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As Filed with the Securities and Exchange Commission on December 22, 2000
Registration No. 333- ______
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
PEOPLES BENEFIT VARIABLE LIFE ACCOUNT A
(Exact name of trust)
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(Name of depositor)
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
(Complete address of depositor's principal executive offices)
(Name and complete address
of agent for service) Copy to:
John D. Cleavenger, Esq. Stephen E. Roth, Esq.
Peoples Benefit Life Insurance Company Sutherland Asbill & Brennan LLP
4333 Edgewood Road NE 1275 Pennsylvania Avenue, N.W.
Cedar Rapids, Iowa 52499 Washington, DC 20004-2415
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
Securities Being Offered: Flexible Premium Variable Life Insurance Policy
The Registrant hereby amends this Registration Statement on such dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment that 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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PART I
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====================================================
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Issued by
PEOPLES BENEFIT VARIABLE LIFE ACCOUNT A PROSPECTUS
PEOPLES BENEFIT LIFE INSURANCE COMPANY
4333 EDGEWOOD ROAD NE _______,2001
CEDAR RAPIDS, IOWA 52499
(319) 398-8511
====================================================
Peoples Benefit Life Insurance Company (the "Company") is offering the
flexible premium variable life insurance policy ("Policy") described in this
prospectus. Certain Policy provisions may vary based on the state where the
Company issues the Policy. The Policy is designed as a long-term investment
that attempts to provide significant life insurance benefits for the Insured.
This prospectus provides information that a prospective owner should know
before investing in the Policy. You should consider the Policy in conjunction
with other insurance you own.
You can allocate your Policy's values to:
- Peoples Benefit Variable Life Account A (the "Separate Account"),
which invests in the portfolios listed on this page; or
- a Fixed Account, which credits a specified rate of interest.
A prospectus for each of the portfolios available through the Separate Account
must accompany this prospectus. Please read these documents before investing
and save them for future reference.
PLEASE NOTE THAT THE POLICIES AND THE PORTFOLIOS:
- ARE NOT GUARANTEED TO ACHIEVE THEIR GOALS;
- ARE NOT FEDERALLY INSURED;
- ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY; AND
- ARE SUBJECT TO RISKS, INCLUDING LOSS OF THE AMOUNT INVESTED.
The following portfolios are available:
JANUS ASPEN SERIES
Janus Aspen Growth Portfolio (Service Shares)
Janus Aspen Worldwide Growth Portfolio
(Service Shares)
Janus Aspen Balanced Portfolio (Service Shares)
Janus Aspen Capital Appreciation Portfolio
(Service Shares)
Janus Aspen Aggressive Growth Portfolio
(Service Shares)
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Main Street Growth & Income
Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Strategic Bond Fund/VA
Oppenheimer High Income Fund/VA
FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
Fidelity VIP II Index 500 Portfolio (Service Class 2)
Fidelity VIP Money Market Portfolio (Service Class 2)
Fidelity VIP Growth Portfolio (Service Class 2)
Fidelity VIP II Contrafund(R) Portfolio
(Service Class 2)
Fidelity VIP III Growth & Income Portfolio
(Service Class 2)
=============================================================================
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THIS
POLICY OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C>
GLOSSARY..............................................................1
POLICY SUMMARY........................................................3
RISK SUMMARY..........................................................8
THE COMPANY AND THE FIXED ACCOUNT....................................10
PEOPLES BENEFIT LIFE INSURANCE COMPANY...........................10
THE FIXED ACCOUNT................................................10
THE SEPARATE ACCOUNT AND THE PORTFOLIOS..............................10
THE SEPARATE ACCOUNT.............................................10
THE PORTFOLIOS...................................................12
VOTING PORTFOLIO SHARES..........................................14
THE POLICY...........................................................15
PURCHASING A POLICY..............................................15
WHEN INSURANCE COVERAGE TAKES EFFECT.............................15
CANCELING A POLICY (FREE-LOOK RIGHT).............................16
OWNERSHIP RIGHTS.................................................17
SELECTING AND CHANGING THE BENEFICIARY.......................17
CHANGING THE OWNER...........................................17
ASSIGNING THE POLICY.........................................17
PREMIUMS.............................................................18
PREMIUM FLEXIBILITY..............................................18
ALLOCATING PREMIUMS..............................................19
POLICY VALUES........................................................20
POLICY VALUE.....................................................20
CASH SURRENDER VALUE.............................................20
SUBACCOUNT VALUE.................................................20
UNIT VALUE.......................................................21
FIXED ACCOUNT VALUE..............................................22
CHARGES AND DEDUCTIONS...............................................22
EXPENSE CHARGE...................................................22
MONTHLY DEDUCTION................................................23
COST OF INSURANCE............................................23
MONTHLY ADMINISTRATIVE CHARGE................................24
CHARGES FOR RIDERS...........................................24
CHARGES FOR A SUBSTANDARD PREMIUM CLASS RATING...............24
MORTALITY AND EXPENSE RISK CHARGE................................24
SURRENDER AND WITHDRAWAL CHARGES.................................24
TRANSFER CHARGE..................................................26
PORTFOLIO EXPENSES...............................................26
DEATH BENEFIT........................................................26
DEATH BENEFIT PROCEEDS...........................................26
DEATH BENEFIT OPTIONS............................................27
CHANGING DEATH BENEFIT OPTIONS...................................28
EFFECTS OF WITHDRAWALS ON THE DEATH BENEFIT......................28
CHANGING THE SPECIFIED AMOUNT....................................29
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</TABLE>
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<TABLE>
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<S> <C>
PAYMENT OPTIONS..................................................29
SURRENDERS AND PARTIAL WITHDRAWALS...................................30
SURRENDERS.......................................................30
WITHDRAWALS......................................................30
TRANSFERS............................................................31
EXCHANGE PRIVILEGE...............................................32
DOLLAR COST AVERAGING............................................32
ASSET REBALANCING PROGRAM........................................33
LOANS................................................................34
LOAN CONDITIONS..................................................34
EFFECT OF POLICY LOANS...........................................35
POLICY LAPSE AND REINSTATEMENT.......................................35
LAPSE............................................................35
REINSTATEMENT....................................................36
FEDERAL TAX CONSIDERATIONS...........................................36
OTHER POLICY INFORMATION.............................................39
OUR RIGHT TO CONTEST THE POLICY..................................39
SUICIDE EXCLUSION................................................39
MISSTATEMENT OF AGE OR SEX.......................................40
MODIFYING THE POLICY.............................................40
PAYMENTS WE MAKE.................................................40
REPORTS TO OWNERS................................................41
RECORDS..........................................................41
POLICY TERMINATION...............................................41
SUPPLEMENTAL BENEFITS AND RIDERS.................................41
PERFORMANCE DATA.....................................................43
ADDITIONAL INFORMATION...............................................49
SALE OF THE POLICIES.............................................49
LEGAL MATTERS....................................................49
LEGAL PROCEEDINGS................................................49
FINANCIAL STATEMENTS.............................................49
ADDITIONAL INFORMATION ABOUT THE COMPANY.........................50
PEOPLES BENEFIT'S EXECUTIVE OFFICERS AND DIRECTORS...............50
ILLUSTRATIONS........................................................52
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</TABLE>
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GLOSSARY
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AGE
The Insured's age on the Insured's last birthday.
BENEFICIARY
The person(s) you select to receive the death benefit proceeds under this
Policy.
CASH SURRENDER VALUE
The amount we pay when you surrender your Policy. It is equal to: (1) the
Policy Value as of the date of surrender; MINUS (2) any surrender charge;
MINUS (3) any Indebtedness.
COMPANY (WE, US, OUR, PEOPLES BENEFIT, HOME OFFICE)
Peoples Benefit Life Insurance Company, 4333 Edgewood Road NE, Cedar Rapids,
Iowa 52499, telephone: 319-398-8511.
CUMULATIVE MINIMUM MONTHLY PREMIUM
The sum of all Minimum Monthly Premiums beginning on the Policy Date.
DEATH BENEFIT PROCEEDS
The amount we pay to the beneficiary when we receive due proof of the
Insured's death. We deduct any Indebtedness or unpaid Monthly Deductions
before making any payment.
FIXED ACCOUNT
Part of our general account. Amounts allocated to the Fixed Account earn at
least 3% annual interest (4% for Policies issued in Florida).
FREE LOOK PERIOD
The period shown on your Policy's cover page during which you may examine and
return the Policy and receive a refund. The length of the free look period
varies by state.
GRACE PERIOD
A 61-day period after which a Policy will lapse if you do not make a
sufficient payment.
INDEBTEDNESS
The total amount of all outstanding Policy loans, including both principal and
interest due.
INSURED
The person whose life is Insured by this Policy.
INVESTMENT START DATE
The Investment Start Date is when we allocate amounts in the Premium Suspense
Account to the Subaccounts and the Fixed Account in accordance with your
allocation instructions. The Investment Start Date is the latest of: (a) the
date of the application; (b) the date all required medical examinations or
diagnostic tests are completed; (c) the date of issue requested in the
application unless underwriting is not yet completed; (d) the date of
underwriting approval; (e) the date we receive the first premium at our Home
Office; and (f) the date all other requirements are met.
LAPSE
A Policy that terminates without value after a grace period. You may reinstate
a lapsed Policy.
MATURITY DATE
The first Policy anniversary after the Insured's 100th birthday. You may elect
to continue the Policy beyond Insured's age 100 under the extended Maturity
Date option.
MINIMUM MONTHLY PREMIUM
This is the amount necessary to guarantee coverage for a No-Lapse Period. It
is shown on your Policy's specification page.
MONTHLY DATE
This is the same day as the Policy Date in each successive month. If there is
no day in a calendar month that coincides with the Policy Date, or if that day
falls on a day that is not a Valuation Date, then the Monthly Date is the next
Valuation Date. On each Monthly Date, we determine Policy charges and deduct
them from the Policy Value.
MONTHLY DEDUCTION
This is the monthly amount we deduct from the Policy Value. The Monthly
Deduction includes the cost of insurance charge, the administrative charge, a
charge for any riders, and any charges for a substandard premium class rating.
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NO-LAPSE PERIOD
A period you choose on the Policy application (5 Policy Years, 20 Policy
Years, 30 Policy Years, or to Insured's age 100) during which the Policy will
not enter a grace period if on a Monthly Date the sum of premiums paid, less
any withdrawals and Indebtedness, equals or exceeds the Cumulative Minimum
Monthly Premium.
OWNER (YOU, YOUR)
The person entitled to exercise all rights as Owner under the Policy.
POLICY DATE
The Policy Date is shown on the Policy's specifications page, and we use it to
measure Policy months, years and anniversaries. We begin to deduct the Monthly
Deductions on the Policy Date. Coverage is effective as of the Policy Date
once all requirements have been met.
POLICY VALUE
The sum of your Policy's value in the Subaccounts and the Fixed Account
(including amounts held in the Fixed Account to secure any loans).
PREMIUMS
All payments you make under the Policy other than repayments of Indebtedness.
PREMIUM SUSPENSE ACCOUNT
A temporary holding account where we place all premiums we receive prior to
the Investment Start Date. The Premium Suspense Account does not credit any
interest or investment return.
SEPARATE ACCOUNT
Peoples Benefit Variable Life Account A. It is a separate investment account
that is divided into Subaccounts, each of which invests in a corresponding
portfolio.
SEPARATE ACCOUNT VALUE
The total value of your Policy allocated to the Subaccounts of the Separate
Account.
SPECIFIED AMOUNT
The dollar amount of insurance selected by the Owner. The Specified Amount may
be increased or decreased after issue. The Specified Amount is a factor in
determining the Policy's death benefit and surrender charge.
SUBACCOUNT
A subdivision of Peoples Benefit Variable Life Account A. We invest each
Subaccount's assets exclusively in shares of one investment portfolio.
SURRENDER
To cancel the Policy by signed request from the Owner.
VALUATION DATE
Each day that both the New York Stock Exchange and the Company are open for
business, except for any days when a Subaccount's corresponding investment
portfolio does not value its shares. As of the date of this prospectus: the
Company is open whenever the New York Stock Exchange is open; and there is no
day when both the New York Stock Exchange and the Company are open for
business but an investment portfolio does not value its shares.
VALUATION PERIOD
The period beginning at the close of business of the New York Stock Exchange
on one Valuation Date and continuing to the close of business on the next
Valuation Date.
WRITTEN NOTICE
The Written Notice you must sign and send us to request or exercise your
rights as Owner under the Policy. To be complete, each Written Notice must:
(1) be in a form we accept, (2) contain the information and documentation that
we determine in our sole discretion is necessary for us to take the action you
request or for you to exercise the right specified, and (3) be received at our
Home Office.
YOU (YOUR, OWNER)
The person entitled to exercise all rights as Owner under the Policy.
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POLICY SUMMARY
===========================================================================
This summary describes the Policy's important features and corresponds to
prospectus sections that discuss the topics in more detail. The Glossary
defines certain words and phrases used in this prospectus.
PREMIUMS
- You can select a premium payment plan (monthly, quarterly, semi-annually,
or annually) but you are not required to pay premiums according to the
plan. The initial premium is due on or before the Policy Date.
Thereafter, you may make subsequent premium payments, in any frequency or
amount, at any time before the Maturity Date. We will not accept any
premiums after the Maturity Date.
- In your application, you must select one of the No-Lapse Periods we
offer: 5 Policy Years; 20 Policy Years; 30 Policy Years; or to Insured's
age 100. We will establish a Minimum Monthly Premium amount for your
Policy based on the Insured's age, sex, premium class, Specified Amount,
riders, death benefit option and the selected No-Lapse Period. The
Minimum Monthly Premium under your Policy is the amount necessary to
guarantee insurance coverage for the No-Lapse Period you select. Longer
No-Lapse Periods require higher Minimum Monthly Premiums.
- We will notify you if your Policy enters a 61-day grace period. Your
Policy will lapse if you do not make a sufficient payment before the end
of the grace period.
If your Policy is in the No-Lapse Period you have selected, then the
Policy will enter a 61-day grace period only if on a Monthly Date the
Cash Surrender Value is not enough to pay the next Monthly Deduction due,
AND the sum of premiums paid minus withdrawals and Indebtedness is less
than the Cumulative Minimum Monthly Premium.
If your Policy is not in the No-Lapse Period you have selected, then your
Policy will enter a 61-day grace period only if the Cash Surrender Value
on any Monthly Date is not enough to pay the next Monthly Deduction due.
- When you receive your Policy, the 10-day FREE LOOK PERIOD begins (the
free look period may be longer in some states). You may return the Policy
during the free look period and receive a refund of all payments you made
(less any withdrawals and Indebtedness).
- We multiply each premium you pay by the expense charge, deduct that
charge, and credit the resulting amount (the net premium) to the Policy
Value.
INVESTMENT OPTIONS
FIXED ACCOUNT:
- You may place money in the Fixed Account where it earns at least 3%
annual interest (4% for Policies issued in Florida). We may declare
higher rates of interest, but are not obligated to do so.
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SEPARATE ACCOUNT:
- You may direct the money in your Policy to any of the Subaccounts of the
Separate Account. WE DO NOT GUARANTEE ANY MONEY YOU PLACE IN THE
SUBACCOUNTS. THE VALUE OF EACH SUBACCOUNT WILL INCREASE OR DECREASE,
DEPENDING ON THE INVESTMENT PERFORMANCE OF THE CORRESPONDING PORTFOLIO.
YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
- Each Subaccount invests exclusively in one of the following investment
portfolios:
<TABLE>
<CAPTION>
- JANUS ASPEN SERIES - OPPENHEIMER VARIABLE ACCOUNT FUNDS
<S> <C>
Janus Aspen Growth Portfolio Oppenheimer Main Street Growth & Income
(Service Shares) Fund/VA
Janus Aspen Worldwide Growth Oppenheimer Multiple Strategies Fund/VA
Portfolio (Service Shares) Oppenheimer Bond Fund/VA
Janus Aspen Balanced Portfolio Oppenheimer Strategic Bond Fund/VA
(Service Shares) Oppenheimer High Income Fund/VA
Janus Aspen Capital Appreciation
Portfolio (Service Shares)
Janus Aspen Aggressive Growth
Portfolio (Service Shares)
- AIM VARIABLE INSURANCE FUNDS - FIDELITY VARIABLE INSURANCE PRODUCTS FUNDS
AIM V.I. Capital Appreciation Fund Fidelity VIP II Index 500 Portfolio
AIM V.I. Government Securities Fund (Service Class 2)
AIM V.I. Growth Fund Fidelity VIP Money Market Portfolio
AIM V.I. International Equity Fund (Service Class 2)
AIM V.I. Value Fund Fidelity VIP Growth Portfolio (Service Class 2)
Fidelity VIP II Contrafund(R) Portfolio
(Service Class 2)
Fidelity VIP III Growth & Income Portfolio
(Service Class 2)
</TABLE>
See "The Company and the Fixed Account," and "The Separate Account and the
Portfolios."
POLICY VALUE
- Policy Value is the sum of your amounts in the Subaccounts and the Fixed
Account. Policy Value is the starting point for calculating important
values under the Policy, such as the Cash Surrender Value and the death
benefit.
- Policy Value varies from day to day, depending on the investment
experience of the Subaccounts you choose, interest we credit to the Fixed
Account, charges we deduct, and any other transactions (e.g., transfers,
withdrawals, and loans). WE DO NOT GUARANTEE A MINIMUM POLICY VALUE.
