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EXHIBIT 99.6
THE MANUFACTURERS INSURANCE COMPANY (U.S.A.)
DESCRIPTION OF PURCHASE, TRANSFER AND REDEMPTION PROCEDURES
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
(1933 FILE ACT NO. 333- )
This document sets forth, as required by Rule 6e-3(T)(b)(12)(iii), the
administrative procedures that will be followed by The Manufacturers
Insurance Company (U.S.A.) (the "Company") and any office the Company
designates for the receipt of payments and processing of policyowner
requests (the "Service Office") in connection with the issuance of its
flexible premium variable universal life insurance policies described
in this registration statement (1933 Act file no. 333- ) (the
"Policy"), the transfer of assets held thereunder, and the redemption
by policyowners of their interests in the Policy.
I. ISSUING A POLICY
A. PREMIUMS
This Policy is a flexible premium variable universal life
insurance policy. The Policy permits the policyowner to pay
flexible premiums. After payment of the initial premium,
premiums may be paid at any time and in any amount during
the lifetime of the insured. A Policy will be issued with a
planned premium, which is based on the amount of premium the
policyowner wished to pay. In no event may the total of all
premiums paid exceed the then-current maximum premium
limitations established by federal income tax law for
Policies that qualify as life insurance under the Guideline
Premium Test. If, at any time, a premium is paid which would
result in total premiums exceeding the above maximum premium
limitation, the Company will only accept that portion of the
premium which will make the total premiums equal to the
maximum. Any part of the premium in excess of that amount
will be returned and no further premiums will be accepted
until allowed by the then-current maximum premium
limitation. The Company also reserves the right to request
evidence of insurability of a premium payment would result
in an increase in the death benefit that is greater than the
increase in Policy Value.
B. UNDERWRITING
The acceptance of an application is subject to the Company's
underwriting rules, and the Company reserves the right to
request additional information or to reject an application
for any reason. The Company will require satisfactory
evidence of insurability. This may include medical exams and
other information. Persons failing to meet standard
underwriting classification may be eligible for a Policy
with an additional rating assigned to it.
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C. APPLICATION
To purchase a Policy, an applicant must submit a completed
application. A Policy will not be issued until the
underwriting process has been completed to the Company's
satisfaction.
Policies may be issued on a basis which does not distinguish
between the insured's sex, with prior approval from the
Company. Generally, a Policy will only be issued on the
lives of insureds from ages 0 through 90.
Each Policy is issued with a Policy Date, an Effective Date
and an Issue Date.
The POLICY DATE is the date coverage takes effect under the
Policy, provided the Company receives the minimum initial
premium at its Service Office, and is the date from which
the first monthly deductions are calculated and from which
Policy Years, Policy Months and Policy Anniversaries are
determined.
The EFFECTIVE DATE is the date the underwriters approve
issuance of the Policy. If the Policy is approved without
the initial premium, the Effective date will be the date the
Company receives at least the minimum initial premium at its
Service Office.
The ISSUE DATE is the date the Company issued the Policy. It
is the date from which the suicide and incontestability
provisions are measured.
If an application is accompanied by a check for the initial
premium and the application is accepted:
(i) the Policy Date will be the date the application and
check were received at the Service Office (unless a special
Policy Date is requested (See "Backdating a Policy" below);
(ii) the Effective Date will be the date the Company's
underwriters approve issuance of the Policy; and
(iii) the Issue Date will be the date the Company issues the
Policy.
If an application accepted by the Company is not accompanied
by a check for the initial premium:
(i) the Policy Date will be the date the Company issues the
Policy (unless a special Policy Date is requested (See
"Backdating a Policy" below);
(ii) the Effective Date will be the date the Service Office
receives the initial premium; and
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(iii) the Issue Date will be the date the Company issues the
Policy.
The initial premium must be received within 60 days after
the Policy Date. If the premium is not paid or if the
application is rejected, the Policy will be canceled and any
partial premiums paid will be returned to the applicant.
D. MINIMUM INITIAL FACE AMOUNT
The Company will generally issue a Policy only if it has a
Face Amount of at least $100,000.
E. BACKDATING A POLICY
Under limited circumstances, the Company may backdate a
Policy, upon request, by assigning a Policy Date earlier
than the date the application is signed. However, in no
event will a Policy be backdated earlier than the earliest
date allowed by state law, which is generally three months
to one year prior to the date of application for the Policy.
