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Exhibit 6
EXHIBIT 6
THE MANUFACTURERS INSURANCE COMPANY OF AMERICA
DESCRIPTION OF PURCHASE, TRANSFER AND REDEMPTION PROCEDURES
VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
(1933 FILE ACT NO. 333-45970)
This document sets forth, as required by Rule 6e-3(T)(b)(12)(iii), the
administrative procedures that will be followed by The Manufacturers Insurance
Company of America (the "Company") and any office the Company designates for the
receipt of payments and processing of policyowner requests (the "Service
Office") in connection with the issuance of its flexible premium variable
universal life insurance policies described in this registration statement (1933
Act file no. 333-45970) (the "Policy"), the transfer of assets held thereunder,
and the redemption by policyowners of their interests in the Policy.
I. ISSUING A POLICY
A. PREMIUMS
This Policy is a flexible premium variable universal life insurance
policy. The Policy permits the policyowner to pay flexible premiums. After
payment of the initial premium, premiums may be paid at any time and in
any amount during the lifetime of the insured. A Policy will be issued
with a planned premium, which is based on the amount of premium the
policyowner wished to pay. In no event may the total of all premiums paid
exceed the then-current maximum premium limitations established by federal
income tax law for Policies that qualify as life insurance under the
Guideline Premium Test. If, at any time, a premium is paid which would
result in total premiums exceeding the above maximum premium limitation,
the Company will only accept that portion of the premium which will make
the total premiums equal to the maximum. Any part of the premium in excess
of that amount will be returned and no further premiums will be accepted
until allowed by the then-current maximum premium limitation. The Company
also reserves the right to request evidence of insurability of a premium
payment would result in an increase in the death benefit that is greater
than the increase in Policy Value.
B. UNDERWRITING
The acceptance of an application is subject to the Company's underwriting
rules, and the Company reserves the right to request additional
information or to reject an application for any reason. The Company will
require satisfactory evidence of insurability. This may include medical
exams and other information. Persons failing to meet standard underwriting
classification may be eligible for a Policy with an additional rating
assigned to it.
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C. APPLICATION
To purchase a Policy, an applicant must submit a completed application. A
Policy will not be issued until the underwriting process has been
completed to the Company's satisfaction.
Policies may be issued on a basis which does not distinguish between the
insured's sex, with prior approval from the Company. Generally, a Policy
will only be issued on the lives of insureds from ages 0 through 90.
Each Policy is issued with a Policy Date, an Effective Date and an Issue
Date.
The POLICY DATE is the date coverage takes effect under the Policy,
provided the Company receives the minimum initial premium at its Service
Office, and is the date from which the first monthly deductions are
calculated and from which Policy Years, Policy Months and Policy
Anniversaries are determined.
The EFFECTIVE DATE is the date the underwriters approve issuance of the
Policy. If the Policy is approved without the initial premium, the
Effective date will be the date the Company receives at least the minimum
initial premium at its Service Office. The Company will take the first
Monthly Deduction on the Effective Date.
The ISSUE DATE is the date the Company issued the Policy. It is the date
from which the suicide and incontestability provisions are measured.
If an application accepted by the Company is not accompanied by a check
for the initial premium and no request to backdate the Policy has been
made:
(i) the Policy Date and the Effective Date will be the date the Company
receives the check at its Service Office;
(ii) the Issue Date will be the date the Company issues the Policy.
The initial premium must be received within 60 days after the Issue Date.
If the premium is not paid or if the application is rejected, the Policy
will be canceled and any partial premiums paid will be returned to the
applicant.
D. MINIMUM INITIAL FACE AMOUNT
The Company will generally issue a Policy only if it has a Face Amount of
at least $100,000.
