AS FILED WITH THE SEC ON ________________. REGISTRATION NO. 33-20000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-6
POST-EFFECTIVE AMENDMENT NO. 19
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED
ON FORM N-8B-2
----------
THE PRUDENTIAL VARIABLE
APPRECIABLE ACCOUNT
(Exact Name of Trust)
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Name of Depositor)
PRUDENTIAL PLAZA
NEWARK, NEW JERSEY 07102-3777
(800) 437-4016 EXT. 46
(Address and telephone number of principal executive offices)
----------
THOMAS C. CASTANO
ASSISTANT SECRETARY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
PRUDENTIAL PLAZA
NEWARK, NEW JERSEY 07102-3777
(Name and address of agent for service)
Copy to:
JEFFREY C. MARTIN
SHEA & GARDNER
1800 MASSACHUSETTS AVENUE, N.W.
WASHINGTON, D.C. 20036
----------
Variable Appreciable Life Insurance Contracts--The Registrant has registered an
indefinite amount of securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 notice for fiscal year 1996 was filed on
February 28, 1997.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[x] on May 1, 1997 pursuant to paragraph (b) of Rule 485
---------------
(date)
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on pursuant to paragraph (a) of Rule 485
---------------
(date)
================================================================================
<PAGE>
CROSS REFERENCE SHEET
(AS REQUIRED BY FORM N-8B-2)
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Sale of the Contract and Sales Commissions
5. The Prudential Variable Appreciable Account
6. The Prudential Variable Appreciable Account
7. Not Applicable
8. Not Applicable
9. Litigation
10. Brief Description of the Contract; Short-Term
Cancellation Right, or "Free Look"; Contract Forms;
Premiums; Contract Date; Allocation of Premiums;
Transfers; Contract Fees and Charges; How the
Contract Fund Changes with Investment Experience;
How a Contract's Death Benefit Will Vary; Surrender of
a Contract; Lapse and Reinstatement; When Proceeds
are Paid; Other Standard Contract Provisions; Voting
Rights; Withdrawal of Excess Cash Surrender Value;
Increases in Face Amount; Decreases in Face Amount;
Riders; The Prudential Series Fund, Inc.
11. Brief Description of the Contract; The Prudential
Variable Appreciable Account
12. Cover Page; Brief Description of the Contract; The
Prudential Series Fund, Inc.; Sale of the Contract and
Sales Commissions
13. Brief Description of the Contract; The Prudential Series
Fund, Inc.; Contract Fees and Charges; Reduction of
Charges for Concurrent Sales to Several Individuals;
Sale of the Contract and Sales Commissions
14. Brief Description of the Contract; Requirements for
Issuance of a Contract
15. Brief Description of the Contract; Allocation of
Premiums; Transfers; Dollar Cost Averaging; Fixed-Rate
Option; Information About the Account, the Real
Property Account and the Fixed Rate Option
16. Brief Description of the Contract; Detailed Information
About the Contract
17. Surrender of a Contract; When Proceeds are Paid
18. The Prudential Variable Appreciable Account
19. Reports to Contract Owners
20. Not Applicable
21. Contract Loans
22. Not Applicable
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
23. Not Applicable
24. Other Standard Contract Provisions
25. Brief Description of the Contract
26. Brief Description of the Contract; Contract Fees and
Charges
27. The Prudential Insurance Company of America; The
Prudential Series Fund, Inc.
28. The Prudential Insurance Company of America; Directors
and Officers
29. The Prudential Insurance Company of America
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. The Prudential Insurance Company of America
36. Not Applicable
37. Not Applicable
38. Sale of the Contract and Sales Commissions
39. Sale of the Contract and Sales Commissions
40. Not Applicable
41. Sale of the Contract and Sales Commissions
42. Not Applicable
43. Not Applicable
44. Brief Description of the Contract; The Prudential Series
Fund, Inc.; How the Contract Fund Changes With
Investment Experience; How a Contract's Death Benefit
Will Vary
45. Not Applicable
46. Brief Description of the Contract; The Prudential
Variable Appreciable Account; The Prudential Series
Fund, Inc.
47. The Prudential Variable Appreciable Account; The
Prudential Series Fund, Inc.
48. Not Applicable
49. Not Applicable
50. Not Applicable
51. Not Applicable
52. Substitution of Series Fund Shares
53. Tax Treatment of Contract Benefits
<PAGE>
N-8B-2 ITEM NUMBER LOCATION
- ------------------ --------
54. Not Applicable
55. Not Applicable
56. Not Applicable
57. Not Applicable
58. Not Applicable
59. Financial Statements; Financial Statements of The
Prudential Variable Appreciable Account; Statutory
Financial Statements of The Prudential Insurance
Company of America
<PAGE>
PART I
INFORMATION REQUIRED IN PROSPECTUS
<PAGE>
PRUDENTIAL'S
VARIABLE APPRECIABLE LIFE(R)
INSURANCE
PROSPECTUS
The Prudential
Variable Appreciable
Account
MAY 1, 1997
PVAL-1 ED 5-97 THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
CATALOG NO. 646960S
<PAGE>
PROSPECTUS
MAY 1, 1997
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
VARIABLE
APPRECIABLE
LIFE(R)____________
INSURANCE CONTRACTS
This prospectus describes two forms of a variable life insurance contract
offered by The Prudential Insurance Company of America under the name Variable
APPRECIABLE LIFE(R) Insurance. The first form provides a death benefit that
generally remains fixed in an amount chosen by the purchaser and cash surrender
values that vary daily. The second form also provides cash surrender values that
vary daily and a death benefit that will also vary daily. Under both forms of
contract, the death benefit will never be less than the "face amount" of
insurance chosen by the purchaser. There is no guaranteed minimum cash surrender
value.
A portion of the Contract's premiums and the earnings on those premiums will be
held in one or more of the following ways. They can be invested in one or more
of fifteen available subaccounts of The Prudential Variable Appreciable Account:
o MONEY MARKET o CONSERVATIVE BALANCED o EQUITY
o DIVERSIFIED BOND o FLEXIBLE MANAGED o PRUDENTIAL JENNISON
o GOVERNMENT INCOME o HIGH YIELD BOND o SMALL CAPITALIZATION STOCK
o ZERO COUPON BOND 2000 o STOCK INDEX o GLOBAL
o ZERO COUPON BOND 2005 o EQUITY INCOME o NATURAL RESOURCES
each of which invests in a corresponding portfolio of The Prudential Series
Fund, Inc. They can be allocated to a FIXED-RATE OPTION. Or they can be invested
in The Prudential Variable Contract Real Property Account (the "REAL PROPERTY
ACCOUNT"), described in a prospectus attached to this one. Additional investment
options may be added in the future. The attached prospectus for the Series Fund,
and the Series Fund's statement of additional information describe the
investment objectives of and the risks of investing in the portfolios. Interest
is credited daily on any portion of the premium payment allocated to the
fixed-rate option at rates periodically declared by Prudential in its sole
discretion but never less than an effective annual rate of 4%. This prospectus
describes the Contract generally and The Prudential Variable Appreciable
Account.
Although it is advantageous to the purchaser to pay a Scheduled Premium amount
on the dates due, which are at least once a year but may be more often,
purchasers have considerable flexibility as to when and in what amounts they pay
premiums.
Before you sign an application to purchase this life insurance contract, you
should read this prospectus with care and have any questions you may have
answered by your Prudential representative. If you do purchase the contract, you
should retain this prospectus for future reference, together with the contract
itself that you will receive.
THE REPLACEMENT OF LIFE INSURANCE IS GENERALLY NOT IN THE INTEREST OF THE
CUSTOMER. IN MOST CASES, WHEN A CUSTOMER REQUIRES ADDITIONAL COVERAGE, A NEW
POLICY SUPPLEMENTING THE EXISTING POLICY SHOULD BE REQUESTED, THEREBY PROTECTING
THE BENEFITS OF THE ORIGINAL POLICY. IF YOU ARE CONSIDERING REPLACING A POLICY,
YOU SHOULD COMPARE THE BENEFITS AND COSTS OF SUPPLEMENTING YOUR EXISTING POLICY
WITH THE BENEFITS AND COSTS OF PURCHASING THE CONTRACT DESCRIBED IN THIS
PROSPECTUS AND YOU SHOULD CONSULT WITH A QUALIFIED TAX ADVISOR.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS ATTACHED TO
A CURRENT PROSPECTUS FOR THE PRUDENTIAL SERIES FUND, INC., DATED MAY 1, 1997. IT
IS ALSO ATTACHED TO A CURRENT PROSPECTUS FOR THE PRUDENTIAL VARIABLE CONTRACT
REAL PROPERTY ACCOUNT, DATED MAY 1, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
Telephone: (800) 437-4016 Ext. 46
*APPRECIABLE LIFE is a registered mark of Prudential.
PVAL-1 Ed 5-97
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION AND SUMMARY................................................................. 1
BRIEF DESCRIPTION OF THE CONTRACT................................................... 1
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS....................................... 3
GENERAL INFORMATION ABOUT PRUDENTIAL, THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT,
AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACT...................... 4
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA......................................... 4
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT......................................... 4
THE PRUDENTIAL SERIES FUND, INC..................................................... 4
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT.............................. 5
THE FIXED-RATE OPTION............................................................... 5
WHICH INVESTMENT OPTION SHOULD BE SELECTED?......................................... 6
DETAILED INFORMATION ABOUT THE CONTRACT.................................................. 6
REQUIREMENTS FOR ISSUANCE OF A CONTRACT............................................. 6
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"........................................ 6
CONTRACT FORMS...................................................................... 6
CONTRACT DATE....................................................................... 7
PREMIUMS............................................................................ 7
ALLOCATION OF PREMIUMS.............................................................. 8
TRANSFERS........................................................................... 9
DOLLAR COST AVERAGING............................................................... 9
CONTRACT FEES AND CHARGES........................................................... 10
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS.................... 14
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE............................ 14
HOW A CONTRACT'S DEATH BENEFIT WILL VARY............................................ 14
INCREASES IN FACE AMOUNT............................................................ 16
DECREASES IN FACE AMOUNT............................................................ 17
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE........................................... 18
SURRENDER OF A CONTRACT............................................................. 18
WHEN PROCEEDS ARE PAID.............................................................. 18
LIVING NEEDS BENEFIT................................................................ 19
HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER VALUES.............. 20
CONTRACT LOANS...................................................................... 21
LAPSE AND REINSTATEMENT............................................................. 22
VOTING RIGHTS....................................................................... 23
SUBSTITUTION OF SERIES FUND SHARES.................................................. 23
REPORTS TO CONTRACT OWNERS.......................................................... 23
TAX TREATMENT OF CONTRACT BENEFITS.................................................. 24
TAX-QUALIFIED PENSION PLANS......................................................... 26
RIDERS.............................................................................. 26
PARTICIPATION IN DIVISIBLE SURPLUS.................................................. 26
OTHER STANDARD CONTRACT PROVISIONS.................................................. 26
PAYING PREMIUMS BY PAYROLL DEDUCTION................................................ 27
UNISEX PREMIUMS AND BENEFITS........................................................ 27
SALES TO PERSONS 14 YEARS OF AGE OR YOUNGER......................................... 27
EXCHANGE OF FIXED-DOLLAR CONTRACT TO VARIABLE CONTRACT.............................. 27
SALE OF THE CONTRACT AND SALES COMMISSIONS.......................................... 28
STATE REGULATION.................................................................... 28
EXPERTS............................................................................. 28
LITIGATION.......................................................................... 28
ADDITIONAL INFORMATION.............................................................. 29
FINANCIAL STATEMENTS................................................................ 29
DIRECTORS AND OFFICERS OF PRUDENTIAL..................................................... 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT...................... A1
STATUTORY FINANCIAL STATEMENTS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA............ B1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE
SERIES FUND, AND THE PROSPECTUS FOR THE REAL PROPERTY ACCOUNT.
<PAGE>
INTRODUCTION AND SUMMARY
This section provides only an overview of the more significant provisions of the
Contract. It omits details which are provided in the rest of this prospectus.
As you read this prospectus you should keep in mind that you are considering the
purchase of a life insurance contract. Because it is VARIABLE LIFE INSURANCE --
and variable life insurance has significant investment aspects and requires you
to make investment decisions -- it is also a "security." That is why you have
been given this prospectus. Securities which are offered to the public must be
registered with the Securities and Exchange Commission, and the prospectus that
is a part of the registration statement must be given to all prospective buyers.
But because a substantial part of your premium pays for life insurance that will
pay to your beneficiary, in the event of your death, an amount far exceeding
your total premium payments, you should not buy this contract unless a major
reason for the purchase is to provide life insurance protection. Because the
contract provides whole-life permanent insurance, it also serves a second
important objective. It can be expected to provide an increasing cash surrender
value that can be used during your lifetime.
BRIEF DESCRIPTION OF THE CONTRACT
The Variable APPRECIABLE LIFE Insurance Contract (referred to from now on as the
"Contract") is issued and sold by The Prudential Insurance Company of America
("Prudential"). The Contract is a form of flexible premium variable life
insurance. It is built around a Contract Fund, the amount of which changes every
business day. That amount represents the value of your Contract on that day
although you will have to pay a surrender charge if you decide to surrender the
Contract during the first ten Contract years.
A broad objective of the Contract is to provide benefits that will increase in
value if favorable investment results are achieved. Prudential has established a
separate account, like a separate division within the Company, called The
Prudential Variable Appreciable Account (the "Account"). Whenever you pay a
premium, Prudential first deducts certain charges (described below) and, unless
you decide otherwise (as explained below) puts the remainder -- often called the
"net premium" -- into the Account, where it is combined with the net premiums
from all other contracts like this one. The money in the Account, including your
Contract Fund, is then invested in the following way. The Account is divided
into fifteen subaccounts and you must decide which subaccount or subaccounts
will hold the assets of your Contract Fund. The money allocated to each
subaccount is immediately invested in a corresponding portfolio of The
Prudential Series Fund, Inc. (the "Series Fund"), a series mutual fund for which
Prudential is the investment advisor.
The MONEY MARKET PORTFOLIO is invested in short-term debt obligations similar to
those purchased by money market funds. The DIVERSIFIED BOND PORTFOLIO is
invested primarily in high quality medium-term corporate and government debt
securities. The GOVERNMENT INCOME PORTFOLIO is invested primarily in U.S.
Government Securities including intermediate and long-term U.S. Treasury
securities and debt obligations issued by agencies of or instrumentalities
established, sponsored or guaranteed by the U.S. Government. The two ZERO COUPON
BOND PORTFOLIOS -- 2000 AND 2005 are invested primarily in debt obligations of
the United States Treasury and investment grade corporations that have been
issued without interest coupons or stripped of their unmatured interest coupons,
interest coupons that have been stripped from such debt obligations, and
receipts and certificates for such stripped debt obligations and stripped
coupons. The CONSERVATIVE BALANCED PORTFOLIO is invested in a mix of money
market instruments, fixed income securities, and common stocks, in proportions
believed by the investment manager to be appropriate for an investor who desires
diversification of investment and prefers a relatively lower risk of loss and a
correspondingly reduced chance of high appreciation. The FLEXIBLE MANAGED
PORTFOLIO is invested in a mix of money market instruments, fixed income
securities, and common stocks, in proportions believed by the investment manager
to be appropriate for an investor desiring diversification of investment who is
willing to accept a relatively high level of loss in an effort to achieve
greater appreciation. The HIGH YIELD BOND PORTFOLIO is invested primarily in
high yield fixed income securities of medium to lower quality, also known as
high risk bonds. The STOCK INDEX PORTFOLIO is invested in common stocks selected
to duplicate the price and yield performance of the Standard & Poor's 500
Composite Stock Price Index. The EQUITY INCOME PORTFOLIO is invested primarily
in common stocks and convertible securities that provide favorable prospects for
investment income returns above those of the Standard & Poor's 500 Stock Index
or the NYSE Composite Index. The EQUITY PORTFOLIO is invested primarily in
common stocks. The PRUDENTIAL JENNISON PORTFOLIO is invested primarily in equity
securities of established companies with above-average growth prospects. The
SMALL CAPITALIZATION STOCK PORTFOLIO is invested primarily in equity securities
of publicly-traded companies with small market capitalization. The GLOBAL
PORTFOLIO is invested in common stocks and common stock equivalents (such as
convertible debt securities) of foreign and domestic issuers. The NATURAL
RESOURCES PORTFOLIO is invested primarily in common stocks and convertible
securities of natural resource companies, and in securities (typically debt
securities or preferred stock) the terms of which are related to the market
value of a natural resource.
1
<PAGE>
Further information about the Series Fund portfolios can be found under THE
PRUDENTIAL SERIES FUND, INC. on page 4 and in the attached prospectus for the
Series Fund.
You also have two additional options which are regulated differently from the
other fifteen because neither one is an investment company registered under the
Investment Company Act of 1940. The first of these is a FIXED-RATE OPTION that
increases the portion of your Contract Fund allocated to this option at a
guaranteed rate of interest. The remaining option is a REAL PROPERTY OPTION
which invests in income-producing real property. It is described in a separate
prospectus that is attached to this one. Thus your Contract Fund value changes
every day depending upon the change in the value of the particular portfolios
(or the other two investment options) that you have selected for the investment
of your Contract Fund.
Although the selection of any of the investment portfolios or of the real
property option offers the possibility that your Contract Fund value will
increase if there is favorable investment performance, you are subject to the
risk that investment performance will be unfavorable and that the value of your
Contract Fund will decrease. The risk will be different, depending upon which
investment options you choose. See WHICH INVESTMENT OPTION SHOULD BE SELECTED?,
page 6. If you select the fixed-rate option, you are credited with a stated rate
of interest but you assume the risk that this rate may change in later years,
although it will never be lower than an effective annual rate of 4%.
Prudential deducts certain charges from each premium payment and from the
amounts held in the designated investment options. In addition, Prudential makes
certain additional charges if a Contract lapses or is surrendered during the
first 10 Contract years. All these charges, which are largely designed to cover
insurance costs and risks as well as sales and administrative expenses, are
fully described under CONTRACT FEES AND CHARGES, on page 10. In brief, and
subject to that fuller description, the following diagram outlines the charges
which may be made:
------------------------------------
PREMIUM PAYMENT
------------------------------------
|
|
-------------------------------
o less charge for taxes
attributable to premiums
o less $2 processing fee
-------------------------------
|
|
- -------------------------------------------------------------------------------
INVESTED PREMIUM AMOUNT
o To be invested in one or a combination of:
o The Investment Portfolios of the Series Fund
o The Fixed-Rate Option
o The Real Property Account
- -------------------------------------------------------------------------------
|
|
- -------------------------------------------------------------------------------
DAILY CHARGES
o Management fees and expenses are deducted from the assets of the
Series Fund.
o A daily charge equivalent to an annual rate of up to 0.9% is deducted
from the assets of the variable investment options for mortality and
expense risks.
- -------------------------------------------------------------------------------
|
|
- -------------------------------------------------------------------------------
MONTHLY CHARGES
o A sales charge is currently deducted from the Contract Fund in the
amount of 1/2 of 1% of the primary annual premium.
o The Contract Fund is reduced by a guaranteed minimum death benefit
risk charge of not more than $0.01 per $1,000 of the face amount of
insurance.
o The Contract Fund is reduced by an administrative charge of up to $3
per Contract and $0.03 per $1,000 of face amount of insurance; if the
face amount of the Contract is greater than $100,000, the charge is
reduced.
o A charge for anticipated mortality is deducted, with the maximum
charge based on the Non-Smoker/Smoker 1980 CSO Tables.
o If the Contract includes riders, a deduction from the Contract Fund
will be made for charges applicable to those riders; a deduction will
also be made if the rating class of the insured results in an extra
charge.
- -------------------------------------------------------------------------------
2
<PAGE>
POSSIBLE ADDITIONAL CHARGES
- --------------------------------------------------------------------------------
o If the Contract lapses or is surrendered during the first 10 years, a
contingent deferred sales charge is assessed; the maximum contingent
deferred sales charge during the first 5 years is 50% of the first
year's primary annual premium but this charge is both subject to other
important limitations and reduced for Contracts that have been in force
for more than 5 years.
o If the Contract lapses or is surrendered during the first 10 years, a
contingent deferred administrative charge is assessed; during the first
5 years, this charge equals $5 per $1,000 of face amount and it begins
to decline uniformly after the fifth Contract year so that it disappears
on the tenth Contract anniversary.
o An administrative processing charge of up to $15 will be made in
connection with each withdrawal of excess cash surrender value or a
decrease in face amount.
- --------------------------------------------------------------------------------
An important feature of the Contract is its death benefit. You have a choice of
two different forms of the Contract which differ in the amount of the death
benefit. Under Contract Form A the death benefit will generally be equal to the
face amount of insurance. It can never be less than this amount, but it is
possible, after the Contract has been held for many years, that the Contract
Fund will become so large that Prudential -- to meet certain requirements of the
Internal Revenue Code -- will increase the death benefit. Under Contract Form B,
the death benefit will increase and decrease as the amount of the Contract Fund
varies with the investment performance of the selected options. However, the
death benefit under Form B, as is true under Form A, will never be less than the
initial face amount and it may also increase to satisfy Internal Revenue Code
requirements. Throughout this prospectus the word "Contract" refers to both Form
A and B unless specifically stated otherwise. Under both Form A and B Contracts
there is no guaranteed minimum cash surrender value.
Your Contract sets forth an annual Scheduled Premium or one that is payable more
frequently, such as monthly. Prudential guarantees that, if the Scheduled
Premiums are paid when due (or if missed premiums are paid later, with interest)
and there are no withdrawals, the Contract will not lapse because of unfavorable
investment experience.
Your Scheduled Premium consists of two amounts. The first or initial amount is
payable from the time you purchase your Contract until the Contract anniversary
immediately following your 65th birthday or the Contract's seventh anniversary,
whichever is later (the "Premium Change Date"). The second amount is the
guaranteed maximum amount payable after the Premium Change Date. See PREMIUMS,
page 7.
The payment of premiums in excess of scheduled premiums may cause the Contract
to become a Modified Endowment Contract for federal income tax purposes. See
PREMIUMS, page 7 and TAX TREATMENT OF CONTRACT BENEFITS, page 24.
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS
The Prudential Variable APPRECIABLE LIFE Insurance Contract is a form of life
insurance that provides much of the flexibility of variable universal life,
however, with two important distinctions. First, Prudential guarantees that if
the Scheduled Premiums are paid when due, or within the grace period (or missed
premiums are paid later with interest), the Contract will not lapse and the face
amount of insurance will be paid upon the death of the insured even if, because
of unfavorable investment experience, the Contract Fund value should drop to
below zero. Second, if all premiums are not paid when due (or made up), the
Contract will not lapse as long as the Contract Fund is higher than a stated
amount set forth in a table in the Contract -- an amount that increases each
year and in later years becomes quite high; it is called the "Tabular Contract
Fund." The Contract lapses when the Contract Fund falls to below this stated
amount, rather than when it drops to zero. Thus, when a Variable APPRECIABLE
LIFE Contract lapses, it may still have considerable value and you will,
therefore, have a substantial incentive to reinstate it, as well as an
opportunity to make a considered decision whether to do so or to take, in one
form or another, the cash surrender value. In effect, Prudential provides an
early and timely warning against the imprudent use of the flexibility provided
by the Contract.
For a limited time, a Contract may be returned for a refund in accordance with
the terms of its "free look" provision. See SHORT-TERM CANCELLATION RIGHT OR
"FREE LOOK," page 6.
This Summary provides only a brief overview of the more significant aspects of
the Contract. Further detail is provided in the subsequent sections of this
prospectus and in the Contract. The Contract, including the application attached
to it, constitutes the entire agreement between the owner and Prudential and
should be retained.
3
<PAGE>
GENERAL INFORMATION ABOUT PRUDENTIAL,
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT,
AND THE VARIABLE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACT
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
The Prudential Insurance Company of America ("Prudential") is a mutual insurance
company, founded in 1875 under the laws of the State of New Jersey. Prudential
is licensed to sell life insurance and annuities in the District of Columbia,
Guam, and in all states. These Contracts are not offered in any state in which
the necessary approvals have not yet been obtained.
Prudential's statutory financial statements begin on page B1 and should be
considered only as bearing upon Prudential's ability to meet its obligations
under the Contracts.
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
The Prudential Variable Appreciable Account (the "Account") was established on
August 11, 1987 under New Jersey law as a separate investment account. The
Account meets the definition of a "separate account" under the federal
securities laws. The Account holds assets that are segregated from all of
Prudential's other assets.
The obligations to Contract owners and beneficiaries arising under the Contract
are general corporate obligations of Prudential. Prudential is also the legal
owner of the assets in the Account. Prudential will maintain assets in the
Account with a total market value at least equal to the reserve and other
liabilities relating to the variable benefits attributable to the Account. These
assets may not be charged with liabilities which arise from any other business
Prudential conducts. In addition to these assets, the Account's assets may
include funds contributed by Prudential to commence operation of the Account and
may include accumulations of the charges Prudential makes against the Account.
From time to time these additional assets may be withdrawn by Prudential.
The Account is registered with the Securities and Exchange Commission ("SEC")
under the Investment Company Act of 1940 ("1940 Act") as a unit investment
trust, which is a type of investment company. This does not involve any
supervision by the SEC of the management or investment policies or practices of
the Account. For state law purposes, the Account is treated as a part or
division of Prudential. The Account's financial statements begin on page A1.
Currently, you may invest in one or a combination of fifteen available
subaccounts within the Account, each of which invests in a single corresponding
portfolio of The Prudential Series Fund, Inc. Additional subaccounts may be
added in the future.
THE PRUDENTIAL SERIES FUND, INC.
The Prudential Series Fund, Inc. (the "Series Fund") is registered under the
1940 Act as an open-end diversified management investment company. Its shares
are currently sold only to separate accounts of Prudential and certain
subsidiary insurers that offer variable life insurance and variable annuity
contracts. The Account will purchase and redeem shares from the Series Fund at
net asset value. Shares will be redeemed to the extent necessary for Prudential
to provide benefits under the Contract and to transfer assets from one
subaccount to another, as requested by Contract owners. Any dividend or capital
gain distribution received from a portfolio of the Series Fund will be
reinvested immediately at net asset value in shares of that portfolio and
retained as assets of the corresponding subaccount.
Prudential is the investment advisor for the assets of each of the portfolios of
the Series Fund. Prudential's principal business address is Prudential Plaza,
Newark, New Jersey 07102-3777. Prudential has a Service Agreement with its
wholly-owned subsidiary The Prudential Investment Corporation ("PIC"), which
provides that, subject to Prudential's supervision, PIC will furnish investment
advisory services in connection with the management of the Series Fund. In
addition, Prudential has entered into a Subadvisory Agreement with its
wholly-owned subsidiary Jennison Associates Capital Corporation ("Jennison"),
under which Jennison furnishes investment advisory services in connection with
the management of the Prudential Jennison Portfolio. Further detail is provided
in the prospectus and statement of additional information for the Series Fund.
Prudential, PIC, and Jennison are registered as investment advisors under the
Investment Advisers Act of 1940.
As an investment advisor, Prudential charges the Series Fund a daily investment
management fee as compensation for its services. In addition to the investment
management fee, each portfolio incurs certain expenses, such as accounting and
custodian fees. See DEDUCTIONS FROM PORTFOLIOS, page 10.
It is conceivable that in the future it may become disadvantageous for both
variable life insurance and variable annuity contract separate accounts to
invest in the same underlying mutual fund. Although neither the companies
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which invest in the Series Fund, nor the Series Fund currently foresees any such
disadvantage, the Series Fund's Board of Directors intends to monitor events in
order to identify any material conflict between variable life insurance and
variable annuity contract owners and to determine what action, if any, should be
taken in response thereto. Material conflicts could result from such things as:
(1) changes in state insurance law; (2) changes in federal income tax law; (3)
changes in the investment management of any portfolio of the Series Fund; or (4)
differences between voting instructions given by variable life insurance and
variable annuity contract owners.
A FULL DESCRIPTION OF THE SERIES FUND, ITS INVESTMENT OBJECTIVES, MANAGEMENT,
POLICIES, AND RESTRICTIONS, ITS EXPENSES, THE RISKS ATTENDANT TO INVESTMENT
THEREIN--INCLUDING ANY RISKS ASSOCIATED WITH INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO, AND ALL OTHER ASPECTS OF ITS OPERATION IS CONTAINED IN THE ATTACHED
PROSPECTUS FOR THE SERIES FUND AND IN ITS STATEMENT OF ADDITIONAL INFORMATION,
WHICH SHOULD BE READ IN CONJUNCTION WITH THIS PROSPECTUS. THERE IS NO ASSURANCE
THAT THE INVESTMENT OBJECTIVES WILL BE MET.
THE PRUDENTIAL VARIABLE CONTRACT REAL PROPERTY ACCOUNT
The Prudential Variable Contract Real Property Account (the "Real Property
Account") is a separate account of Prudential that, through a general
partnership formed by Prudential and two of its subsidiaries, invests primarily
in income-producing real property such as office buildings, shopping centers,
agricultural land, hotels, apartments or industrial properties. It also invests
in mortgage loans and other real estate-related investments, including
sale-leaseback transactions. It is not registered as an investment company under
the Investment Company Act of 1940 and is therefore not subject to the same
regulation as the Series Fund. The objectives of the Real Property Account and
the Partnership are to preserve and protect capital, provide for compounding of
income as a result of reinvestment of cash flow from investments, and provide
for increases over time in the amount of such income through appreciation in the
value of assets.
The Partnership has entered into an investment management agreement with
Prudential, under which Prudential selects the properties and other investments
held by the Partnership. Prudential charges the Partnership a daily fee for
investment management which amounts to 1.25% per year of the average daily gross
assets of the Partnership.
A full description of the Real Property Account, its management, policies, and
restrictions, its charges and expenses, the risks associated with investment
therein, the Partnership's investment objectives, and all other aspects of the
Real Property Account's and the Partnership's operations is contained in the
attached prospectus for the Real Property Account, which should be read together
with this prospectus by any Contract owner considering the real estate
investment option. There is no assurance that the investment objectives will be
met.
THE FIXED-RATE OPTION
Because of exemptive and exclusionary provisions, interests in the fixed-rate
option under the Contract have not been registered under the Securities Act of
1933 and Prudential has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, interests in the fixed-rate option
are not subject to the provisions of these Acts, and Prudential has been advised
that the staff of the Securities and Exchange Commission has not reviewed the
disclosure in this prospectus relating to the fixed-rate option. Any inaccurate
or misleading disclosure regarding the fixed-rate option may, however, subject
Prudential and its directors to civil liability if that results in any damage.
As explained earlier, you may elect to allocate, either initially or by
transfer, all or part of the amount credited under the Contract to the
fixed-rate option, and the amount so allocated or transferred becomes part of
Prudential's general assets. Sometimes this is referred to as Prudential's
general account, which consists of all assets owned by Prudential other than
those in the Account and in other separate accounts that have been or may be
established by Prudential. Subject to applicable law, Prudential has sole
discretion over the investment of the assets of the general account, and
Contract owners do not share in the investment experience of those assets.
Instead, Prudential guarantees that the part of the Contract Fund allocated to
the fixed-rate option will accrue interest daily at an effective annual rate
that Prudential declares periodically. This rate may not be less than an
effective annual rate of 4%. Currently, declared interest rates remain in effect
from the date money is allocated to the fixed-rate option until the Monthly date
in the same month in the following year. See CONTRACT DATE, page 7. Thereafter,
a new crediting rate will be declared each year and will remain in effect for
the calendar year. Prudential reserves the right to change this practice.
Prudential is not obligated to credit interest at a higher rate than 4%,
although in its sole discretion it may do so. Different crediting rates may be
declared for different portions of the Contract Fund allocated to the fixed-rate
option. At least annually and on request, you will be advised of the interest
rates that currently apply to your Contract.
Transfers from the fixed-rate option are subject to strict limits. (See
TRANSFERS, page 9). The payment of any cash surrender value attributable to the
fixed-rate option may be delayed up to 6 months (see WHEN PROCEEDS ARE PAID,
page 18).
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WHICH INVESTMENT OPTION SHOULD BE SELECTED?
Historically, for investments held over relatively long periods, the investment
performance of common stocks has generally been superior to that of short or
long-term debt securities, even though common stocks have been subject to much
more dramatic changes in value over short periods of time. Accordingly, the
Stock Index, Equity Income, Equity, Prudential Jennison, Small Capitalization
Stock, Global, or Natural Resources Portfolios may be desirable options if you
are willing to accept such volatility in your Contract values. Each of these
equity portfolios involves somewhat different policies and investment risks.
You may prefer the somewhat greater protection against loss of principal (and
reduced chance of high total return) provided by the Government Income or
Diversified Bond Portfolios. There may be times when you desire even greater
safety of principal and may then prefer the Money Market Portfolio or the
fixed-rate option, recognizing that the level of short-term rates may change
rather rapidly. Money invested in a Zero Coupon Bond Portfolio and held to its
liquidation date will realize a predictable return, although the portfolio's
value may fluctuate significantly with changes in interest rates prior to its
liquidation date. If you are willing to take risks and possibly achieve a higher
total return, you may prefer the High Yield Bond Portfolio, recognizing that
with higher yielding, lower quality bonds the risks are greater. You may wish to
divide your invested premium among two or more of the portfolios. You may wish
to obtain diversification by relying on Prudential's judgment for an appropriate
asset mix by choosing the Conservative Balanced or Flexible Managed Portfolios.
The Real Property Account permits you to diversify your investment under the
Contract to include an interest in a pool of income-producing real property, and
real estate is often considered to be a hedge against inflation.
You should make a choice that takes into account how willing you are to accept
investment risks, the manner in which your other assets are invested, and your
own predictions about what investment results are likely to be in the future.
Prudential does recommend AGAINST frequent transfers among the several options
as experience generally indicates that "market timing" investing, particularly
by non-professional investors, is likely to prove unsuccessful.
DETAILED INFORMATION ABOUT THE CONTRACT
REQUIREMENTS FOR ISSUANCE OF A CONTRACT
The Contract may generally be issued on insureds below the age of 81. Generally,
the minimum initial guaranteed death benefit that can be applied for is $60,000;
however, higher minimums apply to insureds over the age of 75. Insureds 14 years
of age or less may apply for a minimum initial guaranteed death benefit of
$40,000, which will increase by 50% at age 21 (see SALES TO PERSONS 14 YEARS OF
AGE OR YOUNGER, page 27). Before issuing any Contract, Prudential requires
evidence of insurability, which may include a medical examination. Non-Smokers
who meet preferred underwriting requirements are offered the most favorable
premium rate. A higher premium is charged if an extra mortality risk is
involved. Certain classes of Contracts, for example a Contract issued in
connection with a tax-qualified pension plan, may be issued on a "guaranteed
issue" basis and may have a lower minimum initial death benefit than a Contract
which is individually underwritten. These are the current underwriting
requirements. Prudential reserves the right to change them on a
non-discriminatory basis.
SHORT-TERM CANCELLATION RIGHT OR "FREE LOOK"
Generally, you may return the Contract for a refund within 10 days after you
receive it, within 45 days after Part I of the application for insurance is
signed, or within 10 days after Prudential mails or delivers a Notice of
Withdrawal Right, whichever is latest. Some states allow a longer period of time
during which a Contract may be returned for a refund. A refund can be requested
by mailing or delivering the Contract to the representative who sold it or to
the Home Office specified in the Contract. A Contract returned according to this
provision shall be deemed void from the beginning. You will then receive a
refund of all premium payments made, plus or minus any change due to investment
experience. However, if applicable law so requires, if you exercise your
short-term cancellation right, you will receive a refund of all premium payments
made, with no adjustment for investment experience.
CONTRACT FORMS
You may select either of two forms of the Contract. The Scheduled Premiums shown
in the Contract will be the same for a given insured, regardless of which
Contract Form is chosen. Contract Form A has a death benefit equal to the
initial face amount of insurance. The death benefit of a Form A Contract does
not vary with the investment performance of the investment options selected by
the owner, unless the death benefit is increased to ensure that the Contract
meets the Internal Revenue Code's definition of life insurance. See HOW A
CONTRACT'S DEATH BENEFIT WILL VARY, page 14. Favorable investment results of the
investment options to which the assets related to the Contract are allocated and
payment of greater than Scheduled Premiums will generally result in increases in
the cash surrender value. See HOW THE CONTRACT FUND CHANGES WITH INVESTMENT
EXPERIENCE, page 14.
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Contract Form B also has an initial face amount of insurance but favorable
investment performance and payment of greater than Scheduled Premiums generally
result in an increase in the death benefit and, over time, in a lesser increase
in the cash surrender value than under the Form A Contract. See HOW THE CONTRACT
FUND CHANGES WITH INVESTMENT EXPERIENCE, page 14 and HOW A CONTRACT'S DEATH
BENEFIT WILL VARY, page 14. Unfavorable investment performance will result in
decreases in the death benefit (but never below the face amount stated in the
Contract) and in the cash surrender value.
You should select the form that best meets your needs and objectives. All
permanent insurance provides both protection for beneficiaries in the event of
death and the opportunity to accumulate savings for possible use in later years.
Prudential's Variable APPRECIABLE LIFE Contract provides more flexible
investment opportunities than do more conventional life insurance policies
because it permits you to decide how the assets held under the Contract will be
invested, because it permits considerable flexibility in determining the amount
and timing of premium payments, because it permits adjustment of the face amount
of insurance (subject, in the case of an increase, to evidence of insurability),
and because favorable investment returns result in an increase in Contract
values. Purchasers who prefer to have favorable investment results and greater
than Scheduled Premiums reflected in part in the form of an increased death
benefit should choose Contract Form B. Purchasers who are satisfied with the
amount of their insurance coverage and wish to have favorable investment results
and additional premiums reflected to the maximum extent in increasing cash
surrender values should choose Contract Form A.
In choosing a Contract form, you should also consider whether you intend to use
the withdrawal feature. Purchasers of Form A Contracts should note that an early
withdrawal may result in a portion of the surrender charge being deducted from
the Contract Fund. Furthermore, a purchaser of a minimum face amount Form A
Contract cannot make withdrawals unless the Contract's death benefit has been
increased to comply with the Internal Revenue Code's definition of life
insurance. Purchasers of Form B Contracts will not incur a surrender charge for
a withdrawal and are not precluded from making withdrawals if they purchase a
minimum size Contract. See WITHDRAWAL OF EXCESS CASH SURRENDER VALUE, page 18.
Withdrawal of part of the cash surrender value may have tax consequences, see
TAX TREATMENT OF CONTRACT BENEFITS, page 24.
CONTRACT DATE
When the first premium payment is paid with the application for a Contract, the
Contract Date will ordinarily be the later of the date of the application and
the date of any medical examination. If the first premium is not paid with the
application, the Contract Date will ordinarily be the date the first premium is
paid and the Contract is delivered. It may be advantageous for a Contract owner
to have an earlier Contract Date when that will result in the use by Prudential
of a lower issue age in determining the amount of the Scheduled Premium.
Prudential will permit a Contract to be back-dated but only to a date not
earlier than 6 months prior to the date of the application. Prudential will
require the payment of all premiums that would have been due had the application
date coincided with the back-dated Contract Date. No Contract may be back-dated
to a date prior to that which is in accordance with Prudential's regulations.
The death benefit and cash surrender value under the Contract will be equal to
what they would have been had the Contract been issued on the Contract Date, all
Scheduled Premiums been received on their due dates, and all Contract charges
been made. The term Monthly Date means the day of each month that is the same as
the Contract Date.
PREMIUMS
As already explained, if you pay your Scheduled Premiums when due and take no
withdrawals, the Contract will not lapse because of unfavorable investment
experience. If you pay premiums other than on a monthly basis, you will receive
a notice that a premium is due about 3 weeks before each due date. If you pay
premiums monthly, you will receive each year a book with 12 coupons that will
serve as a reminder. With Prudential's consent, you may change the frequency of
premium payments.
You may elect to have monthly premiums paid automatically under the "Pru-Matic
Premium Plan" by pre-authorized transfers from a bank checking account. Some
Contract owners may also be eligible to have monthly premiums paid by
pre-authorized deductions from an employer's payroll.
As stated above, your Contract sets forth two Scheduled Premium amounts. Your
first or initial amount is payable from the time you purchase your Contract
until the Contract anniversary immediately following your 65th birthday or the
Contract's 7th anniversary, whichever is later (the "Premium Change Date"). If
your Contract Fund, net of any excess premiums, on the Premium Change Date is
higher than it would have been had all Scheduled Premiums been paid when due,
maximum contractual charges been deducted, and only a net rate of return of 4%
been earned, then the second Scheduled Premium Amount will be lower than the
maximum amount stated in your Contract. You will be told what the amount of your
second Scheduled Premium will be. For examples of what the second Scheduled
Premium might be, see Footnote 3 to the tables on pages T1 through T4.
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A significant feature of this Contract is that it permits you to pay greater
than Scheduled Premiums. This may be done by making occasional unscheduled
premium payments or on a periodic basis. If you wish, you may select a higher
contemplated premium than the Scheduled Premium. Prudential will then bill you
for the chosen premium. In general, the regular payment of higher premiums will
result in higher cash surrender values and, at least under Form B, in higher
death benefits. Conversely, payment of a Scheduled Premium need not be made if
the Contract Fund is sufficiently large to enable the charges due under the
Contract to be made without causing the Contract to lapse. See LAPSE AND
REINSTATEMENT, page 22. The payment of premiums in excess of Scheduled Premiums
may cause the Contract to become a Modified Endowment Contract. If this happens,
loans and other distributions which would otherwise not be taxable events will
be subject to federal income taxation. See TAX TREATMENT OF CONTRACT BENEFITS,
page 24.
If you elect to add a "rider" to your Contract that provides additional benefits
(see RIDERS, page 26), the Scheduled Premium may be increased. Some riders
provide additional term insurance in a stated amount that does not vary with
investment experience. One of these "term riders" also allows you to choose
different insurance amounts in different years. For these riders, you may choose
to pay a billed premium higher than your initial Scheduled Premium. Under some
circumstances this could result in a higher cash surrender value and death
benefit than if the same premium had been paid under a Contract with the same
death benefit but without the rider. After several years, however, even if the
billed premiums are paid on time, the Contract could lose its guarantee against
lapse and, after many more years, could have lower cash surrender values.
The Contract allows you to choose a level premium option. In that case, the
Scheduled Premium, (the amount of which can be quoted by your Prudential
representative), will be higher and the Scheduled Premium will not increase at
age 65 (or 7 years after issue, if later). If that level Scheduled Premium is
paid when due or within the grace period (or missed premiums are paid later with
interest) and there are no withdrawals, the Contract will not lapse because of
unfavorable investment experience.
Prudential will generally accept any premium payment if the payment is at least
$25. Prudential does reserve the right, however, to limit unscheduled premiums
to a total of $10,000 in any Contract year, and to refuse to accept premiums
that would immediately result in more than a dollar-for-dollar increase in the
death benefit. See HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 14. The
flexibility of premium payments provides Contract owners with different
opportunities under the two Forms of the Contract. Greater than scheduled
payments under a Form A Contract increase the Contract Fund. Greater than
scheduled payments under a Form B Contract increase both the Contract Fund and
the death benefit, but generally, any future increases in the Contract Fund will
be less than under a Form A Contract. This is because the monthly mortality
charges under the Form B Contract will be higher to compensate for the higher
amount of insurance. For all Contracts, the privilege of making large or
additional premium payments offers a way of investing amounts which accumulate
without current income taxation.
Unless you elect otherwise, your Contract will include a "waiver of premium"
provision under which Prudential will pay your Scheduled Premiums if you incur a
disability before age 60 that lasts over six months. If the disability begins
after you become 60 and before you are 65, premiums will be paid only until the
first Contract anniversary following your 65th birthday. The waiver of premium
provision does not apply if you become disabled after your 65th birthday.
ALLOCATION OF PREMIUMS
On the Contract Date, the $2 processing charge and the charge for taxes
attributable to premiums are deducted from the initial premium, and the first
monthly deductions are made. See CONTRACT FEES AND CHARGES, page 10. The
remainder of the initial premium will be allocated on the Contract Date among
the subaccounts, the fixed-rate option or the Real Property Account according to
the desired allocation specified in the application form. The invested portion
of any part of the initial premium in excess of the Scheduled Premium is
generally placed in the selected investment options on the date of receipt at a
Home Office, but not earlier than the Contract Date. Thus, to the extent that
Prudential receives the initial premium prior to the Contract Date, there will
be a period during which it will not be invested. All subsequent premium
payments, after the deductions from premiums, will be invested as of the end of
the valuation period when received at a Home Office in accordance with the
allocation previously designated. Provided the Contract is not in default, you
may change the way in which subsequent premiums are allocated by giving written
notice to the Home Office stated in the Contract. You may also change the way in
which subsequent premiums are allocated by telephoning a Home Office, provided
you are enrolled to use the Telephone Transfer System. If any part of the
invested portion of a premium is allocated to a particular investment option,
that portion must be at least 10% on the date the allocation takes effect. All
percentage allocations must be in whole numbers. For example, 33% can be
selected but 331/3% cannot. Of course, the total allocation of all selected
investment options must equal 100%.
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TRANSFERS
If the Contract is not in default, or if the Contract is in force as variable
reduced paid-up insurance (see LAPSE AND REINSTATEMENT, page 22), you may, up to
four times in each Contract year, transfer amounts from one subaccount to
another subaccount, to the fixed-rate option or to the Real Property Account.
Currently, you may make additional transfers with our consent. There is no
charge. All or a portion of the amount credited to a subaccount may be
transferred.
In addition, the total amount credited to a Contract held in the subaccounts or
the Real Property Account may be transferred to the fixed-rate option at any
time during the first two Contract years. If you wish to convert your variable
Contract to a fixed-benefit Contract in this manner, you must request a complete
transfer of funds to the fixed-rate option and also change your allocation
instructions regarding future premiums.
Transfers among subaccounts will take effect as of the end of the valuation
period (usually the business day) in which a proper transfer request is received
at a Home Office. A valuation period is the period of time from one
determination of the value of the amount invested in a subaccount to the next.
Such determinations are made when the net asset values of the portfolios of the
Series Fund are calculated, which is generally 4:15 p.m. New York City time on
each day during which the New York Stock Exchange is open. The request may be in
terms of dollars, such as a request to transfer $10,000 from one subaccount to
another, or may be in terms of a percentage reallocation among subaccounts. In
the latter case, as with premium reallocations, the percentages must be in whole
numbers. You may transfer amounts by proper written notice to a Home Office, or
by telephone, provided you are enrolled to use the Telephone Transfer System.
You will automatically be enrolled to use the Telephone Transfer System unless
your Contract is jointly owned or if you elect not to have this privilege.
Telephone transfers may not be available on policies that are assigned (see
ASSIGNMENT, page 27), depending on the terms of the assignment. Prudential has
adopted procedures designed to ensure that requests by telephone are genuine.
Prudential will not be held liable for following telephone instructions that we
reasonably believe to be genuine. Prudential cannot guarantee that you will be
able to get through to complete a telephone transfer during peak periods such as
periods of drastic economic or market change.
On the liquidation date of a Zero Coupon Bond Subaccount, all the shares held by
it in the corresponding portfolio of the Series Fund will be redeemed and the
proceeds of the redemption applicable to each Contract will be transferred to
the Money Market Subaccount unless the owner directs that it be transferred to
another subaccount. A transfer that occurs upon the liquidation date of a Zero
Coupon Bond Subaccount will not be counted as one of the four permissible
transfers in a Contract year.
Transfers from the fixed-rate option to the subaccounts or the Real Property
Account are currently permitted once each Contract year and only during the
30-day period beginning on the Contract anniversary. The maximum amount which
may be transferred out of the fixed-rate option each year is currently the
greater of: (a) 25% of the amount in the fixed-rate option, or (b) $2,000. Such
transfer requests received prior to the Contract anniversary will be effected on
the Contract anniversary. Transfer requests received within the 30-day period
beginning on the Contract anniversary will be effected as of the end of the
valuation period in which a proper transfer request is received at a Home
Office. These limits are subject to change in the future. Transfers from the
Real Property Account are also subject to restrictions, and these restrictions
are described in the attached prospectus for that investment option.
DOLLAR COST AVERAGING
A feature called Dollar Cost Averaging ("DCA") is available to Contract owners.
If you wish, premiums may be allocated to the portion of the Money Market
Subaccount used for this feature (the "DCA account"), and designated dollar
amounts will be transferred monthly from the DCA account to other investment
options available under the Contract, excluding the Money Market Subaccount and
the fixed-rate option, but including the Real Property Account. Automatic
monthly transfers must be at least 3% of the amount allocated to the DCA account
(that is, if you designate $5,000, the minimum monthly transfer is $150), with a
minimum of $20 transferred into any one investment option. These amounts are
subject to change at Prudential's discretion. The minimum transfer amount will
only be recalculated if the amount designated for transfer is increased.
When you establish DCA at issue, you must allocate to the DCA account the
greater of $2,000 or 10% of the initial premium payment. When you establish DCA
after issue, you must allocate to the DCA account at least $2,000. These
minimums are subject to change at Prudential's discretion. After DCA has been
established and as long as the DCA account has a positive balance, you may
allocate or transfer amounts to the DCA account, subject to the limitations on
premium payments and transfers generally. In addition, if you pay premiums on an
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annual or semi-annual basis, and you have already established DCA, your premium
allocation instructions may include an allocation of all or a portion of all
your premium payments to the DCA account.
Each automatic monthly transfer will take effect as of the end of the valuation
period on the Monthly Date, provided the New York Stock Exchange ("NYSE") is
open on that date. If the NYSE is not open on the Monthly Date, the transfer
will take effect as of the end of the valuation period on the next day that the
NYSE is open. If the Monthly Date does not occur in a particular month (e.g.,
February 30), the transfer will take effect as of the end of the valuation
period on the last day of the month that the NYSE is open. Automatic monthly
transfers will continue until the balance in the DCA account reaches zero, or
until the Contract owner gives notification of a change in allocation or
cancellation of the feature. If you have an outstanding premium allocation to
the DCA account, but your DCA option has previously been canceled, premiums
allocated to the DCA account will be allocated to the Money Market Subaccount.
Currently there is no charge for using the DCA feature.
CONTRACT FEES AND CHARGES
This section provides a detailed description of each charge that is described
briefly in the chart on page 2, and an explanation of the purpose of the charge.
In several instances we will use the terms "maximum charge" and "current
charge." The "maximum charge," in each instance, will be the highest charge that
Prudential is entitled to make under the Contract. The "current charge" is the
lower amount that Prudential is now charging. However, if circumstances change,
Prudential reserves the right to increase each current charge, up to but to no
more than the maximum charge, without giving any advance notice.
A Contract owner may add several "riders" to the Contract which provide
additional benefits, which are charged for separately. The statement and
description of charges that follows assumes there are no riders to the Contract.
DEDUCTIONS FROM PREMIUMS
(a) A charge for taxes attributable to premiums is deducted from each premium
payment. That charge is currently made up of two parts. The first part is in an
amount equal to the state or local premium tax. It varies from state to state
and generally ranges from 0.75% to 5% (but in some instances can exceed 5%) of
the premium received by Prudential. The second part is a charge for federal
income taxes measured by premiums and it is equal to 1.25% of the premium.
Prudential believes that this charge is a reasonable estimate of an increase in
its federal income taxes resulting from a 1990 change in the Internal Revenue
Code. It is intended to recover this increased tax. During 1996, 1995 and 1994,
Prudential deducted a total of approximately $24,941,000, $23,620,000 and
$22,131,000, respectively, in taxes attributable to premiums.
(b) A charge of $2 is deducted from each premium payment to cover the cost of
collecting and processing premiums. Thus, if you pay premiums annually, this
charge will be $2 per year. If you pay premiums monthly, the charge will be $24
per year. If you pay premiums more frequently, for example under a payroll
deduction plan with your employer, the charge may be more than $24 per year.
During 1996, 1995 and 1994, Prudential received a total of approximately
$31,475,000, $29,170,000 and $28,372,000, respectively, in processing charges.
DEDUCTIONS FROM PORTFOLIOS
An investment advisory fee is deducted daily from each portfolio at a rate, on
an annualized basis, from 0.35% for the Stock Index Portfolio to 0.75% for the
Global Portfolio. The expenses incurred in conducting the investment operations
of the portfolios (such as custodian fees and preparation and distribution of
annual reports) are paid out of the portfolio's income. These expenses also vary
from portfolio to portfolio.
The total expenses of each portfolio for the year 1996 expressed as a percentage
of the average assets during the year are shown below:
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- --------------------------------------------------------------------------------
| | OTHER | TOTAL
| INVESTMENT | EXPENSES | EXPENSES
PORTFOLIO | ADVISORY | (AFTER EXPENSE | (AFTER EXPENSE
| FEE | REIMBURSEMENT)* | REIMBURSEMENT)*
- ------------------------------|-------------|------------------|----------------
| | |
MONEY MARKET | 0.40% | 0.04% | 0.44%
DIVERSIFIED BOND | 0.40% | 0.05% | 0.45%
GOVERNMENT INCOME | 0.40% | 0.06% | 0.46%
ZERO COUPON BOND 2000 | 0.40% | 0.0%* | 0.40%*
ZERO COUPON BOND 2005 | 0.40% | 0.0%* | 0.40%*
CONSERVATIVE BALANCED | 0.55% | 0.04% | 0.59%
FLEXIBLE MANAGED | 0.60% | 0.04% | 0.64%
HIGH YIELD BOND | 0.55% | 0.08% | 0.63%
STOCK INDEX | 0.35% | 0.05% | 0.40%
EQUITY INCOME | 0.40% | 0.05% | 0.45%
EQUITY | 0.45% | 0.05% | 0.50%
PRUDENTIAL JENNISON | 0.60% | 0.06% | 0.66%
SMALL CAPITALIZATION STOCK | 0.40% | 0.16% | 0.56%
GLOBAL | 0.75% | 0.17% | 0.92%
NATURAL RESOURCES | 0.45% | 0.07% | 0.52%
- --------------------------------------------------------------------------------
* For some of the portfolios, the actual expenses were higher than those
shown in the second and third columns. Prudential currently makes payments
to the following six subaccounts so that the portfolio expenses indirectly
borne by a Contract owner investing in: (1) the Zero Coupon Bond Portfolios
will not exceed the investment management fee; and (2) the High Yield Bond,
Stock Index, Equity Income, and Natural Resources Portfolios will not
exceed the investment advisory fee plus 0.1% of the average daily net
assets of the Portfolio. Without such adjustments the portfolio expenses
indirectly borne by a Contract owner, expressed as a percentage of the
average daily net assets by portfolio, would have been 0.52% for the Zero
Coupon Bond Portfolio 2000 and 0.53% for the Zero Coupon Bond Portfolio
2005 during 1996. No adjustment was necessary for the High Yield Bond
Portfolio, the Stock Index Portfolio, the Equity Income Portfolio or the
Natural Resources Portfolio during 1996. Prudential intends to continue
making these adjustments in the future, although it retains the right to
stop doing so.
MONTHLY DEDUCTIONS FROM CONTRACT FUND
The following monthly charges are deducted proportionately from the dollar
amounts held in each of the chosen investment option[s].
(a) An administrative charge of $3 plus $0.03 per $1,000 per month of face
amount of insurance is deducted each month. Thus, for a Contract with $60,000
face amount, the charge is $3 plus $1.80 for a total of $4.80. The charge is
intended to pay for processing claims, keeping records, and communicating with
Contract owners. The current charge for Contracts with face amounts greater than
$100,000 is lower. The $0.03 per $1,000 portion of the charge is reduced to
$0.01 per $1,000 for that part of the face amount that exceeds $100,000 and will
not exceed $12. During 1996, 1995 and 1994, Prudential received a total of
approximately $61,196,000, $60,000,000 and $56,055,000, respectively, in monthly
administrative charges.
(b) A mortality charge is deducted that is intended to be used to pay death
benefits. When an insured dies, the amount payable to the beneficiary is larger
than the Contract Fund and significantly larger if the insured dies in the early
years of a Contract. The mortality charges collected from all Contract owners
enables Prudential to pay the death benefit for the few insureds who die. The
maximum mortality charge is determined by multiplying the "net amount at risk"
under a Contract (the amount by which the Contract's death benefit exceeds the
Contract Fund) by a rate based upon the insured's current attained age and sex
(except where unisex rates apply) and the anticipated mortality for that class
of persons. The anticipated mortality is based upon mortality tables published
by The National Association of Insurance Commissioners called the
Non-Smoker/Smoker 1980 CSO Tables. Generally, Prudential's current mortality
charge is lower than the maximum for insureds 32 years of age and older. In
addition, for insureds of all ages, if a Contract has a face amount of at least
$100,000 and the insured under the Contract has met strict underwriting
requirements and qualifies for a "select rating" basis for the particular risk
classification, the current mortality charges may be lower still.
11
<PAGE>
Certain Contracts, for example Contracts issued in connection with tax-qualified
pension plans, may be issued on a "guaranteed issue" basis and may have current
mortality charges which are different from those mortality charges for Contracts
which are individually underwritten. These Contracts with different current
mortality charges may be offered to categories of individuals meeting
eligibility guidelines determined by Prudential.
(c) A sales charge, often called a sales load, is deducted to pay part of the
costs Prudential incurs in selling the Contracts, including commissions,
advertising and the printing and distribution of prospectuses and sales
literature. The charge is equal to 0.5% of the "primary annual premium" which is
equal to the Scheduled Premium that would be payable if premiums were being paid
annually, less the two deductions from premiums (taxes attributable to premiums
and the $2 processing charge), and less the $3 part of the monthly deduction
described in (a) above. The deduction is made whether the Contract owner is
paying premiums annually or more frequently. It is lower on Contracts issued on
insureds over 60 years of age. At present this sales charge is made only during
the first five Contract years. However, Prudential reserves the right to make
this charge in all Contract years. To summarize, for most Contracts, this charge
is somewhat less than 6% of the annual Scheduled Premium for each of the first
five Contract years and it may but probably will not continue to be charged
after that.
There is a second sales load, which will be charged only if a Contract lapses or
is surrendered before the end of the 10th Contract year. It is often described
as a contingent deferred sales load ("CDSL") and is described below under
SURRENDER OR WITHDRAWAL CHARGES. During 1996, 1995 and 1994, Prudential received
a total of approximately $104,023,000, $102,068,000 and $96,357,000, in sales
charges.
(d) A charge of $0.01 per $1,000 of face amount of insurance is made to
compensate Prudential for the risk it assumes by guaranteeing that, no matter
how unfavorable investment experience may be, the death benefit will never be
less than the guaranteed minimum death benefit so long as Scheduled Premiums are
paid on or before the due date or during the grace period. This charge and the
administrative charge described in (a) above may be calculated together. During
1996, 1995 and 1994, Prudential received a total of approximately $13,527,000,
$10,377,000 and $9,487,000, respectively, for this risk charge.
(e) If a rider is added to the basic Contract, or if an insured is in a
substandard risk classification (for example, a person in a hazardous
occupation), the annual Scheduled Premium will be increased and the additional
charges will be deducted monthly.
(f) A charge may be deducted to cover federal, state or local taxes (other than
"taxes attributable to premiums" described above) that are imposed upon the
operations of the Account. At present no such taxes are imposed and no charge is
made.
The earnings of the Account are taxed as part of the operations of Prudential.
No charge is being made currently to the Account for Company federal income
taxes. Prudential will review the question of a charge to the Account for
Company federal income taxes periodically. Such a charge may be made in future
years for any federal income taxes that would be attributable to the Contracts.
DAILY DEDUCTION FROM THE CONTRACT FUND
Each day a charge is deducted from the assets of each of the subaccounts and/or
the Real Property Account (the "variable investment options") in an amount
equivalent to an effective annual rate of 0.9%. For Contracts with face amounts
of $100,000 or more, the current charge is 0.6%. This charge is intended to
compensate Prudential for assuming mortality and expense risks under the
Contract. The mortality risk assumed is that insureds may live for shorter
periods of time than Prudential estimated when it determined what mortality
charge to make. The expense risk assumed is that expenses incurred in issuing
and administering the Contract will be greater than Prudential estimated in
fixing its administrative charges. During 1996, 1995 and 1994, Prudential
received a total of approximately $29,065,000, $22,308,000 and $16,959,000,
respectively, in mortality and expense risk charges. This charge is not assessed
against amounts allocated to the fixed-rate option.
SURRENDER OR WITHDRAWAL CHARGES
(a) An additional sales load, the contingent deferred sales load (the CDSL) is
assessed if the Contract lapses or is surrendered during the first ten Contract
years, or if a withdrawal is made under a Form A Contract during that ten year
period. No such charge is applicable to the death benefit, no matter when that
may become payable. Subject to the additional limitations described below, for
Contracts that lapse or are surrendered during the first five Contract years the
charge will be equal to 50% of the first year's primary annual premium. The
primary annual premium is equal to the Scheduled Premium that would be payable
if premiums were being paid annually, less the two deductions from premiums
(taxes attributable to premiums and the $2 processing charge), and less the $3
part of the monthly administrative charge. In the next five Contract years that
percentage is reduced uniformly on a daily basis until it reaches zero on the
tenth Contract anniversary. Thus, for Contracts surrendered at the end of
12
<PAGE>
the sixth year, the maximum deferred sales charge will be 40% of the first
year's primary annual premium, for Contracts surrendered at the end of year
seven, the maximum deferred sales charge will be 30% of the first year's primary
annual premium, and so forth.
The contingent deferred sales load is also subject to a further limit at older
issue ages (approximately above age 67) in order to comply with certain
requirements of state law. Specifically, the contingent deferred sales load for
such insureds is no more than $32.50 per $1,000 of face amount.
The sales load is subject to a further important limitation that may,
particularly for Contracts that lapse or are surrendered within the first five
or six years, result in a lower contingent deferred sales load than that
described above. (This limitation might also, under unusual circumstances, apply
to reduce the monthly sales load deductions described in item (c) under MONTHLY
DEDUCTIONS FROM CONTRACT FUND, page 11.)
The limitation is based on a Guideline Annual Premium ("GAP") that is associated
with every Contract. The GAP is an amount, generally larger than the gross
annual scheduled premium for the Contract, determined actuarially in accordance
with a definition set forth in a regulation of the Securities and Exchange
Commission. The maximum aggregate sales load that Prudential will charge (that
is, the sum of the monthly sales load deduction and the contingent deferred
sales charge) will not be more than 30% of the premiums actually paid until
those premiums total one GAP plus no more than 9% of the next premiums paid
until total premiums are equal to 5 GAPS, plus no more than 6% of all subsequent
premiums. If the sales charges described above would at any time exceed this
maximum amount then the charge, to the extent of any excess, will not be made.
The amount of this charge can be more easily understood by reference to the
following table which shows the sales loads that would be paid by a 35 year old
man under a Form B Contract with $100,000 face amount of insurance, both through
the monthly deductions from the Contract Fund described above and upon the
surrender of the Contract. If the Contract is partially surrendered or the face
amount is decreased during the first ten years, a proportionate amount of the
contingent deferred sales charge will be deducted from the Contract Fund.
- --------------------------------------------------------------------------------
| | | | | CUMULATIVE
| | CUMULATIVE | | | TOTAL SALES
SURRENDER, | CUMULATIVE | SALES LOAD | CONTINGENT | TOTAL | LOAD AS
LAST DAY OF | SCHEDULED | DEDUCTED | DEFERRED | SALES | PERCENTAGE
YEAR NO. | PREMIUMS | FROM | SALES | LOAD | OF SCHEDULED
| PAID | CONTRACT | LOAD | | PREMIUMS
| | FUND | | | PAID
- ------------|--------------|-------------|------------|----------|--------------
| | | | |
1 | $ 894.06 | $ 49.56 | $218.66 | $268.22 | 30.00%
2 | 1,788.12 | 99.12 | 367.64 | 466.76 | 26.10%
3 | 2,682.18 | 148.68 | 398.55 | 547.23 | 20.40%
4 | 3,576.24 | 198.24 | 414.00 | 612.24 | 17.12%
5 | 4,470.30 | 247.80 | 414.00 | 661.80 | 14.80%
6 | 5,364.36 | 247.80 | 331.00 | 578.80 | 10.79%
7 | 6,258.42 | 247.80 | 248.00 | 495.80 | 7.92%
8 | 7,152.48 | 247.80 | 166.00 | 413.80 | 5.79%
9 | 8,046.54 | 247.80 | 83.00 | 330.80 | 4.11%
10 | 8,940.60 | 247.80 | 0.00 | 247.80 | 2.77%
- --------------------------------------------------------------------------------
The percentages shown in the last column will not be appreciably different for
insureds of different ages.
(b) An administrative charge of $5 per $1,000 of face amount of insurance is
deducted upon lapse or surrender to cover the cost of processing applications,
conducting medical examinations, determining insurability and the insured's
rating class, and establishing records. However, this charge is reduced
beginning on the Contract's fifth anniversary and declines daily at a constant
rate until it disappears entirely on the tenth Contract anniversary. If the
Contract is partially surrendered or the face amount is decreased during the
first ten years, a proportionate amount of the charge will be deducted from the
Contract Fund. During 1996, 1995 and 1994, Prudential received a total of
approximately $9,713,000, $9,266,000 and $7,971,000, respectively, from
surrendered or lapsed Contracts.
13
<PAGE>
TRANSACTION CHARGES
There may be transaction charges if certain events take place. Examples are: the
face amount of insurance is decreased or part of the cash surrender value is
withdrawn. Prudential is entitled under the Contract to charge a fee in these
situations, which will generally be $15 or less. Currently, it waives the fee in
some instances. These fees are described at the appropriate place in this
prospectus.
REDUCTION OF CHARGES FOR CONCURRENT SALES TO SEVERAL INDIVIDUALS
Prudential may reduce the sales charges and/or other charges on individual
Contracts sold to members of a class of associated individuals, or to a trustee,
employer or other entity representing such a class, where it is expected that
such multiple sales will result in savings of sales or administrative expenses.
Prudential determines both the eligibility for such reduced charges, as well as
the amount of such reductions, by considering the following factors: (1) the
number of individuals; (2) the total amount of premium payments expected to be
received from these Contracts; (3) the nature of the association between these
individuals, and the expected persistency of the individual Contracts; (4) the
purpose for which the individual Contracts are purchased and whether that
purpose makes it likely that expenses will be reduced; and (5) any other
circumstances which Prudential believes to be relevant in determining whether
reduced sales or administrative expenses may be expected. Some of the reductions
in charges for these sales may be contractually guaranteed; other reductions may
be withdrawn or modified by Prudential on a uniform basis. Prudential's
reductions in charges for these sales will not be unfairly discriminatory to the
interests of any individual Contract owners.
HOW THE CONTRACT FUND CHANGES WITH INVESTMENT EXPERIENCE
As explained above, after the tenth Contract year (and ten years from an
increase in face amount), there will no longer be a surrender charge and, if
there is no Contract loan, the cash surrender value will be equal to the
Contract Fund. This section, therefore, also describes how the cash surrender
value of the Contract will change with investment experience.
On the Contract Date, the Contract Fund value is the initial premium less the
deductions from premiums and the first monthly deductions. See CONTRACT FEES AND
CHARGES, page 10. This amount is placed in the investment options designated by
you. Thereafter the Contract Fund value changes daily, reflecting increases or
decreases in the value of the securities in which the assets of the subaccount
have been invested, the performance of the Real Property Account if that option
has been selected, and interest credited on any amounts allocated to the
fixed-rate option. It is also reduced by the daily asset charge for mortality
and expense risks assessed against the variable investment options. The Contract
Fund value also increases to reflect the receipt of additional premium payments
and is decreased by the monthly deductions.
A Contract's cash surrender value on any date will be the Contract Fund value
reduced by the withdrawal charges, if any, and by any Contract debt. Upon
request, Prudential will tell you the cash surrender value of your Contract. It
is possible, although highly unlikely, that the cash surrender value of a
Contract could decline to zero because of unfavorable investment performance,
even if you continue to pay Scheduled Premiums when due.
The tables on pages T1 through T4 of this prospectus illustrate what the death
benefit and cash surrender values would be for a representative Contract,
assuming uniform hypothetical investment results in the selected portfolio[s],
and also provide information about the aggregate premiums payable under the
Contract. The tables also show, if the level premium option has not been chosen,
the maximum Scheduled Premium that may be payable for the period after the
insured reaches the age of 65 for the illustrated Contract under each of the
assumed investment returns.
14
<PAGE>
HOW A CONTRACT'S DEATH BENEFIT WILL VARY
As noted above, there are two Forms of the Contract, Form A and Form B. The
death benefit under a Form B Contract varies with investment performance while
the death benefit under a Form A Contract does not, unless it must be increased
to satisfy tax requirements.
Under a Form A Contract, the guaranteed minimum death benefit is equal to the
face amount of insurance. (However, should the death benefit become payable
while a Contract loan is outstanding, the debt will be deducted from the death
benefit.) If the Contract is kept in force for several years and if investment
performance is reasonably favorable, the Contract Fund value may grow to the
point where it is necessary to increase the death benefit in order to ensure
that the Contract will satisfy the Internal Revenue Code's definition of life
insurance. Thus, the death benefit under a Form A Contract will always be the
greater of (1) the guaranteed minimum death benefit; and (2) the Contract Fund
divided by the "net single premium" per $1 of death benefit at the insured's
attained age on that date. The latter provision ensures that the Contract will
always have a death benefit large enough to be treated as life insurance for tax
purposes under current law. The net single premium is used only in the
calculation of the death benefit, not for premium payment purposes. The
following is a table of illustrative net single premiums for $1 of death benefit
under Contracts issued on insureds in the preferred rating class.
- --------------------------------------------------------------------------------
| | INCREASE IN INSURANCE
MALE | NET SINGLE | AMOUNT PER $1
ATTAINED AGE | PREMIUM | INCREASE IN CONTRACT FUND
- ----------------------|-----------------------|---------------------------------
5 | .09151 | $10.93
25 | .17000 | $ 5.88
35 | .23700 | $ 4.22
55 | .45209 | $ 2.21
65 | .59468 | $ 1.68
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
| | INCREASE IN INSURANCE
FEMALE | NET SINGLE | AMOUNT PER $1
ATTAINED AGE | PREMIUM | INCREASE IN CONTRACT FUND
- ----------------------|-----------------------|---------------------------------
5 | .07919 | $12.63
25 | .15112 | $ 6.62
35 | .21127 | $ 4.73
55 | .40090 | $ 2.49
65 | .53639 | $ 1.86
- --------------------------------------------------------------------------------
Whenever the death benefit is determined in this way, Prudential reserves the
right to refuse to accept further premium payments, although in practice the
payment of the lesser of 2 years' scheduled premiums or the average of all
premiums paid over the last 5 years will generally be allowed.
Under a Form B Contract, the death benefit will vary with investment experience.
Assuming no withdrawals, the death benefit will be equal to the face amount of
insurance plus the amount (if any) by which the Contract Fund value exceeds the
applicable "Tabular Contract Fund value" for the Contract (subject to an
exception described below under which the death benefit is higher). Each
Contract contains a table that sets forth the Tabular Contract Fund value as of
the end of each of the first 20 years of the Contract. Tabular Contract Fund
values between Contract anniversaries are determined by interpolation. The
Tabular Contract Fund value for each Contract year is an amount that is slightly
less than the Contract Fund value that would result as of the end of such year
if only scheduled premiums were paid, they were paid when due, the selected
investment options earned a net return at a uniform rate of 4% per year, full
mortality charges based upon the 1980 CSO Table were deducted, maximum sales
load and expense charges were deducted, and there was no Contract debt.
Thus, under a Form B Contract with no withdrawals, the death benefit will equal
the face amount if the Contract Fund equals the Tabular Contract Fund value. If,
due to investment results greater than a net return of 4%, or to payment of
greater than scheduled premiums, or to smaller than maximum charges, the
Contract Fund value is a given amount greater than the Tabular Contract Fund
value, the death benefit will be the face amount plus that excess amount. If,
due to investment results less favorable than a net return of 4%, the Contract
Fund value is less than the tabular Contract Fund value, the death benefit will
not fall below the initial face amount stated in the
15
<PAGE>
Contract; however, this unfavorable investment experience must first be offset
by favorable performance or additional payments that bring the Contract Fund up
to the tabular level before favorable investment results or additional payments
will increase the death benefit. Again, the death benefit will reflect a
deduction for the amount of any Contract debt. See CONTRACT LOANS, page 21.
As is the case under a Form A Contract, the Contract Fund of a Form B Contract
could grow to the point where it is necessary to increase the death benefit by a
greater amount in order to ensure that the Contract will satisfy the Internal
Revenue Code's definition of life insurance. Thus, the death benefit under a
Form B Contract will always be the greatest of (1) the face amount plus the
Contract Fund minus the tabular Contract Fund value; (2) the guaranteed minimum
death benefit; and (3) the Contract Fund divided by the net single premium per
$1 of death benefit at the insured's attained age on that date.
You may also increase or decrease the face amount of your Contract, subject to
certain conditions. See INCREASES IN FACE AMOUNT, below and DECREASES IN FACE
AMOUNT, page 17.
INCREASES IN FACE AMOUNT
An owner who wishes to increase the amount of his or her insurance may do so by
increasing the face amount of the Contract (which is also the guaranteed minimum
death benefit), subject to state approval and underwriting requirements
determined by Prudential. An increase in face amount is in many ways similar to
the purchase of a second Contract, but it differs in the following respects: the
minimum permissible increase is $25,000, while the minimum for a new Contract is
$60,000; monthly fees are lower because only a single $3 per month
administrative charge is made rather than two; a combined premium payment
results in deduction of a single $2 per premium processing charge while separate
premium payments for separate Contracts would involve two charges; the monthly
expense charge of $0.03 per $1,000 of face amount may be lower if the increase
is to a face amount greater than $100,000; and the Contract will lapse as a
unit, unlike the case if two separate Contracts are purchased. These differences
aside, the decision to increase face amount is comparable to the purchase of a
second Contract in that it involves a commitment to higher scheduled premiums in
exchange for greater insurance benefits.
You may elect to increase the face amount of your Contract no earlier than the
first anniversary of the Contract. The following conditions must be met: (1) you
must ask for the increase in writing on an appropriate form; (2) the amount of
the increase in face amount must be at least $25,000; (3) the insured must
supply evidence of insurability for the increase satisfactory to Prudential; (4)
if Prudential requests, you must send in the Contract to be suitably endorsed;
(5) the Contract must not be in default on the date the increase takes effect;
(6) you must pay an appropriate premium at the time of the increase; (7)
Prudential has the right to deny more than one increase in a Contract year; and
(8) if Prudential has, between the Contract Date and the date that any requested
increase in face amount will take effect, changed any of the bases on which
benefits and charges are calculated under newly issued Contracts, Prudential has
the right to deny the increase. An increase in face amount resulting in a total
face amount under the Contract of at least $100,000 may, subject to strict
underwriting requirements, render the Contract eligible for a select rating.
