Registration Nos. 333-92475
811-09725
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT # 1
to
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
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THE GUARDIAN SEPARATE ACCOUNT N
(Exact Name of Trust)
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THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
201 Park Avenue South, New York, New York 10003
(Complete Address of Principal Executive Offices)
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RICHARD T. POTTER, JR., ESQ.
The Guardian Insurance & Annuity Company, Inc.
7 Hanover Square
New York, New York 10004
(Name and address of agent for service)
Copy to:
Kimberly J. Smith, Esq.
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
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Flexible Premium Adjustable Variable Life Insurance Policies -- Registration of
Indefinite Amount of Securities Pursuant to Rule 24F-2 Under the Investment
Company Act of 1940 (Title, amount and proposed maximum offering price of
securities being registered)
Approximate date of proposed public offering: Upon the effective date of this
Registration Statement
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2
N-8B-2 Item Heading in Prospectus
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1,2,3,51(a)..................... Cover Page; Summary
4............................... Distribution of the policy and other
contractual arrangements
5............................... Summary
6(a)............................ The variable investment options
6(b)............................ The variable investment options
7............................... Not Applicable
8............................... Financial Statements of the Guardian
Separate Account N
9............................... Legal proceedings
10(a),(b)....................... Partial withdrawals; your right to Cancel
your policy; Surrendering your policy
10(d)........................... Fixed-benefit insurance during the
first 24 months; Transfers between the
investment options; Dollar cost averaging
transfer option; Decreasing the face amount
10(e)........................... Premiums (Default; Grace Period;
Reinstating your policy)
10(f)........................... Voting rights
10(g),(h)....................... Rights Reserved by GIAC
10(i),44(a),51(g)............... Premiums; Benefits and policy values; Policy
proceeds
11.............................. The variable investment options
12.............................. The variable investment options
13(a),(b),(c),51(g)............. Premiums, deductions and charges
13(d),(g)....................... Not Applicable
13(e),(f)....................... Deductions and charges; Distribution of the
policy and other contractual arrangements
14.............................. Issuing the policy
15.............................. Premiums (How your premiums are allocated;
Crediting payments)
16.............................. Premiums (How your premiums are allocated;
Transfers between the investment options);
Dollar cost averaging transfer option;
Policy loans
17.............................. Surrendering your policy; Partial
withdrawals; Your right to cancel your
policy; Policy proceeds
18.............................. The variable investment options
19.............................. Communications from GIAC
20.............................. Not Applicable
21(a),(b)....................... Policy Loans; Premiums (Automatic Premium
Loan); Policy proceeds
21(c),22,23..................... Not Applicable
24.............................. Payment options; Limits to GIAC's Right to
Challenge a Policy; Other information
25,27,29,48..................... Summary
26.............................. Not Applicable
28.............................. GIAC's Management
30,31,32,33,34,35,36,37......... Not Applicable
38,39,41(a)..................... Distribution of the policy and other
contractual arrangements
40.............................. The variable investment options (The Funds'
Investment Advisers)
41(b),(c),42,43................. Not Applicable
44(a)........................... Premiums; Benefits and policy values
44(b)........................... Exhibits
44(c)........................... Premiums
45.............................. Not Applicable
46(a),47........................ Benefits and policy values (Amounts in the
Separate Account; Net investment factor);
Policy Proceeds
46(b)........................... Not Applicable
49,50........................... Not Applicable
51(b)........................... Cover Page
51(c),(d)....................... Death benefit options; Deductions and
charges; Cost of insurance charge;
Deductions from the Separate Account
51(e),(f)....................... The Policyowner; The Beneficiary
51(h),(i),(j)................... Not Applicable
52(a),(c)....................... Rights Reserved by GIAC
52(b),(d)....................... Not Applicable
53(a)........................... GIAC's Taxes
53(b),54,55,56,57,58............ Not Applicable
59.............................. Financial Statements of the Guardian
Separate Account N
<PAGE>
May 1, 2000
PROSPECTUS FOR PARK AVENUE VUL AND PARK AVENUE SURVIVORSHIP VUL -- MILLENNIUM
SERIES
PARK AVENUE VUL AND PARK AVENUE SURVIVORSHIP VUL -- MILLENNIUM SERIES (Park
Avenue VUL and Park Avenue SVUL) are variable universal life insurance policies
providing lifetime insurance protection. They also offer flexibility in the
timing and amount of the premiums you pay, how your premiums are invested, and
the amount of coverage you have, but you bear the risk of investment losses for
any premiums or cash values allocated to the variable investment options.
A prospective purchaser should evaluate the need for life insurance and the
policy's long term investment potential before buying a policy. In addition, it
may not be advantageous to terminate existing life insurance coverage and
replace it with a Park Avenue VUL or SVUL policy. Variable life insurance is not
a short-term investment. Both policies are issued by The Guardian Insurance &
Annuity Company, Inc. (GIAC), a wholly owned subsidiary of The Guardian Life
Insurance Company of America (Guardian Life) through its Separate Account N
(Separate Account). Our offices are located at 7 Hanover Square, Mail Station
215-B, New York, New York 10004.
This prospectus sets forth information that you should know about the policy
before investing, and you should retain it for future reference. It must be
accompanied by the current prospectuses for:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aggressive Growth Portfolio
- Janus Capital Appreciation Portfolio
- Janus Growth Portfolio
- Janus Worldwide Growth Portfolio
o MFS(R) Variable Insurance Trust(sm)
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
These funds correspond to the policy's variable investment options. You can also
allocate premiums to a fixed-rate option. Special limits apply to transfers out
of the fixed-rate option.
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These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Commission or
any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Neither policy is a deposit or obligation of or guaranteed or endorsed by, any
bank or depository institution, is not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other agency, and
involve investment risk, including possible loss of principal amount invested.
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<PAGE>
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CONTENTS
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Summary ...................................................................
About the Park Avenue VUL Policy ..........................................
- - Issuing the policy .....................................................
- - The Policyowner ........................................................
- - The Beneficiary ........................................................
Benefits and policy values ................................................
- - Additional sum insured .................................................
- - No Lapse Guarantee .....................................................
- - Death benefit options ..................................................
- - Changing your death benefit option .....................................
- - Paying the death benefit ...............................................
- - Policy values ..........................................................
Premiums, deductions and charges ..........................................
- - Premiums ...............................................................
- - Deductions and charges .................................................
Your allocation options ...................................................
- - The variable investment options ........................................
- - The fixed-rate option ..................................................
Special features of your policy ...........................................
- - Policy loans ...........................................................
- - Decreasing the face amount .............................................
- - Increasing the face amount .............................................
- - Partial withdrawals ....................................................
- - Surrendering your policy ...............................................
- - Transfers between the investment options ...............................
- - Transfers from the fixed-rate option ...................................
- - Dollar cost averaging transfer option ..................................
- - Policy proceeds ........................................................
- - Exchange for fixed-benefit insurance ...................................
- - Payment options ........................................................
Tax considerations ........................................................
- - Tax status of the policy ...............................................
- - Treatment of policy proceeds ...........................................
- - Exchanges ..............................................................
- - Policy changes .........................................................
- - Estate and generation skipping transfer taxes ..........................
- - Possible tax law changes ...............................................
- - GIAC's taxes ...........................................................
- - Income tax withholding .................................................
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Rights and responsibilities ...............................................
- - Assigning the rights to your policy ....................................
- - Voting rights ..........................................................
- - Limits to GIAC's right to challenge a policy ...........................
- - Rights reserved by GIAC ................................................
- - Your right to cancel your policy .......................................
Other Information .........................................................
- - Distribution of the policy and other contractual arrangements ..........
- - Communications we'll send you ..........................................
- - Special provisions for group or sponsored arrangements .................
- - Legal considerations for employers .....................................
- - Advertising practices ..................................................
- - Legal proceedings ......................................................
- - Legal matters ..........................................................
- - Registration statement .................................................
- - Financial and actuarial experts ........................................
- - Year 2000 compliance ...................................................
- - GIAC's management ......................................................
Special terms used in this prospectus .....................................
Financial Statements ......................................................
- - Statutory Basis Financial Statements of
The Guardian Insurance & Annuity Company, Inc. .........................
Appendices A to E .........................................................
Appendix F: About Park Avenue Survivorship VUL ............................
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The Park Avenue VUL policy may not be available in all states or jurisdictions.
This prospectus does not constitute an offering in any state or jurisdiction in
which such offering may not lawfully be made. GIAC does not authorize any
information or representations regarding the offering described in this
prospectus other than as contained in this prospectus or any supplement thereto
or in any supplemental sales material authorized by GIAC.
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SUMMARY
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THIS SUMMARY outlines the principal features of your Park Avenue VUL variable
universal life insurance policy. It is qualified by the detailed explanation
which follows and the terms of your VUL policy. We deliver this prospectus with
a copy of the prospectuses for each of the mutual funds corresponding to the
variable investment options in which you may invest your Park Avenue VUL
premiums.
If you are purchasing a Park Avenue SVUL policy, certain provisions which follow
may be inapplicable or amended. Please refer to the appendix F, "About Park
Avenue Survivorship VUL" for important additional information on your SVUL
policy.
Please read this prospectus and the fund prospectuses carefully before
investing.
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WHAT IS VARIABLE LIFE INSURANCE AND HOW DOES IT WORK?
Variable life insurance is intended to provide two important benefits:
o a death benefit that is not taxable to your beneficiary
o a cash value that can grow, with taxes on the growth being deferred.
You allocate your net premium payments (the amount that remains after we deduct
premium charges from the premiums you pay) and cash value among the variable
investment options and the fixed-rate option. Most of these options provide
variable returns. That's why it's called variable life insurance. Under a
variable universal life insurance policy, you are also able to change:
o the death benefit option
o your policy's face amount, and
o the frequency and amounts of payments.
If the investment options that you choose perform well, the cash value of your
policy will increase, and the death benefit may also increase. As a variable
life insurance policy owner, however, you bear the risk of investment losses to
the extent that your cash values are invested in the variable options. Your
policy has no guaranteed cash value.
WHO CAN BUY A PARK AVENUE VUL POLICY?
You can buy a VUL policy if:
o you live in a state or jurisdiction where we offer the policy, and
o the person being insured is at most age 80 and meets our insurance
requirements.
Terms we've used
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In this document, we, us, and our refer to The Guardian Insurance & Annuity
Company, Inc., and you and your refer to the policyowner. You can find
definitions of special terms used in this prospectus at the end of this
document. We've used italic script to highlight these terms the first time they
appear in the text.
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S U M M A R Y P R O S P E C T U S 1
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<PAGE>
If you already own a fixed-benefit insurance policy from us or our parent
company, Guardian Life, you may be able to buy a Park Avenue VUL policy without
meeting our insurance requirements by exchanging your present policy. You may
also convert it to a Park Avenue VUL policy if your fixed-benefit policy
includes the appropriate riders. In this case you may have to meet minimal
insurance requirements.
Consult your legal or tax adviser about the consequences of exchanging your
existing policy for a Park Avenue VUL policy. See the sections in this
prospectus called Deductions and charges, Tax considerations, and Special
provisions for group or sponsored arrangements.
Benefits
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There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit.
WHAT ARE THE BENEFITS UNDER YOUR POLICY?
There are two types of insurance benefits available through this policy: death
benefits and rider benefits. We pay death benefits to the beneficiary named in
the policy when we receive proof that the insured has died while the policy was
in force. Rider benefits offer special optional coverage in addition to the
death benefit. The rider benefits you choose will determine the additional
amount, if any, that's paid to the beneficiary.
Death benefits
You have a choice of three death benefit options with this policy:
o under Option 1, the death benefit is a fixed amount, your policy's face
amount, set when you purchase your policy.
o under Option 2, the death benefit is a variable amount, based on your
policy's face amount and the value of the investments held in your policy,
your policy account value. These values can change depending on the
performance of the investments held in your policy.
o under Option 3, the death benefit is an amount based on your policy's face
amount and the sum of your net accumulated premiums. The death benefit
amount will increase when you make premium payments, but may decrease when
you make partial withdrawals.
You may choose among these options, with some restrictions, until the policy
anniversary (the anniversary each year of the date your policy was issued)
closest to the insured's 100th birthday. On or after this date, the death
benefit will be the policy account value.
You can change your policy's death benefit option on any policy anniversary
after your policy has been in force for one year, and as long as the insured is
still living. If you want Option 3, you must select it at issue; you cannot
change to Option 3 after that time. If you are changing from Option 1 to Option
2, you will need to prove that the insured meets our insurance requirements. For
more information see Death benefit options.
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2 P R O S P E C T U S S U M M A R Y
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<PAGE>
Additional sum insured
You may purchase an additional sum insured when this policy is issued. The
additional sum insured will be part of your policy's face amount. See Benefits
and policy values.
Rider benefits
Riders are a way to add to the coverage offered by your policy. The following
riders are offered under this policy. They are subject to GIAC's insurance and
policy issuing requirements, and all may not be available in all states:
o adjustable annual renewable term rider
o accidental death benefit rider
o guaranteed insurability option rider
o guaranteed coverage rider
o waiver of monthly deduction rider
o disability benefit rider.
o select security rider
o exchange of insured rider
Depending on your individual circumstances, it may or may not be to your
advantage to add coverage to your policy through a rider. Some of the
circumstances to consider include the premium you want to pay, the amount of
coverage and how long you want this additional coverage for, and the age, sex
and underwriting classification of the insured. Your GIAC representative can
help you decide whether adding rider benefits to your policy would be in your
best interest.
The cost of any rider benefits you have added to your policy will be included in
your monthly deduction, which is withdrawn from your policy account value each
month.
HOW MUCH DO WE PAY OUT IF THE INSURED DIES?
The amount we pay when the insured dies is:
o the proceeds of the death benefit option in effect as of the monthly
processing date immediately preceding the insured's death, plus
o the extra insurance provided by any riders included in your policy, minus
o any outstanding policy loans, plus accrued interest, as of the date of the
insured's death, minus
o as of the date of the insured's death, the lesser of:
o any premium required under the no lapse guarantee, or
o the amount required to bring the cash surrender value up to zero,
and minus
o any partial withdrawals between the last monthly processing date and the
date of death.
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S U M M A R Y P R O S P E C T U S 3
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<PAGE>
If Option 3 is in effect when the insured dies, the amount we pay will increase
by the amount of premiums paid between the last monthly processing date and the
date of death.
We pay these benefits in a lump sum, or under one of the options described in
Payment options.
Paying premiums
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After you have paid the initial premium, you may pay premiums on your policy at
any time and in any amount during the lifetime of the insured.
HOW MUCH DO YOU HAVE TO PAY IN PREMIUMS?
Premiums are the payments you make to buy and keep your insurance in force.
There are several types of premiums associated with your Park Avenue VUL, which
together form your policy premium. They are:
o the initial premium, which you pay to begin your policy, and which must be
at least one-sixth of your minimum annual premium,
o the minimum annual premium, which is set out in your policy and is used to
calculate the amount of premium that must be paid as of the most recent
monthly processing date to satisfy the No Lapse Guarantee Premium Test
during the first three years of your policy,
o your planned premium, which is a premium amount that you choose when you
apply for a policy. You do not have to pay your planned premiums, however,
we will send you reminder notices for them,
o your target premium, which is based on the insured's age, sex (unless
gender-neutral rates are required by law), riders, face amount and
underwriting class, is used to determine premium charges and agent
commissions. You have a separate target premium for your policy (including
any additional sum insured) and for each policy segment that you add to
your policy in order to increase its face amount. Certain riders also have
target premiums associated with them,
After you have paid the initial premium, you may pay premiums on your policy at
any time and in any amount during the lifetime of the insured. However, if the
cash value of your policy is not sufficient to cover the monthly deduction from
your policy, your policy may lapse, unless the No Lapse Guarantee is in effect
and you have satisfied its requirements. We will warn you if your policy is in
danger of lapsing.
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4 P R O S P E C T U S S U M M A R Y
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<PAGE>
Allocation options
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You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of twenty allocation options at one time.
WHAT ARE YOUR ALLOCATION OPTIONS?
You choose where your net premiums are invested. There are a number of variable
investment options and a fixed-rate option. Your premiums may be allocated to a
maximum of twenty allocation options at one time.
Each variable investment option invests in a series of a mutual fund. The value
of these options, and your policy account value in them, will vary depending on
the performance of the mutual funds corresponding to the options you choose.
There is no minimum guaranteed policy account value for amounts allocated to the
variable investment options.
The mutual funds that are currently available through the variable investment
options are:
o The Guardian Variable Contract Funds, Inc.
- The Guardian Stock Fund
- The Guardian VC 500 Index Fund
- The Guardian VC Asset Allocation Fund
- The Guardian VC High Yield Bond Fund
o The Guardian Bond Fund, Inc.
o The Guardian Cash Fund, Inc.
o GIAC Funds, Inc.
- Baillie Gifford International Fund
- Baillie Gifford Emerging Markets Fund
- The Guardian Small Cap Stock Fund
o AIM Variable Insurance Funds, Inc.
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Global Utilities Fund
- AIM V.I. Value Fund
o Davis Variable Account Fund, Inc.
- Davis Financial Portfolio
- Davis Real Estate Portfolio
- Davis Value Portfolio
o Fidelity Variable Insurance Products Fund
- Fidelity VIP II Contrafund(R) Portfolio
- Fidelity VIP Equity-Income Portfolio
- Fidelity VIP III Growth Opportunities Portfolio
- Fidelity VIP III Mid Cap Portfolio
o Gabelli Capital Series Funds, Inc.
- Gabelli Capital Asset Fund
o Janus Aspen Series
- Janus Aggressive Growth Portfolio
- Janus Capital Appreciation Portfolio
- Janus Growth Portfolio
- Janus Worldwide Growth Portfolio
o MFS(R) Variable Insurance TrustSM
- MFS Emerging Growth Series
- MFS Growth With Income Series
- MFS New Discovery Series
- MFS Research Series
- MFS Total Return Series
o Value Line Strategic Asset Management Trust
o Value Line Centurion Fund
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S U M M A R Y P R O S P E C T U S 5
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<PAGE>
You will find the investment objectives, policies, risks, fees and expenses for
each of these funds listed in the accompanying prospectus for that fund. You
should read the corresponding fund prospectus carefully before investing in any
variable investment option. For a summary of this information see The variable
investment options.
Amounts allocated to the fixed-rate option earn a set rate of interest. You earn
interest on the total that you have invested in the fixed-rate option, including
interest you have earned in previous years. Interest accrues daily at a minimum
annual interest rate of 4%. GIAC sets the rate of interest for the fixed-rate
option in its sole discretion and guarantees your principal and interest under
this option.
CAN YOU TRANSFER THE MONEY IN YOUR POLICY AMONG DIFFERENT ALLOCATION OPTIONS?
Provided the money in your policy is not being held as collateral against a
loan, you can transfer it among the variable investment options, and into the
fixed-rate option, at any time. You may choose up to twenty allocation options
at any time. We limit transfers out of the fixed-rate option. See The fixed-rate
option.
Withdrawing money
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After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. You may also
borrow up to 90% of your policy's cash surrender value less any interest due on
the outstanding policy debt and the amount borrowed at the next policy
anniversary. You may at any time surrender your policy for the net cash
surrender value.
DO YOU HAVE ACCESS TO THE MONEY YOU'VE INVESTED IN YOUR POLICY?
After your policy has been in force for one year, you may, within limits, make
partial withdrawals of your policy's net cash surrender value. The net cash
surrender value is your policy account value minus any surrender charges and
policy debt.
You may also borrow up to 90% of your policy's cash surrender value less any
outstanding policy debt and less any interest due on the outstanding policy debt
and the amount borrowed at the next policy anniversary. The cash surrender value
is the policy account value minus any surrender charges. We will charge you an
annual interest rate of 5% on all outstanding loans that you have taken against
your policy. This rate will decrease to 4.5% after your policy's 20th
anniversary.
You may at any time surrender your policy for the net cash surrender value.
After you surrender your policy, you no longer have insurance coverage.
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6 P R O S P E C T U S S U M M A R Y
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<PAGE>
Tax on increases
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Increases in the value of your policy should not be taxed unless you make a
withdrawal (or, in some cases, take a loan) or surrender your policy before the
insured dies.
HOW IS YOUR POLICY AFFECTED BY TAXES?
Increases in the value of your policy and the death benefit
We believe it is reasonable to conclude that your Park Avenue VUL policy will
receive the tax benefits generally associated with life insurance contracts
under existing federal tax laws. This means that increases in the value of your
policy should not be taxed unless you make a withdrawal in excess of basis (or,
in some cases, take a loan) or surrender your policy before the insured dies.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. We believe that the money the
beneficiary receives when the insured dies generally should not be subject to
federal income tax, but may be subject to federal estate taxes or generation
skipping transfer taxes. See Tax Considerations.
WHAT DEDUCTIONS AND CHARGES DO YOU HAVE TO PAY?
There are various deductions and charges associated with maintaining your Park
Avenue VUL policy. Each of these charges is outlined below and in detail in
Deductions and charges. Some of these charges can vary, depending on certain
circumstances, and there may be a guaranteed or maximum charge, and a current
charge. The guaranteed or maximum charge is the most that we can charge you for
a particular item. The current charge is what we are now charging for that item.
We have the right to increase the current charge up to the maximum charge. We
will tell you if we increase these charges.
Charges deducted from your policy premiums
Premium charge: A charge of 8% is deducted from each premium you pay up to one
target premium during each of the first 12 policy years after issue or an
increase in coverage. This charge drops to 4% after 12 policy years or 12 years
after an increase in coverage. On premiums in a policy year in excess of the
target premium, this charge is 4% during each of the first 12 policy years after
issue or an increase in coverage, and 0% starting in the 13th year.
The monthly deduction
We deduct certain charges from your policy account value on the same date each
month. The monthly deduction consists of the following:
Administrative Charges: There are two administrative charges. At the beginning
of each policy month, we will deduct an administrative charge of $7.50. In
addition, for the first 12 policy years after issue or after an increase in face
amount, we will deduct a monthly charge based on the age, sex, face amount and
underwriting class of the insured.
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S U M M A R Y P R O S P E C T U S 7
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<PAGE>
Mortality and expense risk charge: This charge is based on the policy account
value in the variable investment options and is guaranteed never to exceed the
current rates stated below plus 0.25%. Through the twelfth policy anniversary,
we will deduct a monthly charge at a current annual rate of 0.60% of the policy
account value in the variable investment options. Starting in the thirteenth
policy year, we will deduct a monthly charge at a current annual rate of 0.40%
of the policy account value in the variable investment options, up to the
account value breakpoint, and 0.20% on the amount in excess of the account value
breakpoint. See Charges and deductions (Mortality and expense risk charge).
Cost of insurance charge: This charge is based on our current cost of insurance
rates for those of the same age, sex, policy duration and underwriting class as
the insured under your policy. The maximum that we can charge for each $1,000 of
the net amount at risk (the difference between your policy's death benefit and
your policy account value) is set out in your policy.
Charges for additional insurance benefits: If you buy additional insurance
coverage by adding one or more riders to your policy, the premiums will be
deducted monthly from your policy account value.
After the anniversary closest to the insured's 100th birthday all monthly
deductions cease.
Transaction deductions
We deduct these charges from the policy account value when you ask us to do
certain transactions. The charges are as follows:
Surrender charge: This charge applies if you surrender your policy or let it
lapse during the nine years following issue or an increase in face amount. The
surrender charge during the first policy year is set forth in your policy. It
declines proportionally each year until it is zero after 9 years. The charge
will vary depending on the insured's age when the policy was issued or the face
amount increased, sex and underwriting class.
Transfer charge: After you make twelve transfers of policy account value among
the allocation options within a policy year, we may charge you $25 for each
additional transfer. We don't currently impose this charge.
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8 P R O S P E C T U S S U M M A R Y
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<PAGE>
Deductions associated with the Separate Account
We have the right to charge the Separate Account to cover any taxes that are
applicable to the Separate Account or the policies. We don't currently impose
this charge.
Deductions associated with the mutual funds
Daily deductions are made from the value of the mutual funds in which you invest
through the Separate Account, to cover advisory fees and other expenses. As a
result, you pay these fees and expenses indirectly. The fees and expenses vary
for each mutual fund and are described in more detail in the fund prospectuses.
Policy changes
- --------------------------------------------------------------------------------
With certain restrictions, you may:
o request an increase or decrease in the face amount of your policy
o exchange your Park Avenue VUL Policy for a fixed benefit life insurance
policy
o cancel your policy after it has been issued.
See accompanying text for details.
WHAT CHANGES CAN YOU MAKE TO YOUR POLICY?
Decreasing the face amount of the policy
On or after your first policy anniversary you may request a decrease in the face
amount. The decrease must be at least $5,000, and the insured must be alive when
we receive your request. The new face amount cannot be lower than GIAC's current
minimum face amount. See Decreasing the face amount.
Increasing the face amount of the policy
On your first policy anniversary, and on each anniversary up to and including
the anniversary nearest the insured's 70th birthday, you may request an increase
in your policy's face amount. The increase is subject to evidence of
insurability, and must be for at least $10,000. The amount of each increase will
be treated as a separate policy segment, with its own underwriting class, cost
of insurance rates, surrender charges, administrative charges, target premiums,
and, during the first three years after any increase, minimum annual premium.
After you increase the face amount, your new premiums will be applied first to
the target premium on your original policy, and then to the target premium for
any policy segments, in the order that you bought them. See Increasing the face
amount.
----------------------
S U M M A R Y P R O S P E C T U S 9
----------------------
<PAGE>
Exchanging your Park Avenue VUL policy for a fixed-benefit life insurance policy
You may exchange all or a portion of your Park Avenue VUL policy for a
fixed-benefit whole life insurance policy issued by GIAC or one of our
affiliates by the later of two years after the issue date of your policy or the
policy anniversary nearest the insured's 70th birthday. If you do this, you
don't have to prove that the person being insured meets our insurance
requirements for issuing a policy. There may be a credit or a cost to be paid.
Canceling your policy after it has been issued
You may cancel your policy by returning it with a written cancellation notice to
either our customer service office or the agent from whom you bought the policy.
You must do this within:
o 10 days after you receive your policy, or
o 45 days after you sign the completed application for your policy.
Longer periods may apply in some states. Once we receive your notice, we will
refund all of the premiums you paid, and your policy will be considered void
from the beginning. See Your right to cancel your policy.
Could your policy lapse?
- --------------------------------------------------------------------------------
Your policy may lapse if you don't pay enough policy premium or if you have
excess policy debt.
COULD YOUR POLICY LAPSE?
Your policy may lapse if its net cash surrender value is less than zero after
deducting the monthly deduction in a given month, and you do not make the
required premium payment within 61 days of the time the monthly deduction is
due.
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if the net cash surrender value of your policy is
insufficient to pay the policy's monthly deduction in a given month, so long as
the No Lapse Guarantee Premium Test is met. See Premiums and No Lapse Guarantee.
Your policy may also lapse if you have not made a loan repayment 61 days after
the monthly date on which the amount of any unpaid loans or interest exceeds
your policy's cash surrender value.
We will warn you at least 30 days in advance if we see that your policy is in
danger of lapsing. We will tell you the premium or the portion of your loan that
you must pay in order to keep your policy in force, and will keep your policy in
force if we receive the required payment when requested. See Grace Period.
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10 P R O S P E C T U S S U M M A R Y
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<PAGE>
HOW CAN YOU COMMUNICATE WITH US?
We cannot act on any request (except for proper telephone transfer requests)
unless it is received in writing at our customer service office, in a form
acceptable to us. Your request must include:
o your policy number
o the full name of all policyowners
o the full name of the insured, and
o your current address.
Our address for regular mail is:
The Guardian Insurance & Annuity Company, Inc.
P.O. Box 26210
Lehigh Valley, PA 18002-6210
Our address for registered, certified or express mail is:
The Guardian Insurance & Annuity Company, Inc.
3900 Burgess Place
Lehigh Valley, PA 18002-6240
If you need information on the value of your policy, you may call us at
1-800-441-6455 between 9 a.m. and 4 p.m. eastern time.
WHO ISSUES YOUR PARK AVENUE VUL POLICY?
Your Park Avenue VUL policy is issued, through its Separate Account N, by The
Guardian Insurance & Annuity Company, Inc. (GIAC), a Delaware stock insurance
company formed in 1970. GIAC is licensed to sell life insurance in all 50 states
of the United States of America and the District of Columbia. As of December 31,
1999, our total assets (statutory basis) exceeded $_ billion.
We are wholly owned by The Guardian Life Insurance Company of America (Guardian
Life). The offices of both Guardian Life and GIAC are located at 7 Hanover
Square, New York, New York 10004.
Both Guardian Life and GIAC have consistently received exemplary ratings from
Moody's Investors Service, Inc., Standard & Poor's Corporation, Duff & Phelps
and A.M. Best. These ratings may change at any time, and only reflect GIAC's
ability to meet its insurance-related obligations and the guaranteed return on
the fixed-rate option. These ratings do not apply to the variable investment
options, which are subject to the risks of investing in any securities. Guardian
Life does not issue the Park Avenue VUL policies, and does not guarantee the
benefits provided by the policy.
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S U M M A R Y P R O S P E C T U S 11
-----------------------
<PAGE>
The Park Avenue VUL policy diagram(1)
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
POLICY PREMIUMS o--------Less--------> Premium charge
[GRAPHIC OMITTED]
POLICY ACCOUNT VALUE
THE SEPARATE ACCOUNT
Fund level expenses
THE MUTUAL FUNDS o--------Less--------> Advisory fees and other expenses
(including any investment return)
Guardian Investor Services Corporation
The Guardian Stock Fund
The Guardian VC Asset Allocation Fund
The Guardian VC High Yield Bond Fund
The Guardian VC 500 Index Fund
The Guardian Small Cap Stock Fund
The Guardian Bond Fund
The Guardian Cash Fund
Guardian Baillie Gilfford Limited
Baillie Gifford International Fund
Baillie Gifford Emerging Markets Fund
Value Line, Inc.
Value Line Centurion Fund
Value Line Strategic Asset Management Trust Policy level expenses
o--------Less--------> Monthly deductions
Gabelli Funds, Inc. o Administrative charges
Gabelli Capital Asset Fund o Mortality and expense risk charge
o Charge for the cost of insurance
Davis Selected Advisers, LP o Charge for additional insurance benefits
Davis Financial Portfolio
Davis Real Estate Portfolio
Davis Value Portfolio
Janus Capital
Janus Aggressive Growth Portfolio
Janus Capital Appreciation Portfolio
Janus Growth Portfolio
Janus Worldwide Growth Portfolio
Massachusetts Financial Services Company
MFS Emerging Growth Series
MFS Total Return Series
MFS Growth With Income Series
MFS Research Series
MFS New Discovery Series
A I M Advisors, Inc.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
AIM V.I. Global Utilities Fund
Fidelity Management & Research Company
Fidelity VIP III Growth Opportunities Portfolio
Fidelity VIP Equity Income Portfolio
Fidelity VIP II Contrafund(R) Portfolio
Fidelity VIP III Mid Cap Portfolio
</TABLE>
<TABLE>
<S> <C> <C>
FIXED-RATE OPTION LOAN ACCOUNT
(plus interest credited) (plus loan interest account)
-------------------------Less--------> Transaction deductions
o Surrender charge
- -----------------------------------------------------
CASH SURRENDER VALUE
- -----------------------------------------------------
-------------------------Less--------> Policy debt
- -----------------------------------------------------
NET CASH SURRENDER VALUE
- -----------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This diagram excludes the transfer charge which is not being imposed
currently. Interest on policy debt and repayments of policy debt are also
not reflected in the diagram.
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12 P R O S P E C T U S S U M M A R Y
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<PAGE>
- --------------------------------------------------------------------------------
ABOUT THE PARK AVENUE VUL POLICY
- --------------------------------------------------------------------------------
This section provides detailed information about your policy. It explains your
rights and responsibilities under the policy, and those of GIAC. Because the
laws and regulations that govern the policy vary among the jurisdictions where
the policy is sold, some of the policy's terms will vary depending on where you
live. These will be outlined in the policy we send you.
- --------------------------------------------------------------------------------
Issuing the policy
- --------------------------------------------------------------------------------
A Park Avenue VUL insurance policy must have basic sum insured coverage of at
least $100,000.
- --------------------------------------------------------------------------------
If you are purchasing a Park Avenue SVUL policy, you should refer to Appendix F,
About Park Avenue Survivorship VUL, for further information on your policy. The
prospectus descriptions of Park Avenue VUL generally also apply to Park Avenue
SVUL, but the prospectus sections listed below are modified for the SVUL policy:
About the Park Avenue VUL Policy
Benefits and policy values
Premiums, deductions and charges
Special features of your policy
Tax considerations
Rights and responsibilities
Special terms used in this prospectus
Appendix A
Appendix C
Appendix D
Appendix E: Deleted
Appendix F: About Park Avenue Survivorship VUL
- --------------------------------------------------------------------------------
ISSUING THE POLICY
A Park Avenue VUL insurance policy must have basic sum insured coverage of at
least $100,000 ($125,000 for the pension trust version of the policy). To issue
a policy:
o the insured must be age 80 or under and meet our insurance requirements,
and
o you must live in a state or jurisdiction in which we offer the policy.
If you already own certain fixed-benefit life insurance policies issued by us or
by Guardian Life, you may be able to buy a Park Avenue VUL policy without having
to meet our insurance requirements again. You can do this by exchanging your
current policy for a Park Avenue VUL policy or if your fixed-benefit policy
contains a rider to permit you to purchase a Park Avenue VUL policy. You may
also be able to convert to a Park Avenue VUL policy if your existing policy
contains appropriate riders. In this case you may have to meet minimal insurance
requirements.
If you have a convertible term policy, or a whole life policy with a convertible
term rider, you may receive a credit of up to one minimum annual premium if you
convert it to a Park Avenue VUL policy.
If you are interested in exchanging an existing policy for a Park Avenue VUL
policy, we recommend that you speak with your lawyer or tax adviser first.
Replacing your existing policy may not be advantageous.
Some jurisdictions do not allow insurance companies to provide different
benefits based on the sex of the insured. For these jurisdictions we offer a
version of the Park Avenue VUL policy with the same benefits for men and women.
Backdating your policy
Under certain circumstances we will backdate your policy if you ask us to,
giving you a policy date up to six months before the application was actually
signed. Backdating your policy will only be allowed if it would allow you to
qualify for a lower premium because the insured was younger on an earlier policy
date. On the date the policy is actually issued, we deduct the monthly
deductions due from the backdated policy date to the issue date. We will not
backdate a policy to a date before which the policy was available in the state
of issue.
-----------------------
A B O U T T H E P O L I C Y P R O S P E C T U S 13
-----------------------
<PAGE>
The Policyowner
- --------------------------------------------------------------------------------
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured.
THE POLICYOWNER
The policyowner is the person named on the application as the owner of the
policy. You may own a policy jointly with more than one person. A policyowner
does not have to be the insured. While the insured is living, only the
policyowner named in our records has the right to exercise rights granted by the
policy unless ownership of the policy has been assigned to someone else. Except
for transfers, all of the policy's joint owners must approve policy transactions
or changes in writing, including assigning ownership of the policy to someone
else. When a joint policyowner dies, we will divide his or her share of the
policy equally among the other policyowners, unless the deceased policyowner has
indicated otherwise.
If you want to change the policyowner, you must request it in writing in a form
acceptable to us. Your request must be signed and dated by all of the
policyowners. The change will be made effective on the date your request was
signed, but will not apply to any payments or actions taken before we receive
your request.
If you are not the insured and die before the insured, your estate (or if there
had been joint owners, the estate of the last surviving joint owner) becomes the
policyowner, unless you have named someone to take over ownership of the policy
(a successor owner). If you are both the policyowner and the insured, a
successor owner may not be named, because the policy ends when you die.
The Beneficiary
- --------------------------------------------------------------------------------
The beneficiary is the person you name to receive the proceeds when the insured
dies.
THE BENEFICIARY
The beneficiary is the person you name to receive the proceeds when the insured
dies. You can change the beneficiary until the insured dies. Also, you may name
a 'contingent' beneficiary, who will receive the proceeds if the first
beneficiary dies before the insured, or a second or 'concurrent' beneficiary,
who will receive a portion of the proceeds when the insured dies. The
beneficiary must live longer than the insured to qualify as a beneficiary, and
has no rights under the policy until the insured dies. If the insured outlives
all of the beneficiaries named in the policy, then the policyowner or the
policyowner's estate becomes the beneficiary.
If you want to change the beneficiary, you must give us your instructions in
writing in a form acceptable to us. Your request must be signed and dated by all
of the policyowners listed in our records. The change is made effective on the
date your request was signed, but will not apply to any payments or actions
taken before we receive your request.
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14 P R O S P E C T U S A B O U T T H E P O L I C Y
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<PAGE>
- --------------------------------------------------------------------------------
BENEFITS AND POLICY VALUES
- --------------------------------------------------------------------------------
ADDITIONAL SUM INSURED
If you choose death benefit Option 1 at issue, you may purchase an additional
sum insured under the policy. The additional sum insured provides a level death
benefit to age 100. The amount of this coverage, if any, plus the basic sum
insured are the two components of your policy's initial face amount.
Coverage provided by the additional sum insured will be treated like coverage
provided by the basic sum insured: (i) it will be included in calculating
whether the policy qualifies for lower cost of insurance rates; (ii) it will
affect the minimum death benefit under Section 7702 of the Internal Revenue
Code; and (iii) it will affect the calculation of premiums for determining
whether the policy is a modified endowment contract. See Deductions and charges;
Death benefit options; and Tax considerations.
You should consider several factors in deciding whether to purchase coverage as
basic sum insured or additional sum insured. The additional sum insured has no
additional administrative charges or surrender charges. The additional sum
insured has lower guideline premiums than the basic sum insured. Cost of
insurance rates for the additional sum insured are the same as for the basic sum
insured. The target premium for the additional sum insured is less than the
target premium for the same amount of basic sum insured. The amount of premium
charges you will pay may be less if you purchase coverage as additional sum
insured, rather than basic sum insured. However, there is no policy account
value for the additional sum insured. If the coverage provided by the additional
sum insured is greater than the coverage under the basic sum insured at issue,
you cannot purchase the Guaranteed Coverage rider.
You may purchase additional sum insured coverage only at issue and only if you
select Option 1. If you change your death benefit option at any time, we will
terminate the additional sum insured. Once terminated, the additional sum
insured cannot be reinstated. The insured must be between 20-70 years of age at
time of issue. The minimum additional sum insured amount you can purchase is
$25,000; the maximum amount cannot exceed 400% of the basic sum insured. If you
purchase an additional sum insured , you may not purchase coverage under the
annual adjustable renewable term insurance rider.
NO LAPSE GUARANTEE
The No Lapse Guarantee ensures that your policy will not lapse, even if high
surrender charges, poor investment performance, or excess policy debt mean that
the net cash surrender value of your policy is not enough to pay the policy's
monthly deduction on a monthly processing date. This guarantee is in effect for
the first three years of your policy so long as the No Lapse Guarantee Premium
Test is met.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 15
-----------------------
<PAGE>
To meet this test, as of the most recent monthly processing date, you must have
paid at least as much into your policy (minus any withdrawals or policy debt) as
the sum of minimum annual premiums up to this date, as stated on page 3 of your
policy. To calculate your minimum annual premium for the current policy year, we
multiply your minimum annual premium by a ratio equal to the number of completed
policy months since the last policy anniversary plus 1 divided by 12.
If you increase the face amount of your policy after the first policy year, your
minimum annual premium will change, which in turn changes the amount that you
must contribute in order to meet the No Lapse Guarantee Premium Test. As of the
most recent monthly processing date, you must have paid at least as much into
your policy (minus any withdrawals or policy debt) as the original minimum
annual premium for the period up to the increase, plus the new minimum annual
premium for the period after the increase in your policy's face amount,
multiplied by the ratio of the number of completed policy months since the
increase plus 1 divided by 12.
If your policy does not meet the No Lapse Guarantee Premium Test, and the cash
value is insufficient to cover the monthly deduction, you will have a 61-day
grace period from that date to make a required premium payment or loan repayment
if there is outstanding policy debt. If you do not make the required payment,
the policy will lapse.
Death benefit options
- --------------------------------------------------------------------------------
You have a choice of three death benefit options with this policy. If a fixed
amount of insurance coverage and potentially lower monthly deductions best fits
your needs, you should choose Option 1. If you want the potential to increase
the amount of your insurance coverage beyond your policy's face amount you
should choose Option 2. If you want to recapture the premiums you have paid into
the policy, you should choose Option 3. See accompanying text for details.
DEATH BENEFIT OPTIONS
You have a choice of three death benefit options with this policy. You should
choose the death benefit option that best meets your insurance needs and
investment objectives. If a fixed amount of insurance coverage and potentially
lower monthly deductions best fit your needs you should choose Option 1. If you
want the potential to increase the amount of your insurance coverage beyond your
policy's face amount you should choose Option 2. If you want to recapture the
premiums you have paid into the policy, you should choose Option 3.*
Option 1
Under Option 1, your death benefit on any monthly processing date prior to the
policy anniversary nearest the insured's 100th birthday is the greater of:
o the face amount; or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, if your investments perform well or you contribute more than
the minimum annual premium and the policy account
- ----------
* Option 3 may be appropriate for split dollar cases where an employer
advances premium payments on behalf of an employee under an agreement that
the employee will reimburse the premium advances.
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16 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
value increases by a sufficient amount, then the net amount at risk will be
lower. When this happens, the amount that we deduct for the cost of insurance
charges each month may also go down.
Option 2
Under Option 2, your death benefit on any monthly processing date prior to the
policy anniversary nearest the insured's 100th birthday is the greater of:
o the face amount plus the policy account value, if positive, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, your death benefit will vary based on your investment
performance and the premiums you pay. Even if your investments perform poorly,
your death benefit will never be lower than the face amount. The net amount at
risk will not change unless we have to increase the death benefit to comply with
Section 7702 of the Internal Revenue Code.
Option 3
Under Option 3, your death benefit on any monthly processing date prior to the
policy anniversary nearest the insured's 100th birthday is the greater of:
o the face amount plus net accumulated premiums, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, as under Option 1, if your investments perform well, or you
contribute more than the minimum annual premium and the policy account value
increases by a sufficient amount, then the net amount at risk will be lower.
When this happens, the amount that we deduct for the cost of insurance charges
each month may also go down.
Regardless of which option you choose, after the policy anniversary closest to
the insured's 100th birthday the death benefit is the policy account value. The
tax consequences of continuing the policy beyond the insured's 100th birthday
are unclear. You should consult a tax adviser for more information.
If you make a partial withdrawal from your policy between the most recent
monthly processing date and the death of the insured, the death benefit under
all options will be reduced by the amount of your withdrawal. Under Option 3,
the death benefit will be increased by the amount of any premium paid between
the most recent monthly processing date and the date of death of the insured.
To qualify as insurance under the Internal Revenue Code, all three options must
pay at least the minimum death benefit required under Section 7702. We calculate
this minimum using one of two methods: the Cash Value Accumulation Test (Cash
Value Test) or the Guideline Premium and Cash Value Corridor Test (Guideline
Premium Test).
Minimum death benefit
- --------------------------------------------------------------------------------
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any monthly processing date is the policy account value multiplied by
the death benefit factor shown in your policy on page 4.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 17
-----------------------
<PAGE>
You decide which method you want used when you complete your application. Once
you've made your choice, you cannot change it. Both tests are explained below.
Here are some general guidelines for choosing between the Cash Value Test and
the Guideline Premium Test:
Test Advantages
- --------------------------------------------------------------------------------
Cash Value Test Guideline Premium Test
- --------------------------------------------------------------------------------
o allows you to make larger o allows greater proportion of
premium payments than the cash relative to death benefit
Guideline Premium Test than under the Cash Value Test
- --------------------------------------------------------------------------------
o increases the death benefit o develops larger policy account
earlier than the Guideline values due to lower death
Premium Test benefits
- --------------------------------------------------------------------------------
Cash Value Test
To satisfy this test, the death benefit must be at least equal to the policy
account value multiplied by a death benefit factor. A table of death benefit
factors appears in your policy. These factors are equal to one divided by the
net single premium (the single premium that would be needed to pay for all
future benefits under the policy).
Guideline Premium Test
The Guideline Premium Test consists of two parts: the Guideline Premium Test and
the Cash Value Corridor Test.
To satisfy the Guideline Premium Test the total of all premiums you pay must not
exceed certain maximums. The total of premiums paid, minus the nontaxable
portion of partial withdrawals, must not be greater than the larger of the
following:
o the guideline single premium on the date the calculation is done, or
o the sum of the guideline level premiums to the date the calculation is
done.
For the purposes of this test, the guideline single premium is the premium that
would be necessary to pay for future benefits under the policy as calculated at
the time the policy is issued. It's based on "reasonable" mortality and expense
charges (as defined in Section 7702 of the Internal Revenue Code) and an
effective annual interest rate of 6%.
The guideline level premium is the level annual premium payable to age 100 that
would be necessary to pay for all future benefits under the policy as calculated
at the time the policy is issued. It's based on "reasonable" mortality and
expense charges (as defined in Section 7702 of the Internal Revenue Code) and an
effective annual interest rate of 4%.
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18 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
Payment of premiums in excess of the guideline premium limit is permitted if
those premiums are necessary to keep the policy in force. To satisfy the Cash
Value Corridor Test, the death benefit must at least equal the percentage of the
policy account value shown in the following table:
Percentage of policy
Attained age account value *
- --------------------------------------------------------------------------------
0-40 250%
- --------------------------------------------------------------------------------
40-45 250% - 215%
- --------------------------------------------------------------------------------
45-50 215% - 185%
- --------------------------------------------------------------------------------
50-55 185% - 150%
- --------------------------------------------------------------------------------
55-60 150% - 130%
- --------------------------------------------------------------------------------
60-65 130% - 120%
- --------------------------------------------------------------------------------
65-70 120% - 115%
- --------------------------------------------------------------------------------
70-75 115% - 105%
- --------------------------------------------------------------------------------
75-90 105%
- --------------------------------------------------------------------------------
90-95 105% - 100%
- --------------------------------------------------------------------------------
95+ 100%
- --------------------------------------------------------------------------------
* The percentage decreases uniformly as attained age increases within the
age ranges.
The minimum death benefit required on any monthly processing date is equal to
the policy account value on that date multiplied by the death benefit factor
shown in your policy. As described above, these death benefit factors vary
depending on whether you have selected the Cash Value Test or the Guideline
Premium Test.
CHANGING YOUR DEATH BENEFIT OPTION
On any policy anniversary you may change your death benefit option, as long as
the insured is alive when we make the change. You must send us your instructions
in writing at our customer service office. Such changes take effect on the
policy anniversary following or coinciding with our receipt of the request.
Changing the death benefit option may have adverse tax consequences. You should
consult a tax adviser before doing so.