E. BACKDATING A POLICY
Under limited circumstances, the Company may backdate a Policy, upon
request, by assigning a Policy Date earlier than the date the application
is
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signed. However, in no event will a Policy be backdated earlier than the
earliest date allowed by state law, which is generally three months to one
year prior to the date of application for the Policy. Monthly deductions
will be made for the period the Policy Date is backdated. Regardless of
whether or not a policy is backdated, Net Premiums (premium paid less
premium load) received prior to the Effective Date of a Policy will be
credited with interest from the date of receipt at the rate of return then
being earned on amounts allocated to the Money Market portfolio. As of the
Effective Date, the premiums paid plus interest credited, net of the
premium load, will be allocated among the Investment Accounts (as
described below under ("Policy Value - Investment Accounts") and/or Fixed
Account in accordance with the policyowner's instructions.
F. TEMPORARY INSURANCE
In accordance with the Company's underwriting practices, temporary
insurance coverage may be provided under the terms of a Temporary
Insurance Agreement. Generally, temporary life insurance may not exceed
$1,000,000 and may not be in effect for more than 90 days. This temporary
insurance coverage will be issued on a conditional receipt basis, which
means that any benefits under such temporary coverage will only be paid if
the life insured meets the Company's usual and customary underwriting
standards for the coverage applied for.
The acceptance of an application is subject to the Company's underwriting
rules, and the Company reserves the right to request additional
information or to reject an application for any reason.
Persons failing to meet standard underwriting classification may be
eligible for a Policy with an additional rating assigned to it.
G. RIGHT TO EXAMINE THE POLICY
A Policy may be returned for a refund within 10 days after it is received.
Some states provide a longer period of time to exercise this right. The
Policy will indicate if the policyowner has a longer time. The Policy can
be mailed or delivered to the Company's agent who sold it or to the
Service Office. Immediately on such delivery or mailing, the Policy shall
be deemed void from the beginning. Within seven days after receipt of the
returned Policy at its Service Office, the Company will refund to the
policyowner an amount equal to either:
(1) the amount of all premiums paid or
(2) (a) the difference between payments made and amounts allocated to
the Separate Account and the Fixed Account; plus
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(b) the value of the amount allocated to the Separate Account and
the Fixed Account as of the date the returned Policy is
received by the Company; minus
(c) any partial withdrawals made and policy loans taken.
Whether the amount described in (1) or (2) is refunded depends on the
requirements of the applicable state.
If a policyowner requests an increase in face amount which results in new
surrender charges, he or she will have the same rights as described above
to cancel the increase. If canceled, the Policy Value and the surrender
charges will be recalculated to the amounts they would have been had the
increase not taken place. A policyowner may request a refund of all or any
portion of premiums paid during the free look period, and the Policy Value
and the surrender charges will be recalculated to the amounts they would
have been had the premiums not been paid.
The Company reserves the right to delay the refund of any premium paid by
check until the check has cleared.
H. PREMIUM ALLOCATION
No premiums will be accepted prior to receipt of a completed application
by the Company. All premiums received prior to the Effective Date of the
Policy will be held in the general account of the Company and credited
with interest from the date of receipt at the rate of return then being
earned on amounts allocated to the Money Market Trust.
On the later of the Effective Date or the date the premium is received,
the Net Premiums paid plus interest credited will be allocated among the
Investment Accounts or the Fixed Account in accordance with the
policyowner's instructions.
All Net Premiums received on or after the Effective Date will be allocated
among Investment Accounts or the Fixed Account as of the business day the
premiums were received at the Service Office. Monthly deductions are due
on the Policy Date and at the beginning of each policy month thereafter.
However, if due prior to the Effective Date, they will be taken on the
Effective Date instead of the dates they were due.
Premiums may be allocated to either the Fixed Account for accumulation at
a rate of interest determined by the Company (the rate of interest will be
at least 3%) or to one or more of the Investment Accounts for investment
in the Portfolio shares held by the corresponding sub-account of the
Separate Account. Allocations among the Investment Accounts and the Fixed
Account are made as a percentage of the premium. The percentage allocation
to any account may be
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any number between zero and 100, provided the total allocation equals 100.