Upon an increase in face amount, Prudential will recompute the Contract's
scheduled premiums, contingent deferred sales and administrative charges,
tabular values, and monthly deductions from the Contract Fund. You have a
choice, limited only by applicable state law, as to whether the recomputation
will be made as of the prior or next Contract anniversary. There will be a
payment required on the date of increase; the amount of the payment will depend,
in part, on which Contract anniversary you select for the recomputation.
Prudential will tell you the amount of the required payment. It should also be
noted that an increase in face amount may impact the status of the Contract as a
Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 24.
Therefore, before increasing the face amount, you should consult with your
Prudential representative.
Provided the increase is approved, the new insurance will take effect once the
proper forms, any medical evidence necessary to underwrite the additional
insurance and any amount needed by the company have been received.
Prudential will supply you with pages which show the increased face amount, the
effective date of the increase, and the recomputed items described two
paragraphs above. The pages will also describe how the increase in face amount
affects the various provisions of the Contract, including a statement that, for
the amount of the increase in face amount, the period stated in the
Incontestability and Suicide provisions (see OTHER STANDARD CONTRACT PROVISIONS,
page 26) will run from the effective date of the increase.
For the purpose of determining the sales load that will be charged after the
increase and upon any subsequent lapse or surrender, the Contract is treated as
if there were two separate Contracts, a "base Contract" representing
16
<PAGE>
the Contract before the increase and an "incremental Contract" representing the
increase viewed as a separate Contract. At the time of the increase, a certain
portion of the Contract Fund may be allocated to the incremental Contract as a
prepayment of premiums for purposes of the sales load limit. That portion is
equal to the Guideline Annual Premium ("GAP") of the incremental Contract
divided by the GAP of the entire Contract after the increase. Premium payments
made after the increase are also allocated between the base Contract and the
incremental Contract for purposes of the sales load limit. A portion of each
premium payment after the increase is allocated to the increase based on the GAP
for the incremental Contract divided by the GAP for the entire Contract. A
monthly deduction equal to 0.5% of the primary annual premium for each part of
the Contract (i.e., the base and incremental Contracts, respectively) will be
made until each part of the Contract has been in force for five years, although
Prudential reserves the right to continue to make this deduction thereafter.
Similarly, the amount, if any, of sales charges upon lapse or surrender and the
application of the overall limitation upon sales load, as described in item (a)
under SURRENDER OR WITHDRAWAL CHARGES, page 12, will be determined as explained
in that section as if there were two Contracts rather than one. Moreover, the
contingent deferred administrative charge is also determined as if there were
two separate Contracts. Thus, an owner considering an increase in face amount
should be aware that such an increase will entail charges, including periodic
sales load deductions and contingent deferred sales and administrative charges,
comparable to the purchase of a new Contract.
Each Contract owner who elects to increase the face amount of his or her
Contract will be granted a "free-look" right which will apply only to the
increase in face amount, not the entire Contract. The right is comparable to the
right afforded to a purchaser of a new Contract. See SHORT-TERM CANCELLATION
RIGHT OR "FREE LOOK", page 6. The "free-look" right would have to be exercised
no later than forty-five days after execution of the application for the
increase or, if later, within ten days after either receipt of the Contract as
increased or receipt of the withdrawal right notice by the owner. Upon exercise
of the "free-look" right, you will receive a refund in the amount of the
aggregate premiums paid since the increase was requested and attributable to the
increase, not the base Contract, as determined pursuant to the proportional
premium allocation rule described above. There will be no adjustment for
investment experience. All charges deducted after the increase will be reduced
to what they would have been had no increase been effected. You may transfer the
total amount attributable to the increase in face amount from the subaccounts or
the Real Property Account to the fixed-rate option at any time within two years
after the increase in face amount.
DECREASES IN FACE AMOUNT
You may effect a partial surrender of a Contract (see SURRENDER OF A CONTRACT,
page 18) or a partial withdrawal of excess cash surrender value (see WITHDRAWAL
OF EXCESS CASH SURRENDER VALUE, page 18). You also have the additional option of
decreasing the face amount (which is also the guaranteed minimum death benefit)
of your Contract without withdrawing any such surrender value. Contract owners
who conclude that, because of changed circumstances, the amount of insurance is
greater than needed will thus be able to decrease their amount of insurance
protection, and the monthly deductions for the cost of insurance, without
decreasing their current cash surrender value. The cash surrender value of the
Contract on the date of the decrease will not change, except that an
administrative processing fee of $15 may be deducted from that value (unless
that fee is separately paid at the time the decrease in face amount is
requested). The Contract's Contract Fund value, however, will be reduced by
deduction of a proportionate part of the then applicable contingent deferred
sales and administrative charges, if any. Scheduled premiums for the Contract
will also be proportionately reduced. The Contracts of owners who exercise the
right to reduce face amount will be amended to show the new face amount, tabular
values, scheduled premiums, monthly charges, and, if applicable, the remaining
contingent deferred sales and administrative charges.
The minimum permissible decrease is $10,000. No decrease will be permitted that
causes the face amount of the Contract to drop below the minimum face amount
applicable to the insured's Contract. See REQUIREMENTS FOR ISSUANCE OF A
CONTRACT, page 6. No reduction will be permitted to the extent that it would
cause the Contract to fail to qualify as "life insurance" for purposes of
Section 7702 of the Internal Revenue Code. If the face amount of a Contract in
force on a select rating basis is reduced below $100,000, it is no longer
eligible for the select rating.
It is important to note, however, that if the face amount is decreased at any
time during the first seven Contract years, there is a danger the Contract might
be classified as a Modified Endowment Contract. See TAX TREATMENT OF CONTRACT
BENEFITS, page 24. Before requesting any decreases in face amount, a Contract
owner should consult his or her Prudential representative.
17
<PAGE>
WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
Under certain circumstances, you may withdraw a portion of the Contract's cash
surrender value without surrendering the Contract in whole or in part. The
amount that you may withdraw is limited by the requirement that the Contract
Fund after withdrawal must not be less than the tabular Contract Fund value. (A
Table of Tabular Contract Fund Values is included in the Contract; the values
increase with each year the Contract remains in force.) But because the Contract
Fund may be made up in part by an outstanding Contract loan, there is a further
limitation that the amount withdrawn may not be larger than an amount sufficient
to reduce the cash surrender value to zero. The amount withdrawn must be at
least $2,000 under a Form A Contract (in which the death benefit is generally
equal to the face-amount of insurance) and at least $500 under a Form B Contract
(in which the death benefit varies daily). You may make no more than four such
withdrawals in each Contract year, and there is an administrative processing fee
for each withdrawal equal to the lesser of $15 or 2% of the amount withdrawn. An
amount withdrawn may not be repaid except as a scheduled or unscheduled premium
subject to the applicable charges. Upon request, Prudential will tell you how
much you may withdraw. Withdrawal of part of the cash surrender value may have
tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 24. A temporary
need for funds may also be met by making a loan and you should consult your
Prudential representative about how best to meet your needs.
Under a Form A Contract, the face amount of insurance is reduced by not more
than the amount of the withdrawal. No partial withdrawal will be permitted under
a Form A Contract if it would result in a new face amount of less than the
minimum face amount applicable to the insured's Contract. See REQUIREMENTS FOR
ISSUANCE OF A CONTRACT, page 6. It is important to note, however, that if the
face amount is decreased at any time during the first seven Contract years,
there is a danger that the Contract might be classified as a Modified Endowment
Contract. See TAX TREATMENT OF CONTRACT BENEFITS, page 24. Before making any
withdrawal which causes a decrease in face amount, you should consult with your
Prudential representative. Also, if a withdrawal under a Form A Contract is made
before the end of the tenth year, the Contract Fund may be reduced not only by
the amount withdrawn but also by a proportionate amount of any surrender charges
that would be made if the Contract were surrendered. The proportion is based on
the percentage reduction in face amount. Form A Contract owners who make a
partial withdrawal will be sent replacement Contract pages showing the new face
amount, scheduled premiums, maximum surrender charges, tabular values, and
monthly deductions.
Under a Form B Contract, the cash surrender value and Contract Fund value are
reduced by the amount of the withdrawal, and the death benefit is accordingly
reduced. Neither the face amount of insurance nor the amount of scheduled
premiums will be changed due to a withdrawal of excess cash surrender value
under a Form B Contract. No surrender charges will be assessed upon a withdrawal
under a Form B Contract.
Withdrawal of part of the cash surrender value increases the risk that the
Contract Fund may be insufficient to provide for benefits under the Contract. If
such a withdrawal is followed by unfavorable investment experience, the Contract
may lapse even if scheduled premiums continue to be paid when due. This is
because, for purposes of determining whether a lapse has occurred, Prudential
treats withdrawals as a return of premium.
SURRENDER OF A CONTRACT
You may surrender a Contract in whole or in part for its cash surrender value
while the insured is living. Partial surrender involves splitting the Contract
into two Contracts. One Contract is surrendered for its cash surrender value;
the other is continued in force on the same terms as the original Contract
except that premiums will be based on the new face amount. You will be given a
new Contract document. The cash surrender value and the guaranteed minimum death
benefit of the new Contract will be proportionately reduced based upon the
reduction in the face amount of insurance. The new Contract must have a face
amount of insurance at least equal to the minimum face amount applicable to the
insured. Otherwise a partial surrender is not permitted. See REQUIREMENTS FOR
ISSUANCE OF A CONTRACT, page 6.
To surrender a Contract in whole or in part, you must deliver or mail it,
together with a written request in a form that meets our needs, to a Home
Office. The cash surrender value of a surrendered or partially surrendered
Contract (taking into account the deferred sales and administrative charges, if
any) will be determined as of the end of the valuation period in which such a
request is received in the Home Office. Surrender of all or part of a Contract
may have tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 24.
WHEN PROCEEDS ARE PAID
Prudential will generally pay any death benefit, cash surrender value, loan
proceeds or withdrawal within seven days after receipt at a Home Office of all
the documents required for such a payment. Other than the death
18
<PAGE>
benefit, which is determined as of the date of death, the amount will be
determined as of the end of the valuation period in which the necessary
documents are received at a Home Office. However, Prudential may delay payment
of proceeds from the subaccount[s] and the variable portion of the death benefit
due under the Contract if the sale or valuation of the Account'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.
With respect to the amount of any cash surrender value allocated to the
fixed-rate option, and with respect to a Contract in force as fixed reduced
paid-up insurance, Prudential expects to pay the cash surrender value promptly
upon request. However, Prudential has the right to delay payment of such cash
surrender value for up to six months (or a shorter period if required by
applicable law). Prudential will pay interest of at least 3% a year if it delays
such a payment for thirty days or more (or a shorter period if required by
applicable law).
LIVING NEEDS BENEFIT
Contract applicants may elect to add the LIVING NEEDS BENEFIT(SM) to their
Contracts at issue. The benefit may vary state-by-state. It can generally be
added only to Contracts of $50,000 or more. There is no charge for adding the
benefit to the Contract. However, an administrative charge (not to exceed $150)
will be made at the time the LIVING NEEDS BENEFIT is paid.
Subject to state regulatory approval, the LIVING NEEDS BENEFIT allows you to
elect to receive an accelerated payment of all or part of the Contract's death
benefit, adjusted to reflect current value, at a time when certain special needs
exist. The adjusted death benefit will always be less than the death benefit,
but will generally be greater than the Contract's cash surrender value. One or
both of the following options may be available. A Prudential representative
should be consulted as to whether additional options may be available.
TERMINAL ILLNESS OPTION. This option is available if the insured is diagnosed as
terminally ill with a life expectancy of six months or less. When satisfactory
evidence is provided, Prudential will provide an accelerated payment of the
portion of the death benefit selected by the Contract owner as a LIVING NEEDS
BENEFIT. You may (1) elect to receive the benefit in a single sum or (2) receive
equal monthly payments for six months. If the insured dies before all the
payments have been made, the present value of the remaining payments will be
paid to the beneficiary designated in the LIVING NEEDS BENEFIT claim form in a
single sum.
NURSING HOME OPTION. This option is available after the insured has been
confined to an eligible nursing home for six months or more. When satisfactory
evidence is provided, including certification by a licensed physician, that the
insured is expected to remain in the nursing home until death, Prudential will
provide an accelerated payment of the portion of the death benefit selected by
the Contract owner as a LIVING NEEDS BENEFIT. You may (1) elect to receive the
benefit in a single sum or (2) receive equal monthly payments for a specified
number of years (not more than ten nor less than two), depending upon the age of
the insured. If the insured dies before all of the payments have been made, the
present value of the remaining payments will be paid to the beneficiary
designated in the LIVING NEEDS BENEFIT claim form in a single sum.
All or part of the Contract's death benefit may be accelerated under the LIVING
NEEDS BENEFIT. If the benefit is only partially accelerated, a death benefit of
at least $25,000 must remain under the Contract. Prudential reserves the right
to determine the minimum amount that may be accelerated.
No benefit will be payable if the Contract owner is required to elect it in
order to meet the claims of creditors or to obtain a government benefit.
Prudential can furnish details about the amount of LIVING NEEDS BENEFIT that is
available to an eligible Contract owner under a particular Contract, and the
adjusted premium payments that would be in effect if less than the entire death
benefit is accelerated.
The Contract owner should consider whether adding this settlement option is
appropriate in his or her given situation. Adding the LIVING NEEDS BENEFIT to
the Contract has no adverse consequences; however, electing to use it could.
With the exception of certain business-related policies, the recently enacted
Health Insurance Portability and Accountability Act of 1996 excludes from income
the LIVING NEEDS BENEFIT if the insured is terminally ill or chronically ill as
defined in the tax law (although the exclusion in the latter case may be
limited). Contract owners should consult a qualified tax advisor before electing
to receive this benefit. Receipt of a LIVING NEEDS BENEFIT payment may also
affect a Contract owner's eligibility for certain government benefits or
entitlements.
19
<PAGE>
HYPOTHETICAL ILLUSTRATIONS OF DEATH BENEFITS AND CASH SURRENDER VALUES
The four tables that follow show how the death benefit and cash surrender values
change with the investment experience of the Account. They are "hypothetical"
because they are based, in part, upon several assumptions, each of which is
described below. All four tables assume, first, that a Contract with a face
amount of $100,000 has been bought on or after December 31, 1996 by a 35 year
old man with select rating in a preferred rating class. It is assumed that the
Scheduled Premium of $894.06 is paid on each anniversary date, and that the
deduction for taxes attributable to premiums is 3.25%. The first table assumes
that a Form A Contract has been purchased and the second table assumes that a
Form B Contract has been purchased. Both assume that the current charges will
continue for the indefinite future. For a description of current and maximum
charges, see CONTRACT FEES AND CHARGES, page 10. The third and fourth tables are
based upon the same assumptions except that it is assumed that the maximum
charges permitted by the Contract have been made from the beginning. In effect,
the third and fourth tables represent a kind of "worst case" scenario.
Another assumption is that the Contract Fund has been invested in equal amounts
in each of the fifteen available portfolios of the Series Fund. Finally, there
are four assumptions, shown separately, about the average investment performance
of the portfolios. The first is that there will be a uniform 0% gross rate of
return, that is, that the average value of the Contract Fund will uniformly be
adversely affected by very unfavorable investment performance. The other three
assumptions are that investment performance will be at a uniform gross annual
rate of 4%, 8% and 12%. These, of course, are unrealistic assumptions since
actual returns will fluctuate from year to year. Nevertheless, these assumptions
help show how the Contract values change with investment experience.
The first column in the following tables shows the Contract year. The second
column, to provide context, shows what the aggregate amount would be if the
Scheduled Premiums had been invested in a savings account paying 4% compounded
interest. Of course, if that were done, there would be no life insurance
protection. The next four columns show the death benefit payable in each of the
years shown for the four different assumed investment returns. Note that a gross
return (as well as the net return) is shown at the top of each column. The gross
return represents the combined effect of income and capital appreciation of the
portfolios before any reduction is made for investment advisory fees or other
Series Fund expenses. The net return reflects an average total annual expenses
of the 15 portfolios of 0.53%, and the daily deduction from the Contract Fund of
0.6% per year for the first two tables, which are based on current charges, and
0.9% per year for the two tables that are based upon maximum charges. For
Contracts with face amounts of less than $100,000, the current charge is 0.9%
per year. Thus, assuming maximum charges, gross returns of 0%, 4%, 8% and 12%
are the equivalent of net returns of -1.43%, 2.57%, 6.57% and 10.57%
respectively. The death benefits and cash surrender values shown reflect the
deduction of all expenses and charges both from the Series Fund and under the
Contract.
The amounts shown assume that there is no loan. The cash surrender values shown
for the first ten years reflect the surrender charges that would be deducted if
the Contract were surrendered in those years. For years after the tenth, the
cash surrender values are equal to the Contract Fund value.
Note that under the Form B Contract the death benefit changes to reflect
investment returns, while under the Form A Contract the death benefit increases
only when the cash surrender value becomes quite large. In later policy years,
the cash surrender values under the Form A Contract are slightly larger than
those under the Form B Contract.
If you are considering the purchase of a variable life insurance contract from
another insurance company, you should not rely upon these tables for comparison
purposes. A comparison between two tables, each showing values for a 35 year old
man, may be useful for a 35 year old man but would be inaccurate if made for a
35 year old woman or a 50 year old man. To take a second example, the death
benefit and cash surrender values under a $50,000 Contract cannot be determined
by dividing by two the amount shown in a table for a $100,000 Contract. Your
Prudential representative can provide you with a comparable hypothetical
illustration for a person of your own age, sex, and rating class. You can obtain
an illustration using premium amounts and payment patterns that you wish to
follow. You may use assumed gross returns different than those shown in the
tables, although they may not be higher than 12%.
20
<PAGE>
<TABLE>
ILLUSTRATIONS
-------------
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE SELECT PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT CONTRACTUAL CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (3) (-1.13% NET) (2.87% NET) (6.87% NET) (10.87% NET) (-1.13% NET) (2.87% NET) (6.87% NET) (10.87% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,000 $100,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,000 $100,000 $ 318 $ 399 $ 482 $ 567
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 834 $ 990 $ 1,156 $ 1,331
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $ 1,336 $ 1,593 $ 1,871 $ 2,174
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $ 1,824 $ 2,205 $ 2,630 $ 3,104
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $ 2,552 $ 3,083 $ 3,691 $ 4,388
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $ 3,271 $ 3,978 $ 4,811 $ 5,791
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $ 3,972 $ 4,882 $ 5,984 $ 7,316
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $ 4,657 $ 5,797 $ 7,215 $ 8,978
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $ 5,326 $ 6,723 $ 8,510 $ 10,793
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $ 7,506 $10,607 $ 15,175 $ 21,918
20 $ 27,688 $100,000 $100,000 $100,000 $100,000 $ 9,636 $15,176 $ 24,617 $ 40,822
25 $ 38,723 $100,000 $100,000 $100,000 $138,544 $11,146 $20,003 $ 37,527 $ 72,278
30 (AGE 65) $ 52,149 $100,000 $100,000 $100,000 $206,576 $11,070 $24,194 $ 54,736 $122,847
35 $ 81,307 $100,000 $100,000 $117,351 $305,573 $27,625 $39,895 $ 78,348 $204,013
40 $116,782 $100,000 $100,000 $148,528 $451,827 $41,759 $56,938 $109,452 $332,956
45 $159,942 $100,000 $100,000 $187,430 $670,243 $52,724 $75,959 $149,470 $534,499
(1) IF PREMIUMS ARE PAID MORE FREQUENTLY THAN ANNUALLY, THE INITIAL PAYMENTS WOULD BE $456.85 SEMI-ANNUALLY, $231.52 QUARTERLY OR
$78.55 MONTHLY. THE ULTIMATE PAYMENTS WOULD BE $2,411.37 SEMI-ANNUALLY, $1,218.60 QUARTERLY OR $410.34 MONTHLY. THE DEATH
BENEFITS AND CASH SURRENDER VALUES WOULD BE SLIGHTLY DIFFERENT FOR A CONTRACT WITH MORE FREQUENT PREMIUM PAYMENTS.
(2) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(3) FOR A HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%, THE SECOND SCHEDULED PREMIUM WILL BE $4,726.61. FOR A GROSS RETURN OF 4%, THE
SECOND SCHEDULED PREMIUM WILL BE $3,170.52. FOR A GROSS RETURN OF 8%, THE SECOND SCHEDULED PREMIUM WILL BE $894.06. FOR A GROSS
RETURN OF 12%, THE SECOND SCHEDULED PREMIUM WILL BE $894.06. THE PREMIUMS ACCUMULATED AT 4% INTEREST IN COLUMN 2 ARE THOSE
PAYABLE IF THE GROSS INVESTMENT RETURN IS 4%. FOR AN EXPLANATION OF WHY THE SCHEDULED PREMIUM MAY INCREASE ON THE PREMIUM
CHANGE DATE, SEE PREMIUMS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS 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 NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T1
</TABLE>
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM B -- VARIABLE DEATH BENEFIT
MALE SELECT PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING CURRENT CONTRACTUAL CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (3) (-1.13% NET) (2.87% NET) (6.87% NET) (10.87% NET) (-1.13% NET) (2.87% NET) (6.87% NET) (10.87% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,019 $100,048 $100,076 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,035 $100,118 $100,204 $ 270 $ 351 $ 434 $ 519
3 $ 2,903 $100,000 $100,048 $100,214 $100,389 $ 789 $ 945 $ 1,111 $ 1,286
4 $ 3,948 $100,000 $100,060 $100,339 $100,642 $ 1,310 $ 1,567 $ 1,846 $ 2,149
5 $ 5,036 $100,000 $100,070 $100,496 $100,970 $ 1,833 $ 2,214 $ 2,640 $ 3,114
6 $ 6,167 $100,000 $100,129 $100,737 $101,434 $ 2,573 $ 3,104 $ 3,712 $ 4,409
7 $ 7,344 $100,000 $100,187 $101,020 $101,998 $ 3,296 $ 4,003 $ 4,836 $ 5,814
8 $ 8,568 $100,000 $100,247 $101,347 $102,676 $ 4,002 $ 4,912 $ 6,012 $ 7,341
9 $ 9,840 $100,000 $100,308 $101,723 $103,479 $ 4,692 $ 5,831 $ 7,246 $ 9,002
10 $ 11,164 $100,000 $100,371 $102,151 $104,424 $ 5,363 $ 6,759 $ 8,539 $ 10,812
15 $ 18,618 $100,000 $100,831 $105,351 $112,007 $ 7,576 $10,670 $ 15,190 $ 21,846
20 $ 27,688 $100,000 $102,175 $111,456 $127,320 $ 9,717 $15,239 $ 24,520 $ 40,384
25 $ 38,723 $100,000 $104,723 $121,722 $155,610 $11,225 $19,993 $ 36,992 $ 70,880
30 (AGE 65) $ 52,149 $100,000 $108,891 $137,641 $205,052 $11,147 $23,891 $ 52,641 $120,052
35 $ 83,540 $100,000 $110,622 $142,438 $298,788 $27,683 $40,923 $ 72,739 $199,483
40 $121,732 $100,000 $114,052 $154,103 $441,955 $41,773 $58,879 $ 98,930 $325,681
45 $168,199 $100,000 $119,626 $175,253 $655,745 $52,712 $77,153 $132,780 $522,937
(1) IF PREMIUMS ARE PAID MORE FREQUENTLY THAN ANNUALLY, THE INITIAL PAYMENTS WOULD BE $456.85 SEMI-ANNUALLY, $231.52 QUARTERLY OR
$78.55 MONTHLY. THE ULTIMATE PAYMENTS WOULD BE $2,411.37 SEMI-ANNUALLY, $1,218.60 QUARTERLY OR $410.34 MONTHLY. THE DEATH
BENEFITS AND CASH SURRENDER VALUES WOULD BE SLIGHTLY DIFFERENT FOR A CONTRACT WITH MORE FREQUENT PREMIUM PAYMENTS.
(2) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(3) FOR A HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%, THE SECOND SCHEDULED PREMIUM WILL BE $4,726.61. FOR A GROSS RETURN OF 4%, THE
SECOND SCHEDULED PREMIUM WILL BE $3,567.01. FOR A GROSS RETURN OF 8%, THE SECOND SCHEDULED PREMIUM WILL BE $894.06. FOR A GROSS
RETURN OF 12%, THE SECOND SCHEDULED PREMIUM WILL BE $894.06. THE PREMIUMS ACCUMULATED AT 4% INTEREST IN COLUMN 2 ARE THOSE
PAYABLE IF THE GROSS INVESTMENT RETURN IS 4%. FOR AN EXPLANATION OF WHY THE SCHEDULED PREMIUM MAY INCREASE ON THE PREMIUM
CHANGE DATE, SEE PREMIUMS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS 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 NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T2
</TABLE>
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM A -- FIXED DEATH BENEFIT
MALE SELECT PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING MAXIMUM CONTRACTUAL CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (3) (-1.43% NET) (2.57% NET) (6.57% NET) (10.57% NET) (-1.43% NET) (2.57% NET) (6.57% NET) (10.57% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,000 $100,000 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,000 $100,000 $ 268 $ 346 $ 427 $ 510
3 $ 2,903 $100,000 $100,000 $100,000 $100,000 $ 751 $ 903 $ 1,063 $ 1,233
4 $ 3,948 $100,000 $100,000 $100,000 $100,000 $1,216 $ 1,463 $ 1,732 $ 2,023
5 $ 5,036 $100,000 $100,000 $100,000 $100,000 $1,661 $ 2,025 $ 2,433 $ 2,888
6 $ 6,167 $100,000 $100,000 $100,000 $100,000 $2,290 $ 2,795 $ 3,375 $ 4,040
7 $ 7,344 $100,000 $100,000 $100,000 $100,000 $2,905 $ 3,571 $ 4,358 $ 5,286
8 $ 8,568 $100,000 $100,000 $100,000 $100,000 $3,495 $ 4,344 $ 5,377 $ 6,629
9 $ 9,840 $100,000 $100,000 $100,000 $100,000 $4,062 $ 5,116 $ 6,433 $ 8,078
10 $ 11,164 $100,000 $100,000 $100,000 $100,000 $4,602 $ 5,882 $ 7,528 $ 9,643
15 $ 18,618 $100,000 $100,000 $100,000 $100,000 $5,932 $ 8,643 $ 12,689 $ 18,730
20 $ 27,688 $100,000 $100,000 $100,000 $100,000 $6,213 $10,806 $ 18,869 $ 33,026
25 $ 38,723 $100,000 $100,000 $100,000 $107,232 $4,714 $11,515 $ 25,876 $ 55,943
30 (AGE 65) $ 52,149 $100,000 $100,000 $100,000 $153,756 $ 140 $ 9,234 $ 33,298 $ 91,435
35 $ 90,072 $100,000 $100,000 $100,000 $215,310 $8,222 $21,576 $ 52,155 $143,749
40 $136,211 $100,000 $100,000 $106,198 $299,729 $8,604 $30,367 $ 78,258 $220,874
45 $192,347 $100,000 $100,000 $138,963 $414,863 $ 0 $31,109 $110,819 $330,841
(1) IF PREMIUMS ARE PAID MORE FREQUENTLY THAN ANNUALLY, THE PAYMENTS WOULD BE $456.85 SEMI-ANNUALLY, $231.52 QUARTERLY OR $78.55
MONTHLY. THE DEATH BENEFITS AND CASH SURRENDER VALUES WOULD BE SLIGHTLY DIFFERENT FOR A CONTRACT WITH MORE FREQUENT PREMIUM
PAYMENTS.
(2) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(3) FOR A HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%, THE PREMIUM AFTER AGE 65 WILL BE $4,726.61; FOR A GROSS RETURN OF 4% THE
PREMIUM AFTER AGE 65 WILL BE $4,726.61; FOR A GROSS RETURN OF 8% THE PREMIUM AFTER AGE 65 WILL BE $2,931.92; FOR A GROSS RETURN
OF 12% THE PREMIUM AFTER AGE 65 WILL BE $894.06. THE PREMIUMS ACCUMULATED AT 4% INTEREST IN COLUMN 2 ARE THOSE PAYABLE IF THE
GROSS INVESTMENT RETURN IS 4%. FOR AN EXPLANATION OF WHY THE SCHEDULED PREMIUM MAY INCREASE ON THE PREMIUM CHANGE DATE, SEE
PREMIUMS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS 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 NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T3
</TABLE>
<PAGE>
<TABLE>
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACT
FORM B -- VARIABLE DEATH BENEFIT
MALE SELECT PREFERRED ISSUE AGE 35
$100,000 GUARANTEED DEATH BENEFIT
$894.06 MINIMUM INITIAL SCHEDULED PREMIUM (1) (3)
USING MAXIMUM CONTRACTUAL CHARGES
<CAPTION>
DEATH BENEFIT (2) CASH SURRENDER VALUE (2)
---------------------------------------------------- ----------------------------------------------------
ASSUMING HYPOTHETICAL GROSS (AND NET) ASSUMING HYPOTHETICAL GROSS (AND NET)
PREMIUMS ANNUAL INVESTMENT RETURN OF ANNUAL INVESTMENT RETURN OF
END OF ACCUMULATED ---------------------------------------------------- ----------------------------------------------------
POLICY AT 4% INTEREST 0% GROSS 4% GROSS 8% GROSS 12% GROSS 0% GROSS 4% GROSS 8% GROSS 12% GROSS
YEAR PER YEAR (3) (-1.43% NET) (2.57% NET) (6.57% NET) (10.57% NET) (-1.43% NET) (2.57% NET) (6.57% NET) (10.57% NET)
------ -------------- ------------ ----------- ----------- ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 930 $100,000 $100,000 $100,020 $100,048 $ 0 $ 0 $ 0 $ 0
2 $ 1,897 $100,000 $100,000 $100,056 $100,139 $ 212 $ 291 $ 371 $ 454
3 $ 2,903 $100,000 $100,000 $100,109 $100,278 $ 695 $ 846 $ 1,006 $ 1,175
4 $ 3,948 $100,000 $100,000 $100,181 $100,472 $1,175 $ 1,421 $ 1,688 $ 1,979
5 $ 5,036 $100,000 $100,000 $100,275 $100,728 $1,650 $ 2,014 $ 2,419 $ 2,872
6 $ 6,167 $100,000 $100,000 $100,391 $101,051 $2,287 $ 2,789 $ 3,366 $ 4,026
7 $ 7,344 $100,000 $100,000 $100,530 $101,451 $2,902 $ 3,565 $ 4,346 $ 5,267
8 $ 8,568 $100,000 $100,000 $100,696 $101,936 $3,492 $ 4,337 $ 5,361 $ 6,601
9 $ 9,840 $100,000 $100,000 $100,889 $102,516 $4,059 $ 5,108 $ 6,412 $ 8,039
10 $ 11,164 $100,000 $100,000 $101,113 $103,200 $4,599 $ 5,873 $ 7,501 $ 9,588
15 $ 18,618 $100,000 $100,000 $102,757 $108,642 $5,930 $ 8,633 $ 12,596 $ 18,481
20 $ 27,688 $100,000 $100,000 $105,506 $118,987 $6,210 $10,794 $ 18,570 $ 32,051
25 $ 38,723 $100,000 $100,000 $109,698 $137,216 $4,711 $11,501 $ 24,968 $ 52,486
30 (AGE 65) $ 52,149 $100,000 $100,000 $115,644 $167,844 $ 138 $ 9,216 $ 30,644 $ 82,844
35 $ 90,072 $100,000 $100,000 $120,474 $198,710 $8,219 $21,553 $ 50,775 $129,011
40 $136,211 $100,000 $100,000 $129,498 $271,193 $8,601 $30,335 $ 74,325 $199,845
45 $192,347 $100,000 $100,000 $144,230 $377,527 $ 0 $31,055 $101,757 $301,067
(1) IF PREMIUMS ARE PAID MORE FREQUENTLY THAN ANNUALLY, THE PAYMENTS WOULD BE $456.85 SEMI-ANNUALLY, $231.52 QUARTERLY OR $78.55
MONTHLY. THE DEATH BENEFITS AND CASH SURRENDER VALUES WOULD BE SLIGHTLY DIFFERENT FOR A CONTRACT WITH MORE FREQUENT PREMIUM
PAYMENTS.
(2) ASSUMES NO CONTRACT LOAN HAS BEEN MADE.
(3) FOR A HYPOTHETICAL GROSS INVESTMENT RETURN OF 0%, THE PREMIUM AFTER AGE 65 WILL BE $4,726.61; FOR A GROSS RETURN OF 4% THE
PREMIUM AFTER AGE 65 WILL BE $4,726.61; FOR A GROSS RETURN OF 8% THE PREMIUM AFTER AGE 65 WILL BE $3,893.61; FOR A GROSS RETURN
OF 12% THE PREMIUM AFTER AGE 65 WILL BE $1,114.09. THE PREMIUMS ACCUMULATED AT 4% INTEREST IN COLUMN 2 ARE THOSE PAYABLE IF THE
GROSS INVESTMENT RETURN IS 4%. FOR AN EXPLANATION OF WHY THE SCHEDULED PREMIUM MAY INCREASE ON THE PREMIUM CHANGE DATE, SEE
PREMIUMS.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS 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 NUMBER OF FACTORS INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING INTEREST RATES, AND RATES
OF INFLATION. THE DEATH BENEFIT AND CASH SURRENDER VALUE FOR A CONTRACT WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF
RETURN AVERAGED 0%, 4%, 8%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL CONTRACT
YEARS. NO REPRESENTATIONS CAN BE MADE BY PRUDENTIAL OR THE SERIES FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
T4
</TABLE>
<PAGE>
CONTRACT LOANS
A Contract owner may borrow from Prudential up to the "loan value" of the
Contract, using the Contract as the only security for the loan. The loan value
is equal to (1) 90% of an amount equal to the portion of the Contract Fund value
attributable to the variable investment options and to any prior loan[s]
supported by the variable investment options, minus the portion of any charges
attributable to variable investment options that would be payable upon an
immediate surrender; plus (2) 100% of an amount equal to the portion of the
Contract Fund value attributable to the fixed-rate option and to any prior
loan[s] supported by the fixed-rate option, minus the portion of any charges
attributable to the fixed-rate option that would be payable upon an immediate
surrender. The minimum amount that may be borrowed at any one time is $200
unless the proceeds are used to pay premiums on the Contract.
If you request a loan you may choose one of two interest rates. You may elect to
have interest charges accrued daily at a fixed effective annual rate of 5.5%.
Alternatively, you may elect a variable interest rate that changes from time to
time. You may switch from the fixed to variable interest loan provision, or
vice-versa, with Prudential's consent.
If you elect the variable loan interest rate provision, interest charged on any
loan will accrue daily at an annual rate Prudential determines at the start of
each Contract year (instead of at the fixed 5.5% rate). This interest rate will
not exceed the greatest of (1) the "Published Monthly Average" for the calendar
month ending two months before the calendar month of the Contract anniversary;
(2) 5%; or (3) the rate permitted by law in the state of issue of the Contract.
The "Published Monthly Average" means Moody's Corporate Bond Yield Average --
Monthly Average Corporates, as published by Moody's Investors Service, Inc. or
any successor to that service, or if that average is no longer published, a
substantially similar average established by the insurance regulator where the
Contract is issued. For example, the Published Monthly Average in 1996 ranged
from 7.10% to 8.00%.
Interest payments on any loan are due at the end of each Contract year. If
interest is not paid when due, it is added to the principal amount of the loan.
The term "Contract debt" means the amount of all outstanding loans plus any
interest accrued but not yet due. If at any time the Contract debt exceeds what
the cash surrender value would be if there were no Contract debt, Prudential
will notify you of its intent to terminate the Contract in 61 days, within which
time you may repay all or enough of the loan to reduce it to below the cash
surrender value and thus keep the Contract in force. If you fail to keep the
Contract in force, the amount of unpaid Contract debt will be treated as a
distribution which may be taxable. See LAPSE AND REINSTATEMENT, page 22, and TAX
TREATMENT OF CONTRACT BENEFITS - PRE-DEATH DISTRIBUTIONS, page 24.
When a loan is made, an amount equal to the loan proceeds (the "loan amount")
will be transferred out of the subaccounts and the Real Property Account
(collectively, the "variable options"), and/or the fixed-rate option to
Prudential's general account. The investment options will normally be reduced
proportionally based on their balances at the time the loan is made. The loan
amount is treated as part of the Contract Fund. While a fixed-rate (5.5%) loan
is outstanding, the loan amount will be credited with the daily equivalent of an
annual return of 4% rather than with the actual rate of return of the variable
options or the fixed-rate option. While a loan made pursuant to the variable
loan interest rate provision is outstanding, the loan amount will be credited
with the daily equivalent of a rate that is 1% less than the loan interest rate
for the Contract year. If a loan remains outstanding at a time Prudential fixes
a new rate, the new interest rate will apply. When the loan is repaid, the
repayment is made to the investment options. The loan repayment is first divided
between the variable options as a group and the fixed-rate option in the same
proportions used for the transfer at the time the loan was made. The portion of
the loan repayment allocated to the variable options as a group is divided among
those options proportionately based on their balances at the time of loan
repayment. The portion of the loan repayment allocated to the fixed-rate option
will be credited with the lesser of the current rate applicable to new premium
payments and the current rate applicable to the portion of the fixed-rate option
from which the loan was made.
Choosing the variable rate option may mean a higher outlay of cash when interest
payments are made or when the loan is repaid, but it may also result in a
greater increase in the Contract Fund value.
A loan will not affect the amount of the premiums due. Should the death benefit
become payable while a loan is outstanding, or should the Contract be
surrendered, any Contract debt will be deducted from the death benefit or the
cash surrender value.
A loan will have an effect on a Contract's cash surrender value and may have an
effect on the death benefit, even if the loan is fully repaid, because the
investment results of the selected investment options will apply only to the
amount remaining invested under those options. The longer the loan is
outstanding, the greater the effect is likely to be. The effect could be
favorable or unfavorable. If investment results are greater than the rate being
credited
21
<PAGE>
on the loan balance while the loan is outstanding, values under the Contract
will not increase as rapidly as they would have if no loan had been made. If
investment results are below that rate, Contract values will be higher than they
would have been had no loan been made. A loan that is repaid will not have any
effect upon the guaranteed minimum death benefit.
Consider, for example, a Contract issued on a 35 year old male, as illustrated
in the table on page T1, with an 8% gross investment return. Assume a $2,500
fixed-rate (5.5%) loan was made under this Contract at the end of Contract year
eight and repaid at the end of Contract year ten and loan interest was paid when
due. Upon repayment, the cash surrender value would be $8,363.61. This amount is
lower than the cash surrender value shown on that page for the end of Contract
year ten because the loan amount was credited with the 4% assumed rate of return
rather than the 6.87% net return for the designated subaccount[s] resulting from
the 8% gross return in the underlying Series Fund. Loans from Modified Endowment
Contracts may be treated for tax purposes as distributions of income. See TAX
TREATMENT OF CONTRACT BENEFITS, page 24.
LAPSE AND REINSTATEMENT
As has already been explained, if Scheduled Premiums are paid on or before each
due date, or within the grace period after each due date, and there are no
withdrawals, a Contract will remain in force even if the investment results of
that Contract's variable investment option[s] have been so unfavorable that the
Contract Fund has decreased to zero or less.
In addition, even if a Scheduled Premium is not paid, the Contract will remain
in force as long as the Contract Fund on any Monthly Date is equal to or greater
than the Tabular Contract Fund value on the following Monthly Date. (A Table of
Tabular Contract Fund Values is included in the Contract; the values increase
with each year the Contract remains in force.) This could occur because of such
factors as favorable investment experience, deduction of current rather than
maximum charges, or the previous payment of greater than Scheduled Premiums.
However, if a Scheduled Premium is not paid, and the Contract Fund is
insufficient to keep the Contract in force, the Contract will go into default.
Should this happen, Prudential will send the Contract owner a notice of default
setting forth the payment necessary to keep the Contract in force on a premium
paying basis. This payment must be received at the Home Office within the
sixty-one day grace period after the notice of default is mailed or the Contract
will lapse. A Contract that lapses with an outstanding Contract loan may have
tax consequences. See TAX TREATMENT OF CONTRACT BENEFITS, page 24.
Neither transfers nor reallocations of premium payments may be made if a
Contract is in default.
A Contract that has lapsed may be reinstated within five years after the date of
default unless the Contract has been surrendered for its cash surrender value.
To reinstate a lapsed Contract, Prudential requires renewed evidence of
insurability, and submission of certain payments due under the Contract.
If your Contract does lapse, it will still provide some benefits. You can
receive the cash surrender value by making a request of Prudential prior to the
end of the sixty-one day grace period. You may also choose one of the three
forms of insurance described below for which no further premiums are payable.
FIXED EXTENDED TERM INSURANCE. The amount of insurance that would have been paid
on the date of default will continue for a stated period of time. You will be
told in writing how long that will be. The insurance amount will not change.
There will be a diminishing cash surrender value but no loan value. Extended
term insurance is not available to insureds in high risk classifications or
under Contracts issued in connection with tax-qualified pension plans.
FIXED REDUCED PAID-UP INSURANCE. This insurance continues for the lifetime of
the insured but at an insurance amount that is lower than that provided by fixed
extended term insurance. It will increase in amount only if dividends are paid
and it will decrease only if a Contract loan is taken. You will be told, if you
ask, what the amount of the insurance will be. Fixed paid-up insurance has a
cash surrender value and a loan value both of which will gradually increase in
value. It is possible for this Contract to be classified as a Modified Endowment
Contract if this option is exercised during the first seven Contract years. See
TAX TREATMENT OF CONTRACT BENEFITS, page 24.
VARIABLE REDUCED PAID-UP INSURANCE. This is similar to fixed paid-up insurance
and will initially be in the same amount. The Contract Fund will continue to
vary to reflect the experience of the selected investment options. There will be
a new guaranteed minimum death benefit. Loans will be available subject to the
same rules that apply to premium-paying Contracts.
22
<PAGE>
Variable paid-up insurance is not available to insureds in high risk rating
classes or if the new guaranteed amount is less than $5,000. It is possible for
this Contract to be classified as a Modified Endowment Contract if this option
is exercised during the first seven Contract years. See TAX TREATMENT OF
CONTRACT BENEFITS, page 24.
WHAT HAPPENS IF NO REQUEST IS MADE? Except in the two situations described
below, if no request is made the "automatic option" will be fixed extended term
insurance. If that is not available to the insured, then fixed reduced paid-up
insurance will be provided. However, if variable reduced paid-up insurance is
available and the amount is at least as great as the amount of fixed extended
term insurance, then the automatic option will be variable reduced paid-up
insurance. This could occur when there is a Contract debt outstanding when the
Contract lapses.
VOTING RIGHTS
As stated above, all of the assets held in the subaccounts of the Account will
be invested in shares of the corresponding portfolios of the Series Fund.
Prudential is the legal owner of those shares and as such has the right to vote
on any matter voted on at Series Fund shareholders meetings. However, Prudential
will vote the shares of the Series Fund at any regular and special shareholders
meetings it is required to hold in accordance with voting instructions received
from Contract owners. The Series Fund will not hold annual shareholders meetings
when not required to do so under Maryland law or the Investment Company Act of
1940. Series Fund shares for which no timely instructions from Contract owners
are received, and any shares indirectly owned by Prudential, will be voted in
the same proportion as shares in the respective portfolios for which
instructions are received.
Matters on which Contract owners may give voting instructions include the
following: (1) election of the Board of Directors of the Series Fund; (2)
ratification of the independent accountant of the Series Fund; (3) approval of
the investment advisory agreement for a portfolio of the Series Fund
corresponding to the Contract owner's selected subaccount[s]; (4) any change in
the fundamental investment policy of a portfolio corresponding to the Contract
owner's selected subaccount[s]; and (5) any other matter requiring a vote of the
shareholders of the Series Fund. With respect to approval of the investment
advisory agreement or any change in a portfolio's fundamental investment policy,
Contract owners participating in such portfolios will vote separately on the
matter.
The number of shares in a portfolio for which you may give instructions is
determined by dividing the portion of your Contract Fund attributable to the
portfolio, by the value of one share of the portfolio. The number of votes for
which each Contract owner may give Prudential instructions will be determined as
of the record date chosen by the Board of Directors of the Series Fund.
Prudential will furnish Contract owners with proper forms and proxies to enable
them to give these instructions. Prudential reserves the right to modify the
manner in which the weight to be given voting instructions is calculated where
such a change is necessary to comply with current federal regulations.
Prudential may, if required by state insurance regulations, disregard voting
instructions if such instructions would require shares to be voted so as to
cause a change in the sub-classification or investment objectives of one or more
of the Series Fund's portfolios, or to approve or disapprove an investment
advisory contract for the Series Fund. In addition, Prudential itself may
disregard voting instructions that would require changes in the investment
policy or investment advisor of one or more of the Series Fund's portfolios,
provided that Prudential reasonably disapproves such changes in accordance with
applicable federal regulations. If Prudential does disregard voting
instructions, it will advise Contract owners of that action and its reasons for
such action in the next annual or semi-annual report to Contract owners.
Contract owners also share with the owners of all Prudential Contracts and
policies the right to vote in elections for members of the Board of Directors of
Prudential.
SUBSTITUTION OF SERIES FUND SHARES
Although Prudential believes it to be unlikely, it is possible that in the
judgment of its management, one or more of the portfolios of the Series Fund may
become unsuitable for investment by Contract owners because of investment policy
changes, tax law changes, or the unavailability of shares for investment. In
that event, Prudential may seek to substitute the shares of another portfolio or
of an entirely different mutual fund. Before this can be done, the approval of
the SEC, and possibly one or more state insurance departments, may be required.
Contract owners will be notified of such substitution.
REPORTS TO CONTRACT OWNERS
Once each Contract year (except where the Contract is in force as fixed extended
term insurance or fixed reduced paid-up insurance), you will be sent a statement
that provides certain information pertinent to your own Contract. These
statements show all transactions during the year that affected the value of your
Contract Fund, including
23
<PAGE>
monthly changes attributable to investment experience. That statement will also
show the current death benefit, cash surrender value, and loan values of your
Contract. On request, you will be sent a current statement in a form similar to
that of the annual statement described above, but Prudential may limit the
number of such requests or impose a reasonable charge if such requests are made
too frequently.
You will also receive, usually at the end of February, an annual report of the
operations of the Series Fund. That report will list the investments held in
each portfolio and include audited financial statements for the Series Fund. A
semi-annual report with similar unaudited information will be sent to you,
usually at the end of August.
TAX TREATMENT OF CONTRACT BENEFITS
Each prospective purchaser is urged to consult a qualified tax advisor. The
following discussion is not intended as tax advice, and it is not a complete
statement of what the effect of federal income taxes will be under all
circumstances. Rather, it provides information about how Prudential believes the
tax laws apply in the most commonly occurring circumstances. There is no
guarantee, however, that the current federal income tax laws and regulations or
interpretations will not change.
TREATMENT AS LIFE INSURANCE. The Contract will be treated as "life insurance" as
long as it satisfies certain definitional tests set forth in Section 7702 of the
Internal Revenue Code (the "Code") and as long as the underlying investments for
the Contract satisfy diversification requirements set forth in Treasury
Regulations issued pursuant to Section 817(h) of the Code.
For further detail on diversification requirements, see DIVIDENDS,
DISTRIBUTIONS, AND TAXES in the attached prospectus for the Series Fund.
Prudential believes that it has taken adequate steps to cause the Contract to be
treated as life insurance for tax purposes. This means that (1) except as noted
below, the Contract owner should not be taxed on any part of the Contract Fund,
including additions attributable to interest, dividends or appreciation until
amounts are distributed under the Contract; and (2) the death benefit should be
excludible from the gross income of the beneficiary under Section 101(a) of the
Code.
However, Section 7702 of the Code, which defines life insurance for tax
purposes, gives the Secretary of the Treasury authority to prescribe regulations
to carry out the purposes of the Section. In this regard, proposed regulations
governing mortality charges were issued in 1991 and proposed regulations
relating to the definition of life insurance were issued in 1992. None of these
proposed regulations has yet been finalized. Additional regulations under
Section 7702 may also be promulgated in the future. Moreover, in connection with
the issuance of temporary regulations under Section 817(h), the Treasury
Department announced that such regulations do not provide guidance concerning
the extent to which Contract owners may direct their investments to particular
divisions of a separate account. Such guidance will be included in regulations
or rulings under Section 817(d) relating to the definition of a variable
contract.
Prudential intends to comply with final regulations issued under Sections 7702
and 817. Therefore, it reserves the right to make such changes as it deems
necessary to assure that the Contract continues to qualify as life insurance for
tax purposes. Any such changes will apply uniformly to affected Contract owners
and will be made only after advance written notice to affected Contract owners.
PRE-DEATH DISTRIBUTIONS. The taxation of pre-death distributions depends on
whether the Contract is classified as a Modified Endowment Contract. The
following discussion first deals with distributions under Contracts not so
classified, and then with Modified Endowment Contracts.
1. A surrender or lapse of the Contract may have tax consequences. Upon
surrender, the owner will not be taxed on the cash surrender value except
for the amount, if any, that exceeds the gross premiums paid less the
untaxed portion of any prior withdrawals. The amount of any unpaid Contract
debt will, upon surrender or lapse, be added to the cash surrender value
and treated, for this purpose, as if it had been received. The tax
consequences of a surrender may differ if the proceeds are received under
any income payment settlement option.
A withdrawal generally is not taxable unless it exceeds total premiums paid
to the date of withdrawal less the untaxed portion of any prior
withdrawals. However, under certain limited circumstances, in the first 15
Contract years all or a portion of a withdrawal may be taxable if the
Contract Fund exceeds the total premiums paid less the untaxed portions of
any prior withdrawals, even if total withdrawals do not exceed total
premiums paid to date.
24
<PAGE>
Extra premiums for optional benefits and riders generally do not count in
computing the gross premiums paid, which in turn determines the extent to
which a withdrawal might be taxed.
Loans received under the Contract will ordinarily be treated as
indebtedness of the owner and will not be considered to be distributions
subject to tax.
2. Some of the above rules are changed if the Contract is classified as a
Modified Endowment Contract under Section 7702A of the Code. It is possible
for the Contract to be classified as a Modified Endowment Contract under at
least two circumstances: premiums substantially in excess of scheduled
premiums are paid; or a decrease in the face amount of insurance is made
(or a rider removed) during the first 7 Contract years. Moreover, the
addition of a rider or the increase in the face amount of insurance after
the Contract Date may have an impact on the Contract's status as a Modified
Endowment Contract. Contract owners contemplating any of these steps should
first consult a qualified tax advisor and their Prudential representative.
If the Contract is classified as a Modified Endowment Contract, then
pre-death distributions, including loans and withdrawals, are includible in
income to the extent that the Contract Fund prior to surrender charges
exceeds the gross premiums paid for the Contract increased by the amount of
any loans previously includible in income and reduced by any untaxed
amounts previously received other than the amount of any loans excludible
from income. These rules may also apply to pre-death distributions,
including loans, made during the 2 year period prior to the Contract
becoming a Modified Endowment Contract.
In addition, pre-death distributions from such Contracts (including full
surrenders) will be subject to a penalty of 10 per cent of the amount
includible in income unless the amount is distributed on or after age
59 1/2, on account of the taxpayer's disability or as a life annuity. It
is presently unclear how the penalty tax provisions apply to Contracts
owned by nonnatural persons such as corporations.
Under certain circumstances, Modified Endowment Contracts issued during any
calendar year will be treated as a single contract for purposes of applying
the above rules.
WITHHOLDING. The taxable portion of any amounts received under the Contract will
be subject to withholding to meet federal income tax obligations if the Contract
owner fails to elect that no taxes be withheld or in certain other
circumstances. Contract owners who do not provide a social security number or
other taxpayer identification number will not be permitted to elect out of
withholding. All recipients of such amounts may be subject to penalties under
the estimated tax payment rules if withholding and estimated tax payments are
not sufficient.
OTHER TAX CONSIDERATIONS. Transfer of the Contract to a new owner or assignment
of the Contract may have tax consequences depending on the circumstances. In the
case of a transfer of the Contract for a valuable consideration, the death
benefit may be subject to federal income taxes under Section 101(a)(2) of the
Code. In addition, a transfer of the Contract to or the designation of a
beneficiary who is either 37 1/2 years younger than the Contract owner or a
grandchild of the Contract owner may have Generation Skipping Transfer tax
consequences under Section 2601 of the Code.
In certain circumstances, deductions for interest paid or accrued on Contract
debt or on other loans that are incurred or continued to purchase or carry the
Contract may be denied under Section 163 of the Code as personal interest or
under Section 264 of the Code. Contract owners should consult a tax advisor
regarding the application of these provisions to their circumstances.
Business-owned life insurance is subject to additional rules. Section 264(a)(1)
of the Code generally precludes business Contract owners from deducting premium
payments. The recently enacted Health Insurance Portability and Accountability
Act of 1996 generally disallows tax deductions for interest on Contract debt on
a business- owned insurance policy effective (with certain transitional rules)
for interest paid or accrued after October 13, 1995. An exception permits the
deduction of interest on policy loans on Contracts for up to 20 key persons. The
interest deduction for Contract debt on such loans is limited to a prescribed
interest rate and a maximum aggregate loan amount of $50,000 per key insured
person. The Code also imposes an indirect tax upon additions to the Contract
Fund or the receipt of death benefits under business-owned life insurance
policies under certain circumstances by way of the corporate alternative minimum
tax.
The individual situation of each Contract owner or beneficiary will determine
the federal estate taxes and the state and local estate, inheritance and other
taxes due if the owner or insured dies.
25
<PAGE>
TAX-QUALIFIED PENSION PLANS
The Contracts may be acquired in connection with the funding of retirement plans
satisfying the qualification requirements of Section 401 of the Internal Revenue
Code. Such Contracts may be issued with a minimum face amount of $10,000, and
increases and decreases in face amount may be effected in minimum increments of
$10,000. The monthly charge for anticipated mortality costs and the scheduled
premiums under such Contracts will be the same for male and female insureds of a
particular age and underwriting classification. Illustrations reflecting such
premiums and charges will be given to purchasers of Contracts issued in
connection with qualified plans. Only certain of the riders normally available
with the Contracts are available to Contracts issued in connection with
qualified plans. Moreover, fixed reduced paid-up insurance and payment of the
cash surrender value are the only options on lapse available to Contracts issued
in connection with qualified plans. See LAPSE AND REINSTATEMENT, page 22.
Finally, Contracts issued in connection with qualified plans may not invest in
the Real Property Account.
Prior to purchase of a Contract in connection with a qualified plan, the
applicable tax rules relating to such plans and life insurance thereunder should
be examined in consultation with a qualified tax advisor.
RIDERS
Contract owners may be able to obtain additional fixed benefits which may
increase the Scheduled Premium. If they do cause an increase in the Scheduled
Premium, they will be charged for by making monthly deductions from the Contract
Fund. These optional insurance benefits will be described in what is known as a
"rider" to the Contract. One rider pays an additional amount if the insured dies
in an accident. Another waives certain premiums if the insured is disabled
within the meaning of the provision (or, in the case of a Contract issued on an
insured under the age of 15, if the applicant dies or becomes disabled within
the meaning of the provision). Others pay an additional amount if the insured
dies within a stated number of years after issue; similar benefits may be
available if the insured's spouse or child should die. The amounts of these
benefits are fully guaranteed at issue; they do not depend on the performance of
the Account, although they will no longer be available if the Contract should
lapse. Certain restrictions may apply; they are clearly described in the
applicable rider.
Under other riders, which provide a fixed amount of term insurance in exchange
for increasing total scheduled annual premiums, the amount payable upon death of
the insured may be substantially increased for a given total initial annual
premium. The rider may be appropriate for Contract owners who reasonably expect
their incomes to increase regularly so that they will be able to afford the
increasing scheduled annual premiums or who may be willing to rely upon their
future Contract Fund values to prevent the Contract from lapsing in later years.
Any Prudential representative authorized to sell the Contract can explain these
extra benefits further. Samples of the provisions are available from Prudential
upon written request.
PARTICIPATION IN DIVISIBLE SURPLUS
The Contract is eligible to be credited part of Prudential's divisible surplus
attributable to the Contracts, as determined by Prudential's Board of Directors.
That determination is made, with respect to the insurance contracts issued by
Prudential, every year. However, Prudential does not expect to credit any
dividends upon these Contracts because favorable investment performance will be
reflected in Contract values and because Prudential intends, if experience
indicates that current charges will be greater than needed to cover expenses, to
reduce those charges further so that there will be no source of distributable
surplus attributable to these Contracts.
OTHER STANDARD CONTRACT PROVISIONS
BENEFICIARY. The beneficiary is designated and named in the application by the
Contract owner. Thereafter, the owner may change the beneficiary, provided it is
in accordance with the terms of the Contract. Should the insured die with no
surviving beneficiary, the insured's estate will become the beneficiary.
INCONTESTABILITY. After the Contract has been in force during the insured's
lifetime for 2 years from the Contract Date or, with respect to any change in
the Contract that requires Prudential's approval and could increase its
liability, after the change has been in effect during the insured's lifetime for
2 years from the effective date of the change, Prudential will not contest its
liability under the Contract in accordance with its terms.
MISSTATEMENT OF AGE OR SEX. If the insured's stated age or sex (except where
unisex rates apply) or both are incorrect in the Contract, Prudential will
adjust the death benefits payable, as required by law, to reflect the correct
age and sex. Any death benefit will be based on what the most recent charge for
mortality would have provided at the correct age and sex.
26
<PAGE>
SUICIDE EXCLUSION. Generally, if the insured, whether sane or insane, dies by
suicide within 2 years from the Contract Date, Prudential will pay no more under
the Contract than the sum of the premiums paid.
If the insured, whether sane or insane, dies by suicide within 2 years from the
effective date of an increase in the face amount of insurance, Prudential will
pay, with respect to the amount of the increase, no more than the sum of the
scheduled premiums attributable to the increase.
ASSIGNMENT. This Contract may not be assigned if such assignment would violate
any federal, state, or local law or regulation. Generally, the Contract may not
be assigned to an employee benefit plan or program without Prudential's consent.
Prudential assumes no responsibility for the validity or sufficiency of any
assignment, and it will not be obligated to comply with any assignment unless it
has received a copy at one of its Home Offices.
SETTLEMENT OPTIONS. The Contract grants to most owners, or to the beneficiary, a
variety of optional ways of receiving Contract proceeds, other than in a lump
sum. Any Prudential representative authorized to sell this Contract can explain
these options upon request.
PAYING PREMIUMS BY PAYROLL DEDUCTION
In addition to the annual, semi-annual, quarterly and monthly premium payment
modes, a payroll budget method of paying premiums may also be available under
certain Contracts. The employer generally deducts the necessary amounts from
employee paychecks and sends premium payments to Prudential monthly. Some
Contracts sold using the payroll budget method may be eligible for a guaranteed
issue program under which the initial minimum death benefit is $25,000 and the
Contracts are based on unisex mortality tables. Any Prudential representative
authorized to sell this Contract can provide further details concerning the
payroll budget method of paying premiums.
UNISEX PREMIUMS AND BENEFITS
The Contract generally employs mortality tables that distinguish between males
and females. Thus, premiums and benefits under Contracts issued on males and
females of the same age will generally differ. However, in those states that
have adopted regulations prohibiting sex-distinct insurance rates, premiums and
cost of insurance charges will be based on a blended unisex rate whether the
insured is male or female. In addition, employers and employee organizations
considering purchase of a Contract should consult their legal advisors to
determine whether purchase of a Contract based on sex-distinct actuarial tables
is consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Prudential may offer the Contract with unisex mortality rates to employers
and employee organizations.
SALES TO PERSONS 14 YEARS OF AGE OR YOUNGER
Both Form A and Form B Contracts covering insureds of 14 years of age or less
contain a special provision providing that the face amount of insurance will
automatically be increased on the Contract anniversary after the insured's 21st
birthday to 150% of the initial face amount, so long as the Contract is not then
in default. The death benefit will also usually increase, at the same time, by
the same dollar amount. In certain circumstances, however, it may increase by a
smaller amount. See HOW A CONTRACT'S DEATH BENEFIT WILL VARY, page 14. This
increase in death benefit will also generally increase the net amount at risk
under the Contract, thus increasing the mortality charge deducted each month
from amounts invested under the Contract. See item (b) under MONTHLY DEDUCTIONS
FROM CONTRACT FUND, page 11. The automatic increase in the face amount of
insurance may affect future premium payments if the Contract owner wants to
avoid the Contract being classified as a Modified Endowment Contract. A Contract
owner should consult his or her Prudential representative before making
unscheduled premium payments.
EXCHANGE OF FIXED-DOLLAR CONTRACT TO VARIABLE CONTRACT
Prudential may, on a non-discriminatory basis, permit the owner of an
APPRECIABLE LIFE insurance policy issued by Prudential (an APPRECIABLE LIFE
policy is a general account, universal life type policy with guaranteed minimum
values) to exchange his or her policy for a comparable Variable APPRECIABLE LIFE
Contract with the same Contract Date, scheduled premiums, and Contract Fund. No
charge will be made for the exchange. There is no new "free look" right when an
APPRECIABLE LIFE insurance policy owner elects to exchange his or her policy for
a comparable Variable APPRECIABLE LIFE Contract.
Although Prudential does not give tax advice, Prudential does believe, based on
its understanding of federal income tax laws as currently interpreted, that the
original date exchange of an APPRECIABLE LIFE Contract should be
27
<PAGE>
considered to be a tax-free exchange under the Internal Revenue Code of 1986 as
amended. It should be noted, however, that the exchange of an APPRECIABLE LIFE
Contract for a Variable APPRECIABLE LIFE Contract may impact the status of the
Contract as Modified Endowment Contract. See TAX TREATMENT OF CONTRACT BENEFITS,
page 24. A contract owner should consult with his or her tax advisor and
Prudential representative before making an exchange.
SALE OF THE CONTRACT AND SALES COMMISSIONS
Pruco Securities Corporation ("Prusec"), an indirect wholly-owned subsidiary of
Prudential, acts as the principal underwriter of the Contract. Prusec, organized
in 1971 under New Jersey law, is registered as a broker and dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. Prusec's principal business address is 213 Washington
Street, Newark, New Jersey 07102-2992. The Contract is sold by registered
representatives of Prusec who are also authorized by state insurance departments
to do so. The Contract may also be sold through other broker-dealers authorized
by Prusec and applicable law to do so. Registered representatives of such other
broker-dealrs may be paid on a different basis than described below. Where the
insured is less than 60 years of age, the representative will generally receive
a commission of no more than 50% of the Scheduled Premiums for the first year,
no more than 6% of the Scheduled Premiums for the second through tenth years,
and no more than 2% of the Scheduled Premiums thereafter. For insureds over 59
years of age, the commission will be lower. The representative may be required
to return all or part of the first year commission if the Contract is not
continued through the second year. Representatives with less than three years of
service may be paid on a different basis. Representatives who meet certain
productivity, profitability, and persistency standards with regard to the sale
of the Contract will be eligible for additional compensation.
STATE REGULATION
Prudential is subject to regulation and supervision by the Department of
Insurance of the State of New Jersey, which periodically examines its operations
and financial condition. It is also subject to the insurance laws and
regulations of all jurisdictions in which it is authorized to do business.
Prudential is required to submit annual statements of its operations, including
financial statements, to the insurance departments of the various jurisdictions
in which it does business to determine solvency and compliance with local
insurance laws and regulations.
In addition to the annual statements referred to above, Prudential is required
to file with New Jersey and other jurisdictions a separate statement with
respect to the operations of all its variable contract accounts, in a form
promulgated by the National Association of Insurance Commissioners.
EXPERTS
The financial statements included in this prospectus for the year ended December
31, 1996 have been audited by Price Waterhouse LLP, independent accountants, as
stated in their reports appearing herein, and are included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing. Price Waterhouse LLP's principal business address is 1177 Avenue of
the Americas, New York, New York, 10036.
The financial statements included in this prospectus for years ended December
31, 1995 and December 31, 1994, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing. Deloitte & Touche LLP's principal business
address is Two Hilton Court, Parsippany, New Jersey 07054-0319.
On March 12, 1996, Deloitte & Touche LLP was dismissed as the independent
accountants of Prudential. There have been no disagreements with Deloitte &
Touche LLP on any matter of accounting principles or practices, financial
statements disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of the accountant, would have caused them to make a reference
to the matter in their reports.
Actuarial matters included in this prospectus have been examined by Pam A.
Schiz, FSA, MAAA, Actuarial Director of Prudential whose opinion is filed as an
exhibit to the registration statement.
LITIGATION
On October 28, 1996, Prudential entered into a Stipulation of Settlement in a
multidistrict proceeding involving allegations of various claims relating to
Prudential's life insurance sales practices. (In re Prudential Insurance
28
<PAGE>
Company of America Sales Practices Litigation, D.N.J., MDL No. 1061, Master
Docket No. 95-4704 (AMW)). On March 7, 1997, the United States District Court
for the District of New Jersey approved the Stipulation of Settlement as fair,
reasonable and adequate.
Pursuant to the Settlement, Prudential has agreed to provide an alternative
dispute resolution process for class members who believe they were misled
concerning the sale or performance of their life insurance policies. The
Settlement also provides certain no-fault relief. The ultimate cost of the
Settlement will depend on a variety of factors, including the number of
policyowners who participate in the Settlement, the number of policyowners who
are afforded relief and the remediation option they select. The administrative
costs of implementing the Settlement are also subject to a number of complex
uncertainties. In light of the uncertainties attendant to these and other
factors, it is difficult at this time to estimate the ultimate cost of the
Settlement to Prudential.
In addition, a number of actions have been filed against Prudential by
policyowners who have excluded themselves from the settlement; Prudential
anticipates that additional suits may be filed by other policyowners.
Also, on July 9, 1996, a Multi-State Life Insurance Task Force comprised of
insurance regulators from 29 states and the District of Columbia, released a
report on Prudential's activities. As of February 24, 1997, Prudential had
entered into consent orders or agreements with all 50 states and the District of
Columbia to implement a remediation plan, whose terms closely parallel the
Settlement approved in the MDL proceeding, and agreed to a series of payments
allocated to all 50 states and the District of Columbia amounting to a total of
approximately $65 million.
Litigation is subject to many uncertainties, and given the complexity and scope
of these suits, their outcome cannot be predicted.
Accordingly, management is unable to make a meaningful estimate of the amount or
range of loss that could result from an unfavorable outcome of all pending
litigation. It is possible that the results of operations or the cash flow of
Prudential, in particular quarterly or annual periods could be materially
affected by an ultimate unfavorable outcome of certain pending litigation and
regulatory matters. Management believes, however, that the ultimate outcome of
all pending litigation and regulatory matters referred to above should not have
a material adverse effect on Prudential's financial position.
ADDITIONAL INFORMATION
A registration statement has been filed with the SEC under the Securities Act of
1933, relating to the offering described in this prospectus. This prospectus
does not include all of the information set forth in the registration statement.
Certain portions have been omitted pursuant to the rules and regulations of the
SEC. The omitted information may, however, be obtained from the SEC's principal
office in Washington, D.C., upon payment of a prescribed fee.
Further information may also be obtained from Prudential. Its address and
telephone number are on the inside front cover of this prospectus.
FINANCIAL STATEMENTS
The financial statements of the Account should be distinguished from the
statutory financial statements of Prudential, which should be considered only as
bearing upon the ability of Prudential to meet its obligations under the
Contracts.
29
<PAGE>
DIRECTORS AND OFFICERS OF PRUDENTIAL
The directors and certain officers of Prudential, listed with their principal
occupations during the past 5 years, are shown below.
DIRECTORS OF PRUDENTIAL
FRANKLIN E. AGNEW. Director. -- Business Consultant. Address: USX Tower, Suite
660, 600 Grant Street, Pittsburgh, PA 15219.
FREDERIC K. BECKER, Director. -- President, Wilentz, Goldman, and Spitzer (law
firm). Address: 90 Woodbridge Center Drive, Woodbridge, NJ 07095.
JAMES G. CULLEN, Director.--Vice Chairman, Bell Atlantic Corporation since 1995;
1993 to 1995: President, Bell Atlantic Corporation; Prior to 1993: President,
New Jersey Bell. Address: 1310 North Court House Road, 11th floor, Alexandria,
VA 22201.
CAROLYNE K. DAVIS, Director.--National and International Health Care Advisor,
Ernst & Young LLP. Address: 1225 Connecticut Avenue, NW, Washington, DC 20036.
ROGER A. ENRICO, Director.--Chairman and Chief Executive Officer, Pepsico Inc.
since 1996; Vice Chairman, Pepsico, Inc., from 1993 to 1996; Chairman and Chief
Executive Officer, Pepsi Co. Worldwide Food, from 1991 to 1993. Address: 14841
North Dallas Parkway, Dallas, TX 75240.
ALLAN D. GILMOUR, Director.--Former Vice Chairman, Ford Motor Company. Address:
Prudential Plaza, Newark, NJ 07102-3777.
WILLIAM H. GRAY, III, Director.--President and Chief Executive Officer, The
College Fund/UNCF. Address: 8260 Willow Oaks Corporate Drive, Fairfax, VA 22031.
JON F. HANSON, Director.--Chairman, Hampshire Management Company. Address: 235
Moore Street, Suite 200, Hackensack, NJ 07601.
GLEN H. HINER, JR., Director.--Chairman and Chief Executive Officer, Owens
Corning. Address: One Owens Corning Parkway, Toledo, OH 43659.
CONSTANCE J. HORNER, Director.--Guest Scholar, The Brookings Institution since
1993; 1991 to 1992: Assistant to the President and Director of Presidential
Personnel, U.S. Government. Address: 1775 Massachusetts Avenue, N.W.,
Washington, DC 20036-2188.
GAYNOR N. KELLEY, Director.--Retired Chairman and Chief Executive Officer, The
Perkin Elmer Corporation. Address: 751 Broad Street, Newark, NJ 07102-3777.
BURTON G. MALKIEL, Director.--Professor, Princeton University. Address:
Princeton University, 110 Fisher Hall, Prospect Avenue, Princeton, NJ
08544-1021.
ARTHUR F. RYAN, Chairman of the Board, President, and Chief Executive Officer.
- -- Chairman, President, and Chief Executive Officer, Prudential since 1994;
Prior to 1994, President and Chief Operating Officer, Chase Manhattan
Corporation. Address: 751 Broad Street, Newark, NJ 07102-3777.
IDA F. S. SCHMERTZ, Director.--Principal, Investment Strategies International
since 1994; Prior to 1994: Senior Vice President of Corporate Affairs, American
Express Company. Address: 90 Riverside Dr., New York, NY 10024.
CHARLES R. SITTER, Director.--Former President, Exxon Corporation. Address: 5959
Las Colinas Boulevard, Irving, TX 75039-2298.
DONALD L. STAHELI, Director.--Chairman and Chief Executive Officer, Continental
Grain Company since 1995; Prior to 1995: President and Chief Executive Officer,
Continental Grain Company. Address: 277 Park Avenue, New York, NY 10172.
RICHARD M. THOMSON, Director.--Chairman and Chief Executive Officer, The
Toronto-Dominion Bank. Address: P.O. Box 1, Toronto-Dominion Centre, Toronto,
Ontario, M5K 1A2, Canada.
JAMES A. UNRUH, Director.--Chairman and Chief Executive Officer, Unisys
Corporation. Address: P.O. Box 500, Blue Bell, PA 19424-0001.
30
<PAGE>
P. ROY VAGELOS, M.D., Director.--Former Chairman and Chief Executive Officer,
Merck & Co., Inc. Address: One Crossroads Drive, Bedminster, NJ 07921.
STANLEY C. VAN NESS, Director.--Attorney, Picco Herbert Kennedy (law firm).
Address: One State Street Square, Suite 1000, Trenton, NJ 08607-1388.
PAUL A. VOLCKER, Director.--Business Consultant since 1996; Prior to 1996:
Chairman, Wolfensohn & Co., Inc. Address: 599 Lexington Avenue, New York, NY
10022.
JOSEPH H. WILLIAMS, Director.--Director, The Williams Companies since 1994;
Prior to 1994: Chairman and Chief Executive Officer, The Williams Companies.
Address: One Williams Center, Tulsa, OK 74172.
OTHER EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
MARTIN A. BERKOWITZ, Senior Vice President and Comptroller.--Senior Vice
President and Chief Financial Officer of Prudential Investment Company.
SUSAN L. BLOUNT, Vice President and Secretary.--Vice President and Secretary of
Prudential since 1995; Prior to 1995: Assistant General Counsel for Prudential
Residential Services Company.
C. EDWARD CHAPLIN, Vice President and Treasurer.--Vice President and Treasurer
of Prudential since 1995; 1993 to 1995: Managing Director and Assistant
Treasurer of Prudential; 1992 to 1993: Vice President and Assistant Treasurer,
Banking and Cash Management for Prudential.
MARK B. GRIER, Chief Financial Officer.--Chief Financial Officer of Prudential
since 1995; Prior to 1995: Executive Vice President and Head of Global Markets,
Chase Manhattan Corporation.