If you change the death benefit option, we will change the policy's face amount
to keep the death benefit the same immediately before and after the change. If
you're changing from Option 1 to Option 2, we will decrease the face amount by
the lesser of the policy account value on the date the change takes effect or
the face amount divided by the applicable death benefit factor shown on page 4
of your policy. If you're changing from Option 2 to Option 1, we will increase
the face amount by the lesser of the policy account value on the date the change
takes effect or the face amount divided by the applicable death benefit factor,
shown on page 4 of your policy, minus 1.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 19
-----------------------
<PAGE>
If you're changing from Option 3 to Option 1, we will increase the face amount
by the amount of net accumulated premiums on the date the change takes effect.
If you're changing from Option 3 to Option 2, we will adjust the face amount by
the amount that net accumulated premiums exceed the lesser of: (i) policy
account value on the effective date of the change or (ii) the face amount
divided by the applicable death benefit factor shown on page 4 of your policy.
We will not permit any change if it results in a reduction of the face amount
below our minimum face amount, currently $100,000. We will not approve any
request to change the option if monthly deductions are being waived under the
waiver of monthly deductions rider and we will not approve any request to change
from Option 1 or Option 2 to Option 3.
Any increase is applied directly to the initial face amount. A decrease
reduces coverage in the same manner as a requested face amount decrease. See
Decreasing the face amount.
If you are changing from Option 1 to Option 2 you must prove that the insured
meets our insurance requirements and we will terminate any additional sum
insured. We won't deduct a surrender charge or impose new surrender charges in
connection with changes in the death benefit option.
PAYING THE DEATH BENEFIT
We will pay a death benefit to the beneficiaries named in your policy when we
receive proof that the insured has died while the policy was in effect. If there
is reason to dispute the policy, then we may delay the payment of death
benefits. See Limits to GIAC's right to challenge a policy.
POLICY VALUES
The following is a detailed breakdown of how we calculate the different values
associated with your policy.
Amounts in the Separate Account
Any net premiums that you allocate or transfer to a variable investment option
are used to buy shares in the mutual fund corresponding to the variable
investment option, according to your instructions. We will sell these shares
when you make a withdrawal, transfer or take a policy loan, or when we withdraw
your monthly deduction, or make dollar cost averaging transfers. Based on the
value of each share on the transaction date, we will sell the number of shares
needed to cover the cost of that transaction. To calculate the value of your
investment in a particular variable investment option, multiply the unit value
of the option by the number of units you own. Unit values change based on the
investment performance of mutual fund shares. We calculate the unit value for
each variable investment option at the end of each business day. Note that you
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20 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
bear all risks associated with the investments in the Separate Account.
Policy account value
Your policy account value is the total value of the investments held in your
policy. This includes the value of your allocations to the fixed-rate and
variable investment options, and any policy values that may be in the Loan
Account or the Loan Interest Account as collateral for a policy loan. It is
calculated as:
o net premiums that you contribute to your policy; plus or minus
o any profit or loss generated by your policy account value in the variable
investment options; plus
o any interest you earn on allocations to the fixed-rate option or interest
we credit on the Loan Account and the Loan Interest Account; minus
o your total monthly deductions; minus
o any partial withdrawals you've made, minus
o any transfer charges.
Cash surrender value and net cash surrender value
- --------------------------------------------------------------------------------
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy or any face amount increase has
been in effect for 9 years. Net cash surrender value is the amount you would
actually receive if you surrendered your life insurance policy.
Cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy or any face amount increase has
been in effect for 9 years, and after the first 9 years of each additional
policy segment created by increasing the face amount. Net cash surrender value
is the amount you would actually receive if you surrendered your life insurance
policy. It is your policy account value minus any surrender charges and policy
debt.
The value of any investments in the variable investment options may increase or
decrease daily depending on how well the investments perform. A combination of
partial withdrawals, policy loans, unfavorable investment performance, surrender
charges and the ongoing monthly deduction can cause a policy's net cash
surrender value to drop below zero. Even if this happens, the policy will not
lapse during the first three policy years if the No Lapse Guarantee is in effect
and the No Lapse Guarantee Premium Test is satisfied. See No Lapse Guarantee.
Certain rider benefits available under the policy may also prevent your policy
from lapsing. See Appendix C.
-----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 21
-----------------------
<PAGE>
Net investment factor
We calculate the unit value of each variable investment option on each business
day by multiplying the option's immediately preceding unit value by the net
investment factor for that day. We calculate the net investment factor as
follows on each business day:
o the net asset value of one share of the mutual fund corresponding to the
variable investment option at the close of the current business day, plus
o the amount per share of any dividends or capital gains distributed by the
fund on the current business day, minus any federal, state or local taxes
payable by GIAC and allocated by GIAC to the variable investment option;
divided by
o the net asset value of one share of the same mutual fund at the close of
the previous business day.
The accompanying prospectuses for each fund describe how they calculate the net
asset values of their mutual fund shares.
- -----------------------
22 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
PREMIUMS, DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
PREMIUMS
Your policy will take effect once you have paid your initial premium, but not
before your policy's issue date. Once it has taken effect you decide the amount
of your premium payments and when you want to make them. However, your premiums
must meet certain requirements for your policy to remain in force.
Your initial premium must equal at least one sixth of your minimum annual
premium. The minimum annual premium is outlined in your policy, and is used to
calculate your initial premium and compliance with the No Lapse Guarantee
Premium Test.
When you set up your policy, you must choose a planned premium. This is the
premium that you intend to pay periodically. We will send you a reminder when
your planned premium is due, annually, semi-annually or quarterly, as requested
unless you are paying your premiums through a pre-authorized checking plan. You
are under no obligation to pay this premium as long as the net cash surrender
value is sufficient to pay the monthly deduction when due.
All premiums must be paid to GIAC's customer service office. Each premium you
pay must be at least $100, unless you are paying through a pre-authorized
checking plan, in which case each premium must be at least $25. No premiums may
be paid after the policy anniversary closest to the insured's 100th birthday.
We may limit the amount that you can pay into your policy, including refusing or
refunding premiums you pay, to attempt to preserve your policy's treatment as
life insurance under federal tax laws.
Under the guideline premium test, the maximum premium we will accept in any
policy year is the greatest amount that will not violate Section 7702. If you
elect the guideline premium test, we will refund to you any portion of a premium
payment that violates section 7702 limits with interest at an annual rate of 6%
within 60 days of receipt of such premium.
Under the cash value accumulation test, we will accept any premium that does not
result in an increase in the death benefit as a result of Section 7702. If a
premium would cause an increase in the death benefit under Section 7702, we may
accept the payment provided the total of premium payments in a policy year does
not exceed the greater of:
o 150% of your policy's target premium, or
o the lesser of 400% of the target premium and 125% of your largest premium
amount paid in the past three policy years.
If you do not meet these tests, we may still accept your premium payment if you
prove that the insured meets our insurance requirements.
We will refund any portion of a premium payment that exceeds these limits.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 23
A N D C H A R G E S -----------------------
<PAGE>
Crediting payments
When you make a payment towards your policy, we will credit it according to your
instructions. If you do not provide specific instructions, we will use the
payment:
o first to repay any policy debt
o then, as a premium payment.
We normally credit your payment and allocate the net premium as of the business
day we receive it, as long as we receive it at our customer service office by
the close of the business day, which is 4:00 p.m. New York time. However, any
payments that we receive before your policy has been issued will be held and
credited on the policy issue date, and any payments that we receive after your
policy has been issued that require additional underwriting will be held and
credited as of the date the underwriting process is complete.
See How your premiums are allocated and Policy loans for specific information on
how your payments are distributed among the fixed-rate and variable investment
options.
Investing net premiums
- --------------------------------------------------------------------------------
When you make a payment towards your policy, the amount that remains after we
deduct the premium charge is the net premium. We invest your net premiums
according to your instructions. When net premiums have been invested, they
become part of your policy account value.
How your premiums are allocated
When you make a payment towards your policy, the amount that remains after we
deduct the premium charge (see Deductions and charges) is the net premium. We
invest your net premiums in the fixed-rate and/or variable investment options
according to your instructions. When net premiums have been invested they become
part of your policy account value.
As part of your initial application, you tell us how you would like your net
premiums distributed among the various allocation options. The percentage you
choose for each allocation option must be in whole numbers, and the total must
equal 100%. You may change how your net premiums are invested at any time by
telling us in writing. The change will be effective on and after the date we
receive your instructions at our customer service office, but will not affect
any existing policy values. To change the allocation of these amounts, you must
effect a transfer. See Transfers between the investment options.
Currently you may invest your net premiums and policy account value in up to 20
different allocation options, although we reserve the right to change this
number from time to time.
- -----------------------
24 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Default
During the first three years of your policy, it is protected from lapsing by the
No Lapse Guarantee as long as the No Lapse Guarantee Premium Test is met. This
feature guarantees that your policy will not lapse, even if its net cash
surrender value is not enough to pay your policy's monthly deduction on a
monthly processing date. See No Lapse Guarantee.
If your policy does not meet this test, and your net cash surrender value isn't
enough to cover your monthly deduction (or you have borrowed too much--see
below), you will have a 61-day grace period to make a required payment. We will
tell you that your policy is in danger of lapsing, and the premium payment or
loan repayment you must pay to keep it from lapsing, at least 30 days before the
end of this grace period. If you must make a premium payment, the premium
required will be the lesser of (i) the amount of the deficiency in the net cash
surrender value, plus three times your policy's current monthly deduction or
(ii) the amount necessary for your policy to meet the no lapse Guarantee Premium
Test, plus one quarter of the minimum annual premium. If we do not receive the
requested payment by the end of the 61-day grace period, the policy will lapse.
After the No Lapse Guarantee has ended, your policy will go into default if its
net cash surrender value is less than the monthly deduction due at each monthly
processing date. We will give you a 61-day grace period from the date of default
to make a required payment. We will tell you that your policy is in danger of
lapsing, and the premium or loan repayment you must pay to keep it from lapsing,
at least 30 days before the end of this grace period. The required premium will
be an amount equal to the difference between the monthly deduction due and the
net cash surrender value, plus three times your policy's current monthly
deduction.
If we do not receive the required payment by the end of the 61-day grace period,
your policy will lapse without value.
Your policy will also go into default if the amount of any unpaid policy loans
and interest, which is your policy debt, exceeds the value of the investments in
your policy, minus any surrender charges, We will then tell you that a loan
repayment is required. Your policy will lapse 61 days from the default date if
you do not make the required loan repayment. The required repayment will be the
amount by which policy debt exceeds cash surrender value. If the insured person
dies after we have mailed our notice that a loan repayment is due, but before
the 61-day grace period is up, we will pay the beneficiary the policy's death
proceeds minus the unpaid policy debt.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 25
A N D C H A R G E S -----------------------
<PAGE>
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
VUL policy. These charges cover certain costs we incur with respect to the
policies including
o the cost of underwriting, issuing and maintaining the policies, including
preparing and sending billing notices, reports and policy owner
statements, communications with insurance agents and other overhead costs.
o the risk that those insured under the policies may not live as long as we
estimated when we issued the policy, and our administrative expenses may
also be higher than expected.
o the cost of paying death benefits, especially in the early policy years
when the policy account value may be far below the death benefit we pay if
the insured dies.
o a portion of our sales and promotional expenses, commissions, and local,
state and federal taxes. You may not claim the portion of these charges
used to pay taxes as a federal income tax deduction.
The amount of a charge does not necessarily correspond to our costs in providing
the service or benefits associated with a particular policy. For example, the
premium charge and the surrender charge may not cover all of our actual sales
expenses for the policies, and proceeds from other charges, including the
mortality and expense risk charge and cost of insurance charges, may be used in
part to cover sales expenses. Once deductions and charges are taken from your
policy they do not contribute to the value of your policy.
All of the deductions and charges are summarized and explained below.
Premium charge
We deduct a charge of 8.0% from each premium you pay, up to one target premium
each of the first twelve policy years after issue or after an increase in
coverage and 4% on all premium payments received in excess of the target
premium. This charge will fall to 4% after 12 policy years or 12 years after an
increase in coverage on all premium payments paid in a policy year up to the
target premium, and 0% on premium payments that exceed the target premium.
Your policy has a separate target premium for the initial face amount and for
any additional coverage you have added through policy segments. The premium
charge will be applied in the order that these were issued. In order to
calculate your premium charge, we will allocate each premium you pay as follows:
o first to your policy's initial face amount, up to the target premium for
that amount
o then to any policy segments that are in force, in the order that they were
purchased, up to the target premium for each segment
o then proportionately, based on the target premium, among the initial face
amount and any policy segments that are in force.
- -----------------------
26 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
- --------------------------------------------------------------------------------
Example
A 45 year-old male (Preferred Plus underwriting class) buys a policy with a face
amount of $250,000 on January 1, 2000. Five years later, on January 1, 2005, the
same male, now age 50 (Preferred Plus underwriting class), requests an increase
in the face amount of $100,000. The initial target premium is $3,502.50, and the
target premium for the increase is $1,781, bringing the total target premium to
$5,283.50. Assume he pays $4,000 per year for 10 years and $6,000 per year for
the next 10 years. The premiums and premium charges are allocated as follows:
Years 1-5: All premiums are allocated to the initial face amount because that
is the only coverage.
Years 6-10: Premiums up to the target for the initial face amount ($3,502.50)
are allocated to the initial face amount, and the excess
($4,000.00 - $3,502.50 = ($497.50) is allocated to the face amount
increase.
Years 11-20: Again, premiums up to the target for the initial face amount
($3,502.50) are allocated to the initial face amount. The excess
amount up to the target premium for the face amount increase
($1,781.00) is allocated to the face amount increase. The
remaining premium ($6,000.00 - 3,502.50 - 1,781.00 = $716.50) is
allocated proportionally based on the target premium for each
segment:
Initial face amount: $716.50 x (3,502.50 / 5,283.50) = $474.98
Face amount increase segment: $716.50 x (1,781.00 / 5,283.50) =
$241.52
Therefore, the total premium allocated to the initial face amount
is $3,502.50 + 474.98 = $3,977.48, and the total allocated to the
face amount increase segment is $1,781.00 + 241.52 = $2,022.52.
- --------------------------------------------------------------------------------
Premium Allocation
Initial Face Amount First Face Amount Increase
- --------------------------------------------------------------------------------
Premium Premium
Date Premium Charge Premium Charge
- --------------------------------------------------------------------------------
2000-2004 $4,000.00 $300.10 $ 0 $ 0
- --------------------------------------------------------------------------------
2005-2009 3,502.50 280.20 497.50 39.80
- --------------------------------------------------------------------------------
2010-2011 3,977.48 299.20 2,022.52 152.14
- --------------------------------------------------------------------------------
2012-2016 3,977.48 140.10 2,022.52 152.14
- --------------------------------------------------------------------------------
2017-2019 3,977.48 140.10 2,022.52 71.24
- --------------------------------------------------------------------------------
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 27
A N D C H A R G E S -----------------------
<PAGE>
Monthly deductions
- --------------------------------------------------------------------------------
We deduct from the policy account value, on the same date each month, amounts
for administrative cost, the cost of insuring the insured, the mortality and
expense risk charge and any riders. These deductions are made proportionately
from your investments in the fixed-rate and variable investment options.
Monthly deductions from the policy account value
We deduct from the policy account value, on the same date each month, amounts to
cover administrative costs, the cost of insuring the insured, the mortality and
expense risk charge and the cost of any riders. These deductions are made
proportionately from your policy account value in the fixed-rate and variable
investment options. We do not make these monthly deductions after the policy
anniversary closest to the insured's 100th birthday.
Administrative charges
On each monthly processing date, we deduct a charge of $7.50.
We also deduct a monthly charge based on the basic sum insured portion of the
face amount on each monthly processing date for the first 12 policy years after
issue or after any increase in face amount. The amount of this charge depends on
the insured's age, sex and underwriting class when the policy is issued or the
face amount is increased. This charge is not reduced if you decrease your face
amount.
The charge will range from $0.30 to $9.00 per $1,000 of coverage. Representative
annual rates per $1,000 are shown in Appendix D. Your policy's charge is set
forth in your policy.
Mortality and expense risk charge
We deduct this charge based on the policy account value in the variable
investment options. Through the twelfth policy anniversary, we deduct a monthly
charge at a current annual rate of 0.60% of the policy account value in the
variable investment options. Starting in the thirteenth policy year, we deduct a
monthly charge at a current annual rate of 0.40% of the policy account value in
the variable investment options, up to the account value breakpoint, and 0.20%
on the amount in excess of the account value breakpoint. The account value
breakpoint is equal to $100,000 less any policy account value allocated to the
fixed-rate option, but not less than zero. This charge is guaranteed never to
exceed the current charge stated above plus 0.25%.
Cost of insurance charge
This charge is based on our cost of insurance rates for insured people of the
same age, sex, duration, face amount, including coverage under the adjustable
annual renewable term rider, and underwriting class. Any additional rating
charges which are applied to the insured because he or she does not satisfy our
insurance requirements for standard insurance are added to the cost of insurance
charge. The maximum that we can charge for each $1,000 of net amount at risk is
set out in your policy and is based on the 1980 Commissioners' Standard Ordinary
Mortality Tables published by the National Association of Insurance
Commissioners. The cost of insurance rate generally increases as the insured
gets older. Rates are currently lower for policies with a face amount including
any adjustable annual renewable term coverage at least equal to $500,000. If the
policy is
- -----------------------
28 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
eligible for the lower rates, they will apply to the initial face amount and all
policy segments. Our current cost of insurance rates are lower than the
guaranteed maximum.
We calculate the cost of insurance charge by multiplying your policy's net
amount at risk each month by the current cost of insurance rate that applies to
the insured, and dividing the result by $1,000. Your policy's cost of insurance
charge is calculated before the calculation of the administrative charges, the
mortality and expense risk charge and the cost of any additional benefit riders.
A cost of insurance charge is determined separately for the basic sum insured,
additional sum insured and each policy segment, and any adjustable annual
renewable term coverage.
After the first policy year, we may change the cost of insurance rates
prospectively, at our discretion, up to the guaranteed maximum rate listed in
your policy. Changes in the health of the insured will not cause your cost of
insurance charge to increase. Increases in the cost of insurance rates are not
made to an individual policy, but are made equally to all policies where the
insured people are of the same attained age, sex, policy or segment duration,
and underwriting class. We may increase this charge when we expect:
o a higher number of deaths among people in a certain group
o higher expenses or federal income taxes
o a higher number of policies that are allowed to lapse by their
policyowners
o changes in our federal income tax costs imposed on us by Section 848 of
the Internal Revenue Code
o lower earnings
Generally, reducing the net amount at risk results in lower charges for cost of
insurance. Decreasing the net amount at risk partly depends on the death benefit
option you choose. The three options are explained under Death benefit options.
If you choose Option 1, in which the death benefit is the face amount of your
policy, you reduce the net amount at risk when you pay premiums. That's because
premiums increase the policy account value. If you choose Option 2, in which the
death benefit can increase to more than the face amount, paying premiums will
not affect the net amount at risk.
Cost of insurance charge
- --------------------------------------------------------------------------------
This charge allows us to pay death benefits, especially in the early policy
years when the policy account value is far below the death benefit we pay if the
insured dies.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 29
A N D C H A R G E S -----------------------
<PAGE>
If you choose Option 3, in which the death benefit is the face amount of your
policy plus your net accumulated premiums, your net amount at risk could be
lower if your investments perform well.
The net amount at risk can increase, for example, when we increase a policy's
death benefit to meet the requirements of the Internal Revenue Code. See Death
benefit options. Having a higher net amount at risk results in higher deductions
for cost of insurance.
There may be different cost of insurance rates for the initial face amount of
your policy and for each subsequent increase in the face amount. As a result, we
calculate the net amount at risk separately for each segment of coverage.
Your policy account value is allocated first to your policy's basic sum insured,
then to the additional sum insured, and finally to each of the policy segments
in the order that they were added to the policy. The maximum amount of your
policy account value that will be allocated to any one policy segment or to the
initial face amount is the amount that the policy segment or initial face amount
provides as a death benefit, divided by 1.0032737. For the purposes of
determining the net amount at risk, if the death benefit is increased due to the
operation of death benefit Option 2 or 3, the increase will be allocated to the
basic sum insured. If the death benefit is further increased due to Section 7702
of the Internal Revenue Code the increase will be allocated to the most recent
policy segment.
Charges for additional insurance benefits
If you acquire additional insurance benefits by buying one or more riders to the
policy, we will deduct rider costs. We deduct these from the policy account
value monthly.
Transaction deductions from the policy account value
When you ask us to make certain transactions, we will take a transaction
deduction from your policy account value. Except as described differently below,
we will make these deductions from your policy account value invested in the
variable investment options, until these are exhausted, and then from your
fixed-rate option.
Surrender charge
During the first 9 policy years of the initial face amount and each policy
segment, we impose a surrender charge if you:
o surrender your policy, or
o let your policy lapse.
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30 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
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<PAGE>
Surrender charges are not affected by a change in death benefit option or by
partial withdrawals. We will not deduct a surrender charge if you reduce or
eliminate your coverage under a term rider, or reduce your face amount.
This charge is a flat rate for every $1,000 of your policy's basic sum insured.
The rate declines proportionally each year until it is zero after nine years.
The first year surrender charge varies from $2.700 to $53.973 per $1,000 of the
basic sum insured, depending on the insured's age when the policy started, sex
and underwriting class.
A separate surrender charge is also calculated for each new policy segment,
based on the coverage it provides and the insured's age, sex, underwriting class
and face amount when it was added to your policy. This means that the total
surrender charges under your policy will be the sum of the different surrender
charges for your initial face amount and each policy segment. The surrender
charge compensates us for administrative and sales-related expenses. See
Appendix E for examples of surrender charges for representative ages, sex and
underwriting classes.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 31
A N D C H A R G E S -----------------------
<PAGE>
Surrender charges
EXAMPLE (Policy with initial face amount only)
The example on the right shows how the surrender charge declines over a nine
year period so that in year 10 it equals $0.
- --------------------------------------------------------------------------------
Male Insured, Age 45
- --------------------------------------------------------------------------------
Preferred Plus Underwriting Class, Nonsmoker
- --------------------------------------------------------------------------------
Face Amount: $250,000
- --------------------------------------------------------------------------------
Surrender Charge per $1000 of basic sum insured in policy year one (from
Appendix E): $12.609
- --------------------------------------------------------------------------------
Surrender charge in policy year one is: The surrender charge per $1000
multiplied by $250,000 or ($12.609 x $250,000 divided by 1000) = $3125.25
- --------------------------------------------------------------------------------
Proportional reduction in surrender charge over 9 year period: $3152.25 divided
by 9 or $350.25 per year.
- --------------------------------------------------------------------------------
All figures in the table following are rounded to the nearest $ .01.
- --------------------------------------------------------------------------------
Actual
surrender
Policy charge
year ($)
- --------------------------------------------------------------------------------
1 3152.25
- --------------------------------------------------------------------------------
2 2802.00
- --------------------------------------------------------------------------------
3 2451.75
- --------------------------------------------------------------------------------
4 2101.50
- --------------------------------------------------------------------------------
5 1751.25
- --------------------------------------------------------------------------------
6 1401.00
- --------------------------------------------------------------------------------
7 1057.75
- --------------------------------------------------------------------------------
8 700.50
- --------------------------------------------------------------------------------
9 350.25
- --------------------------------------------------------------------------------
10 0.00
- --------------------------------------------------------------------------------
Assume in the above example the insured effects a face amount increase of
$200,000 at the beginning of policy year 6 (attained age 55) and another face
amount increase of $100,000 at the beginning of policy year 11 (attained age
55). At the time of the first increase, the insured is again classified in the
Preferred Plus underwriting class, but at the time of the second increase he is
classified in the Standard underwriting class.
For the purposes of calculating the applicable surrender charges, each face
amount increase is treated separately based on the insured's attained age and
underwriting class at the time of the increase. Therefore, for each increase the
policy will incur a new set of surrender charges. Surrender charges are
calculated as if the policyowner has purchased a policy with the amount of the
increase being the face amount; in other words, they are calculated just as in
the first example. The total surrender charge for a particular policy year
equals the sum of the surrender charge for the initial face amount and the
applicable surrender charge for each policy segment.
First year
Age at Policy face surrender charge
Beginning beginning amount rate per $1000
of year of year ($) ($)
- --------------------------------------------------------------------------------
Initial face amount 1 45 250,000 12.609
- --------------------------------------------------------------------------------
1st increase 6 50 200,000 16.029
- --------------------------------------------------------------------------------
2nd increase 11 55 100,000 26.973
- --------------------------------------------------------------------------------
- -----------------------
32 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
The following is a calculation of the surrender charge for this example. Note
that the surrender charges are shown for policy years 1 through 20 only as,
after the 20th policy year, surrender charges equal zero for the initial face
amount as well as for the two face amount increases.
Per $1,000 Surrender Charge Rates x Basic Sum Insured/1000
(actual surrender charge)
- --------------------------------------------------------------------------------
Total policy
Initial First Second surrender
Policy coverage increase increase charge
year ($) ($) ($) ($)
- --------------------------------------------------------------------------------
1 3,152.25 NA NA 3,152.25
- --------------------------------------------------------------------------------
2 2,802.00 NA NA 2,802.00
- --------------------------------------------------------------------------------
3 2,451.75 NA NA 2,451.75
- --------------------------------------------------------------------------------
4 2,101.50 NA NA 2,101.50
- --------------------------------------------------------------------------------
5 1,751.25 NA NA 1,751.25
- --------------------------------------------------------------------------------
6 1,401.00 3,205.80 NA 4,606.80
- --------------------------------------------------------------------------------
7 1,050.75 2,849.60 NA 3,900.35
- --------------------------------------------------------------------------------
8 700.50 2,493.40 NA 3,193.90
- --------------------------------------------------------------------------------
9 350.25 2,137.20 NA 2,487.45
- --------------------------------------------------------------------------------
10 0.00 1,781.00 NA 1,781.00
- --------------------------------------------------------------------------------
11 0.00 1,424.80 2,697.30 4,122.10
- --------------------------------------------------------------------------------
12 0.00 1,068.60 2,397.60 3,466.20
- --------------------------------------------------------------------------------
13 0.00 712.40 2,097.90 2,810.30
- --------------------------------------------------------------------------------
14 0.00 356.20 1,798.20 2,154.40
- --------------------------------------------------------------------------------
15 0.00 0.00 1,498.50 1,498.50
- --------------------------------------------------------------------------------
16 0.00 0.00 1,198.80 1,198.80
- --------------------------------------------------------------------------------
17 0.00 0.00 899.10 899.10
- --------------------------------------------------------------------------------
18 0.00 0.00 599.40 599.00
- --------------------------------------------------------------------------------
19 0.00 0.00 299.70 299.70
- --------------------------------------------------------------------------------
20 0.00 0.00 0.00 0.00
- --------------------------------------------------------------------------------
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 33
A N D C H A R G E S -----------------------
<PAGE>
Transfer charge
You may transfer your policy account value among the allocation options. If you
make more than 12 transfers within a policy year, we reserve the right to charge
you $25 for each additional transfer. We will deduct the transfer charge from
the allocation options from which you are making the transfer, and will use this
amount for our processing costs.
We will not deduct a transfer charge when:
o you make multiple transfers under your policy's dollar cost averaging
feature
o you transfer amounts as part of taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
We have the right to charge the Separate Account, the account through which we
invest your premiums in the variable investment option, for any federal, state
or local income taxes relating to the Separate Account. We also have the right
to impose additional charges if there is a change in our tax status, if the
income tax treatment of variable life insurance changes for insurance companies,
or for any other tax-related charges associated with the Separate Account or the
policies. We don't currently charge for taxes attributable to the Separate
Account.
Deductions from mutual funds
Daily deductions are made from the assets of the mutual funds to cover advisory
fees and other expenses. As a result, you pay these fees and expenses
indirectly. These expenses vary from year to year. Except as noted below, the
following chart shows the actual fees and expenses for each fund for the year
ended December 31, 1999 as a percentage of the fund's average daily net assets.
- -----------------------
34 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
Fees and expenses for mutual funds
<TABLE>
<CAPTION>
Other Total
expenses expenses
(after any (after any
applicable waivers applicable waivers
Advisory and expense and expense
Fund name fee reimbursements) reimbursements)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guardian Stock Fund 0.50%
- ----------------------------------------------------------------------------------------
Guardian Small Cap Stock Fund 0.75%
- ----------------------------------------------------------------------------------------
Guardian Cash Fund 0.50%
- ----------------------------------------------------------------------------------------
Guardian Bond Fund 0.50%
- ----------------------------------------------------------------------------------------
Guardian VC 500 Index Fund 0.25%
- ----------------------------------------------------------------------------------------
Guardian VC Asset Allocation Fund 0.50%
- ----------------------------------------------------------------------------------------
Guardian VC High Yield Bond Fund 0.60%
- ----------------------------------------------------------------------------------------
Baillie Gifford International Fund 0.80%
- ----------------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund 1.00%
- ----------------------------------------------------------------------------------------
Value Line Centurion Fund(1) 0.50%
- ----------------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust(1) 0.50%
- ----------------------------------------------------------------------------------------
Gabelli Capital Asset Fund 1.00%
- ----------------------------------------------------------------------------------------
MFS Emerging Growth Series 0.75%
- ----------------------------------------------------------------------------------------
MFS Total Return Series(1) 0.75%
- ----------------------------------------------------------------------------------------
MFS Growth With Income Series(1) 0.75%
- ----------------------------------------------------------------------------------------
MFS New Discovery Series(1) 0.90%
- ----------------------------------------------------------------------------------------
MFS Research Series(1) 0.75%
- ----------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund 0.62%
- ----------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund 0.65%
- ----------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61%
- ----------------------------------------------------------------------------------------
Davis Financial Portfolio 0.75%
- ----------------------------------------------------------------------------------------
Davis Real Estate Portfolio 0.75%
- ----------------------------------------------------------------------------------------
Davis Value Portfolio 0.75%
- ----------------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(1) 0.59%
- ----------------------------------------------------------------------------------------
Fidelity VIP Equity-Income
Portfolio(1) 0.49%
- ----------------------------------------------------------------------------------------
Fidelity VIP III
Mid Cap Portfolio 0.59%
- ----------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0.59%
- ----------------------------------------------------------------------------------------
Janus Aggressive Growth Portfolio 0.75%
- ----------------------------------------------------------------------------------------
Janus Capital Appreciation Portfolio 0.70%
- ----------------------------------------------------------------------------------------
Janus Growth Portfolio 0.65%
- ----------------------------------------------------------------------------------------
Janus Worldwide Growth Portfolio 0.65%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) See Notes to fees and expense table
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 35
A N D C H A R G E S -----------------------
<PAGE>
Notes to fees and expense table
These percentages reflect the actual fees and expenses incurred by each Fund
during the year ended December 31, 1999 except for new Funds, whose expenses are
estimated for the year ending December 31, 2000.
The expenses for MFS Growth With Income Series and MFS Total Return Series
reflect an agreement with the adviser to these series that the adviser will bear
the expenses of the series, exclusive of the advisory fee and subject to
reimbursement, so that operational expenses will not exceed 0.25% of the average
daily net assets of the Growth With Income Series and Total Return Series for
the fiscal year ended December 31, 1999. These agreements are also in effect for
the current fiscal year. Without these agreements, total expenses for the year
ended December 31, 1999 would be .__% for the MFS Growth With Income Series and
__% for the MFS Total Return Series, because of reimbursement to the adviser of
previous years' expense payments, and ii) ____% for the MFS Bond Series. An
agreement to limit the Emerging Growth Series' operational expenses to 0.25% of
the average daily net assets of the Fund is also in effect.
Prior to October 2, 1998, The Adviser of MFS Growth With Income Series agreed to
bear expenses for the Series such that the Series' "Other Expenses" shall not
exceed 0.25% of the average daily net assets of the Series during the current
fiscal year. The Adviser agreed to this arrangement on the condition that it
would be reimbursed over time for the expenses advanced. Since the Series'
expenses for 1999 were less than the maximum of 0.25% under the agreement, the
Series reimbursed the Adviser for expenses it had advanced in previous years.
This resulted in higher expenses for the Series in 1999 than it would have
incurred absent the agreement with the Adviser. Absent the agreement, "Other
Expenses" and "Total Operating Expenses" would have been _% and _% respectively.
The expenses shown for MFS New Discovery Series reflect an agreement by the
Fund's adviser to bear expenses, subject to reimbursement by the Fund, such that
the Fund's "Other expenses" will not exceed 0.25% of the Fund's average daily
net assets during 1999. The Fund has an expense offset arrangement which reduces
the custodian fee based upon the amount of cash maintained by the Fund with its
custodian. The "Total fund operating expenses" in the table do not take into
account this expense reduction and are therefore higher than the actual expenses
of the Fund. Reimbursement by the Fund will be accomplished by the payment of an
expense reimbursement fee by the Fund to the adviser, subject to the maximum
0.25% described above. The adviser's obligation to bear part of the Fund's
expenses under this agreement terminates on the earlier of the date the Fund has
reimbursed all expenses borne by the adviser, or May 1, 2001. Please see the
Fund's prospectus for a complete explanation of the Fund's fees and expenses.
- -----------------------
36 P R O S P E C T U S P R E M I U M S , D E D U C T I O N S
- ----------------------- A N D C H A R G E S
<PAGE>
The Fidelity VIP IIContrafund Portfolio, Fidelity VIP III Mid Cap Portfolio,
Fidelity VIP III Growth Opportunities Portfolio and Fidelity VIP Equity-Income
Portfolio have entered into varying arrangements with third parties who either
paid or reduced a portion of the expenses. The Fidelity management fees for each
of these funds consist of a group fee rate and an individual fee rate. The fee
shown here adds these components and multiplies the result by the portfolio's
average net assets. Please see the Fidelity prospectuses for a complete
explanation of the applicable portfolio management fees and expenses.
The "Total fund operating expenses" shown for Janus Capital Appreciation
Portfolio, Janus Growth Portfolio and Janus Worldwide Growth Portfolio reflect
contractual waivers and fee reductions by the Fund's adviser. Fee reductions by
the adviser reduce the management fees to the level of the corresponding Janus
retail fund. The other waivers are applied first against the management fee and
then against "Other Expenses." Without these waivers and fee reductions, total
expenses for Janus Capital Appreciation Portfolio, Janus Growth Portfolio and
Janus Worldwide Growth Portfolio would have been __%, __% and __%, respectively.
Janus has agreed to continue these waivers and fee reductions until at least the
next annual renewal of the Funds' advisory agreement.
The operational expenses for Value Line Strategic Asset Management Trust and
Value Line Centurion Fund reflect expense reimbursements paid by those funds to
us for certain administrative and shareholder servicing expenses that we incur
on their behalf. For the year ended December 31, 1999, we were reimbursed
$________ by Value Line Strategic Asset Management Trust, and $________ by Value
Line Centurion Fund.
Because this is the first full year of operations for The Guardian VC 500 Index
Fund, The Guardian VC Asset Allocation Fund, The Guardian VCHigh Yield Bond
Fund, Davis Financial Portfolio, Davis Real Estate Portfolio and Davis Value
Portfolio, the amounts shown under "Other expenses" and "Total fund operating
expenses" in the table reflect estimated annualized expenses for these Funds'
first year of operations.
We have also entered into agreements with certain fund advisers under which we
will be reimbursed for certain administrative, distribution or other expenses
that we incur as a result of offering certain funds, including the MFS, AIM,
Fidelity, Davis and Janus funds, to our policyowners. The amount of compensation
may be based on assets of the fund attributable to policies we issue and may
vary from adviser to adviser.
-----------------------
P R E M I U M S , D E D U C T I O N S P R O S P E C T U S 37
A N D C H A R G E S -----------------------
<PAGE>
- --------------------------------------------------------------------------------
YOUR ALLOCATION OPTIONS
- --------------------------------------------------------------------------------
As part of your policy you are able to direct where a portion of your premiums
are allocated. There are several variable investment options and a fixed-rate
option. You may choose up to 20 allocation options at any time.
- --------------------------------------------------------------------------------
THE VARIABLE INVESTMENT OPTIONS
The variable investment options give you the opportunity to invest a portion of
your net premiums, indirectly, in a series of mutual funds offering variable
rates of return. The value of your investments will vary depending on the
performance of the mutual funds. There is no minimum guaranteed policy account
value for the portion of your policy that is held in the variable investment
options.
The Separate Account
The Separate Account is the account through which we invest your net premiums in
the variable investment options. We are the record owner of the assets in the
Separate Account, and use them exclusively to support the variable life
insurance policies issued through the Separate Account. The Separate Account
consists of 31 investment divisions, each corresponding to a mutual fund in
which the Separate Account invests. The Separate Account was established by
GIAC's Board of Directors on September 23, 1999 under the insurance law of the
state of Delaware, and meets the definition of a separate account under the
federal securities laws. Our Separate Account is registered with the SEC as a
unit investment trust - a type of investment company under the Investment
Company Act of 1940 (the 1940 Act). Registration under the 1940 Act does not
involve any supervision by the SEC of the investment management or programs of
the Separate Account or GIAC. However, both GIAC and the Separate Account are
subject to regulation under Delaware law. GIAC is also subject to the insurance
laws and regulations of all states and jurisdictions where the company is
authorized to do business.
GIAC owns the assets held in the Separate Account. The assets equal to the
reserves and other liabilities of the Separate Account are used only to support
the variable life insurance policies issued through the Separate Account.
Delaware insurance law provides that these assets may not be used to satisfy
liabilities arising from any other business that GIAC may conduct. This means
that the assets supporting policy account values maintained in the variable
investment options are not available to meet the claims of GIAC's general
creditors. GIAC may also retain in the Separate Account assets that exceed the
reserves and other liabilities of the Separate Account. Such assets can include
GIAC's direct contributions to the Account, accumulated charges for mortality
and expense risks or the investment results attributable to GIAC's retained
assets. Because such retained assets do not support policy account values, GIAC
may transfer them from the Separate Account to its general account.
- -----------------------
38 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Each mutual fund is described briefly below. Complete information can be found
in the accompanying fund prospectuses.
The Funds
Each of the funds corresponding to a variable investment option is either an
open-end diversified management company or a series of an open-end diversified
management company registered with the Securities and Exchange Commission. The
funds don't charge us for buying or selling their shares, allowing us to buy and
sell them at their net asset value in response to your instructions and other
policy-related transactions.
Currently, other investment products that we and other insurers offer are also
able to invest in certain of the mutual funds through the Separate Account.
While the Board of Directors of each fund monitors activities in an effort to
avoid or correct any material irreconcilable conflicts arising out of this
arrangement, we may also take actions to protect the interests of our
policyowners. For more information see Rights reserved by GIAC, and the
prospectuses for the individual mutual funds.
Investment objectives and policies of the funds
Each fund has a different investment objective that it tries to achieve by
following certain investment policies. These objectives affect the potential
risks and returns for each fund, and there is no guarantee that a fund will be
able to meet its investment objectives fully. Some funds have similar investment
objectives and policies to other funds managed by the same adviser. The
investment results of the funds, however, may be higher or lower than the
adviser's other funds. There is no assurance, and we make no representation,
that the performance of any fund will be comparable to the performance results
of any other fund.
The table below summarizes each fund's investment objective, along with the
typical investments that make up that fund.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 39
-----------------------
<PAGE>
Variable investment options
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The Guardian Stock Fund Long-term growth of capital U.S. common stocks
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC 500 Index Fund Seeks to match the investment performance Common stocks of companies in the S&P
of the Standard & Poor's 500 Corporate Index, which emphasizes large U.S.
Stock Price Index ("the S&P Index") Companies
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund Long-term growth of capital U.S. common stocks of companies
with small market capitalization
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Bond Fund Maximum income without undue Investment grade debt obligations
risk of principal; capital appreciation
is a secondary objective
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund Current income; capital appreciation is Corporate bonds and other debt
a secondary objective securities rated below investment grade
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian Cash Fund High level of current income consistent Money market instruments
with liquidity and preservation of
capital
- --------------------------------------------------------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund Long-term total investment return Shares of The Guardian Stock Fund, The
consistent with moderate investment risk Guardian Bond Fund, and The Guardian
Cash Fund
- --------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford International Fund Long-term capital appreciation Common stocks and convertible securities
issued by foreign companies
- --------------------------------------------------------------------------------------------------------------------------------
Baillie Gifford Emerging Markets Fund Long-term capital appreciation Common stocks and convertible securities of
emerging market companies
- --------------------------------------------------------------------------------------------------------------------------------
Value Line Centurion Fund Long-term growth of capital U.S. common stocks with selections based on
rankings of the Value Line Ranking System
- --------------------------------------------------------------------------------------------------------------------------------
Value Line Strategic Asset High total investment return (current U.S. common stocks with selections
Management Trust income and capital appreciation) based on rankings of the Value Line
consistent with reasonable risk Ranking System, bonds and money
market instruments
- --------------------------------------------------------------------------------------------------------------------------------
Gabelli Capital Asset Fund Growth of capital; current income as U.S. common stocks and convertible
a secondary objective securities
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Growth of capital Common stocks of medium and
small-sized growth companies
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund High current income; growth of capital Common and preferred stocks
as a secondary objective of domestic or foreign public utilities
- --------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund Long-term growth of capital; Equity securities judged to be
income as a secondary objective undervalued by the investment advisor
- --------------------------------------------------------------------------------------------------------------------------------
Davis Financial Portfolio Growth of capital Common stocks of financial companies
- --------------------------------------------------------------------------------------------------------------------------------
Davis Real Estate Portfolio Total return through a combination of Securities issued by companies that are
growth and income "principally engaged" in real estate
- --------------------------------------------------------------------------------------------------------------------------------
Davis Value Portfolio Growth of capital U.S. common stocks of companies with
at least $5 billion market capitalization
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio Long-term capital appreciation U.S. and foreign common stocks of
companies believed to be undervalued
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Reasonable income; also considers Income-producing equity securities
potential for capital appreciation
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Capital growth U.S. and foreign common stocks
Portfolio
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio Long-term growth of capital Common stocks with medium market
capitalization, both U.S. and foreign
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
40 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Variable investment options (Continued)
<TABLE>
<CAPTION>
Fund Investment objectives Typical investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Janus Aggressive Growth Portfolio Long-term growth of capital Equity securities of medium-sized
companies; may concentrate in a small
number of issuers
- --------------------------------------------------------------------------------------------------------------------------------
Janus Capital Appreciation Portfolio Long-term growth of capital Equity securities of companies of any size;
may concentrate in a small number of
issuers
- --------------------------------------------------------------------------------------------------------------------------------
Janus Growth Portfolio Long term growth of capital Common stocks of issuers of any size
in a manner consistent with
preservation of capital
- --------------------------------------------------------------------------------------------------------------------------------
Janus Worldwide Growth Portfolio Long term growth of capital Common stocks of foreign and U.S.
in a manner consistent with issuers; usually invests in at least five
preservation of capital countries, including the U.S.
- --------------------------------------------------------------------------------------------------------------------------------
MFS Emerging Growth Series Long-term growth of capital Common stocks of emerging growth
companies of any size
- --------------------------------------------------------------------------------------------------------------------------------
MFS Growth with Income Series Reasonable current income and long- Equity securities issued by U.S. and
term growth of capital and income foreign companies
- --------------------------------------------------------------------------------------------------------------------------------
MFS New Discovery Series To seek capital appreciation Equity securities of companies that offer
superior prospects for growth, both U.S.
and foreign
- --------------------------------------------------------------------------------------------------------------------------------
MFS Research Series Long-term growth of capital Equity securities of companies
and future income believed to possess better than average
prospects for long-term growth
- --------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series Above average income consistent Broad list of securities, including a
with prudent employment of capital; combination of equity and fixed-
as a secondary objective, to provide income, both U.S. and foreign
reasonable opportunity for growth of
capital and income
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Some of these Funds may not be available in your state.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 41
-----------------------
<PAGE>
Total returns do not reflect deductions
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, or transaction deductions.
Including the effects of these deductions reduces returns under the policy. See
Special terms used in this prospectus and Deductions and charges for additional
information.
Investment performance of the Funds
The table below shows the average annual total returns for the mutual funds for
years ended December 31, 1999. The performance figures reflect the deduction of
fund investment advisory fees and operating expenses, and assume that any
dividends and capital gains are reinvested in the fund. These figures do not
reflect how the funds' investment performance will affect the value of your
policy, because they do not take into account the insurance and other charges we
deduct from your policy. If these charges were taken into account, total returns
would be lower. Also, past returns should not be used to predict future
performance. Total returns for The Guardian Cash Fund are not presented here.
Years ended December 31, 1999
--------------------------------------
Fund name Since
and inception date 1 Year 5 Years 10 Years inception
- --------------------------------------------------------------------------------
The Guardian Stock Fund(1)
(4/13/83)
- --------------------------------------------------------------------------------
The Guardian VC 500 Index Fund
(9/7/99)
- --------------------------------------------------------------------------------
The Guardian Small Cap Stock Fund(1)
(7/16/97)
- --------------------------------------------------------------------------------
The Guardian Bond Fund(1)
(5/1/83)
- --------------------------------------------------------------------------------
The Guardian VC High Yield Bond Fund
(9/7/99)
- --------------------------------------------------------------------------------
The Guardian VC Asset Allocation Fund
(9/7/99)
- --------------------------------------------------------------------------------
Baillie Gifford International Fund
(2/8/91)
- --------------------------------------------------------------------------------
Baillie Gifford Emerging
Markets Fund
(10/17/94)
- --------------------------------------------------------------------------------
Value Line Centurion Fund
(11/15/83)
- --------------------------------------------------------------------------------
Value Line Strategic Asset
Management Trust
(10/1/87)
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund(2)
(5/1/95)
- --------------------------------------------------------------------------------
AIM V.I. Capital
Appreciation Fund(3)
(5/5/93)
- --------------------------------------------------------------------------------
AIM V.I. Global Utilities Fund(3)
(5/2/94)
- --------------------------------------------------------------------------------
AIM V.I. Value Fund(3)
(5/5/93)
- --------------------------------------------------------------------------------
Davis Financial Portfolio
(7/1/99)
- --------------------------------------------------------------------------------
Davis Real Estate Portfolio
(7/1/99)
- --------------------------------------------------------------------------------
Davis Value Portfolio
(7/1/99)
- --------------------------------------------------------------------------------
- -----------------------
42 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Years ended December 31, 1999
--------------------------------------
Fund name and Since
and inception date 1 Year 5 Years 10 Years inception
- --------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio(4)
(1/3/95)
- --------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(4)
(10/9/96)
- --------------------------------------------------------------------------------
Fidelity VIP III Growth
Opportunities Portfolio(4)
(1/3/95)
- --------------------------------------------------------------------------------
Fidelity VIP III Mid Cap Portfolio(4)
(12/28/98)
- --------------------------------------------------------------------------------
Janus Aggressive Growth Portfolio
(9/13/93)
- --------------------------------------------------------------------------------
Janus Capital Appreciation Portfolio
(5/1/97)
- --------------------------------------------------------------------------------
Janus Growth Portfolio
(9/13/93)
- --------------------------------------------------------------------------------
Janus Worldwide Growth Portfolio
(9/13/93)
- --------------------------------------------------------------------------------
MFS Emerging Growth Series(5)
(7/24/95)
- --------------------------------------------------------------------------------
MFS Growth with Income Series(5)
(10/9/95)
- --------------------------------------------------------------------------------
MFS New Discovery Series(5)
(5/1/98)
- --------------------------------------------------------------------------------
MFS Research Series(5)
(7/26/95)
- --------------------------------------------------------------------------------
MFS Total Return Series(5)
(1/2/95)
- --------------------------------------------------------------------------------
These total returns are for the funds only and do not reflect the effects of
deductions from policy premiums, monthly deductions, transaction deductions or
any deductions from the Separate Account. Including the effects of these
deductions reduces returns. See Special terms used in this prospectus and
Deductions and charges for additional information.
