 10,614 14,584
10 16,508 8,709 12,262 17,363 8,606 12,159 17,260
15 28,322 12,161 20,307 34,765 12,161 20,307 34,765
20 43,399 14,844 29,941 63,434 14,844 29,941 63,434
25 62,642 16,437 41,433 110,673 16,437 41,433 110,673
30 87,201 16,238 55,107 187,484 16,238 55,107 187,484

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 100,000 100,000 100,000
2 100,000 100,000 100,000
3 100,000 100,000 100,000
4 100,000 100,000 100,000
5 100,000 100,000 100,000
6 100,000 100,000 100,000
7 100,000 100,000 100,000
8 100,000 100,000 100,000
9 100,000 100,000 100,000
10 100,000 100,000 100,000
15 100,000 100,000 100,000
20 100,000 100,000 100,000
25 100,000 100,000 148,302
30 100,000 100,000 228,730
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

THE HYPOTHETICAL RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR
FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS
THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER AND THE ACTUAL EXPERIENCE OF THE
ACCOUNTS. THE POLICY ACCOUNT VALUE, CASH SURRENDER VALUE, AND DEATH BENEFIT FOR
A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN
AVERAGED 0.00%, 6.00%, AND 12.00% OVER A PERIOD OF YEARS, BUT ALSO FLUCTUATED
ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATIONS
CAN BE MADE BY STATE FARM OR ANY OF THE FUNDS THAT THESE HYPOTHETICAL RATES OF
RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
VALUES ILLUSTRATED ARE NET OF ANY APPLICABLE CHARGES, SUCH AS PREMIUM CHARGES,
MORTALITY AND EXPENSE RISK CHARGES, MONTHLY EXPENSE CHARGES, COST OF INSURANCE
CHARGES, AND CHARGES FOR FUND EXPENSES AND FEES.

17-------
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 35 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $1,250 ANNUAL PREMIUM
DEATH BENEFIT OPTION 1
VALUES BASED ON MAXIMUM CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS (AND NET) GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED --------------------------------------------- ---------------------------------------------
END OF AT 5% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.42% NET) (4.49% NET) (10.41% NET) (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- --------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,313 906 968 1,030 648 710 772
2 2,691 1,792 1,971 2,159 1,276 1,455 1,643
3 4,138 2,655 3,010 3,396 2,139 2,494 2,880
4 5,657 3,495 4,085 4,752 2,979 3,569 4,236
5 7,252 4,312 5,197 6,238 3,796 4,681 5,722
6 8,928 5,103 6,345 7,865 4,587 5,829 7,349
7 10,686 5,868 7,531 9,649 5,455 7,118 9,236
8 12,533 6,606 8,755 11,606 6,297 8,445 11,297
9 14,472 7,317 10,018 13,754 7,111 9,812 13,547
10 16,508 7,999 11,321 16,111 7,895 11,218 16,008
15 28,322 10,915 18,445 31,905 10,915 18,445 31,905
20 43,399 12,763 26,573 57,582 12,763 26,573 57,582
25 62,642 12,907 35,536 99,781 12,907 35,536 99,781
30 87,201 10,227 45,105 167,671 10,227 45,105 167,671

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 100,000 100,000 100,000
2 100,000 100,000 100,000
3 100,000 100,000 100,000
4 100,000 100,000 100,000
5 100,000 100,000 100,000
6 100,000 100,000 100,000
7 100,000 100,000 100,000
8 100,000 100,000 100,000
9 100,000 100,000 100,000
10 100,000 100,000 100,000
15 100,000 100,000 100,000
20 100,000 100,000 100,000
25 100,000 100,000 133,707
30 100,000 100,000 204,559
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

- ---------
18
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 35 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $1,250 ANNUAL PREMIUM
DEATH BENEFIT OPTION 2
VALUES BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS (AND NET) GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED --------------------------------------------- ---------------------------------------------
END OF AT 5% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.32% NET) (4.60% NET) (10.52% NET) (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- --------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,313 959 1,023 1,086 701 765 828
2 2,691 1,899 2,086 2,280 1,383 1,570 1,764
3 4,138 2,820 3,191 3,592 2,304 2,675 3,076
4 5,657 3,719 4,336 5,032 3,203 3,820 4,516
5 7,252 4,596 5,524 6,612 4,080 5,008 6,096
6 8,928 5,450 6,755 8,346 4,934 6,239 7,830
7 10,686 6,279 8,028 10,248 5,866 7,615 9,835
8 12,533 7,082 9,344 12,335 6,772 9,035 12,026
9 14,472 7,859 10,706 14,625 7,653 10,499 14,419
10 16,508 8,609 12,111 17,137 8,505 12,008 17,034
15 28,322 11,897 19,824 33,876 11,897 19,824 33,876
20 43,399 14,281 28,683 60,564 14,281 28,683 60,564
25 62,642 15,357 38,454 103,059 15,357 38,454 103,059
30 87,201 14,294 48,323 170,442 14,294 48,323 170,442

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 100,959 101,023 101,086
2 101,899 102,086 102,280
3 102,820 103,191 103,592
4 103,719 104,336 105,032
5 104,596 105,524 106,612
6 105,450 106,755 108,346
7 106,279 108,028 110,248
8 107,082 109,344 112,335
9 107,859 110,706 114,625
10 108,609 112,111 117,137
15 111,897 119,824 133,876
20 114,281 128,683 160,564
25 115,357 138,454 203,059
30 114,294 148,323 270,442
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

19-------
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 35 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $1,250 ANNUAL PREMIUM
DEATH BENEFIT OPTION 2
VALUES BASED ON MAXIMUM CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS (AND NET) GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED --------------------------------------------- ---------------------------------------------
END OF AT 5% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.42% NET) (4.49% NET) (10.41% NET) (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- --------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1,313 904 966 1,028 646 708 770
2 2,691 1,787 1,966 2,153 1,271 1,450 1,637
3 4,138 2,644 2,998 3,382 2,128 2,482 2,866
4 5,657 3,477 4,064 4,726 2,961 3,548 4,210
5 7,252 4,285 5,163 6,195 3,769 4,647 5,679
6 8,928 5,063 6,294 7,799 4,547 5,778 7,283
7 10,686 5,813 7,457 9,551 5,401 7,045 9,139
8 12,533 6,534 8,654 11,466 6,224 8,344 11,156
9 14,472 7,223 9,882 13,557 7,017 9,676 13,351
10 16,508 7,880 11,142 15,842 7,777 11,039 15,739
15 28,322 10,604 17,874 30,849 10,604 17,874 30,849
20 43,399 12,093 25,061 54,102 12,093 25,061 54,102
25 62,642 11,619 31,877 89,811 11,619 31,877 89,811
30 87,201 8,034 36,770 144,300 8,034 36,770 144,300

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 100,904 100,966 101,028
2 101,787 101,966 102,153
3 102,644 102,998 103,382
4 103,477 104,064 104,726
5 104,285 105,163 106,195
6 105,063 106,294 107,799
7 105,813 107,457 109,551
8 106,534 108,654 111,466
9 107,223 109,882 113,557
10 107,880 111,142 115,842
15 110,604 117,874 130,849
20 112,093 125,061 154,102
25 111,619 131,877 189,811
30 108,034 136,770 244,300
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

- ---------
20
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 50 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $2,500 ANNUAL PREMIUM
DEATH BENEFIT OPTION 1
VALUES BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
----------------------------------------- -----------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
GROSS (AND NET) GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
ACCUMULATED ----------------------------------------- -----------------------------------------
END OF AT 5% INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.32% NET) (4.60% NET) (10.52% NET) (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- -------------- ------------ ----------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,893 2,020 2,146 1,257 1,384 1,510
2 5,381 3,742 4,112 4,499 2,470 2,840 3,227
3 8,275 5,542 6,279 7,077 4,270 5,007 5,805
4 11,314 7,292 8,519 9,903 6,020 7,247 8,631
5 14,505 8,990 10,836 13,003 7,718 9,564 11,731
6 17,855 10,633 13,232 16,406 9,361 11,960 15,134
7 21,373 12,217 15,705 20,144 11,199 14,687 19,126
8 25,066 13,742 18,261 24,255 12,979 17,498 23,492
9 28,945 15,204 20,902 28,781 14,695 20,393 28,272
10 33,017 16,599 23,628 33,770 16,344 23,374 33,515
15 56,644 22,313 38,590 67,871 22,313 38,590 67,871
20 86,798 25,187 56,200 125,325 25,187 56,200 125,325
25 125,284 23,604 78,177 218,977 23,604 78,177 218,977
30 174,402 15,037 108,719 372,707 15,037 108,719 372,707

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- ------------ ----------- ------------
<S> <C> <C> <C>
1 100,000 100,000 100,000
2 100,000 100,000 100,000
3 100,000 100,000 100,000
4 100,000 100,000 100,000
5 100,000 100,000 100,000
6 100,000 100,000 100,000
7 100,000 100,000 100,000
8 100,000 100,000 100,000
9 100,000 100,000 100,000
10 100,000 100,000 100,000
15 100,000 100,000 100,000
20 100,000 100,000 145,377
25 100,000 100,000 234,306
30 100,000 114,155 391,342
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

21-------
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 50 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $2,500 ANNUAL PREMIUM
DEATH BENEFIT OPTION 1
VALUES BASED ON MAXIMUM CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS (AND NET) GROSS (AND NET)
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
AT 5% --------------------------------------------- ---------------------------------------------
END OF INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.42% NET) (4.49% NET) (10.41% NET) (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,748 1,869 1,992 1,112 1,233 1,356
2 5,381 3,435 3,786 4,154 2,163 2,514 2,882
3 8,275 5,056 5,749 6,502 3,784 4,477 5,230
4 11,314 6,606 7,753 9,050 5,334 6,481 7,778
5 14,505 8,082 9,797 11,817 6,810 8,525 10,545
6 17,855 9,479 11,879 14,825 8,207 10,607 13,553
7 21,373 10,792 13,998 18,101 9,775 12,980 17,083
8 25,066 12,021 16,155 21,675 11,258 15,392 20,912
9 28,945 13,159 18,348 25,582 12,650 17,839 25,073
10 33,017 14,198 20,574 29,858 13,943 20,319 29,604
15 56,644 17,532 32,025 58,633 17,532 32,025 58,633
20 86,798 16,338 43,595 107,663 16,338 43,595 107,663
25 125,284 6,620 54,641 187,779 6,620 54,641 187,779
30 174,402 0 64,183 317,834 0 64,183 317,834

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 100,000 100,000 100,000
2 100,000 100,000 100,000
3 100,000 100,000 100,000
4 100,000 100,000 100,000
5 100,000 100,000 100,000
6 100,000 100,000 100,000
7 100,000 100,000 100,000
8 100,000 100,000 100,000
9 100,000 100,000 100,000
10 100,000 100,000 100,000
15 100,000 100,000 100,000
20 100,000 100,000 124,889
25 100,000 100,000 200,923
30 0 100,000 333,726
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

- ---------
22
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 50 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $2,500 ANNUAL PREMIUM
DEATH BENEFIT OPTION 2
VALUES BASED ON CURRENT CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS (AND NET) GROSS (AND NET)
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
AT 5% --------------------------------------------- ---------------------------------------------
END OF INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.32% NET) (4.60% NET) (10.52% NET) (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- ------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,885 2,011 2,137 1,249 1,375 1,501
2 5,381 3,717 4,085 4,469 2,445 2,813 3,197
3 8,275 5,491 6,220 7,010 4,219 4,948 5,738
4 11,314 7,204 8,415 9,779 5,932 7,143 8,507
5 14,505 8,854 10,668 12,796 7,582 9,396 11,524
6 17,855 10,436 12,978 16,081 9,164 11,706 14,809
7 21,373 11,943 15,338 19,654 10,926 14,320 18,637
8 25,066 13,375 17,749 23,545 12,612 16,986 22,782
9 28,945 14,725 20,206 27,777 14,216 19,698 27,269
10 33,017 15,986 22,704 32,380 15,731 22,449 32,126
15 56,644 20,589 35,408 61,972 20,589 35,408 61,972
20 86,798 21,271 47,149 105,993 21,271 47,149 105,993
25 125,284 16,042 55,124 170,903 16,042 55,124 170,903
30 174,402 3,105 55,851 267,371 3,105 55,851 267,371

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.32% NET) (4.60% NET) (10.52% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 101,885 102,011 102,137
2 103,717 104,085 104,469
3 105,491 106,220 107,010
4 107,204 108,415 109,779
5 108,854 110,668 112,796
6 110,436 112,978 116,081
7 111,943 115,338 119,654
8 113,375 117,749 123,545
9 114,725 120,206 127,777
10 115,986 122,704 132,380
15 120,589 135,408 161,972
20 121,271 147,149 205,993
25 116,042 155,124 270,903
30 103,105 155,851 367,371
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

23-------
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
MALE ISSUE AGE 50 STANDARD NON-TOBACCO
$100,000 INITIAL DEATH BENEFIT $2,500 ANNUAL PREMIUM
DEATH BENEFIT OPTION 2
VALUES BASED ON MAXIMUM CHARGES
<TABLE>
<CAPTION>
POLICY ACCOUNT VALUE CASH SURRENDER VALUE
--------------------------------------------- ---------------------------------------------
ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
PREMIUMS GROSS (AND NET) GROSS (AND NET)
ACCUMULATED ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
AT 5% --------------------------------------------- ---------------------------------------------
END OF INTEREST 0% GROSS 6% GROSS 12% GROSS 0% GROSS 6% GROSS 12% GROSS
POL YR PER YEAR (-1.42% NET) (4.49% NET) (10.41% NET) (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- --------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,625 1,737 1,858 1,980 1,101 1,222 1,344
2 5,381 3,403 3,752 4,116 2,131 2,480 2,844
3 8,275 4,992 5,675 6,417 3,720 4,403 5,145
4 11,314 6,496 7,620 8,892 5,224 6,348 7,620
5 14,505 7,910 9,582 11,552 6,638 8,310 10,280
6 17,855 9,227 11,553 14,408 7,955 10,281 13,136
7 21,373 10,442 13,526 17,471 9,425 12,509 16,453
8 25,066 11,551 15,496 20,759 10,788 14,733 19,996
9 28,945 12,545 17,453 24,284 12,036 16,944 23,775
10 33,017 13,414 19,382 28,057 13,159 19,128 27,803
15 56,644 15,395 27,990 51,022 15,395 27,990 51,022
20 86,798 11,850 32,524 81,613 11,850 32,524 81,613
25 125,284 0 27,737 119,912 0 27,737 119,912
30 174,402 0 4,095 162,555 0 4,095 162,555

<CAPTION>
DEATH BENEFIT
-----------------------------------------

ASSUMING HYPOTHETICAL
GROSS (AND NET)
ANNUAL INVESTMENT RETURN OF
-----------------------------------------
END OF 0% GROSS 6% GROSS 12% GROSS
POL YR (-1.42% NET) (4.49% NET) (10.41% NET)
- --------- ------------- ----------- -------------
<S> <C> <C> <C>
1 101,737 101,858 101,980
2 103,403 103,752 104,116
3 104,992 105,675 106,417
4 106,496 107,620 108,892
5 107,910 109,582 111,552
6 109,227 111,553 114,408
7 110,442 113,526 117,471
8 111,551 115,496 120,759
9 112,545 117,453 124,284
10 113,414 119,382 128,057
15 115,395 127,990 151,022
20 111,850 132,524 181,613
25 0 127,737 219,912
30 0 104,095 262,555
</TABLE>

(1) Assumes annual premiums are paid at the beginning of each policy year.

(2) Assumes no policy loans or withdrawals are made.

(3) Zero values indicate termination of insurance coverage in the absence of
additional premium payments.

- ---------
24
<PAGE>
REQUESTING PAYMENTS AND
TELEPHONE TRANSACTIONS

Requesting Payments. Written requests for payment (except where telephone
requests are authorized by us) must be sent to our Home Office or given to an
authorized State Farm agent for forwarding to our Home Office. We will
ordinarily pay any Death Benefit, loan proceeds or surrender or withdrawal
proceeds in a lump sum within seven days after receipt at our Home Office of all
the documents required for such a payment or, for surrenders and withdrawals, on
a later date if you so request. Other than the Death Benefit, which is
determined as of the date of the Insured's death, the amount will be determined
as of the end of the Valuation Period during which our Home Office receives all
required documents or, for surrenders and withdrawals, on a later date if you so
request. The Death Benefit generally will be paid through the State Farm Benefit
Management Account-Registered Trademark-, an interest bearing checking account.
We will send the State Farm Benefit Management Account-Registered Trademark-
checkbook to you within seven days after we receive all required documents. A
Beneficiary will have immediate access to the proceeds by writing a check on the
State Farm Benefit Management Account-Registered Trademark-. Interest will be
paid on the amount in the State Farm Benefit Management
Account-Registered Trademark- from the date of the Insured's death to the date
the State Farm Benefit Management Account-Registered Trademark- is closed.
Amounts in the State Farm Benefit Management Account-Registered Trademark- are
not insured by the Federal Deposit Insurance Corporation or any other agency.

We may delay making a payment or processing a transfer request if: (1) the
disposal or valuation of the Variable Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by order permits postponement
of payment to protect State Farm's Policy Owners. We also may defer making
payments attributable to a check that has not cleared, and we may defer payment
of proceeds from the Fixed Account for a withdrawal, surrender or Policy loan
request for up to six months from the date we receive the request. However, we
will not defer payment of a withdrawal or Policy loan requested to pay a premium
due on a State Farm policy.

The Policy offers a wide variety of optional ways of receiving proceeds payable
under the Policy other than in a lump sum. An authorized State Farm agent can
explain these options upon request. None of these options vary with the
investment performance of a Variable Account because they are all forms of
fixed-benefit annuities.

Telephone Transactions. You may make certain requests under the Policy by
telephone provided we have your written authorization on file at the Home
Office. These include requests for transfers, withdrawals, Policy loans, changes
in premium allocation designations, dollar-cost averaging changes and changes in
the portfolio rebalancing program. Our Home Office will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
Such procedures may include, among others, requiring some form of personal
identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions. Your request for telephone transactions authorizes us to
record telephone calls. If reasonable procedures are not employed, we may be
liable for any losses due to unauthorized or fraudulent instructions. However,
if reasonable procedures are employed, we will not be liable for any losses due
to unauthorized or fraudulent instructions. We reserve the right to place
limits, including dollar limits, on telephone transactions.

OTHER POLICY BENEFITS AND PROVISIONS

Exchange Provision. You have the right to transfer all of your Policy Account
Value to the Fixed Account during the first two Policy Years (or the first two
years after an increase in Basic Amount), or within 60 days after the effective
date of a material change in the investment policy of the Variable Account. Such
transfers are not counted for purposes of determining whether a transfer
processing fee applies.

For Policies issued in New York, on any Policy Anniversary, you have the right
to request that we exchange the Policy for a fixed paid-up whole life insurance
policy. Such exchanges are not counted for purposes of determining whether a
transfer processing fee applies. If Death Benefit Option 2 is in effect, we will
change the death benefit option to Death Benefit Option 1. The effective date of
the whole life insurance policy will be the Policy Anniversary on or next
following the date we receive your request. We will transfer the entire
Subaccount Policy

25-------
<PAGE>
Value to the Fixed Account. The Basic Amount after the change will be determined
by applying the Cash Surrender Value on the Policy Anniversary as a single
premium at the Insured's age, sex, and rate class. We will use the mortality
table used to determine the maximum cost of insurance rates and the guaranteed
interest rate for the Fixed Account. Any riders will be terminated. No monthly
expense charge will be made. No further changes in Basic Amount, changes in
death benefit option, or withdrawals will be allowed. The Fixed Policy Account
Value will be reduced by the amount of any surrender charge and the Loan Amount.
No further surrender charge will be applied. The Basic Amount Minimum will not
apply.

Other Policy Provisions. The Policy contains provisions addressing the following
matters:

- DIVIDENDS. The Policy is participating. However, we do not anticipate that
any dividends will be paid on the Policy.

- INCONTESTABILITY. The Policy limits our right to contest the Policy as
issued or as increased, for reasons of material misstatements contained in
the application, after it has been in force during the Insured's lifetime
for a minimum period, generally for two years from the Issue Date of the
Policy or effective date of the increase.

- LIMITED DEATH BENEFIT. The Policy limits the Death Benefit if the Insured
dies by suicide generally within two years after the Issue Date of the
Policy or effective date of the increase.

- MISSTATEMENT OF AGE OR SEX. The Death Benefit will be adjusted if the
Insured's Age or sex has been misstated in the application.

Beneficiary. You may name the Beneficiary(ies) when you apply for the Policy.
The Beneficiary is entitled to the insurance benefits under the Policy. You may
change the Beneficiary or the order of payment during the Insured's lifetime by
providing a written request to the Home Office. Your change will be effective on
the date the request is signed or on any later date specified in the request,
but the change will not affect any action we have taken before we receive the
request. When the Insured dies, we will make payment in equal shares to the
primary Beneficiary(ies) living when payment is made. If no Beneficiary is
living when the Insured dies, we will make a one sum payment to you, if you are
alive when payment is made. Otherwise, we will make a one sum payment to the
estate of the last survivor of you and all Beneficiaries.

Reinstatement. If the Policy has not been surrendered, the Policy may be
reinstated within five years after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.

Other Changes. At any time we may make such changes in the Policy as are
necessary to assure compliance at all times with the definition of life
insurance prescribed by the Code; to make the Policy, our operations, or the
operation of the Variable Account conform with any law or regulation issued by
any government agency to which they are subject; or to reflect a change in the
operation of the Variable Account, if allowed by the Policy. Only an officer of
the Company has the right to change the Policy. No agent has the authority to
change the Policy or waive any of its terms. All endorsements, amendments, or
riders must be signed by an officer to be valid.

Reports to Policy Owners. State Farm maintains records and accounts of all
transactions involving the Policy, the Variable Account, the Fixed Account and
the Loan Account. Each year, or more often if required by law, you will be sent
a report showing information about your Policy for the period covered by the
report. You will also be sent an annual and a semi-annual report for each Fund
underlying a Subaccount to which you have allocated Policy Account Value, as
required by the 1940 Act. In addition, when you pay premiums (other than by pre-
authorized checking account deduction) or if you take out a Policy loan, make
transfers or make withdrawals, you will receive a written confirmation of these
transactions.

Assignment and Change of Owner. You may assign the Policy subject to its terms.
We will not be deemed to know of an assignment unless we receive a written copy
of it at our Home Office. We assume no responsibility for the validity or effect
of any assignment. In certain circumstances, an assignment may be a taxable
event. See "Tax Considerations", page 31. You may change the Owner of the Policy
by sending a written request to our Home Office while the Insured is alive and
the Policy is in force. The change will take effect the date you sign the
Written Request, but the change will not affect any action we have taken before
we receive the Written Request. A change of Owner does not change the
Beneficiary designation.

Supplemental Benefits. The following supplemental benefits are available and may
be added to your Policy by rider. Monthly charges for these benefits will be
deducted from your Policy Account Value as part of the Monthly Deduction (see
page 10).

GUARANTEED INSURABILITY OPTION RIDER. Allows you to increase the Basic
Amount on the specific option dates without evidence of insurability.

DISABILITY WAIVER OF MONTHLY DEDUCTION RIDER. Provides for the waiver of
the Monthly Deductions upon total disability of the Insured for as long as
the disability continues.

ADDITIONAL INSURED RIDER. Provides level term insurance coverage for the
spouse of the Insured to spouse's age 80.

ACCIDENTAL DEATH BENEFIT RIDER. Provides additional death benefit if
accidental death occurs prior to age 70.

CHILDREN'S TERM RIDER. Provides term life insurance on your eligible
children.

Additional rules and limits apply to these supplemental benefits. Please ask
your authorized State Farm agent for further information or contact our Home
Office.

- ---------
26
<PAGE>
STATE FARM AND THE FIXED ACCOUNT

State Farm Life and Accident Assurance Company. State Farm is an Illinois stock
life insurance company that is wholly-owned by State Farm Mutual Automobile
Insurance Company, an Illinois mutual insurance company. State Farm's home
office is located at One State Farm Plaza, Bloomington, Illinois 61710. State
Farm was incorporated in 1960 and has been continuously engaged in the life
insurance business since that year. State Farm is subject to regulation by the
Insurance Department of the State of Illinois as well as by the insurance
departments of all other states in which it does business. State Farm sells
insurance in New York and Wisconsin and is also licensed in Illinois and
Connecticut. State Farm submits annual statements on its operations and finances
to insurance officials in such states. The Policy described in this prospectus
has been filed with and, where required, approved by, insurance officials in
those states where it is sold.

State Farm Directors and Officers. State Farm is managed by a board of
directors. The following table sets forth the name and principal occupations
during the past five years of each of State Farm's directors. Each person's
address is One State Farm Plaza, Bloomington, Illinois 61710-0001.

BOARD OF DIRECTORS

<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH STATE FARM PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ----------------- ------------------------ ---------------------------------------------------------------------------
<S> <C> <C>

Edward B. Rust, Director; President Chairman of the Board, President and CEO -- State Farm Mutual Automobile
Jr. Insurance Company; President and CEO -- State Farm Fire and Casualty
Company; President and CEO -- State Farm General Insurance Company;
President -- State Farm County Mutual Insurance Company of Texas; Director
-- State Farm Lloyds, Inc.; Chairman of the Board, President and Treasurer
-- State Farm Companies Foundation; Director -- State Farm International
Services, Inc.; President and Director -- State Farm Life Insurance
Company, State Farm Annuity and Life Insurance Company, State Farm Life and
Accident Assurance Company, State Farm Investment Management Corp., State
Farm Growth Fund, Inc., State Farm Balanced Fund, Inc., State Farm Interim
Fund, Inc., and State Farm Municipal Bond Fund, Inc.; President, CEO and
Director -- State Farm VP Management Corp.; President, CEO and Trustee --
State Farm Variable Product Trust (1997-present)

Roger B. Tompkins Director; Executive Vice Director and Executive Vice President -- State Farm Life Insurance Company,
President State Farm Annuity and Life Insurance Company, and State Farm Life and
Accident Assurance Company (1997-present); Vice President -- California --
State Farm Mutual Automobile Insurance Company, State Farm Fire and
Casualty Company, State Farm General Insurance Company; Vice President and
Director (1997-present), -- State Farm VP Management Corp.

Charles R. Wright Director; Agency Vice Director (1995-present) and Agency Vice President (1992-present) -- State
President Farm Mutual Automobile Insurance Company; -- State Farm Fire and Casualty
Company, State Farm General Insurance Company, State Farm International
Services, Inc., State Farm Life Insurance Company, State Farm Annuity and
Life Insurance Company, and State Farm Life and Accident Assurance Company;
Vice President and Director (1997-present) -- State Farm VP Management
Corp.

Bruce Callis Director Director -- State Farm Annuity and Life Insurance Company (1986-present),
State Farm Life and Accident Assurance Company (1991-present), State Farm
General Insurance Company (1992-1998), State Farm Companies Foundation
(1992-present); Senior Vice President -- State Farm Mutual Automobile
Insurance Company (1995-present); Vice President -- State Farm Mutual
Automobile Insurance Company (1983-1995)
</TABLE>

27-------
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH STATE FARM PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ----------------- ------------------------ ---------------------------------------------------------------------------
<S> <C> <C>
Roger S. Joslin Director Director, Senior Vice President and Treasurer -- State Farm Mutual
Automobile Insurance Company; Director, Chairman of the Board and Treasurer
-- State Farm Fire and Casualty Company; Director, Vice President and
Treasurer -- State Farm General Insurance Company; Treasurer -- State Farm
County Mutual Insurance Company of Texas; Director, Vice President and
Treasurer -- State Farm Lloyds, Inc.; Assistant Treasurer -- State Farm
Companies Foundation; Director, Vice President and Treasurer -- State Farm
International Services, Inc., State Farm Investment Management Corp., State
Farm Growth Fund, Inc., State Farm Balanced Fund, Inc., State Farm Interim
Fund, Inc., and State Farm Municipal Bond Fund, Inc.; Director -- State
Farm Life Insurance Company, State Farm Annuity and Life Insurance Company,
and State Farm Life and Accident Assurance Company; Vice President,
Treasurer and Director (1997-present) -- State Farm VP Management Corp.;
Vice President, Treasurer and Trustee (1997-present) -- State Farm Variable
Product Trust

Roger J. Lehman Director Director -- State Farm General Insurance Company (1990-1997), State Farm
Fire and Casualty Company (1992-1995), State Farm Life and Accident
Assurance Company (1992-present); Vice President -- State Farm Mutual
Automobile Insurance Company, State Farm Fire and Casualty Company, and
State Farm General Insurance Company (1987-1994)

Kurt G. Moser Director; Vice President Vice President -- Investments -- State Farm Mutual Automobile Insurance
-- Investments Company; Director and Vice President -- Investments -- State Farm Fire and
Casualty Company, State Farm General Insurance Company, State Farm Life
Insurance Company, State Farm Annuity and Life Insurance Company, and State
Farm Life and Accident Assurance Company; Vice President -- Investments --
State Farm County Mutual Insurance Company of Texas, State Farm Lloyds,
Inc., and State Farm International Services, Inc.; Investment Officer --
State Farm Indemnity Company; Underwriter -- State Farm Lloyds; Director
and Senior Vice President -- State Farm Investment Management Corp.; Vice
President -- State Farm Growth Fund, Inc., State Farm Balanced Fund, Inc.,
State Farm Interim Fund, Inc., and State Farm Municipal Bond Fund, Inc.;
Director -- State Farm VP Management Corp.; Vice President -- State Farm
Variable Product Trust (1997-present)

Laura P. Sullivan Director; Vice President Vice President -- Counsel and Secretary of the Board -- State Farm Mutual
-- Counsel; and Automobile Insurance Company, State Farm Fire and Casualty Company;
Secretary Director -- Vice President -- Counsel and Secretary of the Board -- State
Farm General Insurance Company; Assistant Secretary -- Treasurer -- State
Farm County Mutual Insurance Company of Texas; Director and Assistant
Secretary -- State Farm Indemnity Company; Director, Vice President --
Secretary -- State Farm Companies Foundation; Assistant Secretary -- State
Farm International Services, Inc.; Vice President -- Counsel and Secretary
of the Board -- State Farm Life Insurance Company, State Farm Annuity and
Life Insurance Company, State Farm Life and Accident Insurance Company

Vincent J. Director Director, Vice Chairman of the Board, Executive Vice President and Chief
Trosino Operating Officer -- State Farm Mutual Automobile Insurance Company;
Director and Vice President -- State Farm Fire and Casualty Company, State
Farm General Insurance Company; Director -- State Farm Lloyds, Inc.;
Assistant Secretary -- State Farm Companies Foundation; Director -- State
Farm International Services, Inc., State Farm Life Insurance Company, State
Farm Annuity and Life Insurance Company, State Farm Life and Accident
Assurance Company, State Farm Investment Management Corp.
</TABLE>

- ---------
28
<PAGE>
The following table sets forth the names and principal occupations during the
past five years of the senior officers of State Farm (other than officers listed
above who are members of State Farm's Board of Directors). Each person's address
is One State Farm Plaza, Bloomington, Illinois 61710-0001.