31
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3]............................................ $ 97,754,363 $ 116,426,677 $1,061,732,578 $1,137,587,038 $ 918,503,799
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 95,829,772 $ 116,230,392 $1,060,371,790 $1,137,482,708 $ 918,784,473
Equity of The Prudential Insurance Company of
America....................................... 1,924,591 196,285 1,360,788 104,330 (280,674)
-------------- -------------- -------------- -------------- --------------
$ 97,754,363 $ 116,426,677 $1,061,732,578 $1,137,587,038 $ 918,503,799
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 4,689,159 $ 7,158,122 $ 23,448,572 $ 32,750,578 $ 35,574,962
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 4A]..... 630,761 769,815 6,600,231 7,402,644 6,248,856
Reimbursement for excess expenses [Note 4D]..... 0 0 0 0 0
-------------- -------------- -------------- -------------- --------------
NET EXPENSES...................................... 630,761 769,815 6,600,231 7,402,644 6,248,856
-------------- -------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS)...................... 4,058,398 6,388,307 16,848,341 25,347,934 29,326,106
-------------- -------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 0 92,436,486 106,224,518 55,843,548
Realized gain (loss) on shares redeemed
[average cost basis].......................... 0 19,658 755,380 487,657 627,498
Net unrealized gain (loss) on investments....... 0 (2,104,541) 41,805,447 (5,082,172) 10,273,250
-------------- -------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 0 (2,084,883) 134,997,313 101,630,003 66,744,296
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 4,058,398 $ 4,303,424 $ 151,845,654 $ 126,977,937 $ 96,070,402
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A1
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3] $ 20,072,530 $ 80,876,861 $ 422,844,131 $ 295,054,376 $ 146,011,161
-------------- -------------- -------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners $ 20,017,682 $ 80,728,287 $ 422,066,809 $ 294,742,410 $ 145,962,740
Equity of The Prudential Insurance Company of
America 54,848 148,574 777,322 311,966 48,421
-------------- -------------- -------------- -------------- --------------
$ 20,072,530 $ 80,876,861 $ 422,844,131 $ 295,054,376 $ 146,011,161
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
<CAPTION>
ZERO
COUPON
GOVERNMENT BOND
GLOBAL INCOME 2005
-------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3] $ 86,164,762 $ 73,847,002 $ 22,819,931
-------------- -------------- --------------
NET ASSETS, representing:
Equity of Contract owners $ 85,828,091 $ 72,963,000 $ 22,175,214
Equity of The Prudential Insurance Company of
America 336,671 884,002 644,717
-------------- -------------- --------------
$ 86,164,762 $ 73,847,002 $ 22,819,931
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY
2000 BOND INDEX INCOME
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 835,394 $ 7,376,933 $ 6,724,618 $ 9,118,093
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 4A] 143,233 532,324 2,544,825 1,767,583
Reimbursement for excess expenses [Note 4D] (23,005) 0 0 0
-------------- -------------- -------------- --------------
NET EXPENSES 120,228 532,324 2,544,825 1,767,583
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) 715,166 6,844,609 4,179,793 7,350,510
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 0 0 4,749,836 9,133,917
Realized gain (loss) on shares redeemed
[average cost basis] 27,409 20,787 263,052 171,030
Net unrealized gain (loss) on investments (556,648) 581,780 61,075,735 32,816,172
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS (529,239) 602,567 66,088,623 42,121,119
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 185,927 $ 7,447,176 $ 70,268,416 $ 49,471,629
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
ZERO
COUPON
NATURAL GOVERNMENT BOND
RESOURCES GLOBAL INCOME 2005
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividend distributions received $ 877,698 $ 1,778,642 $ 4,676,803 $ 1,123,279
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 4A] 909,008 446,499 519,382 147,863
Reimbursement for excess expenses [Note 4D] (16,487) 0 0 (27,318)
-------------- -------------- -------------- --------------
NET EXPENSES 892,521 446,499 519,382 120,545
-------------- -------------- -------------- --------------
NET INVESTMENT INCOME (LOSS) (14,823) 1,332,143 4,157,421 1,002,734
-------------- -------------- -------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received 17,021,108 1,298,584 0 246,221
Realized gain (loss) on shares redeemed
[average cost basis] 341,761 16,670 22,685 290
Net unrealized gain (loss) on investments 13,941,557 9,125,406 (3,090,993) (1,505,763)
-------------- -------------- -------------- --------------
NET GAIN (LOSS) ON INVESTMENTS 31,304,426 10,440,660 (3,068,308) (1,259,252)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 31,289,603 $ 11,772,803 $ 1,089,113 $ (256,518)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A2
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF NET ASSETS
December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
SMALL
PRUDENTIAL CAPITALIZATION
JENNISON STOCK
-------------- --------------
<S> <C> <C>
ASSETS
Investment in shares of The Prudential Series
Fund, Inc. Portfolios at net asset value [Note
3]............................................ $ 41,246,859 $ 28,405,156
-------------- --------------
NET ASSETS, representing:
Equity of Contract owners....................... $ 40,599,027 $ 28,186,629
Equity of The Prudential Insurance Company of
America....................................... 647,832 218,527
-------------- --------------
$ 41,246,859 $ 28,405,156
-------------- --------------
-------------- --------------
</TABLE>
STATEMENTS OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<CAPTION>
SUBACCOUNTS
------------------------------
SMALL
PRUDENTIAL CAPITALIZATION
JENNISON STOCK
-------------- --------------
<S> <C> <C>
INVESTMENT INCOME
Dividend distributions received................. $ 64,455 $ 153,825
EXPENSES
Charges to Contract owners for assuming
mortality risk and expense risk [Note 4A]..... 149,932 100,546
Reimbursement for excess expenses [Note 4D]..... 0 0
-------------- --------------
NET EXPENSES...................................... 149,932 100,546
-------------- --------------
NET INVESTMENT INCOME (LOSS)...................... (85,477) 53,279
-------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Capital gains distributions received............ 0 489,855
Realized gain (loss) on shares redeemed
[average cost basis].......................... 0 (7,039)
Net unrealized gain (loss) on investments....... 3,012,624 2,049,209
-------------- --------------
NET GAIN (LOSS) ON INVESTMENTS.................... 3,012,624 2,532,025
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS....................... $ 2,927,147 $ 2,585,304
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A3
<PAGE>
(This page intentionally left blank.)
A4
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
MONEY DIVERSIFIED
MARKET BOND
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).....$ 4,058,398 $ 4,217,643 $ 2,402,301 $ 6,388,307 $ 5,652,448 $ 4,226,871
Capital gains distributions
received....................... 0 0 0 0 222,002 158,594
Realized gain (loss) on shares
redeemed
[average cost basis]........... 0 0 0 19,658 30,407 4,403
Net unrealized gain (loss) on
investments.................... 0 0 0 (2,104,541) 10,042,691 (7,162,380)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS........ 4,058,398 4,217,643 2,402,301 4,303,424 15,947,548 (2,772,512)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS.... 768,830 8,955,240 6,444,757 10,268,006 9,712,345 11,829,119
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7]......................... 1,422,930 161,461 (213,654) (142,209) 143,151 (532,267)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS........................... 6,250,158 13,334,344 8,633,404 14,429,221 25,803,044 8,524,340
NET ASSETS:
Beginning of year................ 91,504,205 78,169,861 69,536,457 101,997,456 76,194,412 67,670,072
-------------- -------------- -------------- -------------- -------------- --------------
End of year......................$ 97,754,363 $ 91,504,205 $ 78,169,861 $ 116,426,677 $ 101,997,456 $ 76,194,412
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A5
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
FLEXIBLE
EQUITY MANAGED
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 16,848,341 $ 9,985,776 $ 7,323,925 $ 25,347,934
Capital gains distributions
received 92,436,486 27,318,049 19,666,506 106,224,518
Realized gain (loss) on shares
redeemed
[average cost basis] 755,380 11,957 86,672 487,657
Net unrealized gain (loss) on
investments 41,805,447 129,700,617 (18,362,891) (5,082,172)
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 151,845,654 167,016,399 8,714,212 126,977,937
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 116,044,081 130,026,767 123,951,671 57,031,152
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] (2,717,850) (595,673) 452,486 (1,594,508)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 265,171,885 296,447,493 133,118,369 182,414,581
NET ASSETS:
Beginning of year 796,560,693 500,113,200 366,994,831 955,172,457
-------------- -------------- -------------- --------------
End of year $1,061,732,578 $ 796,560,693 $ 500,113,200 $1,137,587,038
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
CONSERVATIVE
BALANCED
----------------------------------------------
1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 21,550,235 $ 14,060,998 $ 29,326,106 $ 25,291,477 $ 16,966,301
Capital gains distributions
received 39,426,921 18,931,168 55,843,548 26,552,510 6,635,310
Realized gain (loss) on shares
redeemed
[average cost basis] 56,509 0 627,498 97,662 31,649
Net unrealized gain (loss) on
investments 110,261,394 (56,779,739) 10,273,250 55,648,508 (33,092,575)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 171,295,059 (23,787,573) 96,070,402 107,590,157 (9,459,315)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 86,936,282 142,298,237 36,970,919 44,932,925 127,164,401
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] (2,895,506) (55,717) (1,143,063) (3,421,660) (1,173,893)
-------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 255,335,835 118,454,947 131,898,258 149,101,422 116,531,193
NET ASSETS:
Beginning of year 699,836,622 581,381,675 786,605,541 637,504,119 520,972,926
-------------- -------------- -------------- -------------- --------------
End of year $ 955,172,457 $ 699,836,622 $ 918,503,799 $ 786,605,541 $ 637,504,119
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A6
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
ZERO COUPON HIGH
BOND YIELD
2000 BOND
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss).... $ 715,166 $ 720,396 $ 1,032,410 $ 6,844,609 $ 6,151,112 $ 4,958,854
Capital gains distributions
received...................... 0 759,176 31,655 0 0 38
Realized gain (loss) on shares
redeemed
[average cost basis].......... 27,409 16,969 1,031 20,787 (58,578) 5,625
Net unrealized gain (loss) on
investments................... (556,648) 1,982,145 (2,416,751) 581,780 3,163,738 (6,827,471)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS....... 185,927 3,478,686 (1,351,655) 7,447,176 9,256,272 (1,862,954)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS... (613,550) 846,650 900,334 5,326,899 4,374,480 9,774,435
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7]........................ 33,778 (645,588) 409,426 52,425 (119,164) (576,511)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.......................... (393,845) 3,679,748 (41,895) 12,826,500 13,511,588 7,334,970
NET ASSETS:
Beginning of year............... 20,466,375 16,786,627 16,828,522 68,050,361 54,538,773 47,203,803
-------------- -------------- -------------- -------------- -------------- --------------
End of year..................... $ 20,072,530 $ 20,466,375 $ 16,786,627 $ 80,876,861 $ 68,050,361 $ 54,538,773
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A7
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
STOCK EQUITY
INDEX INCOME
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 4,179,793 $ 3,665,394 $ 3,181,988 $ 7,350,510
Capital gains distributions
received 4,749,836 2,097,393 267,733 9,133,917
Realized gain (loss) on shares
redeemed
[average cost basis] 263,052 293,916 58,302 171,030
Net unrealized gain (loss) on
investments 61,075,735 66,716,563 (2,856,319) 32,816,172
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 70,268,416 72,773,266 651,704 49,471,629
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 55,125,681 33,935,158 26,983,569 23,125,635
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] 82,144 (100,558) (298,727) (711,051)
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 125,476,241 106,607,866 27,336,546 71,886,213
NET ASSETS:
Beginning of year 297,367,890 190,760,024 163,423,478 223,168,163
-------------- -------------- -------------- --------------
End of year $ 422,844,131 $ 297,367,890 $ 190,760,024 $ 295,054,376
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
<CAPTION>
NATURAL
RESOURCES
----------------------------------------------
1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 6,301,712 $ 4,108,092 $ (14,823) $ 515,411 $ 203,463
Capital gains distributions
received 9,279,251 7,633,088 17,021,108 4,578,307 1,375,424
Realized gain (loss) on shares
redeemed
[average cost basis] 46,601 34,607 341,761 68,144 22,045
Net unrealized gain (loss) on
investments 18,945,636 (11,478,198) 13,941,557 14,973,181 (5,314,192)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 34,573,200 297,589 31,289,603 20,135,043 (3,713,260)
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 38,554,244 51,018,498 13,900,701 9,214,757 22,317,372
-------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] (646,585) (376,490) (277,180) (398,931) (47,480)
-------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 72,480,859 50,939,597 44,913,124 28,950,869 18,556,632
NET ASSETS:
Beginning of year 150,687,304 99,747,707 101,098,037 72,147,168 53,590,536
-------------- -------------- -------------- -------------- --------------
End of year $ 223,168,163 $ 150,687,304 $ 146,011,161 $ 101,098,037 $ 72,147,168
-------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A8
<PAGE>
FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
SUBACCOUNTS
----------------------------------------------------------------------------------------------
GOVERNMENT
GLOBAL* INCOME
---------------------------------------------- ----------------------------------------------
1996 1995 1994 1996 1995 1994
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss)...$ 1,332,143 $ 454,049 $ (11,478) $ 4,157,421 $ 3,989,499 $ 3,587,433
Capital gains distributions
received..................... 1,298,584 915,804 5,622 0 0 0
Realized gain (loss) on shares
redeemed
[average cost basis]......... 16,670 4,998 0 22,685 (8,599) (74,828)
Net unrealized gain (loss) on
investments.................. 9,125,406 4,212,026 (1,421,127) (3,090,993) 7,403,233 (7,299,824)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS....... 11,772,803 5,586,877 (1,426,983) 1,089,113 11,384,133 (3,787,219)
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS... 24,827,377 16,098,541 29,174,840 (1,166,024) 481,705 4,183,444
-------------- -------------- -------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7]........................ (137,878) (1,921,654) 2,190,839 788,406 (293,673) (467,937)
-------------- -------------- -------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS.......................... 36,462,302 19,763,764 29,938,696 711,495 11,572,165 (71,712)
NET ASSETS:
Beginning of year............... 49,702,460 29,938,696 0 73,135,507 61,563,342 61,635,054
-------------- -------------- -------------- -------------- -------------- --------------
End of year..................... $ 86,164,762 $ 49,702,460 $ 29,938,696 $ 73,847,002 $ 73,135,507 $ 61,563,342
-------------- -------------- -------------- -------------- -------------- --------------
-------------- -------------- -------------- -------------- -------------- --------------
*Commenced
Business
on 5/1/94
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A9
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
--------------------------------------------------------------
ZERO COUPON
BOND PRUDENTIAL**
2005 JENNISON
---------------------------------------------- --------------
1996 1995 1994 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 1,002,734 $ 838,006 $ 782,620 $ (85,477)
Capital gains distributions
received 246,221 425,717 3,474 0
Realized gain (loss) on shares
redeemed
[average cost basis] 290 0 (2,913) 0
Net unrealized gain (loss) on
investments (1,505,763) 3,328,939 (2,073,481) 3,012,624
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS (256,518) 4,592,662 (1,290,300) 2,927,147
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 1,428,479 2,469,936 3,624,370 30,275,275
-------------- -------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] 484,066 7,956 (146,182) 385,656
-------------- -------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 1,656,027 7,070,554 2,187,888 33,588,078
NET ASSETS:
Beginning of year 21,163,904 14,093,350 11,905,462 7,658,781
-------------- -------------- -------------- --------------
End of year $ 22,819,931 $ 21,163,904 $ 14,093,350 $ 41,246,859
-------------- -------------- --------------
-------------- -------------- --------------
--------------
--------------
**Commenced
Business
on 5/1/95
<CAPTION>
SMALL
CAPITALIZATION**
STOCK
------------------------------
1995 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (11,994) $ 53,279 $ 6,422
Capital gains distributions
received 0 489,855 47,413
Realized gain (loss) on shares
redeemed
[average cost basis] 0 (7,039) 0
Net unrealized gain (loss) on
investments 281,405 2,049,209 181,809
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM OPERATIONS 269,411 2,585,304 235,644
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM PREMIUM PAYMENTS
AND OTHER OPERATING TRANSFERS 7,175,027 20,015,548 5,360,329
-------------- -------------- --------------
NET INCREASE (DECREASE) IN NET
ASSETS
RESULTING FROM EQUITY TRANSFERS
[NOTE 7] 214,343 (22,002) 230,333
-------------- -------------- --------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 7,658,781 22,578,850 5,826,306
NET ASSETS:
Beginning of year 0 5,826,306 0
-------------- -------------- --------------
End of year $ 7,658,781 $ 28,405,156 $ 5,826,306
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS ON PAGES A11 THROUGH A15.
A10
<PAGE>
NOTES TO FINANCIAL STATEMENTS OF
THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 1996
NOTE 1: GENERAL
The Prudential Variable Appreciable Account (the "Account") of The Prudential
Insurance Company of America ("Prudential") was established on August 11, 1987
by a resolution of Prudential's Board of Directors in conformity with insurance
laws of the State of New Jersey. The assets of the Account are segregated from
Prudential's other assets. Currently Prudential Variable Appreciable Life (PVAL)
and Prudential Survivorship Preferred (SVUL) Contracts invest in the Account.
The Account is registered under the Investment Company Act of 1940, as amended,
as a unit investment trust. There are fifteen subaccounts within the Account,
each of which invests only in a corresponding portfolio of The Prudential Series
Fund, Inc. (the "Series Fund"). The Series Fund is a diversified open-end
management investment company, and is managed by Prudential.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements are prepared in conformity with generally
accepted accounting principles (GAAP). The preparation of the financial
statements, in conformity with GAAP, requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates.
Investments--The investments in shares of the Series Fund are stated at the net
asset value of the respective portfolio.
Security Transactions--Realized gains and losses on security transactions are
reported on an average cost basis. Purchase and sale transactions are recorded
as of the trade date of the security being purchased or sold.
Distributions Received--Dividend and capital gain distributions received are
reinvested in additional shares of the Series Fund and are recorded on the
ex-dividend date.
Equity of Prudential Life Insurance Company of America--Prudential maintains a
position in the Account for the purpose of administering activity in the
Account. The activity includes unit transactions, fund share transaction, and
expense processing. Prudential monitors the balance daily and transfers funds
based upon anticipated activity. At times, Prudential may owe an amount to the
Account, which is reflected in Prudential's equity as a negative balance. The
position does not have an effect on the Contract owner's account or the related
unit value.
A11
<PAGE>
NOTE 3: INVESTMENT INFORMATION FOR THE PRUDENTIAL SERIES FUND, INC. PORTFOLIOS
The net asset value per share for each portfolio of the Series Fund, the number
of shares of each portfolio held by the subaccounts of the Account and the
aggregate cost of investments in such shares at December 31, 1996 were as
follows:
<TABLE>
<CAPTION>
PORTFOLIOS
-------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 9,775,436 10,521,659 39,374,630 63,953,829 59,193,160
Net asset value
per share: $ 10.0000 $ 11.06543 $ 26.96489 $ 17.78763 $ 15.51706
Cost: $ 97,754,363 $ 114,592,428 $ 869,667,765 $ 1,051,479,910 $ 867,829,661
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 1,553,971 10,279,881 17,807,930 15,940,424 7,387,206
Net asset value
per share: $ 12.91693 $ 7.86749 $ 23.74471 $ 18.50982 $ 19.76541
Cost: $ 19,568,381 $ 81,489,704 $ 276,796,836 $ 245,473,957 $ 114,441,743
<CAPTION>
PORTFOLIOS (CONTINUED)
-------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
------------- -------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Number of shares: 4,825,875 6,581,090 1,862,198 2,879,726 2,059,558
Net asset value
per share: $ 17.85474 $ 11.22109 $ 12.25430 $ 14.32319 $ 13.79187
Cost: $ 74,248,457 $ 74,192,758 $ 22,039,796 $ 37,952,830 $ 26,174,138
</TABLE>
NOTE 4: CONTRACT OWNER UNIT INFORMATION
Outstanding Contract owner units, unit values and total Contract owner equity
for the year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SUBACCOUNTS
---------------------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(PVAL):.......... 20,056,038.673 22,704,270.329 125,708,228.822 170,578,041.832 191,537,546.348
Unit value
(PVAL):......... $ 1.48140 $ 1.96816 $ 3.38380 $ 2.56528 $ 2.20934
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(PVAL):......... $ 29,711,016 $ 44,685,637 $ 425,371,505 $ 437,580,439 $ 423,171,563
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(PVAL $100,000+
face):.......... 43,335,963.712 35,477,635.783 183,134,501.442 266,455,295.837 219,052,666.063
Unit value (PVAL
$100,000+
face):.......... $ 1.51614 $ 2.01468 $ 3.46333 $ 2.62570 $ 2.26154
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity (PVAL
$100,000+
face):.......... $ 65,703,388 $ 71,476,083 $ 634,255,213 $ 699,631,670 $ 495,396,366
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(SVUL):......... 398,970.245 66,018.689 621,738.271 236,429.835 192,082.432
Unit value
(SVUL):......... $ 1.04110 $ 1.04019 $ 1.19837 $ 1.14452 $ 1.12735
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(SVUL):......... $ 415,368 $ 68,672 $ 745,072 $ 270,599 $ 216,544
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:... $ 95,829,772 $ 116,230,392 $ 1,060,371,790 $ 1,137,482,708 $ 918,784,473
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
A12
<PAGE>
<TABLE>
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO HIGH
COUPON BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(PVAL):.......... 3,660,585.720 15,387,903.704 51,026,977.087 32,505,484.983 19,894,002.086
Unit value
(PVAL):......... $ 2.21829 $ 2.05571 $ 3.26565 $ 3.00354 $ 2.94988
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(PVAL):......... $ 8,120,240 $ 31,633,068 $ 166,636,248 $ 97,631,524 $ 58,684,918
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(PVAL $100,000+
face):.......... 5,239,201.945 23,074,678.840 76,187,047.686 64,028,857.775 28,893,658.632
Unit value (PVAL
$100,000+
face):.......... $ 2.27085 $ 2.10376 $ 3.34316 $ 3.07507 $ 3.01942
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity (PVAL
$100,000+
face):.......... $ 11,897,442 $ 48,543,586 $ 254,705,490 $ 196,893,220 $ 87,242,091
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(SVUL):......... N/A 505,102.997 581,484.963 176,423.502 27,944.197
Unit value
(SVUL):......... N/A $ 1.09212 $ 1.24693 $ 1.23377 $ 1.27865
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(SVUL):......... N/A $ 551,633 $ 725,071 $ 217,666 $ 35,731
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:... $ 20,017,682 $ 80,728,287 $ 422,066,809 $ 294,742,410 $ 145,962,740
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
<CAPTION>
SUBACCOUNTS (CONTINUED)
---------------------------------------------------------------------------------------------
ZERO SMALL
GOVERNMENT COUPON BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Contract Owner
Units Outstanding
(PVAL):.......... 14,777,544.603 16,407,557.842 3,427,063.251 6,773,439.848 3,759,138.927
Unit value
(PVAL):......... $ 1.31795 $ 1.77603 $ 2.08804 $ 1.41447 $ 1.41503
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(PVAL):......... $ 19,476,065 $ 29,140,315 $ 7,155,845 $ 9,580,827 $ 5,319,294
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(PVAL $100,000+
face):.......... 49,638,503.339 24,092,277.326 7,027,780.240 21,504,423.254 15,751,841.033
Unit value (PVAL
$100,000+
face):.......... $ 1.32837 $ 1.81715 $ 2.13621 $ 1.42160 $ 1.42227
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity (PVAL
$100,000+
face):.......... $ 65,938,299 $ 43,779,282 $ 15,012,815 $ 30,570,688 $ 22,403,371
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Units
Outstanding
(SVUL):......... 349,659.305 42,594.932 6,571.354 363,119.018 372,329.523
Unit value
(SVUL):......... $ 1.18323 $ 1.01897 $ 0.99738 $ 1.23241 $ 1.24611
----------------- ----------------- ----------------- ----------------- -----------------
Contract Owner
Equity
(SVUL):......... $ 413,727 $ 43,403 $ 6,554 $ 447,512 $ 463,964
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CONTRACT
OWNER EQUITY:... $ 85,828,091 $ 72,963,000 $ 22,175,214 $ 40,599,027 $ 28,186,629
----------------- ----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- ----------------- -----------------
</TABLE>
A13
<PAGE>
NOTE 5: CHARGES AND EXPENSES
A. Mortality Risk and Expense Risk Charges
The mortality risk and expense risk charges at an effective annual rate of
0.90% may be applied daily against the net assets representing equity of
PVAL Contract owners held in each subaccount. For Contract owners investing
in PVAL with face amounts of $100,000 or more the annual rate is 0.60%. For
Contract owners investing in SVUL the annual rate is 0.90%.
Mortality risk is that Contract holders may not live as long as estimated
and expense risk is that the cost of issuing and administering the policies
may exceed the estimated expenses. For 1996, the amount of these charges
paid to Prudential was $14,434,420 for PVAL Contracts, $14,467,520 for PVAL
Contracts with face amounts of $100,000 or more and $11,561 for SVUL
Contracts.
B. Deferred Sales Charge
Subsequent to Contract owner redemption, a deferred sales charge is imposed
upon surrenders of certain variable life insurance Contracts to compensate
Prudential for sales and other marketing expenses. The amount of any sales
charge will depend on the number of years that have elapsed since the
Contract was issued. No sales charge will be imposed after the tenth year
of the Contract. No sales charge will be imposed on death benefits. For
1996, the amount of these charges was $9,647,647.
C. Partial Withdrawal Charge
A charge is imposed by Prudential on partial withdrawals of the cash
surrender value. For 1996, the amount of these charges was $3,327,939.
D. Expense Reimbursement
PVAL Contracts are reimbursed by Prudential, on a non-guaranteed basis, for
expenses incurred by the Series Fund in excess of the effective rate of
0.40% for all Zero Coupon Bond Portfolios, 0.45% for the Stock Index
Portfolio, 0.50% for the Equity Income Portfolio, 0.55% for the Natural
Resources Portfolio, and 0.65% for the High Yield Bond Portfolio of the
average daily net assets of these portfolios. For 1996, the amount of these
reimbursements totaled $66,808.
SVUL Contracts are reimbursed by Prudential, on a non-guaranteed basis, for
expenses incurred by the Series Fund in excess of the effective rate of
0.40% of the average daily net assets of these portfolio of each of the
Zero Coupon Bond Portfolios. For 1996, the amount of these reimbursements
totaled $1.
E. Cost of Insurance Charges
Contract holders contributions are applied to the account net of the
following charges: transaction costs, premium taxes, and sales charges,
monthly administration charges, and death benefit risk charges prior to the
investment in the Account. During 1996, Prudential received a total of
$31,272,838, $25,108,207, $104,984,845, $60,980,190, and $13,514,144,
respectively, for these charges.
NOTE 6: TAXES
Prudential is taxed as a "life insurance company" under the Internal Revenue
Code and the operations of the Account form a part of and are taxed with those
of Prudential. Under current federal law, no federal income taxes are payable by
the Account. As such, no provision for tax liability has been recorded.
NOTE 7: NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM EQUITY TRANSFERS
The increase (decrease) in net assets resulting from equity transfers represents
the net contributions (withdrawals) of Prudential to (from) the Account.
A14
<PAGE>
NOTE 8: PURCHASES AND SALES OF INVESTMENTS
The aggregate costs of purchases and proceeds from sales of investments in the
Series Fund, Inc. were as follows:
<TABLE>
<CAPTION>
PORTFOLIOS
--------------------------------------------------------------------------------
MONEY DIVERSIFIED FLEXIBLE CONSERVATIVE
MARKET BOND EQUITY MANAGED BALANCED
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year
ended December
31, 1996
Purchases..... $ 23,234,000 $ 10,499,000 $ 110,220,000 $ 51,960,000 $ 36,639,000
Sales......... $ (21,673,000) $ (1,256,000) $ (3,494,000) $ (3,926,000) $ (7,060,000)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON HIGH
BOND YIELD STOCK EQUITY NATURAL
2000 BOND INDEX INCOME RESOURCES
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year
ended December
31, 1996
Purchases..... $ 144,000 $ 6,063,000 $ 53,532,000 $ 22,154,000 $ 14,071,000
Sales......... $ (844,000) $ (1,216,000) $ (869,000) $ (1,507,000) $ (1,340,000)
<CAPTION>
PORTFOLIOS (CONTINUED)
--------------------------------------------------------------------------------
ZERO
COUPON SMALL
GOVERNMENT BOND PRUDENTIAL CAPITALIZATION
GLOBAL INCOME 2005 JENNISON STOCK
-------------- -------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
For the year
ended December
31, 1996
Purchases..... $ 24,498,000 $ 1,525,000 $ 1,827,000 $ 30,511,000 $ 20,824,000
Sales......... $ (255,000) $ (2,422,000) $ (35,000) $ 0 $ (931,000)
</TABLE>
NOTE 9: RELATED PARTY TRANSACTIONS
The Prudential has purchased multiple Variable Appreciable Life insurance
contracts insuring the lives of certain employees. The Prudential is the owner
and beneficiary of the Contracts. There were no net premium payments for the
year ended December 31, 1996. Equity of Contract owners in that subaccount at
December 31, 1996 includes approximately $210.2 million owned by the Prudential.
A15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Contract Owners of
Prudential Variable Appreciable Account
and the Board of Directors of
The Prudential Insurance Company of America
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets present fairly, in all
material respects, the financial position of Money Market Subaccount,
Diversified Bond Subaccount, Equity Subaccount, Flexible Managed Subaccount,
Conservative Balanced Subaccount, Zero Coupon Bond 2000 Subaccount, High Yield
Bond Subaccount, Stock Index Subaccount, Equity Income Subaccount, Natural
Resources Subaccount, Global Subaccount, Government Income Subaccount, Zero
Coupon Bond 2005 Subaccount, Prudential Jennison Subaccount and Small
Capitalization Stock Subaccount of Prudential Variable Appreciable Account at
December 31, 1996, and the results of each of their operations and the changes
in each of their net assets for the year then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of The Prudential Insurance Company of America's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of shares owned in The
Prudential Series Fund, Inc. at December 31, 1996, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
New York, New York
March 31, 1997
A16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contract Owners of
The Prudential Variable Appreciable
Account and the Board of Directors
of the Prudential Insurance Company of America
Newark, New Jersey
We have audited the accompanying statements of changes in net assets of The
Prudential Variable Appreciable Account of The Prudential Insurance Company of
America (comprising, respectively, the Money Market, Diversified Bond, Equity,
Flexible Managed, Conservative Balanced, Zero Coupon Bond 2000, High Yield Bond,
Stock Index, Equity Income, Natural Resources, Global, Government Income, Zero
Coupon Bond 2005, Prudential Jennison, and Small Capitalization Stock
subaccounts) for the periods presented for each of the two years ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the changes in net assets of each of the respective subaccounts
constituting The Prudential Variable Appreciable Account for the respective
stated periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Parsippany, New Jersey
February 15, 1996
A17
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1996 1995
-------- --------
(In Millions)
<S> <C> <C>
ASSETS
Bonds ............................................................................ $ 75,006 $ 77,494
Preferred stock .................................................................. 239 396
Common stock ..................................................................... 7,076 6,133
Mortgage loans on real estate .................................................... 17,039 20,280
Real estate ...................................................................... 2,094 2,488
Policy loans and premium notes ................................................... 6,023 6,208
Cash and short-term investments .................................................. 5,982 4,803
Other invested assets ............................................................ 2,591 3,304
-------- --------
TOTAL CASH AND INVESTED ASSETS ................................................... 116,050 121,106
Premiums due and deferred ........................................................ 1,925 1,917
Accrued investment income ........................................................ 1,640 1,688
Other assets ..................................................................... 1,208 1,120
Assets held in separate accounts ................................................. 57,797 53,903
-------- --------
TOTAL ASSETS ..................................................................... $178,620 $179,734
======== ========
LIABILITIES AND SURPLUS
LIABILITIES
Policy liabilities and insurance reserves:
Future policy benefits and claims ............................................ $ 87,582 $ 93,346
Unearned premiums ............................................................ 619 624
Policy dividends ............................................................. 1,878 1,893
Policyholder account balances ................................................ 7,968 7,966
Notes payable and other borrowings ............................................... 763 807
Asset valuation reserve .......................................................... 2,682 2,705
Federal income tax payable ....................................................... 729 1,278
Other liabilities ................................................................ 9,588 9,191
Liabilities related to separate accounts ......................................... 57,436 53,256
-------- --------
TOTAL LIABILITIES ................................................................ 169,245 171,066
-------- --------
CONTINGENCIES (NOTE 11)
SURPLUS
Capital notes .................................................................... 985 984
Special surplus fund ............................................................. 1,268 1,274
Unassigned surplus ............................................................... 7,122 6,410
-------- --------
TOTAL SURPLUS .................................................................... 9,375 8,668
-------- --------
TOTAL LIABILITIES AND SURPLUS .................................................... $178,620 $179,734
======== ========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF OPERATIONS AND CHANGES IN SURPLUS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995 1994
(In Millions)
<S> <C> <C> <C>
REVENUE
Premiums and annuity considerations .................................... $ 20,674 $ 21,088 $ 23,612
Net investment income .................................................. 8,677 8,637 7,387
Other income ........................................................... 571 363 367
-------- -------- --------
TOTAL REVENUE .......................................................... 29,922 30,088 31,366
-------- -------- --------
BENEFITS AND EXPENSES
Death benefits ......................................................... 2,943 2,858 2,798
Annuity benefits ....................................................... 3,582 3,495 3,354
Disability benefits .................................................... 5,630 5,765 5,201
Other benefits ......................................................... 806 853 845
Surrender benefits and fund withdrawals ................................ 11,844 12,538 11,714
Net (decrease) increase in reserves .................................... (1,572) (2,178) 1,251
Commissions ............................................................ 477 535 610
Other expenses ......................................................... 2,690 2,650 3,727
-------- -------- --------
TOTAL BENEFITS AND EXPENSES ............................................ 26,400 26,516 29,500
-------- -------- --------
Operating income before dividends and income taxes ..................... 3,522 3,572 1,866
Dividends to policyholders ............................................. 2,526 2,464 2,290
-------- -------- --------
Operating income (loss) before income taxes ............................ 996 1,108 (424)
Income tax provision ................................................... 51 590 453
-------- -------- --------
INCOME (LOSS) FROM OPERATIONS .......................................... 945 518 (877)
NET REALIZED CAPITAL GAINS (LOSSES) .................................... 457 (183) (24)
-------- -------- --------
NET INCOME (LOSS) ..................................................... $ 1,402 $ 335 $ (901)
======== ======== ========
SURPLUS
SURPLUS, BEGINNING OF YEAR ............................................. 8,668 7,449 8,004
Net income (loss) ...................................................... 1,402 335 (901)
Change in net unrealized capital gains (losses) ........................ 191 661 (51)
Change in non-admitted assets .......................................... (206) 717 82
Change in asset valuation reserve ...................................... 11 (694) 653
Other changes, net ..................................................... (691) 200 (338)
-------- -------- --------
SURPLUS, END OF YEAR ................................................... $ 9,375 $ 8,668 $ 7,449
======== ======== ========
</TABLE>
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
- 1 -
<PAGE>
<TABLE>
<CAPTION>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
STATEMENTS OF CASH FLOWS (STATUTORY BASIS)
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1996 1995 1994
--------- --------- ---------
(In Millions)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Premiums and annuity considerations ...................................... $ 20,669 $ 21,030 $ 23,635
Net investment income .................................................... 8,629 8,511 7,261
Other income received .................................................... 599 479 502
Separate account transfers ............................................... 1,183 1,002 (494)
Benefits and claims paid ................................................. (24,952) (25,524) (24,403)
Policyholders' dividends paid ............................................ (2,453) (2,393) (2,594)
Federal income taxes (paid) received ..................................... (230) (847) 179
Other operating expenses ................................................. (4,224) (3,738) (3,636)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ...................... (779) (1,480) 450
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold, matured, or repaid
Bonds ............................................................... 119,195 93,178 80,668
Stocks .............................................................. 4,328 2,985 4,263
Mortgage loans on real estate ....................................... 3,140 4,997 4,205
Real estate ......................................................... 537 573 935
Net gains (losses) on cash and short-term investments ............... 13 (9) (5)
Miscellaneous proceeds .............................................. 2,128 3,707 2,671
Payments for investments acquired
Bonds ............................................................... (118,009) (101,018) (81,677)
Stocks .............................................................. (6,029) (2,199) (2,312)
Mortgage loans on real estate ....................................... (1,841) (2,810) (3,282)
Real estate ......................................................... (120) (425) (194)
Miscellaneous applications .......................................... (718) (1,213) (1,275)
Net (tax) benefit on capital gains and losses ............................ (622) 107 (275)
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ...................... 2,002 (2,127) 3,722
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments of) proceeds from borrowed money ......................... (44) 123 1
Net proceeds from the issuance of capital notes .......................... 0 686 0
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ..................... (44) 809 1
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS ............... 1,179 (2,798) 4,173
Cash and short-term investments, beginning of year ....................... 4,803 7,601 3,428
--------- --------- ---------
CASH AND SHORT-TERM INVESTMENTS, END OF YEAR ............................. $ 5,982 $ 4,803 $ 7,601
========= ========= =========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest payments of $253 million, $144 million and $85 million were made during
1996, 1995 and 1994, respectively.
SEE NOTES TO STATUTORY FINANCIAL STATEMENTS
- 2 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. ACCOUNTING POLICIES AND PRINCIPLES
A. Business and basis of presentation - The statutory financial
statements include the accounts of The Prudential Insurance Company of
America ("the Company"), a mutual life insurance company. The
activities of the Company include a broad range of financial services,
including life and health insurance, asset management, and investment
advisory services.
These financial statements were prepared on an unconsolidated
statutory basis of accounting, which differs from the 1995 and 1994
financial statements prepared for general distribution on a
consolidated statutory basis of accounting, both of which differ from
generally accepted accounting principles ("GAAP"). The financial
statements for 1995 and 1994 have been restated on an unconsolidated
statutory basis of accounting adopted in 1996 for purposes of general
distribution. Certain reclassifications have been made to the 1995 and
1994 financial statement amounts to conform to the 1996 presentation.
The Company, domiciled in the State of New Jersey, prepares its
statutory financial statements in accordance with accounting practices
prescribed or permitted by the New Jersey Department of Banking and
Insurance ("the Department"). Prescribed statutory accounting
practices include publications of the National Association of
Insurance Commissioners ("NAIC"), state laws, regulations, and general
administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The financial
statements are substantially the same as those included in the
Statutory Annual Statement except for certain reclassifications and
adjustments. These financial statements differ from those filed with
the Department in that changes to estimated income and premium taxes
applicable to prior periods, which are recorded as direct charges or
credits to surplus in the Annual Statement, have been included in the
"Income tax provision" and "Other expenses" in the Statements of
Operations and Changes in Surplus. This item has the net effect of
increasing (decreasing) net income by $396 million, ($143) million and
$6 million in 1996, 1995 and 1994, respectively.
Pursuant to the Financial Accounting Standards Board Interpretation
No. 40 "Applicability of Generally Accepted Accounting Principles to
Mutual Life Insurance and Other Enterprises," as amended, which is
effective for 1996 financial statements, statutory accounting
practices ("SAP") are no longer considered GAAP for mutual life
insurance companies. SAP differs from GAAP primarily as follows:
(a) the Commissioner's Reserve Valuation Method ("CRVM") is used for the
majority of individual insurance reserves under SAP, whereas for
individual insurance, policyholder liabilities are generally
established using the net level premium method under GAAP. Policy
assumptions used in the estimation of policyholder liabilities are
generally prescribed under SAP, but are based upon actual company
experience under GAAP;
(b) for investment-type contracts that do not contain mortality or
morbidity risk and universal life-type contracts, cash receipts are
recorded as premiums and reserves are established using prescribed
reserving methods under SAP. Under GAAP, premium from investment-type
and universal life-type contracts are generally recognized as
deposits. Revenues from these contracts represent amounts assessed
against policyholders and are reported in the period of assessment;
(c) policy acquisition costs are expensed when incurred under SAP rather
than being deferred and charged against earnings over the periods
covered by the related policies;
(d) deferred income taxes are not recorded for the tax effect of temporary
differences between book and tax basis of assets and liabilities under
SAP;
(e) certain "non-admitted assets" must be excluded under SAP through a
charge against surplus, e.g. fixed assets, prepaid pensions and
impaired investments;
(f) investments in the common stock of the Company's wholly-owned
subsidiaries are accounted for using the equity method under SAP
rather than consolidated;
(g) bonds are carried at amortized cost under SAP rather than categorized
as "held to maturity", "available for sale", or "trading". Under GAAP,
bonds classified as "available for sale" and "trading" are carried at
market value;
(h) certain reclassifications would be required with respect to the
balance sheet and statement of cash flows under SAP;
(i) the Asset Valuation Reserve ("AVR") and Interest Maintenance Reserve
("IMR") are required for life insurance companies under SAP.
The following is a summary of accounting practices permitted by the
state of New Jersey and reflected in these financial statements:
o Prescribed statutory accounting practices require Department
approval of each and every interest payment at the time of
payment in order to classify the Company's Capital Notes as a
component of surplus. Otherwise, such notes are required to be
classified as a liability. Interest payments on $300 million in
Capital Notes issued in 1993 are pre-approved by the Department,
and permitted to be classified in surplus.
o The Company sells synthetic guaranteed interest contracts
("GICs") containing minimum investment related guarantees on
qualified pension plan assets. The assets are owned by the
trustees of such plans, who invest the assets
- 3 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
under the terms of investment guidelines agreed to with the
Company. The investment related guarantees may include a minimum
rate of return on the underlying assets and/or a guarantee of
liquidity to meet plan cash flow requirements. The Company, with
the approval of the Department, reports both the plan liabilities
associated with the synthetic GICs and the trust assets
supporting this potential liability. In addition, the Company
files detailed schedules of trust assets and related statements
with the Department. Currently, prescribed statutory accounting
practices do not address accounting for synthetic GICs.
o The Company establishes guaranty fund liabilities for the
insolvencies of certain life insurance companies. The liabilities
are established net of estimated premium tax credits and federal
income tax. Prescribed statutory accounting practices do not
address the establishment of liabilities for guaranty fund
assessments.
B. Divestiture - On July 31, 1996, Prudential sold a substantial portion
of its Canadian Branch business to the London Life Insurance Company
("London Life"). The transaction was structured as an assumption
reinsurance transaction, whereby London Life assumed total liabilities
of the Canadian Branch equal to $3,146 million as well as a related
amount of total assets equal to $3,040 million. A net gain of $138
million was recorded for this transaction.
C. Use of estimates - The preparation of financial statements in
conformity with SAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reported period. Actual results could differ from those
estimates.
D. Investments - Bonds, which consist of long-term bonds, are stated
primarily at amortized cost.
Preferred stock is generally valued at amortized cost.
Common Stock is carried at fair value. Investments in subsidiaries,
which are included in "Common stock", are accounted for using the
equity method. The subsidiaries' change in net assets, excluding
capital contributions and distributions, is included in "Net
investment income." The subsidiaries are engaged principally in the
businesses of life and health insurance, property and casualty
insurance, group health care, securities brokerage, asset management,
investment advisory services, retail banking and real estate and
brokerage.
Mortgage loans on real estate are stated primarily at unpaid principal
balances.
Real estate, except for real estate acquired in satisfaction of debt,
is carried at cost less accumulated straight-line depreciation,
encumbrances and permanent impairments in value. Properties acquired
in satisfaction of debt are valued at lower of depreciated cost or
fair value less disposition costs.
Policy loans and premium notes are stated at unpaid principal
balances.
Cash includes cash on hand, amounts due from banks and money market
instruments. Short term investments, including highly liquid debt
instruments purchased with an original maturity of twelve months or
less, are stated at amortized cost, which approximates fair value.
Other invested assets primarily include the Company's investment in
joint ventures and other forms of partnerships. These investments are
accounted for using the equity method where the Company has the
ability to exercise significant influence over the operating and
financial policies of the entity. The cost method is used for all
other assets.
Derivatives used in asset/liability risk management activities, which
support life and health insurance and annuity contracts, are recorded
at either fair value or statement value, depending upon the underlying
instrument, with unrealized gains and losses recorded in "Change in
net unrealized capital gains (losses)." Upon termination of
derivatives, the interest-related gains and losses are amortized
through the IMR.
E. Separate accounts - These assets and liabilities, reported at
estimated fair value, represent segregated funds invested for pension
and other clients. Investment risks associated with fair value changes
are generally borne by the clients, except to the extent of minimum
guarantees made by the Company with respect to certain accounts.
F. Revenue recognition of insurance income and related expenses - Life
premiums are recognized as income over the premium paying period of
the related policies. Annuity considerations are recognized as revenue
when received. Health premiums are earned ratably over the terms of
the related insurance and reinsurance contracts or policies. Expenses
incurred in connection with acquiring new insurance business,
including such acquisition costs as sales commissions, are charged to
operations as incurred.
- 4 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
G. Policyholder dividends - Substantially all of the policies issued by
the Company are participating. The amount of dividends to be paid to
policyholders is determined annually by the Company's Board of
Directors. The aggregate amount of policyholders' dividends is related
to actual interest, mortality, morbidity, and expense experience for
the year and judgment as to the appropriate level of statutory surplus
to be retained by the Company. Dividends declared by the Board of
Directors which have not been paid are included in "Policy dividends".
2. POLICY LIABILITIES AND INSURANCE RESERVES
A. For life insurance and annuities, future policy benefits and claims
include estimates of benefits and associated settlement expenses on
reported claims and those which are incurred but not reported.
Activity in the liability for unpaid claims and claim adjustment
expenses for accident and health business, which is included in
"Future policy benefits and claims", is as follows:
1996 1995 1994
------- ------- -------
(In Millions)
Balance at January 1 $ 2,636 $ 2,440 $ 2,416
Less reinsurance recoverables 15 23 15
------- ------- -------
Net balance at January 1 2,621 2,417 2,401
------- ------- -------
Incurred related to:
Current year 5,734 5,759 5,398
Prior years (87) 42 (87)
------- ------- -------
Total incurred 5,647 5,801 5,311
------- ------- -------
Paid related to:
Current year 4,135 4,028 3,856
Prior years 1,467 1,569 1,439
------- ------- -------
Total paid 5,602 5,597 5,295
------- ------- -------
Net balance at December 31 2,666 2,621 2,417
Plus reinsurance recoverables 10 15 23
------- ------- -------
Balance at December 31 $ 2,676 $ 2,636 $ 2,440
======= ======= =======
As a result of changes in reserve estimates for insured events of
prior years, the provision for claims and claim adjustment expenses
changed by ($87) million and $42 million in 1996 and 1995,
respectively, due to changes in claim cost trends and changed by ($87)
million in 1994 because of faster-than-expected shrinkage in the
indemnity health business.
B. Reserves for individual life insurance are calculated using various
methods, interest rates and mortality tables, which produce reserves
that meet the aggregate requirements of state laws and regulations.
Approximately 39% of individual life insurance reserves are determined
using the net level premium method, or by using the greater of the net
level premium reserve or the policy cash value. About 52% of
individual life insurance reserves are calculated according to CRVM
or methods which compare CRVM to policy cash values. The remaining
reserves include universal life reserves which are equal to the
greater of the policyholder account value less the unamortized expense
allowance and the policy cash value, or are for supplementary benefits
whose reserves are calculated using methods, interest rates and tables
appropriate for the benefit provided.
For group life insurance, about 56% of the reserves are associated
with extended death benefits. These reserves are primarily calculated
using modified group tables at various interest rates. The remainder
are unearned premium reserves (calculated using the 1960
Commissioner's Standard Group Table), reserves for group life fund
accumulations and other miscellaneous reserves.
Reserves for deferred individual annuity contracts are determined
using the Commissioner's Annuity Reserve Valuation Method. These
account for 72% of the individual annuity reserves. The remaining
reserves are equal to the present value of future payments with the
annuity mortality table and interest rates based on the date of issue
or maturity as appropriate.
Reserves for other deposit funds or other liabilities with life
contingencies reflect the contract deposit account or experience
accumulation for the contract and any purchased annuity reserves.
Accident and health reserves represent the present value of the future
potential payments, adjusted for contingencies and interest. The
remaining material reserves for active life reserves and unearned
premiums are valued using the preliminary term method, gross premium
valuation method, or a pro rata portion of gross premiums. Reserves
are also held for amounts not yet due on hospital benefits and other
coverages.
- 5 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The reserve for guaranteed interest contracts, deposit funds and other
liabilities without life contingencies equal either the present value
of future payments discounted at the guaranteed rate or the fund
value.
Policyholders, at their discretion, may withdraw funds from their
annuity policies. At December 31, 1996 and 1995, approximately 55% of
total annuity actuarial reserves and deposit liabilities of $92,536
million and $95,092 million, respectively, were not subject to
discretionary withdrawal.
3. INCOME TAXES
The Company and its domestic subsidiaries file a consolidated federal income
tax return. The Internal Revenue Code (the "Code") taxes the Company on its
operating income after dividends to policyholders. In calculating this tax,
the Code requires the capitalization and amortization of policy acquisition
expenses.
The Code also imposes an "equity tax" on mutual life insurance companies
which, in effect, imposes an additional amount of taxable income to the
Company. "Income tax provision" includes an estimate for the total equity tax
to be paid with respect to the year. Income from sources outside the United
States is taxed under applicable foreign statutes.
The Internal Revenue Service (the "Service") has completed an examination of
the consolidated federal income tax return through 1989. The Service is
examining the years 1990 through 1992. Discussions are being held with the
Service with respect to proposed adjustments. However, management believes
there are adequate defenses against, or sufficient reserves to provide for,
such adjustments.
4. INVESTED ASSETS
A. Bonds and stocks - The Company invests in both investment grade and
non-investment grade public and private bonds. The Securities
Valuation Office of the NAIC rates the bonds held by insurers for
regulatory purposes and classifies investments into six categories
ranging from highest quality bonds to those in or near default. The
lowest three NAIC categories represent primarily high-yield securities
and are defined by the NAIC as including any security with a public
agency rating equivalent to B+ or B1 or less. Securities in these
lowest three categories approximated 2.8% and 1.0%, of the Company's
bonds at December 31, 1996, 1995, respectively.
The following tables provide additional information relating to bonds
and preferred stock as of December 31:
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
GROSS GROSS ESTIMATED
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
------- ------- ------ -------
Bonds (In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 9,504 $ 353 $ 74 $ 9,783
Obligations of U.S. states and their
political subdivisions 206 7 6 207
Foreign government bonds 2,420 133 11 2,542
Corporate securities 57,282 2,625 323 59,584
Mortgage-backed securities 5,594 131 15 5,710
------- ------- ------- -------
Total $75,006 $ 3,249 $ 429 $77,826
======= ======= ======= =======
Preferred Stock
Redeemable $ 142 $ 3 $ 6 $ 139
Non-redeemable 97 23 0 120
------- ------- ------- -------
Total $ 239 $ 26 $ 6 $ 259
======= ======= ======= =======
</TABLE>
- 6 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1995
--------------------------------------------------
GROSS GROSS
CARRYING UNREALIZED UNREALIZED FAIR
AMOUNT GAINS LOSSES VALUE
------- ------- ------- -------
Bonds (In Millions)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $15,715 $ 1,392 $ 1 $17,106
Obligations of U.S. states and their
political subdivisions 214 22 1 235
Foreign government bonds 3,196 260 1 3,455
Corporate securities 54,411 4,609 97 58,923
Mortgage-backed securities 3,958 241 8 4,191
------- ------- ------- -------
Total $77,494 $ 6,524 $ 108 $83,910
======= ======= ======= =======
Preferred Stock
Redeemable $ 304 $ 16 $ 4 $ 316
Non-redeemable 92 2 0 94
------- ------- ------- -------
Total $ 396 $ 18 $ 4 $ 410
======= ======= ======= =======
</TABLE>
The carrying amount and estimated fair value of bonds at December 31,
1996, categorized by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers
may prepay obligations with or without call or prepayment penalties.
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
(In Millions)
Due in one year or less $ 1,999 $ 2,012
Due after one year through five years 19,125 19,445
Due after five years through ten years 19,406 20,081
Due after ten years 28,882 30,578
------- -------
69,412 72,116
------- -------
Mortgage-backed securities 5,594 5,710
------- -------
Total $75,006 $77,826
======= =======
Proceeds from the sale and maturity of bonds during 1996, 1995 and
1994 were $119,195 million, $93,178 million and $80,668 million,
respectively. Gross gains of $1,516 million, $1,913 million and $618
million and gross losses of $988 million, $782 million and $1,841
million were realized on such sales during 1996, 1995 and 1994,
respectively. Realized gains and losses are determined using the
specific identification method.
B. Mortgage loans on real estate - Mortgage loans on real estate at
December 31 are as follows:
1996 1995
------------------ ------------------
CARRYING PERCENT CARRYING PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ --------
(In Millions)
Commercial and agricultural loans:
In good standing $15,546 91.3% $17,649 87.0%
In good standing
with structured terms 809 4.7% 966 4.8%
Past due 90 days or more 229 1.3% 144 0.7%
In process of foreclosure 68 0.4% 157 0.8%
Residential loans 387 2.3% 1,364 6.7%
------- ----- ------- -----
Total $17,039 100.0% $20,280 100.0%
======= ===== ======= =====
At December 31, 1996, the Company's mortgage loans on real estate were
collateralized by the following property types: office buildings
(34%), retail stores (22%), residential properties (2%), apartment
complexes (18%), industrial buildings (11%), agricultural properties
(9%) and other commercial properties (4%). The maximum percentage of
any one loan to the value of collateral at the time of the loan,
exclusive of insured, guaranteed, purchase money mortgages or
mortgages supported by high credit leases is 80%. The mortgage loans
are geographically dispersed throughout the United States and
- 7 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Canada with the largest concentrations in California (26%) and New
York (8%). Included in these balances are mortgage loans with
affiliated joint ventures of $560 million and $653 million at December
31, 1996 and 1995, respectively.
C. Real estate - Real estate at December 31 was as follows:
1996 1995
------ ------
(In Millions)
Investment real estate $1,201 $1,484
Properties occupied by the Company 525 533
Properties acquired in
satisfaction of debt 368 471
------ ------
Total $2,094 $2,488
====== ======
Accumulated depreciation on real estate was $808 million and $853
million at December 31, 1996 and 1995, respectively.
D. Other invested assets - Other invested assets of $2,591 million and
and $3,304 million as of December 31, 1996 and 1995, respectively,
principally include the Company's net equity in joint ventures and
other forms of partnerships. The Company's share of net income from
other invested assets was $283 million, $240 million and $348 million
for 1996, 1995 and 1994, respectively.
E. Investment in subsidiaries - Included in "Common stock" is the
Company's investment in subsidiaries of $4,610 million and $4,328
million at December 31, 1996 and 1995, respectively. Included in "Net
investment income" for 1996, 1995 and 1994 is $370 million, $143
million and $(936) million, respectively, attributable to
undistributed income (loss) of subsidiaries.
In October 1995, the Company completed the sale of Prudential
Reinsurance Holdings, Inc., through an initial public offering of
common stock. As a result of the sale, an after-tax gain of $72
million was recorded in 1995.
In March 1995, the Company announced its intention to sell its
mortgage banking unit. On January 26, 1996, the Company entered into a
definitive agreement to sell substantially all the assets of
Prudential Home Mortgage Company, Inc. ("PHMC") and it also
liquidated certain mortgage-backed securities and extended warehouse
loans. In 1995, PHMC recorded an after-tax loss of $98 million which
includes operating gains and losses, asset write downs, and other
costs directly related to the sale. The Company continues to have
discussions with prospective buyers for the sale of the remaining
assets.
F. Net unrealized capital gains (losses) - Changes in net unrealized
capital gains (losses), which result principally from changes in the
differences between cost and carrying amounts of invested assets, were
$191 million and $661 million for the years ended December 31, 1996
and 1995, respectively, and are reflected in "Unassigned surplus."
G. Asset valuation reserve and interest maintenance reserve - These
reserves are required for life insurance companies under NAIC
requirements. The AVR is calculated based on a statutory formula and
is designed to mitigate the effect of valuation and credit-related
losses on unassigned surplus. The IMR captures realized capital gains
and losses, net of tax, resulting from changes in the general level of
interest rates. These gains and losses are amortized into net
investment income utilizing grouped amortization schedules over the
expected remaining life of the investments sold. At December 31, 1996,
AVR is comprised of 68% for bonds, stocks, and short-term investments;
17% for mortgage loans on real estate; and 15% for real estate and
other invested assets. The IMR balance at December 31, 1996 and 1995
was $1,365 million and $1,163 million, respectively, and is recorded
in "Other liabilities". During 1996, 1995 and 1994, $327 million, $766
million and ($910) million, respectively, of net realized capital
gains (losses) were deferred and $126 million, $82 million and $102
million, respectively, was amortized and included in income.
H. Restricted assets and special deposits - Assets in the amounts of $941
million and $5,072 million at December 31, 1996 and 1995,
respectively, were on deposit with governmental authorities or
trustees as required by law. Assets valued at $2,994 million and
$3,121 million at December 31, 1996 and 1995, respectively, were
maintained as compensating balances or pledged as collateral for bank
loans and other financing agreements. Letter stock or other securities
restricted as to sale amounted to $720 million in 1996 and $354
million in 1995.
I. Loan backed and structured securities - A retrospective method is
employed to recalculate the values of the loan backed and structured
securities holdings with the exception of interest only bonds. Each
acquisition lot was reviewed to recalculate the effective yield. The
recalculated effective yield was used to derive a book value as if the
new yield were applied at the time of acquisition. Outstanding
principal
- 8 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
factors from the time of acquisition to adjustment date were used to
calculate the prepayment history for all applicable securities.
Conditional prepayment rates, computed with life to date factor
histories and weighted average maturities, were used to affect the
calculation of projected payments for pass through, interest only and
principal only security types. Interest only bond adjustments are
developed on a prospective basis with adjustments made for permanent
impairments if needed.
J. Securities lending is a program whereby the Company loans securities
to third parties, primarily major brokerage firms. As of December 31,
1996 and 1995, the estimated fair values of loaned securities were
$6,362 million and $5,939 million respectively. Company and NAIC
policies require a minimum of 102% and 105% of the fair value of the
domestic and foreign loaned securities, respectively, to be separately
maintained as collateral for the loans. Cash collateral received is
invested in short-term investments. The offsetting collateral
liability as of December 31, 1996 and 1995 is $4,813 million and
$3,625 million, respectively. Non-cash collateral is not reflected in
the Statements of Admitted Assets, Liabilities and Surplus.
5. EMPLOYEE BENEFIT PLANS
A. Pension plans - The Company has several defined benefit pension plans,
which cover substantially all of its employees. Benefits are generally
based on career average earnings and credited length of service. The
Company's funding policy for U.S. plans is to contribute annually the
amount necessary to satisfy the Internal Revenue Service contribution
guidelines.
Employee pension benefit plan status is as follows:
1996 1995
------- -------
(In Millions)
Actuarial present value of benefit obligation:
Vested benefit obligation $(3,878) $(3,270)
======= =======
Accumulated benefit obligation $(4,174) $(3,572)
======= =======
Projected benefit obligation $(4,989) $(4,330)
Plan assets at fair value 7,326 6,688
------- -------
Plan assets in excess of projected
benefit obligation 2,337 2,358
Unrecognized transition amount (769) (904)
Unrecognized prior service cost 356 199
Unrecognized net gain (916) (753)
------- -------
Prepaid pension cost $ 1,008 $ 900
======= =======
Plan assets consist primarily of equity securities, bonds, real estate
and short-term investments, of which $5,668 million and $4,788 million
are included in separate account assets and liabilities at December
31, 1996 and 1995, respectively.
The components of the net periodic pension benefit for 1996, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In Millions)
<S> <C> <C> <C>
Service cost $ 119 $ 110 $ 141
Interest cost 336 371 293
Actual return on assets (720) (1,249) 62
Net amortization and deferral 57 604 (633)
Net curtailment gains and special termination benefits 63 0 156
------ ------ ------
Net periodic pension benefit $ (145) $ (164) $ 19
====== ====== ======
</TABLE>
The net increase to surplus relating to the Company's pension plans is
$37 million, $30 million and $0 million in 1996, 1995 and 1994,
respectively, which considers the changes in the non-admitted prepaid
pension asset of $108 million, $134 million and ($19) million,
respectively.
The accounting assumptions used by the Company were:
AS OF SEPTEMBER 30,
------------------------
1996 1995 1994
------ ------ ------
Discount rate 7.75% 7.50% 8.50%
Rate of increase in compensation levels 4.50% 4.50% 5.50%
Expected long-term rate of return on assets 9.50% 9.00% 9.00%
The Company maintains non-qualified supplemental retirement plans
providing benefits that may not be paid from the Company's two
qualified plans since qualified plans have limits imposed by Section
415 and 401(a)(17) of the Code. One of these plans also provides
certain participants with a subsidized early retirement benefit.
- 9 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
B. Postretirement benefits - The Company provides certain life insurance
and health care benefits for its retired employees. Substantially all
of the Company's employees may become eligible to receive these
benefits if they retire after age 55 with at least 10 years of
service.
Postretirement benefits are accounted for in accordance with
prescribed NAIC policy. The Company has elected to amortize its
transition obligation over 20 years. During 1996, 1995 and 1994,
funding of its postretirement benefit obligations totaled $35 million,
$47 million and $31 million, respectively.
The postretirement benefit plan status is as follows:
SEPTEMBER 30,
------------------
1996 1995
---- ----
(In Millions)
Accumulated postretirement benefit obligation for:
Retirees $(1,418) $(1,465)
Fully eligible active plan participants (35) (103)
Plan assets at fair value 1,341 1,309
------- -------
Funded status (112) (259)
Unrecognized transition amount 355 378
Unrecognized net gain (177) (19)
------- -------
Prepaid postretirement benefit cost $ 66 $ 100
======= =======
Plan assets consist of group and individual variable life insurance
policies, group life and health contracts and short-term investments,
of which $1,003 million and $990 million are included in the separate
account assets and liabilities at December 31, 1996 and 1995,
respectively.
Net periodic postretirement benefit cost for 1996, 1995 and 1994
includes the following components:
1996 1995 1994
----- ----- -----
(In Millions)
Service cost $ 24 $ 30 $ 36
Interest cost 115 117 107
Actual return on plan assets (104) (144) (98)
Amortization of transition obligation 22 22 23
Other 12 49 52
----- ----- -----
Net periodic postretirement benefit cost $ 69 $ 74 $ 120
===== ===== =====
The net reduction to surplus relating to the Company's postretirement
benefit plans is $35 million, $46 million, and $30 million in 1996,
1995 and 1994, respectively, which considers the changes in the
prepaid postretirement benefit cost of $34 million, $28 million and
$90 million in 1996 , 1995 and 1994, respectively.
The assumptions used for the postretirement benefit plan were:
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.75% 7.50% 8.50%
Expected long-term rate of return on plan assets 9.00% 8.00% 9.00%
Rate of increase in compensation levels 4.50% 4.50% 5.50%
Health care cost trend rates 8.50-12.50% 8.90-13.30% 9.10-13.90%
Ultimate health care cost trend rate at 2006 5.00% 5.00% 6.00%
</TABLE>
A 1% increase in health care cost trend rates would increase the
September 30, 1996 accumulated postretirement benefit obligation and
service/interest costs by $115 million and $12 million, respectively.
C. Postemployment benefits - The Company accrues for postemployment
benefits primarily for life and health benefits provided to former or
inactive employees who are not retirees. The net accumulated liability
for these benefits at December 31, 1996 and 1995 was $99 million and
$96 million, respectively.
- 10 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
6. NOTES PAYABLE AND OTHER BORROWINGS
Notes payable and other borrowings consisted of the following at December
31:
Short-term: 1996 1995
---- ----
(In Millions)
Notes payable to affiliate $ 99 $ 0
Current portion of long term
notes payable 11 128
---- ----
$110 $128
Long-Term: 1996 1995
---- ----
8.173% note due 2002 $249 $249
7.501% note due 1999 248 248
5.0819% note due 2004 56 66
12.00% note due 1999 0 16
Secured demand note
due 1998 100 100
---- ----
653 679
---- ----
Total principal repayments and accrued interest $763 $807
==== ====
Scheduled principal repayments as of December 31, 1996, are as
follows: $110 million in 1997, $100 million in 1998, $239 million in
1999, $0 in 2000, $0 in 2001 and $294 million thereafter.
7. SURPLUS
A. Capital notes - The Company issues Capital Notes that are subordinate
in right of payment to policy claims, prior claims and senior
indebtedness. A summary of the outstanding Capital Notes as of
December 31, 1996 is as follows:
PRINCIPAL CARRYING INTEREST MATURITY
ISSUE DATE (PAR) AMOUNT RATE DATE
- ---------- --------- -------- -------- --------
(In Millions)
April 28, 1993 $ 300 $ 299 6.875% April 15, 2003
July 1, 1995 350 340 8.300% July 1, 2025
July 1, 1995 250 246 7.650% July 1, 2007
July 15, 1995 100 100 8.100% July 15, 2015
------- -----
Total $ 1,000 $ 985
======= =====
B. Special surplus fund - In accordance with the requirements of various
states, a special surplus fund has been established for contingency
reserves of $1,268 million and $1,274 million as of December 31, 1996
and 1995, respectively.
C. Non-admitted assets - Non-admitted assets were $1,367 million and
$1,167 million as of December 31, 1996 and 1995, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values presented below have been determined using available
information and reasonable valuation methodologies. Considerable judgment
is applied in interpreting data to develop the estimates of fair value.
Accordingly, such estimates presented may not be realized in a current
market exchange. The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair values.
The following methods and assumptions were used in calculating the fair
values. (For all other financial instruments, the carrying value is a
reasonable estimate of fair value.)
Bonds and preferred stock - Fair values for bonds and preferred stock,
other than private placement securities, are based on quoted market
prices or estimates from independent pricing services. Fair values for
private placement securities are estimated using a discounted cash
flow model which considers the current market spreads between the U.S.
Treasury yield curve and corporate bond yield curve, adjusted for the
type of issue, its current credit quality and its remaining average
life. The fair value of certain non-performing private placement
securities is based on amounts provided by state regulatory
authorities.
Common stock - Fair value of unaffiliated common stock is based on
quoted market prices, where available, or prices provided by state
regulatory authorities.
- 11 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Mortgage loans on real estate - The fair value of residential
mortgages is based on recent market trades or quotes, adjusted where
necessary for differences in risk characteristics. The fair value of
the commercial mortgage and agricultural loan portfolio is primarily
based upon the present value of the scheduled cash flows discounted at
the appropriate U.S. Treasury rate, adjusted for the current market
spread for a similar quality mortgage. For certain non-performing and
other loans, fair value is based upon the value of the underlying
collateral.
Policy loans and premium notes - The estimated fair value of policy
loans is calculated using a discounted cash flow model based upon
current U.S. Treasury rates and historical loan repayments.
Derivative financial instruments - The fair value of swap agreements
is estimated based on the present value of future cash flows under the
agreements discounted at the applicable zero coupon U.S. Treasury rate
and swap spread. The fair value of forwards, futures and options is
estimated based on market quotes for a transaction with similar terms.
The fair value of loan commitments is derived by comparing the
contractual future stream of fees with such fee streams adjusted to
reflect current market rates that would be applicable to instruments
of similar type, maturity and credit standing.
Investment-type insurance contract liabilities - Fair values for the
Company's investment-type insurance contract liabilities are estimated
using a discounted cash flow model, based on interest rates currently
being offered for similar contracts. Carrying amounts are included in
"Future policy benefits and claims."
Notes payable and other borrowings - The estimated fair value of notes
payable is derived using discount rates based on the borrowing rates
currently available to the Company for debt with similar terms and
remaining maturities.
The following table discloses the carrying amounts and estimated fair
values of the Company's financial instruments at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
(In Millions)
FINANCIAL ASSETS:
<S> <C> <C> <C> <C>
Bonds $75,006 $77,826 $77,494 $83,910
Preferred stock 239 259 396 410
Common stock * 2,466 2,466 1,805 1,805
Mortgage loans on real estate 17,039 17,364 20,280 20,839
Policy loans and premium notes 6,023 5,942 6,208 6,452
Short-term investments 5,817 5,817 4,633 4,633
Cash 165 165 170 170
Assets held in separate accounts 57,797 57,797 53,903 53,903
Derivative financial instruments 9 16 15 64
FINANCIAL LIABILITIES:
Investment-type insurance
contracts 30,194 30,328 34,799 35,720
Notes payable and other borrowings 763 794 807 829
Liabilities related to separate accounts 57,436 57,436 53,256 53,256
Derivative financial instruments 60 63 94 108
</TABLE>
* Excludes investments in subsidiaries of $4,610 million and $4,328 million
at December 31, 1996 and 1995, respectively.
- 12 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
9. DERIVATIVE AND OFF-BALANCE SHEET CREDIT-RELATED INSTRUMENTS
A. Derivative financial instruments - Derivatives include swaps,
forwards, futures, options and fixed-rate loan commitments subject to
market risk, all of which are used by the Company in the normal course
of business in activities other than trading. The Company does not
issue or hold derivatives for trading purposes. This classification is
based on management's intent at the time of contract inception and
throughout the life of the contract. The Company uses derivatives
primarily for asset/liability risk management and to reduce exposure
to interest rate, currency and other market risks. Of those
derivatives held at December 31,1996, 35% of the notional amounts
consisted of interest rate derivatives and 65% consisted of foreign
currency derivatives.
The tables below summarize the Company's outstanding positions on a
gross basis before netting pursuant to rights of offset, qualifying
master netting agreements with counterparties or collateral
arrangements at December 31:
<TABLE>
<CAPTION>
DERIVATIVE FINANCIAL INSTRUMENTS
1996 1995
---- ----
(In Millions)
CARRYING ESTIMATED CARRYING ESTIMATED
NOTIONAL AMOUNT FAIR VALUE NOTIONAL AMOUNT FAIR VALUE
-------- ------ ---------- -------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Swaps:
Assets $ 159 $ 1 $ 6 $ 418 $ (1) $ 32
Liabilities 479 50 53 371 76 79
Forwards:
Assets 453 8 8 235 13 17
Liabilities 980 9 9 1,074 13 13
Futures:
Assets 0 0 0 683 5 5
Liabilities 399 1 1 864 5 7
Options:
Assets 175 0 0 195 0 0
Liabilities 0 0 0 3 0 0
Loan Commitments:
Assets 164 0 2 122 (2) 10
Liabilities 9 0 0 532 0 9
------ ------ ------ ------ ------ ------
Total:
Assets $ 951 $ 9 $ 16 $1,653 $ 15 $ 64
====== ====== ====== ====== ====== ======
Liabilities $1,867 $ 60 $ 63 $2,844 $ 94 $ 108
====== ====== ====== ====== ====== ======
</TABLE>
B. Off-balance sheet credit-related instruments - During the normal
course of its business, the Company utilizes financial instruments
with off-balance sheet credit risk such as commitments, financial
guarantees and letters of credit. Commitments include variable rate
commitments to purchase and sell mortgage loans and the unfunded
portion of commitments to fund investments in private placement
securities. The Company also provides financial guarantees incidental
to other transactions and letters of credit that guarantee the
performance of customers to third parties. These credit-related
financial instruments have off-balance sheet credit risk because only
their origination fees, if any, and accruals for probable losses, if
any, are recognized until the obligation under the instrument is
fulfilled or expires. These instruments can extend for several years
and expirations are not concentrated in any period. The Company seeks
to control credit risk associated with these instruments by limiting
credit, maintaining collateral where customary and appropriate, and
performing other monitoring procedures.
The notional amount of these instruments, which represents the
Company's maximum exposure to credit loss from other parties'
non-performance, was $785 million and $1,254 million at December 31,
1996 and 1995, respectively. Because many of these amounts expire
without being advanced in whole or in part, the notional amounts do
not represent future cash flows.
The estimated fair value of these instruments, which represents the
Company's current exposure to credit loss from other parties'
non-performance, was $8 million and $56 million at December 31, 1996
and 1995, respectively.
10. RELATED PARTY TRANSACTIONS
A. Service agreements - The Company has entered into service agreements
with various subsidiaries. Under these agreements, the Company
furnishes services of officers and employees and provides supplies,
use of equipment, office space, and makes payment to
- 13 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
third parties for general expenses, state and local taxes. The
agreements obligate the subsidiaries to reimburse the Company for the
approximate cost of providing such services. The amounts receivable
from subsidiaries, reported in "Other assets" at December 31, 1996 and
1995, were $490 million and $509 million, respectively. The
subsidiaries also furnish similar services to the Company in
connection with such agreements. The amount payable to subsidiaries,
reported in "Other liabilities" at December 31, 1996 was $87 million.
There was no outstanding balance at December 31, 1995.
Certain of the Company's group health care subsidiaries provide health
insurance to certain employees of the Company. Enrollment contract
costs reported in "Other expenses" were $126 million, $111 million and
$104 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company purchases corporate owned life insurance policies from one
of its life insurance subsidiaries for certain employees. The premium
charged for these policies reported in "Other expenses" was $3
million, $12 million and $12 million for the years ended December 31,
1996, 1995 and 1994, respectively. The cash value associated with
these policies was $118 million and $102 million at December 31,
1996 and 1995, respectively.
Certain of the Company's subsidiaries perform services for the Company
in connection with the Company's obligations under investment advisory
or subadvisory agreements. The costs incurred in connection with
performing such services, primarily reported in "Other expenses," were
$145 million, $327 million and $342 million for the years ended
December 31, 1996, 1995 and 1994, respectively. The Company also
provides these services to subsidiaries in connection with such
agreements. The investment advisory fees received from affiliates by
the Company, reported in "Other income" were $161 million, $92 million
and $110 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
The Company borrows short-term funds from Prudential Funding
Corporation ("Funding"), a wholly owned subsidiary. The interest
expense for these borrowings was $131 million, $66 million and $21
million for the years ended December 31, 1996, 1995 and 1994,
respectively. The outstanding balance at December 31, 1996 was $99
million. There was no outstanding balance at December 31, 1995.
B. Net worth maintenance agreement - The Company has entered into a
support agreement with Funding under which it agrees to maintain
Funding's tangible net worth, including subordinated debt, at not less
than $1.00. As of December 31, 1996, the tangible net worth of Funding
was $44 million. Since the inception of the agreement, no support
payments have been required.
11. CONTINGENCIES
The Company is reviewing its obligations under certain managed care
arrangements for possible failure to comply with contractual and regulatory
requirements. It is the opinion of management that appropriate reserves
have been established in accordance with applicable accounting standards to
provide for appropriate reimbursements to customers.
Various lawsuits against the Company have arisen in the course of the
Company's business. In certain of these matters, large and/or indeterminate
amounts are sought.
Twenty-six purported class actions and over 280 individual actions are
pending against the Company on behalf of those persons who purchased life
insurance policies allegedly because of deceptive sales practices engaged
in by the Company and its insurance agents in violation of state and
federal laws. The Company anticipates additional suits may be filed by
individuals who opted out of the class action settlement described below.
The sales practices alleged to have occurred are contrary to Company
policy. Some of these cases seek very substantial damages while others seek
unspecified compensatory, punitive and treble damages. The Company intends
to defend these cases vigorously.
A Multi-State Life Insurance Task Force (the "Task Force"), comprised of
insurance regulators from 29 states and the District of Columbia, was
created to conduct a review of sales and marketing practices throughout the
life insurance industry. As the largest life insurance company in the
United States, the Company was the initial focus of the Task Force
examination. On July 9, 1996, the Task Force released its report on the
Company's activities. In it, the Task Force found that some sales of life
insurance policies made by the Company were improper. The report criticizes
the Company's training, oversight, discipline and compliance programs
related to insurance sales. Based on these findings, the Task Force
recommended, and the Company agreed to, a series of fines allocated to all
50 states and the District of Columbia amounting to a total of $35 million.
In addition, the Task Force recommended a remediation program pursuant to
which the Company would offer relief to policyowners who purchased 10.7
million whole life insurance policies in the United States from the Company
from 1982 through 1995. In subsequent negotiations with several states, the
Company agreed to pay additional amounts aggregating approximately $30
million by way of fine, reimbursement of investigation expenses and costs
associated with outreach to residents of Florida and California.
On October 28, 1996, the Company entered into a Stipulation of Settlement
with attorneys for the plaintiffs in the class actions consolidated in a
Multi-District Litigation involving alleged improprieties in connection
with the Company's sale of whole life
- 14 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
insurance policies from 1982 through 1995. Pursuant to the proposed
settlement, the Company has agreed to provide certain enhancements and
changes to the remediation program previously accepted by the Multi-State
Task Force, including some additional remedies. In addition, the Company
agreed that a minimum cost of $410 million (which was recorded in the
Statement of Operations and Changes in Surplus) would be incurred in
providing remedies to policyowners under the program, and agreed to certain
other payments and guarantees. Under the terms of the guarantees, the
Company has agreed that the average cost per remedy will not be less than
$2,364 for up to 330,000 claims remedied. For claims remedied in excess of
330,000, the Company has not guaranteed an average cost per remedy. The
Company has also agreed to provide additional compensation to be
distributed by formula that will range in an aggregate amount from $50
million to $300 million depending on the total number of claims remedied.
