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Exhibit 7
DESCRIPTION OF ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES
PURSUANT TO RULE 6e-3(T)(b)(12)(iii) UNDER THE INVESTMENT COMPANY ACT
OF 1940 FOR GE LIFE AND ANNUITY ASSURANCE COMPANY FLEXIBLE
PREMIUM VARIABLE LIFE INSURANCE POLICIES
This document sets forth the administrative procedures that will be followed by
GE Life and Annuity Assurance Company ("we", "us" or "our") in connection with
the issuance of its Flexible Premium Variable Life Insurance Policy ("Policy" or
"Policies") and acceptance of payments thereunder, the transfer of assets held
thereunder, and the redemption by owners of the Policy ("Owners") of their
interests in those Policies. Capitalized terms used herein have the same meaning
as in the prospectus for the Policy that is included in the current registration
statement on Form S-6 for the Policy (File No. 333-???) as filed with the
Securities and Exchange Commission ("Commission" or "SEC").
I. Procedures Relating to Purchase and Issuance of the Policies and Acceptance
of Premiums
A. Offer of the Policies; Application; Initial Premiums; and Issuance
1. Offer of the Policies. The Policies will be offered and issued
for premiums pursuant to underwriting standards in accordance with
state insurance laws. Premiums for the Policies will not be the same
for all Owners selecting the same Specified Amount. Insurance is based
on the principle of pooling and distribution of mortality risks, which
assumes that the Owner of each Policy pays a premium commensurate with
the Insured's mortality risk as actuarially determined, utilizing
factors such as age, sex, health and occupation. A uniform cost of
insurance for all Insureds would discriminate unfairly in favor of
those Insureds representing greater risk. Although there will be no
uniform cost of insurance for all Insureds, there will be a uniform
cost of insurance for all Insureds of the same risk classification.
2. Application. Persons wishing to purchase a Policy must complete
an application and submit it to us through our authorized agent. The
applicant must specify the name of the Insured, and provide certain
required information about the Insured. The applicant must pay an
initial premium of a sufficient amount and specify a periodic premium
payment plan, which contemplates level premiums at specified
intervals, annually, semi-annually, or quarterly), designate Net
Premium allocation percentages, select the initial Specified Amount
and name the Beneficiary. Before an application will be deemed
complete so that underwriting will proceed, the application must
include the applicant's signature and the Insured's date of birth and
a signed authorization. The initial premium and Specified Amount must
meet certain minimums for the Policy.
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3. Receipt of Application and Underwriting. Upon receipt of a
completed application from an applicant, we will follow certain
insurance underwriting (risk evaluation) procedures designed to
determine whether the proposed Insured is insurable. This process may
involve such verification procedures as medical examinations and may
require that further information be provided about the Insured before
a determination can be made.
4. Issuance of Policy. When the underwriting procedure has been
completed and, the application has been approved, and an initial
premium of sufficient amount has been received, the Policy is issued.
5. Initial Premium. An applicant must pay an initial premium of
sufficient amount which, if not submitted with the application or
during the underwriting period, must be submitted when the Policy is
delivered before the Policy will be issued. The premium amounts
sufficient to fund the Policy depend on a number of factors, such as
the Age, sex (where appropriate) and risk class of the proposed
Insured, the desired Specified Amount, and any supplemental benefits.
Coverage becomes effective on the Policy Date. The Policy Date is
used to measure Policy Months, Policy Years, and Policy Anniversaries.
A Policy Date is assigned each Policy when issued. The Policy Date
will normally be a date between the date the application is signed and
the date the Policy is issued; however, the Policy Date may be any
other date mutually agreeable to GE Life & Annuity and the Owner. If
the Policy Date would have occurred on the 29th, 30th or 31st day of
any month, we will designate the 28th day of the month as the Policy
Date.
6. Additional Premiums.
a. Additional Premiums Permitted. Additional premiums may be
paid in any amount and at any time, subject to the following
limits:
. A planned periodic premium must be at least $20 unless paid
monthly by pre-authorized check in which case the minimum is
$15.
. We reserve the right to limit the number and amount of any
unscheduled premium payment.
. Total premiums paid in a Policy Year may not exceed guideline
premium limitations for life insurance set forth in the
Internal Revenue Code of 1986, as amended (the "Code").
. We will monitor Policies and will attempt to notify an Owner
on a timely basis if the Owner's Policy is in jeopardy of
becoming a modified endowment contract under the Code.