SENIOR OFFICERS

<TABLE>
<CAPTION>
POSITION WITH STATE
NAME AND ADDRESS FARM PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
- ---------------------- ---------------------- -------------------------------------------------------------------------
<S> <C> <C>
James G. Fisher Vice President -- Vice President -- Operations (1995 - present) -- State Farm Life
Operations Insurance Company, State Farm Life and Accident Assurance Company;
Executive Assistant (1994 - 1995), and Agency Director (1988 - 1994) --
State Farm Insurance Companies

William A. Montgomery Senior Vice President Senior Vice President and General Counsel -- State Farm Mutual Automobile
and General Counsel Insurance Company, State Farm Fire and Casualty Company, State Farm
General Insurance Company, State Farm Life Insurance Company, State Farm
Annuity and Life Insurance Company, and State Farm Life and Accident
Assurance Company since 1997 (Vice President and General Counsel from
1993 - 1997); Law Firm Partner (through 1993) -- Schiff, Hardin & Waite

Danny L. Scott, M.D. Vice President and Vice President and Medical Director -- State Farm Life Insurance Company,
Medical Director State Farm Annuity and Life Insurance Company, and State Farm Life and
Accident Assurance Company

Darrell W. Beernink Vice President and Vice President and Actuary -- Health -- State Farm Mutual Automobile
Actuary Insurance Company; Director, Vice President and Actuary -- State Farm
Life Insurance Company; Vice President and Actuary -- State Farm Annuity
and Life Insurance Company, and State Farm Life and Accident Assurance
Company

Dale R. Egeberg Vice President and Vice President and Controller -- Life -- State Farm Life Insurance
Controller -- Life Company, State Farm Annuity and Life Insurance Company, and State Farm
Life and Accident Assurance Company (1997 - present); Controller -- State
Farm Life Insurance Company, State Farm Annuity and Life Insurance
Company, and State Farm Life and Accident Assurance Company (through
1997)

Terry L. Huff Vice President -- Vice President -- Advanced Products (1998 - present), Assistant Vice
Advanced Products President (1997-1998), and Actuary (prior to 1997) -- State Farm Life
Insurance Company, State Farm Annuity and Life Insurance Company, and
State Farm Life and Accident Assurance Company

Max E. McPeek Vice President -- Vice President--Compliance (1998 - present), Assistant Vice President--
Compliance Compliance (1997-1998), Assistant Vice President (prior to 1997) -- State
Farm Life Insurance Company, State Farm Annuity and Life Insurance
Company, and State Farm Life and Accident Assurance Company
</TABLE>

29-------
<PAGE>
A fidelity bond in the amount of $5 million covering State Farm's directors,
officers and employees has been issued by National Union Fire Insurance Company.

State Farm's Fixed Account Option. The Fixed Account is part of State Farm's
general account assets. State Farm's general account assets are used to support
our insurance and annuity obligations other than those funded by separate
accounts. Subject to applicable law, State Farm has sole discretion over the
investment of the assets of the Fixed Account.

Because of exemptive and exclusionary provisions, interests in the Fixed Account
have not been registered under the Securities Act of 1933 nor has the Fixed
Account been registered as an investment company under the 1940 Act.
Accordingly, neither the Fixed Account 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 disclosure in this prospectus relating
to the Fixed Account. The disclosure regarding the Fixed Account may, however,
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in a
prospectus.

THE VARIABLE ACCOUNT AND THE TRUST

The Variable Account. State Farm established the Variable Account as a separate
investment account under Illinois law on December 9, 1996. State Farm owns the
assets in the Variable Account and is obligated to pay all benefits under the
Policies. The Variable Account is used to support the Policies as well as for
other purposes permitted by law. The Variable Account is registered with the SEC
as a unit investment trust under the 1940 Act and qualifies as a "separate
account" within the meaning of the federal securities laws. Such registration
does not involve any supervision by the SEC of the management of the Variable
Account or State Farm. State Farm has established other separate investment
accounts, of which State Farm Life and Accident Assurance Company Variable
Annuity Separate Account is registered with the SEC under the 1940 Act.

The Variable Account is divided into Subaccounts, each of which currently
invests in shares of a specific Fund of State Farm Variable Product Trust. These
Subaccounts buy and redeem Fund shares at net asset value without any sales
charge. Any dividend from net investment income and distribution from realized
gains from security transactions of a Fund is reinvested at net asset value in
shares of the same Fund. Income, gains and losses, realized or unrealized, of a
Subaccount are credited to or charged against that Subaccount without regard to
any other income, gains or losses of State Farm. Assets equal to the reserves
and other contract liabilities with respect to each Subaccount are not
chargeable with liabilities arising out of any other business or account of
State Farm. If the assets exceed the required reserves and other liabilities,
State Farm may transfer the excess to its general account.

The Variable Account may include other Subaccounts that are not available under
the Policy and are not otherwise discussed in this prospectus. State Farm may
substitute another subaccount or insurance company separate account under the
Policy if, in State Farm's judgment, investment in a Subaccount should no longer
be possible or becomes inappropriate to the purposes of the Policies, or if
investment in another subaccount or insurance company separate account is in the
best interest of Owners. No substitution may take place without notice to Owners
and prior approval of the SEC and insurance regulatory authorities, to the
extent required by the 1940 Act and applicable law.

The Trust. State Farm Investment Management Corp. ("SFIM"), a wholly owned
subsidiary of State Farm Mutual Automobile Insurance Company, serves as
investment adviser to the Trust. SFIM has engaged Barclays Global Fund Advisors
as the investment sub-adviser to provide day-to-day portfolio management for the
Large Cap Equity Index Fund, the Small Cap Equity Index Fund, and the
International Equity Index Fund. For more information concerning the investment
adviser and investment sub-adviser, please see the accompanying prospectus for
the Trust.

Voting of Fund Shares. State Farm is the legal owner of shares held by the
Subaccounts and as such has the right to vote on all matters submitted to
shareholders of the Funds. However, as required by law, State Farm will vote
shares held in the Subaccounts at regular and special meetings of shareholders
of the Funds in accordance with instructions received from Owners with Policy
Account Value in the Subaccounts. To obtain voting instructions from Owners,
before a meeting of shareholders of the Funds State Farm will send Owners voting
instruction material, a voting instruction form and any other related material.
Shares held by a Subaccount for which no timely instructions are received will
be voted by State Farm in the same proportion as those shares for which voting
instructions are received. Should the applicable federal securities laws,
regulations or interpretations thereof change so as to permit State Farm to vote
shares of the Funds in its own right, State Farm may elect to do so. State Farm
may, if required by state insurance officials, disregard Owner voting
instructions if such instructions would require shares to be voted so as to
cause a change in sub-classification or investment objectives of one or more of
the Funds, or to approve or disapprove an investment advisory agreement. In
addition, State Farm may under certain circumstances disregard voting
instructions that would require changes in the investment policy or investment
adviser of one

- ---------
30
<PAGE>
or more of the Funds, provided that State Farm reasonably disapproves of such
changes in accordance with applicable federal regulations. If State Farm ever
disregards voting instructions, Owners will be advised of that action and of the
reasons for such action in the next report to Owners.

TAX CONSIDERATIONS

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 State
Farm's 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 (the
"IRS").

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 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. Nevertheless, State Farm
believes that a Policy issued on the basis of a standard risk class should
satisfy the applicable requirements. There is less guidance with respect to
Policies issued on a substandard basis (i.e., a premium class involving higher
than standard mortality risk), and it is not clear whether such a Policy would
satisfy the applicable requirements, particularly if the Owner pays the full
amount of premiums permitted under the Policy. If it is subsequently determined
that a Policy does not satisfy the applicable requirements, State Farm may take
appropriate steps to bring the Policy into compliance with such requirements and
reserves the right to restrict Policy transactions in order to do so.

In certain circumstances, owners of variable life insurance contracts have been
considered for Federal income tax purposes to be the owners of the assets of the
Variable Account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the contract
owners have been currently taxed on income and gains attributable to the
Variable Account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of an Owner to allocate
premium payments and Policy Account Values, have not been explicitly addressed
in published rulings. While State Farm believes that the Policies do not give
Owners investment control over Variable Account assets, State Farm reserves the
right to modify the Policies as necessary to prevent an Owner from being treated
as the owner of the Variable Account assets supporting the Policy.

In addition, the Code requires that the investments of the Variable Account be
"adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Variable Account, 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. State Farm believes that the Death Benefit under a Policy should be
excludible from the gross income of the Beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Owner or Beneficiary. A tax advisor should
be consulted on these consequences.

In recent years, 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 advisor.

Generally, the Owner will not be deemed to be in constructive receipt of the
Policy Account Value until there is a distribution. When distributions from a
Policy occur, or when loans are taken out from or secured by (e.g., by
assignment), 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 Policies as to premiums 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 premiums paid during the first seven
Policy Years. Certain changes in a Policy after it is issued could also cause it
to be classified as a Modified Endowment Contract. A current or prospective
Owner should consult with a competent advisor to determine whether a Policy
transaction will cause the Policy to be classified as a Modified Endowment
Contract. State Farm will monitor the Policies, however, and will attempt to
notify an Owner on a timely basis if it believes that such Owner's Policy is in
jeopardy of becoming a Modified Endowment Contract.

Distributions from Modified Endowment Contracts. Policies classified as Modified
Endowment Contracts are subject to the following tax rules:

31-------
<PAGE>
(1) All distributions, including distributions upon surrender and
withdrawals, will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the unloaned Policy Account Value
(Cash Surrender Value for surrenders) immediately before the distribution
plus prior distributions over the Owner's total investment in the Policy
at that time. "Total investment in the Policy" means the aggregate amount
of any premiums or other considerations paid for a Policy, plus any
previously taxed distributions, minus any credited dividends.

(2) Loans taken from or secured by (e.g., by assignment), such a Policy are
treated as distributions and taxed accordingly.

(3) A 10 percent additional income tax is imposed on the amount included in
income except where the distribution or loan is made when the Owner 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 Owner or the joint lives (or joint life expectancies)
of the Owner and the Owner's Beneficiary or designated Beneficiary.

Distributions from Policies that are not Modified Endowment
Contracts. Distributions from a Policy that is not a Modified Endowment Contract
are generally treated first as a recovery of an Owner's investment in the Policy
and only after the recovery of all investment in the Policy as taxable income.
However, certain 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 are
generally not treated as distributions.

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
tax.

Policy Loans. In general, interest on a loan from a Policy will not be
deductible. Before taking out a Policy loan, an Owner should consult a tax
advisor as to the tax consequences.

Multiple Policies. All Modified Endowment Contracts that are issued by State
Farm (or its affiliates) to the same Owner during any calendar year are treated
as one Modified Endowment Contract for purposes of determining the amount
includible in the Owner's income when a taxable distribution occurs.

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. For instance, the President's 1999
Budget Proposal recommended legislation that, if enacted, would adversely modify
the federal taxation of this Policy. It is possible that any legislative change
could be retroactive (that is, effective prior to the date of the change).
Consult a tax advisor with respect to legislative developments and their effect
on the Policy.

ADDITIONAL INFORMATION

Sale of the Policies. State Farm VP Management Corp., a subsidiary of State Farm
Mutual Automobile Insurance Company, acts as the principal underwriter of the
Policies. State Farm VP Management Corp. also acts as principal underwriter for
State Farm Life and Accident Assurance Company Variable Annuity Separate
Account, a separate account also established by State Farm, and may act as
principal underwriter for other separate accounts established by affiliates of
State Farm. State Farm VP Management Corp. is a corporation organized under the
laws of the state of Delaware in 1996, is registered as a broker-dealer under
the Securities Exchange Act of 1934, and is a member of the National Association
of Securities Dealers, Inc. (the "NASD"). The Policies may not be available in
all states. The Policies are sold by certain registered representatives of State
Farm VP Management Corp. who are also appointed and licensed as State Farm
insurance agents. Commissions are payable to the broker-dealer under two
alternative commission schedules, depending on which schedule is elected by the
registered representatives. Under the first schedule, commissions will not
exceed 40% of the premiums received up to the Primary Compensation Premium (as
defined in agreements between State Farm VP Management Corp. and its registered
representatives) and 3 1/2% of all other premiums received. Under the second
schedule, commissions will not exceed 30% of the premiums received up to the
first Primary Compensation Premium, 15% of the premiums received up to the next
two Primary Compensation Premiums, and 4% of all other premiums received. In
addition, State Farm may pay incentive bonuses or expense reimbursements.

Other Information. A registration statement under the Securities Act of 1933 has
been filed with the SEC relating to the offering described in this prospectus.
This prospectus does not include all the information set forth in the
registration statement. The omitted information may be obtained at the SEC's
principal office in Washington, D.C. by paying the SEC's prescribed fees. The
omitted information is also available at the SEC's Internet site
(http://www.sec.gov).

Preparing for Year 2000. Like all financial services providers, State Farm, in
administering the Policies, utilizes systems that may be affected by Year 2000
transition issues and relies on service providers that also may be affected.
State Farm has developed, and is in the process of implementing, a Year 2000

- ---------
32
<PAGE>
transition plan, and is confirming that its service providers are also so
engaged. The resources that are being devoted to this effort are substantial. We
are unable to predict the outcome of these efforts; however, as of the date of
this prospectus, it is not anticipated that Owners will experience negative
effects with respect to their Policies as a result of Year 2000 transition
implementation. Business application systems and external interfaces will be
tested, prioritized and remediated as necessary to provide continuous,
uninterrupted service. Our target date for completion is June, 1999 or earlier
for most activities, but there can be no assurance that State Farm will be
successful, or that interaction with other service providers will not impact
State Farm's services at that time.

Litigation. State Farm and its affiliates, like other life insurance companies,
are involved in lawsuits, including class action lawsuits. In some class action
and other lawsuits involving insurers, substantial damages have been sought
and/or material settlement payments have been made. Since the outcome of any
litigation cannot be predicted with certainty, State Farm believes that it is
possible that such litigation could have a material impact on State Farm,
although State Farm does not believe it would have any impact on the Variable
Account.

Legal Matters. The legal matters in connection with the Policy described in this
prospectus have been passed on by William A. Montgomery, the Senior Vice
President and General Counsel of State Farm. Sutherland, Asbill & Brennan LLP of
Washington, D.C. has provided advice on matters relating to the federal
securities laws.

Relationships with the Companies that Maintain the Benchmark Indices.

Standard & Poor's

Standard & Poor's-Registered Trademark-, S&P-Registered Trademark-, S&P
500-Registered Trademark-, Standard & Poor's 500 and 500 are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by State Farm and the
Trust. Neither the State Farm Variable Universal Life Policy, the Large Cap
Equity Index Fund, nor the Stock and Bond Balanced Fund (the "Product and the
Funds") is sponsored, endorsed, sold or promoted by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ("S&P").

S&P makes no representation or warranty, express or implied, to the owners of
the Product and the Funds or any member of the public regarding the advisability
of investing in securities generally or in the Product and Funds particularly or
the ability of the S&P 500 Index to track general stock market performance.
S&P's only relationship to State Farm and the Trust is the licensing of certain
trademarks and trade names of S&P and of the S&P 500 Index which is determined,
composed and calculated by S&P without regard to State Farm, the Trust, the
Product, or the Funds. S&P has no obligation to take the needs of State Farm,
the Trust or the owners of the Product or the Funds into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not responsible
for and has not participated in the determination of the prices and amount of
the Product or the Funds or the timing of the issuance or sale of the Product or
the Funds or in the determination or calculation of the equation by which the
Product or the Funds are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Product or the Funds.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY STATE FARM, THE TRUST, OWNERS OF THE PRODUCT AND
FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Frank Russell Company

1) The Russell 2000-Registered Trademark- Index is a trademark/service mark of
the Frank Russell Company. Russell-TM- is a trademark of the Frank Russell
Company. The Small Cap Equity Index Fund is not promoted, sponsored or
endorsed by, nor in any way affiliated with Frank Russell Company. Frank
Russell Company is not responsible for and has not reviewed the prospectus
for the Small Cap Equity Index Fund nor any associated literature or
publications and Frank Russell Company makes no representation or warranty,
express or implied, as to their accuracy, or completeness, or otherwise.

2) Frank Russell Company reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change its Index. Frank Russell Company
has no obligation to take the needs of any particular fund or its
participants or any other product or person into consideration in
determining, composing or calculating the Index.

3) Frank Russell Company's publication of the Index in no way suggests or
implies an opinion by Frank Russell Company as to the attractiveness or
appropriateness of investment in

33-------
<PAGE>
any or all securities upon which the Index is based. FRANK RUSSELL COMPANY
MAKES NO REPRESENTATION, WARRANTY, OR GUARANTEE AS TO THE ACCURACY,
COMPLETENESS, RELIABILITY, OR OTHERWISE OF THE INDEX OR ANY DATA INCLUDED IN
THE INDEX. FRANK RUSSELL COMPANY MAKES NO REPRESENTATION OR WARRANTY
REGARDING THE USE, OR THE RESULTS OF USE, OF THE INDEX OR ANY DATA INCLUDED
THEREIN, OR ANY SECURITY (OR COMBINATION THEREOF) COMPRISING THE INDEX. FRANK
RUSSELL COMPANY MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, AND EXPRESSLY
DISCLAIMS ANY WARRANTY, OF ANY KIND, INCLUDING, WITHOUT MEANS OF LIMITATION,
ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE INDEX OR ANY DATA OR ANY SECURITY (OR COMBINATION THEREOF)
INCLUDED THEREIN.

Morgan Stanley & Co. Incorporated

The Morgan Stanley Capital International Europe, Australia, and Far East Free
(EAFE-Registered Trademark- Free) Index is the exclusive property of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"). Morgan Stanley Capital
International is a service mark of Morgan Stanley and has been licensed for use
by the Trust.

The International Equity Index Fund (the "Fund") is not sponsored, endorsed,
sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or
warranty, express or implied, to the owners of this Fund or any member of the
public regarding the advisability of investing in funds generally or in this
Fund particularly or the ability of the Morgan Stanley Capital International
EAFE Free Index to track general stock market performance. Morgan Stanley is the
licensor of certain trademarks, service marks and trade names of Morgan Stanley
and of the Morgan Stanley Capital International EAFE Free Index which is
determined, composed and calculated by Morgan Stanley without regard to the
issuer of this Fund. Morgan Stanley has no obligation to take the needs of the
issuer of this Fund or the owners of this Fund into consideration in
determining, composing or calculating the Morgan Stanley Capital International
EAFE Free Index. Morgan Stanley is not responsible for and has not participated
in the determination of the timing of, prices at, or quantities of this Fund to
be issued or in the determination or calculation of the equation by which this
Fund is redeemable for cash. Morgan Stanley has no obligation or liability to
owners of this Fund in connection with the administration, marketing or trading
of this Fund. ALTHOUGH MORGAN STANLEY SHALL OBTAIN INFORMATION FOR INCLUSION IN
OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCES WHICH MORGAN STANLEY
CONSIDERS RELIABLE, NEITHER MORGAN STANLEY NOR ANY OTHER PARTY GUARANTEES THE
ACCURACY AND /OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN.
NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST, THE TRUST'S CUSTOMERS AND
COUNTERPARTIES, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE
OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
HEREUNDER OR FOR ANY OTHER USE. NEITHER MORGAN STANLEY NOR ANY OTHER PARTY MAKES
ANY EXPRESS OR IMPLIED WARRANTIES, AND MORGAN STANLEY HEREBY EXPRESSLY DISCLAIMS
ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL MORGAN STANLEY OR ANY OTHER PARTY HAVE ANY
LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY
OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF
SUCH DAMAGES.

Experts. The statutory basis statements of admitted assets, liabilities and
surplus of State Farm Life and Accident Assurance Company as of December 31,
1997 and 1996, and the related statutory basis statements of income and changes
in surplus, and cash flows for the years then ended, appearing in this
prospectus have been audited by Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP), independent accountants, with offices in Chicago,
Illinois, whose report thereon is set forth elsewhere herein, and are included
in reliance upon the authority of such firm as experts in accounting and
auditing. As stated in their report, these financial statements were prepared by
State Farm in conformity with the accounting practices prescribed or permitted
by the Insurance Department of the State of Illinois (statutory basis), which
practices differ from generally accepted accounting principles (GAAP). The
effect on the financial statements of the variances between the statutory basis
of accounting and GAAP, although not reasonably determinable, are presumed to be
material. Therefore, their report contains a qualified opinion on the financial
statements of State Farm in conformity with GAAP, but an unqualified opinion in
conformity with statutory basis accounting. Actuarial matters included in this
prospectus have been examined by Gerry Brogla, F.S.A., Actuary of State Farm,
whose opinion is filed as an exhibit to the registration statement.

Financial Statements. The audited statutory basis statements of admitted assets,
liabilities and surplus of State Farm Life and Accident Assurance Company as of
December 31, 1997 and 1996, and the related statutory basis statements of income
and changes in surplus, and cash flows for the years then ended, as well as the
Report of the Independent Accountants, appear in Appendix B. The unaudited
interim statutory basis statements of admitted assets, liabilities and surplus
of State Farm Life and Accident Assurance Company as of June 30, 1998, also
appear in Appendix B. The financial statements of State Farm should be
considered only as bearing on our ability to meet our obligations under the
Policies. THEY SHOULD NOT BE CONSIDERED AS BEARING ON THE INVESTMENT PERFORMANCE
OF THE ASSETS HELD IN THE VARIABLE ACCOUNT. No financial statements are
presented in this prospectus for the Variable Account because it had not yet
commenced operations, had no assets or liabilities, and had received no income
nor incurred any expenses as of the date of this prospectus.

- ---------
34
<PAGE>
APPENDIX A
EXAMPLE OF SURRENDER CHARGES

<TABLE>
<CAPTION>
POLICY ISSUED TO MALE AGE 35 POLICY ISSUED TO MALE AGE 50
------------------------------ ------------------------------

$50,000
INCREASE $50,000
IN BASIC INCREASE
AMOUNT, IN BASIC
BEGINNING POLICY AMOUNT,
- ------------------------ $100,000 BEGINNING OF $100,000 BEGINNING OF
POLICY POLICY INITIAL YEAR 16 (AGE INITIAL YEAR 16 (AGE
YEAR MONTH BASIC AMOUNT 50) BASIC AMOUNT 65)
- ----------- ----------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1 1 $ 21.50* $ 0.00 $ 53.00* $ 0.00
1 6 129.00 0.00 318.00 0.00
1 12 258.00 0.00 636.00 0.00
2 6 387.00 0.00 954.00 0.00
2 12 516.00 0.00 1,272.00 0.00
3 1 516.00 0.00 1,272.00 0.00
4 1 516.00 0.00 1,272.00 0.00
5 1 516.00 0.00 1,272.00 0.00
6 1 516.00 0.00 1,272.00 0.00
7 1 412.80 0.00 1,017.60 0.00
8 1 309.60 0.00 763.20 0.00
9 1 206.40 0.00 508.80 0.00
10 1 103.20 0.00 254.40 0.00
11 1 0.00 0.00 0.00 0.00
12 1 0.00 0.00 0.00 0.00
13 1 0.00 0.00 0.00 0.00
14 1 0.00 0.00 0.00 0.00
15 1 0.00 0.00 0.00 0.00
16 1 0.00 26.50* 0.00 40.42*
16 6 0.00 159.00 0.00 242.50
16 12 0.00 318.00 0.00 485.00
17 6 0.00 477.00 0.00 727.50
17 12 0.00 636.00 0.00 970.00
18 1 0.00 636.00 0.00 970.00
19 1 0.00 636.00 0.00 970.00
20 1 0.00 636.00 0.00 970.00
21 1 0.00 636.00 0.00 970.00
22 1 0.00 508.80 0.00 776.00
23 1 0.00 381.60 0.00 582.00
24 1 0.00 254.40 0.00 388.00
25 1 0.00 127.20 0.00 194.00
26 1 0.00 0.00 0.00 0.00
</TABLE>

- ------------------------------

* In this example, the Surrender Charge increases by approximately this amount
each month through the first 2 years after issue or increase. The Surrender
Charge then remains level through the end of the 6th year. Starting at the
beginning of the 7th year after issue or increase, the surrender charge
decreases by 1/5 at the beginning of each year, until it is zero in the 11th
year.

A-1-------
<PAGE>
APPENDIX B
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL
AUTOMOBILE INSURANCE COMPANY)
REPORT ON AUDITS OF FINANCIAL STATEMENTS -- STATUTORY BASIS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

B-1-------
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE(S)
<S> <C>
Report of Independent Accountants B-3

Financial Statements:
Statements of Admitted Assets, Liabilities, Capital and
Surplus -- Statutory Basis, December 31, 1997 and 1996 B-4
Statements of Operations -- Statutory Basis for the years
ended December 31, 1997 and 1996 B-5
Statements of Changes in Capital and Surplus -- Statutory
Basis for the years ended December 31, 1997 and 1996 B-6
Statements of Cash Flows -- Statutory Basis for the years
ended December 31, 1997 and 1996 B-7

Notes to Financial Statements -- Statutory Basis B-8 - B-13

Supplemental Schedule of Assets and Liabilities B-15 - B-17

Statements of Admitted Assets, Liabilities, Capital and
Surplus -- Statutory Basis (Unaudited) As of June 30, 1998 B-18
Statements of Operations -- Statutory Basis (Unaudited) for
the six months ended June 30, 1998 B-19
Statements of Changes in Capital and Surplus -- Statutory
Basis (Unaudited) for the six months ended June 30, 1998 B-20
Statements of Cash Flows -- Statutory Basis (Unaudited) for
the six months ended June 30, 1998 B-21

Note to Financial Statements B-22
</TABLE>

- ---------
B-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
State Farm Life and Accident Assurance Company
Bloomington, Illinois

We have audited the accompanying statutory statements of admitted assets,
liabilities, capital and surplus of State Farm Life and Accident Assurance
Company as of December 31, 1997 and 1996, and the related statutory statements
of operations, changes in capital and surplus, and cash flows, for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

As described more fully in Note 2, these financial statements were prepared by
the Company in conformity with accounting practices prescribed or permitted by
the Insurance Department of the State of Illinois (statutory-basis), which
practices differ from generally accepted accounting principles. When
statutory-basis financial statements are presented for purposes other than for
filing with a regulatory agency, generally accepted auditing standards require
that an auditor's report on them state whether they are presented fairly in
conformity with generally accepted accounting principles. The effects on the
financial statements of the variances between the statutory basis of accounting
and generally accepted accounting principles, although not reasonably
determinable, are presumed to be material.

In our opinion, because of the effects of the matter discussed in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of State Farm Life and Accident Assurance Company as of December 31, 1997 and
1996, or the results of its operations or its cash flows for the years then
ended.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the admitted assets, liabilities, capital and surplus of
State Farm Life and Accident Assurance Company as of December 31, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended,
on the basis of accounting described in Note 2.

Our audit was conducted for the purpose of expressing an opinion on the
statutory financial statements taken as a whole. The Supplemental Schedule of
Assets and Liabilities is presented to comply with the NAIC's Annual Statement
Instructions and is not a required part of the basic statutory financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic statutory financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
statutory financial statements taken as a whole.

/s/ Coopers & Lybrand L.L.P.

Chicago, Illinois
February 17, 1998

B-3-------
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
STATEMENTS OF ADMITTED ASSETS, LIABILITIES, CAPITAL AND SURPLUS -- STATUTORY
BASIS
DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
ADMITTED ASSETS
Bonds:
United States Government $ 255,888,160 $ 261,169,872
Other governmental units 53,772,072 41,081,626
Public utility 123,669,069 119,036,061
Industrial and other 229,795,080 200,352,271
--------------- ---------------
663,124,381 621,639,830
--------------- ---------------

Mortgage loans 434,956 881,687
--------------- ---------------

Policy loans 55,227,567 50,619,504
Cash (225,037) 793,829
Short-term investments 32,123,095 22,912,462
--------------- ---------------
87,125,625 74,325,795
--------------- ---------------
Total cash and invested assets 750,684,962 696,847,312

Federal income taxes recoverable 6,401 4,995
Premiums deferred and uncollected 2,800,161 2,955,909
Investment income due and accrued 13,378,335 12,696,611
Other assets 523,555 508,880
--------------- ---------------
Total admitted assets $ 767,393,414 $ 713,013,707
--------------- ---------------
--------------- ---------------

LIABILITIES
Aggregate reserves for life polices and contracts $ 522,598,055 $ 487,454,812
Supplementary contracts without life contingencies 15,886,447 13,984,522
Policy and contract claims 3,192,384 3,743,996
Policyholders' dividend accumulations 44,984,808 40,397,525
Dividends to policyholders payable in the following year 18,337,390 17,155,313
Advance premiums, deposits and other policy and contract liabilities 11,547,853 10,820,786
Interest maintenance reserve 2,971,290 3,224,825
Commissions payable 307,194 256,625
Other liabilities 6,131,527 4,811,220
Federal income taxes due or accrued 28,502 28,502
Federal income taxes (payable to affiliates) 2,005,289 1,768,283
Asset valuation reserve 1,499,234 3,413,208
--------------- ---------------
Total liabilities 629,489,973 587,059,617
--------------- ---------------

CAPITAL AND SURPLUS

Common stock, $100 par value; 10,000 shares authorized, issued and outstanding 1,000,000 1,000,000
Paid-in surplus 2,000,000 2,000,000
Group contingency life reserve 115,796 112,574
Unassigned surplus 134,787,645 122,841,516
--------------- ---------------
Total capital and surplus 137,903,441 125,954,090
--------------- ---------------
Total liabilities, capital and surplus $ 767,393,414 $ 713,013,707
--------------- ---------------
--------------- ---------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

- ---------
B-4
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF OPERATIONS -- STATUTORY BASIS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Income:
Premiums and annuity considerations $ 87,937,701 $ 83,530,695
Net investment income 52,128,562 48,639,789
Considerations for supplementary contracts and dividend accumulations 12,926,962 12,439,159
Other 244,648 238,722
------------- -------------
$ 153,237,873 $ 144,848,365
------------- -------------
Benefits and other expenses:
Death benefits 11,774,735 10,652,837
Surrender benefits and other fund withdrawals 23,964,018 22,498,422
Other benefits and claims 4,384,724 5,607,763
Payments on supplementary contracts and dividend accumulations 11,472,593 11,098,199
Increase in policy and contract reserves 41,087,000 39,317,611
Commissions 6,412,280 6,069,105
General insurance expenses 14,020,365 12,841,898
Taxes, licenses and fees 2,259,658 2,225,026
------------- -------------
$ 115,375,373 $ 110,310,861
------------- -------------
Net gain from operations before dividends to policyholders and federal income taxes 37,862,500 34,537,504
Dividends to policyholders 17,978,550 16,870,893
------------- -------------
Net gain from operations after dividends to policyholders and before federal income taxes 19,883,950 17,666,611
Federal income taxes incurred (excluding capital gains) 9,074,127 7,643,806
------------- -------------
Net gain from operations after dividends to policyholders and federal income taxes and
before realized gains 10,809,823 10,022,805
Net realized capital gains less capital gains tax of $20,934 and $41,017 (excluding
($10,323) and ($84,120) transferred to the IMR) (26,493) (84,352)
------------- -------------
Net income $ 10,783,330 $ 9,938,453
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

B-5-------
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Common stock:
Balance at beginning and end of year $ 1,000,000 $ 1,000,000
------------- -------------
Paid in surplus:
Balance at beginning and end of year 2,000,000 2,000,000
------------- -------------
Group contingency life reserve:
Balance at beginning of year 112,574 107,411
Transfer from unassigned surplus 3,222 5,163
------------- -------------
Balance at end of year 115,796 112,574
------------- -------------
Unassigned surplus:
Balance at beginning of year 122,841,516 114,436,603
Net income 10,783,330 9,938,453
Net unrealized capital (losses) gains (682) 130
Change in nonadmitted assets (130,312) (69,928)
Change in asset valuation reserve 1,913,974 (170,943)
Change in group contingency life reserve (3,222) (5,163)
Increase in reserves on account of change in valuation basis (616,959) (1,287,636)
------------- -------------
Balance at end of year 134,787,645 122,841,516
------------- -------------
Total capital and surplus $ 137,903,441 $ 125,954,090
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

- ---------
B-6
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Cash from operations:
Premiums and annuity considerations $ 88,923,871 $ 84,238,057
Other premiums, considerations and deposits, allowances and reserve adjustments and other
income 12,928,398 12,441,484
Investment income received (excluding realized gains/losses and net of investment
expenses) 52,713,874 49,069,364
Life and accident and health benefits paid (12,615,700) (11,745,944)
Surrender benefits and other fund withdrawals paid (23,964,018) (22,498,422)
Other benefits to policyholders paid (15,554,952) (15,112,660)
Commissions, other expenses and taxes paid (excluding federal income taxes) (21,432,911) (20,830,652)
Dividends to policyholders paid (16,796,472) (15,929,693)
Federal income taxes paid (excluding tax on capital gains) (8,818,190) (8,616,731)
--------------- ---------------
Net cash from operations 55,383,900 51,014,803
--------------- ---------------
Cash from investments:
Proceeds from investments sold, matured or repaid:
Bonds 43,467,042 35,084,672
Stocks and mortgage loans 453,109 386,564
Net loss on cash and short-term investments -- (658)
--------------- ---------------
Total investment proceeds 43,920,151 35,470,578
Tax on capital gains 41,271 133,963
--------------- ---------------
Total cash from investments 43,878,880 35,336,615
--------------- ---------------
Cost of investments acquired (long term only):
Bonds 86,260,215 79,477,197
--------------- ---------------
Total investments acquired 86,260,215 79,477,197
--------------- ---------------
Increase in policy loans and premium notes 4,608,746 5,026,094
--------------- ---------------
Net cash from investments (46,990,081) (49,166,676)
--------------- ---------------
Cash from financing and miscellaneous sources:
Other cash provided 640,478 689,616
Other applications (net) (842,530) (718,727)
--------------- ---------------
Net cash from financing and miscellaneous sources (202,052) (29,111)
--------------- ---------------
Net change in cash and short-term investments 8,191,767 1,819,016
Cash and short-term investments, beginning of year 23,706,291 21,887,275
--------------- ---------------
Cash and short-term investments, end of year $ 31,898,058 $ 23,706,291
--------------- ---------------
--------------- ---------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

B-7-------
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS

1. NATURE OF BUSINESS OPERATIONS

State Farm Life and Accident Assurance Company (the Company) is a wholly-owned
subsidiary of State Farm Mutual Automobile Insurance Company (SFMAIC). The
Company is licensed in four states and primarily markets individual life and
annuity products through an independent contractor agency force. The Company's
individual life insurance products include traditional whole life, universal
life and term insurance which together account for approximately 88% of premium
revenue. Individual annuity products account for an additional 12%. The Company
also writes small amounts of group credit life and employee group life.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

The accompanying financial statements have been prepared on a statutory basis in
accordance, in all material respects, with accounting practices prescribed in
the National Association of Insurance Commissioners (NAIC) Annual Statement
Instructions and Accounting Practices and Procedures manuals, as well as state
laws, regulations, and general administrative rules. Statutory basis accounting
also permits the use of accounting practices which differ from those prescribed
in the sources referred to above, when such practices are approved by the
insurance department of the insurer's state of domicile. State Farm Life and
Accident Assurance Company has used no such permitted accounting practices in
the preparation of these financial statements that would be deemed to have a
material effect on the determination of its financial position as of December
31, 1997 and 1996, or the results of its operations for the years then ended.