The Company cannot predict how many claims ultimately will be remedied. The
Company has also recorded in the Statement of Operations and Changes in
Surplus, its estimate of the minimum administrative costs related to the
remediation program. As of March 5, 1997, all 50 states and the District of
Columbia have directed the Company to offer a remediation plan based on the
program accepted by the Task Force and containing many of the enhancements
of the class action settlement.
Also on October 28, 1996, the U.S. District Court of the District of New
Jersey, in which the Multi-District Litigation is pending, conditionally
certified a class for settlement purposes and scheduled a hearing on the
fairness, reasonableness and adequacy of the proposed settlement. This
hearing was held on February 24, 1997. On March 7, 1997, the Court
rendered its decision approving the settlement. The owners of approximately
23,000 policies have taken steps to exclude themselves from the class
action and are not bound by the settlement.
To date, the Company has mailed packages to 8.5 million policyowners
eligible for the remediation program, informing policyowners in all 50
states and the District of Columbia of their rights under the program. The
deadline for electing to participate in the Alternative Dispute Resolution
Process ("ADR") or Basic Claim Relief is June 1, 1997. Policyowners who
believe that they were misled can file a claim through the ADR.
Policyowners who do not believe they were misled, or who do not wish to
file a claim under the ADR, may choose from several options available under
Basic Claim Relief, such as preferred rate premium loans, or the purchase
of enhanced annuities, mutual fund shares or life insurance policies.
It is not possible on any reliable basis to estimate how many policyowners
will participate in the settlement. The cost of the settlement is dependent
upon complex and varying factors, including the number of policyowners that
participate in the settlement, the relief options chosen and the ultimate
dollar value of the settlement. The administrative costs to the Company of
remediation of policyowner claims are also subject to a number of complex
uncertainties in addition to the unknown quantity and cost of policyowner
claims. In light of the uncertainties attendant to these and other factors,
management is unable to make a reasonable estimate of the ultimate cost of
the remediation program to the Company.
A purported class action was brought against the Company and certain
subsidiaries alleging common law fraud, negligent misrepresentation and
violations of the New Jersey RICO statute arising out of the plaintiffs'
purchase of certain subordinated mortgage pass-through securities and
seeking compensatory and punitive damages and injunctive relief. The
Company will deny the substantive allegations of the complaint in its
answer and will vigorously defend the suit. The case is at a preliminary
stage, and management is not now in a position to predict the outcome or
effect of the litigation.
Litigation is subject to many uncertainties, and given the complexity and
scope of these suits, their outcome cannot be predicted. It is also not
possible to predict the likely results of any regulatory inquiries or their
effect on litigation which might be initiated in response to widespread
media coverage of these matters. Accordingly, management is unable to make
a meaningful estimate of the amount or range of loss that could result from
an unfavorable outcome of all pending litigation and the regulatory
inquiries. It is possible that the results of operations or the cash flow
of the Company, in particular quarterly or annual periods, could be
materially affected by an ultimate unfavorable outcome of certain pending
litigation and regulatory matters. Management believes, however, that the
ultimate outcome of all pending litigation and regulatory matters referred
to above should not have a material adverse effect on the Company's
financial position, after consideration of applicable reserves.
In 1993, Prudential Securities, Inc. ("PSI"), a subsidiary of Prudential,
entered into an agreement with the Securities and Exchange Commission, the
National Association of Securities Dealers, Inc., and state securities
commissions whereby PSI agreed to pay $330 million into a settlement fund
to pay eligible claims on certain limited partnership matters. Under this
agreement, if partnership matter claims exceed the established settlement
fund, PSI is obligated to pay such additional claims. The agreement also
required PSI to take measures to enhance the adequacy of its sales
practices compliance controls.
In October 1994, the United States Attorney for the Southern District of
New York (the "U.S. Attorney") filed a complaint against PSI in connection
with its sale of certain limited partnerships. Simultaneously, PSI entered
into an agreement to comply with certain conditions for a period of three
years, and to pay an additional $330 million into the settlement fund. At
the end of the three year period, assuming PSI has fully complied with the
terms of the agreement, the U.S. Attorney will institute no further action.
In the opinion of management, PSI is in compliance with all provisions of
the aforementioned agreements.
- 15 -
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
NOTES TO STATUTORY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The Company has entered into a reinsurance agreement with The Prudential
Life Insurance Company, Ltd., a wholly owned subsidiary, under which it has
agreed to reinsure certain individual life insurance policies through a
yearly renewable term contract. The reinsurance assumed premiums and
reserves for 1996 were $27 million and $17 million, respectively.
The Company as a result of the sale of Prudential Reinsurance Inc. (a PRUCO
Inc. subsidiary), agreed to guarantee up to $775 million of Gibraltar
Casualty Company (a Prudential subsidiary) obligations with respect to a
Stop Loss Agreement and PRUCO Inc.'s (a Prudential subsidiary) payment
obligations under an Indemnity Agreement, subject to maximum aggregate
payments of $400 million. The maximum aggregate payments under the
Prudential Guarantee of the Gibraltar Casualty Company obligations will be
reduced in certain circumstances to take account of payments made and
collateral provided in respect of the guaranteed obligations. The Stop Loss
Agreement is intended to mitigate the impact on Prudential Reinsurance Inc.
of adverse development of loss reserves, as of June 30, 1995, of up to $375
million of the first $400 million of adverse development. The Company has
recorded a loss reserve of $175 million as of December 31, 1996.
Gibraltar Casualty Company and other property and casualty insurance
subsidiaries receive claims under expired contracts which assert alleged
injuries and/or damages relating to or resulting from toxic torts, toxic
waste and other hazardous substances. The liabilities for such claims
cannot be estimated by traditional reserving techniques. As a result of
judicial decisions and legislative actions, the coverage afforded under
these contracts may be expanded beyond their original terms. Extensive
litigation between insurers and insureds over these issues continues and
the outcome is not predictable. In establishing the unpaid claim reserves
for these losses, management considered the available information and
established these reserves in accordance with applicable accounting
standards. However, given the expansion of coverage and liability by the
courts and legislatures in the past, and potential for other unfavorable
trends in the future, the ultimate cost of these claims could increase from
the levels currently established.
The Company and a number of other insurers (the "Consortium") entered into
a Reinsurance and Participation Agreement ("the Agreement") with MBL Life
Assurance Corporation ("MBLLAC") and others, under which the Company and
the other insurers agreed to reinsure certain payments to be made to
contractholders by MBLLAC in connection with the plan of rehabilitation of
Mutual Benefit Life Insurance Company. Under the Agreement, the Consortium,
subject to certain terms and conditions, will indemnify MBLLAC for the
ultimate net loss sustained by MBLLAC on each contract subject to the
Agreement. The ultimate net loss represents the amount by which the
aggregate required payments exceed the fair market value of the assets
supporting the covered contracts at the time such payments are due. The
Company's share of any net loss is 30.55%. The Company has determined that
it does not expect to make any payments to MBLLAC under the agreement. The
Company concluded this after testing a wide range of potentially adverse
scenarios during the rehabilitation period for MBLLAC.
******
- 16 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Policyholders of
The Prudential Insurance Company of America
We have audited the accompanying statement of admitted assets, liabilities and
surplus (statutory basis) of The Prudential Insurance Company of America as of
December 31, 1996, and the related statements of operations and changes in
surplus (statutory basis), and of cash flows (statutory basis) for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the New Jersey Department
of Insurance, which practices differ from generally accepted accounting
principles. The effects on the financial statements of the variances between the
statutory basis of accounting and generally accepted accounting principles,
although not reasonably determinable, are presumed to be material.
In our opinion, because of the effects of the matters referred to in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of The Prudential Insurance Company of America at December
31, 1996, and the results of its operations and its cash flows for the year then
ended.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the admitted assets, liabilities and surplus of The
Prudential Insurance Company of America at December 31, 1996, and the results of
its operations and its cash flows for the year then ended, on the basis of
accounting described in Note 1.
/s/ PRICE WATERHOUSE, LLP
New York, New York
March 10, 1997
- 17 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Prudential Insurance Company of America
Newark, New Jersey
We have audited the accompanying statement of admitted assets, liabilities and
surplus--statutory basis of The Prudential Insurance Company of America as of
December 31, 1995, and the related statements of operations and changes in
surplus--statutory basis, and cash flows--statutory basis for each of the two
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our report dated March 1, 1996, we expressed an opinion that the 1995 and
1994 financial statements, prepared using accounting practices prescribed and
permitted by the New Jersey Department of Insurance, presented fairly, in all
material respects, the financial position of The Prudential Insurance Company of
America as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles. As described in Note 1 to these financial statements,
pursuant to the pronouncements of the Financial Accounting Standards Board, the
1995 and 1994 financial statements of The Prudential Insurance Company of
America, prepared using accounting practices prescribed or permitted by
insurance regulators (statutory financial statements) are no longer considered
presentations in conformity with generally accepted accounting principles. The
effects on the financial statements of the differences between the statutory
basis of accounting and generally accepted accounting principles are material
and are also described in Note 1. Accordingly, our present opinion on the
presentation of the 1995 and 1994 financial statements in accordance with
generally accepted accounting principles, as presented herein, is different from
that expressed in our previous report.
In our opinion, because of the effects of the matter discussed in the third
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the admitted assets,
liabilities and surplus of the Company as of December 31, 1995, and its
operations, changes in surplus and its cash flows for each of the two years in
the period ended December 31, 1995.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the admitted assets, liabilities and surplus
of The Prudential Insurance Company of America as of December 31, 1995, and the
results of its operations, changes in surplus and its cash flows for each of the
two years in the period then ended, on the basis of accounting described in Note
1.
Also, as described in Note 1 to the financial statements, these financial
statements were prepared on an unconsolidated statutory basis of accounting,
which differs from the 1995 and 1994 financial statements prepared for general
distribution on a consolidated statutory basis of accounting, both of which
differ from generally accepted accounting principles. The financial statements
for 1995 and 1994 have been restated on an unconsolidated statutory basis of
accounting adopted in 1996 for purposes of general distribution. Further, these
financial statements differ from the previously issued unconsolidated statutory
financial statements because certain permitted financial statement presentation
practices are no longer being used.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 1, 1996, except for Note 1A,
as to which the date is March 10, 1997
- 18 -
<PAGE>
PRUDENTIAL'S
VARIABLE APPRECIABLE LIFE(R)
INSURANCE
[LOGO] PRUDENTIAL
The Prudential Insurance Company of America
751 Broad Street, Newark, NJ 07102-2992
Telephone: (800) 437-4016, Ext. 46
<PAGE>
PART II
OTHER INFORMATION
<PAGE>
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 WITH RESPECT TO CHARGES
The Prudential Insurance Company of America represents that the fees and charges
deducted under the Variable Appreciable Life Insurance Contracts registered by
this registration statement, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred, and the risks assumed
by Prudential.
UNDERTAKING WITH RESPECT TO INDEMNIFICATION
The Prudential Directors' and Officers' Liability and Corporation Reimbursement
Insurance program, purchased by Prudential from Aetna Casualty & Surety Company,
CNA Insurance Companies, Lloyds of London, Great American Insurance Company,
Reliance Insurance Company, Corporate Officers & Directors Assurance Ltd.,
A.C.E. Insurance Company, Ltd., XL Insurance Company, Ltd., and Zurich-American
Insurance Company, provides reimbursement for "Loss" (as defined in the
policies) which the Company pays as indemnification to its directors or officers
resulting from any claim for any actual or alleged act, error, misstatement,
misleading statement, omission, or breach of duty by persons in the discharge of
their duties in their capacities as directors or officers of Prudential, any of
its subsidiaries, or certain investment companies affiliated with Prudential.
Coverage is also provided to the individual directors or officers for such Loss,
for which they shall not be indemnified. Loss essentially is the legal liability
on claims against a director or officer, including adjudicated damages,
settlements and reasonable and necessary legal fees and expenses incurred in
defense of adjudicatory proceedings and appeals therefrom. Loss does not include
punitive or exemplary damages or the multiplied portion of any multiplied damage
award, criminal or civil fines or penalties imposed by law, taxes or wages, or
matters which are uninsurable under the law pursuant to which the policies are
construed.
There are a number of exclusions from coverage. Among the matters excluded are
Losses arising as the result of (1) claims brought about or contributed to by
the criminal, dishonest or fraudulent acts or omissions or the willful violation
of any law by a director or officer, (2) claims based on or attributable to
directors or officers gaining personal profit or advantage to which they were
not legally entitled, and (3) claims arising from actual or alleged performance
of, or failure to perform, services as, or in any capacity similar to, an
investment adviser, investment banker, underwriter, broker or dealer, as those
terms are defined in the Securities Act of 1933, the Securities Exchange Act of
1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940,
any rules or regulations thereunder, or any similar federal, state or local
statute, rule or regulation.
The limit of coverage under the program for both individual and corporate
reimbursement coverage is $150,000,000. The retention for corporate
reimbursement coverage is $10,000,000 per loss.
The relevant provisions of New Jersey law permitting or requiring
indemnification, New Jersey being the state of organization of Prudential, can
be found in Section 14A:3-5 of the New Jersey Statutes Annotated. The text of
Prudential's by-law 26, which relates to indemnification of officers and
directors, is incorporated by reference to Exhibit 1.A.(6)(b) of Post-Effective
Amendment No. 1 to Form S-6, Registration No. 33-61079, filed April 25, 1996, on
behalf of The Prudential Variable Appreciable Account.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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.
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
- ------------------------------------------------------------------------
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 75 pages.
The undertaking to file reports.
The representation with respect to charges.
The undertaking with respect to indemnification.
The signatures.
Written consents of the following persons:
1. Deloitte & Touche LLP, independent auditors.
2. Price Waterhouse LLP, independent accountants.
3. Clifford E. Kirsch, Esq.
4. Pam A. Schiz, FSA, MAAA.
The following exhibits:
1. The following exhibits correspond to those required by paragraph A of
the instructions as to exhibits in Form N-8B-2:
A. (1) Resolution of Board of Directors of The Prudential Insurance
Company of America establishing The Prudential Variable
Appreciable Account. (Note 4)
(2) Not Applicable.
(3) Distributing Contracts:
(a) Distribution Agreement between Pruco Securities
Corporation and The Prudential Insurance Company of
America. (Note 1)
(b) Proposed form of Agreement between Pruco Securities
Corporation and independent brokers with respect to the
Sale of the Contracts. (Note 4)
(c) Schedules of Sales Commissions. (Note 1)
(4) Not Applicable.
(5) Variable Appreciable Life Insurance Contracts: (Note 1)
(a) With fixed death benefit for use in New Jersey and
domicile approval states.
(b) With variable death benefit for use in New Jersey and
domicile approval states.
(c) With fixed death benefit for use in non-domicile
approval states.
(d) With variable death benefit for use in non-domicile
approval states.
(6) (a) Charter of The Prudential Insurance Company of America,
as amended November 14, 1995. (Note 8)
(b) By-laws of The Prudential Insurance Company of America,
as amended April 8, 1997. (Note 9)
(7) Not Applicable.
(8) Not Applicable.
(9) Not Applicable.
(10) (a) Application Form. (Note 7)
(b) Supplement to the Application for Variable Appreciable
Life Insurance Contract. (Note 1)
(11) Form of Notice of Withdrawal Right. (Note 1)
(12) Memorandum describing Prudential's issuance, transfer, and
redemption procedures for the Contracts pursuant to Rule
6e-3(T)(b)(12)(iii) and method of computing adjustments in
payments and cash surrender values upon conversion to
fixed-benefit policies pursuant to Rule
6e-3(T)(b)(13)(v)(B). (Note 1)
II-2
<PAGE>
(13) Available Contract Riders and Endorsements:
(a) Rider for Insured's Waiver of Premium Benefit.
(Note 1)
(b) Rider for Applicant's Waiver of Premium Benefit.
(Note 1)
(c) Rider for Insured's Accidental Death Benefit.
(Note 1)
(d) Rider for Level Term Insurance Benefit on Life of
Insured. (Note 1)
(e) Rider for Decreasing Term Insurance Benefit on Life
of Insured. (Note 6)
(f) Rider for Interim Term Insurance Benefit. (Note 1)
(g) Rider for Option to Purchase Additional Insurance on
Life of Insured. (Note 1)
(h) Rider for Decreasing Term Insurance Benefit on Life
of Insured Spouse. (Note 6)
(i) Rider for Level Term Insurance Benefit on Dependent
Children. (Note 1)
(j) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions. (Note 1)
(k) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions or Attained Age
Change. (Note 1)
(l) Endorsement defining Insured Spouse. (Note 1)
(m) Rider covering lack of Evidence of Insurability on a
Child. (Note 1)
(n) Rider modifying Waiver of Premium Benefit. (Note 1)
(o) Rider to terminate a Supplementary Benefit. (Note 1)
(p) Rider providing for election of Variable Reduced
Paid-up Insurance. (Note 1)
(q) Rider to provide for exclusion of Aviation Risk.
(Note 1)
(r) Rider to provide for exclusion of Military Aviation
Risk. (Note 1)
(s) Rider to provide for exclusion for War Risk.
(Note 1)
(t) Rider to provide for Reduced Paid-up Insurance.
(Note 1)
(u) Rider providing for Option to Exchange Policy.
(Note 1)
(v) Endorsement defining Ownership and Control of the
Contract. (Note 1)
(w) Rider providing for Modification of Incontestability
and Suicide Provisions. (Note 1)
(x) Endorsement issued in connection with Non-Smoker
Qualified Contracts. (Note 1)
(y) Endorsement issued in connection with Smoker
Qualified Contracts. (Note 1)
(z) Home Office Endorsement. (Note 1)
(aa) Endorsement showing Basis of Computation for
Non-Smoker Contracts. (Note 1)
(bb) Endorsement showing Basis of Computation for Smoker
Contracts. (Note 1)
(cc) Rider for Term Insurance Benefit on Life of Insured
--Decreasing Amount After Three Years. (Note 1)
(dd) Rider for Renewable Term Insurance Benefit on Life
of Insured. (Note 1)
(ee) Rider for Level Term Insurance Benefit on Life of
Insured Spouse. (Note 1)
(ff) Living Needs Benefit Rider
(i) for use in Florida. (Note 1)
(ii) for use in all approved jurisdictions except
Florida and New York. (Note 1)
(iii) for use in New York. (Note 1)
(gg) Rider for Renewable Term Insurance Benefit on Life
of Insured Spouse. (Note 1)
(hh) Rider for Level Term Insurance Benefit on Life of
Insured--Premium Increases Annually. (Note 1)
(ii) Rider for Term Insurance Benefit on Life of
Insured--Decreasing Amount. (Note 1)
(jj) Rider for a Level Premium Option. (Note 1)
(kk) Payment of Unscheduled Premium Benefit (Note 1)
(ll) Rider for Scheduled Term Insurance Benefit on Life
of Insured. (Note 1)
(mm) Endorsement altering the Assignment provision.
(Note 2)
(nn) Rider for Non-Convertible Term Insurance Benefit on
Life of Insured Spouse. (Note 6)
(oo) Rider for Convertible Term Insurance Benefit on Life
of Insured Spouse. (Note 6)
(pp) Rider for Level Term Insurance Benefit on Life of
Insured--Premium Increases Annually (Note 6)
(qq) Rider for Non-Convertible Term Insurance Benefit on
Life of Insured. (Note 6)
(rr) Rider for Convertible Term Insurance Benefit on Life
of Insured. (Note 6)
2. See Exhibit 1.A.(5).
II-3
<PAGE>
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the legality of
the securities being registered. (Note 1)
4. None.
5. Not Applicable.
6. Opinion and Consent of Pam A. Schiz, FSA, MAAA, as to actuarial
matters pertaining to the securities being registered. (Note 1)
7. Powers of Attorney.
(a) F. Agnew, F. Becker, M. Berkowitz, J.Cullen
C. Davis, R. Enrico, A. Gilmour, W. Gray, III, M. Grier
J. Hanson, C. Horner, B. Malkiel, A. Ryan, C. Sitter
D. Staheli, R. Thomson, J. Unruh, P. Vagelos
S. Van Ness, P. Volcker, J. Williams (Note 5)
(b) G. Hiner, Jr. (Note 9)
27. Financial Data Schedule. (Note 1)
(Note 1) Filed herewith.
(Note 2) Incorporated by reference to Post-Effective Amendment No. 14 to
this Registration Statement, filed February 15, 1995.
(Note 3) Incorporated by reference to Form S-6 Registration Statement,
Registration No. 33-61079, filed July 17, 1995 on behalf of The
Prudential Variable Appreciable Account.
(Note 4) Incorporated by reference to Post-Effective Amendment No. 15 to
this Registration Statement filed May 1, 1995.
(Note 5) Incorporated by reference to Pre-Effective Amendment No. 1 to Form
S-6, Registration No. 333- 01031, filed August 22, 1996 on behalf of
The Prudential Variable Contract Account GI-2.
(Note 6) Incorporated by reference to Post-Effective Amendment No. 18 to
this Registration Statement, filed December 26, 1996.
(Note 7) Incorporated by reference to Form S-6, Registration No. 333-07451,
filed July 2, 1996 on behalf of the Pruco Life Variable Appreciable
Account.
(Note 8) Incorporated by reference to Post-Effective Amendment No. 9 to
Form S-1, Registration No. 33- 20083, filed April 9, 1997 on behalf
of The Prudential Variable Contract Real Property Account.
(Note 9) Incorporated by reference to Post-Effective Amendment No. 12 to
Form N-4, Registration No. 33- 25434, filed on or about April 25,
1997 on behalf of The Prudential Individual Variable Contract
Account.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Prudential Variable Appreciable Account, certifies that this Amendment is filed
solely for one or more of the purposes specified in Rule 485(b)(1) under the
Securities Act of 1933 and that no material event requiring disclosure in the
prospectus, other than one listed in Rule 485(b)(1), has occurred since the
effective date of the most recent Post-Effective Amendment to the Registration
Statement which included a prospectus, and has caused this Post-Effective
Amendment No. 19 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, and its seal hereunto affixed and
attested, all in the city of Newark and the State of New Jersey, on this 25th
day of April, 1997.
(Seal) THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
(Registrant)
By: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
(Depositor)
Attest: /s/ THOMAS C. CASTANO By: /s/ ESTHER H. MILNES
----------------------------- -----------------------------
Thomas C. Castano Esther H. Milnes
Assistant Secretary Vice President and Actuary
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 19 to the Registration Statement has been signed below by the
following persons in the capacities indicated on this 25th day of April, 1997.
SIGNATURE AND TITLE
-------------------
/s/ *
- -------------------------------------
Arthur F. Ryan
Chairman of the Board, President,
and Chief Executive Officer
/s/ *
- -------------------------------------
Martin A. Berkowitz
Senior Vice President and Comptroller
/s/ *
- -------------------------------------
Mark B. Grier *By: /s/ THOMAS C. CASTANO
Principal Financial Officer -----------------------------
Thomas C. Castano
(Attorney-in-Fact)
/s/ *
- -------------------------------------
Franklin E. Agnew
Director
/s/ *
- -------------------------------------
Frederic K. Becker
Director
/s/ *
- -------------------------------------
James G. Cullen
Director
/s/ *
- -------------------------------------
Carolyne K. Davis
Director
/s/ *
- -------------------------------------
Roger A. Enrico
Director
/s/*
- -------------------------------------
Allan D. Gilmour
Director
II-5
<PAGE>
/s/ *
- -------------------------------------
William H. Gray, III
Director
/s/ *
- -------------------------------------
Jon F. Hanson
Director
/s/ *
- -------------------------------------
Glen H. Hiner, Jr.
Director
/s/ *
- -------------------------------------
Constance J. Horner
Director
- -------------------------------------
Gaynor N. Kelley
Director
/s/ *
- -------------------------------------
Burton G. Malkiel *By: /s/ THOMAS C. CASTANO
Director -----------------------------
Thomas C. Castano
(Attorney-in-Fact)
- -------------------------------------
Ida F. S. Schmertz
Director
/s/*
- -------------------------------------
Charles R. Sitter
Director
/s/*
- -------------------------------------
Donald L. Staheli
Director
/s/ *
- -------------------------------------
Richard M. Thomson
Director
/s/ *
- -------------------------------------
James A. Unruh
Director
/s/ *
- -------------------------------------
P. Roy Vagelos, M.D.
Director
/s/ *
- -------------------------------------
Stanley C. Van Ness
Director
/s/ *
- -------------------------------------
Paul A. Volcker
Director
/s/ *
- -------------------------------------
Joseph H. Williams
Director
II-6
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
<C> <S> <C>
Consent of Deloitte & Touche LLP, independent auditors. Page II-10
Consent of Price Waterhouse LLP, independent accountants. Page II-11
1.A.(3)(a) Distribution Agreement between Pruco Securities Corporation
and The Prudential Insurance Company of America. Page II-12
1.A.(3)(c) Schedules of Sales Commissions. Page II-18
1.A.(5)(a) Variable Appreciable Life Contract with fixed death
benefit for use in New Jersey and domicile approval
states. Page II-20
1.A.(5)(b) Variable Appreciable Life Contract with variable
death benefit for use in New Jersey and domicile
approval states. Page II-57
1.A.(5)(c) Variable Appreciable Life Contract with fixed death benefit
for use in non-domicile approval states. Page II-92
1.A.(5)(d) Variable Appreciable Life Contract with variable death benefit
for use in non-domicile approval states. Page II-129
1.A.(10)(b) Supplement to the Application for Variable Appreciable Life
Insurance Contract. Page II-164
1.A.(11) Form of Notice of Withdrawal Right. Page II-165
1.A.(12) Memorandum describing Prudential's issuance,
transfer, and redemption procedures for the Contracts
pursuant to Rule 6e-3(T)(b)(12)(iii) and method of
computing adjustments in payments and cash surrender
values upon conversion to fixed-benefit policies
pursuant to Rule 6e-3(T)(b)(13)(v)(B). Page II-167
1.A.(13)(a) Rider for Insured's Waiver of Premium Benefit. Page II-176
1.A.(13)(b) Rider for Applicant's Waiver of Premium Benefit. Page II-178
1.A.(13)(c) Rider for Insured's Accidental Death Benefit. Page II-181
1.A.(13)(d) Rider for Level Term Insurance Benefit on Life of Insured. Page II-182
1.A.(13)(f) Rider for Interim Term Insurance Benefit. Page II-184
1.A.(13)(g) Rider for Option to Purchase Additional Insurance on Life
of Insured. Page II-185
1.A.(13)(i) Rider for Level Term Insurance Benefit on Dependent
Children. Page II-188
1.A.(13)(j) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions. Page II-191
1.A.(13)(k) Rider for Level Term Insurance Benefit on Dependent
Children--from Term Conversions or Attained Age Change. Page II-194
II-7
<PAGE>
<CAPTION>
<C> <S> <C>
1.A.(13)(l) Endorsement defining Insured Spouse. Page II-197
1.A.(13)(m) Rider covering lack of Evidence of Insurability on a Child. Page II-198
1.A.(13)(n) Rider modifying Waiver of Premium Benefit. Page II-199
1.A.(13)(o) Rider to terminate a Supplementary Benefit. Page II-200
1.A.(13)(p) Rider providing for election of Variable Reduced Paid-up
Insurance. Page II-201
1.A.(13)(q) Rider to provide for exclusion of Aviation Risk. Page II-202
1.A.(13)(r) Rider to provide for exclusion of Military Aviation Risk. Page II-203
1.A.(13)(s) Rider to provide for exclusion for War Risk. Page II-204
1.A.(13)(t) Rider to provide for Reduced Paid-up Insurance. Page II-205
1.A.(13)(u) Rider providing for Option to Exchange Policy. Page II-206
1.A.(13)(v) Endorsement defining Ownership and Control of the
Contract. Page II-208
1.A.(13)(w) Rider providing for Modification of Incontestability and
Suicide Provisions. Page II-209
1.A.(13)(x) Endorsement issued in connection with Non-Smoker Qualified
Contracts. Page II-210
1.A.(13)(y) Endorsement issued in connection with Smoker Qualified
Contracts. Page II-211
1.A.(13)(z) Home Office Endorsement. Page II-212
1.A.(13)(aa) Endorsement showing Basis of Computation for Non-Smoker
Contracts. Page II-213
1.A.(13)(bb) Endorsement showing Basis of Computation for Smoker
Contracts. Page II-214
1.A.(13)(cc) Rider for Term Insurance Benefit on Life of
Insured--Decreasing Amount After Three Years. Page II-215
1.A.(13)(dd) Rider for Renewable Term Insurance Benefit on Life of
Insured. Page II-220
1.A.(13)(ee) Rider for Level Term Insurance Benefit on Life of Insured
Spouse. Page II-223
1.A.(13)(ff)(i) Living Needs Benefit Rider for use in Florida. Page II-227
1.A.(13)(ff)(ii) Living Needs Benefit Rider for use in all approved
jurisdictions except Florida and New York. Page II-230
1.A.(13)(ff)(iii) Living Needs Benefit Rider for use in New York. Page II-233
1.A.(13)(gg) Rider for Renewable Term Insurance Benefit on Life of
Insured Spouse. Page II-235
II-8
<PAGE>
<CAPTION>
<C> <S> <C>
1.A.(13)(hh) Rider for Level Term Insurance Benefit on Life of
Insured--Premium Increases Annually. Page II-239
1.A.(13)(ii) Rider for Term Insurance Benefit on Life of
Insured--Decreasing Amount. Page II-242
1.A.(13)(jj) Rider for a Level Premium Option. Page II-245
1.A.(13)(kk) Payment of Unscheduled Premium Benefit. Page II-247
1.A.(13)(ll) Rider for Scheduled Term Insurance Benefit on Life
of Insured. Page II-250
3. Opinion and Consent of Clifford E. Kirsch, Esq. as to the
legality of the securities being registered. Page II-252
6. Opinion and Consent of Pam A. Schiz, FSA, MAAA, as to
actuarial matters pertaining to the securities being
registered. Page II-253
27. Financial Data Schedule. Page II-254
</TABLE>
II-9
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 19 to Registration
Statement No. 33-20000 on Form S-6 of The Prudential Variable Appreciable
Account of The Prudential Insurance Company of America of our report dated
February 15, 1996, relating to the financial statements of Prudential Variable
Appreciable Account, and of our report dated March 1, 1996, except for Note 1A,
as to which the date is March 10, 1997 relating to the statutory financial
statements of The Prudential Insurance Company of America appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 25, 1997
II-10
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Post-Effective Amendment No. 19 to the registration statement on Form S-6
(the "Registration Statement") of our report dated March 31, 1997,
relating to the financial statements of Prudential Variable Appreciable
Account, which appears in such Prospectus.
We also consent to the use in the Prospectus constituting part of this
Registration Statement of our report dated March 10, 1997, relating to
the statutory financial statements of Prudential Insurance Company of
America, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in the
Prospectus.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 24, 1997
II-11
EXHIBIT 1.A.(3)(a)
DISTRIBUTION AGREEMENT - VARIABLE LIFE INSURANCE CONTRACTS
AGREEMENT made this 1st day of February 1988, by and between The Prudential
Insurance Company of America, a New Jersey corporation ("Company"), on its own
behalf and on behalf of The Prudential Variable Life Insurance Account and The
Prudential Variable Appreciable Life Insurance Account (collectively,
"Accounts") and Pruco Securities Corporation, a New Jersey corporation
("Distributor").
WITNESSETH:
WHEREAS, the Company has established and maintains The Prudential Variable
Life Insurance Account and The Prudential Variable Appreciable Life Insurance
Account, separate investment accounts, pursuant to the laws of New Jersey for
the purpose of selling scheduled premium variable life insurance contracts and
flexible premium variable life insurance contracts (collectively, "Contracts"),
respectively, to commence after the effectiveness of respective Registration
Statements filed with the Securities and Exchange Commission on Form S-6
pursuant to the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Account will be registered as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, Distributor is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "Securities Exchange Act") and is a member of the
National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, the Company and the Distributor wish to enter into an agreement to
have the Distributor act as the Company's principal underwriter for the sale of
the Contracts through the Account;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of the Distributor
The Company agrees that during the term of this Agreement it will take all
action which is required to cause the Contracts to comply as an insurance
product and a registered security with all applicable federal and state laws and
regulations. The Company appoints the Distributor and the Distributor agrees to
act as the principal
II-12
<PAGE>
-2-
underwriter for the sale of Contracts to the public, during the term of this
Agreement, in each state and other jurisdictions in which such Contracts may
lawfully be sold. Distributor shall offer the Contracts for sale and
distribution at premium rates set by the Company. Applications for the Contracts
shall be solicited only by representatives duly and appropriately licensed or
otherwise qualified for the sale of such Contracts in each state or other
jurisdiction. Company shall undertake to appoint Distributor's qualified
representatives as life insurance agents of Company. Completed applications for
Contracts shall be transmitted directly to the Company for acceptance or
rejection in accordance with underwriting rules established by the Company.
Initial premium payments under the Contracts shall be made by check payable to
the Company and shall be held at all times by Distributor or its representatives
in a fiduciary capacity and remitted promptly to the Company. Anything in this
Agreement to the contrary notwithstanding, the Company retains the ultimate
right to control the sale of the Contracts and to appoint and discharge life
insurance agents of the Company. The Distributor shall be held to the exercise
of reasonable care in carrying out the provisions of this Agreement.
2. Sales Agreements
Distributor is hereby authorized to enter into separate written agreements,
on such terms and conditions as Distributor may determine not inconsistent with
this Agreement, with one or more organizations which agree to participate in the
distribution of either or both of the Contracts. Such organization (hereafter
"Dealer") shall be both registered as a broker/dealer under the Securities
Exchange Act and a member of NASD. Dealer and its agents or representatives
soliciting applications for Contracts shall be duly and appropriately licensed,
registered or otherwise qualified for the sale of such Contracts (and the riders
and other policies offered in connection therewith) under the insurance laws and
any applicable blue-sky laws of each state or other jurisdiction in which the
Company is licensed to sell the Contracts.
Distributor shall have the responsibility for ensuring that Dealer
supervises its representatives. Dealer shall assume any legal responsibilities
of Company for the acts, commissions or defalcations of such representatives
insofar as they relate to the sale of the Contracts. Applications for Contracts
solicited by such Dealer through
II-13
<PAGE>
-3-
its agents or representatives shall be transmitted directly to the Company, and
if received by Distributor, shall be forwarded to Company. All premium payments
under the Contracts shall be made by check to Company and, if received by
Distributor, shall be held at all times in a fiduciary capacity and remitted
promptly to Company.
3. Life Insurance Licensing
Company shall be responsible for insuring that Brokers are duly qualified,
under the insurance laws of the applicable jurisdictions, to sell the Contracts.
4. Suitability
Company wishes to ensure that Contracts sold by Distributor will be issued
to purchasers for whom the Contract will be suitable. Distributor shall take
reasonable steps to ensure that the various representatives appointed by it
shall not make recommendations to an applicant to purchase a contract in the
absence of reasonable grounds to believe that the purchase of the Contract is
suitable for such applicant. While not limited to the following, a determination
of suitability shall be based on information furnished to a representative after
reasonable inquiry of such applicant concerning the applicant's insurance and
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make the premium payments contemplated by the
Contracts.
5. Promotion Materials
Company shall have the responsibility for furnishing to Distributor and its
representatives sales promotion materials and individual sales proposals related
to the sale of the Contracts. Distributor shall not use any such materials that
have not been approved by Company.
6. Compensation
Company shall arrange for the payment of commissions directly to those
registered representatives of Distributor who are entitled thereto in connection
with the sale of the Contracts on behalf of Distributor, in the amounts and on
such terms and conditions as Company and Distributor shall determine; provided
that such terms, conditions and commissions shall be as are set forth in or
II-14
<PAGE>
-4-
as are not inconsistent with the Prospectus included as part of the Registration
Statement for the Contracts and effective under the 1933 Act.
Company shall arrange for the payment of commissions directly to those
Brokers who sell Contracts under agreements entered into pursuant to paragraph
2 hereof, in amounts as may be agreed to by the Company and specified in such
written agreements.
Company shall reimburse Distributor for the costs and expenses incurred by
Distributor in furnishing or obtaining the services, materials and supplies
required by the terms of this Agreement in the initial sales efforts and the
continuing obligations hereunder.
7. Records
Distributor shall have the responsibility for maintaining the records of
representatives licensed, registered and otherwise qualified to sell the
Contracts. Distributor shall maintain such other records as are required of it
by applicable laws and regulations. The books, accounts, and records of Company,
the Account and Distributor shall be maintained so as to clearly and accurately
disclose the nature and details of the transactions. All records maintained by
the Distributor in connection with this Agreement shall be the property of the
Company and shall be returned to the Company upon termination of this Agreement,
free from all claims or retention of rights by the Distributor. The Distributor
shall keep confidential any information obtained pursuant to this Agreement and
shall disclose such information, only if the Company has authorized such
disclosure, or if such disclosure is expressly required by applicable federal or
state regulatory authorities.
8. Investigation and Proceeding
(a) Distributor and Company agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Contracts distributed under this Agreement. Distributor and
Company further agree to cooperate fully in any securities regulatory
investigation or proceeding with respect to Company, Distributor, their
affiliates and their agents or representatives to the extent that such
investigation or proceeding is in connection with Contracts
II-15
<PAGE>
-5-
distributed under this Agreement. The Distributor shall furnish applicable
federal and state regulatory authorities with any information or reports in
connection with its services under this Agreement which such authorities may
request in order to ascertain whether the Company's operations are being
conducted in a manner consistent with any applicable law or regulations.
(b) In the case of a substantive customer complaint, Distributor and
Company will cooperate in investigating such complaint and any response to such
complaint will be sent to the other party to this Agreement for approval not
less than five business days prior to its being sent to the customer or
regulatory authority, except that if a more prompt response is required, the
proposed response shall be communicated by telephone or telegraph.
9. Termination
This Agreement shall terminate automatically upon its assignment without
the prior written consent of both parties. This Agreement may be terminated at
any time by either party on 60 days' written notice to the other party, without
the payment of any penalty. Upon termination of this Agreement all
authorizations, rights and obligations shall cease except the obligation to
settle accounts hereunder, including commissions on premiums subsequently
received for Contracts in effect at time of termination, and the agreements
contained in paragraph 8 hereof.
10. Regulation
This Agreement shall be subject to the provisions of the 1940 Act and the
Securities Exchange Act of the rules, regulations, and rulings thereunder and of
the applicable rules and regulations of the NASD, from time to time in effect,
and the terms hereof shall be interpreted and construed in accordance therewith.
11. Severability
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
II-16
<PAGE>
-6-
12. Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE PRUDENTIAL LIFE INSURANCE COMPANY
OF AMERICA
BY:____________[signature]___________
Second Vice President
PRUCO SECURITIES CORPORATION
BY:____________[signature]___________
President
II-17
EXHIBIT 1a(3)(c)
Commission Schedule For Variable Appreciable Life Insurance Contracts
I. District Agencies
A. First year commissions on contracts issued on the following insureds:
Commission as Percentage
Insured of Scheduled Premiums
------- ---------------------
Under Age 60 50%
Age 60-69 45%
Age 70-75 40%
B. Commissions on renewal scheduled premiums in contract years two
through four, whether paid or not, are 7%;
C. On premiums paid in excess of the first scheduled premium, a
commission of 3% will be paid until the client has paid premiums equal
to ten years of scheduled premiums, and 2% thereafter.
II. ORDINARY AGENCIES
A. First year commissions are the same as those stated above for District
Agencies.
B. Commissions on renewal scheduled premiums on contracts sold through
Ordinary Agencies depend on the classification of the selling agent.
1. For agents in categories T (Career agent - ICP/TAP), W (Career
agent - temporary ACCUM), and Y (Career agent - temporary), the
following commission schedule on renewal scheduled premiums
applies.
Commission as Percentage of Scheduled Premiums
----------------------------------------------
12% in contract years two through four; 3% in contract
years five through ten
II-18
<PAGE>
-2-
2. For agents in categories A (Asst. Mgr. or Assoc. mgr.), B
(Broker), G (Part-Time Special Agent), K (Retired Agent), M
(Manager), P (part-Time Special AGENT), S (Surplus Broker), and U
(Manager), the commission rate on renewal scheduled premiums is
5% for contract years two through ten.
3. For agents in categories F (Asst. Mgr. or Assoc. Mgr., Special),
E (Full-Time Agents, PCAP), V (Full-Time Career Agents), and N
(Agent Emeritus), the following commission schedule on renewal
scheduled premiums applies:
Cornmission as Percentage
of Scheduled Premiums
---------------------
10% in contract years two
through four; 3% in contract years five through ten
4. Agents with less than three years of service may be paid on a
different basis. Agents who meet certain productivity,
profitability, and persistency standards with regard to the sale
of the contracts will be eligible for additional compensation.
III. The registered representatives of Prudential-Bache Securities, Inc. will be
paid the following commissions on contracts they sell: the same as stated
above for District Agencies for first year scheduled premiums, and 5% of
the second through tenth year scheduled premiums. They will also be paid 3%
of premiums paid in excess of scheduled premiums until the client has paid
premiums equal to ten years of scheduled premiums, and 2% thereafter.
IV. In the event a contract lapses or is surrendered within the first two
contract years, a portion or all of the first year commission may be
subject to recapture by The Prudential. If the contract lapses at the end
of year one, 30% of the commission is subject to recapture. A higher
percentage of the first year commission may be recaptured on earlier
lapses. A lower and decreasing portion of the first year commission is
subject to recapture throughout the second contract year.
V. The Contract may also be sold through other broker-dealers authorized by
Prusec and applicable law to do so. Registered representatives of such
other broker-dealers may be paid on a different basis than that stated
above.
II-19
EXHIBIT 1.A.(5)(a)
- --------------------------------------------------------------------------------
The Prudential Insurance Company of America
[Prudential Logo] a mutual life insurance company
Corporate Office, Newark, New Jersey
Insured JOHN DOE XX XXX XXX Policy Number
SEP 10, 1988 Contract Date
Face Amount $50,000--
Premium Period LIFE
Agency R-NK 1
- --------------------------------------------------------------------------------
We will pay the beneficiary the proceeds of this contract promptly if we
receive due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The proceeds arising from the Insured's death will be the insurance amount,
plus the amount of any extra benefit arising from the Insured's death (unless
the contract is in default or there is contract debt). The insurance amount may
be fixed or variable depending on the payment of premiums, the investment
experience of the variable investment options, any excess interest credited to
the fixed investment options, and the charges made. But it will not be less than
the face amount. (We describe the insurance amount on page 16.)
The cash value may increase or decrease daily depending on the payment of
premiums, the investment experience of the variable investment options, any
excess interest credited to the fixed investment options, and the charges made.
There is no guaranteed minimum.
We specify a schedule of premiums. Additional premiums may be paid at your
option subject to the limitations in the contract.
Please read this contract with care. A summary is on page 5. If there is
ever a question about it, or if there is a claim, just see one of our agents or
get in touch with one of our offices.
Right to Cancel contract.--You may return this contract to us within:
(1) 10 days after you get it, or (2) 45 days after Part 1 of the application was
signed, or (3) 10 days after we mail or deliver to you any withdrawal right
notice required by the Securities and Exchange Commission, whichever is latest.
All you have to do is take the contract or mail it to one of our offices or to
the agent who sold it to you. It will be canceled from the start and we will
promptly give you the value of your contract fund on the date you return the
contract to us. We will also give back any charges we made in accord with this
contract.
Signed for Prudential.
/s/ SPECIMEN /s/ SPECIMEN
---------------------- ------------------------
Secretary President
Modified Premium Variable Whole Life Insurance Policy. Insurance payable
only upon death. Scheduled premiums payable throughout Insured's lifetime.
Provision for optional additional premiums. Cash values reflect premium
payments, investment results and charges. Death benefit guaranteed if scheduled
premiums duly paid and no contract debt or withdrawals. Increase in face amount
at attained age 21 if contract issued at age 14 or lower. Eligible for annual
dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VALA--88
II-20
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ............................................................. 3
List of Contract Minimums;
List of Supplementary Benefits, if any; Summary
of Face Amount; Schedule of Premiums; Schedule
of Deduction from Premium Payments; Schedule
of Monthly Deductions from the Contract Fund;
Schedule of Other Charges; Schedule of
Maximum Surrender Charges; Table of Maximum
Monthly Rates; List of Investment Options;
Schedule of Initial Allocation of Invested Premium
Amounts;
Tabular Values ............................................................ 4
Contract Summary .......................................................... 5
Table of Basic Amounts
General Provisions......................................................... 6
Definitions; The Contract; Contract
Modifications; Ownership and Control;
Suicide Exclusion; Currency; Misstatement
of Age or Sex; Incontestability; Assignment;
Annual Report; Increase in Face Amount
at Age 21 for Contracts Issued at Age 14
or Lower; Payment of Death Claim; Change in Plan
Beneficiary................................................................ 8
Premium Payment and Reinstatement.......................................... 8
Payment of Premiums; Basic Premiums; Charge
for Applicable Taxes; Scheduled Premiums;
Unscheduled Premiums; Invested Premium
Amount; Contract Change Date(s); Allocations;
Premium Account; Default; Grace Period;
Reinstatement
Face Amount Changes and Withdrawals ....................................... 12
Face Amount; Increase in Face
Amount; Decrease in Face Amount;
Withdrawals
Dividends ................................................................. 14
Participation; Dividend Options; Dividend Credits
Described; Settlement
Separate Account .......................................................... 15
Separate Account; Variable Investment Options;
Separate Account Investments
Fixed Investment Options .................................................. 16
Transfers ................................................................. 16
Insurance Amount .......................................................... 16
Contract Fund ............................................................. 16
Contract Fund Defined; Guaranteed Interest;
Excess Interest, Charge for Extra Rating Class;
Charge for Extra Benefits; Monthly Deduction
Contract Value Options .................................................... 18
Benefit After the Grace Period; Extended
Insurance; Fixed Reduced Paid-up
Insurance; Variable Reduced Paid-up Insurance
Computations; Optional Benefit; Cash Value
Option; Tabular Values
Loans ..................................................................... 21
Loan Requirements; Contract Debt; Loan
Value; Interest Charge; Fixed Loan Rate Option;
Variable Loan Rate Option; Repayment; Effect
of a Loan; Excess Contract Debt; Postponement
of Loan
Settlement Options ........................................................ 23
Payee Defined; Choosing an Option;
Options Described; First Payment Due Date;
Residue Described;
Withdrawal of Residue; Designating
Contingent Payee(s);
Changing Options; Conditions;
Death of Payee
Automatic Mode of Settlement .............................................. 26
Applicability; Interest on Proceeds;
Settlement at Payee's Death; Spendthrift and
Creditor
Income Tables ............................................................. 27
Voting Rights ............................................................. 28
Home Office Locations ..................................................... 28
Any supplementary benefits and a copy of the application follow page 28.
(VALA--88)
Page 2H
II-21
<PAGE>
CONTRACT DATA
Insured's Sex and Issue Age M-35
Insured JOHN DOE XX XXX XXX Policy Number
Face Amount $50,000-- SEP 10, 1988 Contract Date
Premium Period LIFE
Agency R-NK 1
Beneficiary CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
Fixed Loan Interest Rate
LIST OF CONTRACT MINIMUMS
The minimum unscheduled premium is $25.
The minimum increase in face amount is $25,000.
The minimum decrease in face amount is $10,000.
The minimum face amount is $50,000.
***** END OF LIST *****
LIST OF SUPPLEMENTARY BENEFITS
***** NONE *****
SUMMARY OF FACE AMOUNT
EFFECTIVE RATING CONTRACT CHANGE
AMOUNT DATE CLASS DATE
Initial $50,000-- SEP 10, 1988 NONSMOKER SEP 10, 2018
***** END OF SUMMARY *****
SCHEDULE OF PREMIUMS
Scheduled premiums are equal to the basic premium plus the charge for applicable
taxes. The initial scheduled premium due on the contract date is $454.59. Due
dates of scheduled premiums occur on the contract date and at intervals of 12
months after that date.
Basic Premiums are $ 445.50 each
Changing on SEP 10, 2018 to $ 2299.00 each
***** END OF SCHEDULE *****
VAL--88 PAGE 3
II-22
<PAGE>
POLICY NO. XX XXX XXX
SCHEDULE OF DEDUCTIONS FROM PREMIUM PAYMENTS
From each premium paid, we first deduct a charge for applicable taxes (other
than taxes discussed on page 17) of 2%. We reserve the right to change this
percentage to conform to changes in the law or if the insured changes residence.
From the remainder, we deduct a charge for payment processing of up to $2.00.
After deduction of this amount, the balance is the invested premium amount.
***** END OF SCHEDULE *****
SCHEDULE OF MONTHLY DEDUCTIONS FROM THE CONTRACT FUND
The maximum monthly deduction, which provides for administration expenses, sales
expenses, the guaranteed minimum death benefit and the expected cost of
mortality, is equal to:
(a) $6.56, changing on Sep 10, 2018 to $15.83, plus
(b) an amount equal to the maximum monthly rate (see Table of Maximum
Monthly Rates) multiplied by the coverage amount (described on page
18).
***** END OF SCHEDULE *****
***** SCHEDULE OF OTHER CHARGES *****
There is a charge of up to $15 for any withdrawal or decrease in face amount.
***** END OF SCHEDULE *****
SCHEDULE OF MAXIMUM SURRENDER CHARGES
For full surrender at the beginning of the contract year indicated, the maximum
charge we will deduct from the contract fund is shown below. For surrender at
other times, the amount of the charge will reflect the number of days since the
beginning of the contract year. For any decrease in face amount, we will deduct
a proportionate part of the surrender charge.
Year of Surrender Year of Surrender
Surrender Charge Surrender Charge
- --------- --------- --------- ---------
1 457.00 6 457.00
2 457.00 7 365.50
3 457.00 8 274.00
4 457.00 9 183.00
5 457.00 10 91.50
11 And Later Zero
***** END OF SCHEDULE *****
VAL--88(H) PAGE 3A
II-23
<PAGE>
POLICY NO. XX XXX XXX
TABLE OF MAXIMUM MONTHLY RATES PER $1000
FOR MONTHLY DEDUCTION (SEE PAGE 18)
Insured's Maximum Insured's Maximum
Attained Age Rate Attained Age Rate
- ------------ ------- ------------ ---------
35 0.1439 68 2.4893
36 0.1514 69 2.7438
37 0.1614 70 3.0317
38 0.1722 71 3.3603
39 0.1839 72 3.7397
40 0.1980 73 4.1690
41 0.2130 74 4.6407
42 0.2288 75 5.1449
43 0.2463 76 5.6774
44 0.2654 77 6.2340
45 0.2870 78 6.8180
46 0.3103 79 7.4478
47 0.3353 80 8.1434
48 0.3627 81 8.9229
49 0.3927 82 9.8023
50 0.4268 83 10.7774
51 0.4659 84 11.8290
52 0.5108 85 12.9330
53 0.5624 86 14.0753
54 0.6198 87 15.2384
55 0.6839 88 16.4173
56 0.7538 89 17.6287
57 0.8278 90 18.8899
58 0.9102 91 20.2303
59 1.0025 92 21.6995
60 1.1057 93 23.4408
61 1.2205 94 25.7770
62 1.3528 95 29.2738
63 1.5025 96 35.0252
64 1.6689 97 45.0097
65 1.8511 98 61.9945
66 2.0483 99 83.1973
67 2.2596
VAL--88(H) PAGE 3B
II-24
<PAGE>
POLICY NO. XX XXX XXX
LIST OF INVESTMENT OPTIONS
I. THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
This account is registered with the SEC under the Investment Company Act of
1940. Each investment option of this account invests in a specific portfolio of
The Prudential Series Fund. The fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The fund has several portfolios. We show below the available investment
options and the fund portfolios they invest in.
INVESTMENT FUND
OPTION PORTFOLIO
---------- ---------
Money Market Money Market
Bond Bond
Common Stock Common Stock
Aggressively Managed Flx Aggressively Managed Flx
Conservative Managed Flx Conservative Managed Flx
High Yield Bond High Yield Bond
II. THE PRUDENTIAL REAL PROPERTY ACCOUNT
This account is not registered with the SEC under the Investment Company Act of
1940. The following investment option is available.
INVESTMENT
OPTION
--------
Real Estate
III. FIXED INVESTMENT OPTIONS
The fixed investment options are funded by the general account of the Company.
The following investment option is available.
INVESTMENT
OPTION
--------
Fixed Interest Rate
********* END OF LIST *********
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 20%
Common Stock 60%
Fixed Interest Rate 20%
********* END OF SCHEDULE *********
VAL--88 PAGE 3C
II-25
<PAGE>
POLICY NO. XX XXX XXX
TABULAR VALUES
Tabular values are calculated based on the scheduled premiums, guaranteed
charges, assumed rate of return, no contract debt and no dividends credited.
Actual values may be different than the tabular amounts shown below.
<TABLE>
<CAPTION>
Tabular
Tabular Extended
End of Tabular Tabular Reduced Insurance*
Contract Contract Cash Paid-up ---------------
Year Fund Value Insurance Years Days
-------- -------- ------- --------- ----- ----
<S> <C> <C> <C> <C> <C>
1 292.00 0.00 0.00 0 0
2 591.50 134.50 531.00 1 7
3 898.00 441.00 1682.00 3 58
4 1210.50 753.50 2779.00 4 360
5 1529.00 1072.00 3824.00 6 170
6 1853.00 1487.00 5132.00 8 41
7 2182.00 1908.00 6369.00 9 151
8 2515.50 2332.50 7533.00 10 154
9 2853.00 2761.50 8632.00 11 63
10 3194.00 3194.00 9663.00 11 262
11 3537.50 3537.50 10361.00 11 316
12 3882.50 3882.50 11012.00 11 338
13 4229.00 4229.00 11617.00 11 329
14 4575.00 4575.00 12174.00 11 294
15 4919.50 4919.50 12684.00 11 236
16 5261.00 5261.00 13146.00 11 158
17 5596.00 5596.00 13556.00 11 62
18 5922.00 5922.00 13913.00 10 314
19 6235.00 6235.00 14211.00 10 185
20 6532.00 6532.00 14449.00 10 46
<CAPTION>
ATTAINED
AGE
--------
<S> <C> <C> <C> <C> <C>
60 7635.00 7635.00 14635.00 7 290
62 7796.50 7796.50 14158.00 6 263
65 7500.00 7500.00 12612.00 5 2
</TABLE>
*There may be extra days of term insurance. We explain this under the Extended
Insurance provision.
Nonforfeiture Factors, applicable during premium
period, per $1,000 of initial face amount
Contract Years 1 through 30 7.45334
Contract Years 31 and later 43.02598
VAL--88 PAGE 4
II-26
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SUMMARY
This life insurance contract will provide benefits while the Insured is
living and upon the Insured's death as described below.
Unless we endorse the contract to say otherwise, it gives you the following
rights, among others, subject to certain limitations and requirements:
o You may change the beneficiary.
o You may borrow on it up to its loan value.
o You may change the allocation of future invested premium amounts among
the investment options.
o You may transfer amounts among the investment options.
o You may change the face amount.
o You may withdraw a portion of the contract's value.
o You may surrender the contract. If you do, the proceeds will be the net
cash value.
To compute the proceeds payable upon the Insured's death, we start with a
basic amount and adjust that amount as described in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TABLE OF BASIC AMOUNTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
If the contract is in force: Then the basic amount is: And we adjust the basic amount
for:
- -------------------------------------------------------------------------------------------------------
and not in default past its days the insurance amount (see page contract debt (see page 21),
of grace 16) plus the amount of any extra dividend credits (see page
benefits arising from the 15), and any charges due in
Insured's death the days of grace (see page 11).
- --------------------------------------------------------------------------------------------------------
as reduced paid-up insurance the amount of reduced paid-up contract debt and dividend
(see page 19) insurance (see page 19) credits since the reduced
paid-up insurance began.
- --------------------------------------------------------------------------------------------------------
as extended insurance (see the amount of term insurance, if nothing.
page 18) the Insured dies in the term (see
page 18); otherwise zero
- --------------------------------------------------------------------------------------------------------
</TABLE>
The contract may have extra benefits that we call supplementary benefits.
If it does, we list them under Supplementary Benefits on the contract data pages
and describe them after page 28. The contract may have other extra benefits. If
it does, we add them by rider. Any extra benefit ends as soon as the contract is
in default past its days of grace, unless the form that describes it states
otherwise.
Proceeds need not be taken in one sum. For instance, on surrender, you may
be able to choose a settlement option to provide retirement income or for some
other purpose. If a death benefit becomes payable the beneficiary may also be
able to make such a choice. We will automatically pay interest under Option 3
from the date of death on any death benefit to which no other manner of payment
applies. This will be automatic as we state on page 26.
- --------------------------------------------------------------------------------
(VALA--88)
Page 5
II-27
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
DEFINITIONS
We define here some of the words and phrases used all through this
contract. We expIain others, not defined here, in other parts of the text.
We, Our, Us and Company.--Prudential.
You and Your.--The owner of the contract.
Insured.--The person named as the Insured on the first page. He or she need
not be the owner.
Example: Suppose we issue a contract on the life of your spouse. You
applied for it and named no one else as owner. Your spouse is the Insured and
you are the owner.
SEC.--The Securities and Exchange Commission.
Issue Date.--The contract date.
Monthly Date.--The contract date and the same day as the contract date in
each later month.
Example: If the contract date is May 9, 1988, the monthly dates are each
May 9, June 9, July 9 and so on.
Anniversary or Contract Anniversary.--The same day and month as the
contract date in each later year.
Example: If the contract date is May 9, 1988, the first anniversary is May
9, 1989. The second is May 9, 1990, and so on.
Contract Year.--A year that starts on the contract date or on an
anniversary.
Example: If the contract date is May 9, 1988, the first contract year
starts then and ends on May 8, 1989. The second starts on May 9, 1989 and ends
on May 8, 1990, and so on.
Contract Month.--A month that starts on a monthly date.
Example: If May 9, 1988 is a monthly date, a contract month starts then and
ends on June 8, 1988. The next contract month starts on June 9, 1988 and ends on
July 8, 1988, and so on.
Attained Age.--The Insured's attained age at any time is the issue age plus
the length of time since the contract date. You will find the issue age near the
top of page 3.
Assumed Rate of Return.--The assumed rate of return is an effective rate of
4% a year. This is the same as 0.01074598% a day compounded daily.
THE CONTRACT
This policy, and the attached copy of the initial application, together
with copies of any subsequent applications to change the policy, and any
additional contract data pages added to the policy, form the whole contract. We
assume that all statements in an application are made to the best of the
knowledge and belief of the person(s) who make them; in the absence of fraud
they are deemed to be representations and not warranties. We rely on those
statements when we issue or change the contract. We will not use any statement,
unless made in an application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Prudential officer with the rank or title of vice president or above
may agree to modify this contract, and then only in writing.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise: (1) the owner of the
contract is the Insured; and (2) while the Insured is living the owner alone is
entitled to (a) any contract benefit and value, and (b) the exercise of any
right and privilege granted by the contract or by us.
(VALA--88)
Page 6
II-28
<PAGE>
SUICIDE EXCLUSION
If the Insured, whether sane or insane, dies by suicide within two years
from the issue date, we will pay no more under this contract than the sum of the
premiums paid.
Also, for any increase in the face amount, if the Insured, whether sane or
insane, dies by suicide within two years from the effective date of the
increase, we will pay, as to the increase in amount, no more than the sum of the
scheduled premiums that were due for the increase.
CURRENCY
Any money we pay, or that is paid to us, must be in United States currency.
Any amount we owe will be payable at our Corporate Office.
MISSTATEMENT OF AGE OR SEX
If the Insured's stated age or sex or both are not correct, we will adjust
each benefit and any amount to be paid to reflect the correct age and sex. Any
death benefit will be based on what item (b) of the most recent monthly
deduction (see pages 3A and 18), would have provided at the correct age and
sex. Where required, we have given the insurance regulator a detailed statement
of how we will make these adjustments.
The Schedule of Premiums may show that basic premiums change or stop on a
certain date. We may have used that date because the Insured would attain a
certain age on that date. If we find that the issue age was wrong, we will
correct that date and, if necessary, the amount of any changed premiums.
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We will not be deemed to know of an assignment unless we receive it, or a
copy of it, at our Home Office. We are not obliged to see that an assignment is
valid or sufficient. This contract may not be assigned to another insurance
company or to any employee benefit plan without our consent. This contract may
not be assigned if such assignment would violate any federal, state, or local
law or regulation prohibiting sex distinct rates for insurance.
ANNUAL REPORT
Each year we will send you a report. It will show: (1) the current death
benefit; (2) the amount of the contract fund in each investment option; (3) the
net cash value; (4) premiums paid, investment results, and charges deducted
since the last report; (5) any withdrawals since the last report; and (6) any
contract debt and the interest on the debt for the prior year. The report will
also include any other data that may be currently required where this contract
is delivered. No report will be sent if this contract is being continued under
fixed reduced paid-up insurance or extended term insurance.
You may ask for a similar report at some other time during the year. Or you
may request from time to time a report projecting results under your contract on
the basis of premium payment assumptions and assumed investment results. We have
the right to make a reasonable charge for reports such as these that you ask for
and to limit the scope and frequency of such requests.
INCREASE IN FACE AMOUNT AT AGE 21 FOR
CONTRACTS ISSUED AT AGE 14 OR LOWER
If this contract was issued at age 14 or lower, it shows on page 3 an
increase in face amount at attained age 21 which applies if the contract is not
then in default beyond its days of grace. In that case, any references in the
contract to face amount or death benefit which apply at or after attained age 21
will be based on the increased face amount, unless otherwise stated.
PAYMENT OF DEATH CLAIM
If we settle this contract in one sum as a death claim, we will usually pay
the proceeds within seven days after we receive at our Home Office proof of
death and any other information we need to pay the claim. But we have the right
to postpone paying the part of the proceeds in excess of the face amount that is
to come from any investment option provided by a separate account registered
under the Investment Company Act of 1940 if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency. We have the right to postpone paying the remainder of any excess for
up to six months.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance either with us or with a subsidiary of ours. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
(VALA--88)
Page 7H
II-29
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing
and in a form that meets our needs. It will take effect only when we file it at
our Home Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Insured will have the right to be paid only if no
one in a prior class survives the Insured.
2. One who has the right to be paid will be the only one paid if no one
else in the same class survives the Insured.
3. Two or more in the same class who have the right to be paid will be paid
in equal shares.
4. If none survives the Insured, we will pay in one sum to the Insured's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. We owe Jane the proceeds if she is living at
the Insured's death. We owe Paul and John the proceeds if they are living then
but Jane is not. But if only one of them is living, we owe him the proceeds. If
none of them is living we owe the Insured's estate.
Beneficiaries who do not have a right to be paid under these terms may
still have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of
the identity, age or any other facts about any persons designated as
beneficiaries. If beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s) again.
- --------------------------------------------------------------------------------
PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt.
Premium payments will in most cases be credited as of the date of receipt
at our Home Office. In the following cases, part or all of a premium payment
will be credited as of a date other than the date of receipt:
1. If the first premium payment is received after the contract date, the
scheduled portion will be credited as of the contract date.
(VALA--88)
Page 8
II-30
<PAGE>
2. If the first premium payment is received before the contract date, it
will be credited as of the contract date.
3. If a premium payment is received during the 61-day period after a
scheduled premium due date and the premium account is negative by no
more than the scheduled premium then due, the portion of the payment
needed to bring the premium account up to zero will be credited to the
premium account, but not the contract fund, as of the due date.
4. If the contract is in default and premium payments are received during
the days of grace while the contract is in default, we will credit to
the contract fund and the premium account those parts of the premium
payments needed to end the default status as of the applicable monthly
dates.
BASIC PREMIUMS
We show the amount and frequency of the basic premiums in the Schedule of
Premiums in the contract data pages. An increase or decrease in the face amount
will change the basic premiums.
CHARGE FOR APPLICABLE TAXES
The charge for applicable taxes is a percentage of each premium paid that
we set from time to time. It will change only on a contract anniversary.
At least sixty days before the start of each contract year, we will
determine the rate we will charge for that contract year. The rate will be based
on the rates of any federal, state or local premium taxes that apply at the last
known address of the Insured.
SCHEDULED PREMIUMS
The scheduled premiums are equal to the basic premiums plus the charge for
applicable taxes. The scheduled premiums will change if the basic premiums
change or the charge for applicable taxes changes. We show the amount of the
first scheduled premium in the Schedule of Premiums. It is due on the contract
date. There is no insurance under this contract unless an amount at least equal
to the first scheduled premium is paid.
The scheduled premium is the minimum premium required, at the frequency
chosen, to continue the contract in full force if you pay all scheduled
premiums when due, you make no withdrawals, and any contract debt does not
exceed the cash value.
If you wish to pay, on a regular basis, premiums that are higher than the
scheduled premiums, we will bill you for the higher amount you choose. Or if you
wish, you may from time to time make a premium payment smaller than the
scheduled amount, subject to the minimum premium amount shown on page 3.
If scheduled premiums that are due are not paid, or if smaller payments are
made, the contract may then or at some future time go into default. Payment of
less than the scheduled premium increases the risk that the contract will end if
investment results are not favorable. The conditions under which the contract
will be in default are described below.
UNSCHEDULED PREMIUMS
Except as we state in the next paragraph, unscheduled premiums may be paid
at any time during the Insured's lifetime as long as the contract is not in
default beyond its days of grace. We show on page 3 the minimum premium we will
accept.
We have the right to limit unscheduled premiums to a total of $10,000 in
any contract year. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
INVESTED PREMIUM AMOUNT
This is the portion of each premium paid that we will add to the premium
account and the contract fund. It is equal to the premium paid minus the charges
described in the contract data pages under Schedule of Deductions from Premium
Payments.
CONTRACT CHANGE DATE(S)
We show the contract change date(s) in the contract data pages. We also
show in the Schedule of Premiums on these pages that the amount of each basic
premium will change on each contract change date and what the new premium will
be. However, when a contract change date arrives we will compute a new premium
amount to be used in calculating the premium account. The new premium that we
compute will be no greater than the new premium for that date which we show in
the contract data pages. In addition, if the premium account is less than zero,
we will set the premium account to zero.
(VALA--88)
Page 9
II-31
<PAGE>
The Schedule of Premiums may show that the premium changes at times other
than contract change dates. This may occur, for example, with a contract issued
with extra benefits or in an extra rating class.
ALLOCATIONS
You may allocate all or a part of your invested premium amount to one or
more of the investment options listed in the contract data pages. You may choose
to allocate nothing to a particular investment option. But any allocation you
make must be at least 10%; you may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so
on, up to 90. But you may not choose a percentage of 1 through 9, or 91 through
99, or any percentage that is not a whole number. The total for all investment
options must be 100%.
The initial allocation of invested premium amounts is shown in the contract
data pages. You may change the allocation for future invested premium amounts at
any time if the contract is not in default. To do so, you must notify us in a
form that meets our needs. The change will take effect on the date we receive
your notice at our Home Office.
A premium might be paid when the contract fund is less than zero. In that
case we first use as much of the invested premium amount as we need to bring the
fund up to zero. We will then allocate any remainder of the invested premium
amount in accord with your most recent request.
PREMIUM ACCOUNT
On the contract date, the premium account is equal to the invested premium
amount credited on that date, minus the basic premium then due, plus the charge
for payment processing. On any other day, the premium account is equal to:
1. what it was on the prior day; plus
2. if the premium account was greater than zero on the prior day, interest
on the excess at 4% a year; minus
3. if the premium account was less than zero on the prior day, interest on
the deficit at 4% a year; plus
4. any invested premium amount credited on that day; minus
5. any basic premium due on that day less the charge for payment
processing; minus
6. any withdrawals on that day.
If we credit a part of a payment as of an earlier date, as we describe
under Payment of Premiums, the premium account for all days from the crediting
date to the date of receipt will be recalculated.
DEFAULT
Unless the contract is already in the grace period, we will determine on
each monthly date whether the contract is in default. To do so, we will first
deduct any applicable charges from the contract fund and add any applicable
credits to it (the contract fund is described on page 16). We will then compute
the amount which will grow to equal the tabular contract fund on the next
monthly date if, during the current contract month: (1) any investment results
are at the assumed rate and (2) we receive no premiums or loan repayments, make
no loans and grant no withdrawals. We will compare this amount to the contract
fund.
If this amount is more than the contract fund, the difference is the fund
deficit. In this case the contract is in default if the premium account is also
less than zero.
(VALA--88)
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GRACE PERIOD
The days of grace begin on any monthly date, other than the contract date,
on which the contract goes into default. Within 30 days after any default we
will send you a notice that your contract is in default. We will indicate the
minimum payment required to bring the contract out of default and the length of
the grace period for making that payment.
We grant at least 61 days of grace from the date we mail you a notice of
default. During the days of grace we will continue to accept premiums and make
the charges we have set.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the sum of the fund deficit on the
date of default and any additional fund deficits on any subsequent monthly dates
since the date of default, and (b) the sum of the amount by which the premium
account is negative on the date of default and any scheduled premiums due since
the date of default, the default will end.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the fund deficit on the date of
default, and (b) the amount by which the premium account is negative on the date
of default, but that are insufficient to end the default, here is what we will
do. We will determine a new default date which is the monthly date after the old
default date. We will grant at least 61 days of grace from the new default date.
If the contract is still in default when the days of grace are over, it
will end and have no value, except as we state under Contract Value Options (see
page 18). Any premiums paid during the days of grace will remain in the
contract fund.
The Insured might die in the days of grace while the contract is in
default. If so, the amount needed to bring the contract out of default is due
us. We will make an adjustment so that the proceeds will not include that
amount.
This contract might have an extra benefit that insures someone other than
the Insured. And there might be a claim under that benefit while the Insured is
living and in the days of grace while the contract is in default. In this case,
we will subtract the amount needed to bring the contract out of default before
we settle the claim.
REINSTATEMENT
If this contract is still in default after the last day of grace, you may
reinstate it. All these conditions must be met:
1. The contract must not be in default more than five years.
2. You must not have surrendered the contract for its net cash value.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
4. We must be paid a premium at least equal to the amount required to bring
the premium account up to zero on the first monthly date on which a
scheduled premium is due after the date of reinstatement.
5. If before reinstatement the contract is in force as reduced paid-up
insurance (see page 19), any contract debt under reduced paid-up
insurance must be repaid with interest or carried over to the reinstated
contract.
(VALA--88)
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If we approve the reinstatement, these statements apply. The date of
reinstatement will be the date of your request or the date the required premium
is paid, if later. We will start to make daily and monthly charges and credits
again as of the date of reinstatement. We will deduct from the premium paid the
charges from premium payments described in the contract data pages, and any
charges in arrears, other than item (b) of the monthly deduction (see pages 3A
and 18), with 4% interest to the date of reinstatement. The contract fund will
be equal to the remainder, plus the cash value of the contract immediately
before reinstatement, plus a refund of that part of any surrender charge
deducted at the time of default which would be charged if the contract were
surrendered immediately after reinstatement.
If we consent, you may be able to reinstate the contract for a premium less
than that described above. We will deduct the same charges and adjust the
contract fund in the same manner. In that case, the premium account will be less
than zero and you may need to pay more than the scheduled premiums to guarantee
that the contract will not go into default again at some future time.
- --------------------------------------------------------------------------------
FACE AMOUNT CHANGES AND WITHDRAWALS
FACE AMOUNT
The face amount is shown on page 3. It will change if: (1) you increase or
decrease it, or (2) you make a withdrawal.
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount once each
contract year. You may do so subject to all these conditions and the paragraph
that follows:
1. You must ask for the increase in writing in a form that meets our
needs; if you are not the Insured and the Insured is age 8 or over, he
or she must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. The contract must not be in default.
6. We must not since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits as
shown on page 3.
9. We must not be waiving premiums in accord with any waiver of premium
benefit that may be included in the contract.
An increase will take effect only if we approve your request for it at our
Home Office. If we approve the increase, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. We will send you new contract data pages showing the amount and
effective date of the increase and the recomputed values. If the Insured is not
living on the effective date, the increase will not take effect.
(VALA--88)
Page 12H
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DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may do
so subject to all these conditions and the paragraphs that follow:
1 . You must ask for the decrease in writing in a form that meets our
needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount after the decrease must be at least equal to the minimum
face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be endorsed.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. A decrease in face amount may also affect the amount of any
extra benefits this contract might have. We will send you new contract data
pages showing the amount and effective date of the decrease and the recomputed
values. If the Insured is not living on the effective date, the decrease will
not take effect.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge from the contract fund.
WITHDRAWALS
You may make withdrawals from the contract. You may do so subject to all
these conditions and the paragraphs that follow:
1. You must ask for the withdrawal in writing in a form that meets our
needs.
2. The amount withdrawn, plus the net cash value after withdrawal, may not
be more than the net cash value before withdrawal.
3. The contract fund after withdrawal must not be less than the tabular
contract fund for the new face amount.
4. You may not withdraw less than $2,000 at any one time.
5. You may make up to four withdrawals in any contract year.
6. The face amount after the withdrawal must be at least equal to the
minimum face amount, which we show on page 3.
7. If we ask you to do so, you must send us the contract to be endorsed.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge, based on the reduction in the face
amount described below, from the contract fund.
We will decrease the face amount by not more than the amount of the
withdrawal. We will recompute the contract's basic premiums, maximum surrender
charges, tabular values, monthly deductions, and expense charges. The decrease
in face amount may also affect the amount of any extra benefit this contract
might have. We will send you new contract data pages showing the recomputed
values.
(VALA--88)
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<PAGE>
We will normally pay any withdrawal within seven days after we receive your
request and, if we ask for it, the contract at our Home Office. But we have the
right to defer paying the part of the withdrawal that is to come from any
variable investment option provided by a separate account registered under the
Investment Company Act of 1940 if: (1) the New York Stock Exchange is closed; or
(2) the SEC requires that trading be restricted or declares an emergency. We
have the right to postpone paying you the remainder of the withdrawal for up to
six months. If we do so for more than thirty days, we will pay interest at the
rate of 3% a year.
An amount withdrawn may not be repaid, except as a premium subject to
charges.
We will tell you how much you may withdraw if you ask us.
- --------------------------------------------------------------------------------
DIVIDENDS
PARTICIPATION
We will decide each year what part, if any, of our surplus to credit to
this contract as a dividend.
While the contract is in force other than as extended or reduced paid-up
insurance, it will be eligible for such a dividend if the Insured is living. We
will credit any such dividend on the anniversary. We do not expect to credit any
dividends to this contract.
DIVIDEND OPTIONS
If you ask us in writing and in a form that meets our needs, you may choose
any of these uses for any such dividend:
1. Cash.--We will pay it to you in cash.
2. Premium Reduction.--We will use it to reduce any premium then required.
If no premium is then required, we will apply the dividend under dividend
option 3.
3. Dividend Addition.--We will use it at the net single premium rate as of
the anniversary to provide a dividend addition, which is paid-up life insurance
on the Insured's life.
4. Accumulation.--We will hold it at interest. The rate will be at least 3%
a year. We may use a higher rate.