Monthly deductions will be made for the period the Policy
Date is backdated. Regardless of whether or not a policy is
backdated, Net Premiums (premium paid less premium load)
received prior to the Effective Date of a Policy will be
credited with interest from the date of receipt at the rate
of return then being earned on amounts allocated to the
Money Market portfolio. As of the Effective Date, the
premiums paid plus interest credited, net of the premium
load, will be allocated among the Investment Accounts (as
described below under ("Policy Value - Investment Accounts")
and/or Fixed Account in accordance with the policyowner's
instructions.
F. TEMPORARY INSURANCE
In accordance with the Company's underwriting practices,
temporary insurance coverage may be provided under the terms
of a Temporary Insurance Agreement. Generally, temporary
life insurance may not exceed $5,000,000 and may not be in
effect for more than 90 days. This temporary insurance
coverage will be issued on a conditional receipt basis,
which means that any benefits under such temporary coverage
will only be paid if the life insured meets the Company's
usual and customary underwriting standards for the coverage
applied for.
The acceptance of an application is subject to the Company's
underwriting rules, and the Company reserves the right to
request additional information or to reject an application
for any reason.
Persons failing to meet standard underwriting classification
may be eligible for a Policy with an additional rating
assigned to it.
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G. RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after
it is received. Some states provide a longer period of time
to exercise this right. The Policy will indicate if the
policyowner has a longer time. The Policy can be mailed or
delivered to the Company's agent who sold it or to the
Service Office. Immediately on such delivery or mailing, the
Policy shall be deemed void from the beginning. Within seven
days after receipt of the returned Policy at its Service
Office, the Company will refund to the policyowner in full
the payment made.
If a policyowner requests an increase in face amount which
results in new surrender charges, he or she will have the
same rights as described above to cancel the increase. If
canceled, the Policy Value and the surrender charges will be
recalculated to the amounts they would have been had the
increase not taken place. A policyowner may request a refund
of all or any portion of premiums paid during the free look
period, and the Policy Value and the surrender charges will
be recalculated to the amounts they would have been had the
premiums not been paid.
The Company reserves the right to delay the refund of any
premium paid by check until the check has cleared.
H. PREMIUM ALLOCATION
No premiums will be accepted prior to receipt of a completed
application by the Company. All premiums received prior to
the Effective Date of the Policy will be held in the general
account of the Company and credited with interest from the
date of receipt at the rate of return then being earned on
amounts allocated to the Money Market Trust.
On the Effective Date, the Net Premiums paid plus interest
credited will be allocated among the Investment Accounts or
the Fixed Account in accordance with the policyowner's
instructions.
All Net Premiums received on or after the Effective Date
will be allocated among Investment Accounts or the Fixed
Account as of the business day the premiums were received at
the Service Office. Monthly deductions are due on the Policy
Date and at the beginning of each policy month thereafter.
However, if due prior to the Effective Date, they will be
taken on the Effective Date instead of the dates they were
due.
Premiums may be allocated to either the Fixed Account for
accumulation at a rate of interest determined by the Company
(the rate of interest will be at least 4%) or to one or more
of the Investment Accounts for investment in the Portfolio
shares held by the corresponding sub-account of the Separate
Account. Allocations among the Investment Accounts and the
Fixed Account are made as
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a percentage of the premium. The percentage allocation to
any account may be any number between zero and 100, provided
the total allocation equals 100. A policyowner may change
the way in which premiums are allocated at any time without
charge. The change will take effect on the date a written
request for change satisfactory to the Company is received
at the Service Office.
II. DEATH BENEFIT OPTION CHANGES
The death benefit option may be changed on the first day of
any Policy month once each Policy Year after the first
Policy Year. The change will occur on the first day of the
next Policy month after a written request for a change is
received at the Service Office. The Company reserves the
right to limit a request for a change if the change would
cause the Policy to fail to qualify as life insurance for
tax purposes.
A change in the death benefit option will result in a change
in the Policy's Face Amount, in order to avoid any change in
the amount of the death benefit, as follows:
Change from Option 1 to Option 2
The new Face Amount will be equal to the Face Amount prior
to the change minus the Policy Value on the date of the
change. The Policy will not be assessed a surrender charge
for a reduction in Face Amount solely due to a change in the
death benefit option.
Change from Option 2 to Option 1
The new Face Amount will be equal to the Face Amount prior
to the change plus the Policy Value on the date of the
change. No new surrender charges will apply to an increase
in Face Amount solely due to a change in the death benefit
option.