Statutory basis accounting is a comprehensive basis of accounting other than
generally accepted accounting principles (GAAP).

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

Significant accounting practices include:

A. INVESTMENTS

Bonds are stated at values prescribed by the NAIC. In general, bonds are stated
at amortized cost. Under GAAP, debt securities would be classified into three
categories: held-to-maturity, trading and available-for-sale. Held-to-maturity
securities would be reported at amortized cost. Trading securities would be
reported at fair value, with unrealized gains and losses included in earnings.
Available-for-sale securities would be reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate component of
surplus.

Prepayment assumptions for loan-backed bonds are internal estimates based on
historical prepayment patterns. Prepayment assumptions for structured securities
are based on estimates from various data reporting services. These assumptions
are consistent with the current interest rate and economic environment. The
retrospective adjustment method is used to value all securities.

Mortgage loans on real estate, all of which are first liens, are carried at the
aggregate unpaid principal balances.

Policy loans are stated at the aggregate of unpaid loan balances which are not
in excess of cash surrender values of related policies.

Short-term investments are stated at cost which approximates market.

Investment income is recorded when earned. Realized gains and losses on sale or
maturity of investments are determined on the basis of specific identification.
Aggregate unrealized capital gains and losses are credited or charged directly
to unassigned surplus.

B. PREMIUMS DEFERRED AND UNCOLLECTED

Premiums deferred and uncollected represent modal premiums, either due and
uncollected or not yet due, where policy reserves have been provided on the
assumption that the full premium for the current policy year has been collected.
Also, where policy reserves have been provided on a continuous premium
assumption, premiums uncollected are similarly defined.

C. AGGREGATE RESERVES FOR LIFE POLICIES AND CONTRACTS

Policy reserves on life insurance are based on statutory mortality and interest
requirements and are computed using principally net level and modified
preliminary term methods with interest rates ranging from 3% to 5.5%. The use of
a modified reserve basis partially offsets the effect of immediately expensing
policy acquisition costs. Policy reserves on annuities are based on statutory
mortality and interest requirements with interest rates ranging from 3% to 7%.
GAAP reserves are based on mortality, lapse, withdrawal and interest rates that
are based on company experience.

- ---------
B-8
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS

D. POLICYHOLDERS' DIVIDENDS

All of the Company's life insurance business is written on the participating
basis. Policyholders' dividends are determined annually by the Board of
Directors. Amounts declared and estimated to be payable to policyholders in the
forthcoming year have been included in the accompanying financial statements as
a liability based on approved dividend scales. Under GAAP, dividends are
anticipated and may be considered as a planned contractual benefit when
computing the value of future policy benefits.

E. FEDERAL INCOME TAXES

The Company's federal income tax return is consolidated with SFMAIC and its
affiliates.

The consolidated federal income tax liability is apportioned to each entity in
accordance with a written agreement. The allocation is based upon separate
return calculations with current credit for net losses and tax credits.
Intercompany federal income tax balances are settled as follows: 1) intercompany
federal income tax receivables and payables which relate to the current tax year
will be settled within ninety (90) days; 2) any refunds of federal income tax
will be settled within sixty (60) days of receipt of the refund; and 3) any
payments of federal income tax due will be settled within sixty (60) days of
payment of the tax due.

The Company's provision for federal income taxes is computed in accordance with
those sections of the Internal Revenue Code applicable to life insurance
companies and is based on income which is currently taxable. Under GAAP,
deferred federal income taxes would be provided for temporary differences
between the tax basis and financial statement basis of assets and liabilities.

F. PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS

Pension Plan

The Company and affiliated insurers sponsor a defined benefit plan covering
substantially all of its employees.

The Company's funding policy is to contribute (1) at least the current service
cost on a current basis and to fund any unfunded liabilities over the
appropriate period and (2) not more than the maximum amount that may be deducted
for federal income tax purposes.

Contributions are allocated among participating companies based on ratios of
annual compensation rates.

Under GAAP, periodic net pension expense would be based on the cost of
incremental benefits for employee service during the period, interest on the
projected benefit obligation, actual return on plan assets and amortization of
actuarial gains and losses rather than the funding policy.

Other Postretirement Benefits

The Company and its affiliated insurers currently provide certain health care
and life insurance benefits pursuant to plans sponsored by its parent, SFMAIC.
Eligible former employees, eligible former agents, and their eligible dependents
currently may participate in these plans.

As a result of the policy promulgated by the NAIC concerning the treatment of
certain postretirement benefits, beginning in 1993, the Company changed its
method of accounting for the costs of the potential health care and life
insurance benefits provided to post-career associates to the accrual method, and
elected to amortize its transition obligation attributable to these potential
benefits over twenty years.

GAAP accounting for postretirement benefits requires an additional accrual for
the estimated cost of the potential benefit obligation under the plans for
active, but not yet eligible, employees and their dependents.

G. INTEREST MAINTENANCE RESERVE AND ASSET VALUATION RESERVE

Interest Maintenance Reserve (IMR) -- Realized capital gains and losses, due to
interest rate fluctuations, net of tax on short-term and long-term fixed income
investments are applied in this calculation. These gains and losses are
amortized into income over the approximate remaining life of the investment
sold. The IMR is not calculated under GAAP.

Asset Valuation Reserve (AVR) -- Realized gains and losses due to credit risk
fluctuations and unrealized gains and losses on applicable invested assets are
reflected in the calculation of this reserve. Changes in the AVR are charged or
credited directly to unassigned surplus and include no voluntary contributions
in 1997 or 1996. The AVR is not calculated under GAAP.

H. RECOGNITION OF PREMIUMS AND ANNUITY CONSIDERATIONS AND RELATED EXPENSES

Premiums and annuity considerations are recognized over the premium paying
period of the policies, whereas acquisition costs such as commissions and other
costs related to new business are expensed as incurred. Under GAAP, certain of
the Company's premium and annuity considerations and initial reserves (e.g. on
universal life policies) would be excluded from

B-9-------
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS

income and the change in reserves. Additionally, acquisition costs under GAAP
are capitalized and amortized over the policy period.

I. NONADMITTED ASSETS

Certain assets designated as "nonadmitted" assets aggregating $307,116 and
$176,804 at December 31, 1997 and 1996, respectively, are not recognized by
statutory accounting practices. These assets are excluded from the balance
sheet, and the net change in such assets is charged or credited directly to
unassigned surplus. GAAP would recognize such assets at the lower of cost or net
realizable value.

The discussion above highlights the significant variances between the statutory
accounting practices followed by the Company and GAAP. The effect of these
differences has not been determined but is presumed to be material.

3. BONDS AND OTHER DEBT SECURITIES

The amortized cost and estimated market values of investments in debt securities
are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>

U.S. Treasury securities and obligations of U.S.
government corporations and agencies $309,842,748 $25,903,661 $ (135,590) $335,610,819
Obligations of states and political subdivisions 2,799,255 96,007 -- 2,895,262

Corporate securities 382,605,473 11,423,289 (739,261) 393,289,501
------------ ----------- ----------- ------------

Total $695,247,476 $37,422,957 $ (874,851) $731,795,582
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>

U.S. Treasury securities and obligations of U.S.
government corporations and agencies $299,847,642 $ 22,178,903 $(1,327,849) $320,698,696

Obligations of states and political subdivisions 3,099,190 85,095 -- 3,184,285

Corporate securities 341,605,460 6,819,931 (4,090,937) 344,334,454
------------ ------------ ------------ ------------

Total $644,552,292 $ 29,083,929 $(5,418,786) $668,217,435
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

The amortized cost and estimated market value of debt securities, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
ESTIMATED
AMORTIZED MARKET
COST VALUE
------------ ------------
<S> <C> <C>

Due in one year or less $ 62,873,481 $ 63,019,585

Due after one year through five years 214,104,126 223,861,793

Due after five years through ten years 367,635,499 390,249,558

Due after ten years 50,634,370 54,664,646
------------ ------------

Total $695,247,476 $731,795,582
</TABLE>

Gross proceeds and realized gains and losses on bonds sold at the discretion of
the Company for the year ended December 31, were:

Proceeds $ 4,819,158 $ 8,272,109

Gross gains -- 277

Gross losses (161,609) (222,005)
</TABLE>

At December 31, 1997, bonds carried at amortized cost of $1,627,655 were on
deposit with regulatory authorities.

- ---------
B-10
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS

4. NET INVESTMENT INCOME

The components of net investment income earned by type of investment for the
years ended December 31, 1997 and 1996, were as follows:

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Bonds $47,315,582 $44,754,214
Short-term investments 1,575,944 1,019,916
Policy loans 3,449,552 3,062,129
Mortgage loans 50,169 99,510
Other 2,777 880
----------- -----------
Gross investment income 52,394,024 48,936,649
Investment expenses (265,462) (296,860)
----------- -----------
Net investment income $52,128,562 $48,639,789
----------- -----------
----------- -----------
</TABLE>

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each significant class of financial instruments for which it is practicable to
estimate that value:

Bonds and Short-Term Investments

Fair values for issues traded on public exchanges are based on the market price
in such exchanges at year end. For issues that are not traded on public
exchanges, fair values were estimated based on market comparables or internal
analysis.

Mortgage Loans

Fair values were estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities.

Cash

The carrying amount is a reasonable estimate of fair value.

Deferred Annuities

Fair values were approximated by the amount due to the annuity holder as if the
annuity contract was surrendered at year end.

Advance Premiums

Fair values were approximated by the amount due to the policyholder as if the
policy was surrendered at year end.

Settlement Options Without Life Contingencies

Settlement options without life contingencies are similar to demand deposits.
The fair value is the amount payable on demand at year end.

The estimated fair values and statement values of the Company's financial
instruments at December 31, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
FAIR STATEMENT FAIR STATEMENT
VALUE VALUE VALUE VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Bonds $699,684,257 $663,124,381 $645,305,556 $621,639,830
Bond reserves 0 1,406,917 0 3,212,828
------------ ------------ ------------ ------------
$699,684,257 $661,717,464 $645,305,556 $618,427,002
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Mortgage loans $ 450,040 $ 434,956 $ 905,156 $ 881,687
Mortgage loan reserves 0 4,893 0 15,430
------------ ------------ ------------ ------------
$ 450,040 $ 430,063 $ 905,156 $ 866,257
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Cash $ (225,037) $ (225,037) $ 793,829 $ 793,829
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Short-term investments: $ 32,111,325 $ 32,123,095 $ 22,911,879 $ 22,912,462
Short-term reserves 0 87,424 0 184,951
------------ ------------ ------------ ------------
$ 32,111,325 $ 32,035,671 $ 22,911,879 $ 22,727,511
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Financial liabilities:
Deferred annuity reserves $127,986,114 $127,653,829 $128,520,058 $128,382,016
Advance premiums 2,294,493 2,315,423 2,495,614 2,538,370
Settlement options without life contingencies 15,886,447 15,886,447 13,984,522 13,984,522
</TABLE>

-------
B-11
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- STATUTORY BASIS

6. FEDERAL INCOME TAXES

The difference between the Company's effective income tax rate and the statutory
rate for both 1997 and 1996 is primarily due to non-deductible policyholder
dividends, unamortized deferred acquisition costs and tax reserves.

The examinations of the Company's federal income tax returns through 1986 have
been closed by the Internal Revenue Service. Returns for 1987, 1988, 1989 and
1990 have been examined. Although a few issues remain open, no open issue would
have a material effect on surplus. Returns for 1991, 1992 and 1993 are currently
under examination. At this time, there have been no issues raised that would
require adjustments which would have a material effect on surplus.

7. PENSION PLAN AND OTHER
POSTRETIREMENT BENEFITS

A. Pension Plan

Plan benefits are based on years of credited service up to 35 years and the
employee's rate of annual compensation during the 5 consecutive years of highest
compensation.

The pension cost allocated to the Company for its employees amounted to $0 and
$100,785 in 1997 and 1996, respectively. A comparison of accumulated plan
benefits, determined in accordance with Statement of Financial Accounting
Standards No. 35, and plan net assets for the non-contributory defined benefit
pension plan of the Company and its parent and other affiliates as of August 31,
1997 (the most recent actuarial valuation date) and 1996 is presented below:

Actuarial present value of accumulated plan
benefits:

Vested $2,857,266,646 $2,620,702,754

Nonvested 59,983,879 56,123,860
-------------- --------------

$2,917,250,525 $2,676,826,614
-------------- --------------
-------------- --------------

Net assets available for benefits $6,611,785,481 $5,235,032,043
-------------- --------------
-------------- --------------
</TABLE>

The assumed rate of return used in determining the actuarial present value of
vested and nonvested accumulated plan benefits was 7% as of August 31, 1997 and
1996.

The Company participates with its affiliates in a qualified defined contribution
plan for which substantially all employees are eligible. Contributions are based
on the performance of the Company and its affiliates as well as matching a
percentage of employee contributions (up to specified limits). Such
contributions for the years ended December 31, 1997 and 1996, were $71,088 and
$61,340, respectively. Benefits, generally available upon retirement, are paid
from net assets available for plan benefits.

B. Other Postretirement Benefits

The Company's share of the net post-career benefit cost for the year ended
December 31, 1997, was $328,983 and included paid benefits, the expected cost of
the potential health care and life insurance benefits for newly eligible
post-career associates, interest cost and amortization of the transition
obligation.

At December 31, 1997 and 1996 respectively, the Company's share of the unfunded
recorded post-career benefit obligation attributable to the potential health
care and life insurance benefits for post-career associates was $985,543 and
$723,089. The transition obligation for these potential benefits is being
amortized over twenty years. The Company's share of the remaining transition
obligation was $807,171 and $1,181,880 at December 31, 1997 and 1996
respectively. The Company's share of unrecognized net (gains) or losses,
resulting from experience different from that assumed and/or changes in
actuarial assumptions was $(35,161) at December 31, 1997. The Company's share of
the estimated cost of the potential benefit obligation under the plans for
active, but not yet eligible employees, agents, and their qualifying dependents,
at January 1, 1997, was $2,353,787 which is not accrued in these financial
statements. The discount rate used in determining the accumulated post-career
benefit obligation attributable to these potential benefits is 7%, and the
health care cost trend rate is 11%, graded to 6% over the following 5 years.

The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the Company's share of
the post-career benefit obligation attributable to the potential health care
insurance benefits for post-career associates by $131,251 as of January 1, 1997,
and the estimated eligibility and interest cost components of the net periodic
post-career benefit cost for 1997 by $24,196.

The Company participates with its affiliates in an unfunded deferred
compensation plan for highly compensated employees

- ---------
B-12
<PAGE>
and independent contractor agents. As the Company currently has no participants
in this plan, there was no liability established for 1997 or 1996.

8. OTHER RELATED PARTY TRANSACTIONS

The Company, its parent, and its affiliates share certain administrative,
occupancy and marketing expenses. Such expenses are allocated to the Company
based on time and usage studies and totaled approximately $8,762,970 and
$7,959,707, in 1997 and 1996, respectively.

At December 31, 1997 and 1996, total amounts owed to the parent company,
exclusive of federal income taxes, were approximately $1,800,341 and $1,539,134,
respectively. Total amounts owed to affiliates were approximately $5,397 and
$3,465 at December 31, 1997 and 1996, respectively.

9. CONTINGENT LIABILITIES

The Company is a defendant in several lawsuits challenging sales practices with
respect to life insurance products, some of which allege class action status.
The ultimate outcome of these lawsuits is uncertain, and an amount or estimate
of a range of amounts relative to the outcome of these cases cannot be
determined at this time. Therefore, no liability has been recorded in these
financial statements. Management believes it is possible that the resolution of
these matters could be material to these statements.

In addition, the Company is subject to liabilities of a contingent nature which
may from time to time arise. Such liabilities could result from income tax
matters, guaranty fund assessments or other occurrences that take place in the
normal course of doing business. In addition, the life insurance industry has
not been exempt from the impact of an increasingly litigious environment which
is being experienced in the United States. Liabilities arising as a result of
these factors, or other such contingencies, that are not provided for elsewhere
in these financial statements are not reasonably estimable and are not
considered by management to be material in relation to the financial position of
the Company.

10. DIVIDEND RESTRICTIONS

The maximum amount of dividends which can be paid to shareholders of insurance
companies domiciled in Illinois without the prior approval of the commissioner
is subject to restrictions related to statutory surplus and net income. For
companies doing business in New York, such payments are subject to similar
restrictions related to statutory surplus.

-------
B-13
<PAGE>
SUPPLEMENTAL SCHEDULE

- ---------
B-14
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
SCHEDULE 1 -- SELECTED FINANCIAL DATA
DECEMBER 31, 1997 AND 1996

The following is a summary of certain financial data included in other exhibits
and schedules subjected to audit procedures by independent auditors and utilized
by actuaries in the determination of reserves.

<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Investment income earned:
U.S. government bonds $ 20,487,860 $ 20,118,942
Other bonds (unaffiliated) 26,827,722 24,635,272
Mortgage loans 50,169 99,510
Premiums notes, policy loans and liens 3,449,552 3,062,129
Short-term investments 1,575,944 1,019,916
Cash on hand 2,777 880
------------ ------------
Gross investment income $ 52,394,024 $ 48,936,649
------------ ------------
------------ ------------
Mortgage loans -- book value
Commercial mortgages $ 434,956 $ 881,687
------------ ------------
Total mortgage loans $ 434,956 $ 881,687
------------ ------------
------------ ------------
Mortgage loans by standing -- book value
Good standing $ 434,956 $ 881,687
------------ ------------
------------ ------------
</TABLE>

-------
B-15
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
SCHEDULE 1 -- SELECTED FINANCIAL DATA, CONTINUED
DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Bonds and short-term investments by class and maturity:
Bonds by maturity -- statement value
Due within one year or less $ 62,873,481 $ 57,726,725
Over 1 year through 5 years 214,104,126 156,503,907
Over 5 years through 10 years 367,635,499 384,092,202
Over 10 years through 20 years 47,644,606 44,238,838
Over 20 years 2,989,764 1,990,620
------------- -------------
Total by maturity $ 695,247,476 $ 644,552,292
------------- -------------
------------- -------------
Bond by class -- statement value
Class 1 $ 671,755,663 $ 627,967,895
Class 2 22,886,243 14,942,661
Class 3 553,599 850,027
Class 4 51,971 791,709
Class 5
Class 6
------------- -------------
Total by class $ 695,247,476 $ 644,552,292
------------- -------------
------------- -------------
Total bonds publicly traded $ 666,183,274 $ 619,390,464
------------- -------------
------------- -------------
Total bonds privately placed $ 29,064,202 $ 25,161,828
------------- -------------
------------- -------------
Short term investments -- book value $ 32,123,095 $ 22,912,462
------------- -------------
------------- -------------
Cash on deposit $ (225,037) $ 793,829
------------- -------------
------------- -------------
</TABLE>

- ---------
B-16
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
SUPPLEMENTAL SCHEDULE OF ASSETS AND LIABILITIES
SCHEDULE 1 -- SELECTED FINANCIAL DATA, CONTINUED
DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
<S> <C> <C>
Life insurance in force
Ordinary $12,406,768,000 $11,416,229,000
--------------- ---------------
--------------- ---------------
Credit life $ 14,124,000 $ 17,231,000
--------------- ---------------
--------------- ---------------
Group life $ 19,777,000 $ 31,484,000
--------------- ---------------
--------------- ---------------
Amount of accidental death insurance in force under ordinary policies $ 315,065,000 $ 318,935,000
--------------- ---------------
--------------- ---------------
Life Insurance policies with disability provisions in force:
Ordinary $ 197,527 $ 190,671
--------------- ---------------
--------------- ---------------
Group life (certificates) $ 603 $ 802
--------------- ---------------
--------------- ---------------
Supplementary contracts in force:
Ordinary -- not involving life contingencies
Amount on deposit $ 8,588,989 $ 8,316,380
--------------- ---------------
--------------- ---------------
Income payable $ 123,053 $ 116,160
--------------- ---------------
--------------- ---------------
Ordinary -- involving life contingencies
Income payable $ 154,207 $ 129,213
--------------- ---------------
--------------- ---------------
Annuities:
Ordinary
Immediate -- amount of income payable $ 2,431,809 $ 2,214,101
--------------- ---------------
--------------- ---------------
Deferred -- fully paid account balance $ 125,241,738 $ 125,694,658
--------------- ---------------
--------------- ---------------
Deferred -- not fully paid -- account balance $ 1,057,844 $ 1,466,957
--------------- ---------------
--------------- ---------------
Deposit funds and dividend accumulations:
Deposit funds -- account balance $ 3,679,461 $ 3,767,979
--------------- ---------------
--------------- ---------------
Dividend accumulations -- account balance $ 44,984,808 $ 40,397,525
--------------- ---------------
--------------- ---------------
</TABLE>

-------
B-17
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)
STATEMENTS OF ADMITTED ASSETS, LIABILITIES, CAPITAL AND SURPLUS -- STATUTORY
BASIS
(UNAUDITED)
AS OF JUNE 30, 1998

<TABLE>
<CAPTION>
1998
---------------
<S> <C>
ADMITTED ASSETS
Bonds:
United States Government $ 252,616,762
Other governmental units 55,446,644
Public utilities 129,315,004
Industrial and other 260,701,689
---------------
698,080,099
---------------
Mortgage Loans 0
---------------
Policy loans 57,770,139
Cash (1,561,157)
Short-term investments 19,660,872
---------------
Total cash and invested assets 773,949,953
---------------

Premiums deferred and uncollected 2,900,203
Investment income due and accrued 14,014,234
Federal income tax recoverable (including from affiliates) 7,156
Other assets 560,717
---------------
Total admitted assets $ 791,432,263
---------------
---------------

LIABILITIES
Aggregate reserves for life policies and contracts $ 540,727,159
Reserve for contracts without life contingencies 17,334,650
Policy and contract claims 4,484,184
Policyholders' dividend accumulations 47,725,087
Dividends to policyholders payable in the following year 18,910,628
Advance premiums, deposits and other policy and contract liabilities 11,556,280
Interest maintenance reserve 2,860,332
Commissions payable 189,098
Federal income taxes due or accrued 246,512
Other liabilities 5,211,555
Asset valuation reserve 1,660,184
---------------
Total Liabilities 650,905,668
---------------

CAPITAL AND SURPLUS

Common stock, $100 par value; 10,000 shares authorized, issued and outstanding 1,000,000
---------------
Special surplus -- group 94,076
Paid-in surplus 2,000,000
Unassigned surplus 137,432,520
---------------
Total capital and surplus 140,526,596
---------------
Total liabilities, capital and surplus $ 791,432,263
---------------
---------------
</TABLE>

The accompanying notes are an integral part of these statements.

- ---------
B-18
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF OPERATIONS -- STATUTORY BASIS
(UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
JUNE 30, 1998
---------------
<S> <C>
Income:
Premiums and annuity considerations $ 46,001,981
Net investment income 27,119,887
Considerations for supplementary contracts and dividend accumulations 7,126,271
Other 126,705
---------------
$ 80,374,844
---------------
Benefits and other expenses:
Death benefits 7,912,379
Surrender benefits and other fund withdrawals 13,524,551
Other benefits and claims 2,541,267
Payments on supplementary contracts and dividend accumulations 5,165,711
Increase in policy and contract reserves 21,899,846
Commissions 3,152,921
General insurance expenses 8,386,471
Taxes, licenses and fees 1,127,173
Other Fees 12,337
---------------
$ 63,722,656
---------------
Net gain from operations before dividends to policyholders and federal income taxes 16,652,188
Dividends to policyholders 10,122,119
---------------
Net gain from operations after dividends to policyholders and before federal income taxes 6,530,069
Federal and foreign income taxes incurred (excluding capital gains) 3,465,451
---------------
Net gain from operations after dividends to policyholders and federal income taxes and before realized
gains 3,064,619
Net realized capital gains or (losses) less capital gains tax of $15,168 (excluding $15,097) transferred to
the IMR) (5,677)
---------------
Net income $ 3,058,941
---------------
---------------
</TABLE>

The accompanying notes are an integral part of these statements.

-------
B-19
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
(UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
JUNE 30, 1998
---------------
<S> <C>
Common stock:
Balance at beginning and end of period $ 1,000,000
---------------
Paid-in surplus:
Balance at beginning and end of period 2,000,000
Group contingency life reserve 94,076
---------------
2,094,076
---------------
Unassigned surplus:
Balance at beginning of year 134,787,645
Net income 3,058,941
Change in nonadmitted assets 31,794
Change in asset valuation reserve (160,949)
Increase in reserves on account of change in valuation basis (306,631)
Change in group contingency life reserve 21,720
---------------
Balance at end of period 137,432,520
---------------
Total capital and surplus $ 140,526,596
---------------
---------------
</TABLE>

The accompanying notes are an integral part of these statements.

- ---------
B-20
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
(UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
JUNE 30, 1998
---------------
<S> <C>
Income:
Premiums and annuity considerations $ 46,170,678
Other premiums, considerations and deposits, allowances and reserve adjustment, and other income 7,126,921
Investment income received (excluding realized gains/losses and net of investment expenses) 27,190,557
Surrender benefits and other fund withdrawals paid (13,524,551)
Other benefits to policyholders paid (14,345,147)
Commissions, other expenses and taxes paid (excluding federal income taxes) (13,521,295)
Dividends to policyholders paid (9,548,882)
Federal income taxes paid (excluding tax on capital gains) (5,268,653)
---------------
Net cash from operations 24,279,627
---------------
Cash from investments:
Proceeds from investments sold, matured or repaid:
Bonds 12,315,837
Mortgage loans 439,289
---------------
Total investment proceeds 12,755,126
Net tax on capital gains 0
---------------
Total cash from investments 12,755,126
---------------
Cost of investments acquired (long-term only):
Bonds 47,879,127
---------------
Total investments acquired 47,879,127
---------------
Increase (decrease) in policy loans and premium notes 2,542,572
---------------
Net cash from investments (37,666,573)
---------------
Cash from financing and miscellaneous sources:
Other cash provided 265,755
Other applications (net) (677,153)
---------------
Net cash from financing and miscellaneous sources (411,398)
---------------
Net change in cash and short-term investments (13,798,343)
Cash and short-term investments, beginning of year 31,898,058
---------------
Cash and short-term investments, end of period $ 18,099,715
---------------
---------------
</TABLE>

The accompanying notes are an integral part of these statements.

-------
B-21
<PAGE>
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY)

NOTE TO FINANCIAL STATEMENTS

The statement of financial position as of June 30, 1998, the statement of
changes in capital and surplus, operations, and cash flows for the six-month
period ended June 30, 1998 are unaudited. The interim financial statements
reflect all adjustments (consisting only of normal recurring accruals) which
are, in the opinion of management, necessary for the fair presentation of the
financial position, changes in capital and surplus, results of operations and
cash flows for the interim periods. The results of operations for the interim
period should not be considered indicative of results to be expected for the
full year.

- ---------
B-22

<PAGE>

[LOGO]

Issued By:
State Farm Life and Accident Assurance Company
(Licensed in New York and Wisconsin)
Home Offices: Bloomington, Illinois

State Farm VP Management Corp.
(Underwriter & Distributor of Variable Products)
One State Farm Plaza
Bloomington, Illinois 61710-0001

Printed in U.S.A.

<PAGE>
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 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Illinois Business Corporation Act Chapter 805 Section 5/8.75 is a
comprehensive provision that defines the power of Illinois corporations to
provide for the indemnification of its officers, directors, employees and
agents. This Section also authorizes Illinois corporations to purchase and
maintain insurance on behalf of directors, officers, employees or agents of the
corporation.

The Articles of Incorporation , as amended, and the Bylaws of State Farm
Life and Accident Assurance Company do not provide for the indemnification of
officers, directors, employees or agents of the Company.

REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)

State Farm Life and Accident Assurance Company hereby represents that 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 State Farm Life and Accident Assurance Company.

CONTENTS OF REGISTRATION STATEMENT

This Registration Statement comprises the following papers and documents:

The facing sheet.

The prospectus consisting of pages.

Undertaking to file reports.

Rule 484 undertaking.

Representation pursuant to Section 26(e)(2)(A).

The signatures.
<PAGE>
Written consents of the following persons: William A. Montgomery, Esq.,
Gerry Brogla, F.S.A., PricewaterhouseCoopers LLP, and Sutherland, Asbill
& Brennan LLP

The following exhibits, corresponding to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:

1 A. (1) Resolution of the Board of Directors of State Farm Life and
Accident Assurance Company establishing State Farm Life and
Accident Assurance Company Variable Life Separate Account

(2) Not Applicable

(3) (a) Not Applicable

(b) Form of Distribution Agreement (1)

(4) Not applicable

(5) (a) Specimen Flexible Premium Variable Universal Life Insurance
Policy

(b) Policy Riders and Endorsements

(6) (a) Articles of Incorporation of State Farm Life and Accident
Assurance Company (2)

(b) By-laws of State Farm Life and Accident Assurance
Company (2)

(7) Not applicable

(8) Form of participation agreement (3)

(9) Not applicable

(10) Application form

(11) Description of issuance, transfer and redemption procedures

(12) Powers of Attorney

B. Not applicable

C. Not applicable

2. Opinion and consent of William A. Montgomery, Esq. as to the legality of
the securities being registered

3. Not applicable

4. Not applicable

5. Not applicable

6. Opinion and consent of Gerry Brogla, F.S.A. as to actuarial matters
pertaining to the securities being registered

7. (a) Consent of Independent Accountants

(b) Consent of Sutherland, Asbill & Brennan LLP

- ------------------------

1. Incorporated herein by reference to Exhibit 3 of the registration statement
on Form N-4 (File No. 333-57579) filed with the Securities and Exchange
Commission on June 24, 1998.

2. Incorporated herein by reference to Exhibit 6 of the registration statement
on Form N-4 (File No. 333-57579) filed with the Securities and Exchange
Commission on June 24, 1998.

3. Incorporated herein by reference to Exhibit 8 of the registration statement
on Form N-4 (File No. 333-57579) filed with the Securities and Exchange
Commission on June 24, 1998.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant,
State Farm Life and Accident Assurance Company Variable Life Separate Account,
has duly caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the City of Bloomington and the State of Illinois, on this 25th
day of September, 1998.

STATE FARM LIFE AND ACCIDENT
ASSURANCE COMPANY
VARIABLE LIFE SEPARATE ACCOUNT
(SEAL) (Registrant)

By: STATE FARM LIFE AND ACCIDENT
ASSURANCE COMPANY
(Depositor)

Attest: /s/ STEPHEN L. HORTON By: *
-------------------------------- --------------------------------
Stephen L. Horton Edward B. Rust, Jr.
PRESIDENT
STATE FARM LIFE AND ACCIDENT
ASSURANCE COMPANY

Pursuant to the requirements of the Securities Act of 1933, State Farm Life
and Accident Assurance Company has duly caused this registration statement to be
signed on its behalf by the undersigned thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the City of Bloomington and the
State of Illinois, on the 25th day of September, 1998.