A policyowner may change the way in which premiums are allocated at any
time without charge. The change will take effect on the date a written
request for change satisfactory to the Company is received at the Service
Office. Changes may also be made by telephone if a valid authorization
form is on file with us.
II. DEATH BENEFIT OPTION CHANGES
The death benefit option may be changed on the first day of any Policy
month once each Policy Year after the first Policy Year. The change will
occur on the first day of the next Policy month after a written request
for a change is received at the Service Office. The Company reserves the
right to limit a request for a change if the change would cause the Policy
to fail to qualify as life insurance for tax purposes.
A change in the death benefit option will result in a change in the
Policy's Face Amount, in order to avoid any change in the amount of the
death benefit, as follows:
Change from Option 1 to Option 2
The new Face Amount will be equal to the Face Amount prior to the change
minus the Policy Value on the date of the change.
Change from Option 2 to Option 1
The new Face Amount will be equal to the Face Amount prior to the change
plus the Policy Value on the date of the change.
Change from Option 3 to Option 1
The new Face Amount will be equal to the Face Amount prior to the change
plus the Premium Death Benefit Account (the sum of premiums paid to date
less any gross withdrawals) as of the date of the change.
No new Surrender Charges will apply to an increase n Face Amount solely
due to a change in the death benefit option.
III. FACE AMOUNT CHANGES
Subject to the limitations stated in the prospectus for the Policy and
stated in this memorandum, a policyowner may, upon written request,
increase or decrease the Face Amount of the Policy. The Company reserves
the right to limit a change in Face Amount so as to prevent the Policy
from failing to qualify as life insurance for tax purposes.
A. INCREASE IN FACE AMOUNT
Increases in Face Amount are subject to satisfactory evidence of
insurability. An increase in Face Amount may be made once each Policy Year
after the first
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Policy Year. Any increase in Face Amount must be at least $50,000 or such
other Minimum Face Amount Increase as the Company may establish on 90 days
written notice to the Policyowner. An increase will become effective at
the beginning of the Policy Month following the date the Company approves
the requested increase. The Company reserves the right to refuse a
requested increase if the life insured's Attained Age (life insured's age
plus the number of whole years that have elapsed since the Policy Date) at
the effective date of the increase would be greater than the maximum issue
age for new Policies at that time.
B. NEW SURRENDER CHARGES FOR AN INCREASE
An increase in Face Amount will result in the Policy's being subject to
new surrender charges. The new surrender charges will be computed as if a
new Policy were being purchased for the increase in Face Amount. The
premiums attributable to the new Face Amount will not exceed the Surrender
Charge Premium Limit associated with that increase. There will be no new
surrender charges associated with restoration of a prior decrease in Face
Amount. As with the purchase of a Policy, a policyowner will have free
look right with respect to any increase resulting in new surrender
charges.
An additional premium may be required for a Face Amount increase, and a
new No-Lapse Guarantee Premium will be determined, if the No-Lapse
Guarantee is in effect at the time of the face amount increase. (See
"Lapse and Reinstatement - No-Lapse Guarantee" below)
C. INCREASE WITH PRIOR DECREASES
If, at the time of the increase, there have been prior decreases in Face
Amount, these prior decreases will be restored first. The insurance
coverage eliminated by the decrease of the oldest Face Amount will be
deemed to be restored first.
D. DECREASE IN FACE AMOUNT
Decreases in Face Amount may be made once each Policy Year after the first
Policy Year. Any decrease in Face Amount must be at least $50,000 or such
other Minimum Face Amount Decrease as the Company may establish on 90 days
written notice to the policyowner. A written request from a policyowner
for a decrease in the Face Amount will be effective at the beginning of
the Policy Month following the date the Company approves the requested
decrease. If there have been previous increases in Face Amount, the
decrease will be applied to the most recent increase first and thereafter
to the next most recent increases successively. Under no circumstances may
the sum of all decreases cause the Policy to fall below the minimum Face
Amount of $100,000.