If you have not made another choice by 31 days after the anniversary, we
will use the dividend as we state under dividend option 3. But if the contract
is in default at the end of the last day of grace, we will use the dividend as
we state under Contract Value Options. You may surrender any of the above
additions or accumulations for their net value if: (1) we have not included them
in the net cash value used to provide extended or reduced paid-up insurance; (2)
we do not need them as security for contract debt; and (3) we have your request
in writing in a form that meets our needs. The surrender value of those
additions will not be less than the dividends we used to provide them.
While the contract is in force as reduced paid-up insurance, it will be
eligible for a dividend if the Insured is living. We will credit any such
dividend on the anniversary as a paid-up life insurance addition on the
Insured's life.
(VALA--88)
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DIVIDEND CREDITS DESCRIBED
The phrase dividend credits means the total of: (1) either the amount or
value, as we explain in the next sentence, of any dividend additions under
dividend option 3 or on reduced paid-up insurance; (2) any dividends and
interest we hold under dividend option 4; and (3) any other dividends we have
credited to the contract but have not yet used or paid. For dividend additions,
the phrase means the amount of any of those additions when we set the amount of
any extended insurance and when we refer to the proceeds that arise from the
Insured's death; the phrase means the net value of any of those additions when
we refer to loans, net cash values, or the proceeds that arise on surrender.
SETTLEMENT
We will include any dividend credits in the amount payable when we settle
the contract.
- --------------------------------------------------------------------------------
SEPARATE ACCOUNTS
SEPARATE ACCOUNT
The words separate account, when we use them in this contract without
qualification, mean any separate account we establish to support variable life
insurance contracts like this one. We list the separate accounts available to
you in the contract data pages. We may establish additional separate accounts.
We will notify you within one year if we do so.
A separate account may or may not be registered with the SEC under the
Investment Company Act of 1940. The contract data pages will tell you whether
or not a particular separate account is so registered.
VARIABLE INVESTMENT OPTIONS
A separate account may offer one or more variable investment options. We
list them in the contract data pages. We may establish additional variable
investment options. We will notify you within one year if we do so.
Income and realized and unrealized gains and losses from assets in each
variable investment option are credited to, or charged against, that variable
investment option. This is without regard to income, gains, or losses in our
other investment accounts.
SEPARATE ACCOUNT INVESTMENTS
We may invest the assets of different separate accounts in different ways.
But we will do so only with the consent of the SEC and, where required, of the
insurance regulator where this contract is delivered.
We will always keep assets in the separate accounts with a total value at
least equal to the amount of the variable investment options under contracts
like this one. To the extent those assets do not exceed that amount, we use them
only to support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over that amount in any way we
choose.
We will determine the value of the assets in each separate account and any
variable investment option at regular intervals.
(VALA--88)
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FIXED INVESTMENT OPTIONS
You may allocate all or part of your invested premium amount to a fixed
investment option. Fixed investment options are credited with interest as
described under Guaranteed Interest and Excess Interest on page 17.
We may establish additional fixed investment options. We will notify you
within one year if we do so.
- --------------------------------------------------------------------------------
TRANSFERS
Four transfers may be made in a policy year. There is no charge for these
transfers.
You may transfer amounts into or out of variable investment options of
separate accounts registered under the Investment Company Act of 1940 and into
the fixed investment options at any time if the contract is not in default or if
the contract is being continued under the variable reduced paid-up option. Other
transfers are allowed only with our consent.
In addition, the entire amount in all investment options may be transferred
to a fixed investment option at any time within the first two contract years.
To make a transfer, you must notify us in a form that meets our needs. The
transfer will take effect on the date we receive your notice at our Home Office.
- --------------------------------------------------------------------------------
INSURANCE AMOUNT
The insurance amount on any date is equal to the greater of: (1) the face
amount, and (2) the contract fund, before deduction of any monthly charges due
on that date, divided by the net single premium per $1 at the Insured's attained
age.
- --------------------------------------------------------------------------------
CONTRACT FUND
CONTRACT FUND DEFINED
On the contract date the contract fund is equal to the invested premium
amounts credited on that date, minus any of the charges described below which
may be due on that date. On any day after that the contract fund is equal to
what it was on the previous day, plus any invested premium amounts credited that
day, plus these items:
(a) any increase due to investment results in the value of the variable
investment options;
(b) guaranteed interest on that portion of the contract fund that is not in
a variable investment option; and
(c) any excess interest on that portion of the contract fund that is not in
a variable investment option;
(VALA--88)
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and minus any of these items applicable on that day:
(d) any decrease due to investment results in the value of the variable
investment options;
(e} a charge against the variable investment options at a rate of not more
than 0.00245475% a day (0.90% a year) for mortality and expense risks that we
assume;
(f) any amount charged against the variable investment options for federal
or state income taxes;
(g) any monthly deduction;
(h) any charge for extra rating class;
(i) any charge for extra benefits;
(j) any withdrawals; and
(k) any surrender charges, administrative charges, or contract debt
cancelled that may result from a withdrawal, a decrease in face amount, or a
change in status to variable reduced paid-up insurance.
We describe under Reinstatement on page 11 what the contract fund will be
on any reinstatement date. There is no contract fund for a contract in force as
extended insurance or fixed reduced paid-up insurance.
GUARANTEED INTEREST
We will credit interest each day on any portion of the contract fund not in
a variable investment option. We will credit 0.01074598% a day, which is
equivalent to an effective rate of 4% a year.
EXCESS INTEREST
We may credit excess interest, that is, interest in addition to the
guaranteed interest, on any portion of the contract fund not in a variable
investment option. The rate of any excess interest will be determined from time
to time and will continue thereafter until a new rate is determined. We may use
different rates of excess interest for different portions of the contract fund.
We may from time to time guarantee rates of excess interest on some portions of
the contract fund.
CHARGE FOR EXTRA RATING CLASS
If the contract is not in default past its days of grace and there is an
extra charge because of the rating class of the Insured, we will deduct it from
the contract fund on each monthly date. The maximum amount of any charge is
included in the amount shown in the contract data pages under Schedule of
Monthly Deductions from the Contract Fund.
CHARGE FOR EXTRA BENEFITS
If the contract has extra benefits, we will deduct the charges for them
from the contract fund on each monthly date. The maximum amount of any such
charges are included in the amount shown in the contract data pages under
Schedule of Monthly Deductions from the Contract Fund.
(VALA--88)
Page 17H
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<PAGE>
MONTHLY DEDUCTION
On each monthly date, we will make a deduction. We show the maximum amount
of this deduction in the contract data pages. We may deduct less than the
maximum amount. The coverage amount (referred to on page 3A) is the difference
between the insurance amount and the adjusted contract fund. The adjusted
contract fund is equal to the tabular contract fund at the end of the contract
year multiplied by 0.98051782 plus the contract fund before deduction of any
monthly charges due on the monthly date, minus the tabular contract fund on the
monthly date.
The maximum monthly rates are based on the Insured's sex, rating class and
attained age and are shown in the contract data pages. At least once every five
years, but not more often than once a year; we will consider the need to change
the rates based on actual or anticipated mortality and expense experience under
contracts like this one. We will change them only if we do so for all contracts
like this one dated in the same year as this one.
- --------------------------------------------------------------------------------
CONTRACT VALUE OPTIONS
BENEFIT AFTER THE GRACE PERIOD
If the contract is in default beyond its days of grace, we will use any net
cash value to keep the contract in force as one of three kinds of insurance:
1. Extended insurance applies to most contracts.
2. Fixed reduced paid-up insurance always applies if we issued the contract
in a rating class for which we do not provide extended insurance; in this case,
the phrase No Extended Insurance will appear under the heading Rating Class in
the contract data pages.
3. Variable reduced paid-up insurance applies if the amount of paid-up
insurance would be at least as great as the amount of extended insurance and the
contract was issued in a rating class permitting extended insurance.
We describe each kind of insurance below. Any extra benefit will end as
soon as the contract is in default past its days of grace, unless the form that
describes the extra benefit states otherwise.
EXTENDED INSURANCE
This will be term insurance on the Insured's life. We will pay the amount
of term insurance if the Insured dies in the term we describe below. Before the
end of the term there will be cash values but no loan value.
The amount of term insurance will be: (1) the insurance amount, plus (2)
any dividend credits minus (3) any contract debt. The term is a period of time
that will start on the day the contract went into default. The length of the
term will be what is provided when we use the net cash value at the net single
premium rate. This rate depends on the Insured's issue age and sex and on the
length of time since the contract date.
(VALA--88)
Page 18H
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<PAGE>
There may be extra days of term insurance. This will occur if, on the day
the contract goes into default, the term of extended insurance provided by the
net cash value does not exceed 90 days, or the number of days the contract was
in force before the default began, if less. The number of extra days will be:
(1) 90, or the number of days the contract was in force before the default
began, if less, minus (2) the number of days of extended insurance that would be
provided by the net cash value if there were no contract debt. The extra days,
if any, start on the day after the last day of term insurance provided by the
net cash value, if any. If there is no such term insurance, they start on the
day the contract goes into default. The term insurance for the extra days has no
cash value. There will be no extra days if you replace the extended insurance
with reduced paid-up insurance or you surrender the contract before the extra
days start.
FIXED REDUCED PAID-UP INSURANCE
This will be paid-up life insurance on the Insured's life. We will pay the
amount of this insurance when the Insured dies. There will be cash values and
loan values.
The amount of this insurance will be what is provided when we use the net
cash value at the net single premium rate. This rate depends on the Insured's
issue age and sex and on the length of time since the contract date.
VARIABLE REDUCED PAID-UP INSURANCE
This will be paid-up variable life insurance on the Insured's life. We will
pay the amount of this insurance when the Insured dies. The death benefit may
change from day to day, as we explain below, but if there is no contract debt it
will not be less than the minimum guaranteed amount. There will be cash values
and loan values.
The minimum guaranteed amount of insurance will be what is provided when we
use the net cash value at the net single premium rate. This rate depends on the
Insured's issue age and sex and on the length of time since the contract date.
The amount payable in the event of death will be the greater of (a) the minimum
guaranteed amount, and (b) the contract fund divided by the net single premium
per $1 at the Insured's attained age. In either case the amount will be
adjusted for any contract debt.
The variable reduced paid-up insurance option will be available only if the
minimum guaranteed amount under the option is at least $5,000 and if we issued
the contract in a rating class permitting extended insurance.
COMPUTATIONS
We will make all computations for any of these benefits as of the date the
contract goes into default. But we will consider any dividend credits you
surrender, any loan you take out or pay back, or any premium payments,
withdrawals, or changes in face amount you make in the days of grace.
(VALA--88)
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<PAGE>
OPTIONAL BENEFIT
You may choose to replace any extended insurance that has a cash value by
fixed reduced paid-up insurance or by variable reduced paid-up insurance if it
is available. To make this choice, you must do so in writing in a form that
meets our needs not more than three months after the date the contract goes into
default. You must also send the contract to us to be endorsed.
CASH VALUE OPTION
You may surrender this contract for its net cash value. The net cash value
at any time is the cash value at that time less any contract debt. To surrender
this contract, you must ask us in writing in a form that meets our needs. You
must also send the contract to us. Here is how we will compute the net cash
value:
1. If the contract is not in default, the net cash value on any date will
be the contract fund, before deduction of any monthly charges due on that date,
minus any surrender charge, plus any dividend credits, minus any contract debt.
The Schedule of Maximum Surrender Charges for this contract is in the contract
data pages.
2. If the contract is in default during its days of grace, we will compute
the net cash value as of the date the contract went into default. But we will
adjust this value for any dividend credits you surrender, any loan you take out
or pay back, and any premium payments, withdrawals, or decreases in face amount
you make in the days of grace.
3. If the contract is in default beyond its days of grace, the net cash
value will be either: (1) the net value on that date of any extended insurance
benefit then in force, or (2) the net value on that date of any reduced paid-up
insurance benefit then in force, including any dividend credits, less any
contract debt.
Within thirty days after an anniversary, the net cash value of any extended
insurance or fixed reduced paid-up insurance will not be less than the value on
that anniversary adjusted for any dividend credits you surrender and any loan
you take out or pay back in those thirty days.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home Office. But we have the right to defer
paying the part of the proceeds that is to come from any investment option
provided by a separate account registered under the Investment Company Act of
1940 if: (1) the New York Stock Exchange is closed; or (2) the SEC requires that
trading be restricted or declares an emergency. We have the right to postpone
paying you the remainder of the proceeds for up to six months. If we do so for
more than thirty days, we will pay interest at the rate of 3% a year.
TABULAR VALUES
We show tabular contract fund values and tabular cash values at the ends of
contract years in the contract data pages.
If we need to compute tabular values at some time during a contract year,
we will count the time since the start of the year. We will let you know the
tabular values for other durations if you ask for them.
(VALA--88)
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LOANS
LOAN REQUIREMENTS
You may borrow from us on the contract. All these conditions must be met:
1. The Insured must be living.
2. The contract must be in force other than as extended insurance.
3. The contract debt will not be more than the loan value.
4. As sole security for the loan, you assign the contract to us in a form
that meets our needs.
5. Except to pay premiums on this contract, you may not borrow less than
$200 at any one time.
If there is already contract debt when you borrow from us, we will add the
new amount you borrow to that debt.
CONTRACT DEBT
Contract debt at any time means the loan on the contract, plus the interest
we have charged that is not yet due and that we have not yet added to the loan.
Example 1: Suppose the contract has a loan value of $6,000. A few months
ago you borrowed $1,500. By now there is interest of $55 charged but not yet
due. The contract debt is now $1,555, which is made up of the $1,500 loan and
the $55 interest.
LOAN VALUE
You may borrow any amount up to the difference between the loan value and
any existing contract debt. Except as we state in the next paragraph, the loan
value at any time is equal to the sum of (a) 90% of the portion of the cash
value that is attributable to the variable investment options, and (b) the
balance of the cash value.
There are two exceptions. The first is that, if the contract is in default,
the loan value during the days of grace is what it was on the date of default
adjusted for any dividend credits you surrender and any premium payments,
withdrawals, or decreases in face amount you make in the days of grace. The
second is that, if the contract is in force as fixed reduced paid-up insurance,
the loan value is equal to the amount that would grow at interest to equal the
cash value on the next anniversary.
Example 2: Suppose, in example 1, you want to borrow all that you can. We
will lend you $4,445 which is the difference between the $6,000 loan value and
the $1,555 contract debt. This will increase the contract debt to $6,000. We
will add the new amount borrowed to the existing loan and will charge interest
on it, too.
INTEREST CHARGE
You may select either the fixed loan rate option or the variable loan rate
option. Both are described below. We show on page 3 the option you have
selected. If you request a change from one option to the other and we agree, we
will tell you the effective date of the change.
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever comes first. If interest
is not paid when due, it becomes part of the loan. Then we start to charge
interest on it, too.
(VALA--88)
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Example 3: Suppose the contract date is in 1988. Six months before the
anniversary in 1997 you borrow $1,600 out of a $4,000 loan value. We charge
5-1/2% a year. Three months later, but still three months before the
anniversary, we will have charged about $22 interest. This amount will be a few
cents more or less than $22 since some months have more days than others. The
interest will not be due until the anniversary unless the loan is paid back
sooner. The loan will still be $1,600. The contract debt will be $1,622, since
contract debt includes interest charged but not yet due.
On the anniversary in 1997 we will have charged about $44 interest. The
interest will then be due.
Example 4: Suppose the $44 interest in example 3 was paid on the
anniversary. The loan and contract debt each became $7,600 right after the
payment.
Example 5: Suppose the $44 interest in example 3 was not paid on the
anniversary. The interest became part of the loan, and we began to charge
interest on it, too. The loan and contract debt each became $1,644.
FIXED LOAN RATE OPTION
The loan interest rate is 5-1/2% a year.
VARIABLE LOAN RATE OPTION
The loan interest rate is the annual rate we set from time to time. The
rate will never be greater than is permitted by law. It will change only on a
contract anniversary.
Before the start of each contract year, we will determine the loan
interest rate we can charge for that contract year. To do this, we will first
find the rate that is the greater of: (1) The Published Monthly Average (which
we describe below) for the calendar month ending two months before the calendar
month of the contract anniversary; and (2) 5%.
If that greater rate is at least 1/2% more than the loan interest rate we
had set for the current contract year, we have the right to increase the loan
interest rate by at least 1/2%, up to that greater rate. If it is at least 1/2%
less, we will decrease the loan interest rate to be no more than the greater
rate. We will not change the loan interest rate by less than 1/2%.
When you make a loan we will tell you the initial interest rate for the
loan. We will send you a notice if there is to be an increase in the rate.
The Published Monthly Average means:
1. Moody's Corporate Bond Yield Average--Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that service;
or
2. If that average is no longer published, a substantially similar average,
established by the insurance regulator where this contract is delivered.
REPAYMENT
All or part of any contract debt may be paid back at any time while the
Insured is living. But if there is contract debt at the end of the last day of
grace when the contract is in default, it will be deducted from the cash value
to determine the net cash value. When we settle the contract, any contract debt
is due us. We will make an adjustment so that the proceeds will not include the
amount of that debt.
EFFECT OF A LOAN
When you take a loan, the amount of the loan continues to be part of the
contract fund and is credited with interest at the guaranteed rate of 4% a year.
If you have selected the variable loan rate option, we will credit excess
interest at an effective rate of not less than the loan interest rate for the
contract year less 5%.
We will reduce the portion of the contract fund allocated to the investment
options by the amount you borrow, and by loan interest that becomes part of the
loan because it is not paid when due.
(VALA--88)
Page 22
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<PAGE>
On each transaction date, if there is a contract loan outstanding, we will
increase the portion of the contract fund in the investment options by interest
credits accrued on the loan since the last transaction date. When you repay all
or part of a loan we will increase the portion of the contract fund in the
investment options by the amount of loan you repay, plus interest credits
accrued on the loan since the last transaction date. We will not increase the
portion of the contract fund allocated to the investment options by loan
interest that is paid before we make it part of the loan.
EXCESS CONTRACT DEBT
If contract debt ever grows to be equal to or more than the cash value, all
the contract's benefits will end 61 days after we mail a notice to you and any
assignee we know of. Also, we may send a notice to the Insured's last known
address. In the notice we will state the amount that, if paid to us, will keep
the contract's benefits from ending for a limited time.
POSTPONEMENT OF LOAN
We will usually make a loan within seven days after we receive your request
at our Home Office. But we have the right to postpone making the part of the
loan that is to come from any investment option provided by a separate account
registered under the Investment Company Act of 1940 if: (1) the New York Stock
Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds of a loan for up to six months, unless it will be used to pay
premiums on this or other contracts with us.
- --------------------------------------------------------------------------------
SETTLEMENT OPTIONS
PAYEE DEFINED
In these provisions and under the Automatic Mode of Settlement, the word
payee means a person who has a right to receive a settlement under the contract.
Such a person may be the Insured, the owner, a beneficiary, or a contingent
payee.
CHOOSING AN OPTION
A payee may choose an option for all or part of any proceeds or residue
that becomes payable to him or her in one sum. We describe residue on page 24.
In some cases, a payee will need our consent to choose an option. We
describe these cases under Conditions.
OPTIONS DESCRIBED
Here are the options we offer. We may also consent to other arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD)
We will make equal payments for up to 25 years based on the Option 1 Table.
The payments will include interest at an effective rate of 3-1/2% a year. We may
credit more interest. If and while we do so, the payments will be larger.
OPTION 2 (LIFE INCOME)
We will make equal monthly payments for as long as the person on
whose life the settlement is based lives, with payments certain for the period
chosen. The choices are either ten years (10-Year Certain) or until the sum of
the payments equals the amount put under this option (Instalment Refund). The
amount of each payment will be based on the Option 2 Table and on the sex and
age, on the due date of the first payment, of the person on whose life the
settlement is based. But if a choice is made more than two years after the
contract proceeds first become payable, we may use the Option 2 rates in
ordinary policies we regularly issue, based on United States currency, on the
due date of the first payment. On request, we will quote the payment rates in
policies we then issue. We must have proof of the date of birth of the person on
whose life the settlement is based. The settlement will share in our surplus to
the extent and in the way we decide.
(VALA--88)
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<PAGE>
OPTION 3 (INTEREST PAYMENT)
We will hold an amount at interest. We will pay interest at an effective
rate of at least 3% a year ($30.00 annually, $14.89 semi-annually, $7.42
quarterly or $2.47 monthly per $1,000). We may pay more interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT)
We will make equal annual, semi-annual, quarterly or monthly payments if
they total at least $90 a year for each $1,000 put under this option. We will
credit the unpaid balance with interest at an effective rate of at least 3-1/2%
a year. We may credit more interest. If we do so, the balance will be larger.
The final payment will be any balance equal to or less than one payment.
OPTION 5 (NONPARTICIPATING INCOME)
We will make payments like those of any annuity we then regularly issue
that: (1) is based on United States currency; (2) is bought by a single sum; (3)
does not provide for dividends; and (4) does not normally provide for deferral
of the first payment. The payment will be at least what we would pay under that
kind of annuity with its first payment due on its contract date. At least one of
the persons on whose life the Option 5 is based must be a payee. If a life
income is chosen, we must have proof of the date of birth of any person on whose
life the option is based. Option 5 cannot be chosen more than 30 days before the
due date of the first payment. On request, we will quote the payment that would
apply for any amount placed under the option at that time.
FIRST PAYMENT DUE DATE
Unless a different date is stated when the option is chosen: (1) the first
payment for Option 3 will be due at the end of the chosen payment interval; and
(2) the first payment for any of the other options will be due on the date the
option takes effect.
RESIDUE DESCRIBED
For Options 1 and 2, residue on any date means the then present value of
any unpaid payments certain. We will compute it at an effective interest rate of
3-1/2% a year. But we will use the interest rate we used to compute the actual
Option 2 payments if they were not based on the table in this contract.
For Options 3 and 4, residue on any date means any unpaid balance with
interest to that date.
For Option 5, it means the then present value of any unpaid payments
certain. We will compute it at the interest rate to which we refer in Option 5.
For Option 2 and 5, residue does not include the value of any payments that
may become due after the certain period.
WITHDRAWAL OF RESIDUE
Unless otherwise stated when the option is chosen: (1) under Options l and
2, the residue may be withdrawn; and (2) under Options 3 and 4 all, or any part
not less than $100, of the residue may be withdrawn. If an Option 3 residue is
reduced to less than $1,000, we have the right to pay it in one sum. Under
Option 2, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
For Option 5, the residue may not be withdrawn while the payee and any
other person on whose life the option is based is living. But, unless otherwise
stated. when the option is chosen, after the death of the last of them to die
any residue not already paid in one sum may be withdrawn.
(VALA--88)
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<PAGE>
DESIGNATING CONTINGENT PAYEE(S)
A payee under an option has the right, unless otherwise stated, to name or
change a contingent payee to receive any residue at that payee's death. This may
be done only if: (1) the payee has the full right to withdraw the residue, (2)
the residue would otherwise have been payable to that payee's estate at death,
or (3) a settlement with payments certain is being made in accord with Option 5.
A payee who has this right may choose, or change the choice of, an option
for all or part of the residue. In some cases, the payee will need our consent
to choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a
form that meets our needs. It will take effect only when we file it at our Home
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the payee who made the request is not living when we
file it.
CHANGING OPTIONS
A payee under Option 1, 3, or 4 may choose another option for any sum that
the payee could withdraw on the date the chosen option is to start. That date
may be before the date the payee makes the choice only if we consent. In some
cases, the payee will need our consent to choose or change an option. We
describe these cases next.
CONDITIONS
Under any of these conditions, our consent is needed for an option to be
used for any person:
1. The person is not a natural person who will be paid in his or her own
right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000.
But we will hold any amount for at least one year in accord with the Automatic
Mode of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the
Insured's death, or (b) the death of the beneficiary who was entitled to be
paid as of the date of the Insured's death.
6. The option is for proceeds that arise other than from the Insured's
death, and we are settling with an owner or any other person who is not the
Insured.
DEATH OF PAYEE
If a payee under an option dies and if no other distribution is shown, we
will pay any residue under that option in one sum to the payee's estate.
(VALA--88)
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<PAGE>
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AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY
These provisions apply to proceeds arising from the Insured's death and
payable in one sum to a payee who is a beneficiary. They do not apply to any
periodic payment.
INTEREST ON PROCEEDS
We will hold the proceeds at interest under Option 3 of the Settlement
Options provisions. The payee may withdraw the residue. We will pay it promptly
on request. We will pay interest annually unless we agree to pay it more often.
We have the right to pay the residue in one sum after one year if: (1) the payee
is not a natural person who will be paid in his or her own right; (2) the payee
will be paid as assignee; or (3) the original amount we hold under Option 3 for
the payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH
If the payee dies and leaves an Option 3 residue, we will honor any
contingent payee provision then in effect. If there is none, here is what we
will do. We will look to the beneficiary designation of the contract; we will
see what other beneficiary(ies), if any, would have been entitled to the portion
of the proceeds that produced the Option 3 residue if the Insured had not died
until immediately after the payee died. Then we will pay the residue in one sum
to such other beneficiary(ies), in accord with that designation. But if, as
stated in that designation, payment would be due the estate of someone else, we
will instead pay the estate of the payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. Jane was living when the Insured died. Jane
later died without having chosen an option or naming someone other than Paul
and John as contingent payee. If Paul and John are living at Jane's death we
owe them the residue. If only one of them is living then, and if the contract
called for payment to the survivor of them, we owe him the residue. If neither
of them is living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR
A beneficiary or contingent payee may not, at or after the Insured's death,
assign, transfer, or encumber any benefit payable. To the extent allowed by law,
the benefits will not be subject to the claims of any creditor of any
beneficiary or contingent payee.
(VALA--88)
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<PAGE>
OPTION 1 TABLE
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- --------------------------------------------------------------------------------
Number of Years Monthly Payment
- --------------------------------------------------------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
- --------------------------------------------------------------------------------
Multiply the monthly amount by 2.989 for quarterly, 5.952 for semi-annual or
11.804 for annual.
<TABLE>
- -------------------------------------------------------------------------------------------------------
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
KIND OF LIFE INCOME KIND OF LIFE INCOME
------------------------------- -------------------------------
AGE 10-Year Instalment AGE 10-Year Instalment
LAST Certain Refund LAST Certain Refund
BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.55
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
- -------------------------------------------------------------------------------------------------------
</TABLE>
(VALA--88)
Page 27
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<PAGE>
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ENDORSEMENTS
(Only we can endorse this contract.)
VOTING RIGHTS
We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to
2:00 P.M. in our office at Prudential Plaza, Newark, N.J. After this contract
has been in force for one year, you may vote either in person or by mail. We
will send you a ballot if you ask for one. Just write to the Secretary at
Prudential Plaza, Newark, New Jersey 07101, at least 60 days before the election
date. By law, your request must show your name, address, policy number and date
of birth. Only individuals at least 18 years old may vote.
HOME OFFICE LOCATIONS
When we use the term Home Office, we mean any of these Prudential
offices:
Corporate Office, Newark, N.J. North Central Home Office,
Minneapolis, Minn.
Eastern Home Office, South-Central Home Office,
Fort Washington, Pa. Jacksonville, Fla.
The Prudential Insurance Company of America,
By /s/ SPECIMEN
------------------------
Secretary
COMB 86184-88
(VALA--88)
Page 28
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<PAGE>
ENDORSEMENTS
(Only we can endorse this contract
BASIS OF COMPUTATiON
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and
sex and on the length of time since the contract date; (2) we use the
Commissioners 1980 Standard Ordinary Non-Smokers Mortality Table; and (3) we use
continuous functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Non-Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By [SPECIMEN SIGNATURE]
Secretary
ORD 86185--88
II-51
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------===============================================================================
Part 1 Application for Life Insurance to
[LOGO] [X] The Prudential Insurance Company of America
[ ] Pruco Life Insurance Company
A Subsidiary of The Prudential Insurance Company of America
No. XX XXX XXX
- -----------------------------------------------------------------------------------------------------------------------------------
1a. Proposed Insured's name--first, initial, last (Print) 1b. Sex 2a. Date of birth 2b. Age 2c. Place of birth
M F Mo. Day Yr.
[X] [ ] 7 10 52 35 (Name of State)
JOHN DOE
- -----------------------------------------------------------------------------------------------------------------------------------
3. [ ] Single [X] Married [ ] Widowed [ ] Separated [ ] Divorced 4. Social Security No. XXX/XX/XXXX
- -----------------------------------------------------------------------------------------------------------------------------------
5a. Occupation(s) Clerk 5b. Duties Clerical Duties
- -----------------------------------------------------------------------------------------------------------------------------------
6. Address for mail No. Street City State Zip
15 Blank Street (Name of City) (Name of State) XXXXX
- -----------------------------------------------------------------------------------------------------------------------------------
7a. Kind of policy Variable Appreciable Life 7b. Initial amount 8. Accidental death coverage
(Level Death Benefit) $50,000 initial amount
If a Variable contract is applied for complete appropriate suitability form. $
- -----------------------------------------------------------------------------------------------------------------------------------
9. Beneficiary: (Include name, age and relationship.) 10.List all life insurance on proposed Insured. Check here if None [ ]
a. Primary (Class 1): Company Initial Yr. Kind Medical
Mary Doe, 35, Spouse amt. issued (Indiv., Group) Yes No
______________________________________ [ ] [ ]
________________________________________________________________________
_______________________________________________________ [ ] [ ]
________________________________________________________________________
b. Contingent (Class 2) if any: [ ] [ ]
Robert Doe, 10, Son ________________________________________________________________________
____________________________________________________ [ ] [ ]
________________________________________________________________________
[ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
11. Other person(s) proposed for coverage including the Applicant for Applicant's Waiver of Premium benefit (AWP)
Relationship to Date of birth Total life insurance
Name--first, initial, last Sex proposed Insured Mo. Day Yr. Age Place of birth in all companies
a. Spouse $
___________________________________________________________________________________________________________________________________
b. $
___________________________________________________________________________________________________________________________________
c. $
___________________________________________________________________________________________________________________________________
d. $
___________________________________________________________________________________________________________________________________
e. $
___________________________________________________________________________________________________________________________________
f. $
- -----------------------------------------------------------------------------------------------------------------------------------
12. Supplementary benefits and riders: a. For proposed Insured b. For spouse, children, Applicant for AWP
Type and duration of benefit Amount Type and duration of benefit Amount
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
[ ] Option to Purchase Additional Ins. $ [ ] Applicant's Waiver of Premium benefit
- -----------------------------------------------------------------------------------------------------------------------------------
13. State any special request.
- -----------------------------------------------------------------------------------------------------------------------------------
14. Has any person named in 1a or 11, within the last 12 months:
a. been treated by a doctor for or had a known heart attack, stroke or cancer (including melanoma) other Yes No
than of the skin? ............................................................................................. [ ] [X]
b. had an electrocardiogram for any physical complaint, or taken medication for high blood pressure? ............. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
15. Premiums payable [X] Ann. [ ] Semi-Ann. [ ] Quar. [ ] Mon. [ ] Pay. Budg. [ ] Pru-Matic [ ] Gov't. Allot.
- -----------------------------------------------------------------------------------------------------------------------------------
16. Amount paid $454.59 [ ] None (Must be "None" if either 14a or b is answered "Yes".)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Is a medical examination to be made on: Yes No
a. the proposed Insured? ......................................................................................... [ ] [X]
b. spouse (if proposed for coverage)? ............................................................................ [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
18. If 17a or b is "Yes", is it agreed that no insurance will take effect on anyone proposed for coverage until Yes No
the person(s) indicated in 17 have been examined, even if 16 shows that an amount has been paid? ................. [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
ORD 84376-86 Page 1 (Continued on page 2)
</TABLE>
II-52
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Continuation of Part 1 of Application
- -----------------------------------------------------------------------------------------------------------------------------------
19. Will this insurance replace or change any existing insurance or annuity in any company on any person named Yes No
in 1a or 11? If "Yes", give their names, name of company, plan, amount, policy numbers and enclose any [ ] [X]
required state replacement form(s).
- -----------------------------------------------------------------------------------------------------------------------------------
20. Is anyone applying for, or trying to reinstate, life or health insurance on any person named in 1a or 11 in Yes No
this or any company? If "Yes", give amount, details and company. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
21. Does any person named in 1a or 11 plan to live or travel outside the United States and Canada within the Yes No
next 12 months? If "Yes", give country(ies), purpose and duration of trip. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
22. Has any person named in 1a or 11 operated or had any duties aboard an aircraft, glider, balloon, or like Yes No
device, within the last 2 years, or does any such person have any plans to do so in the future? If "Yes", [ ] [X]
complete Aviation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
23. Has any person named in 1a or 11 engaged in hazardous sports such as: auto, motorcycle or power boat Yes No
sports; bobsledding, scuba or skin diving; mountain climbing; parachuting or sky diving; snowmobile [ ] [X]
racing or any other hazardous sport or hobby within the last 2 years or does any such person plan to
do so in the future? If "Yes", complete Avocation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
24. Has any person (age 15 or over) named in 1a or 11 in the last 3 years: Yes No
a. had a driver's license denied, suspended or revoked? ......................................................... [ ] [X]
b. been convicted of three or more moving violations of any motor vehicle law or of driving while under
the influence of alcohol or drugs? ........................................................................... [ ] [X]
c. been involved as a driver in 2 or more auto accidents? ....................................................... [ ] [X]
If "Yes", give name, driver's license number and state of issue, type of violation and reason for license
denial, suspension or revocation.
- -----------------------------------------------------------------------------------------------------------------------------------
25. a. Has the proposed Insured smoked cigarettes within the past twelve months? .............................. Yes [ ] No [ ]
b. Has the spouse (if proposed for coverage) smoked cigarettes within the past twelve months? ............. Yes [ ] No [ ]
c. If the proposed Insured or spouse has ever smoked cigarettes, cigars or a pipe, show date(s) last smoked:
Cigarettes Cigars Pipe
Proposed Insured Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
Spouse Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
- -----------------------------------------------------------------------------------------------------------------------------------
26. Changes made by the Company. (Not applicable in West Virginia)
- -----------------------------------------------------------------------------------------------------------------------------------
To the best of the knowledge and belief of those who sign below, the statements in this application are complete and true. It
is understood that, if any of the above statements (for example, the smoking data) is a material misrepresentation, coverage
could be invalidated as a result. The beneficiary named in the application is for insurance payable upon death of (1) the Insured,
and (2) an insured child after the death of the Insured if there is no insured spouse.
When the Company gives a Limited Insurance Agreement form, ORD 84376A-86, of the same date as this Part 1, coverage will start as
shown in that form. Otherwise, no coverage will start unless: (1) a contract is issued, (2) it is accepted, and (3) the full first
premium is paid while all persons to be covered are living and their health remains as stated in Parts 1 and 2. If all these take
place, coverage will start on the contract date. If the Company makes a change as indicated in 26 it will be approved by acceptance
of the contract. But where the law requires written consent for any change in the application, such change can be made only if those
who sign this form approve the change in writing. No agent can make or change a contract, or waive any of the Company's rights or
needs.
Ownership: Unless otherwise asked for above, the owner of the contract will be (1) the applicant if other than the proposed Insured,
otherwise (2) the proposed Insured. But this is subject to any automatic transfer of ownership stated in the contract.
JOHN DOE
--------------------------------------------------------------------
Signature of Proposed Insured (If age 8 or over)
Dated at (Name of City/State) on Aug. 3, 1987
- ----------------------------------------------------------- --------------------------------------------------------------------
(City/State) Signature of Applicant (If other than proposed Insured --
If applicant is a firm or corporation, show that company's name
Witness JOHN ROE By
- ----------------------------------------------------------- --------------------------------------------------------------------
(Licensed agent must witness where required by law) (Signature and title of officer signing for that company)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORD 84376-86
Page 2
II-53
<PAGE>
The Prudential Insurance Company of America No. xx xxx xxx
A Supplement to the Life Insurance Application for a variable contract in which
John Doe is named as the proposed insured.
- -------------------------------------------------------------------------------
I BELIEVE THIS CONTRACT MEETS MY INSURANCE NEEDS AND FINANCIAL OBJECTIVES. I
ACKNOWLEDGE RECEIPT OF A CURRENT PROSPECTUS FOR THE CONTRACT. I UNDERSTAND THAT
THE CONTRACT'S VALUE AND DEATH BENEFIT MAY VARY DEPENDING ON THE CONTRACT'S
INVESTMENT EXPERIENCE ....................................... YES [X] NO [ ]
NOTE: Upon request, we will furnish illustrations of benefits, including
death benefits and cash values, for (a) the variable life insurance contract
applied for and (b) a fixed benefit life insurance contract for the same premium
Date Signature of Applicant
Aug. 3, 1987 JOHN DOE
- -------------------------------- -----------------------------------
ORD 86189--88
II-54
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract
(VALA--88)
Page 29
II-55
<PAGE>
- --------------------------------------------------------------------------------
Modified Premium Variable whole Life Insurance Policy. Insurance payable
only upon death. Scheduled premiums payable throughout Insured's lifetime.
Provisions for optional additional premiums. Cash values reflect premium
payments, investment results and charges. Death benefit guaranteed if scheduled
premiums duly paid and no contract debt or withdrawals. Increase in face amount
at attained age 21 if contract issued at age 14 or lower. Eligible for annual
dividends as stated under Dividends.
VALA--88
Page 30
II-56
EXHIBIT 1.A.(5)(b)
- --------------------------------------------------------------------------------
The Prudential Insurance Company of America
[Prudential Logo] a mutual life insurance company
Prudential Plaza, Newark, New Jersey 07101
Insured JOHN DOE XX XXX XXX Policy Number
SEP 10, 1988 Contract Date
Face Amount $50,000--
Premium Period LIFE
Agency R-NK 1
- --------------------------------------------------------------------------------
We will pay the beneficiary the proceeds of this contract promptly if we
receive due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The proceeds arising from the Insured's death will be the insurance amount,
plus the amount of any extra benefit arising from the Insured's death (unless
the contract is in default or there is contract debt). The insurance amount may
be fixed or variable depending on the payment of premiums, the investment
experience of the variable investment options, any excess interest credited to
the fixed investment options, and the charges made. But it will not be less than
the face amount. (We describe the insurance amount on page 16.)
The cash value may increase or decrease daily depending on the payment of
premiums, the investment experience of the variable investment options, any
excess interest credited to the fixed investment options, and the charges made.
There is no guaranteed minimum.
We specify a schedule of premiums. Additional premiums may be paid at your
option subject to the limitations in the contract.
Please read this contract with care. A summary is on page 5. If there is
ever a question about it, or if there is a claim, just see one of our agents or
get in touch with one of our offices.
Right to Cancel contract.--You may return this contract to us within:
(1) 10 days after you get it, or (2) 45 days after Part 1 of the application was
signed, or (3) 10 days after we mail or deliver to you any withdrawal right
notice required by the Securities and Exchange Commission, whichever is latest.
All you have to do is take the contract or mail it to one of our offices or to
the agent who sold it to you. It will be canceled from the start and we will
promptly give you the value of your contract fund on the date you return the
contract to us. We will also give back any charges we made in accord with this
contract.
Signed for Prudential.
/s/ SPECIMEN /s/ SPECIMEN
------------------------ -------------------------
Secretary President
Modified Premium Variable Whole Life Insurance Policy with variable
insurance amount. Insurance payable only upon death. Scheduled premiums payable
throughout Insured's lifetime. Provision for optional additional premiums.
Benefits reflect premium payments, investment results and charges. Death benefit
guaranteed if scheduled premiums duly paid and no contract debt or withdrawals.
Increase in face amount at attained age 21 if contract issued at age 14 or
lower. Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VALB--88
II-57
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ............................................................. 3
List of Contract Minimums;
List of Supplementary Benefits, if any; Summary
of Face Amount; Schedule of Premiums; Schedule
of Expense Charges from Premium Payments; Schedule
of Monthly Deductions from the Contract Fund;
Schedule of Maximum Surrender Charges;
List of Subaccounts and Portfolios; List of fixed
Account Options; Schedule of Initial Allocation of
New Premimums;
Tabular Values ............................................................ 4
Contract Summary .......................................................... 5
Table of Basic Amounts
General Provisions......................................................... 6
Definitions; The Contract; Contract
Modifications; Ownership and Control;
Suicide Exclusion; Currency; Misstatement
of Age or Sex; Incontestability; Assignment;
Annual Report; Increase in Face Amount
at Age 21 for Contracts Issued at Age 14
or Lower; Payment of Death Claim; Change in Plan
Beneficiary................................................................ 8
Premium Payment and Reinstatement.......................................... 8
Payment of Premiums; Basic Premiums; Charge
for Applicable Taxes; Scheduled Premiums;
Unscheduled Premiums; Invested Premium
Amount; Contract Change Date(s); Allocations;
Premium Account; Default; Grace Period;
Reinstatement
Face Amount Changes and Withdrawals ....................................... 12
Face Amount; Increase in Face
Amount; Decrease in Face Amount;
Withdrawals
Dividends ................................................................. 14
Participation; Dividend Options; Dividend Credits
Described; Settlement
Separate Account .......................................................... 15
Separate Account; Variable Investment Options;
Separate Account Investments;
Fixed Investment Options .................................................. 16
Transfers ................................................................. 16
Insurance Amount .......................................................... 16
Contract Fund ............................................................. 16
Contract Fund Defined; Guaranteed Interest;
Excess Interest; Charge for Extra Rating Class;
Charge for Extra Benefits; Monthly Deduction
Contract Value Options .................................................... 18
Benefit After the Grace Period; Extended
Insurance; Fixed Reduced Paid-up
Insurance; Variable Reduced Paid-up Insurance;
Computations; Optional Benefit; Cash Value
Option; Tabular Values
Loans ..................................................................... 20
Loan Requirements; Contract Debt; Loan
Value; Interest Charge; Fixed Loan Rate Option;
Variable Loan Rate Option; Repayment; Effect
of a Loan; Excess Contract Debt; Postponement
of Loan
Settlement Options ........................................................ 22
Payee Defined; Choosing an Option;
Options Described; First Payment Due Date;
Residue Described;
Withdrawal of Residue; Designating
Contingent Payee(s);
Changing Options; Conditions;
Death of Payee
Automatic Mode of Settlement .............................................. 24
Applicability; Interest on Proceeds;
Settlement at Payee's Death; Spendthrift and
Creditor
Income Tables ............................................................. 25
Voting Rights ............................................................. 26
Home Office Location ...................................................... 26
Any supplementary benefits and a copy of the application follow page 26.
(VALB--88)
Page 2H
II-58
<PAGE>
CONTRACT DATA
Insured's Sex and Issue Age M-35
Insured JOHN DOE XX XXX XXX Policy Number
Face Amount $50,000-- SEP 10, 1988 Contract Date
Premium Period LIFE
Agency R-NK 1
Beneficiary CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
Fixed Loan Interest Rate
LIST OF CONTRACT MINIMUMS
The minimum unscheduled premium is $25.
The minimum increase in face amount is $25,000.
The minimum decrease in face amount is $10,000.
The minimum face amount is $50,000.
***** END OF LIST *****
LIST OF SUPPLEMENTARY BENEFITS
***** NONE *****
SUMMARY OF FACE AMOUNT
EFFECTIVE RATING CONTRACT CHANGE
AMOUNT DATE CLASS DATE
Initial $50,000-- SEP 10, 1988 NONSMOKER
SEP 10, 2018
***** END OF SUMMARY *****
SCHEDULE OF PREMIUMS
Scheduled premiums are equal to the basic premium plus the charge for applicable
taxes. The initial scheduled premium due on the contract date is $454.59. Due
dates of scheduled premiums occur on the contract date and at intervals of 12
months after that date.
Basic Premiums are $ 445.50 each
Changing on SEP 10, 2018 to $ 2299.00 each
***** END OF SCHEDULE *****
VAL--88 PAGE 3
II-59
<PAGE>
POLICY NO. XX XXX XXX
SCHEDULE OF DEDUCTIONS FROM PREMIUM PAYMENTS
From each premium paid, we first deduct a charge for applicable taxes (other
than taxes discussed on page 17) of 2%. We reserve the right to change this
percentage to conform to changes in the law or if the insured changes residence.
From the remainder, we deduct a charge for payment processing of up to $2.00.
After deduction of this amount, the balance is the invested premium amount.
***** END OF SCHEDULE *****
SCHEDULE OF MONTHLY DEDUCTIONS FROM THE CONTRACT FUND
The maximum monthly deduction, which provides for administration expenses, sales
expenses, the guaranteed minimum death benefit and the expected cost of
mortality, is equal to:
(a) $6.56, changing on Sep 10, 2018 to $15.83, plus
(b) an amount equal to the maximum monthly rate (see Table of Maximum
Monthly Rates) multiplied by the coverage amount (described on page
18).
***** END OF SCHEDULE *****
***** SCHEDULE OF OTHER CHARGES *****
There is a charge of up to $15 for any withdrawal or decrease in face amount.
***** END OF SCHEDULE *****
SCHEDULE OF MAXIMUM SURRENDER CHARGES
For full surrender at the beginning of the contract year indicated, the maximum
charge we will deduct from the contract fund is shown below. For surrender at
other times, the amount of the charge will reflect the number of days since the
beginning of the contract year. For any decrease in face amount, we will deduct
a proportionate part of the surrender charge.
Year of Surrender Year of Surrender
Surrender Charge Surrender Charge
- --------- --------- --------- ---------
1 457.00 6 457.00
2 457.00 7 365.50
3 457.00 8 274.00
4 457.00 9 183.00
5 457.00 10 91.50
11 And Later Zero
***** END OF SCHEDULE *****
VAL--88(H) PAGE 3A
II-60
<PAGE>
POLICY NO. XX XXX XXX
TABLE OF MAXIMUM MONTHLY RATES PER $1000
FOR MONTHLY DEDUCTION (SEE PAGE 18)
Insured's Maximum Insured's Maximum
Attained Age Rate Attained Age Rate
- ------------ ------- ------------ ---------
35 0.1439 68 2.4893
36 0.1514 69 2.7438
37 0.1614 70 3.0317
38 0.1722 71 3.3603
39 0.1839 72 3.7397
40 0.1980 73 4.1690
41 0.2130 74 4.6407
42 0.2288 75 5.1449
43 0.2463 76 5.6774
44 0.2654 77 6.2340
45 0.2870 78 6.8180
46 0.3103 79 7.4478
47 0.3353 80 8.1434
48 0.3627 81 8.9229
49 0.3927 82 9.8023
50 0.4268 83 10.7774
51 0.4659 84 11.8290
52 0.5108 85 12.9330
53 0.5624 86 14.0753
54 0.6198 87 15.2384
55 0.6839 88 16.4173
56 0.7538 89 17.6287
57 0.8278 90 18.8899
58 0.9102 91 20.2303
59 1.0025 92 21.6995
60 1.1057 93 23.4408
61 1.2205 94 25.7770
62 1.3528 95 29.2738
63 1.5025 96 35.0252
64 1.6689 97 45.0097
65 1.8511 98 61.9945
66 2.0483 99 83.1973
67 2.2596
VAL--88(H) PAGE 3B
II-61
<PAGE>
POLICY NO. XX XXX XXX
LIST OF INVESTMENT OPTIONS
I. THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
This account is registered with the SEC under the Investment Company Act of
1940. Each investment option of this account invests in a specific portfolio of
The Prudential Series Fund. The fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The fund has several portfolios. We show below the available investment
options and the fund portfolios they invest in.
INVESTMENT FUND
OPTION PORTFOLIO
---------- ---------
Money Market Money Market
Bond Bond
Common Stock Common Stock
Aggressively Managed Flx Aggressively Managed Flx
Conservative Managed Flx Conservative Managed Flx
High Yield Bond High Yield Bond
II. THE PRUDENTIAL REAL PROPERTY ACCOUNT
This account is not registered with the SEC under the Investment Company Act of
1940. The following investment option is available.
INVESTMENT
OPTION
--------
Real Estate
III. FIXED INVESTMENT OPTIONS
The fixed investment options are funded by the general account of the Company.
The following investment option is available.
INVESTMENT
OPTION
--------
Fixed Interest Rate
********* END OF LIST *********
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 20%
Common Stock 60%
Fixed Interest Rate 20%
********* END OF SCHEDULE *********
VAL--88 PAGE 3C
II-62
<PAGE>
POLICY NO. XX XXX XXX
TABULAR VALUES
Tabular values are calculated based on the scheduled premiums, guaranteed
charges, assumed rate of return, no contract debt and no dividends credited.
Actual values may be different than the tabular amounts shown below.
<TABLE>
<CAPTION>
Tabular
Tabular Extended
End of Tabular Tabular Reduced Insurance*
Contract Contract Cash Paid-up ---------------
Year Fund Value Insurance Years Days
-------- -------- ------- --------- ----- ----
<S> <C> <C> <C> <C> <C>
1 292.00 0.00 0.00 0 0
2 591.50 134.50 531.00 1 7
3 898.00 441.00 1682.00 3 58
4 1210.50 753.50 2779.00 4 360
5 1529.00 1072.00 3824.00 6 170
6 1853.00 1487.00 5132.00 8 41
7 2182.00 1908.00 6369.00 9 151
8 2515.50 2332.50 7533.00 10 154
9 2853.00 2761.50 8632.00 11 63
10 3194.00 3194.00 9663.00 11 262
11 3537.50 3537.50 10361.00 11 316
12 3882.50 3882.50 11012.00 11 338
13 4229.00 4229.00 11617.00 11 329
14 4575.00 4575.00 12174.00 11 294
15 4919.50 4919.50 12684.00 11 236
16 5261.00 5261.00 13146.00 11 158
17 5596.00 5596.00 13556.00 11 62
18 5922.00 5922.00 13913.00 10 314
19 6235.00 6235.00 14211.00 10 185
20 6532.00 6532.00 14449.00 10 46
<CAPTION>
ATTAINED
AGE
--------
<S> <C> <C> <C> <C> <C>
60 7635.00 7635.00 14635.00 7 290
62 7796.50 7796.50 14158.00 6 263
65 7500.00 7500.00 12612.00 5 2
</TABLE>
*There may be extra days of term insurance. We explain this under the Extended
Insurance provision.
Nonforfeiture Factors, applicable during premium
period, per $1,000 of initial face amount
Contract Years 1 through 30 7.45334
Contract Years 31 and later 43.02598
VAL--88 PAGE 4
II-63
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SUMMARY
This life insurance contract will provide benefits while the Insured is
living and upon the Insured's death as described below.
Unless we endorse the contract to say otherwise, it gives you the following
rights, among others, subject to certain limitations and requirements:
o You may change the beneficiary.
o You may borrow on it up to its loan value.
o You may change the allocation of future invested premium amounts among
the investment options.
o You may transfer amounts among the investment options.
o You may change the face amount.
o You may withdraw a portion of the contract's value.
o You may surrender the contract. If you do, the proceeds will be the net
cash value.
To compute the proceeds payable upon the Insured's death, we start with a
basic amount and adjust that amount as described in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TABLE OF BASIC AMOUNTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
If the contract is in force: Then the basic amount is: And we adjust the basic amount
for:
- -------------------------------------------------------------------------------------------------------
and not in default past its days the insurance amount (see page contract debt (see page 20),
of grace 16) plus the amount of any extra dividend credits (see page
benefits arising from the 14), and any charges due in
Insured's death the days of grace (see page 11).
- --------------------------------------------------------------------------------------------------------
as reduced paid-up insurance the amount of reduced paid-up contract debt and dividend
(see pages 18 & 19) insurance (see pages 18 & 19) credits since the reduced
paid-up insurance began.
- --------------------------------------------------------------------------------------------------------
as extended insurance (see the amount of term insurance, if nothing.
page 18) the Insured dies in the term (see
page 18); otherwise zero
- --------------------------------------------------------------------------------------------------------
</TABLE>
The contract may have extra benefits that we call supplementary benefits.
If it does, we list them under Supplementary Benefits on the contract data pages
and describe them after page 26. The contract may have other extra benefits. If
it does, we add them by rider. Any extra benefit ends as soon as the contract is
in default past its days of grace, unless the form that describes it states
otherwise.
Proceeds need not be taken in one sum. For instance, on surrender, you may
be able to choose a settlement option to provide retirement income or for some
other purpose. If a death benefit becomes payable the beneficiary may also be
able to make such a choice. We will automatically pay interest under Option 3
from the date of death on any death benefit to which no other manner of payment
applies. This will be automatic as we state on page 24.
- --------------------------------------------------------------------------------
(VALB--88)
Page 5
II-64
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
DEFINITIONS
We define here some of the words and phrases used all through this
contract. We expIain others, not defined here, in other parts of the text.
We, Our, Us and Company.--Prudential.
You and Your.--The owner of the contract.
Insured.--The person named as the Insured on the first page. He or she need
not be the owner.
Example: Suppose we issue a contract on the life of your spouse. You
applied for it and named no one else as owner. Your spouse is the Insured and
you are the owner.
SEC.--The Securities and Exchange Commission.
Issue Date.--The contract date.
Monthly Date.--The contract date and the same day as the contract date in
each later month.
Example: If the contract date is May 9, 1988, the monthly dates are each
May 9, June 9, July 9 and so on.
Anniversary or Contract Anniversary.--The same day and month as the
contract date in each later year.
Example: If the contract date is May 9, 1988, the first anniversary is May
9, 1989. The second is May 9, 1990, and so on.
Contract Year.--A year that starts on the contract date or on an
anniversary.
Example: If the contract date is May 9, 1988, the first contract year
starts then and ends on May 8, 1989. The second starts on May 9, 1989 and ends
on May 8, 1990, and so on.
Contract Month.--A month that starts on a monthly date.
Example: If May 9, 1988 is a monthly date, a contract month starts then and
ends on June 8, 1988. The next contract month starts on June 9, 1988 and ends on
July 8, 1988, and so on.
Attained Age.--The Insured's attained age at any time is the issue age plus
the length of time since the contract date. You will find the issue age near the
top of page 3.
Assumed Rate of Return.--The assumed rate of return is an effective rate of
4% a year. This is the same as 0.01074598% a day compounded daily.
THE CONTRACT
This policy, and the attached copy of the initial application, together
with copies of any subsequent applications to change the policy, and any
additional contract data pages added to the policy, form the whole contract. We
assume that all statements in an application are made to the best of the
knowledge and belief of the person(s) who make them; in the absence of fraud
they are deemed to be representations and not warranties. We rely on those
statements when we issue or change the contract. We will not use any statement,
unless made in an application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Prudential officer with the rank or title of vice president or above
may agree to modify this contract, and then only in writing.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise: (1) the owner of the
contract is the Insured; and (2) while the Insured is living the owner alone is
entitled to (a) any contract benefit and value, and (b) the exercise of any
right and privilege granted by the contract or by us.
(VALA--88)
Page 6
II-65
<PAGE>
SUICIDE EXCLUSION
If the Insured, whether sane or insane, dies by suicide within two years
from the issue date, we will pay no more under this contract than the sum of the
premiums paid.
Also, for any increase in the face amount, if the Insured, whether sane or
insane, dies by suicide within two years from the effective date of the
increase, we will pay, as to the increase in amount, no more than the sum of the
scheduled premiums that were due for the increase.
CURRENCY
Any money we pay, or that is paid to us, must be in United States currency.
Any amount we owe will be payable at our Corporate Office.
MISSTATEMENT OF AGE OR SEX
If the Insured's stated age or sex or both are not correct, we will adjust
each benefit and any amount to be paid to reflect the correct age and sex. Any
death benefit will be based on what item (b) of the most recent monthly
deduction (see pages 3A and 18), would have provided at the correct age and
sex. Where required, we have given the insurance regulator a detailed statement
of how we will make these adjustments.
The Schedule of Premiums may show that basic premiums change or stop on a
certain date. We may have used that date because the Insured would attain a
certain age on that date. If we find that the issue age was wrong, we will
correct that date and, if necessary, the amount of any changed premiums.
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We will not be deemed to know of an assignment unless we receive it, or a
copy of it, at our Home Office. We are not obliged to see that an assignment is
valid or sufficient. This contract may not be assigned to another insurance
company or to any employee benefit plan without our consent. This contract may
not be assigned if such assignment would violate any federal, state, or local
law or regulation prohibiting sex distinct rates for insurance.
ANNUAL REPORT
Each year we will send you a report. It will show: (1) the current death
benefit; (2) the amount of the contract fund in each investment option; (3) the
net cash value; (4) premiums paid, investment results, and charges deducted
since the last report; (5) any withdrawals since the last report; and (6) any
contract debt and the interest on the debt for the prior year. The report will
also include any other data that may be currently required where this contract
is delivered. No report will be sent if this contract is being continued under
fixed reduced paid-up insurance or extended term insurance.
You may ask for a similar report at some other time during the year. Or you
may request from time to time a report projecting results under your contract on
the basis of premium payment assumptions and assumed investment results. We have
the right to make a reasonable charge for reports such as these that you ask for
and to limit the scope and frequency of such requests.
INCREASE IN FACE AMOUNT AT AGE 21 FOR
CONTRACTS ISSUED AT AGE 14 OR LOWER
If this contract was issued at age 14 or lower, it shows on page 3 an
increase in face amount at attained age 21 which applies if the contract is not
then in default beyond its days of grace. In that case, any references in the
contract to face amount or death benefit which apply at or after attained age 21
will be based on the increased face amount, unless otherwise stated.
PAYMENT OF DEATH CLAIM
If we settle this contract in one sum as a death claim, we will usually pay
the proceeds within seven days after we receive at our Home Office proof of
death and any other information we need to pay the claim. But we have the right
to postpone paying the part of the proceeds in excess of the face amount that is
to come from any investment option provided by a separate account registered
under the Investment Company Act of 1940 if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency. We have the right to postpone paying the remainder of any excess for
up to six months.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance either with us or with a subsidiary of ours. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
(VALA--88)
Page 7H
II-66
<PAGE>
- --------------------------------------------------------------------------------
BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing
and in a form that meets our needs. It will take effect only when we file it at
our Home Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Insured will have the right to be paid only if no
one in a prior class survives the Insured.
2. One who has the right to be paid will be the only one paid if no one
else in the same class survives the Insured.
3. Two or more in the same class who have the right to be paid will be paid
in equal shares.
4. If none survives the Insured, we will pay in one sum to the Insured's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. We owe Jane the proceeds if she is living at
the Insured's death. We owe Paul and John the proceeds if they are living then
but Jane is not. But if only one of them is living, we owe him the proceeds. If
none of them is living we owe the Insured's estate.
Beneficiaries who do not have a right to be paid under these terms may
still have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of
the identity, age or any other facts about any persons designated as
beneficiaries. If beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s) again.
- --------------------------------------------------------------------------------
PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt.
Premium payments will in most cases be credited as of the date of receipt
at our Home Office. In the following cases, part or all of a premium payment
will be credited as of a date other than the date of receipt:
1. If the first premium payment is received after the contract date, the
scheduled portion will be credited as of the contract date.
(VALA--88)
Page 8
II-67
<PAGE>
2. If the first premium payment is received before the contract date, it
will be credited as of the contract date.
3. If a premium payment is received during the 61-day period after a
scheduled premium due date and the premium account is negative by no
more than the scheduled premium then due, the portion of the payment
needed to bring the premium account up to zero will be credited to the
premium account, but not the contract fund, as of the due date.
4. If the contract is in default and premium payments are received during
the days of grace while the contract is in default, we will credit to
the contract fund and the premium account those parts of the premium
payments needed to end the default status as of the applicable monthly
dates.
BASIC PREMIUMS
We show the amount and frequency of the basic premiums in the Schedule of
Premiums in the contract data pages. An increase or decrease in the face amount
will change the basic premiums.
CHARGE FOR APPLICABLE TAXES
The charge for applicable taxes is a percentage of each premium paid that
we set from time to time. It will change only on a contract anniversary.
At least sixty days before the start of each contract year, we will
determine the rate we will charge for that contract year. The rate will be based
on the rates of any federal, state or local premium taxes that apply at the last
known address of the Insured.
SCHEDULED PREMIUMS
The scheduled premiums are equal to the basic premiums plus the charge for
applicable taxes. The scheduled premiums will change if the basic premiums
change or the charge for applicable taxes changes. We show the amount of the
first scheduled premium in the Schedule of Premiums. It is due on the contract
date. There is no insurance under this contract unless an amount at least equal
to the first scheduled premium is paid.
The scheduled premium is the minimum premium required, at the frequency
chosen, to continue the contract in full force if you pay all scheduled
premiums when due, you make no withdrawals, and any contract debt does not
exceed the cash value.
If you wish to pay, on a regular basis, premiums that are higher than the
scheduled premiums, we will bill you for the higher amount you choose. Or if you
wish, you may from time to time make a premium payment smaller than the
scheduled amount, subject to the minimum premium amount shown on page 3.
If scheduled premiums that are due are not paid, or if smaller payments are
made, the contract may then or at some future time go into default. Payment of
less than the scheduled premium increases the risk that the contract will end if
investment results are not favorable. The conditions under which the contract
will be in default are described below.
UNSCHEDULED PREMIUMS
Except as we state in the next paragraph, unscheduled premiums may be paid
at any time during the Insured's lifetime as long as the contract is not in
default beyond its days of grace. We show on page 3 the minimum premium we will
accept.
We have the right to limit unscheduled premiums to a total of $10,000 in
any contract year. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
INVESTED PREMIUM AMOUNT
This is the portion of each premium paid that we will add to the premium
account and the contract fund. It is equal to the premium paid minus the charges
described in the contract data pages under Schedule of Deductions from Premium
Payments.
CONTRACT CHANGE DATE(S)
We show the contract change date(s) in the contract data pages. We also
show in the Schedule of Premiums on these pages that the amount of each basic
premium will change on each contract change date and what the new premium will
be. However, when a contract change date arrives we will compute a new premium
amount to be used in calculating the premium account. The new premium that we
compute will be no greater than the new premium for that date which we show in
the contract data pages. In addition, if the premium account is less than zero,
we will set the premium account to zero.
(VALA--88)
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The Schedule of Premiums may show that the premium changes at times other
than contract change dates. This may occur, for example, with a contract issued
with extra benefits or in an extra rating class.
ALLOCATIONS
You may allocate all or a part of your invested premium amount to one or
more of the investment options listed in the contract data pages. You may choose
to allocate nothing to a particular investment option. But any allocation you
make must be at least 10%; you may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so
on, up to 90. But you may not choose a percentage of 1 through 9, or 91 through
99, or any percentage that is not a whole number. The total for all investment
options must be 100%.
The initial allocation of invested premium amounts is shown in the contract
data pages. You may change the allocation for future invested premium amounts at
any time if the contract is not in default. To do so, you must notify us in a
form that meets our needs. The change will take effect on the date we receive
your notice at our Home Office.
A premium might be paid when the contract fund is less than zero. In that
case we first use as much of the invested premium amount as we need to bring the
fund up to zero. We will then allocate any remainder of the invested premium
amount in accord with your most recent request.
PREMIUM ACCOUNT
On the contract date, the premium account is equal to the invested premium
amount credited on that date, minus the basic premium then due, plus the charge
for payment processing. On any other day, the premium account is equal to:
1. what it was on the prior day; plus
2. if the premium account was greater than zero on the prior day, interest
on the excess at 4% a year; minus
3. if the premium account was less than zero on the prior day, interest on
the deficit at 4% a year; plus
4. any invested premium amount credited on that day; minus
5. any basic premium due on that day less the charge for payment
processing; minus
6. any withdrawals on that day.
If we credit a part of a payment as of an earlier date, as we describe
under Payment of Premiums, the premium account for all days from the crediting
date to the date of receipt will be recalculated.
DEFAULT
Unless the contract is already in the grace period, we will determine on
each monthly date whether the contract is in default. To do so, we will first
deduct any applicable charges from the contract fund and add any applicable
credits to it (the contract fund is described on page 16). We will then compute
the amount which will grow to equal the tabular contract fund on the next
monthly date if, during the current contract month: (1) any investment results
are at the assumed rate and (2) we receive no premiums or loan repayments, make
no loans and grant no withdrawals. We will compare this amount to the contract
fund.
If this amount is more than the contract fund, the difference is the fund
deficit. In this case the contract is in default if the premium account is also
less than zero.
(VALA--88)
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GRACE PERIOD
The days of grace begin on any monthly date, other than the contract date,
on which the contract goes into default. Within 30 days after any default we
will send you a notice that your contract is in default. We will indicate the
minimum payment required to bring the contract out of default and the length of
the grace period for making that payment.
We grant at least 61 days of grace from the date we mail you a notice of
default. During the days of grace we will continue to accept premiums and make
the charges we have set.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the sum of the fund deficit on the
date of default and any additional fund deficits on any subsequent monthly dates
since the date of default, and (b) the sum of the amount by which the premium
account is negative on the date of default and any scheduled premiums due since
the date of default, the default will end.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the fund deficit on the date of
default, and (b) the amount by which the premium account is negative on the date
of default, but that are insufficient to end the default, here is what we will
do. We will determine a new default date which is the monthly date after the old
default date. We will grant at least 61 days of grace from the new default date.
If the contract is still in default when the days of grace are over, it
will end and have no value, except as we state under Contract Value Options (see
page 18). Any premiums paid during the days of grace will remain in the
contract fund.
The Insured might die in the days of grace while the contract is in
default. If so, the amount needed to bring the contract out of default is due
us. We will make an adjustment so that the proceeds will not include that
amount.
This contract might have an extra benefit that insures someone other than
the Insured. And there might be a claim under that benefit while the Insured is
living and in the days of grace while the contract is in default. In this case,
we will subtract the amount needed to bring the contract out of default before
we settle the claim.
REINSTATEMENT
If this contract is still in default after the last day of grace, you may
reinstate it. All these conditions must be met:
1. The contract must not be in default more than five years.
2. You must not have surrendered the contract for its net cash value.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
4. We must be paid a premium at least equal to the amount required to bring
the premium account up to zero on the first monthly date on which a
scheduled premium is due after the date of reinstatement.
5. If before reinstatement the contract is in force as reduced paid-up
insurance (see pages 18 & 19), any contract debt under reduced paid-up
insurance must be repaid with interest or carried over to the reinstated
contract.
(VALB--88)
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If we approve the reinstatement, these statements apply. The date of
reinstatement will be the date of your request or the date the required premium
is paid, if later. We will start to make daily and monthly charges and credits
again as of the date of reinstatement. We will deduct from the premium paid the
charges from premium payments described in the contract data pages, and any
charges in arrears, other than item (b) of the monthly deduction (see pages 3A
and 18), with 4% interest to the date of reinstatement. The contract fund will
be equal to the remainder, plus the cash value of the contract immediately
before reinstatement, plus a refund of that part of any surrender charge
deducted at the time of default which would be charged if the contract were
surrendered immediately after reinstatement.
If we consent, you may be able to reinstate the contract for a premium less
than that described above. We will deduct the same charges and adjust the
contract fund in the same manner. In that case, the premium account will be less
than zero and you may need to pay more than the scheduled premiums to guarantee
that the contract will not go into default again at some future time.
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FACE AMOUNT CHANGES AND WITHDRAWALS
FACE AMOUNT
The face amount is shown on page 3. It will change if: (1) you increase or
decrease it, or (2) you make a withdrawal.
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount once each
contract year. You may do so subject to all these conditions and the paragraph
that follows:
1. You must ask for the increase in writing in a form that meets our
needs; if you are not the Insured and the Insured is age 8 or over, he
or she must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. The contract must not be in default.
6. We must not since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits as
shown on page 3.
9. We must not be waiving premiums in accord with any waiver of premium
benefit that may be included in the contract.
An increase will take effect only if we approve your request for it at our
Home Office. If we approve the increase, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. We will send you new contract data pages showing the amount and
effective date of the increase and the recomputed values. If the Insured is not
living on the effective date, the increase will not take effect.
(VALA--88)
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DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may do
so subject to all these conditions and the paragraphs that follow:
1 . You must ask for the decrease in writing in a form that meets our
needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount after the decrease must be at least equal to the minimum
face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be endorsed.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions and
expense charges. A decrease in face amount may also affect the amount of any
extra benefits this contract might have. We will send you new contract data
pages showing the amount and effective date of the decrease and the recomputed
values. If the Insured is not living on the effective date, the decrease will
not take effect.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge from the contract fund.
WITHDRAWALS
You may make withdrawals from the contract. You may do so subject to all
these conditions and the paragraphs that follow:
1. You must ask for the withdrawal in writing in a form that meets our
needs.
2. The amount withdrawn, plus the net cash value after withdrawal, may not
be more than the net cash value before withdrawal.
3. The contract fund after withdrawal must not be less than the tabular
contract fund.
4. The amount you withdraw must be at least $500.
5. You may make up to four withdrawals in any contract year.
6. If we ask you to do so, you must send us the contract to be endorsed.
We may deduct an administrative fee of up to $15.00.
We will normally pay any withdrawal within seven days after we receive your
request at our Home Office. But we have the right to postpone paying the part of
the proceeds that is to come from any investment option provided by a separate
account registered under the Investment Company Act of 1940 if: (1) the New York
Stock Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds for up to six months. If we do so for more than thirty days, we
will pay interest at the rate of 3% a year.
An amount withdrawn may not be repaid, except as a premium subject to
charges.
We will tell you how much you may withdraw if you ask us.
(VALB--88)
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DIVIDENDS
PARTICIPATION
We will decide each year what part, if any, of our surplus to credit to
this contract as a dividend.
While the contract is in force other than as extended or reduced paid-up
insurance, it will be eligible for such a dividend if the Insured is living. We
will credit any such dividend on the anniversary. We do not expect to credit any
dividends to this contract.
DIVIDEND OPTIONS
If you ask us in writing and in a form that meets our needs, you may choose
any of these uses for any such dividend:
1. Cash.--We will pay it to you in cash.
2. Premium Reduction.--We will use it to reduce any premium then required.
If no premium is then required, we will apply the dividend under dividend
option 3.
3. Dividend Addition.--We will use it at the net single premium rate as of
the anniversary to provide a dividend addition, which is paid-up life insurance
on the Insured's life.
4. Accumulation.--We will hold it at interest. The rate will be at least 3%
a year. We may use a higher rate.
If you have not made another choice by 31 days after the anniversary, we
will use the dividend as we state under dividend option 3. But if the contract
is in default at the end of the last day of grace, we will use the dividend as
we state under Contract Value Options. You may surrender any of the above
additions or accumulations for their net value if: (1) we have not included them
in the net cash value used to provide extended or reduced paid-up insurance; (2)
we do not need them as security for contract debt; and (3) we have your request
in writing in a form that meets our needs. The surrender value of those
additions will not be less than the dividends we used to provide them.
While the contract is in force as reduced paid-up insurance, it will be
eligible for a dividend if the Insured is living. We will credit any such
dividend on the anniversary as a paid-up life insurance addition on the
Insured's life.
DIVIDEND CREDITS DESCRIBED
The phrase dividend credits means the total of: (1) either the amount or
value, as we explain in the next sentence, of any dividend additions under
dividend option 3 or on reduced paid-up insurance; (2) any dividends and
interest we hold under dividend option 4; and (3) any other dividends we have
credited to the contract but have not yet used or paid. For dividend additions,
the phrase means the amount of any of those additions when we set the amount of
any extended insurance and when we refer to the proceeds that arise from the
Insured's death; the phrase means the net value of any of those additions when
we refer to loans, net cash values, or the proceeds that arise on surrender.
SETTLEMENT
We will include any dividend credits in the amount payable when we settle
the contract.
(VALB--88)
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SEPARATE ACCOUNTS
SEPARATE ACCOUNT
The words separate account, when we use them in this contract without
qualification, mean any separate account we establish to support variable life
insurance contracts like this one. We list the separate accounts available to
you in the contract data pages. We may establish additional separate accounts.
We will notify you within one year if we do so.
A separate account may or may not be registered with the SEC under the
Investment Company Act of 1940. The contract data pages will tell you whether
or not a particular separate account is so registered.
VARIABLE INVESTMENT OPTIONS
A separate account may offer one or more variable investment options. We
list them in the contract data pages. We may establish additional variable
investment options. We will notify you within one year if we do so.
Income and realized and unrealized gains and losses from assets in each
variable investment option are credited to, or charged against, that variable
investment option. This is without regard to income, gains, or losses in our
other investment accounts.
SEPARATE ACCOUNT INVESTMENTS
We may invest the assets of different separate accounts in different ways.
But we will do so only with the consent of the SEC and, where required, of the
insurance regulator where this contract is delivered.
We will always keep assets in the separate accounts with a total value at
least equal to the amount of the variable investment options under contracts
like this one. To the extent those assets do not exceed that amount, we use them
only to support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over that amount in any way we
choose.
We will determine the value of the assets in each separate account and any
variable investment option at regular intervals.
(VALB--88)
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FIXED INVESTMENT OPTIONS
You may allocate all or part of your invested premium amount to a fixed
investment option. Fixed investment options are credited with interest as
described under Guaranteed Interest and Excess Interest on page 17.
We may establish additional fixed investment options. We will notify you
within one year if we do so.
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TRANSFERS
Four transfers may be made in a policy year. There is no charge for these
transfers.
You may transfer amounts into or out of variable investment options of
separate accounts registered under the Investment Company Act of 1940 and into
the fixed investment options at any time if the contract is not in default or if
the contract is being continued under the variable reduced paid-up option. Other
transfers are allowed only with our consent.
In addition, the entire amount in all investment options may be transferred
to a fixed investment option at any time within the first two contract years.
To make a transfer, you must notify us in a form that meets our needs. The
transfer will take effect on the date we receive your notice at our Home Office.
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INSURANCE AMOUNT
The insurance amount on any date is equal to the greatest of: (1) the face
amount, (2) the face amount, plus the contract fund before deduction of any
monthly charges due on that date, minus the tabular contract fund, and (3) the
contract fund before deduction of any monthly charges due on that date, divided
by the net single premium per $1 at the Insured's attained age.
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CONTRACT FUND
CONTRACT FUND DEFINED
On the contract date the contract fund is equal to the invested premium
amounts credited on that date, minus any of the charges described below which
may be due on that date. On any day after that the contract fund is equal to
what it was on the previous day, plus any invested premium amounts credited that
day, plus these items:
(a) any increase due to investment results in the value of the variable
investment options;
(b) guaranteed interest on that portion of the contract fund that is not in
a variable investment option; and
(c) any excess interest on that portion of the contract fund that is not in
a variable investment option;
(VALB--88)
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and minus any of these items applicable on that day:
(d) any decrease due to investment results in the value of the variable
investment options;
(e} a charge against the variable investment options at a rate of not more
than 0.00245475% a day (0.90% a year) for mortality and expense risks that we
assume;
(f) any amount charged against the variable investment options for federal
or state income taxes;
(g) any monthly deduction;
(h) any charge for extra rating class;
(i) any charge for extra benefits;
(j) any withdrawals; and
(k) any surrender charges, administrative charges, or contract debt
cancelled that may result from a withdrawal, a decrease in face amount or a
change in status to variable reduced paid-up insurance.
We describe under Reinstatement on page 11 what the contract fund will be
on any reinstatement date. There is no contract fund for a contract in force as
extended insurance or fixed reduced paid-up insurance.
GUARANTEED INTEREST
We will credit interest each day on any portion of the contract fund not in
a variable investment option. We will credit 0.01074598% a day, which is
equivalent to an effective rate of 4% a year.