STATE FARM LIFE AND ACCIDENT
ASSURANCE COMPANY

(SEAL)

Attest: /s/ STEPHEN L. HORTON By: *
-------------------------------- --------------------------------
Stephen L. Horton Edward B. Rust, Jr.
PRESIDENT
STATE FARM LIFE AND ACCIDENT
ASSURANCE COMPANY

<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the date(s) set forth below.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------

<C> <S> <C>
* President and Director
---------------------------------- (Principal Executive Officer)
Edward B. Rust, Jr.

* Vice President and Actuary;
---------------------------------- (Principal Financial Officer)
Darrell W. Beernink

* Vice President and Controller -- Life
---------------------------------- (Principal Accounting Officer)
Dale R. Egeberg

*
---------------------------------- Director; Executive Vice President
Roger B. Tompkins

*
---------------------------------- Director
Bruce Callis

*
---------------------------------- Director
Roger S. Joslin

*
---------------------------------- Director
Kurt G. Moser

*
---------------------------------- Director
Roger J. Lehman

* Director; Vice President, Counsel and
---------------------------------- Secretary
Laura P. Sullivan

*
---------------------------------- Director
Vincent J. Trosino

*
---------------------------------- Director
Charles R. Wright
</TABLE>

<TABLE>
<S> <C> <C>
By: /s/ TERRY HUFF September 25, 1998
--------------------------------- -----------------
Terry Huff (Date)
PURSUANT TO POWER OF ATTORNEY
</TABLE>

<PAGE>

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

BOARD OF DIRECTORS RESOLUTIONS

FOR VARIABLE LIFE SEPARATE ACCOUNT

BE IT RESOLVED, That the Board of Directors of State Farm Life and Accident
Assurance Company (the "Company"), hereby establishes a separate account,
pursuant to the provisions of 215 ILCS 5/245.21 of the Illinois Insurance
Laws, designated the State Farm Life and Accident Assurance Company Variable
Life Separate Account (hereinafter the "Variable Account"), for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and

FURTHER RESOLVED, That the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable annuity
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and

FURTHER RESOLVED, That the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses
of the Company; and

FURTHER RESOLVED, That the assets of the Variable Account equal to the
reserves and other liabilities under the Policies and any other policies
issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and

FURTHER RESOLVED, That the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of
a mutual fund portfolio, and net premiums under the Policies shall be
allocated in accordance with instructions received from owners of the
Policies; and

FURTHER RESOLVED, That the President, Executive Vice President, and Vice
President - Investments are jointly authorized to add or remove any
Subaccount of the Variable Account or add or remove any mutual fund as may
hereafter be deemed necessary or appropriate; and

FURTHER RESOLVED, That the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account,
without regard to other income, gains or losses of any other Subaccount of
the Variable Account; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them,

<PAGE>

with full power to act without the others, be, and they hereby are, severally
authorized to invest such amount or amounts of the Company's cash in the
Variable Account or in any Subaccount thereof or in any mutual fund as may be
deemed necessary or appropriate to facilitate the commencement of the
Variable Account's and/or the fund's operations and/or to meet any minimum
capital requirements under the Investment Company Act of 1940 (the "1940
Act"); and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, be, and they hereby are, severally authorized to
transfer cash from time to time from the Company's general account to the
Variable Account, or from the Variable Account to the general account, as
deemed necessary or appropriate and consistent with the terms of the
Policies; and

FURTHER RESOLVED, That the Board of Directors of the Company reserves the
right to change the designation of the Variable Account hereafter to such
other designation as it may deem necessary or appropriate; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, with such assistance from the Company's independent
certified public accountants, legal counsel and independent consultants or
others as they may require, be, and they hereby are, severally authorized and
directed to take all action necessary to: (a) register the Variable Account
as a unit investment trust under the 1940 Act; (b) register the Policies in
such amounts, which may be an indefinite amount, as such officers of the
Company shall from time to time deem appropriate under the Securities Act of
1933 (the "1933 Act"); and (c) take all other actions that are necessary in
connection with the offering of the Policies for sale and the operation of
the Variable Account in order to comply with the 1940 Act, the Securities
Exchange Act of 1934, the 1933 Act, and other applicable Federal laws,
including the filing of any registration statements, any undertakings,
no-action requests, consents, and any applications for exemptions from the
1940 Act or other applicable federal laws and any amendments to the foregoing
as the officers of the Company shall deem necessary or appropriate; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, are severally authorized and empowered to prepare,
execute and cause to be filed with the Securities and Exchange Commission on
behalf of the Variable Account, and by the Company as sponsor and depositor,
a Notification of Registration on Form N-8A, a registration statement
registering the Account as an investment

-2-
<PAGE>

company under the 1940 Act and the Policies under the 1933 Act, and any and
all amendments to the foregoing on behalf of the Variable Account and the
Company and on behalf of and as attorneys-in-fact for the principal executive
officer and/or the principal financial officer and/or the principal
accounting officer and/or any other officer of the Company; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President-Counsel and Secretary, Vice President and Actuary, and Controller
are duly appointed as agents for service under any such registration
statement and are duly authorized to receive communications and notices from
the Securities and Exchange Commission with respect thereto; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all action that each of
them may deem necessary or advisable in order to offer and sell the Policies,
including any registrations, filings and qualifications both of the Company,
its officers, agents and employees, and of the Policies, under the insurance
and securities laws of any of the states of the United States of America or
other jurisdictions, and in connection therewith to prepare, execute, deliver
and file all such applications, requests, undertakings, reports, covenants,
resolutions, applications for exemptions, consents to service of process and
other papers and instruments as may be required under such laws, and to take
any and all further action which such officers or legal counsel of the
Company may deem necessary or desirable (including entering into whatever
agreements and contracts may be necessary) in order to maintain such
registrations or qualifications for as long as the officers or legal counsel
deem it to be in the best interests of the Variable Account and the Company;
and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company to execute and
file irrevocable written consents on the part of the Variable Account and of
the Company to be used in such states wherein such consents to service of
process may be required under the insurance or securities laws therein in
connection with the registration or qualification of the Policies and to
appoint the appropriate state official, or such other person as may be
allowed by insurance or securities laws, agent of the Variable Account and of
the Company for the purpose of receiving and accepting process; and

-3-
<PAGE>

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of
the Policies with respect to securities owned by the Variable Account; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (i) with State
Farm VP Management Corp. or other qualified entity under which State Farm VP
Management Corp. or such other entity will be appointed principal underwriter
and distributor for the Policies, (ii) with one or more qualified banks or
other qualified entities to provide administrative and/or custody services in
connection with the establishment and maintenance of the Variable Account and
the design, issuance, and administration of the Policies, and (iii) with the
designated mutual funds and/or the principal underwriter and distributor of
those funds for the purchase and redemption of fund shares; and

FURTHER RESOLVED, That the President, Executive Vice President, Vice
President and Actuary, and Controller, and each of them, with full power to
act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as
each of them may deem necessary or desirable to carry out the foregoing
resolutions and the intent and purposes thereof.

FURTHER RESOLVED, That the Company hereby adopts and establishes the following
Standards of Suitability for its officers, employees, and agents with respect to
the suitability of the Policies for applicants:

1. No recommendation shall be made to an applicant to purchase a Policy,
and no Policy shall be issued, in the absence of reasonable grounds to
believe that the purchase of the Policy is suitable for the applicant
on the basis of information furnished after reasonable inquiry of the
applicant concerning the applicant's insurance and investment
objectives, financial situation and needs, and any other information
known to the Company or to the agent making the recommendation;

2. A good faith, reasonable inquiry shall be made as to the facts and
circumstances concerning a prospective contractowner's insurance and
financial needs and no recommendation shall be made that the
prospective contractowner purchase a

-4-
<PAGE>

Policy when such a purchase is not reasonably consistent with the
information that is known or reasonably should be known to the Company
or its agents. In making such recommendation, factors which may be
considered are: age, earnings, marital status, number and age of
dependents, the value of savings or other assets, and current life
insurance program.

Additionally, the Company's agents, as registered representatives, will be
subject to supervision by a registered broker-dealer with respect to suitability
and other sales practices under the rules of the National Association of
Securities Dealers, Inc.; and

FURTHER RESOLVED, that the Company hereby adopts and establishes the following
Standards of Conduct for itself and its officers, directors, and employees
(each, an "Employee") with respect to the purchase or sale of investments of the
Variable Account:

No Employee shall:

1. Employ any device, scheme or artifice to defraud the Variable
Account or the owners of the Policies;

2. Make any untrue statement of a material fact with respect to the
investments of the Variable Account or omit to state a material
fact necessary in order to make the statements made, in light of
the circumstances in which they were made, not misleading;

3. Engage in any act, practice or course of business that operates
or would operate as a fraud or deceit upon the Variable Account
or the owners of the Policies;

4. Engage in any manipulative practice with respect to the Variable
Account or the owners of the Policies;

5. Sell to, or purchase from, the Variable Account any securities or
other property, except as permitted under applicable laws, rules,
regulations, order or other interpretation of any government,
agency, or self-regulatory organization;

6. Purchase or allow to be purchased for the Variable Account any
securities of which the Company or an affiliated company is the
issuer, except as

-5-
<PAGE>

permitted under applicable laws, rules, regulations, order or
other interpretation of any government, agency, or
self-regulatory organization;

7. Accept any compensation other than a regular salary or wages from
the Company or an affiliated company for the sale or purchase of
investment securities to or from the Variable Account except as
permitted under applicable laws, rules, regulations, orders, or
other interpretations of any government, agency or
self-regulatory organization;

8. Engage in any joint transaction, participation or common
undertaking whereby the Company or an affiliated company
participates with the Variable Account in any transaction in
which the Company or an affiliated company obtains an advantage
in the price or quality of the item purchased, the service
received or in the cost of such service, and the Variable Account
or the owners of the Policies are disadvantaged in any of these
respects by the same transaction; or

9. Borrow money or securities from the Variable Account other than
under a policy loan provision.

FURTHER RESOLVED, that the Company shall require any third party providing
administrative services to the Variable Account to adopt Standards of Conduct
encompassing the standards set forth above.

-6-

<PAGE>

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
HOME OFFICE: ONE STATE FARM PLAZA, BLOOMINGTON, ILLINOIS 61710-0001

[LOGO] INSURED JOHN J DOE
(Male)
AGE 35
POLICY NUMBER AS-0000-0000
POLICY DATE October 15, 1997
INITIAL BASIC AMOUNT $50,000

This policy is based on the application and the payment of premiums, as
specified in the policy, while the Insured lives. State Farm Life and Accident
Assurance Company will pay the proceeds to the beneficiary when due proof of the
Insured's death is received. If the Insured is alive on the Maturity Date, the
Cash Surrender Value on the Maturity Date will be paid to the Owner and this
policy will terminate.

FREE LOOK PERIOD. This policy may be returned within 10 days of its receipt for
a refund of all premiums paid. Return may be made to State Farm Life and
Accident Assurance Company or one of its authorized agents. If returned, this
policy will be void from the Policy Date.

READ THIS POLICY WITH CARE. This is a legal contract between the Owner and
State Farm Life and Accident Assurance Company.

THE AMOUNT OF THE PROCEEDS OR THE LENGTH OF TIME THIS POLICY REMAINS IN FORCE,
OR BOTH, MAY INCREASE OR DECREASE DEPENDING ON THE INVESTMENT PERFORMANCE OF THE
SUBACCOUNTS. A DEATH BENEFIT GUARANTEE IS PROVIDED UNTIL THE DEATH BENEFIT
GUARANTEE PERIOD EXPIRATION DATE IF MINIMUM MONTHLY PREMIUMS ARE PAID AS DEFINED
IN THE POLICY.

THE POLICY ACCOUNT VALUE MAY INCREASE OR DECREASE DAILY DEPENDING ON THE
INVESTMENT PERFORMANCE OF THE SUBACCOUNTS. THE PART OF THE POLICY ACCOUNT VALUE
IN THE SUBACCOUNTS IS NOT GUARANTEED.

/s/ Laura P. Sullivan /s/ Edward B. Rust Jr.
--------------------- ----------------------
Secretary President

BASIC PLAN DESCRIPTION
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE. A Death Benefit is payable
when the Insured dies before the Maturity Date. The Cash Surrender Value is
payable if the Insured is alive on the Maturity Date. Coverage may terminate
prior to the Maturity Date. Flexible premiums are payable while the Insured is
alive until the Maturity Date. The Basic Plan is eligible for annual
dividends.

PAGE 1

<PAGE>
CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
POLICY IDENTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SCHEDULE OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SCHEDULE OF PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ALLOCATION OF NET PREMIUM PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CHARGES AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GUARANTEED INTEREST RATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
COST OF INSURANCE RATES AND MONTHLY CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
OWNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Owner. Change of Owner/Successor Owner.
Successor Owner.
DEATH BENEFIT AND DEATH BENEFIT OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Death Benefit. Change in Basic Amount.
Death Benefit Guarantee. Change of Death Benefit Option.
Death Benefit Options.
PAYMENT OF BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Beneficiary Designation. Minimum Payment.
Change of Beneficiary Designation. Basis of Computation for Payments.
Order of Payment on the Insured's Death. Additional Amounts Payable.
Methods of Payment.
PREMIUMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Payment of Premiums. Grace Period.
Premium Charge. Reinstatement.
Rejection of Premium Payments for Tax
Purposes.
VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Variable Account. Units.
Subaccounts. Unit Value.
Changes to the Variable Account. Net Investment Factor.
Variable Policy Account Value.
FIXED ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Fixed Policy Account Value. Interest Credited.
FEES AND CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Monthly Deduction. Surrender Charge.
Cost of Insurance. Withdrawal Processing Fee.
Monthly Cost of Insurance Rates. Transfer Processing Fee.
Monthly Expense Charge.
ALLOCATION AND TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Allocation of Net Premium Payments. Fixed Account Transfer Restrictions.
Transfer Right. Exchange of Policy.
SURRENDER AND WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Surrenders. Withdrawals.
POLICY LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Loan. Interest Credit for the Loan Account.
Interest Charge for the Loan Account. Loan Repayment.
Loan Collateral.
GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
The Contract. Changes in Rates and Charges.
Transaction Delay. Assignment.
Minimum Values. Error in Age or Sex.
Annual Report. Incontestability.
Annual Dividends. Suicide Exclusion.
</TABLE>

THE APPLICATION AND ANY RIDERS AND ENDORSEMENTS FOLLOW PAGE 20.

PAGE 2

<PAGE>
P O L I C Y I D E N T I F I C A T I O N

Insured JOHN J DOE Age 35
(Male)

Policy Number AS-0000-0000 Initial Basic Amount $50,000

Policy Date October 15, 1997

Issue Date October 15, 1997

S C H E D U L E O F B E N E F I T S

Variable Universal Life Basic Plan:
Death Benefit Option 1 (Basic Amount includes the Policy Account Value)
Basic Amount (Standard rate class-male nontobacco): $50,000
Maturity Date: October 15, 2062
Basic Amount Minimum: $50,000
Minimum Withdrawal: $500
Death Benefit Guarantee Period Expiration Date: October 15, 2002
Minimum Monthly Premium for Death Benefit Guarantee Period:
Beginning: Monthly Premium

October 15, 1997 $37.50

S C H E D U L E O F P R E M I U M S

Initial premium: $37.50
Planned premium: $37.50 Monthly

Total Premiums
Beginning: For Policy Year

October 15, 1997 $ 450.00

A L L O C A T I O N O P T I O N S

Fixed Account

State Farm Life and Accident Assurance Company Variable Life Separate Account
Subaccounts that invest in Funds of the State Farm Variable Product Trust:

Large Cap Equity Index Subaccount
Small Cap Equity Index Subaccount
International Equity Index Subaccount
Stock and Bond Balanced Subaccount
Bond Subaccount
Money Market Subaccount

Continued on Next Page
Page 3

<PAGE>
Continued from Page 3

A L L O C A T I O N O F N E T P R E M I U M P A Y M E N TS

To the end of the day on November 3, 1997 (presumed end of free-look period):
Fixed Account 100%

Starting at the end of the day on November 3, 1997 (presumed end of free-look
period):
Large Cap Equity Index Subaccount 15%
Small Cap Equity Index Subaccount 15%
International Equity Index Subaccount 15%
Stock and Bond Balanced Subaccount 15%
Bond Subaccount 15%
Money Market Subaccount 15%
Fixed Account 10%

Minimum percent of Net Premium Payment allocated to a Subaccount or to the Fixed
Account: 1%.
Minimum Transfer Amount: $250

I N T E R E S T R A T E S

Guaranteed Interest Rate credited to the Fixed Account: 4%
Guaranteed Interest Rate credited to the Loan Account: 6%

C H A R G E S A N D F E E S

Deduction Date: 15th of each month

Maximum Premium Charge Percentage: 5%

Maximum Monthly Expense Charge: $8

Maximum Transfer Processing Fee per transfer after first 12 transfers in a
policy year: $25

Withdrawal Processing Fee: Lesser of $25 or 2% of the amount withdrawn

Continued on Next Page
Page 3

<PAGE>
Continued from Page 3

S C H E D U L E O F S U R R E N D E R C H A R G E S

<TABLE>
<CAPTION>
Beginning Beginning
Policy Policy Surrender Policy Policy Surrender
Year Month Charge Year Month Charge
<S> <C> <C> <C> <C> <C>
1 1 $ 10.75 2 6 $193.50
1 2 21.50 2 7 204.25
1 3 32.25 2 8 215.00
1 4 43.00 2 9 225.75
1 5 53.75 2 10 236.50
1 6 64.50 2 11 247.25
1 7 75.25 2 12 258.00
1 8 86.00 3 1 258.00
1 9 96.75 4 1 258.00
1 10 107.50 5 1 258.00
1 11 118.25 6 1 258.00
1 12 129.00 7 1 206.40
2 1 139.75 8 1 154.80
2 2 150.50 9 1 103.20
2 3 161.25 10 1 51.60
2 4 172.00 11 1 0.00
2 5 182.75
</TABLE>

Additional surrender charges will apply for each increase in Basic Amount for 10
years starting on the effective date of the increase.

NOTE: The Planned Premium shown may not continue the policy in force to the
maturity date even if that amount is paid as scheduled. The period
for which the policy will continue will depend on (1) the amount,
time, and frequency of premium payments, (2) your premium allocation
when the premiums are paid, (3) the actual premium charge percentage
applied to each premium payment, (4) any changes in the Basic Amount,
(5) any changes in Death Benefit Option, (6) any interest in excess of
4% a year credited to the Fixed Account, (7) the net investment
results of the Subaccounts, (8) the actual monthly deductions made
against the policy, (9) the actual mortality and expense risk charge
deducted from the Subaccounts, (10) any transfers made, (11) any
withdrawals made, and (12) loans. See the Changes in Rates and Charges
provision for rates and charges we can change.

Page 3 Continued

<PAGE>
C O S T O F I N S U R A N C E R A T E S A N D M O N T H L Y C H A R G E S

Maximum Monthly Cost of Insurance Rates
Per $1000

(Standard rate class - male non-tobacco)

The maximum cost of insurance rates are based on the Insured's age last birthday
at the start of the policy year, sex, and tobacco use as shown above. The
Commissioners 1980 Standard Ordinary Non-Smoker Mortality Table applies.
Modifications are made for rate classes other than standard.

Page 4

<PAGE>
DEFINITIONS

WE, US, and OUR refer to State Farm Life and Accident Assurance Company.

YOU and YOUR refer to the Owner.

APPLICATION. Includes any life insurance application, any application for
change in the policy, medical history, questionnaire, and other documents from
you or any other person proposed for insurance which are made a part of this
policy.

BASIC AMOUNT. Shown on page 3. The Initial Basic Amount plus any increases
less any decreases.

BASIC AMOUNT MINIMUM. Shown on page 3.

BENEFIT PERIOD ENDS. For any rider, the policy anniversary in the year shown
under this heading on page 3 is the date the rider terminates.

CASH VALUE. The Policy Account Value less any applicable Surrender Charge.

CASH SURRENDER VALUE. Cash Value less any Loan Amount.

CODE. The U.S. Internal Revenue Code, as amended.

DEDUCTION DATE. The Policy Date and each monthly anniversary of the Policy
Date.

DEATH BENEFIT GUARANTEE. Basic Amount shown on page 3.

DEATH BENEFIT GUARANTEE PERIOD. Starts on the Policy Date and ends on the
expiration date shown on page 3.

DOLLARS. Any money we pay, or which is paid to us, must be in United States
dollars.

EFFECTIVE DATE. Coverage starts on this date.

FIXED ACCOUNT. Part of our General Account to which the Policy Account Value
may be transferred or Net Premium Payments may be allocated under a policy.

FUND. Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series, thereof, in which a Subaccount
invests.

GENERAL ACCOUNT. Our assets not allocated to the Variable Account or any other
separate account.

INITIAL BASIC AMOUNT. Shown on page 3. The amount of coverage on the Insured
provided by the Basic Plan on the Policy Date.

INITIAL PREMIUM PAYMENT. The amount shown on page 3 that you must pay before
this policy becomes effective.

INSURANCE AMOUNT. The amount of coverage on the effective date of each rider
shown on page 3.

ISSUE DATE. The date the policy is issued.

LOAN ACCOUNT. A part of our General Account to which Variable Policy Account
Value or Fixed Policy Account Value is transferred to provide collateral for any
loan taken under this policy.

LOAN AMOUNT. On a policy anniversary, the Loan Policy Account Value. On any
other date, the Loan Policy Account Value plus any interest charge accrued to
that date.

LOAN POLICY ACCOUNT VALUE. The value in the Loan Account for this policy.

MATURITY DATE. The policy anniversary when the Insured is age 100.

MINIMUM MONTHLY PREMIUM. This amount is shown on page 3.

MINIMUM PREMIUM. On each Deduction Date, the sum of the Minimum Monthly Premium
for each Deduction Date from the Policy Date through such Deduction Date.

MONTHLY CHARGE DEDUCTIBLE. A monthly charge for any rider is deducted as part
of the monthly deduction until the policy anniversary in the year shown on page
3.

PAGE 5

<PAGE>
DEFINITIONS (CONTINUED)

NET ASSET VALUE PER SHARE. The value per share of any Fund during any Valuation
Period. The method of computing the Net Asset Value Per Share is described in
the prospectus for the Funds.

NET PREMIUM PAYMENT. Your premium payment less any premium charge.

OFFICER. The president, a vice president, the secretary, or an assistant
secretary of State Farm Life and Accident Assurance Company.

PAYEE. On the Insured's death, the beneficiaries shown in the application,
unless changed. If you cash surrender this policy, the persons that you have
named. A payee can be other than a natural person only if we agree.

PLANNED PREMIUM. The premium amount that you have chosen. This amount is shown
on page 3 for the payment period that you have chosen.

POLICY ACCOUNT VALUE. The sum of the Variable Policy Account Value, the Fixed
Policy Account Value, and the Loan Policy Account Value.

POLICY DATE. The effective date of this policy.

POLICY MONTH, YEAR, OR ANNIVERSARY. A policy month, year, or anniversary is
measured from the Policy Date.

PROCEEDS. The amounts payable on the death of the Insured.

RATE CLASS. The underwriting class of the person insured. A rate class will be
determined for the Initial Basic Amount and each increase in the Basic Amount.

REQUEST. A written request signed by the person making the request. Such
request must be sent to and be in a form acceptable to us. We may, in our sole
discretion, accept telephone requests in connection with certain transactions.
We may also, in our sole discretion, adopt rules and procedures from time to
time for telephone requests.

RIDER. Any benefit, other than the Basic Plan, made a part of this policy.

SEC. The U.S. Securities and Exchange Commission.

SUBACCOUNT. A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.

UNIT. A unit of measure used to calculate the Variable Policy Account Value in
a Subaccount.

VALUATION DAY. For each Subaccount, each day on which the New York Stock
Exchange is open for business except for certain holidays listed in the
Prospectus for the policy and days that a Subaccount's corresponding Fund
does not value its shares.

VALUATION PERIOD. The period that starts at the close of regular trading on
the New York Stock Exchange on any Valuation Day and ends at the close of
regular trading on the next succeeding Valuation Day.

VARIABLE ACCOUNT. Our separate account named on page 3.

PAGE 6

<PAGE>
OWNERSHIP PROVISIONS

OWNER. You, as the Owner, are named in the application, unless changed. You
may exercise any policy provision only by request and while the Insured is
alive.

SUCCESSOR OWNER. Your Successor Owner is named in the application if you are
not the Insured. The Successor Owner will become the Owner of this policy if
you die while this policy is in force.

CHANGE OF OWNER/SUCCESSOR OWNER. You may change the Owner or Successor Owner
by sending us a request while the Insured is alive and the policy is in
force. We have the right to request this policy to make the change on it.
The change will take effect the date you sign the request, but the change
will not affect any action we have taken before we receive the request. A
change of owner or successor owner does not change the beneficiary
designation.

DEATH BENEFIT AND DEATH BENEFIT OPTIONS PROVISIONS

DEATH BENEFIT. The amount of death benefit is an amount of insurance based on
the death benefit option plus any insurance amounts payable under any riders on
the Insured less any Loan Amount less, if the Insured dies during the grace
period, the monthly deductions from the start of the grace period.

DEATH BENEFIT GUARANTEE. On any Deduction Date before the end of the Death
Benefit Guarantee Period and prior to the Insured's death, the Death Benefit
Guarantee is in effect if the Minimum Premium, as of that Deduction Date, is
less than or equal to the total of all premiums paid on the policy less any
withdrawals and less the Loan Amount.

DEATH BENEFIT OPTIONS. There are two death benefit options. If you do not
choose an option, we will use option 2. The Policy Account Value on the
Insured's date of death is used in determining the amount of insurance.

OPTION 1. The amount of insurance will be the greater of:

(1) the Basic Amount plus any Net Premium Payment received since the last
Deduction Date or

(2) a percentage of the Policy Account Value. Such percentage is based on the
Insured's age at the start of the current policy year, as indicated in the
table shown below.

OPTION 2. The amount of insurance will be the greater of:

(1) the Basic Amount plus the Policy Account Value or

(2) a percentage of the Policy Account Value. Such percentage is based on the
Insured's age at the start of the current policy year, as indicated in the
table shown below.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PERCENTAGE OF POLICY ACCOUNT VALUE TABLE
- -------------------------------------------------------------------------------
AGE PERCENTAGE AGE PERCENTAGE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
0-40 250% 61 128%
41 243% 62 126%
42 236% 63 124%
43 229% 64 122%
44 222% 65 120%
45 215% 66 119%
46 209% 67 118%
47 203% 68 117%
48 197% 69 116%
49 191% 70 115%
50 185% 71 113%
51 178% 72 111%
52 171% 73 109%
53 164% 74 107%
54 157% 75-90 105%
55 150% 91 104%
56 146% 92 103%
57 142% 93 102%
58 138% 94 101%
59 134% 95 & up 100%
60 130%
- -------------------------------------------------------------------------------
</TABLE>

The percentages in the table are those in effect on the Policy Date. We
reserve the right to change the percentages if the table becomes inconsistent
with any federal income tax law or regulation.

PAGE 7

<PAGE>
DEATH BENEFIT AND DEATH BENEFIT OPTIONS PROVISIONS (CONTINUED)

CHANGE IN BASIC AMOUNT. You may request a change in the Basic Amount once
each policy year. The minimum amount of change is $25,000 for an increase
and $10,000 for a decrease. For any change in Basic Amount, we will send you
revised policy pages 3 and 4 to be placed with this policy.

If you request an increase, an application must be completed, evidence of
insurability satisfactory to us must be furnished, and there must be enough
Cash Surrender Value to make a monthly deduction which includes the cost of
insurance for the increase. No increases will be allowed after the policy
anniversary when the Insured is age 80. Each increase will be subject to
additional surrender charges. A revised page 3 and page 4 will show the
amount of the increase, its effective date, maximum monthly cost of insurance
rates for the increase, if the rate class is different, additional surrender
charges, and any changes in premiums.

If you request a decrease, the Basic Amount remaining after the decrease
cannot be less than the Basic Amount Minimum shown on page 3. We reserve the
right to not accept a request for a decrease in the Basic Amount if such
decrease could result in this policy being disqualified as a life insurance
contract under any section of, regulation or ruling under, the Code, as
amended from time to time. Any decrease will first be used to reduce the
most recent increase. Then, the next most recent increases will be reduced.
Finally, the Initial Basic Amount will be reduced. The decrease will take
effect on the date we receive the request. The revised page 3 will show the
amount of decrease and its effective date and any changes in premiums.

CHANGE OF DEATH BENEFIT OPTION. You may request a change of death benefit
option once each policy year. The change will take effect on the date we
receive the request. For a change in death benefit option, we will send you
a revised page 3 to be placed with this policy. The revised page will show
the new death benefit option and the effective date of the change.

If the change is to option 1, the Basic Amount will be increased by the
Policy Account Value on the effective date of the change. We reserve the
right to not accept a request for a change to option 1 if such change could
result in this policy being disqualified as a life insurance contract under
any section of, regulation or ruling under, the Code, as amended from time to
time.

If the change is to option 2, the Basic Amount will be decreased by the
Policy Account Value on the effective date of the change.

PAGE 8

<PAGE>
PAYMENT OF BENEFITS PROVISIONS

BENEFICIARY DESIGNATION. This is as shown in the application, unless you have
made a change. It includes the name of the beneficiary and the order and method
of payment. If you name "estate" as a beneficiary, it means the executors or
administrators of the last survivor of you and all beneficiaries. If you name
"children" of a person as a beneficiary, only children born to or legally
adopted by that person as of the Insured's date of death will be included.

We may rely on an affidavit as to the ages, names, and other facts about all
beneficiaries. We will incur no liability if we act on such affidavit.

CHANGE OF BENEFICIARY DESIGNATION. You may make a change while the Insured is
alive by sending us a request. The change will take effect the date the request
is signed or on any later date specified in the request, but the change will not
affect any action we have taken before we receive the request. We have the
right to request your policy to make the change on it.

ORDER OF PAYMENT ON THE INSURED'S DEATH. When the Insured dies, we will make
payment in equal shares to the primary beneficiaries living when payment is
made. If a primary dies after the first payment is made, we will pay that
primary's unpaid share in equal shares to the other primaries living when
payment is made. If the last primary dies, we will make payment in equal
shares to the successor beneficiaries living when payment is made. If a
successor dies while receiving payments, we will pay that successor's unpaid
share in equal shares to the other successors living when payment is made.
If, at any time, no primary or successor is alive, we will make a one sum
payment in equal shares to the final beneficiaries. If, at any time, no
beneficiary is living, we will make a one sum payment to you, if living when
payment is made. Otherwise, we will make a one sum payment to the estate of
the last survivor of you and all beneficiaries. "When payment is made" means
(1) the date that a periodic payment is due or (2) the date that a request is
signed for a cash withdrawal or a one sum payment. You may change this order
of payment by sending us a request while the Insured is alive.

METHODS OF PAYMENT. We will pay the proceeds under the One Sum Method unless
you choose another method. If the payee is other than a natural person, we will
make payment under the One Sum method.

All payment intervals are measured from the date the policy is surrendered or
from the date the Insured dies. No part of any payment can be assigned before
the payment is made.

After the Insured's death, anyone who has the right to make a withdrawal may
change the method of payment and may name a successor to their interest. The
successor payee may be their estate.

METHOD 1 (INTEREST METHOD). We will pay interest at the end of each
monthly interval. The interest rate w ill be at least 3 1/2% a year. If
chosen, we will pay interest at the end of 3, 6, or 12 month intervals.
Withdrawals may be made at any time, but any withdrawal must be at least
$500. We will pay interest to the date of withdrawal on the amount withdrawn.

METHOD 2 (FIXED YEARS METHOD). We will make equal payments at the end of
each monthly interval for a fixed number of years. These payments include
interest. The guaranteed interest rate is 3 1/2% a year. The present value of
any unpaid payments may be withdrawn at any time.

- -------------------------------------------------------------------------------
FIXED YEARS TABLE
- -------------------------------------------------------------------------------
Monthly payments that $1000 will provide for the number of years chosen.
Payments for years not shown will be given, if requested.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
YEARS PAYMENTS YEARS PAYMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $84.90 8 $11.93
2 43.18 9 10.78
3 29.28 10 9.86
4 22.33 15 7.12
5 18.17 20 5.77
6 15.39 25 4.98
7 13.41 30 4.46
- -------------------------------------------------------------------------------
</TABLE>

PAGE 9

<PAGE>
PAYMENT OF BENEFITS PROVISIONS (CONTINUED)

METHOD 3 (LIFE INCOME METHOD). We will make equal payments at the end of
each monthly interval as long as the payee is alive. We base the amount of each
payment on the payee's age and sex at the start of the first monthly interval.
We may require proof of the payee's age and sex. The payee may not withdraw the
present value of the payments. If the payee dies during a certain
period, we will continue the payments to the successor payee to the end of the
certain period; or the successor payee may have the present value of any
remaining payments paid in one sum.