- Prior to the Investment Start Date, we allocate the net premiums to the
Premium Suspense Account. On the first Valuation Date on or following the
Investment Start Date, we will transfer the amounts in
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the Premium Suspense Account to the Subaccounts and the Fixed Account
according to your allocation percentages.CHARGES AND DEDUCTIONS
- EXPENSE CHARGE: We multiply each premium by an expense charge, deduct that
charge, and credit the remaining amount (the net premium) to your Policy
Value according to your allocation instructions. The expense charge varies
by Policy Year as follows:
Premiums paid DURING the first 10 Policy Years: expense charge = 5%
Premiums paid AFTER the first 10 Policy Years: expense charge =
currently 2.5% (maximum 5%).
- MONTHLY DEDUCTION. On the Policy Date and on each Monthly Date
thereafter, we deduct:
- a cost of insurance charge for the Policy
- a $10 monthly administrative charge
- charges for any riders
- any charges for a substandard premium class rating
SURRENDER AND WITHDRAWAL CHARGES:
- Surrender: During the first 19 Policy Years, we deduct a surrender
charge that varies based on your age, sex, premium class, and initial
Specified Amount. A separate surrender charge applies for 19 years after
any Specified Amount increase. See "Charges and Deductions -- Surrender
and Withdrawal Charges" for a table showing surrender charges for sample
Insureds and premium classes.
- Withdrawals: For each withdrawal, we deduct (from the remaining Policy
Value) a fee equal to the lesser of $25 or 2% of the amount withdrawn.
- MORTALITY AND EXPENSE RISK CHARGE: We deduct a daily charge equal to
0.75% (at an annual rate) of the average net assets of the Separate
Account.
- TRANSFER CHARGE: We assess a $25 fee for the 13th and each additional
transfer among the Subaccounts or the Fixed Account in a Policy Year.
- PORTFOLIO EXPENSES: The portfolios deduct investment advisory fees and
other expenses from the amounts the Subaccounts invest in the portfolios.
These fees and expenses (shown in the following table) vary by portfolio
and currently range from 0.55% to 0.97% per year of the average portfolio
assets.
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The following table shows the fees and expenses charged by the portfolios. The
purpose of the table is to assist you in understanding the various costs and
expenses that you will bear directly and indirectly. The table reflects
charges and expenses of the portfolios for the fiscal year ended December 31,
1999. Expenses of the portfolios may be higher or lower in the future. Please
refer to the portfolios' prospectuses for more information on the management
fees.
ANNUAL PORTFOLIO OPERATING EXPENSES (As a percentage of average portfolio
assets before fee waivers and expense reimbursements)
<TABLE>
<CAPTION>
2000
----
MANAGEMENT DISTRIBUTION OTHER
PORTFOLIO/FUND NAME FEES FEES EXPENSES TOTAL
------------------- ---- ---- -------- -----
<S> <C> <C> <C> <C>
Janus Aspen Growth Portfolio (Service Shares) (1) 0.65% 0.25% 0.02% 0.92%
Janus Aspen Worldwide Growth Portfolio (Service Shares)(1) 0.65% 0.25% 0.05% 0.95%
Janus Aspen Balanced Portfolio (Service Shares) (1) 0.65% 0.25% 0.02% 0.92%
Janus Aspen Capital Appreciation Portfolio (Service Shares)(1) 0.65% 0.25% 0.04% 0.94%
Janus Aspen Aggressive Growth Portfolio (Service Shares)(1) 0.65% 0.25% 0.02% 0.92%
AIM V.I. Capital Appreciation Fund 0.62% 0.00% 0.11% 0.73%
AIM V.I. Government Securities Fund 0.50% 0.00% 0.40% 0.90%
AIM V.I. Growth Fund 0.63% 0.00% 0.10% 0.73%
AIM V.I. International Equity Fund 0.75% 0.00% 0.22% 0.97%
AIM V.I. Value Fund 0.61% 0.00% 0.15% 0.76%
Oppenheimer Main Street Growth & Income Fund/VA 0.73% 0.00% 0.05% 0.78%
Oppenheimer Multiple Strategies Fund/VA 0.72% 0.00% 0.01% 0.73%
Oppenheimer Bond Fund/VA 0.72% 0.00% 0.01% 0.73%
Oppenheimer Strategic Bond Fund/VA 0.74% 0.00% 0.04% 0.78%
Oppenheimer High Income Fund/VA 0.74% 0.00% 0.01% 0.75%
Fidelity VIP II Index 500 Portfolio (Service Class 2)(2) 0.24% 0.25% 0.11% 0.60%
Fidelity VIP Money Market Portfolio (Service Class 2)(2) 0.18% 0.25% 0.12% 0.55%
Fidelity VIP Growth Portfolio (Service Class 2)(2) 0.58% 0.25% 0.10% 0.93%
Fidelity VIP II Contrafund(R) Portfolio (Service Class 2)(2) 0.58% 0.25% 0.12% 0.95%
Fidelity VIP III Growth & Income Portfolio (Service Class 2)(2) 0.48% 0.25% 0.13% 0.86%
AVERAGE 0.82%
-------
RANGE 0.55% TO 0.97%
----- --
</TABLE>
(1) Expenses are based upon the estimated expenses that the new Service Shares
class of each portfolio expects to incur in its initial fiscal year. All
expenses are shown without the effect of any expense offset arrangement.
(2) These fees are without reimbursement and expense reductions for the period
ended 12/31/99. Services Class 2 expenses are based on estimated expenses for
the first year.
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SURRENDERS AND WITHDRAWALS
- SURRENDER: At any time while the Policy is in force, you may make a
written request to surrender your Policy and receive the Cash Surrender
Value (i.e., the Policy Value on the date of surrender minus any surrender
charge, and minus any Indebtedness).
- WITHDRAWALS: After the 1st Policy Year, you may make a written request to
withdraw part of the Policy Value, subject to the following rules.
Withdrawals may have tax consequences.
- You may make one withdrawal in a Policy Year.
- You must request at least $500;
- If you request a withdrawal that will leave a Cash Surrender Value of
less than $500, we will treat it as a surrender request; and
- For each withdrawal, we deduct a fee equal to the lesser of $25 or 2% of
the amount withdrawn.
DEATH BENEFITS
- You must choose between two death benefit options under the Policy. After
the first Policy Year, you may change death benefit options once each
12-month period. We calculate the amount under each death option as of the
Insured's date of death. See "Death Benefit Options."
> LEVEL DEATH BENEFIT is equal to the greater of:
the Specified Amount (which is the amount of insurance the
owner selects); OR
the Policy Value multiplied by the applicable Death Benefit
Ratio.
> INCREASING DEATH BENEFIT is equal to the greater of :
the Specified Amount PLUS the Policy Value; OR
the Policy Value multiplied by the applicable Death Benefit
Ratio.
TRANSFERS
- You may make an unlimited number of transfers among the Subaccounts and
the Fixed Account.
- The minimum amount you may transfer from a Subaccount or the Fixed Account
is the lesser of $100, or the total value in the Subaccount or Fixed
Account.
- We charge $25 per transfer for the 13th and each additional transfer
during a Policy Year.
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LOANS
- You may take a loan (minimum $250) from your Policy at any time. The
maximum loan amount you may take is 90% (100% in certain states) of the
Cash Surrender Value, minus 6 months of Monthly Deductions. Loans may have
tax consequences.
- As collateral for the loan, we transfer an amount equal to the loan plus
interest in advance until the next Policy Anniversary from the Separate
Account and Fixed Account to the loan reserve (part of our Fixed Account).
We credit interest on amounts in the loan reserve and we guarantee that
the annual rate will not be lower than 3% (4% in Florida).
- We charge you a maximum annual interest rate of 5.66% in advance on your
loan. Interest is due and payable at the beginning of each Policy Year.
Unpaid interest becomes part of the outstanding loan and accrues interest
if it is not paid before the beginning of the next Policy Year.
- After the 10th Policy Year, we consider certain portions of the loan
amount to be preferred loans. The maximum preferred loan available in each
Policy Year is 25% of the Policy Value (subject to the maximum loan
amount). We charge an annual interest rate of 3.85% in advance on
preferred loan amounts.
- You may repay all or part of your Indebtedness at any time. Loan
repayments must be at least $25, unless the loan amount is less than $25,
in which case full payment is required. The payment must be clearly marked
as "loan repayments" or we will credit them as premiums.
- We deduct any unpaid Indebtedness from the proceeds payable on the
Insured's death.
RISK SUMMARY
===========================================================================
<TABLE>
<CAPTION>
The following are some of the risks associated with the Policy.
<S> <C>
INVESTMENT If you invest your Policy Value in one or more Subaccounts,
RISK then you will be subject to the risk that investment
performance will be unfavorable and that the Policy Value
will decrease. You COULD lose everything you invest. If you
allocate net premiums to the Fixed Account, then we credit
your Policy Value (in the Fixed Account) with a declared
rate of interest, but you assume the risk that the rate may
decrease, although it will never be lower than a guaranteed
minimum annual effective rate of3%.
-----------------------------------------------------------------------------
RISK OF If your Policy fails to meet certain conditions, we will
LAPSE notify you that the Policy has entered a 61-day grace
period and will lapse unless you make a sufficient payment
during the grace period. You may reinstate a lapsed Policy.
If your Policy is in the selected No-Lapse Period, then the
Policy will enter a grace period only if on a Monthly Date
the Cash Surrender Value is not enough to pay the next
Monthly Deduction due, AND the sum of premiums paid minus
withdrawals and Indebtedness is less than the Cumulative
Minimum Monthly Premium.
</TABLE>
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<TABLE>
<S> <C>
If your Policy is not in the selected No-Lapse Period, then
your Policy will enter a grace period only if the Cash
Surrender Value on a Monthly Date is not enough to pay the
next Monthly Deduction due.
Your Policy also may lapse (whether or not you are in the
selected No-lapse Period) if your Indebtedness reduces the
Cash Surrender Value to zero.
-----------------------------------------------------------------------------
TAX RISKS We anticipate that the Policy will generally be deemed a
life insurance contract under Federal tax law, so that the
death benefit paid to the beneficiary will not be subject
to Federal income tax. However, there is more uncertainty
with respect to Policies issued on a substandard premium
class basis and Policies with a Level One-Year Term
Insurance Rider attached. Depending on the total amount of
premiums you pay, the Policy may be treated as a modified
endowment contract ("MEC") under Federal tax laws. If a
Policy is treated as a MEC, then surrenders, partial
withdrawals, and loans under a Policy will be taxable as
ordinary income to the extent there are earnings in the
Policy. In addition, a 10% penalty tax may be imposed on
surrenders, partial withdrawals, and loans taken before you
reach age 59 1/2. You should consult a qualified tax
advisor for assistance in all Policy-related tax matters.
-----------------------------------------------------------------------------
SURRENDER The surrender charge under this Policy applies for 19
RISKS Policy Years after the Policy Date. An additional surrender
charge will be applicable for 19 years from the date of any
increase in the Specified Amount. It is possible that you
will receive no Cash Surrender Value if you surrender your
Policy in the first few Policy Years. You should purchase
this Policy only if you have the financial ability to keep
it in force for a substantial period of time.
Even if you do not ask to surrender your Policy, surrender
charges may play a role in determining whether your Policy
will lapse, because surrender charges affect the Cash
Surrender Value which is a measure we use to determine
whether your Policy will enter a grace period (and possibly
lapse). See "Risk of Lapse," above.
-----------------------------------------------------------------------------
LOAN RISKS A Policy loan, whether or not repaid, will affect Policy
Value over time because we subtract the amount of the loan
from the Subaccounts and Fixed Account as collateral, and
the loan collateral does not participate in the investment
results of the Subaccounts or receive any higher current
interest rate credited to the Fixed Account.
We reduce the amount we pay on the Insured's death by the
amount of any Indebtedness. Your Policy may lapse if your
Indebtedness reduces the Cash Surrender Value to zero.
-----------------------------------------------------------------------------
</TABLE>
9
<PAGE> 15
THE COMPANY AND THE FIXED ACCOUNT
=============================================================================
PEOPLES BENEFIT LIFE INSURANCE COMPANY
Peoples Benefit Life Insurance Company is the insurance company issuing the
Policy. Peoples Benefit was incorporated in 1920 and redomiciled under Iowa
law on December 31, 1999, and is a wholly owned indirect subsidiary of AEGON
USA, Inc. Peoples Benefit established the Separate Account to support the
investment options under this Policy and under other variable life insurance
policies we may issue. Our general account supports the Fixed Account options
under the Policy.
IMSA. Peoples Benefit is a member of the Insurance Marketplace Standards
Association ("IMSA"). IMSA members subscribe to a set of ethical standards
involving the sales and service of individually sold life insurance and
annuities. As a member of IMSA, Peoples Benefit may use the IMSA logo and
language in advertisements.
THE FIXED ACCOUNT
The Fixed Account is part of our general account. We own the assets in the
general account and we use these assets to support our insurance and annuity
obligations other than those funded by our separate investment accounts.
Subject to applicable law, the Company has sole discretion over investment of
the Fixed Account's assets. The Company bears the full investment risk for all
amounts allocated or transferred to the Fixed Account. We guarantee that the
amounts allocated to the Fixed Account will be credited interest daily at a
net effective annual interest rate of at least 3% (4% for Policies issued in
Florida). We will determine any interest rate credited in excess of the
guaranteed rate at our sole discretion.
WE HAVE NOT REGISTERED THE FIXED ACCOUNT WITH THE SECURITIES AND EXCHANGE
COMMISSION AND THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
REVIEWED THE DISCLOSURE IN THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT.
THE SEPARATE ACCOUNT AND THE PORTFOLIOS
=============================================================================
THE SEPARATE ACCOUNT
We established Peoples Benefit Variable Life Account A as a separate
investment account under Iowa law on October 6, 2000. We own the assets in the
Separate Account and we are obligated to pay all benefits under the Policies.
We may use the Separate Account to support other variable life insurance
policies we issue. The Separate Account is registered with the Securities and
Exchange Commission as an unit investment trust under the Investment Company
Act of 1940 and qualifies as a "separate account" within the meaning of the
Federal securities laws.
We have divided the Separate Account into Subaccounts, each of which invests
in shares of one portfolio among the following mutual funds:
10
<PAGE> 16
- Janus Aspen Series (managed by Janus Capital Corporation)
- AIM Variable Insurance Funds (managed by A I M Advisors, Inc.)
- Oppenheimer Variable Account Funds (managed by OppenheimerFunds,
Inc.)
- Fidelity Variable Insurance Products Funds (managed by Fidelity
Management & Research Company)
The Subaccounts buy and sell portfolio shares at net asset value. Any
dividends and distributions from a portfolio are reinvested at net asset value
in shares of that portfolio.
Income, gains, and losses credited to, or charged against, a Subaccount of the
Separate Account reflect the Subaccount's own investment experience and not
the investment experience of our other assets. We may not use the Separate
Account's assets to pay any of our liabilities other than those arising from
the Policies. If the Separate Account's assets exceed the required reserves
and other liabilities, we may transfer the excess to our general account.
The Separate Account may include other Subaccounts that are not available
under the Policies and are not discussed in this prospectus. Where permitted
by applicable law, we reserve the right to:
1. Create new separate accounts;
2. Combine the Separate Account with other separate accounts;
3. Remove, combine or add Subaccounts and make the new Subaccounts
available to you at our discretion;
4. Make new portfolios available under the Separate Account or
remove existing portfolios;
5. Substitute new portfolios for any existing portfolios if shares
of a portfolio are no longer available for investment or if we
determine that investment in a portfolio is no longer
appropriate in light of the Separate Account's purposes;
6. Deregister the Separate Account under the Investment Company
Act of 1940 if such registration is no longer required;
7. Operate the Separate Account as a management investment company
under the Investment Company Act of 1940, or as any other form
permitted by law;
8. Manage the Separate Account under the direction of a committee
at any time;
9. Fund additional classes of variable life insurance contracts
through the Separate Account; and
10. Make any changes required by the Investment Company Act of 1940
or any other law.
We will not make any such changes without receiving any necessary approval of
the Securities and Exchange Commission and applicable state insurance
departments. We will notify you of any changes.
11
<PAGE> 17
THE PORTFOLIOS
The Separate Account invests in shares of certain portfolios. Each portfolio
is part of a mutual fund that is registered with the Securities and Exchange
Commission as an open-end management investment Company. Such registration
does not involve supervision of the management or investment practices or
policies of the portfolios by the Securities and Exchange Commission.
Each portfolio's assets are held separate from the assets of the other
portfolios, and each portfolio has investment objectives and policies that are
different from those of the other portfolios. Thus, each portfolio operates as
a separate investment fund, and the income or losses of one portfolio
generally have no effect on the investment performance of any other portfolio.
Pending any prior approval by a state insurance regulatory authority, certain
Subaccounts and corresponding portfolios may not be available to residents of
some states.
The following table summarizes each portfolio's investment objective(s) and
policies. THERE IS NO ASSURANCE THAT ANY OF THE PORTFOLIOS WILL ACHIEVE ITS
STATED OBJECTIVE(s). You can find more detailed information about the
portfolios, including a description of risks, in the prospectuses for the
portfolios. You should read these prospectuses carefully.