EXCESS INTEREST
We may credit excess interest, that is, interest in addition to the
guaranteed interest, on any portion of the contract fund not in a variable
investment option. The rate of any excess interest will be determined from time
to time and will continue thereafter until a new rate is determined. We may use
different rates of excess interest for different portions of the contract fund.
We may from time to time guarantee rates of excess interest on some portions of
the contract fund.
CHARGE FOR EXTRA RATING CLASS
If the contract is not in default past its days of grace and there is an
extra charge because of the rating class of the Insured, we will deduct it from
the contract fund on each monthly date. The maximum amount of any charge is
included in the amount shown in the contract data pages under Schedule of
Monthly Deductions from the Contract Fund.
CHARGE FOR EXTRA BENEFITS
If the contract has extra benefits, we will deduct the charges for them
from the contract fund on each monthly date. The maximum amount of any such
charges are included in the amount shown in the contract data pages under
Schedule of Monthly Deductions from the Contract Fund.
(VALB--88)
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MONTHLY DEDUCTION
On each monthly date, we will make a deduction. We show the maximum amount
of this deduction in the contract data pages. We may deduct less than the
maximum amount. The coverage amount (referred to on page 3A) is the difference
between the insurance amount and the adjusted contract fund. The adjusted
contract fund is equal to the tabular contract fund at the end of the contract
year multiplied by 0.98051782 plus the contract fund before deduction of any
monthly charges due on the monthly date, minus the tabular contract fund on the
monthly date.
The maximum monthly rates are based on the Insured's sex, rating class and
attained age and are shown in the contract data pages. At least once every five
years, but not more often than once a year; we will consider the need to change
the rates based on actual or anticipated mortality and expense experience under
contracts like this one. We will change them only if we do so for all contracts
like this one dated in the same year as this one.
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CONTRACT VALUE OPTIONS
BENEFIT AFTER THE GRACE PERIOD
If the contract is in default beyond its days of grace, we will use any net
cash value to keep the contract in force as one of three kinds of insurance:
1. Extended insurance applies to most contracts.
2. Fixed reduced paid-up insurance always applies if we issued the contract
in a rating class for which we do not provide extended insurance; in this case,
the phrase No Extended Insurance will appear under the heading Rating Class in
the contract data pages.
3. Variable reduced paid-up insurance applies if the amount of paid-up
insurance would be at least as great as the amount of extended insurance and the
contract was issued in a rating class permitting extended insurance.
We describe each kind of insurance below. Any extra benefit will end as
soon as the contract is in default past its days of grace, unless the form that
describes the extra benefit states otherwise.
EXTENDED INSURANCE
This will be term insurance on the Insured's life. We will pay the amount
of term insurance if the Insured dies in the term we describe below. Before the
end of the term there will be cash values but no loan value.
The amount of term insurance will be: (1) the insurance amount, plus (2)
any dividend credits minus (3) any contract debt. The term is a period of time
that will start on the day the contract went into default. The length of the
term will be what is provided when we use the net cash value at the net single
premium rate. This rate depends on the Insured's issue age and sex and on the
length of time since the contract date.
There may be extra days of term insurance. This will occur if, on the day
the contract goes into default, the term of extended insurance provided by the
net cash value does not exceed 90 days, or the number of days the contract was
in force before the default began, if less. The number of extra days will be:
(1) 90, or the number of days the contract was in force before the default
began, if less, minus (2) the number of days of extended insurance that would be
provided by the net cash value if there were no contract debt. The extra days,
if any, start on the day after the last day of term insurance provided by the
net cash value, if any. If there is no such term insurance, they start on the
day the contract goes into default. The term insurance for the extra days has no
cash value. There will be no extra days if you replace the extended insurance
with reduced paid-up insurance or you surrender the contract before the extra
days start.
FIXED REDUCED PAID-UP INSURANCE
This will be paid-up life insurance on the Insured's life. We will pay the
amount of this insurance when the Insured dies. There will be cash values and
loan values.
(VALB--88)
Page 18H
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<PAGE>
The amount of this insurance will be what is provided when we use the net
cash value at the net single premium rate. This rate depends on the Insured's
issue age and sex and on the length of time since the contract date.
VARIABLE REDUCED PAID-UP INSURANCE
This will be paid-up variable life insurance on the Insured's life. We will
pay the amount of this insurance when the Insured dies. The death benefit may
change from day to day, as we explain below, but if there is no contract debt it
will not be less than the minimum guaranteed amount. There will be cash values
and loan values.
The minimum guaranteed amount of insurance will be what is provided when we
use the net cash value at the net single premium rate. This rate depends on the
Insured's issue age and sex and on the length of time since the contract date.
The amount payable in the event of death will be the greater of (a) the minimum
guaranteed amount, and (b) the contract fund divided by the net single premium
per $1 at the Insured's attained age. In either case the amount will be
adjusted for any contract debt.
The variable reduced paid-up insurance option will be available only if the
minimum guaranteed amount under the option is at least $5,000 and if we issued
the contract in a rating class permitting extended insurance.
COMPUTATIONS
We will make all computations for any of these benefits as of the date the
contract goes into default. But we will consider any dividend credits you
surrender, any loan you take out or pay back, or any premium payments,
withdrawals, or changes in face amount you make in the days of grace.
OPTIONAL BENEFIT
You may choose to replace any extended insurance that has a cash value by
fixed reduced paid-up insurance or by variable reduced paid-up insurance if it
is available. To make this choice you must do so in writing in a form that
meets our needs not more than three months after the date the contract goes into
default. You must also send the contract to us to be endorsed.
CASH VALUE OPTION
You may surrender this contract for its net cash value. The net cash value
at any time is the cash value at that time less any contract debt. To surrender
this contract, you must ask us in writing in a form that meets our needs. You
must also send the contract to us. Here is how we will compute the net cash
value:
1. If the contract is not in default, the net cash value on any date will
be the contract fund, before deduction of any monthly charges due on that date,
minus any surrender charge, plus any dividend credits, minus any contract debt.
The Schedule of Maximum Surrender Charges for this contract is in the contract
data pages.
2. If the contract is in default during its days of grace, we will compute
the net cash value as of the date the contract went into default. But we will
adjust this value for any dividend credits you surrender, any loan you take out
or payback and any premium payments, withdrawals or decreases in face amount
you make in the days of grace.
3. If the contract is in default beyond its days of grace, the net cash
value will be either: (1) the net value on that date of any extended insurance
benefit then in force, or (2) the net value on that date of any reduced paid-up
insurance benefit then in force, including any dividend credits, less any
contract debt.
Within thirty days after an anniversary, the net cash value of any extended
insurance or fixed reduced paid-up insurance will not be less than the value on
that anniversary adjusted for any dividend credits you surrender and any loan
you take out or pay back in those thirty days.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home Office. But we have the right to defer
paying the part of the proceeds that is to come from any investment option
provided by a separate account registered under the Investment Company Act of
1940 if: (1) the New York Stock Exchange is closed; or (2) the SEC requires that
trading be restricted or declares an emergency. We have the right to postpone
paying you the remainder of the proceeds for up to six months. If we do so for
more than thirty days, we will pay interest at the rate of 3% a year.
(VALB--88)
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<PAGE>
TABULAR VALUES
We show tabular contract fund values and tabular cash values at the ends of
contract years in the contract data pages.
If we need to compute tabular values at some time during a contract year,
we will count the time since the start of the year. We will let you know the
tabular values for other durations if you ask for them.
- --------------------------------------------------------------------------------
LOANS
LOAN REQUIREMENTS
You may borrow from us on the contract. All these conditions must be met:
1. The Insured must be living.
2. The contract must be in force other than as extended insurance.
3. The contract debt will not be more than the loan value.
4. As sole security for the loan, you assign the contract to us in a form
that meets our needs.
5. Except to pay premiums on this contract, you may not borrow less than
$200 at any one time.
If there is already contract debt when you borrow from us, we will add the
new amount you borrow to that debt.
CONTRACT DEBT
Contract debt at any time means the loan on the contract, plus the interest
we have charged that is not yet due and that we have not yet added to the loan.
Example 1: Suppose the contract has a loan value of $6,000. A few months
ago you borrowed $1,500. By now there is interest of $55 charged but not yet
due. The contract debt is now $1,555, which is made up of the $1,500 loan and
the $55 interest.
LOAN VALUE
You may borrow any amount up to the difference between the loan value and
any existing contract debt. Except as we state in the next paragraph, the loan
value at any time is equal to the sum of (a) 90% of the portion of the cash
value that is attributable to the variable investment options, and (b) the
balance of the cash value.
There are two exceptions. The first is that, if the contract is in default,
the loan value during the days of grace is what it was on the date of default
adjusted for any dividend credits you surrender and any premium payments,
withdrawals, or decreases in face amount you make in the days of grace. The
second is that, if the contract is in force as fixed reduced paid-up insurance,
the loan value is equal to the amount that would grow at interest to equal the
cash value on the next anniversary.
Example 2: Suppose, in example 1, you want to borrow all that you can. We
will lend you $4,445 which is the difference between the $6,000 loan value and
the $1,555 contract debt. This will increase the contract debt to $6,000. We
will add the new amount borrowed to the existing loan and will charge interest
on it, too.
INTEREST CHARGE
You may select either the fixed loan rate option or the variable loan rate
option. Both are described below. We show on page 3 the option you have
selected. If you request a change from one option to the other and we agree, we
will tell you the effective date of the change.
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever comes first. If interest
is not paid when due, it becomes part of the loan. Then we start to charge
interest on it, too.
(VALB--88)
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<PAGE>
Example 3: Suppose the contract date is in 1988. Six months before the
anniversary in 1997 you borrow $1,600 out of a $4,000 loan value. We charge
5-1/2% a year. Three months later, but still three months before the
anniversary, we will have charged about $22 interest. This amount will be a few
cents more or less than $22 since some months have more days than others. The
interest will not be due until the anniversary unless the loan is paid back
sooner. The loan will still be $1,600. The contract debt will be $1,622, since
contract debt includes interest charged but not yet due.
On the anniversary in 1997 we will have charged about $44 interest. The
interest will then be due.
Example 4: Suppose the $44 interest in example 3 was paid on the
anniversary. The loan and contract debt each became $1,600 right after the
payment.
Example 5: Suppose the $44 interest in example 3 was not paid on the
anniversary. The interest became part of the loan, and we began to charge
interest on it, too. The loan and contract debt each became $1,644.
FIXED LOAN RATE OPTION
The loan interest rate is 5-1/2% a year.
VARIABLE LOAN RATE OPTION
The loan interest rate is the annual rate we set from time to time. The
rate will never be greater than is permitted by law. It will change only on a
contract anniversary.
Before the start of each contract year, we will determine the loan
interest rate we can charge for that contract year. To do this, we will first
find the rate that is the greater of: (1) The Published Monthly Average (which
we describe below) for the calendar month ending two months before the calendar
month of the contract anniversary; and (2) 5%.
If that greater rate is at least 1/2% more than the loan interest rate we
had set for the current contract year, we have the right to increase the loan
interest rate by at least 1/2%, up to that greater rate. If it is at least 1/2%
less, we will decrease the loan interest rate to be no more than the greater
rate. We will not change the loan interest rate by less than 1/2%.
When you make a loan we will tell you the initial interest rate for the
loan. We will send you a notice if there is to be an increase in the rate.
The Published Monthly Average means:
1. Moody's Corporate Bond Yield Average--Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that service;
or
2. If that average is no longer published, a substantially similar average,
established by the insurance regulator where this contract is delivered.
REPAYMENT
All or part of any contract debt may be paid back at any time while the
Insured is living. But if there is contract debt at the end of the last day of
grace when the contract is in default, it will be deducted from the cash value
to determine the net cash value. When we settle the contract, any contract debt
is due us. We will make an adjustment so that the proceeds will not include the
amount of that debt.
EFFECT OF A LOAN
When you take a loan, the amount of the loan continues to be part of the
contract fund and is credited with interest at the guaranteed rate of 4% a year.
If you have selected the variable loan rate option, we will credit excess
interest at an effective rate of not less than the loan interest rate for the
contract year less 5%.
We will reduce the portion of the contract fund allocated to the investment
options by the amount you borrow, and by loan interest that becomes part of the
loan because it is not paid when due.
(VALB--88)
Page 21
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<PAGE>
On each transaction date, if there is a contract loan outstanding, we will
increase the portion of the contract fund in the investment options by interest
credits accrued on the loan since the last transaction date. When you repay part
or all of a loan we will increase the portion of the contract fund in the
investment options by the amount of loan you repay, plus interest credits
accrued on the loan since the last transaction date. We will not increase the
portion of the contract fund allocated to the investment options by loan
interest that is paid before we make it part of the loan.
EXCESS CONTRACT DEBT
If contract debt ever grows to be equal to or more than the cash value, all
the contract's benefits will end 61 days after we mail a notice to you and any
assignee we know of. Also, we may send a notice to the Insured's last known
address. In the notice we will state the amount that, if paid to us, will keep
the contract's benefits from ending for a limited time.
POSTPONEMENT OF LOAN
We will usually make a loan within seven days after we receive your request
at our Home Office. But we have the right to postpone making the part of the
loan that is to come from any investment option provided by a separate account
registered under the Investment Company Act of 1940 if: (1) the New York Stock
Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds of a loan for up to six months, unless it will be used to pay
premiums on this or other contracts with us.
- --------------------------------------------------------------------------------
SETTLEMENT OPTIONS
PAYEE DEFINED
In these provisions and under the Automatic Mode of Settlement, the word
payee means a person who has a right to receive a settlement under the contract.
Such a person may be the Insured, the owner, a beneficiary, or a contingent
payee.
CHOOSING AN OPTION
A payee may choose an option for all or part of any proceeds or residue
that becomes payable to him or her in one sum. We describe residue on page 23.
In some cases, a payee will need our consent to choose an option. We
describe these cases under Conditions.
OPTIONS DESCRIBED
Here are the options we offer. We may also consent to other arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD)
We will make equal payments for up to 25 years based on the Option 1 Table.
The payments will include interest at an effective rate of 3-1/2% a year. We may
credit more interest. If and while we do so, the payments will be larger.
OPTION 2 (LIFE INCOME)
We will make equal monthly payments for as long as the person on
whose life the settlement is based lives, with payments certain for the period
chosen. The choices are either ten years (10-Year Certain) or until the sum of
the payments equals the amount put under this option (Instalment Refund). The
amount of each payment will be based on the Option 2 Table and on the sex and
age, on the due date of the first payment, of the person on whose life the
settlement is based. But if a choice is made more than two years after the
contract proceeds first become payable, we may use the Option 2 rates in
ordinary policies we regularly issue, based on United States currency, on the
due date of the first payment. On request, we will quote the payment rates in
policies we then issue. We must have proof of the date of birth of the person on
whose life the settlement is based. The settlement will share in our surplus to
the extent and in the way we decide.
(VALB--88)
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OPTION 3 (INTEREST PAYMENT)
We will hold an amount at interest. We will pay interest at an effective
rate of at least 3% a year ($30.00 annually, $14.89 semi-annually, $7.42
quarterly or $2.47 monthly per $1,000). We may pay more interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT)
We will make equal annual, semi-annual, quarterly or monthly payments if
they total at least $90 a year for each $1,000 put under this option. We will
credit the unpaid balance with interest at an effective rate of at least 3-1/2%
a year. We may credit more interest. If we do so, the balance will be larger.
The final payment will be any balance equal to or less than one payment.
OPTION 5 (NONPARTICIPATING INCOME)
We will make payments like those of any annuity we then regularly issue
that: (1) is based on United States currency; (2) is bought by a single sum; (3)
does not provide for dividends; and (4) does not normally provide for deferral
of the first payment. The payment will be at least what we would pay under that
kind of annuity with its first payment due on its contract date. At least one of
the persons on whose life the Option 5 is based must be a payee. If a life
income is chosen, we must have proof of the date of birth of any person on whose
life the option is based. Option 5 cannot be chosen more than 30 days before the
due date of the first payment. On request, we will quote the payment that would
apply for any amount placed under the option at that time.
FIRST PAYMENT DUE DATE
Unless a different date is stated when the option is chosen: (1) the first
payment for Option 3 will be due at the end of the chosen payment interval; and
(2) the first payment for any of the other options will be due on the date the
option takes effect.
RESIDUE DESCRIBED
For Options 1 and 2, residue on any date means the then present value of
any unpaid payments certain. We will compute it at an effective interest rate of
3-1/2% a year. But we will use the rate we used to compute the actual Option 2
payments if they were not based on the table in this contract.
For Options 3 and 4, residue on any date means any unpaid balance with
interest to that date.
For Option 5, it means the then present value of any unpaid payments
certain. We will compute it at the interest rate to which we refer in Option 5.
For Option 2 and 5, residue does not include the value of any payments that
may become due after the certain period.
WITHDRAWAL OF RESIDUE
Unless otherwise stated when the option is chosen: (1) under Options l and
2, the residue may be withdrawn; and (2) under Options 3 and 4 all, or any part
not less than $100, of the residue may be withdrawn. If an Option 3 residue is
reduced to less than $1,000, we have the right to pay it in one sum. Under
Option 2, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
For Option 5, the residue may not be withdrawn while the payee and any
other person on whose life the option is based is living. But, unless otherwise
stated, when the option is chosen, after the death of the last of them to die
any residue not already paid in one sum may be withdrawn.
DESIGNATING CONTINGENT PAYEE(S)
A payee under an option has the right, unless otherwise stated, to name or
change a contingent payee to receive any residue at that payee's death. This may
be done only if: (1) the payee has the full right to withdraw the residue, (2)
the residue would otherwise have been payable to that payee's estate at death,
or (3) a settlement with payments certain is being made in accord with Option 5.
A payee who has this right may choose, or change the choice of, an option
for all or part of the residue. In some cases, the payee will need our consent
to choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a
form that meets our needs. It will take effect only when we file it at our Home
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the payee who made the request is not living when we
file it.
(VALB--88)
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CHANGING OPTIONS
A payee under Option 1, 3, or 4 may choose another option for any sum that
the payee could withdraw on the date the chosen option is to start. That date
may be before the date the payee makes the choice only if we consent. In some
cases, the payee will need our consent to choose or change an option. We
describe these cases next.
CONDITIONS
Under any of these conditions, our consent is needed for an option to be
used for any person:
1. The person is not a natural person who will be paid in his or her own
right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000.
But we will hold any amount for at least one year in accord with the Automatic
Mode of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the
Insured's death, or (b) the death of the beneficiary who was entitled to be
paid as of the date of the Insured's death.
6. The option is for proceeds that arise other than from the Insured's
death, and we are settling with an owner or any other person who is not the
Insured.
DEATH OF PAYEE
If a payee under an option dies and if no other distribution is shown, we
will pay any residue under that option in one sum to the payee's estate.
- --------------------------------------------------------------------------------
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY
These provisions apply to proceeds arising from the Insured's death and
payable in one sum to a payee who is a beneficiary. They do not apply to any
periodic payment.
INTEREST ON PROCEEDS
We will hold the proceeds at interest under Option 3 of the Settlement
Options provisions. The payee may withdraw the residue. We will pay it promptly
on request. We will pay interest annually unless we agree to pay it more often.
We have the right to pay the residue in one sum after one year if: (1) the payee
is not a natural person who will be paid in his or her own right; (2) the payee
will be paid as assignee; or (3) the original amount we hold under Option 3 for
the payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH
If the payee dies and leaves an Option 3 residue, we will honor any
contingent payee provision then in effect. If there is none, here is what we
will do. We will look to the beneficiary designation of the contract; we will
see what other beneficiary(ies), if any, would have been entitled to the portion
of the proceeds that produced the Option 3 residue if the Insured had not died
until immediately after the payee died. Then we will pay the residue in one sum
to such other beneficiary(ies), in accord with that designation. But if, as
stated in that designation, payment would be due the estate of someone else, we
will instead pay the estate of the payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. Jane was living when the Insured died. Jane
later died without having chosen an option or naming someone other than Paul
and John as contingent payee. If Paul and John are living at Jane's death we
owe them the residue. If only one of them is living then, and if the contract
called for payment to the survivor of them, we owe him the residue. If neither
of them is living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR
A beneficiary or contingent payee may not, at or after the Insured's death,
assign, transfer, or encumber any benefit payable. To the extent allowed by law,
the benefits will not be subject to the claims of any creditor of any
beneficiary or contingent payee.
(VALB--88)
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OPTION 1 TABLE
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- --------------------------------------------------------------------------------
Number of Years Monthly Payment
- --------------------------------------------------------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
- --------------------------------------------------------------------------------
Multiply the monthly amount by 2.989 for quarterly, 5.952 for semi-annual or
11.804 for annual.
<TABLE>
- -------------------------------------------------------------------------------------------------------
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
KIND OF LIFE INCOME KIND OF LIFE INCOME
------------------------------- -------------------------------
AGE 10-Year Instalment AGE 10-Year Instalment
LAST Certain Refund LAST Certain Refund
BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.55
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
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</TABLE>
(VALB--88)
Page 25
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<PAGE>
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ENDORSEMENTS
(Only we can endorse this contract.)
VOTING RIGHTS
We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to
2:00 P.M. in our office at Prudential Plaza, Newark, N.J. After this contract
has been in force for one year, you may vote either in person or by mail. We
will send you a ballot if you ask for one. Just write to the Secretary at
Prudential Plaza, Newark, New Jersey 07101, at least 60 days before the election
date. By law, your request must show your name, address, policy number and date
of birth. Only individuals at least 18 years old may vote.
HOME OFFICE LOCATIONS
When we use the term Home Office, we mean any of these Prudential
offices:
Corporate Office, Newark, N.J. North Central Home Office,
Minneapolis, Minn.
Eastern Home Office, South-Central Home Office,
Fort Washington, Pa. Jacksonville, Fla.
The Prudential Insurance Company of America,
By /s/ SPECIMEN
------------------------
Secretary
COMB 86184--88
(VALB--88)
Page 26
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<PAGE>
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ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATiON
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and
sex and on the length of time since the contract date; (2) we use the
Commissioners 1980 Standard Ordinary Non-Smokers Mortality Table; and (3) we use
continuous functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Non-Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By [SPECIMEN SIGNATURE]
Secretary
ORD 86185--88
II-86
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------===============================================================================
Part 1 Application for Life Insurance to
[LOGO] [X] The Prudential Insurance Company of America
[ ] Pruco Life Insurance Company
A Subsidiary of The Prudential Insurance Company of America
No. XX XXX XXX
- -----------------------------------------------------------------------------------------------------------------------------------
1a. Proposed Insured's name--first, initial, last (Print) 1b. Sex 2a. Date of birth 2b. Age 2c. Place of birth
M F Mo. Day Yr.
[X] [ ] 7 10 52 35 (Name of State)
JOHN DOE
- -----------------------------------------------------------------------------------------------------------------------------------
3. [ ] Single [X] Married [ ] Widowed [ ] Separated [ ] Divorced 4. Social Security No. XXX/XX/XXXX
- -----------------------------------------------------------------------------------------------------------------------------------
5a. Occupation(s) Clerk 5b. Duties Clerical Duties
- -----------------------------------------------------------------------------------------------------------------------------------
6. Address for mail No. Street City State Zip
15 Blank Street (Name of City) (Name of State) XXXXX
- -----------------------------------------------------------------------------------------------------------------------------------
7a. Kind of policy Variable Appreciable Life 7b. Initial amount 8. Accidental death coverage
(Variable Death Benefit) $50,000 initial amount
If a Variable contract is applied for complete appropriate suitability form. $
- -----------------------------------------------------------------------------------------------------------------------------------
9. Beneficiary: (Include name, age and relationship.) 10.List all life insurance on proposed Insured. Check here if None [ ]
a. Primary (Class 1): Company Initial Yr. Kind Medical
Mary Doe, 35, Spouse amt. issued (Indiv., Group) Yes No
______________________________________ [ ] [ ]
________________________________________________________________________
_______________________________________________________ [ ] [ ]
________________________________________________________________________
b. Contingent (Class 2) if any: [ ] [ ]
Robert Doe, 10, Son ________________________________________________________________________
____________________________________________________ [ ] [ ]
________________________________________________________________________
[ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
11. Other person(s) proposed for coverage including the Applicant for Applicant's Waiver of Premium benefit (AWP)
Relationship to Date of birth Total life insurance
Name--first, initial, last Sex proposed Insured Mo. Day Yr. Age Place of birth in all companies
a. Spouse $
___________________________________________________________________________________________________________________________________
b. $
___________________________________________________________________________________________________________________________________
c. $
___________________________________________________________________________________________________________________________________
d. $
___________________________________________________________________________________________________________________________________
e. $
___________________________________________________________________________________________________________________________________
f. $
- -----------------------------------------------------------------------------------------------------------------------------------
12. Supplementary benefits and riders: a. For proposed Insured b. For spouse, children, Applicant for AWP
Type and duration of benefit Amount Type and duration of benefit Amount
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
[ ] Option to Purchase Additional Ins. $ [ ] Applicant's Waiver of Premium benefit
- -----------------------------------------------------------------------------------------------------------------------------------
13. State any special request.
- -----------------------------------------------------------------------------------------------------------------------------------
14. Has any person named in 1a or 11, within the last 12 months:
a. been treated by a doctor for or had a known heart attack, stroke or cancer (including melanoma) other Yes No
than of the skin? ............................................................................................. [ ] [X]
b. had an electrocardiogram for any physical complaint, or taken medication for high blood pressure? ............. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
15. Premiums payable [X] Ann. [ ] Semi-Ann. [ ] Quar. [ ] Mon. [ ] Pay. Budg. [ ] Pru-Matic [ ] Gov't. Allot.
- -----------------------------------------------------------------------------------------------------------------------------------
16. Amount paid $454.59 [ ] None (Must be "None" if either 14a or b is answered "Yes".)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Is a medical examination to be made on: Yes No
a. the proposed Insured? ......................................................................................... [ ] [X]
b. spouse (if proposed for coverage)? ............................................................................ [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
18. If 17a or b is "Yes", is it agreed that no insurance will take effect on anyone proposed for coverage until Yes No
the person(s) indicated in 17 have been examined, even if 16 shows that an amount has been paid? ................. [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
ORD 84376-86 Page 1 (Continued on page 2)
</TABLE>
II-87
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Continuation of Part 1 of Application
- -----------------------------------------------------------------------------------------------------------------------------------
19. Will this insurance replace or change any existing insurance or annuity in any company on any person named Yes No
in 1a or 11? If "Yes", give their names, name of company, plan, amount, policy numbers and enclose any [ ] [X]
required state replacement form(s).
- -----------------------------------------------------------------------------------------------------------------------------------
20. Is anyone applying for, or trying to reinstate, life or health insurance on any person named in 1a or 11 in Yes No
this or any company? If "Yes", give amount, details and company. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
21. Does any person named in 1a or 11 plan to live or travel outside the United States and Canada within the Yes No
next 12 months? If "Yes", give country(ies), purpose and duration of trip. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
22. Has any person named in 1a or 11 operated or had any duties aboard an aircraft, glider, balloon, or like Yes No
device, within the last 2 years, or does any such person have any plans to do so in the future? If "Yes", [ ] [X]
complete Aviation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
23. Has any person named in 1a or 11 engaged in hazardous sports such as: auto, motorcycle or power boat Yes No
sports; bobsledding, scuba or skin diving; mountain climbing; parachuting or sky diving; snowmobile [ ] [X]
racing or any other hazardous sport or hobby within the last 2 years or does any such person plan to
do so in the future? If "Yes", complete Avocation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
24. Has any person (age 15 or over) named in 1a or 11 in the last 3 years: Yes No
a. had a driver's license denied, suspended or revoked? ......................................................... [ ] [X]
b. been convicted of three or more moving violations of any motor vehicle law or of driving while under
the influence of alcohol or drugs? ........................................................................... [ ] [X]
c. been involved as a driver in 2 or more auto accidents? ....................................................... [ ] [X]
If "Yes", give name, driver's license number and state of issue, type of violation and reason for license
denial, suspension or revocation.
- -----------------------------------------------------------------------------------------------------------------------------------
25. a. Has the proposed Insured smoked cigarettes within the past twelve months? .............................. Yes [ ] No [ ]
b. Has the spouse (if proposed for coverage) smoked cigarettes within the past twelve months? ............. Yes [ ] No [ ]
c. If the proposed Insured or spouse has ever smoked cigarettes, cigars or a pipe, show date(s) last smoked:
Cigarettes Cigars Pipe
Proposed Insured Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
Spouse Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
- -----------------------------------------------------------------------------------------------------------------------------------
26. Changes made by the Company. (Not applicable in West Virginia)
- -----------------------------------------------------------------------------------------------------------------------------------
To the best of the knowledge and belief of those who sign below, the statements in this application are complete and true. It
is understood that, if any of the above statements (for example, the smoking data) is a material misrepresentation, coverage
could be invalidated as a result. The beneficiary named in the application is for insurance payable upon death of (1) the Insured,
and (2) an insured child after the death of the Insured if there is no insured spouse.
When the Company gives a Limited Insurance Agreement form, ORD 84376A-86, of the same date as this Part 1, coverage will start as
shown in that form. Otherwise, no coverage will start unless: (1) a contract is issued, (2) it is accepted, and (3) the full first
premium is paid while all persons to be covered are living and their health remains as stated in Parts 1 and 2. If all these take
place, coverage will start on the contract date. If the Company makes a change as indicated in 26 it will be approved by acceptance
of the contract. But where the law requires written consent for any change in the application, such change can be made only if those
who sign this form approve the change in writing. No agent can make or change a contract, or waive any of the Company's rights or
needs.
Ownership: Unless otherwise asked for above, the owner of the contract will be (1) the applicant if other than the proposed Insured,
otherwise (2) the proposed Insured. But this is subject to any automatic transfer of ownership stated in the contract.
JOHN DOE
--------------------------------------------------------------------
Signature of Proposed Insured (If age 8 or over)
Dated at (Name of City/State) on Aug. 3, 1987
- ----------------------------------------------------------- --------------------------------------------------------------------
(City/State) Signature of Applicant (If other than proposed Insured --
If applicant is a firm or corporation, show that company's name)
Witness JOHN ROE By
- ----------------------------------------------------------- --------------------------------------------------------------------
(Licensed agent must witness where required by law) (Signature and title of officer signing for that company)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORD 84376-86
Page 2
II-88
<PAGE>
The Prudential Insurance Company of America No. xx xxx xxx
A Supplement to the Life Insurance Application for a variable contract in which
John Doe is named as the proposed insured.
- -------------------------------------------------------------------------------
I BELIEVE THIS CONTRACT MEETS MY INSURANCE NEEDS AND FINANCIAL OBJECTIVES. I
ACKNOWLEDGE RECEIPT OF A CURRENT PROSPECTUS FOR THE CONTRACT. I UNDERSTAND THAT
THE CONTRACT'S VALUE AND DEATH BENEFIT MAY VARY DEPENDING ON THE CONTRACT'S
INVESTMENT EXPERIENCE ....................................... YES [X] NO [ ]
Date Signature of Applicant
Aug. 3, 1987 JOHN DOE
- -------------------------------- -----------------------------------
ORD 86218--88
II-89
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
(VALB--88)
Page 27
II-90
<PAGE>
- --------------------------------------------------------------------------------
Modified Premium Variable whole Life Insurance Policy with variable
insurance amount. Insurance payable only upon death. Scheduled premiums payable
throughout Insured's lifetime. Provision for optional additional premiums.
Benefits reflect premium payments, investment results and charges. Death benefit
guaranteed if scheduled premiums duly paid and no contract debt or withdrawals.
Increase in face amount at attained age 21 if contract issued at age 14 or
lower. Eligible for annual dividends as stated under Dividends.
VALB--88
Page 28
II-91
EXHIBIT 1.A.(5)(c)
- --------------------------------------------------------------------------------
The Prudential Insurance Company of America
[Prudential Logo] a mutual life insurance company
Prudential Plaza, Newark, New Jersey 07101
Insured JOHN DOE XX XXX XXX Policy Number
SEP 10, 1988 Contract Date
Face Amount $50,000--
Premium Period LIFE
Agency R-NK 1
- --------------------------------------------------------------------------------
We will pay the beneficiary the proceeds of this contract promptly if we
receive due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The proceeds arising from the Insured's death will be the insurance amount,
plus the amount of any extra benefit arising from the Insured's death (unless
the contract is in default or there is contract debt). The insurance amount may
be fixed or variable depending on the payment of premiums, the investment
experience of the variable investment options, any excess interest credited to
the fixed investment options, and the charges made. But it will not be less than
the face amount. (We describe the insurance amount on page 16.)
The cash value may increase or decrease daily depending on the payment of
premiums, the investment experience of the variable investment options, any
excess interest credited to the fixed investment options, and the charges made.
There is no guaranteed minimum.
We specify a schedule of premiums. Additional premiums may be paid at your
option subject to the limitations in the contract.
Please read this contract with care. A summary is on page 5. If there is
ever a question about it, or if there is a claim, just see one of our agents or
get in touch with one of our offices.
Right to Cancel contract.--You may return this contract to us within:
(1) 10 days after you get it, or (2) 45 days after Part 1 of the application was
signed, or (3) 10 days after we mail or deliver to you any withdrawal right
notice required by the Securities and Exchange Commission, whichever is latest.
All you have to do is take the contract or mail it to one of our offices or to
the agent who sold it to you. It will be canceled from the start and we will
promptly give you the value of your contract fund on the date you return the
contract to us. We will also give back any charges we made in accord with this
contract.
Signed for Prudential.
/s/ SPECIMEN /s/ SPECIMEN
-------------------- -----------------------
Secretary President
Modified Premium Variable Whole Life Insurance Policy. Insurance payable
only upon death. Scheduled premiums payable throughout Insured's lifetime.
Provision for optional additional premiums. Cash values reflect premium
payments, investment results and charges. Death benefit guaranteed if scheduled
premiums duly paid and no contract debt or withdrawals. Increase in face amount
at attained age 21 if contract issued at age 14 or lower. Eligible for annual
dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VALA--88
II-92
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ............................................................. 3
List of Contract Minimums;
List of Supplementary Benefits, if any; Summary
of Face Amount; Schedule of Premiums; Schedule
of Deduction from Premium Payments; Schedule
of Monthly Deductions from the Contract Fund;
Schedule of Other Charges; Schedule of
Maximum Surrender Charges; Table of Maximum
Monthly Mortality Rates; List of Investment Options;
Schedule of Initial Allocation of Invested Premium
Amounts; Home Office
Tabular Values ............................................................ 4
Contract Summary .......................................................... 5
Table of Basic Amounts
General Provisions......................................................... 6
Definitions; The Contract; Contract
Modifications; Ownership and Control;
Suicide Exclusion; Currency; Misstatement
of Age or Sex; Incontestability; Assignment;
Annual Report; Increase in Face Amount
at Age 21 for Contracts Issued at Age 14
or Lower; Payment of Death Claim; Change in Plan
Beneficiary................................................................ 8
Premium Payment and Reinstatement.......................................... 8
Payment of Premiums; Basic Premiums; Charge
for Applicable Taxes; Scheduled Premiums;
Unscheduled Premiums; Invested Premium
Amount; Contract Change Date(s); Allocations;
Premium Account; Default; Grace Period;
Reinstatement
Face Amount Changes and Withdrawals ....................................... 12
Face Amount; Increase in Face
Amount; Decrease in Face Amount;
Withdrawals
Dividends ................................................................. 14
Participation; Dividend Options; Dividend Credits
Described; Settlement
Separate Account .......................................................... 15
Separate Account; Variable Investment Options;
Separate Account Investments
Fixed Investment Options .................................................. 16
Transfers ................................................................. 16
Insurance Amount .......................................................... 16
Contract Fund ............................................................. 16
Contract Fund Defined; Guaranteed Interest;
Excess Interest, Charge for Expected Mortality;
Charge for Extra Rating Class; Charge for Extra
Benefits; Charges for Administration, Sales
Expenses and Minimum Death Benefit Guarantee
Contract Value Options .................................................... 18
Benefit After the Grace Period; Extended
Insurance; Fixed Reduced Paid-up
Insurance; Variable Reduced Paid-up Insurance
Computations; Optional Benefit; Cash Value
Option; Tabular Values
Loans ..................................................................... 21
Loan Requirements; Contract Debt; Loan
Value; Interest Charge; Fixed Loan Rate Option;
Variable Loan Rate Option; Repayment; Effect
of a Loan; Excess Contract Debt; Postponement
of Loan
Settlement Options ........................................................ 23
Payee Defined; Choosing an Option;
Options Described; First Payment Due Date;
Residue Described;
Withdrawal of Residue; Designating
Contingent Payee(s);
Changing Options; Conditions;
Death of Payee
Automatic Mode of Settlement .............................................. 26
Applicability; Interest on Proceeds;
Settlement at Payee's Death; Spendthrift and
Creditor
Income Tables ............................................................. 27
Voting Rights ............................................................. 28
Home Office Locations ..................................................... 28
Any supplementary benefits and a copy of the application follow page 28.
(VALA--88)
Page 2
II-93
<PAGE>
CONTRACT DATA
Insured's Sex and Issue Age M-35
Insured JOHN DOE XX XXX XXX Policy Number
Face Amount $50,000-- SEP 10, 1988 Contract Date
Premium Period LIFE
Agency R-NK 1
Beneficiary CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
Fixed Loan Interest Rate
LIST OF CONTRACT MINIMUMS
The minimum unscheduled premium is $25.
The minimum increase in face amount is $25,000.
The minimum decrease in face amount is $10,000.
The minimum face amount is $50,000.
***** END OF LIST *****
LIST OF SUPPLEMENTARY BENEFITS
***** NONE *****
SUMMARY OF FACE AMOUNT
EFFECTIVE RATING CONTRACT CHANGE
AMOUNT DATE CLASS DATE
Initial $50,000-- SEP 10, 1988 NONSMOKER SEP 10, 2018
***** END OF SUMMARY *****
SCHEDULE OF PREMIUMS
Scheduled premiums are equal to the basic premium plus the charge for applicable
taxes. The initial scheduled premium due on the contract date is $454.59. Due
dates of scheduled premiums occur on the contract date and at intervals of 12
months after that date.
Basic Premiums are $ 445.50 each
Changing on SEP 10, 2018 to $ 2299.00 each
***** END OF SCHEDULE *****
VAL--88 PAGE 3
II-94
<PAGE>
POLICY NO. XX XXX XXX
SCHEDULE OF DEDUCTIONS FROM PREMIUM PAYMENTS
From each premium paid, we first deduct a charge for applicable taxes (other
than taxes discussed on page 14) of 2%. We reserve the right to change this
percentage to conform to changes in the law or if the insured changes residence.
From the remainder, we deduct a charge for payment processing of up to $2.00.
After deduction of this amount, the balance is the invested premium amount.
***** END OF SCHEDULE *****
SCHEDULE OF MONTHLY DEDUCTIONS FROM THE CONTRACT FUND
The monthly charge for administration is no more than $4.00.
The monthly charge to guarantee the minimum death benefit is no more than $0.50.
The monthly charge for sales expenses is no more than $2.06.
***** END OF SCHEDULE *****
***** SCHEDULE OF OTHER CHARGES *****
There is a charge of up to $15 for any withdrawal or decrease in face amount.
***** END OF SCHEDULE *****
SCHEDULE OF MAXIMUM SURRENDER CHARGES
For full surrender at the beginning of the contract year indicated, the maximum
charge we will deduct from the contract fund is shown below. For surrender at
other times, the amount of the charge will reflect the number of days since the
beginning of the contract year. For any decrease in face amount, we will deduct
a proportionate part of the surrender charge.
Year of Surrender Year of Surrender
Surrender Charge Surrender Charge
- --------- --------- --------- ---------
1 457.00 6 457.00
2 457.00 7 365.50
3 457.00 8 274.00
4 457.00 9 183.00
5 457.00 10 91.50
11 AND LATER Zero
***** END OF SCHEDULE *****
VAL--88 PAGE 3A
II-95
<PAGE>
POLICY NO. XX XXX XXX
TABLE OF MAXIMUM MONTHLY MORTALITY RATES PER $1000
Insured's Maximum Insured's Maximum
Attained Age Rate Attained Age Rate
- ------------ ------- ------------ ---------
35 0.1439 68 2.4893
36 0.1514 69 2.7438
37 0.1614 70 3.0317
38 0.1722 71 3.3603
39 0.1839 72 3.7397
40 0.1980 73 4.1690
41 0.2130 74 4.6407
42 0.2288 75 5.1449
43 0.2463 76 5.6774
44 0.2654 77 6.2340
45 0.2870 78 6.8180
46 0.3103 79 7.4478
47 0.3353 80 8.1434
48 0.3627 81 8.9229
49 0.3927 82 9.8023
50 0.4268 83 10.7774
51 0.4659 84 11.8290
52 0.5108 85 12.9330
53 0.5624 86 14.0753
54 0.6198 87 15.2384
55 0.6839 88 16.4173
56 0.7538 89 17.6287
57 0.8278 90 18.8899
58 0.9102 91 20.2303
59 1.0025 92 21.6995
60 1.1057 93 23.4408
61 1.2205 94 25.7770
62 1.3528 95 29.2738
63 1.5025 96 35.0252
64 1.6689 97 45.0097
65 1.8511 98 61.9945
66 2.0483 99 83.1973
67 2.2596
VAL--88 PAGE 3B
II-96
<PAGE>
POLICY NO. XX XXX XXX
LIST OF INVESTMENT OPTIONS
I. THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
This account is registered with the SEC under the Investment Company Act of
1940. Each investment option of this account invests in a specific portfolio of
The Prudential Series Fund. The fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The fund has several portfolios. We show below the available investment
options and the fund portfolios they invest in.
INVESTMENT FUND
OPTION PORTFOLIO
---------- ---------
Money Market Money Market
Bond Bond
Common Stock Common Stock
Aggressively Managed Flx Aggressively Managed Flx
Conservative Managed Flx Conservative Managed Flx
High Yield Bond High Yield Bond
II. THE PRUDENTIAL REAL PROPERTY ACCOUNT
This account is not registered with the SEC under the Investment Company Act of
1940. The following investment option is available.
INVESTMENT
OPTION
--------
Real Estate
III. FIXED INVESTMENT OPTIONS
The fixed investment options are funded by the general account of the Company.
The following investment option is available.
INVESTMENT
OPTION
--------
Fixed Interest Rate
********* END OF LIST *********
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 20%
Common Stock 60%
Fixed Interest Rate 20%
********* END OF SCHEDULE *********
VAL--88 PAGE 3C
II-97
<PAGE>
POLICY NO. XX XXX XXX
TABULAR VALUES
Tabular values are calculated based on the scheduled premiums, guaranteed
charges and assumed rate of interest. Actual values may be different than the
tabular amounts shown below.
<TABLE>
<CAPTION>
Tabular
Tabular Extended
End of Tabular Tabular Reduced Insurance*
Contract Contract Cash Paid-up ---------------
Year Fund Value Insurance Years Days
-------- -------- ------- --------- ----- ----
<S> <C> <C> <C> <C> <C>
1 292.00 0.00 0.00 0 0
2 591.50 134.50 531.00 1 7
3 898.00 441.00 1682.00 3 58
4 1210.50 753.50 2779.00 4 360
5 1529.00 1072.00 3824.00 6 170
6 1853.00 1487.50 5132.00 8 41
7 2182.00 1908.00 6369.00 9 151
8 2515.50 2332.50 7533.00 10 154
9 2853.00 2761.50 8632.00 11 63
10 3194.00 3194.00 9663.00 11 262
11 3537.50 3537.50 10361.00 11 316
12 3882.50 3882.50 11012.00 11 338
13 4229.00 4229.00 11617.00 11 329
14 4575.00 4575.00 12174.00 11 294
15 4919.50 4919.50 12684.00 11 236
16 5261.00 5261.00 13146.00 11 158
17 5596.00 5596.00 13556.00 11 62
18 5922.00 5922.00 13913.00 10 314
19 6235.00 6235.00 14211.00 10 185
20 6532.00 6532.00 14449.00 10 46
<CAPTION>
ATTAINED
AGE
--------
<S> <C> <C> <C> <C> <C>
60 7635.00 7635.00 14635.00 7 290
62 7796.50 7796.50 14158.00 6 263
65 7500.00 7500.00 12612.00 5 2
</TABLE>
*There may be extra days of term insurance. We explain this under the Extended
Insurance provision.
Nonforfeiture Factors, applicable during premium
period, per $1,000 of initial face amount
Contract Years 1 through 30 7.45334
Contract Years 31 and later 43.02598
VAL--88 PAGE 4
II-98
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SUMMARY
This life insurance contract will provide benefits while the Insured is
living and upon the Insured's death as described below.
Unless we endorse the contract to say otherwise, it gives you the following
rights, among others, subject to certain limitations and requirements:
o You may change the beneficiary.
o You may borrow on it up to its loan value.
o You may change the allocation of future invested premium amounts among
the investment options.
o You may transfer amounts among the investment options.
o You may change the face amount.
o You may withdraw a portion of the contract's value.
o You may surrender the contract. If you do, the proceeds will be the net
cash value.
To compute the proceeds payable upon the Insured's death, we start with a
basic amount and adjust that amount as described in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TABLE OF BASIC AMOUNTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
If the contract is in force: Then the basic amount is: And we adjust the basic amount
for:
- -------------------------------------------------------------------------------------------------------
and not in default past its days the insurance amount (see page contract debt (see page 21),
of grace 16) plus the amount of any extra dividend credits (see page
benefits arising from the 15), and any charges due in
Insured's death the days of grace (see page 11).
- --------------------------------------------------------------------------------------------------------
as reduced paid-up insurance the amount of reduced paid-up contract debt and dividend
(see page 19) insurance (see page 19) credits since the reduced
paid-up insurance began.
- --------------------------------------------------------------------------------------------------------
as extended insurance (see the amount of term insurance, if nothing.
page 18) the Insured dies in the term (see
page 18); otherwise zero
- --------------------------------------------------------------------------------------------------------
</TABLE>
The contract may have extra benefits that we call supplementary benefits.
If it does, we list them under Supplementary Benefits on the contract data pages
and describe them after page 28. The contract may have other extra benefits. If
it does, we add them by rider. Any extra benefit ends as soon as the contract is
in default past its days of grace, unless the form that describes it states
otherwise.
Proceeds need not be taken in one sum. For instance, on surrender, you may
be able to choose a settlement option to provide retirement income or for some
other purpose. If a death benefit becomes payable the beneficiary may also be
able to make such a choice. We will automatically pay interest under Option 3
from the date of death on any death benefit to which no other manner of payment
applies. This will be automatic as we state on page 26.
- --------------------------------------------------------------------------------
(VALA--88)
Page 5
II-99
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
DEFINITIONS
We define here some of the words and phrases used all through this
contract. We expIain others, not defined here, in other parts of the text.
We, Our, Us and Company.--Prudential.
You and Your.--The owner of the contract.
Insured.--The person named as the Insured on the first page. He or she need
not be the owner.
Example: Suppose we issue a contract on the life of your spouse. You
applied for it and named no one else as owner. Your spouse is the Insured and
you are the owner.
SEC.--The Securities and Exchange Commission.
Issue Date.--The contract date.
Monthly Date.--The contract date and the same day as the contract date in
each later month.
Example: If the contract date is May 9, 1988, the monthly dates are each
May 9, June 9, July 9 and so on.
Anniversary or Contract Anniversary.--The same day and month as the
contract date in each later year.
Example: If the contract date is May 9, 1988, the first anniversary is May
9, 1989. The second is May 9, 1990, and so on.
Contract Year.--A year that starts on the contract date or on an
anniversary.
Example: If the contract date is May 9, 1988, the first contract year
starts then and ends on May 8, 1989. The second starts on May 9, 1989 and ends
on May 8, 1990, and so on.
Contract Month.--A month that starts on a monthly date.
Example: If May 9, 1988 is a monthly date, a contract month starts then and
ends on June 8, 1988. The next contract month starts on June 9, 1988 and ends on
July 8, 1988, and so on.
Attained Age.--The Insured's attained age at any time is the issue age plus
the length of time since the contract date. You will find the issue age near the
top of page 3.
Assumed Rate of Return.--The assumed rate of return is an effective rate of
4% a year. This is the same as 0.01074598% a day compounded daily.
THE CONTRACT
This policy, and the attached copy of the initial application, together
with copies of any subsequent applications to change the policy, and any
additional contract data pages added to the policy, form the whole contract. We
assume that all statements in an application are made to the best of the
knowledge and belief of the person(s) who make them; in the absence of fraud
they are deemed to be representations and not warranties. We rely on those
statements when we issue or change the contract. We will not use any statement,
unless made in an application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Prudential officer with the rank or title of vice president or above
may agree to modify this contract, and then only in writing.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise: (1) the owner of the
contract is the Insured; and (2) while the Insured is living the owner alone is
entitled to (a) any contract benefit and value, and (b) the exercise of any
right and privilege granted by the contract or by us.
(VALA--88)
Page 6
II-100
<PAGE>
SUICIDE EXCLUSION
If the Insured, whether sane or insane, dies by suicide within two years
from the issue date, we will pay no more under this contract than the sum of the
premiums paid.
Also, for any increase in the face amount, if the Insured, whether sane or
insane, dies by suicide within two years from the effective date of the
increase, we will pay, as to the increase in amount, no more than the sum of the
scheduled premiums that were due for the increase.
CURRENCY
Any money we pay, or that is paid to us, must be in United States currency.
Any amount we owe will be payable at our Corporate Office.
MISSTATEMENT OF AGE OR SEX
If the Insured's stated age or sex or both are not correct, we will adjust
each benefit and any amount to be paid to reflect the correct age and sex. Any
death benefit will be based on what the most recent charge for mortality would
have provided at the correct age and sex. Where required, we have given the
insurance regulator a detailed statement of how we will make these adjustments.
The Schedule of Premiums may show that basic premiums change or stop on a
certain date. We may have used that date because the Insured would attain a
certain age on that date. If we find that the issue age was wrong, we will
correct that date and, if necessary, the amount of any changed premiums.
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We will not be deemed to know of an assignment unless we receive it, or a
copy of it, at our Home Office. We are not obliged to see that an assignment is
valid or sufficient. This contract may not be assigned to another insurance
company or to any employee benefit plan without our consent. This contract may
not be assigned if such assignment would violate any federal, state, or local
law or regulation prohibiting sex distinct rates for insurance.
ANNUAL REPORT
Each year we will send you a report. It will show: (1) the current death
benefit; (2) the amount of the contract fund in each investment option; (3) the
net cash value; (4) premiums paid, investment results, and charges deducted
since the last report; (5) any withdrawals since the last report; and (6) any
contract debt and the interest on the debt for the prior year. The report will
also include any other data that may be currently required where this contract
is delivered. No report will be sent if this contract is being continued under
fixed reduced paid-up insurance or extended term insurance.
You may ask for a similar report at some other time during the year. Or you
may request from time to time a report projecting results under your contract on
the basis of premium payment assumptions and assumed investment results. We have
the right to make a reasonable charge for reports such as these that you ask for
and to limit the scope and frequency of such requests.
INCREASE IN FACE AMOUNT AT AGE 21 FOR
CONTRACTS ISSUED AT AGE 14 OR LOWER
If this contract was issued at age 14 or lower, it shows on page 3 an
increase in face amount at attained age 21 which applies if the contract is not
then in default beyond its days of grace. In that case, any references in the
contract to face amount or death benefit which apply at or after attained age 21
will be based on the increased face amount, unless otherwise stated.
PAYMENT OF DEATH CLAIM
If we settle this contract in one sum as a death claim, we will usually pay
the proceeds within seven days after we receive at our Home Office proof of
death and any other information we need to pay the claim. But we have the right
to postpone paying the part of the proceeds in excess of the face amount that is
to come from any investment option provided by a separate account registered
under the Investment Company Act of 1940 if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency. We have the right to postpone paying the remainder of any excess for
up to six months.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance either with us or with a subsidiary of ours. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
(VALA--88)
Page 7
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<PAGE>
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BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing
and in a form that meets our needs. It will take effect only when we file it at
our Home Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Insured will have the right to be paid only if no
one in a prior class survives the Insured.
2. One who has the right to be paid will be the only one paid if no one
else in the same class survives the Insured.
3. Two or more in the same class who have the right to be paid will be paid
in equal shares.
4. If none survives the Insured, we will pay in one sum to the Insured's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. We owe Jane the proceeds if she is living at
the Insured's death. We owe Paul and John the proceeds if they are living then
but Jane is not. But if only one of them is living, we owe him the proceeds. If
none of them is living we owe the Insured's estate.
Beneficiaries who do not have a right to be paid under these terms may
still have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of
the identity, age or any other facts about any persons designated as
beneficiaries. If beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s) again.
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PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt.
Premium payments will in most cases be credited as of the date of receipt
at our Home Office. In the following cases, part or all of a premium payment
will be credited as of a date other than the date of receipt:
1. If the first premium payment is received after the contract date, the
scheduled portion will be credited as of the contract date.
(VALA--88)
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2. If the first premium payment is received before the contract date, it
will be credited as of the contract date.
3. If a premium payment is received during the 61-day period after a
scheduled premium due date and the premium account is negative by no
more than the scheduled premium then due, the portion of the payment
needed to bring the premium account up to zero will be credited to the
premium account, but not the contract fund, as of the due date.
4. If the contract is in default and premium payments are received during
the days of grace while the contract is in default, we will credit to
the contract fund and the premium account those parts of the premium
payments needed to end the default status as of the applicable monthly
dates.
BASIC PREMIUMS
We show the amount and frequency of the basic premiums in the Schedule of
Premiums in the contract data pages. An increase or decrease in the face amount
will change the basic premiums.
CHARGE FOR APPLICABLE TAXES
The charge for applicable taxes is a percentage of each premium paid that
we set from time to time. It will change only on a contract anniversary.
At least sixty days before the start of each contract year, we will
determine the rate we will charge for that contract year. The rate will be based
on the rates of any federal, state or local premium taxes that apply at the last
known address of the Insured.
SCHEDULED PREMIUMS
The scheduled premiums are equal to the basic premiums plus the charge for
applicable taxes. The scheduled premiums will change if the basic premiums
change or the charge for applicable taxes changes. We show the amount of the
first scheduled premium in the Schedule of Premiums. It is due on the contract
date. There is no insurance under this contract unless an amount at least equal
to the first scheduled premium is paid.
The scheduled premium is the minimum premium required, at the frequency
chosen, to continue the contract in full force if you pay all scheduled
premiums when due, you make no withdrawals, and any contract debt does not
exceed the cash value.
If you wish to pay, on a regular basis, premiums that are higher than the
scheduled premiums, we will bill you for the higher amount you choose. Or if you
wish, you may from time to time make a premium payment smaller than the
scheduled amount, subject to the minimum premium amount shown on page 3.
If scheduled premiums that are due are not paid, or if smaller payments are
made, the contract may then or at some future time go into default. Payment of
less than the scheduled premium increases the risk that the contract will end if
investment results are not favorable. The conditions under which the contract
will be in default are described below.
UNSCHEDULED PREMIUMS
Except as we state in the next paragraph, unscheduled premiums may be paid
at any time during the Insured's lifetime as long as the contract is not in
default beyond its days of grace. We show on page 3 the minimum premium we will
accept.
We have the right to limit unscheduled premiums to a total of $10,000 in
any contract year. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
INVESTED PREMIUM AMOUNT
This is the portion of each premium paid that we will add to the premium
account and the contract fund. It is equal to the premium paid minus the charges
described in the contract data pages under Schedule of Deductions from Premium
Payments.
CONTRACT CHANGE DATE(S)
We show the contract change date(s) in the contract data pages. We also
show in the Schedule of Premiums on these pages that the amount of each basic
premium will change on each contract change date and what the new premium will
be. However, when a contract change date arrives we will compute a new premium
amount to be used in calculating the premium account. The new premium that we
compute will be no greater than the new premium for that date which we show in
the contract data pages. In addition, if the premium account is less than zero,
we will set the premium account to zero.
(VALA--88)
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The Schedule of Premiums may show that the premium changes at times other
than contract change dates. This may occur, for example, with a contract issued
with extra benefits or in an extra rating class.
ALLOCATIONS
You may allocate all or a part of your invested premium amount to one or
more of the investment options listed in the contract data pages. You may choose
to allocate nothing to a particular investment option. But any allocation you
make must be at least 10%; you may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so
on, up to 90. But you may not choose a percentage of 1 through 9, or 91 through
99, or any percentage that is not a whole number. The total for all investment
options must be 100%.
The initial allocation of invested premium amounts is shown in the contract
data pages. You may change the allocation for future invested premium amounts at
any time if the contract is not in default. To do so, you must notify us in a
form that meets our needs. The change will take effect on the date we receive
your notice at our Home Office.
A premium might be paid when the contract fund is less than zero. In that
case we first use as much of the invested premium amount as we need to bring the
fund up to zero. We will then allocate any remainder of the invested premium
amount in accord with your most recent request.
PREMIUM ACCOUNT
On the contract date, the premium account is equal to the invested premium
amount credited on that date, minus the basic premium then due, plus the charge
for payment processing. On any other day, the premium account is equal to:
1. what it was on the prior day; plus
2. if the premium account was greater than zero on the prior day, interest
on the excess at 4% a year; minus
3. if the premium account was less than zero on the prior day, interest on
the deficit at 4% a year; plus
4. any invested premium amount credited on that day; minus
5. any basic premium due on that day less the charge for payment
processing; minus
6. any withdrawals on that day.
If we credit a part of a payment as of an earlier date, as we describe
under Payment of Premiums, the premium account for all days from the crediting
date to the date of receipt will be recalculated.
DEFAULT
Unless the contract is already in the grace period, we will determine on
each monthly date whether the contract is in default. To do so, we will first
deduct any applicable charges from the contract fund and add any applicable
credits to it (the contract fund is described on page 16). We will then compute
the amount which will grow to equal the tabular contract fund on the next
monthly date if, during the current contract month: (1) any investment results
are at the assumed rate and (2) we receive no premiums or loan repayments, make
no loans and grant no withdrawals. We will compare this amount to the contract
fund.
If this amount is more than the contract fund, the difference is the fund
deficit. In this case the contract is in default if the premium account is also
less than zero.
(VALA--88)
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GRACE PERIOD
The days of grace begin on any monthly date, other than the contract date,
on which the contract goes into default. Within 30 days after any default we
will send you a notice that your contract is in default. We will indicate the
minimum payment required to bring the contract out of default and the length of
the grace period for making that payment.
We grant at least 61 days of grace from the date we mail you a notice of
default. During the days of grace we will continue to accept premiums and make
the charges we have set.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the sum of the fund deficit on the
date of default and any additional fund deficits on any subsequent monthly dates
since the date of default, and (b) the sum of the amount by which the premium
account is negative on the date of default and any scheduled premiums due since
the date of default, the default will end.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the fund deficit on the date of
default, and (b) the amount by which the premium account is negative on the date
of default, but that are insufficient to end the default, here is what we will
do. We will determine a new default date which is the monthly date after the old
default date. We will grant at least 61 days of grace from the new default date.
If the contract is still in default when the days of grace are over, it
will end and have no value, except as we state under Contract Value Options (see
page 18). Any premiums paid during the days of grace will remain in the
contract fund.
The Insured might die in the days of grace while the contract is in
default. If so, the amount needed to bring the contract out of default is due
us. We will make an adjustment so that the proceeds will not include that
amount.
This contract might have an extra benefit that insures someone other than
the Insured. And there might be a claim under that benefit while the Insured is
living and in the days of grace while the contract is in default. In this case,
we will subtract the amount needed to bring the contract out of default before
we settle the claim.
REINSTATEMENT
If this contract is still in default after the last day of grace, you may
reinstate it. All these conditions must be met:
1. The contract must not be in default more than five years.
2. You must not have surrendered the contract for its net cash value.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
4. We must be paid a premium at least equal to the amount required to bring
the premium account up to zero on the first monthly date on which a
scheduled premium is due after the date of reinstatement.
5. If before reinstatement the contract is in force as reduced paid-up
insurance (see page 19), any contract debt under reduced paid-up
insurance must be repaid with interest or carried over to the reinstated
contract.
(VALA--88)
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If we approve the reinstatement, these statements apply. The date of
reinstatement will be the date of your request or the date the required premium
is paid, if later. We will start to make daily and monthly charges and credits
again as of the date of reinstatement. We will deduct from the premium paid the
charges from premium payments described in the contract data pages, and any
charges in arrears, other than the charge for expected mortality, with 4%
interest to the date of reinstatement. The contract fund will be equal to the
remainder, plus the cash value of the contract immediately before reinstatement,
plus a refund of that part of any surrender charge deducted at the time of
default which would be charged if the contract were surrendered immediately
after reinstatement.
If we consent, you may be able to reinstate the contract for a premium less
than that described above. We will deduct the same charges and adjust the
contract fund in the same manner. In that case, the premium account will be less
than zero and you may need to pay more than the scheduled premiums to guarantee
that the contract will not go into default again at some future time.
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FACE AMOUNT CHANGES AND WITHDRAWALS
FACE AMOUNT
The face amount is shown on page 3. It will change if: (1) you increase or
decrease it, or (2) you make a withdrawal.
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount once each
contract year. You may do so subject to all these conditions and the paragraph
that follows:
1. You must ask for the increase in writing in a form that meets our
needs; if you are not the Insured and the Insured is age 8 or over, he
or she must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. The contract must not be in default.
6. We must not since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits as
shown on page 3.
9. We must not be waiving premiums in accord with any waiver of premium
benefit that may be included in the contract.
An increase will take effect only if we approve your request for it at our
Home Office. If we approve the increase, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. We will send you new contract data pages showing the amount and
effective date of the increase and the recomputed values. If the Insured is not
living on the effective date, the increase will not take effect.
(VALA--88)
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DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may do
so subject to all these conditions and the paragraphs that follow:
1 . You must ask for the decrease in writing in a form that meets our
needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount after the decrease must be at least equal to the minimum
face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be endorsed.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. A decrease in face amount may also affect the amount of any
extra benefits this contract might have. We will send you new contract data
pages showing the amount and effective date of the decrease and the recomputed
values. If the Insured is not living on the effective date, the decrease will
not take effect.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge from the contract fund.
WITHDRAWALS
You may make withdrawals from the contract. You may do so subject to all
these conditions and the paragraphs that follow:
1. You must ask for the withdrawal in writing in a form that meets our
needs.
2. The amount withdrawn, plus the net cash value after withdrawal, may not
be more than the net cash value before withdrawal.
3. The contract fund after withdrawal must not be less than the tabular
contract fund for the new face amount.
4. You may not withdraw less than $2,000 at any one time.
5. You may make up to four withdrawals in any contract year.
6. The face amount after the withdrawal must be at least equal to the
minimum face amount, which we show on page 3.
7. If we ask you to do so, you must send us the contract to be endorsed.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge, based on the reduction in the face
amount described below, from the contract fund.
We will decrease the face amount by not more than the amount of the
withdrawal. We will recompute the contract's basic premiums, maximum surrender
charges, tabular values, monthly deductions, and expense charges. The decrease
in face amount may also affect the amount of any extra benefit this contract
might have. We will send you new contract data pages showing the recomputed
values.
(VALA--88)
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We will normally pay any withdrawal within seven days after we receive your
request and, if we ask for it, the contract at our Home Office. But we have the
right to defer paying the part of the withdrawal that is to come from any
variable investment option provided by a separate account registered under the
Investment Company Act of 1940 if: (1) the New York Stock Exchange is closed; or
(2) the SEC requires that trading be restricted or declares an emergency. We
have the right to postpone paying you the remainder of the withdrawal for up to
six months. If we do so for more than thirty days, we will pay interest at the
rate of 3% a year.
An amount withdrawn may not be repaid, except as a premium subject to
charges.
We will tell you how much you may withdraw if you ask us.
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DIVIDENDS
PARTICIPATION
We will decide each year what part, if any, of our surplus to credit to
this contract as a dividend.
While the contract is in force other than as extended or reduced paid-up
insurance, it will be eligible for such a dividend if the Insured is living. We
will credit any such dividend on the anniversary. We do not expect to credit any
dividends to this contract.
DIVIDEND OPTIONS
If you ask us in writing and in a form that meets our needs, you may choose
any of these uses for any such dividend:
1. Cash.--We will pay it to you in cash.
2. Premium Reduction.--We will use it to reduce any premium then required.
If no premium is then required, we will apply the dividend under dividend
option 3.
3. Dividend Addition.--We will use it at the net single premium rate as of
the anniversary to provide a dividend addition, which is paid-up life insurance
on the Insured's life.
4. Accumulation.--We will hold it at interest. The rate will be at least 3%
a year. We may use a higher rate.
If you have not made another choice by 31 days after the anniversary, we
will use the dividend as we state under dividend option 3. But if the contract
is in default at the end of the last day of grace, we will use the dividend as
we state under Contract Value Options. You may surrender any of the above
additions or accumulations for their net value if: (1) we have not included them
in the net cash value used to provide extended or reduced paid-up insurance; (2)
we do not need them as security for contract debt; and (3) we have your request
in writing in a form that meets our needs. The surrender value of those
additions will not be less than the dividends we used to provide them.
While the contract is in force as reduced paid-up insurance, it will be
eligible for a dividend if the Insured is living. We will credit any such
dividend on the anniversary as a paid-up life insurance addition on the
Insured's life.
(VALA--88)
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DIVIDEND CREDITS DESCRIBED
The phrase dividend credits means the total of: (1) either the amount or
value, as we explain in the next sentence, of any dividend additions under
dividend option 3 or on reduced paid-up insurance; (2) any dividends and
interest we hold under dividend option 4; and (3) any other dividends we have
credited to the contract but have not yet used or paid. For dividend additions,
the phrase means the amount of any of those additions when we set the amount of
any extended insurance and when we refer to the proceeds that arise from the
Insured's death; the phrase means the net value of any of those additions when
we refer to loans, net cash values, or the proceeds that arise on surrender.
SETTLEMENT
We will include any dividend credits in the amount payable when we settle
the contract.
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SEPARATE ACCOUNTS
SEPARATE ACCOUNT
The words separate account, when we use them in this contract without
qualification, mean any separate account we establish to support variable life
insurance contracts like this one. We list the separate accounts available to
you in the contract data pages. We may establish additional separate accounts.
We will notify you within one year if we do so.
A separate account may or may not be registered with the SEC under the
Investment Company Act of 1940. The contract data pages will tell you whether
or not a particular separate account is so registered.
VARIABLE INVESTMENT OPTIONS
A separate account may offer one or more variable investment options. We
list them in the contract data pages. We may establish additional variable
investment options. We will notify you within one year if we do so.
Income and realized and unrealized gains and losses from assets in each
variable investment option are credited to, or charged against, that variable
investment option. This is without regard to income, gains, or losses in our
other investment accounts.
SEPARATE ACCOUNT INVESTMENTS
We may invest the assets of different separate accounts in different ways.
But we will do so only with the consent of the SEC and, where required, of the
insurance regulator where this contract is delivered.
We will always keep assets in the separate accounts with a total value at
least equal to the amount of the variable investment options under contracts
like this one. To the extent those assets do not exceed that amount, we use them
only to support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over that amount in any way we
choose.
We will determine the value of the assets in each separate account and any
variable investment option at regular intervals.
(VALA--88)
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FIXED INVESTMENT OPTIONS
You may allocate all or part of your invested premium amount to a fixed
investment option. Fixed investment options are credited with interest as
described under Guaranteed Interest and Excess Interest on page 17.
We may establish additional fixed investment options. We will notify you
within one year if we do so.
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TRANSFERS
Four transfers may be made in a policy year. There is no charge for these
transfers.
You may transfer amounts into or out of variable investment options of
separate accounts registered under the Investment Company Act of 1940 and into
the fixed investment options at any time if the contract is not in default or if
the contract is being continued under the variable reduced paid-up option. Other
transfers are allowed only with our consent.
In addition, the entire amount in all investment options may be transferred
to a fixed investment option at any time within the first two contract years.
To make a transfer, you must notify us in a form that meets our needs. The
transfer will take effect on the date we receive your notice at our Home Office.
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INSURANCE AMOUNT
The insurance amount on any date is equal to the greater of: (1) the face
amount, and (2) the contract fund, before deduction of any monthly charges due
on that date, divided by the net single premium per $1 at the Insured's attained
age.
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CONTRACT FUND
CONTRACT FUND DEFINED
On the contract date the contract fund is equal to the invested premium
amounts credited on that date, minus any of the charges described below which
may be due on that date. On any day after that the contract fund is equal to
what it was on the previous day, plus any invested premium amounts credited that
day, plus these items:
(a) any increase due to investment results in the value of the variable
investment options;
(b) guaranteed interest on that portion of the contract fund that is not in
a variable investment option; and
(c) any excess interest on that portion of the contract fund that is not in
a variable investment option;
(VALA--88)
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and minus any of these items applicable on that day:
(d) any decrease due to investment results in the value of the variable
investment options;
(e} a charge against the variable investment options at a rate of not more
than 0.00245475% a day (0.90% a year) for mortality and expense risks that we
assume;
(f) any amount charged against the variable investment options for federal
or state income taxes;
(g) any charge for expected mortality;
(h) any charge for extra rating class;
(i) any charge for extra benefits;
(j) any charge for administration;
(k) any charge for sales expenses;
(l) any charge to guarantee the minimum death benefit;
(m) any withdrawals; and
(n) any surrender charges, administrative charges, or contract debt
cancelled that may result from a withdrawal, a decrease in face amount, or a
change in status to variable reduced paid-up insurance.
We describe under Reinstatement on page 11 what the contract fund will be
on any reinstatement date. There is no contract fund for a contract in force as
extended insurance or fixed reduced paid-up insurance.
GUARANTEED INTEREST
We will credit interest each day on any portion of the contract fund not in
a variable investment option. We will credit 0.01074598% a day, which is
equivalent to an effective rate of 4% a year.
EXCESS INTEREST
We may credit excess interest, that is, interest in addition to the
guaranteed interest, on any portion of the contract fund not in a variable
investment option. The rate of any excess interest will be determined from time
to time and will continue thereafter until a new rate is determined. We may use
different rates of excess interest for different portions of the contract fund.
We may from time to time guarantee rates of excess interest on some portions of
the contract fund.
CHARGE FOR EXPECTED MORTALITY
On each monthly date, we will deduct a charge for expected mortality. The
maximum amount we can deduct is computed as the maximum monthly mortality rate
multiplied by the coverage amount. The coverage amount is the difference between
the insurance amount and the adjusted contract fund. The adjusted contract fund
is equal to the tabular contract fund at the end of the contract year multiplied
by 0.980517829, plus the contract fund before deduction of any monthly charges
due on the monthly date, minus the tabular contract fund on the monthly date.
The maximum monthly mortality rates are based on the Insured's sex, rating
class, and attained age and are shown in the contract data pages. We may use
lower rates. At least once every five years, but not more often than once a
year, we will consider the need to change to rates. We will change them only if
we do so for all contracts like this one dated in the same year as this one.
(VALA--88)
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CHARGE FOR EXTRA RATING CLASS
If the contract is not in default past its days of grace and there is an
extra charge because of the rating class of the Insured, we will deduct it from
the contract fund on each monthly date. The maximum amount of any charge is
included in the amount shown in the contract data pages under Schedule of
Monthly Deductions from the Contract Fund.
CHARGE FOR EXTRA BENEFITS
If the contract has extra benefits, we will deduct the charges for them
from the contract fund on each monthly date. The maximum amount of any such
charges are included in the amount shown in the contract data pages under
Schedule of Monthly Deductions from the Contract Fund.
CHARGES FOR ADMINISTRATION, SALES EXPENSES AND MINIMUM DEATH BENEFIT GUARANTEE
If the contract is not in default past its days of grace, we will deduct a
charge for administration and a charge for sales expenses. We will also deduct
a charge for guaranteeing that the investment performance of the variable
investment options will not reduce the death benefit below the face amount
provided scheduled premiums are paid when due and you make no loans or
withdrawals. We show the maximum amount of these charges in the contract data
pages under Schedule of Monthly Deductions from the Contract Fund.
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CONTRACT VALUE OPTIONS
BENEFIT AFTER THE GRACE PERIOD
If the contract is in default beyond its days of grace, we will use any net
cash value to keep the contract in force as one of three kinds of insurance:
1. Extended insurance applies to most contracts.
2. Fixed reduced paid-up insurance always applies if we issued the contract
in a rating class for which we do not provide extended insurance; in this case,
the phrase No Extended Insurance will appear under the heading Rating Class in
the contract data pages.
3. Variable reduced paid-up insurance applies if the amount of paid-up
insurance would be at least as great as the amount of extended insurance and the
contract was issued in a rating class permitting extended insurance.
We describe each kind of insurance below. Any extra benefit will end as
soon as the contract is in default past its days of grace, unless the form that
describes the extra benefit states otherwise.
EXTENDED INSURANCE
This will be term insurance on the Insured's life. We will pay the amount
of term insurance if the Insured dies in the term we describe below. Before the
end of the term there will be cash values but no loan value.
The amount of term insurance will be: (1) the insurance amount, plus (2)
any dividend credits minus (3) any contract debt. The term is a period of time
that will start on the day the contract went into default. The length of the
term will be what is provided when we use the net cash value at the net single
premium rate. This rate depends on the Insured's issue age and sex and on the
length of time since the contract date.
(VALA--88)
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There may be extra days of term insurance. This will occur if, on the day
the contract goes into default, the term of extended insurance provided by the
net cash value does not exceed 90 days, or the number of days the contract was
in force before the default began, if less. The number of extra days will be:
(1) 90, or the number of days the contract was in force before the default
began, if less, minus (2) the number of days of extended insurance that would be
provided by the net cash value if there were no contract debt. The extra days,
if any, start on the day after the last day of term insurance provided by the
net cash value, if any. If there is no such term insurance, they start on the
day the contract goes into default. The term insurance for the extra days has no
cash value. There will be no extra days if you replace the extended insurance
with reduced paid-up insurance or you surrender the contract before the extra
days start.
FIXED REDUCED PAID-UP INSURANCE
This will be paid-up life insurance on the Insured's life. We will pay the
amount of this insurance when the Insured dies. There will be cash values and
loan values.
The amount of this insurance will be what is provided when we use the net
cash value at the net single premium rate. This rate depends on the Insured's
issue age and sex and on the length of time since the contract date.
VARIABLE REDUCED PAID-UP INSURANCE
This will be paid-up variable life insurance on the Insured's life. We will
pay the amount of this insurance when the Insured dies. The death benefit may
change from day to day, as we explain below, but if there is no contract debt it
will not be less than the minimum guaranteed amount. There will be cash values
and loan values.
The minimum guaranteed amount of insurance will be what is provided when we
use the net cash value at the net single premium rate. This rate depends on the
Insured's issue age and sex and on the length of time since the contract date.
The amount payable in the event of death will be the greater of (a) the minimum
guaranteed amount, and (b) the contract fund divided by the net single premium
per $1 at the Insured's attained age. In either case the amount will be
adjusted for any contract debt.
The variable reduced paid-up insurance option will be available only if the
minimum guaranteed amount under the option is at least $5,000 and if we issued
the contract in a rating class permitting extended insurance.