7. Refund of Excess Premium Amount. We reserve the right to
reject any premium, or portion thereof, if at any time a premium
payment would result in the Policy being disqualified as life
insurance under the Code. We will refund any excess premium along
with interest accrued thereon.
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8. Planned Premium. At the time of application, each Owner will
select a plan for paying premiums at specified annual, semi-annual or
quarterly intervals. The Owner is not required to pay premiums in
accordance with this plan. The Owner may change the planned premium
frequency (between annual, semi-annual and quarterly) and amount by
providing a written notice or telephone instructions (if we have an
authorization for telephone instructions on file) to our Home Office.
Any such change must comply with the premium limits for additional
premiums discussed above.
9. Crediting Premiums
a. Initial Premium. The initial premium will be credited to
the Policy on the later of the Policy Date, the date we approve
the application or the date we receive payment.
b. Additional Premiums. Any additional premium received by
us will be credited to the Policy on the Valuation Day it is
received at our Home Office.
c. Electronic Funds Transfer. The Owner may arrange with us
to have annual, semi-annual, quarterly or monthly premiums paid
via pre-authorized, automatic deductions from the Owner's bank
account or similar account acceptable to us. We will notify the
Owner's bank or account holder of the automatic deduction, and
funds will be deducted from the Owner's account and credited to
the Owner's Policy on the next Valuation Day.
B. Premiums Upon Increase in Specified Amount, Premiums During a Grace
Period, and Premiums Upon Reinstatement
1. Premiums Upon Increase in Specified Amount. Generally, no
premium is required for an increase in Specified Amount. However,
depending on Surrender Value at the time of an increase in the
Specified Amount and the amount of the increase requested, an
additional premium or change in the amount of planned premiums may be
necessary. Also, during the Continuation Period an increase in the
Specified Amount will increase the Continuation Amount.
2. Premiums During a Grace Period. If the Surrender Value on a
Monthly Anniversary Day is less than the amount of the monthly
deduction due on that date, and the Continuation Period is not in
effect, the Policy will be in default and a grace period will begin.
During the Continuation Period, the Policy will remain in force,
regardless of the sufficiency of the Surrender Value, if the Net Total
Premium is at least equal to the Continuation Amount. The Continuation
Amount is a cumulative minimum amount that is required to keep the
Policy in force during the Continuation Period. The Continuation
Amount is based in part on the sex, Age, and risk class of the
Insured, the requested Specified Amount and any supplemental benefits.
. The grace period will end 61 days after the date on which we send a
grace period notice to the Owner's last known address stating the
amount required to be paid to prevent the Policy from lapsing. The
Policy will not lapse, and the insurance coverage continues, until
the expiration of this grace period.
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. If the grace period ends prior to the end of the Continuation Period
and the Policy is reinstated prior to the end of the Continuation
Period, the required premium must equal,
. the Continuation Amount as of the date of reinstatement,
. minus the sum of monthly deductions that would have been made during
the period between termination and reinstatement, divided by the
Net Premium factor,
. minus the Net Total Premium on the date of termination, and
. plus the premium sufficient to keep the Policy in effect for two
months after the date of reinstatement.
. If the grace period ends prior to the end of the Continuation Period
and the Policy is reinstated after the end of the Continuation Period,
the required premium, after multiplying by the Net Premium factor,
must equal
. the surrender charge on the date of termination,
. plus the monthly deduction for two months after the date of
reinstatement,
. minus the Account Value on the date of termination.
. If the grace period ends after the end of the Continuation Period and
the Policy is reinstated, the required premium must be large enough to
keep the Policy in effect for at least two months.
. Failure to make a sufficient payment within the grace period will
result in lapse of the Policy without value or benefits payable.
. A Policy that lapses without value may be reinstated at any time
within three years alter lapse by submitting: an application for
reinstatement, evidence of the Insured's insurability satisfactory to
us, and payment of a required premium.
D. Allocations of Net Premiums to the Variable Account
1. Net Premium. The Net Premium is equal to the premium paid times
the Net Premium Factor.
2. Separate Account II. An Owner may allocate Net Premiums to one
or more of the investment Subdivisions of GE Life & Annuity Separate
Account II ("Separate Account II"). Separate Account II currently
consists of forty-two Investment Subdivisions, the assets of which are
used to purchase shares of a designated corresponding investment
portfolio of twelve series-type mutual funds (the "Funds"). Each Fund
is registered under the Investment Company Act of 1940 as an open-end
management investment company. Additional Investment Subdivisions may
be added from time to time to invest in any of the portfolios of the
Funds or any other investment company.