- -------------------------------------------------------------------------------
LIFE INCOME TABLE
- -------------------------------------------------------------------------------
Monthly payments for life that $1000 will provide. Payments for ages not shown
will be given, if requested.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIFE WITH
AGE LAST LIFE 10 YEARS CERTAIN
BIRTHDAY MALE FEMALE MALE FEMALE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
50 $4.34 $4.02 $4.30 $4.01
55 4.70 4.31 4.64 4.28
60 5.17 4.69 5.07 4.64
65 5.82 5.20 5.63 5.11
70 6.73 5.90 6.34 5.73
75 8.01 6.92 7.17 6.52
- -------------------------------------------------------------------------------
</TABLE>

METHOD 4 (FIXED AMOUNT METHOD). We will make equal payments at the end
of 1, 3, 6, or 12 month intervals. We will continue payments until the
amount put under this method together with compound interest has been paid.
The interest rate will be at least 3 1/2% a year. The payment interval
chosen must provide a total annual payment of at least $100 for each $1000
put under this method. The unpaid balance may be withdrawn at any time.

METHOD 5 (JOINT LIFE INCOME METHOD). We will make equal payments at the
end of each monthly interval as long as at least one of the two payees is
alive. We will base each payment on the age and sex of both payees at the
start of the first monthly interval. We may require proof of the age and sex
of each payee. The payees may not withdraw the present value of any payments.

- -------------------------------------------------------------------------------
JOINT LIFE INCOME TABLE
- -------------------------------------------------------------------------------
Monthly payments that $1000 will provide as long as at least one of the two
payees is alive. Payments for age combinations not shown will be given, if
requested.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGE LAST FEMALE
BIRTHDAY 60 65 70 75
MALE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
60 $4.27 $4.47 $4.66 $4.82
65 4.39 4.66 4.93 5.19
70 4.49 4.82 5.20 5.58
75 4.56 4.95 5.42 5.95
- -------------------------------------------------------------------------------
</TABLE>

METHOD 6 (ONE SUM METHOD). We will pay the Cash Surrender Value or the
proceeds in one sum. Interest at the rate of at least 3 1/2% a year will be
paid from the date of the Insured's death to the date of payment.

METHOD 7 (OTHER METHOD). Payment by any other method may be made if we
agree.

MINIMUM PAYMENT. If any payment, except the last, under a method of payment
would be less than $100 per payee, we will pay the present value of any unpaid
payments in one sum.

BASIS OF COMPUTATION FOR PAYMENTS. The monthly payments shown for methods 3 and
5 are guaranteed payments based on an interest rate of 3 1/2% a year and the
1983a Individual Annuity Mortality Table with ages set back 4 years.

Any present values will be based on the interest rate used in determining the
payments for the method.

ADDITIONAL AMOUNTS PAYABLE. Each year we will apportion and pay dividends or
additional interest under any method of payment.

PAGE 10

<PAGE>
PREMIUM PROVISIONS

PAYMENT OF PREMIUMS. You may pay premiums at our Home Office, a regional
office, or to one of our authorized agents. We will give you a receipt
signed by one of our officers, if you request one. The initial premium is
shown on page 3 and is due on the Policy Date. All other premiums may be
paid at any time and must be at least $25.

PREMIUM CHARGE. The premium charge percentage times the amount of the premium
received is the premium charge. The actual premium charge percentage will be
determined as described in the Change in Rates and Charges provision. Such
percentage cannot exceed the maximum premium charge percentage shown on page 3.

REJECTION OF PREMIUM PAYMENTS FOR TAX PURPOSES. We reserve the right to
reject any premium paid if such premium amount would result in this policy
being disqualified as a life insurance contract under any section of,
regulation or ruling under, the Code, as amended from time to time. We
reserve the right to request evidence of insurability prior to accepting any
premium payment. We will promptly return any rejected premium. No premium
charge will be deducted from any rejected premium.

GRACE PERIOD. If, on any Deduction Date, the Death Benefit Guarantee is not
in effect and the Cash Surrender Value is not enough to cover the monthly
deduction, the policy will stay in force until the end of the grace period.
The grace period starts on that Deduction Date and ends 61 days after we mail
a notice to you and to any assignee of record. The notice will state (1) the
policy will remain in force until the end of the grace period, (2) the date
the grace period ends, and (3) the policy will terminate unless the required
premium is paid prior to that date.

If the grace period ends prior to the Death Benefit Guarantee Period
Expiration Date, the required premium must be large enough to provide the
lessor of:

(1) the Minimum Premium required at the end of the grace period or

(2) an amount large enough to provide an increase in the Cash Surrender Value
to cover the monthly deductions for the grace period and any increase in
the surrender charges through the end of the grace period.

If the grace period ends after the Death Benefit Guarantee Period Expiration
Date, the required premium must be large enough to provide an increase in the
Cash Surrender Value to cover the monthly deductions for the grace period and
any increase in the surrender charges through the end of the grace period.

If the required premium is not paid before the end of the grace period, this
policy will lapse and terminate without value.

REINSTATEMENT. If the policy is terminated at the end of the grace period,
you may apply to reinstate it within 5 years after lapse. You must give us
proof of the Insured's insurability that is satisfactory to us. You must pay
a premium as specified below:

(1) If reinstatement is requested prior to the Death Benefit Guarantee Period
Expiration Date, that premium must be large enough to provide the lessor
of:
(a) the Minimum Premium required on the deduction date on or next
following the date reinstatement takes effect or
(b) an increase in the Policy Account Value over the amount we reinstate
so that the Cash Surrender Value will cover the monthly deductions for
the grace period and for the 2 months following the date the
reinstatement takes effect.
(2) If reinstatement is requested after the Death Benefit Guarantee Period
Expiration Date, that premium must be large enough to provide an increase
in the Policy Account Value over the amount we reinstate so that the Cash
Surrender Value will cover the monthly deductions for the grace period and
the 2 months following the date the reinstatement takes effect.
Reinstatement will take effect on the date we approve the application for
reinstatement. The amount of any Loan Amount on the date of lapse will be
reinstated when reinstatement takes effect. No interest from the date of lapse
to date of reinstatement is included in that amount. We will reinstate the
amount of the Policy Account Value equal to the Policy Account Value on the date
of lapse less any decrease in the amount of any surrender charge between the
date of lapse and the date of reinstatement.

PAGE 11

<PAGE>
VARIABLE ACCOUNT PROVISIONS

VARIABLE ACCOUNT. The Variable Account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940, as amended (the
"Act"). The Variable Account is also subject to the laws of the state of
Illinois, our state of domicile. We own the assets of the Variable Account;
however, these assets are held separately from our other assets and are not
part of our General Account. The assets of the Variable Account are used to
support the operation of and provide the variable values and benefits for
this policy and similar policies. The part of the assets of the Variable
Account equal to the reserves and other policy liabilities of the Variable
Account are not chargeable with liabilities from any other business in which
we take part. We have the right to transfer to our General Account any
assets of the Variable Account that are in excess of such reserves and other
liabilities.

SUBACCOUNTS. The Variable Account consists of Subaccounts. The income,
gains and losses, realized and unrealized, from the assets allocated to a
Subaccount are credited to or charged against such Subaccount, without regard
to our other income, gains or losses.

Those Subaccounts currently available under this policy are shown on page 3.
Each Subaccount invests exclusively in shares of a corresponding Fund. Shares
of a Fund are bought and redeemed for a Subaccount at their net asset value.
Any amounts of income, dividends, and gains distributed from the shares of a
Fund are reinvested in additional shares of that Fund at net asset value.

The dollar amounts of values and benefits of this policy provided by the
Variable Account depend on the investment performance of the Subaccounts
selected by you. We do not guarantee the investment performance of the
Subaccounts. You bear the full investment risk for the Subaccount Policy
Value in the Subaccounts you have chosen.

CHANGES TO THE VARIABLE ACCOUNT. Where permitted by applicable law, we may:
(1) create new separate accounts;
(2) combine separate accounts, including the Variable Account;
(3) add new Subaccounts to or remove existing Subaccounts from the
Variable Account or combine Subaccounts;
(4) make any Subaccount available to such classes of policies as we may
determine;
(5) add new Funds or remove existing Funds;
(6) substitute new Funds for any existing Fund if shares of the Fund are
no longer available for investment or if we determine investment in
a Fund is no longer appropriate in light of the purposes of the
Variable Account;
(7) deregister the Variable Account under the Act if such registration is
no longer required; and
(8) operate the Variable Account as a management investment company under
the Act or in any other form permitted by law.

The investment policy of the Variable Account will only be changed with the
approval of the insurance supervisory official of the state of Illinois, our
state of domicile. The investment policy of the Variable Account is to
invest in one or more investment companies. The process for such approval is
on file.

VARIABLE POLICY ACCOUNT VALUE. The Variable Policy Account Value reflects:
(1) the investment experience of the Subaccounts to which it is allocated;
(2) any Net Premium Payments allocated to the Subaccounts;
(3) transfers of Policy Account Value in or out of the Subaccounts;
(4) any dividends transferred to the Subaccounts;
(5) any deduction of the monthly deduction, withdrawal processing fee, or
transfer processing fee; or
(6) any withdrawals of the Variable Policy Account Value.
Transfers of Policy Account Value include any loan repayments allocated to the
Subaccounts. There is no guaranteed minimum Variable Policy Account Value.

PAGE 12

<PAGE>
VARIABLE ACCOUNT PROVISIONS (CONTINUED)

UNITS. For each Subaccount, Net Premium Payments allocated to a Subaccount or
amounts of Policy Account Value or dividend transferred to a Subaccount are
converted into Units. The number of Units credited to a policy equals the
dollar amount directed to each Subaccount divided by the value of the Unit for
that Subaccount for the Valuation Period as of which the dollar amount is
invested in the Subaccount. Any dollar amount directed to a Subaccount
increases the number of Units of that Subaccount credited to the policy.

Certain events will cancel an appropriate number of Units of a Subaccount
credited to a policy:
(1) withdrawals or transfers of Subaccount Policy Value from a Subaccount,
including any applicable withdrawal processing fee or transfer
processing fee deducted;
(2) surrender of the policy;
(3) payment of the proceeds; and
(4) deduction of the monthly deduction.
Units are cancelled as of the end of the Valuation Period in which the event
occurs.

UNIT VALUE. The Unit values for each Subaccount were arbitrarily set
initially at $10 when that Subaccount began operation. Thereafter, the Unit
value for every Valuation Period is the Unit value for the previous Valuation
Period times the Net Investment Factor. The Subaccount Policy Value on any
day equals the number of Units attributable to the policy times the Unit
Value for that Subaccount on that day.

NET INVESTMENT FACTOR. The Net Investment Factor is an index applied to
measure the investment performance of a Subaccount from one Valuation Period
to the next. The Net Investment Factor for any Subaccount for any Valuation
Period is equal to (1) divided by (2) and subtracting (3) from the result,
where:
(1) is the result of:
(a) the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the current Valuation Period; plus
(b) the per share amount of any dividend or capital gain distribution
made by the Fund held in the Subaccount, if the "ex-dividend"
date occurs during the Valuation Period; plus or minus
(c) a per share charge or credit for any taxes reserved for, which is
determined by us to have resulted from the operations of the
Subaccount.
(2) is the Net Asset Value Per Share of the Fund held in the Subaccount,
determined at the end of the prior Valuation Period.
(3) is a daily factor representing the mortality and expense risk charge
deducted from the Subaccount adjusted for the number of days in the
Valuation Period. The actual charge will be determined as described
in the Changes in Rates and Charges provision. Such charge will not
exceed an annual rate of .90% of the daily net asset value of the
Variable Account.

PAGE 13

<PAGE>
FIXED ACCOUNT PROVISIONS

FIXED POLICY ACCOUNT VALUE. The Fixed Policy Account Value on any Deduction
Date is the Fixed Policy Account Value on the prior Deduction Date (zero if
prior to the Policy Date):
(1) plus any Net Premium Payments allocated to the Fixed Account since the
prior Deduction Date; plus
(2) any Policy Account Value transferred to the Fixed Account since the
prior Deduction Date; plus
(3) any loan repayment transferred to the Fixed Account since the prior
Deduction Date; plus
(4) interest accrued to the Fixed Account since the prior Deduction Date;
plus
(5) any dividend paid and allocated to the Fixed Account on the current
Deduction Date, if the current Deduction Date is a policy anniversary;
less
(6) any withdrawals, transfers, any applicable withdrawal processing fee,
or any applicable transfer processing fees deducted from the Fixed
Account since the prior Deduction Date; less
(7) transfers to the Loan Account from the Fixed Account since the prior
Deduction Date; less
(8) the part of the following amounts allocated to the Fixed Account:
(a) the deduction for the cost of insurance for any increase in the
Basic Amount since the prior Deduction Date;
(b) the monthly charges for any riders that became effective since
the prior Deduction Date; and
(c) the current monthly deduction.

The Fixed Policy Account Value on any other date is the Fixed Policy Account
Value on the prior Deduction Date:
(1) plus any Net Premium Payments allocated to the Fixed Account since the
prior Deduction Date; plus
(2) any Policy Account Value transferred to the Fixed Account since the
prior Deduction Date; plus
(3) any loan repayment transferred to the Fixed Account since the prior
Deduction Date; plus
(4) interest accrued to the Fixed Account since the prior Deduction Date;
less
(5) any withdrawals, transfers, any applicable withdrawal processing fees,
or any applicable transfer processing fees deducted from the Fixed
Account since the prior Deduction Date; less
(6) transfers to the Loan Account from the Fixed Account since the prior
Deduction Date; less
(7) the part of the following amounts allocated to the Fixed Account:
(a) the deduction for the cost of insurance for any increase in the
Basic Amount since the prior Deduction Date; and
(b) the monthly charges for any riders that became effective since
the prior Deduction Date.

Any Net Premium allocated to the Fixed Account is added to the Fixed Policy
Account Value on the date allocated.

INTEREST CREDITED. We guarantee to credit interest to the Fixed Policy Account
Value. The actual effective annual rate will be determined as described in the
Changes in Rates and Charges provision. Such rate will not be less than the
Guaranteed Interest Rate shown on page 3. Except for surrender charges
allocated to and monthly deductions deducted from the Fixed Account, once
interest is credited to the Fixed Account that interest becomes part of the
Fixed Account and is nonforeitable.

PAGE 14

<PAGE>
FEES AND CHARGES PROVISIONS

MONTHLY DEDUCTION. The monthly deduction is a charge made by us on the Policy
Date and on every Deduction Date thereafter by reducing Subaccount Policy Values
(liquidating Units) and Fixed Policy Account Value. We will deduct the charge
from each Subaccount and the Fixed Account on a pro-rata basis. The monthly
deduction consists of the monthly cost of insurance, the monthly expense charge,
and the cost of any riders.

COST OF INSURANCE. This cost is calculated at the start of each Policy Month.
The cost is determined separately for the Initial Basic Amount and each increase
in Basic Amount.

The cost of insurance is the monthly cost of insurance rate times the difference
between (1) and (2), where:
(1) is the amount of insurance attributable to the Initial Basic Amount or
increase, as applicable, on the Deduction Date at the start of the
month divided by 1.0032737, and
(2) is the Policy Account Value attributable to the Initial Basic Amount
or increase, as applicable, on the Deduction Date at the start of the
month after the deduction of the part of the monthly deduction that
does not include the cost of insurance and the monthly charge for any
waiver of monthly deduction benefit rider.
Until the Policy Account Value exceeds the Initial Basic Amount, the Policy
Account Value is part of the Initial Basic Amount. Once the Policy Account Value
exceeds that amount, if there have been any increases in Basic Amount, the
excess will be part of the increases in order in which the increases occurred.

MONTHLY COST OF INSURANCE RATES. These rates for each policy year are based
on the Insured's age on the policy anniversary, sex, and applicable rate
class. A rate class will be determined for the Initial Basic Amount and for
each increase in Basic Amount. The rates shown on page 4 are the maximum
monthly cost of insurance rates for the Initial Basic Amount. Maximum
monthly cost of insurance rates will be provided for each increase in the
Basic Amount. The actual monthly cost of insurance rates will be determined
as described in the Change in Rates and Charges provision. Such rates cannot
exceed the maximum monthly cost of insurance rates and cannot be changed more
than once a calendar year.

MONTHLY EXPENSE CHARGE. The actual monthly expense charge will be determined as
described in the Changes in Rates and Charges provision. The charge cannot
exceed the maximum monthly expense charge shown on page 3.

SURRENDER CHARGE. The surrender charges are shown on page 3. We will deduct
any applicable surrender charge if you surrender the policy. The surrender
charge is deducted from Policy Account Value.

The surrender charge shown on page 3 is the sum of the surrender charge for the
Initial Basic Amount and any increase in Basic Amount.

WITHDRAWAL PROCESSING FEE. If you request a withdrawal, we will deduct a
withdrawal processing fee in addition to the amount of the withdrawal. The
withdrawal processing fee is shown on page 3.

TRANSFER PROCESSING FEE. A number of transfers during each policy year are
free as shown on page 3. We reserve the right to assess a transfer fee for
each transfer in excess of that number during a policy year. The amount of
the fee cannot exceed the amount shown on page 3. For the purpose of
assessing this fee, each request is considered one transfer, regardless of
the number of Subaccounts affected by the transfer. This fee is deducted on
a pro-rata basis from any Subaccount and the Fixed Account from which the
transfer is made. All transfers involving the Loan Account are not subject to
this provision.

PAGE 15

<PAGE>

ALLOCATION AND TRANSFERS PROVISIONS

ALLOCATION OF NET PREMIUM PAYMENTS. You may allocate Net Premium Payments among
the Subaccounts and the Fixed Account.

The allocation for the Initial Net Premium Payment and any Net Premium Payments
we receive prior to the end of the free-look period is shown on page 3. For
purposes of this provision, we presume your free-look period will end on the
date shown on page 3. On that date, any Policy Account Value will be
transferred to the Subaccounts and the Fixed Account on a pro-rata basis using
your allocation instructions for Net Premium Payments in effect at that time.
Any additional Net Premium Payments received will be allocated according to your
allocation instructions for Net Premium Payments in the application or in a
subsequent request.

Allocation instructions must be in whole percentages. The minimum amount we
can allocate to any Subaccount or the Fixed Account is shown on page 3 as a
percentage of any Net Premium Payment. We reserve the right to set
additional limitations on premium payment allocations.

TRANSFER RIGHT. While the Insured is alive and the policy is in force, you
may request to transfer all or part of any Subaccount Policy Value to another
Subaccount(s) (subject to availability) or to the Fixed Account, or transfer
all or part of the Fixed Policy Account Value to any Subaccount(s), (subject
to availability). Transfers are subject to the lesser of:
(1) the minimum transfer amount shown on page 3; and
(2) the entire Subaccount Policy Value or Fixed Policy Account Value,
and the additional restrictions on transfers from the Fixed Account.

We reserve the right to modify, restrict, suspend, or eliminate the transfer
right at any time, for any reason.

FIXED ACCOUNT TRANSFER RESTRICTIONS. You may transfer all or part of the Fixed
Policy Account Value to a Subaccount, subject to the following:
(1) You may make only one transfer each policy year from the Fixed Account
to one or more Subaccounts. Such a transfer must be made within 30
days after the policy anniversary. An unused transfer does not carry
over to the next year; and
(2) The maximum transfer amount is the greater of 25% of the Fixed Policy
Account Value on the date of the transfer or $1,000, unless waived by
us.

EXCHANGE OF POLICY. Within 24 months after the Policy Date or the effective
date of any increase in Basic Amount or within 60 days after the effective date
of a material change in the investment policy of the Variable Account, you have
the right to exchange this policy for a flexible premium adjustable life policy
that provides for benefits that do not vary with investment return of the
Subaccounts. You do this by requesting a transfer of the entire Variable Policy
Account Value to the Fixed Account. The Transfer Processing Fee provision does
not apply to this request.

On any policy anniversary, you have the right to exchange this policy for a
fixed paid-up whole life insurance policy. You do this by requesting us to
make this policy a paid-up whole life insurance policy. The effective date
will be the policy anniversary on or next following the date we receive your
request. We will transfer the entire Variable Policy Account Value to the
Fixed Account. The Transfer Processing Fee provision does not apply to this
request. If Death Benefit Option 2 is in effect, we will change the death
benefit option to Death Benefit Option 1. The Basic Amount on the effective
date will be determined by applying the Cash Surrender Value on the policy
anniversary as a single premium at the Insured's age, sex, and rate class.
The mortality table used to determine the maximum cost of insurance rates and
the Guaranteed Interest Rate for the Fixed Account will be used. Any riders
will be terminated. No monthly expense charge will be made. No further
changes in Basic Amount, changes in death benefit option, or withdrawals will
be allowed. The Fixed Policy Account Value will be reduced by the amount of
any surrender charge and the Loan Amount. No further surrender charge will
be applied. The Basic Amount Minimum will not apply. We will send you
revised pages 3 and 4 to be placed with this policy.

PAGE 16

<PAGE>
SURRENDER AND WITHDRAWAL PROVISIONS

SURRENDERS. You may request surrender of this policy at any time. This policy
will terminate on the date we receive your request or later date if you so
request it. See the Surrender Charge provision regarding the surrender charges
applicable.

WITHDRAWALS. You may request to withdraw part of the Cash Surrender Value while
this policy is in force. No more than 4 withdrawals can be made in any Policy
Year. Any withdrawal must be at least the minimum withdrawal amount shown on
page 3. The withdrawal is effective on the date we receive your request or a
later date, if you so request it. As of that date, the Policy Account Value is
reduced by the amount of the withdrawal and the withdrawal processing fee.
Unless specified by you, we will deduct the amount withdrawn and the fee from
each Subaccount and the Fixed Account on a pro-rata basis.

If death benefit option 1 is in effect, then the Basic Amount will be reduced by
the amount of any withdrawal. The effective date of the reduction will be the
date of the withdrawal. The reduction will be made as if a decrease in the
Basic Amount had been requested.

If you request a Basic Amount decrease or a death benefit option change at the
same time you request a withdrawal, we will process withdrawal before processing
either the Basic Amount decrease or the death benefit option change.

We reserve the right to reject a withdrawal request if the request would reduce
the Basic Amount below the Basic Amount Minimum shown on page 3. We reserve the
right to reject a withdrawal request if the withdrawal would result in this
policy being disqualified as a life insurance contract under any section of,
regulation or ruling under, the Code, as amended from time to time.

POLICY LOAN PROVISIONS

LOAN. You may request to borrow against this policy, but you should consider
possible tax consequences of doing this. This policy is the sole security
for such loan if you have signed the loan agreement and made a satisfactory
assignment of the policy to us. The amount requested when added to the Loan
Amount cannot exceed 90% of the Cash Value as of the date of the loan. If, on
any Deduction Date, the Loan Amount exceeds the Cash Value on that d ate and
the Death Benefit Guarantee is not in effect, the Grace Period provision will
apply.

INTEREST CHARGE FOR THE LOAN ACCOUNT. Interest accrues and is payable each day
at a rate of 8% a year. If, on any Policy Anniversary, any interest accrued
since the last Policy Anniversary is not paid, then that interest is added to
the Loan Account on that date.

LOAN COLLATERAL. When you borrow against this policy, we transfer an amount of
Policy Account Value sufficient to secure the loan out of the Subaccounts and
the Fixed Account into the Loan Account. Unless specified by you, we will
allocate the amount transferred from each Subaccount and the Fixed Account on a
pro-rata basis. If unpaid interest is due from you on a Policy Anniversary and
is added to the Loan Account, an amount equal to the unpaid interest is
transferred to the Loan Account on that Policy Anniversary. We will allocate
the amount of unpaid interest transferred from each Subaccount and the Fixed
Account on a pro-rata basis.

INTEREST CREDIT FOR THE LOAN ACCOUNT. Interest will be credited at an effective
annual rate of interest shown on page 3. On each Deduction Date, interest
earned on the Loan Account since the preceding Deduction Date is transferred to
each Subaccount and the Fixed Account based on your allocation instructions for
Net Premium Payments.

PAGE 17

<PAGE>
POLICY LOAN PROVISIONS (CONTINUED)

LOAN REPAYMENT. You may repay all or part of a loan at any time before the
Insured dies or the policy is surrendered or terminated. On the date we receive
the repayment, Loan Policy Account Value equal to the repayment is transferred
to the Subaccounts and the Fixed Account. Unless specified by you, the amount
transferred is allocated to each Subaccount and the Fixed Account based on your
allocation instructions for Net Premium Payments.

GENERAL PROVISIONS

THE CONTRACT. The policy contains the Basic Plan, any amendments,
endorsements, and riders, and a copy of the application. A copy of any
application for a change to this policy will be sent to you to be placed with
the policy. Such applications become part of this policy. The policy is the
entire contract. We have relied on the statements in the application in
issuing this policy. We reserve the right to investigate the truth and
completeness of those statements. Those statements are representations and
not warranties. Only statements in the application will be used to rescind
this policy or deny a claim.

Only an officer has the right to change this policy. No agent has the authority
to change the policy or to waive any of its terms. All endorsements,
amendments, and riders must be signed by an officer to be valid.

We may modify this policy as follows after we notify you:
(1) to conform the policy or our operations or the operation of the
Variable Account to the requirements of any law (or regulation issued
by a government agency) to which we, this policy, or the Variable
Account is subject.
(2) to assure continued qualification of this policy as a life insurance
policy under the Code; or
(3) to reflect a change in the operation of the Variable Account, if
allowed by this policy.
If we modify this policy, we will send you the appropriate endorsement to be
placed with this policy. If any provision of this policy conflicts with the law
of a jurisdiction that governs this policy, the provision is deemed to be
amended to conform with such law.

TRANSACTION DELAY. We usually make any payments from the Subaccounts within 7
business days of our receipt of the request for payment; however, we may
postpone:
(1) payment of Cash Surrender Value or a withdrawal,
(2) making a policy loan,
(3) payment of any part of the proceeds in excess of the Basic Amount, and
(4) transfer from a Subaccount
if:
(1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings); or
(2) the SEC permits, by an order, the postponement for the protection of
owners;
(3) the SEC requires that trading be restricted or declares an emergency;
or
(4) the SEC determines an emergency exists that would make the disposal of
securities held in the Variable Account or the determination of their
value not reasonably practicable.
We may defer payment from the Fixed Account of any Cash Surrender Value,
withdrawal, transfer, or policy loan for up to 6 months from the date we receive
your request. However, a withdrawal or a policy loan to pay a premium on other
policies with us will not be deferred.

If we defer any such payment for 30 days or more, we will pay interest in
addition to such payment. Such interest accrues from the date the payment
becomes payable to the date of payment at 3 1/2% per year or the rate and time
required by law, if greater.

PAGE 18

<PAGE>
GENERAL PROVISIONS (CONTINUED)

MINIMUM VALUES. The Cash Surrender Values are at least as large as those
required by law in the state where this policy is delivered. The insurance
authority there has a statement of how these values are calculated. We base
minimum Cash Surrender Values, maximum monthly cost of insurance rates, and
reserves on the Insured's age last birthday, sex and tobacco use, if
applicable. The guaranteed interest rate for the Fixed Account is shown on
page 3. The mortality table used is shown on page 4.

ANNUAL REPORT. Each year, or more often if required by law, we will send you a
report. This report will show:
(1) the period covered by the report;
(2) the current Policy Account Value, the Cash Value, and the Cash
Surrender Value;
(3) the current Variable Policy Account Value showing each Subaccount
Policy Value, Fixed Policy Account Value, and the Loan Policy Account
Value;
(4) the amount of the death benefit as of the date of the report;
(5) any premiums paid, any deductions made, any withdrawals made, and any
dividends paid since the last report;
(6) current Net Premium allocations; and
(7) any other information required by law or by the Superintendent of
Insurance where this policy is delivered.
You may request additional copies of reports from us, but we reserve the right
to charge a fee for additional copies.

ANNUAL DIVIDENDS. We do not expect to pay dividends on this policy; however, we
may apportion and pay dividends each year. All dividends apportioned will be
derived from the divisible surplus of our participating business. Any such
dividends will be paid only at the end of the Policy Year. There is no right to
a partial or pro rated dividend prior to the end of the Policy Year.

You may choose to have your dividend used under one of these options:
1. Cash. We will pay it to you in cash.
2. Increase in Basic Amount. We will use it to increase the Basic
Amount. The amount of the increase is based on the single premium
rate at the Insured's sex and attained age at that time assuming
paid-up whole life insurance. We will transfer the amount of the
dividend to the Policy Account Value at the end of the Policy Year.
Unless specified by you, the amount transferred is allocated to each
Subaccount and the Fixed Account on a pro-rata basis.

If you do not choose an option or the option you choose is not available, we
will use option 2. You may request to change the option. The change will apply
only to dividends paid after we receive the request.

CHANGES IN RATES AND CHARGES. Monthly cost of insurance rates, monthly charges
for any additional insured's level term life insurance benefit rider, the
premium charge percentage, the monthly expense charge, the mortality and expense
risk charge, and the interest rate applicable to the Fixed Account are subject
to change at any time. We will determine each based on future expectations as
to investment earnings, mortality, expenses, and persistency. Any changes will
be made in accordance with procedures and standards on file with the
Superintendent of Insurance where this policy is delivered. The frequency of
review will be at least as often as such rates and charges are reviewed for new
issues. The monthly cost of insurance rates and monthly charges for any
additional insured's level term life insurance benefit rider will be reviewed at
least once every 5 years.

ASSIGNMENT. You may assign this policy or any interest in it. We will
recognize an assignment only if it is in writing and filed with us. We are not
responsible for the validity or effect of any assignment. An assignment may
limit the interest of any beneficiary.

PAGE 19

<PAGE>
GENERAL PROVISIONS (CONTINUED)

ERROR IN AGE OR SEX. If the Insured's date of birth or sex is not as stated in
the application, we will adjust each benefit on the Insured to the benefit
payable had the Insured's age and sex been stated correctly. Such adjustment
will be based on the ratio of the correct deduction for the cost of insurance or
monthly charge for the most recent Deduction Date for that benefit to the
deduction for the cost of insurance or monthly charge that was made. For the
Basic Plan, the adjustment is made to the amount of insurance less the Policy
Account Value.

INCONTESTABILITY. We will not contest the Basic Plan after it has been in force
during the Insured's lifetime for 2 years from the issue date of the policy. We
will not contest any increase in Basic Amount or reinstatement after it has been
in force during the lifetime of the Insured for 2 years from the effective date
of the increase in Basic Amount or reinstatement. We will not contest an
increase due to a change to Death Benefit Option 1. Any contest of any increase
in Basic Amount or reinstatement will be limited to material statements
contained in the application for such increase or reinstatement.

Each rider has its own incontestability provision.

SUICIDE EXCLUSION. If the Insured dies by suicide within 2 years from the
issue date of the policy, the Basic Amount will not be paid. The proceeds in
this case will be limited to the premiums paid on the Basic Plan less any
Loan Amount, any withdrawals and applicable surrender charges from the Policy
Account Value, and any dividends paid on the Basic Plan.

Any increase in Basic Amount will not be paid if the Insured's death results
from suicide within 2 years from the effective date of such increase. The
proceeds of the increase will be limited to the monthly cost of insurance
deductions for such increase. This does not apply to an increase due to a
change to Death Benefit Option 1.

Each rider has its own suicide exclusion provision.

PAGE 20

<PAGE>
BASIC PLAN DESCRIPTION
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE. A Death Benefit is payable
when the Insured dies before the Maturity Date. The Cash Surrender Value is
payable if the Insured is alive on the Maturity Date. Coverage may terminate
prior to the Maturity Date. Flexible premiums are payable while the Insured is
alive until the Maturity Date. The Basic Plan is eligible for annual
dividends.