E. CHANGING BOTH THE FACE AMOUNT AND THE DEATH BENEFIT OPTION
If a change to both the Face Amount and the death benefit option are
requested in the same month, the death benefit option change shall be
deemed to occur first.
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IV. POLICY VALUE
A. DETERMINATION OF THE POLICY VALUE
A Policy has a Policy Value, a portion of which is available to the
policyowner by making a policy loan or partial withdrawal, or upon
surrender of the Policy. The Policy Value may also affect the amount of
the death benefit. The Policy Value at any time is equal to the sum of the
values in the Investment Accounts, the Fixed Account, and the Loan
Account.
B. INVESTMENT ACCOUNTS
An Investment Account is established under each Policy for each
sub-account of the Separate Account to which net premiums or transfer
amounts have been allocated. Each Investment Account under a Policy
measures the interest of the Policy in the corresponding sub-account. The
value of the Investment Account established for a particular sub-account
is equal to the number of units of that sub-account credited to the Policy
times the value of such units.
C. FIXED ACCOUNT
Amounts in the Fixed Account do not vary with the investment performance
of any sub-account. Instead, these amounts are credited with interest at a
rate determined by the Company.
D. LOAN ACCOUNT
Amounts borrowed from the Policy are transferred to the Loan Account.
Amounts in the Loan Account do not vary with the investment performance of
any sub-account. Instead, these amounts are credited with interest at a
rate which is equal to the amount charged on the outstanding Policy Loan
(the aggregate amount of policy loans, including borrowed and accrued
interest, less any loan repayments) less the Loan Interest Credited
Differential set forth in the Policy. (See "Policy Loans - Interested
Credited to Loan Account" below)
E. UNITS AND UNIT VALUES
Crediting and Canceling Units
Units of a particular sub-account are credited to a Policy when net
premiums are allocated to that sub-account or amounts are transferred to
that sub-account. Units of a sub-account are canceled whenever amounts are
deducted, transferred or withdrawn from the sub-account. The number of
units credited or canceled for a specific transaction is based on the
dollar amount of the transaction divided by the value of the unit on the
Business Day* on which the transaction occurs. The number of units
credited with respect to a premium payment will be based on the applicable
unit values for the Business Day on which the premium is received at the
Service Office, except for any premiums received before the Effective
Date. For premiums received before the Effective Date, the values will be
determined on the Effective Date.
Units are valued at the end of each Business Day. When an order involving
the crediting or canceling of units is received after the end of a
Business Day, or on
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a day which is not a Business Day, the order will be processed on the
basis of unit values determined on the next Business Day. Similarly, any
determination of Policy Value, Investment Account value or death benefit
to be made on a day which is not a Business Day will be made on the next
Business Day.
*Business Day is any day that the New York Stock Exchange is open for
trading. The Company will deem each Business day to end at the close of
regularly scheduled trading of the New York Stock Exchange (currently 4:00
p.m. Eastern Time) on that day.
Unit Values
The value of a unit of each sub-account was initially fixed at $10.00. For
each subsequent Business Day the unit value for that sub-account is
determined by multiplying the unit value for the immediately preceding
Business Day by the net investment factor for the that sub-account on such
subsequent Business Day.
The net investment factor for a sub-account on any Business Day is equal
to (a) divided by (b), where:
(a) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of such Business Day before any policy
transaction are made on that day; and
(b) is the net asset value of the underlying Portfolio shares held by that
sub-account as of the end of the immediately preceding Business Day after
all policy transaction were made for that day.
The value of a unit may increase, decrease, or remain the same, depending
on the investment performance of a sub-account from one Business Day to
the next.
V. TRANSFER OF POLICY VALUE
A. GENERAL TRANSFERS
At any time, a policyowner may transfer Policy Value (the sum of the
values in the Loan Account, the Fixed Account and the Investment Accounts)
from one sub-account to another or to the Fixed Account. Transfers
involving the Fixed Account are subject to certain limitations noted
below. Transfer requests must be in writing in a format satisfactory to
the Company, or by telephone if a currently valid telephone transfer
authorization form is on file.