When an Owner allocates an amount to an Investment Subdivision
(either by Net Premium allocation, transfer of Account Value, transfer
of loan interest from the General Account or repayment of a Policy
Loan, the Policy is credited with units in that Investment
Subdivision. The number of units is determined by dividing the amount
allocated to the Investment Subdivision by the Investment
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Subdivision's unit value for the Valuation Day when the allocation or
transfer is effected. An Investment Subdivision's unit value is
determined for each Valuation Period after the date of establishment
(the unit value for each Investment Subdivision was arbitrarily set at
$10 when the Investment Subdivision was established) by multiplying
the value of a unit for an Investment Subdivision for the prior
Valuation Period by the net investment factor for the Investment
Subdivision for the current Valuation Period. The net investment
factor is an index used to measure the investment performance of an
Investment Subdivision from one Valuation Period to the next.
3. Allocations Among the Investment Subdivision. Net Premiums are
allocated to the investment Subdivisions in accordance with the
following procedures:
a. General. In the application for the Policy, the Owner
will specify the percentage of Net Premium to be allocated to
each Investment Subdivision of Separate Account II. The
percentage of each Net Premium that may be allocated to any
Investment Subdivision must be a whole number not less than 1%,
and the sum of the allocation percentages must be 100%. Such
allocation percentages may be changed at any time by the Owner
submitting written instructions to our Home Office, provided that
the 1%/100% requirements described above are met. An Owner may
not allocate Net Premiums and Account Value to more than seven
Investment Subdivisions at any given time.
b. Allocation During Free-Look Period. In general, during
the free-look period Net Premiums will be allocated to the
Investment Subdivisions based on the Net Premium allocation
percentages specified in the application. For states requiring
the refund of premiums during the free-look period, all Net
Premiums will be allocated to the Investment Subdivision
investing in the Money Market Fund of GE Investments Funds.
Fifteen days following this allocation, the Account Value is
transferred to and allocated to the Investment Subdivisions based
on the Net Premium allocation percentages then in effect. We
anticipate revising this allocation procedure within the fourth
quarter of 200 to allow immediate allocation to the Investment
Subdivisions. For this purpose, the Company assumes the free-look
period starts 5 days after the Policy is issued.
c. Allocation After Free-Look Period. Additional Net
Premiums received after the free-look period expires will be
credited to the Policy and allocated to the Investment
Subdivisions in accordance with the allocation percentages in
effect on the Valuation Day that the premium is received at our
Home Office. Allocation percentages can be changed at any time.
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E. Policy Debt Repayments and Interest Payments
1. Repaying Policy Debt. The Owner may repay all or part of the
Policy Debt at any time while the Policy is in force and the Insured
is living. Policy Debt is equal to the sum of all outstanding Policy
loans plus any accrued interest. Loan repayments must be sent to our
Home Office and will be credited as of the date received. Loan
repayments will not be subject to the current premium charge. If the
Life Insurance Proceeds become payable while Policy Debt is
outstanding, the Life Insurance Proceeds will be reduced by
outstanding Policy Debt to determine the death benefit payable.
2. Allocation for Repayment of Policy Debt. On the date we
receive a repayment of all or part of Policy Debt, an amount equal to
the repayment will be transferred from the General Account to the
Investment Subdivisions and allocated as directed by the Owner when
submitting the repayment. If no direction is provided, the amount will
be allocated in accordance with the Owner's current Net Premium
allocation percentages.
3. Interest on Policy Debt. A portion of Policy loans taken or
existing on or after the Preferred Loan Availability Date (defined
in the Policy data pages) will be designated as Preferred Policy Debt.
In Policy Years 11 and later, Preferred Policy Debt will be that
portion of Policy Debt which equals the difference between the Account
Value and the sum of all premium payments made. We redetermine the
amount of Preferred Policy Debt each Policy Month. The rate of
interest credited to the amount of Account Value transferred to the
General Account will earn at least a minimum annual interest rate of
4%.
II. Transfers
A. Transfers Among the Investment Subdivisions
In general, after the Policy is issued the Owner may transfer
Account Value among the Investment Subdivisions by written or
telephone request to our Home Office (if we have the Owner's telephone
authorization on file). For states requiring the refund of premiums
during the free-look period, no transfers may be made until after the
end of the free-look period. We anticipate revising this allocation
procedure within the fourth quarter of 200 to allow for transfers
during the free-look period. For this purpose, we assume the free-look
period starts 5 days after the Policy is issued.