<PAGE>

Ex-1A(5)(b)

- -------------------------------------------------------------------------------
ADDITIONAL INSURED'S LEVEL TERM LIFE INSURANCE BENEFIT RIDER
- -------------------------------------------------------------------------------

GENERAL. This rider is part of your policy. It is based on the application
for this rider and the deduction of the monthly charges for this rider. Only
certain policy provisions are a part of this rider. They are "Definitions,"
"Ownership," "Payment of Benefits," "Grace Period," "Reinstatement," "Monthly
Deduction," "The Contract," "Annual Dividends," "Changes in Rates and
Charges," "Assignment," and "Error in Age or Sex." The Additional Insured is
named on page 3. "Ownership" is modified by "Ownership Modification."
"Additional Insured" is used in place of "Insured" in the Reinstatement and
Error in Age or Sex provisions when they apply to this rider. The Additional
Insured is named on page 3. This rider does not increase the Policy Account
Value. The rider does not develop cash value, but monthly charges are
deducted from the Policy Account Value.

ADDITIONAL INSURED'S LEVEL TERM LIFE INSURANCE BENEFIT. The amount is shown
on page 3 of the policy. This amount will be paid when due proof is received
that the Additional Insured died before this rider terminated.

MONTHLY CHARGES FOR THIS RIDER. The charges for each policy year are based
on the Additional Insured's age on the policy anniversary, sex, and rate
class for this rider. The actual monthly charges for this rider will be
determined as described in the Changes in Rates and Charges provision. Such
charges cannot exceed the maximum monthly charges for this rider shown per
$1000 on page 4 and cannot be changed more than once a calendar year.

OWNERSHIP MODIFICATION. If the Insured is the Owner, the Additional Insured
will become the Owner when the Insured dies.

BENEFICIARY. When the Additional Insured dies, we will make payment to you,
if then living. Otherwise, we will make payment in equal shares to any
surviving children born to or legally adopted by the Insured and Additional
Insured if they were husband and wife. Otherwise, we will make payment to
the Additional Insured's estate. We will make the payment in one sum. You
may request that this provision be changed.

CONVERSION. You may request to convert this rider to a new policy on the
Additional Insured without evidence of insurability subject to the following:
(1) This rider must be in force.
(2) The conversion must occur on or before the policy anniversary
when the Additional Insured is age 75.
(3) The request must include this policy and the first premium for
the new policy.

If the Insured dies while this rider can be converted, the request to convert
must be received within 90 days after the Insured dies. The effective date
of the new policy will be the day after the end of the 90-day period.
Coverage continues until the end of that period.

The new policy becomes effective when we receive that request. Coverage
under this rider will terminate when the conversion occurs. Pages 3 and 4 of
this policy will then be revised.

The new policy will be subject to the following conditions at the time of
conversion:
(1) It must be a whole life plan then available. At least one plan
will be made available.
(2) The amount of insurance can be no more than the amount then
provided by this rider.
(3) The premium will be based on the Additional Insured's attained
age, sex, and rate class. The rate class will be the same as
for this rider.
(4) All limitations of this rider will be part of the new policy.
(5) The Incontestability and Suicide Exclusion provisions in the new
policy will not extend beyond the period set by this rider.

<PAGE>
- -------------------------------------------------------------------------------
ADDITIONAL INSURED'S LEVEL TERM LIFE INSURANCE BENEFIT RIDER
(CONTINUED)
- -------------------------------------------------------------------------------

TERMINATION. This rider will terminate on the earlier of the policy
anniversary shown under Benefit Period Ends on page 3 or the policy
anniversary when the Additional Insured is age 80. We will terminate this
rider before either of those dates:
(1) when this rider is converted,
(2) when the policy is terminated by surrender or lapse or is
continued as a paid-up policy, or
(3) 90 days after the Insured's death.

You may request termination of this rider. You must send us the request and
the policy. This rider will terminate on the date the request and the policy
are received. We will revise pages 3 and 4 of the policy to show this change.

INCONTESTABILITY. We will not contest this rider after it has been in force
during the lifetime of the Additional Insured for 2 years from its issue date.

SUICIDE EXCLUSION. If the Additional Insured dies by suicide within 2 years
from the issue date of this rider, the benefit will be limited to the monthly
charges deducted for this rider.

EFFECTIVE DATE OF THIS RIDER. This is the policy date unless a different
date for this rider is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>

- -------------------------------------------------------------------------------
CHILDREN'S TERM LIFE INSURANCE BENEFIT RIDER
- -------------------------------------------------------------------------------

GENERAL. This rider is part of your policy. It is based on the application
for this rider and the deduction of the monthly charges for this rider. The
monthly charges per $1000 are shown on page 4. Only certain policy
provisions are a part of this rider. They are "Definitions," "Ownership,"
"Grace Period," "Reinstatement," "Monthly Deduction," "Annual Dividends,"
"The Contract," and "Assignment." "Ownership" is modified by "Ownership
Modification." "Each Eligible Child" is used in place of "Insured" in the
Reinstatement provision when it applies to this rider. This rider does not
increase the Policy Account Value.

CHILDREN'S TERM LIFE INSURANCE BENEFIT. The amount is shown on page 3 of the
policy. This amount will be paid when due proof is received that an Eligible
Child died before this rider terminated, after that child was 15 days old,
and before that child was age 25.

OWNERSHIP MODIFICATION. If the Insured is the Owner, the Eligible Children
under age 25 will become Joint Owners of this rider when the Insured dies.

ELIGIBLE CHILDREN DEFINED. A child, stepchild, or legally adopted child of
the Insured and named on the application who is under age 18 on this rider's
effective date. After the effective date, any newborn child of the Insured
will be an Eligible Child. After the effective date, any stepchild or
legally adopted child of the Insured will be an Eligible Child if the child
is under age 18 at the time of the Insured's marriage or of the adoption.

PAID-UP RIDER. If the Insured dies while this rider is in force, even if
such death results from suicide, the rider benefit becomes paid-up.

The paid-up rider has cash values. When paid up, a table of cash values will
be given, if requested. The cash values are at least as large as those
required by law in the state where this rider is delivered. The cash value
is the net level reserve for the paid-up term insurance. The age last
birthday and sex of each Eligible Child is used for calculating such reserve.
The Commissioners 1980 Standard Ordinary Mortality Table is used. The
interest rate is 5% a year. It is assumed that claims are paid immediately.
Cash values will not decrease during the 31 days after a policy anniversary.
There is no loan value. No dividends will be paid on the paid-up rider.

You may request to surrender the paid-up rider at any time. All coverage
ceases when we receive this request. We will promptly pay you the cash value
in one sum.

BENEFICIARY. When an Eligible Child dies, we will make payment to you, if
then living. Otherwise, we will make payment to the child's estate. The
payment will be in one sum. If more than one Owner is living at that time,
we will make payment in equal shares. You may request that this provision be
changed.

CONVERSION. When the insurance on an Eligible Child terminates on that
child's twenty-fifth birthday or on the policy anniversary shown on page 3
under Benefit Period Ends, such child may request to convert such insurance
to a new policy without evidence of insurability. We must receive that
request before that child dies and no later than 31 days after the insurance
terminates. If that child dies within the 31-day period and before the
conversion becomes effective, the benefit will be paid as though the
insurance had not terminated. The effective date of the new policy on that
child will be the day after the end of the 31-day period.

The new policy will be subject to the following conditions at the time of
conversion:
(1) It must be a plan then available. At least one plan will be
made available.
(2) The amount of insurance can be no more than five times the
amount then provided by this rider.
(3) The premium will be based on that child's attained age, sex,
and rate class. The rate class will be the same as for this
rider.
(4) All limitations of this rider will be part of the new policy.
(5) The Incontestability and Suicide Exclusion provisions in the
new policy will not extend beyond the time period specified
for the new policy but starting on this rider's issue date.

<PAGE>

- -------------------------------------------------------------------------------
CHILDREN'S TERM LIFE INSURANCE BENEFIT RIDER
(CONTINUED)
- -------------------------------------------------------------------------------

TERMINATION. This rider will terminate on the policy anniversary shown on
page 3 under Benefit Period Ends. We will terminate this rider before that
date when the policy is terminated by surrender or lapse or is continued as a
paid-up policy.

INCONTESTABILITY. We will not contest this rider after it has been in force
during the lifetime of each Eligible Child for 2 years from its issue date.

EFFECTIVE DATE OF THIS RIDER. This is the policy date unless a different
date for this rider is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>

- -------------------------------------------------------------------------------
WAIVER OF MONTHLY DEDUCTION BENEFIT RIDER
- -------------------------------------------------------------------------------

MONTHLY CHARGE FOR THIS RIDER. The monthly charge is (1) times (2) where:
(1) is the total monthly deduction to which this benefit applies
before the monthly charge for this rider is added and
(2) is the monthly charge for this rider per dollar of monthly
deduction.

The charges per dollar of monthly deduction are shown on page 4 and are not
subject to change.

WAIVER OF MONTHLY DEDUCTION BENEFIT. We will waive monthly deductions for
this policy as defined below if the Insured becomes totally disabled and such
total disability has existed for 6 continuous months during the lifetime of
the Insured. We will waive those monthly deductions as long as the total
disability continues. We will only waive monthly deductions on deduction
dates on and after total disability starts. Any monthly deductions taken
after the total disability starts will be reallocated to the Subaccounts and
the Fixed Account in the same manner as they were deducted. If Death Benefit
Option 1 is in effect, it will be automatically changed to Death Benefit
Option 2. The effective date of the death benefit option change will be the
date we start to waive monthly deductions.

The monthly deduction that will be waived includes only those portions of the
total monthly deduction for which a charge for this rider was deducted on the
deduction date on or just prior to the date total disability starts.

If part of the monthly deduction that is being waived is for the cost of
insurance on the Basic Amount, any increase in its surrender charges that
would occur while the total disability continues will be waived.

If we are waiving the monthly deduction on any Deduction Date during the
first 10 policy years, the minimum monthly premium for that Deduction Date is
zero.

TOTAL DISABILITY DEFINED. Total disability is a condition caused by injury
or disease. During the first 24 months after total disability starts, this
condition must prevent the Insured from performing substantially all of the
work of the Insured's regular occupation for remuneration or profit. After
the first 24 months, the condition must prevent the Insured from performing
substantially all of the work in any occupation for remuneration or profit
for which the Insured is, or becomes, reasonably qualified based upon
education, training, or experience. If the Insured is legally required to
attend school, total disability is a condition caused by injury or disease
which prevents the Insured from attending school. The Insured's total and
irrecoverable loss, caused by injury or disease, of any of the following will
be considered total disability even if the Insured is able to work:
(1) sight in both eyes.
(2) use of both hands.
(3) use of both feet.
(4) use of one hand and one foot.

DISABILITIES NOT COVERED. We will not waive monthly deductions if total
disability:
(1) starts before or within 2 years after the issue date of this
rider and is the result of disease or injury occurring before
the issue date of this rider unless such disease or injury was
disclosed in the application,
(2) results from an intended self-injury, or
(3) results from any act due to war whether or not the Insured is
in the military service and such war disability starts within
5 years from the issue date. "War" means declared or
undeclared war or conflict involving the armed forces of one
or more countries, governments, or international organizations.

We will not waive monthly deductions if total disability starts before the
policy anniversary when the Insured is age 5.

<PAGE>

- -------------------------------------------------------------------------------
WAIVER OF MONTHLY DEDUCTION BENEFIT RIDER (CONTINUED)
- -------------------------------------------------------------------------------

NOTICE AND PROOF OF TOTAL DISABILITY. Notice of a claim and due proof of
total disability must be given to us while the Insured is alive and totally
disabled. If this is not done, you should submit such notice and proof as
soon as reasonably possible. We may also require you to submit proof of the
Insured's continuing total disability at reasonable intervals. If you do not
submit proof when we require it, no further monthly deductions will be
waived. We will not require proof more than once a year after the total
disability has lasted more than 2 years.

PREMIUM PAYMENTS. If the Insured's total disability starts during a grace
period, before we will approve a claim, a premium must be paid which is large
enough to cover the monthly deductions plus any increase in the surrender
charge from the start of the grace period through the policy month in which
total disability starts.

Premiums, sufficient to keep the policy in force until we approve the claim,
are payable.

TERMINATION. This rider will terminate on the policy anniversary shown on
page 3 under Benefit Period Ends. We will terminate this rider before that
date when the policy terminates by surrender or lapse or is continued as a
paid-up policy.

Termination will not affect any claim for total disability which starts
before termination.

INCONTESTABILITY. We will not contest this rider after it has been in force
during the lifetime of the Insured for 2 years from its issue date unless the
Insured becomes totally disabled within that period.

EFFECTIVE DATE OF THIS RIDER. This is the date coverage starts. It is the
same as the issue date of the policy unless a different date for this rider
is shown on page 3. The effective date and issue date for this rider are
shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>

- -------------------------------------------------------------------------------
ACCIDENTAL DEATH BENEFIT RIDER
- -------------------------------------------------------------------------------

GENERAL. This rider is part of your policy. It is based on the application
for this rider and the deduction of the monthly charges for this rider. The
monthly charges per $1000 are shown on page 4 and are not subject to change.
Only certain policy provisions are a part of this rider. They are
"Definitions," "Ownership," "Payment of Benefit," "Grace Period,"
"Reinstatement," "Monthly Deduction," "The Contract," "Assignment," and
"Error in Age or Sex." This rider does not increase the Policy Account Value.

ACCIDENTAL DEATH BENEFIT. The amount is shown on page 3. We will pay this
amount when we receive due proof that the Insured's death:
(1) resulted, directly and independently of all other causes, from
an accidental bodily injury;
(2) occurred within 180 days of that injury; and
(3) occurred while this rider was in force.
We will pay this amount as part of the proceeds.

We will pay double the amount of accidental death benefit if death results
from travel as a fare-paying rider on a public conveyance licensed for
passenger service.

RISKS NOT ASSUMED. We will not pay a benefit if the Insured's death
results from any of the following:
(1) Suicide while sane or self-destruction while insane.
(2) The voluntary taking of a drug or drug-containing substance unless
taken as prescribed by a physician.
(3) The voluntary taking of a poison.
(4) The voluntary inhaling of a gas, fume, or vapor.
(5) Any disease of mind or body.
(6) Committing an assault or felony.
(7) Taking part in a riot.
(8) Flight in an aircraft:
(a) while the Insured has duties on such aircraft,
(b) as an instructor or student, or
(c) for the purpose of descent from such aircraft.
(9) Descent from an aircraft while in flight.
(10) Operating or riding in an aircraft controlled or chartered by a
military service.
(11) Any act due to war whether or not the Insured is in the military
service. "War" means declared or undeclared war or conflict involving
the armed forces of one or more countries, governments, or
international organizations.

We will not pay a benefit if death occurs before the Insured's first birthday.

TERMINATION. This rider will terminate on the policy anniversary when the
Insured is age 70. This rider will terminate before that date when the
policy terminates by surrender or lapse or is continued as a paid-up policy.

You may request termination of this rider. You must send us the request and
the policy. This rider will terminate on the date the request and policy are
received. We will revise pages 3 and 4 of the policy to show this change.

INCONTESTABILITY. We will not contest this rider after it has been in force
during the lifetime of the Insured for 2 years from its issue date.

EFFECTIVE DATE OF THIS RIDER. This is the policy date unless a different
date for this rider is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>

- -------------------------------------------------------------------------------
GUARANTEED INSURABILITY OPTION BENEFIT RIDER
- -------------------------------------------------------------------------------

GENERAL. This rider is part of your policy. It is based on the application
for this rider and the deduction of the monthly charges for this rider. The
monthly charges per $1000 are shown on page 4 and are not subject to change.
Only certain policy provisions are a part of this rider. They are
"Definitions," "Ownership," "Payment of Benefits," "Grace Period,"
"Reinstatement," "Monthly Deduction," "The Contract," "Assignment," and
"Error in Age or Sex." This rider does not increase the Policy Account Value.

GUARANTEED INSURABILITY OPTION BENEFIT. Option years for this benefit are
shown on page 3 of the policy. An option date is the policy anniversary in
the option year. On each option date before termination, you may increase
the Basic Amount. We must receive an application for the increase within the
60 day period that ends on the option date. No evidence of insurability is
required. The increase in Basic Amount will become effective on the option
date.

The increase in Basic Amount will be subject to the following conditions on
the option date.
(1) The amount of increase must be at least $10,000 but can be no more
than the initial amount for this rider as shown on page 3 of the
policy.
(2) The monthly cost of insurance rates will be based on the Insured's
attained age, sex, and rate class. The rate class shown on page 3
for this rider will be used.
(3) All limitations that apply to the policy on this rider's effective
date will apply to the increase. Any limitations that we would
place on such policies then being issued will apply to the increase.
(4) We will not contest the increase after this rider has been in force
during the lifetime of the Insured for 2 years from this rider's
issue date.
(5) If the waiver of monthly deduction benefit is then a part of the
policy and monthly deductions are then being waived, the monthly
deduction for the increase will be waived while the Insured's total
disability continues.

There is a 90-day period of term life insurance on the Insured. It starts
when a named event occurs. A "named event" is:
(1) the Insured's marriage,
(2) a live birth of a child of the Insured, or
(3) the effective date of a legal adoption of a child by the Insured.
The term life insurance provided is equal to the initial amount of this
rider. If a multiple birth occurs, this amount is multiplied by the number of
live children born at that time. The amount will be paid when due proof is
received that a named event occurred and the Insured died within the 90-day
period and before this rider terminated. The amount will be paid as part of
the proceeds.

ADVANCE OF OPTION DATE. When such term insurance is in effect, the next
available option date may be advanced to the day after the end of the 90-day
period. The amount of increase can be no more than the amount of term insurance
then provided. If an increase becomes effective, the option date that is
advanced will be canceled. To advance the option date, we must receive due
proof that a named event occurred.

You may request to terminate this rider. You must send us the request and
the policy. This rider will terminate the later of the date we receive your
request and the policy or the termination date you choose. We will revise
pages 3 and 4 of the policy to show this change.

INCONTESTABILITY. We will not contest this rider after it has been in force
during the lifetime of the Insured for 2 years from its issue date.

<PAGE>

- -------------------------------------------------------------------------------
GUARANTEED INSURABILITY OPTION BENEFIT RIDER (CONTINUED)
- -------------------------------------------------------------------------------

SUICIDE EXCLUSION. If the Insured dies by suicide within 2 years from the
issue date of this rider, the benefit will be limited to the charges paid
for this rider.

EFFECTIVE DATE OF THIS RIDER. This is the policy date unless a different
date for this rider is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>
- -------------------------------------------------------------------------------
AVIATION LIMITATION ENDORSEMENT
- -------------------------------------------------------------------------------

LIMITED DEATH BENEFIT. If the Risks Not Assumed provision applies when the
Insured dies, the proceeds will be limited to the greater of (1) or (2):
(1) This amount will be the total premiums paid less the total
dividends paid less any withdrawals. Any loan and accrued loan
interest that exists when the Insured dies will be deducted from
this amount.
(2) This amount will be the reserve on the Basic Plan. The reserve is
based on the Commissioners 1980 Standard Ordinary mortality table.
It is assumed that deaths during any policy year occur evenly
during that year. The interest rate is 4%. The reserve is
calculated using the Commissioners Reserve Valuation Method. Any
loan and accrued loan interest that exists when the Insured dies
will be deducted from this amount.

GENERAL. This endorsement does not affect any Accidental Death Benefit
Rider.

Any policy issued in exchange for this policy will contain a similar
endorsement.

RISKS NOT ASSUMED. This endorsement will apply if the Insured's death
results from any of the following:
(1) Flight in an aircraft while the Insured has duties on such aircraft.
(2) Flight in an aircraft as an instructor or student.
(3) Flight in an aircraft for the purpose of descent from such aircraft.
(4) Descent from an aircraft while in flight.
(5) Operating or riding in an aircraft controlled or chartered by a
military service.

EFFECTIVE DATE OF THIS ENDORSEMENT. This is the policy date unless a
different date is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>
- -------------------------------------------------------------------------------
AVIATION LIMITATION ENDORSEMENT (5 YEAR)
- -------------------------------------------------------------------------------

GENERAL. This endorsement does not affect any Accidental Death Benefit Rider.

Any policy issued in exchange for this policy will contain a similar
endorsement.

RISKS NOT ASSUMED. This endorsement will apply if the Insured's death occurs
within 5 years from the effective date of this endorsement and results from
any of the following:
(1) Flight in an aircraft while the Insured has duties on such aircraft.
(2) Flight in an aircraft as an instructor or student.
(3) Flight in an aircraft for the purpose of descent from such aircraft.
(4) Descent from an aircraft while in flight.
(5) Operating or riding in an aircraft controlled or chartered by a
military service.

EFFECTIVE DATE OF THIS ENDORSEMENT. This is the policy date unless a
different date is shown on page 3.

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

/s/ Edward B. Rust Jr.
President

/s/ Laura P. Sullivan
Secretary

<PAGE>

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY, BLOOMINGTON, ILLINOIS
VARIABLE UNIVERSAL LIFE INSURANCE APPLICATION PAGE 1

- -----------------------------------------------------------------------------------------------------------------------------------
1 IF THE APPLICATION IS FOR A CHANGE IN A STATE FARM POLICY, GIVE THE POLICY NUMBER:
----------------------
- -----------------------------------------------------------------------------------------------------------------------------------
2 PROPOSED INSURED 1 (PRINT NAME IN FULL)
- -----------------------------------------------------------------------------------------------------------------------------------
MR / / LAST NAME FIRST NAME MIDDLE INITIAL MAILING ADDRESS
a MS / /
- -----------------------------------------------------------------------------------------------------------------------------------
CITY STATE ZIP CODE IN YES NO SOCIAL SECURITY DRIVER'S STATE
CITY? / / / / OR TAX ID NUMBER LICENSE NUMBER
b
- -----------------------------------------------------------------------------------------------------------------------------------
SEX BIRTH DATE AGE MARITAL STATUS HEIGHT WEIGHT STATE UNITED STATES OR YES NO
MO-DAY-YR OF BIRTH CANADIAN CITIZEN? / / / /
c
- -----------------------------------------------------------------------------------------------------------------------------------
OCCUPATION EMPLOYERS NAME Do job duties fall into one of the following YES NO
(GIVE EXACT DUTIES) AND ADDRESS hazardous categories? (amusements/sports; construction/ / / / /
d explosive/divers; liquor; logging/mining; gas/oil)
- -----------------------------------------------------------------------------------------------------------------------------------
3 PROPOSED INSURED 2 (PRINT NAME IN FULL)
- -----------------------------------------------------------------------------------------------------------------------------------
MR / / LAST NAME FIRST NAME MIDDLE INITIAL SOCIAL SECURITY OR DRIVER'S STATE
a MS / / TAX IDENTIFICATION LICENSE NUMBER
NUMBER
- -----------------------------------------------------------------------------------------------------------------------------------
SEX BIRTH DATE AGE MARITAL STATUS HEIGHT WEIGHT STATE UNITED STATES OR YES NO
MO-DAY-YR OF BIRTH CANADIAN CITIZEN? / / / /
b
- -----------------------------------------------------------------------------------------------------------------------------------
OCCUPATION EMPLOYERS NAME Do job duties fall into one of the following YES NO
(GIVE EXACT DUTIES) AND ADDRESS hazardous categories? (amusements/sports; construction/ / / / /
c explosive/divers; liquor; logging/mining; gas/oil)
- -----------------------------------------------------------------------------------------------------------------------------------
4 APPLICANT/OWNER (IF NOT PROPOSED INSURED 1, PRINT NAME IN FULL)
- -----------------------------------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
a
- -----------------------------------------------------------------------------------------------------------------------------------
MAILING ADDRESS CITY STATE ZIP CODE IN YES NO
b CITY? / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
SUCCESSOR OWNER (REQUIRED UNLESS APPLICANT/OWNER IS A TRUST OR CORPORATION)
- -----------------------------------------------------------------------------------------------------------------------------------
LAST NAME FIRST NAME MIDDLE INITIAL
c
- -----------------------------------------------------------------------------------------------------------------------------------
COMPLETE: IF PROPOSED a Is Proposed Insured 1 to be YES NO b Give amount of (IF NONE, SO INDICATE)
INSURED IS UNDER AGE 16 Owner at and after age 21? / / / / insurance in force on:
Father $ Mother $
- -----------------------------------------------------------------------------------------------------------------------------------
5 VARIABLE UNIVERSAL LIFE
- -----------------------------------------------------------------------------------------------------------------------------------
a Initial Basic Amount: $
- -----------------------------------------------------------------------------------------------------------------------------------
b Death Benefit: / / Option 1- / / Option 2-Basic Amount
(COMPLETE FOR NEW POLICY ONLY) Basic Amount plus Account Value
If option not chosen, policy provisions determine option.
- -----------------------------------------------------------------------------------------------------------------------------------
Riders/Benefits applied for: Waiver of Monthly YES NO
c (CHECK RATEBOOK FOR AVAILABILITY OF RIDERS.) Deduction (For Disability) / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
/ / AMOUNT / / AMOUNT
AD GIO 1-COMPLETE 8 & 9
- -----------------------------------------------------------------------------------------------------------------------------------
/ / / / A1 2 AMOUNT 2-COMPLETE QUESTIONS
CTR(1) UNITS TERM FOR PROPOSED INSURED 2
- -----------------------------------------------------------------------------------------------------------------------------------
d Dividend Option: / / Increase in Basic Amount / / Cash Payment
If option not chosen, policy provisions determine option.
- -----------------------------------------------------------------------------------------------------------------------------------
e Planned Premium: ------------------------
AGENTS EMPLOYEES EXISTING SPECIAL MONTHLY
EXISTING PAYROLL PAYROLL SALARY ACCOUNT NUMBER:
ANNUAL SFPP LIFE PAC DEDUCTION DEDUCTION ALLOTMENT
Mode: / / / / / / / / / / / / ------------------------
(Check one)

Amount to be billed each payment date $
-------------------
- -----------------------------------------------------------------------------------------------------------------------------------
f Increase in Basic Amount:
(DO NOT COMPLETE FOR NEW POLICY) $
- -----------------------------------------------------------------------------------------------------------------------------------
g Initial Account and Payment Allocation: COMPLETE FOR NEW POLICY ONLY
(During the free look period, all net premiums %
will be allocated to the Fixed Account.) (MUST BE WHOLE %
WITH 1% MINIMUM)

/ / Large Cap Equity Index Subaccount
----------------
/ / Small Cap Equity Index Subaccount
----------------
/ / International Equity Index Subaccount
----------------
/ / Stock and Bond Balanced Subaccount
----------------
/ / Bond Subaccount
----------------
/ / Money Market Subaccount
----------------
/ / Fixed Account
----------------
TOTAL = 100 %
- -----------------------------------------------------------------------------------------------------------------------------------
h Check the appropriate box if you wish to have:
ONLY ONE MAY BE IN EFFECT AT ONE TIME.
/ / Dollar Cost Averaging -OR- / / Portfolio Rebalancing
COMPLETE SEPARATE FORM IF EITHER IS CHECKED.
- -----------------------------------------------------------------------------------------------------------------------------------
i Premium submitted with the application $
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
6 BENEFICIARY DESIGNATION - PROPOSED INSURED 1
- -----------------------------------------------------------------------------------------------------------------------------------
Completion of this section will replace all previous rider and policy designations for this policy. If a Change of Plan,
this will replace previous designations.
- -----------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY - FULL NAME AGE RELATIONSHIP

/ / Interest Option or / / One Sum or / / Other-Explain*
- -----------------------------------------------------------------------------------------------------------------------------------
SUCCESSOR BENEFICIARY - FULL NAME AGE RELATIONSHIP

One Sum Settlement Only
- -----------------------------------------------------------------------------------------------------------------------------------
* IF ADDITIONAL SPACE IS NEEDED, USE THE EXPLANATION SECTION ON PAGE 2.
If a beneficiary survives the Insured, any payment to successor will be one sum, unless changed.
- -----------------------------------------------------------------------------------------------------------------------------------
7 BENEFICIARY DESIGNATION - PROPOSED INSURED 2
- -----------------------------------------------------------------------------------------------------------------------------------
(Complete for Additional Insured's rider only if Beneficiary provision in the rider is NOT desired.) If a Change of Plan this will
replace previous designations. If this section is completed, the Payment of Benefit Provisions of the policy will control rather
than the Beneficiary provision of such rider. "Additional Insured" would be used in place of "Insured."
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY - FULL NAME AGE RELATIONSHIP

<PAGE>

VARIABLE UNIVERSAL LIFE INSURANCE APPLICATION PAGE 2
- --------------------------------------------------------------------------------
CHILDREN'S TERM RIDER OR JUVENILE APPLICATIONS (AGES 0 -15)
COMPLETE 8 & 9 COMPLETE 9 & 10

<S><C>
8 List children under age 18: (ONLY IF CTR APPLIED FOR) (IF NONE, SO STATE)
------------------------------------------------------------------------------------
LAST NAME, FIRST NAME, MI RELATIONSHIP TO BIRTH DATE AMOUNT NOW
(IF LAST NAME DIFFERENT EXPLAIN) PROPOSED INSURED (1) ------------ INSURED FOR
MO. DAY YR.
------------
$

</TABLE>

9 Has juvenile or have any children named in question 12:
(IF YES, EXPLAIN) YES NO

a had a birth defect, mental disorder, or
impairment of sight, hearing, or speech? / / / /

b had asthma, seizure, diabetes, or kidney disease? / / / /

c had heart murmur, anemia, leukemia, or cancer? / / / /

d in the last 3 years, for any reason not
previously explained, been a patient in a
hospital, clinic, or emergency room? / / / /

e in the last 10 years, had or been
treated for Acquired Immune Deficiency
Syndrome (AIDS)? / / / /
- --------------------------------------------------------------------------------
ALL APPLICATIONS COMPLETE 10
- --------------------------------------------------------------------------------
PROPOSED INSURED
1 2
YES NO YES NO
10a Do you have personal and business life
insurance of more than $200,000 (IF YES,
GIVE AMOUNTS AND DETAILS) / / / / / / / /

b Do you have any accidental death insurance
excluding group? (IF YES, AND AD APPLIED FOR,
GIVE AMOUNT ____________) / / / / / / / /

c Will this policy replace or change
insurance or annuities you now have? (IF
YES, EXPLAIN) / / / / / / / /

d Are you now applying for life or heath
insurance with any other company? (IF YES,
STATE COMPANIES AND AMOUNT) / / / / / / / /

e Do you plan to leave or travel from the
United States or Canada in the next 6
months? (IF YES, EXPLAIN) / / / / / / / /
- ----------------------------------------------------
APPLICATIONS (AGES 16 & UP):
- - IF NO MEDICAL EXAM REQUIRED
COMPLETE 10-16
- - IF MEDICAL EXAM REQUIRED
COMPLETE 11, 12, 14a, & 14e.
- ----------------------------------------------------
11 Have you used tobacco in any form in the
last 12 months? / / / / / / / /
- ----------------------------------------------------
12 Have you, in the last 3 years:
(IF YES, EXPLAIN)

a flown as a pilot, crew member, or a
student pilot in aircraft such as an
airplane, helicopter, glider, or
ultralight? Or, is any such activity
planned in the next 6 months? / / / / / / / /

b engaged in avocations such as mountain
or rock climbing, auto, motorcycle, or
powerboat racing, scuba or sky diving,
hang gliding, or ballooning? Or, is any
such activity planned in the next 6 months? / / / / / / / /

c had your driver's license suspended or
revoked, had any moving violations, had
2 or more accidents, or been charged with
driving under the influence of alcohol
or drugs? / / / / / / / /
- ----------------------------------------------------

13 Have you ever: (IF YES, EXPLAIN)

a applied for or received disability
benefits? / / / / / / / /

b had an impairment or loss of sight
or hearing, or an impairment of neck,
back, or limb? / / / / / / / /

- ----------------------------------------------------
14 Have you in the last 10 years, had or
been treated for: (IF YES, CIRCLE AND EXPLAIN)

*a high blood pressure, stroke, heart murmur,
chest pain, heart attack, tumor, cancer,
or lymph gland disorder? / / / / / / / /

b mental, nervous, or convulsive disorder;
or epilepsy? / / / / / / / /

c pneumonia, emphysema, asthma; ulcer,
colitis, liver, or intestinal disorder;
anemia or blood disorder? / / / / / / / /

d diabetes, arthritis, sexually transmitted
disease, or kidney disease? / / / / / / / /

*e Acquired Immune Deficiency Syndrome (AIDS)? / / / / / / / /

f chronic diarrhea, unexplained weight loss,
recurrent fever, fatigue, or night sweats? / / / / / / / /

- ----------------------------------------------------
15 Have you, in the last 5 years: (IF YES, EXPLAIN)

a used cocaine, marijuana, hallucinogenic
drugs, or narcotics not prescribed by a
physician? / / / / / / / /

b been treated or counseled, or advised
to seek treatment or counsel, for alcohol
or drug use? / / / / / / / /

- ----------------------------------------------------
16 Have you, in the last 5 years, for any
reason not previously explained: (IF YES,
EXPLAIN)

a had treatment or a test (except for HIV)
in any medical facility such as a lab,
clinic, emergency room, or hospital? / / / / / / / /

b had treatment or advice from any
physician or psychologist? / / / / / / / /

c taken prescribed medication? (IF YES, LIST &
EXPLAIN) / / / / / / / /

d had surgery or been told surgery was necessary? / / / / / / / /

- --------------------------------------------------------------------------------

* AGENT - IF YES, IT MAY BE ADVISABLE NOT TO COLLECT MONEY OR GIVE A
BINDING RECEIPT - CONSULT AGENTS SERVICE FOR SPECIFIC INSTRUCTIONS.
<PAGE>

VARIABLE UNIVERSAL LIFE INSURANCE APPLICATION PAGE 3
- --------------------------------------------------------------------------------
17 SUITABILITY INFORMATION (COMPLETE FOR NEW POLICY ONLY)
- --------------------------------------------------------------------------------
Applicants are urged to supply information in order that the agent may make an
informed judgment as to the suitability of a particular purchase of a Variable
Universal Life Policy. If the Applicant chooses not to, the agent must complete
the following items to the best of his/her knowledge.