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
<S> <C>
JANUS ASPEN GROWTH [X] Seeks long-term growth of capital in a manner
(Service Shares) consistent with the preservation of capital.
Invests primarily in common stocks of issuers
of any size.
JANUS ASPEN [X] Seeks long-term growth of capital in a manner
WORLDWIDE GROWTH consistent with the preservation of capital.
(Service Shares) Invests primarily in common stocks of foreign
and domestic issuers of any size.
JANUS ASPEN BALANCED [X] Seeks long-term capital growth, consistent with
(Service Shares) preservation of capital and balanced by current
income.
JANUS ASPEN CAPITAL
APPRECIATION [X] Seeks long-term growth of capital. Invests in
(Service Shares) common stocks of issuers of any size.
JANUS ASPEN [X] Seeks long-term growth of capital. Normally
AGGRESSIVE GROWTH invests at least 50% of its equity assets in
(Service Shares) securities issued by medium-sized companies.
AIM V.I. CAPITAL [X] Seeks to provide growth of capital.
APPRECIATION FUND
AIM V.I. GOVERNMENT [X] Seeks to achieve a high level of current income
SECURITIES FUND consistent with reasonable concern for safety
of principal.
</TABLE>
12
<PAGE> 18
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
<S> <C>
AIM V.I. GROWTH FUND [X] Seeks to provide growth of capital.
AIM V.I. INTERNATIONAL [X] Seeks to provide long-term growth of capital.
EQUITY FUND
AIM V.I. VALUE FUND [X] Seeks to achieve long-term growth of capital.
OPPENHEIMER MAIN [X] Seeks a high total return (which includes
STREET GROWTH & growth in the value of its shares as well as
INCOME/VA current income) from equity and debt
securities.
OPPENHEIMER MULTIPLE [X] Seeks a high total investment return which
STRATEGIES/VA includes current income and capital
appreciation in the value of its shares.
OPPENHEIMER [X] Seeks a high level of current income as its
BOND/VA primary objective. As a secondary objective,
seeks capital appreciation when consistent with
its primary objective.
OPPENHEIMER [X] Seeks a high level of current income
STRATEGIC BOND/VA principally derived from interest on debt
securities.
OPPENHEIMER HIGH [X] Seeks a high level of current income from
INCOME/VA investment in high-yield, fixed-income
securities. Investments include unrated
securities or high-risk securities in the lower
rating categories, commonly known as "junk
bonds," which are subject to a greater risk of
loss of principal and nonpayment of interest
than higher-rated securities.
FIDELITY INDEX 500 [X] Seeks to provide investment results that
(SERVICE CLASS 2) correspond to the total return of a broad range
of common stocks publicly traded in the United
States, as represented by the Standard &
Poor's(R) Composite Index of 500 Stocks.
FIDELITY MONEY MARKET [X] Seeks to earn a high level of current income
(SERVICE CLASS 2) while maintaining a stable $1.00 share price by
investing in high-quality, short-term
securities.
FIDELITY GROWTH [X] Seeks capital appreciation by investing
(SERVICE CLASS 2) primarily in common stocks.
FIDELITY CONTRAFUND(R) [X] Seeks capital appreciation by investing in
(SERVICE CLASS 2) securities of companies whose value the adviser
believes is not fully recognized by the public.
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
PORTFOLIO INVESTMENT OBJECTIVE
--------- --------------------
<S> <C>
FIDELITY GROWTH & [X] Seeks high total return through a combination
INCOME (SERVICE CLASS 2) of current income and capital appreciation.
</TABLE>
In addition to the Separate Account, the portfolios may sell shares to other
separate investment accounts established by other insurance companies to
support variable annuity contracts and variable life insurance policies or
qualified retirement plans. It is possible that, in the future, it may become
disadvantageous for variable life insurance separate accounts and variable
annuity separate accounts to invest in the portfolios simultaneously. Although
neither the Company nor the portfolios currently foresee any such
disadvantages, either to variable life insurance policy owners or to variable
annuity contract owners, each portfolio's Board of Directors (Trustees) will
monitor events in order to identify any material conflicts between the
interests of such variable life insurance policy owners and variable annuity
contract owners, and will determine what action, if any, it should take. Such
action could include the sale of portfolio shares by one or more of the
separate accounts, which could have adverse consequences. Material conflicts
could result from, for example, (1) changes in state insurance laws, (2)
changes in Federal income tax laws, or (3) differences in voting instructions
between those given by variable life insurance policy owners and those given
by variable annuity contract owners.
If a portfolio's Board of Directors (Trustees) were to conclude that separate
portfolios should be established for variable life insurance and variable
annuity separate accounts, we will bear the attendant expenses, but variable
life insurance policy owners and variable annuity contract owners would no
longer have the economies of scale resulting from a larger combined portfolio.
THESE PORTFOLIOS ARE NOT AVAILABLE FOR PURCHASE DIRECTLY BY THE GENERAL
PUBLIC, AND ARE NOT THE SAME AS OTHER MUTUAL FUND PORTFOLIOS WITH VERY SIMILAR
OR NEARLY IDENTICAL NAMES THAT ARE SOLD DIRECTLY TO THE PUBLIC. However, the
investment objectives and policies of certain portfolios available under the
Policy are very similar to the investment objectives and policies of other
portfolios that are or may be managed by the same investment adviser or
manager. Nevertheless, the investment performance and results of the
portfolios available under the Policy may be lower or higher than the
investment results of such other (publicly available) portfolios. THERE CAN BE
NO ASSURANCE, AND WE MAKE NO REPRESENTATION, THAT THE INVESTMENT RESULTS OF
ANY OF THE PORTFOLIOS AVAILABLE UNDER THE POLICY WILL BE COMPARABLE TO THE
INVESTMENT RESULTS OF ANY OTHER PORTFOLIO, EVEN IF THE OTHER PORTFOLIO HAS THE
SAME INVESTMENT ADVISER OR MANAGER, THE SAME INVESTMENT OBJECTIVES AND
POLICIES, AND A VERY SIMILAR NAME.
PLEASE READ THE PORTFOLIO PROSPECTUSES TO OBTAIN MORE COMPLETE INFORMATION
REGARDING THE PORTFOLIOS. KEEP THESE PROSPECTUSES FOR FUTURE REFERENCE.
VOTING PORTFOLIO SHARES
Even though we are the legal owner of the portfolio shares held in the
Subaccounts, and have the right to vote on all matters submitted to
shareholders of the portfolios, we will vote our shares only as Owners
instruct, so long as such action is required by law.
Before a vote of a portfolio's shareholders occurs, you will receive voting
materials. We will ask you to instruct us on how to vote and to return your
proxy to us in a timely manner. You will have the right to
14
<PAGE> 20
instruct us on the number of portfolio shares that corresponds to the amount
of Policy Value you have in that portfolio (as of a date set by the
portfolio).
If we do not receive voting instructions on time from some Owners, we will
vote those shares in the same proportion as the timely voting instructions we
receive. Should Federal securities laws, regulations and interpretations
change, we may elect to vote portfolio shares in our own right. If required by
state insurance officials, or if permitted under Federal regulation, we may
disregard certain Owner voting instructions. If we ever disregard voting
instructions, we will send you a summary in the next annual report to Owners
advising you of the action and the reasons we took such action.
THE POLICY
=============================================================================
PURCHASING A POLICY
To purchase a Policy, you must submit a completed application and an initial
premium to us at our Home Office. You may also send the application and
initial premium to us through any licensed life insurance agent who is also a
registered representative of a broker-dealer having a selling agreement with
AFSG Securities Corporation, the principal underwriter for the Policy.
We determine the minimum Specified Amount benefit for a Policy based on the
Insured's age when we issue the Policy. The minimum Specified Amount is
$50,000.
Generally, the Policy is available for Insureds between issue ages 0-85 for
preferred risk classes, and between issue ages 18-85 for tobacco risk classes.
Starting at Specified Amounts of $250,000, we add a better risk class
(super-preferred) for non-tobacco users only. Super-preferred rates are
available for issue ages 18-75. We can provide you with details as to these
underwriting standards when you apply for a Policy. We reserve the right to
modify our underwriting requirements at any time. We must receive evidence of
insurability that satisfies our underwriting standards before we will issue a
Policy. We reserve the right to reject an application for any reason permitted
by law.
WHEN INSURANCE COVERAGE TAKES EFFECT
Full insurance coverage under the Policy will take effect only if the proposed
Insured is alive and in the same condition of health as described in the
application when we deliver the Policy to you, and if the initial premium is
paid.
CONDITIONAL INSURANCE COVERAGE. Before full insurance coverage takes effect,
you may receive conditional insurance converge subject to certain
requirements. This coverage shall not exceed (1) the amount of insurance
applied for; or (2) $500,000, whichever is smaller, less all other sums we pay
upon the death of a proposed Insured under any other pending application or
policy. If a proposed Insured is less than 15 days old or more than 60 years
old, no insurance shall take effect until the Policy is delivered. If we do
not approve your application, we will make a full refund of the initial
premium paid with the application.
15
<PAGE> 21
If all of the following conditions of coverage have been met, then conditional
insurance coverage will go into effect on the Policy Date subject to the
liability limits shown above and subject to the conditions of the Policy as
applied for. The conditions of such coverage are that:
1. the full first premium on the premium mode selected for the Policy
benefits applied for, including any additional premium required for
restrictions or benefits, is paid when the application is signed; and
2. each proposed Insured has completed any required medical examinations,
diagnostic tests, and interviews, or has supplied us with any additional
information we require; and
3. each proposed Insured is, on the Policy Date, insurable and acceptable
to us under our rules, limits and underwriting standards for the plan
and for the amount applied for without modification and at the rate of
premium paid.
If insurance does not take effect under these conditions, then no insurance
shall take effect unless a Policy is delivered to and accepted by the
applicant, the full first premium is paid, and the health and insurability of
each proposed Insured has not changed since the date of application.
Conditional life insurance coverage is void if the application contains any
material misrepresentation. Benefits will also be denied if any proposed
Insured commits suicide.
Conditional life insurance coverage terminates automatically, and without
notice, on the earliest of:
- the date we notify you that the application is declined and we
return the initial premium; or
- the date we determine the Insured has satisfied our
underwriting requirements; or
- 10 days following any counteroffer we make to offer insurance
to any proposed Insured under a different policy, or at an
increased premium, or under a different underwriting class; or
- 60 days from the beginning of conditional insurance coverage.
FULL INSURANCE COVERAGE. Once we determine that the Insured meets our
underwriting requirements, full insurance coverage begins, we issue the
Policy, and we begin to deduct monthly charges from your Policy Value. Prior
to the Investment Start Date, we will place your premium (less charges) in the
Premium Suspense Account. On the first Valuation Date on or following the
Investment Start Date, we will transfer the amount in the Premium Suspense
Account to the Subaccounts and/or the Fixed Account as you directed on your
application. See "Allocating Premiums."
CANCELING A POLICY (FREE-LOOK RIGHT)
You may cancel a Policy during the free-look period by returning it to the
Company, or to the agent who sold it. The free-look period generally expires
10 days after you receive the Policy, but this period will be longer if
required by state law. If you decide to cancel the Policy during the free-look
period, we will
16
<PAGE> 22
treat the Policy as if we never issued it. Within seven calendar days after we
receive the returned Policy, we will refund all payments you made under the
Policy (less any withdrawals and Indebtedness).
OWNERSHIP RIGHTS
The Policy belongs to the Owner named in the application. The Owner may
exercise all of the rights and options described in the Policy. The Owner is
the Insured unless the application specifies a different person as the
Insured. If the Owner dies before the Insured and no contingent Owner is
named, then Ownership of the Policy will pass to the Owner's estate. The Owner
may exercise certain rights described below.
SELECTING AND - You designate the beneficiary (the person to receive
CHANGING THE the death benefit when the Insured dies) in the
BENEFICIARY application.
- If you designate more than one beneficiary, then each
beneficiary shares equally in any death benefit unless
the beneficiary designation states otherwise.
- If the beneficiary dies before the Insured, then any
contingent beneficiary becomes the beneficiary.
- If both the beneficiary and contingent beneficiary die
before the Insured, then we will pay the death benefit
to the Owner or the Owner's estate once the Insured
dies.
- You can change the beneficiary by providing us with a
written request while the Insured is living.
- The change in beneficiary is effective as of the date
you sign the written request.
- We are not liable for any actions we take before we
received the written request.
CHANGING THE - You may change the Owner by providing a written
OWNER request to us at any time while the Insured is alive.
- The change takes effect on the date you sign the
written request.
- We are not liable for any actions we take before we
received the written request.
- Changing the Owner does not automatically change the
beneficiary and does not change the Insured.
- Changing the Owner may have tax consequences. You
should consult a tax advisor before changing the
Owner.
ASSIGNING THE - You may assign Policy rights while the Insured is alive
POLICY by submitting a written request to our Home Office.
- The Owner retains any Ownership rights that are not
assigned.
- Assignee may not change the Owner or the beneficiary,
and may not elect or change an optional method of
payment. We will pay any amount payable to the
assignee in a lump sum.
- Claims under any assignment are subject to proof of
interest and the extent of the assignment.
- We are not:
-> bound by any assignment unless we receive a Written
Notice of the
17
<PAGE> 23
assignment;
-> responsible for the validity of any assignment; or
-> Liable for any payment we make before we received
Written Notice of the assignment.
- Assigning the Policy may have tax consequences. See
"Tax Treatment of Policy Benefits."
-----------------------------------------------------------
PREMIUMS
=============================================================================
PREMIUM FLEXIBILITY
When you apply for a Policy, you may indicate your intention to pay premiums
on a monthly, quarterly, semi-annual, or annual basis (planned premiums).
However, you do not have to pay premiums according to any schedule. You have
flexibility to determine the frequency and the amount of the premiums you pay.
You must send all premium payments to our Home Office or such other office as
we may designate from time to time. You may not pay any premiums after the
Policy's Maturity Date. You may not pay premiums less than $25.
We have the right to limit or refund any premium if (1) the premium would
disqualify the Policy as a life insurance contract under the Internal Revenue
Code; or (2) the amount you pay is less than $25; or (3) payment of a greater
amount would increase the death benefit by application of the death benefit
ratio (unless you provide us with satisfactory evidence of insurability).
You can stop paying premiums at any time and your Policy will continue in
force until the earlier of the Maturity Date, or the date when either (1) the
Insured dies, or (2) the grace period ends without a sufficient payment (see
"Lapse," below), or (3) we receive your Written Notice requesting a surrender
of the Policy.
MINIMUM MONTHLY PREMIUM. On your application, you must select one of the
No-Lapse Periods we offer under the Policy: 5 Policy Years; 20 Policy Years;
30 Policy Years; or to Insured's age 100. The 5 Policy Year No-Lapse Period is
only for Insureds age 50 and over. Certain states may require No-Lapse Periods
that differ from those we offer. Your Policy's specification page will show a
Minimum Monthly Premium amount for your Policy, which is based on the
Insured's age, sex, premium class, Specified Amount, riders, death benefit
option and the selected No-Lapse Period. The Minimum Monthly Premium is the
amount necessary to guarantee insurance coverage for the No-lapse Period. (For
two Policies covering Insureds with the same age, sex, premium class,
Specified Amount, riders, and death benefit option, the Minimum Monthly
Premium is higher for the Policy with the longer No-Lapse Period.) Beginning
on the Policy Date until the end of the No-Lapse Period, your Policy will not
enter a grace period if on each Monthly Date during the No-Lapse Period, your
Cash Surrender Value is enough to pay the next Monthly Deduction due, AND the
sum of premiums paid less any withdrawals and Indebtedness, equals or exceeds
the Cumulative Minimum Monthly Premium. See "Policy Lapse and Reinstatement."
During the No-Lapse Period, we allow you to make premium payments necessary to
cover any deficiency in the Cumulative Minimum Monthly Premium.
The Minimum Monthly Premium will increase if you increase the Specified Amount
or add supplemental benefits to your Policy. The Minimum Monthly Premium will
decrease for any supplemental benefit you
18
<PAGE> 24
decrease or discontinue. The Minimum Monthly Premium will not decrease if you
decrease the Specified Amount. See "Changing the Specified Amount."
LAPSE. Under certain conditions, your Policy will enter into a 61-day grace
period and possibly lapse:
- If your Policy is in the No-Lapse Period, then the Policy will enter a
grace period if on any Monthly Date the Cash Surrender Value is not
enough to pay the next Monthly Deduction due, AND the sum of premiums
paid minus withdrawals and Indebtedness is less than the Cumulative
Minimum Monthly Premium.
- If your Policy is not in the No-Lapse Period, then your Policy will
enter a 61-day grace period if the Cash Surrender Value on any Monthly
Date is not enough to pay the next Monthly Deduction due.
We will notify you when your Policy is in a grace period. If you do not make a
sufficient payment before the end of the grace period, then your Policy will
lapse. You may reinstate a lapsed Policy if you meet certain requirements. See
"Policy Lapse and Reinstatement."
TAX-FREE EXCHANGES (1035 EXCHANGES). We may accept as part of your initial
premium, money from another life insurance contract that qualified for a
tax-free exchange under Section 1035 of the Internal Revenue Code, contingent
upon receipt of the cash from that contract. If you contemplate such an
exchange, you should consult a tax advisor to discuss the potential tax
effects of such a transaction.