COMPUTATIONS
We will make all computations for any of these benefits as of the date the
contract goes into default. But we will consider any dividend credits you
surrender, any loan you take out or pay back, or any premium payments,
withdrawals, or changes in face amount you make in the days of grace.
(VALA--88)
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<PAGE>
OPTIONAL BENEFIT
You may choose to replace any extended insurance that has a cash value by
fixed reduced paid-up insurance or by variable reduced paid-up insurance if it
is available. To make this choice, you must do so in writing in a form that
meets our needs not more than three months after the date the contract goes into
default. You must also send the contract to us to be endorsed.
CASH VALUE OPTION
You may surrender this contract for its net cash value. The net cash value
at any time is the cash value at that time less any contract debt. To surrender
this contract, you must ask us in writing in a form that meets our needs. You
must also send the contract to us. Here is how we will compute the net cash
value:
1. If the contract is not in default, the net cash value on any date will
be the contract fund, before deduction of any monthly charges due on that date,
minus any surrender charge, plus any dividend credits, minus any contract debt.
The Schedule of Maximum Surrender Charges for this contract is in the contract
data pages.
2. If the contract is in default during its days of grace, we will compute
the net cash value as of the date the contract went into default. But we will
adjust this value for any dividend credits you surrender, any loan you take out
or pay back, and any premium payments, withdrawals, or decreases in face amount
you make in the days of grace.
3. If the contract is in default beyond its days of grace, the net cash
value will be either: (1) the net value on that date of any extended insurance
benefit then in force, or (2) the net value on that date of any reduced paid-up
insurance benefit then in force, including any dividend credits, less any
contract debt.
Within thirty days after an anniversary, the net cash value of any extended
insurance or fixed reduced paid-up insurance will not be less than the value on
that anniversary adjusted for any dividend credits you surrender and any loan
you take out or pay back in those thirty days.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home Office. But we have the right to defer
paying the part of the proceeds that is to come from any investment option
provided by a separate account registered under the Investment Company Act of
1940 if: (1) the New York Stock Exchange is closed; or (2) the SEC requires that
trading be restricted or declares an emergency. We have the right to postpone
paying you the remainder of the proceeds for up to six months. If we do so for
more than thirty days, we will pay interest at the rate of 3% a year.
TABULAR VALUES
We show tabular contract fund values and tabular cash values at the ends of
contract years in the contract data pages.
If we need to compute tabular values at some time during a contract year,
we will count the time since the start of the year. We will let you know the
tabular values for other durations if you ask for them.
(VALA--88)
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- --------------------------------------------------------------------------------
LOANS
LOAN REQUIREMENTS
You may borrow from us on the contract. All these conditions must be met:
1. The Insured must be living.
2. The contract must be in force other than as extended insurance.
3. The contract debt will not be more than the loan value.
4. As sole security for the loan, you assign the contract to us in a form
that meets our needs.
5. Except to pay premiums on this contract, you may not borrow less than
$200 at any one time.
If there is already contract debt when you borrow from us, we will add the
new amount you borrow to that debt.
CONTRACT DEBT
Contract debt at any time means the loan on the contract, plus the interest
we have charged that is not yet due and that we have not yet added to the loan.
Example 1: Suppose the contract has a loan value of $6,000. A few months
ago you borrowed $1,500. By now there is interest of $55 charged but not yet
due. The contract debt is now $1,555, which is made up of the $1,500 loan and
the $55 interest.
LOAN VALUE
You may borrow any amount up to the difference between the loan value and
any existing contract debt. Except as we state in the next paragraph, the loan
value at any time is equal to the sum of (a) 90% of the portion of the cash
value that is attributable to the variable investment options, and (b) the
balance of the cash value.
There are two exceptions. The first is that, if the contract is in default,
the loan value during the days of grace is what it was on the date of default
adjusted for any dividend credits you surrender and any premium payments,
withdrawals, or decreases in face amount you make in the days of grace. The
second is that, if the contract is in force as fixed reduced paid-up insurance,
the loan value is equal to the amount that would grow at interest to equal the
cash value on the next anniversary.
Example 2: Suppose, in example 1, you want to borrow all that you can. We
will lend you $4,445 which is the difference between the $6,000 loan value and
the $1,555 contract debt. This will increase the contract debt to $6,000. We
will add the new amount borrowed to the existing loan and will charge interest
on it, too.
INTEREST CHARGE
You may select either the fixed loan rate option or the variable loan rate
option. Both are described below. We show on page 3 the option you have
selected. If you request a change from one option to the other and we agree, we
will tell you the effective date of the change.
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever comes first. If interest
is not paid when due, it becomes part of the loan. Then we start to charge
interest on it, too.
(VALA--88)
Page 21
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<PAGE>
Example 3: Suppose the contract date is in 1988. Six months before the
anniversary in 1997 you borrow $1,600 out of a $4,000 loan value. We charge
5-1/2% a year. Three months later, but still three months before the
anniversary, we will have charged about $22 interest. This amount will be a few
cents more or less than $22 since some months have more days than others. The
interest will not be due until the anniversary unless the loan is paid back
sooner. The loan will still be $1,600. The contract debt will be $1,622, since
contract debt includes interest charged but not yet due.
On the anniversary in 1997 we will have charged about $44 interest. The
interest will then be due.
Example 4: Suppose the $44 interest in example 3 was paid on the
anniversary. The loan and contract debt each became $1,600 right after the
payment.
Example 5: Suppose the $44 interest in example 3 was not paid on the
anniversary. The interest became part of the loan, and we began to charge
interest on it, too. The loan and contract debt each became $1,644.
FIXED LOAN RATE OPTION
The loan interest rate is 5-1/2% a year.
VARIABLE LOAN RATE OPTION
The loan interest rate is the annual rate we set from time to time. The
rate will never be greater than is permitted by law. It will change only on a
contract anniversary.
Before the start of each contract year, we will determine the loan
interest rate we can charge for that contract year. To do this, we will first
find the rate that is the greater of: (1) The Published Monthly Average (which
we describe below) for the calendar month ending two months before the calendar
month of the contract anniversary; and (2) 5%.
If that greater rate is at least 1/2% more than the loan interest rate we
had set for the current contract year, we have the right to increase the loan
interest rate by at least 1/2%, up to that greater rate. If it is at least 1/2%
less, we will decrease the loan interest rate to be no more than the greater
rate. We will not change the loan interest rate by less than 1/2%.
When you make a loan we will tell you the initial interest rate for the
loan. We will send you a notice if there is to be an increase in the rate.
The Published Monthly Average means:
1. Moody's Corporate Bond Yield Average--Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that service;
or
2. If that average is no longer published, a substantially similar average,
established by the insurance regulator where this contract is delivered.
REPAYMENT
All or part of any contract debt may be paid back at any time while the
Insured is living. But if there is contract debt at the end of the last day of
grace when the contract is in default, it will be deducted from the cash value
to determine the net cash value. When we settle the contract, any contract debt
is due us. We will make an adjustment so that the proceeds will not include the
amount of that debt.
EFFECT OF A LOAN
When you take a loan, the amount of the loan continues to be part of the
contract fund and is credited with interest at the guaranteed rate of 4% a year.
If you have selected the variable loan rate option, we will credit excess
interest at an effective rate of not less than the loan interest rate for the
contract year less 5%.
We will reduce the portion of the contract fund allocated to the investment
options by the amount you borrow, and by loan interest that becomes part of the
loan because it is not paid when due.
(VALA--88)
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<PAGE>
On each transaction date, if there is a contract loan outstanding, we will
increase the portion of the contract fund in the investment options by interest
credits accrued on the loan since the last transaction date. When you repay all
or part of a loan we will increase the portion of the contract fund in the
investment options by the amount of loan you repay, plus interest credits
accrued on the loan since the last transaction date. We will not increase the
portion of the contract fund allocated to the investment options by loan
interest that is paid before we make it part of the loan.
EXCESS CONTRACT DEBT
If contract debt ever grows to be equal to or more than the cash value, all
the contract's benefits will end 61 days after we mail a notice to you and any
assignee we know of. Also, we may send a notice to the Insured's last known
address. In the notice we will state the amount that, if paid to us, will keep
the contract's benefits from ending for a limited time.
POSTPONEMENT OF LOAN
We will usually make a loan within seven days after we receive your request
at our Home Office. But we have the right to postpone making the part of the
loan that is to come from any investment option provided by a separate account
registered under the Investment Company Act of 1940 if: (1) the New York Stock
Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds of a loan for up to six months, unless it will be used to pay
premiums on this or other contracts with us.
- --------------------------------------------------------------------------------
SETTLEMENT OPTIONS
PAYEE DEFINED
In these provisions and under the Automatic Mode of Settlement, the word
payee means a person who has a right to receive a settlement under the contract.
Such a person may be the Insured, the owner, a beneficiary, or a contingent
payee.
CHOOSING AN OPTION
A payee may choose an option for all or part of any proceeds or residue
that becomes payable to him or her in one sum. We describe residue on page 24.
In some cases, a payee will need our consent to choose an option. We
describe these cases under Conditions.
OPTIONS DESCRIBED
Here are the options we offer. We may also consent to other arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD)
We will make equal payments for up to 25 years based on the Option 1 Table.
The payments will include interest at an effective rate of 3-1/2% a year. We may
credit more interest. If and while we do so, the payments will be larger.
OPTION 2 (LIFE INCOME)
We will make equal monthly payments for as long as the person on
whose life the settlement is based lives, with payments certain for the period
chosen. The choices are either ten years (10-Year Certain) or until the sum of
the payments equals the amount put under this option (Instalment Refund). The
amount of each payment will be based on the Option 2 Table and on the sex and
age, on the due date of the first payment, of the person on whose life the
settlement is based. But if a choice is made more than two years after the
contract proceeds first become payable, we may use the Option 2 rates in
ordinary policies we regularly issue, based on United States currency, on the
due date of the first payment. On request, we will quote the payment rates in
policies we then issue. We must have proof of the date of birth of the person on
whose life the settlement is based. The settlement will share in our surplus to
the extent and in the way we decide.
(VALA--88)
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OPTION 3 (INTEREST PAYMENT)
We will hold an amount at interest. We will pay interest at an effective
rate of at least 3% a year ($30.00 annually, $14.89 semi-annually, $7.42
quarterly or $2.47 monthly per $1,000). We may pay more interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT)
We will make equal annual, semi-annual, quarterly or monthly payments if
they total at least $90 a year for each $1,000 put under this option. We will
credit the unpaid balance with interest at an effective rate of at least 3-1/2%
a year. We may credit more interest. If we do so, the balance will be larger.
The final payment will be any balance equal to or less than one payment.
OPTION 5 (NON-PARTICIPATING INCOME)
We will make payments like those of any annuity we then regularly issue
that: (1) is based on United States currency; (2) is bought by a single sum; (3)
does not provide for dividends; and (4) does not normally provide for deferral
of the first payment. The payment will be at least what we would pay under that
kind of annuity with its first payment due on its contract date. At least one of
the persons on whose life the Option 5 is based must be a payee. If a life
income is chosen, we must have proof of the date of birth of any person on whose
life the option is based. Option 5 cannot be chosen more than 30 days before the
due date of the first payment. On request, we will quote the payment that would
apply for any amount placed under the option at that time.
FIRST PAYMENT DUE DATE
Unless a different date is stated when the option is chosen: (1) the first
payment for Option 3 will be due at the end of the chosen payment interval; and
(2) the first payment for any of the other options will be due on the date the
option takes effect.
RESIDUE DESCRIBED
For Options 1 and 2, residue on any date means the then present value of
any unpaid payments certain. We will compute it at an effective interest rate of
3-1/2% a year. But we will use the interest rate we used to compute the actual
Option 2 payments if they were not based on the table in this contract.
For Options 3 and 4, residue on any date means any unpaid balance with
interest to that date.
For Option 5, it means the then present value of any unpaid payments
certain. We will compute it at the interest rate to which we refer in Option 5.
For Option 2 and 5, residue does not include the value of any payments that
may become due after the certain period.
WITHDRAWAL OF RESIDUE
Unless otherwise stated when the option is chosen: (1) under Options l and
2, the residue may be withdrawn; and (2) under Options 3 and 4 all, or any part
not less than $100, of the residue may be withdrawn. If an Option 3 residue is
reduced to less than $1,000, we have the right to pay it in one sum. Under
Option 2, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
For Option 5, the residue may not be withdrawn while the payee and any
other person on whose life the option is based is living. But, unless otherwise
stated, when the option is chosen, after the death of the last of them to die
any residue not already paid in one sum may be withdrawn.
(VALA--88)
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<PAGE>
DESIGNATING CONTINGENT PAYEE(S)
A payee under an option has the right, unless otherwise stated, to name or
change a contingent payee to receive any residue at that payee's death. This may
be done only if: (1) the payee has the full right to withdraw the residue, (2)
the residue would otherwise have been payable to that payee's estate at death,
or (3) a settlement with payments certain is being made in accord with Option 5.
A payee who has this right may choose, or change the choice of, an option
for all or part of the residue. In some cases, the payee will need our consent
to choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a
form that meets our needs. It will take effect only when we file it at our Home
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the payee who made the request is not living when we
file it.
CHANGING OPTIONS
A payee under Option 1, 3, or 4 may choose another option for any sum that
the payee could withdraw on the date the chosen option is to start. That date
may be before the date the payee makes the choice only if we consent. In some
cases, the payee will need our consent to choose or change an option. We
describe these cases next.
CONDITIONS
Under any of these conditions, our consent is needed for an option to be
used for any person:
1. The person is not a natural person who will be paid in his or her own
right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000.
But we will hold any amount for at least one year in accord with the Automatic
Mode of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the
Insured's death, or (b) the death of the beneficiary who was entitled to be
paid as of the date of the Insured's death.
6. The option is for proceeds that arise other than from the Insured's
death, and we are settling with an owner or any other person who is not the
Insured.
DEATH OF PAYEE
If a payee under an option dies and if no other distribution is shown, we
will pay any residue under that option in one sum to the payee's estate.
(VALA--88)
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- --------------------------------------------------------------------------------
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY
These provisions apply to proceeds arising from the Insured's death and
payable in one sum to a payee who is a beneficiary. They do not apply to any
periodic payment.
INTEREST ON PROCEEDS
We will hold the proceeds at interest under Option 3 of the Settlement
Options provisions. The payee may withdraw the residue. We will pay it promptly
on request. We will pay interest annually unless we agree to pay it more often.
We have the right to pay the residue in one sum after one year if: (1) the payee
is not a natural person who will be paid in his or her own right; (2) the payee
will be paid as assignee; or (3) the original amount we hold under Option 3 for
the payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH
If the payee dies and leaves an Option 3 residue, we will honor any
contingent payee provision then in effect. If there is none, here is what we
will do. We will look to the beneficiary designation of the contract; we will
see what other beneficiary(ies), if any, would have been entitled to the portion
of the proceeds that produced the Option 3 residue if the Insured had not died
until immediately after the payee died. Then we will pay the residue in one sum
to such other beneficiary(ies), in accord with that designation. But if, as
stated in that designation, payment would be due the estate of someone else, we
will instead pay the estate of the payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. Jane was living when the Insured died. Jane
later died without having chosen an option or naming someone other than Paul
and John as contingent payee. If Paul and John are living at Jane's death we
owe them the residue. If only one of them is living then, and if the contract
called for payment to the survivor of them, we owe him the residue. If neither
of them is living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR
A beneficiary or contingent payee may not, at or after the Insured's death,
assign, transfer, or encumber any benefit payable. To the extent allowed by law,
the benefits will not be subject to the claims of any creditor of any
beneficiary or contingent payee.
(VALA--88)
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OPTION 1 TABLE
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- --------------------------------------------------------------------------------
Number of Years Monthly Payment
- --------------------------------------------------------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
- --------------------------------------------------------------------------------
Multiply the monthly amount by 2.989 for quarterly, 5.952 for semi-annual or
11.804 for annual.
<TABLE>
- -------------------------------------------------------------------------------------------------------
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
KIND OF LIFE INCOME KIND OF LIFE INCOME
------------------------------- -------------------------------
AGE 10-Year Instalment AGE 10-Year Instalment
LAST Certain Refund LAST Certain Refund
BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.58
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
- -------------------------------------------------------------------------------------------------------
</TABLE>
(VALA--88)
Page 27
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<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
VOTING RIGHTS
We are a mutual life insurance company. Our principal office is in
Newark, New Jersey, and we are incorporated in that State. By law, we have 24
directors. This includes 16 elected by our policyholders (four each year for
four year terms), two of our officers, and six public directors named by New
Jersey's Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to
2:00 P.M. in our office at Prudential Plaza, Newark, N.J. After this contract
has been in force for one year, you may vote either in person or by mail. We
will send you a ballot if you ask for one. Just write to the Secretary at
Prudential Plaza, Newark, New Jersey 07101, at least 60 days before the election
date. By law, your request must show your name, address, policy number and date
of birth. Only individuals at least 18 years old may vote.
HOME OFFICE LOCATIONS
When we use the term Home Office, we mean any of these Prudential
offices:
CORPORATE OFFICE, NEWARK, N.J. NORTH CENTRAL HOME OFFICE,
MINNEAPOLIS, MINN.
EASTERN HOME OFFICE, SOUTH-CENTRAL HOME OFFICE,
FORT WASHINGTON, PA. JACKSONVILLE, FLA.
The Prudential Insurance Company of America,
By SPECIMEN
------------------------
Secretary
COMB 86184--88
(VALA--88)
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ENDORSEMENTS
(Only we can endorse this contract
BASIS OF COMPUTATiON
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and
sex and on the length of time since the contract date; (2) we use the
Commissioners 1980 Standard Ordinary Non-Smokers Mortality Table; and (3) we use
continuous functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Non-Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By [SPECIMEN SIGNATURE]
---------------------
Secretary
ORD 86185--88
II-123
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------===============================================================================
Part 1 Application for Life Insurance to
[LOGO] [X] The Prudential Insurance Company of America
[ ] Pruco Life Insurance Company
A Subsidiary of The Prudential Insurance Company of America
No. XX XXX XXX
- -----------------------------------------------------------------------------------------------------------------------------------
1a. Proposed Insured's name--first, initial, last (Print) 1b. Sex 2a. Date of birth 2b. Age 2c. Place of birth
M F Mo. Day Yr.
[X] [ ] 7 10 52 35 (Name of State)
JOHN DOE
- -----------------------------------------------------------------------------------------------------------------------------------
3. [ ] Single [X] Married [ ] Widowed [ ] Separated [ ] Divorced 4. Social Security No. XXX/XX/XXXX
- -----------------------------------------------------------------------------------------------------------------------------------
5a. Occupation(s) Clerk 5b. Duties Clerical Duties
- -----------------------------------------------------------------------------------------------------------------------------------
6. Address for mail No. Street City State Zip
15 Blank Street (Name of City) (Name of State) XXXXX
- -----------------------------------------------------------------------------------------------------------------------------------
7a. Kind of policy Variable Appreciable Life 7b. Initial amount 8. Accidental death coverage
(Level Death Benefit) $50,000 initial amount
If a Variable contract is applied for complete appropriate suitability form. $
- -----------------------------------------------------------------------------------------------------------------------------------
9. Beneficiary: (Include name, age and relationship.) 10.List all life insurance on proposed Insured. Check here if None [ ]
a. Primary (Class 1): Company Initial Yr. Kind Medical
Mary Doe, 35, Spouse amt. issued (Indiv., Group) Yes No
____________________________________________________ [ ] [ ]
________________________________________________________________________
_______________________________________________________ [ ] [ ]
________________________________________________________________________
b. Contingent (Class 2) if any: [ ] [ ]
Robert Doe, 10, Son ________________________________________________________________________
____________________________________________________ [ ] [ ]
________________________________________________________________________
[ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
11. Other person(s) proposed for coverage including the Applicant for Applicant's Waiver of Premium benefit (AWP)
Relationship to Date of birth Total life insurance
Name--first, initial, last Sex proposed Insured Mo. Day Yr. Age Place of birth in all companies
a. Spouse $
___________________________________________________________________________________________________________________________________
b. $
___________________________________________________________________________________________________________________________________
c. $
___________________________________________________________________________________________________________________________________
d. $
___________________________________________________________________________________________________________________________________
e. $
___________________________________________________________________________________________________________________________________
f. $
- -----------------------------------------------------------------------------------------------------------------------------------
12. Supplementary benefits and riders: a. For proposed Insured b. For spouse, children, Applicant for AWP
Type and duration of benefit Amount Type and duration of benefit Amount
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
[ ] Option to Purchase Additional Ins. $ [ ] Applicant's Waiver of Premium benefit
- -----------------------------------------------------------------------------------------------------------------------------------
13. State any special request.
- -----------------------------------------------------------------------------------------------------------------------------------
14. Has any person named in 1a or 11, within the last 12 months:
a. been treated by a doctor for or had a known heart attack, stroke or cancer (including melanoma) other Yes No
than of the skin? ............................................................................................. [ ] [X]
b. had an electrocardiogram for any physical complaint, or taken medication for high blood pressure? ............. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
15. Premiums payable [X] Ann. [ ] Semi-Ann. [ ] Quar. [ ] Mon. [ ] Pay. Budg. [ ] Pru-Matic [ ] Gov't. Allot.
- -----------------------------------------------------------------------------------------------------------------------------------
16. Amount paid $454.59 [ ] None (Must be "None" if either 14a or b is answered "Yes".)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Is a medical examination to be made on: Yes No
a. the proposed Insured? ......................................................................................... [ ] [X]
b. spouse (if proposed for coverage)? ............................................................................ [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
18. If 17a or b is "Yes", is it agreed that no insurance will take effect on anyone proposed for coverage until Yes No
the person(s) indicated in 17 have been examined, even if 16 shows that an amount has been paid? ................. [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
ORD 84376-86 Page 1 (Continued on page 2)
</TABLE>
II-124
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
CONTINUATION OF PART 1 OF APPLICATION
- -----------------------------------------------------------------------------------------------------------------------------------
19. Will this insurance replace or change any existing insurance or annuity in any company on any person named Yes No
in 1a or 11? If "Yes", give their names, name of company, plan, amount, policy numbers and enclose any [ ] [X]
required state replacement form(s).
- -----------------------------------------------------------------------------------------------------------------------------------
20. Is anyone applying for, or trying to reinstate, life or health insurance on any person named in 1a or 11 in Yes No
this or any company? If "Yes", give amount, details and company. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
21. Does any person named in 1a or 11 plan to live or travel outside the United States and Canada within the Yes No
next 12 months? If "Yes", give country(ies), purpose and duration of trip. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
22. Has any person named in 1a or 11 operated or had any duties aboard an aircraft, glider, balloon, or like Yes No
device, within the last 2 years, or does any such person have any plans to do so in the future? If "Yes", [ ] [X]
complete Aviation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
23. Has any person named in 1a or 11 engaged in hazardous sports such as: auto, motorcycle or power boat Yes No
sports; bobsledding, scuba or skin diving; mountain climbing; parachuting or sky diving; snowmobile [ ] [X]
racing or any other hazardous sport or hobby within the last 2 years or does any such person plan to
do so in the future? If "Yes", complete Avocation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
24. Has any person (age 15 or over) named in 1a or 11 in the last 3 years: Yes No
a. had a driver's license denied, suspended or revoked? ......................................................... [ ] [X]
b. been convicted of three or more moving violations of any motor vehicle law or of driving while under
the influence of alcohol or drugs? ........................................................................... [ ] [X]
c. been involved as a driver in 2 or more auto accidents? ....................................................... [ ] [X]
If "Yes", give name, driver's license number and state of issue, type of violation and reason for license
denial, suspension or revocation.
- -----------------------------------------------------------------------------------------------------------------------------------
25. a. Has the proposed Insured smoked cigarettes within the past twelve months? .............................. Yes [ ] No [ ]
b. Has the spouse (if proposed for coverage) smoked cigarettes within the past twelve months? ............. Yes [ ] No [ ]
c. If the proposed Insured or spouse has ever smoked cigarettes, cigars or a pipe, show date(s) last smoked:
Cigarettes Cigars Pipe
Proposed Insured Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
Spouse Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
- -----------------------------------------------------------------------------------------------------------------------------------
26. CHANGES MADE BY THE COMPANY. (Not applicable in West Virginia)
- -----------------------------------------------------------------------------------------------------------------------------------
To the best of the knowledge and belief of those who sign below, the statements in this application are complete and true. It
is understood that, if any of the above statements (for example, the smoking data) is a material misrepresentation, coverage
could be invalidated as a result. The beneficiary named in the application is for insurance payable upon death of (1) the Insured,
and (2) an insured child after the death of the Insured if there is no insured spouse.
When the Company gives a Limited Insurance Agreement form, ORD 84376A-86, of the same date as this Part 1, coverage will start as
shown in that form. Otherwise, no coverage will start unless: (1) a contract is issued, (2) it is accepted, and (3) the full first
premium is paid while all persons to be covered are living and their health remains as stated in Parts 1 and 2. If all these take
place, coverage will start on the contract date. If the Company makes a change as indicated in 26 it will be approved by acceptance
of the contract. But where the law requires written consent for any change in the application, such change can be made only if those
who sign this form approve the change in writing. No agent can make or change a contract, or waive any of the Company's rights or
needs.
OWNERSHIP: Unless otherwise asked for above, the owner of the contract will be (1) the applicant if other than the proposed Insured,
otherwise (2) the proposed Insured. But this is subject to any automatic transfer of ownership stated in the contract.
JOHN DOE
--------------------------------------------------------------------
Signature of Proposed Insured (If age 8 or over)
Dated at (Name of City/State) on Aug. 3, 1987
- ----------------------------------------------------------- --------------------------------------------------------------------
(City/State) Signature of Applicant (If other than proposed Insured --
If applicant is a firm or corporation, show that company's name)
Witness JOHN ROE By
- ----------------------------------------------------------- --------------------------------------------------------------------
(Licensed agent must witness where required by law) (Signature and title of officer signing for that company)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORD 84376--86
Page 2
II-125
<PAGE>
The Prudential Insurance Company of America No. xx xxx xxx
A Supplement to the Life Insurance Application for a variable contract in which
John Doe is named as the proposed insured.
- -------------------------------------------------------------------------------
I BELIEVE THIS CONTRACT MEETS MY INSURANCE NEEDS AND FINANCIAL OBJECTIVES. I
ACKNOWLEDGE RECEIPT OF A CURRENT PROSPECTUS FOR THE CONTRACT. I UNDERSTAND THAT
THE CONTRACT'S VALUE AND DEATH BENEFIT MAY VARY DEPENDING ON THE CONTRACT'S
INVESTMENT EXPERIENCE ....................................... YES [X] NO [ ]
Date Signature of Applicant
Aug. 3, 1987 JOHN DOE
- -------------------------------- -----------------------------------
ORD 86218--88
II-126
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract)
(VALA--88)
Page 29
II-127
<PAGE>
- --------------------------------------------------------------------------------
MODIFIED PREMIUM VARIABLE WHOLE LIFE INSURANCE POLICY. INSURANCE PAYABLE
ONLY UPON DEATH. SCHEDULED PREMIUMS PAYABLE THROUGHOUT INSURED'S LIFETIME.
PROVISION FOR OPTIONAL ADDITIONAL PREMIUMS. CASH VALUES REFLECT PREMIUM
PAYMENTS, INVESTMENT RESULTS AND CHARGES. DEATH BENEFIT GUARANTEED IF SCHEDULED
PREMIUMS DULY PAID AND NO CONTRACT DEBT OR WITHDRAWALS. INCREASE IN FACE AMOUNT
AT ATTAINED AGE 21 IF CONTRACT ISSUED AT AGE 14 OR LOWER. ELIGIBLE FOR ANNUAL
DIVIDENDS AS STATED UNDER DIVIDENDS.
VALA--88
Page 30
II-128
EXHIBIT 1.A.(5)(d)
- --------------------------------------------------------------------------------
The Prudential Insurance Company of America
[Prudential Logo] a mutual life insurance company
Prudential Plaza, Newark, New Jersey 07101
Insured JOHN DOE XX XXX XXX Policy Number
SEP 10, 1988 Contract Date
Face Amount $50,000--
Premium Period LIFE
Agency R-NK 1
- --------------------------------------------------------------------------------
We will pay the beneficiary the proceeds of this contract promptly if we
receive due proof that the Insured died. We make this promise subject to all the
provisions of the contract.
The proceeds arising from the Insured's death will be the insurance amount,
plus the amount of any extra benefit arising from the Insured's death (unless
the contract is in default or there is contract debt). The insurance amount may
be fixed or variable depending on the payment of premiums, the investment
experience of the variable investment options, any excess interest credited to
the fixed investment options, and the charges made. But it will not be less than
the face amount. (We describe the insurance amount on page 16.)
The cash value may increase or decrease daily depending on the payment of
premiums, the investment experience of the variable investment options, any
excess interest credited to the fixed investment options, and the charges made.
There is no guaranteed minimum.
We specify a schedule of premiums. Additional premiums may be paid at your
option subject to the limitations in the contract.
Please read this contract with care. A summary is on page 5. If there is
ever a question about it, or if there is a claim, just see one of our agents or
get in touch with one of our offices.
Right to cancel Contract.--You may return this contract to us within: (1)
10 days after you get it, or (2) 45 days after Part 1 of the application was
signed, or (3) 10 days after we mail or deliver to you any withdrawal right
notice required by the Securities and Exchange Commission, whichever is latest.
All you have to do is take the contract or mail it to one of our offices or to
the agent who sold it to you. It will be canceled from the start and we will
promptly give you the value of your contract fund on the date you return the
contract to us. We will also give back any charges we made in accord with this
contract.
Signed for Prudential.
/s/ SPECIMEN /s/ SPECIMEN
----------------------- -----------------------
Secretary President
Modified Premium Variable Whole Life Insurance Policy with variable
insurance amount. Insurance payable only upon death. Scheduled premiums payable
throughout Insured's lifetime. Provision for optional additional premiums.
Benefits reflect premium payments, investment results and charges. Death benefit
guaranteed if scheduled premiums duly paid and no contract debt or withdrawals.
Increase in face amount at attained age 21 if contract issued at age 14 or
lower. Eligible for annual dividends as stated under Dividends.
- --------------------------------------------------------------------------------
VALB--88
II-129
<PAGE>
GUIDE TO CONTENTS
Page
Contract Data ............................................................. 3
List of Contract Minimums;
List of Supplementary Benefits, if any; Summary
of Face Amount; Schedule of Premiums; Schedule
of Expense Charges from Premium Payments; Schedule
of Monthly Deductions from Contract Fund;
Schedule of Maximum Surrender Charges;
List of Subaccounts and Portfolios; List
of Fixed Account Options; Schedule
of Initial Allocation of Net Premiums; Home Office
Tabular Values ............................................................ 4
Contract Summary .......................................................... 5
Table of Basic Amounts
General Provisions......................................................... 6
Definitions; The Contract; Contract
Modifications; Ownership and Control;
Suicide Exclusion; Currency; Misstatement
of Age or Sex; Incontestability; Assignment;
Annual Report; Increase in Face Amount
at Age 21 for Contracts Issued at Age 14
or Lower; Payment of Death Claim; Change in Plan
Beneficiary................................................................ 8
Premium Payment and Reinstatement.......................................... 8
Payment of Premiums; Basic Premiums; Charge
for Applicable Taxes; Scheduled Premiums;
Unscheduled Premiums; Invested Premium
Amount; Contract Change Date(s); Allocations;
Premium Account; Default; Grace Period;
Reinstatement
Face Amount Changes and Withdrawals ....................................... 12
Face Amount; Increase in Face
Amount; Decrease in Face Amount;
Withdrawals
Dividends ................................................................. 14
Participation; Dividend Options; Dividend Credits
Described; Settlement
Separate Account .......................................................... 15
Separate Account; Variable Investment Options;
Separate Account Investments
Fixed Investment Options .................................................. 16
Transfers ................................................................. 16
Insurance Amount .......................................................... 16
Contract Fund ............................................................. 16
Contract Fund Defined; Guaranteed Interest;
Excess Interest; Charge for Expected Mortality;
Charge for Extra Rating Class; Charge for Extra
Benefits; Charges for Administration, Sales
Expenses and Minimum Death Benefit Guarantee
Contract Value Options .................................................... 18
Benefit After the Grace Period; Extended
Insurance; Fixed Reduced Paid-up
Insurance; Variable Reduced Paid-up Insurance
Computations; Optional Benefit; Cash Value
Option; Tabular Values
Loans ..................................................................... 20
Loan Requirements; Contract Debt; Loan
Value; Interest Charge; Fixed Loan Rate Option;
Variable Loan Rate Option; Repayment; Effect
of a Loan; Excess Contract Debt; Postponement
of Loan
Settlement Options ........................................................ 22
Payee Defined; Choosing an Option;
Options Described; First Payment Due Date;
Residue Described;
Withdrawal of Residue; Designating
Contingent Payee(s);
Changing Options; Conditions;
Death of Payee
Automatic Mode of Settlement .............................................. 24
Applicability; Interest on Proceeds;
Settlement at Payee's Death; Spendthrift and
Creditor
Income Tables ............................................................. 25
Voting Rights ............................................................. 26
Home Office Location ...................................................... 26
Any supplementary benefits and a copy of the application follow page 26.
(VALB--88)
Page 2H
II-130
<PAGE>
CONTRACT DATA
Insured's Sex and Issue Age M-35
Insured JOHN DOE XX XXX XXX Policy Number
Face Amount $50,000-- SEP 10, 1988 Contract Date
Premium Period LIFE
Agency R-NK 1
Beneficiary CLASS 1 MARY DOE, WIFE
CLASS 2 ROBERT DOE, SON
Fixed Loan Interest Rate
LIST OF CONTRACT MINIMUMS
The minimum unscheduled premium is $25.
The minimum increase in face amount is $25,000.
The minimum decrease in face amount is $10,000.
The minimum face amount is $50,000.
***** END OF LIST *****
LIST OF SUPPLEMENTARY BENEFITS
***** NONE *****
SUMMARY OF FACE AMOUNT
EFFECTIVE RATING CONTRACT CHANGE
AMOUNT DATE CLASS DATE
Initial $50,000-- SEP 10, 1988 NONSMOKER SEP 10, 2018
***** END OF SUMMARY *****
SCHEDULE OF PREMIUMS
Scheduled premiums are equal to the basic premium plus the charge for applicable
taxes. The initial scheduled premium due on the contract date is $454.59. Due
dates of scheduled premiums occur on the contract date and at intervals of 12
months after that date.
Basic Premiums are $ 445.50 each
Changing on SEP 10, 2018 to $ 2299.00 each
***** END OF SCHEDULE *****
VAL--88 PAGE 3
II-131
<PAGE>
POLICY NO. XX XXX XXX
SCHEDULE OF DEDUCTIONS FROM PREMIUM PAYMENTS
From each premium paid, we first deduct a charge for applicable taxes (other
than taxes discussed on page 17) of 2%. We reserve the right to change this
percentage to conform to changes in the law or if the insured changes residence.
From the remainder, we deduct a charge for payment processing of up to $2.00.
After deduction of this amount, the balance is the invested premium amount.
***** END OF SCHEDULE *****
SCHEDULE OF MONTHLY DEDUCTIONS FROM THE CONTRACT FUND
The monthly charge for administration is no more than $4.00.
The monthly charge to guartantee the minimum death benefit is no more than
$0.50.
The monthly charge for sales expenses is no more than $2.06.
Changing on Sep 10, 2018 to $11.33.
***** END OF SCHEDULE *****
***** SCHEDULE OF OTHER CHARGES *****
There is a charge of up to $15 for any withdrawal or decrease in face amount.
***** END OF SCHEDULE *****
SCHEDULE OF MAXIMUM SURRENDER CHARGES
For full surrender at the beginning of the contract year indicated, the maximum
charge we will deduct from the contract fund is shown below. For surrender at
other times, the amount of the charge will reflect the number of days since the
beginning of the contract year. For any decrease in face amount, we will deduct
a proportionate part of the surrender charge.
Year of Surrender Year of Surrender
Surrender Charge Surrender Charge
- --------- --------- --------- ---------
1 457.00 6 457.00
2 457.00 7 365.50
3 457.00 8 274.00
4 457.00 9 183.00
5 457.00 10 91.50
11 And Later Zero
***** END OF SCHEDULE *****
VAL--88(H) PAGE 3A
II-132
<PAGE>
POLICY NO. XX XXX XXX
TABLE OF MAXIMUM MONTHLY RATES PER $1000
Insured's Maximum Insured's Maximum
Attained Age Rate Attained Age Rate
- ------------ ------- ------------ ---------
35 0.1439 68 2.4893
36 0.1514 69 2.7438
37 0.1614 70 3.0317
38 0.1722 71 3.3603
39 0.1839 72 3.7397
40 0.1980 73 4.1690
41 0.2130 74 4.6407
42 0.2288 75 5.1449
43 0.2463 76 5.6774
44 0.2654 77 6.2340
45 0.2870 78 6.8180
46 0.3103 79 7.4478
47 0.3353 80 8.1434
48 0.3627 81 8.9229
49 0.3927 82 9.8023
50 0.4268 83 10.7774
51 0.4659 84 11.8290
52 0.5108 85 12.9330
53 0.5624 86 14.0753
54 0.6198 87 15.2384
55 0.6839 88 16.4173
56 0.7538 89 17.6287
57 0.8278 90 18.8899
58 0.9102 91 20.2303
59 1.0025 92 21.6995
60 1.1057 93 23.4408
61 1.2205 94 25.7770
62 1.3528 95 29.2738
63 1.5025 96 35.0252
64 1.6689 97 45.0097
65 1.8511 98 61.9945
66 2.0483 99 83.1973
67 2.2596
VAL--88(H) PAGE 3B
II-133
<PAGE>
POLICY NO. XX XXX XXX
LIST OF INVESTMENT OPTIONS
I. THE PRUDENTIAL VARIABLE APPRECIABLE ACCOUNT
This account is registered with the SEC under the Investment Company Act of
1940. Each investment option of this account invests in a specific portfolio of
The Prudential Series Fund. The fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end diversified management investment
company. The fund has several portfolios. We show below the available investment
options and the fund portfolios they invest in.
INVESTMENT FUND
OPTION PORTFOLIO
---------- ---------
Money Market Money Market
Bond Bond
Common Stock Common Stock
Aggressively Managed Flx Aggressively Managed Flx
Conservative Managed Flx Conservative Managed Flx
High Yield Bond High Yield Bond
Stock Index Stock Index
High Dividend Stock High Dividend Stock
Natural Resources Natural Resources
II. THE PRUDENTIAL REAL PROPERTY ACCOUNT
This account is not registered with the SEC under the Investment Company Act of
1940. The following investment option is available.
INVESTMENT
OPTION
--------
Real Estate
III. FIXED INVESTMENT OPTIONS
The fixed investment options are funded by the general account of the Company.
The following investment option is available.
INVESTMENT
OPTION
--------
Fixed Interest Rate
********* END OF LIST *********
SCHEDULE OF INITIAL ALLOCATION OF INVESTED PREMIUM AMOUNTS
Money Market 20%
Common Stock 60%
Fixed Interest Rate 20%
********* END OF SCHEDULE *********
VAL--88 PAGE 3C
II-134
<PAGE>
POLICY NO. XX XXX XXX
TABULAR VALUES
Tabular values are calculated based on the scheduled premiums, guaranteed
charges, assumed rate of return, no contract debt and no dividends credited.
Actual values may be different than the tabular amounts shown below.
<TABLE>
<CAPTION>
Tabular
Tabular Extended
End of Tabular Tabular Reduced Insurance*
Contract Contract Cash Paid-up ---------------
Year Fund Value Insurance Years Days
-------- -------- ------- --------- ----- ----
<S> <C> <C> <C> <C> <C>
1 292.00 0.00 0.00 0 0
2 591.50 134.50 531.00 1 7
3 898.00 441.00 1682.00 3 58
4 1210.50 753.50 2779.00 4 360
5 1529.00 1072.00 3824.00 6 170
6 1853.00 1487.00 5132.00 8 41
7 2182.00 1908.00 6369.00 9 151
8 2515.50 2332.50 7533.00 10 154
9 2853.00 2761.50 8632.00 11 63
10 3194.00 3194.00 9663.00 11 262
11 3537.50 3537.50 10361.00 11 316
12 3882.50 3882.50 11012.00 11 338
13 4229.00 4229.00 11617.00 11 329
14 4575.00 4575.00 12174.00 11 294
15 4919.50 4919.50 12684.00 11 236
16 5261.00 5261.00 13146.00 11 158
17 5596.00 5596.00 13556.00 11 62
18 5922.00 5922.00 13913.00 10 314
19 6235.00 6235.00 14211.00 10 185
20 6532.00 6532.00 14449.00 10 46
<CAPTION>
ATTAINED
AGE
--------
<S> <C> <C> <C> <C> <C>
60 7635.00 7635.00 14635.00 7 290
62 7796.50 7796.50 14158.00 6 263
65 7500.00 7500.00 12612.00 5 2
</TABLE>
*There may be extra days of term insurance. We explain this under the Extended
Insurance provision.
Nonforfeiture Factors, applicable during premium
period, per $1,000 of initial face amount
Contract Years 1 through 30 7.45334
Contract Years 31 and later 43.02598
VAL--88 PAGE 4
II-135
<PAGE>
- --------------------------------------------------------------------------------
CONTRACT SUMMARY
This life insurance contract will provide benefits while the Insured is
living and upon the Insured's death as described below.
Unless we endorse the contract to say otherwise, it gives you the following
rights, among others, subject to certain limitations and requirements:
o You may change the beneficiary.
o You may borrow on it up to its loan value.
o You may change the allocation of future invested premium amounts among
the investment options.
o You may transfer amounts among the investment options.
o You may change the face amount.
o You may withdraw a portion of the contract's value.
o You may surrender the contract. If you do, the proceeds will be the net
cash value.
To compute the proceeds payable upon the Insured's death, we start with a
basic amount and adjust that amount as described in the table below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
TABLE OF BASIC AMOUNTS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
If the contract is in force: Then the basic amount is: And we adjust the basic amount
for:
- -------------------------------------------------------------------------------------------------------
and not in default past its days the insurance amount (see page contract debt (see page 21),
of grace 16) plus the amount of any extra dividend credits (see page
benefits arising from the 14), and any charges due in
Insured's death the days of grace (see page 11).
- --------------------------------------------------------------------------------------------------------
as reduced paid-up insurance the amount of reduced paid-up contract debt and dividend
(see pages 18 & 19) insurance (see pages 18 & 19) credits since the reduced
paid-up insurance began.
- --------------------------------------------------------------------------------------------------------
as extended insurance (see the amount of term insurance, if nothing.
page 18) the Insured dies in the term (see
page 18); otherwise zero
- --------------------------------------------------------------------------------------------------------
</TABLE>
The contract may have extra benefits that we call supplementary benefits.
If it does, we list them under Supplementary Benefits on the contract data pages
and describe them after page 26. The contract may have other extra benefits. If
it does, we add them by rider. Any extra benefit ends as soon as the contract is
in default past its days of grace, unless the form that describes it states
otherwise.
Proceeds need not be taken in one sum. For instance, on surrender, you may
be able to choose a settlement option to provide retirement income or for some
other purpose. If a death benefit becomes payable the beneficiary may also be
able to make such a choice. We will automatically pay interest under Option 3
from the date of death on any death benefit to which no other manner of payment
applies. This will be automatic as we state on page 24.
- --------------------------------------------------------------------------------
(VALA--88)
Page 5
II-136
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
DEFINITIONS
We define here some of the words and phrases used all through this
contract. We expIain others, not defined here, in other parts of the text.
We, Our, Us and Company.--Prudential.
You and Your.--The owner of the contract.
Insured.--The person named as the Insured on the first page. He or she need
not be the owner.
Example: Suppose we issue a contract on the life of your spouse. You
applied for it and named no one else as owner. Your spouse is the Insured and
you are the owner.
SEC.--The Securities and Exchange Commission.
Issue Date.--The contract date.
Monthly Date.--The contract date and the same day as the contract date in
each later month.
Example: If the contract date is May 9, 1988, the monthly dates are each
May 9, June 9, July 9 and so on.
Anniversary or Contract Anniversary.--The same day and month as the
contract date in each later year.
Example: If the contract date is May 9, 1988, the first anniversary is May
9, 1989. The second is May 9, 1990, and so on.
Contract Year.--A year that starts on the contract date or on an
anniversary.
Example: If the contract date is May 9, 1988, the first contract year
starts then and ends on May 8, 1989. The second starts on May 9, 1989 and ends
on May 8, 1990, and so on.
Contract Month.--A month that starts on a monthly date.
Example: If May 9, 1988 is a monthly date, a contract month starts then and
ends on June 8, 1988. The next contract month starts on June 9, 1988 and ends on
July 8, 1988, and so on.
Attained Age.--The Insured's attained age at any time is the issue age plus
the length of time since the contract date. You will find the issue age near the
top of page 3.
Assumed Rate of Return.--The assumed rate of return is an effective rate of
4% a year. This is the same as 0.01074598% a day compounded daily.
THE CONTRACT
This policy, and the attached copy of the initial application, together
with copies of any subsequent applications to change the policy, and any
additional contract data pages added to the policy, form the whole contract. We
assume that all statements in an application are made to the best of the
knowledge and belief of the person(s) who make them; in the absence of fraud
they are deemed to be representations and not warranties. We rely on those
statements when we issue or change the contract. We will not use any statement,
unless made in an application, to try to void the contract or to deny a claim.
CONTRACT MODIFICATIONS
Only a Prudential officer with the rank or title of vice president or above
may agree to modify this contract, and then only in writing.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise: (1) the owner of the
contract is the Insured; and (2) while the Insured is living the owner alone is
entitled to (a) any contract benefit and value, and (b) the exercise of any
right and privilege granted by the contract or by us.
(VALA--88)
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SUICIDE EXCLUSION
If the Insured, whether sane or insane, dies by suicide within two years
from the issue date, we will pay no more under this contract than the sum of the
premiums paid.
Also, for any increase in the face amount, if the Insured, whether sane or
insane, dies by suicide within two years from the effective date of the
increase, we will pay, as to the increase in amount, no more than the sum of the
scheduled premiums that were due for the increase.
CURRENCY
Any money we pay, or that is paid to us, must be in United States currency.
Any amount we owe will be payable at our Corporate Office.
MISSTATEMENT OF AGE OR SEX
If the Insured's stated age or sex or both are not correct, we will adjust
each benefit and any amount to be paid to reflect the correct age and sex. Any
death benefit will be based on what the most recent charge for mortality would
have provided at the correct age and sex. Where required, we have given the
insurance regulator a detailed statement of how we will make these adjustments.
The Schedule of Premiums may show that basic premiums change or stop on a
certain date. We may have used that date because the Insured would attain a
certain age on that date. If we find that the issue age was wrong, we will
correct that date and, if necessary, the amount of any changed premiums.
INCONTESTABILITY
Except as we state in the next sentence, we will not contest this contract
after it has been in force during the Insured's lifetime for two years from the
issue date. There are two exceptions: (1) non-payment of enough premium to
provide the required charges; and (2) any change in the contract that requires
our approval and that would increase our liability. For any such change, we will
not contest the change after it has been in effect during the Insured's lifetime
for two years from the date it takes effect.
ASSIGNMENT
We will not be deemed to know of an assignment unless we receive it, or a
copy of it, at our Home Office. We are not obliged to see that an assignment is
valid or sufficient. This contract may not be assigned to another insurance
company or to any employee benefit plan without our consent. This contract may
not be assigned if such assignment would violate any federal, state, or local
law or regulation prohibiting sex distinct rates for insurance.
ANNUAL REPORT
Each year we will send you a report. It will show: (1) the current death
benefit; (2) the amount of the contract fund in each investment option; (3) the
net cash value; (4) premiums paid, investment results, and charges deducted
since the last report; (5) any withdrawals since the last report; and (6) any
contract debt and the interest on the debt for the prior year. The report will
also include any other data that may be currently required where this contract
is delivered. No report will be sent if this contract is being continued under
fixed reduced paid-up insurance or extended term insurance.
You may ask for a similar report at some other time during the year. Or you
may request from time to time a report projecting results under your contract on
the basis of premium payment assumptions and assumed investment results. We have
the right to make a reasonable charge for reports such as these that you ask for
and to limit the scope and frequency of such requests.
INCREASE IN FACE AMOUNT AT AGE 21 FOR
CONTRACTS ISSUED AT AGE 14 OR LOWER
If this contract was issued at age 14 or lower, it shows on page 3 an
increase in face amount at attained age 21 which applies if the contract is not
then in default beyond its days of grace. In that case, any references in the
contract to face amount or death benefit which apply at or after attained age 21
will be based on the increased face amount, unless otherwise stated.
PAYMENT OF DEATH CLAIM
If we settle this contract in one sum as a death claim, we will usually pay
the proceeds within seven days after we receive at our Home Office proof of
death and any other information we need to pay the claim. But we have the right
to postpone paying the part of the proceeds in excess of the face amount that is
to come from any investment option provided by a separate account registered
under the Investment Company Act of 1940 if: (1) the New York Stock Exchange is
closed; or (2) the SEC requires that trading be restricted or declares an
emergency. We have the right to postpone paying the remainder of any excess for
up to six months.
CHANGE IN PLAN
You may be able to have this contract changed to another plan of life
insurance either with us or with a subsidiary of ours. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
(VALA-88)
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BENEFICIARY
You may designate or change a beneficiary. Your request must be in writing
and in a form that meets our needs. It will take effect only when we file it at
our Home Office; this will be after you send the contract to us to be endorsed,
if we ask you to do so. Then any previous beneficiary's interest will end as of
the date of the request. It will end then even if the Insured is not living when
we file the request. Any beneficiary's interest is subject to the rights of any
assignee of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated. To show priority, we may use numbered classes, so that
the class with first priority is called class 1, the class with next priority is
called class 2, and so on. When we use numbered classes, these statements apply
to beneficiaries unless the form states otherwise:
1. One who survives the Insured will have the right to be paid only if no
one in a prior class survives the Insured.
2. One who has the right to be paid will be the only one paid if no one
else in the same class survives the Insured.
3. Two or more in the same class who have the right to be paid will be paid
in equal shares.
4. If none survives the Insured, we will pay in one sum to the Insured's
estate.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. We owe Jane the proceeds if she is living at
the Insured's death. We owe Paul and John the proceeds if they are living then
but Jane is not. But if only one of them is living, we owe him the proceeds. If
none of them is living we owe the Insured's estate.
Beneficiaries who do not have a right to be paid under these terms may
still have a right to be paid under the Automatic Mode of Settlement.
Before we make a payment, we have the right to decide what proof we need of
the identity, age or any other facts about any persons designated as
beneficiaries. If beneficiaries are not designated by name and we make
payment(s) based on that proof, we will not have to make the payment(s) again.
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PREMIUM PAYMENT AND REINSTATEMENT
PAYMENT OF PREMIUMS
Premiums may be paid at our Home Office or to any of our authorized agents.
If we are asked to do so, we will give a signed receipt.
Premium payments will in most cases be credited as of the date of receipt
at our Home Office. In the following cases, part or all of a premium payment
will be credited as of a date other than the date of receipt:
1. If the first premium payment is received after the contract date, the
scheduled portion will be credited as of the contract date.
(VALA-88)
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2. If the first premium payment is received before the contract date, it
will be credited as of the contract date.
3. If a premium payment is received during the 61-day period after a
scheduled premium due date and the premium account is negative by no
more than the scheduled premium then due, the portion of the payment
needed to bring the premium account up to zero will be credited to the
premium account, but not the contract fund, as of the due date.
4. If the contract is in default and premium payments are received during
the days of grace while the contract is in default, we will credit to
the contract fund and the premium account those parts of the premium
payments needed to end the default status as of the applicable monthly
dates.
BASIC PREMIUMS
We show the amount and frequency of the basic premiums in the Schedule of
Premiums in the contract data pages. An increase or decrease in the face amount
will change the basic premiums.
CHARGE FOR APPLICABLE TAXES
The charge for applicable taxes is a percentage of each premium paid that
we set from time to time. It will change only on a contract anniversary.
At least sixty days before the start of each contract year, we will
determine the rate we will charge for that contract year. The rate will be based
on the rates of any federal, state or local premium taxes that apply at the last
known address of the Insured.
SCHEDULED PREMIUMS
The scheduled premiums are equal to the basic premiums plus the charge for
applicable taxes. The scheduled premiums will change if the basic premiums
change or the charge for applicable taxes changes. We show the amount of the
first scheduled premium in the Schedule of Premiums. It is due on the contract
date. There is no insurance under this contract unless an amount at least equal
to the first scheduled premium is paid.
The scheduled premium is the minimum premium required, at the frequency
chosen, to continue the contract in full force if you pay all scheduled
premiums when due, you make no withdrawals, and any contract debt does not
exceed the cash value.
If you wish to pay, on a regular basis, premiums that are higher than the
scheduled premiums, we will bill you for the higher amount you choose. Or if you
wish, you may from time to time make a premium payment smaller than the
scheduled amount, subject to the minimum premium amount shown on page 3.
If scheduled premiums that are due are not paid, or if smaller payments are
made, the contract may then or at some future time go into default. Payment of
less than the scheduled premium increases the risk that the contract will end if
investment results are not favorable. The conditions under which the contract
will be in default are described below.
UNSCHEDULED PREMIUMS
Except as we state in the next paragraph, unscheduled premiums may be paid
at any time during the Insured's lifetime as long as the contract is not in
default beyond its days of grace. We show on page 3 the minimum premium we will
accept.
We have the right to limit unscheduled premiums to a total of $10,000 in
any contract year. We also have the right to refuse any payment that increases
the insurance amount by more than it increases the contract fund.
INVESTED PREMIUM AMOUNT
This is the portion of each premium paid that we will add to the premium
account and the contract fund. It is equal to the premium paid minus the charges
described in the contract data pages under Schedule of Deductions from Premium
Payments.
CONTRACT CHANGE DATE(S)
We show the contract change date(s) in the contract data pages. We also
show in the Schedule of Premiums on these pages that the amount of each basic
premium will change on each contract change date and what the new premium will
be. However, when a contract change date arrives we will compute a new premium
amount to be used in calculating the premium account. The new premium that we
compute will be no greater than the new premium for that date which we show in
the contract data pages. In addition, if the premium account is less than zero,
we will set the premium account to zero.
(VALA--88)
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The Schedule of Premiums may show that the premium changes at times other
than contract change dates. This may occur, for example, with a contract issued
with extra benefits or in an extra rating class.
ALLOCATIONS
You may allocate all or a part of your invested premium amount to one or
more of the investment options listed in the contract data pages. You may choose
to allocate nothing to a particular investment option. But any allocation you
make must be at least 10%; you may not choose a fractional percent.
Example: You may choose a percentage of 0, or 100, or 10, 11, 12, and so
on, up to 90. But you may not choose a percentage of 1 through 9, or 91 through
99, or any percentage that is not a whole number. The total for all investment
options must be 100%.
The initial allocation of invested premium amounts is shown in the contract
data pages. You may change the allocation for future invested premium amounts at
any time if the contract is not in default. To do so, you must notify us in a
form that meets our needs. The change will take effect on the date we receive
your notice at our Home Office.
A premium might be paid when the contract fund is less than zero. In that
case we first use as much of the invested premium amount as we need to bring the
fund up to zero. We will then allocate any remainder of the invested premium
amount in accord with your most recent request.
PREMIUM ACCOUNT
On the contract date, the premium account is equal to the invested premium
amount credited on that date, minus the basic premium then due, plus the charge
for payment processing. On any other day, the premium account is equal to:
1. what it was on the prior day; plus
2. if the premium account was greater than zero on the prior day, interest
on the excess at 4% a year; minus
3. if the premium account was less than zero on the prior day, interest on
the deficit at 4% a year; plus
4. any invested premium amount credited on that day; minus
5. any basic premium due on that day less the charge for payment
processing; minus
6. any withdrawals on that day.
If we credit a part of a payment as of an earlier date, as we describe
under Payment of Premiums, the premium account for all days from the crediting
date to the date of receipt will be recalculated.
DEFAULT
Unless the contract is already in the grace period, we will determine on
each monthly date whether the contract is in default. To do so, we will first
deduct any applicable charges from the contract fund and add any applicable
credits to it (the contract fund is described on page 16). We will then compute
the amount which will grow to equal the tabular contract fund on the next
monthly date if, during the current contract month: (1) any investment results
are at the assumed rate and (2) we receive no premiums or loan repayments, make
no loans and grant no withdrawals. We will compare this amount to the contract
fund.
If this amount is more than the contract fund, the difference is the fund
deficit. In this case the contract is in default if the premium account is also
less than zero.
(VALA--88)
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GRACE PERIOD
The days of grace begin on any monthly date, other than the contract date,
on which the contract goes into default. Within 30 days after any default we
will send you a notice that your contract is in default. We will indicate the
minimum payment required to bring the contract out of default and the length of
the grace period for making that payment.
We grant at least 61 days of grace from the date we mail you a notice of
default. During the days of grace we will continue to accept premiums and make
the charges we have set.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the sum of the fund deficit on the
date of default and any additional fund deficits on any subsequent monthly dates
since the date of default, and (b) the sum of the amount by which the premium
account is negative on the date of default and any scheduled premiums due since
the date of default, the default will end.
If at any time during the days of grace we have received payments that in
total are at least equal to the lesser of (a) the fund deficit on the date of
default, and (b) the amount by which the premium account is negative on the date
of default, but that are insufficient to end the default, here is what we will
do. We will determine a new default date which is the monthly date after the old
default date. We will grant at least 61 days of grace from the new default date.
If the contract is still in default when the days of grace are over, it
will end and have no value, except as we state under Contract Value Options (see
page 18). Any premiums paid during the days of grace will remain in the
contract fund.
The Insured might die in the days of grace while the contract is in
default. If so, the amount needed to bring the contract out of default is due
us. We will make an adjustment so that the proceeds will not include that
amount.
This contract might have an extra benefit that insures someone other than
the Insured. And there might be a claim under that benefit while the Insured is
living and in the days of grace while the contract is in default. In this case,
we will subtract the amount needed to bring the contract out of default before
we settle the claim.
REINSTATEMENT
If this contract is still in default after the last day of grace, you may
reinstate it. All these conditions must be met:
1. The contract must not be in default more than five years.
2. You must not have surrendered the contract for its net cash value.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the contract.
4. We must be paid a premium at least equal to the amount required to bring
the premium account up to zero on the first monthly date on which a
scheduled premium is due after the date of reinstatement.
5. If before reinstatement the contract is in force as reduced paid-up
insurance (see pages 18 & 19), any contract debt under reduced paid-up
insurance must be repaid with interest or carried over to the reinstated
contract.
(VALB--88)
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If we approve the reinstatement, these statements apply. The date of
reinstatement will be the date of your request or the date the required premium
is paid, if later. We will start to make daily and monthly charges and credits
again as of the date of reinstatement. We will deduct from the premium paid the
charges from premium payments described in the contract data pages, and any
charges in arrears, other than the charge for expected mortality, with 4%
interest to the date of reinstatement. The contract fund will be equal to the
remainder, plus the cash value of the contract immediately before reinstatement,
plus a refund of that part of any surrender charge deducted at the time of
default which would be charged if the contract were surrendered immediately
after reinstatement.
If we consent, you may be able to reinstate the contract for a premium less
than that described above. We will deduct the same charges and adjust the
contract fund in the same manner. In that case, the premium account will be less
than zero and you may need to pay more than the scheduled premiums to guarantee
that the contract will not go into default again at some future time.
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FACE AMOUNT CHANGES AND WITHDRAWALS
FACE AMOUNT
The face amount is shown on page 3. It will change if: (1) you increase or
decrease it, or (2) you make a withdrawal.
INCREASE IN FACE AMOUNT
After the first contract year, you may increase the face amount once each
contract year. You may do so subject to all these conditions and the paragraph
that follows:
1. You must ask for the increase in writing in a form that meets our
needs; if you are not the Insured and the Insured is age 8 or over, he
or she must sign the form too.
2. The amount of the increase must be at least equal to the minimum
increase in face amount, which we show on page 3.
3. You must give us any facts we need to satisfy us that the Insured is
insurable for the amount of the increase.
4. If we ask you to do so, you must send us the contract to be endorsed.
5. The contract must not be in default.
6. We must not since the issue date, have changed the basis on which
benefits and charges are calculated under newly issued contracts.
7. You must make any required payment.
8. The Insured must be eligible for the same rating class and benefits as
shown on page 3.
9. We must not be waiving premiums in accord with any waiver of premium
benefit that may be included in the contract.
An increase will take effect only if we approve your request for it at
our Home Office. If we approve the increase, we will recompute the
contract's basic premiums, maximum surrender charges, tabular values,
monthly deductions, and expense charges. We will send you new contract
data pages showing the amount and effective date of the increase and
the recomputed values. If the Insured is not living on the effective
date, the increase will not take effect.
(VALB--88)
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DECREASE IN FACE AMOUNT
After the first contract year, you may decrease the face amount. You may do
so subject to all these conditions and the paragraphs that follow:
1. You must ask for the decrease in writing in a form that meets our
needs.
2. The amount of the decrease must be at least equal to the minimum
decrease in face amount, which we show on page 3.
3. The face amount after the decrease must be at least equal to the minimum
face amount, which we show on page 3.
4. If we ask you to do so, you must send us the contract to be endorsed.
A decrease will take effect only if we approve your request for it at our
Home Office. If we approve the decrease, we will recompute the contract's basic
premiums, maximum surrender charges, tabular values, monthly deductions, and
expense charges. A decrease in face amount may also affect the amount of any
extra benefits this contract might have. We will send you new contract data
pages showing the amount and effective date of the decrease and the recomputed
values. If the Insured is not living on the effective date, the decrease will
not take effect.
We may deduct an administrative fee of up to $15.00, and a proportionate
part of any then applicable surrender charge from the contract fund.
WITHDRAWALS
You may make withdrawals from the contract. You may do so subject to all
these conditions and the paragraphs that follow:
1. You must ask for the withdrawal in writing in a form that meets our
needs.
2. The amount withdrawn, plus the net cash value after withdrawal, may not
be more than the net cash value before withdrawal.
3. The contract fund after withdrawal must not be less than the tabular
contract fund.
4. The amount you withdraw must be at least $500.
5. You may make up to four withdrawals in any contract year.
6. If we ask you to do so, you must send us the contract to be endorsed.
We may deduct an administrative fee of up to $15.00.
We will normally pay any withdrawal within seven days after we receive your
request at our Home Office. But we have the right to postpone paying the part of
the proceeds that come from any investment option provided by a separate account
registered under the Investment Company Act of 1940 if: (1) the New York Stock
Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds for up to six months. If we do so for more than thirty days, we
will pay interest at the rate of 3% a year.
An amount withdrawn may not be repaid, except as a premium subject to
charges.
We will tell you how much you may withdraw if you ask us.
(VALB--88)
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DIVIDENDS
PARTICIPATION
We will decide each year what part, if any, of our surplus to credit to
this contract as a dividend.
While the contract is in force other than as extended or reduced paid-up
insurance, it will be eligible for such a dividend if the Insured is living. We
will credit any such dividend on the anniversary. We do not expect to credit any
dividends to this contract.
DIVIDEND OPTIONS
If you ask us in writing and in a form that meets our needs, you may choose
any of these uses for any such dividend:
1. Cash.--We will pay it to you in cash.
2. Premium Reduction.--We will use it to reduce any premium then due. If no
premium is then required, we will apply the dividend under dividend option 3.
3. Dividend Addition.--We will use it at the net single premium rate as of
the anniversary to provide a dividend addition, which is paid-up life insurance
on the Insured's life.
4. Accumulation.--We will hold it at interest. The rate will be at least 3%
a year. We may use a higher rate.
If you have not made another choice by 31 days after the anniversary, we
will use the dividend as we state under dividend option 3. But if a contract
is in default at the end of the last day of grace, we will use the dividend as
we state under Contract Value Options. You may surrender any of the above
additions or accumulations for their net value if: (1) we have not included them
in the net cash value used to provide extended or reduced paid-up insurance; (2)
we do not need them as security for contract debt; and (3) we have your request
in writing in a form that meets our needs. The surrender value of those
additions will not be less than the dividends we used to provide them.
While the contract is in force as reduced paid-up insurance, it will be
eligible for a dividend if the Insured is living. We will credit any such
dividend on the anniversary as a paid-up life insurance addition on the
Insured's life.
DIVIDEND CREDITS DESCRIBED
The phrase dividend credits means the total of: (1) either the amount or
value, as we explain in the next sentence, of any dividend additions under
dividend option 3 or on reduced paid-up insurance; (2) any dividends and
interest we hold under dividend option 4; and (3) any other dividends we have
credited to the contract but have not yet used or paid. For dividend additions,
the phrase means the amount of any of those additions when we set the amount of
any extended insurance and when we refer to the proceeds that arise from the
Insured's death; the phrase means the net value of any of those additions when
we refer to loans, net cash values, or the proceeds that arise on surrender.
SETTLEMENT
We will include any dividend credits in the amount payable when we settle
the contract.
(VALA--88)
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SEPARATE ACCOUNTS
SEPARATE ACCOUNT
The words separate account, when we use them in this contract without
qualification, mean any separate account we establish to support variable life
insurance contracts like this one. We list the separate accounts available to
you in the contract data pages. We may establish additional separate accounts.
We will notify you within one year if we do so.
A separate account may or may not be registered with the SEC under the
Investment Company Act of 1940. The contract data pages will tell you whether
or not a particular separate account is so registered.
VARIABLE INVESTMENT OPTIONS
A separate account may one or more variable investment options. We list
them in the contract data pages. We may establish additional variable investment
options. We will notify you within one year if we do so.
Income and realized and unrealized gains and losses from assets in each
variable investment option are credited to, or charged against, that variable
investment option. This is without regard to income, gains, or losses in our
other investment accounts.
SEPARATE ACCOUNT INVESTMENTS
We may invest the assets of different separate accounts in different ways.
But we will do so only with the consent of the SEC and, where required, of the
insurance regulator where this contract is delivered.
We will always keep assets in the separate accounts with a total value at
least equal to the amount of the variable investment options under contracts
like this one. To the extent those assets do not exceed that amount, we use them
only to support those contracts; we do not use those assets to support any other
business we conduct. We may use any excess over that amount in any way we
choose.
We will determine the value of the assets in each separate account and any
variable investment option at regular intervals.
(VALB--88)
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FIXED INVESTMENT OPTIONS
You may allocate all or part of your invested premium amount to a fixed
investment option. Fixed investment options are credited with interest as
described under Guaranteed Interest and Excess Interest on page 17.
We may establish additional fixed investment options. We will notify you
within one year if we do so.
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TRANSFERS
Four transfers may be made in a policy year. There is no charge for these
transfers.
You may transfer amounts into or out of variable investment options of
separate accounts registered under the Investment Company Act of 1940 and into
the fixed investment options at any time if the contract is not in default or if
the contract is being continued under the variable reduced paid-up option. Other
transfers are allowed only with our consent.
In addition, the entire amount in all investment options may be transferred
to a fixed investment option at any time within the first two contract years.
To make a transfer, you must notify us in a form that meets our needs. The
transfer will take effect on the date we receive your notice at our Home Office.
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INSURANCE AMOUNT
The insurance amount on any date is equal to the greatest of: (1) the face
amount, (2) the face amount, plus the contract fund before deduction of any
monthly charges due on that date, minus the tabular contract fund, and (3) the
contract fund before deduction of any monthly charges due on that date, divided
by the net single premium per $1 at the Insured's attained age.
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CONTRACT FUND
CONTRACT FUND DEFINED
On the contract date the contract fund is equal to the invested premium
amounts credited on that date, minus any of the charges described below which
may be due on that date. On any day after that the contract fund is equal to
what it was on the previous day, plus any invested premium amounts credited that
day, plus these items:
(a) any increase due to investment results in the value of the variable
investment options;
(b) guaranteed interest on that portion of the contract fund that is not in
a variable investment option; and
(c) any excess interest on that portion of the contract fund that is not in
a variable investment option;
(VALA--88)
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and minus any of these items applicable on that day:
(d) any decrease due to investment results in the value of the variable
investment options;
(e} a charge against the variable investment options at a rate of not more
than 0.00245475% a day (0.90% a year) for mortality and expense risks that we
assume;
(f) any amount charged against the variable investment options for federal
or state income taxes;
(g) any charge for expected mortality;
(h) any charge for extra rating class;
(i) any charge for extra benefits;
(j) any charge for administration;
(k) any charge for sales expenses;
(l) any charge to guarantee the minimum death benefit;
(m) any withdrawals; and
(n) any surrender charges, administrative charges or contract debt
cancelled that may result from a withdrawal, a decrease in face amount or a
change in status to variable reduced paid-up insurance.
We describe under Reinstatement on page 11 what the contract fund will be
on any reinstatement date. There is no contract fund for a contract in force as
extended insurance or fixed reduced paid-up insurance.
GUARANTEED INTEREST
We will credit interest each day on any portion of the contract fund not in
a variable investment option. We will credit 0.01074598% a day, which is
equivalent to an effective rate of 4% a year.
EXCESS INTEREST
We may credit excess interest, that is, interest in addition to the
guaranteed interest, on any portion of the contract fund not in a variable
investment option. The rate of any excess interest will be determined from time
to time and will continue thereafter until a new rate is determined. We may use
different rates of excess interest for different portions of the contract fund.
We may from time to time guarantee rates of excess interest on some portions of
the contract fund.
CHARGE FOR EXPECTED MORTALITY
On each monthly date, we will deduct a charge for expected mortality. The
maximum amount we can deduct is computed as the maximum monthly mortality rate
multiplied by the coverage amount. The coverage amount is the difference between
the insurance amount and the adjusted contract fund. The adjusted contract fund
is equal to the tabular contract fund at the end of the contract year multiplied
by 0.980517829, plus the contract fund before deduction of any monthly charges
due on the monthly date, minus the tabular contract fund on the monthly date.
The maximum monthly mortality rates are based on the Insured's sex, rating
class, and attained age and are shown in the contract data pages. We may use
lower rates. At least once every five years, but not more often than once a
year, we will consider the need to change the rates. We will change them only if
we do so for all contracts like this one dated in the same year as this one.
(VALB--88)
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<PAGE>
CHARGE FOR EXTRA RATING CLASS
If the contract is not in default past its days of grace and there is an
extra charge because of the rating class of the Insured, we will deduct it from
the contract fund on each monthly date. The maximum amount of any charge is
included in the amount shown in the contract data pages under Schedule of
Monthly Deductions from the Contract Fund.
CHARGE FOR EXTRA BENEFITS
If the contract has extra benefits, we will deduct the charges for them
from the contract fund on each monthly date. The maximum amount of any such
charges are included in the amount shown in the contract data pages under
Schedule of Monthly Deductions from the Contract Fund.
CHARGES FOR ADMINISTRATION SALES EXPENSES AND MINIMUM DEATH BENEFIT GUARANTEE
If the contract is not in default past its days of grace, we will deduct a
charge for administration and a charge for sales expenses from the contract fund
on each monthly date. We will also deduct a charge for guaranteeing that the
investment performance of the variable investment options will not reduce the
death benefit below the face amount provided scheduled premiums are paid when
due and you make no loans or withdrawals. We show the maximum amount of these
charges in the contract data pages under Schedule of Monthly Deductions from the
Contract Fund.
- --------------------------------------------------------------------------------
CONTRACT VALUE OPTIONS
BENEFIT AFTER THE GRACE PERIOD
If the contract is in default beyond its days of grace, we will use any net
cash value to keep the contract in force as one of three kinds of insurance:
1. Extended insurance applies to most contracts.
2. Fixed reduced paid-up insurance always applies if we issued the contract
in a rating class for which we do not provide extended insurance; in this case,
the phrase No Extended Insurance will appear under the heading Rating Class in
the contract data pages.
3. Variable reduced paid-up insurance applies if the amount of paid-up
insurance would be at least as great as the amount of extended insurance and the
contract was issued in a rating class permitting extended insurance.
We describe each kind of insurance below. Any extra benefit will end as
soon as the contract is in default past its days of grace, unless the form that
describes the extra benefit states otherwise.
EXTENDED INSURANCE
This will be term insurance on the Insured's life. We will pay the amount
of term insurance if the Insured dies in the term we describe below. Before the
end of the term there will be cash values but no loan value.
The amount of term insurance will be: (1) the insurance amount, plus (2)
any dividend credits minus (3) any contract debt. The term is a period of time
that will start on the day the contract went into default. The length of the
term will be what is provided when we use the net cash value at the net single
premium rate. This rate depends on the Insured's issue age and sex and on the
length of time since the contract date.
There may be extra days of term insurance. This will occur if, on the day
the contract goes into default, the term of extended insurance provided by the
net cash value does not exceed 90 days, or the number of days the contract was
in force before the default began, if less. The number of extra days will be:
(1) 90, or the number of days the contract was in force before the default
began, if less, minus (2) the number of days of extended insurance that would be
provided by the net cash value if there were no contract debt. The extra days,
if any, start on the day after the last day of term insurance provided by the
net cash value, if any. If there is no such term insurance, they start on the
day the contract goes into default. The term insurance for the extra days has no
cash value. There will be no extra days if you replace the extended insurance
with reduced paid-up insurance or you surrender the contract before the extra
days start.
FIXED REDUCED PAID-UP INSURANCE
This will be paid-up life insurance on the Insured's life. We will pay the
amount of this insurance when the Insured dies. There will be cash values and
loan values.
(VALB--88)
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<PAGE>
The amount of this insurance will be what is provided when we use the net
cash value at the net single premium rate. This rate depends on the Insured's
issue age and sex and on the length of time since the contract date.
VARIABLE REDUCED PAID-UP INSURANCE
This will be paid-up variable life insurance on the Insured's life. We will
pay the amount of this insurance when the Insured dies. The death benefit may
change from day to day, as we explain below, but if there is no contract debt it
will not be less than the minimum guaranteed amount. There will be cash values
and loan values.
The minimum guaranteed amount of insurance will be what is provided when we
use the net cash value at the net single premium rate. This rate depends on the
Insured's issue age and sex and on the length of time since the contract date.
The amount payable in the event of death will be the greater of (a) the minimum
guaranteed amount, and (b) the contract fund divided by the net single premium
per $1 at the Insured's attained age. In either case the amount will be
adjusted for any contract debt.
The variable reduced paid-up insurance option will be available only if the
minimum guaranteed amount under the option is at least $5,000 and if we issued
the contract in a rating class permitting extended insurance.
COMPUTATIONS
We will make all computations for any of these benefits as of the date the
contract goes into default. But we will consider any dividend credits you
surrender, any loan you take out or pay back, or any premium payments,
withdrawals, or changes in face amount you make in the days of grace.
OPTIONAL BENEFIT
You may choose to replace any extended insurance that has a cash value by
fixed reduced paid-up insurance or by variable reduced paid-up insurance if it
is available. To make this choice you must do so in writing in a form that meets
our needs not more than three months after the date the contract goes into
default. You must also send the contract to us to be endorsed.