(1) Results for The Guardian Bond Fund and The Guardian Stock Fund reflect
effects of expense reimbursements that occurred during the years ended
December 31, 1984 and 1985. Without these expense reimbursements, results
for these funds would be lower. The inception date for The Guardian Small
Cap Stock Fund is the date of commencement of the public offering of the
fund.
(2) For the period from May 1, 1995 through December 31, 1995, the Manager and
the Adviser of Gabelli Capital Asset Fund absorbed a portion of the fund's
operating expenses. Total returns for this period would have been lower if
these expenses had not been absorbed.
(3) Total returns for AIM V.I. Value Fund and AIM V.I. Capital Appreciation
Fund reflect the effects of fee waivers and/or expense offset
arrangements. In the absence of such arrangements total returns would have
been lower.
(4) Total returns for the Fidelity VIP III Growth Opportunities, Fidelity VIP
Equity-Income, Fidelity VIP II Contrafund and Fidelity VIP III Mid Cap
Portfolios reflect the reimbursement of certain fund expenses by the
Adviser during certain periods and/or the effects of varying arrangements
with third parties who either paid or reimbursed a portion of the fund's
expenses. In the absence of these arrangements total returns would have
been lower.
(5) Total returns for the MFS Growth With Income Series, Emerging Growth
Series, and Total Return Series reflect the agreement by the series'
Adviser to bear expenses for the series, subject to reimbursement by the
series, such that the operational expenses shall not exceed, for the
Growth With Income, Emerging Growth, and Total Return Series, 0.25%, of
the average daily net assets of the series for each fiscal year since
inception. In the absence of this agreement, except where a series is
reimbursing its adviser for previous years' expense payments on its
behalf, total returns would be lower.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 43
-----------------------
<PAGE>
The funds' investment advisers
All of the funds' investment advisers are registered as investment advisers
under the Investment Advisers Act of 1940 (Advisers Act).
Guardian Investor Services Corporation
The Guardian Stock Fund, The Guardian Small Cap Stock Fund, The Guardian Bond
Fund, The Guardian Cash Fund, The Guardian VC Asset Allocation Fund, The
Guardian VC High Yield Bond Fund, and The Guardian VC 500 Index Fund (the
Guardian funds) are advised by Guardian Investor Services Corporation (GISC), 7
Hanover Square, New York, New York, 10004. GISC is wholly owned by GIAC.
Guardian Baillie Gifford Limited
Baillie Gifford International Fund and Baillie Gifford Emerging Markets Fund are
advised by Guardian Baillie Gifford Limited (GBG), 1 Rutland Court, Edinburgh,
EH3 8EY, Scotland. GBG is a member of Great Britain's Investment Management
Regulatory Organization Limited (IMRO). GBG was incorporated in Scotland by GIAC
and Baillie Gifford Overseas Limited (BG Overseas) in November 1990. BG Overseas
is wholly owned by Baillie Gifford & Co., which is currently one of the largest
investment management partnerships in the United Kingdom.
Baillie Gifford Overseas Limited
GBG has appointed BG Overseas to serve as sub-investment adviser to Baillie
Gifford International Fund and Baillie Gifford Emerging Markets Fund. Like GBG,
BG Overseas is located at 1 Rutland Court, Edinburgh, EH3 8EY, Scotland. BG
Overseas is also a member of IMRO. No separate or additional fee is paid by the
fund to BG Overseas.
Value Line, Inc.
Value Line Strategic Asset Management Trust and Value Line Centurion Fund are
advised by Value Line, Inc., 220 East 42nd Street, New York, New York 10017.
Gabelli Funds, Inc.
Gabelli Capital Asset Fund is managed by GISC, which has appointed Gabelli
Funds, Inc. (GFI) as the investment adviser to the Fund. GFI has its principal
offices at One Corporate Center, Rye, New York 10580. No separate or additional
fee is paid by the Fund to GFI.
- -----------------------
44 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- -----------------------
<PAGE>
Massachusetts Financial Services Company
MFS Growth With Income Series, MFS Emerging Growth Series, MFS Total Return
Series, MFS Research Series, and MFS New Discovery Series are advised by
Massachusetts Financial Services Company (MFS), 500 Boylston Street, Boston, MA.
MFS is a subsidiary of Sun Life of Canada (U.S.) Financial Services Holdings,
Inc. which is itself an indirect wholly owned subsidiary of Sun Life Assurance
Company of Canada.
A I M Advisors, Inc.
AIM V.I. Value Fund, AIM V.I. Global Utilities Fund, and AIM V.I. Capital
Appreciation Fund are advised by A I M Advisors, Inc. (AIM), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046.
Fidelity Management & Research Company
The Fidelity VIP III Growth Opportunities Portfolio, Fidelity VIP Equity-Income
Portfolio, Fidelity VIP II Contrafund Portfolio, and Fidelity VIP III Mid Cap
Portfolio are advised by Fidelity Management & Research Company (FMR), 82
Devonshire Street, Boston, Massachusetts 02109.
On behalf of the Fidelity VIP II Contrafund Portfolio, Fidelity VIP III Growth
Opportunities Portfolio, and Fidelity VIP III Mid Cap Portfolio, FMR has
sub-advisory agreements with two affiliates, FMR U.K. and FMR Far East. No
separate or additional fee is paid by the portfolios to the sub-adviser.
Davis Selected Advisers, LP
Davis Financial Portfolio, Davis Real Estate Portfolio, and Davis Value
Portfolio are advised by Davis Selected Advisers, LP, 124 East Marcy Street,
Santa Fe, New Mexico 87501 (Davis). Davis Selected Advisers-NY, Inc. acts as
sub-adviser to the Funds. It is located at 609 Fifth Avenue, New York 10017.
Janus Capital
Janus Growth Portfolio, Janus Aggressive Growth Portfolio, Janus Capital
Appreciation Portfolio, and Janus Worldwide Growth Portfolio are advised by
Janus Capital Corporation (Janus), 100 Fillmore Street, Denver, Colorado 80206.
-----------------------
Y O U R A L L O C A T I O N O P T I O N S P R O S P E C T U S 45
-----------------------
<PAGE>
Fixed-rate option
- --------------------------------------------------------------------------------
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
THE FIXED-RATE OPTION
The net premiums you allocate to the fixed-rate option earn a set rate of
interest. You may allocate some or all of your net premiums to the fixed-rate
option, and may transfer some or all of your investments in the variable
investment options into the fixed-rate option. There are restrictions on making
transfers out of the fixed-rate option. See Transfers between the investment
options. Your policy account value in the fixed-rate option is backed by GIAC's
general account.
We have not registered the fixed-rate option or our general account as
investment companies, and interests in the fixed-rate option are not registered
under the Securities Act of 1933. The SEC staff does not review the prospectus
disclosure about the fixed-rate option or the general account, but the
information we present may be subject to certain generally applicable provisions
of the federal securities laws regarding the accuracy and completeness of
information appearing in a prospectus.
Amounts in the fixed-rate option
The total amount that you have invested in the fixed-rate option consists of:
o the portion of your net premiums and any loan repayments that you have
allocated to this option, plus
o any amounts that you have transferred to this option from the variable
investment options, plus
o the interest paid on your policy account value in this option, minus
o any deductions or withdrawals from the fixed-rate option, including
applicable charges.
Because different interest rates may be in effect as you make transfers and
contributions, your effective interest rate at any time may be a weighted
average of the different rates which apply to the portions of your policy
account value in the fixed-rate option. Interest accrues daily on the total that
you have invested in the fixed-rate option, including interest you have earned
in previous years. The minimum annual interest rate for the fixed-rate option is
4%. Interest rates may be changed at any time in our discretion. We are not
obliged to pay more than 4% in interest, although we may choose to do so.
- ----------------------
46 P R O S P E C T U S Y O U R A L L O C A T I O N O P T I O N S
- ----------------------
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
- --------------------------------------------------------------------------------
Policy loans
- --------------------------------------------------------------------------------
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan.
POLICY LOANS
While the insured is alive, you may borrow all or a portion of the loan value of
your policy, by assigning your policy to us as collateral for your loan. Your
policy's loan value is:
o 90% of the cash surrender value of your policy on the date we receive your
written request, minus
o the amount of any outstanding policy debt, minus
o the amount of interest that will accrue on the outstanding policy debt and
the amount to be borrowed up to the next policy anniversary
The minimum loan amount is $500, or your policy's loan value, whichever is less.
We will normally pay loan proceeds to you within seven days of receiving your
request (see Policy proceeds for exceptions to this general rule).
We will not process any loan request that does not specify the variable
investment options from which the loan should be taken, or that exceeds the
amount available.
When taking out a policy loan, you should consider:
o amounts transferred out of the variable and fixed-rate options and into
our Loan Account are no longer affected by the investment experience,
positive or negative, or interest crediting, of those allocation options
o as a result, taking a policy loan will have a permanent effect on your
policy account value, even after the loan is repaid in full
o the amount of your policy that is available for withdrawal or surrender,
and your policy's death benefit proceeds, will also be reduced
dollar-for-dollar by the amount of any policy debt
o if your policy is considered to be a modified endowment contract under the
Internal Revenue Code, there may be tax consequences associated with
taking a policy loan. See Tax considerations for a discussion of modified
endowment contracts and the effects on policy loans
When you request a loan, we will first transfer that amount from the policy
account value in the variable investment options that you specify in your
request. If the amount of the loan requested exceeds the policy account value in
the variable investment options, we will transfer the excess from your policy
account value in the fixed-rate option into our Loan Account.
The investments in the Loan Account will earn interest at an annual rate of 4%.
We credit this interest monthly to the Loan Interest Account. Although this
means that you are effectively paying a maximum interest rate of 1.0% in the
first twenty years and 0.5% thereafter on your policy loans, you are expected to
pay the loan interest charged when it is due (see below).
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Interest on your policy loan
- --------------------------------------------------------------------------------
We charge interest at an annual rate of 5% on all outstanding policy debt,
payable in arrears, until the 20th anniversary of your policy. After this, the
annual rate falls to 4.5% for all existing and new policy loans.
Interest on your policy loan
We charge simple interest that accrues daily at an annual rate of 5% on all
outstanding policy debt, payable in arrears, until the 20th anniversary of your
policy. After this, the annual rate falls to 4.5% for all existing and new
policy loans. Interest accrues daily and is due on each policy anniversary. If
you do not pay the interest on your loan when it is due, the amount will be
capitalized and added to the Loan Account.
We transfer the required amount from the Loan Interest Account to the Loan
Account. After the transfer, any amount remaining in the Loan Interest Account
is transferred to the variable investment options and the fixed-rate option in
accordance with the current premium allocation instructions. If the amount in
the Loan Interest Account is not sufficient to cover the loan interest due, any
deficiency will be transferred proportionately from the amounts in the variable
investment options and the fixed-rate option.
Repaying your policy loan
Except for required loan repayments, you may repay all or part of any
outstanding policy debt at any time while the insured is alive and the policy is
in force. The minimum loan repayment amount is $100 or the outstanding balance
of your policy debt, whichever is lower.
If the insured has died and the death benefit proceeds have not been paid,
either in cash or under a payment option, you have 60 days after his or her
death to repay any policy debt. If you do, we will then increase the amount
payable to the beneficiary by the amount of your repayment.
Except for required loan repayments, we will apply a loan repayment first to the
payment of loan interest due but not yet capitalized, then to reduce amounts in
the Loan Account and then to policy interest accrued since the last policy
anniversary but not yet due. We credit any repayment applied to reduce amounts
in the Loan Account to the variable investment options and the fixed-rate option
according to your current allocation instructions. The amount credited to the
fixed-rate option will earn the interest rate in effect at that time until the
next policy anniversary.
Transfers under your policy that are made in connection with policy loans are
not subject to transfer charges. Also, loan repayments are not subject to
premium charges, so it may be to your advantage, if you have outstanding loans
or interest, to make loan repayments rather than premium payments.
If, on any monthly processing date, you owe more in loans and interest than your
cash surrender value, we will notify you that a loan repayment is required for
your policy to remain in force. Your policy will lapse without value 61 days
after the default date set out
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48 P R O S P E C T U S S P E C I A L F E A T U R E S
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in our notice if we do not receive a payment equal to the amount by which your
policy debt exceeds the cash surrender value on the monthly processing date in
question.
If the insured dies after we have sent this notice, but before the 61 days are
up, we will pay the beneficiary the death benefit proceeds, minus any policy
debt and unpaid interest. There may be adverse tax consequences if your policy
lapses and you have outstanding policy debt.
Decreasing the face amount
- --------------------------------------------------------------------------------
On and after the first policy anniversary, you may request a reduction in its
face amount, which is the guaranteed minimum amount your policy will pay at
death or maturity.
DECREASING THE FACE AMOUNT
On and after the first policy anniversary, you may request a reduction in face
amount, which is the guaranteed minimum amount your policy will pay at death. To
do this we require that:
o you make your request in writing and we receive it at our customer service
office
o the insured is alive when we receive your request
o the reduction is at least $5,000 unless it is caused by a partial
withdrawal, in which case the partial withdrawal rules apply
o the new face amount is not lower than our minimum face amount, currently
$100,000, and
o the monthly deductions are not currently being waived under a waiver of
monthly deductions rider.
We reduce your face amount on the monthly processing date coinciding with or
next following the date we approve your request.
Your death benefit option will determine how your policy is affected by a
reduction in the face amount due to a partial withdrawal:
o under Option 1, a partial withdrawal will typically cause an immediate
reduction in your policy's face amount
o under Option 2, a partial withdrawal will not reduce your policy's face
amount. However, the amount of your death benefit will decline with each
partial withdrawal.
o under Option 3, a partial withdrawal will typically not cause an immediate
reduction in your policy's face amount.
If you have made one or more increases to the initial face amount by adding
policy segments and then request a face amount decrease, we will apply the
decrease to your policy segments as follows. We start with the most recent
policy segment, followed by the next most recent, and so on, and then reduce the
additional sum insured portion of the initial face amount and, finally, against
the basic sum insured portion of the initial face amount.
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S P E C I A L F E A T U R E S P R O S P E C T U S 49
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Since we do not deduct a surrender charge when you decrease the face amount, the
surrender charge does not change. Your policy account value must always be
greater than the surrender charge. Further, the administrative charge per $1,000
of coverage is not reduced by a decrease in face amount.
We will send you policy pages that reflect the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may have tax consequences, including
possibly causing it to be considered a modified endowment contract under the
Internal Revenue Code. See Tax considerations.
You can also reduce or cancel coverage provided by the additional sum insured
and Annual Adjustable Renewable Term rider. If you have coverage provided by the
additional sum insured, a reduction in that coverage will result in a reduction
of the face amount. A reduction in the face amount of the Adjustable Annual
Renewable Term rider will not affect the face amount of your policy. Likewise,
you can decrease the face amount of your policy without reducing the coverage of
your term rider.
Consult your sales representative for advice. See Benefits and policy values and
Appendix C for more information on the additional sum insured and Annual
Adjustable Renewable Term rider, respectively.
INCREASING THE FACE AMOUNT
On any policy anniversary up to and including the anniversary closest to the
insured's 70th birthday, you may ask us to increase your policy's face amount.
To do this we require that:
o you make your request in writing and we receive it at our customer service
office at least 30 days before your policy anniversary
o you prove that the insured meets our insurance requirements
o the increase be for at least $10,000, and
o the monthly deductions are not currently being waived under a waiver of
monthly deductions rider.
If we approve the increase, it will take effect on the policy anniversary on or
after we receive the request, provided the insured is alive on that date. We'll
send you revised policy pages reflecting the changes to your policy.
We'll issue the increase in the form of a separate policy segment. Each policy
segment has its own underwriting class, rate for cost of insurance, surrender
charges, administrative charges, premium charge, target premium, and, during the
first three years after any increase, minimum annual premium.
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50 P R O S P E C T U S S P E C I A L F E A T U R E S
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After an increase in the face amount takes effect, to calculate premium charges
we will allocate premium payments first to the initial face amount and then to
each policy segment, starting with the oldest policy segment and ending with the
most recent one. We'll allocate premiums in such a way that they won't exceed
the annual target premium for the initial face amount or for each policy
segment. When the sum of the premiums paid during a policy year exceeds the
target premium for the initial face amount, we will allocate the excess to the
first policy segment. If the premiums you pay during a policy year exceed the
target premiums for all the policy segments and the initial face amount, we'll
allocate the excess proportionately among the target premium for the initial
face amount and each policy segment.
If you increase the face amount of your policy, it will be subject to new
surrender charges. We'll calculate the surrender charges as if you had bought a
new policy for the increase in the face amount. A new 9-year surrender charge
will apply to the policy segment that increased the face amount. We'll notify
you about the new surrender charge after any increase in the face amount.
You don't have to pay an additional premium to increase the face amount.
However, you may have to make a premium payment to prevent the policy from going
into default. That's because the new surrender charges triggered by an increase
in the face amount would automatically reduce the net cash surrender value of
the policy. Depending on your circumstances, a premium payment may be necessary
to keep the net cash surrender value above zero.
Increasing the face amount of your policy may have tax consequences, including
possibly causing your policy to be considered a modified endowment contract. The
tax consequences associated with your policy being classified as a modified
endowment contract are discussed in Tax considerations.
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S P E C I A L F E A T U R E S P R O S P E C T U S 51
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Partial withdrawals
- --------------------------------------------------------------------------------
After the first policy year, you may withdraw part of your policy's net cash
surrender value. The minimum partial withdrawal is $500.
PARTIAL WITHDRAWALS
After the first policy year, you may withdraw part of your policy's net cash
surrender value. You must make your request for withdrawal in writing, and the
insured must be alive when you make the withdrawal. The minimum partial
withdrawal is $500. We have the right to limit the number of partial withdrawals
you make in a policy year to 12.
If we approve your request, it will be effective as of the business day we
receive it at our customer service office. The proceeds will normally be paid
within seven days of the time we receive your request. For exceptions to this
general rule see Policy proceeds. We will not approve or process a partial
withdrawal if:
o your remaining net cash surrender value would be insufficient to cover
three times the most recent monthly deduction, or
o you have chosen death benefit Option 1 or Option 3 and the partial
withdrawal would cause your policy's face amount to fall below our minimum
face amount, or
o you do not specify the variable investment options from which the
withdrawal is to be deducted, or
o the amount of the request exceeds the amount available for partial
withdrawal
We will tell you if these conditions apply.
A partial withdrawal will reduce your policy account value by the amount of the
partial withdrawal. In addition the face amount will be reduced by the amount of
any partial withdrawal that exceeds the reduction-free partial withdrawal
amount. So if you wish to make a partial withdrawal that does not reduce your
face amount, you should make a reduction-free partial withdrawal. The amount of
your reduction-free partial withdrawal depends on the death benefit option in
effect and is calculated as shown below. If you have increased your policy's
face amount by adding policy segments, we will reduce the face amount starting
with the most recent policy segment, and ending with the additional sum insured
and the basic sum insured, respectively. See Decreasing the face amount.
We will calculate the reduction-free partial withdrawal amount as of the close
of business on the date we receive your request. This amount will be affected by
which death benefit option you have chosen.
If you have chosen death benefit Option 1, your reduction-free partial
withdrawal amount is any positive amount resulting from:
o your policy account value, minus
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52 P R O S P E C T U S S P E C I A L F E A T U R E S
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o your policy's face amount divided by the death benefit factor outlined in
your policy.
If you have chosen death benefit Option 2, all partial withdrawals are
reduction-free.
If you have chosen death benefit Option 3, your reduction-free partial
withdrawal amount is the greater of:
o your net accumulated premiums immediately prior to the partial withdrawal,
or
o any positive amount resulting from:
o your policy account value, minus
o your policy's face amount divided by the death benefit factor outlined in
your policy.
We deduct the amount of your withdrawal from the policy account value
attributable to the variable investment options that you specified in your
request. If the partial withdrawal exceeds the policy account value attributable
to the variable investment options specified, we will deduct the excess amount
from the policy account value attributable to the fixed-rate option.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
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Surrendering your policy
- --------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while the insured
is alive. Your policy's net cash surrender value will normally be paid within
seven days of the time we receive your request.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while the insured
is alive. We will calculate your policy's net cash surrender value as of the
close of the business day we receive your written request, which must include
your policy, or an acceptable affidavit confirming that you've lost your policy,
at our customer service office. Your policy's net cash surrender value will
normally be paid within seven days of the time we receive your request. Your
policy's net cash surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan Account
and Loan Interest Account, minus
o any surrender charges, minus
o any outstanding policy debt.
Your total surrender charges will be the total of the surrender charges for the
initial face amount, and for any policy segments. See Deductions and charges.
- --------------------------------------------------------------------------------
EXAMPLE
Surrender in policy year 5
----------------------------------------------------------------------------
Male insured, Age 35
----------------------------------------------------------------------------
Preferred Plus Underwriting Class
----------------------------------------------------------------------------
Face Amount: $250,000
----------------------------------------------------------------------------
Annual Policy Premium: $2,207.50
----------------------------------------------------------------------------
Assuming, 6% hypothetical gross return: (5.19% net return)
(See Appendix A)
----------------------------------------------------------------------------
Policy Account Value $7,920.14
------------------------------------- ---------------------------------
Surrender Charge 1,103.75
------------------------------------- ---------------------------------
Policy Debt 0
------------------------------------- ---------------------------------
Net Cash Surrender Value $6,816.39
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All insurance coverage will end on the day we calculate your policy's net cash
surrender value. For a discussion of the tax consequences of surrendering your
policy, see Tax considerations.
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54 P R O S P E C T U S S P E C I A L F E A T U R E S
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Transfers
- --------------------------------------------------------------------------------
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. Each transfer
must be for a minimum of $500, or the total amount you have invested in the
option you are transferring funds out of, whichever is lower.
TRANSFERS BETWEEN THE INVESTMENT OPTIONS
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. We will make
transfers based on the unit values at the end of the business day on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our customer service office or by calling 1-800-935-4128.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. Before you can request transfers over the
telephone, you must first send us a written authorization form.
Your policy account value may not be invested in more than twenty of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. If you make more than twelve transfers within a
policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
We will accept transfer instructions by telephone between 9:00 a.m. and 3:30
p.m. New York time on each business day. We will ask callers to provide
identification and a personal security code for the policy, and will accept the
instructions of anyone who can provide this information. We may also record
telephone transfer requests without notifying the caller. If we reasonably
believe that telephone instructions are genuine, we are not liable for any
losses, damages or costs resulting from a transaction. As a result, you bear the
risk of any losses caused by unauthorized or fraudulent telephone transactions.
The rules for telephone transfers are subject to change, and we reserve the
right to suspend or withdraw this service without notice. During periods of
financial market or economic volatility, it may be difficult to contact us in
order to make a transfer by telephone. If this happens, you should send your
request to us in writing.
TRANSFERS FROM THE FIXED-RATE OPTION
You may only transfer your policy account value out of the fixed-rate option
once each policy year. We must receive your request within 30 days of your
policy anniversary. If we receive your request in the 30 days before your policy
anniversary, we will make the transfer on your policy anniversary. If we receive
your request in the 30 day period after your policy anniversary, we will make
the transfer on the business day we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
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<PAGE>
When you request a transfer from the fixed-rate option, the amounts that you
have held in the fixed-rate option longest will be withdrawn first.
The maximum that you may transfer out of the fixed-rate option each policy year
is either 33 1/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
Dollar cost averaging
- --------------------------------------------------------------------------------
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular variable investment option or options each month, over a
period of time. Dollar cost averaging may reduce the impact of price
fluctuations on unit values of the variable investment options over the period
that automatic transfers are made, but cannot guarantee an increase in the
overall value of your investments or offer protection against losses in a
declining market.
DOLLAR COST AVERAGING TRANSFER OPTION
Under this option, you transfer the same dollar amount from The Guardian Cash
Fund to a particular option or options each month, over a period of time. Using
dollar cost averaging, you purchase more units in the variable investment
options when their share prices are lower, and fewer units when prices are
higher. In this way, dollar cost averaging may reduce the impact of price
fluctuations on unit values of the variable investment options over the period
that automatic transfers are made. However, this strategy cannot guarantee an
increase in the overall value of your investments or offer protection against
losses in a declining market.
The amount of your monthly transfer under this option must be at least $100 for
each option you wish to invest in. Amounts will be transferred automatically on
each monthly processing date from The Guardian Cash Fund into the variable
investment options you have chosen.
Before the program can begin, you must submit an authorization form.
We will stop your dollar cost averaging program when:
o the period of time listed on your dollar cost averaging authorization form
ends
o your policy account value in The Guardian Cash Fund is insufficient to
cover your monthly investment in the variable investment options you have
chosen. If this happens we will divide what you do have in The Guardian
Cash Fund proportionally among the variable investment options you have
chosen, leaving a balance of zero in The Guardian Cash Fund
o you tell us in writing to end the program, and we receive this notice at
least three days before the next monthly processing date, or
o your policy lapses or you surrender it.
You may change your transfer instructions or reinstate the dollar cost averaging
program, subject to the rules above, if we receive a new authorization form at
least three business days before your policy's next monthly processing date.
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56 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the insured is
determined as explained under Death benefit options, and is payable when we
receive proof that the insured has died while the policy was in effect. It is
calculated as follows:
o the death proceeds based on the death benefit option in effect as of the
monthly processing date immediately preceding the insured's death, plus
o the proceeds of any coverage you have added to your policy through riders,
plus
o if you have chosen death benefit Option 3, any premiums paid between the
monthly processing date and the insured's date of death, minus, as of the
date of the insured's death,
o any outstanding policy debt, minus
o as of the date of the insured's death, the lesser of:
o any premium required under the No Lapse Guarantee; or
o the amount required to bring the cash surrender value up to zero,
and minus
o any partial withdrawals between the monthly processing date and the
insured's date of death.
We may adjust the death proceeds paid to the beneficiaries if:
o the age or sex listed on the policy application is incorrect
o the insured commits suicide within two years of the policy issue date, a
change in the face amount, or the date a change in the death benefit from
Option 1 or Option 3 to Option 2 takes effect (but only for any increase
in the death benefit over your policy's face amount that was a result of
the change)
o there are limits imposed by riders to the policy.
If the insured has reached the attained age of 100 or older, the death proceeds
will be the policy account value minus any policy debt as of the date of death.
The amount of all other transactions will be calculated at the end of the
business day on which we receive the necessary instructions, information or
documentation at our customer service office.
If the proceeds are being taken from your policy account value in the variable
investment options, we will normally pay proceeds within seven days of receiving
the necessary information. However,
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<PAGE>
we may delay any transfers, loans or other payments made from the variable
investment options when:
o the New York Stock Exchange is closed, except for weekends or holidays, or
when trading has been restricted
o the Securities and Exchange Commission determines that a state of
emergency exists, making policy transactions impracticable, or
o when one or more of the mutual funds corresponding to the variable
investment options legally suspends payment or redemption of their shares.
We will pay interest on the death proceeds from the date of the insured's death
until the proceeds are paid, either in a lump sum or through a payment option.
If the proceeds are from your policy account value in the fixed-rate option,
they will normally be paid promptly once we have received the necessary
information. However, we may delay any transfers, loans or other payments made
from the fixed-rate option for up to six months from the date of your request.
If we do this, we will pay interest of at least 3% per year on payments that we
delay for 30 days or more. Please note that requests for transfers from the
fixed-rate option may only be made during certain periods. See Transfers from
the fixed-rate option.
Exchanging a policy
- --------------------------------------------------------------------------------
You may exchange all or a portion of your Park Avenue VUL policy for a
fixed-benefit whole life policy issued by us or one of our affiliates, without
having to prove that the insured meets our insurance requirements.
EXCHANGE FOR FIXED-BENEFIT INSURANCE
You have the right to exchange all or a portion of your Park Avenue VUL policy
for a fixed-benefit whole life policy issued by us or our affiliate, Guardian
Life, without having to prove that the insured meets our insurance requirements.
Once exercised, this right terminates. Under the new policy, your policy value
will be held in the issuer's general account. Your face amount cannot exceed the
face amount of this policy on the date you make the exchange nor be less than
the minimum face amount under GIAC's or its affiliate's rules. If you exchange a
portion of the face amount, the face amount remaining must meet GIAC's minimum
face amount requirements. The insured's age when the Park Avenue VUL policy took
effect will also be carried over. Before you can make any exchange, however, you
must repay any outstanding policy debt on your Park Avenue VUL policy, and all
due monthly deductions must be paid. See your policy for details.
The exchange may result in a cost or credit to you. The cost or credit will
reflect any differences in cash values and premiums between the exchanged
portion of this policy and the new policy.
The new policy will be issued and effective either on the business day that we
receive your written exchange request at our customer service office along with
your policy, or on the date that any exchange cost owing is received by the
issuer of your new policy, whichever is later.
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<PAGE>
Additional rider benefits are available only if you provide the issuer of your
new policy with satisfactory evidence of insurability for the insured, and will
be subject to the issuing company's rules on the exchange date.
You should consult with legal and tax advisers before exchanging your policy.
Payment options
- --------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options specified in the accompanying text.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
the insured is living. If the insured has died and you have not chosen a payment
option, the beneficiaries may choose the payment options, up to one year after
the insured's death. If you are surrendering your policy, you have 60 days after
the proceeds of your policy become payable within which to choose a payment
option. You, or the beneficiaries, may choose to distribute the proceeds under
more than one payment option at a time, but you must distribute at least $5,000
through each option selected. Monthly payments under each option must be at
least $50.
The proceeds of your policy must be paid to a `natural person'. Payments will
not be made to his or her estate if he or she dies before the proceeds have been
fully paid. You may name a second person to receive any remaining payments if
this happens.
The proceeds that we hold in order to make payments under the payment options do
not share in the income, gains or losses of the variable investment options, nor
do they earn interest in the same way or amount as funds in the fixed-rate
option.
Under Payment Option 1, we will hold the proceeds and make monthly interest
payments at a guaranteed annual rate of 3%.
Under Payment Option 2, we will make monthly payments of a specified amount
until the proceeds and interest are fully paid. At least 10% of the original
proceeds must be paid each year. Guaranteed interest of 3% will be added to the
proceeds each year.
Under Payment Option 3, we will make monthly payments for a specified number of
years. The amount of the payments will include interest at 3% per year.
Under Payment Option 4, we will make monthly payments for the longer of the life
of the payee or 10 years. The minimum amount of each payment will include
interest at 3% per year.
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<PAGE>
Under Payment Option 5, we will make monthly payments until the amount paid
equals the proceeds settled, and for the remaining life of the payee. The
minimum amount of each payment will include interest at 3% per year.
Under Payment Option 6, we will make monthly payments for 10 years and for the
remaining life of the last surviving of two payees. The minimum amount of each
payment will include interest at 3% per year.
Payment option tables for Options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female) projected 20 years to the year 2020 by 100%
of the male scale G Factors (for males) and 50% of the female scale G Factors
(for females).
Your policy lists the monthly payment for every $1,000 of proceeds that the
payee applies under Options 3 to 6.
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60 P R O S P E C T U S S P E C I A L F E A T U R E S
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TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
THIS DISCUSSION of tax considerations for your Park Avenue VUL policy is general
in nature, does not purport to be complete or to cover all tax situations, and
should not be considered as tax advice. It is based on our understanding of
federal income tax laws as they are currently being interpreted. We cannot
guarantee that these laws will not change while this prospectus is in use, or
while your policy is in force. You should consult a lawyer or tax adviser
regarding your individual situation.
- --------------------------------------------------------------------------------
Tax status
- --------------------------------------------------------------------------------
To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in the
Internal Revenue Code. For example, the underlying investments must be
"adequately diversified" in order for the policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that the
investment divisions of the Separate Account, through the mutual funds, will
satisfy these diversification requirements.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under federal tax law, a life insurance policy must satisfy certain requirements
which are set forth in Section 7702 of the Internal Revenue Code. Guidance as to
how these requirements are to be applied is limited. Accordingly, there is some
uncertainty about the application of Section 7702 to a policy, particularly so
with respect to policies issued on an insured who does not meet our insurance
requirements for standard coverage. Nevertheless, we believe it is reasonable to
conclude that your policy should satisfy the applicable requirements. If it is
subsequently determined that a policy does not satisfy the applicable
requirements, we may take appropriate steps to bring the policy into compliance
with such requirements and we reserve the right to modify the policy as
necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have been
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the policyowners
have been currently taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the Park
Avenue VUL policy, such as your flexibility to allocate premiums and the policy
account value, have not been explicitly addressed in published rulings. While we
believe that the policy does not give policyowners investment control over the
Separate Account's assets, we reserve the right to modify the policy as
necessary to prevent the policyowner from being treated as the owner of the
Separate Account assets supporting the policy.
In addition, the Code requires that the investments of the investment divisions
of our Separate Account be "adequately diversified" in order for the policy to
be treated as a life insurance contract for federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual 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.
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Treatment of policy proceeds
- --------------------------------------------------------------------------------
We believe that the death benefits under your policy should be excludable from
the gross income of the beneficiary. Generally, under the existing federal tax
laws, increases in the value of your policy will not be taxed federally unless
you make a withdrawal before the insured dies.
TREATMENT OF POLICY PROCEEDS
We believe that the death benefits under your policy generally should be
excludable from the gross income of the beneficiary. Generally, under the
existing federal tax laws, increases in the value of your policy will not be
taxed federally unless you make a withdrawal before the insured dies. The money
that you receive when the insured dies is not subject to federal income tax, but
may be subject to federal estate taxes or generation skipping taxes.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. How this money is taxed depends on
whether your policy is classified as a modified endowment contract.
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," with less favorable tax treatment than other
life insurance contracts. Due to the flexibility of the policy as to 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 premium payments made
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.
You should consult with a competent tax adviser to determine whether a policy
transaction will cause your policy to be classified as a modified endowment
contract.
If your policy is not considered a modified endowment contract:
o money that you withdraw from your policy will generally be taxed only if
the total that you withdraw exceeds your "basis" in the policy - which is
generally equal to the total amount that you have paid in premiums. The
difference between what you have put in and what you take out will be
taxed as ordinary income. When you withdraw money from your policy, your
basis is reduced by any amount withdrawn that is not taxed
o if you surrender your policy, you will generally be taxed only on the
amount by which the value of your policy, including any policy debt, is
greater than your basis in the policy. The tax consequences of
surrendering your policy may vary if you receive the proceeds under one of
the payment plans. Losses are generally not tax deductible
o policy loans are generally not taxable because they must be paid back. The
interest you pay on these loans is generally not tax deductible. However,
if your policy lapses while you have an outstanding policy loan, you may
have to pay tax on the amount that you still owe to your policy. The tax
consequences of a policy loan are unclear if the difference between the
rate we charge on the loan and the interest rate earned on the loan is
very small. You should consult a tax adviser regarding these consequences.
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62 P R O S P E C T U S T A X C O N S I D E R A T I O N S
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If your policy is considered a modified endowment contract:
o all distributions other than death benefits, including partial
withdrawals, surrenders, assignments and policy loans, will be treated
first as distributions of gain, taxable as ordinary income to the extent
of any gain; and as a tax free recovery of basis only after all the gain
in the contract has been distributed.
o all modified endowment contracts issued by GIAC or its affiliates during
any calendar year will be treated as one modified endowment contract to
determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 59 1/2 years of age or older; is attributable to
a disability; or is received as substantially equal periodic payments made
over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same person is being insured. Paying
additional premiums under the new policy may cause it to be treated as a
modified endowment contract. Your policy may also lose any "grandfathering"
privilege, where you would be exempt from certain legislative or regulatory
changes made after your original policy was issued, if you exchange your policy.
You should consult with a tax adviser if you are considering exchanging any life
insurance policy.
POLICY CHANGES
We will make changes to policies and their riders where necessary to attempt to
ensure that they continue to qualify as life insurance under the Internal
Revenue Code, and policyowners are not considered the direct owners of the
mutual funds held in the Separate Account. Any changes will be made uniformly to
all policies affected. We will provide advance notice in writing of these
changes when required by state insurance regulators.
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue VUL
policy, please consult a legal or tax adviser.
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Transfer taxes
- --------------------------------------------------------------------------------
If you are both the policyowner and the insured, the death benefit under your
Park Avenue VUL policy will generally be included in the value of your gross
estate for federal estate tax purposes. If the beneficiary of the policy is
someone who is two or more generations younger than the policyowner, the
generation-skipping transfer (GST) tax may be imposed.
ESTATE AND GENERATION SKIPPING TRANSFER TAXES
If you are both the policyowner and the insured, the death benefit under your
Park Avenue VUL policy will generally be included in the value of your gross
estate for federal estate tax purposes. If you are not the insured, the value of
the policy will be included in your gross estate.
Also, if the beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax may be
imposed.
The individual situation of a policyowner or beneficiary will determine how the
ownership of a policy or the receipt of policy proceeds will affect their tax
situation. Because the rules are complex, a legal or tax adviser should be
consulted for specific information.
Other tax consequences
Park Avenue VUL policies can be used in various ways, including:
o as non-qualified deferred compensation or salary continuance plans
o in split-dollar insurance plans, and
o as part of executive bonus plans, retiree medical benefits plans, or other
similar plans.
The tax consequences of these plans will vary depending on individual
arrangements and circumstances. We recommend that anyone considering buying a
Park Avenue VUL policy with the expectation of favorable tax consequences should
consult with a qualified tax adviser before investing.
In addition, new rules have recently been passed by Congress relating to life
insurance owned by businesses. Any business should consult with a qualified tax
adviser before buying a policy, and before making any changes or transactions
under the policy.
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64 P R O S P E C T U S T A X C O N S I D E R A T I O N S
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Possible tax law changes
- --------------------------------------------------------------------------------
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We may pay taxes at the state and local level, as well as premium taxes, but at
present these are not substantial. If they increase, we reserve the right to
recover these costs by charging the Separate Account or the policy.
INCOME TAX WITHHOLDING
We are generally required to withhold money for income taxes when you make a
transaction on which you will have to pay tax. You can request in writing that
we not withhold any amount for income tax purposes. If we do not, or if we fail
to withhold enough to cover the taxes that are due, you could be penalized. You
would also be responsible for any unpaid taxes when you file your regular income
tax return. We may similarly withhold generation skipping transfer taxes unless
you tell us in writing that these taxes are not required.
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T A X C O N S I D E R A T I O N S P R O S P E C T U S 65
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RIGHTS AND RESPONSIBILITIES
- --------------------------------------------------------------------------------
Assigning policy rights
- --------------------------------------------------------------------------------
You may assign the rights under your Park Avenue VUL policy to another person or
business, subject to certain restrictions discussed in the accompanying text.
ASSIGNING THE RIGHTS TO YOUR POLICY
You may assign the rights under your Park Avenue VUL policy to another person or
business. This is often done, for example, to secure a loan. We will only be
bound by such an agreement when we have received a copy of the assignment
papers, signed by you, as well as the business or person to whom you are
assigning your rights, and your policy's beneficiaries, if applicable.
Assignments are subject to all payments made or actions we have taken on or
before the date we receive the assignment papers. We are not responsible for
determining whether the transfer of your policy's rights is legally valid.
The entity or person to whom you assign your rights may exercise all rights
granted under the policy except the right to:
o change the policyowner or beneficiary
o change a payment option, and
o direct where your net premiums will be invested or make transfers among
the fixed-rate and variable investment options.
VOTING RIGHTS
As explained in The variable investment options, we are the owner of the fund
shares held in the Separate Account. As a result, we have the right to vote at
any meeting of the funds' shareholders.
Where we are required to by law, we will vote fund shares based on the
instructions we receive from Park Avenue VUL policyowners. If we do not receive
instructions from some policyowners, we will vote fund shares attributable to
their policies, and any shares we own in our own right, in the same proportion
as the shares attributable to the policyowners from whom we do receive
instructions. This proportion could include policyowners and contract owners
from other separate accounts.
If changes in the law or its interpretation allow us to make voting decisions in
our own right, or to restrict the voting of policyowners, we reserve the right
to do so. We will ask you for your voting instructions if, on the record date
set by the fund's directors, part of your policy account value is invested in
the variable investment option of the Separate Account that corresponds to the
mutual fund holding a shareholders' meeting.
The number of votes that you have will be based on the number of shares that you
hold. We will calculate the number of shares, or fraction of a share, that you
hold on the record date by dividing the dollar value of your investment in the
division of the Separate Account corresponding to the mutual fund, by the net
asset value of the variable investment option's shares on that date.
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66 P R O S P E C T U S R I G H T S A N D R E S P O N S I B I L I T I E S
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<PAGE>
If, after careful examination, we reasonably disapprove of a proposed change to
a mutual fund's investment adviser, its advisory contract, or its investment
objectives or policies, we may disregard policyowners' voting instructions, if
the law allows us to do so. If the change affects the investment adviser or
investment policy, we will only exercise this right if we determine in good
faith that the proposed change is contrary to state law or is inappropriate in
view of the fund's investment objective and purpose. If we exercise this right,
we will provide a detailed explanation of our actions in the next semi-annual
report to policyowners.
Certain activities related to the operation of the Separate Account may require
the approval of policyowners. See Rights reserved by GIAC. If a vote is
required, you will be given one vote for every $100 of your policy that is held
in the variable investment options. For any investments that we hold on our own
behalf, we will vote in the same proportion as our policyowners.
You do not have the right to vote on the operations of the fixed-rate option.
LIMITS TO GIAC'S RIGHT TO CHALLENGE A POLICY
Incontestability
- --------------------------------------------------------------------------------
Generally, we cannot challenge your policy once it is in force for two years.
Incontestability
Generally, we cannot challenge your policy or any face amount increase once it
is in force for two years. If you change your policy's death benefit from Option
1 or Option 3 to Option 2, we have two years to challenge any increase in the
death benefit that results from this change. If we are successful in our
challenge, your death benefit will revert to what it would have been under
Option 1 or Option 3, whichever is applicable.
Misstatement of age or sex
If we find that the information in the application regarding the age or sex of
the insured is wrong, we will adjust the death benefit to that which would have
been purchased by the most recent deduction for cost of insurance under the
policy and any rider costs using the correct age or sex.
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<PAGE>
Suicide exclusion
If the insured commits suicide within two years of the policy's issue date or
within two years of a face amount increase, regardless of whether he or she is
considered sane at the time, the amount that we must pay in death benefits will
be limited to the greater of
o the net cash surrender value as of the date of death, or
o the policy premiums paid, minus
o any policy debt, minus
o any partial withdrawals.
If the insured commits suicide, while sane or insane within two years from the
effective date of any increase in the face amount, our liability will be limited
to the cost of insurance for such increase.
If the insured commits suicide within two years of an increase in your policy's
death benefit due to a change from Option 1 or Option 3 to Option 2, the death
benefit will be limited to the original death benefit under Option 1 or Option
3, whichever is applicable, plus the additional cost of insurance charges paid
for the increased death benefit.
RIGHTS RESERVED BY GIAC
We reserve the right to make changes or take actions that we feel are in the
best interests of Park Avenue VUL policyowners and their beneficiaries, or are
appropriate for the policy. We will follow applicable laws and regulations in
exercising our rights, and will seek the approval of policyowners or regulators
when necessary. Some of the changes or actions we may take include:
o operating the Separate Account in any form permitted by law
o taking any action that will allow the Separate Account either to comply
with or be exempt from sections of the 1940 Act
o de-registering the Separate Account under the 1940 Act
o transferring the assets from one division of the Separate Account into
other divisions, or to one or more separate accounts, or to our general
account, and adding, combining, or removing investment divisions in the
Separate Account
o substituting the shares of one mutual fund held through the Separate
Account for shares of a different class in the same mutual fund, shares of
a different mutual fund, or any other investment allowed by law
o adding to, suspending or eliminating your ability to direct how your net
premiums are invested, or to transfer your investments among the variable
investment options or the fixed-rate option
o changing the way we make deductions or collect charges, consistent with
the limits outlined in the policy
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68 P R O S P E C T U S R I G H T S A N D R E S P O N S I B I L I T I E S
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<PAGE>
o changing the policy as required to ensure that it continues to qualify as
life insurance under the Internal Revenue Code, or to preserve favorable
tax treatment for your benefits under the policy, or
o making any changes necessary to the policy so that it conforms with any
action we are permitted to take.
We will inform you if we make a change that affects the basic nature of the
investments in any of the variable investment options. If this occurs, you will
have 60 days from the postmark on our notice to transfer your investments out of
this option and into one of the other investment options, without charge. See
Transfers between the investment options.
YOUR RIGHT TO CANCEL YOUR POLICY
You may cancel your policy by returning it with a written cancellation notice to
either our executive office or the agent from whom you bought the policy. You
must do this within the later of:
o 10 days of receiving your policy, or
o 45 days of signing your completed policy application.
Longer periods may apply in some states. If a cancellation notice is sent by
mail, it will be effective on the date of the postmark. Once we receive your
notice, we will refund all of the premiums you have made towards your policy,
and it will be considered void from the beginning. We may delay refunding any
payments you made by check until your check has cleared.
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OTHER INFORMATION
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE POLICY AND OTHER CONTRACTUAL ARRANGEMENTS
We have an agreement with Guardian Investor Services Corporation (GISC) for GISC
to act as the principal underwriter of Park Avenue VUL policies, as well as the
other variable life insurance policies and variable annuity contracts that we
offer. GISC is a broker-dealer registered under the Securities and Exchange Act
of 1934, and a member of the National Association of Securities Dealers. Under
this agreement GISC was paid or accrued a total of $1,979,926 in 1997,
$1,946,477 in 1998 and $______ in 1999. GISC is a New York corporation.
Agents and commissions
GIAC agents who are licensed by state insurance authorities to sell variable
life insurance policies must also be registered representatives of GISC, or of
broker-dealer firms which have entered into agreements with GIAC and GISC to
sell Park Avenue VUL policies, which may include our affiliate Park Avenue
Securities LLC. Our agents receive a maximum sales commission of:
o 55% of the policy premium paid for the first policy year or the first year
of a policy segment up to one target premium, and 3% of any policy
premiums in excess of one target premium, then
o 4% of the policy premiums paid for policy years two through ten or years
two through ten of any policy segment up to one target premium, and 3% of
any policy premiums in excess of one target premium, then
o 0.15% per annum of the policy account value paid monthly after policy year
10.