III. FACE AMOUNT CHANGES
Subject to the limitations stated in the prospectus for the
Policy and stated in this memorandum, a policyowner may,
upon written request, increase or decrease the Face Amount
of the Policy. The Company reserves the right to limit a
change in Face Amount so as to prevent the Policy from
failing to qualify as life insurance for tax purposes.
A. INCREASE IN FACE AMOUNT
Increases in Face Amount are subject to satisfactory
evidence of insurability. An increase in Face Amount may be
made once each Policy Year after the first Policy Year. Any
increase in Face Amount must be at least $50,000. An
increase will become effective at the beginning of the
Policy Month following the date the Company approves the
requested increase. The Company reserves the right to refuse
a requested increase if the life insured's Attained Age
(life insured's age plus the number of whole years that have
elapsed since the Policy
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Date) at the effective date of the increase would be greater
than the maximum issue age for new Policies at that time.
B. NEW SURRENDER CHARGES FOR AN INCREASE
An increase in Face Amount will 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. There will be no new surrender
charges associated with restoration of a prior decrease in
Face Amount. As with the purchase of a Policy, a policyowner
will have free look right with respect to any increase
resulting in new surrender charges.
An additional premium may be required for a face amount
increase, and a new No-Lapse Guarantee Premium will be
determined, if the No-Lapse Guarantee is in effect at the
time of the face amount increase. (See "Lapse and
Reinstatement - No-Lapse Guarantee" below)
C. INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior
decreases in Face Amount, these prior decreases will be
restored first. The insurance coverage eliminated by the
decrease of the oldest Face Amount will be deemed to be
restored first.
D. DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year
after the first Policy Year. Any decrease in Face Amount
must be at least $50,000. A written request from a
policyowner for a decrease in the Face Amount will be
effective at the beginning of the Policy Month following the
date the Company approves the requested decrease. If there
have been previous increases in Face Amount, the decrease
will be applied to the most recent increase first and
thereafter to the next most recent increases successively.
IV. POLICY VALUE
A. DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available
to the policyowner by making a policy loan or partial
withdrawal, or upon surrender of the Policy. The Policy
Value may also affect the amount of the death benefit. The
Policy Value at any time is equal to the sum of the values
in the Investment Accounts, the Fixed Account, and the Loan
Account.
B. INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for
each sub-account of the Separate Account to which net
premiums or transfer amounts have been allocated. Each
Investment Account under a Policy measures the interest of
the Policy in the corresponding sub-account. The value of
the Investment Account established for a particular
sub-account is equal to the number of units of that
sub-account credited to the Policy times the value of such
units.
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C. FIXED ACCOUNT
Amounts in the Fixed Account do not vary with the investment
performance of any sub-account. Instead, these amounts are
credited with interest at a rate determined by the Company.
D. LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan
Account. Amounts in the Loan Account do not vary with the
investment performance of any sub-account. Instead, these
amounts are credited with interest at a rate which is equal
to the amount charged on the outstanding Policy Debt (the
aggregate amount of policy loans, including borrowed and
accrued interest, less any loan repayments) less the Loan
Spread set forth in the Policy. (See "Policy Loans -
Interested Credited to Loan Account" below)
E. UNITS AND UNIT VALUES
Crediting and Canceling Units
Units of a particular sub-account are credited to a Policy
when net premiums are allocated to that sub-account or
amounts are transferred to that sub-account. Units of a
sub-account are canceled whenever amounts are deducted,
transferred or withdrawn from the sub-account. The number of
units credited or canceled for a specific transaction is
based on the dollar amount of the transaction divided by the
value of the unit on the Business Day* on which the
transaction occurs. The number of units credited with
respect to a premium payment will be based on the applicable
unit values for the Business Day on which the premium is
received at the Service Office, except for any premiums
received before the Effective Date. For premiums received
before the Effective Date, the values will be determined on
the Effective Date.
Units are valued at the end of each Business Day. When an
order involving the crediting or canceling of units is
received after the end of a Business Day, or on a day which
is not a Business Day, the order will be processed on the
basis of unit values determined on the next Business Day.
Similarly, any determination of Policy Value, Investment
Account value or death benefit to be made on a day which is
not a Business Day will be made on the next Business Day.
*Business Day is any day that the New York Stock Exchange is
open for trading. The Company will deem each Business day to
end at the close of regularly scheduled trading of the New
York Stock Exchange (currently 4:00 p.m. Eastern Time) on
that day.