These transfer privileges are subject to the Company's consent. The
Company reserves the right to impose limitations on transfers, including
the maximum amount that may be transferred. In addition, transfer
privileges are subject to any restrictions that may be imposed by any
underlying portfolio.
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While the Policy is in force, the policyowner may transfer the Policy
Value from any of the Investment Accounts to the Fixed Account without
incurring transfer charges and without being subject to the twelve
transfer limit described below:
(a) within eighteen months after the Issue Date; or
(b) within 60 days of the effective date of a material change in the
investment objectives of any of the sub-accounts or within 60 days
of the date of notification of such change, whichever is later.
A policyowner may make up to twelve transfers each policy year free of
charge. Additional transfers in each policy year may be made at a cost of
per transfer as set forth in the currently effective prospectus. This
charge will be deducted from the Investment Account or the Fixed Account
to which the transfer is being made. All transfer requests received by the
Company on the same Business Day are treated as a single transfer request.
The maximum amount that may be transferred from the Fixed Account in any
one policy year is the greater of $500 or 15% of the Fixed Account Value
at the previous Policy Anniversary. Any transfer which involves a transfer
out of the Fixed Account may not involve a transfer to the Investment
Account for the Money Market Trust.
Although failure to follow reasonable procedures may result in the Company
being liable for any losses resulting from unauthorized or fraudulent
telephone transfers, Manufacturers Life of America will not be liable for
following instructions communicated by telephone that the Company
reasonably believes to be genuine. The Company will employ reasonable
procedures to confirm that instructions communicated by telephone are
genuine. Such procedures shall consist of confirming that a valid
telephone authorization form is on file, tape recording of all telephone
transactions and providing written confirmation thereof.
VI. POLICY SURRENDER AND PARTIAL WITHDRAWALS
A. POLICY SURRENDER
A Policy may be surrendered for its Net Cash Surrender Value at any time
while the life insured is living. The Net Cash Surrender Value is equal to
the Policy Value less any surrender charges and outstanding monthly
deductions due (the "Cash Surrender Value") minus the Policy Debt. If
there have been any prior Face amount increases, the Surrender Charge will
be the sum of the Surrender Charge for the Initial Face Amount plus the
Surrender Charge for each increase. The Net Cash Surrender Value will be
determined at the end of the Business Day on which the Company receives
the Policy and a written request for surrender at its Service Office.
After a Policy is surrendered, the insurance coverage and all other
benefits under the Policy will terminate.
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A policyowner may make a partial withdrawal of the Net Cash Surrender
Value once each Policy Month after the first Policy Anniversary. The
policyowner may specify the portion of the withdrawal to be taken from
each Investment Account and the Fixed Account. In the absence of
instructions, the withdrawal will be allocated among such accounts in the
same proportion as the Policy Value in each account bears to the Net
Policy Value (Policy Value less the value in the Loan Account).
Withdrawals will be limited if they would otherwise cause the Face Amount
to fall below $100,000.
If Death Benefit Option 1 is in effect when a partial withdrawal is made
and the death benefit equals the Face Amount, the Face Amount of the
Policy will be reduced by the amount of the withdrawal plus any applicable
Surrender Charges. Otherwise, if the death benefit is the Minimum Death
Benefit* as described in the Policy, the Face Amount will be reduced by
the amount, if any, by which the withdrawal plus the pro-rata Surrender
Charge exceeds the difference between the death benefit and the Face
Amount.
*The Minimum Death Benefit is on any date the Policy Value on that date
multiplied by the applicable minimum death benefit percentage for the
Attained Age of the life insured.
If Death Benefit Option 3 is in effect when a partial withdrawal is made,
the withdrawal plus the pro-rata Surrender Charge exceeds the Premium
Death Benefit Account and the death benefit equals the Face Amount plus
the Premium Death Benefit Account, the Face Amount of the Policy will be
reduced by the amount by which the withdrawal plus the pro-rata Surrender
Charge exceeds the Premium Death Benefit Account. If the death benefit is
the Minimum Death Benefit as described in the Policy, the Face Amount will
be reduced by the amount, if any, by which such excess exceeds the
difference between the death benefit and the Face Amount plus the Premium
Death Benefit Account.