We may also compensate our agents in the form of commission overrides, expense
allowances, bonuses, wholesaler fees and training allowances. In addition,
agents may qualify for non-cash compensation such as expense-paid trips or
educational seminars.
If you return your policy under the right to cancel provisions, the agent may
have to return some or all of any commissions we have paid.
Administrative services
Through an agreement with our parent company, Guardian Life, to carry out the
administration of Park Avenue VUL policies, we are billed quarterly for the time
that their staff spends on GIAC business, and for the use of their centralized
services and sales force.
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Other agreements
We have entered into several other agreements, including:
o an agreement with Value Line, Inc. under which we are compensated for
marketing the Value Line Centurion Fund and the Value Line Strategic Asset
Management Trust to our policyowners, and
o agreements with MFS, AIM, Davis, Fidelity and Janus under which we are
compensated for certain administrative costs and expenses connected to the
offering and sale of their funds to our policyholders. The amount we
receive is based on a percentage of assets under management.
SPECIAL PROVISIONS FOR GROUP OR SPONSORED ARRANGEMENTS
Where state insurance laws allow us to, we may sell Park Avenue VUL policies
under a group or sponsored arrangement.
A group arrangement is one in which a group of individuals is covered under a
single policy. This might be arranged, for example, by an employer, a trade
union, or a professional association.
A sponsored arrangement is one in which we are allowed to offer members of a
group, such as employees of a company or members of an association, insurance
policies on an individual basis.
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Communications we'll send you
Shortly after your policy anniversary each year, we will send you an
updated statement showing the following information:
o the amount of your current death benefit
o the instructions we have on file regarding where to invest your net
premiums, and how much you have invested in each of the allocation
options
o your policy account value, cash surrender value and net cash
surrender value
o the amount you have paid in policy premiums and the charges that we
have deducted, since the last anniversary of your policy
o a summary of any transfers or partial withdrawals, loans or loan
repayments that you have made since your last annual statement
o the total of any outstanding policy debt that you owe us, and
o the interest rate for allocations to the fixed-rate option.
Twice a year we will also send you reports containing the financial
statements of the mutual funds and the Separate Account through which you
invest in these funds. Of these reports, the annual reports will contain
audited financial statements.
We will confirm in writing receipt of your policy premiums and any
transfers or other transactions. We will also write you to request a
premium or loan repayment to keep your policy from lapsing.
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O T H E R I N F O R M A T I O N P R O S P E C T U S 71
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<PAGE>
We may reduce or eliminate certain deductions and charges outlined in this
prospectus for policies bought under group or sponsored arrangements including
policies issued in connection with certain business insurance arrangements. We
may, for instance, sell policies without surrender charges and/or with reduced
or eliminated fees and charges to employees, officers, directors and agents of
Guardian Life and its subsidiaries and their immediate family members. We may
reduce or waive policy charges and deductions in accordance with the rules in
effect as of the date an application for a policy is approved. In addition, GIAC
may permit groups and persons purchasing under a sponsored arrangement to apply
for simplified issue and multi-life underwriting. To qualify for a reduction in
the policy's charges or deductions certain criteria must be met. These may
include:
o the size of the group
o the expected number of participants
o the expected amount of premium payments.
o the expected number of policies to be issued
o the amount of coverage
The amount of any reduction in charges or deductions and the criteria to qualify
for a reduction will reflect our reduced cost of selling and/or maintaining the
policies in group or sponsored arrangements.
From time to time we may change the amount of any reduction in charges or
deductions, or the criteria that a group must meet to qualify for these
reductions. Any change will be made on a non-discriminatory basis.
LEGAL CONSIDERATIONS FOR EMPLOYERS
The Park Avenue VUL policy estimates different risks for men and women in
establishing a policy's premiums, benefits and deductions, except in states
where gender-neutral standards must be used. In 1983, the United States Supreme
Court held that optional annuity benefits offered under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. Anyone interested in buying Park
Avenue VUL policies in connection with insurance or benefits programs should
consult with their legal advisers to determine if the policy is appropriate for
this purpose.
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ADVERTISING PRACTICES
In our advertisements and sales materials for Park Avenue VUL policies we may
include:
o articles or reports on variable life insurance in general, or Park Avenue
VUL specifically, and any other information published in business or
general information publications.
o relevant indices or rankings of investment securities or similar groups of
funds
o comparisons of the variable investment options with the mutual funds
offered through the separate accounts of other insurance companies, or
those with similar investment objectives and policies, and
o comparisons with other investments, including those guaranteed by various
governments.
We may use the past performance of the variable investment options and funds to
promote the policies. This data is not indicative of the performance of the
funds or the policies in the future or the investment experience of individual
policyowners.
We may feature individual funds and their managers, and describe the asset
levels and sales volumes of GIAC, GISC and others in the investment industry. We
may also refer to past, current, or prospective economic trends and investment
performance, and any other information that may be of interest.
We are a member of the Insurance Marketplace Standards Association ("IMSA"). and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards for sales and service of individually sold life insurance and
annuities.
LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings that would threaten our
financial position or that of the Separate Account.
LEGAL MATTERS
The legal validity of the Park Avenue VUL policy, as described in this
prospectus, has been confirmed by Richard T. Potter, Jr., Vice President and
Counsel of GIAC.
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O T H E R I N F O R M A T I O N P R O S P E C T U S 73
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REGISTRATION STATEMENT
We have omitted some information from this prospectus, which is contained in our
registration with the Securities and Exchange Commission (SEC), relating to the
Separate Account and the Park Avenue VUL policy. You can obtain this information
by contacting the SEC's main office in Washington, DC, and paying the required
fee.
FINANCIAL AND ACTUARIAL EXPERTS
The following items are included in this prospectus:
o statutory basis balance sheets of GIAC as of December 31, 1998 and
December 31, 1999
o related statutory basis statements of operations, changes in common stock,
surplus, and cash flow of GIAC for the three years ended December 31,
1999.
These items have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants of GIAC, whose report
thereon appears herein, given on their authority as experts in accounting and
auditing. PricewaterhouseCoopers LLP is located at 1177 Avenue of the Americas,
New York, New York 10036.
The GIAC statutory basis financial statements contained in this prospectus
should only be used to determine our ability to meet our obligations under the
Park Avenue VUL policies, and not as an indication of the investment experience
of the Separate Account.
The actuarial matters contained in this prospectus have been examined by Charles
G. Fisher, FSA, Vice President and Actuary of GIAC. His opinion on actuarial
matters is filed as an exhibit to the registration statement filed with the
Securities and Exchange Commission.
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74 P R O S P E C T U S O T H E R I N F O R M A T I O N
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GIAC'S MANAGEMENT
The directors and officers of GIAC are named below together with information
about their principal occupations and affiliations during the past five years.
The business address of each director and officer is 7 Hanover Square, New York,
New York 10004. The "Guardian Fund Complex" referred to in the biographical
information is comprised of (1) The Guardian Variable Contract Funds, Inc. (a
series fund that issues its shares in four series), (2) The Guardian Bond Fund,
(3) The Guardian Cash Fund, (4) The Park Avenue Portfolio (a series trust that
issues its shares in nine series) and (5) GIAC Funds, Inc. (a series fund that
issues its shares in three series).
Name Title Business History
- --------------------------------------------------------------------------------
Joseph A. Caruso Vice President Vice President and Corporate
and Secretary Secretary, The Guardian Life
Insurance Company of America 3/96 -
present; Second Vice President and
Corporate Secretary 1/95 - 2/96;
Vice President and Secretary,
Guardian Investor Services
Corporation, Secretary, Guardian
Asset Management Corporation,
Guardian Baillie Gifford Limited,
Park Avenue Securities LLC and
various mutual funds within the
Guardian Fund Complex.
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Philip H. Dutter Director Management Consultant
(self-employed). Director of The
Guardian Life Insurance Company of
America 3/88 - present. Director of
Guardian Investor Services
Corporation.
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Earl C. Harry Treasurer Treasurer, The Guardian Life
Insurance Company of America 11/96 -
present. Assistant Treasurer prior
thereto. Treasurer of Guardian
Investor Services Corporation,
Guardian Asset Management
Corporation and Park Avenue
Securities LLC.
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Arthur V. Ferrara Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America 1/93 - 12/95; Director
1/81 - present. Director (Trustee)
of Guardian Investor Services
Corporation, Guardian Asset
Management Corporation, Gabelli
Capital Asset Fund, Park Avenue
Securities LLC and various mutual
funds within the Guardian Fund
Complex.
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Charles G. Fisher Vice President Second Vice President and Actuary,
and Actuary The Guardian Life Insurance Company
of America.
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Leo R. Futia Director Retired. Former Chairman of the
Board and Chief Executive Officer,
The Guardian Life Insurance Company
of America; Director 5/70 - present.
Director (Trustee) of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and various
mutual funds within the Guardian
Fund Complex.
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Peter L. Hutchings Director Executive Vice President and Chief
Financial Officer, The Guardian Life
Insurance Company of America 5/87 -
present. Director of Guardian
Investor Services Corporation, Park
Avenue Securities LLC and Guardian
Asset Management Corporation.
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Frank J. Jones Executive Executive Vice President and Chief
Vice President, Investment Officer, The Guardian
Chief Investment Life Insurance Company of America,
Officer, and Director, Guardian Investor Services
Director Corporation, Guardian Baillie
Gifford Limited, Park Avenue
Securities LLC, Director and
President Guardian Asset Management
Corporation. Executive Vice
President, GIAC Funds, Inc.. Officer
of various mutual funds within the
Guardian Fund Complex.
- --------------------------------------------------------------------------------
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O T H E R I N F O R M A T I O N P R O S P E C T U S 75
----------------------
<PAGE>
Name Title Business History
- --------------------------------------------------------------------------------
Edward K. Kane Executive Executive Vice President, The
Vice President Guardian Life Insurance Company of
and Director America 1/97 - present; Senior Vice
President and General Counsel prior
thereto; 11/88 - present. Director,
Guardian Asset Management
Corporation.
- --------------------------------------------------------------------------------
Bruce C. Long Director and ____________________, The Guardian
Senior Life Insurance Company of America
Vice President 9/99 - present;
__________________________________,
prior thereto; President, Guardian
Investor Series Corporation.
- --------------------------------------------------------------------------------
Frank L. Pepe Vice President Vice President and Controller,
and Controller Equity Products, The Guardian Life
Insurance Company of America 1/96 -
present; Second Vice President and
Controller, Equity Products prior
thereto. Vice President and
Controller of Guardian Investor
Services Corporation. Vice President
and Treasurer, GIAC Funds, Inc..
Officer of various mutual funds
within the Guardian Fund Complex.
- --------------------------------------------------------------------------------
Richard T. Potter, Jr. Vice President Vice President and Equity Counsel,
and Counsel The Guardian Life Insurance Company
of America 1/96 - present; Second
Vice President and Equity Counsel
prior thereto. Vice President and
Counsel of Guardian Investor
Services Corporation. Counsel of
Guardian Asset Management
Corporation, Park Avenue Securities
LLC, and various mutual funds within
the Guardian Fund Complex.
- --------------------------------------------------------------------------------
Joseph D. Sargent President, President, Chief Executive Officer
Chief Executive and Director The Guardian Life
Officer and Insurance Company of America 1/96 -
Director present; President prior thereto;
Director 1/93 - present. Chairman of
the Board of Guardian Investor
Services Corporation and Guardian
Asset Management Corporation and
various mutual funds within the
Guardian Fund Complex. Director of
Guardian Baillie Gifford Limited and
Park Avenue Securities LLC.
- --------------------------------------------------------------------------------
John M. Smith Director Retired. Executive Vice President,
The Guardian Life Insurance Company
of America 1/95 - 10/99; Senior Vice
President, Equity Products prior
thereto. Director, Guardian Investor
Services Corporation. Director,
Guardian Baillie Gifford Limited.
Director, Guardian Asset Management
Corporation.
- --------------------------------------------------------------------------------
William C. Warren Director Retired. Dean Emeritus, Columbia Law
School. Former Chairman of the
Board, Sandoz, Inc.; Director of The
Guardian Life Insurance Company of
America since 1/57, Park Avenue
Securities LLC, and Director of
Guardian Investor Services
Corporation.
- --------------------------------------------------------------------------------
No officer or director of GIAC receives any compensation from the Separate
Account. No separately allocable compensation has been paid by GIAC, or any of
its affiliates, to any person listed above for services rendered to the Separate
Account.
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76 P R O S P E C T U S O T H E R I N F O R M A T I O N
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<PAGE>
- --------------------------------------------------------------------------------
SPECIAL TERMS USED IN THIS PROSPECTUS
- --------------------------------------------------------------------------------
Some of the special terms used in this prospectus are defined below.
Additional sum insured
This is additional insurance coverage that provides a level death benefit to the
insured's 100th birthday.
Age
The insured's age on his or her birthday closest to the date the policy takes
effect.
Attained age
The insured's Age plus the number of policy years completed since the policy
date.
Basic policy
The policy, including the basic sum insured, additional sum insured,
endorsements and applications, but excluding any additional benefit riders.
Basic sum insured
The amount of coverage provided by the Basic policy, excluding any additional
sum insured.
Business day
Each day that GIAC processes transactions, currently including each day on which
the New York Stock Exchange or its successor is open for trading and GIAC is
open for business. GIAC's close of business is 4 p.m. New York time. If any
transaction or event occurs or is scheduled to occur on a day that is not a
business day, or if a transaction request is received after GIAC's close of
business, such transaction or event will be deemed to occur as of the next
following business day unless otherwise specified.
Face amount
The sum of the basic sum insured plus the additional sum insured and any policy
segments in force at the time of determination. The minimum face amount is
currently $100,000 of basic sum insured.
Initial face amount
The face amount in force on the policy's issue date. The minimum initial face
amount is currently $100,000.
Internal Revenue Code
The Internal Revenue Code of 1986, as amended, and its related rules and
regulations.
Issue date
The date your policy is issued at GIAC's customer service Office.
----------------------
S P E C I A L T E R M S P R O S P E C T U S 77
----------------------
<PAGE>
Loan account
An account to which values from the variable investment options and the
fixed-rate option are transferred when a policy loan is taken. The Loan Account
is equal to the loan.
Loan amount
The sum of any amounts borrowed plus any capitalized loan interest less any loan
repayment.
Loan interest account
An account that represents the interest earnings credited by GIAC on the Loan
Account.
Minimum annual premium
An amount used to determine whether your policy meets the No Lapse Guarantee
Premium Test, and in setting your policy's initial premium. It is shown in your
policy.
Monthly processing date
The day of each policy month on which the monthly deduction is deducted from the
policy account value and certain policy benefits and values are calculated. The
monthly processing date is the same date of each calender month as the policy
date, or the last day of a calender month if that is earlier. If such calendar
day is not a business day, the monthly processing date will be the next
following business day.
Net accumulated premiums
For death benefit Option 3, the sum of premiums paid less the sum of adjusted
partial withdrawals taken to date. An adjusted partial withdrawal is a partial
withdrawal reduced by the portion that exceeds the Net Accumulated Premiums on
the date of the partial withdrawal.
Net amount at risk
The difference between the amount that you would be paid under a policy segment
under the policy's death benefit and the policy account value allocated to that
segment.
No Lapse Guarantee
For the first three years of your policy the No Lapse Guarantee ensures that it
will not lapse, even if the cash value of your policy is not enough to pay the
policy's monthly deduction in a given month, so long as the No Lapse Guarantee
Premium Test is met.
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78 P R O S P E C T U S S P E C I A L T E R M S
- ----------------------
<PAGE>
No Lapse Guarantee Premium Test
This test is used to determine whether your policy qualifies for the No Lapse
Guarantee. It states that, as of the most recent monthly processing date, you
must have paid at least as much into your policy (minus any withdrawals or
policy debt) as the minimum annual premiums up to this date, as outlined in your
policy. To calculate your minimum annual premium for the current policy year,
multiply your minimum annual premium by a ratio equal to the number of completed
policy months since the last policy anniversary plus 1 over 12.
Policy anniversary
The same date each year as the policy date.
Policy date
The date your policy comes into effect. This date is used to measure policy
months, policy years, policy anniversaries, and monthly processing dates.
Policy debt
The unpaid policy loan amount plus the accumulated and unpaid interest on those
loans.
Target premium
A measure of premium used to determine your policy's premium charges and agent
commissions. Your policy's initial face amount and any policy segments you buy
each have their own target premium. The target premium associated with the
initial face amount is based on the insured's age, underwriting class and sex
(unless gender-neutral rates are required by law). The target premium associated
with any policy segment is based on the insured's attained age and the
underwriting class for each policy segment.
The target premium for any rider, except the guaranteed coverage rider, is based
on the monthly deduction for that rider during the first policy year.
----------------------
S P E C I A L T E R M S P R O S P E C T U S 79
----------------------
<PAGE>
FINANCIAL STATEMENTS TO BE FILED BY AMENDMENT
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80 P R O S P E C T U S A P P E N D I C E S
- ----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES, NET CASH SURRENDER
VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically,
they show how the death benefit, net cash surrender value and policy account
value can vary over an extended period of time assuming hypothetical gross rates
of return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$250,000 for a male insured Age 40. The insured is assumed to be in the
preferred plus classification for the first 8 illustrations and the preferred
classification for the next 8 illustrations. Values are first given based on
current charges and then based on the policy's higher guaranteed charges. Each
illustration is given first for a policy with an Option 1 death benefit, then
for a policy with an Option 2 death benefit, and, finally, for a policy with an
Option 3 death benefit. In addition, the first 12 illustrations will show values
based on the cash value test and the next 12 illustrations will show values
based on the guideline premium test. These illustrations may assist in the
comparison of death benefits, net cash surrender values and policy account
values for Park Avenue VUL policies with those under other variable life
insurance policies that may be issued by GIAC or other companies. Prospective
policyowners are advised, however, that it may not be advantageous to replace
existing life insurance coverage by purchasing a Park Avenue VUL policy,
particularly if the decision to replace existing coverage is based primarily on
a comparison of policy illustrations.
Death benefits, net cash surrender values and policy account values will
be different from the amounts shown if: (1) the actual gross rates of return
average 0%, 6% or 12%, but vary above and below the average over the period; and
(2) premiums are paid at other than annual intervals. Benefits and values will
also be affected by the policyowner's allocation of the unloaned policy account
value among the variable investment options and the fixed-rate option. If the
actual gross rate of return for all options averages 0%, 6% or 12%, but varies
above or below that average for individual options, allocation and transfer
decisions can have a significant impact on a policy's performance. Policy loans
and other policy transactions, such as partial withdrawals, will also affect
results, as will the insured's sex, smoker status and underwriting class.
Death benefits, net cash surrender values and policy account values shown
in the tables reflect the fact that: (1) deductions have been made from premiums
for premium charges; and (2) monthly deductions are deducted from the policy
account value on each monthly date. The net cash surrender values shown in the
tables reflect the fact that a surrender charge is deducted upon surrender or
lapse during the first 9 policy years. See "Deductions and charges." The amounts
shown in the illustrations also reflect an average of the investment advisory
fees and operating expenses incurred by the mutual funds, at an annual rate of
___% of the average daily net assets of such funds. The average is based upon
actual expenses incurred during 1999 for all funds without regard for
reimbursements made by the funds for previous years' expense payments.
-----------------------------------------
Explanations of certain expense
reduction arrangements to be
included in amendment.
-----------------------------------------
In the absence of these arrangements, operating expenses of the affected
funds, and the average investment advisory fees and expenses used in the
following illustrations would have been higher. For an explanation of the
expenses see the accompanying fund prospectuses.
Taking account of the charges, the average investment advisory fee and the
operating expenses of the mutual funds, the gross annual rates of return of 0%,
6% and 12% correspond to net investment experience at ___%, ___% and ____%,
respectively.on a current basis, and -%, -% and -%, respectively, on a
guaranteed basis. See "Net investment factor."
The hypothetical rates of return shown in the tables do not reflect any
tax charges attributable to the Separate Account since no charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash surrender values
and policy account values illustrated. See "GIAC's taxes."
----------------------
A P P E N D I C E S P R O S P E C T U S 81
----------------------
<PAGE>
The fourth column of each table shows the amount which would accumulate if
an amount equal to the target premium was invested to earn interest, after
taxes, of 5% per year, compounded annually. There can be no assurance that a
prospective policyowner would be able to earn this return.
GIAC will furnish upon request an illustration reflecting the proposed
insured's Age, sex, underwriting class and the face amount requested, but a
premium-based illustration must reflect GIAC's current minimum face amount
requirement for Park Avenue VUL -- which is $100,000.
These illustrations will refer to "net outlay" as the cash flow into or
out of the policy. It is equal to the sum of all premiums and accrued loan
interest paid in cash and reduced by the proceeds of any policy loan or partial
withdrawal received in cash. For purposes of these illustrations "net outlay"
will be equal to target premium.
From time to time, advertisements or sales literature for Park Avenue VUL
may quote historical performance data of one or more of the underlying funds,
and may include cash surrender values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with
historical average annual total returns of the underlying funds for which
performance data is shown in the advertisement or sales literature replacing the
hypothetical rates of return shown in the following tables. This information may
be shown in the form of graphs, charts, tables, and examples. Any such
information is intended to show the policy's investment experience based on the
historical experience of the underlying funds and is not intended to represent
what may happen in the future.
GIAC began to offer Park Avenue VUL on May 1, 2000. As such the policies
may not have been available when the funds commenced their operations. However,
illustrations may be based on the actual investment experience of the funds
since their respective inception dates (See "Investment performance of the
Funds"). The results for any period prior to the policies' being offered would
be calculated as if the policies had been offered during that period of time,
with all charges assumed to be those applicable to the policies. Thus the
illustrations will reflect deductions for each fund's expenses, and the charges
deducted from premiums, monthly deductions and any transaction deductions
associated with the policy in question.
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82 P R O S P E C T U S A P P E N D I C E S
- ----------------------
<PAGE>
ILLUSTRATIONS TO BE FILED BY AMENDMENT
----------------------
A P P E N D I C E S P R O S P E C T U S 83
----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
USES OF LIFE INSURANCE
- --------------------------------------------------------------------------------
The following are examples of ways in which the policy can be used to address
certain financial objectives, bearing in mind that variable life insurance is
not a short-term investment and that its primary purpose is to provide benefits
upon the death of the insured.
Family Income Protection
Life insurance may be purchased on the lives of a family's income earners to
provide a death benefit to cover final expenses, and continue the current income
to the family. The amount of insurance purchase should be an amount which will
provide a death benefit that when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the insured's income.
Estate Protection
Life insurance may be purchased by a trust on the life of a person whose estate
will incur federal estate taxes upon his or her death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. Upon
the insured's death, the trustee could make the death proceeds available to the
estate for the payment of estate taxes.
Education Funding
Life insurance may be purchased on the life of the parent(s) or primary person
funding an education. The amount of insurance purchased should equal the total
education cost projected at a reasonable inflation rate.
In the event of the insured's death, the guaranteed death benefit is available
to help pay the education costs. If the insured lives through the education
years, the cash value accumulations may be accessed to help offset the remaining
education costs. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Mortgage Protection
Life insurance may be purchased on the life of the person(s) responsible for
making mortgage payments. The amount of insurance purchased should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to offset the remaining mortgage balance.
During the insured's lifetime, the cash value accumulations may be accessed late
in the mortgage term to help make the remaining mortgage payments. Any policy
loans or partial withdrawals will reduce the policy's death benefit and may have
tax consequences.
Key Person Protection
Life insurance may be purchased by a business on the life of a key person in an
amount equal to a key person's value, considering salary, benefits, and
contribution to business profits. Upon the key person's death, the business can
use the death benefit to ease the interruption of business operations and/or to
provide a replacement fund for hiring a new executive.
Business Continuation Protection
Life insurance may be purchased on the life of each business owner in an amount
equal to the value of each owner's business interest. In the event of death, the
guaranteed death benefit may provide the funds needed to carry out the purchase
of the deceased's business interest by the business, or surviving owners, from
the deceased owner's heirs.
Retirement Income
Life insurance may be purchased on the life of a family income earner during his
or her working life. If the insured lives to retirement, the cash value
accumulations may be accessed to provide retirement payments. In the event of
the insured's death, the proceeds may be used to provide retirement income to
his or her spouse. Any policy loans or partial withdrawals will reduce the
policy's death benefit and may have tax consequences.
Deferred Compensation Plans
Life insurance may be purchased to fund a Deferred Compensation Plan, or
Selective Incentive Plan, for key employees. A Deferred Compensation Plan, or
Selective Incentive Plan, is a written agreement between an employer and an
executive. The employer makes an unsecured promise to make future benefit
payments to a key executive if the executive meets certain stated requirements.
- ----------------------
84 P R O S P E C T U S A P P E N D I C E S
- ----------------------
<PAGE>
APPENDIX B
USES OF LIFE INSURANCE
Under this type of plan, a company purchases a cash value life insurance policy
insuring an executive's life to (1) informally fund the promised benefits and
(2) recover its plan costs at the death of the executive. The policy cash values
may be used to help pay the promised benefits to the executive. In the event
that the executive dies prior to retirement, the policy death benefits can be
used to fund survivor benefits.
Split Dollar Plans
Life insurance may be purchased by an employer on the life of an employee under
a Split Dollar Plan. In a Split Dollar Plan, the employer advances the executive
the premium on a life insurance policy. Both the employer and the executive
share the cash value and death benefit under the policy. Generally, the employer
has rights to the cash value and death benefit equal to its advances. The
balance of the cash value and death benefit belong to the executive.
The executive receives an economic benefit for which he or she must contribute
into the plan or pay income tax. The economic benefit is equal to the term value
of the death benefit assuming taxation under IRS Revenue Rulings and IRC Section
72. Different results are possible if these or other code sections are applied
or amended.
Executive Bonus Plans
Life Insurance may be purchased by an employee with funds provided by his or her
employer for that purpose. An Executive Bonus plan involves an employer
providing an executive with additional compensation to enable the executive to
pay premiums on a life insurance policy. The bonus is tax deductible by the
employer and received as taxable income by the executive.
Because the policy provides a death benefit and cash surrender value, the policy
can be used for various individual and business planning purposes. Purchasing
the policy in part for such purposes entails certain risks, particularly if the
policy's cash surrender value, as opposed to its death benefit, will be the
principal policy feature used for such planning purposes. If Policy Premiums are
not paid, the investment performance of the Variable Investment Options to which
Policy Account Value is allocated is poorer than anticipated, or insufficient
cash surrender value is maintained, then the policy may lapse or may not
accumulate sufficient values to fund the purpose for which the policy was
purchased. Because the policy is designed to provide benefits on a long-term
basis, before purchasing a policy for a specialized purpose, a purchaser should
consider whether the long-term nature of the policy is consistent with the
purpose for which it is being considered.
Policyowners are urged to consult competent tax advisors about the possible tax
consequences of pre-death distributions from any life insurance policy,
including Park Avenue Life.
----------------------
A P P E N D I C E S P R O S P E C T U S 85
----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
ADDITIONAL BENEFITS BY RIDER
- --------------------------------------------------------------------------------
Additional benefits are available by riders to the policy. Riders are issued
subject to GIAC's standards for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are deducted monthly from
policy account value. The benefits provided by the riders are fully described in
the riders and summarized here. These riders may not be available in all states.
Adjustable Annual Renewable Term (AART) rider -- this rider, available only at
issue, provides term insurance coverage to the insured's age 80. Coverage under
this rider generally has a lower cost of insurance, but has no cash value
associated with it. If you have purchased an additional sum insured you cannot
have an AART rider. If AART overage is greater than basic sum insured coverage,
you cannot purchase a guaranteed coverage rider.
Waiver of Monthly Deductions rider-- this rider provides for the waiver of the
monthly deductions while the insured is totally disabled as defined in the
rider. Age limits apply.
Guaranteed Coverage rider ("GCR") -- this rider, available with death benefit
option 1 and at issue only, guarantees that the policy will remain in force even
if the net cash surrender value is less than the current monthly deductions,
provided the GCR requirement, as described in the rider, and requiring the
payment of certain premium amounts is met. It is not available if coverage under
the additional sum insured or AART rider is greater than the basic sum insured
at issue.
Disability Benefit rider -- this rider provides for crediting as a premium an
amount equal to the specified amount, as defined in the rider, while the insured
is totally disabled, as defined in the rider.
Accidental Death Benefit rider -- this rider, available only at issue, provides
additional insurance coverage if the insured's death results from accidental
bodily injury on or before his or her 75th birthday. The maximum coverage under
this rider is the lesser of (i) $500,000 or (ii) the basic sum insured plus
coverage provided by the additional sum insured or AART rider.
Guaranteed Insurability Option rider -- this rider, available only at issue,
provides the policyowner the right to increase the face amount of insurance
coverage without evidence of insurability on the policy anniversaries nearest
certain birthdays of the insured, or within specified time periods of qualifying
life events subject to the conditions in the rider.
Select Security rider -- this rider, used in split dollar cases, is an
endorsement that prevents the policy owner from making certain policy changes
without the consent of the policy owner's employer. There is no charge for this
rider.
Exchange of Insureds rider -- this rider gives the policy owner the right to
exchange the policy for a new one on the life of a substitute insured. The
exercise of this rider will be treated as a taxable exchange for federal income
tax purposes.
GIAC may from time to time discontinue the availability of one or more of these
riders, or make other riders available. GIAC agents can provide information
about the current availability of particular riders.
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86 P R O S P E C T U S A P P E N D I C E S
- ----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX D
- --------------------------------------------------------------------------------
REPRESENTATIVE ANNUAL ADMINISTRATIVE EXPENSE CHARGES PER $1,000 OF FACE AMOUNT
Males Females Unisex
- --------------------------------------------------------------------------------
Preferred Preferred Preferred
Plus Plus Plus
and and and
Age Preferred Standard Preferred Standard Preferred Standard
- --- --------- -------- --------- -------- --------- --------
25 0.85 1.05 0.70 0.85 0.83 1.02
30 1.00 1.25 0.85 1.05 0.98 1.22
35 1.15 1.45 1.00 1.25 1.13 1.42
40 1.38 1.78 1.13 1.45 1.34 1.73
45 1.60 2.10 1.25 1.65 1.55 2.03
50 2.25 2.90 1.75 2.30 2.18 2.81
55 2.90 3.70 2.30 2.95 2.81 3.59
60 3.55 4.50 2.85 3.60 3.45 4.37
65 4.20 5.30 3.40 4.25 4.08 5.14
Note: Monthly rates are one twelfth of the annual rates
----------------------
A P P E N D I C E S P R O S P E C T U S 87
----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX E
- --------------------------------------------------------------------------------
REPRESENTATIVE FIRST YEAR SURRENDER CHARGE RATES PER $1,000 OF FACE AMOUNT
Male Female Unisex
- --------------------------------------------------------------------------------
Preferred Preferred Preferred
Plus Plus Plus
and and and
Age Preferred Standard Preferred Standard Preferred Standard
- --- --------- -------- --------- -------- --------- --------
25 5.247 7.686 4.284 6.039 5.112 7.461
30 6.417 9.432 5.274 7.497 6.255 9.171
35 7.947 11.241 6.543 8.946 7.749 10.926
40 9.972 13.590 8.154 10.728 9.711 13.203
45 12.609 16.605 10.206 12.852 12.267 16.092
50 16.029 20.421 12.852 15.462 15.570 19.737
55 20.547 26.973 16.317 19.962 19.926 25.983
60 26.631 36.054 20.943 26.010 25.803 34.623
65 34.938 48.348 27.306 34.173 33.822 46.278
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88 P R O S P E C T U S A P P E N D I C E S
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<PAGE>
May 1, 2000
APPENDIX F
ABOUT PARK AVENUE SURVIVORSHIP VUL
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
About Park Avenue Survivorship VUL
- Issuing the policy ..............................................
Benefits and policy values ........................................
- Additional sum insured ..........................................
- Death benefit options ...........................................
- Changing your death benefit option ..............................
- Paying the death benefit ........................................
- Policy values ...................................................
- Cash surrender value and net cash surrender value .........
Premiums, deductions and charges ..................................
- Deductions and charges ..........................................
- Premium charge ............................................
- Monthly deductions from the policy account value ..........
- Administrative charges ..............................
- Cost of insurance charges ...........................
- Additional sum insured charge .......................
- Transaction deductions from the policy account value ............
- Surrender charge ................................................
- Transfer charge ...........................................
- Deductions from the separate account ............................
- Deductions from the mutual funds ................................
Special features of your policy ...................................
- Policy loans ....................................................
- Decreasing the face amount ......................................
- Increasing the face amount ......................................
- Partial withdrawals .............................................
- Surrendering your policy ........................................
- Policy proceeds .................................................
- Exchange for fixed-benefit insurance ............................
- Payment options .................................................
Tax considerations ................................................
- Tax status of the policy ........................................
- Treatment of policy proceeds ....................................
- Exchanges .......................................................
- Policy split option .............................................
- Policy changes ..................................................
- Estate and generation skipping transfer taxes ...................
- Possible tax law changes ........................................
- GIAC's taxes ....................................................
- Income tax withholding ..........................................
<PAGE>
Rights and responsibilities .......................................
- Limits to GIAC's right to challenge a policy ....................
- Incontestability ..........................................
- Misstatement of age or sex ................................
- Suicide exclusion .........................................
Special terms used in this supplement .............................
Appendix A Supplement .............................................
Appendix C Supplement .............................................
Appendix D Supplement .............................................
- --------------------------------------------------------------------------------
The Park Avenue SVUL policy may not be available in all states or jurisdictions.
This prospectus does not constitute an offering in any state or jurisdiction in
which such offering may not lawfully be made. GIAC does not authorize any
information or representations regarding the offering described in this
prospectus other than as contained in this prospectus or any supplement thereto
or in any supplemental sales material authorized by GIAC.
- --------------------------------------------------------------------------------
<PAGE>
This page intentionally left blank
<PAGE>
- --------------------------------------------------------------------------------
ABOUT PARK AVENUE SURVIVORSHIP VUL
- --------------------------------------------------------------------------------
Issuing the policy
- --------------------------------------------------------------------------------
A Park Avenue SVUL insurance policy must have basic sum insured coverage
of at least $250,000.
ISSUING THE POLICY
A Park Avenue SVUL insurance policy must have basic sum insured coverage of at
least $250,000. To issue a policy:
o the insureds must be between ages 20 and 90 and meet our insurance
requirements,
o no more than one of the insureds can be in the uninsurable risk class, and
o you must live in a state or jurisdiction in which we offer the policy.
If you have a whole life policy with a convertible term rider issued by us or by
Guardian Life, you may receive a credit of up to one minimum annual premium if
you convert it to a Park Avenue SVUL policy.
If you are interested in exchanging an existing policy for a Park Avenue SVUL
policy, we recommend that you speak with your lawyer or tax adviser first.
Replacing your existing policy may not be advantageous.
Some jurisdictions do not allow insurance companies to provide different
benefits based on the sex of the insured. For these jurisdictions we offer a
version of the Park Avenue SVUL policy with the same benefits for men and women.
Backdating your policy
Under certain circumstances we will backdate your policy if you ask us to,
giving you a policy date up to six months before the application was actually
signed. Backdating your policy will only be allowed if it would allow you to
qualify for a lower premium because the insureds were younger on an earlier
policy date. On the date the policy is actually issued, we deduct the monthly
deductions due from the backdated policy date to the issue date. We will not
backdate a policy to a date before which the policy was available in the state
of issue.
----------------------
A B O U T T H E P O L I C Y P R O S P E C T U S 1
----------------------
<PAGE>
- --------------------------------------------------------------------------------
BENEFITS AND POLICY VALUES
- --------------------------------------------------------------------------------
ADDITIONAL SUM INSURED
If you choose death benefit Option 1 at issue, you may purchase an additional
sum insured under the policy. The additional sum insured provides a level death
benefit to age 100 of the younger insured. The amount of this coverage, if any,
plus the basic sum insured are the two components of your policy's initial face
amount.
Coverage provided by the additional sum insured will be treated like coverage
provided by the basic sum insured: (i) it will affect the minimum death benefit
under Section 7702 of the Internal Revenue Code; and (ii) it will affect the
calculation of premiums for determining whether the policy is a modified
endowment contract. See Deductions and charges; Death benefit options; and Tax
considerations.
You should consider several factors in deciding whether to purchase coverage as
basic sum insured or additional sum insured. The additional sum insured has no
additional surrender charges and the administrative charge is lower than the
administrative charge for a comparable amount of basic sum insured. The target
premium for the additional sum insured is zero. The amount of premium charges
you will pay may be less if you purchase coverage as additional sum insured,
rather than basic sum insured. If the coverage provided by the additional sum
insured is greater than the coverage under the basic sum insured at issue, you
cannot purchase the Guaranteed Coverage rider.
You may purchase additional sum insured coverage only at issue and only if you
select Option 1. The minimum additional sum insured amount you can purchase is
$25,000; the maximum amount cannot exceed 400% of the basic sum insured. If you
purchase an additional sum insured, you may not purchase coverage under the
adjustable annual renewable term insurance rider.
- ----------------------
2 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
- ----------------------
<PAGE>
Death Benefit Options
- --------------------------------------------------------------------------------
You have a choice of three death benefit options with this policy. If a
fixed amount of insurance coverage and potentially lower monthly
deductions best fits your needs, you should choose Option 1. If you want
the potential to increase the amount of your insurance coverage beyond
your policy's face amount you should choose Option 2. If you want to
recapture the premiums you have paid into the policy, you should choose
Option 3. See accompanying text for details.
DEATH BENEFIT OPTIONS
You have a choice of three death benefit options with this policy. You should
choose the death benefit option that best meets your insurance needs and
investment objectives. If a fixed amount of insurance coverage and potentially
lower monthly deductions best fit your needs you should choose Option 1. If you
want the potential to increase the amount of your insurance coverage beyond your
policy's face amount you should choose Option 2. If you want to recapture the
premiums you have paid into the policy, you should choose Option 3.*
Option 1
Under Option 1, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount; or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, if your investments perform well or you contribute more than
the minimum annual premium and the policy account value increases by a
sufficient amount, then the net amount at risk will be lower. When this happens,
the amount that we deduct for the cost of insurance charges each month may also
go down.
Option 2
Under Option 2, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount plus the policy account value, if positive, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
Under this option, your death benefit will vary based on your investment
performance and the premiums you pay. Even if your investments perform poorly,
your death benefit will never be lower than the face amount. The net amount at
risk will not change unless we have to increase the death benefit to comply with
Section 7702 of the Internal Revenue Code.
Option 3
Under Option 3, your death benefit on any monthly processing date prior to the
policy anniversary nearest the younger insured's 100th birthday is the greater
of:
o the face amount plus net accumulated premiums, or
o the minimum death benefit required under Section 7702 of the Internal
Revenue Code.
- --------------------------------------------------------------------------------
Minimum death benefit
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any monthly processing date is the policy account value multiplied by
the death benefit factor shown in your policy on page 4.
- --------------------------------------------------------------------------------
- ----------
* Option 3 may be appropriate for split dollar cases where an employer
advances premium payments on behalf of an employee under an agreement that
the employee will reimburse the premium advances.
----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 3
----------------------
<PAGE>
Under this option, as under Option 1, if your investments perform well, or you
contribute more than the minimum annual premium and the policy account value
increases by a sufficient amount, then the net amount at risk will be lower.
When this happens, the amount that we deduct for the cost of insurance charges
each month may also go down.
Regardless of which option you choose, after the policy anniversary closest to
the younger insured's 100th birthday, whether or not the younger insured is
alive, the death benefit is the policy account value. The tax consequences of
continuing the policy beyond the younger insured's 100th birthday are unclear.
You should consult a tax adviser for more information.
If you make a partial withdrawal from your policy between the most recent
monthly processing date and the death of the surviving insured, the death
benefit under all options will be reduced by the amount of your withdrawal.
Under Option 3, the death benefit will be increased by the amount of any premium
paid between the most recent monthly processing date and the date of death of
the surviving insured.
To qualify as insurance under the Internal Revenue Code, all three options must
pay at least the minimum death benefit required under Section 7702. We calculate
this minimum using the Guideline Premium and Cash Value Corridor Test (Guideline
Premium Test).
The Guideline Premium Test consists of two parts: the Guideline Premium Test and
the Cash Value Corridor Test.
To satisfy the Guideline Premium Test the total of all premiums you pay must not
exceed certain maximums. The total of premiums paid, minus the nontaxable
portion of partial withdrawals, must not be greater than the larger of the
following:
o the guideline single premium on the date the calculation is done, or
o the sum of the guideline level premiums to the date the calculation is
done.
For the purposes of this test, the guideline single premium is the premium that
would be necessary to pay for future benefits under the policy as calculated at
the time the policy is issued or at the time of certain policy changes. It's
generally based on "reasonable" mortality and expense charges (as defined in
Section 7702 of the Internal Revenue Code) and an effective annual interest rate
of 6%.
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4 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
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<PAGE>
The guideline level premium is the level annual premium payable to age 100 that
would be necessary to pay for all future benefits under the policy as calculated
at the time the policy is issued or at the time of certain policy changes. It's
generally based on "reasonable" mortality and expense charges (as defined in
Section 7702 of the Internal Revenue Code) and an effective annual interest rate
of 4%.
Payment of premiums in excess of the guideline premium limit is permitted only
if those premiums are necessary to keep the policy in force. To satisfy the Cash
Value Corridor Test, the death benefit must at least equal the percentage of the
policy account value shown in the following table:
Attained age Percentage of policy
of younger insured account value *
- --------------------------------------------------------------------------------
0-40 250%
- --------------------------------------------------------------------------------
40-45 250% - 215%
- --------------------------------------------------------------------------------
45-50 215% - 185%
- --------------------------------------------------------------------------------
50-55 185% - 150%
- --------------------------------------------------------------------------------
55-60 150% - 130%
- --------------------------------------------------------------------------------
60-65 130% - 120%
- --------------------------------------------------------------------------------
65-70 120% - 115%
- --------------------------------------------------------------------------------
70-75 115% - 105%
- --------------------------------------------------------------------------------
75-90 105%
- --------------------------------------------------------------------------------
90-95 105% - 100%
- --------------------------------------------------------------------------------
95+ 100%
- --------------------------------------------------------------------------------
* The percentage decreases uniformly as attained age of the younger insured
increases within the age ranges.
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B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 5
----------------------
<PAGE>
The minimum death benefit required on any monthly processing date is equal to
the policy account value on that date multiplied by the death benefit factor
shown in your policy.
CHANGING YOUR DEATH BENEFIT OPTION
On any policy anniversary you may change your death benefit option, as long as
either insured is alive when we make the change. You must send us your
instructions in writing at our customer service office. Such changes take effect
on the policy anniversary following or coinciding with our receipt of the
request. Changing the death benefit option may have adverse tax consequences.
You should consult a tax adviser before doing so.
If you change the death benefit option, we will change the policy's face amount
to keep the death benefit the same immediately before and after the change. If
you're changing from Option 1 to Option 2, we will decrease the face amount by
the lesser of the policy account value on the date the change takes effect or
the face amount divided by the applicable death benefit factor shown on page 4
of your policy. If you're changing from Option 2 to Option 1, we will increase
the face amount by the lesser of the policy account value on the date the change
takes effect or the face amount divided by the applicable death benefit factor,
shown on page 4 of your policy, minus 1.
If you're changing from Option 3 to Option 1, we will increase the face amount
by the amount of net accumulated premiums on the date the change takes effect.
If you're changing from Option 3 to Option 2, we will adjust the face amount by
the amount that net accumulated premiums exceed the lesser of: (i) policy
account value on the effective date of the change or (ii) the face amount
divided by the applicable death benefit factor shown on page 4 of your policy.
We will not permit any change if it results in a reduction of the face amount
below our minimum face amount, currently $250,000. We will not approve any
request to change from Option 1 or Option 2 to Option 3.
Any increase is applied directly to the initial face amount. A decrease reduces
coverage in the same manner as a requested face amount decrease. See Decreasing
the face amount.
If you are changing from Option 1 to Option 2 you must prove that the insureds
meet our insurance requirements and any additional sum insured coverage will be
converted to basic sum insured coverage.
We won't deduct a surrender charge or impose new surrender charges in connection
with changes in the death benefit option.
- ----------------------
6 P R O S P E C T U S B E N E F I T S A N D P O L I C Y V A L U E S
- ----------------------
<PAGE>
PAYING THE DEATH BENEFIT
We will pay a death benefit to the beneficiaries named in your policy when we
receive proof that the surviving insured has died while the policy was in
effect. You must also provide us with due proof of the death of the first of the
insureds to die at our customer service office as soon as death occurs or as
soon after as is reasonably possible. If there is reason to dispute the policy,
then we may delay the payment of death benefits. See Limits to GIAC's right to
challenge a policy.
POLICY VALUES
The following is a detailed breakdown of how we calculate the different values
associated with your policy.
Cash surrender value and net cash surrender value
- --------------------------------------------------------------------------------
Cash surrender value is the policy account value minus any surrender
charges. There are no surrender charges after your policy or any face
amount increase has been in effect for a maximum of 10 years. The net cash
surrender value is the amount you would actually receive if you
surrendered your life insurance policy.
Cash surrender value and net cash surrender value
Cash surrender value is the policy account value minus any surrender charges.
There are no surrender charges after your policy or any face amount increase has
been in effect for a maximum of 10 years. Net cash surrender value is the amount
you would actually receive if you surrendered your life insurance policy. It is
your policy account value minus any surrender charges and policy debt.
The value of any investments in the variable investment options may increase or
decrease daily depending on how well the investments perform. A combination of
partial withdrawals, policy loans, unfavorable investment performance, surrender
charges and the ongoing monthly deduction can cause a policy's net cash
surrender value to drop below zero. Even if this happens, the policy will not
lapse during the first three policy years if the No Lapse Guarantee is in effect
and the No Lapse Guarantee Premium Test is satisfied. See No Lapse Guarantee. If
you have purchased the guaranteed coverage rider, this may also prevent your
policy from lapsing. See Appendix C Supplement.
----------------------
B E N E F I T S A N D P O L I C Y V A L U E S P R O S P E C T U S 7
----------------------
<PAGE>
- --------------------------------------------------------------------------------
PREMIUMS, DEDUCTIONS AND CHARGES
- --------------------------------------------------------------------------------
DEDUCTIONS AND CHARGES
There are various deductions and charges required to maintain your Park Avenue
SVUL policy. These charges cover certain costs we incur with respect to the
policies including:
o the cost of underwriting, issuing and maintaining the policies, including
preparing and sending billing notices, reports and policy owner
statements, communications with insurance agents and other overhead costs.
o the risk that those insured under the policies may not live as long as we
estimated when we issued the policy, or that our administrative expenses
may also be higher than expected.
o the cost of paying death benefits, especially in the early policy years
when the policy account value may be far below the death benefit we pay if
the insureds die.
o our sales and promotional expenses, commissions, and local, state and
federal taxes (you may not claim the portion of these charges used to pay
taxes as a federal income tax deduction.)