ALLOCATING PREMIUMS
When you apply for a Policy, you must instruct us to allocate your net premium
to one or more Subaccounts of the Separate Account and to the Fixed Account
according to the following rules:
- You must allocate at least 5% of each net premium to any
Subaccount or the Fixed Account you select.
- Allocation percentages must be in whole numbers and the sum of
the percentages must equal 100%.
- No more than 10 accounts (Subaccounts and Fixed Account) may be
concurrently active (have net premiums allocated to it).
- Up to 4 times each Policy Year, you can change the allocation
instructions for additional net premiums without charge by
providing us with written notification (or any other
notification we deem satisfactory). Any change in allocation
instructions will be effective on the date we record the
change.
Investment returns from amounts allocated to the Subaccounts will vary with
the investment experience of these Subaccounts and will be reduced by Policy
charges. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU ALLOCATE TO THE
SUBACCOUNTS.
Prior to the Investment Start Date, we will place your premium (less charges)
in the Premium Suspense Account. We do not credit any interest or investment
returns to amounts in the Premium Suspense Account. On the first Valuation
Date on or following the Investment Start Date, we will transfer the amount in
the Premium Suspense Account to the Subaccounts and/or the Fixed Account in
accordance
19
<PAGE> 25
with the allocation percentages provided in your application. This transfer is
not included in calculating any transfer charge. Amounts allocated from the
Premium Suspense Account will be invested at the unit value next determined on
the first Valuation Date on or following the Investment Start Date. We invest
all net premiums paid thereafter at the unit value next determined after we
receive the premium at our Home Office or such other office as we may designate
from time to time.
POLICY VALUES
=============================================================================
POLICY VALUE - serves as the starting point for calculating values
under a Policy;
- equals the sum of all values in the Fixed Account and in
each Subaccount;
- is determined on the Policy Date and on each Valuation
Date; and
- has no guaranteed minimum amount and may be more or less
than premiums paid.
CASH SURRENDER VALUE
The Cash Surrender Value is the amount we pay to you when you surrender your
Policy. We determine the Cash Surrender Value at the end of the Valuation
Period when we receive your written surrender request.
CASH SURRENDER VALUE ON - the Policy Value as of such date; MINUS
ANY VALUATION DATE - any surrender charge as of such date; MINUS
EQUALS: - any outstanding Indebtedness.
SUBACCOUNT VALUE
Each Subaccount's value is the Policy Value in that Subaccount. At the end of
any Valuation Period, the Subaccount's value is equal to the number of units
that the Policy has in the Subaccount, multiplied by the unit value of that
Subaccount.
THE NUMBER OF - the initial units purchased at the unit value on the
UNITS IN ANY Investment Start Date; PLUS
SUBACCOUNT ON - units purchased with additional net premiums; PLUS
ANY VALUATION - units purchased via transfers from another Subaccount,
DATE EQUALS: the Fixed Account, or the loan reserve; MINUS
- units redeemed to pay for Monthly Deductions; MINUS
- units redeemed to pay for partial withdrawals; MINUS
- units redeemed as part of a transfer to another
Subaccount, the Fixed Account, or the loan reserve.
Every time you allocate or transfer money to or from a Subaccount, we convert
that dollar amount into units. We determine the number of units we credit to,
or subtract from, your Policy by dividing the dollar amount of the transaction
by the unit value for that Subaccount at the end of the Valuation Period.
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<PAGE> 26
UNIT VALUE
We determine a unit value for each Subaccount to reflect how investment
results affect the Policy values. Unit values will vary among Subaccounts. The
unit value of each Subaccount was originally established at $10 per unit. The
unit value may increase or decrease from one Valuation Period to the next.
THE UNIT VALUE OF - the total value of the assets held in the
ANY SUBACCOUNT AT Subaccount, determined by multiplying the number of
THE END OF A shares of the designated portfolio the Subaccount
VALUATION PERIOD owns by the portfolio's net asset value per share;
IS CALCULATED AS: MINUS
- a deduction for the mortality and expense risk
charge; MINUS
- the accrued amount of reserve for any taxes or other
economic burden resulting from applying tax laws
that we determine to be properly attributable to the
Subaccount;
AND THE RESULT DIVIDED BY
- the number of outstanding units in the Subaccount.
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<PAGE> 27
FIXED ACCOUNT VALUE
On the Investment Start Date, the Fixed Account value is equal to the net
premiums allocated to the Fixed Account, less the portion of the first Monthly
Deduction taken from the Fixed Account.
- the net premium(s) allocated to the Fixed Account;
THE FIXED ACCOUNT PLUS
VALUE AT THE END OF - any amounts transferred to the Fixed Account
ANY VALUATION PERIOD (including amounts transferred from the loan
IS EQUAL TO: reserve); PLUS
- interest credited to the Fixed Account; MINUS
- amounts charged to pay for Monthly Deductions;
MINUS
- amounts withdrawn from the Fixed Account; MINUS
- amounts transferred from the Fixed Account to a
Subaccount or to the loan reserve.
CHARGES AND DEDUCTIONS
=============================================================================
We make certain charges and deductions under the Policy. These charges and
deductions compensate us for: (1) services and benefits we provide; (2) costs
and expenses we incur; and (3) risks we assume.
SERVICES AND - the death benefit, cash and loan benefits under the
BENEFITS WE Policy
PROVIDE: - investment options, including premium allocations
- administration of elective options
- the distribution of reports to Owners
COSTS AND - costs associated with processing and underwriting
EXPENSES WE applications, issuing and administering the Policy
INCUR: (including any riders)
- overhead and other expenses for providing services
and benefits
- sales and marketing expenses
- other costs of doing business, such as collecting
premiums, maintaining records, processing claims,
effecting transactions, and paying Federal, state
and local premium and other taxes and fees
RISKS WE ASSUME: - that the cost of insurance charges we may deduct
are insufficient to meet our actual claims because
Insureds die sooner than we estimate
- that the costs of providing the services and
benefits under the Policies exceed the charges we
deduct
EXPENSE CHARGE
We deduct an expense charge from each premium payment to compensate us for
distribution expenses and state and local premium taxes. We credit the
remaining amount (the net premium) to your Policy Value according to your
allocation instructions. The expense charge currently varies by Policy Year
and is guaranteed not to exceed 5% of each premium in any Policy Year:
22
<PAGE> 28
Premiums paid during first 10 Policy Years: expense charge = 5%
Premiums paid after first 10 Policy Years: expense charge = 2.5%
While we may change the expense charge, we guarantee that the expense charge
will not exceed 5% of premiums paid in any Policy Year.
MONTHLY DEDUCTION
We deduct a Monthly Deduction from the Policy Value on the Policy Date and on
each Monthly Date. We will make deductions from each Subaccount and the Fixed
Account on a pro rata basis (i.e., in the same proportion that the value in
each Subaccount and the Fixed Account bears to the total Policy Value on the
Monthly Date). Because portions of the Monthly Deduction (such as the cost of
insurance) can vary from month-to-month, the Monthly Deduction will also vary.
The Monthly Deduction has four components:
- a cost of insurance charge for the Policy;
- a $10 monthly administrative charge;
- charges for any riders; and
- any charges for a substandard premium class rating.
COST OF INSURANCE. We assess a monthly cost of insurance charge to compensate
us for underwriting the death benefit. The charge depends on a number of
variables (age, sex, premium class, and Specified Amount) that would cause it
to vary from Policy to Policy and from Monthly Date to Monthly Date.
We calculate the cost of insurance charge separately for the initial Specified
Amount and for any increase in Specified Amount. If we approve an increase in
your Policy's Specified Amount, then a different premium class (and a
different cost of insurance charge) may apply to the increase, based on the
Insured's circumstances at the time of the increase.
COST OF The cost of insurance charge is equal to:
INSURANCE
CHARGE - the monthly cost of insurance rate; MULTIPLIED BY
- the net amount at risk for your Policy on the
Monthly Date.
The net amount at risk is equal to:
- the death benefit at the beginning of the month;
DIVIDED BY
- 1.0024663 (1.0032737 for Policies issued in Florida)
which is a "risk rate divisor" (a factor that
reduces the net amount at risk, for purposes of
computing the cost of insurance, by taking into
account assumed monthly earnings at an annual rate
of 3.0% (4.0% for Policies issued in Florida));
MINUS
- the Policy Value at the beginning of the month.
We base the cost of insurance rates on the Insured's age, sex, premium class
and Specified Amount. The actual monthly cost of insurance rates are based on
our expectations as to future mortality experience.
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<PAGE> 29
The rates will never be greater than the guaranteed amount stated in your
Policy. These guaranteed rates are based on the 1980 Commissioner's Standard
Ordinary (C.S.O.) Mortality Tables and the Insured's age and premium class.
For standard premium classes, these guaranteed rates will never be greater
than the rates in the 1980 C.S.O. tables.
MONTHLY ADMINISTRATIVE CHARGE. Each month we deduct a $10 monthly
administrative charge to compensate us for expenses such as record keeping,
processing death benefit claims and Policy changes, and overhead costs. This
charge will not exceed $10 per month.
CHARGES FOR RIDERS. The Monthly Deduction includes charges for any
supplemental insurance benefits you add to your Policy by rider. See
"Supplemental Benefits and Riders."
CHARGES FOR A SUBSTANDARD PREMIUM CLASS RATING. The Monthly Deduction includes
a charge we apply if our underwriting places the Insured in a substandard
premium class rating.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge from each Subaccount (not the Fixed Account) to
compensate us for certain mortality and expense risks we assume. The mortality
risk is that an Insured will live for a shorter time than we project. The
expense risk is that the expenses that we incur will exceed the administrative
charge limits we set in the Policy. This charge is equal to:
- the assets in each Subaccount, MULTIPLIED BY
- 0.00002047, which is the daily portion of the annual mortality
and expense risk charge rate of 0.75% during all Policy Years.
If this charge does not cover our actual costs, we absorb the loss.
Conversely, if the charge more than covers actual costs, the excess is added
to our surplus. We expect to profit from this charge and may use such profits
for any lawful purpose including covering distribution expenses.
SURRENDER AND WITHDRAWAL CHARGES
SURRENDER CHARGE. If you fully surrender your Policy during the first 19
Policy Years, we deduct a surrender charge from your Policy Value and pay the
remaining amount (less any outstanding Indebtedness) to you. The payment you
receive is called the Cash Surrender Value. The surrender charge varies based
on your age, sex, premium class, and initial Specified Amount. The highest
surrender charge on any Policy occurs in the first Policy Year or the first
year following an increase in the Specified Amount. An increase in the
Specified Amount will increase the surrender charge, but a decrease in the
Specified Amount will not result in a decrease in the surrender charge. The
maximum surrender charge for any Insured is $58 per $1,000 of Specified
Amount.
The table below provides the maximum applicable surrender charges for the
initial Specified Amount for selected sample Insureds. Your Policy's
specifications page indicates the surrender charges applicable to your Policy.
A separate surrender charge that lasts for 19 years applies to each Specified
Amount increase. No surrender charges apply to withdrawals or Specified Amount
decreases.
24
<PAGE> 30
SURRENDER CHARGE PER $1,000 OF SPECIFIED AMOUNT; INSURED AGE 35
<TABLE>
<CAPTION>
MALE FEMALE
PREFERRED AND MALE PREFERRED AND FEMALE
POLICY YEAR SUPER-PREFERRED TOBACCO SUPER-PREFERRED TOBACCO
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $24.00 $28.00 $22.00 $24.00
2 $22.80 $26.60 $20.90 $22.80
3 $21.60 $25.20 $19.80 $21.60
4 $20.40 $23.80 $18.70 $20.40
5 $19.20 $22.40 $17.60 $19.20
6 $18.00 $21.00 $16.50 $18.00
7 $16.80 $19.60 $15.40 $16.80
8 $15.60 $18.20 $14.30 $15.60
9 $14.40 $16.80 $13.20 $14.40
10 $13.20 $15.40 $12.10 $13.20
11 $12.00 $14.00 $11.00 $12.00
12 $10.80 $12.60 $9.90 $10.80
13 $9.60 $11.20 $8.80 $9.60
14 $8.40 $9.80 $7.70 $8.40
15 $7.20 $8.40 $6.60 $7.20
16 $6.00 $7.00 $5.50 $6.00
17 $4.80 $5.60 $4.40 $4.80
18 $3.60 $4.20 $3.30 $3.60
19 $2.40 $2.80 $2.20 $2.40
20 $0.00 $0.00 $0.00 $0.00
</TABLE>
THE SURRENDER CHARGE MAY BE SIGNIFICANT. YOU SHOULD CAREFULLY CALCULATE THIS
CHARGE BEFORE YOU REQUEST A SURRENDER. Under some circumstances the level of
surrender charges might result in no Cash Surrender Value available.
WITHDRAWAL CHARGE. After the first Policy Year, you may request a partial
withdrawal from your Policy Value. For each withdrawal, we will deduct from
your Policy Value a fee equal to the lesser of $25 or 2% of the amount
withdrawn.
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<PAGE> 31
TRANSFER CHARGE
- We currently allow you to make 12 transfers each Policy Year
free of charge.
- We charge $25 for the 13th and each additional transfer among
the Subaccounts and Fixed Account during a Policy Year. We will
not increase this charge.
- For purposes of assessing the transfer charge, each written or
telephone request is considered to be one transfer, regardless
of the number of Subaccounts (or Fixed Account) affected by the
transfer.
- We deduct the transfer charge from the amount being
transferred.
- Transfers we effect to reallocate amounts on the Investment
Start Date, and transfers due to dollar cost averaging, asset
rebalancing, or loans, do NOT count as transfers for the
purpose of assessing this charge.
PORTFOLIO EXPENSES
The value of the net assets of each Subaccount reflects the investment
advisory (management) fees and other expenses incurred by the corresponding
portfolio in which the Subaccount invests. For further information on the
management fees, see the portfolios' prospectuses and Annual Portfolio
Operating Expenses table included in the summary of this prospectus.
DEATH BENEFIT
=============================================================================
DEATH BENEFIT PROCEEDS
As long as the Policy is in force, we will pay the death benefit proceeds to
the primary beneficiary or a contingent beneficiary once we receive
satisfactory proof of the Insured's death. We may require you to return the
Policy. If the beneficiary dies before the Insured and there is no contingent
beneficiary, we will pay the death benefit proceeds to the Owner or the
Owner's estate. We will pay the death benefit proceeds in a lump sum or under
a payment option. See "Payment Options."
DEATH BENEFIT - the death benefit (described below); PLUS
PROCEEDS EQUAL: - any additional insurance provided by rider; MINUS
- any past due Monthly Deductions; MINUS
- any outstanding Indebtedness on the date of death.
If all or part of the death benefit proceeds are paid in one sum, we will pay
interest on this sum as required by applicable state law from the date we
receive due proof of the Insured's death to the date we make payment.
An increase in the Specified Amount will increase the death benefit and a
decrease in the Specified Amount will decrease the death benefit.
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<PAGE> 32
We may further adjust the amount of the death benefit proceeds under certain
circumstances. See "Our Right to Contest the Policy," and "Misstatement of Age
or Sex."
DEATH BENEFIT OPTIONS
The Policy provides two death benefit options: Increasing Option (varying
death benefit), and Level Option (level death benefit). We calculate the
amount available under each death benefit option as of the date of the
Insured's death. After the first Policy Year, you may change death benefit
options once each 12-month period.
The death benefit under - the Specified Amount PLUS the Policy Value on
the INCREASING OPTION the Insured's date of death; OR
is the greater of:
- the Policy Value on the Insured's date of
death multiplied by the applicable death
benefit ratio.
Under the Increasing Option, the death benefit always varies as the Policy
Value varies.
The death benefit under - the Specified Amount on the Insured's date of
the LEVEL OPTION is the death; OR
greater of: - the Policy Value on the Insured's date of death
multiplied by the applicable death benefit
ratio.
Under the Level Option, your death benefit does not change unless the death
benefit ratio multiplied by the Policy Value is greater than the Specified
Amount. Then the death benefit will vary as the Policy Value varies. The death
benefit will also vary if you change the Specified Amount or Death Benefit
Option.
The DEATH BENEFIT RATIO is a ratio set forth in the Federal tax code based on
the Insured's age at the beginning of each Policy Year. The following table
indicates the applicable death benefit ratio for different ages:
<TABLE>
<CAPTION>
AGE DEATH BENEFIT RATIO
----------------------------------------------------------------
<S> <C> <C>
40 and under 2.50
41 to 45 2.50 minus 0.07 for each age over age 40
46 to 50 2.15 minus 0.06 for each age over age 45
51 to 55 1.85 minus 0.07 for each age over age 50
56 to 60 1.50 minus 0.04 for each age over age 55
61 to 65 1.30 minus 0.02 for each age over age 60
66 to 70 1.20 minus 0.01 for each age over age 65
71 to 74 1.15 minus 0.02 for each age over age 70
75 to 90 1.05
91 to 94 1.05 minus 0.01 for each age over age 90
95 and above 1.00
</TABLE>
If the Federal tax code requires us to determine the death benefit by
reference to these death benefit ratios, the Policy is described as "in the
corridor." An increase in the Policy Value will increase our risk, and we will
increase the cost of insurance we deduct from the Policy Value.