YES NO
Did the applicant provide the suitability information? / / / / (IF NO, EXPLAIN)
- --------------------------------------------------------------------------------

a. Annual Income from Occupation $

b. Annual Income from other sources $
Indicate other sources:

c. Projected Income for next 12 months $

d. Estimated Net Worth (excluding home) $_____________________
Liquid Assets included in Net Worth $_____________________

e. No. and Age of Dependent Children:
(IF NONE, SO STATE)

f. Tax Bracket:

g. Score from Risk Profiler:

h. Purpose for Purchasing this Policy:

/ / Death Benefit
/ / Personal Retirement Planning
Years to Retirement: _________
/ / Other (specify) ____________________________

j. Which best approximates your experience with the following types of
investments:
NONE UP TO 5 YRS 5 YRS OR MORE
Mutual Funds / / / / / /
Individual Common Stocks / / / / / /
Annuities / / / / / /
- --------------------------------------------------------------------------------
18 TELEPHONE AUTHORIZATION
- --------------------------------------------------------------------------------

The owner may make certain requests under the Policy by telephone if we have a
written telephone authorization on file. These include requests for transfers,
withdrawals, changes in premium allocation instructions, dollar-cost averaging
changes, and changes in portfolio rebalancing program. Our Home Office will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include, among others, requiring some
other form of personal identification prior to acting upon instructions received
by telephone, providing written confirmation of such transactions and/or tape
recording of telephone instructions. Your request for telephone transactions
authorizes us to record telephone calls. If reasonable procedures are not
employed, we may be liable for any losses due to unauthorized or fraudulent
instructions. If reasonable procedures are employed, we will not be liable for
any losses due to unauthorized or fraudulent instructions.

This authorization will continue in force until the earlier of a) the date we
receive a revocation request from the Owner, b) the date we restrict or
discontinue all Telephone Authorizations, or c) the date we receive an ownership
change.

YES NO
Do you elect to have telephone authorization? / / / /

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
19 EXPLANATIONS IF SPACE IS INSUFFICIENT, USE ADDITIONAL SHEETS, WHICH WILL BE PART OF THIS APPLICATION. SHEETS MUST BE
SIGNED & DATED BY PROPOSED INSURED(S), AND/OR APPLICANT, AND WITNESSED BY AGENT.
- ----------------------------------------------------------------------------------------------------------------------------------
QUESTION NAME OF PERSON NATURE AND SEVERITY OF CONDITION DATES NAMES & ADDRESSES OF
NUMBER FREQUENCY OF ATTACKS - TREATMENT RECEIVED ONSET RECOVERY MEDICAL ATTENDANTS AND HOSPITALS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MO. YR MO. YR.

- ----------------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S><C>
VARIABLE UNIVERSAL LIFE INSURANCE APPLICATION PAGE 4
- -----------------------------------------------------------------------------------------------------------------------------
20 AGREEMENTS AND ACKNOWLEDGMENTS
- -----------------------------------------------------------------------------------------------------------------------------

YES NO
a. DO YOU BELIEVE THAT THIS POLICY WILL MEET YOUR NEEDS AND FINANCIAL OBJECTIVES? / / / /

b. DO YOU UNDERSTAND THAT THE AMOUNT AND DURATION OF THE DEATH BENEFIT MAY VARY,
DEPENDING ON THE INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS IN THE SEPARATE
ACCOUNT? / / / /

c. DO YOU UNDERSTAND THAT THE POLICY VALUES MAY INCREASE OR DECREASE, DEPENDING ON
THE INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT? / / / /

d. DID YOU RECEIVE THE SEPARATE ACCOUNT PROSPECTUS AND THE FUND PROSPECTUS FOR THE
POLICY APPLIED FOR? IF YES, GIVE DATE SHOWN ON THE PROSPECTUS:____________________________ / / / /

e. ARE YOU ASSOCIATED WITH AN NASD MEMBER BROKER DEALER? / / / /

Coverage will be effective as of the policy date if the following conditions are met: the first premium is paid when the
policy is delivered; the Proposed Insureds are living on the delivery date; and, on that delivery date, the information given
to the Company is true and complete without material changes.

For changes in Basic Amount, the change will be effective on the deduction date on or next following acceptance of the
change by the Company if on such deduction date the following conditions are met: there is enough cash surrender value to
make the required deduction; the Proposed Insureds are all living; and the information given to the Company is true and
complete without material changes.

However, if a binding receipt has been given and is in effect, its terms apply.

All Proposed Insureds and the Applicant state that the information in this application and any medical history is true and
complete. It is agreed that the Company can investigate the truth and completeness of such information while the policy is
contestable.

By accepting the policy, the Owner agrees to the beneficiaries named, method of payment, and corrections made. No change
in plan, amount, benefits, or age at issue may be made on the application unless the Owner agrees in writing. Only
an authorized company officer may change the policy provisions. Neither the agent nor a medical examiner may pass on
insurability.

- -----------------------------------------------------------------------------------------------------------------------------
Social Security or Tax Identification Number (TIN) Certification - By signing this application, I certify under penalties
of perjury that (1) the TIN shown above is correct, and (2) that I am not subject to backup withholding either because I
have not been notified that I am subject to backup withholding as a result of a failure to report all interest or dividends,
or the Internal Revenue Service has notified me that I am no longer subject to backup withholding. (IF YOU ARE SUBJECT TO
BACKUP WITHHOLDING, CROSS OUT ITEM 2.) The Internal Revenue Service does not require your consent to any provision of this
document other than the certifications required to avoid backup withholding.
- -----------------------------------------------------------------------------------------------------------------------------

Any policy issued on this application will be owned by Proposed Insured 1 or the Applicant, if other than Proposed
Insured 1.

DATED ON SIGNATURE OF PROPOSED INSURED 1 X
----------- MONTH ---------- DAY --------- YEAR --------- --------------------------
NOT REQUIRED IF PROPOSED
INSURED IS UNDER AGE 16

AT
--------------- CITY -------------------- STATE --------------- SIGNATURE OF PROPOSED INSURED 2 X
--------------------------

SIGNATURE OF AGENT AS
WITNESS TO ALL SIGNATURES X SIGNATURE OF APPLICANT X
--------------------------------------- ------------------------------------
NOT REQUIRED UNLESS APPLICANT IS
OTHER THAN PROPOSED INSURED 1. IF
A FIRM OR CORPORATION IS TO BE THE
OWNER, GIVE ITS NAME AND SIGNATURE
OF AUTHORIZED OFFICER.

- -----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------
[LOGO] STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
----------------------------------------------

PRE-NOTICE OF INVESTIGATIVE CONSUMER REPORT
In accordance with the provisions of the federal Fair Credit Reporting Act, this is to inform you that as a part of our
procedure for processing your application for life insurance, an investigative consumer report may be prepared whereby
information is obtained through personal interviews with your neighbors, friends, or others with whom you are acquainted.
This inquiry includes information as to your character, general reputation, personal characteristics, and mode of living,
except as may be related directly or indirectly to your sexual orientation. You have the right to make a written request
within a reasonable period of time to receive additional detailed information about the nature and scope of this
investigation. You may also request to be interviewed during the preparation of such a report and if an investigative
consumer report is prepared, you are entitled to request and receive a copy of the report.

ACKNOWLEDGMENT
I have received the Notices and the Acknowledgment and Authorization.

AUTHORIZATION
I authorize any source having information about me or my children to give to the Company, its reinsurers, or its
representatives all such information as to health history, diagnosis, treatment, or prognosis with respect to any physical
or mental condition, and as to other non-medical information. "Source" includes any doctor, hospital, clinic, U.S. Veterans
Administration Hospital, mental health facility, or any other medically related facility, MIB, Inc., insurance company, or
consumer reporting agency. Any information obtained will be used to determine eligibility for insurance. This information
may be released to another insurance company or MIB, Inc.; however, no MIB, Inc. information will be released to a consumer
reporting agency. This authorization is valid for 2 years. A photocopy is as valid as the original.

I authorize the Company to obtain an investigative consumer report on me (and any others proposed for insurance).

I elect to be interviewed if an investigative consumer report is prepared and indicate this preference by a "checkmark"
in the following box. / /

SIGNATURE OF SIGNATURE OF
DATE SIGNED PROPOSED INSURED 1 X PROPOSED INSURED 2 X
------------------- ----------------------------- -------------------------
(PARENT'S OR GUARDIAN'S
SIGNATURE IF JUVENILE
APPLICATION)

MAIDEN OR FORMER NAME MAIDEN OR FORMER NAME
--------------------------- ------------------------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>

AGENT'S STATEMENT
- ----------------------------------------------------------------------------------------------------------------------------------
YES NO 5 Is this policy a replacement or YES NO 8 Personal History Interview
1 Do you know the Proposed Insureds? / / / / change of existing insurance or Telephone Information
annuities? (IF YES, EXPLAIN) / / / / DAYTIME
PHONE NO. ( )
-------------
- ------------------------------------------------ --------------------------------
2 Who is to pay premiums? (FULL NAME AND
RELATIONSHIP IF OTHER THAN PROPOSED INSUREDS) 9 If applicable, has YES NO
an oral specimen
test been completed / / / /
or an exam been
scheduled? (SHOW DATE
AND PHYSICIAN OR
PARAMEDICAL FACILITY)

- ----------------------------------------------------------------------------------------------------------------------------------
YES NO 6 Is State Farm Health YES NO Agent's Code Stamp
3 Was a Binding Receipt issued? / / / / Insurance being applied for? / / / /
- -----------------------------------------------------------------------------------------------
4 Indicate other State Farm insurance in family. 7 Did you give Proposed Insureds YES NO
the Notices and the Acknowledgment
/ / Auto / / Life / / Fire / / Health and Authorization? / / / /
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

- -------------------------------------------------------
[LOGO] STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY BINDING RECEIPT
- -------------------------------------------------------

The Company has received $_________. This money is part of the application
for life insurance on _________________ (Proposed Insured 1) and any others
named in the application. Any check received must be honored for payment when
presented. Otherwise this Receipt is void.

As of the application date, life insurance and any additional benefits
will be payable according to the terms of the application and the policy
applied for, subject to the terms of this Receipt. No benefits are provided
by this Receipt unless Death or Total Disability results from an accident
that occurs or an illness that first manifests itself after the application
date. THE TOTAL INSURANCE BENEFIT FOR A PROPOSED INSURED UNDER THIS OR ANY
OTHER RECEIPTS AND APPLICATIONS WILL NOT EXCEED $300,000. IF THAT PROPOSED
INSURED IS UNDER THE AGE OF 15 DAYS AT DEATH, THE TOTAL INSURANCE BENEFIT
WILL NOT EXCEED $3,000. If the Waiver of Monthly Deduction Benefit is applied
for and if a death benefit becomes payable under the terms of this receipt,
the Company will return any premiums paid.

Coverage under this Receipt will end when the first of the following
occurs: (a) The application is approved; (b) Notice of disapproval of the
application is given; (c) 60 days have expired starting with the application
date.

The Company reserves the right to disapprove the application by (a)
offering to issue a policy other than as applied for, or (b) declining to
issue a policy. If the application is disapproved, the notice of disapproval
will be given to Proposed Insured 1 or to the Applicant, if other than
Proposed Insured 1. The notice will be given either (a) in person to, or (b)
by mailing it to the last known address of Proposed Insured 1 or the
Applicant. If mailed, coverage will end the earlier of the date that notice
is received or 5 days after mailing of that notice.

The money received will be refunded if (a) the policy is not accepted, or
(b) the Company declines to issue a policy, or (c) the 60-day period has
expired.

There is no coverage under this Receipt if the application contains any
material misrepresentation.

NO AGENT OR COMPANY REPRESENTATIVE MAY WAIVE OR CHANGE THE ANSWER TO ANY
QUESTION IN THE APPLICATION OR CHANGE THE TERMS OF THIS RECEIPT.

DATE OF APPLICATION
---------------------------------

SIGNATURE OF AGENT X
---------------------------------------------------

Note: Do NOT use this Receipt for a change on a Variable Universal Life
policy. See reverse side.

- -------------------------------------------------------------------------------

- ---------------------------------------------------

Detach and leave with Proposed Insured
when Application is written:

- -------------------------------------------------------
[LOGO] STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY
- -------------------------------------------------------

NOTICES

NOTICE OF INFORMATION PRACTICES

The life insurance application requests personal information about the
persons proposed for coverage. Occasionally, we may need to collect
additional personal information from other sources. All such personal
information is treated as confidential. In certain cases, however, that
information might be disclosed to others without authorization. A right of
access and correction exists as to the personal information we may collect. A
more detailed notice, including a description of our information practices
and your rights, is available upon request.

MIB, INC. (MEDICAL INFORMATION BUREAU) NOTICE

Information regarding your insurability will be treated as confidential. The
Company or its reinsurers may, however, make a brief report to MIB, Inc. This
is a non-profit membership organization of life insurance companies which
operates an information exchange on behalf of its members. If you apply to
another MIB, Inc., member company for life or health insurance coverage, or a
claim for benefits is submitted to such a company, MIB, Inc., upon request,
will supply such a company with the information it may have in its file.

Upon receipt of a request from you, MIB, Inc. will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the MIB, Inc. file, you may contact MIB, Inc. and seek a
correction in accordance with the procedures set forth in the federal Fair
Credit Reporting Act. The address of the MIB, Inc. information office is Post
Office Box 105, Essex Station, Boston, Massachusetts 02112, telephone number
(617) 426-3660.

The Company or its reinsurers, may also release information in its file to
other life insurance companies to whom you may apply for life or health
insurance, or to whom a claim for benefits may be submitted.

<PAGE>

Exhibit 1.A.(11)

DESCRIPTION OF ISSUANCE,
TRANSFER AND REDEMPTION PROCEDURES
FOR VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

This document sets forth the administrative procedures that will be
followed by State Farm Life and Accident Assurance Company (the "Company" or
"State Farm") in connection with the issuance of its variable universal life
insurance policy ("Policy" or "Policies") and acceptance of payments
thereunder, the transfer of assets held thereunder, and the redemption by
owners of the Policy ("Owners") of their interests in those Policies.
Capitalized terms used herein have the same definition as in the prospectus
for the Policy that is included in the current registration statement on Form
S-6 for the Policy as filed with the Securities and Exchange Commission
("Commission" or "SEC") on or about September 21, 1998.

I. PROCEDURES RELATING TO PURCHASE AND ISSUANCE OF THE POLICIES AND ACCEPTANCE
OF PREMIUMS

A. OFFER OF THE POLICIES, APPLICATION, INITIAL PREMIUMS, AND ISSUANCE

1. OFFER OF THE POLICIES. The Policies are offered and issued for
premiums pursuant to underwriting standards in accordance with
state insurance laws. Premiums for the Policies are not the same
for all Owners selecting the same Basic Amount. Insurance is based
on the principle of pooling and distribution of mortality risks,
which assumes that each Owner pays premiums commensurate with the
Insured's mortality risk as actuarially determined utilizing
factors such as Age, sex, and rate class of the Insured. Uniform
premiums for all Insureds would discriminate unfairly in favor of
those Insureds representing greater risk. Although there is no
uniform premium for all Insureds, there is a uniform premium for
all Insureds of the same rate class, age, and

<PAGE>

sex and same Basic Amount.

2. APPLICATION. Persons wishing to purchase a Policy must
complete an application and submit it to the Company through an
authorized agent of the Company. The application must specify the
name of the Insured and provide certain required information about
the Insured. The application also must specify a premium payment
plan, which contemplates level premiums at specified intervals
(e.g., monthly or annually), designate Net Premium allocation
percentages, select the initial Basic Amount, and name the
Beneficiary. Before an application will be deemed complete so that
underwriting will proceed, the application must include the
applicant's signature and the Insured's date of birth, a signed
authorization, a valid authorized agent's state code, and
suitability information. The premium and Basic Amount selected must
meet certain minimums for the Policy.

3. RECEIPT OF APPLICATION AND UNDERWRITING. Upon receipt of a
completed application in good order from an applicant, the Company
will follow its established insurance underwriting procedures for
life insurance designed to determine whether the proposed Insured
is insurable. This process may involve such verification procedures
as medical examinations and may require that further information be
provided about the proposed Insured before a determination can be
made.

The underwriting process determines the rate class to which the
Insured is assigned if the application is accepted. The Company
currently places Insureds in the following rate classes, based on the
Company's underwriting: a male or female or unisex rate class, and a
tobacco or nontobacco rate class. Juveniles (persons under age 20) are
placed in a male or female or unisex rate class. This original rate
class applies to the initial Basic Amount. The rate class may change
upon an increase in Basic Amount.

The Company reserves the right to reject an application for any
reason permitted by law. If an application is rejected, any premium
received will be returned, without interest.

4. EXCHANGE PRIVILEGE. The Company will permit the owner of a
State Farm Universal Life policy or a State Farm Traditional Ordinary
whole life policy to exchange such policy for a Policy subject to
certain conditions as follows: (1) the initial Basic Amount for the
Policy must equal or exceed the Basic Amount less any policy loan and
accrued loan interest of the original policy; (2) the Company will
waive evidence of insurability where the initial Basic Amount of the
Policy is equal to the Basic Amount less any policy loan and accrued
loan interest of the original policy, and where the death benefit
options are the same for exchanges from a Universal Life policy or
where the death benefit option is Option 1 for exchanges from a
Traditional Ordinary whole life policy; and (3) the original policy
must be terminated. The Company can change this program at any time.

On exchanges from a Universal Life policy to a Policy, the Company
will waive the surrender charge on the Universal Life policy and will
waive the 5% premium charge on the Policy for the amount transferred
from the Universal Life policy to the Policy.

On exchanges from a Traditional Ordinary whole life policy to a

<PAGE>

Policy, the Company will waive the 5% premium charge on the Policy for
the amount transferred from the Traditional Ordinary whole life policy
to the Policy.

5. ISSUANCE OF POLICY. When the underwriting procedure has been
completed, the application has been approved, and an initial premium
of sufficient amount has been received, the Policy is issued.

6. INITIAL PREMIUM. An applicant must pay an initial premium of
sufficient amount which, if not submitted with the application or
during the underwriting period, must be submitted before the Policy
will be issued. This amount must be at least equal to the minimum
monthly premium if the mode of the Policy is monthly, and 12 times the
minimum monthly premium if the mode of the Policy is annual. The
minimum monthly premium for a Policy depends on a number of factors,
such as the Age, sex, and rate class of the proposed Insured, the
requested Basic Amount, and any supplemental benefits. Coverage
becomes effective as of the date State Farm receives the premium, but
is limited to $300,000 until the application is approved. Moreover, if
the proposed Insured is under the age of 15 days at death, the total
insurance will not exceed $3,000. The Policy Date is used to measure
Policy Months, Policy Years, and Policy Anniversaries. If the Policy
is issued as applied for and the Company receives the premium in good
order before the Issue Date, the Policy Date is the later of the
application date or the date the Company receives the premium.
Otherwise the Policy Date is the Issue Date. If the Policy Date would
have occurred on the 29th, 30th or 31st day of any month, the Company
will designate the 28th day of the month as the Policy Date. For a
premium to be received in "good order," it must be received in cash
(U.S. currency) or by check payable in U.S. currency, and must clearly
identify the purpose for the payment.

The Company allows a credit on conversions of eligible Company term
insurance to the Policy. The amount of the credit is based on the
premiums paid on the term coverage during the 12 months prior to
conversion. The amount of the credit will be added to the initial
premium, if any, submitted by the Owner converting the term coverage,
and will be treated as part of the initial premium for the Policy
(except for purposes of the free-look provision). Therefore, the
credit will be included in the premiums for purposes of calculating
and deducting the premium charge. If the Policy is surrendered, the
credit will not be recaptured by the Company. The amount of the credit
will not be included for purposes of calculating agent compensation.

B. ADDITIONAL PREMIUMS

1. ADDITIONAL PREMIUMS PERMITTED. Additional premiums may be
paid in any amount, and at any time, subject to the following
limits:

. A premium must be at least $25.

. Total premiums paid in a Policy Year may not exceed guideline
premium limitations for life insurance set forth in the Internal
Revenue Code.

<PAGE>

2. REFUND OF EXCESS PREMIUM AMOUNTS. If at any time a premium
is paid that would result in total premiums exceeding limits
established by law to qualify a Policy as a life insurance
policy, the Company will only accept premium that would make
total premiums equal at most the maximum amount that may be paid
under the Policy. The Company may either refuse the entire
premium, or refund the excess premium.

The Company will also monitor Policies and will attempt to notify an
Owner on a timely basis if the Owner's Policy is in jeopardy of
becoming a modified endowment contract under the Internal Revenue
Code.

3. PLANNED PREMIUMS. At the time of application, each Owner
will select a plan for paying premiums at specified monthly or
annual intervals. The Owner may change the planned premium
frequency (between monthly and annually) and amount by providing
a written notice or telephone instructions (if the Company has an
authorization for telephone instructions on file) to the Home
Office. Any such change must comply with the premium limits for
additional premiums discussed above.

4. CREDITING PREMIUMS

(a) INITIAL PREMIUM. The initial premium will be credited
to the Policy on the Policy Date.

(b) ADDITIONAL PREMIUMS. Any additional premiums received by
the Company after the Policy Date will be credited to the
Policy as of the end of the Valuation Period during which
it is received at the Home Office. Premiums received on a
non-Valuation Day will be deemed received on the next
succeeding Valuation Day.

(c) ELECTRONIC FUNDS TRANSFER. An Owner may arrange with the
Company to have monthly premiums paid via pre-authorized,
automatic deductions from the Owner's checking account. The
Company will notify the Owner's bank of the automatic
deduction, and funds will be deducted from the Owner's
checking account and credited to the Owner's Policy on the
next Valuation Day.

C. OVERPAYMENTS AND UNDERPAYMENTS In accordance with industry practice,
the Company will establish procedures to handle errors in initial
and additional premium payments to refund overpayments and collect
underpayments, except for de minimis amounts. The Company will
issue a refund check for any minimal overpayment in excess of the
Guideline Premium amount. For larger overpayments, the Company will
place the premium in a suspense account to determine whether the
premium actually is in excess of the Guideline Premium or whether
the premium was intended for another policy issued by the Company.
In the case of an underpayment, if the Cash Surrender Value on a
Deduction Date is less than the Monthly Deduction to be made on
that date and the Death Benefit Guarantee is

<PAGE>

not in effect, the Policy will be in default and a grace period
will begin. The Company will notify Owners of the required premium
that must be paid prior to the end of the grace period.

D. PREMIUMS UPON INCREASE IN BASIC AMOUNT, PREMIUMS DURING A GRACE
PERIOD, AND PREMIUMS UPON REINSTATEMENT

1. PREMIUMS UPON INCREASE IN BASIC AMOUNT. Generally, no
premium is required for an increase in Basic Amount. However,
depending on the Policy Account Value at the time of an increase
in the Basic Amount and the amount of the increase requested, an
additional premium or change in the amount of planned premiums
may be advisable. Also, the minimum monthly premium for the Death
Benefit Guarantee will increase. See "Changing the Basic Amount."

2. PREMIUMS DURING A GRACE PERIOD. If the Cash Surrender Value
on a Deduction Date is less than the amount of the Monthly
Deduction due on that date, and the Death Benefit Guarantee is
not in effect, the Policy will be in default and a grace
period will begin. During the Death Benefit Guarantee Period
(the first 10 Policy years), the Policy will remain in force,
regardless of the sufficiency of the Cash Surrender Value, if
the total premiums paid less any withdrawals and the Loan
Policy Account Value, is greater than or equal to the Minimum
Premium for the Policy. The Minimum Premium is a cumulative
minimum amount that is required to keep the Death Benefit
Guarantee in effect. The Minimum Premium is based in part on
the sex, Age, and rate class of the Insured, the requested
Basic Amount and any supplemental benefits.

- The grace period will end 61 days after the date on which the
Company sends a grace period notice stating the amount required
to be paid during the grace period to the Owner's last known
address and to any assignee of record. The Policy does not lapse,
and the insurance coverage continues, until the expiration of
this grace period.

- If the grace period ends prior to the end of the Death Benefit
Guarantee Period, the required premium must be large enough to
provide the lesser of (1) the Minimum Premium required at the
end of the grace period, or (2) an amount large enough to
provide an increase in the Cash Surrender Value sufficient to
cover the Monthly Deductions for the grace period and any
increase in the surrender charges. If the grace period ends
after the end of the Death Benefit Guarantee Period, the
required premium must be large enough to provide an increase
in the Cash Surrender Value sufficient to cover the Monthly
Deductions for the grace period and any increase in the surrender
charges.

- Failure to make a sufficient payment within the grace period will
result in lapse of the Policy without value or benefits payable.

3. PREMIUMS UPON REINSTATEMENT. A Policy that lapses without
value may be reinstated at any time within five years after lapse
by submitting evidence of the Insured's insurability
satisfactory to the Company, and payment of a required premium.
If reinstatement is requested prior to the end of the Death
Benefit Guarantee Period, the required premium must be large
enough to provide the lesser of (1) the Minimum Premium required

<PAGE>

on the Deduction Date on or next following the date reinstatement
takes effect, or (2) an increase in the Policy Account Value over
the amount the Company reinstates so that the Cash Surrender
Value will cover the Monthly Deductions for the grace period and
for the 2 months following the date the reinstatement takes
effect. Otherwise, the necessary premium must be large enough to
provide an increase in the Policy Account Value over the amount
the Company reinstates so that the Cash Surrender Value will
cover the Monthly Deductions for the grace period and for the 2
months following the date the reinstatement takes effect.

- Upon reinstatement, the Policy Account Value will be the Policy
Account Value at the date of lapse minus any decrease in the
amount of any surrender charges between the date of lapse and the
date of reinstatement.

- The amount of any Loan Amount on the date of lapse will be
reinstated when reinstatement takes effect. No interest from the
date of lapse to the date of reinstatement is included in that
amount.

E. ALLOCATIONS OF NET PREMIUMS AMONG THE VARIABLE ACCOUNT AND THE FIXED
ACCOUNT

1. NET PREMIUM. The Net Premium is equal to the premium paid less
the premium charge.

2. THE VARIABLE ACCOUNT. An Owner may allocate Net Premiums to one
or more of the Subaccounts of State Farm Life and Accident
Assurance Company Variable Life Separate Account (the "Variable
Account"). The Variable Account currently consists of six
Subaccounts, the assets of which are used to purchase shares of a
designated corresponding investment portfolio of State Farm
Variable Product Trust (the "Fund"). The Fund is registered under
the Investment Company Act of 1940 as an open-end management
investment company. Additional Subaccounts may be added from time
to time to invest in any of the portfolios of the Fund or any other
investment company.

When an Owner allocates an amount to a Subaccount (either by Net
Premium allocation, transfer of Policy Account Value or repayment of a
Policy loan) the Policy is credited with units in that Subaccount. The
number of units is determined by dividing the amount allocated,
transferred or repaid to the Subaccount by the Subaccount's unit value
for the Valuation Day when the allocation, transfer or repayment is
effected. A Subaccount's unit value is determined for each Valuation
Period after the date of establishment (the unit value for each
Subaccount was arbitrarily set at $10 when the Subaccount was
established) by multiplying the value of a unit for a Subaccount for
the prior Valuation Period by the net investment factor for the
Subaccount for the current Valuation Period. The net investment factor
is an index used to measure the investment performance of a Subaccount
from one Valuation Period to the next.

3. THE FIXED ACCOUNT. Owners also may allocate Net Premiums to the
Fixed Account, which guarantees a minimum fixed rate of interest.

4. ALLOCATIONS AMONG THE VARIABLE ACCOUNT AND THE FIXED ACCOUNT.

<PAGE>

Net Premiums are allocated to the Subaccounts and the Fixed Account in
accordance with the following procedures:

(a) GENERAL. In the application for the Policy, the Owner
will specify the percentage of Net Premium to be allocated to
each Subaccount of the Variable Account and/or the Fixed
Account. The percentage of each Net Premium that may be
allocated to any Subaccount or the Fixed Account must be a
whole number, and the sum of the allocation percentages must
be 100%. Such allocation percentages may be changed at any
time by the Owner submitting a written notice or telephone
instructions to the Home Office (provided the Company has
telephone authorizations on file), provided that the
requirements described above are met.

(b) ALLOCATION DURING FREE-LOOK PERIOD. Until the
free-look period expires, all Net Premiums will be
allocated to the Fixed Account. The free-look period is a
period expiring 10 days after an Owner receives a Policy
(some states may require a longer period), during which an
Owner may cancel the Policy and receive a refund of
premiums paid. At the end of the free-look period, the
Policy Account Value is transferred to and allocated to
the Subaccounts and/or remains in the Fixed Account based
on the Net Premium allocation percentages then in effect.
For this purpose, the Company assumes the free-look period
starts 10 days after the Policy is issued.

(c) ALLOCATION AFTER FREE-LOOK PERIOD. Additional Net
Premium received after the free-look period expires will be
credited to the Policy and allocated to the Subaccounts or
Fixed Account in accordance with the allocation percentages
in effect at the end of the Valuation Period during which
the premium is received at the Home Office. Allocation
percentages can be changed at any time.

F. LOAN REPAYMENTS AND INTEREST PAYMENTS

1. REPAYING LOAN AMOUNT. The Owner may repay all or part of the
Loan Amount at any time while the Policy is in force and the Insured
is living. The Loan Amount is equal to the sum of all outstanding
Policy loans including both principal plus any accrued interest. Loan
repayments must be sent to the Home Office and will be credited at
the end of the Valuation Period during which it is received. Loan
repayments will not be subject to a premium charge. If the Death
Benefit becomes payable while a Policy loan is outstanding, the
Loan Amount will be deducted in calculating the Death Benefit.

2. ALLOCATION FOR REPAYMENT OF POLICY LOANS. At the end of the
Valuation Period during which the Company receives a repayment of
all or part of a loan, an amount equal to the repayment will be
transferred from the Loan Account to the Subaccounts and the Fixed
Account and allocated as directed by the Owner when submitting the
repayment. If no direction is provided, the amount will be
allocated in accordance with the Owner's current Net Premium
allocation percentages.

3. INTEREST ON LOAN ACCOUNT. On each Deduction Date, the amount

<PAGE>

in the Loan Account will be credited with interest at a minimum
guaranteed annual effective rate of 6%. See "Policy Loans" below. On
each Deduction Date, the interest earned is transferred to the
Subaccounts and the Fixed Account in accordance with the instructions
for Net Premium allocations then in effect.

4. NOTICE OF EXCESSIVE LOAN AMOUNT. If the Loan Amount exceeds the
Cash Value on any Deduction Date and the Death Benefit Guarantee is
not in effect, the Policy will be in default. The Company will send
Owners and any assignee of record, notice of the default. The notice
will specify the amount that must be paid to prevent lapse. This
amount must be paid to the Home Office within a 61-day grace period to
avoid lapse. A Policy that lapses due to excessive Loan Amount can be
reinstated.