In any Policy Year, the Owner may make an unlimited number of
transfers; however, we reserve the right to limit the number of
transfers to twelve each calendar year. In addition, we reserve the
right to charge up to $10 per transfer.
We reserve the right to modify, restrict, suspend, or eliminate
the transfer privileges (including telephone transfer privileges) at
any time and for any reason.
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B. Dollar Cost Averaging
The dollar-cost averaging program permits Owners to
systematically transfer on a monthly or quarterly basis a set dollar
amount from the Investment Subdivision investing in the Money Market
Fund of GE Investments Fund to any combination of other Investment
Subdivisions. Owners may elect to participate in the dollar-cost
averaging program by selecting the program on the application,
completing a dollar-cost averaging agreement, or calling our Home
Office. To use the dollar-cost averaging program, Owners must
transfer at least $100 from the Money Market Investment Subdivision
with each transfer. Once elected, dollar-cost averaging remains in
effect from the date we receive the Owner's request until the value of
the Investment Subdivision from which transfers are being made is
depleted, or until the Owner cancels the program by written request or
by telephone (if the Owner's telephone authorization is on file).
There is no additional charge for dollar-cost averaging. A transfer
under this program does not count toward the free transfer permitted
each calendar month nor any limit on the maximum number of transfers
we may impose for a calendar year. We reserve the right to
discontinue offering or modify the dollar-cost averaging program at
any time and for any reason.
C. Portfolio Rebalancing
An Owner may instruct us to automatically rebalance (on a
quarterly, semi-annual or annual basis) the Account Value to return to
the percentages specified in the Owner's allocation instructions. An
Owner may elect to participate the portfolio rebalancing program at
any time by completing the portfolio rebalancing agreement. The
percentage allocations must be in whole percentages and be at least 1%
per allocation. Subsequent changes to the percentage allocations may
be made at any time by written or telephone instructions to our Home
Office (provided the Owner's telephone authorization is on file).
Once elected, portfolio rebalancing remains in effect from the date an
Owner's written request is received until the Owner instructs us to
discontinue portfolio rebalancing. There is no additional charge for
using portfolio rebalancing, and a portfolio rebalancing transfer is
not considered a transfer for purposes of assessing a transfer charge
nor for calculating any limit on the maximum number of transfers we
may impose for a calendar year. We reserve the right to discontinue
offering the portfolio rebalancing program at any time and for any
reason. Portfolio rebalancing is not available while an Owner is
participating in the dollar-cost averaging program.
D. Transfer Errors
In accordance with industry practice, GE Life & Annuity will
establish procedures to address and to correct errors in amounts
transferred among the Investment Subdivisions, except for de minimis
amounts. We will correct non-de minimis errors we make and will
assume any risk associated with the error. Owners will not be
penalized in any way for errors made by us. We will take any gain
resulting from the error.
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III. "Redemption" Procedures
A. Free-Look Rights
The Policy provides for an initial free-look right during which an
Owner may cancel the Policy by returning it to us or our agent before
the end of 10 days after the Owner receives the Policy. The free-look
period may be longer in some states. Upon returning the Policy to us
or to our authorized agent for forwarding to our Home Office, the
Policy will be deemed void from the beginning. Within seven days after
we receive the cancellation request and Policy, we will pay a refund
of all charges deducted from premiums paid, plus the Net Premiums
allocated to Separate Account II adjusted for investment gains and
losses. Some states require the refund of all premiums paid.
B. Surrenders
1. Requests for Surrender Value. The Owner may surrender the
Policy at any time for its Surrender Value. The Surrender Value on any
Valuation Day is the Account Value less any applicable surrender
charge minus any Policy Debt. The Surrender Value will be determined
by us on the Valuation Day our Home Office receives a surrender
request signed by the Owner and the Policy. The surrender request must
include the Policy number, signature of the Owner, and clear
instructions regarding the request. We will cancel the Policy as of
the date the written request is received at our Home Office and we
will ordinarily pay the Surrender Value within seven days following
receipt of the request.
2. Surrender of Policy - Surrender Charge. If the Policy is
surrendered during the surrender charge period, we will deduct a
surrender charge. The surrender charge will depend on the Insured's
Age at issue, sex (where appropriate) and risk class. The surrender
charge is based on an amount per $1,000 of the lowest Specified Amount
in effect prior to the surrender. The surrender charge is calculated
by multiplying a factor times the lowest Specified Amount in effect
prior to surrender, divided by 1000. The surrender charge remains
level for the first five Policy Years and then decreases each Policy
Month to zero over the next 10 Policy Years or at age 95, whichever is
earlier. The surrender charge will be deducted before the Surrender
Value is paid.