Unit Values
The value of a unit of each sub-account was initially fixed
at $10.00. For each subsequent Business Day the unit value
for that sub-account is determined by multiplying the unit
value for the immediately preceding Business Day by the net
investment factor for the that sub-account on such
subsequent Business Day.
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The net investment factor for a sub-account on any Business
Day is equal to (a) divided by (b), where:
(a) is the net asset value of the underlying Portfolio
shares of Manufacturers Investment Trust held by that
sub-account as of the end of such Business Day before any
policy transaction are made on that day; and
(b) is the net asset value of the underlying Portfolio
shares held by that sub-account as of the end of the
immediately preceding Business Day after all policy
transaction were made for that day.
The value of a unit may increase, decrease, or remain the
same, depending on the investment performance of a
sub-account from one Business Day to the next.
V. TRANSFER OF POLICY VALUE
A. GENERAL TRANSFERS
At any time, a policyowner may transfer Policy Value (the
sum of the values in the Loan Account, the Fixed Account and
the Investment Accounts) from one sub-account to another or
to the Fixed Account. Transfer requests must be in writing
in a format satisfactory to the Company, or by telephone if
a currently valid telephone transfer authorization form is
on file.
These transfer privileges are subject to the Company's
consent. The Company reserves the right to impose
limitations on transfers, including the maximum amount that
may be transferred. In addition, transfer privileges are
subject to any restrictions that may be imposed by
Manufacturers Investment Trust.
While the Policy is in force, the policyowner may transfer
the Policy Value from any of the Investment Accounts to the
Fixed Account without incurring transfer charges:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material
change in the investment objectives of any of the
sub-accounts or within 60 days of the date of
notification of such change, whichever is later.
A policyowner may make up to twelve transfers each policy
year free of charge. Additional transfers in each policy
year may be made at a cost of per transfer as set forth in
the currently effective prospectus. This charge will be
deducted from the Investment Account or the Fixed Account to
which the transfer is being made. All transfer requests
received by the Company on the same Business Day are treated
as a single transfer request.
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The maximum amount that may be transferred from the Fixed
Account in any one policy year is the greater of $500 or 15%
of the Fixed Account Value at the previous Policy
Anniversary. Any transfer which involves a transfer out of
the Fixed Account may not involve a transfer to the
Investment Account for the Money Market Trust.
Although failure to follow reasonable procedures may result
in the Company being liable for any losses resulting from
unauthorized or fraudulent telephone transfers,
Manufacturers Life of America will not be liable for
following instructions communicated by telephone that the
Company reasonably believes to be genuine. The Company will
employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures shall
consist of confirming that a valid telephone authorization
form is on file, tape recording of all telephone
transactions and providing written confirmation thereof.
VI. POLICY SURRENDER AND PARTIAL WITHDRAWALS
A. POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value
at any time while the life insured is living. The Net Cash
Surrender Value is equal to the Policy Value less any
surrender charges and outstanding monthly deductions due
(the "Cash Surrender Value") minus the Policy Debt. If there
have been any prior Face amount increases, the Surrender
Charge will be the sum of the Surrender Charge for the
Initial Face Amount plus the Surrender Charge for each
increase. The Net Cash Surrender Value will be determined at
the end of the Business Day on which the Company receives
the Policy and a written request for surrender at its
Service Office. After a Policy is surrendered, the insurance
coverage and all other benefits under the Policy will
terminate.
A policyowner may make a partial withdrawal of the Net Cash
Surrender Value once each Policy Month after the first
Policy Anniversary. The policyowner may specify the portion
of the withdrawal to be taken from each Investment Account
and the Fixed Account. In the absence of instructions, the
withdrawal will be allocated among such accounts in the same
proportion as the Policy Value in each account bears to the
Net Policy Value (Policy Value less the value in the Loan
Account).
If Death Benefit Option 1 is in effect when a partial
withdrawal is made, the Face Amount of the Policy will be
reduced by the amount of the withdrawal plus any applicable
Surrender Charges, unless satisfactory evidence of
insurability is provided.
If the death benefit is based upon the Policy Value times
the minimum death benefit percentage, the Face Amount will
be reduced only to the extent that the
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amount of the withdrawal plus the portion of the Surrender
Charge assessed exceeds the difference between the death
benefit and 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 in the same manner as a requested
decrease in Face Amount, i.e., against the Face Amount
provided by the most recent increase, then against the next
most recent increases successively and finally against the
initial Face Amount.