The amount of a charge does not necessarily correspond to our costs in providing
the service or benefits associated with a particular policy. For example, the
premium charge and the surrender charge may not cover all of our actual sales
expenses for the policies, and proceeds from other charges, including the
mortality and expense risk charge and cost of insurance charges, may be used in
part to cover sales expenses. Once deductions and charges are taken from your
policy they do not contribute to the value of your policy.
All of the deductions and charges are summarized and explained below.
Premium charge
During each of the first 12 policy years after issue or after an increase in
coverage, a charge of 8% is deducted from premiums you pay up to the target
premium and 4% on premiums in excess of the target premium. After the 12th year,
this charge drops to 4% for premiums paid up to the target, and no charge for
premiums paid in excess of the target.
Your policy has a separate target premium for the initial face amount and for
any additional coverage you have added through policy segments. The premium
charge will be applied in the order that these were issued. In order to
calculate your premium charge, we will allocate each premium you pay as follows:
o first to your policy's initial face amount, up to the target premium for
that amount
o then to any policy segments that are in force, in the order that they were
purchased, up to the target premium for each segment
o then proportionately, based on the target premium, among the initial face
amount and any policy segments that are in force.
- ---------------------- P R E M I U M S, D E D U C T I O N S
8 P R O S P E C T U S A N D C H A R G E S
- ----------------------
<PAGE>
Monthly deductions from the policy account value
We deduct from the policy account value, on the same date each month, amounts to
cover administrative costs, the cost of insuring the insureds, the mortality and
expense risk charge and the cost of any riders. These deductions are made
proportionately from your policy account value in the fixed-rate and variable
investment options. We do not make these monthly deductions after the policy
anniversary closest to the younger insured's 100th birthday.
Administrative charges
We deduct a monthly charge of $7.50.
We also deduct a monthly charge based on the basic sum insured portion of the
face amount on each monthly processing date for the first 12 policy years after
issue or after any increase in face amount. The amount of this charge depends on
the younger insured's age, sex and underwriting class when the policy is issued
or the face amount is increased. This charge is not reduced if you decrease your
face amount.
The charge will range from $0.09 to $0.65 per $1,000 of coverage. Representative
annual rates per $1,000 are shown in Appendix D Supplement to About Park Avenue
Survivorship VUL. Your policy's charge is set forth in your policy.
There is also a charge of $0.01 per $1,000 of the additional sum insured and
adjustable annual renewal term rider per month for the first 12 years after
issue.
Cost of insurance charge
- --------------------------------------------------------------------------------
This charge allows us to pay death benefits, especially in the early
policy years when the policy account value is far below the death benefit
we pay if both insureds die.
Cost of insurance charge
This charge is based on our cost of insurance rates for insured people of the
same age, sex, duration, and underwriting class as each insured. Any additional
rating charges which are applied to the insureds because either does not satisfy
our insurance requirements for standard insurance will increase the cost of
insurance charge. The maximum that we can charge for each $1,000 of net amount
at risk is set out in your policy and is based on the 1980 Commissioners'
Standard Ordinary Mortality Tables published by the National Association of
Insurance Commissioners. Our current cost of insurance rates never exceed the
guaranteed maximum.
We calculate the cost of insurance charge by multiplying your policy's net
amount at risk each month by the current cost of insurance rate that applies to
the insureds, and dividing the result by $1,000. Your policy's cost of insurance
charge is calculated before the calculation of the administrative charges, the
mortality and expense risk charge and the cost of any additional benefit riders.
A cost of insurance charge is determined separately for the basic sum insured,
additional sum insured and each policy segment, and any adjustable annual
renewable term or single life term coverage.
After the first policy year, we may change the cost of insurance rates
prospectively, at our discretion, up to the guaranteed maximum rate listed in
your policy. Changes in the health of either insured will not cause your cost of
insurance charge to increase. Increases in the cost of insurance rates are not
made to an individual policy, but are made
P R E M I U M S, D E D U C T I O N S ----------------------
A N D C H A R G E S P R O S P E C T U S 9
----------------------
<PAGE>
equally to all policies where the insured people are of the same attained age,
sex, policy or segment duration, and underwriting class. We may increase this
charge when we expect:
o a higher number of deaths among people in a certain group
o higher expenses or federal income taxes
o a higher number of policies that are allowed to lapse by their
policyowners
o state or local premium taxes
o lower earnings
Generally, reducing the net amount at risk results in lower charges for cost of
insurance. Decreasing the net amount at risk partly depends on the death benefit
option you choose. The three options are explained under Death benefit options.
If you choose Option 1, in which the death benefit is the face amount of your
policy, you reduce the net amount at risk when you pay premiums. That's because
premiums increase the policy account value. If you choose Option 2, in which the
death benefit can increase to more than the face amount, paying premiums will
not affect the net amount at risk.
If you choose Option 3, in which the death benefit is the face amount of your
policy plus your net accumulated premiums, your net amount at risk could be
lower if your investments perform well.
The net amount at risk can increase, for example, when we increase a policy's
death benefit to meet the requirements of the Internal Revenue Code. See Death
benefit options. Having a higher net amount at risk results in higher deductions
for cost of insurance.
There will be different cost of insurance rates for the initial face amount of
your policy and for each subsequent increase in the face amount. As a result, we
calculate the net amount at risk separately for each segment of coverage.
Your policy account value is allocated first to your policy's basic sum insured,
then to the additional sum insured, and finally to each of the policy segments
in the order that they were added to the policy. The maximum amount of your
policy account value that will be allocated to any one policy segment or to the
initial face amount is the amount that the policy segment or initial face amount
provides as a death benefit, divided by 1.0032737. For the purposes of
determining the net amount at risk, if the death benefit is increased due to the
operation of death benefit Option 2 or 3, the increase will be allocated to the
basic sum insured. If the death benefit is further increased due to Section 7702
of the Internal Revenue Code the increase will be allocated to the most recent
policy segment.
Charges for additional insurance benefits
If you acquire additional insurance benefits by buying one or more riders to the
policy, we will deduct rider costs. We deduct these from the policy account
value monthly.
TRANSACTION DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
When you ask us to make certain transactions, we will take a transaction
deduction from your policy account value. Except as described differently below,
we will make these deductions from
- ----------------------- P R E M I U M S, D E D U C T I O N S
10 P R O S P E C T U S A N D C H A R G E S
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<PAGE>
your policy account value invested in the variable investment options, until
these are exhausted, and then from your fixed-rate option.
Surrender charge
During a period of time that will not exceed the first 9 policy years of the
initial face amount and each policy segment, we impose a surrender charge if
you:
o surrender your policy, or
o let your policy lapse.
The period during which the charge will be imposed depends on the age of the
younger insured when the policy is issued or the face amount increased. Your
policy's surrender charge is set forth in the policy.
The amount of the surrender charge shown in your policy is based on the
insureds' ages, sexes, and underwriting classes, the basic sum insured, and a
number of actuarial assumptions. The surrender charge grades down each policy
year over a maximum of 9 years as shown in the following chart:
<TABLE>
<CAPTION>
Percentage of Initial Surrender Charge
ISSUE AGE OF YOUNGER INSURED
--------------------------------------------------------------------------------------------------------
Coverage Up to Age 70
Year age 60 61 62 63 64 65 66 67 68 69 and over
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0 100.0% 100.0% 100.0% 100.0%
2 88.9% 88.8% 88.6% 88.5% 88.4% 88.2% 88.1% 88.0% 87.8% 87.7% 87.5%
3 77.8% 77.5% 77.3% 77.0% 76.7% 76.5% 76.2% 75.9% 75.6% 75.3% 75.0%
4 66.7% 65.7% 64.8% 63.8% 62.8% 61.8% 60.7% 59.6% 58.5% 57.4% 56.3%
5 55.6% 53.9% 52.3% 50.6% 48.8% 47.1% 45.2% 43.4% 41.5% 39.5% 37.5%
6 44.4% 42.1% 39.8% 37.4% 34.9% 32.4% 29.8% 27.1% 24.4% 21.6% 18.8%
7 33.3% 30.3% 27.3% 24.1% 20.9% 17.6% 14.3% 10.8% 7.3% 3.7% 0.0%
8 16.7% 12.9% 9.1% 5.2% 1.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
9 5.6% 1.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
10+ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
(all percentages rounded to nearest 0.1%)
Surrender charges are not affected by a change in death benefit option or by
partial withdrawals. We will not deduct a surrender charge if you reduce or
eliminate your coverage under a term rider, or reduce your face amount.
A separate surrender charge is also calculated for each new policy segment,
based on the coverage it provides and the insureds' ages, sexes, and
underwriting classes when it is added to your policy. This means that the total
surrender charges under your policy will be the sum of the different surrender
charges for your initial face amount and each policy segment. The surrender
charge compensates us for administrative and sales-related expenses.
P R E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S P R O S P E C T U S 11
-----------------------
<PAGE>
Surrender charges
- --------------------------------------------------------------------------------
EXAMPLE (Policy with initial face amount only)
The example on the right shows how the surrender charge declines over a maximum
nine year period so that by year 10 it equals $0.
- --------------------------------------------------------------------------------
Male Insured, Age 50 and Female Insured, Age 45
- --------------------------------------------------------------------------------
Male: Preferred Plus Underwriting Class, Nonsmoker;
Female: Preferred Plus Underwriting Class, Nonsmoker
- --------------------------------------------------------------------------------
Face Amount: $500,000
- --------------------------------------------------------------------------------
All figures in the table following are rounded to the nearest dollar.
Actual
surrender
Policy charge
year ($)
- ---------------------------------
1 4,227
- ---------------------------------
2 3,757
- ---------------------------------
3 3,287
- ---------------------------------
4 2,817
- ---------------------------------
5 2,348
- ---------------------------------
6 1,878
- ---------------------------------
7 1,409
- ---------------------------------
8 704
- ---------------------------------
9 235
- ---------------------------------
10 0
- ---------------------------------
Assume in the above example you effect a face amount increase of $250,000 at the
beginning of policy year 6 (attained age 55 Male and 50 Female) and another face
amount increase of $250,000 at the beginning of policy year 11 (attained age 60
Male and 55 Female). At the time of the first increase, both insureds are again
classified in the Preferred Plus underwriting class, but at the time of the
second increase the male is classified in the Standard underwriting class.
For the purposes of calculating the applicable surrender charges, each face
amount increase is treated separately based on the insureds' attained ages and
underwriting classes at the time of the increase. Therefore, for each increase
the policy will incur a new set of surrender charges. Surrender charges are
calculated as if the policyowner has purchased a policy with the amount of the
increase being the face amount; in other words, they are calculated just as in
the first example. The total surrender charge for a particular policy year
equals the sum of the surrender charge for the initial face amount and the
applicable surrender charge for each policy segment.
- ----------------------- P R E M I U M S, D E D U C T I O N S
12 P R O S P E C T U S A N D C H A R G E S
- -----------------------
<PAGE>
The following is a calculation of the surrender charge for this example. Note
that the surrender charges are shown for policy years 1 through 20 only as,
after the 20th policy year, surrender charges equal zero for the initial face
amount as well as for the two face amount increases.
Total Surrender Charge
- --------------------------------------------------------------------------------
Total policy
Initial First Second surrender
Policy coverage increase increase charge
year ($) ($) ($) ($)
- --------------------------------------------------------------------------------
1 4,227 NA NA 4,227
- --------------------------------------------------------------------------------
2 3,757 NA NA 3,757
- --------------------------------------------------------------------------------
3 3,287 NA NA 3,287
- --------------------------------------------------------------------------------
4 2,818 NA NA 2,818
- --------------------------------------------------------------------------------
5 2,348 NA NA 2,348
- --------------------------------------------------------------------------------
6 1,878 2,635 NA 4,514
- --------------------------------------------------------------------------------
7 1,409 2,342 NA 3,751
- --------------------------------------------------------------------------------
8 704 2,049 NA 2,754
- --------------------------------------------------------------------------------
9 235 1,757 NA 1,992
- --------------------------------------------------------------------------------
10 0 1,464 NA 1,464
- --------------------------------------------------------------------------------
11 0 1,171 3,644 4,815
- --------------------------------------------------------------------------------
12 0 878 3,239 4,118
- --------------------------------------------------------------------------------
13 0 439 2,834 3,273
- --------------------------------------------------------------------------------
14 0 146 2,429 2,576
- --------------------------------------------------------------------------------
15 0 0 2,024 2,024
- --------------------------------------------------------------------------------
16 0 0 1,620 1,620
- --------------------------------------------------------------------------------
17 0 0 1,215 1,215
- --------------------------------------------------------------------------------
18 0 0 607 607
- --------------------------------------------------------------------------------
19 0 0 202 202
- --------------------------------------------------------------------------------
20 0 0 0 0
- --------------------------------------------------------------------------------
P R E M I U M S, D E D U C T I O N S -----------------------
A N D C H A R G E S P R O S P E C T U S 13
-----------------------
<PAGE>
Transfer charge
- --------------------------------------------------------------------------------
You may transfer your policy account value among the allocation options. If you
make more than 12 transfers within a policy year, we reserve the right to charge
you $25 for each additional transfer. We will deduct the transfer charge from
the allocation options from which you are making the transfer, and will use this
amount for our processing costs.
We will not deduct a transfer charge when:
o you make multiple transfers under your policy's dollar cost averaging
feature
o you transfer amounts as part of taking or repaying a policy loan, or
o you transfer amounts out of a variable investment option because the
investment policies of the corresponding mutual fund have materially
changed.
We do not currently deduct transfer charges.
Deductions from the Separate Account
We have the right to charge the Separate Account, the account through which we
invest your premiums in the variable investment option, for any federal, state
or local income taxes relating to the Separate Account. We also have the right
to impose additional charges if there is a change in our tax status, if the
income tax treatment of variable life insurance changes for insurance companies,
or for any other tax-related charges associated with the Separate Account or the
policies. We don't currently charge for taxes attributable to the Separate
Account.
Deductions from mutual funds
Daily deductions are made from the assets of the mutual funds to cover advisory
fees and other expenses. As a result, you pay these fees and expenses
indirectly. These expenses vary from year to year and are detailed in the VUL
prospectus.
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14 P R O S P E C T U S A N D C H A R G E S
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<PAGE>
- --------------------------------------------------------------------------------
SPECIAL FEATURES OF YOUR POLICY
- --------------------------------------------------------------------------------
Policy loans
- --------------------------------------------------------------------------------
While either insured is alive, you may borrow all or a portion of the loan
value of your policy, by assigning your policy to us as collateral for
your loan.
POLICY LOANS
While either insured is alive, you may borrow all or a portion of the loan value
of your policy, by assigning your policy to us as collateral for your loan. Your
policy's loan value is:
o 90% of the cash surrender value of your policy on the date we receive your
written request, minus
o the amount of any outstanding policy debt, minus
o any interest due at the next policy anniverary on the outstanding policy
debt plus the amount to be borrowed.
The minimum loan amount is $500, or your policy's loan value, whichever is less.
We will normally pay loan proceeds to you within seven days of receiving your
request (see Policy proceeds for exceptions to this general rule).
We will not process any loan request that does not specify the variable
investment options from which the loan should be taken, or that exceeds the
amount available.
When taking out a policy loan, you should consider:
o amounts transferred out of the variable and fixed-rate options and into
our Loan Account are no longer affected by the investment experience,
positive or negative, or interest crediting, of those allocation options
o as a result, taking a policy loan will have a permanent effect on your
policy account value, even after the loan is repaid in full
o the amount of your policy that is available for withdrawal or surrender,
and your policy's death benefit proceeds, will also be reduced
dollar-for-dollar by the amount of any policy debt
o if your policy is considered to be a modified endowment contract under the
Internal Revenue Code, there may be tax consequences associated with
taking a policy loan. See Tax considerations for a discussion of modified
endowment contracts and the effects on policy loans
When you request a loan, we will first transfer that amount from the policy
account value in the variable investment options that you specify in your
request. If the amount of the loan requested exceeds the policy account value in
all variable investment options, we will transfer the excess from your policy
account value in the fixed-rate option into our Loan Account.
The investments in the Loan Account will earn interest at a minimum annual rate
of 4%. We credit this interest monthly to the Loan Interest Account.
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S P E C I A L F E A T U R E S P R O S P E C T U S 15
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Interest on
policy loans
- --------------------------------------------------------------------------------
We charge interest at an annual rate of 5% on all outstanding policy debt,
payable in arrears, until the 20th anniversary of your policy. After this
point the annual rate falls to 4.5% for all existing and new policy loans.
Interest on your policy loan
We charge simple interest that accrues daily at an annual rate of 5% on all
outstanding policy debt, payable in arrears, until the 20th anniversary of your
policy. After this, the annual rate falls to 4.5% for all existing and new
policy loans. Interest accrues daily and is due on each policy anniversary. If
you do not pay the interest on your loan when it is due, the amount will be
capitalized and added to the Loan Account.
We transfer the required amount from the Loan Interest Account to the Loan
Account. After the transfer, any amount remaining in the Loan Interest Account
is transferred to the variable investment options and the fixed-rate option in
accordance with the current premium allocation instructions. If the amount in
the Loan Interest Account is not sufficient to cover the loan interest due, any
deficiency will be transferred proportionately from the amounts in the variable
investment options and the fixed-rate option.
Repaying your policy loan
Except for required loan repayments, you may repay all or part of any
outstanding policy debt at any time while either insured is alive and the policy
is in force. The minimum loan repayment amount is $100 or the outstanding
balance of your policy debt, whichever is lower.
If the surviving insured has died and the death benefit proceeds have not been
paid, either in cash or under a payment option, you have 60 days after his or
her death to repay any policy debt. If you do, we will then increase the amount
payable to the beneficiary by the amount of your repayment.
Except for required loan repayments (see below), we will apply a loan repayment
first to the payment of loan interest due but not yet capitalized, then to
reduce amounts in the Loan Account and then to policy interest accrued since the
last policy anniversary but not yet due. We credit any repayment applied to
reduce amounts in the Loan Account to the variable investment options and the
fixed-rate option according to your current allocation instructions. The amount
credited to the fixed-rate option will earn the interest rate in effect at that
time until the next policy anniversary.
Transfers under your policy that are made in connection with policy loans are
not subject to transfer charges. Also, loan repayments are not subject to
premium charges, so it may be to your advantage, if you have outstanding loans
or interest, to make loan repayments rather than premium payments.
If, on any monthly processing date, you owe more in loans and interest than your
cash surrender value, we will notify you that a loan repayment is required for
your policy to remain in force. Your
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16 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
policy will lapse without value 61 days after the default date set out in our
notice if we do not receive a payment equal to the amount by which your policy
debt exceeds the cash surrender value on the monthly processing date in
question.
If the surviving insured dies after we have sent this notice, but before the 61
days are up, we will pay the beneficiary the death benefit proceeds, minus any
policy debt and unpaid interest.
There may be adverse tax consequences if your policy lapses and you have
outstanding policy debt.
Decreasing the face amount
- --------------------------------------------------------------------------------
On and after the first policy anniversary, you may request a reduction in
its face amount, which is the guaranteed minimum amount your policy will
pay at death or maturity.
DECREASING THE FACE AMOUNT
On and after the first policy anniversary, you may request a reduction in face
amount, which is the guaranteed minimum amount your policy will pay at death. To
do this we require that:
o you make your request in writing and we receive it at our customer service
office
o at least one insured is alive when we receive your request
o the reduction is at least $5,000 unless it is caused by a partial
withdrawal, in which case the partial withdrawal rules apply, and
o the new face amount is not lower than our minimum face amount, currently
$250,000.
We reduce your face amount on the monthly processing date coinciding with or
next following the date we approve your request.
Your death benefit option will determine how your policy is affected by a
reduction in the face amount due to a partial withdrawal:
o under Option 1, a partial withdrawal will typically cause an immediate
reduction in your policy's face amount
o under Option 2, a partial withdrawal will not reduce your policy's face
amount. However, the amount of your death benefit will decline with each
partial withdrawal.
o under Option 3, a partial withdrawal will typically not cause an immediate
reduction in your policy's face amount. However, the amount of your death
benefit will decline with each partial withdrawal.
If you have made one or more increases to the initial face amount by adding
policy segments and then request a face amount decrease, we will apply the
decrease to your policy segments as follows. We start with the most recent
policy segment, followed by the next most recent, and so on, and then reduce the
additional sum insured portion of the initial face amount and, finally, reduce
the basic sum insured portion of the initial face amount.
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S P E C I A L F E A T U R E S P R O S P E C T U S 17
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<PAGE>
Since we do not deduct a surrender charge when you decrease the face amount, the
surrender charge does not change. Your policy account value must always be
greater than the surrender charge. Further, the administrative charge is not
reduced by a decrease in face amount.
We will send you policy pages that reflect the changes resulting from your
reduction in the face amount.
Reducing the face amount of your policy may have tax consequences, including
possibly causing it to be considered a modified endowment contract under the
Internal Revenue Code. See Tax considerations.
You can also reduce or cancel coverage provided by the Adjustable Annual
Renewable Term rider. Areduction in the face amount of the Adjustable Annual
Renewable Term rider will not affect the face amount of your policy. Likewise,
you can decrease the face amount of your policy without reducing the coverage of
your term rider.
Consult your sales representative for advice. See Benefits and policy values and
Appendix C Supplement for more information on the additional sum insured and
Adjustable Annual Renewable Term rider, respectively.
INCREASING THE FACE AMOUNT
Provided both insureds are living, on any policy anniversary up to and including
the anniversary closest to the younger insured's 70th birthday, you may ask us
to increase your policy's face amount. To do this we require that:
o you make your request in writing and we receive it at our customer service
office at least 30 days before your policy anniversary
o at the time of the increase the younger insured must be at most age 70 and
the other insured at most age 90
o you prove that the insureds meet our insurance requirements, and
o the increase be for at least $10,000.
If we approve the increase, it will take effect on the policy anniversary on or
after we receive the request, provided the insureds are alive on that date.
We'll send you revised policy pages reflecting the changes to your policy.
We'll issue the increase in the form of a separate policy segment. Each policy
segment has its own underwriting classes, rates for cost of insurance, surrender
charges, administrative charges, premium charge, target premiums, and, during
the first three policy years, minimum annual premium.
After an increase in the face amount takes effect, to calculate premium charges
we will allocate premium payments first to the initial face amount and then to
each policy segment, starting with
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18 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
the oldest policy segment and ending with the most recent one. We'll allocate
premiums in such a way that they won't exceed the annual target premium for the
initial face amount or for each policy segment. When the sum of the premiums
paid during a policy year exceeds the target premium for the initial face
amount, we will allocate the excess to the first policy segment. If the premiums
you pay during a policy year exceed the target premiums for all the policy
segments and the initial face amount, we'll allocate the excess proportionately
according to the target premiums for the initial face amount and each policy
segment.
If you increase the face amount of your policy, it will be subject to new
surrender charges. We'll calculate the surrender charges as if you had bought a
new policy for the increase in the face amount. A new surrender charge will
apply to the policy segment that increased the face amount. We'll notify you
about the new surrender charge after any increase in the face amount.
You don't have to pay an additional premium to increase the face amount.
However, you may have to make a premium payment to prevent the policy from going
into default. That's because the new surrender charges triggered by an increase
in the face amount would automatically reduce the net cash surrender value of
the policy. Depending on your circumstances, a premium payment may be necessary
to keep the net cash surrender value above zero.
Increasing the face amount of your policy may have tax consequences, including
possibly causing your policy to be considered a modified endowment contract. The
tax consequences associated with your policy being classified as a modified
endowment contract are discussed in Tax considerations.
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S P E C I A L F E A T U R E S P R O S P E C T U S 19
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<PAGE>
Partial withdrawals
- --------------------------------------------------------------------------------
After the first policy year, you may withdraw part of your policy's net
cash surrender value. The minimum partial withdrawal is $500.
PARTIAL WITHDRAWALS
After the first policy year, you may withdraw part of your policy's net cash
surrender value. You must make your request for withdrawal in writing, and at
least one insured must be alive when you make the withdrawal. The minimum
partial withdrawal is $500. We have the right to limit the number of partial
withdrawals you make in a policy year to 12.
If we approve your request, it will be effective as of the business day we
receive it at our customer service office. The proceeds will normally be paid
within seven days of the time we receive your request. For exceptions to this
general rule see Policy proceeds. We will not approve or process a partial
withdrawal if:
o your remaining net cash surrender value would be insufficient to cover
three times the most recent monthly deduction, or
o you have chosen death benefit Option 1 or Option 3 and the partial
withdrawal would cause your policy's face amount to fall below our minimum
face amount, or
o you do not specify the variable investment options from which the
withdrawal is to be deducted, or
o the amount of the request exceeds the amount available for partial
withdrawal
We will tell you if these conditions apply.
A partial withdrawal will reduce your policy account value by the amount of the
partial withdrawal. In addition the face amount will be reduced by the amount of
any partial withdrawal that exceeds the reduction-free partial withdrawal
amount. So if you wish to make a partial withdrawal that does not reduce your
face amount, you should make a reduction-free partial withdrawal. The amount of
your reduction-free partial withdrawal depends on the death benefit option in
effect and is calculated, as shown below, as of the close of business on the
date we receive your request. If you have increased your policy's face amount by
adding policy segments, we will reduce the face amount starting with the most
recent policy segment, and ending with the additional sum insured and the basic
sum insured, in that order. See Decreasing the face amount.
If you have chosen death benefit Option 1, your reduction-free partial
withdrawal amount is any positive amount resulting from:
o your policy account value, minus
o your policy's face amount divided by the death benefit factor outlined in
your policy.
If you have chosen death benefit Option 2, all partial withdrawals are
reduction-free.
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20 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
If you have chosen death benefit Option 3, your reduction-free partial
withdrawal amount is the greater of:
o your net accumulated premiums immediately prior to the partial withdrawal,
or
o any positive amount resulting from:
o your policy account value, minus
o your policy's face amount divided by the death benefit factor
outlined in your policy.
We deduct the amount of your withdrawal from the policy account value
attributable to the variable investment options that you specified in your
request. If the partial withdrawal exceeds the policy account value attributable
to all variable investment options, we will deduct the excess amount from the
policy account value attributable to the fixed-rate option.
The tax consequences of making partial withdrawals are discussed under Tax
considerations.
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S P E C I A L F E A T U R E S P R O S P E C T U S 21
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<PAGE>
Surrendering your policy
- --------------------------------------------------------------------------------
You may surrender your policy for its net cash surrender value while
either insured is alive. Your policy's net cash surrender value will
normally be paid within seven days of the time we receive your request.
SURRENDERING YOUR POLICY
You may surrender your policy for its net cash surrender value while either
insured is alive. We will calculate your policy's net cash surrender value as of
the close of the business day we receive your written request, which must
include your policy, or an acceptable affidavit confirming that you've lost your
policy, at our customer service office. Your policy's net cash surrender value
will normally be paid within seven days of the time we receive your request.
Your policy's net cash surrender value will be calculated as follows:
o your policy account value, including any amount held in the Loan Account
and Loan Interest Account, minus
o any surrender charges, minus
o any outstanding policy debt.
Your total surrender charges will be the total of the surrender charges for the
initial face amount, and for any policy segments. See Deductions and charges.
- --------------------------------------------------------------------------------
Example
Surrender in policy year 5
--------------------------------------------------------------------------
Male insured, Age 50 / Female insured, Age 45
--------------------------------------------------------------------------
Male: Preferred Plus Underwriting Class; Female: Preferred Plus
Underwriting Class
--------------------------------------------------------------------------
Face Amount: $500,000
--------------------------------------------------------------------------
Annual Policy Premium: $4,696
--------------------------------------------------------------------------
Assuming, 6% hypothetical gross return: (5.19% net return)
(See Appendix A)
--------------------------------------------------------------------------
Policy Account Value $19,132
------------------------------------------------- --------------------
Surrender Charge 2,348
------------------------------------------------- --------------------
Policy Debt 0
------------------------------------------------- --------------------
Net Cash Surrender Value $16,784
- --------------------------------------------------------------------------------
All insurance coverage will end on the day we calculate your policy's net cash
surrender value. For a discussion of the tax consequences of surrendering your
policy, see Tax considerations.
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22 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
Transfers
- --------------------------------------------------------------------------------
You may ask us to transfer your policy account value in and out of the
variable investment options, or into the fixed-rate option, at any time.
Each transfer must be for a minimum of $500, or the total amount you have
invested in the option you are transferring funds out of, whichever is
lower.
TRANSFERS BETWEEN THE INVESTMENT OPTIONS
You may ask us to transfer your policy account value in and out of the variable
investment options, or into the fixed-rate option, at any time. We will make
transfers based on the unit values at the end of the business day on which we
receive your instructions, either in writing or by telephone. You can request a
transfer by writing to our customer service office or by calling 1-800-935-4128.
Before you can request transfers over the telephone, you must first send us a
written authorization form.
Your policy account value may not be invested in more than twenty of our
allocation options at any one time. Each transfer must be for a minimum of $500,
or the total amount you have invested in the option you are transferring funds
out of, whichever is lower. If you make more than twelve transfers within a
policy year, we reserve the right to charge you $25 for each additional
transfer. We also reserve the right to limit you to one transfer every 30 days.
We do not currently charge for additional transfers. There are also restrictions
on making transfers out of the fixed-rate option, which are outlined below.
Written requests that are received after 4:00 p.m. New York time will be
effective on the next business day. We will accept transfer instructions by
telephone between 9:00 a.m. and 3:30 p.m. New York time on each business day. We
will ask callers to provide identification and a personal security code for the
policy, and will accept the instructions of anyone who can provide this
information. We may also record telephone transfer requests without notifying
the caller. If we reasonably believe that telephone instructions are genuine, we
are not liable for any losses, damages or costs resulting from a transaction. As
a result, you bear the risk of any losses caused by unauthorized or fraudulent
telephone transactions.
The rules for telephone transfers are subject to change, and we reserve the
right to suspend or withdraw this service without notice. During periods of
financial market or economic volatility, it may be difficult to contact us in
order to make a transfer by telephone. If this happens, you should send your
request to us in writing.
TRANSFERS FROM THE FIXED-RATE OPTION
You may only transfer your policy account value out of the fixed-rate option
once each policy year. We must receive your request within 30 days of your
policy anniversary. If we receive your request in the 30 days before your policy
anniversary, we will make the transfer on your policy anniversary. If we receive
your request in the 30 day period after your policy anniversary, we will make
the transfer on the business day we receive your request. We will not honor
requests to transfer investments out of the fixed-rate option that we receive at
any other time of the year.
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S P E C I A L F E A T U R E S P R O S P E C T U S 23
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<PAGE>
When you request a transfer from the fixed-rate option, the amounts that you
have held in the fixed-rate option longest will be withdrawn first.
The maximum that you may transfer out of the fixed-rate option each policy year
is either 33 1/3% of your allocation in the fixed-rate option on the policy
anniversary on or immediately preceding the date of transfer, or $2,500,
whichever is higher. If you have less than $2,500 in the fixed-rate option, you
may transfer the entire amount.
POLICY PROCEEDS
The amount that your beneficiaries will receive upon the death of the surviving
insured is determined as explained under Death benefit options, and is payable
when we receive proof that both insureds died while the policy was in effect. It
is calculated as follows:
o the death proceeds based on the death benefit option in effect as of the
monthly processing date immediately preceding the surviving insured's
death, plus
o the proceeds of any coverage you have added to your policy through riders,
plus
o if you have chosen death benefit Option 3, any premiums paid between the
monthly processing date and the surviving insured's date of death, minus,
as of the date of the surviving insured's death,
o any outstanding policy debt, minus
o as of the date of the surviving insured's death, the lesser of:
o any premium required under the No Lapse Guarantee; or
o the amount required to bring the cash surrender value up to
zero,
and minus
o any partial withdrawals between the monthly processing date and the
surviving insured's date of death.
We may adjust the death proceeds paid to the beneficiaries if:
o the age or sex of an insured listed on the policy application is incorrect
o an insured commits suicide within two years of the policy issue date, a
change in the face amount, or the date a change in the death benefit from
Option 1 or Option 3 to Option 2 takes effect (but only for any increase
in the death benefit over your policy's face amount that was a result of
the change)
o there are limits imposed by riders to the policy.
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24 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
If the younger insured has or would have reached the attained age of 100 or
older, the death proceeds will be the policy account value minus any policy debt
as of the date of death.
The amount of all other transactions will be calculated at the end of the
business day on which we receive the necessary instructions, information or
documentation at our customer service office.
If the proceeds are being taken from your policy account value in the variable
investment options, we will normally pay proceeds within seven days of receiving
the necessary information. However, we may delay any transfers, loans or other
payments made from the variable investment options when:
o the New York Stock Exchange is closed, except for weekends or holidays, or
when trading has been restricted
o the Securities and Exchange Commission determines that a state of
emergency exists, making policy transactions impracticable, or
o when one or more of the mutual funds corresponding to the variable
investment options legally suspends payment or redemption of their shares.
We will pay interest on the death proceeds from the date of the surviving
insured's death until the proceeds are paid, either in a lump sum or through a
payment option.
If the proceeds are from your policy account value in the fixed-rate option,
they will normally be paid promptly once we have received the necessary
information. However, we may delay any transfers, loans or other payments made
from the fixed-rate option for up to six months from the date of your request.
If we do this, we will pay interest of at least 3% per year on payments that we
delay for 30 days or more. Please note that requests for transfers from the
fixed-rate option may only be made during certain periods. See Transfers from
the fixed-rate option.
Exchanging a policy
- --------------------------------------------------------------------------------
You may exchange all or a portion of your Park Avenue SVUL policy for a
fixed-benefit policy on the lives of the insureds issued by us or one of
our affiliates, without having to prove that the insureds meet our
insurance requirements.
EXCHANGE FOR FIXED-BENEFIT INSURANCE
At any time prior to the second policy anniversary you have the right to
exchange all or a portion of your Park Avenue SVUL policy for a fixed-benefit
policy on the lives of the insureds issued by our affiliate, Guardian Life,
without having to prove that the insureds meet our insurance requirements. Once
exercised, this right terminates. Under the new policy, your policy value will
be held in the issuer's general account. Your face amount cannot exceed the face
amount of this policy on the date you make the exchange nor be less than the
minimum face amount under GIAC's or its affiliate's rules. If you exchange a
portion of the face amount, the face amount remaining must meet GIAC's minimum
face amount requirements. The insureds' ages when the Park Avenue SVUL
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S P E C I A L F E A T U R E S P R O S P E C T U S 25
-----------------------
<PAGE>
policy took effect will also be carried over. Before you can make any exchange,
however, you must repay any outstanding policy debt on your Park Avenue SVUL
policy, and all due monthly deductions must be paid. Both insureds must be alive
on the date of the exchange. See your policy for details.
The exchange may result in a cost or credit to you. The cost or credit will
reflect any differences in cash values and premiums between the exchanged
portion of this policy and the new policy.
The new policy will be issued and effective either on the business day that we
receive your written exchange request at our customer service office along with
your policy, or on the date that any exchange cost owing is received by the
issuer of your new policy, whichever is later.
Additional rider benefits are available only if you provide the issuer of your
new policy with satisfactory evidence of insurability, and will be subject to
the issuing company's rules on the exchange date.
You should consult with legal and tax advisers before exchanging your policy.
Payment options
- --------------------------------------------------------------------------------
You have several payment options for the death or surrender proceeds from
your policy. These proceeds can either be paid in a single lump sum, or
under one or more of the payment options specified in the accompanying
text.
PAYMENT OPTIONS
You have several payment options for the death or surrender proceeds from your
policy. These proceeds can either be paid in a single lump sum, or under one or
more of the payment options listed below. You may select a payment option while
an insured is living. If the surviving insured has died and you have not chosen
a payment option, the beneficiaries may choose the payment options, up to one
year after the surviving insured's death. If you are surrendering your policy,
you have 60 days after the proceeds of your policy become payable within which
to choose a payment option. You, or the beneficiaries, may choose to distribute
the proceeds under more than one payment option at a time, but you must
distribute at least $5,000 through each option selected. Monthly payments under
each option must be at least $50.
The proceeds of your policy must be paid to a `natural person'. Payments will
not be made to his or her estate if he or she dies before the proceeds have been
fully paid. You may name a second person to receive any remaining payments if
this happens.
The proceeds that we hold in order to make payments under the payment options do
not share in the income, gains or losses of the variable investment options, nor
do they earn interest in the same way or amount as funds in the fixed-rate
option.
Under Payment Option 1, we will hold the proceeds and make monthly interest
payments at a guaranteed annual rate of 3%.
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26 P R O S P E C T U S S P E C I A L F E A T U R E S
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<PAGE>
Under Payment Option 2, we will make monthly payments of a specified amount
until the proceeds and interest are fully paid. At least 10% of the original
proceeds must be paid each year. Guaranteed interest of 3% will be added to the
proceeds each year.
Under Payment Option 3, we will make monthly payments for a specified number of
years. The amount of the payments will include interest at 3% per year.
Under Payment Option 4, we will make monthly payments for the longer of the life
of the payee or 10 years. The minimum amount of each payment will include
interest at 3% per year.
Under Payment Option 5, we will make monthly payments until the amount paid
equals the proceeds settled, and for the remaining life of the payee. The
minimum amount of each payment will include interest at 3% per year.
Under Payment Option 6, we will make monthly payments for 10 years and for the
remaining life of the last surviving of two payees. The minimum amount of each
payment will include interest at 3% per year.
Payment option tables for Options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female) projected 20 years to the year 2020 by 100%
of the male scale G Factors (for males) and 50% of the female scale G Factors
(for females).
Your policy lists the monthly payment for every $1,000 of proceeds that the
payee applies under Options 3 to 6.
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S P E C I A L F E A T U R E S P R O S P E C T U S 27
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<PAGE>
- --------------------------------------------------------------------------------
TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
Tax status
- --------------------------------------------------------------------------------
To qualify as a life insurance contract and to receive the tax treatment
normally accorded life insurance contracts under Federal tax law, a life
insurance policy must satisfy certain requirements which are set forth in
the Internal Revenue Code. For example, the underlying investments must be
"adequately diversified" in order for the policy to be treated as a life
insurance contract for Federal income tax purposes. It is intended that
the investment divisions of the Separate Account, through the mutual
funds, will satisfy these diversification requirements.
THIS DISCUSSION of tax considerations for your Park Avenue SVUL policy is
general in nature, does not purport to be complete or to cover all tax
situations, and should not be considered as tax advice. It is based on our
understanding of federal income tax laws as they are currently being
interpreted. We cannot guarantee that these laws will not change while this
prospectus is in use, or while your policy is in force. You should consult a
lawyer or tax adviser regarding your individual situation.
- --------------------------------------------------------------------------------
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for federal income tax purposes
and to receive the tax treatment normally accorded life insurance contracts
under federal tax law, a life insurance policy must satisfy certain requirements
which are set forth in Section 7702 of the Internal Revenue Code. Guidance as to
how these requirements are to be applied is limited. Accordingly, there is some
uncertainty about the application of Section 7702 to a policy. Nevertheless, we
believe it is reasonable to conclude that your policy should satisfy the
applicable requirements. If it is subsequently determined that a policy does not
satisfy the applicable requirements, we may take appropriate steps to bring the
policy into compliance with such requirements and we reserve the right to modify
the policy as necessary in order to do so.
In certain circumstances, owners of variable life insurance policies have been
considered for federal income tax purposes to be the owners of the assets of the
separate account supporting their contracts due to their ability to exercise
investment control over those assets. Where this is the case, the policyowners
have been currently taxed on income and gains attributable to separate account
assets. There is little guidance in this area, and some features of the Park
Avenue SVUL policy, such as your flexibility to allocate premiums and the policy
account value, have not been explicitly addressed in published rulings. While we
believe that the policy does not give policyowners investment control over the
Separate Account's assets, we reserve the right to modify the policy as
necessary to prevent the policyowner from being treated as the owner of the
Separate Account assets supporting the policy.
In addition, the Code requires that the investments of the investment divisions
of our Separate Account be "adequately diversified" in order for the policy to
be treated as a life insurance contract for federal income tax purposes. It is
intended that the investment divisions of the Separate Account, through the
mutual funds, will satisfy these diversification requirements.
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28 P R O S P E C T U S T A X C O N S I D E R A T I O N S
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<PAGE>
The following discussion assumes that the policy will qualify as a life
insurance contract for federal income tax purposes.
Treatment of policy proceeds
- --------------------------------------------------------------------------------
We believe that the death benefits under your policy should be excludable
from the gross income of the beneficiary. Generally, under the existing
federal tax laws, increases in the value of your policy will not be taxed
federally unless you make a withdrawal before the insured dies.
TREATMENT OF POLICY PROCEEDS
We believe that the death benefits under your policy generally should be
excludable from the gross income of the beneficiary. Generally, under the
existing federal tax laws, increases in the value of your policy will not be
taxed federally unless you make a withdrawal before the insured dies. The money
that you receive when the insured dies is not subject to federal income tax, but
may be subject to federal estate taxes or generation skipping taxes.
Partial withdrawals, surrenders and policy loans all result in money being taken
out of your policy before the insured dies. How this money is taxed depends on
whether your policy is classified as a modified endowment contract.
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," with less favorable tax treatment than other
life insurance contracts. Due to the flexibility of the policy as to 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 premium payments made
during the first seven policy years. Certain changes in a policy after it is
issued (including a reduction in benefits at any time after issuance) could also
cause it to be classified as a modified endowment contract. You should consult
with a competent tax adviser to determine whether a policy transaction will
cause your policy to be classified as a modified endowment contract.
If your policy is not considered a modified endowment contract:
o money that you withdraw from your policy will generally be taxed only if
the total that you withdraw exceeds your "basis" in the policy - which is
generally equal to the total amount that you have paid in premiums. The
difference between what you have put in and what you take out will be
taxed as ordinary income. When you withdraw money from your policy, your
basis is reduced by any amount withdrawn that is not taxed
o if you surrender your policy, you will generally be taxed only on the
amount by which the value of your policy, including any policy debt, is
greater than your basis in the policy. The tax consequences of
surrendering your policy may vary if you receive the proceeds under one of
the payment plans. Losses are generally not tax deductible
o policy loans are generally not taxable because they must be paid back. The
interest you pay on these loans is generally not tax deductible. However,
if your policy lapses while you have an outstanding policy loan, you may
have to pay tax on the amount
-----------------------
T A X C O N S I D E R A T I O N S P R O S P E C T U S 29
-----------------------
<PAGE>
that you still owe to your policy. The tax consequences of a policy loan
are unclear if the difference between the rate we charge on the loan and
the interest rate earned on the loan is very small. You should consult a
tax adviser regarding these consequences.
If your policy is considered a modified endowment contract:
o all distributions other than death benefits, including partial
withdrawals, surrenders, assignments and policy loans, will be treated
first as distributions of gain, taxable as ordinary income to the extent
of any gain; and as a tax free recovery of basis only after all the gain
in the contract has been distributed.
o all modified endowment contracts issued by GIAC or its affiliates during
any calendar year will be treated as one modified endowment contract to
determine the taxable portion of any distribution
o a 10% penalty tax will also apply to any taxable distribution unless it is
made to a taxpayer who is 59 1/2 years of age or older; is attributable to
a disability; or is received as substantially equal periodic payments made
over the life of the taxpayer, or the life of the taxpayer and a
beneficiary.
EXCHANGES
Generally, there are no tax consequences when you exchange one life insurance
policy for another, as long as the same persons are being insured. Paying
additional premiums under the new policy may cause it to be treated as a
modified endowment contract. Your policy may also lose any "grandfathering"
privilege, where you would be exempt from certain legislative or regulatory
changes made after your original policy was issued, if you exchange your policy.
You should consult with a tax adviser if you are considering exchanging any life
insurance policy.
POLICY SPLIT OPTION
The policy split option permits a policy to be split into two single life
insurance policies. It is not clear whether exercising the policy split option
will be treated as a taxable transaction or whether the individual policies that
result would be classified as modified endowment contracts. A competent tax
advisor should be consulted before exercising the policy split option.
POLICY CHANGES
We will make changes to policies and their riders where necessary to attempt to
ensure that they continue to qualify as life insurance under the Internal
Revenue Code, and policyowners are not considered the direct owners of the
mutual funds held in the Separate Account. Any changes will be made uniformly to
all policies affected. We will provide advance notice in writing of these
changes when required by state insurance regulators.
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30 P R O S P E C T U S T A X C O N S I D E R A T I O N S
- -----------------------
<PAGE>
Federal, state and local governments may, from time to time, introduce new
legislation concerning the taxation of life insurance policies. They can also
change or adopt new interpretations of existing laws and regulations without
notice. If you have questions about the tax consequences of your Park Avenue
SVUL policy, please consult a legal or tax adviser.
-----------------------
T A X C O N S I D E R A T I O N S P R O S P E C T U S 31
-----------------------
<PAGE>
Transfer taxes
- --------------------------------------------------------------------------------
If you are both the policyowner and the surviving insured, the death
benefit under your Park Avenue SVUL policy will generally be included in
the value of your gross estate for federal estate tax purposes. If the
beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax
may be imposed.
ESTATE AND GENERATION SKIPPING TRANSFER TAXES
If you are both the policyowner and the surviving insured, the death benefit
under your Park Avenue SVUL policy will generally be included in the value of
your gross estate for federal estate tax purposes. If you are not an insured,
the value of the policy will be included in your gross estate.
Also, if the beneficiary of the policy is someone who is two or more generations
younger than the policyowner, the generation-skipping transfer (GST) tax may be
imposed.
The individual situation of a policyowner or beneficiary will determine how the
ownership of a policy or the receipt of policy proceeds will affect their tax
situation. Because the rules are complex, a legal or tax adviser should be
consulted for specific information.
Other tax consequences
Park Avenue SVUL policies can be used in various ways, including:
o as non-qualified deferred compensation or salary continuance plans
o in split-dollar insurance plans, and
o as part of executive bonus plans, retiree medical benefits plans, or other
similar plans.
The tax consequences of these plans will vary depending on individual
arrangements and circumstances. We recommend that anyone considering buying a
Park Avenue SVUL policy with the expectation of favorable tax consequences
should consult with a qualified tax adviser before investing.
In addition, new rules have recently been passed by Congress relating to life
insurance owned by businesses. Any business should consult with a qualified tax
adviser before buying a policy, and before making any changes or transactions
under the policy.
- -----------------------
32 P R O S P E C T U S T A X C O N S I D E R A T I O N S
- -----------------------
<PAGE>
Possible tax law changes
- --------------------------------------------------------------------------------
Although the likelihood of legislative change is uncertain, there is
always the possibility that the tax treatment of the policy could change
by legislation or otherwise. You should consult a tax adviser with respect
to legislative developments and their effect on the policy.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the policy could change by legislation or
otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
GIAC'S TAXES
Based on current life insurance tax regulations, GIAC does not pay tax on
investment income or capital gains from the assets held in the Separate Account.
The operations of the Separate Account are reported on our federal income tax
return, which is then consolidated with that of our parent company, Guardian
Life.