Decreases in the Specified Amount to less than the lowest
Specified Amount that had previously been in effect (other than as a
result of partial surrenders or changes in Death Benefit Options),
will also incur a surrender charge. The amount of the surrender
charge will be the charge for a full surrender multiplied by the ratio
of (a) to (b), where:
(a) is the lowest Specified Amount that was in effect prior to
the current decrease, minus the Specified Amount after the
current decrease; and
(b) is the lowest Specified Amount that was in effect prior to
the current decrease.
A surrender charge is not imposed in connection with a partial
surrender.
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C. Partial Surrenders
1. When Partial Surrenders are Permitted. At any time, the Owner
may, by submitting a written or telephone request to our Home Office,
withdraw a portion of the Surrender Value subject to the following
conditions:
. The minimum partial surrender amount is $500.
. A partial surrender processing fee equal to the lesser of $25 or 2%
of the amount surrendered will be assessed when each partial
surrender is made. The partial surrender processing fee will be
deducted from the Account Value along with the amount requested for
the partial surrender.
. When the Owner requests a partial surrender, the Owner may direct
how it will be deducted from the Account Value. If no directions
are provided, the partial surrender will be deducted from the
Account Value in the Investment Subdivisions on a pro-rata basis.
. We generally will pay a partial surrender request within seven day
after receipt by our Home Office of all the documents required for
such a payment.
D. Delayed Payments
We may delay making payment for partial or full surrender if (1) the
disposal or valuation of Separate Account II's assets is not
reasonably practicable because the New York Stock Exchange is closed
for other than a regular holiday or weekend, trading is restricted by
the SEC, or the SEC declares that an emergency exists; or (2) the SEC
by order permits postponement of payment to protect our Policy Owners.
We also may defer making payments attributable to a check that has not
cleared.
E. Lapses
If a sufficient premium has not been received by the 61st day
after a grace period notice is sent, the Policy will lapse without
value and no amount will be payable to the Owner.
F. Monthly Deduction
On the Policy Date and each Monthly Anniversary Day, redemptions
in the form of deductions will be made from Account Value for the
Monthly Deduction, which is a charge compensating us for the services
and benefits provided, costs and expenses incurred, and risks assumed
by us in connection with the Policy. The Monthly Deduction consists of
three components: (a) the cost of insurance charge; (b) a current
monthly policy charge of $12 in the first Policy Year ($12 per month
maximum in the first Policy Year) and $6 per month thereafter ($12 per
month maximum after the first Policy Year); and (c) any charges for
additional benefits added by riders to the Policy. If an increase in
Specified Amount becomes effective, there will be a one-time charge
(per increase) of $1.50 per $1,000 of increase included in the Monthly
Deduction (it can not exceed $300 per increase). The Monthly
Deduction will be deducted from the Investment Subdivisions on a pro
rata basis.
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1. Cost of Insurance Charge. The cost of insurance charge is the
primary charge for the death benefit provided by the Policy. The cost
of insurance charge is calculated monthly, and depends on a number of
variables, including the Age, sex (where appropriate), policy duration
and risk class of the Insured. The charge varies from Policy to
Policy and from Monthly Anniversary Day to Monthly Anniversary Day.
The charge is calculated separately for the Specified Amount at issue
and for any increase in the Specified Amount.
The cost of insurance charge is equal to the net amount at risk
under the Policy divided by 1000 then multiplied by our current cost
of insurance rate for the Insured. The net amount at risk is
calculated by dividing the Life Insurance Proceeds by 1.0032737, and
then subtracting the Account Value.
Our current cost of insurance rates may be less than the
guaranteed maximum rates permitted under the Policy. Current cost of
insurance rates will be determined based on our expectations as to
future mortality, persistency, taxes, and expenses. These rates may
change from time to time, but they will never be more than the
guaranteed maximum rates set forth in the Owner's Policy. We can
change the rates without notice to Owners, unless state law requires
that we provide such notice. The maximum cost of insurance rates are
based on the Insured's age at the nearest birthday to the start of the
Policy Year, sex (where appropriate), and, where appropriate, tobacco
use. For issue ages 0 - 14, the Commissioner's 1980 Standard Ordinary
Mortality Table without distinction for tobacco use or non-tobacco use
is used through attained age 14, after which the Commissioner's 1980
Standard Ordinary Nonsmoker Mortality Table is used. For issue ages
15 - 17, the Commissioner's 1980 Standard Ordinary Nonsmoker Mortality
Table is used. For issue ages 18 and above, the Commissioners' 1980
Standard Ordinary Smoker or Non-Smoker Table applies. Modifications
are made for rate classes other than standard.