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<PAGE> 33
CHANGING DEATH BENEFIT OPTIONS
After the first Policy Year, you may change death benefit options once each
12-month period. Changing the death benefit option may have tax consequences.
You should consult a tax advisor before changing death benefit options. Please
note the following when changing death benefit options:
- You must make your request in writing.
- The effective date of the change will be the Monthly Date on or
following the date when we approve your request for a change.
- We will send you a Policy endorsement with the change to attach to your
Policy.
If you change FROM INCREASING OPTION TO LEVEL OPTION:
- We may require that you provide satisfactory evidence of
insurability.
- The Specified Amount will change. The new Level Option
Specified Amount will equal the Increasing Option
Specified Amount plus the Policy Value on the effective
date of the change.
- Your Minimum Monthly Premium may change.
If you change FROM LEVEL OPTION TO INCREASING OPTION:
- We may require that you provide satisfactory evidence of
insurability.
- The Specified Amount will change. The new Increasing
Option Specified Amount will equal the Level Option
Specified Amount less the Policy Value immediately
before the change, but the new Specified Amount may not
be less than the minimum Specified Amount shown on your
Policy's specifications page.
- Your Minimum Monthly Premium may change.
EFFECTS OF WITHDRAWALS ON THE DEATH BENEFIT
If the Level Option is in effect, a withdrawal will reduce the Specified
Amount by the amount of the withdrawal (not including the withdrawal fee), and
will reduce the Policy Value by the amount of the withdrawal (including the
withdrawal fee). The reduction in Specified Amount will be subject to the
terms of the Changing the Specified Amount section below.
If the Increasing Option is in effect, a withdrawal will not affect the
Specified Amount.
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<PAGE> 34
CHANGING THE SPECIFIED AMOUNT
You select the Specified Amount when you apply for the Policy. After the first
Policy Year, you may change the Specified Amount once each 12-month period
subject to the conditions described below. We will not permit any change that
would result in your Policy being disqualified as a life insurance contract
under Section 7702 of the Internal Revenue Code. However, changing the
Specified Amount may have tax consequences and you should consult a tax
advisor before doing so.
INCREASING THE SPECIFIED AMOUNT
- You may increase the Specified Amount by submitting a
written request and providing evidence of insurability
satisfactory to us. The increase will be effective on
the next Monthly Date after we approve the increase
request.
- The minimum increase is $10,000.
- Increasing the Specified Amount will increase your
Minimum Monthly Premium and cause the No-Lapse Period to
begin again.
- Increasing the Specified Amount will result in an
additional surrender charge that lasts for 19 years.
- A different cost of insurance charge may apply to the
increase in Specified Amount, based on the Insured's
circumstances at the time of the increase.
DECREASING THE SPECIFIED AMOUNT
- You must submit a written request to decrease the
Specified Amount, but you may not decrease the Specified
Amount below the minimum amount shown on your Policy
specifications page.
- Any decrease will be effective on the next Monthly Date
after we process your written request.
- For purposes of determining the cost of insurance
charge, any decrease will first be used to reduce the
most recent increase, then the next most recent
increases in succession, and then the initial Specified
Amount.
- A decrease in Specified Amount may require that a
portion of Policy Value be distributed as a withdrawal
in order to maintain Federal tax compliance.
- Decreasing the Specified Amount will not affect the
Minimum Monthly Premium or the surrender charges.
PAYMENT OPTIONS
There are several ways of receiving proceeds under the death benefit and
surrender provisions of the Policy, other than in a lump sum. None of these
options vary with the investment performance of a
29
<PAGE> 35
Separate Account. More detailed information concerning these settlement options
is available on request to our Home Office.
SURRENDERS AND PARTIAL WITHDRAWALS
=============================================================================
SURRENDERS
- You may make a written request to surrender your Policy for its
Cash Surrender Value as calculated at the end of the Valuation
Date when we receive your request. A surrender may have tax
consequences. See "Tax Treatment of Policy Benefits."
- The Insured must be alive and the Policy must be in force when
you make your written request. A surrender is effective as of
the date when we receive your written request. We may require
that you return the Policy.
- If you surrender your Policy during the first 19 Policy Years
(or during the first 19 years after an increase in the
Specified Amount), you will incur a surrender charge that
varies based on the Insured's age, sex, premium class and
Specified Amount. See "Charges and Deductions -- Surrender and
Withdrawal Charges."
- Once you surrender your Policy, all coverage and other benefits
under it cease and cannot be reinstated.
- We will pay you the Cash Surrender Value in a lump sum within
seven days unless you request other arrangements.
WITHDRAWALS
After the 1st Policy Year, you may request to withdraw a portion of your
Policy Value subject to certain conditions.
- You may make only one withdrawal per Policy Year.
- You must: (1) make your request in writing, and (2) request at
least $500.
- If you request a withdrawal that would leave a Cash Surrender
Value of less than $500, then we will treat it as a request to
surrender your Policy.
- For each withdrawal, we deduct (from the remaining Policy
Value) a fee equal to the lesser of $25 or 2% of the amount
withdrawn. See "Charges and Deductions -- Surrender and
Withdrawal Charges."
- You can specify the Subaccount(s) and Fixed Account from which
to make the withdrawal; otherwise we will deduct the amount
(including any fee) from the
30
<PAGE> 36
Subaccounts and the Fixed Account on a pro-rata basis (that is,
according to the percentage of Policy Value contained in each
Subaccount and the Fixed Account).
- We will process the withdrawal at the unit values next
determined after we receive your request.
- We generally will pay a withdrawal request from the subaccounts
within seven days after the Valuation Date when we receive the
request. We reserve the right to defer any withdrawals from the
Fixed Account for up to six months (or any shorter period
required by law). We will not defer a withdrawal if you are
applying the withdrawal amount to a premium payment to us.
- Withdrawals may have tax consequences. See "Tax Treatment of
Policy Benefits."
TRANSFERS
=============================================================================
You may make transfers from the Subaccounts or from the Fixed Account. We
determine the amount you have available for transfers at the end of the
Valuation Period when we receive your transfer request. The following features
apply to transfers under the Policy:
- You may make an unlimited number of transfers in a Policy Year.
- You may request transfers in writing (in a form we accept), or
by telephone.
- You must transfer at least $100, or, if less, the total value
in the Subaccount or Fixed Account.
- We deduct a $25 charge from the amount transferred for the 13th
and each additional transfer in a Policy Year. Transfers we
effect from the Premium Suspense Account, and transfers
resulting from loans, dollar cost averaging, asset rebalancing,
and the exchange privilege are NOT treated as transfers for
purposes of the transfer charge.
- We consider each written or telephone request to be a single
transfer, regardless of the number of Subaccounts (or Fixed
Account) involved. We will treat all transfer requests received
on the same day as a single request.
- We process transfers based on unit values determined at the end
of the Valuation Date when we receive your transfer request.
Your Policy, as applied for and issued, will automatically receive telephone
transfer privileges unless you provide other instructions. The telephone
transfer privileges allow you to give authority to the registered
representative or agent of record for your Policy to make telephone transfers
and to change the allocation of future payments among the Subaccounts and the
Fixed Account on your behalf according to your instructions. To make a
telephone transfer, you may call 1-800-625-4213.
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<PAGE> 37
Please note the following regarding telephone transfers:
- We are not liable for any loss, damage, cost or expense from
complying with telephone instructions we reasonably believe to
be authentic. You bear the risk of any such loss.
- We will employ reasonable procedures to confirm that telephone
instructions are genuine.
- Such procedures may include requiring forms of personal
identification prior to acting upon telephone instructions,
providing written confirmation of transactions to you, and/or
tape recording telephone instructions received from you.
- If we do not employ reasonable confirmation procedures, we may
be liable for losses due to unauthorized or fraudulent
instructions.
The corresponding portfolio of any Subaccount determines its net asset value
per share once daily, as of the close of the regular business session of the
New York Stock Exchange ("NYSE") (usually 4:00 p.m. Eastern time), which
coincides with the end of each Valuation Period. Therefore, we will process
any transfer request we receive after the close of the regular business
session of the NYSE, using the net asset value for each share of the
applicable portfolio determined as of the close of the next regular business
session of the NYSE.
EXCHANGE PRIVILEGE
At any one time, you may exercise the Exchange Privilege under your Policy
which results in the transfer of the entire amount in the Separate Account to
the Fixed Account, and the allocation of all future net premiums to the Fixed
Account. This serves as an exchange of the Policy for the equivalent of a
flexible premium fixed benefit life insurance policy. We will not assess any
transfer or other charges in connection with the Exchange Privilege.
DOLLAR COST AVERAGING
You may elect to participate in a dollar cost averaging program. Dollar cost
averaging is an investment strategy designed to reduce the investment risks
associated with market fluctuations. The strategy spreads the allocation of
your premium into the Subaccounts or Fixed Account over a period of time. This
allows you to potentially reduce the risk of investing most of your premium
into the Subaccounts at a time when prices are high. We do not assure the
success of this strategy and the success depends on market trends. You should
carefully consider your financial ability to continue the program over a long
enough period of time to purchase units when their value is low as well as
when it is high.
To participate in dollar cost averaging, you must place at least $5,000 in a
"source account" (either the Fixed Account, AIM V.I. Government Securities
Fund Subaccount, Oppenheimer Bond Fund/VA Subaccount, or the Fidelity VIP
Money Market Portfolio Subaccount). There can be only one source account. Each
month, we will automatically transfer equal amounts (minimum $100) from the
source account to your designated "target accounts." You may have multiple
target accounts.
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<PAGE> 38
There is no charge for dollar cost averaging. A transfer under this program is
NOT considered a transfer for purposes of assessing the transfer fee.
DOLLAR COST AVERAGING - we receive your written request to cancel your
WILL END IF: participation;
- the value in the source account is exhausted;
- you elect to participate in the asset
rebalancing program.
We may modify, suspend, or discontinue the dollar cost averaging program at
any time.
ASSET REBALANCING PROGRAM
We also offer an asset rebalancing program under which we will automatically
transfer amounts semi-annually to maintain a particular percentage allocation
among the Subaccounts. Policy Value allocated to each Subaccount will grow or
decline in value at different rates. The asset rebalancing program
automatically reallocates the Policy Value in the Subaccounts at the end of
each semi-annual period to match your Policy's currently effective premium
allocation schedule. The asset rebalancing program will transfer Policy Value
from those Subaccounts that have increased in value to those Subaccounts that
have declined in value (or not increased as much). Over time, this method of
investing may help you buy low and sell high. The asset rebalancing program
does not guarantee gains, nor does it assure that any Subaccount will not have
losses. Policy Value in the Fixed Account is not available for this program.
TO PARTICIPATE IN THE - you must complete an asset rebalancing request
ASSET REBALANCING form and submit it to us before the Maturity Date
PROGRAM: - you must have a minimum Policy Value of $5,000.
If you elect asset rebalancing, it will occur on each semi-annual anniversary
of the Policy Date. You may modify your allocations up to 4 times in a Policy
Year. Once we receive the asset rebalancing request form, we will effect the
initial rebalancing semi-annually, in accordance with the Policy's current
premium allocation schedule. We will credit the amounts transferred at the
unit value next determined on the dates the transfers are made. If a day on
which rebalancing would ordinarily occur falls on a day on which the NYSE is
closed, rebalancing will occur on the next day the NYSE is open. There is no
charge for the asset rebalancing program. Any reallocation which occurs under
the asset rebalancing program will NOT be counted towards the 12 free
transfers allowed during each Policy Year. You can begin or end this program
only once each Policy Year.
ASSET REBALANCING - you elect to participate in the dollar cost
WILL END IF: averaging program;
- we receive your request to discontinue
participation; OR
- you make a transfer to or from any Subaccount
other than under a scheduled rebalancing (not
including transfers in connection with loans).
We may modify, suspend, or discontinue the asset rebalancing program at any
time.
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<PAGE> 39
LOANS
=============================================================================
While the Policy is in force, you may borrow money from us using the Policy as
the only collateral for the loan. A loan that is taken from, or secured by, a
Policy may have tax consequences.
LOAN CONDITIONS:
- You may request a loan in writing (in a form that is acceptable
to us)
- The MINIMUM LOAN you may take is $250.
- The MAXIMUM LOAN you may take is 90% (100% in certain states)
of the Cash Surrender Value, minus 6 months of Monthly
Deductions.
- To secure the loan, we transfer an amount equal to the loan
(plus loan interest in advance) from the Separate Account and
Fixed Account to the loan reserve, which is a part of the Fixed
Account. Unless you specify otherwise, we will transfer the
loan from the Subaccounts and the Fixed Account on a pro-rata
basis.
- Amounts in the loan reserve earn interest at an annual rate
guaranteed not to be lower than 3.0% (4.0% for Policies issued
in Florida). We may credit the loan reserve with an interest
rate different than the rate credited to net premiums allocated
to the Fixed Account.
- We normally pay the amount of the loan within seven days after
we receive a proper loan request. We may postpone payment of
loans under certain conditions. See "Payments We Make."
- We charge you a maximum interest rate of 5.66% per year on your
loan. Interest is due and payable at the beginning of each
Policy Year. Unpaid interest becomes part of the outstanding
loan and accrues interest if it is not paid before the
beginning of the next Policy Year.
- After the 10th Policy Year, we consider certain portions of the
loan amount to be preferred loans. The maximum preferred loan
available in each Policy Year is 25% of the Policy Value
(subject to the maximum loan amount). We charge a maximum
annual interest rate of 3.85% in advance on preferred loan
amounts.
- We cannot change the interest rate on a loan once you take the
loan.
- You may repay all or part of your Indebtedness at any time.
Loan repayments must be at least $25, unless the loan amount is
less than $25 in which case full payment is required. The
payment must be clearly marked as "loan repayments" or they
will be credited as premiums if they meet minimum premium
requirements.
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<PAGE> 40
- Upon each loan repayment, we will transfer an amount equal to
the loan repayment from the loan reserve to the Fixed and/or
Separate Account according to your current premium allocation
schedule.
- We deduct any Indebtedness from the Policy Value upon
surrender, and from the death benefit proceeds payable on the
Insured's death.
- If your Indebtedness equals or exceeds the Policy Value less
any applicable surrender charge (thereby reducing the Cash
Surrender Value to zero), then your Policy will enter a grace
period. See "Policy Lapse and Reinstatement."
EFFECT OF POLICY LOANS
A loan affects the Policy, because the death benefit proceeds and Cash
Surrender Value include reductions for the amount of any Indebtedness.
Repaying a loan causes the death benefit and Cash Surrender Value to increase
by the amount of the repayment. As long as a loan is outstanding, we hold an
amount equal to the loan in the loan reserve. This amount is not affected by
the Subaccounts' investment performance and may not be credited with the
interest rates accruing on the Fixed Account. Amounts transferred from the
Separate Account to the loan reserve will affect the Policy Value, even if the
loan is repaid, because we credit such amounts with an interest rate we
declare rather than a rate of return reflecting the investment results of the
Separate Account.
There are risks involved in taking a loan, including the potential for a
Policy to lapse if projected earnings, taking into account outstanding loans,
are not achieved. If the Policy is a "modified endowment contract" (see
"Federal Tax Considerations"), then a loan will be treated as a withdrawal for
Federal income tax purposes. A loan may also have possible adverse tax
consequences that could occur if a Policy lapses with loans outstanding.
We will notify you (and any assignee of record) if the sum of your
Indebtedness is more than the Policy Value less any applicable surrender
charge. If you do not submit a sufficient payment within 61 days from the date
of the notice, your Policy may lapse. See "Policy Lapse and Reinstatement."
POLICY LAPSE AND REINSTATEMENT
==============================================================================
LAPSE
Under certain conditions, your Policy may enter a 61-day grace period, and
possibly lapse (terminate without value):
- If your Policy is in the No-Lapse Period you have selected, then the
Policy will enter a grace period only if on a Monthly Date the Cash
Surrender Value is not enough to pay the next Monthly Deduction due, AND
the sum of premiums paid minus withdrawals and Indebtedness is less than
the Cumulative Minimum Monthly Premium.
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<PAGE> 41
- If your Policy is not in the No-Lapse Period you have selected, then
your Policy will enter a grace period if the Cash Surrender Value on any
Monthly Date is not enough to pay the next Monthly Deduction due.
If you have taken a loan, then your Policy also will enter a grace period (and
possibly lapse) whenever your Indebtedness reduces the Cash Surrender Value to
zero.
If your Policy enters into a grace period, we will mail a notice to your last
known address and to any assignee of record. The 61-day grace period begins on
the date of the notice. The notice will specify the minimum payment required
and the final date by which we must receive the payment to keep the Policy
from lapsing. If we do not receive the specified minimum payment by the end of
the grace period, all coverage under the Policy will terminate and you will
receive no benefits.
REINSTATEMENT
Unless you have surrendered your Policy for its Cash Surrender Value, you may
reinstate a lapsed Policy at any time within 5 years after the end of the
grace period (and prior to the Maturity Date) by submitting all of the
following items to us at our Home Office:
1. a Written Notice requesting reinstatement;
2. the Insured's written consent to reinstatement;
3. evidence of insurability we deem satisfactory;
4. payment or reinstatement of any Indebtedness; and
5. payment of enough premium to keep the Policy in force
for at least 3 months.
The effective date of reinstatement will be the first Monthly Date on or next
following the date we approve your application for reinstatement. We reserve
the right to decline a reinstatement request.