We may pay taxes at the state and local level, as well as premium taxes, but at
present these are not substantial. If they increase, we reserve the right to
recover these costs by charging the Separate Account or the policy.
INCOME TAX WITHHOLDING
We are generally required to withhold money for income taxes when you make a
transaction on which you will have to pay tax. You can request in writing that
we not withhold any amount for income tax purposes. If we do not, or if we fail
to withhold enough to cover the taxes that are due, you could be penalized. You
would also be responsible for any unpaid taxes when you file your regular income
tax return. We may similarly withhold generation skipping transfer taxes unless
you tell us in writing that these taxes are not required.
-----------------------
T A X C O N S I D E R A T I O N S P R O S P E C T U S 33
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
RIGHTS AND RESPONSIBILITIES
- --------------------------------------------------------------------------------
Incontestability
- --------------------------------------------------------------------------------
Generally, we cannot challenge your policy once it is in force for two
years.
LIMITS TO GIAC'S RIGHT TO CHALLENGE A POLICY
Incontestability
Generally, we cannot challenge your policy or any face amount increase once it
is in force during a given insured's lifetime for two years. This policy will
terminate upon successful contest with respect to either insured. If you change
your policy's death benefit from Option 1 or Option 3 to Option 2, we cannot
challenge the amount of the increase in death benefit that results from this
change once it has been in effect during a given insured's lifetime for 2 years
from the date the change took effect. If we are successful in our challenge,
your death benefit will revert to what it would have been under Option 1 or
Option 3, whichever is applicable.
Misstatement of age or sex
If we find that the information in the application regarding the age or sex of
an insured is wrong, we will adjust the death benefit to that which would have
been purchased by the most recent deduction for cost of insurance under the
policy and any rider costs using the correct age or sex.
- -----------------------
34 P R O S P E C T U S R I G H T S A N D R E S P O N S I B I L I T I E S
- -----------------------
<PAGE>
Suicide exclusion
If an insured commits suicide within two years of the policy's issue date we
will cancel the policy and no death benefit proceeds will be paid, regardless of
whether he or she is considered sane at the time. The amount that we must pay in
death benefits will be limited to the greater of
o the net cash surrender value as of the date of death, or
o the policy premiums paid, minus
o any policy debt, minus
o any partial withdrawals.
If an insured commits suicide, while sane or insane within two years from the
effective date of any increase in the face amount, our liability will be limited
to the cost of insurance for such increase.
If an insured commits suicide within two years of an increase in your policy's
death benefit due to a change from Option 1 or Option 3 to Option 2, the death
benefit will be limited to the original death benefit under Option 1 or Option
3, whichever is applicable, plus the additional cost of insurance charges paid
for the increased death benefit.
-----------------------
R I G H T S A N D R E S P O N S I B I L I T I E S P R O S P E C T U S 35
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL TERMS USED IN THIS SUPPLEMENT
- --------------------------------------------------------------------------------
Some of the special terms used in this supplement are defined below. These
definitions are applicable to SVUL policies only. Other terms used in the
supplement are defined in Special terms used in this prospectus.
Age
Each insured's age on the birthday closest to the date the policy takes effect.
Attained age
Each insured's Age plus the number of policy years completed since the policy
date.
Surviving insured
The insured remaining alive after the first death that occurs while this policy
is in force.
Target premium
A measure of premium used to determine your policy's premium charges and agent
commissions. Your policy's basic sum insured and any policy segments you buy
each have their own target premium. The target premium associated with the basic
sum insured is based on both insureds' ages, underwriting classes and sex
(unless gender-neutral rates are required by law). The target premium associated
with any policy segment is based on the insureds' attained ages and the
underwriting classes for each policy segment.
Younger insured
The younger of the two insureds on the policy date.
- -----------------------
36 P R O S P E C T U S S P E C I A L T E R M S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A SUPPLEMENT
- --------------------------------------------------------------------------------
ILLUSTRATIONS OF DEATH BENEFITS, POLICY ACCOUNT VALUES, NET CASH SURRENDER
VALUES AND ACCUMULATED POLICY PREMIUMS
The following tables illustrate how the policies operate. Specifically,
they show how the death benefit, net cash surrender value and policy account
value can vary over an extended period of time assuming hypothetical gross rates
of return (i.e., investment income and capital gains and losses, realized or
unrealized) for the Separate Account that are equal to constant after tax annual
rates of 0%, 6% and 12%. The tables are based on policies with face amounts of
$______ for a male insured Age __ and a female insured Age __. The insureds are
assumed to be in the preferred plus classification for the first _ illustrations
and the preferred classification for the next _ illustrations. Values are first
given based on current charges and then based on the policy's higher guaranteed
charges. Each illustration is given first for a policy with an Option 1 death
benefit, then for a policy with an Option 2 death benefit, and, finally, for a
policy with an Option 3 death benefit. In addition, the first __ illustrations
will show values based on the cash value test and the next __ illustrations will
show values based on the guideline premium test. These illustrations may assist
in the comparison of death benefits, net cash surrender values and policy
account values for Park Avenue SVUL policies with those under other variable
life insurance policies that may be issued by GIAC or other companies.
Prospective policyowners are advised, however, that it may not be advantageous
to replace existing life insurance coverage by purchasing a Park Avenue SVUL
policy, particularly if the decision to replace existing coverage is based
primarily on a comparison of policy illustrations.
Death benefits, net cash surrender values and policy account values will
be different from the amounts shown if: (1) the actual gross rates of return
average 0%, 6% or 12%, but vary above and below the average over the period; and
(2) premiums are paid at other than annual intervals. Benefits and values will
also be affected by the policyowner's allocation of the unloaned policy account
value among the variable investment options and the fixed-rate option. If the
actual gross rate of return for all options averages 0%, 6% or 12%, but varies
above or below that average for individual options, allocation and transfer
decisions can have a significant impact on a policy's performance. Policy loans
and other policy transactions, such as partial withdrawals, will also affect
results, as will the insured's sex, smoker status and underwriting class.
Death benefits, net cash surrender values and policy account values shown
in the tables reflect the fact that: (1) deductions have been made from premiums
for premium charges; and (2) the monthly deduction is deducted from the policy
account value on each monthly processing date. The net cash surrender values
shown in the tables reflect the fact that a surrender charge is deducted upon
surrender or lapse during a period of time that will not exceed 9 policy years.
See "Deductions and charges." The amounts shown in the illustrations also
reflect an average of the investment advisory fees and operating expenses
incurred by the mutual funds, at an annual rate of ___% of the average daily net
assets of such funds. The average is based upon actual expenses incurred during
1999 for all funds without regard for reimbursements made by the funds for
previous years' expense payments.
-----------------------------------------
Explanations of certain expense
reduction arrangements to be
included in amendment.
-----------------------------------------
In the absence of these arrangements, operating expenses of the affected
funds, and the average investment advisory fees and expenses used in the
following illustrations would have been higher. For an explanation of the
expenses see the accompanying fund prospectuses.
Taking account of the charges, the average investment advisory fee and the
operating expenses of the mutual funds, the gross annual rates of return of 0%,
6% and 12% correspond to net investment experience at ___%, ___% and ____%,
respectively.on a current basis, and -%, -% and -%, respectively, on a
guaranteed basis. See "Net investment factor" in the VUL prospectus.
The hypothetical rates of return shown in the tables do not reflect any
tax charges attributable to the Separate Account since no charges are currently
made. If any such charges are imposed in the future, the gross annual rate of
return would have to exceed the rates shown by an amount sufficient to cover the
tax charges, in order to produce the death benefits, net cash surrender values
and policy account values illustrated. See "GIAC's taxes."
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A P P E N D I C E S P R O S P E C T U S 37
-----------------------
<PAGE>
The fourth column of each table shows the amount which would accumulate if
an amount equal to the target premium was invested to earn interest, after
taxes, of 5% per year, compounded annually. There can be no assurance that a
prospective policyowner would be able to earn this return.
GIAC will furnish upon request an illustration reflecting the proposed
insureds' Ages, sexes, underwriting classes and the face amount requested, but a
premium-based illustration must reflect GIAC's current minimum face amount
requirement for Park Avenue SVUL -- which is $250,000.
These illustrations will refer to "net outlay" as the cash flow into or
out of the policy. It is equal to the sum of all premiums and accrued loan
interest paid in cash and reduced by the proceeds of any policy loan or partial
withdrawal received in cash. For purposes of these illustrations "net outlay"
will be equal to target premium.
From time to time, advertisements or sales literature for Park Avenue SVUL
may quote historical performance data of one or more of the underlying funds,
and may include cash surrender values and death benefit figures computed using
the same methodology as that used in the following illustrations, but with
historical average annual total returns of the underlying funds for which
performance data is shown in the advertisement or sales literature replacing the
hypothetical rates of return shown in the following tables. This information may
be shown in the form of graphs, charts, tables, and examples. Any such
information is intended to show the policy's investment experience based on the
historical experience of the underlying funds and is not intended to represent
what may happen in the future.
GIAC began to offer Park Avenue SVUL on May 1, 2000. As such the policies
may not have been available when the funds commenced their operations. However,
illustrations may be based on the actual investment experience of the funds
since their respective inception dates (See "Investment performance of the
Funds"). The results for any period prior to the policies' being offered would
be calculated as if the policies had been offered during that period of time,
with all charges assumed to be those applicable to the policies. Thus the
illustrations will reflect deductions for each fund's expenses, and the charges
deducted from premiums, monthly deductions and any transaction deductions
associated with the policy in question.
- -----------------------
38 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<PAGE>
ILLUSTRATIONS TO BE FILED BY AMENDMENT
-----------------------
A P P E N D I C E S P R O S P E C T U S 39
-----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C SUPPLEMENT
ADDITIONAL BENEFITS BY RIDER FOR SVUL
- --------------------------------------------------------------------------------
Additional benefits are available by riders to the policy. Riders are issued
subject to GIAC's standards for classifying risks. GIAC charges premiums for
additional benefit riders. These premium amounts are deducted monthly from
policy account value. The benefits provided by the riders are fully described in
the riders and summarized here. These riders may not be available in all states.
Survivorship Adjustable Annual Renewable Term (AART) rider -- this rider,
available only at issue, provides term insurance coverage to the policy
anniversary nearest the younger insured's 100th birthday. Coverage under this
rider has no cash value associated with it. If you have purchased additional sum
insured coverage you cannot have an AART rider. If AART coverage is greater than
basic sum insured coverage, you cannot purchase a guaranteed coverage rider.
Guaranteed Coverage rider ("GCR") -- this rider, available with death benefit
option 1 and at issue only, guarantees that the policy will remain in force even
if the net cash surrender value is less than the current monthly deduction,
provided the GCR requirement, as described in the rider, is met. It is not
available if coverage under the additional sum insured or AART rider is greater
than the basic sum insured at issue.
Select Security rider -- this rider, used in split dollar cases, is an
endorsement that prevents the policy owner from making certain policy changes
without the consent of the policy owner's employer. There is no charge for this
rider.
Exchange of Insureds rider -- this rider gives the policy owner the right to
exchange the policy for a new one on the life of substitute insureds. The
exercise of this rider will be treated as a taxable exchange for federal income
tax purposes.
Single Life Term rider -- this is a term insurance rider available on either or
both of the insureds' lives.
Policy Split Option -- this rider, which is only available if the insureds are
spouses, allows the policyowner to split the policy into two single traditional
whole life policies, each having the same policy date as the original policy.
Certain conditions must be satisfied before the policy split option can be
exercised.
GIAC may from time to time discontinue the availability of one or more of these
riders, or make other riders available. GIAC agents can provide information
about the current availability of particular riders.
- -----------------------
40 P R O S P E C T U S A P P E N D I C E S
- -----------------------
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX D SUPPLEMENT
- --------------------------------------------------------------------------------
Representative Monthly Administrative Expense
Charges per $1,000 of Face Amount
<TABLE>
<CAPTION>
Younger Insured Male Younger Insured Female Younger Insured Unisex
- -------------------------------------------------------------------------------------------------
Preferred Preferred Preferred
Plus Plus Plus
Issue and and and
Age Preferred Standard Preferred Standard Preferred Standard
---- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
35 0.12 0.13 0.11 0.12 0.11 0.12
40 0.13 0.14 0.13 0.13 0.13 0.14
45 0.15 0.16 0.15 0.15 0.15 0.16
50 0.18 0.20 0.17 0.18 0.17 0.19
55 0.21 0.23 0.20 0.20 0.20 0.21
60 0.25 0.27 0.23 0.24 0.24 0.25
65 0.32 0.33 0.29 0.29 0.30 0.31
70 0.46 0.47 0.41 0.41 0.44 0.44
75 0.59 0.60 0.58 0.59 0.59 0.59
80 0.61 0.61 0.60 0.61 0.61 0.61
</TABLE>
Note: Montly rates are one twelfth of the annual rates
-----------------------
A P P E N D I C E S P R O S P E C T U S 41
-----------------------
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
UNDERTAKING PURSUANT TO RULE 484
Under Article VIII of GIAC's By-Laws, as supplemented by Section 3.2 of
GIAC's Certificate of Incorporation, any past or present director or officer of
GIAC (including persons who serve at GIAC's request or for its benefit as
directors or officers of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise [hereinafter referred to
as a "Covered Person"]) is indemnified to the fullest extent permitted by law
against liability and all expenses reasonably incurred by such Covered Person in
connection with any action, suit or proceeding to which such Covered Person may
be a party or otherwise involved by reason of being or having been a Covered
Person. However, this provision does not protect a Covered Person against any
liability to either GIAC or its stockholder to which such Covered Person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
Covered Person's office. This provision does protect a director of GIAC against
any liability to GIAC or its stockholder for monetary damages or for breach of
fiduciary duty as a director of GIAC, except for liability (i) for any breach of
the director's duty of loyalty to GIAC or its stockholder, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26
GIAC hereby presents that the fees and charges deducted under the contract, in
the aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by GIAC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The undertaking to file reports.
The undertaking pursuant to Rule 484.
The representation pursuant to Section 26 of The Investment Company Act of
1940.
The signatures.
Written consents of the following persons:
Richard T. Potter, Jr., Esq.*
Charles G. Fisher*
PricewaterhouseCoopers LLP*
- ----------
* To be filed by amendment.
II-1
<PAGE>
The following exhibits:
1.A (1) Resolution of the Board of Directors of The Guardian
Insurance & Annuity Company, Inc. establishing The
Guardian Separate Account N.*
(2) Not Applicable.
(3)(a), (b)
and (c) Distribution Agreements.*
(4) Not Applicable.
(5)(a) Specimen of the Flexible Premium Adjustable Variable Whole
Life Insurance Policy.*
(5)(b) Specimin of the Flexible Premium Survivorship Adjustable
Variable Whole Life Insurance Policy.
(6)(a) Certificate of Incorporation of The Guardian Insurance &
Annuity Company, Inc.*
(6)(b) By-laws of The Guardian Insurance & Annuity Company, Inc.*
(7) Not Applicable.
(8) Amended and Restated Agreement for Services and
Reimbursement Therefor between The Guardian Life Insurance
Company of America and The Guardian Insurance & Annuity
Company, Inc.*
(9) Not Applicable.
(10) Form of Application for the Flexible Premium Adjustable
Variable Whole Life Policy and Flexible Premium Adjustable
Survivorship Variable Life Insurance Policy.*
(11)(a) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy for Flexible
Premium Adjustable Variable Life Insurance Policy.
(11)(b) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy for Flexible
Premium Adjustable Survivorship Variable Life Insurance
Policy.
2. See Exhibit 1.A(5).
3. (a)Opinion of Richard T. Potter, Jr., Esq.**
3. (b)Consent of Richard T. Potter, Jr., Esq.**
4. None.
5. Not Applicable.
6. Opinion and Consent of Charles G. Fisher, F.S.A.**
7. Consent of PricewaterhouseCoopers LLP**
8. Powers of Attorney executed by a majority of the Board of Directors
and certain principal officers of The Guardian Insurance & Annuity
Company, Inc.*
- ----------
* Incorporated by reference to the Registration Statement on Form S-6 filed
by the Registrant on December 10, 1999 (File No. 333-92475).
** To be filed by amendment.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant, The
Guardian Separate Account N, has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York, on the 21st day of January, 2000.
THE GUARDIAN SEPARATE ACCOUNT N
(Name of Registrant)
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
(Name of Depositor)
By: /s/ Richard T. Potter, Jr
-------------------------------------
Richard T. Potter, Jr
Vice President and Counsel
Attest: /s/ Sheri L. Kocen
---------------------------------
SHERI L. KOCEN
COUNSEL
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following directors and
principal officers of The Guardian Insurance & Annuity Company, Inc. in the
capacities and on the date indicated.
/s/ Joseph D. Sargent* President, Chief Executive Officer
- ----------------------------------- and Director
Joseph D. Sargent
(Principal Executive Officer)
/s/ Frank J. Jones* Executive Vice President, Chief Investment
- ----------------------------------- Officer and Director
Frank J. Jones
(Principal Financial Officer)
/s/ Edward K. Kane* Executive Vice President
- ----------------------------------- and Director
Edward K. Kane
/s/ Frank L. Pepe Vice President and Controller
- -----------------------------------
Frank L. Pepe
(Principal Accounting Officer)
Director
- -----------------------------------
John M. Smith
/s/ Philip H. Dutter* Director
- -----------------------------------
Philip H. Dutter
/s/ Arthur V. Ferrara* Director
- -----------------------------------
Arthur V. Ferrara
/s/ Leo R. Futia* Director
- -----------------------------------
Leo R. Futia
/s/ Peter L. Hutchings* Director
- -----------------------------------
Peter L. Hutchings
/s/ William C. Warren* Director
- -----------------------------------
William C. Warren
*By: /s/ Richard T. Potter, Jr. Date: January 21, 2000
---------------------------------
Richard T. Potter, Jr.
Vice President and Counsel
Pursuant to Power of Attorney
II-4
<PAGE>
THE GUARDIAN SEPARATE ACCOUNT N
EXHIBIT INDEX
Exhibit
Number Description Page*
1. A(5)(b) Specimin of the Flexible Premium Survivorship Adjustable Variable
Whole Life Insurance Policy.
1. A(11)(a) Memorandum on the Policy's Issuance, Transfer and
Redemption Procedures and on the Method of Computing Cash
Adjustments upon Exchange of the Policy for Flexible Premium
Adjustable Variable Life Insurance Policy.
1. A (11)(b) Memorandum on the Policy's Issuance, Transfer and Redemption
Procedures and on the Method of Computing Cash Adjustments upon
Exchange of the Policy for Flexible Premium Adjustable
Survivorship Variable Life Insurance Policy.
INSURED A JOHN DOE 50-MALE AGE AND SEX
INSURED B MARY DOE 45-FEMALE
SPECIMEN POLICY NUMBER
JAN 06, 2000 POLICY DATE
FACE AMOUNT BASIC SUM INSURED AT ISSUE $ 250,000
ADDITIONAL SUM INSURED $ 25,000
AT ISSUE
INITIAL FACE AMOUNT $ 275,000
ISSUE DATE JAN 06, 2000 PREFERRED PLUS INSURED A
PLAN OF SURVIVORSHIP FLEXIBLE PREMIUM PREFERRED PLUS INSURED B
INSURANCE ADJUSTABLE VARIABLE LIFE INSURANCE GUIDELINE PREMIUM SECTION
7702 TEST
[LOGO] The Guardian A Stock Company
GUARDIAN(SM) Insurance & Annuity Incorporated in the
Company, Inc. State of Delaware
Customer Service Office:
P.O. Box 26210
Lehigh Valley, PA 18002-6210
Read this policy carefully. This policy is a legal contract between the owner
and The Guardian Insurance & Annuity Company, Inc. (GIAC). GIAC will pay the
death proceeds to the beneficiary upon receipt at the Customer Service Office of
due proof that the insured died while this policy was in force. The entire
contract consists of the Basic Policy and any attached additional benefit
riders, endorsements and applications. This policy is issued and administered by
GIAC at its Customer Service Office. GIAC's home office is 1209 Orange Street,
Wilmington, Delaware 19801. GIAC receives all communications at its Customer
Service Office.
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
Secretary President
ALL VALUES UNDER THIS POLICY WHICH ARE BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT ARE VARIABLE, MAY INCREASE OR DECREASE AND ARE NOT GUARANTEED.
THE DEATH PROCEEDS, POLICY ACCOUNT VALUE AND CASH SURRENDER VALUE UNDER THIS
POLICY MAY INCREASE OR DECREASE DAILY, DEPENDING UPON PAYMENTS MADE, THE
INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT, THE AMOUNT OF INTEREST CREDITED
TO THE FIXED-RATE OPTION, THE AMOUNT OF CHARGES DEDUCTED, CHANGES IN FACE AMOUNT
AND WHETHER PARTIAL WITHDRAWALS OR POLICY LOANS ARE TAKEN. SEE PAGES 7 AND 15
FOR A FULL DESCRIPTION OF DEATH PROCEEDS AND THE POLICY ACCOUNT VALUE.
THERE IS NO MINIMUM GUARANTEED CASH SURRENDER VALUE. THE LOAN VALUE OF THIS
POLICY IS LESS THAN 100% OF THE CASH SURRENDER VALUE. SEE PAGES 5, 18 AND 19 FOR
A FULL DESCRIPTION OF CASH SURRENDER VALUE AND LOAN VALUE.
RIGHT TO CANCEL:
The owner has the right to examine this policy and return it for cancellation to
the Customer Service Office or to the agent from whom it was purchased by the
later of: 1) 10 days after receiving it; or 2) 45 days from the date the
completed application was signed. The policy and a written cancellation notice
must be delivered or mailed to cancel this policy. Any notice given by mail is
effective on being postmarked, properly addressed, and postage prepaid. If the
policy is canceled during this period, GIAC will refund any amounts paid. The
policy will be void from the beginning.
Survivorship Flexible Premium Adjustable Variable Life Insurance Policy
o Flexible premiums payable while either insured is alive
o Adjustable death proceeds payable at the second death if policy is in
force- No death proceeds payable on the first death
o Investment experience reflected in benefits
o Non-participating--No dividends payable
00-SVUL
<PAGE>
POLICY SUMMARY
This summary outlines some of the major policy provisions; it does not alter any
of these provisions. The actual policy provisions set forth the full details and
conditions of this policy; only the actual policy provisions will control.
While this policy is in force, the owner may increase or decrease the Face
Amount in accordance with "Changing the Face Amount" on page 9. The Initial Face
Amount is shown on page 3. GIAC will pay the death proceeds to the beneficiary
if the Surviving Insured dies while this policy is in force. GIAC will determine
the actual death proceeds payable in accordance with "Death Proceeds" on page 7.
The premiums for this policy are flexible, which means that premium payments may
be made at any time and for varying amounts, subject to the limits described on
page 11. However, the Planned Premium is shown on page 3. The Planned Premium is
the premium the owner designates in the application; this premium is not
required, but may be paid as elected. The payment of Planned Premiums does not
guarantee that this policy will stay in force.
This policy will stay in force as long as the Net Cash Surrender Value is at
least equal to the Monthly Deduction when due, except that during the first 3
policy years this policy will remain in force if specific conditions are met
(see "No Lapse Guarantee Period" and "No Lapse Guarantee Conditions" on page
11.)
The owner may allocate all or part of any Net Premium to any of the Variable
Investment Options and to the Fixed-Rate Option, subject to any applicable
restrictions described in this policy. The owner may change the allocation of
future Net Premiums (see "Allocations and Transfers" on page 12.) Amounts
allocated to the Fixed-Rate Option will accrue interest at a guaranteed minimum
effective interest rate of 4% per year. GIAC may declare an interest rate
greater than 4% at its discretion (see "The Fixed-Rate Option" on page 15).
The Policy Account Value is the sum of the values which are allocated to the
Variable Investment Options, the Fixed-Rate Option, the Loan Account and the
Loan Interest Account. The Policy Account Value may vary daily with the
investment experience of Separate Account N, the amount of interest credited to
the Fixed-Rate Option and the Loan Interest Account, and charges deducted (see
"Policy Account Value" on page 15). The owner may transfer any portion of the
unloaned Policy Account Value among the Variable Investment Options and the
Fixed-Rate Option, subject to the provisions set forth in "Allocations and
Transfers".
This policy does not have a minimum guaranteed Cash Surrender Value (see
"Partial Withdrawals and Surrender" on page 17). If this policy has a Cash
Surrender Value, the owner may, subject to limitations:
o make partial withdrawals (see "Partial Withdrawals" on page 17);
o obtain a policy loan (see "Policy Loans" on page 18);
o surrender this policy for cash (see "Surrender" on page 18);
o use this policy to provide life income (see "Payment Options" on
page 21).
If the Net Cash Surrender Value is less than the current Monthly Deduction when
due, GIAC allows a 61 day grace period for the required premium (see "Grace
Period" on page 11). If the required premium is not paid by the end of the grace
period, this policy will lapse without value.
Any endorsements, additional benefit riders and applications which are attached
to this policy follow.
An Index appears on the inside of the back cover.
Guide to Policy Provisions
1. Definitions 8. The Fixed-Rate Option
2. Death Proceeds 9. Policy Account Value
3. Changing the Face Amount 10. Partial Withdrawals and Surrender
4. Owner and Beneficiary 11. Policy Loans
5. Premiums 12. Exchange of Policy
6. Allocations and Transfers 13. Payment Options
7. The Separate Account 14. General Provisions
00-SVUL Page 2 {POL NO}
<PAGE>
POLICY DATA
INSURED A JOHN DOE 50-MALE AGE AND SEX
INSURED B MARY DOE 45-FEMALE
SPECIMEN POLICY NUMBER
JAN 06, 2000 POLICY DATE
FACE AMOUNT BASIC SUM INSURED AT ISSUE $250,000
ADDITIONAL SUM INSURED $ 25,000
AT ISSUE
INITIAL FACE AMOUNT $275,000
ISSUE DATE JAN 06, 2000 PREFERRED PLUS INSURED A
PLAN OF INSURANCE SURVIVORSHIP FLEXIBLE PREMIUM PREFERRED PLUS INSURED B
ADJUSTABLE VARIABLE LIFE INSURANCE [1] DEATH
BENEFIT
OPTION
OWNER JOHN DOE GUIDELINE PREMIUM SECTION
BENEFICIARY MARY DOE, WIFE 7702 TEST
BENEFITS AND PREMIUMS
POLICY YEARS
BASIC POLICY AMOUNT PAYABLE
PLANNED [ANNUAL] PREMIUM $ 1,495
MINIMUM ANNUAL PREMIUM $ 1,172 1 through 3
GUIDELINE LEVEL PREMIUM $ 3,530
GUIDELINE SINGLE PREMIUM $ 38,754
MINIMUM FACE AMOUNT $250,000
EXCHANGE OF POLICY OPTION
EXPIRY DATE: 01/06/2002
ANNUAL RENEWABLE TERM
INSURANCE RIDER
INSURED: JOHN DOE
TERM FACE AMOUNT
EXPIRY DATE: 01/06/2035 $ 25,000
00-SVUL (CONTINUED ON PAGE 3.1) Page 3 {POL NO}
<PAGE>
POLICY DATA - CONT'D
BENEFITS AND PREMIUMS (cont'd)
POLICY YEARS
AMOUNT PAYABLE
------ -------
GUARANTEED COVERAGE RIDER
ANNUAL GUARANTEED COVERAGE PREMIUM $ 1,495 1 through 30
START DATE: 01/06/2000
EXPIRY DATE: 01/06/2030
EXCHANGE OF INSUREDS RIDER
AMENDMENT TO OWNER PROVISION
SURVIVORSHIP VARIABLE POLICY
SPLIT OPTION RIDER
To obtain information about your coverage you may call your agent or GIAC at:
[1-800-441-6455]
00-SVUL (CONTINUED ON PAGE 3.2) Page 3.1 {POL NO}
<PAGE>
POLICY DATA - CONT'D
PREMIUM ALLOCATION INFORMATION
This amount is allocated as follows:
[The Guardian Stock Fund 25% Gabelli Capital Asset Fund 25%
The Guardian Bond Fund 25% The Guardian VC 500 Index Fund 0%]
The Guardian Small Cap Stock Fund 0% The Fixed-Rate Option 25%
The Guardian VC Asset Allocation Fund 0%
The maximum number of Allocation Options in which the Policy Account Value may
be invested at any time is [20].
POLICY LOANS
The minimum loan amount is $500. The minimum loan repayment is the lesser of:
(a) $100; or (b) the total outstanding Policy Debt.
Policy Loans bear interest at a yearly rate of 5%, payable in arrears. The
yearly loan interest rate changes to 4.5%, payable in arrears, beginning on
01/06/2020.
See "Policy Loans" on page 18 for details on loan value.
PREMIUM CHARGE
GIAC deducts a charge from premium payments based on the following percentages.
See "Premiums" on page 11 for details on the determination of premium charge.
The Target Premium is $2,434.62.
-------------------------------------------------
Up to Target Excess over
Policy Years Premium Target Premium
-------------------------------------------------
1-12 8% 4%
-------------------------------------------------
13+ 4% 0%
-------------------------------------------------
00-SVUL (CONTINUED ON PAGE 3.3) Page 3.2 {POL NO}
<PAGE>
POLICY DATA - CONT'D
MONTHLY DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
1. COST OF INSURANCE CHARGES
BASIC POLICY
GIAC deducts the current cost of insurance charge for the Basic Policy on
each Monthly Processing Date. GIAC bases the monthly cost of insurance
charge on its current cost of insurance rates. The current cost of
insurance rate will never exceed the maximum monthly cost of insurance
rate for the applicable policy year. The Table of Maximum Monthly Cost of
Insurance Rates is shown on page 4. See "Monthly Cost of Insurance" on
page 16.
2. ADMINISTRATIVE CHARGES
GIAC deducts the administrative charges for the Policy on each Monthly
Processing Date.
o $7.50 per month for all Policy Years, plus
o $0.15 per $1,000 of Basic Sum Insured at Issue deducted
monthly for the first 12 policy years.
o [$0.01 per $1,000 Additional Sum Insured at Issue deducted
monthly for the first 12 policy years.]
o [$0.01 per $1,000 of Survivorship Adjustable Annual Renewable
Term Insurance Rider at issue deducted monthly for the first
12 policy years.]
3. MAXIMUM MORTALITY AND EXPENSE RISK CHARGE
GIAC deducts the Mortality and Expense Risk charge for the Policy on each
Monthly Processing Date. These deductions are based on amounts in the
Variable Investment Options.
o For Policy Years 1-12, the rate is 0.000708333.
o For Policy Years 13+, the rate is 0.00054167 for amounts up to
the Account Value Breakpoint and 0.00037500 for amounts in
excess of the Account Value Breakpoint.
00-SVUL (CONTINUED ON PAGE 3.4) Page 3.3 {POL NO}
<PAGE>
POLICY DATA - CONT'D
4. RIDER CHARGES
GIAC will also deduct the cost of these other riders. See "Monthly
Deductions" on page 16.
GUARANTEED COVERAGE RIDER $2.75 1 through 30
00-SVUL (CONTINUED ON PAGE 3.5) Page 3.4 {POL NO}
<PAGE>
POLICY DATA - CONT'D
TRANSACTION DEDUCTIONS FROM THE POLICY ACCOUNT VALUE
TRANSFERS
The minimum amount which may be transferred from a Variable Investment
Option and the Fixed-Rate Option is the lesser of: a) $100; or b) the
entire value of that option. GIAC reserves the right to charge $25 for
each transfer after the 12th transfer in a policy year. Additional
restrictions regarding transfers are described in "Transfers from the
Fixed-Rate Option" on page 13.
PARTIAL WITHDRAWAL OF NET CASH SURRENDER VALUE
The minimum partial withdrawal is $500. GIAC reserves the right to limit
the number of withdrawals in a policy year to 12. See "Partial Withdrawals
and Surrender" on page 17.
00-SVUL (CONTINUED ON PAGE 3.6) Page 3.5 {POL NO}
<PAGE>
POLICY DATA - CONT'D
SURRENDER CHARGES
The table below shows surrender charges for the Initial Face Amount. For a
detailed description of surrender charges, see "Partial Withdrawals and
Surrender" on page 17.
POLICY SURRENDER
YEAR CHARGE
----------------- -------------
1 $ 2,154.77
2 $ 1,915.35
3 $ 1,675.93
4 $ 1,436.51
5 $ 1,197.10
6 $ 957.68
7 $ 718.26
8 $ 323.22
9 $ 107.74
10 and thereafter $0
00-SVUL Page 3.6 {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
Monthly cost of insurance charges are based on current cost of insurance rates.
The current cost of insurance rate applicable to the Net Amount at Risk for the
Initial Face Amount will never exceed the applicable maximum monthly cost of
insurance rate shown below. See "Monthly Cost of Insurance" on Page16.
MAXIMUM MAXIMUM
------- -------
POLICY YEAR MONTHLY RATE POLICY YEAR MONTHLY RATE
----------- ------------ ----------- ------------
1 0.00013 36 5.83427
2 0.00404 37 6.64975
3 0.00751 38 7.56482
4 0.01178 39 8.59037
5 0.01701 40 9.71756
6 0.02344 41 10.95086
7 0.03126 42 12.27804
8 0.04072 43 13.71276
9 0.05222 44 15.25039
10 0.06600 45 16.94406
11 0.08251 46 18.83212
12 0.10204 47 20.99774
13 0.12508 48 23.54242
14 0.15197 49 26.26529
15 0.18370 50 28.61598
16 0.22137 51 33.45272
17 0.26584 52 40.04678
18 0.31935 53 55.15920
19 0.38400 54 83.33333
20 0.46171 55 83.33333
21 0.55361
22 0.66732
23 0.78767
24 0.93196
25 1.09824
26 1.28996
27 1.51257
28 1.77408
29 2.08050
30 2.43813
31 2.85173
32 3.32331
33 3.85437
34 4.44645
35 5.10327
00-SVUL (CONTINUED ON PAGE 4.1) Page 4 {POL NO}
<PAGE>
TABLE OF DEATH BENEFIT FACTORS
Death Benefit Factors are used to calculate the death benefit provided under the
Section 7702 Minimum Death Benefit (see the applicable provisions on page 7).
POLICY YEAR FACTOR POLICY YEAR FACTOR
----------- ------ ----------- ------
1 2.15 36 1.05
2 2.09 37 1.05
3 2.03 38 1.05
4 1.97 39 1.05
5 1.91 40 1.05
6 1.85 41 1.05
7 1.78 42 1.05
8 1.71 43 1.05
9 1.64 44 1.05
10 1.57 45 1.05
11 1.50 46 1.05
12 1.46 47 1.04
13 1.42 48 1.03
14 1.38 49 1.02
15 1.34 50 1.01
16 1.30 51 1.00
17 1.28 52 1.00
18 1.26 53 1.00
19 1.24 54 1.00
20 1.22 55 1.00
21 1.20
22 1.19
23 1.18
24 1.17
25 1.16
26 1.15
27 1.13
28 1.11
29 1.09
30 1.07
31 1.05
32 1.05
33 1.05
34 1.05
35 1.05
00-SVUL Page 4.1 {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF SURVIVORSHIP TERM COVERAGE
Monthly rider charges are based on current cost of insurance rates. The current
cost of insurance rate applicable to the survivorship adjustable annual
renewable term insurance benefits will never exceed the applicable maximum
monthly cost of insurance rate shown below. See Rider Cost in the attached
rider.
MAXIMUM MAXIMUM
------- -------
MONTHLY MONTHLY
------- -------
POLICY YEAR RATE POLICY YEAR RATE
----------- ---- ----------- ----
1 0.00013 36 5.83427
2 0.00404 37 6.64975
3 0.00751 38 7.56482
4 0.01178 39 8.59037
5 0.01701 40 9.71756
6 0.02344 41 10.95086
7 0.03126 42 12.27804
8 0.04072 43 13.71276
9 0.05222 44 15.25039
10 0.06600 45 16.94406
11 0.08251 46 18.83212
12 0.10204 47 20.99774
13 0.12508 48 23.54242
14 0.15197 49 26.26529
15 0.18370 50 28.61598
16 0.22137 51 33.45272
17 0.26584 52 40.04678
18 0.31935 53 55.15920
19 0.38400 54 83.33333
20 0.46171 55 83.33333
21 0.55361
22 0.66732
23 0.78767
24 0.93196
25 1.09824
26 1.28996
27 1.51257
28 1.77408
29 2.08050
30 2.43813
31 2.85173
32 3.32331
33 3.85437
34 4.44645
35 5.10327
00-SVUL Page 3-R215SVUL {POL NO}
<PAGE>
TABLE OF MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF INDIVIDUAL TERM COVERAGE
Monthly cost of insurance charges are based on current cost of insurance rates.
The current cost of insurance rate applicable to the adjustable annual renewable
individual term insurance benefit will never exceed the applicable maximum
monthly cost of insurance rate shown below. See Rider Cost in the attached
rider.
MAXIMUM
-------
POLICY YEAR MONTHLY RATE
----------- ------------
1 0.13476
2 0.44713
3 0.48989
4 0.53771
5 0.59311
6 0.65444
7 0.72255
8 0.79493
9 0.87327
10 0.96182
11 1.06061
12 1.17052
13 1.29585
14 1.43921
15 1.60155
16 1.78129
17 1.97513
18 2.18574
19 2.41241
20 2.66044
21 2.94130
22 3.13274
23 3.63093
24 4.05839
25 4.54126
26 5.06274
27 5.62182
28 6.21387
29 6.83324
30 7.49616
31 8.22966
32 9.05445
33 9.99708
34 11.07332
35 12.26712
00-SVUL Page 3-R218SVUL {POL NO}
<PAGE>
1. DEFINITIONS
Certain important terms used in this policy are defined below. Additional terms,
not explained here, are defined in other parts of this policy.
Account Value Breakpoint: The amount used to calculate the mortality and expense
risk charge on the 12th Policy Anniversary and thereafter. The Account Value
Breakpoint amount is the greater of zero or $100,000 less the amount of Policy
Account Value in the Fixed-Rate Option.
Additional Sum Insured: The Additional Sum Insured, if elected, is additional
insurance coverage which provides a level death benefit to the anniversary
nearest the younger insured's 100th birthday. The Additional Sum Insured is
shown on page 3.
Age: Each insured's Age on the birthday nearest the Policy Date. These Ages are
shown on page 3.
Allocation Options: The Allocation Options consist of the Variable Investment
Options and the Fixed-Rate Option.
Attained Age: Each insured's Age as shown on page 3, plus the number of policy
years completed since the Policy Date.
Basic Policy: This policy, including any attached endorsements and applications,
but excluding any additional benefit riders.
Basic Sum Insured: The Basic Sum Insured is shown on Page 3.
Business Day: Each day that GIAC processes transactions, currently including
each day that the New York Stock Exchange or its successor is open for trading
and GIAC is open for business. GIAC's close of business is 4:00 PM New York City
time. If any transaction or event occurs or is scheduled to occur on a day that
is not a Business Day, or if a transaction is received after GIAC's close of
business, such transaction or event will be deemed to occur as of the next
following Business Day unless otherwise specified.
Cash Surrender Value: The Policy Account Value less any surrender charges.
Face Amount: The sum of the Basic Insured Amount plus the Additional Sum Insured
and the amount of any Policy Segments then in force.
Good Order: Notice from the party authorized to initiate a policy transaction
under this policy in a format satisfactory to GIAC, including all information
required by GIAC to process the requested transaction under this policy.
Initial Face Amount: The Face Amount in force on this policy's Issue Date.
Internal Revenue Code: The Internal Revenue Code of 1986, as amended, and its
related rules and regulations.
Investment Unit: A unit of measure used to determine the value attributable to a
Variable Investment Option.
Issue Date: The date this policy is issued at the Customer Service Office. The
Issue Date is shown on page 3.
Loan Account: An account to which values from the Variable Investment Options
and the Fixed-Rate Option are transferred when a policy loan is taken. The Loan
Account is equal to the loan.
Loan Amount: Loan Amount is the sum of any amounts borrowed plus any capitalized
loan interest less any loan repayment.
Loan Interest Account: An account which represents the interest earnings
credited by GIAC on the Loan Account.
Minimum Annual Premium: The premium amount required to maintain the No-Lapse
Guarantee. The Minimum Annual Premium is shown on page 3.
Monthly Deduction: The total of the charges due and payable on each Monthly
Processing Date.
Monthly Processing Date: The day of each policy month on which the Monthly
Deduction is deducted from the Policy Account Value and certain policy benefits
and values are calculated. The Monthly Processing Date is the same date of each
calendar month as the Policy Date, or the last day of a calendar month, if
earlier. If such calendar day is not a Business Day, the Monthly Processing Date
will be the next following Business Day.
Net Amount at Risk: The amount calculated as:
o the amount of death benefit provided under the Death Benefit Option in
force;
o divided by 1.0032737;
o less the Policy Account Value immediately prior to the Monthly Deduction.
A separate Net Amount at Risk is determined for the Basic Sum Insured,
Additional Sum Insured, and for each Policy Segment.
Net Cash Surrender Value: The Cash Surrender Value less any Policy Debt.
00-SVUL Page 5 {POL NO}
<PAGE>
DEFINITIONS-- cont'd
Net Accumulated Premiums: For Death Benefit Option 3, the sum of premiums paid
less the sum of adjusted partial withdrawals taken to date. An adjusted partial
withdrawal is the partial withdrawal reduced by the portion that exceeds the Net
Accumulated Premiums at the date of the partial withdrawal.
Net Premium: The portion of a premium payment which is allocated to the Variable
Investment Options or the Fixed-Rate Option. GIAC deducts the premium charge
based on the percentages shown on page 3 from each premium payment before
allocation.
Planned Premium: The premium the owner designates in the application. The amount
or mode of the Planned Premium may be changed if GIAC receives the owner's
written request for such change in Good Order at the Customer Service Office.
Policy Account Value: The sum of the values of the Variable Investment Options,
the Fixed-Rate Option, the Loan Account, and the Loan Interest Account. The
unloaned Policy Account Value is the Policy Account Value less the Loan Account
and the Loan Interest Account.
Policy Anniversary: The same date of each calendar year as the Policy Date.
Policy Date: The Policy Date is shown on page 3. Policy months, policy years and
Policy Anniversaries are measured from the Policy Date.
Policy Debt: The Loan Amount, plus accrued and unpaid loan interest.
Policy Segment: The additional coverage provided by an increase in the Face
Amount.
Section 7702: The section of the Internal Revenue Code which defines life
insurance.
Surviving Insured: The insured remaining alive after the first death that occurs
while this policy is in force.
Target Premium: An amount GIAC uses to determine premium charges. The Target
Premium is shown on page 3.
Unit Value: The value of an Investment unit.
Variable Investment Options: The investment divisions of The Guardian Separate
Account N (Account N).
Younger Insured: The youngest of the two insureds on the Policy Date. Certain
policy calculations are based on the Age of the Younger Insured even if the
Younger Insured is deceased.
00-SVUL Page 6 {POL NO}
<PAGE>
2. DEATH PROCEEDS
Death Proceeds
The death proceeds become payable to the beneficiary upon GIAC's receipt at the
Customer Service Office of due proof in Good Order that the Surviving Insured
died while this policy was in force. The death proceeds payable are the sum of
the following:
o the amount of death benefit as of the Monthly Processing Date immediately
preceding the Surviving Insured's death provided under the Death Benefit
Option then in force (see "Death Benefit Options" below); and
o any insurance on the insured's life provided by additional benefit riders;
less, as of the date of the Surviving Insured's death:
o any Policy Debt;
o the lesser of:
o any premium required under the no lapse guarantee; or
o the amount required to bring the Cash Surrender Value up to zero;
and
o any partial withdrawals between the Monthly Processing Date and the
date of the Surviving Insured's death.
If the Death Benefit Option is Option 3, the death benefit increases by the
amount of any premiums paid between the Monthly Processing Date and the date of
the Surviving Insured's death.
Death Benefit Options
The owner elects the Death Benefit Option in the application.
Option 1 (Level): The amount of death benefit provided under this option on any
Monthly Processing Date prior to the Policy Anniversary nearest the Younger
Insured's 100th birthday is the greater of:
o the Face Amount; or
o the minimum death benefit required under Section 7702.
Option 2 (Increasing): The amount of death benefit provided under this option on
any Monthly Processing Date prior to the Policy Anniversary nearest the Younger
Insured's 100th birthday is the greater of:
o the Face Amount plus the Policy Account Value, if positive; or
o the minimum death benefit required under Section 7702.
Option 3 (Return of Premium): The amount of death benefit provided under this
option on any Monthly Processing Date prior to the Policy Anniversary nearest
the Younger Insured's 100th birthday is the greater of:
o the Face Amount plus the Net Accumulated Premiums; or
o the minimum death benefit required under Section 7702.
On the Policy Anniversary nearest the Younger Insured's 100th birthday and
thereafter, the death benefit under Death Benefit Options 1, 2 and 3 will equal
the Policy Account Value on the date of the Surviving Insured's death.
Section 7702 Minimum Death Benefit
The amount of death benefit will always equal or exceed the minimum death
benefit required by the Guideline Premium Test under Section 7702.
The minimum death benefit required under Section 7702 on any Monthly Processing
Date is the Policy Account Value on the Monthly Processing Date multiplied by
the factor shown in the Table of Death Benefit Factors on page 4.
Changing the Death Benefit Option
Subject to the rules stated below and while either insured is living, the owner
may change the Death Benefit Option on any Policy Anniversary. GIAC must receive
the owner's written request for the change in Good Order at the Customer Service
Office. Any such change will become effective on the Policy Anniversary on or
after receipt of the request.
00-SVUL Page 7 {POL NO}
<PAGE>
DEATH PROCEEDS--cont'd
Changing from Option 1 to Option 2: GIAC requires satisfactory evidence of
insurability for this change. GIAC will decrease the Face Amount by the lesser
of:
o the amount of the Policy Account Value on the effective date of change; or
o the Face Amount divided by the factor shown in the Table of Death Benefit
Factors on page 4.
The Face Amount is decreased so that the amount of death benefit remains the
same on the effective date of change. GIAC will not permit any change from
Option 1 to Option 2 if it results in the reduction of the Face Amount below the
Minimum Face Amount shown on page 3.
Changing from Option 2 to Option 1: GIAC will increase the Face Amount by the
lesser of:
o the amount of the Policy Account Value on the effective date of change; or
o the Face Amount divided by the factor shown in the Table of Death Benefit
Factors on page 4 minus 1.
The Face Amount is increased so that the amount of the death benefit remains the
same on the effective date of change; such increase will not result in a new
Policy Segment.
Changing from Option 3 to Option 1: GIAC will increase the Face Amount by the
amount of the Net Accumulated Premiums on the effective date of change.
The Face Amount is increased so that the amount of the death benefit remains the
same on the effective date of change; such increase will not result in a new
Policy Segment.