2. Current Monthly Policy Charge. The current monthly Policy
charge is $12 per month in the first Policy Year ($12 per month
maximum in the first Policy Year) and $6 per month thereafter ($12 per
month maximum after the first Policy Year). This charge is designed to
reimburse us for expenses associated with underwriting applications,
increases in Specified Amount, and riders, various overhead and other
expenses associated with providing the services and benefits provided
by the Policy, sales and marketing expenses, and other costs of doing
business, such as federal, state and local premium and other taxes and
fees.
3. Supplemental Benefit Charges. An Owner may add supplemental
benefits to the Policy. Such benefits are made available by us through
riders to the Policy. If any additional benefits are added to a
Policy, charges for these benefits will be deducted monthly as part of
the Monthly Deduction.
G. Death Benefits
No change in death benefits will be permitted that will result in
the Policy being disqualified as a life insurance policy under section
7702 under the Code.
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1. Payment of Death Proceeds. As long as the Policy remains in
force, we will pay the death benefit to the Beneficiary upon receipt
at our Home Office of the Policy, due proof of the Insured's death.
The death benefit is equal to the Life Insurance Proceeds determined
under the Death Benefit Option in effect on the date of the Insured's
death, plus any supplemental death benefit provided by riders, minus
any Policy Debt on that date and, if the date of death occurred during
a grace period, minus the premium that would have been required to
keep the Policy in force. The death benefit will be paid to the
Beneficiary in a lump sum generally within seven days after the
Valuation Day by which we have received at our Home Office all
materials necessary to constitute due proof of death. If an Optional
Payment Plan is elected, the death benefit will be applied to the
option within seven days after the Valuation Day by which we received
due proof of death and payments will begin under that option when
provided by the option.
2. Death Benefit Options. The Owner can elect one of two Death
Benefit Options under the Policy. Under Option A, the Life Insurance
Proceeds equals the greater of (1) the Specified Amount plus the
Account Value, or (2) the applicable corridor percentage of the
Account Value as determined using the table of percentages set forth
in the prospectus. Under Option B, the Life Insurance Proceeds equals
the greater of (1) the Specified Amount, or (2) the applicable
corridor percentage of the Account Value, as determined using the
table of percentages set forth in the prospectus. The corridor
percentage is 250% to Age 40 and declines thereafter as the Insured's
Attained Age increases. We may change the table if the table of
percentages currently in effect becomes inconsistent with any federal
income tax laws and/or regulations.
Under Option A, the Life Insurance Proceeds vary directly with
the investment performance of the Account Value. Under Option B, the
Life Insurance Proceeds ordinarily will not change until the
applicable percentage amount of the Account Value exceeds the
Specified Amount or the Owner changes the Specified Amount.
3. Changing the Death Benefit Option. The Death Benefit Option is
selected in the application for the Policy. The Owner, by written
request submitted to, and received by, our Home Office, may change the
Death Benefit Option on the Policy subject to the following rules;
however, no change will be permitted that may result in the Policy
being disqualified as a life insurance policy under section 7702 of
the Code:
. The effective date of the change will be the Monthly Anniversary
Day after we receive the request;
. When a change from Death Benefit Option A to Death Benefit Option B
is made, the Specified Amount will be increased by the Account
Value on the effective date of the change; and
. When a change from Death Benefit Option B to Death Benefit Option A
is made, the Specified Amount after the change will be decreased by
the Account Value on the effective date of the change.
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4. Changing the Specified Amount. The initial Specified Amount is
set at the time the Policy is issued. The Owner may increase or
decrease the Specified Amount after the first Policy Year, subject to
the following conditions; however, no change will be permitted that
may result in the Policy being disqualified as a life insurance policy
under section 7702 of the Code:
Rules for Increases
. To increase the Specified Amount, the Owner send to our Home Office
a written request and the Policy, a completed supplemental
application, and evidence of insurability satisfactory to us.