If Death Benefit Option 2 is in effect, partial withdrawals do not affect
the Face Amount of a Policy.
When the Face Amount of a Policy is based on one or more increases
subsequent to issuance of the Policy, a reduction resulting from a partial
withdrawal will be applied in the same manner as a requested decrease in
Face Amount, i.e., against the Face Amount provided by the most recent
increase, then against the next most recent increases successively and
finally against the initial Face Amount.
As long as the Policy is in force, the Company will ordinarily pay any
policy loans, surrenders, partial withdrawals or insurance benefit within
seven days after receipt at its Service Office of all the documents
required for such a
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payment. The Company may delay the payment of any policy loans,
surrenders, partial withdrawals, or insurance benefit that depends on
Fixed Account values for up to six months or in the case of any Investment
Account for any period during which (i) the New York Stock Exchange is
closed for trading (except for normal weekend and holiday closings), (ii)
trading on the New York Stock Exchange is restricted (iii) an emergency
exists as a result of which disposal of securities held in the Separate
Account is not reasonably practicable or it is not reasonably practicable
to determine the value of the Separate Account's net assets or (iv) the
SEC, by order, so permits for the protection of security holders; provided
that applicable rules and regulations of the SEC shall govern as to
whether the conditions described in (2) and (3) exist.
B. SURRENDER CHARGES
The Company will deduct a Surrender Charge if during the first 10 years
following the Policy date, or the effective date of a Face Amount
increase:
* the Policy is surrendered for its Net Cash Surrender Value,
* a partial withdrawal is made, or
* the Policy lapses.
Surrender Charge Calculation
The Surrender Charge is the sum of (i) plus (ii), multiplied by (iii),
multiplied by the applicable Grading Percentage, where:
(i) is the Rate per $1000 of initial Face Amount (or Face Amount increase);
(ii) is 80% of the lesser of (a) the premiums paid in the first two Policy
Years per $1000 of initial Face Amount (or the premiums attributable to
each $1000 of Face Amount increase in the two years following the
increase) or (b) the Surrender Charge Premium Limit set out in the Policy
for the initial face Amount (or furnished by the Company with respect to a
Face Amount increase); and
(iii) is the initial Face Amount (or the Face Amount increase) divided by 1000.
The Rate per $1000 of initial Face Amount is based on the life insured's Age at
issuance of the Policy. The Rate per $1000 of Face Amount increase is based on
the life insured's Attained Age at the time of an increase. The Rates per $1000
are set forth in the following table.
TABLE OF GUARANTEED SURRENDER CHARGE RATES PER $ 1000
OF FACE AMOUNT OR FACE AMOUNT INCREASE
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AGE AT ISSUANCE OR DEATH BENEFIT DEATH BENEFIT
ATTAINED AGE AT INCREASE OPTIONS 1 AND 3 OPTION 2
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25 or less $7.30 $6.30
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25 - 35 $6.40 $5.60
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36 - 45 $5.90 $4.70
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46 - 55 $4.00 $4.50
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56 - 65 $2.90 $1.90
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66 or greater $2.40 $1.90
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The Grading Percentage varies with the Policy Month in which the transaction
causing the assessment of the Surrender Charge occurs. As indicated in the
following table, the Grading Percentage starts at 100% for the first Policy
Month and grades down 10% each Policy Year (or .833% each Policy Month) reaching
zero at the end of 10 years.
GRADING PERCENTAGES DURING THE SURRENDER CHARGE PERIOD
(Applicable To The Initial Face Amount And Subsequent Increases)
The Grading Percentages Will Not Exceed The Following:
Surrender Charge Period Grading
(Policy Year) Percentage*
1 100%
2 90%
3 80%
4 70%
5 60%
6 50%
7 40%
8 30%
9 20%
10 10%
11 0%
* The Grading Percentages shown are at the beginning of
each Policy Year. Proportionate Grading Percentages
apply for other Policy Months.