FEDERAL TAX CONSIDERATIONS
==============================================================================
The following summarizes some of the basic Federal income tax considerations
associated with a Policy and does not purport to be complete or to cover all
situations. THIS DISCUSSION IS NOT INTENDED AS TAX ADVICE. Please consult
counsel or other qualified tax advisors for more complete information. We base
this discussion on our understanding of the present Federal income tax laws as
they are currently interpreted by the Internal Revenue Service (the "IRS").
Federal income tax laws and the current interpretations by the IRS may change.
TAX STATUS OF THE POLICY. A Policy must satisfy certain requirements set forth
in the Internal Revenue Code ("Code") 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. The manner in which these
requirements are to be applied to certain innovative features of the Policy
are not directly addressed by the Code, and/or there is limited guidance as to
how these requirements are to be applied. Nevertheless, we believe that a
Policy should generally satisfy the applicable Code requirements. Because of
the absence of pertinent interpretations of the Code requirements, there is,
however, some uncertainty about the application of such requirements to the
Policy. There is more uncertainty with respect to Policies
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<PAGE> 42
issued on a substandard premium class basis and Policies with a Level One-Year
Term Insurance Rider attached. 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 restrict Policy transactions in order to do so.
In certain circumstances, Owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the Owners of the assets
of the Separate Account supporting their contracts due to their ability to
exercise investment control over those assets. Where this is the case, the
contract Owners have been currently taxed on income and gains attributable to
the Separate Account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility to allocate premiums and
Policy Values, have not been explicitly addressed in published rulings. While
we believe that the Policy does not give you investment control over Separate
Account assets, we reserve the right to modify the Policy as necessary to
prevent you from being treated as the Owner of the Separate Account assets
supporting the Policy.
In addition, the Code requires that the investments of the Separate Account be
"adequately diversified" in order to treat the Policy as a life insurance
contract for Federal income tax purposes. We intend that the Separate Account,
through the Portfolios, will satisfy these diversification requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the beneficiary's gross income. Federal, state and local
transfer, and other tax consequences of Ownership or receipt of Policy
proceeds depend on your circumstances and the beneficiary's circumstances. You
should consult a tax advisor on these consequences.
Generally, you will not be deemed to be in constructive receipt of the Policy
Value until there is a distribution. In addition, if you elect the Terminal
Illness Accelerated Death Benefit, the tax consequences associated with
continuing the Policy after a distribution is made are unclear. Please consult
a tax advisor on these consequences. When distributions from a Policy occur,
or when loans are taken out from or secured by a Policy (e.g., by assignment),
then the tax consequences depend on whether the Policy is classified as a
"Modified Endowment Contract." Moreover, if a loan from a Policy that is not a
MEC is outstanding when the Policy is canceled or lapses, the amount of the
outstanding indebtedness will be added to the amount distributed and will be
taxed accordingly.
MODIFIED ENDOWMENT CONTRACTS. Under the Code, certain life insurance contracts
are classified as "Modified Endowment Contracts" ("MECs") and receive less
favorable tax treatment than other life insurance contracts. The rules are too
complex to be summarized here, but generally depend on the amount of premiums
paid during the first seven contract years. Certain changes in a contract
after it is issued could also cause it to be classified as a MEC. Due to the
Policy's flexibility, each Policy's circumstances will determine whether the
Policy is classified as a MEC. If you do not want your Policy to be classified
as a MEC, you should consult a tax advisor to determine the circumstances, if
any, under which your Policy would or would not be classified as a MEC.
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<PAGE> 43
DISTRIBUTIONS FROM MODIFIED ENDOWMENT CONTRACTS. Policies classified as MECs
are subject to the following tax rules:
- All distributions other than death benefits from a MEC,
including distributions upon surrender and withdrawals, will be
treated as ordinary income subject to tax up to an amount equal
to the excess (if any) of the unloaned Policy Value immediately
before the distribution plus prior distributions over the
Owner's total investment in the Policy at that time. They will
be treated as tax-free recovery of the Owner's investment in
the Policy only after all such excess has been distributed.
"Total investment in the Policy" means the aggregate amount of
any premiums or other considerations paid for a Policy, plus
any previously taxed distributions.
- Loans taken from such a Policy (or secured by such a Policy,
e.g., by assignment) are treated as distributions and taxed
accordingly.
- A 10% additional income tax penalty is imposed on the amount
included in income except where the distribution or loan is
made when you have attained age 59 1/2 or are disabled, or
where the distribution is part of a series of substantially
equal periodic payments for your life (or life expectancy) or
the joint lives (or joint life expectancies) of you the
beneficiary.
- If a contract becomes a MEC, distributions that occur during
the contract year will be taxed as distributions from a MEC. In
addition, distributions from a contract within two years before
it becomes a MEC will be taxed in this manner. This means that
a distribution from a contract that is not a MEC at the time
when the distribution is made could later become taxable as a
distribution from a MEC.
DISTRIBUTIONS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS.
Distributions from a Policy that is not a MEC are generally treated first as a
recovery of your investment in the Policy, and as taxable income after the
recovery of all investment in the Policy. However, certain distributions which
must be made in order to enable the Policy to continue to qualify as a life
insurance contract for Federal income tax purposes if Policy benefits are
reduced during the first 15 Policy Years may be treated in whole or in part as
ordinary income subject to tax.
Loans from or secured by a Policy that is not a MEC are generally not treated
as distributions. However, there is some uncertainty as to the tax treatment
of a Preferred Loan under a Policy that is not a MEC and you should consult a
tax advisor on this point.
Finally, neither distributions from nor loans from (or secured by) a Policy
that is not a MEC are subject to the 10% additional tax.
DEDUCTIBILITY OF POLICY LOAN INTEREST. In general, interest you pay on a loan
from a Policy will not be deductible. Before taking out a Policy loan, you
should consult a tax advisor as to the tax consequences.
MULTIPLE POLICIES. All MECs that we issue (or that our affiliates issue) to
the same Owner during any calendar year are treated as one MEC for purposes of
determining the amount includible in the Owner's income when a taxable
distribution occurs.
BUSINESS USES OF THE POLICY. The Policy may be used in various arrangements,
including nonqualified deferred compensation or salary continuance plans,
split dollar insurance plans, executive bonus plans, retiree medical benefit
plans and others. The tax consequences of such plans and business uses of the
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<PAGE> 44
Policy may vary depending on the particular facts and circumstances of each
individual arrangement and business uses of the Policy. Therefore, if you are
contemplating using the Policy in any arrangement the value of which depends
in part on its tax consequences, you should be sure to consult a tax advisor
as to tax attributes of the arrangement.
POSSIBLE TAX LAW CHANGES. While the likelihood of legislative or other changes
is uncertain, there is always a possibility that the tax treatment of the
Policy could change by legislation or otherwise. It is even possible that any
legislative change could be retroactive (effective prior to the date of the
change). Consult a tax advisor with respect to legislative developments and
their effect on the Policy.
POSSIBLE CHARGES FOR OUR TAXES. At the present time, we make no charge for any
Federal, state or local taxes (other than the charge for state premium taxes)
that may be attributable to the subaccounts or to the Policy. We reserve the
right to impose charges for any future taxes or economic burden we may incur.
OTHER POLICY INFORMATION
==============================================================================
OUR RIGHT TO CONTEST THE POLICY
In issuing this Policy, we rely on all statements made by or for you and/or
the Insured in the application or in a supplemental application. Therefore, if
you make any material misrepresentation of a fact in the application (or any
supplemental application), then we may contest the Policy's validity or may
resist a claim under the Policy.
In the absence of fraud or non-payment of a Monthly Deduction, we cannot bring
any legal action to contest the validity of the Policy after the Policy has
been in force during the Insured's lifetime for two years after:
(a) the Policy Date;
(b) the effective date of any increase in the Specified
Amount (and then only for the increased amount); or
(c) the effective date of any reinstatement.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within two years of the
Policy Date, the Policy will terminate and our liability is limited to an
amount equal to the premiums paid, less any Indebtedness, and less any
withdrawals previously paid.
If the Insured commits suicide, while sane or insane, within two years from
the effective date of any increase in the Specified Amount, the Policy will
terminate and our liability for the amount of increase will be limited to the
cost of insurance for the increase.
Certain states may require suicide exclusion provisions that differ from those
stated here.
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<PAGE> 45
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex was stated incorrectly in the application, we will
adjust the death benefit proceeds to the amount that would have been payable
at the correct age and sex based on the most recent deduction for cost of
insurance.
MODIFYING THE POLICY
Any modification or waiver of our rights or requirements under the Policy must
be in writing and signed by our president, a vice president, our secretary, or
one of our officers. No agent may bind us by making any promise not contained
in the Policy.
Upon notice to you, we may modify the Policy:
- to conform the Policy, our operations, or the Separate
Account's operations to the requirements of any law (or
regulation issued by a government agency) to which the Policy,
our Company or the Separate Account is subject; or
- to assure continued qualification of the Policy as a life
insurance contract under the Federal tax laws; or
- to reflect a change in the Separate Account's operation.
If we modify the Policy, we will make appropriate endorsements to the Policy.
If any provision of the Policy conflicts with the laws of a jurisdiction that
govern the Policy, we reserve the right to amend the provision to conform with
such laws.
PAYMENTS WE MAKE
We usually pay the amounts of any surrender, withdrawal, death benefit, or
settlement options within seven business days after we receive all applicable
Written Notices and/or due proofs of death. However, we can postpone such
payments if:
- the NYSE is closed, other than customary weekend and holiday
closing, or trading on the NYSE is restricted as determined by
the Securities and Exchange Commission (SEC); OR
- the SEC permits, by an order or less formal interpretation
(e.g., no-action letter), the postponement of any payment for
the protection of Owners; OR
- the SEC determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the
determination of their value not reasonably practicable.
We have the right to defer payment of amounts from the Fixed Account for up to
6 months.
If you have submitted a recent check or draft, we have the right to defer
payment of surrenders, withdrawals, death benefit proceeds, or payments under
a payment option until such check or draft has been honored.
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<PAGE> 46
REPORTS TO OWNERS
At least once each year, or more often as required by law, we will mail to
Owners at their last known address a report showing the following information
as of the end of the report period:
- the current Policy Value
- the current Cash Surrender Value
- the current death benefit
- any activity since the last report (e.g., premiums paid,
withdrawals, deductions, loans or loan repayments, and other
transactions)
- any other information required by law
RECORDS
We will maintain all records relating to the Separate Account and the Fixed
Account at our Home Office.
POLICY TERMINATION
Your Policy will terminate on the earliest of:
- the Maturity Date;
- the end of the grace period without a sufficient
payment;
- the date the Insured dies; or
- the date you surrender the Policy.
SUPPLEMENTAL BENEFITS AND RIDERS
The following supplemental benefits and riders are available under the Policy.
We deduct any monthly charges for these benefits and riders from Policy Value
as part of the Monthly Deduction. The benefits and riders available (which are
summarized below) provide fixed benefits that do not vary with the investment
experience of the Separate Account. For each Policy, we automatically provide
the supplemental benefits listed below. You may elect to add one or more of
the riders listed below at any time, subject to certain limitations. We may
require underwriting for certain riders. Your agent can help you determine
whether certain of the riders are suitable for you. Please contact us for
further details on these supplemental benefits and riders.
SUPPLEMENTAL BENEFITS
EXTENDED MATURITY DATE: Extends the Maturity Date past the original
Maturity Date. You must make a written request for this benefit (and
we must receive it) within 30 days prior to the original Maturity
Date. The tax consequences of keeping the Policy in force beyond the
Insured's 100th birthday are uncertain and you should consult a tax
advisor before doing so. TERMINAL ILLNESS ACCELERATED BENEFIT: You may
elect to receive a portion of the death benefit proceeds in a "single
sum benefit" if the Insured has incurred a terminal condition while
the Policy is in force. Payment of any amounts under this benefit will
result in reductions in your Policy Value, Specified Amount, and
certain Policy benefits. The tax consequences of electing to
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<PAGE> 47
receive a terminal illness accelerated benefit are uncertain and you
should consult a tax advisor before making this election.
RIDERS
- WAIVER OF PREMIUM BENEFIT: Waives the initial planned premium
if the Insured becomes totally and permanently disabled for at
least six consecutive months prior to the Policy anniversary
following the Insured's 60th birthday.
- WAIVER OF MONTHLY DEDUCTION: Waives the Monthly Deduction if
the Insured becomes totally and permanently disabled for at
least six consecutive months prior to the Policy anniversary
following the Insured's 60th birthday.
- LEVEL ONE-YEAR TERM INSURANCE: Provides one-year renewable
term insurance on the Insured.
- ADDITIONAL INSURED'S LEVEL ONE-YEAR TERM INSURANCE: Provides
one-year renewable term insurance on an additional Insured.
- ACCIDENTAL DEATH BENEFIT: Provides for payment of an additional
benefit if the Insured dies due to and within 90 days of an
accidental injury that occurred on or before the Policy
anniversary when the Insured is age 65.
- GUARANTEED INSURABILITY BENEFIT: Provides options to purchase
additional insurance without evidence of insurability.
- CHILDREN'S BENEFIT: Provides level term insurance on each of
the Insured's dependent children, until their 25th birthday.
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<PAGE> 48
PERFORMANCE DATA
============================================================================
In order to demonstrate how the actual investment experience of the portfolios
could have affected the death benefit, Policy Value and Cash Surrender Value
of the Policy, we may provide hypothetical illustrations using the actual
investment experience of each portfolio since its inception. THESE
HYPOTHETICAL ILLUSTRATIONS ARE DESIGNED TO SHOW THE PERFORMANCE THAT COULD
HAVE RESULTED IF THE POLICY HAD BEEN IN EXISTENCE DURING THE PERIOD
ILLUSTRATED AND ARE NOT INDICATIVE OF FUTURE PERFORMANCE.
The values we illustrate for death benefit, Policy Value and Cash Surrender
Value take into account all applicable charges and deductions from the Policy
(current and guaranteed), the Separate Account and the portfolios. We have not
deducted premium taxes or charges for any riders. These charges would lower
the performance figures significantly if reflected.
The inception date of the Service Class shares of underlying Janus Aspen
Portfolios (Growth, Worldwide Growth, Capital Appreciation, Balanced and
Aggressive Growth) was December 31, 1999. Therefore, it is not possible to
illustrate examples of the corresponding Subaccounts since no performance data
exists for these portfolios.
(To be added by amendment.)
The inception date of the Service Class 2 shares of underlying Fidelity
Portfolios (VIP Index 500, VIP Money Market, VIP Growth, VIP Contrafund and
VIP III Growth & Income) was January 12, 2000. Therefore, it is not possible
to illustrate examples of the corresponding Subaccounts since no performance
data exists for these portfolios.
(To be added by amendment.)
[This portion of the page has been intentionally left blank]
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<PAGE> 49
The following example shows how the hypothetical net return of the AIM V.I.
Value Fund would have affected benefits for a Policy dated January 1, 1994. This
example assumes that the Net Premiums and related Policy Values were in the
Sub-account for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
AIM V.I. VALUE FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $666 $664 $0 $0
1996* $1,810 $1,805 $0 $0
1997* $2,780 $2,772 $260 $252
1998* $4,169 $4,159 $1,789 $1,779
1999* $6,277 $6,262 $4,037 $4,022
2000* $9,006 $8,821 $6,906 $6,721
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
The following example shows how the hypothetical net return of the AIM V.I.
Capital Appreciation Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AIM V.I. CAPITAL APPRECIATION FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $653 $651 $0 $0
1996* $1,785 $1,780 $0 $0
1997* $2,817 $2,809 $297 $289
1998* $3,849 $3,840 $1,469 $1,460
1999* $5,251 $5,238 $3,011 $2,998
2000* $8,572 $8,375 $6,472 $6,275
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
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<PAGE> 50
The following example shows how the hypothetical net return of the AIM V.I.
Growth Fund would have affected benefits for a Policy dated January 1, 1994.
This example assumes that the Net Premiums and related Policy Values were in the
Subaccount for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
AIM V.I. GROWTH FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $613 $611 $0 $0
1996* $1,717 $1,712 $0 $0
1997* $2,751 $2,743 $231 $223
1998* $4,245 $4,235 $1,865 $1,855
1999* $6,463 $6,447 $4,223 $4,207
2000* $9,634 $9,444 $7,534 $7,344
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
The following example shows how the hypothetical net return of the AIM V.I.
International Equity Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AIM V.I. INTERNATIONAL EQUITY FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $620 $618 $0 $0
1996* $1,476 $1,471 $0 $0
1997* $2,511 $2,504 $0 $0
1998* $3,287 $3,279 $907 $899
1999* $4,430 $4,418 $2,190 $2,178
2000* $7,937 $7,733 $5,837 $5,633
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
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<PAGE> 51
The following example shows how the hypothetical net return of the AIM V.I.