. When an increase in Specified Amount is requested, we conduct
underwriting before approving the increase to determine whether a
different rate class will apply to the increase. If an increase in
Specified Amount is approved, a different rate class may apply to
the increase based on the Insured's circumstances at the time of
the increase.
. There must be enough Surrender Value to make a Monthly Deduction
for the Policy Month following the increase.
. If approved, the increase in Specified Amount will become effective
on the date shown in the supplemental policy data pages sent to the
Owner and the Account Value will be adjusted to the extent
necessary to reflect a pro rata portion of the Monthly Deduction
attributable to the increase as of the effective date based on the
increase in Specified Amount.
. We will assess a one-time charge (per increase) of $1.50 per $1,000
of increase to cover underwriting and administrative costs
associated with the increase. This charge will be included in the
monthly deduction for the month the increase becomes effective.
The charge will not exceed $300 per increase.
Rules for Decreases
. To decrease the Specified Amount, the Owner must submit a written
request and the Policy to our Home Office.
. The effective date of any decrease in Specified Amount will be the
Monthly Anniversary Day after the date the written request is
received by our Home Office.
. Any decrease will first be used to reduce the most recent increase,
then the next most recent increases successively, then the initial
Specified Amount.
. During the Continuation Period, we will not allow a decrease unless
the Account Value less any Policy Debt is greater than the
surrender charge.
. The Specified Amount following a decrease can never be less than
the minimum Specified Amount for the Policy when it was issued.
. A surrender charge may be assessed in connection with a decrease in
Specified Amount.
. If decreases in Specified Amount cause premium to exceed new lower
limitations required by federal tax law, the excess will be
withdrawn from Account Value and refunded to you so that the Policy
will continue to meet the requirements. Account Value so withdrawn
and refunded will be withdrawn from each Investment Subdivision in
the same proportion that the Account Value in the Investment
Subdivision bears to the total Account Value in all Investment
Subdivisions under the Policy at the time of withdrawal (i.e. on a
pro rata basis).
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H. Policy Loans
1. Policy Loans. The Owner may obtain a Policy loan from us at any
time by submitting a written or telephone request to our Home Office
(if the Owner's telephone authorization is on file). The Owner may
borrow up to 90% of the difference between (1) the Owner's Account
Value at the end of the Valuation Period during which the loan request
is received, and (2) any surrender charges on the date of the loan.
Policy loans will be processed as of the Valuation Day the request is
received and loan proceeds generally will be sent to the Owner within
seven days thereafter. Outstanding Policy Debt, including accrued
interest reduces the amount available for new loans.
2. Collateral for Policy Loans. When a Policy loan is made, an
amount equal to the loan proceeds is transferred from the Account
Value in the Investment Subdivisions to our General Account. If the
Owner does not direct an allocation for this transfer when requesting
the loan, we will make it on a pro rata basis.
3. Interest on Policy Loans. We will charge interest daily at an
effective annual rate of 6% on any outstanding non-preferred policy
debt and at an effective annual rate of 4% on preferred policy debt.
Interest is due and payable at the end of each Policy Year while a
Policy loan is outstanding. If, on any Policy Anniversary, interest
accrued since the last Policy Anniversary has not been paid, the
amount of the interest is added to the loan and becomes part of the
outstanding Policy Debt. An amount equal to the unpaid amount of
interest is transferred to our General Account from each Investment
Subdivision on a pro-rata basis according to the respective values in
each Investment Subdivision.
4. Effect on Death Benefit. If the death benefit becomes payable
while a Policy loan is outstanding, Policy Debt will be deducted from
the Life Insurance Proceeds. If Policy Debt exceeds the Account Value
less any applicable surrender charge on any Monthly Anniversary Day
and the Continuation Period is not in effect, the Policy will lapse
without payment of a required loan payment. During the Continuation
Period, if Policy Debt on any Monthly Anniversary Day exceeds the
Account Value less any applicable surrender charge, and the Net Total
Premium is less than the Continuation Amount, the Policy will lapse
without payment of a required loan payment. In either event, we will
mail to the Owner notice of the amount required to be paid to keep the
Policy in force, and the Owner will have a 61-day grace period from
the date we mail the notice to make the required loan payment.
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I. Optional Payment Plans
The Policy currently offers five optional payment plans as
alternatives to the payment of a death benefit or Surrender Value in a
lump sum. An optional payment plan can be selected in the application
or by notifying us in writing at our Home Office. Any proceeds left
with us for payment under an optional payment plan will be transferred
to our General Account. Payments under an optional payment plan will
not vary with the investment performance of Separate Account II
because they are all forms of fixed-benefit annuities. Proceeds will
earn interest at a minimum annual rate of 3%. We reserve the right,
however, to credit a higher rate of interest. Certain conditions and
restrictions apply to payments received under an optional payment
plan.