Changing from Option 3 to Option 2: GIAC will change the Face Amount by an
amount equal to (a) minus (b) on the effective date of change, where:
o (a) is the Net Accumulated Premiums, and
o (b) is the lesser of:
o the Policy Account Value on the effective
date of change; or
o the Face Amount divided by the factor shown in the Table of Death
Benefit Factors on page 4.
The net effect is that the Face Amount is increased or decreased so that the
amount of the death benefit remains the same on the effective date of change.
Any resulting increase will not result in a new Policy Segment.
GIAC will not permit any change from Option 3 to Option 2 if it results in the
reduction of the Face Amount below the Minimum Face Amount shown on page 3.
No Changes to Option 3: Changes from Option 1 to Option 3, or from Option 2 to
Option 3 are not allowed.
00-SVUL Page 8 {POL NO}
<PAGE>
3. CHANGING THE FACE AMOUNT
Increases in Face Amount
The owner may request an increase in Face Amount on the first Policy
Anniversary:
o provided both insureds are alive;
o on any subsequent Policy Anniversary up to and including the Policy
Anniversary when the Younger Insured is at most age 70; and
o the older insured is at most 90.
GIAC must receive the owner's written request for the increase in Good Order at
the Customer Service Office at least 30 days before a Policy Anniversary. To
process an increase in the Face Amount, GIAC requires that:
o the increase is for at least $10,000; and
o each insured provides evidence of insurability satisfactory to GIAC.
If GIAC approves the change, the increase will take effect on the Policy
Anniversary, provided that both insureds are living on that date. The increase
will be issued as a separate Policy Segment. Each Policy Segment will have its
own:
o underwriting classes;
o cost of insurance rates;
o surrender charges;
o administrative charges;
o Target Premiums; and
o Minimum Annual Premium.
Premium charges will be affected by Policy Segments (see "Determination of
Premium Charges" on page 11).
GIAC will send the owner revised policy pages reflecting any changes caused by
an increase in Face Amount.
Decreases in Face Amount
The owner may request a decrease in the Face Amount at any time on or after the
first Policy Anniversary. GIAC must receive the owner's written request for the
decrease in Good Order at the Customer Service Office. To process a decrease in
the Face Amount, GIAC requires that:
o at least one insured is living on the date GIAC receives the owner's
written request;
o the amount of the decrease is at least $5,000; and
o the reduced Face Amount may not be less than the Minimum Face Amount shown
on page 3.
The decrease will take effect on the Monthly Processing Date coinciding with or
next following the date GIAC approves the change. A decrease is applied:
o first, to reduce the amount provided by the most recent in force Policy
Segment;
o next, to reduce the next most recent in force Policy Segments,
successively;
o next, to reduce the Additional Sum Insured portion of the Initial Face
Amount;
o finally, to reduce the Basic Sum Insured portion of the Initial Face
Amount.
GIAC will send the owner revised policy pages reflecting any changes caused by a
decrease in Face Amount.
4. OWNER AND BENEFICIARY
Owner
The owner is named in the application or in any later change shown in GIAC's
records. While either insured is living and subject to any assignment on file
with GIAC, the owner alone has the right to receive all benefits and exercise
all rights this policy grants or GIAC allows.
Successor Owner
A numbered sequence may be used to name successor owners. If the owner dies,
ownership passes to the next designated successor owner then living. If none is
then living, ownership passes to the owner's estate.
00-SVUL Page 9 {POL NO}
<PAGE>
OWNER AND BENEFICIARY--cont'd
Joint Owner
If more than one person is named as owner with no number or the same number,
they are joint owners. Except for transfers, any request for a policy
transaction or change must be signed by all of the joint owners named in GIAC's
records. Unless otherwise provided, if a joint owner dies, ownership passes to
the surviving joint owner(s) equally. When the last joint owner dies, ownership
passes to that person's estate, unless otherwise provided.
Beneficiary
The beneficiary is named in the application or in any later change shown in
GIAC's records. GIAC will pay the death proceeds to the beneficiary, subject to
the terms of "Death Proceeds" on page 7. Unless otherwise provided, in order to
receive proceeds at the Surviving Insured's death, a beneficiary must be living
on the earlier of:
o the date GIAC receives due proof of the Surviving Insured's death in Good
Order at the Customer Service Office; or
o the 15th day after the Surviving Insured's death.
Unless otherwise provided, if no designated beneficiary is living on such
earlier date, the owner or the owner's estate is the beneficiary.
Contingent Beneficiary
A numbered sequence may be used to name contingent beneficiaries. The
beneficiary is the living person(s) designated by the lowest number in the
sequence.
Concurrent Beneficiary
If more than one person is named as beneficiary with no number or the same
number, those persons are concurrent beneficiaries. Shares are equal, unless
otherwise specified. If shares are equal, the share of a concurrent beneficiary
who predeceases the Surviving Insured will be shared equally by the surviving
concurrent beneficiaries. If unequal shares are specified and a concurrent
beneficiary predeceases the Surviving Insured, the beneficiary of that share
will be the owner or the owner's estate.
Change of Owner or Beneficiary
The owner may change the owner or beneficiary by written request in Good Order.
The change will take effect as of the date the request is signed, whether or not
the Surviving Insured is living when GIAC receives the request at the Customer
Service Office. However, the change will not apply to any payments made or
actions taken by GIAC on or before the date the request is received by GIAC.
Assignment
No assignment will bind GIAC unless the original, or a copy, is filed at the
Customer Service Office in Good Order. An assignment must be signed and dated by
both the assignor and the assignee and, as applicable, by the beneficiary. The
rights of any owner or beneficiary and the entire contract, as defined in "The
Contract" on page 25, will be subject to the assignment. GIAC will rely solely
on the assignee's statement as to the amount of the assignee's interest. GIAC
will not be responsible for the validity of any assignment. Unless otherwise
provided, the assignee may exercise all rights this policy grants except:
o the right to change the owner or beneficiary;
o the right to elect a Payment Option; and
o the right to allocate or transfer amounts among the Variable Investment
Options and the Fixed-Rate Option.
Assignments are subject to all payments made or actions taken by GIAC on or
before the date GIAC receives the assignment at the Customer Service Office.
00-SVUL Page 10 {POL NO}
<PAGE>
5. PREMIUMS
Premium Payment
The first premium is due on the Issue Date. This premium must be at least one
sixth of the Minimum Annual Premium shown on page 3. This policy is in force
when the first premium is paid, but not before the Issue Date. After the first
premium, all other premiums are payable only at the Customer Service Office.
Upon request, GIAC will give the owner a receipt signed by one of its officers.
Premiums may be paid at any time while this policy is in force, subject to
GIAC's premium limitations.
The owner selects a Planned Premium on the application. GIAC will send reminder
notices for the Planned Premium annually, semi-annually, or quarterly as
requested. However, no premium needs to be paid as long as the Net Cash
Surrender Value is sufficient to provide for payment in full of the Monthly
Deduction when due.
The minimum premium payment GIAC will accept is $100, unless GIAC is authorized
to accept payment under a pre-authorized check plan. The minimum premium payment
GIAC will accept under a pre-authorized check plan is $25.
Premium Limitations
The Guideline Premium Test under Section 7702 of the Internal Revenue Code
limits the relationship of premiums to death benefit in order to qualify this
policy as life insurance. GIAC will refund to the owner any portion of a premium
payment which violates Section 7702 limits with interest at an annual rate of 6%
within 60 days of receipt of such premium.
Crediting Payments
When a payment is received at the Customer Service Office without being
identified as a premium payment, such payment will be applied:
o first, to repay any Policy Debt;
o then, as a premium payment.
All premium payments will be credited as of the Business Day of receipt in Good
Order at the Customer Service Office.
Determination of Premium Charges
GIAC determines premium charges based on:
o premium payments allocated to the Initial Face Amount and any Policy
Segments; and
o the Target Premiums associated with the Initial Face Amount and any Policy
Segments, as described below:
In any policy year, GIAC will allocate premium payments to the Initial Face
Amount, until such payments equal the Target Premium associated with the Initial
Face Amount. GIAC will then allocate premium payments sequentially to each
Policy Segment, if any, until the total premium payments equal the sum of all
Target Premiums associated with such segments.
GIAC will allocate any additional premium payments to the Initial Face Amount
and any Policy Segments proportionately based on the Target Premiums. After
premium payments are allocated, the premium charge for the Initial Face Amount
and any Policy Segments will be assessed in accordance with "Premium Charge" on
page 3.
No Lapse Guarantee Period
This policy will not lapse as long as the Net Cash Surrender Value is at least
equal to the Monthly Deduction when due. However, provided that the "No Lapse
Guarantee Condition" (as described below) is met, GIAC guarantees that this
policy (including any riders) will not lapse during the No Lapse Guarantee
Period even if the Net Cash Surrender Value is less than the Monthly Deduction
when due. The No Lapse Guarantee Period starts on the Policy Date. The No Lapse
Guarantee Period ends on the third Policy Anniversary.
No Lapse Guarantee Condition
The No Lapse Guarantee Condition on any Monthly Processing Date is met if (a) is
equal to or greater than (b) where:
o (a) is the sum of all premium payments made under this policy:
o less the amount of any existing Policy Debt, and
o less any previous partial withdrawals; and
o (b) is the sum of the Minimum Annual Premium for all previous policy
years, plus the Minimum Annual Premium for the current policy year times a
ratio. This ratio equals one plus the number of complete policy months
since the last Policy Anniversary, divided by 12.
Grace Period
GIAC allows a grace period of 61 days after the Monthly Processing Date that:
o the Net Cash Surrender Value is less than the current Monthly Deduction
when due and the No Lapse Guarantee Condition is not met; or
o the Policy Debt exceeds the Cash Surrender Value, and GIAC requires a loan
repayment.
If either event occurs, GIAC will mail to the owner, at least 30 days before the
end of the grace period, at the owner's last known address, a notice of the
required premium or loan repayment to keep this policy in force (see "Repayment"
on page 19 for details on the amount required for such loan repayments).
00-SVUL Page 11 {POL NO}
<PAGE>
PREMIUMS--cont'd
During the first three policy years, if the Net Cash Surrender Value is less
than the current Monthly Deductions when due, the required premium will equal
the lesser of:
o the amount of the deficiency plus 3 times the current Monthly Deduction;
or
o the amount of the deficiency in the No Lapse Guarantee Condition, plus one
quarter of the Minimum Annual Premium shown on page 3.
After the third Policy Anniversary, if the Net Cash Surrender Value is less than
the current Monthly Deduction, the required premium will equal the amount of the
deficiency plus 3 times the current Monthly Deduction.
This policy remains in force during the grace period. If the required premium or
loan repayment is not paid by the end of the grace period, this policy will
lapse without value.
6. ALLOCATIONS AND TRANSFERS
Allocation of Net Premiums
On the Issue Date, GIAC will allocate any Net Premiums received prior to the
Issue Date to the Allocation Options in accordance with the allocation
percentages then in effect and the limitations specified on page 3. After the
Issue Date, the owner may allocate all or part of a Net Premium to the
Allocation Options. GIAC applies the Net Premium in accordance with the
allocation percentages in effect on that date (see "Crediting Payments" on page
11). GIAC reserves the right to limit the number of options in which the Policy
Account Value may be invested; the maximum number of Allocation Options in which
the Policy Account Value may be invested is shown on page 3. All allocation
percentages must be in whole numbers; no fractional percentages are permitted.
The sum of the percentages allocated among the options must equal 100.
The allocation percentages in effect on the Issue Date are those designated in
the application; they are shown on page 3. The owner may subsequently change
these allocation percentages. GIAC will change the allocation percentages
following receipt of the owner's written request at the Customer Service Office
in Good Order. Any allocation change will only apply to Net Premiums received on
or after the Business Day on which GIAC receives the request at the Customer
Service Office.
Transfers
The owner may transfer all or a portion of the unloaned Policy Account Value
among the Variable Investment Options and the Fixed-Rate Option, subject to the
conditions and restrictions described below.
o GIAC must receive the owner's proper request for transfer in Good Order at
the Customer Service Office.
o The minimum amount which may be transferred from a Variable Investment
Option or the Fixed-Rate Option is the lesser of the amount shown on page
3 or the entire value of that option.
00-SVUL Page 12 {POL NO}
<PAGE>
ALLOCATIONS AND TRANSFERS--cont'd
o GIAC reserves the right to charge for each transfer, after the twelfth
transfer in a policy year. The amount of the transfer charge is shown on
page 3. GIAC will deduct any transfer charge from the options from which
the amounts are transferred. However, a transfer charge will not be
assessed for certain transactions as described elsewhere in this policy.
o The Policy Account Value may be invested in no more than the maximum
number of Allocation Options specified on page 3.
Transfers Among the Variable Investment Options or into the Fixed-Rate Option
o Any transfer among the Variable Investment Options or into the Fixed-Rate
Option will be effective as of the close of the Business Day on which GIAC
receives the request in Good Order at the Customer Service Office.
o GIAC reserves the right to limit transfers among the Variable Investment
Options or into the Fixed-Rate Option to once every 30 days.
Transfers from the Fixed-Rate Option
GIAC permits transfers from the Fixed-Rate Option into one or more of the
Variable Investment Options only once each year on or within 30 days after a
Policy Anniversary. Amounts first allocated or transferred to the Fixed-Rate
Option will be the first amounts transferred from this option. The maximum
amount that may be transferred from the Fixed-Rate Option each policy year is
the greater of:
o 33 1/3% of the Policy Account Value attributable to the Fixed-Rate Option
on the Policy Anniversary; or
o $2,500.
Transfers from the Fixed-Rate Option will be effective:
o as of the Policy Anniversary, if GIAC receives the owner's transfer
request at the Customer Service Office on or within 30 days prior to that
Anniversary; or
o as of the close of the Business Day on which GIAC receives the owner's
transfer request at the Customer Service Office, if such request is
received within 30 days after a Policy Anniversary.
GIAC will not process any request for transfer from the Fixed-Rate Option which
is received on any other date.
Dollar Cost Averaging Transfer Option
The owner may make monthly transfers under the Dollar Cost Averaging Transfer
Option if a portion of the Policy
Account Value is attributable to The Guardian Cash Fund Variable Investment
Option.
Under this option, an amount specified by the owner automatically will be
transferred from The Guardian Cash Fund on a Monthly Processing Date and into
one or more of the other Variable Investment Options or into the Fixed-Rate
Option, as elected by the owner. The minimum amount which may be transferred
into each option is $100 per transfer.
GIAC must receive the owner's written election of this option in Good Order at
the Customer Service Office at least 3 Business Days before the Monthly
Processing Date on which such monthly transfers are to begin.
The Dollar Cost Averaging Transfer Option will terminate:
o when GIAC receives the owner's written request for cancellation in Good
Order at the Customer Service Office at least 3 Business Days before the
Monthly Processing Date on which a transfer would normally occur; or
o if the portion of the Policy Account Value attributable to The Guardian
Cash Fund is less than the amount designated for transfer on a Monthly
Processing Date. GIAC automatically will transfer the portion of the
Policy Account Value remaining in The Guardian Cash Fund on a pro rata
basis into the other Variable Investment Options or into the Fixed-Rate
Option, in accordance with the owner's then current Dollar Cost Averaging
transfer instructions.
The owner may change the transfer instructions under this option or reinstate
this option if it has terminated. GIAC must receive the owner's written request
in Good Order at the Customer Service Office at least 3 Business Days before the
Monthly Processing Date on which the change or such reinstatement would take
effect.
00-SVUL Page 13 {POL NO}
<PAGE>
7. THE SEPARATE ACCOUNT
The Guardian Separate Account N
The Variable Investment Options under this policy are funded by The Guardian
Separate Account N (Account N). Account N is a separate investment account
established by GIAC under the laws of the state of Delaware. Account N is
registered as a unit investment trust with the Securities and Exchange
Commission (SEC) under the Investment Company Act of 1940 (the 1940 Act).
Account N is treated as a division of GIAC and is used to provide values and
benefits for variable life insurance policies only. GIAC owns the assets in
Account N. The assets in Account N are kept separate from:
o GIAC's general account; and
o GIAC's other separate accounts.
Assets equal to the reserves and contract liabilities of Account N will not be
charged with liabilities that arise from any other business GIAC may conduct.
GIAC may transfer assets in excess of the reserves and contract liabilities of
Account N to its general account. Income and realized and unrealized gains and
losses from assets in each Variable Investment Option in Account N are credited
to or charged against such Variable Investment Option without regard to income
and realized and unrealized gains or losses in Account N's other Variable
Investment Options or in GIAC's general account, or other separate accounts. The
valuation of all assets in Account N will be determined in accordance with all
applicable laws and regulations.
Investment Divisions
Account N consists of several investment divisions or Variable Investment
Options. Each investment division of Account N invests in shares of a mutual
fund. Each mutual fund is managed by an investment adviser registered under the
Investment Advisers Act of 1940. The investment divisions available on the Issue
Date are listed in the then current prospectus for Account N as it relates to
this policy. Each mutual fund is more fully described in a separate prospectus.
Any investment adviser's fee, if applicable, is described in the appropriate
prospectus.
Rights Reserved
GIAC reserves the right to take certain actions which it deems:
o necessary to serve the best interests of the owner and beneficiary; and
o appropriate to carry out the purposes of this policy.
GIAC will exercise its reserved rights only when permitted by applicable law.
When required by law, GIAC will obtain approval by the owner, the SEC, and any
appropriate regulatory authority. Examples of the actions GIAC may take include:
o deregistering Account N under the 1940 Act;
o operating Account N in any form permitted under the 1940 Act, or in any
other form permitted by law;
o taking any action necessary to comply with or obtain and continue any
exemptions from the 1940 Act;
o transferring any assets in an investment division:
o into another investment division; or
o into one or more separate accounts; or
o into GIAC's general account;
o adding, combining or removing investment divisions in Account N;
o substituting, for the mutual fund shares held in any investment division,
the shares of another class issued by such mutual fund or the shares of
another investment company or any other investment permitted by law;
o changing the way GIAC deducts or collects charges under a policy, but
without increasing the charges unless and to the extent permitted by other
provisions of this policy;
o modifying this policy as necessary to ensure that it continues to qualify
as life insurance under Section 7702;
o making any other necessary technical changes in this policy in order to
conform with any action this provision permits GIAC to take;
o adding to, eliminating, or suspending the owner's ability to allocate Net
Premiums or transfer unloaned Policy Account Value amounts into any
Variable Investment Option or into the Fixed-Rate Option.
GIAC will notify the owner if any of these changes result in a material change
in the underlying investments of an investment division of Account N to which
any part of the Policy Account Value is allocated. Details of any such change
will be filed with any regulatory authority where required and will be subject
to any required approval.
If the owner objects to the material change and a portion of the Policy Account
Value is attributable to the affected investment division, then GIAC will
transfer that value into:
o another investment division; or
o the Fixed-Rate Option.
To effect such transfer, GIAC must receive the owner's written request in Good
Order at the Customer Service Office within 60 days of the postmarked notice of
material change. GIAC will not deduct a transfer charge for this transaction.
00-SVUL Page 14 {POL NO}
<PAGE>
8. THE FIXED-RATE OPTION
The Fixed-Rate Option is funded by GIAC's general account. The owner may:
o allocate all or part of any Net Premium to the Fixed-Rate Option; or
o transfer all or part of the Policy Account Value attributable to the
Variable Investment Options into the Fixed-Rate Option (for restrictions
on transfers from the Fixed-Rate Option, see "Transfers from the
Fixed-Rate Option" on page 13).
GIAC will credit interest on all amounts allocated or transferred to the
Fixed-Rate Option. Interest will accrue daily at a minimum guaranteed effective
annual rate of 4% and will be credited to the Fixed-Rate Option each Monthly
Processing Date. GIAC may declare interest rates greater than 4% at its
discretion.
On each Policy Anniversary, GIAC will begin accruing interest on all amounts
held in the Fixed-Rate Option at the interest rate in effect on that date. The
annual statement to the owner shows the interest rate in effect on a Policy
Anniversary if a portion of the Policy Account Value is then attributable to the
Fixed-Rate Option. GIAC will provide the interest rate in effect on any other
date upon request.
9. POLICY ACCOUNT VALUE
The Policy Account Value is the sum of the values of the Variable Investment
Options, the Fixed-Rate Option, the Loan Account and the Loan Interest Account
attributable to this policy.
Each Variable Investment Option has Investment Units and a related Unit Value.
The portion of the Policy Account Value attributable to a Variable Investment
Option equals:
o the number of Investment Units attributable to this policy which are in
that Variable Investment Option;
multiplied by:
o the applicable Unit Value for that Variable Investment Option.
The portion of the Policy Account Value attributable to the Fixed-Rate Option,
the Loan Account and the Loan Interest Account, if any, is expressed as a dollar
amount.
Investment Units
Amounts allocated, transferred or added to a Variable Investment Option are used
to purchase Investment Units. Investment Units are redeemed and canceled when
amounts are deducted, withdrawn or transferred from a Variable Investment
Option. GIAC determines the number of Investment Units purchased or redeemed in
a Variable Investment Option by dividing the dollar amount of the transaction by
the Unit Value for that Variable Investment Option at the close of the Business
Day the transaction occurs.
Investment Unit Value
GIAC determines the Unit Value for each Variable Investment Option at the close
of every Business Day. The Unit Value for any Business Day is (a) multiplied by
(b), where:
o (a) is the Unit Value for the Investment Unit at the close of business on
the preceding Business Day; and
o (b) is the net investment factor, as described below, for the current
Business Day.
Net Investment Factor
On any Business Day, the net investment factor for a Variable Investment Option
is determined by dividing the sum of (a) and (b) by (c) where:
o (a) is the net asset value per share of the Variable Investment Option's
corresponding mutual fund at the close of the current Business Day;
o (b) is the per share amount of any dividends or capital gains distributed
by the mutual fund on the current Business Day reduced by the sum of any
federal, state, or local taxes payable by GIAC and allocated by GIAC to
the Variable Investment Option; and
o (c) is the net asset value per share of such mutual fund at the close of
the Business Day immediately preceding the current Business Day.
00-SVUL Page 15 {POL NO}
<PAGE>
POLICY ACCOUNT VALUE--cont'd
Monthly Deductions
On each Monthly Processing Date, GIAC will deduct a Monthly Deduction from the
Variable Investment Options and the Fixed-Rate Option in proportion to the
portion of the Policy Account Value attributable to each option. The Monthly
Deduction for a policy month is the sum of:
o the monthly cost of insurance charge;
o the administrative charges;
o the mortality and expense risk charge; and
o the monthly costs for any riders.
GIAC will not make Monthly Deductions on or after the Policy Anniversary nearest
the Younger Insured's 100th birthday.
Monthly Cost of Insurance
The monthly cost of insurance charge on each Monthly Processing Date equals the
sum of the products of (a) and (b), where:
o (a) is the applicable cost of insurance rate in effect on that Monthly
Processing Date; and
o (b) is the applicable Net Amount at Risk on the Monthly Processing Date,
divided by 1,000.
The monthly cost of insurance charge is calculated before the calculation of the
administrative charges, the Mortality and Expense Risk Charge, and the cost for
any additional benefit riders.
When the Net Amount at Risk is determined, the Policy Account Value will be
allocated first to the Basic Sum Insured; any excess will be allocated to any in
force Policy Segments in the order they took effect. If the death benefit is
increased due to the operation of Death Benefit Option 2 or 3, the increase will
be allocated to the Basic Sum Insured. If the death benefit is further increased
due to Section 7702, such increase will be allocated to the most recent Policy
Segment.
Monthly cost of insurance rates applicable to the Net Amount at Risk for the
Basic Sum Insured, the Additional Sum Insured and any Policy Segments are based
on each insured's underwriting class, Age on the Issue Date, and sex as well as
the Policy or Policy Segment duration.
GIAC has the right to change the monthly cost of insurance rates; however, these
rates will never exceed the maximum monthly cost of insurance rates shown in the
table on page 4. Any such change will be on a uniform basis for combinations of
insured's which have the same:
o underwriting classes;
o Ages on the Policy Date or the date of any Policy Segment;
o duration; and
o sexes.
Any change in the monthly cost of insurance rates will be based on changes in
future expectations for:
o mortality;
o expenses;
o persistency;
o federal income taxes;
o state or local premium taxes; and
o GIAC's investment earnings.
Changes in the monthly cost of insurance rates:
o will be determined only prospectively;
o will not occur because of the deterioration of health or death of an
insured;
o will not be made so GIAC may recoup any prior losses;
o will apply to all policies that are issued on this form; and
o will comply with the procedures and standards on file with the insurance
department for the jurisdiction where this policy is delivered.
Administrative Charges
The Monthly Deduction on each Monthly Processing Date includes the
administrative charges shown on page 3.
The administrative charges are not affected by subsequent decreases in Face
Amount nor by Death Benefit Option changes.
Mortality and Expense Risk Charge
The mortality and expense risk charge is based on the Policy Account Value
allocated to the Variable Investment Options on the Monthly Processing Date. The
amount of this charge varies by duration, and the rates are guaranteed never to
exceed a maximum monthly rate as specified on page 3.
Transaction Deductions
GIAC will deduct any applicable transfer charge (see "Transfers" on page 3) from
the Allocation Options from which amounts were transferred.
00-SVUL Page 16 {POL NO}
<PAGE>
POLICY ACCOUNT VALUE--cont'd
Continuation of Insurance
This policy will stay in force, even if the owner stops paying premiums, as long
as the Net Cash Surrender Value is at least equal to the current Monthly
Deduction when due.
If the Net Cash Surrender Value is less than the Monthly Deduction when due, the
Grace Period provision on page 11 will apply.
10. PARTIAL WITHDRAWALS AND SURRENDER
Partial Withdrawals
After the first policy year and while either insured is living, the owner may
request a partial withdrawal from the Net Cash Surrender Value, subject to the
conditions described below. All partial withdrawals will reduce the Policy
Account Value by the amount of the partial withdrawal. The portion of a partial
withdrawal which exceeds the reduction-free partial withdrawal, as described
below, will also reduce the Face Amount.
GIAC will calculate the reduction-free partial withdrawal as of the close of the
Business Day of receipt of the owner's written request for a partial withdrawal
as follows:
For Death Benefit Option 1, the reduction-free partial withdrawal will equal the
lesser of the full amount of the partial withdrawal or the excess, if any, of
(a) over (b) where:
o (a) equals the Policy Account Value; and
o (b) equals the Face Amount, divided by the applicable Death Benefit Factor
shown on page 4.
For Death Benefit Option 2, the full partial withdrawal is reduction-free.
For Death Benefit Option 3, the reduction-free partial withdrawal is the lesser
of the full amount of the partial withdrawal or the greater of:
o the Net Accumulated Premiums; or
o the lesser of the full amount of the partial withdrawal or the excess, if
any, of (a) or (b), where;
o (a) equals the Policy Account Value; and
o (b) equals the Face Amount divided by the applicable Death Benefit
Factor shown on page 4.
A partial withdrawal will take effect as of the Business Day on which GIAC
receives the owner's request for the partial withdrawal.
GIAC will send the owner revised policy pages reflecting any reduction in
benefits and values due to a partial withdrawal. The conditions for taking a
partial withdrawal are as follows:
o GIAC must receive the owner's written request in Good Order at the
Customer Service Office;
o the partial withdrawal must be at least the amount of the minimum partial
withdrawal shown on page 3;
o if Death Benefit Option 1 or Option 3 is in effect, the Face Amount
remaining after any reduction, as specified above, may not be less than
the Minimum Face Amount shown on page 3; and
o the Net Cash Surrender Value after a partial withdrawal must be sufficient
to cover 3 times the most recent Monthly Deduction.
GIAC reserves the right to limit the number of partial withdrawals to 12 a
policy year.
GIAC will first deduct the amount of any partial withdrawal from the Policy
Account Value attributable to the Variable Investment Options specified in the
owner's request for the partial withdrawal. GIAC will only deduct from the Fixed
Rate Option if the partial withdrawal exceeds the Policy Account Value
attributable to all Variable Investment Options.
GIAC will not process any request for a partial withdrawal that:
o does not specify the Variable Investment Options from which the partial
withdrawal should be taken; or
o exceeds the amount available.
00-SVUL Page 17 {POL NO}
<PAGE>
PARTIAL WITHDRAWALS AND SURRENDER--cont'd
Surrender
The owner may surrender this policy for its Net Cash Surrender Value if GIAC
receives this policy and written request in Good Order at the Customer Service
Office. The surrender will take effect as of the close of the Business Day on
which GIAC receives the written request. Upon surrender, this policy will
terminate and all insurance under this policy will end. The surrender charge is
shown on page 3.
GIAC will deduct surrender charges if this policy is surrendered for its Net
Cash Surrender Value during a surrender charge period.
Total surrender charges under this policy will equal the sum of the surrender
charges for the Initial Face Amount and any in force Policy Segments.
The Surrender Charge Table applicable to the Initial Face Amount is shown on
page 3.
An increase in Face Amount that creates a new Policy Segment will result in
additional surrender charges. The owner will be notified of the new surrender
charges. The new surrender charges will take effect on the effective date of the
new Policy Segment.
Surrender charges are not affected by a change in Death Benefit Option or by
decreases in Face Amount.
11. POLICY LOANS
The owner may obtain a policy loan at any time if:
o either insured is living; and
o GIAC receives the owner's written request in Good Order at the Customer
Service Office.
This policy must be assigned to GIAC; this is the only security needed. The
policy loan will take effect as of the Business Day on which GIAC receives the
written request.
Loan Value
The loan value is the maximum amount the owner may borrow on this policy. The
loan value on any Business Day is:
o 90% of the Cash Surrender Value on that Business Day; less:
o the amount of any Policy Debt on that Business Day; less:
o the amount of any interest which will accrue on this Policy Debt and the
amount borrowed up to the next Policy Anniversary.
The minimum loan amount is shown on page 3.
Policy Debt
Any Policy Debt not repaid upon the Surviving Insured's death will be deducted
from the death proceeds.
Loan Interest
Loan interest accrues daily at a yearly rate of 5% until the date shown on page
3, and 4.5% thereafter. This interest is payable in arrears on each Policy
Anniversary. Any accrued and unpaid interest as of the Policy Anniversary will
be capitalized and added to the outstanding loan amounts and will be charged
interest at the same rate.
See "Repayment" below for interest on the due date of the loan repayments.
00-SVUL Page 18 {POL NO}
<PAGE>
POLICY LOANS--cont'd
Loan Account
When the owner takes a policy loan, GIAC transfers an amount equal to the loan
amount from the Variable Investment Options and the Fixed-Rate Option into a
Loan Account. An amount equal to the loan amount remains in the Loan Account
until the loan is repaid. Amounts transferred from the Variable Investment
Options into the Loan Account no longer share in the investment experience of
the options from which they were transferred. Amounts transferred from the
Fixed-Rate Option no longer earn the rate of interest which applied to the
Fixed-Rate Option.
GIAC will first transfer the loan amount from the Policy Account Value
attributable to the Variable Investment Options specified in the owner's request
for the loan. GIAC will only transfer the excess from the Fixed Rate Option if
the loan exceeds the Policy Account Value attributable to all Variable
Investment Options.
GIAC will not process any request for loan amount that:
o does not specify the Variable Investment Options from which the loan
amount should be taken; or
o exceeds the amount available.
On each Policy Anniversary, GIAC will transfer an amount needed to increase the
Loan Account to equal the Policy Debt. This amount will first be transferred
from the Loan Interest Account (see "Loan Interest Account," below) to the
extent available and thereafter proportionately from the amounts in the Variable
Investment Options and the Fixed-Rate Option.
Loan Interest Account
Amounts in the Loan Account earn interest from the Business Day of the transfer
at a minimum effective yearly rate of 4%.
Interest earned on the Loan Account is credited to the Loan Interest Account.
Amounts in the Loan Interest Account earn interest at a minimum effective yearly
rate of 4%.
On each Policy Anniversary, the amount remaining in the Loan Interest Account
after the transfer required to cover the Policy Debt, if any, is transferred to
the Variable Investment Options and the Fixed-Rate Option in accordance with the
premium allocation instructions in effect on that date.
Repayment
Except for required loan repayments, any outstanding Policy Debt may be repaid
at any time before the Surviving Insured's death while this policy is in force.
Loan repayments are applied:
o first to policy loan interest due but not yet capitalized;
o then to loan amounts outstanding; and
o then to policy interest accrued since the last Policy Anniversary but not
yet due.
The minimum amount loan repayment is shown on page 3.
GIAC will require a loan repayment when the Policy Debt exceeds the Cash
Surrender Value. GIAC will notify the owner if a loan repayment is required. The
notice will specify the amount and due date of any required loan repayment (see
"Grace Period" on page 11 for the due date of a required loan repayment). The
amount of the required loan repayment will be the amount by which the Policy
Debt exceeds the Cash Surrender Value on the Monthly Processing Date that GIAC
identified the shortfall.
The required loan repayment will be credited as of the close of the Business Day
on which GIAC receives the repayment in Good Order at the Customer Service
Office. If a required loan repayment is not paid by its due date, this policy
will lapse without value.
Any outstanding Policy Debt may also be repaid within 60 days after the
Surviving Insured's death if:
o the death proceeds of this policy have not been paid in one sum or applied
under a payment option; and
o the policy was in force on the date of the Surviving Insured's death.
00-SVUL Page 19 {POL NO}
<PAGE>
12. EXCHANGE OF POLICY
The owner may exchange this policy for a new fixed-benefit policy on the lives
of the insureds at any time until the applicable date shown on page 3; evidence
of insurability will not be required. The values under the new policy will not
be available for allocation to the Variable Investment Options or the Fixed-Rate
Option. This exchange is subject to the following conditions:
o GIAC must receive written request at the Customer Service Office in Good
Order;
o both insureds must be alive on the exchange date;
o this policy must be in force with all due Monthly Deductions paid to the
exchange date;
o this policy must be surrendered to GIAC;
o the exchange cost, if any, must be paid to the issuing company (see
"Exchange Cost or Credit") below;
o any outstanding Policy Debt must be paid to GIAC;
o the new policy will be an annual premium survivorship whole life plan then
being issued by GIAC or its affiliate. GIAC's affiliate is The Guardian
Life Insurance Company of America;
o the new policy will have the same Policy Date as this policy;
o the face amount of the new policy will be for the same Face Amount as this
policy; however, the owner may exchange a portion of this policy's Face
Amount, subject to the following conditions:
o the new policy's face amount may not be less than the minimum face
amount under GIAC's or its affiliate's rules;
o the remaining policy's face amount shall not be less than the
minimum face amount under GIAC's rules. If the remaining policy's
face amount does not meet GIAC's requirements, then it will
terminate on the date the new policy takes effect;
o if a partial exchange is made, a pro rata portion of this policy's
Net Cash Surrender Value will be withdrawn and applied to the new
policy;
o if a partial exchange is made, no further policy exchanges may be
made.
o the new policy's underwriting classes will be based on the underwriting
classes made available by the issuing company and will be comparable to
the underwriting classes of the most recent in force Policy Segment of
this policy; however, it will be subject to any face amount limitations
then in effect;
o premiums for the new policy will be based on the published rates of the
issuing company on the exchange date. The premiums will depend on the new
policy's plan, face amount and underwriting classes, and the insureds'
Ages and sexes;
o the contestable and suicide periods for the new policy will be measured
from the Issue Date of this policy; and
o the new policy will be subject to any existing assignment of this policy.
Riders
Additional benefit riders will be available on the new policy only with the
issuing company's receipt of satisfactory evidence of insurability. All riders
on the new policy will be subject to the issuing company's rules on the exchange
date.
Exchange Cost or Credit
In some cases, there may be an exchange cost or credit, depending on the amount
applied to the new policy.
The exchange cost or credit is the greater of (a) or (b) where:
o (a) is the cumulative premiums for the new policy with an annual interest
rate of 6%, less the pro rata portion of the cumulative Premiums for this
policy applicable to the Face Amount exchanged with an annual interest
rate of 6%; and
o (b) is the cash value of the new policy, less the pro rata portion of this
policy's Net Cash Surrender Value on the exchange date applicable to the
Face Amount exchanged.
If this amount is greater than zero, the owner must pay the exchange cost to the
issuing company. If this amount is less than zero, the issuing company will pay
an exchange credit to the owner.
Exchange Date
The exchange date is the Issue Date of the new policy. This date is the later
of:
o the Business Day GIAC receives the owner's written request for exchange in
Good Order and this policy at the Customer Service Office; or
o the Business Day the issuing company receives any exchange cost payable by
the owner.
00-SVUL Page 20 {POL NO}
<PAGE>
13. PAYMENT OPTIONS
Payment of Proceeds
The proceeds of this policy will be paid in one sum, unless otherwise provided.
All or part of this sum may be applied under any payment option described below
or in any other manner GIAC approves. The payee under any payment option must be
a natural person.
Election of Payment Options
Prior to the death of the Surviving Insured, the owner may choose any option for
payment of the death proceeds. If no election is in force when the proceeds
become payable, the payee may make an election subject to the following
conditions:
o for death proceeds, election must be made within one year after the
Surviving Insured's death;
o for other proceeds, election must be made within 60 days after the
proceeds become payable.
The owner may appoint a secondary payee to receive any payments remaining after
the death of the payee. Upon the death of any payee receiving payments under an
option, the remaining payments will be continued to the secondary payee or paid
in one sum as described in "Termination" on page 22, whichever is elected.
Any election must be in a written form satisfactory to GIAC. Payment options are
fixed and do not vary with the performance of the variable investment options.
Options Available
o Option 1 - Proceeds Left at Interest: GIAC will hold the proceeds, making
monthly interest payments. The yearly guaranteed interest rate is 3%.
o Option 2 - Payments of a Specified Amount: GIAC will make monthly payments
of a specified amount until the proceeds and interest are fully paid. The
total amount paid each year must be at least 10% of the original proceeds.
Interest will be added to the proceeds each year; the yearly guaranteed
interest rate is 3%.
o Option 3 - Payments for a Specified Period: GIAC will make monthly
payments for the number of years elected. The guaranteed monthly payments
shown in the Option 3 table on page 22 include interest at 3% per year.
o Option 4 - Life Income with 10 Years Guaranteed: GIAC will make monthly
payments for 10 years and for the remaining lifetime of the person on
whose life the option is based. The guaranteed monthly payments shown in
the Option 4 table on page 23 include interest at 3% per year.
o Option 5 - Refund Life Income: GIAC will make monthly payments until the
total amount paid equals the proceeds settled, and for the remaining
lifetime of the person on whose life the option is based. The guaranteed
monthly payments shown in the Option 5 table on page 23 include interest
at 3% per year.
o Option 6 - Joint and Survivor Income with 10 Years Guaranteed: GIAC will
make monthly payments for 10 years and for the remaining lifetime of
either of the two persons on whose lives the option is based. The
guaranteed monthly payments shown in the Option 6 table on page 24 include
interest at 3% per year.
The Payment Option Tables for options 4, 5 and 6 are based on the Annuity 2000
Mortality Tables (male and female), projected 20 years to the year 2020 by:
o 100% of male Scale G factors for males;
o 50% of female Scale G factors for females.
Payment Provisions
o At least $5,000 must be applied under each option selected.
o Each periodic payment must be at least $50.
o The effective date of any option is the date the proceeds become payable.
This date is the option date. Death proceeds are payable as of the date of
the Surviving Insured's death.
o After an option becomes effective, it cannot be terminated for payment in
one sum, unless otherwise provided.
o The first payment under Option 1 is due one month after the option date.
The first payment under Option 2, 3, 4, 5, or 6 is due on the option date.
o GIAC requires satisfactory proof of age of any person on whose life the
option is based before any payment is made.
o Under Option 4, 5, or 6, the present value of future benefits may not be
withdrawn.
00-SVUL Page 21 {POL NO}
<PAGE>
PAYMENT OPTIONS -- cont'd
Termination
Upon termination of an option, any amount payable is:
o Under Option 1 or 2, any unpaid proceeds with any accrued interest.
o Under Option 3, the present value on the basis of 3% yearly compound
interest of any unpaid payments for the specified period.
o Under Option 4, 5, or 6, the present value of any unpaid payments for the
guaranteed period. This present value is derived using the interest rate
which was used in computing the actual monthly payment.
PAYMENT OPTION TABLES
OPTION 3 - PAYMENTS FOR A SPECIFIED PERIOD
GUARANTEED MONTHLY PAYMENT
FOR EACH $1,000 OF PROCEEDS
---------------------------------------------------------
Years 1 2 3 4 5 6
Amount $ 84.47 42.86 28.99 22.06 17.91 15.14
Years 7 8 9 10 11 12
Amount $ 13.16 11.68 10.53 9.61 8.86 8.24
Years 13 14 15 16 17 18
Amount $ 7.71 7.26 6.87 6.53 6.23 5.96
Years 19 20 21 22 23 24
Amount $ 5.73 5.51 5.32 5.15 4.99 4.84
Years 25 26 27 28 29 30
Amount $ 4.71 4.59 4.47 4.37 4.27 4.18
---------------------------------------------------------
00-SVUL Page 22 {POL NO}
<PAGE>
PAYMENT OPTION TABLES--cont'd
OPTIONS 4 AND 5 - GUARANTEED MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS+
Option 4* Option 5*
Age Male Female Male Female
20 2.93 2.89 2.92 2.88
21 2.95 2.90 2.94 2.89
22 2.97 2.92 2.95 2.91
23 2.98 2.93 2.97 2.92
24 3.00 2.95 2.99 2.94
25 3.02 2.96 3.00 2.95
26 3.04 2.98 3.02 2.97
27 3.06 3.00 3.04 2.99
28 3.08 3.02 3.06 3.01
29 3.10 3.04 3.08 3.03
30 3.12 3.06 3.10 3.05
31 3.15 3.08 3.13 3.07
32 3.17 3.10 3.15 3.09
33 3.20 3.12 3.17 3.11
34 3.22 3.15 3.20 3.13
35 3.25 3.17 3.23 3.16
36 3.28 3.20 3.25 3.18
37 3.31 3.23 3.28 3.21
38 3.35 3.26 3.31 3.24
39 3.38 3.29 3.34 3.26
40 3.42 3.32 3.38 3.29
41 3.45 3.35 3.41 3.32
42 3.49 3.39 3.44 3.36
43 3.53 3.42 3.48 3.39
44 3.58 3.46 3.52 3.43
45 3.62 3.50 3.56 3.46
46 3.67 3.54 3.60 3.50
47 3.72 3.59 3.64 3.54
48 3.77 3.63 3.69 3.58
49 3.82 3.68 3.74 3.63
50 3.87 3.73 3.79 3.67
51 3.93 3.79 3.84 3.72
52 3.99 3.84 3.89 3.77
53 4.06 3.90 3.95 3.82
54 4.13 3.96 4.01 3.88
55 4.20 4.03 4.07 3.94
56 4.27 4.10 4.13 4.00
57 4.35 4.17 4.20 4.06
58 4.43 4.24 4.27 4.13
59 4.52 4.32 4.34 4.20
60 4.61 4.41 4.42 4.27
61 4.71 4.50 4.50 4.35
62 4.81 4.59 4.59 4.43
63 4.92 4.69 4.68 4.52
64 5.03 4.80 4.77 4.61
65 5.15 4.91 4.87 4.70
66 5.28 5.03 4.97 4.81
67 5.41 5.16 5.08 4.91
68 5.54 5.29 5.20 5.03
69 5.68 5.43 5.32 5.15
70 5.83 5.57 5.44 5.27
71 5.98 5.73 5.58 5.41
72 6.14 5.89 5.72 5.55
73 6.30 6.06 5.86 5.70
74 6.46 6.24 6.02 5.86
75 6.63 6.42 6.18 6.03
76 6.80 6.61 6.35 6.20
77 6.97 6.81 6.53 6.39
78 7.15 7.00 6.72 6.59
79 7.33 7.20 6.92 6.80
80 7.51 7.40 7.13 7.03
81 7.68 7.60 7.35 7.26
82 7.86 7.80 7.59 7.52
83 8.03 7.99 7.83 7.78
84 8.19 8.17 8.09 8.06
85 8.35 8.34 8.37 8.35
* Amount payable unless owner irrevocably elects, prior to the Surviving
Insured's death, to have this option apply for death proceeds. If this option is
irrevocably elected prior to the Surviving Insured's death, add 2 years to
annuitant's age at all ages.
+ Guaranteed monthly payments for any ages not shown will be furnished upon
request.
00-SVUL Page 23 {POL NO}
<PAGE>
PAYMENT OPTION TABLES -- cont'd
OPTION 6-GUARANTEED MONTHLY PAYMENT FOR EACH $1,000 OF PROCEEDS+
Female Male Age
Age 50 51 52 53 54 55 56 57 58 59
50 3.44 3.46 3.48 3.50 3.51 3.53 3.54 3.55 3.57 3.58
51 3.47 3.49 3.50 3.52 3.54 3.56 3.57 3.59 3.60 3.62
52 3.49 3.51 3.53 3.55 3.57 3.58 3.60 3.62 3.63 3.65
53 3.51 3.53 3.55 3.57 3.59 3.61 3.63 3.65 3.67 3.69
54 3.53 3.55 3.58 3.60 3.62 3.64 3.66 3.68 3.70 3.72
55 3.55 3.58 3.60 3.62 3.65 3.67 3.69 3.72 3.74 3.76
56 3.57 3.60 3.62 3.65 3.67 3.70 3.72 3.75 3.77 3.79
57 3.59 3.62 3.65 3.67 3.70 3.73 3.75 3.78 3.80 3.83
58 3.61 3.64 3.67 3.70 3.73 3.75 3.78 3.81 3.84 3.86
59 3.63 3.66 3.69 3.72 3.75 3.78 3.81 3.84 3.87 3.90
60 3.64 3.68 3.71 3.74 3.78 3.81 3.84 3.87 3.90 3.94
61 3.66 3.70 3.73 3.76 3.80 3.83 3.87 3.90 3.94 3.97
62 3.68 3.71 3.75 3.79 3.82 3.86 3.90 3.93 3.97 4.00
63 3.69 3.73 3.77 3.81 3.84 3.88 3.92 3.96 4.00 4.04
64 3.71 3.75 3.79 3.83 3.87 3.91 3.95 3.99 4.03 4.07
65 3.72 3.76 3.80 3.84 3.89 3.93 3.97 4.02 4.06 4.10
66 3.73 3.78 3.82 3.86 3.91 3.95 4.00 4.04 4.09 4.13
67 3.75 3.79 3.83 3.88 3.92 3.97 4.02 4.07 4.12 4.16
68 3.76 3.80 3.85 3.89 3.94 3.99 4.04 4.09 4.14 4.19
69 3.77 3.81 3.86 3.91 3.96 4.01 4.06 4.11 4.17 4.22
70 3.78 3.83 3.87 3.92 3.97 4.03 4.08 4.14 4.19 4.25
Female Male Age
Age 60 61 62 63 64 65 66 67 68 69 70
50 3.59 3.60 3.61 3.62 3.63 3.64 3.65 3.66 3.67 3.67 3.68
51 3.63 3.64 3.65 3.66 3.67 3.68 3.69 3.70 3.71 3.72 3.72
52 3.66 3.68 3.69 3.70 3.72 3.73 3.74 3.75 3.76 3.76 3.77
53 3.70 3.72 3.73 3.75 3.76 3.77 3.78 3.79 3.80 3.81 3.82
54 3.74 3.76 3.77 3.79 3.80 3.82 3.83 3.84 3.85 3.86 3.87
55 3.78 3.80 3.81 3.83 3.85 3.86 3.88 3.89 3.90 3.92 3.93
56 3.81 3.84 3.86 3.87 3.89 3.91 3.93 3.94 3.96 3.97 3.98
57 3.85 3.88 3.90 3.92 3.94 3.96 3.98 3.99 4.01 4.02 4.04
58 3.89 3.92 3.94 3.96 3.99 4.01 4.03 4.05 4.06 4.08 4.10
59 3.93 3.96 3.98 4.01 4.03 4.06 4.08 4.10 4.12 4.14 4.16
60 3.97 4.00 4.02 4.05 4.08 4.11 4.13 4.15 4.18 4.20 4.22
61 4.00 4.04 4.07 4.10 4.13 4.16 4.18 4.21 4.24 4.26 4.28
62 4.04 4.08 4.11 4.14 4.18 4.21 4.24 4.27 4.29 4.32 4.35
63 4.08 4.11 4.15 4.19 4.22 4.26 4.29 4.32 4.35 4.38 4.41
64 4.11 4.15 4.19 4.23 4.27 4.31 4.35 4.38 4.41 4.45 4.48
65 4.15 4.19 4.23 4.28 4.32 4.36 4.40 4.44 4.48 4.51 4.55
66 4.18 4.23 4.27 4.32 4.36 4.41 4.45 4.50 4.54 4.58 4.61
67 4.21 4.26 4.31 4.36 4.41 4.46 4.51 4.55 4.60 4.64 4.68
68 4.25 4.30 4.35 4.40 4.46 4.51 4.56 4.61 4.66 4.71 4.75
69 4.28 4.33 4.39 4.44 4.50 4.56 4.61 4.67 4.72 4.77 4.82
70 4.31 4.36 4.42 4.48 4.54 4.60 4.66 4.72 4.78 4.84 4.89
+ Guaranteed monthly payments for any ages not shown will be furnished upon
request.