Government Securities Fund would have affected benefits for a Policy dated
January 1, 1994. This example assumes that the Net Premiums and related Policy
Values were in the Subaccount for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
AIM V.I. GOVERNMENT SECURITIES FUND
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $603 $601 $0 $0
1996* $1,432 $1,427 $0 $0
1997* $2,065 $2,058 $0 $0
1998* $2,846 $2,839 $466 $459
1999* $3,643 $3,633 $1,403 $1,393
2000* $4,212 $4,054 $2,112 $1,954
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
The following example shows how the hypothetical net return of the Oppenheimer
Main Street Growth & Income Fund/VA would have affected benefits for a Policy
dated January 1, 1996. This example assumes that the Net Premiums and related
Policy Values were in the Subaccount for the entire period and that the values
were determined on the first Valuation Date following January 1st of each year.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1996 $899 $897 $0 $0
1998* $2,062 $2,057 $0 $0
1999* $2,776 $2,768 $256 $248
2000* $4,093 $4,083 $1,713 $1,703
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
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<PAGE> 52
The following example shows how the hypothetical net return of the Oppenheimer
Multiple Strategies Fund/VA would have affected benefits for a Policy dated
January 1, 1990. This example assumes that the Net the Net Premiums and related
Policy Values were in the Subaccount for the entire period and that the values
were determined on the first Valuation Date following January 1st of each year.
OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1991 $617 $615 $0 $0
1992* $1,476 $1,472 $0 $0
1993* $2,261 $2,254 $0 $0
1994* $3,294 $3,286 $914 $906
1995* $3,733 $3,723 $1,493 $1,483
1996* $5,329 $5,153 $3,229 $3,053
1997* $6,869 $6,497 $4,909 $4,537
1998* $8,739 $8,125 $6,919 $6,305
1999* $9,881 $9,053 $8,201 $7,373
2000* $11,605 $10,490 $10,065 $8,950
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
The following example shows how the hypothetical net return of the Oppenheimer
Bond Fund/VA would have affected benefits for a Policy dated January 1, 1990.
This example assumes that the Net Premiums and related Policy Values were in the
Sub-account for the entire period and that the values were determined on the
first Valuation Date following January 1st of each year.
OPPENHEIMER BOND FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1991 $697 $695 $0 $0
1992* $1,572 $1,567 $0 $0
1993* $2,307 $2,300 $0 $0
1994* $3,257 $3,249 $877 $869
1995* $3,696 $3,687 $1,456 $1,447
1996* $5,089 $4,916 $2,989 $2,816
1997* $5,965 $5,623 $4,005 $3,663
1998* $7,147 $6,600 $5,327 $4,780
1999* $8,201 $7,441 $6,521 $5,761
2000* $8,545 $7,615 $7,005 $6,075
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
47
<PAGE> 53
The following example shows how the hypothetical net return of the Oppenheimer
Strategic Bond Fund/VA would have affected benefits for a Policy dated January
1, 1994. This example assumes that the Net Premiums and related Policy Values
were in the Sub-account for the entire period and that the values were
determined on the first Valuation Date following January 1st of each year.
OPPENHEIMER STRATEGIC BOND FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1995 $602 $600 $0 $0
1996* $1,428 $1,424 $0 $0
1997* $2,278 $2,271 $0 $0
1998* $3,092 $3,085 $712 $705
1999* $3,721 $3,712 $1,481 $1,472
2000* $4,476 $4,315 $2,376 $2,215
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
The following example shows how the hypothetical net return of the Oppenheimer
High Income Fund/VA would have affected benefits for a Policy dated January 1,
1990. This example assumes that the Net Premiums and related Policy Values were
in the Sub-account for the entire period and that the values were determined on
the first Valuation Date following January 1st of each year.
OPPENHEIMER HIGH INCOME FUND/VA
Male, Issue Age 35, $1,080 Annual Premium
($100,000 Specified Amount, Tobacco Risk)
Level Death Benefit
Both Current and Guaranteed Costs and Expenses
<TABLE>
<CAPTION>
Policy Value Cash Surrender Value
------------ --------------------
Policy Anniversary on January 1 of Current Guaranteed Current Guaranteed
---------------------------------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C>
1991 $671 $669 $0 $0
1992* $1,782 $1,777 $0 $0
1993* $2,823 $2,815 $303 $295
1994* $4,316 $4,306 $1,936 $1,926
1995* $4,669 $4,657 $2,429 $2,417
1996* $6,405 $6,229 $4,305 $4,129
1997* $8,089 $7,719 $6,129 $5,759
1998* $9,720 $9,134 $7,900 $7,314
1999* $10,260 $9,506 $8,580 $7,826
2000* $11,203 $10,234 $9,663 $8,694
</TABLE>
*For each year shown, benefits and values reflect only premiums paid during
Previous Policy years.
48
<PAGE> 54
ADDITIONAL INFORMATION
==============================================================================
SALE OF THE POLICIES
The Policy will be sold by individuals who are licensed as our life insurance
agents and who are also registered representatives of broker-dealers having
written sales agreements for the Policy with AFSG Securities Corporation
("AFSG"), the principal underwriter of the Policy. AFSG is located at 4425 North
River Blvd., NE, Cedar Rapids, IA 52402, is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer, and is a member of the
National Association of Securities Dealers, Inc. The maximum sales commission
payable to our agents or other registered representatives may vary with the
sales agreement, but it is not expected to be greater than: 90% of all premiums
paid during the first Policy Year, and 2.50% of all premiums paid during Policy
Years 2 through 10. We will pay an additional sales commission of up to 0.25% of
the unloaned Policy Value on the sixth Policy anniversary and each anniversary
thereafter where the Policy Value (minus amounts attributable to loans) equals
at least $5,000. In addition, certain production, persistency and managerial
bonuses may be paid.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to the Policy under the Federal securities laws.
John D. Cleavenger, Esq., Vice President and General Counsel (Individual
Division) of the Company, has passed upon all matters of Iowa law pertaining to
the Policy.
LEGAL PROCEEDINGS
Like other life insurance companies, we are involved in lawsuits. In some class
action and other lawsuits involving other insurers, substantial damages have
been sought and/or material settlement payments have been made. We believe that
there are no pending or threatened lawsuits that will adversely impact us or the
Separate Account.
FINANCIAL STATEMENTS
This prospectus does not include financial statements of the Separate Account
because, as of the date of this prospectus, the Separate Account had not yet
commenced operations, had no assets, and had incurred no liabilities. The
Company's financial statements appear at the end of this prospectus. The
statutory-basis balance sheets of Peoples Benefit Life Insurance Company as of
December 31, 2000 and 1999, and the related statutory-basis statements of
operations, changes in capital and surplus, and cash flows for each of the three
years in the period ended December 31, 2000, and the financial statement
schedules as of December 31, 2000 for each of the three years in the period then
ended have been audited by Ernst & Young LLP, independent accountants, whose
reports thereon is set forth elsewhere herein. Such financial statements and
schedules are included in this prospectus in reliance upon such report given
upon the authority of Ernst & Young LLP as experts in accounting and auditing.
You should distinguish the Company's financial statements from the Separate
Account's financial statements and you should consider our financial statements
only as bearing upon our ability to meet our obligations under the Policies.
[Financial Statements to be added by amendment]
49
<PAGE> 55
ADDITIONAL INFORMATION ABOUT THE COMPANY
Peoples Benefit is a stock life insurance Company that is a wholly owned
indirect subsidiary of AEGON USA, Inc. AEGON USA, Inc. is a wholly owned
indirect subsidiary of AEGON NV, a Netherlands corporation that is a publicly
traded international insurance group. Peoples Benefit's Home Office or such
other office as we may designate from time to time, is located at 4333 Edgewood
Road NE, Cedar Rapids, Iowa 52499.
Peoples Benefit was redomiciled under Iowa law on December 31, 1999 and is
subject to regulation by the Iowa Commissioner of Insurance. Peoples Benefit is
engaged in the business of issuing life insurance policies and annuity
contracts, and is licensed to do business in the District of Columbia and all
states except New York. Peoples Benefit submits annual statements on its
operations and finances to insurance officials in all states and jurisdictions
in which it does business. Peoples Benefit has filed the Policy described in
this prospectus with insurance officials in those jurisdictions in which the
Policy is sold.
Peoples Benefit intends to reinsure a portion of the risks assumed under the
Policies.
PEOPLES BENEFIT EXECUTIVE OFFICERS AND DIRECTORS
Peoples Benefit is governed by a board of directors. The following tables set
forth the name, address and principal occupation during the past five years of
each of Peoples Benefit's executive officers and directors.
BOARD OF DIRECTORS AND SENIOR OFFICERS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
POSITION WITH PEOPLES
NAME BENEFIT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
---------------------------------------------------------------------------------------------
<S> <C> <C>
**Bart Herbert, Jr. Director, Chairman of Director, Chairman of the Board, and President
the Board, and President (1997- present)
---------------------------------------------------------------------------------------------
**Martha A. Treasurer Treasurer (1997-present) of Peoples Benefit
McConnell Life Co; Senior Vice President of Finance,
AEGON Special Markets Group (1997-present);
Vice President and Controller (1993-1997)
Monument General Insurance Group
---------------------------------------------------------------------------------------------
*Steven C. Vice President and Vice President and Corporate Actuary
Chamberlin Corporate Actuary (1999-present)
---------------------------------------------------------------------------------------------
*Craig D. Vermie Director, Vice Secretary (1997-present), General Counsel
President, Secretary (1996-present), Vice President (1995-present),
and General Counsel Assistant General Counsel, Associate General
Counsel, Corporate Counsel (respectively)
(1986-1995) - AEGON USA, Inc.
---------------------------------------------------------------------------------------------
</TABLE>
50
<PAGE> 56
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
POSITION WITH PEOPLES
NAME BENEFIT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
---------------------------------------------------------------------------------------------
<S> <C> <C>
*Kathleen M. Vice President and Director (2000-present) and Vice President of
Modzelewski Director Peoples Benefit Life Insurance Company; Vice
President and Director of Corporate Taxes
(1999-present) AEGON USA, Inc.
---------------------------------------------------------------------------------------------
*Brenda K. Clancy Director, Vice Vice President and Controller (1992-1997);
President, Treasurer Treasurer and Senior Vice President (1997-present)
and Chief Financial of AEGON USA, Inc.
Officer
---------------------------------------------------------------------------------------------
*Larry N. Norman Director, Executive Executive Vice President and Director
Vice President (1998-present)
---------------------------------------------------------------------------------------------
**David G. Rekoski Director, Senior Vice Director (1999-present) and Senior Vice
President President
---------------------------------------------------------------------------------------------
***G. Douglas Director and Senior Director (1998-present) and Senior Vice
Mangum, Jr. Vice President President
---------------------------------------------------------------------------------------------
**Brian A. Smith Director and Vice Director (1998-present) and Vice President
President
---------------------------------------------------------------------------------------------
***Douglas A.Sarcia Director and Vice Director (1997-present) and Vice President
President
---------------------------------------------------------------------------------------------
</TABLE>
Individuals designated with "*" are located at Peoples Benefit Insurance
Company, 4333 Edgewood Road, NE, Cedar Rapids, IA 52499.
Individuals designated with "**" are located at Peoples Benefit Life Insurance
Company, 1111 North Charles, Baltimore, Maryland 21201
Individuals designated with "***" are located at Peoples Benefit Life Insurance
Company, 20 Moores Road, Frazer, PA 19355
Peoples Benefit holds the Separate Account's assets physically segregated and
apart from the general account. Peoples Benefit maintains records of all
purchases and sale of portfolio shares by each of the Subaccounts. A blanket
bond in the amount of $10 million (subject to a $1 million deductible), covering
directors, officers and all employees of AEGON USA, Inc. and its affiliates has
been issued to Peoples Benefit and its affiliates.
51
<PAGE> 57
ILLUSTRATIONS
===============================================================================
The following illustrations show how certain values under a sample Policy would
change with different rates of fictional investment performance over an extended
period of time. In particular, the illustrations show how the death benefit,
Policy Value, and Cash Surrender Value under a Policy covering a male or female
Insured of age 35 on the Policy Date in a tobacco or preferred class, would
change over time if the planned premiums were paid and the return on the assets
in the Subaccounts were a uniform gross annual rate (before any expenses) of 0%,
6% or 12%. The tables also show how the Policy would operate if premiums
accumulated at 5% interest. The tables illustrate Policy values that would
result based on assumptions that you pay the premiums indicated, you do not
increase your Specified Amount, and you do not make any withdrawals or Policy
loans. The values under the Policy will be different from those shown even if
the returns averaged 0%, 6% or 12%, but fluctuated over and under those averages
throughout the years shown.
THE HYPOTHETICAL INVESTMENT RETURNS ARE PROVIDED ONLY TO ILLUSTRATE THE
MECHANICS OF A HYPOTHETICAL POLICY AND DO NOT REPRESENT PAST OR FUTURE
INVESTMENT RATES OF RETURN. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return. The actual
return on your Policy Value will depend on factors such as the amounts you
allocate to particular portfolios, the amounts deducted for the Policy's monthly
charges, the portfolios' expense ratios, and your Policy loan and withdrawal
history.
The illustrations assume that the assets in the portfolios are subject to an
annual expense ratio of 0.82% of the average daily net assets. This annual
expense ratio is based on the average of the expense ratios of each of the
portfolios for the last fiscal year and, for the new class of shares, the
expense ratio is based on estimated expenses for their initial fiscal years.
This annual expense ratio does not take into account current expense
reimbursement arrangements. For information on the portfolios' management fees
see the Annual Portfolio Operating Expenses table in the "Policy Summary --
Charges and Deductions" section of this prospectus, and see the portfolios'
prospectuses.
Separate illustrations on each of the following pages reflect our current
expense charge and cost of insurance charge and the higher guaranteed maximum
expense charge and cost of insurance charge that we have the contractual right
to charge. The illustrations assume no charges for Federal or state taxes or
charges for supplemental benefits.
After deducting portfolio expenses and mortality and expense risk charges, the
illustrated gross annual investment rates of return of 0%, 6% and 12% would
correspond to approximate net annual rates for the Separate Account of -1.56%,
4.40% and 10.35%, respectively.