The optional payment plans are described below.
. Income for a Fixed Period. We will make equal periodic payments
for a fixed period, not longer than 30 years. Payments can be
annual, semi-annual, quarterly or monthly.
. Life Income. We will make equal monthly payments for a guaranteed
minimum period. If the payee lives longer than the minimum period,
payments will continue for his or her life. The minimum period can
be 10, 15 or 20 years.
. Income of a Definite Amount. We will make equal periodic payments
of a definite amount. Payments can be annual, semi-annual,
quarterly or monthly.
. Interest Income. We will make periodic payments of interest earned
from the proceeds left with us. Payments can be annual,
semi-annual, quarterly or monthly, and will begin at the end of the
first period chosen.
. Joint Life and Survivor Income. We will make equal monthly payments
to two payees for a guaranteed minimum of 10 years. Each payee must
be at least 35 years old when payments begin. Payments will
continue as long as either payee is living.
J. Lump Sum Payments
Lump sum payments of partial surrenders, surrenders, loan
proceeds or Life Insurance Proceeds will be ordinarily made within
seven days of the Valuation Day on which we receive the request and
all required documentation at our Home Office. We may postpone the
payment or processing of any such transaction for any of the following
reasons:
1. If the disposal or valuation of Separate Account II assets is
not reasonably practicable because the New York Stock Exchange
("NYSE") is closed for trading other than for customary holiday or
weekend closings, trading on the NYSE is otherwise restricted, or the
Securities and Exchange Commission ("SEC") declares that an emergency
exists.
2. If the SEC by order permits postponement of payment for the
protection of Owners.
3. If the payment is attributable to a check that has not cleared
the bank on which it is drawn.
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Any Life Insurance Proceeds that are paid in one lump sum will
include interest from the date of death to the date of payment.
Interest will be paid at a rate set by us, or by law if greater. The
minimum interest rate which will be paid is 2.5%. Interest will not
be paid beyond one year or any longer time set by law.
K. Exchange Privilege
During the first 24 Policy Months, the Owner may convert the
Policy to a permanent fixed benefit policy. If the Owner objects to a
material change in the investment policy of Separate Account II or the
Investment Subdivisions, the Owner may also convert the Policy to a
permanent fixed benefit policy within 60 days after the change. In
either ease, the Owner may elect either the same death benefit or the
same net amount at risk as the existing Policy at the time of
conversion. Premiums will be based on the same Age at issue and risk
classification of the Insured as the existing Policy. The conversion
will be subject to an equitable adjustment in payments and Account
Value to reflect variances, if any, in the payments and Account Value
under the existing Policy and the new policy.
L. Redemption Errors
In accordance with industry practice, we will establish
procedures to address and to correct errors in amounts redeemed from
the Investment Subdivisions, except for de minimis amounts.
M. Misstatement of Age or Sex
Life Insurance Proceeds will be adjusted if the Insured's Age or
sex has been misstated in the application. The Life Insurance Proceeds
after the adjustment will be the sum of:
. the Account Value at the time of the Insured's death and
. the unadjusted Life Insurance Proceeds, reduced by the Account
Value at the time of the Insured's death, and multiplied by the
ratio of(1) the most recent monthly deduction based on the Age and
sex shown in the application, to (2) the most recent monthly
deduction based on the true Age or sex.
All amounts are those in effect, with respect to the Insured, in the
Policy Month of the Insured's death.
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N. Incontestability.
The Policy limits our right to contest the Policy as issued or as
increased, except for material misstatements contained in the
application or a supplemental application, after it has been in force
during the Insured's lifetime for a minimum period, generally for two
years from the Policy Date or effective date of the increase. This
provision does not apply to riders that provide disability benefits.
O. Suicide Exclusion
If the Insured commits suicide while sane or insane, within two
years of the Policy Date, Life Insurance Proceeds payable under the
Policy will be limited to all premiums paid, less outstanding Policy
Debt and less amounts paid upon partial surrender of the Policy.
If the Insured commits suicide while sane or insane, more than
two years after the Policy Date but within two years after the
effective date of an increase in the Specified Amount, the proceeds
payable with respect to the increase will be limited to the cost of
insurance applied to the increase.
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