As long as the Policy is in force, the Company will
ordinarily pay any policy loans, surrenders, partial
withdrawals or insurance benefit within seven days after
receipt at its Service Office of all the documents required
for such a payment. The Company may delay the payment of any
policy loans, surrenders, partial withdrawals, or insurance
benefit that depends on Fixed Account values for up to six
months or in the case of any Investment Account for any
period during which (i) the New York Stock Exchange is
closed for trading (except for normal weekend and holiday
closings), (ii) trading on the New York Stock Exchange is
restricted (iii) an emergency exists as a result of which
disposal of securities held in the Separate Account is not
reasonably practicable or it is not reasonably practicable
to determine the value of the Separate Account's net assets
or (iv) the SEC, by order, so permits for the protection of
security holders; provided that applicable rules and
regulations of the SEC shall govern as to whether the
conditions described in (2) and (3) exist.
B. SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the
first 10 years following the Policy date, or the effective
date of a Face Amount increase:
- the Policy is surrendered for its Net Cash Surrender
Value,
- a partial withdrawal is made, or
- the Policy lapses.
Surrender Charge Calculation
The Surrender Charge for the initial Face Amount or for the amount of any
increase in Face Amount is determined by the following formula (the calculation
is also described in words below):
Surrender Charge = (Surrender Charge Rate)x(Face Amount associated with the
Surrender Charge/1000)x(Grading Percentage)
Surrender Charge Rate (the calculation is also described in words below)
Surrender Charge Rate = X + (80%)x(Surrender Charge Premium) where "X" is equal
to:
Table for Rate per $1,000 of Face Amount:
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<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Age Rate per $1,000 of Face Age Rate per $1,000 of Face
Amount Amount
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0 $2.00 18 $4.25
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1 2.13 19 4.38
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2 2.25 20 4.50
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3 2.38 21 5.00
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4 2.50 22 5.50
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5 2.63 23 6.00
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6 2.75 24 6.50
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7 2.88 25 7.00
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8 3.00 26 7.20
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9 3.13 27 7.40
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10 3.25 28 7.60
--------------------------------------------------------------------------------------------
11 3.38 29 7.80
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12 3.50 30 8.00
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13 3.63 31 8.04
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14 3.75 32 8.08
--------------------------------------------------------------------------------------------
15 3.88 33 8.12
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16 4.00 34 8.16
--------------------------------------------------------------------------------------------
17 4.13 35 + 8.20
--------------------------------------------------------------------------------------------
</TABLE>
DEFINITIONS OF THE FORMULA FACTORS ABOVE
FACE AMOUNT ASSOCIATED WITH SURRENDER CHARGE
The Face Amount associated with the Surrender Charge equals the Face Amount for
which the Surrender Charge is being applied. The Face Amount may be increased or
decreased as described under "Changing the Face Amount" above.
The SURRENDER CHARGE PREMIUM is the lesser of:
(a) the premiums paid during the first policy year per $1,000 of Face Amount or
Face Amount increase, and (b) the Surrender Charge Premium Limit specified in
the Policy per $1,000 of Face Amount.
GRADING PERCENTAGE
The grading percentages during the Surrender Charge Period and set forth in the
table below apply to the initial Face Amount and to all subsequent Face Amount
increases.
The grading percentage is based on the Policy Year in which the transaction
causing the assessment of the charge occurs as set forth in the table below:
SURRENDER CHARGE GRADING PERCENTAGE
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SURRENDER CHARGE SURRENDER CHARGE
PERIOD GRADING PERCENTAGE
----------------- ------------------------
1 100%
2 90%
3 80%
4 70%
5 60%
6 50%
7 40%
8 30%
9 20%
10 10%
11 0%
Within a Policy year, grading percentages will be interpolated on a monthly
basis. For example, if the policyowner surrenders the Policy four years and four
months after the Surrender Charge is assessed, the grading percentage will be
67.5%.
Surrender Charges on a Partial Withdrawal
A partial withdrawal will result in the assessment of a portion of the Surrender
Charges to which the Policy is subject. The portion of the Surrender Charges
assessed will be based on the ratio of the amount of the withdrawal to the Net
Cash Surrender Value of the Policy as at the date of the withdrawal. The
Surrender Charges will be deducted from the Policy Value at the time of the
partial withdrawal on a pro-rata basis from each of the Investment Accounts and
the Fixed Account. If the amount in the accounts is not sufficient to pay the
Surrender Charges assessed, then the amount of the withdrawal will be reduced.