II. TRANSFERS

A. TRANSFERS AMONG THE SUBACCOUNTS AND THE FIXED ACCOUNT

After the free-look period, by written or telephone request to
the Home Office (if the Company has the Owner's telephone
authorization on file), the Owner may transfer Policy Account Value
between and among the Subaccounts of the Variable Account and, subject
to certain special rules, to and from the Fixed Account. For this
purpose, the Company assumes the free-look period starts 10 days after
the Policy is issued.

In any Policy Year, the Owner may make an unlimited number of
transfers; however, the Company reserves the right to impose an excess
transfer processing fee of $25 for each transfer in excess of 12
during any Policy Year. For purposes of the transfer processing fee,
each transfer request is considered one transfer, regardless of the
number of Subaccounts affected by the transfer. Any unused "free"
transfers do not carry over to the next year.

The minimum amount that may be transferred from each Subaccount
or the Fixed Account is $250 or, if less, the balance in the
Subaccount or the Fixed Account. There is no minimum amount that must
remain in a Subaccount or the Fixed Account following a transfer. If a
transfer request does not conform to this provision, the transfer will
be rejected.

Transfers from the Fixed Account are permitted only during the
30-day period following the end of each Policy Year, and only one such
transfer may be made in a Policy Year. The maximum transfer amount
from the Fixed Account to the Subaccounts in any Policy Year is the
greater of 25% of the Policy Account Value in the Fixed Account on the
date of the transfer, or $1,000, unless waived by the Company.

For any class of Policies, the Company reserves the right to
modify, restrict, suspend, or eliminate the transfer privileges
(including telephone transfer privileges) at any time and for any
reason.

B. DOLLAR COST AVERAGING

The dollar-cost averaging program permits Owners to
systematically transfer on a monthly, quarterly, semi-annual or annual
basis a set dollar amount from either the Subaccount investing in the

<PAGE>

Money Market Fund (the "Money Market Subaccount") or the Subaccount
investing in the Bond Fund (the "Bond Subaccount") to any combination
of Subaccounts and/or the Fixed Account. If the Money Market
Subaccount or the Bond Subaccount is the Subaccount from which the
transfer is made, it cannot also be used as one of the Subaccounts in
this combination. Owners may elect to participate in the dollar-cost
averaging program at any time by sending the Company a written
request. To use the dollar-cost averaging program, Owners must
transfer at least $100 from the Money Market Subaccount or Bond
Subaccount, as applicable. Once elected, dollar-cost averaging remains
in effect until the value of the Subaccount from which transfers are
being made is depleted, or until the Owner cancels the program by
written request or by telephone (if the Owner's telephone
authorization is on file). There is no additional charge for dollar-
cost averaging. A transfer under this program is not considered a
transfer for purposes of assessing a transfer processing fee. The
Company reserves the right to discontinue offering the dollar-cost
averaging program at any time and for any reason. Dollar-cost
averaging is not available while Owners are participating in the
portfolio rebalancing program.

C. PORTFOLIO REBALANCING

An Owner may instruct the Company to automatically rebalance (on
a monthly, quarterly, semi-annual or annual basis) the Policy Account
Value to return to the percentages specified in the Owner's allocation
instructions. An Owner may elect to participate in the portfolio
rebalancing program at any time by sending the Company a written
request at the Home Office. The percentage allocations must be in
whole percentages. Subsequent changes to the percentage allocations
may be made at any time by written or telephone instructions to the
Home Office (provided the Owner's telephone authorization is on file).
Once elected, portfolio rebalancing remains in effect until the Owner
instructs the Company to discontinue portfolio rebalancing. There is
no additional charge for using portfolio rebalancing, and a portfolio
rebalancing transfer is not considered a transfer for purposes of
assessing a transfer processing fee. The Company reserves the right to
discontinue offering the portfolio rebalancing program at any time and
for any reason. Portfolio rebalancing is not available while an Owner
is participating in the dollar-cost averaging program.

D. TRANSFER ERRORS

In accordance with industry practice, the Company will establish
procedures to address and to correct errors in amounts transferred
among the Subaccounts and the Fixed Account, except for de minimis
amounts. The Company will correct non-de minimis errors it makes and
will assume any risk associated with the error. Owners will not be
penalized in any way for errors made by the Company. The Company will
take any gain resulting from the error.

III. "REDEMPTION" PROCEDURES

A. "FREE-LOOK" RIGHTS

The Policy provides for an initial free-look right during which
an Owner may cancel the Policy by returning it to the Company or to an

<PAGE>

agent of the Company before the end of 10 days after the Policy is
delivered. The free-look period may be longer in some states. Upon
returning the Policy to the Company or to an authorized agent for
forwarding to the Home Office, the Policy will be deemed void from the
beginning. Within seven days after the Company or the Home Office
receives the cancellation request and Policy, the Company or the Home
Office will pay a refund equal to the total premiums received.

B. SURRENDERS

1. REQUESTS FOR CASH SURRENDER VALUE. The Owner may surrender
the Policy at any time for its Cash Surrender Value. The Cash
Surrender Value on any Valuation Day is the Policy Account Value
less any applicable surrender charge minus any Loan Amount. The
Cash Surrender Value will be determined by the Company on the
Valuation Day the Home Office receives all required documents,
including a satisfactory written request signed by the Owner, or
on a later date if the Owner so requests. The written request
must include the Policy number, signature of the Owner, and clear
instructions regarding the request. The Company will cancel the
Policy as of the date the written request is received at the Home
Office, or on a later date if the Owner so requests. The Company
will ordinarily pay the Cash Surrender Value within seven days
following receipt of the written request and all other required
documents, or on the later date requested. The Policy cannot be
reinstated after it is surrendered.

2. SURRENDER OF POLICY -- SURRENDER CHARGES. If the Policy
is surrendered during the first 10 Policy Years or the first 10
years after an increase in Basic Amount, the Company will deduct
a surrender charge based on the Basic Amount at issue, or
increase, as applicable. The surrender charge will be deducted
before any surrender proceeds are paid. The surrender charge is
set forth in each Policy and depends on the Insured's Age at
issue, or on the Policy Anniversary preceding an increase. It is
calculated as an amount per thousand of the Basic Amount at issue
(or increase). During the 10-year period a surrender charge is in
effect, it increases monthly in the first two years, remains
level for the next four years, then decreases by 1/5 each year
for the next five years to zero.

C. WITHDRAWALS

1. WHEN WITHDRAWALS ARE PERMITTED. At any time, the Owner may,
by submitting a written or telephone request to the Home Office,
withdraw a portion of the Cash Surrender Value subject to the
following conditions:

- The minimum amount that may be withdrawn is $500.

- The amount withdrawn must be less than the then-current Cash
Surrender Value.

- No more than 4 withdrawals may be made during a Policy Year.

- A withdrawal processing fee equal to the lesser of $25 or 2% of
the amount withdrawn will be assessed on each withdrawal made
during a Policy Year. The withdrawal processing fee will be

<PAGE>

deducted from the Policy Account Value along with the amount
requested to be withdrawn.

- When the Owner requests a withdrawal, the Owner may direct how
the withdrawal will be deducted from the Policy Account Value. If
no directions are provided, the withdrawal will be deducted from
the Policy Account Value in the Subaccounts and the Fixed Account
on a pro-rata basis.

- The Company generally will pay a withdrawal request within seven
days after receipt by the Home Office of all the documents
required for such a payment, or on a later date if so requested
by the Owner.

- The Company may delay making a payment if: (1) the disposal or
valuation of the Variable Account's assets is not reasonably
practicable because the New York Stock Exchange is closed for
other than a regular holiday or weekend, trading is restricted by
the SEC, or the SEC declares that an emergency exists; or (2) the
SEC by order permits postponement of payment to protect State
Farm's Policy Owners. The Company also may defer making payments
attributable to a check that has not cleared, and may defer
payment of proceeds from the Fixed Account for a withdrawal,
surrender or Policy loan request for up to six months from the
date the request is received. The Company will not defer payment
of a withdrawal or Policy loan requested to pay a premium due on
a policy issued by the Company.

- If Death Benefit Option 1 is in effect, a withdrawal will reduce
the Basic Amount dollar-for-dollar. If the Basic Amount reflects
increases in the Initial Basic Amount, the withdrawal will reduce
first the most recent increase, and then the next most recent
increase, if any, in reverse order, and finally the Initial Basic
Amount. If Death Benefit Option 2 is in effect, the Basic Amount
is unaffected by the withdrawal.

D. LAPSES

If a sufficient premium has not been received by the 61st day
after a grace period notice is sent, the Policy will lapse without
value and no amount will be payable to the Owner.

E. MONTHLY DEDUCTIONS

On each Deduction Date, redemptions in the form of deductions
will be made from Policy Account Value for the Monthly Deduction,
which is a charge compensating the Company for the services and
benefits provided, costs and expenses incurred, and risks assumed by
the Company in connection with the Policy. The Monthly Deduction
consists of three components: (a) the cost of insurance charge; (b) a
monthly expense charge; and (c) any charges for additional benefits
added by riders to the Policy. The Monthly Deduction will be deducted
from the Subaccounts of the Variable Account and the Fixed Account on
a pro rata basis.

1. COST OF INSURANCE CHARGE. The cost of insurance charge is the
primary charge for the death benefit provided by the Policy. The cost
of insurance charges are calculated monthly, and depend on a number of
variables, including the Age, sex and rate class of the Insured. The
charge varies from Policy to Policy and from Deduction Date to

<PAGE>

Deduction Date. The charge is calculated separately for the Basic
Amount at issue and for any increase in the Basic Amount.

The cost of insurance charge is equal to the Company's current
monthly cost of insurance rate for the Insured multiplied by the net
amount at risk under the Policy for the Basic Amount at issue or
increase. The net amount at risk is equal to the difference between
(1) the amount of insurance attributable to the Basic Amount at issue
or as increased, as applicable, on the Deduction Date at the start of
the month divided by 1.0032737, and (2) the Policy Account Value
attributable to the Basic Amount at issue or increase, as applicable,
on the Deduction Date at the start of the month after the deduction of
the part of the Monthly Deduction that does not include the cost of
insurance and the monthly charge for any Waiver of Monthly Deduction
rider.

The Company's current cost of insurance rates may be less than
the guaranteed rates. Current cost of insurance rates will be
determined based on the Company's expectations as to future mortality,
investment earnings, expenses and persistency. These rates may change
from time to time, but they will never be more than the guaranteed
maximum rates set forth in the Owner's Policy. The Company can change
the rates without notice to Owners. The maximum cost of insurance
rates are based on the Insured's age last birthday at the start of the
Policy Year, sex, and, for issue ages 20 and over, tobacco use. If the
Insured is age 20 and over on the Policy Date or the effective date of
any increase in Basic Amount, the Commissioners 1980 Standard Ordinary
Non-Smoker Table applies if the Insured is classified as non-tobacco;
otherwise, the Commissioners 1980 Standard Ordinary Smoker Mortality
Table applies. If the Insured is under age 20 on the Policy Date or
the effective date of any increase in Basic Amount, the Commissioners
1980 Standard Ordinary Mortality Table applies. Modifications are made
for rate classes other than standard.

2. MONTHLY EXPENSE CHARGE. The current monthly expense charge is
$6 per month and is guaranteed never to exceed $8 a month. This charge
is designed to reimburse the Company for expenses associated with
underwriting applications, increases in Basic Amount, and riders,
various overhead and other expenses associated with providing the
services and benefits provided by the Policy, sales and marketing
expenses, and other costs of doing business, such as federal, state
and local premium and other taxes and fees.

3. SUPPLEMENTAL BENEFIT CHARGES. An Owner may add supplemental
benefits to the Policy. Such benefits are made available by the
Company through riders to the Policy. If any additional benefits are
added to a Policy, charges for these benefits will be deducted monthly
as part of the Monthly Deduction.

F. DEATH BENEFITS

1. PAYMENT OF DEATH PROCEEDS. As long as the Policy remains in
force, the Company will pay the death benefit to the Beneficiary upon
receipt at the Home Office of due proof of the Insured's death. The
death benefit is equal to the amount of insurance determined under the
Death Benefit Option in effect on the date of the Insured's death,
plus any supplemental death benefit provided by riders, minus any Loan
Amount on that date and, if the date of death occurred during a grace
period, minus the past due Monthly Deductions. The death benefit will

<PAGE>

be paid to the Beneficiary in a lump sum generally within seven days
after the Valuation Day by which the Company has received at the Home
Office all materials necessary to constitute due proof of death. If a
payment option is elected, the death benefit will be applied to the
option within seven days after the Valuation Day by which the Company
received due proof of death and payments will begin under that option
when provided by the option. The Death Benefit generally will be paid
through the State Farm Benefit Management Account(R), an interest
bearing checking account. The Company will send the State Farm Benefit
Management Account(R) checkbook to the Beneficiary within seven days
after the Company receives all required documents. A Beneficiary will
have immediate access to the proceeds by writing a check on the State
Farm Benefit Management Account(R). Interest will be paid on the
amount in the State Farm Benefit Management Account(R) from the date
of the Insured's death to the date the State Farm Benefit Management
Account(R) is closed. Amounts in the State Farm Benefit Management
Account(R) are not insured by the Federal Deposit Insurance
Corporation or any other agency.

2. DEATH BENEFIT OPTIONS. The Policy Account Value on the
Insured's date of death is used in determining the amount of
insurance. Under Option 1, the death benefit is the greater of (1)
the Basic Amount plus any Net Premiums received since the last
Deduction Date, or (2) the applicable percentage amount of the
Policy Account Value based on the Insured's Age at the start of the
current Policy Year, as determined using the table of percentages
prescribed by federal income tax law. Under Option 2, the death
benefit is the greater of (1) the Basic Amount plus the Policy
Account Value, or (2) the applicable percentage amount of the
Policy Account Value based on the Insured's Age at the start of the
current Policy Year, as determined using the table of percentages
prescribed by federal income tax law. The percentage is 250% to Age
40 and declines thereafter as the Insured's Age increases. A table
of percentages is shown in the prospectus under "Death Benefit
Options." The Company may change the table if the table of
percentages currently in effect becomes inconsistent with any
federal income tax laws and/or regulations.

Under Option 1, the death benefit ordinarily will not change.
Under Option 2, the death benefit will vary directly with the
investment performance of the Policy Account Value.

3. CHANGING THE DEATH BENEFIT OPTION. The Death Benefit Option is
selected in the application for the Policy. The Owner, by written
request submitted to, and received by, the Home Office, may change
the Death Benefit Option on the Policy subject to the following
rules; however, no change will be permitted that may result in the
Policy being disqualified as a life insurance policy under Section
7702 of the Code.

- The Death Benefit Option may be changed only once each Policy
Year;

- The effective date of the change will be the date at the end of
the Valuation Period during which the Company receives the
request;

- When a change from Death Benefit Option 1 to Death Benefit
Option 2 is made, the Basic Amount will be decreased by the
Policy Account Value on the effective date of the change;

- When a change from Death Benefit Option 2 to Death Benefit
Option 1 is made, the Basic Amount after the change will be
increased by the Policy Account Value on the effective date of
the change; and

<PAGE>

- Before approving a change in Death Benefit Option, the Company
will review the Guideline Annual Premiums.

4. CHANGING THE BASIC AMOUNT. The initial Basic Amount is set at
the time the Policy is issued. The minimum initial Basic Amount is
$50,000. The Owner may increase or decrease the Basic Amount from
time to time, subject to the following conditions; however, no
change will be permitted that may result in the Policy being
disqualified as a life insurance policy under Section 7702 of the
Code:

- Only one change (increase or decrease) may be made during a Policy
Year.

RULES FOR INCREASES

- To increase the Basic Amount, the Owner must contact an agent
authorized by the Company.

- Any increase in the Basic Amount must be at least $25,000 and
an application on a prescribed form must be submitted. The
Company may require additional evidence of insurability. When
an increase in Basic Amount is requested, the Company conducts
underwriting before approving the increase to determine whether
a different rate class will apply to the increase. If an
increase in Basic Amount is approved, a different rate class
may apply to the increase, based on the Insured's circumstances
at the time of the increase.

- There must be enough Cash Surrender Value to make a Monthly
Deduction that includes the cost of insurance for the increase.

- If approved, the increase in Basic Amount will become effective
on the date of application for the increase and the Policy
Account Value will be adjusted to the extent necessary to
reflect a portion of the Monthly Deduction attributable to the
increase as of the effective date and any intervening Deduction
Date based on the increase in Basic Amount.

- The surrender charge will increase upon an increase in Basic
Amount.

- No increases will be allowed after the Policy Anniversary when
the Insured is age 80.

- Revised pages to the Policy will be sent to the Owner
indicating the amount of the increase, the effective date of
the increase, the maximum monthly cost of insurance rates for
the increase, the rate class for the increase, the additional
surrender charge, and any changes in premium.

RULES FOR DECREASES

- To decrease the Basic Amount, the Owner must submit a written
request to the Home Office.

- Any decrease in the Basic Amount must be at least $10,000.

- The Basic Amount after the decrease must be at least $50,000.

- The effective date of any decrease in Basic Amount will be the
date at the end of the Valuation Period during which the written
request is received by the Home Office.

- Any decrease will first be used to reduce the most recent
increase, then the next most recent increases, then the initial
Basic Amount.

<PAGE>

- The minimum monthly premium for the Death Benefit Guarantee will
decrease.

- No surrender charge will be deducted upon a decrease in Basic
Amount.

- The surrender charge will not be reduced upon a decrease in
Basic Amount.

G. POLICY LOANS

1. POLICY LOANS. The Owner may obtain a Policy loan from the Company at
any time by submitting a written or telephone request to the Home Office
(if the Owner's telephone authorization is on file). The maximum loan
amount is 90% of the Policy's Cash Value at the time of the loan. Policy
loans will be processed as of the end of the Valuation Period during which
the request is received and loan proceeds generally will be sent to the
Owner within seven days thereafter. If loan proceeds are payable "on the
spot" by authorized agents of the Company, the Company imposes a limit
of $5,000.

2. COLLATERAL FOR POLICY LOANS. When a Policy loan is made, an amount
equal to the loan proceeds is transferred from the Policy Account Value in
the Subaccounts or Fixed Account to the Loan Account. This withdrawal is
made pro rata on the basis of Policy Account Value in each Subaccount and
the Fixed Account unless the Owner directs a different allocation when
requesting the loan.

3. INTEREST ON POLICY LOANS. The Company charges interest daily on any
outstanding Policy loan at an effective annual interest rate of 8%.
Interest is due and payable at the end of each Policy Year while a Policy
loan is outstanding. On each Policy Anniversary, any unpaid amount of loan
interest accrued since the last Policy Anniversary becomes part of the
outstanding loan.

An amount equal to the unpaid amount of interest is transferred to the Loan
Account from each Subaccount and the Fixed Account on a pro-rata basis
according to the respective values in each Subaccount and the Fixed
Account.

4. EFFECT ON DEATH BENEFIT. If the death benefit becomes payable while a
Policy loan is outstanding, the Loan Amount will be deducted in calculating
the death benefit. If the Loan Amount exceeds the Cash Value on any
Deduction Date and the Death Benefit Guarantee is not in effect, the Policy
will be in default. The Company will send the Owner, and any assignee of
record, notice of the default. The Owner will have a 61-day grace period to
submit a sufficient payment to avoid lapse.

H. PAYMENT OPTIONS

The Policy offers six methods of receiving proceeds payable under the
Policy. In addition to these methods, which are described below, payment
may be made by any other method to which the Company agrees. If proceeds
from a surrender or death benefits are to be applied to a payment option,
the proceeds will usually be applied within seven days of the Valuation Day
on which the Company receives the request and all required documentation at
the Home Office.

- INTEREST METHOD. The Company will pay interest at the end of 1, 3, 6,

<PAGE>

or 12 month intervals. The interest rate will be at least 3 1/2% per
year. Withdrawals of at least $500 may be made at any time, and the
Company will pay interest to the date of withdrawal on the amount
withdrawn.

- FIXED YEARS METHOD. The Company will make equal payments, including
interest at the rate of at least 3 1/2% per year, at the end of each
monthly interval for a fixed number of years. The present value of any
unpaid payments may be withdrawn at any time.

- LIFE INCOME METHOD. The Company will make equal payments at the end of
each monthly interval for as long as the payee is alive. The amount of
each payment is based on the payee's Age and sex at the start of the
first monthly interval. The Company may require proof of the payee's
Age and sex. The payee may not withdraw the present value of the
payments. If the payee dies during a certain period, the Company will
continue the payments to the successor payee to the end of the certain
period, or the successor payee may have the present value of any
remaining payments paid in one sum.

- FIXED AMOUNT METHOD. The Company will make equal payments at the end
of 1, 3, 6, or 12 month intervals until the amount put under this
method together with compound interest of at least 3 1/2% per year has
been paid. The payment interval chosen must provide a total annual
payment of at least $100 for each $1,000 put under this method. The
unpaid balance may be withdrawn at any time.

- Joint Life Income Method. The Company will make equal payments at the
end of each monthly interval as long as at least one of the two payees
is alive. The Company will base each payment on the Age and sex of both
payees at the start of the first monthly interval, and may require
proof of the Age and sex of each payee. The payees may not withdraw the
present value of any payments.

- ONE SUM METHOD. The Company will pay the Cash Surrender Value or the
proceeds in one sum. Interest at the rate of at least 3 1/2% per year
will be paid from the date of the Insured's death to the date of
payment.

I. LUMP SUM PAYMENTS BY THE COMPANY

Lump sum payments of withdrawals, surrenders or death benefits from the
Subaccounts will be ordinarily made within seven days of the Valuation Day
on which the Company receives the request and all required documentation at
the Home Office. The Company may postpone the processing of any such
transactions for any of the following reasons:

1. If the disposal or valuation of the Variable Account's assets is not
reasonably practicable because the New York Stock Exchange ("NYSE") is
closed for trading other than for customary holiday or weekend closings, or
trading on the NYSE is otherwise restricted, or an emergency exists, as
determined by the SEC.

2. When the SEC by order permits a delay for the protection of Owners.

3. If the payment is attributable to a check that has not cleared.

<PAGE>

The Company may defer for up to six months after the date the Company
receives the request, the payment of any proceeds from the Fixed Account
for a withdrawal, surrender or Policy loan request. The Company will not
defer payment of a withdrawal or Policy loan requested to pay a premium due
on a policy issued by the Company. If the Company defers any such payment
for 30 days or more, interest will be credited at 3 1/2% per year or the
rate required by law, if greater, from the date the payment becomes payable
to the date of payment, or the time required by law, if greater.

J. RIGHT TO EXCHANGE THE POLICY

The Owner has the right to transfer all of the Policy Account Value to
the Fixed Account during the first two Policy Years (or the first two
years after an increase in Basic Amount), or written 60 days after the
effective date of a material change in the investment policy of the
Variable Accounts. Such transfers are not counted for purposes of
determining whether a transfer processing fee applies.

For policies issued in New York, the Owner has the right to request
that the Company exchange the Policy for a fixed paid-up whole life
insurance policy. The effective date of the whole life insurance policy
will be the Policy Anniversary on or next following the date the Company
receives the request. The Company will transfer the entire Subaccount
Policy Value to the Fixed Account. The Basic Amount after the change
will be determined by applying the Cash Surrender Value on the Policy
Anniversary as a single premium at the Insured's age, sex, and rate
class. The Company will use the mortality table used to determine the
maximum cost of insurance rates and the guaranteed interest rate for the
Fixed Account. Any riders will be terminated. No monthly expense
charge will be made.

K. REDEMPTION ERRORS

In accordance with industry practice, the Company will establish
procedures to address and to correct errors in amounts redeemed from the
Subaccounts and the Fixed Account, except for de minimis amounts. The
Company will assume the risk of any non de minimus errors caused by the
Company.

L. MISSTATEMENT OF AGE OR SEX

If the Insured's Age or sex has been misstated in the application, the
Death Benefit under the Policy will be the amount that would have been
provided by the correct Age and sex. The adjustment will be based on the
ratio of the correct cost of insurance for the most recent Deduction Date
for that benefit to the cost of insurance charge that was made.

M. INCONTESTABILITY

The Policy limits the Company's right to contest the Policy as issued
or as increased, for reasons of material misstatements contained in the
application, after it has been in force during the Insured's lifetime for a
minimum period, generally for two years from the Issue Date of the Policy
or effective date of the increase.

N. LIMITED DEATH BENEFIT

The Policy limits the Death Benefit if the Insured dies by suicide
generally within two years after the Issue Date of the Policy or effective
date of the increase.

<PAGE>
POWER OF ATTORNEY
-----------------

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer and/or
director of State Farm Life and Accident Assurance Company, a life insurance
corporation organized under the laws of Illinois, does hereby constitute and
appoint Stephen L. Horton and Terry Huff, each located at One State Farm
Plaza, Bloomington, IL 61710 and each of them, with full power of
substitution as his or her true and lawful attorney-in-fact and agent to do
any and all acts and things and to execute any and all instruments which said
attorney-in-fact and agent may deem necessary or advisable, including, not
limited to, accepting service of process on behalf of the undersigned, and
appointing the Director of the Illinois Department of Insurance and his
successors as the true and lawful attorney of the undersigned for service of
process:

(i) to enable the said corporation to comply with the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations and
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the registration under the said 1933 Act of
variable life insurance contracts and variable annuity contracts of the
said corporation (hereinafter collectively called "State Farm
Securities"), including specifically, but without limiting the
generality of the foregoing, the power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer and/or
director of the said corporation to a registration statement or to any
amendment thereto filed with the Securities and Exchange Commission with
respect to said State Farm Securities and to any instrument or document
filed as part of, as an exhibit to or in connection with, said
registration statement or amendment; and

(ii) to register or qualify said State Farm Securities for sale and to
register or license said corporation or any affiliate thereof as broker
or dealer in said State Farm Securities under the securities or Blue Sky
Laws of all such states as may be necessary or appropriate to permit
therein the offering and sale of said State Farm Securities as
contemplated by said registration statement, including specifically, but
without limiting the generality of the foregoing, the power of attorney
to sign for and on behalf of the undersigned the name of the undersigned
as an officer and/or director of said corporation to any application,
statement, petition, prospectus, notice or other instrument or
document, or to any amendment thereto, or to any exhibit filed as a part
thereto or in connection therewith, which is required to be signed by
the undersigned and to be filed with the public authority or authorities
administering State Farm Securities or Blue Sky Laws for the purpose of
so registering or licensing said corporation;

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
1st day of September, 1998.

/s/ Darrell W. Beernink
----------------------------------
In the Presence of: Darrell W. Beernink

/s/ Sandra Alderman
- ---------------------------------------
Sandra Alderman

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
2nd day of September, 1998.

/s/ Dale R. Egeberg
----------------------------------
In the Presence of: Dale R. Egeberg

/s/ Sandra Alderman
- ---------------------------------------
Sandra Alderman

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Kurt G. Moser
----------------------------------
In the Presence of: Kurt G. Moser

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Edward B. Rust, Jr.
----------------------------------
In the Presence of: Edward B. Rust, Jr.

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Bruce Callis
----------------------------------
In the Presence of: Bruce Callis

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Roger S. Joslin
----------------------------------
In the Presence of: Roger S. Joslin

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Vincent J. Trosino
----------------------------------
In the Presence of: Vincent J. Trosino

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ R.J. Lehman
----------------------------------
In the Presence of: R.J. Lehman

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Laura P. Sullivan
----------------------------------
In the Presence of: Laura P. Sullivan

/s/ Jeanette Kaufman
- ---------------------------------------
Jeanette Kaufman

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
15th day of September, 1998.

/s/ Charles R. Wright
----------------------------------
In the Presence of: Charles R. Wright

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>
POWER OF ATTORNEY
-----------------

and the undersigned does hereby ratify and confirm as his or her own act and
deed all that said attorney and agent shall do or cause to be done by virtue
hereof,

IN WITNESS WHEREOF, the undersigned has subscribed these presents this
21st day of September, 1998.

/s/ Roger B. Tompkins
----------------------------------
In the Presence of: Roger B. Tompkins

/s/ Laura P. Sullivan
- ---------------------------------------
Laura P. Sullivan

<PAGE>

Exhibit 2

STATE FARM LIFE AND ACCIDENT ASSURANCE COMPANY

ONE STATE FARM PLAZA
BLOOMINGTON, ILLINOIS 61710-0001
August 26, 1998

Ladies and Gentlemen:

As Vice President and General Counsel of State Farm Life and Accident
Assurance Company (the "Company"), I have general supervision of the
Company's legal affairs. In connection with the proposed registration
statement under the Securities Act of 1933, as amended, of certain variable
universal life insurance policies (the "Contracts") to be issued by the
Company through the State Farm Life and Accident Assurance Company Variable
Life Separate Account (the "Separate Account"), I have been advised by
members of our legal staff concerning the establishment of the Separate
Account by the Board of Directors of the Company on December 9, 1996 as a
separate account for assets applicable to variable life insurance policies,
pursuant to the provisions of 215 ILCS 5/245.21 of the Illinois Insurance
Laws. I have further been advised by members of our legal staff concerning
such other documents and matters of law as I deem necessary and appropriate
for this opinion, and I therefore advise you that:

1. The Company was duly organized and is a validly existing corporation under
the laws of the State of Illinois.

2. The Company has been duly authorized by the Illinois Department of
Insurance to issue variable life insurance policies.

3. The Separate Account is a separate account of the Company duly created and
validly existing pursuant to the laws of the State of Illinois. The assets of
the Separate Account are owned by the Company. The income, gains and losses,
realized or unrealized, from assets allocated to the Separate Account must be
credited to or charged against the Separate Account, without regard to other
income, gains or losses of the Company.

4. The Contracts, when issued in accordance with the prospectus constituting
a part of the Registration Statement and upon compliance with applicable
local law, will be legal, validly issued and binding obligations of the
Company in accordance with their respective terms.

5. The portion of the assets held in the Separate Account equal to reserves
and other contract liabilities with respect to the Separate Account is not
chargeable with liabilities arising out of any other business the Company may
conduct.

I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the heading "Legal Matters" in the
prospectus constituting a part of the Registration Statement.

Very truly yours,

/s/ William A. Montgomery

William A. Montgomery
Vice President and General Counsel

<PAGE>

Exhibit 6

GERRY BROGLA, F.S.A.
ACTUARY
PHONE (309) 766-7957
FAX (309) 766-1827

April 27, 1998

Gentlemen:

This opinion is furnished in connection with the registration by State Farm
Life and Accident Assurance Company of its Variable Universal Life Insurance
Policy ("the Policy"), under the Securities Act of 1933 (the "Registration
Statement"). The prospectus included in the Registration Statement on Form
S-6 describes the Policy. I have reviewed the Policy form and I have
participated in the preparation and review of the Registration Statement and
Exhibits thereto. In my opinion:

(1) The illustrations of policy account values, cash surrender values,
and death benefits included in the section of the prospectus entitled,
"Hypothetical Illustrations of Accumulated Premiums, Policy Account
Values, Cash Surrender Values, and Death Benefits", based on the
assumptions stated in this section, are consistent with the
provisions of the Policy. The rate structure of the Policy has not
been designed so as to make the relationship between premiums and
benefits, as shown in the illustrations, appear more favorable to a
prospective purchaser of a Policy for males ages 35 and 50 than to
prospective purchasers of Policies on males of other ages or on
females.

(2) The Example of Surrender Charges shown in Appendix A is consistent
with the provisions of the Policy.

I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.

Sincerely,

/s/ Gerry Brogla
------------------------
Gerry Brogla, F.S.A.
Actuary

<PAGE>

[LETTERHEAD]

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
State Farm Life and Accident Assurance Company

We consent to the inclusion in the Registration Statement of State Farm Life and
Accident Assurance Company Variable Life Separate Account on Form S-6 of our
report dated February 17, 1998, on our audits of the statutory financial
statements of State Farm Life and Accident Assurance Company. We also consent
to the reference to our Firm under the caption "Experts" in the Prospectus.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois
September 17, 1998

<PAGE>
Exhibit 7.(b)

[Letterhead of Sutherland, Asbill & Brennan LLP]

September 15, 1998

State Farm Life and Accident Assurance Company
One State Farm Plaza
Bloomington, Illinois 61710-0001

Gentlemen:

We hereby consent to the reference to our name under the caption "Legal
Matters" in the prospectus filed as part of the Form S-6 registration
statement for State Farm Life and Accident Assurance Company Variable Life
Separate Account. In giving this consent, we do not admit that we are in the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933.

Sincerely,

SUTHERLAND, ASBILL & BRENNAN LLP

By: /s/ Stephen E. Roth
-------------------------------------
Stephen E. Roth, Esq.