Surrender Charges will be reduced or eliminated if certain riders are
added to the Policy.
Surrender Charges on a Partial Withdrawal
A partial withdrawal made during the Surrender Charge Period will result in the
assessment of a pro-rata portion of the Surrender Charges to which the Policy is
subject. The portion of the Surrender Charges assessed will be based on the
ratio of the amount of the withdrawal to the Net Cash Surrender Value of the
Policy as of the date of the withdrawal. It will equal (a) divided by (b),
multiplied by (c), where:
(a) is the amount of the partial Net Cash Surrender Value withdrawal;
(b) is the Net Cash Surrender Value prior to the withdrawal; and
(c) is the current total Surrender Charge prior to the withdrawal.
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The Surrender Charges will be deducted from the Policy Value at the time of the
partial withdrawal on a pro-rata basis from each of the Investment Accounts and
the Fixed Account unless you direct that the Surrender Charges be deducted from
one or more Investment Accounts or the Fixed Account. If the amount in the
accounts is not sufficient to pay the Surrender Charges assessed, then the
amount of the withdrawal will be reduced.
Whenever a portion of the surrender charges are deducted as a result of a
partial withdrawal, the Policy's remaining surrender charges will be reduced in
the same proportion that the surrender charge deducted bears to the total
surrender charge immediately before the partial withdrawal.
VII. LAPSE AND REINSTATEMENT
A. LAPSE
Unless the No-Lapse Guarantee Cumulative Premium Test is satisfied, a Policy
will go into default if at the beginning of any Policy Month the Policy's Net
Cash Surrender Value would be zero or below after deducting the monthly
deduction then due. The Company will notify the policyowner of the default and
will allow a 61 day grace period in which the policyowner may make a premium
payment sufficient to bring the Policy out of default. The required payment will
be equal to the amount necessary to bring the Net Cash Surrender Value to zero,
if it was less than zero on the date of default, plus the monthly deductions due
at the date of default and payable at the beginning of each of the two Policy
Months thereafter, plus any applicable premium load. If the required payment is
not received by the end of the grace period, the Policy will terminate with no
value.
Death During Grace Period
If the life insured should die during the grace period, the Policy Value used in
the calculation of the death benefit will be the Policy Value as of the date of
default and the insurance benefit will be reduced by any outstanding monthly
deductions due at the time of death.
No-Lapse Guarantee
In those states where it is permitted, as long as the No-Lapse Guarantee
Cumulative Premium Test is satisfied during the No-Lapse Guarantee Period, as
described below, the Company will guarantee that the Policy will not go into
default, even if adverse investment experience or other factors should cause the
Policy's Net Cash Surrender Value to be insufficient to meet the monthly
deductions due at the beginning of a Policy Month.
The No-Lapse Guarantee Period is fixed at the lesser of 20 years or age
95,depending upon applicable state law requirements.
While the No-Lapse Guarantee is in effect, the Company will determine at the
beginning of the Policy Month that the Policy would otherwise be in default,
whether the No-Lapse Guarantee Cumulative Premium Test, described in the Policy,
has been met. If it has not been satisfied, the Company will notify the
policyowner of that fact and allow a 61-day grace period in which the
policyowner may make a premium payment sufficient to keep the policy from going
into default. This required payment is described in the notification to the
policyowner.
If the required payment is not received by the end of the grace period, the
No-Lapse Guarantee
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and the Policy will terminate.
B. REINSTATEMENT
A policyowner can reinstate a Policy which has terminated after going into
default at any time within the five-year period following the date of
termination subject to the following conditions:
(a) Evidence of the life insured's insurability, satisfactory to the Company, is
provided to the Company;
(b) A premium equal to the amount that was required to bring the Policy out of
default immediately prior to termination, plus the amount needed to keep the
Policy in force to the next scheduled date for payment of the Planned Premium
must be paid to the Company.