The illustrations are based on our sex distinct rates for tobacco and preferred
users. Upon request, we will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those shown in the following
illustrations
52
<PAGE> 58
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Preferred Class
Annual Premium $1,000 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross) 12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $159,563
40 (AGE 75) $126,840 $100,000 $100,000 $383,409
50 (AGE 85) $219,815 $0 $100,000 $1,006,196
60 (AGE 95) $371,263 $0 $150,543 $2,540,845
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $647 $694 $741 $0 $0 $0
2 $1,275 $1,410 $1,551 $0 $0 $0
3 $1,884 $2,148 $2,434 $0 $0 $274
4 $2,471 $2,906 $3,398 $431 $866 $1,358
5 $3,038 $3,686 $4,449 $1,118 $1,766 $2,529
6 $3,700 $4,608 $5,719 $1,900 $2,808 $3,919
7 $4,341 $5,560 $7,111 $2,661 $3,880 $5,431
8 $4,959 $6,541 $8,635 $3,399 $4,981 $7,075
9 $5,552 $7,550 $10,302 $4,112 $6,110 $8,862
10 $6,121 $8,590 $12,129 $4,801 $7,270 $10,809
15 $8,715 $14,421 $24,492 $7,995 $13,701 $23,772
20 $10,643 $21,212 $44,460 $10,643 $21,212 $44,460
30 (AGE 65) $11,496 $37,899 $130,789 $11,496 $37,899 $130,789
40 (AGE 75) $4,352 $59,848 $358,327 $4,352 $59,848 $358,327
50 (AGE 85) $0 $92,264 $958,282 $0 $92,264 $958,282
60 (AGE 95) $0 $149,053 $2,515,688 $0 $149,053 $2,515,688
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portoflios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
53
<PAGE> 59
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Preferred Class
Annual Premium $1,000 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $136,314
40 (AGE 75) $126,840 $0 $100,000 $320,781
50 (AGE 85) $219,815 $0 $0 $820,071
60 (AGE 95) $371,263 $0 $0 $1,968,378
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $646 $694 $741 $0 $0 $0
2 $1,275 $1,410 $1,551 $0 $0 $0
3 $1,883 $2,148 $2,434 $0 $0 $274
4 $2,471 $2,906 $3,397 $431 $866 $1,357
5 $3,037 $3,686 $4,448 $1,117 $1,766 $2,528
6 $3,580 $4,485 $5,593 $1,780 $2,685 $3,793
7 $4,098 $5,304 $6,843 $2,418 $3,624 $5,163
8 $4,591 $6,143 $8,206 $3,031 $4,583 $6,646
9 $5,059 $7,001 $9,695 $3,619 $5,561 $8,255
10 $5,499 $7,878 $11,321 $4,179 $6,558 $10,001
15 $7,225 $12,509 $22,036 $6,505 $11,789 $21,316
20 $7,892 $17,355 $38,969 $7,892 $17,355 $38,969
30 (AGE 65) $2,764 $24,934 $111,733 $2,764 $24,934 $111,733
40 (AGE 75) $0 $15,240 $299,795 $0 $15,240 $299,795
50 (AGE 85) $0 $0 $781,020 $0 $0 $781,020
60 (AGE 95) $0 $0 $1,948,889 $0 $0 $1,948,889
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
54
<PAGE> 60
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Tobacco Class
Annual Premium $1,000 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $123,399
40 (AGE 75) $126,840 $0 $100,000 $295,447
50 (AGE 85) $219,815 $0 $0 $769,441
60 (AGE 95) $371,263 $0 $0 $1,901,060
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $551 $595 $640 $0 $0 $0
2 $1,076 $1,199 $1,327 $0 $0 $0
3 $1,569 $1,805 $2,062 $0 $0 $0
4 $2,028 $2,410 $2,844 $0 $30 $464
5 $2,451 $3,015 $3,681 $211 $775 $1,441
6 $2,983 $3,763 $4,725 $883 $1,663 $2,625
7 $3,481 $4,520 $5,852 $1,521 $2,560 $3,892
8 $3,940 $5,280 $7,067 $2,120 $3,460 $5,247
9 $4,357 $6,038 $8,374 $2,677 $4,358 $6,694
10 $4,733 $6,796 $9,785 $3,193 $5,256 $8,245
15 $6,509 $11,166 $19,528 $5,669 $10,326 $18,688
20 $7,217 $15,654 $34,777 $7,217 $15,654 $34,777
30 (AGE 65) $4,045 $24,061 $101,147 $4,045 $24,061 $101,147
40 (AGE 75) $0 $23,036 $276,119 $0 $23,036 $276,119
50 (AGE 85) $0 $0 $732,801 $0 $0 $732,801
60 (AGE 95) $0 $0 $1,882,238 $0 $0 $1,882,238
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
55
<PAGE> 61
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
MALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Tobacco Class
Annual Premium $1,000 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $0 $0 $100,000
40 (AGE 75) $126,840 $0 $0 $164,855
50 (AGE 85) $219,815 $0 $0 $423,451
60 (AGE 95) $371,263 $0 $0 $1,017,535
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $549 $593 $638 $0 $0 $0
2 $1,072 $1,194 $1,323 $0 $0 $0
3 $1,563 $1,799 $2,055 $0 $0 $0
4 $2,022 $2,404 $2,837 $0 $24 $457
5 $2,444 $3,006 $3,670 $204 $766 $1,430
6 $2,825 $3,600 $4,556 $725 $1,500 $2,456
7 $3,164 $4,184 $5,497 $1,204 $2,224 $3,537
8 $3,457 $4,754 $6,498 $1,637 $2,934 $4,678
9 $3,701 $5,306 $7,561 $2,021 $3,626 $5,881
10 $3,893 $5,834 $8,688 $2,353 $4,294 $7,148
15 $3,972 $7,981 $15,526 $3,132 $7,141 $14,686
20 $2,019 $8,548 $24,951 $2,019 $8,548 $24,951
30 (AGE 65) $0 $0 $58,576 $0 $0 $58,576
40 (AGE 75) $0 $0 $154,070 $0 $0 $154,070
50 (AGE 85) $0 $0 $403,287 $0 $0 $403,287
60 (AGE 95) $0 $0 $1,007,460 $0 $0 $1,007,460
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
56
<PAGE> 62
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Preferred Class
Annual Premium $1,000 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $168,747
40 (AGE 75) $126,840 $100,000 $100,000 $407,677
50 (AGE 85) $219,815 $0 $121,608 $1,075,299
60 (AGE 95) $371,263 $0 $187,252 $2,729,179
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $681 $729 $778 $0 $0 $0
2 $1,342 $1,482 $1,627 $0 $0 $0
3 $1,985 $2,258 $2,555 $5 $278 $575
4 $2,608 $3,060 $3,570 $738 $1,190 $1,700
5 $3,214 $3,890 $4,683 $1,454 $2,130 $2,923
6 $3,899 $4,847 $6,005 $2,249 $3,197 $4,355
7 $4,562 $5,835 $7,452 $3,022 $4,295 $5,912
8 $5,204 $6,856 $9,040 $3,774 $5,426 $7,610
9 $5,827 $7,913 $10,783 $4,507 $6,593 $9,463
10 $6,430 $9,007 $12,698 $5,220 $7,797 $11,488
15 $9,260 $15,224 $25,726 $8,600 $14,564 $25,066
20 $11,551 $22,635 $46,890 $11,551 $22,635 $46,890
30 (AGE 65) $13,822 $41,761 $138,317 $13,822 $41,761 $138,317
40 (AGE 75) $12,208 $70,196 $381,007 $12,208 $70,196 $381,007
50 (AGE 85) $0 $115,818 $1,024,095 $0 $115,818 $1,024,095
60 (AGE 95) $0 $185,398 $2,702,157 $0 $185,398 $2,702,157
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
57
<PAGE> 63
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Preferred Class
Annual Premium $1,000 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $145,701
40 (AGE 75) $126,840 $0 $100,000 $347,877
50 (AGE 85) $219,815 $0 $100,000 $899,946
60 (AGE 95) $371,263 $0 $0 $2,182,873
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $668 $716 $764 $0 $0 $0
2 $1,317 $1,455 $1,598 $0 $0 $0
3 $1,945 $2,215 $2,508 $0 $235 $528
4 $2,552 $2,998 $3,500 $682 $1,128 $1,630
5 $3,137 $3,802 $4,583 $1,377 $2,042 $2,823
6 $3,698 $4,627 $5,764 $2,048 $2,977 $4,114
7 $4,235 $5,473 $7,052 $2,695 $3,933 $5,512
8 $4,747 $6,341 $8,459 $3,317 $4,911 $7,029
9 $5,236 $7,232 $9,998 $3,916 $5,912 $8,678
10 $5,702 $8,149 $11,685 $4,492 $6,939 $10,475
15 $7,647 $13,104 $22,911 $6,987 $12,444 $22,251
20 $8,798 $18,641 $40,934 $8,798 $18,641 $40,934
30 (AGE 65) $7,526 $31,192 $119,427 $7,526 $31,192 $119,427
40 (AGE 75) $0 $41,668 $325,119 $0 $41,668 $325,119
50 (AGE 85) $0 $23,103 $857,091 $0 $23,103 $857,091
60 (AGE 95) $0 $0 $2,161,261 $0 $0 $2,161,261
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
58
<PAGE> 64
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Tobacco Class
Annual Premium $1,000 Level Death Benefit
Using Current Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $147,393
40 (AGE 75) $126,840 $100,000 $100,000 $354,821
50 (AGE 85) $219,815 $0 $100,000 $930,545
60 (AGE 95) $371,263 $0 $100,680 $2,328,760
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $620 $667 $713 $0 $0 $0
2 $1,214 $1,346 $1,483 $0 $0 $0
3 $1,781 $2,036 $2,313 $0 $0 $153
4 $2,319 $2,737 $3,210 $279 $697 $1,170
5 $2,824 $3,445 $4,175 $904 $1,525 $2,255
6 $3,439 $4,303 $5,364 $1,639 $2,503 $3,564
7 $4,020 $5,177 $6,653 $2,340 $3,497 $4,973
8 $4,572 $6,068 $8,056 $3,012 $4,508 $6,496
9 $5,096 $6,980 $9,585 $3,656 $5,540 $8,145
10 $5,592 $7,913 $11,257 $4,272 $6,593 $9,937
15 $7,890 $13,205 $22,648 $7,170 $12,485 $21,928
20 $9,659 $19,453 $41,174 $9,659 $19,453 $41,174
30 (AGE 65) $8,976 $33,306 $120,814 $8,976 $33,306 $120,814
40 (AGE 75) $1,103 $50,667 $331,609 $1,103 $50,667 $331,609
50 (AGE 85) $0 $70,485 $886,234 $0 $70,485 $886,234
60 (AGE 95) $0 $99,684 $2,305,703 $0 $99,684 $2,305,703
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
59
<PAGE> 65
PEOPLES BENEFIT LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
HYPOTHETICAL ILLUSTRATIONS
FEMALE ISSUE AGE 35
<TABLE>
<CAPTION>
Specified Amount $100,000 Tobacco Class
Annual Premium $1,000 Level Death Benefit
Using Guaranteed Cost Assumptions
DEATH BENEFIT*
END OF PREMIUMS ASSUMING HYPOTHETICAL GROSS AND
POLICY ACCUMULATED NET ANNUAL INVESTMENT RETURN OF
YEAR AT 5% 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C>
1 $1,050 $100,000 $100,000 $100,000
2 $2,153 $100,000 $100,000 $100,000
3 $3,310 $100,000 $100,000 $100,000
4 $4,526 $100,000 $100,000 $100,000
5 $5,802 $100,000 $100,000 $100,000
6 $7,142 $100,000 $100,000 $100,000
7 $8,549 $100,000 $100,000 $100,000
8 $10,027 $100,000 $100,000 $100,000
9 $11,578 $100,000 $100,000 $100,000
10 $13,207 $100,000 $100,000 $100,000
15 $22,657 $100,000 $100,000 $100,000
20 $34,719 $100,000 $100,000 $100,000
30 (AGE 65) $69,761 $100,000 $100,000 $117,554
40 (AGE 75) $126,840 $0 $100,000 $281,053
50 (AGE 85) $219,815 $0 $0 $726,306
60 (AGE 95) $371,263 $0 $0 $1,759,567
</TABLE>
<TABLE>
<CAPTION>
END OF POLICY VALUE CASH SURRENDER VALUE
POLICY ASSUMING HYPOTHETICAL GROSS AND ASSUMING HYPOTHETICAL GROSS AND
YEAR NET ANNUAL INVESTMENT RETURN OF NET ANNUAL INVESTMENT RETURN OF
0.00% (Gross)6.00% (Gross) 12.00% (Gross) 0.00% (Gross) 6.00% (Gross)12.00% (Gross)
-1.56% (Net) 4.40% (Net) 10.35% (Net) -1.56% (Net) 4.40% (Net) 10.35% (Net)
<S> <C> <C> <C> <C> <C> <C>
1 $619 $665 $712 $0 $0 $0
2 $1,213 $1,344 $1,481 $0 $0 $0
3 $1,779 $2,035 $2,312 $0 $0 $152
4 $2,316 $2,734 $3,207 $276 $694 $1,167
5 $2,822 $3,442 $4,172 $902 $1,522 $2,252
6 $3,293 $4,154 $5,210 $1,493 $2,354 $3,410
7 $3,727 $4,868 $6,328 $2,047 $3,188 $4,648
8 $4,126 $5,585 $7,534 $2,566 $4,025 $5,974
9 $4,490 $6,306 $8,840 $3,050 $4,866 $7,400
10 $4,820 $7,032 $10,256 $3,500 $5,712 $8,936
15 $5,920 $10,695 $19,450 $5,200 $9,975 $18,730
20 $5,893 $14,217 $33,796 $5,893 $14,217 $33,796
30 (AGE 65) $948 $19,325 $96,356 $948 $19,325 $96,356
40 (AGE 75) $0 $10,672 $262,666 $0 $10,672 $262,666
50 (AGE 85) $0 $0 $691,720 $0 $0 $691,720
60 (AGE 95) $0 $0 $1,742,145 $0 $0 $1,742,145
</TABLE>
* Even though the Cash Surrender Value is 0, the Policy would not Lapse if it
was in a No Lapse Period and the premiums paid, less withdrawals and
indebtedness, equaled or exceeded the cumulative minimum monthly premiums. These
hypothetical illustrations assume the Insured has elected a 20 year No Lapse
Period.
The hypothetical rates of return shown above are illustrative only and should
not be deemed a representation of past or future investment rates of return.
Actual rates of return may be more or less than those shown and will depend on a
numbers of factors, including investment allocations made by an Owner and the
actual investment experience of the Portfolios. The Policy Value, Cash Surrender
Value and Death Benefit for a Policy would be different from those shown if the
actual rates of return averages 0.00%, 6.00% and 12.00% over a period of years,
but also fluctuated above or below those averages for Individual Policy Years.
No representations can be made that these hypothetical rates of return can be
achieved for any one year or sustained over any period of time.
60
<PAGE> 66
PART II.
OTHER INFORMATION
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.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Peoples Benefit Life Insurance Company ("Peoples Benefit") hereby
represents that the fees and charges deducted under the Policies, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Peoples Benefit.
RULE 484 UNDERTAKING
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
CONTENTS OF REGISTRATION STATEMENT
This registration statement comprises the following papers and documents:
The facing sheet
The Prospectus, consisting of 60 pages
The undertaking to file reports
Representation pursuant to Section 26(e)(2)(A)
The Rule 484 undertaking
The signatures
Written consent of the following persons:
(a) Roger Hallquist, Actuary
(b) John D. Cleavenger, Esq.
(c) Sutherland Asbill & Brennan LLP
(d) Ernst & Young LLP
II-1
<PAGE> 67
The following exhibits:
1. The following exhibits correspond to those required by paragraph A to the
instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of the Board of Directors of Peoples
Benefit establishing Peoples Benefit Variable Life
Account A. (the Separate Account") @
(2) Not Applicable (Custody Agreement)
(3) Distribution of Policies
(a) Form of Principal Underwriting Agreement (1)
(b) Form of Broker-Dealer Supervision and Sales
Agreement (1)
(4) Not Applicable (Agreements between Peoples Benefit,
the principal underwriter, or custodian other than
those set forth above in A. (1), (2), and (3))
(5) Specimen Flexible Premium Variable Life Insurance
Policy @
(a) Waiver of Premium Benefit @
(b) Waiver of Monthly Deduction @
(c) Level One-Year Term Insurance @
(d) Additional Insured's Level One-Year Term
Insurance @
(e) Accidental Death Benefit @
(f) Guaranteed Insurability Benefit @
(g) Children's Benefit @
(6) (a) Certificate of Incorporation of Peoples
Benefit@
(b) By-Laws of Peoples Benefit @
(7) Not Applicable (Any insurance policy under a
contract between the Separate Account and Peoples
Benefit)
(8) (a) Form of Participation Agreement regarding
Janus Aspen Series (1)
(b) Form of Participation Agreement regarding AIM
Variable Insurance Funds, Inc. (1)
(c) Form of Participation Agreement regarding
Oppenheimer Variable Account Funds (1)
(d) Form of Participation Agreement regarding
Fidelity Variable Insurance Products Funds
(1)
(9) Not Applicable (All other material contracts
concerning the Separate Account)
(10) Application for Flexible Premium Variable Life
Insurance Policy@
(11) Memorandum describing issuance, transfer and
redemption procedures (1)
2. Opinion of Counsel as to the legality of the securities being registered
(1)
3. Not Applicable (Financial statements omitted from the prospectus pursuant
to Instruction 1(b) or (c) of Part I
4. Not Applicable
5. Consent of Sutherland Asbill & Brennan LLP (1)
II-2
<PAGE> 68
6. Opinion and consent of Roger Hallquist as to actuarial matters pertaining
to the securities being registered (1)
7. Consent of Ernst & Young LLP(1)
8. Powers of Attorney @
--------------------------------------------------------------------------------
@ Filed herewith
(1) To be filed by amendment.
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<PAGE> 69
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Peoples Benefit Variable Life Account A, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, on this 19th of
December, 2000.
(Seal) PEOPLES BENEFIT VARIABLE LIFE ACCOUNT A
(Registrant)
PEOPLES BENEFIT LIFE INSURANCE COMPANY
(Depositor)
/s/ CRAIG D. VERMIE /s/ BART HERBERT, JR.
----------------------------- ------------------------------
Craig D. Vermie Bart Herbert, Jr.
Vice President, Secretary President, Chairman of the Board and Director
General Counsel and Director
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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<PAGE> 70
Signatures (continued)
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature and Title Date
<S> <C>
/s/ BART HERBERT, JR. 12/19/00
----------------------------- -------
Bart Herbert, Jr.
President, Chairman of the Board and Director
/s/ CRAIG D. VERMIE 12/14/00
----------------------------- -------
Craig D. Vermie
Vice President, Secretary, General Counsel and Director
/s/ MARTHA A. MCCONNELL 12/14/00
----------------------------- -------
Martha A. McConnell
Treasurer
/s/ STEVEN CHAMBERLIN 12/19/00
----------------------------- -------
Steven C. Chamberlin
Vice President and Corporate Actuary
/s/ BRENDA K. CLANCY 12/14/00
----------------------------- -------
Brenda K. Clancy
Vice President and Director
/s/ KATHLEEN M. MODZELEWSKI 12/13/00
----------------------------- -------
Kathleen M. Modzelewski
Vice President and Director
/s/ LARRY N. NORMAN 12/13/00
----------------------------- -------
Larry N. Norman
Executive Vice President and Director
/s/ DAVID G. REKOSKI 12/15/00
----------------------------- -------
David G. Rekoski
Senior Vice President and Director
/s/ G. DOUGLAS MANGUM, JR. 12/15/00
----------------------------- -------
G. Douglas Mangum, Jr.
Senior Vice President and Director
/s/ BRIAN A. SMITH 12/15/00
----------------------------- -------
Brian A. Smith
Vice President and Director
/s/ DOUGLAS A. SARCIA 12/18/00
----------------------------- -------
Douglas A. Sarcia
Vice President and Director
</TABLE>
II-5
<PAGE> 71
EXHIBIT INDEX
1. A. (1) Resolution of the Board of Directors of Peoples Benefit
establishing Peoples Benefit Variable Life Account
A. (the Separate Account")
(5) Specimen Flexible Premium Variable Life Insurance Policy
(a) Waiver of Premium Benefit
(b) Waiver of Monthly Deduction
(c) Level One-Year Term Insurance
(d) Additional Insured's Level One-Year Term
Insurance
(e) Accidental Death Benefit
(f) Guaranteed Insurability Benefit
(g) Children's Benefit
(6) (a) Certificate of Incorporation of Peoples Benefit
(b) By-Laws of Peoples Benefit
(10) Application for Flexible Premium Variable Life Insurance
Policy
8. Powers of Attorney