Whenever a portion of the surrender charges are deducted as a result of a
partial withdrawal, the Policy's remaining surrender charges will be reduced in
the same proportion that the surrender charge deducted bears to the total
surrender charge immediately before the partial withdrawal.
VII. LAPSE AND REINSTATEMENT
A. LAPSE
Unless the No-Lapse Guarantee Cumulative Premium Test is satisfied, a Policy
will go into default if at the beginning of any Policy Month the Policy's Net
Cash Surrender Value would be zero or below after deducting the monthly
deduction then due. The Company will notify the policyowner of the default and
will allow a 61 day grace period in which the policyowner may make a premium
payment sufficient to bring the Policy out of default. The required payment will
be equal to the amount necessary to bring the Net Cash Surrender Value to zero,
if it was less than zero on the date of default, plus the monthly deductions due
at the date of default and payable at the beginning of each of the two Policy
Months thereafter, plus any applicable premium load. If the required payment is
not received by the end of the grace period, the Policy will terminate with no
value.
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Death During Grace Period
If the life insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding monthly
deductions due at the time of death.
No-Lapse Guarantee
In those states where it is permitted, as long as the No-Lapse Guarantee
Cumulative Premium Test is satisfied during the No-Lapse Guarantee Period, as
described below, the Company will guarantee that the Policy will not go into
default, even if adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a Policy Month.
The No-Lapse Guarantee Period is fixed at the lesser of ten years or age 95.
While the No-Lapse Guarantee is in effect, the Company will determine at the
beginning of the Policy Month that the Policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described in the Policy,
has been met. If it has not been satisfied, the Company will notify the
policyowner of that fact and allow a 61-day grace period in which the
policyowner may make a premium payment sufficient to keep the policy from going
into default. This required payment is described in the notification to the
policyowner.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee and the Policy will terminate.
B. REINSTATEMENT
A policyowner can reinstate a Policy which has terminated after going into
default at any time within 21 days following the date of termination subject to
the following conditions:
(a) the life insured's risk classification is standard or preferred, and
(b) the life insured's Attained Age is less than 46.
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) Evidence of the life insured's insurability, satisfactory to the Company, is
provided to the Company;
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the amount needed to keep the
Policy in force to the next scheduled date for payment of the Planned Premium
must be paid to the Company.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any surrender
charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the
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crediting of any Net Premium paid on the reinstatement, will be equal to the
Policy Value on the date the Policy terminated.
VIII. POLICY LOANS
While the Policy is in force and has an available loan value, a policyowner may
borrow against the Policy Value of the Policy. The Policy serves as the only
security for the loan.
A. AVAILABLE LOAN VALUE
The amount of any loan cannot exceed 90% of the Net Cash Surrender Value.
B. INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. During the first ten Policy Years, the rate of interest
charged will be an effective annual rate of 5.25%. Thereafter the rate of
interest charged will be an effective annual rate of 4%, subject to the
Company's reservation of the right to increase the rate if the Company
determines, in its sole discretion, that there is a substantial risk that a loan
will be treated as a taxable distribution under Federal tax law. If the interest
due on a Policy Anniversary is not paid by the policyowner, the interest will be
borrowed against the Policy.
C. LOAN ACCOUNT
When a loan is made, the amount necessary to cover the loan principal, plus loan
interest due to the next Policy Anniversary, will be deducted from the
Investment Accounts or the Fixed Account and transferred to the Loan Account.
The policyowner may designate how the amount to be transferred to the Loan
Account is allocated among the accounts from which the transfer is to be made.
In the absence of instructions, the amount to be transferred will be allocated
to each account in the same proportion as the value in each Investment Account
and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the cancellation of units of the underlying
sub-account equal in value to the amount transferred from the Investment
Account. However, since the Loan Account is part of the Policy Value, transfers
made in connection with a loan will not change the Policy Value.
D. INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 4.00%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Spread which is currently
1.25% and is guaranteed not to exceed 1.25%.
E. LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the life insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the Fixed
Account or the Investment Accounts. Loan repayments will be allocated first to
the Fixed Account until the associated Loan Sub-Account is reduced to zero and
then to each Investment Account in the same proportion as the value of the
corresponding Loan Sub-Account bears to the value of the Loan Account. Where
permitted by applicable state law, when a portion of the Loan Account amount is
allocated to the Fixed Account, the Company may require that any amounts paid to
it be applied to outstanding loan balances.
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Amounts paid to the Company not specifically designated in writing as loan
repayments will be treated as premiums.