If the reinstatement is approved, the date of reinstatement will be the later of
the date the Company approves the policyowner's request or the date the required
payment is received at the Company's Service Office. In addition, any Surrender
Charges will be reinstated to the amount they were at the date of default. The
Policy Value on the date of reinstatement, prior to the crediting of any Net
Premium paid on the reinstatement, will be equal to the Policy Value on the date
the Policy terminated.
VIII. POLICY LOANS
While the Policy is in force and has an available loan value, a policyowner may
borrow against the Policy Value of the Policy. The Policy serves as the only
security for the loan.
A. AVAILABLE LOAN VALUE
The amount of any loan cannot exceed 100% of the Policy Net Cash Surrender Value
(Cash Surrender Value less Policy Debt) less required charges to maintain the
Policy value to the next anniversary, at the guaranteed interest rate.
B. INTEREST CHARGED ON POLICY LOANS
Interest on the Policy Debt will accrue daily and be payable annually on the
Policy Anniversary. During the first ten Policy Years, the rate of interest
charged will be an effective annual rate of 5.25%. Thereafter the rate of
interest charged will be an effective annual rate of 4%, subject to the
Company's reservation of the right to increase the rate if the Company
determines, in its sole discretion, that there is a substantial risk that a loan
will be treated as a taxable distribution under Federal tax law. If the interest
due on a Policy Anniversary is not paid by the policyowner, the interest will be
borrowed against the Policy.
C. LOAN ACCOUNT
When a loan is made, the amount necessary to cover the loan principal, plus loan
interest due to the next Policy Anniversary, will be deducted from the
Investment Accounts or the Fixed Account and transferred to the Loan Account.
The policyowner may designate how the amount to be transferred to the Loan
Account is allocated among the accounts from which the transfer is to be made.
In the absence of instructions, the amount to be transferred will be allocated
to each account in the same proportion as the value in each Investment Account
and the Fixed Account bears to the Net Policy Value. A transfer from an
Investment Account will result in the
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cancellation of units of the underlying sub-account equal in value to the amount
transferred from the Investment Account. However, since the Loan Account is part
of the Policy Value, transfers made in connection with a loan will not change
the Policy Value.
D. INTEREST CREDITED TO THE LOAN ACCOUNT
Interest will be credited to amounts in the Loan Account at an effective annual
rate of at least 3.50%. The actual rate credited is equal to the rate of
interest charged on the policy loan less the Loan Interest Credited Differential
which is currently 1.25% during the first ten policy years and 0.50%
thereafter,and is guaranteed not to exceed these rates. The Company may change
the Loan Interest Credited Differential as of 90 days after sending you written
notice of such change.
E. LOAN ACCOUNT ADJUSTMENTS
On the first day of each Policy Anniversary the difference between the Loan
Account and the Policy Debt is transferred to the Loan Account from the
Investment Accounts or the Fixed Account. Amounts transferred to the Loan
Account will be taken from the Investment Accounts and the Fixed Account in the
same proportion as the value in each Investment Account and the Fixed Account
bears to the Net Policy Value
F. LOAN REPAYMENTS
Policy Debt may be repaid in whole or in part at any time prior to the death of
the life insured, provided that the Policy is in force. When a repayment is
made, the amount is credited to the Loan Account and transferred to the Fixed
Account or the Investment Accounts. Loan repayments will be allocated first to
the Fixed Account until the associated Loan Sub-Account is reduced to zero and
then to each Investment Account in the same proportion as the value of the
corresponding Loan Sub-Account bears to the value of the Loan Account. Where
permitted by applicable state law, when a portion of the Loan Account amount is
allocated to the Fixed Account, the Company may require that any amounts paid to
it be applied to outstanding loan balances.
Amounts paid to the Company not specifically designated in writing as loan
repayments will be treated as premiums.
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