00-SVUL Page 24 {POL NO}
<PAGE>
14. GENERAL PROVISIONS
The Contract
The entire contract consists of the Basic Policy and any attached additional
benefit riders, endorsements, the original application and any subsequent
applications for changes that are attached to this policy. GIAC relied upon the
application(s) in issuing this policy. All statements in the application(s) are
assumed to be true to the best knowledge and belief of the person(s) making
them. These statements are representations and not warranties. No statement will
be used to contest this policy unless contained in the application(s).
Only the President, a Vice President, or the Secretary of GIAC may make or
modify this policy. No agent has the authority to:
o change this policy;
o waive any provision of this policy or any of GIAC's requirements; or
o waive an answer to any question in the application(s).
GIAC will not be bound by any promise or statement made by any agent or other
person except as stated above.
Basis of Values
The maximum cost of insurance rates under this policy are based on:
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
aggregate, for Attained Ages 0 through 14; or
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
non-smoker, for Attained Ages 15 through 19; or
o the Commissioners 1980 Standard Ordinary Mortality Table, male or female,
smoker or non-smoker, for Attained Ages 20 and over.
All policy values equal or exceed those required by any state statute. A
detailed statement of the method of computing these values has been filed with
each state insurance department.
Age and Sex
If the Age or sex of an insured has been misstated, the amount of death benefit
for the Basic Policy will be that which would be purchased by the most recent
deduction for the cost of insurance charge based on the correct Age and sex; the
amount of death benefit for any riders will be that which would be purchased by
the most recent deduction for rider charges based on the correct Age and sex.
Incontestability
This policy will be incontestable after it has been in force during a given
insured's lifetime for 2 years from its Issue Date. This policy will terminate
upon successful contest with respect to either insured.
If the Death Benefit Option is changed from Option 1 or Option 3 to Option 2,
the amount of any increase in the death benefit will be incontestable after such
increase has been in force during a given insured's lifetime for 2 years from
the date the change takes effect. If the Face Amount has been increased, such
increase will be incontestable after it has been in force during a given
insured's lifetime for 2 years from the date the increase takes effect. If GIAC
successfully contests a change from Death Benefit Option 1 or Option 3 to Option
2 or an increase in Face Amount, the death benefit will be the amount that would
have been payable had such change or increase not taken effect.
The contestable period of any additional benefit rider attached to this policy
is stated in the rider.
Suicide Exclusion
If either insured commits suicide, while sane or insane, within 2 years from the
Issue Date no death benefit proceeds will be paid. GIAC's liability will be
limited to the greater of (a) or (b) as of the date of the insured's death,
where:
o (a) is the sum of all premium payments made under this policy; less:
o any Policy Debt; and
o any partial withdrawals;
o (b) is the Net Cash Surrender Value.
If either insured commits suicide, while sane or insane within 2 years from the
effective date of any increase in the Face Amount, GIAC's liability with respect
to such increase will be limited to the cost of insurance for such increase. If
either insured commits suicide, while sane or insane, within 2 years from the
effective date of any change from Death Benefit Option 1 or Option 3 to Option
2, GIAC's liability will be limited to the death benefit that would have been
payable had such change not taken effect; GIAC will also refund to the owner any
cost of insurance associated with any increase in death benefit due to such
change.
00-SVUL Page 25 {POL NO}
<PAGE>
GENERAL PROVISIONS--cont'd
Deferment
GIAC reserves the right to defer calculation and payment of this policy's
benefits which are attributable to the Variable Investment Options when:
o the New York Stock Exchange is closed for trading (except for customary
weekend and holiday closings);
o the Securities and Exchange Commission restricts trading or determines
that an emergency exists; or
o a Variable Investment Option's corresponding mutual fund lawfully suspends
payment or redemption of its shares.
In such situations, GIAC may defer:
o determination or payment of a partial withdrawal, surrender or death
proceeds (GIAC may defer payment of death proceeds for up to 2 months
only);
o determination or payment of policy loans;
o transfers among the Variable Investment Options; or
o allocation of Net Premiums to the Variable Investment Options.
GIAC may defer the following transactions from the Fixed-Rate Option for up to 6
months from the Business Day GIAC receives the owner's written request in Good
Order at the Customer Service Office:
o determination or payment of a partial withdrawal, surrender or death
proceeds. GIAC will pay interest on deferred partial withdrawals and
surrenders at a rate not less than 3% a year if any such payment is
deferred 30 days or more; or
o determination or payment of policy loans; or
o transfers from the Fixed-Rate Option.
Communications with GIAC
GIAC receives all communications only at the Customer Service Office. Please
include the policy number, the full names of the owner and insured, and the
owner's current address in all correspondence with GIAC.
Payments by GIAC
All amounts payable by GIAC are payable at the Customer Service Office.
Statement to the Owner
GIAC will provide a written statement to the owner once each year. GIAC will
send the statement soon after each Policy Anniversary.
The statement will show the following information as of the most recent Policy
Anniversary:
o the amount of the current death benefit;
o the Policy Account Value and the portion of the Policy Account Value
attributable to the Variable Investment Options and the Fixed-Rate Option;
o the Net Cash Surrender Value and Cash Surrender Value;
o the premiums paid, and charges deducted since the last statement;
o any transfers or partial withdrawals since the last statement; and
o any outstanding Policy Debt.
The statement will also include any other information required by the
jurisdiction where this policy is delivered.
00-SVUL Page 26 {POL NO}
<PAGE>
INDEX
Subject Page
Age and Sex................................................25
Allocation of Net Premiums.................................12
Assignment.................................................10
Basis of Values............................................25
Beneficiary..............................................3,10
Changing the Face Amount....................................9
Communications with GIAC...................................26
Continuation of Insurance..................................17
Crediting Payments.........................................11
Death Proceeds..............................................7
Deferment................................................. 26
Definitions.................................................5
Dollar Cost Averaging Option.............................. 13
Exchange of Policy.........................................20
The Fixed-Rate Option......................................15
Grace Period...............................................11
The Guardian Separate Account N............................14
Incontestability...........................................25
Investment Units....................................... 5, 15
Loan Account..............................................19
Monthly Cost of Insurance..................................16
Monthly Deductions......................................3, 16
No Lapse Guarantee Condition...............................11
No Lapse Guarantee Period..................................11
Owner....................................................3, 9
Partial Withdrawals........................................17
Payment Options........................................21, 22
Payment Option Tables..............................22, 23, 24
Policy Account Value............................6, 15, 16, 17
Policy Data.................................................3
Policy Loans...............................................18
Premium Payment.........................................11,12
Rights Reserved........................................... 14
Statement to the Owner.....................................26
Suicide Exclusion..........................................25
Surrender...............................................17,18
Table of Maximum Monthly Cost of Insurance Rates............4
Table of Death Benefit Factors..............................4
Transaction Deductions...................................3,16
Transfers..................................................12
00-SVUL Page 27 {POL NO}
<PAGE>
Survivorship Flexible Premium Adjustable Variable Life Insurance Policy
o Flexible premiums payable while either insured is alive
o Adjustable death proceeds payable at the second death if policy is in
force- No death proceeds payable on the first death
o Investment experience reflected in benefits
o Non-participating--No dividends payable
[LOGO] The Guardian A Stock Company
GUARDIAN(SM) Insurance & Annuity Incorporated in the
Company, Inc. State of Delaware
Customer Service Office:
P.O. Box 26210
Lehigh Valley, PA 18002-6210
00-SVUL
EXHIBIT - 99.1.A (11)(a)
ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
FLEXIBLE PREMIUM ADJUSTABLE VARIABLE LIFE INSURANCE POLICY
Description of the
Issuance, Transfer and Redemption Procedures for FPVL Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
Under the Investment Company Act of 1940
and
Method of Computing Adjustments in
Payment and Cash Values
Upon Conversion to Fixed Benefit Life Policies
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)
Under the Investment Company Act of 1940
This document sets forth the administrative procedures that will be
followed by The Guardian Insurance & Annuity Company, Inc. ("GIAC") in
connection with the issuance of its Flexible Premium Adjustable Variable Life
Insurance Policy with (the "Policy/Policies"), the transfer of assets held under
the Policies, and the redemption by Policyowners of their interests in said
Policies. This document also explains the method that GIAC will follow in making
cash adjustments when a Policy is exchanged for a fixed-benefit life insurance
policy. Defined terms indicated by initial upper case letters have the same
meaning herein as in the registration statement on Form S-6 for the Policies and
the Separate Account through which they are issued (Reg. No. 333-92475).
<PAGE>
I. Procedures Relating to Issuance of the Policy*
A. Premiums and Underwriting Standards
Minimum Annual Premiums for GIAC's Policy will not be the same for all
owners. 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, reflecting factors such
as age, sex, health and occupation. A uniform premium for all insureds would
discriminate unfairly in favor of those insureds representing greater risks.
Although there will be no uniform Minimum Annual Premium for all insureds, there
will be a single price for all insureds of the same age and sex who are within
the same risk classification. In addition to a Minimum Annual Premium, a Policy
will also have a Planned Premium which is the premium the policyowner plans to
pay on a regular basis. Neither the Minimum Annual Premium nor the Planned
Premium is required to be paid, but payment of the Minimum Annual Premium during
the first three policy years will keep the No Lapse Guarantee in effect during
that period.
The Policy will be offered and sold pursuant to established premium
schedules and underwriting standards and in accordance with state insurance
laws. The Minimum Annual Premium and any additional benefits acquired by rider
to the Policy that are to be paid by a Policyowner will be specified in the
Policy issued to such owner.
- ----------
* The term "Policy" refers to the Policy described in the Prospectus (contained
in the registration statement to which this document is an exhibit) exclusive of
any Additional Benefit Riders acquired by the Policyowner.
-2-
<PAGE>
B. Application and the Processing of Policy Premium Payments
When a completed application is received, GIAC will follow certain
insurance underwriting (i.e., evaluation of risk) procedures designed to
determine whether at least one of 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. A Policy will not be issued until this
underwriting procedure has been completed. Permanent coverage under a Policy
begins when all underwriting requirements have been met, the Initial Premium has
been paid, and the Policy has been delivered while the insured is living.
Owners of certain fixed-benefit life insurance policies issued by GIAC or
its parent, The Guardian Life Insurance Company of America, may be able to
purchase the Policy (i) without evidence of insurability, by exchanging their
present policies or (ii) without evidence of insurability, or with simplified
underwriting, by exercising applicable riders to their fixed-benefit life
insurance policies. Policyowners who elect to convert to a Park Avenue SVUL
policy may receive a credit upon conversion in an amount up to one Minimum
Annual Premium.
The Policy Date is the date as of which the insureds' Ages are determined.
It is the date when the Policy is issued. The Policy Date is used to measure
Policy months and Policy years.
GIAC will permit a policy to be backdated, upon request if it would allow
the policy owner to qualify for a lower premium because the insureds were
younger on an earlier policy date, but only to a Policy Date not earlier than
six months prior to the date the application is signed. To backdate a policy,
GIAC will require the payment of all Policy premiums that would have been due
had the application date coincided with the backdated Policy Date. Also, on the
Issue Date, all Monthly Deductions for the period from the backdated Policy Date
to the Issue Date will be deducted.
-3-
<PAGE>
GIAC credits and allocates any payment received on or before the Issue
Date to the investment divisions of the Separate Account (i.e., the Variable
Investment Options) chosen by the Policyowner and/or the Fixed-Rate Option as of
the Issue Date. Only the Net Premium amount will be allocated among the Variable
Investment Options and the Fixed-Rate Option. The Net Premium is the premium
minus the Premium Charge which is described in the prospectus. Once a Policy is
in force, GIAC credits and allocates that portion of any payment that is used to
pay a Policy premium as of the Business Day such payment is received if it
receives such a payment before the close of business at its Customer Service
Office. After payment of the Initial Premium, premiums may be paid at any time
and in any amount subject to certain limitations.
II. Procedures Relating to Transfers Among Investment Divisions
The Account is subdivided into investment divisions which correspond to
the mutual funds (collectively referred to as the "Funds") currently offered
under the Policies. Each of the Funds is registered under the Investment Company
Act of 1940 as an open-end management investment company.
Net Premiums under the Policy are allocated to the investment divisions
designated in the application, or as changed in writing by the Policyowner.
The Policyowner may transfer all or a portion of the unloaned Policy
Account Value among the Account's investment divisions as often as he/she
wishes. However, the number of options in which the Policy Account Value may be
invested or held at any one time, including the Fixed-Rate Option, cannot exceed
20, and GIAC reserves the right to limit such transfers to no more frequently
than once every 30 days. Transfers may be requested in writing or by telephone.
Transfers are effective as of the end of the Business Day on which the request
is received. The minimum transfer amount is the lesser of $500 or the entire
amount held in the investment division from which GIAC effects a transfer.
-4-
<PAGE>
The Policyowner may elect to have designated dollar amounts automatically
transferred on each Monthly Date from The Guardian Cash Fund Investment Division
to one or more of the other investment divisions or the Fixed-Rate Option for a
minimum of 12 months. The minimum automatic transfer amount is $100 per
receiving option.
III. Procedures Relating to Redemptions Under the Policy
A. Partial Withdrawals
After the first Policy year and while the insured is living, the
Policyowner may take withdrawals from the Net Cash Surrender Value. The minimum
net partial withdrawal amount is $500. All partial withdrawals will reduce the
Policy Account Value by the amount of the partial withdrawal. GIAC may limit the
number of partial withdrawals made in a policy year to 12.
Any portion of a partial withdrawal which exceeds the amount eligible for
a reduction-free partial withdrawal, as described below, will reduce the Face
Amount. When the Face Amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied against the Face Amount provided by the most recent
increase, then against the next most recent increases successively and finally
against the additional sum insured and the basic sum insured portions of the
Initial Face Amount. GIAC will calculate the amount eligible for a
reduction-free partial withdrawal as of date it receives the policyowner's
written request for a partial withdrawal as follows:
Under death benefit option 1, the amount of a reduction-free partial
withdrawal is any positive amount resulting from:
(a) the Policy Account Value, minus
-5-
<PAGE>
(b) the Face Amount divided by the applicable death benefit factor set forth
in the policy.
Under death benefit option 2, all partial withdrawals are reduction-free.
Under death benefit option 3, the free partial withdrawal amount is the
greater of:
(a) your Net Accumulated Premiums immediately prior to the partial withdrawal;
and
(b) an amount calculated as if death benefit option 1 were in effect.
The requested partial withdrawal amount will be deducted from the Variable
Investment Options specified in the Policyowner's request as of the Business Day
of the Policyowner's request, then proportionately from all other Variable
Investment Options and, finally, from the Fixed-Rate Option. Payment will
typically be made within seven days of the date that GIAC received the
Policyowner's partial withdrawal request. After effecting a partial withdrawal,
the remaining Cash Surrender Value must be sufficient to cover Monthly
Deductions for three months.
B. Face Amount Decreases and Increases
After the first Policy year, the Policyowner may ask GIAC to decrease the
Face Amount of his/her Policy. The minimum reduction is $5,000. The reduction
will take effect on the Monthly Processing Date coinciding with or next
following the date that GIAC approves the change.
-6-
<PAGE>
GIAC will not deduct a surrender charge if the Face Amount is reduced
during the first 9 Policy years. The Minimum Annual Premium, Policy Account
Value, Monthly Deductions, Target Premiums, and any benefits provided under
additional benefit riders will generally decrease after a Face Amount reduction.
The surrender charge will not change and the policy account value must always be
greater than the full surrender charge. When the Face Amount of a Policy is
based on one or more increases subsequent to issuance of the Policy, a requested
decrease in Face Amount will be applied against the Face Amount provided by the
most recent increase, then against the next most recent increases successively,
the Additional Sum Insured portion of the Initial Face Amount and, finally,
against the remainder of the Initial Face Amount.
Effective on the first Policy Anniversary or any Policy Anniversary
thereafter until the Policy Anniversary nearest the date on which the insured
reaches age 70, a Policyowner may ask GIAC to increase the Face Amount of
his/her Policy. The minimum increase is $10,000. The increase will take effect
on the Policy Anniversary following GIAC's receipt of the request, provided the
insured is alive on that date.
The increase will be issued as a separate Policy Segment with a separate
and distinct underwriting class, cost of insurance rates, surrender charges,
administrative charges, premium charges, Target Premium and minimum annual
premium. Premiums will be allocated to the Initial Face Amount and each Policy
Segment in amounts not to exceed the Target Premium for each on an annual basis,
such that when the sum of premiums paid during the policy year exceeds the
Target Premium for the Initial Face Amount, the premium will then be allocated
to the first Policy Segment. When, in a policy year, the sum of premiums paid
exceeds the sum of all applicable Target Premiums, the excess premium will be
allocated pro-rata to the Target Premium for the Initial Face Amount and each
Policy Segment.
An increase in the Face Amount will usually result in the policy's being
subject to new surrender charges. The new surrender charges will be computed as
if a new policy were being purchased for the increase in Face Amount and a new 9
year surrender charge period will apply to the Policy Segment resulting from an
increase.
-7-
<PAGE>
No additional premium is required for a Face Amount increase. However, a
premium payment may be necessary to prevent the Policy from going into default,
since new surrender charges would reduce the Net Cash Surrender Value of the
Policy.
C. Policy Loans
While the insured is alive, a Policyowner may borrow all or part of a
Policy's "loan value," by assigning the Policy to GIAC as security for the loan.
A Policy's loan value is 90% of the Cash Surrender Value on the date that GIAC
receives a proper, written loan request (which includes an assignment of the
Policy) at its Customer Service Office, minus any then outstanding Policy Debt
and minus the amount of interest due on the outstanding Policy Debt and the
amount to be borrowed at the next policy anniversary. The sum of any outstanding
loan amounts plus accrued loan interest is the Policy Debt. Policy loan proceeds
will ordinarily be paid within seven days of the date that GIAC received the
loan request. The minimum loan amount is $500.
When a Policyowner takes a loan, GIAC transfers the amount of the loan
from the Variable Investment Options and the Fixed-Rate Option into a Loan
Account within GIAC's general account. GIAC will transfer amounts held in the
Variable Investment Options in accordance with the policyowner's instructions as
of the date it received the loan request. Any excess amount will be transferred
from the fixed-rate option only after all variable options have been exhausted.
Amounts in the Loan Account earn interest from the date of transfer at a minimum
effective annual rate of 4%, which is credited to the Loan Interest Account.
GIAC charges the Policyowner interest on all outstanding loans at an
annual rate of 5% until the twentieth Policy Anniversary, at which time the
annual rate decreases to 4.5% for all existing and new loans. Interest accrues
daily and is payable in arrears on Policy Anniversaries. If interest is not paid
when due on each Policy Anniversary, GIAC transfers the required amount from the
Loan Interest Account to the Loan Account. Any amount remaining in the Loan
Interest Account after the transfer is transferred to the Variable Investment
Options and the Fixed-Rate Option in accordance with the current premium
allocation instructions. If the amount in the Loan Interest Account is not
sufficient to cover the interest due, any deficiency will be transferred
proportionately from the amounts in the Variable Investment Options and the
Fixed-Rate Option.
-8-
<PAGE>
The Policyowner may repay all or part of the Policy Debt. The minimum loan
repayment amount is the lesser of $100, unless the repayment accompanies the
then outstanding Policy Debt.
When GIAC receives a loan repayment, other than a required loan repayment,
it applies that repayment first to the payment of loan interest due but not yet
capitalized, then to reduce amounts in the Loan Account, and then to policy
interest accrued since the last policy anniversary but not yet due. GIAC credits
any repayment applied to reduce amounts in the Loan Account to the Variable
Investment Options and the Fixed-Rate Option according to the Policy owner's
current allocation instructions.
If the Policy Debt exceeds the Cash Surrender Value on a Monthly
Processing Date, the Policy could lapse. GIAC will notify the Policyowner that a
specified loan repayment is required to keep the Policy in force, unless the No
Lapse Guarantee is in effect.
D. Surrender
If the insured is alive, the Policyowner may surrender the Policy by
submitting to GIAC a written and signed request (in a form acceptable to GIAC)
together with the Policy or an acceptable affidavit of loss. GIAC will normally
pay the Net Cash Surrender Value as of the Business Day on which it received the
surrender request within seven days. All insurance coverage ends as of the
Business Day that GIAC computes the Net Cash Surrender Value for surrender.
-9-
<PAGE>
The Net Cash Surrender Value on any given date is the Policy Account Value
minus any surrender charge, minus any Policy Debt. GIAC assesses a surrender
charge if a Policy is surrendered during the first 10 policy years. This charge
is described in the prospectus for the Policy.
The Net Cash Surrender Value can be paid in a single sum or under one of
the payment options described in the prospectus for the Policy. At least $5,000
must be applied under each option selected, and periodic payments under a
payment option must be at least $50. Other restrictions and limitations are set
forth in the Policy and described in the prospectus.
If either Policy premium or required loan repayment (see above) remains
unpaid by the end of a 61-day grace period from its due date, the Policy lapses
as of the end of the grace period unless the No Lapse Guarantee is in effect. If
the No Lapse Guarantee is in effect, the Policy will not lapse during the first
three policy years even if the Policy's Net Cash Surrender Value is insufficient
to meet the Monthly Deductions due on a Monthly Processing Date. Once the Policy
lapses, the Policyowner may take steps to surrender the Policy for its Net Cash
Surrender Value. The No Lapse Guarantee cannot be reinstated once terminated.
-10-
<PAGE>
E. Death Claims
GIAC will normally pay the death proceeds under a Policy to the
beneficiary within seven (7) days after it has received due proof of the
insured's death and all other required information or documentation necessary to
make payment.**
The Policy provides three death benefit options. The Policyowner must
choose an option on the Policy application. Regardless which death benefit
option is chosen by the policyowner, after the Policy Anniversary nearest to the
insured's 100th birthday, the death benefit is equal to the Policy Account
Value.
The death benefit provided under Option 1 is the greater of:
* the Face Amount on the Monthly Processing Date preceding the
insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
insured's death.
The death benefit provided under Option 2 is the greater of:
* the Face Amount plus the Policy Account Value as of the Monthly
Processing Date preceding the insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
insured's date of death.
The death benefit provided under Option 3 is the greater of:
* the Face Amount plus Net Accumulated Premiums in effect on the date
of the insured's death
- ----------
** State insurance laws impose various requirements, such as receipt of a tax
waiver, before an insurer may pay a death benefit. In addition, payment of the
death benefit is subject to the provisions of the Policy regarding suicide and
incontestability.
-11-
<PAGE>
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the monthly processing date preceding the
insured's date of death.
Any partial withdrawals taken between the Monthly Processing Date and the date
of death will reduce the death benefit under Option 1, 2 or 3 by the amount of
the partial withdrawal and any applicable surrender charge. Under death benefit
Option 3, any premiums paid between the Monthly Processing Date and the date of
death will increase death benefit.
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any Monthly Processing Date is determined, at the election of the
policyowner, by either the Cash Value Accumulation Test or the Guideline Premium
and Cash Value Corridor Test. This election, once made, cannot be changed. The
minimum death benefit required on any Monthly Processing Date is the Policy
Account Value on the Monthly Processing Date multiplied by the factor shown in
the Table of Death Benefit Factors in the Policy.
On or after the first Policy Anniversary, the Policyowner may change the
death benefit option in effect for his/her Policy once each Policy year.
Evidence of insurability is required to change from Option 1 to Option 2. No
changes from Option 1 or 2 to Option 3 will be permitted.
The death proceeds payable to the beneficiary will include any proceeds
provided by additional benefit riders, but will be reduced by any outstanding
Policy Debt. If the insured dies during the grace period, GIAC will calculate
the death benefit as though any required premium had been paid and then deduct
the portion of such premium that relates to periods through the Policy month of
death from the payable death proceeds.
GIAC will pay the death benefit from its general account, and will
transfer assets from the Separate Account to its general account in an amount
equal to the reserve liability applicable to the Policy held in the Account. Any
excess of the insurance amount over the Face Amount will be paid out of the
general account reserve maintained for that purpose.
-12-
<PAGE>
The death proceeds can be paid in a single sum or under one of the payment
options described in the prospectus for the Policy. The Policyowner may elect
how death proceeds are to be paid while the insured is alive. If no election is
in effect when the insured dies, the beneficiary makes the election. An option
in effect at death may not be changed after death. At least $5,000 must be
applied under each option selected, and periodic payments under a payment option
must be at least $50. Other restrictions and limitations are set forth in the
Policy and described in the prospectus.
IV. Deferment of Benefits
GIAC can delay the payment of death proceeds if the Policy is being
contested and may postpone calculating or paying any benefit or effecting other
Policy transactions involving any Policy Account Value held in the Separate
Account's investment divisions if: (i) the New York Stock Exchange is closed for
other than weekends or holidays, or trading is restricted; (ii) the Securities
and Exchange Commission determines that a state of emergency exists which may
make Policy transactions impracticable; or (iii) at any other time when one or
more of the Variable Investment Options' corresponding Funds lawfully suspends
payment or redemption of their shares.
V. Cash Adjustment Upon Exchange of Policy
The Policyowner may exchange all or a portion of the Policy for a
permanent fixed-benefit whole life insurance policy offered by GIAC or its
affiliate, without submission of new evidence of insurability. Once exercised,
this right terminates. The new policy will have a Face Amount not in excess of
the Face Amount of the Policy being exchanged and not less than the minimum face
amount under GIAC's or its affiliate's rules. If only a portion of the Policy is
exchanged, the remaining face amount of this Policy must meet GIAC's minimum
face amount requirements. The new policy will have the same Policy Date, and the
insured's Age will be retained for the new policy. The underwriting class of the
new policy will be comparable to the underwriting class of the most recent
policy segment. This exchange privilege is designed to permit a Policyowner to
opt out of this Policy which provides benefits that vary with investment results
in order to obtain a similar policy which provides a fixed benefit.
-13-
<PAGE>
The exchange may result in a cost or credit to be paid. The cost or credit
will reflect any differences in cash values and premiums between the exchanged
portion of the policy and the new policy.
-14-
EXHIBIT - 99.1.A (11)(b)
ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
FLEXIBLE PREMIUM ADJUSTABLE SURVIVORSHIP VARIABLE LIFE INSURANCE POLICY
Description of the
Issuance, Transfer and Redemption Procedures for FPVL Policies
Pursuant to Rule 6e-3(T)(b)(12)(iii)
Under the Investment Company Act of 1940
and
Method of Computing Adjustments in
Payment and Cash Values
Upon Conversion to Fixed Benefit Life Policies
Pursuant to Rule 6e-3(T)(b)(13)(v)(B)
Under the Investment Company Act of 1940
This document sets forth the administrative procedures that will be
followed by The Guardian Insurance & Annuity Company, Inc. ("GIAC") in
connection with the issuance of its Flexible Premium Adjustable Survivorship
Variable Life Insurance Policy with (the "Policy/Policies"), the transfer of
assets held under the Policies, and the redemption by Policyowners of their
interests in said Policies. This document also explains the method that GIAC
will follow in making cash adjustments when a Policy is exchanged for a
fixed-benefit life insurance policy. Defined terms indicated by initial upper
case letters have the same meaning herein as in the registration statement on
Form S-6 for the Policies and the Separate Account through which they are issued
(Reg. No. 333-92475).
<PAGE>
I. Procedures Relating to Issuance of the Policy*
A. Premiums and Underwriting Standards
Minimum Annual Premiums for GIAC's Policy will not be the same for all
owners. 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, reflecting factors such
as age, sex, health and occupation. A uniform premium for all insureds would
discriminate unfairly in favor of those insureds representing greater risks.
Although there will be no uniform Minimum Annual Premium for all insureds, there
will be a single price for all insureds of the same age and sex who are within
the same risk classification. In addition to a Minimum Annual Premium, a Policy
will also have a Planned Premium which is the premium the policyowner plans to
pay on a regular basis. Neither the Minimum Annual Premium nor the Planned
Premium is required to be paid, but payment of the Minimum Annual Premium during
the first three policy years will keep the No Lapse Guarantee in effect during
that period.
The Policy will be offered and sold pursuant to established premium
schedules and underwriting standards and in accordance with state insurance
laws. The Minimum Annual Premium and any additional benefits acquired by rider
to the Policy that are to be paid by a Policyowner will be specified in the
Policy issued to such owner.
- ----------
* The term "Policy" refers to the Policy described in the Prospectus (contained
in the registration statement to which this document is an exhibit) exclusive of
any Additional Benefit Riders acquired by the Policyowner.
-2-
<PAGE>
B. Application and the Processing of Policy Premium Payments
When a completed application is received, GIAC will follow certain
insurance underwriting (i.e., evaluation of risk) procedures designed to
determine whether the proposed insureds are insurable. This process may involve
such verification procedures as medical examinations, and may require that
further information be provided about the proposed insureds before a
determination can be made. A Policy will not be issued until this underwriting
procedure has been completed. Permanent coverage under a Policy begins when all
underwriting requirements have been met, the Initial Premium has been paid, and
the Policy has been delivered while the insureds are living.
Owners of certain fixed-benefit life insurance policies issued by GIAC or
its parent, The Guardian Life Insurance Company of America, may be able to
purchase the Policy (i) without evidence of insurability, by exchanging their
present policies or (ii) without evidence of insurability, or with simplified
underwriting, by exercising applicable riders to their fixed-benefit life
insurance policies. Policyowners who elect to convert to a Park Avenue Life SVVL
policy may receive a credit upon conversion in an amount up to one Minimum
Annual Premium.
The Policy Date is the date as of which the insured's Age is determined.
It is the date when the Policy is issued. The Policy Date is used to measure
Policy months and Policy years.
GIAC will permit a policy to be backdated, upon request if it would allow
the policyowner to qualify for a lower premium because the insureds were younger
on an earlier policydate, but only to a Policy Date not earlier than six months
prior to the date the application is signed. To backdate a policy, GIAC will
require the payment of all Policy premiums that would have been due had the
application date coincided with the backdated Policy Date. Also, on the Issue
Date, all Monthly Deductions for the period from the backdated Policy Date to
the Issue Date will be deducted.
-3-
<PAGE>
GIAC credits and allocates any payment received on or before the Issue
Date to the investment divisions of the Separate Account (i.e., the Variable
Investment Options) chosen by the Policyowner and/or the Fixed-Rate Option as of
the Issue Date. Only the Net Premium amount will be allocated among the Variable
Investment Options and the Fixed-Rate Option. The Net Premium is the premium
minus the Premium Charge which is described in the prospectus. Once a Policy is
in force, GIAC credits and allocates that portion of any payment that is used to
pay a Policy premium as of the Business Day such payment is received if it
receives such a payment before the close of business at its Customer Service
Office. After payment of the Initial Premium, premiums may be paid at any time
and in any amount subject to certain limitations.
II. Procedures Relating to Transfers Among Investment Divisions
The Account is subdivided into investment divisions which correspond to
the mutual funds (collectively referred to as the "Funds") currently offered
under the Policies. Each of the Funds is registered under the Investment Company
Act of 1940 as an open-end management investment company.
Net Premiums under the Policy are allocated to the investment divisions
designated in the application, or as changed in writing by the Policyowner.
The Policyowner may transfer all or a portion of the unloaned Policy
Account Value among the Account's investment divisions as often as he/she
wishes. However, the number of options in which the Policy Account Value may be
invested or held at any one time, including the Fixed-Rate Option, cannot exceed
20, and GIAC reserves the right to limit such transfers to no more frequently
than once every 30 days. Transfers may be requested in writing or by telephone.
Transfers are effective as of the end of the Business Day on which the request
is received. The minimum transfer amount is the lesser of $500 or the entire
amount held in the investment division from which GIAC effects a transfer.
-4-
<PAGE>
The Policyowner may elect to have designated dollar amounts automatically
transferred on each Monthly Date from The Guardian Cash Fund Investment Division
to one or more of the other investment divisions or the Fixed-Rate Option for a
minimum of 12 months. The minimum automatic transfer amount is $100 per
receiving option.
III. Procedures Relating to Redemptions Under the Policy
A. Partial Withdrawals
After the first Policy year and while an insured is living, the
Policyowner may take withdrawals from the Net Cash Surrender Value. The minimum
net partial withdrawal amount is $500. All partial withdrawals will reduce the
Policy Account Value by the amount of the partial withdrawal. GIAC may limit the
number of partial withdrawals made in a policy year to 12.
Any portion of a partial withdrawal which exceeds the amount eligible for
a reduction-free partial withdrawal, as described below, will reduce the Face
Amount. When the Face Amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied against the Face Amount provided by the most recent
increase, then against the next most recent increases successively and finally
against the additional sum insured and the basic sum insured portions of the
Initial Face Amount. GIAC will calculate the amount eligible for a
reduction-free partial withdrawal as of date it receives the policyowner's
written request for a partial withdrawal as follows:
Under death benefit option 1, the amount of a reduction-free partial
withdrawal is any positive amount resulting from:
(a) the Policy Account Value, minus
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(b) the Face Amount divided by the applicable death benefit factor set forth
in the policy.
Under death benefit option 2, all partial withdrawals are reduction-free.
Under death benefit option 3, the free partial withdrawal amount is the
greater of:
(a) your Net Accumulated Premiums immediately prior to the partial withdrawal;
and
(b) an amount calculated as if death benefit option 1 were in effect.
The requested partial withdrawal amount will be deducted from the Variable
Investment Options specified in the Policyowner's request as of the Business Day
of the Policyowner's request, then proportionately from all other Variable
Investment Options and, finally, from the Fixed-Rate Option. Payment will
typically be made within seven days of the date that GIAC received the
Policyowner's partial withdrawal request. After effecting a partial withdrawal,
the remaining Cash Surrender Value must be sufficient to cover Monthly
Deductions for three months.
B. Face Amount Decreases and Increases
Provided at least one insured is alive, after the first Policy year, the
Policyowner may ask GIAC to decrease the Face Amount of his/her Policy. The
minimum reduction is $5,000. The reduction will take effect on the Monthly
Processing Date coinciding with or next following the date that GIAC approves
the change.
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GIAC will not deduct a surrender charge if the Face Amount is reduced. The
Minimum Annual Premium, Policy Account Value, Monthly Deductions, Target
Premiums, and any benefits provided under additional benefit riders will
generally decrease after a Face Amount reduction. The surrender charge will not
change and the policy account value must always be greater than the full
surrender charge. When the Face Amount of a Policy is based on one or more
increases subsequent to issuance of the Policy, a requested decrease in Face
Amount will be applied against the Face Amount provided by the most recent
increase, then against the next most recent increases successively, the
Additional Sum Insured portion of the Initial Face Amount and, finally, against
the remainder of the Initial Face Amount.
Provided both insureds are living, on any Policy Anniversary until the
Policy Anniversary nearest the younger insured's 70th birthday, a Policyowner
may ask GIAC to increase the Face Amount of his/her Policy. The minimum increase
is $10,000. The increase will take effect on the Policy Anniversary following
GIAC's receipt of the request, provided the insured is alive on that date.
The increase will be issued as a separate Policy Segment with separate and
distinct underwriting classes, cost of insurance rates, surrender charges,
administrative charges, premium charges, Target Premium and minimum annual
premium. Premiums will be allocated to the Initial Face Amount and each Policy
Segment in amounts not to exceed the Target Premium for each on an annual basis,
such that when the sum of premiums paid during the policy year exceeds the
Target Premium for the Initial Face Amount, the premium will then be allocated
to the first Policy Segment. When, in a policy year, the sum of premiums paid
exceeds the sum of all applicable Target Premiums, the excess premium will be
allocated pro-rata to the Target Premium for the Initial Face Amount and each
Policy Segment.
An increase in the Face Amount will usually result in the policy's being
subject to new surrender charges. The new surrender charges will be computed as
if a new policy were being purchased for the increase in Face Amount and a new
surrender charge will apply to the Policy Segment resulting from an increase.
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No additional premium is required for a Face Amount increase. However, a
premium payment may be necessary to prevent the Policy from going into default,
since new surrender charges would reduce the Net Cash Surrender Value of the
Policy.
C. Policy Loans
While either insured is alive, a Policyowner may borrow all or part of a
Policy's "loan value," by assigning the Policy to GIAC as security for the loan.
A Policy's loan value is 90% of the Cash Surrender Value on the date that GIAC
receives a proper, written loan request (which includes an assignment of the
Policy) at its Customer Service Office, minus any then outstanding Policy Debt
and minus the amount of interest due on the outstanding Policy Debt and the
amount to be borrowed at the next policy anniversary. The sum of any outstanding
loan amounts plus accrued loan interest is the Policy Debt. Policy loan proceeds
will ordinarily be paid within seven days of the date that GIAC received the
loan request. The minimum loan amount is $500.
When a Policyowner takes a loan, GIAC transfers the amount of the loan
from the Variable Investment Options and the Fixed-Rate Option into a Loan
Account within GIAC's general account. GIAC will transfer amounts held in the
Variable Investment Options in accordance with the policyowner's instructions as
of the date it received the loan request. Any excess amount will be transferred
from the fixed-rate option only after all variable options have been exhausted.
Amounts in the Loan Account earn interest from the date of transfer at a minimum
effective annual rate of 4%, which is credited to the Loan Interest Account.
GIAC charges the Policyowner interest on all outstanding loans at an
annual rate of 5% until the twentieth Policy Anniversary, at which time the
annual rate decreases to 4.5% for all existing and new loans. Interest accrues
daily and is payable in arrears on Policy Anniversaries. If interest is not paid
when due on each Policy Anniversary, GIAC transfers the required amount from the
Loan Interest Account to the Loan Account. Any amount remaining in the Loan
Interest Account after the transfer is transferred to the Variable Investment
Options and the Fixed-Rate Option in accordance with the current premium
allocation instructions. If the amount in the Loan Interest Account is not
sufficient to cover the interest due, any deficiency will be transferred
proportionately from the amounts in the Variable Investment Options and the
Fixed-Rate Option.
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The Policyowner may repay all or part of the Policy Debt. The minimum loan
repayment amount is the lesser of $100, unless the repayment accompanies the
then outstanding Policy Debt.
When GIAC receives a loan repayment, other than a required loan repayment,
it applies that repayment first to the payment of loan interest due but not yet
capitalized, then to reduce amounts in the Loan Account, and then to policy
interest accrued since the last policy anniversary but not yet due. GIAC credits
any repayment applied to reduce amounts in the Loan Account to the Variable
Investment Options and the Fixed-Rate Option according to the Policy owner's
current allocation instructions.
If the Policy Debt exceeds the Cash Surrender Value on a Monthly
Processing Date, the Policy could lapse. GIAC will notify the Policyowner that a
specified loan repayment is required to keep the Policy in force, unless the No
Lapse Guarantee is in effect.
D. Surrender
If either insured is alive, the Policyowner may surrender the Policy by
submitting to GIAC a written and signed request (in a form acceptable to GIAC)
together with the Policy or an acceptable affidavit of loss. GIAC will normally
pay the Net Cash Surrender Value as of the Business Day on which it received the
surrender request within seven days. All insurance coverage ends as of the
Business Day that GIAC computes the Net Cash Surrender Value for surrender.
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The Net Cash Surrender Value on any given date is the Policy Account Value
minus any surrender charge, minus any Policy Debt. GIAC assesses a surrender
charge if a Policy is surrendered when a surrender charge is in effect. This
charge is described in the prospectus for the Policy.
The Net Cash Surrender Value can be paid in a single sum or under one of
the payment options described in the prospectus for the Policy. At least $5,000
must be applied under each option selected, and periodic payments under a
payment option must be at least $50. Other restrictions and limitations are set
forth in the Policy and described in the prospectus.
If either Policy premium or required loan repayment (see above) remains
unpaid by the end of a 61-day grace period from its due date, the Policy lapses
as of the end of the grace period unless the No Lapse Guarantee is in effect. If
the No Lapse Guarantee is in effect, the Policy will not lapse during the first
three policy years even if the Policy's Net Cash Surrender Value is insufficient
to meet the Monthly Deductions due on a Monthly Processing Date. Once the Policy
lapses, the Policyowner may take steps to surrender the Policy for its Net Cash
Surrender Value. The No Lapse Guarantee cannot be reinstated once terminated.
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E. Death Claims
GIAC will normally pay the death proceeds under a Policy to the
beneficiary within seven (7) days after it has received due proof of the
insured's death and all other required information or documentation necessary to
make payment.**
The Policy provides three death benefit options. The Policyowner must
choose an option on the Policy application. Regardless which death benefit
option is chosen by the policyowner, after the Policy Anniversary nearest to the
younger insured's 100th birthday, the death benefit is equal to the Policy
Account Value.
The death benefit provided under Option 1 is the greater of:
* the Face Amount on the Monthly Processing Date preceding the
surviving insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
surviving insured's death.
The death benefit provided under Option 2 is the greater of:
* the Face Amount plus the Policy Account Value as of the Monthly
Processing Date preceding the surviving insured's date of death; or
* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the Monthly Processing Date preceding the
surviving insured's date of death.
The death benefit provided under Option 3 is the greater of:
* the Face Amount plus Net Accumulated Premiums in effect on the date
of the surviving insured's death
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** State insurance laws impose various requirements, such as receipt of a tax
waiver, before an insurer may pay a death benefit. In addition, payment of the
death benefit is subject to the provisions of the Policy regarding suicide and
incontestability.
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* the minimum death benefit then required under Section 7702 of the
Internal Revenue Code on the monthly processing date preceding the
surviving insured's date of death.
Any partial withdrawals taken between the Monthly Processing Date and the date
of the surviving insured's death will reduce the death benefit under Option 1, 2
or 3 by the amount of the partial withdrawal and any applicable surrender
charge. Under death benefit Option 3, any premiums paid between the Monthly
Processing Date and the date of the surviving insured's death will increase
death benefit.
The minimum death benefit required under Section 7702 of the Internal Revenue
Code on any Monthly Processing Date is determined by the Guideline Premium and
Cash Value Corridor Test. The minimum death benefit required on any Monthly
Processing Date is the Policy Account Value on the Monthly Processing Date
multiplied by the factor shown in the Table of Death Benefit Factors in the
Policy.
On or after the first Policy Anniversary, the Policyowner may change the
death benefit option in effect for his/her Policy once each Policy year,
provided either insured is alive. Evidence of insurability is required to change
from Option 1 to Option 2. No changes from Option 1 or 2 to Option 3 will be
permitted.
The death proceeds payable to the beneficiary will include any proceeds
provided by additional benefit riders, but will be reduced by any outstanding
Policy Debt. If the insured dies during the grace period, GIAC will calculate
the death benefit as though any required premium had been paid and then deduct
the portion of such premium that relates to periods through the Policy month of
death from the payable death proceeds.
GIAC will pay the death benefit from its general account, and will
transfer assets from the Separate Account to its general account in an amount
equal to the reserve liability applicable to the Policy held in the Account. Any
excess of the insurance amount over the Face Amount will be paid out of the
general account reserve maintained for that purpose.
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The death proceeds can be paid in a single sum or under one of the payment
options described in the prospectus for the Policy. The Policyowner may elect
how death proceeds are to be paid while the insured is alive. If no election is
in effect when the insured dies, the beneficiary makes the election. An option
in effect at death may not be changed after death. At least $5,000 must be
applied under each option selected, and periodic payments under a payment option
must be at least $50. Other restrictions and limitations are set forth in the
Policy and described in the prospectus.
IV. Deferment of Benefits
GIAC can delay the payment of death proceeds if the Policy is being
contested and may postpone calculating or paying any benefit or effecting other
Policy transactions involving any Policy Account Value held in the Separate
Account's investment divisions if: (i) the New York Stock Exchange is closed for
other than weekends or holidays, or trading is restricted; (ii) the Securities
and Exchange Commission determines that a state of emergency exists which may
make Policy transactions impracticable; or (iii) at any other time when one or
more of the Variable Investment Options' corresponding Funds lawfully suspends
payment or redemption of their shares.
V. Cash Adjustment Upon Exchange of Policy
The Policyowner may exchange all or a portion of the Policy for a
permanent fixed-benefit policy on the lives of the insureds offered by GIAC or
its affiliate, without submission of new evidence of insurability. Once
exercised, this right terminates. The new policy will have a Face Amount not in
excess of the Face Amount of the Policy being exchanged and not less than the
minimum face amount under GIAC's or its affiliate's rules. If only a portion of
the Policy is exchanged, the remaining face amount of this Policy must meet
GIAC's minimum face amount requirements. The new policy will have the same
Policy Date, and the insureds' Ages will be retained for the new policy. The
underwriting classes of the new policy will be comparable to the underwriting
classes of the most recent policy segment. This exchange privilege is designed
to permit a Policyowner to opt out of this Policy which provides benefits that
vary with investment results in order to obtain a similar policy which provides
a fixed benefit.
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The exchange may result in a cost or credit to be paid. The cost or credit
will reflect any differences in cash values and premiums between the exchanged
portion of the policy and the new policy.
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