CASH VALUE OPTION
You may surrender this contract for its net cash value. The net cash value
at any time is the cash value at that time less any contract debt. To surrender
this contract, you must ask us in writing in a form that meets our needs. You
must also send the contract to us. Here is how we will compute the net cash
value:
1. If the contract is not in default, the net cash value on any date will
be the contract fund, before deduction of any monthly charges due on that date,
minus any surrender charge, plus any dividend credits, minus any contract debt.
The Schedule of Maximum Surrender Charges for this contract is in the contract
data pages.
2. If the contract is in default during its days of grace, we will compute
the net cash value as of the date the contract went into default. But we will
adjust this value for any dividend credits you surrender, any loan you take out
or pay back, and any premium payments, withdrawals or decreases in face amount
you make in the days of grace.
3. If the contract is in default beyond its days of grace, the net cash
value will be either: (1) the net value on that date of any extended insurance
benefit then in force, or (2) the net value on that date of any reduced paid-up
insurance benefit then in force, including any dividend credits, less any
contract debt.
Within thirty days after an anniversary, the net cash value of any extended
insurance or fixed reduced paid-up insurance will not be less than the value on
that anniversary adjusted for any dividend credits you surrender and any loan
you take out or pay back in those thirty days.
We will usually pay any net cash value within seven days after we receive
your request and the contract at our Home Office. But we have the right to defer
paying the part of the proceeds that is to come from any investment option
provided by a separate account registered under the Investment Company Act of
1940 if: (1) the New York Stock Exchange is closed; or (2) the SEC requires that
trading be restricted or declares an emergency. We have the right to postpone
paying you the remainder of the proceeds for up to six months. If we do so for
more than thirty days, we will pay interest at the rate of 3% a year.
(VALB--88)
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TABULAR VALUES
We show tabular contract fund values and tabular cash values at the ends of
contract years in the contract data pages.
If we need to compute tabular values at some time during a contract year,
we will count the time since the start of the year. We will let you know the
tabular values for other durations if you ask for them.
- --------------------------------------------------------------------------------
LOANS
LOAN REQUIREMENTS
You may borrow from us on the contract. All these conditions must be met:
1. The Insured must be living.
2. The contract must be in force other than as extended insurance.
3. The contract debt will not be more than the loan value.
4. As sole security for the loan, you assign the contract to us in a form
that meets our needs.
5. Except to pay premiums on this contract, you may not borrow less than
$200 at any one time.
If there is already contract debt when you borrow from us, we will add the
new amount you borrow to that debt.
CONTRACT DEBT
Contract debt at any time means the loan on the contract, plus the interest
we have charged that is not yet due and that we have not yet added to the loan.
Example 1: Suppose the contract has a loan value of $6,000. A few months
ago you borrowed $1,500. By now there is interest of $55 charged but not yet
due. The contract debt is now $1,555, which is made up of the $1,500 loan and
the $55 interest.
LOAN VALUE
You may borrow any amount up to the difference between the loan value and
any existing contract debt. Except as we state in the next paragraph, the loan
value at any time is equal to the sum of (a) 90% of the portion of the cash
value that is attributable to the variable investment options, and (b) the
balance of the cash value.
There are two exceptions. The first is that, if the contract is in default,
the loan value during the days of grace is what it was on the date of default
adjusted for any dividend credits you surrender and any premium payments,
withdrawals, or decreases in face amount you make in the days of grace. The
second is that, if the contract is in force as fixed reduced paid-up insurance,
the loan value is equal to the amount that would grow at interest to equal the
cash value on the next anniversary.
Example 2: Suppose, in example 1, you want to borrow all that you can. We
will lend you $4,445 which is the difference between the $6,000 loan value and
the $1,555 contract debt. This will increase the contract debt to $6,000. We
will add the new amount borrowed to the existing loan and will charge interest
on it, too.
INTEREST CHARGE
You may select either the fixed loan rate option or the variable loan rate
option. Both are described below. We show on page 3 the option you have
selected. If you request a change from one option to the other and we agree, we
will tell you the effective date of the change.
We charge interest daily on any loan. Interest is due on each contract
anniversary, or when the loan is paid back, whichever comes first. If interest
is not paid when due, it becomes part of the loan. Then we start to charge
interest on it, too.
(VALB--88)
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<PAGE>
Example 3: Suppose the contract date is in 1988. Six months before the
anniversary in 1997 you borrow $1,600 out of a $4,000 loan value. We charge
5-1/2% a year. Three months later, but still three months before the
anniversary, we will have charged about $22 interest. This amount will be a few
cents more or less than $22 since some months have more days than others. The
interest will not be due until the anniversary unless the loan is paid back
sooner. The loan will still be $1,600. The contract debt will be $1,622, since
contract debt includes interest charged but not yet due.
On the anniversary in 1997 we will have charged about $44 interest. The
interest will then be due.
Example 4: Suppose the $44 interest in example 3 was paid on the
anniversary. The loan and contract debt each became $1,600 right after the
payment.
Example 5: Suppose the $44 interest in example 3 was not paid on the
anniversary. The interest became part of the loan, and we began to charge
interest on it, too. The loan and contract debt each became $1,644.
FIXED LOAN RATE OPTION
The loan interest rate is 5-1/2% a year.
VARIABLE LOAN RATE OPTION
The loan interest rate is the annual rate we set from time to time. The
rate will never be greater than is permitted by law. It will change only on a
contract anniversary.
Before the start of each contract year, we will determine the loan
interest rate we can charge for that contract year. To do this, we will first
find the rate that is the greater of: (1) The Published Monthly Average (which
we describe below) for the calendar month ending two months before the calendar
month of the contract anniversary; and (2) 5%.
If that greater rate is at least 1/2% more than the loan interest rate we
had set for the current contract year, we have the right to increase the loan
interest rate by at least 1/2%, up to that greater rate. If it is at least 1/2%
less, we will decrease the loan interest rate to be no more than the greater
rate. We will not change the loan interest rate by less than 1/2%.
When you make a loan we will tell you the initial interest rate for the
loan. We will send you a notice if there is to be an increase in the rate.
The Published Monthly Average means:
1. Moody's Corporate Bond Yield Average--Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that service;
or
2. If that average is no longer published, a substantially similar average,
established by the insurance regulator where this contract is delivered.
REPAYMENT
All or part of any contract debt may be paid back at any time while the
Insured is living. But if there is contract debt at the end of the last day of
grace when the contract is in default, it will be deducted from the cash value
to determine the net cash value. When we settle the contract, any contract debt
is due us. We will make an adjustment so that the proceeds will not include the
amount of that debt.
EFFECT OF A LOAN
When you take a loan, the amount of the loan continues to be part of the
contract fund and is credited with interest at the guaranteed rate of 4% a year.
If you have selected the variable loan rate option, we will credit excess
interest at an effective rate of not less than the loan interest rate for the
contract year less 5%.
We will reduce the portion of the contract fund allocated to the investment
options by the amount you borrow, and by loan interest that becomes part of the
loan because it is not paid when due.
(VALB--88)
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On each transaction date, if there is a contract loan outstanding, we will
increase the portion of the contract fund in the investment options by interest
credits accrued on the loan since the last transaction date. When you repay all
or part of a loan we will increase the portion of the contract fund in the
investment options by the amount of loan you repay, plus interest credits
accrued on the loan since the last transaction date. We will not increase the
portion of the contract fund allocated to the investment options by loan
interest that is paid before we make it part of the loan.
EXCESS CONTRACT DEBT
If contract debt ever grows to be equal to or more than the cash value, all
the contract's benefits will end 61 days after we mail a notice to you and any
assignee we know of. Also, we may send a notice to the Insured's last known
address. In the notice we will state the amount that, if paid to us, will keep
the contract's benefits from ending for a limited time.
POSTPONEMENT OF LOAN
We will usually make a loan within seven days after we receive your request
at our Home Office. But we have the right to postpone making the part of the
loan that is to come from any investment option provided by a separate account
registered under the Investment Company Act of 1940 if: (1) the New York Stock
Exchange is closed; or (2) the SEC requires that trading be restricted or
declares an emergency. We have the right to postpone paying you the remainder of
the proceeds of a loan for up to six months, unless it will be used to pay
premiums on this or other contracts with us.
- --------------------------------------------------------------------------------
SETTLEMENT OPTIONS
PAYEE DEFINED
In these provisions and under the Automatic Mode of Settlement, the word
payee means a person who has a right to receive a settlement under the contract.
Such a person may be the Insured, the owner, a beneficiary, or a contingent
payee.
CHOOSING AN OPTION
A payee may choose an option for all or part of any proceeds or residue
that becomes payable to him or her in one sum. We describe residue on page 23.
In some cases, a payee will need our consent to choose an option. We
describe these cases under Conditions.
OPTIONS DESCRIBED
Here are the options we offer. We may also consent to other arrangements.
OPTION 1 (INSTALMENTS FOR A FIXED PERIOD)
We will make equal payments for up to 25 years based on the Option 1 Table.
The payments will include interest at an effective rate of 3-1/2% a year. We may
credit more interest. If and while we do so, the payments will be larger.
OPTION 2 (LIFE INCOME)
We will make equal monthly payments for as long as the person on
whose life the settlement is based lives, with payments certain for the period
chosen. The choices are either ten years (10-Year Certain) or until the sum of
the payments equals the amount put under this option (Instalment Refund). The
amount of each payment will be based on the Option 2 Table and on the sex and
age, on the due date of the first payment, of the person on whose life the
settlement is based. But if a choice is made more than two years after the
contract proceeds first become payable, we may use the Option 2 rates in
ordinary policies we regularly issue, based on United States currency, on the
due date of the first payment. On request, we will quote the payment rates in
policies we then issue. We must have proof of the date of birth of the person on
whose life the settlement is based. The settlement will share in our surplus to
the extent and in the way we decide.
(VALB--88)
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OPTION 3 (INTEREST PAYMENT)
We will hold an amount at interest. We will pay interest at an effective
rate of at least 3% a year ($30.00 annually, $14.89 semi-annually, $7.42
quarterly or $2.47 monthly per $1,000). We may pay more interest.
OPTION 4 (INSTALMENTS OF A FIXED AMOUNT)
We will make equal annual, semi-annual, quarterly or monthly payments if
they total at least $90 a year for each $1,000 put under this option. We will
credit the unpaid balance with interest at an effective rate of at least 3-1/2%
a year. We may credit more interest. If we do so, the balance will be larger.
The final payment will be any balance equal to or less than one payment.
OPTION 5 (NONPARTICIPATING INCOME)
We will make payments like those of any annuity we then regularly issue
that: (1) is based on United States currency; (2) is bought by a single sum; (3)
does not provide for dividends; and (4) does not normally provide for deferral
of the first payment. The payment will be at least what we would pay under that
kind of annuity with its first payment due on its contract date. At least one of
the persons on whose life the Option 5 is based must be a payee. If a life
income is chosen, we must have proof of the date of birth of any person on whose
life the option is based. Option 5 cannot be chosen more than 30 days before the
due date of the first payment. On request, we will quote the payment that would
apply for any amount placed under the option at that time.
FIRST PAYMENT DUE DATE
Unless a different date is stated when the option is chosen: (1) the first
payment for Option 3 will be due at the end of the chosen payment interval; and
(2) the first payment for any of the other options will be due on the date the
option takes effect.
RESIDUE DESCRIBED
For Options 1 and 2, residue on any date means the then present value of
any unpaid payments certain. We will compute it at an effective interest rate of
3-1/2% a year. But we will use the rate we used to compute the actual Option 2
payments if they were not based on the table in this contract.
For Options 3 and 4, residue on any date means any unpaid balance with
interest to that date.
For Option 5, it means the then present value of any unpaid payments
certain. We will compute it at the interest rate to which we refer in Option 5.
For Options 2 and 5, residue does not include the value of any payments
that may become due after the certain period.
WITHDRAWAL OF RESIDUE
Unless otherwise stated when the option is chosen: (1) under Options l and
2, the residue may be withdrawn; and (2) under Options 3 and 4 all, or any part
not less than $100, of the residue may be withdrawn. If an Option 3 residue is
reduced to less than $1,000, we have the right to pay it in one sum. Under
Option 2, withdrawal of the residue will not affect any payments that may become
due after the certain period; the value of those payments cannot be withdrawn.
Instead, the payments will start again if they were based on the life of a
person who lives past the certain period.
For Option 5, the residue may not be withdrawn while the payee and any
other person on whose life the option is based is living. But, unless otherwise
stated. when the option is chosen, after the death of the last of them to die
any residue not already paid in one sum may be withdrawn.
DESIGNATING CONTINGENT PAYEE(S)
A payee under an option has the right, unless otherwise stated, to name or
change a contingent payee to receive any residue at that payee's death. This may
be done only if: (1) the payee has the full right to withdraw the residue, (2)
the residue would otherwise have been payable to that payee's estate at death,
or (3) a settlement with payments certain is being made in accord with Option 5.
A payee who has this right may choose, or change the choice of, an option
for all or part of the residue. In some cases, the payee will need our consent
to choose or change an option. We describe these cases under Conditions.
Any request to exercise any of these rights must be in writing and in a
form that meets our needs. It will take effect only when we file it at our Home
Office. Then the interest of anyone who is being removed will end as of the date
of the request, even if the payee who made the request is not living when we
file it.
(VALB--88)
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CHANGING OPTIONS
A payee under Option 1, 3, or 4 may choose another option for any sum that
the payee could withdraw on the date the chosen option is to start. That date
may be before the date the payee makes the choice only if we consent. In some
cases, the payee will need our consent to choose or change an option. We
describe these cases next.
CONDITIONS
Under any of these conditions, our consent is needed for an option to be
used for any person:
1. The person is not a natural person who will be paid in his or her own
right.
2. The person will be paid as assignee.
3. The amount to be held for the person under Option 3 is less than $1,000.
But we will hold any amount for at least one year in accord with the Automatic
Mode of Settlement.
4. Each payment to the person under the option would be less than $20.
5. The option is for residue arising other than at (a) the
Insured's death, or (b) the death of the beneficiary who was entitled to be
paid as of the date of the Insured's death.
6. The option is for proceeds that arise other than from the Insured's
death, and we are settling with an owner or any other person who is not the
Insured.
DEATH OF PAYEE
If a payee under an option dies and if no other distribution is shown, we
will pay any residue under that option in one sum to the payee's estate.
- --------------------------------------------------------------------------------
AUTOMATIC MODE OF SETTLEMENT
APPLICABILITY
These provisions apply to proceeds arising from the Insured's death and
payable in one sum to a payee who is a beneficiary. They do not apply to any
periodic payment.
INTEREST ON PROCEEDS
We will hold the proceeds at interest under Option 3 of the Settlement
Options provisions. The payee may withdraw the residue. We will pay it promptly
on request. We will pay interest annually unless we agree to pay it more often.
We have the right to pay the residue in one sum after one year if: (1) the payee
is not a natural person who will be paid in his or her own right; (2) the payee
will be paid as assignee; or (3) the original amount we hold under Option 3 for
the payee is less than $1,000.
SETTLEMENT AT PAYEE'S DEATH
If the payee dies and leaves an Option 3 residue, we will honor any
contingent payee provision then in effect. If there is none, here is what we
will do. We will look to the beneficiary designation of the contract; we will
see what other beneficiary(ies), if any, would have been entitled to the portion
of the proceeds that produced the Option 3 residue if the Insured had not died
until immediately after the payee died. Then we will pay the residue in one sum
to such other beneficiary(ies), in accord with that designation. But if, as
stated in that designation, payment would be due the estate of someone else, we
will instead pay the estate of the payee.
Example: Suppose the class 1 beneficiary is Jane and the class 2
beneficiaries are Paul and John. Jane was living when the Insured died. Jane
later died without having chosen an option or naming someone other than Paul and
John as contingent payee. If Paul and John are living at Jane's death we owe
them the residue. If only one of them is living then, and if the contract called
for payment to the survivor of them, we owe him the residue. If neither of them
is living then, we owe Jane's estate.
SPENDTHRIFT AND CREDITOR
A beneficiary or contingent payee may not, at or after the Insured's death,
assign, transfer, or encumber any benefit payable. To the extent allowed by law,
the benefits will not be subject to the claims of any creditor of any
beneficiary or contingent payee.
(VALB--88)
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OPTION 1 TABLE
------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR
EACH $1,000, THE FIRST PAYABLE IMMEDIATELY
------------------------------------------
Number of Years Monthly Payment
------------------------------------------
1 $84.65
2 43.05
3 29.19
4 22.27
5 18.12
6 15.35
7 13.38
8 11.90
9 10.75
10 9.83
11 9.09
12 8.46
13 7.94
14 7.49
15 7.10
16 6.76
17 6.47
18 6.20
19 5.97
20 5.75
21 5.56
22 5.39
23 5.24
24 5.09
25 4.96
------------------------------------------
Multiply the monthly amount by 2.989 for
quarterly, 5.952 for semi-annual or 11.804
for annual.
------------------------------------------
<TABLE>
OPTION 2 TABLE
- -------------------------------------------------------------------------------------------------------
MINIMUM AMOUNT OF MONTHLY PAYMENT FOR EACH $1,000, THE FIRST
PAYABLE IMMEDIATELY
- -------------------------------------------------------------------------------------------------------
<CAPTION>
KIND OF LIFE INCOME KIND OF LIFE INCOME
------------------------------------ ------------------------------------
AGE 10-Year Instalment AGE 10-Year Instalment
LAST Certain Refund LAST Certain Refund
BIRTHDAY Male Female Male Female BIRTHDAY Male Female Male Female
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 $3.18 $3.11 $3.17 $3.10 45 $4.06 $3.82 $3.99 $3.78
and under 46 4.12 3.86 4.03 3.81
11 3.19 3.12 3.18 3.11 47 4.17 3.90 4.08 3.85
12 3.20 3.13 3.19 3.12 48 4.23 3.94 4.13 3.90
13 3.21 3.14 3.20 3.13 49 4.28 3.99 4.18 3.94
14 3.22 3.15 3.21 3.14
50 4.35 4.04 4.24 3.98
15 3.24 3.16 3.23 3.15 51 4.41 4.09 4.29 4.03
16 3.25 3.17 3.24 3.16 52 4.48 4.15 4.35 4.08
17 3.27 3.19 3.25 3.18 53 4.55 4.21 4.41 4.13
18 3.28 3.20 3.27 3.19 54 4.62 4.27 4.48 4.19
19 3.30 3.21 3.28 3.20
55 4.70 4.33 4.55 4.24
20 3.31 3.22 3.30 3.21 56 4.78 4.40 4.62 4.30
21 3.33 3.24 3.32 3.23 57 4.86 4.47 4.69 4.37
22 3.35 3.25 3.33 3.24 58 4.95 4.54 4.77 4.43
23 3.36 3.26 3.35 3.25 59 5.05 4.62 4.86 4.50
24 3.38 3.28 3.37 3.27
60 5.15 4.71 4.94 4.58
25 3.40 3.30 3.39 3.29 61 5.25 4.79 5.03 4.66
26 3.42 3.31 3.41 3.30 62 5.36 4.89 5.13 4.74
27 3.45 3.33 3.43 3.32 63 5.48 4.98 5.23 4.82
28 3.47 3.35 3.45 3.34 64 5.60 5.09 5.34 4.92
29 3.49 3.37 3.47 3.35
65 5.73 5.20 5.45 5.01
30 3.52 3.39 3.49 3.37 66 5.87 5.31 5.57 5.11
31 3.54 3.41 3.52 3.39 67 6.01 5.43 5.70 5.22
32 3.57 3.43 3.54 3.41 68 6.15 5.56 5.83 5.34
33 3.60 3.45 3.57 3.44 69 6.30 5.70 5.97 5.46
34 3.63 3.47 3.60 3.46
70 6.46 5.84 6.11 5.58
35 3.66 3.50 3.63 3.48 71 6.62 5.99 6.27 5.72
36 3.69 3.52 3.66 3.50 72 6.79 6.15 6.43 5.86
37 3.72 3.55 3.69 3.53 73 6.96 6.31 6.60 6.01
38 3.76 3.58 3.72 3.56 74 7.13 6.49 6.78 6.18
39 3.80 3.61 3.75 3.58
75 7.30 6.67 6.97 6.35
40 3.84 3.64 3.79 3.61 76 7.48 6.85 7.17 6.53
41 3.88 3.67 3.82 3.64 77 7.66 7.04 7.38 6.72
42 3.92 3.70 3.86 3.67 78 7.83 7.24 7.60 6.93
43 3.97 3.74 3.90 3.71 79 8.00 7.44 7.83 7.15
44 4.01 3.78 3.94 3.74
80 8.17 7.64 8.07 7.38
and over
- -------------------------------------------------------------------------------------------------------
</TABLE>
(VALB--88)
Page 25
II-156
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
VOTING RIGHTS
We are a mutual life insurance company. Our principal office is in Newark,
New Jersey, and we are incorporated in that State. By law, we have 24 directors.
This includes 16 elected by our policyholders (four each year for four year
terms), two of our officers, and six public directors named by New Jersey's
Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to 2:00
P.M. in our office at Prudential Plaza, Newark, N.J. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to the Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, policy number and date of birth.
Only individuals at least 18 years old may vote.
HOME OFFICE LOCATIONS
When we use the term Home Office, we mean any of these Prudential offices:
Corporate Office, Newark, N.J. North Central Home Office,
Minneapolis, Minn.
Eastern Home Office, South-Central Home Office,
Fort Washington, Pa. Jacksonville, Fla.
The Prudential Insurance Company of America,
By /s/ SPECIMEN
------------------------
Secretary
COMB 86184-88
(VALB--88)
Page 26
II-157
<PAGE>
ENDORSEMENTS
(Only we can endorse this contract)
BASIS OF COMPUTATION
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and
sex and on the length of time since the contract date; (2) we use the
Commissioners 1980 Standard Ordinary Non-Smokers Mortality Table; and (3) we use
continuous functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Non-Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By [SPECIMEN SIGNATURE]
Secretary
ORD 86185--88
II-158
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------===============================================================================
Part 1 Application for Life Insurance to
[LOGO] [X] The Prudential Insurance Company of America
[ ] Pruco Life Insurance Company
A Subsidiary of The Prudential Insurance Company of America
No. XX XXX XXX
- -----------------------------------------------------------------------------------------------------------------------------------
1a. Proposed Insured's name--first, initial, last (Print) 1b. Sex 2a. Date of birth 2b. Age 2c. Place of birth
M F Mo. Day Yr.
[X] [ ] 7 10 52 35 (Name of State)
JOHN DOE
- -----------------------------------------------------------------------------------------------------------------------------------
3. [ ] Single [X] Married [ ] Widowed [ ] Separated [ ] Divorced 4. Social Security No. XXX/XX/XXXX
- -----------------------------------------------------------------------------------------------------------------------------------
5a. Occupation(s) Clerk 5b. Duties Clerical Duties
- -----------------------------------------------------------------------------------------------------------------------------------
6. Address for mail No. Street City State Zip
15 Blank Street (Name of City) (Name of State) XXXXX
- -----------------------------------------------------------------------------------------------------------------------------------
7a. Kind of policy Variable Appreciable Life 7b. Initial amount 8. Accidental death coverage
(Variable Death Benefit) $50,000 initial amount
If a Variable contract is applied for complete appropriate suitability form. $
- -----------------------------------------------------------------------------------------------------------------------------------
9. Beneficiary: (Include name, age and relationship.) 10. List all life insurance on proposed Insured. Check here if None [ ]
a. Primary (Class 1): Company Initial Yr. Kind Medical
Mary Doe, 35, Spouse amt. issued (Indiv., Group) Yes No
_______________________________________________________ [ ] [ ]
________________________________________________________________________
_______________________________________________________ [ ] [ ]
________________________________________________________________________
b. Contingent (Class 2) if any: [ ] [ ]
Robert Doe, 10, Son ________________________________________________________________________
____________________________________________________ [ ] [ ]
________________________________________________________________________
[ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
11. Other person(s) proposed for coverage including the Applicant for Applicant's Waiver of Premium benefit (AWP)
Relationship to Date of birth Total life insurance
Name--first, initial, last Sex proposed Insured Mo. Day Yr. Age Place of birth in all companies
a. Spouse $
___________________________________________________________________________________________________________________________________
b. $
___________________________________________________________________________________________________________________________________
c. $
___________________________________________________________________________________________________________________________________
d. $
___________________________________________________________________________________________________________________________________
e. $
___________________________________________________________________________________________________________________________________
f. $
- -----------------------------------------------------------------------------------------------------------------------------------
12. Supplementary benefits and riders: a. For proposed Insured b. For spouse, children, Applicant for AWP
Type and duration of benefit Amount Type and duration of benefit Amount
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
$ $
___________________________________________________________________________________________________________________________________
[ ] Option to Purchase Additional Ins. $ [ ] Applicant's Waiver of Premium benefit
- -----------------------------------------------------------------------------------------------------------------------------------
13. State any special request.
- -----------------------------------------------------------------------------------------------------------------------------------
14. Has any person named in 1a or 11, within the last 12 months:
a. been treated by a doctor for or had a known heart attack, stroke or cancer (including melanoma) other Yes No
than of the skin? ............................................................................................. [ ] [X]
b. had an electrocardiogram for any physical complaint, or taken medication for high blood pressure? ............. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
15. Premiums payable [X] Ann. [ ] Semi-Ann. [ ] Quar. [ ] Mon. [ ] Pay. Budg. [ ] Pru-Matic [ ] Gov't. Allot.
- -----------------------------------------------------------------------------------------------------------------------------------
16. Amount paid $454.59 [ ] None (Must be "None" if either 14a or b is answered "Yes".)
- -----------------------------------------------------------------------------------------------------------------------------------
17. Is a medical examination to be made on: Yes No
a. the proposed Insured? ......................................................................................... [ ] [X]
b. spouse (if proposed for coverage)? ............................................................................ [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
18. If 17a or b is "Yes", is it agreed that no insurance will take effect on anyone proposed for coverage until Yes No
the person(s) indicated in 17 have been examined, even if 16 shows that an amount has been paid? ................. [ ] [ ]
- -----------------------------------------------------------------------------------------------------------------------------------
ORD 84376-86 Page 1 (Continued on page 2)
</TABLE>
II-159
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Continuation of Part 1 of Application
- -----------------------------------------------------------------------------------------------------------------------------------
19. Will this insurance replace or change any existing insurance or annuity in any company on any person named Yes No
in 1a or 11? If "Yes", give their names, name of company, plan, amount, policy numbers and enclose any [ ] [X]
required state replacement form(s).
- -----------------------------------------------------------------------------------------------------------------------------------
20. Is anyone applying for, or trying to reinstate, life or health insurance on any person named in 1a or 11 in Yes No
this or any company? If "Yes", give amount, details and company. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
21. Does any person named in 1a or 11 plan to live or travel outside the United States and Canada within the Yes No
next 12 months? If "Yes", give country(ies), purpose and duration of trip. [ ] [X]
- -----------------------------------------------------------------------------------------------------------------------------------
22. Has any person named in 1a or 11 operated or had any duties aboard an aircraft, glider, balloon, or like Yes No
device, within the last 2 years, or does any such person have any plans to do so in the future? If "Yes", [ ] [X]
complete Aviation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
23. Has any person named in 1a or 11 engaged in hazardous sports such as: auto, motorcycle or power boat Yes No
sports; bobsledding; scuba or skin diving; mountain climbing; parachuting or sky diving; snowmobile [ ] [X]
racing or any other hazardous sport or hobby within the last 2 years or does any such person plan to
do so in the future? If "Yes", complete Avocation Questionnaire.
- -----------------------------------------------------------------------------------------------------------------------------------
24. Has any person (age 15 or over) named in 1a or 11 in the last 3 years: Yes No
a. had a driver's license denied, suspended or revoked? ......................................................... [ ] [X]
b. been convicted of three or more moving violations of any motor vehicle law or of driving while under
the influence of alcohol or drugs? ........................................................................... [ ] [X]
c. been involved as a driver in 2 or more auto accidents? ....................................................... [ ] [X]
If "Yes", give name, driver's license number and state of issue, type of violation and reason for license
denial, suspension or revocation.
- -----------------------------------------------------------------------------------------------------------------------------------
25. a. Has the proposed Insured smoked cigarettes within the past twelve months? .............................. Yes [ ] No [ ]
b. Has the spouse (if proposed for coverage) smoked cigarettes within the past twelve months? ............. Yes [ ] No [ ]
c. If the proposed Insured or spouse has ever smoked cigarettes, cigars or a pipe, show date(s) last smoked:
Cigarettes Cigars Pipe
Proposed Insured Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
Spouse Mo. _______ Yr. _______ Mo. _______ Yr. _______ Mo._______ Yr. _______
- -----------------------------------------------------------------------------------------------------------------------------------
26. Changes made by the Company. (Not applicable in West Virginia)
- -----------------------------------------------------------------------------------------------------------------------------------
To the best of the knowledge and belief of those who sign below, the statements in this application are complete and true. It
is understood that, if any of the above statements (for example, the smoking data) is a material misrepresentation, coverage
could be invalidated as a result. The beneficiary named in the application is for insurance payable upon death of (1) the Insured,
and (2) an insured child after the death of the Insured if there is no insured spouse.
When the Company gives a Limited Insurance Agreement form, ORD 84376A-86, of the same date as this Part 1, coverage will start as
shown in that form. Otherwise, no coverage will start unless: (1) a contract is issued, (2) it is accepted, and (3) the full first
premium is paid while all persons to be covered are living and their health remains as stated in Parts 1 and 2. If all these take
place, coverage will start on the contract date. If the Company makes a change as indicated in 26 it will be approved by acceptance
of the contract. But where the law requires written consent for any change in the application, such change can be made only if those
who sign this form approve the change in writing. No agent can make or change a contract, or waive any of the Company's rights or
needs.
Ownership: Unless otherwise asked for above, the owner of the contract will be (1) the applicant if other than the proposed Insured,
otherwise (2) the proposed Insured. But this is subject to any automatic transfer of ownership stated in the contract.
JOHN DOE
--------------------------------------------------------------------
Signature of Proposed Insured (If age 8 or over)
Dated at (Name of City/State) on Aug. 3, 1987
- ----------------------------------------------------------- --------------------------------------------------------------------
(City/State) Signature of Applicant (If other than proposed Insured --
If applicant is a firm or corporation, show that company's name)
Witness JOHN ROE By
- ----------------------------------------------------------- --------------------------------------------------------------------
(Licensed agent must witness where required by law) (Signature and title of officer signing for that company)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ORD 84376-86
Page 2
II-160
<PAGE>
The Prudential Insurance Company of America No. XX XXX XXX
A Supplement to the Life Insurance Application for a variable contract in which
John Doe is named as the proposed Insured.
- -------------------------------------------------------------------------------
I BELIEVE THIS CONTRACT MEETS MY INSURANCE NEEDS AND FINANCIAL OBJECTIVES. I
ACKNOWLEDGE RECEIPT OF A CURRENT PROSPECTUS FOR THE CONTRACT. I UNDERSTAND THAT
THE CONTRACT'S VALUE AND DEATH BENEFIT MAY VARY DEPENDING ON THE CONTRACT'S
INVESTMENT EXPERIENCE ....................................... YES [X] NO [ ]
Date Signature of Applicant
Aug. 3, 1987 JOHN DOE
- -------------------------------- -----------------------------------
ORD 86218--88
II-161
<PAGE>
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
(VALB--88)
Page 27
II-162
<PAGE>
- --------------------------------------------------------------------------------
Modified Premium Variable whole Life Insurance Policy with variable
insurance amount. Insurance payable only upon death. Scheduled premiums payable
throughout Insured's lifetime. Provision for optional additional premiums.
Benefits reflect premium payments, investment results and charges. Death benefit
guaranteed if scheduled premiums duly paid and no contract debt or withdrawals.
Increase in face amount at attained age 21 if contract issued at age 14 or
lower. Eligible for annual dividends as stated under Dividends.
VALB--88
Page 30
II-163
EXHIBIT 1.A.(10)(b)
The Prudential Insurance Company of America No. xx xxx xxx
A Supplement to the Life Insurance Application for a variable contract in which
John Doe is named as the proposed insured.
- -------------------------------------------------------------------------------
I BELIEVE THIS CONTRACT MEETS MY INSURANCE NEEDS AND FINANCIAL OBJECTIVES. I
ACKNOWLEDGE RECEIPT OF A CURRENT PROSPECTUS FOR THE CONTRACT. I UNDERSTAND THAT
THE CONTRACT'S VALUE AND DEATH BENEFIT MAY VARY DEPENDING ON THE CONTRACT'S
INVESTMENT EXPERIENCE ....................................... YES [X] NO [ ]
Date Signature of Applicant
Aug. 3, 1987 JOHN DOE
- -------------------------------- -----------------------------------
ORD 86218--88
II-164
EXHIBIT 1.(A)(11)
NOTICE OF WITHDRAWAL RIGHT
In order to comply with the laws administered by the Securities and
Exchange Commission, we are sending you this notice. Please read it carefully
and keep it with your records.
You have recently purchased a Variable Appreciable Life insurance contract
from The Prudential. The benefits of this contract depend on the investment
experience of the selected investment options (The Prudential Variable
Appreciable Account, The Prudential Variable Contract Real Property Account and
The Fixed Account are currently available). The investment options of these
accounts are described in Prospectuses that were given to you at the time of
sale.
You have the right to examine and cancel this contract. Upon return, you
are entitled to a refund of all premiums paid, plus or minus any change due to
investment performance in the value of the invested portions of such premiums.
However, if applicable state law so requires, you will receive a refund of all
premiums paid, unadjusted for investment performance prior to cancellation. The
cancellation deadline is the latest of:
1. 10 days after you received the contract
2. 45 days from the date you completed PART 1 of the application
3. 10 days from the date of delivery of this notice.
In determining whether or not to cancel your contract, you should consider,
along with other factors such as the needs and other reasons which motivated you
to purchase this contract, the projected cost and your ability to make the
scheduled premium payments as stated in your contract. Please consult and review
the Prospectus you have received. The Prospectus describes the deductions from
premiums before amounts are allocated to the investment options. These are:
A deduction of xx.xx% for premium tax
A per payment charge of $2.00
In addition, the Prospectus describes certain charges that are deducted
periodically from amounts allocated to the investment options. The Prospectus
also describes charges that may be assessed upon surrender.
If you decide to cancel your contract, complete the enclosed form and
return it along with your contract. The postmark of the returned contract must
be on or before the deadline described above.
II-165
<PAGE>
INSTRUCTIONS
Please read carefully
If, after reading the enclosed notice, you decide to return your contract
for cancellation, you must:
1. Sign and date the bottom portion of this form.
2. Mail this notice together with your contract to:
Prudential Insurance Company
Eastern service Office
Box 388
Fort Washington, Pa. 19034
3. Make certain that the postmark on the envelope is on or before the
latest date permitted for cancellation as described in the enclosed
notice.
4. Check the box at the bottom if you have not yet received your contract
when mailing this form.
To be Filled Out by Owner
To: Prudential
Pursuant to the terms of the notice previously furnished me by Prudential,
I hereby return the contract numbered below for cancellation and request a full
refund of all premiums paid by me. I release Prudential from any claims in
connection with the sale or issuance of this contract, and acknowledge that
Prudential's only liability is the refund of the premiums paid for the contract.
[Where state law permits, this paragraph will read: "Pursuant to the terms of
the notice previously furnished me by Prudential, I hereby return the contract
numbered below for cancellation and request a refund of all premiums paid by me,
plus or minus any change due to investment performance in the value of the
invested portions of such premiums. I release Prudential from any claims in
connection with the sale or issuance of this contract, and acknowledge that
Prudential's only liability is the refund of the premiums paid for the contract,
plus or minus any change due to investment performance in the value of the
invested portions of such premiums."]
- --------------------- ----------------------------------
Date Signature of Contract Owner
----------------------------------
Contract Number
----------------------------------
Name of Insured
(if other than Owner)
_______ I have not yet received the contract and, should it be received, I
will return it to Prudential.
II-166
Exhibit 1.A.(12)
DESCRIPTION OF THE PRUDENTIAL'S ISSUANCE, TRANSFER
AND REDEMPTION PROCEDURES FOR
VARIABLE APPRECIABLE LIFE INSURANCE CONTRACTS
PURSUANT TO RULE 6e-3(T)(b)(12)(iii)
and
METHOD OF COMPUTING ADJUSTMENTS IN
PAYMENTS AND CASH SURRENDER VALUES UPON
CONVERSION TO FIXED BENEFIT POLICIES
PURSUANT TO RULE 6e-3(T)(b)(13)(v)(B)
This document sets forth the administrative procedures that will be followed by
The Prudential Insurance Company of America ("Prudential") in connection with
the issuance of its Variable Appreciable Life Insurance Contract ("Contract"),
the transfer of assets held thereunder, and the redemption by contract owners of
their interests in said Contracts. The document also explains the method that
Prudential will follow in making a cash adjustment when a Contract is exchanged
for a fixed benefit insurance policy pursuant to Rule 6e-3(T)(b)(13)(v)(B).
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF THE CONTRACTS
A. PREMIUM SCHEDULES AND UNDERWRITING STANDARDS
Premiums for the Contract will not be the same for all owners. Insurance is
based on the principle of pooling and distribution of mortality risks, which
assumes that each owner pays a premium commensurate with the Insured's mortality
risk as actuarially determined utilizing factors such as age, sex (in most
cases), smoking status, health and occupation. A uniform premium for all
Insureds would discriminate unfairly in favor of those Insureds representing
greater risks. However, for a given face amount of insurance, Contracts issued
on insureds in a given risk classification will have the same scheduled premium.
The underwriting standards and premium processing practices followed by
Prudential are similar to those followed in connection with the offer and sale
of fixed-benefit life insurance, modified where necessary to meet the
requirements of the federal securities laws.
B. APPLICATION AND INITIAL PREMIUM PROCESSING
Upon receipt of a completed application form from a prospective owner,
Prudential will follow certain insurance underwriting (i.e., evaluation of risk)
procedures designed to determine whether the proposed Insured is insurable. In
the majority of cases this will involve only evaluation of the answers to the
questions on the application and will not include a medical examination. In
other cases, the process may involve such verification procedures as medical
examinations and may require that further information be provided by the
proposed Insured before a determination can be made. A Contract cannot be
issued, i.e., physically issued through Prudential's computerized issue system,
until this underwriting procedure has been completed.
These processing procedures are designed to provide immediate benefits to every
prospective owner who pays the initial scheduled premium at the time the
application is submitted, without diluting any benefit payable to any existing
owner.
II-167
<PAGE>
Although a Contract cannot be issued until after the underwriting process has
been completed, such a proposed Insured will receive immediate insurance
coverage for the face amount of the Contract, if he or she proves to be
insurable and the owner has paid the first scheduled premium.
The Contract Date marks the date on which benefits begin to vary in accordance
with the investment performance of the selected investment option(s). It is also
the date as of which the insurance age of the proposed Insured is determined. It
represents the first day of the Contract year and therefore determines the
Contract anniversary and also the Monthly Dates. It also represents the
commencement of the suicide and contestable periods for purposes of the
Contract. If the initial scheduled premium is paid with the application and no
medical examination is required (so that Part 2 of the application is not
completed) the Contract Date will ordinarily be the date of the application. If
an unusual delay is encountered (for example, if a request for further
information is not met promptly), the Contract Date will be 21 days prior to the
date on which the Contract is physically issued. If a medical examination is
required, the Contract Date will ordinarily be the date on which Part 2 of the
application (the medical report) is completed, subject to the same qualification
as that noted above.
If the initial scheduled premium is not paid with the application, the Contract
Date will be the Contract Date stated in the Contract, which will generally be
the date the initial premium is received from the owner and the Contract is
delivered.
To facilitate administration, Contracts will generally not be given a Contract
Date of the 29th, 30th or 31st of any month. There are two principal variations
from the foregoing procedure. First, if the owner wishes permanent insurance
protection and variability of benefits to commence at a future date, he or she
can designate that date and purchase term insurance in a fixed amount for the
intervening period. The maximum length of initial term insurance available is
eleven months.
Second, if permitted by the insurance laws of the state in which the Contract is
issued, the Contract may be back-dated up to six months, provided that all past
due scheduled premiums are paid with the application and that the backdating
results in a lower insurance age for the Insured. The values under the Contract
and the amount(s) deposited into the selected investment option(s) will be
calculated upon the assumptions that the Contract has been issued on the
Contract Date and all scheduled premiums had been received on their due dates.
If the initial premium paid is in excess of the aggregate of the scheduled
premiums due since the Contract Date, the excess (after the front-end
deductions) will be credited to the Contract and placed in the selected
investment options(s) on the date of receipt.
In general, (1) the invested portion of the initial scheduled premium will be
placed in the Contract Fund and allocated to the selected investment options as
of the Contract Date; and (2) the invested portion of any premiums in excess of
the initial scheduled premium will be placed in the Contract Fund and allocated
to the selected investment options as of the later of the Contract Date and the
date received.
If, however, one or more premium due dates has passed before all requirements
for the issuance of the Contract have been satisfied, (1) the invested portion
of the initial scheduled premium will be placed in the Contract Fund as of the
Contract Date, (2) scheduled premiums will be placed in the Contract Fund as of
the intervening premium due dates, and (3) any premium payments in excess of the
aggregate premiums due since the Contract Date will be placed in the
II-168
<PAGE>
Contract Fund as of the date of receipt.
C. PREMIUM PROCESSING
Whenever a premium after the first is received, unless the Contract is in
default past its days of grace, Prudential will subtract the front-end
deductions. What is left will be invested in the selected investment option(s)
on the date received (or, if that is not a business day, on the next business
day). There is an exception if the Contract is in default within its days of
grace. Then, to the extent necessary to end the default, premiums will be
credited as of the date of the default or the Monthly Date after default, and
premiums greater than this amount will be credited when received. The Contract
provides a grace period of 61 days from the date Prudential mails the Contract
owner a notice of default. As an administrative practice, Prudential extends the
grace period by seven days to minimize manual processing required when premium
payments are processed shortly after the 61st day.
D. REINSTATEMENT
The Contract may be reinstated within five years after default (this period will
be longer if required by state law) unless the Contract has been surrendered for
its cash surrender value. A Contract will be reinstated upon receipt by
Prudential of a written application for reinstatement, production of evidence of
insurability satisfactory to Prudential and payment of at least the amount
required to bring the premium account up to zero on the first monthly date on
which a scheduled premium is due after the date of reinstatement. Any contract
debt under reduced paid-up insurance must be repaid with interest or carried
over to the reinstated contract.
Prudential will treat the amount paid upon reinstatement as a premium. It will
deduct the front-end charges, plus any charges in arrears, other than mortality
charges, with interest. The contract fund of the reinstated Contract will,
immediately upon reinstatement, be equal to this net premium payment, plus the
cash surrender value of the Contract immediately before reinstatement, plus a
refund of that part of the deferred sales and administrative charges which would
be charged if the Contract were surrendered immediately after reinstatement. An
adjustment will be made for any termination dividend paid at the time of lapse.
The original Contract Date still controls for purposes of calculating any
contingent deferred sales and administrative charges, and any termination
dividends.
The reinstatement will take effect as of the date the required proof of
insurability and payment of the reinstatement amount have been received by
Prudential at its Home Office.
Prudential may agree to accept a lower amount than described above. This lower
amount must be at least the amount necessary to bring the contract fund after
reinstatement up to the tabular contract fund, plus the scheduled premiums for
the next three months. The contract fund after reinstatement will be calculated
in the same way as described above. In this case, the premium account after
reinstatement will be negative, so payment of future scheduled premiums does not
guarantee that the contract will not lapse at some time in the future.
There is an alternative to this reinstatement procedure that applies only if
reinstatement is requested within three months after the contract went into
default. In such a case, evidence of insurability will not be required and the
amount of the required payment will be the lesser of the unpaid scheduled
premiums and the amount necessary to make the contract fund equal to the tabular
contract fund on the third Monthly Date following the date on which the Contract
went into default.
II-169
<PAGE>
E. REPAYMENT OF LOAN
A loan made under the Contract may be repaid with an amount equal to the monies
borrowed plus interest which accrues daily, either at a fixed annual rate of
5-1/2% or, if a contract owner elected to have a variable loan interest rate
applicable to loans made under the Contract, at the variable loan interest rate
then applicable to the loan.
When a loan is made, Prudential will transfer an amount equal to the contract
loan from the investment option(s). Under the fixed-rate contract loan
provision, the amount of contract fund attributable to the outstanding contract
loan will be credited with interest at an annual rate of 4%, and Prudential thus
will realize the difference between that rate and the fixed loan interest rate,
which will be used to cover the loan investment expenses, income taxes, if any,
and processing costs. If an owner so desires, the owner may elect to have a
variable loan interest rate apply to the contract loans, if any, that he or she
may make. If this election is made:
1. Interest on the loan will accrue daily at an annual rate Prudential
determines at the start of each contract year (instead of at a fixed rate),
as described in the prospectus.
2. While a loan is outstanding, the amount of the contract fund attributable
to the outstanding contract loan will be credited with interest at a rate
which is less than the loan interest rate for the contract year by 1%
(instead of 4%).
Upon repayment of Contract debt, the loan portion of the payment (i.e., not the
interest) will be added to the investment option(s). Amounts originally borrowed
from the fixed-rate option will be allocated to the fixed-rate option, and the
rest will be allocated among the variable investment option(s) in proportion to
the amounts in each variable investment option attributable to the Contract as
of the date of repayment.
II. TRANSFERS
The Prudential Variable Appreciable Account ("Account") currently has 15
subaccounts, each of which is invested in shares of a corresponding portfolio of
The Prudential Series Fund, Inc. ("Fund"), which is registered under the 1940
Act as an open-end diversified management investment company. In addition, a
fixed-rate option and Real Property Account are available for investment by
contract owners. Provided the Contract is not in default or is in force as
variable reduced paid-up insurance, the owner may, up to four times in each
contract year, transfer amounts from one subaccount to another subaccount, to
the fixed-rate option, or to the Real Property Account without charge. All or a
portion of the amount credited to a subaccount may be transferred. In addition,
the entire amount of the contract fund may be transferred to the fixed-rate
option at any time during the first two contract years. A contract owner who
wishes to convert his or her variable contract to a fixed-benefit contract in
this manner must request a complete transfer of funds to the fixed-rate option
and should also change his or her allocation instructions regarding any future
premiums.
Transfers among subaccounts will take effect at the end of the valuation period
during which a proper written request or authorized telephone request is
received at a Prudential Home Office. The request may be in terms of dollars,
such as a request to transfer $10,000 from one account to another, or may be in
terms of a percentage reallocation among subaccounts. In the latter case, as
with premium reallocations, the percentages must be in whole numbers.
Transfers from either the fixed-rate option or the Real Property Account to
other investment options are currently permitted only once each contract year
and only during the thirty-day period beginning on the contract anniversary. The
maximum amount which may currently be transferred out of the fixed-rate option
each year is the greater of: (a)
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25% of the amount in the fixed-rate option, and (b) $2,000. The maximum amount
which may currently be transferred out of the Real Property Account each year is
the greater of: (a) 50% of the amount in the Real Property Account, and (b)
$10,000. Such transfer requests received within the thirty-day period beginning
on the contract anniversary will be effected as of the end of the valuation
period during which the request is received. These limits are subject to change
in the future.
III. "REDEMPTION" PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. SURRENDER FOR CASH SURRENDER VALUE
If the insured party under a Contract is alive, Prudential will pay, within
seven days, the Contract's cash surrender value as of the date of receipt at its
Home Office of the Contract and a signed request for surrender. The Contract's
cash surrender value is computed as follows:
1. If the Contract is not in default: The cash surrender value is the contract
fund, minus any surrender charge, consisting of a deferred sales charge and
a deferred administrative charge, minus any contract debt, plus any
termination dividend. The deferred sales charge and deferred administrative
charge are described in the prospectus. The deferred administrative charge
is designed to recover the administrative expenses, such as underwriting
expenses, incurred in connection with the issuance of a Contract. As a
result, in the early months after issue, there may be no cash surrender
value if only scheduled premiums are paid.
2. If the Contract is in default during its days of grace, Prudential will
compute the cash surrender value as of the date the Contract went into
default. It will adjust this value for any loan the owner took out or paid
back or any premium payments or withdrawals made in the days of grace.
3. If the Contract is in default beyond its days of grace, the cash surrender
value as of any date will be either the value on the date of any extended
insurance benefit then in force, or the value on that date of any fixed or
variable reduced paid-up insurance benefit then in force, less any Contract
debt.
In lieu of the payment of the cash surrender value in a single sum upon
surrender of a Contract, an election may be made by the owner to apply all or a
portion of the proceeds under one of the fixed benefit settlement options
described in the Contract or, with the approval of Prudential, a combination of
options. An option is available only if the proceeds to be applied are $1,000 or
more or would result in periodic payments of at least $20.00. The fixed-benefit
settlement options are subject to the restrictions and limitations set forth in
the Contract.
B. PARTIAL SURRENDERS AND WITHDRAWAL OF EXCESS CASH SURRENDER VALUE
An owner may surrender a Contract in part. Partial surrender involves splitting
the Contract into two Contracts. One is surrendered for its cash surrender
value; the other is continued in force on the same terms as the original
Contract except that future scheduled premiums are reduced based upon the
continued Contract's face amount and all values under the Contract are
proportionately reduced based upon the reduction in the face amount of
insurance. The Contract continued must have at least the minimum face amount of
insurance stated in the contract. An alternative to surrender or partial
surrender of a Contract is a withdrawal of cash surrender value without
splitting the Contract into two Contracts. A withdrawal may be made only if the
following conditions are satisfied. First, the amount withdrawn, plus the cash
surrender value after withdrawal, may not be more than the cash surrender value
before withdrawal. Second,
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the contract fund after the withdrawal must not be less than the tabular
contract fund after the withdrawal. Third, the amount withdrawn must be at least
$500 under a Form B Contract and at least $2,000 under a Form A Contract. An
owner may make no more than four such withdrawals in a Contract year, and there
is a fee of the lesser of $15 and 2% of the amount withdrawn for each such
withdrawal. An amount withdrawn may not be repaid except as a premium subject to
the Contract charges.
Whenever a withdrawal is made, the death benefit payable will immediately be
reduced by at least the amount of the withdrawal. This will not change the
guaranteed minimum amount of insurance under a Form B Contract (i.e., the face
amount) nor the amount of the scheduled premium that will be payable thereafter
on such a Contract. Under a Form A Contract, however, the resulting reduction in
death benefit may require a reduction in the face amount. No withdrawal will be
permitted under a Form A Contract if it would result in a new face amount less
than the minimum face amount. Furthermore, any applicable deferred
administrative and sales charges are reduced in proportion to the reduction in
face amount. The contract fund is reduced by the sum of the cash withdrawn, the
fee for the withdrawal and the reduction in the backload. An amount equal to the
reduction in the contract fund will be withdrawn from the investment options. In
addition, the amount of the scheduled premiums due thereafter under a Form A
Contract will be reduced to reflect the lower face amount of insurance.
C. DEATH CLAIMS
Prudential will pay a death benefit to the beneficiary within seven days after
receipt at its Service Office of due proof of death of the Insured and all other
requirements necessary to make payment. State Insurance laws impose various
requirements, such as receipt of a tax waiver, before payment of the death
benefit may be made. In addition, payment of the death benefit is subject to the
provisions of the Contract regarding suicide and incontestability. In the event
Prudential should contest the validity of a death claim, an amount up to the
portion of the Contract fund in the variable investment options will be
withdrawn, if appropriate, and held in Prudential's general account.
The following describes the death benefit if the Contract is not in default past
its days of grace. The death benefit under a Form A Contract is the face amount
less any contract debt. The death benefit under a Form B Contract is the face
amount, plus any excess of the contract fund over the tabular contract fund,
less any contract debt. There may be an additional amount payable from an extra
benefit added to the Contract by rider. Tabular contract funds on Contract
anniversaries are shown in the contract data pages. Tabular contract funds at
intermediate times can be obtained by interpolation.
If the contract fund grows to exceed the net single premium at the insured's
attained age for the death benefit described above, the death benefit will be
the contract fund, divided by such net single premium. The death benefit will be
adjusted for any contract debt and any extra benefits in the same manner as
above.
The proceeds payable on death also will include interest (at a rate determined
by Prudential from time to time) from the date that the death benefit is
computed (the date of death) until the date of payment.
Prudential will make payment of the death benefit out of its general account,
and will transfer assets, if appropriate, from the Account and/or the Real
Property Account to the general account in an amount up to the contract fund. In
lieu of payment of the death benefit in a single sum, an election may be made to
apply all or a portion of the proceeds
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under one of the fixed benefit settlement options described in the Contract or,
with the approval of Prudential, a combination of options. The election may be
made by the owner during the Insured's lifetime, or, at death, by the
beneficiary. An option in effect at death may not be changed to another form of
benefit after death. An option is available only if the proceeds to be applied
are $1,000 or more or would result in periodic payments of at least $20.00. The
fixed benefit settlement options are subject to the restrictions and limitations
set forth in the Contract.
D. DEFAULT AND OPTIONS ON LAPSE
The Contract is in default on any Monthly Date on which the premium account is
less than zero and the contract fund is less than an amount which will grow at
the assumed net rate of return to the tabular contract fund applicable on the
next Monthly Date. Monthly Dates occur on the Contract Date and in each later
month on the same day of the month as the Contract Date. The Contract provides
for a grace period commencing on the Monthly Date on which the Contract goes
into default and extending at least 61 days after the mailing date of the notice
of default. The insurance coverage continues in force during the grace period,
but if the Insured dies during the grace period, any charges due during the
grace period are deducted from the amount payable to the beneficiary.
Except for Contracts issued on certain insureds in high risk rating classes, a
lapsed Contract will normally provide extended term insurance at expiration of
the grace period. The death benefit of the extended term insurance is equal to
the death benefit of the Contract (excluding riders) as of the date of default,
less any Contract debt. The extended term insurance will continue for a length
of time that depends on the cash benefit of the extended term insurance is equal
to the death benefit of the Contract (excluding riders) as of the due date of
the premium in default, less any Contract debt. The extended term insurance will
continue for a length of time that depends on the cash surrender value on the
due date of first unpaid premium, the amount of insurance, and the age and sex
of the insured. However, extended term insurance may be exchanged, if the
contract owner so elects, for fixed or variable reduced paid-up insurance within
three months of the due date of the premium in default. The face amount of the
reduced paid-up insurance will depend on the cash surrender value on the due
date of the premium in default, and the age and sex of the insured. Variable
reduced paid-up is only available if the amount of such insurance is at least
$5,000, and if the insured is not in a high risk rating class.
Contracts issued on the above-mentioned high risk insureds will be converted to
fixed reduced paid-up whole-life insurance at expiration of the grace period.
If the amount of variable reduced paid-up (VRPU) is at least equal to the amount
of extended term insurance, and VRPU is available, then VRPU will be the
automatic option on lapse.
E. LOANS
The Contract provides that an owner, if no premium is in default beyond the
grace period, may take out a loan at any time a loan value is available. The
Contract also provides for a loan value if the Contract is in effect under the
contract value option for fixed or variable reduced paid-up insurance, but not
if it is in effect as extended term insurance. The owner may borrow money on
completion of a form satisfactory to Prudential. The Contract is the only
security for the loan. Disbursement of the amount of the loan will be made
within seven days of receipt of the form at Prudential's Home Office. The
investment options will be debited in the amount of the loan on the date the
form is received. The
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percentage of the loan withdrawn from each investment option will normally be
equal to the percentage of the value of such assets held in the investment
option. An owner may borrow up to the Contract's full loan value. The loan
provision is described in the prospectus.
A loan does not affect the amount of premiums due. When a loan is made, the
contract fund is not reduced, but the value of the assets relating to the
Contract held in the investment option(s) is reduced. Accordingly, the daily
changes in the cash surrender value will be different from what they would have
been had no loan been taken. Cash surrender values and the death benefit are
thus permanently affected by any Contract debt, whether or not repaid.
The guaranteed minimum death benefit is not affected by Contract debt if
premiums are duly paid. However, on settlement the amount of any Contract debt
is subtracted from the insurance proceeds. If Contract debt ever becomes equal
to or more than what the cash surrender value would be if there was no Contract
debt, all the Contract's benefits will end 61 days after notice is mailed to the
owner and any know assignee, unless payment of an amount sufficient to end the
default is made within that period.
F. KEY EMPLOYEE RIDER
Many life insurance companies offer fixed-benefit "key person" insurance
policies. Those policies enable an employer to purchase life insurance payable
to the employer upon the death of an important or "key" employee whose death
would constitute a financial disadvantage to the employer. Such policies often
permit the owner the right to change the person insured under the policy, a
right often exercised when the original insured terminates his or her employment
with the company and is replaced by another person.
If permitted by the insurance laws of the state in which the Contract is issued,
a rider to the Contract is available, referred to herein as the "key person"
rider, that allows the owner the option to continue the Contract in force on the
life of a different insured, subject to certain conditions. This rider is
primarily offered to corporate and non-corporate employers who own or may
purchase a Contract issued on the life of a key employee. The rider may be
included at the time the original Contract is issued or added after issue. If
the Contract includes this rider, the owner will be able to continue the
Contract in force on the life of a different key employee. Thus, the rider
provides employers with a way to purchase the Contract on the life of a key
employee that may continue in force in an appropriately modified form on the
life of a new employee when the original insured leaves the owner's employment.
The revised Contract will have a new scheduled premium and certain other revised
specifications, which will be set forth in a new Contract document. An Owner's
exercise of the option provided by the key person rider could be viewed as an
exchange of the existing Contract for a new Contract. The Contract prior to the
owner's exercise of the option to change insureds will be referred to as the
"original Contract". The Contract in force after the exchange is effected will
be referred to as the "new Contract".
An Owner's exercise of the right granted by the key person rider is subject to
several conditions. These conditions include but are not limited to the
following: (i) the new insured must have been alive as of the original Contract
Date (i.e., the date the Contract was issued) and must be less than 70 years old
as of the date of the proposed change of insureds; (ii) the new insured must
satisfy Prudential's underwriting requirements; (iii) the owner of the new
Contract must remain the same as the owner of the original Contract and that
owner must have an insurable interest in the new
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insured's life; and (iv) Prudential must not be waiving any premiums under the
Contract pursuant to a rider that waives premiums in the event of disability.
The specifications of the new Contract will be determined as follows: The
Contract date will remain the same as that of the original Contract. The face
amount of the new Contract will generally be the amount requested by the owner
in the application to effect the change of insureds, except that it cannot be
more than the face amount of the original Contract. The contract fund of the
original Contract will become the initial contract fund of the new Contract. The
premium for the new Contract will be based on Prudential's rates in force on the
date of the change for the new insured's rating class. If the original Contract
has contract debt due to an outstanding loan, the contract debt may be
transferred to the new Contract unless that debt would exceed the new Contract's
loan value, in which case the excess contract debt must be paid off.
Upon the exchange of the original Contract for the new Contract, neither the
contingent deferred sales charge nor the contingent deferred administrative
charge is assessed. If the new Contract is subsequently surrendered, however,
the Contract's cash surrender value will be determined by using the greater of
the surrender charges that would apply under the original or the new Contract.
Thus, with respect to the contingent deferred administrative charge, the amount
of this charge upon surrender of the new Contract will be determined on the
basis of the face amount of the original Contract since the face amount cannot
be increased upon exercise of the right to change insureds. The original
Contract Date, however, will govern for purposes of determining whether this
charge will be reduced or eliminated for persistency. With respect to the
contingent deferred sales load, the amount of this charge can be increased
following exercise of the option granted by the key person rider because the
scheduled premiums on the new Contract can be higher than the scheduled premiums
on the original Contract due to the replacement of the original insured with an
insured of an older issue age. If this is so, the contingent deferred sales load
will be calculated as if the Contract had originally been issued on the life of
the new insured. The original Contract Date will control for purposes of
calculating the reduction in the contingent deferred sales charge for
persistency.
IV. CASH ADJUSTMENT UPON EXCHANGE OF CONTRACT
As described previously, at any time during the first 24 months after a Contract
is issued, so long as the Contract is not in default, the Owner may transfer all
amounts in the variable investment options into the fixed-rate option. This
option is provided in lieu of the option to exchange to a comparable
fixed-benefit life insurance combined.
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EXHIBIT 1.A.(13)(a)
RIDER FOR INSURED'S WAIVER OF PREMIUM BENEFIT
This benefit is a part of this contract only if it is included in the
list of supplementary benefits on the contract data pages.
TOTAL DISABILITY BENEFIT
We will pay scheduled premiums into the contract for you on their due dates
while the Insured is totally disabled. But this is subject to all the provisions
of this benefit and of the rest of this contract.
DISABILITY DEFINED
When we use the words disability and disabled in this benefit we mean total
disability and totally disabled. Here is how we define them: (1) until the
Insured has stayed disabled for two years, we mean that he or she cannot, due to
sickness or injury, do any of the duties of his or her regular occupation: but
(2) after the Insured has stayed disabled for two years, we mean that he or she
cannot, due to sickness or injury, do any gainful work for which he or she is
reasonably fitted by education, training, or experience.
Except for what we state in the next sentence, we will at no time regard an
Insured as disabled who is doing gainful work for which he or she is reasonably
fitted by education, training, or experience. We will regard an Insured as
disabled, even if working or able to work, if he or she incurs, during a period
in which premiums are eligible to be waived as we describe below, one of the
following: (1) permanent and complete blindness of both eyes; or (2) physical
severance of both hands at or above the wrists or both feet at or above the
ankles; or (3) physical severance of one hand at or above the wrist and one foot
at or above the ankle.
PREMIUMS ELIGIBLE TO BE PAID BY US
If the Insured becomes disabled before the first contract anniversary
following his or her 60th birthday and that disability begins: (1) on or after
the first contract anniversary following his or her 5th birthday, if the
contract date was before that birthday; or (2) on or after the contract date, if
that date was on or after his or her 5th birthday, we will pay all scheduled
premiums that fall due while he or she stays disabled.
If the Insured becomes disabled on or after the first contract anniversary
following his or her 60th birthday, we will pay only those scheduled premiums
that fall due before the first contract anniversary following his or her 65th
birthday and while he or she stays disabled.
If the Insured becomes disabled on or after the first contract anniversary
after his or her 65th birthday, we will not pay any scheduled premiums that fall
due in that period of disability.
CONDITIONS
Both of these conditions must be met: (1) The Insured must become disabled
while this contract is in force and not in default past the last day of the
grace period; (2) The Insured must stay disabled for a period of at least six
months while living.
EXCEPTIONS
We will not pay any scheduled premiums if the Insured becomes disabled
from: (1) an injury he causes to himself, or she causes to herself, on purpose;
or (2) sickness or injury due to service on or after the contract date in the
armed forces of any country(ies) at war. The word war means declared or
undeclared war and includes resistance to armed aggression.
SUCCESSIVE DISABILITIES
Here is what happens if the Insured has at least one scheduled premium paid
by us while disabled, then gets well so that he or she resumes making payments,
and then becomes disabled again. In this case, we will not apply the six-month
period that would otherwise be required by Condition (2) and will consider the
second period of disability to be part of the first period unless: (1) the
Insured has done gainful work, for which he or she is reasonably fitted, for at
least six months between the periods; or (2) the Insured became disabled the
second time from an entirely different cause.
If we do not apply the six-month period required by Condition (2), we also
will not count the days when there was no disability as part of the two year
period when disability means the Insured cannot do any of the duties of his or
her regular occupation.
AL 100B
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NOTICE AND PROOF OF CLAIM
Notice and proof of any claim must be given to us while the Insured is
living and disabled, or as soon as reasonably possible. If notice or proof is
not given as soon as reasonably possible, we will not pay any scheduled premium
due more than one year before the date the notice or proof is given to us.
We may also require proof at reasonable times that the Insured is still
disabled. After he or she has been disabled for two years, we will not ask for
proof of continued disability more than once a year; and we will require no
further proof of continued disability after the first contract anniversary that
follows the Insured's 65th birthday if he or she has been continually disabled
for at least five years.
As a part of any proof, we have the right to require that the Insured be
examined at our expense by doctors of our choice.
WHEN WE WILL STOP PAYING PREMIUMS
We will stop paying scheduled premiums if: (1) disability ends; or (2) we
ask for proof that the Insured is disabled and we do not receive it; or (3) we
require that the Insured be examined and he or she fails to do so.
CHANGES IN THE FACE AMOUNT
If there was an increase or decrease in the face amount before we approved
a claim under this benefit, but we find that the increase or decrease took
effect on a monthly processing date on which the Insured was disabled we will
restore the coverage to what it would have been if the increase or decrease had
not taken effect.
BENEFIT PREMIUMS AND CHARGES
We include the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
UNSCHEDULED PREMIUMS DURING DISABILITY
You may make unscheduled premium payments if you wish, as provided in the
Unscheduled Premiums section of the contract even when we are paying scheduled
premiums that fall due during a period of disability.
TERMINATION
This benefit will end and we will make no more scheduled premium payments
for you on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the day before the first contract anniversary that follows
the Insured's 65th birthday, unless the Insured has stayed disabled since before
the first contract anniversary that follows the 60th birthday;
3. the date the contract is surrendered under its Cash Value Option, if it
has one; and
4. the date the contract ends for any other reason.
If you do not make any withdrawals from the contract starting on the date
the Insured becomes disabled, the contract cannot go into default during the
period we are paying scheduled premiums into the contract.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
AL 100B
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EXHIBIT 1.A.(13)(b)
RIDER FOR APPLICANT'S WAIVER OF PREMIUM BENEFIT
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
DEATH PROVISION
DEATH BENEFIT
We will pay into the contract for you on their due dates those scheduled
premiums that fall due after the applicant's death but before the benefit
termination date which we show in the contract data pages. For us to do so, we
must receive due proof that he or she died: (1) before that date and (2) while
this contract is in force and not in default past the last day of the grace
period. But this promise is subject to all the provisions of this benefit and of
the rest of this contract.
SUICIDE EXCLUSION
If the applicant, whether sane or insane, dies by suicide within the period
that we state in the Suicide Exclusion under General Provisions and while this
benefit is in force, we will not pay, under this benefit, the scheduled premiums
we describe above. Instead, we will pay no more than the sum of the monthly
charges deducted for the benefit plus the charge for applicable taxes.
DISABILITY PROVISION
TOTAL DISABILITY BENEFIT
Before the benefit termination date, we will pay into the contract for you
on their due dates scheduled premiums that fall due while the applicant is
totally disabled. But this is subject to all the provisions of this benefit and
of the rest of this contract.
DISABILITY DEFINED
When we use the words disability and disabled in this benefit we mean total
disability and totally disabled. Here is how we define them: (1) until the
applicant has stayed disabled for two years, we mean that he or she cannot, due
to sickness or injury, do any of the duties of his or her regular occupation;
but (2) after the applicant has stayed disabled for two years, we mean that he
or she cannot, due to sickness or injury, do any gainful work for which he or
she is reasonably fitted by education, training, or experience.
Except for what we state in the next sentence, we will at no time regard an
applicant as disabled who is doing gainful work for which he or she is
reasonably fitted by education, training, or experience. We will regard an
applicant as disabled, even if working or able to work, if he or she incurs,
during a period in which premiums are eligible to be waived as we describe
below, one of the following: (1) permanent and complete blindness of both eyes;
or (2) physical severance of both hands at or above the wrists or both feet at
or above the ankles; or (3) physical severance of one hand at or above the wrist
and one foot at or above the ankle.
PREMIUMS ELIGIBLE TO BE PAID BY US
If the applicant becomes disabled before the first contract anniversary
after his or her 65th birthday, we will pay only those scheduled premiums that
fall due: (1) while he or she stays disabled; and (2) before the benefit
termination date.
If the applicant becomes disabled on or after: (1) the first contract
anniversary after his or her 65th birthday, or (2) the benefit termination date,
we will not pay any scheduled premium that falls due in that period of
disability.
CONDITIONS
Both of these conditions must be met: (1) The applicant must become
disabled while this contract is in force and not in default past the last day of
the grace period. (2) The applicant must stay disabled for a period of at least
six months while living.
AL 150B
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EXCEPTIONS
We will not pay any scheduled premium if the applicant becomes disabled
from: (1) an injury he causes to himself, or she causes to herself, on purpose;
or (2) sickness or injury due to service on or after the contract date in the
armed forces of any country(ies) at war. The word war means declared or
undeclared war and includes resistance to armed aggression.
SUCCESSIVE DISABILITIES
Here is what happens if the applicant has at least one scheduled premium
paid by us while disabled, then gets well so that premium payment resumes, and
then becomes disabled again. In this case, we will not apply the six-month
period that would otherwise be required by Condition (2) and will consider the
second period of disability to be part of the first period unless: (1) the
applicant has done gainful work, for which he or she is reasonably fitted, for
at least six months between the periods; or (2) the applicant became disabled
the second time from an entirely different cause.
If we do not apply the six-month period required by Condition (2), we also
will not count the days when there was no disability as part of the two year
period when disability means the applicant cannot do any of the duties of his or
her regular occupation.
NOTICE AND PROOF OF CLAIM
Notice and proof of any claim must be given to us while the applicant is
living and disabled, or as soon as reasonably possible. If notice or proof is
not given as soon as reasonably possible, we will not pay any scheduled premium
due more than one year before the date the notice or proof is given to us.
We may also require proof at reasonable times that the applicant is still
disabled. After he or she has been disabled for two years, we will not ask for
proof of continued disability more than once a year; and we will require no
further proof of continued disability after the first contract anniversary that
follows the applicant's 65th birthday if he or she has been continually disabled
for at least five years.
As a part of any proof, we have the right to require that the applicant be
examined at our expense by doctors of our choice.
WHEN WE WILL STOP PAYING PREMIUMS
We will stop paying scheduled premiums if: (1) disability ends; or (2) we
ask for proof that the applicant is disabled and we do not receive it; or (3) we
require that the applicant be examined and he or she fails to do so.
MISCELLANEOUS PROVISIONS
REINSTATEMENT
If this contract is reinstated, it will not include this benefit on the
life of the applicant unless we are given any facts we need to satisfy us that
he or she is insurable for the benefit.
MISSTATEMENT OF AGE OR SEX
If the applicant's stated age or sex or both are not correct, here is what
we will do. We will change each benefit and any amount payable to what the
premiums and charges would have bought for the correct age and sex.
CHANGES IN THE FACE AMOUNT
If there was an increase or decrease in the face amount before we approved
a claim under this benefit, but we find that the increase or decrease took
effect on a monthly processing date on which the applicant was disabled we will
restore the coverage to what it would have been if the increase or decrease had
not taken effect.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and charges stop on the earlier of: (1) the first contract
anniversary after the Insured's 24th birthday, and (2) the last contract
anniversary before the benefit termination date.
UNSCHEDULED PREMIUMS DURING DISABILITY
You may make unscheduled premium payments if you wish, as provided in the
Unscheduled Premiums section of the contract, even when we are paying scheduled
premiums that fall due during a period of the applicants' disability or because
of the applicants' death.
AL 150B
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TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the day that is the last premium due date before the benefit
termination date we show on the contract data pages;
3. the date the contract is surrendered under its Cash Value Option, if it
has one; and
4. the date the contract ends for any other reason.
If you do not make any withdrawals from the contract starting on the date
the applicant becomes disabled, the contract cannot go into default during the
period we are paying scheduled premiums into the contract.
Further, if you ask us in writing in the premium period, and we agree, we
will cancel the benefit as of the date to which premiums are paid. Contract
premiums due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
AL 150B
II-180
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EXHIBIT 1.A.(13)(c)
RIDER FOR INSURED'S ACCIDENTAL DEATH BENEFIT
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay the amount of this benefit that we show on the contract data
pages for the Insured's accidental loss of life. But our payment is subject to
all the provisions of the benefit and of the rest of this contract.
MANNER OF PAYMENT
We will include in the proceeds of this contract any payment under this
benefit.
CONDITIONS
Both of these conditions must be met: (1) We must receive due proof that
the Insured's death was the direct result, independent of all other causes, of
accidental bodily injury that occurred on or after the contract date. (2) The
death must occur (a) no more than 90 days after the iniury; and (b) while the
contract is in force.
EXCLUSIONS
We will not pay under this benefit for death caused or contributed to by:
(1) suicide or attempted suicide while sane or insane; or (2) infirmity or
disease of mind or body or treatment for it; or (3) any infection other than one
caused by an accidental cut or wound.
Even if death is caused by accidental bodily injury, we will not pay for it
under this benefit if it is caused or contributed to by: (1) service in the
armed forces of any country(ies) at war; or (2) war or any act of war; or (3)
travel by, or descent from, any aircraft if the Insured had any duties or acted
in any capacity other than as a passenger at any time during the flight. But we
will ignore (3) if all these statements are true of the aircraft: (a) it has
fixed wings and a permitted gross takeoff weight of at least 75,000 pounds. (b)
It is operated by an air carrier that is certificated under the laws of the
United States or Canada to carry passengers to or from places in those
countries. (c) It is not being operated for any armed forces for training or
other purposes. As used here, the word aircraft includes rocket craft or any
other vehicle for flight in or beyond the earth's atmosphere. The word war means
declared or undeclared war and includes resistance to armed aggression.
AUTOMATIC REDUCTION
We have the right to limit the amount of this benefit to no more than twice the
face amount of this contract. If that face amount is decreased for any reason,
we have the right to reduce the amount of the benefit to twice the new face
amount.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the premium account
and the contract fund.
The monthly cnarge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the date the contract is surrendered under its Cash Value Option, if it
has one; and
3. the date the contract ends for any other reason.
Further, if you ask us in writing, and we agree, we will cancel the benefit
as of the first monthly date on or after we receive your request. Contract
premiums and monthly charges due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
AL 110B
II-181
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EXHIBIT 1.A.(13)(d)
RIDER FOR LEVEL TERM INSURANCE BENEFIT ON LIFE OF INSURED
This Benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
Insured died: (1) in the term period for the benefit; and (2) while this
contract is in force and not in default beyond the last day of the grace period.
Any proceeds under this contract that may arise from the Insured's death will
include this amount. But our payment is subject to all the provisions of the
benefit and of the rest of this contract.
We show the amount of term insurance on the contract data pages. We also
show the term period for the benefit there. It starts on the contract date,
which we show on the first page. The anniversary at the end of the term period
is part of that period.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
You may be able to exchange this benefit for a new contract of life
insurance on the Insured's life. In any of these paragraphs, when we use the
phrase new contract we mean the contract for which this benefit may be
exchanged. You will not have to prove that the Insured is insurable.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
You must ask for the exchange in writing and in a form that meets our needs. (2)
You must send this contract to us to be endorsed. (3) We must have your request
and the contract at our Home Office while the Benefit is in force and before the
end of its term period.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1) the insurance under the
new contract took effect on its contract date; and (2) this benefit ended just
before that contract date.
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be after the end of the term period for the benefit. And it may not be more than
31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accord with our
regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the Insured; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less-than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than the amount
of term insurance for this benefit. The face amount you want might be less than
the smallest amount we would regularly issue on the plan you wish. In that case
we will issue a new contract for as low as $10,000 on the Life Paid Up at Age 85
plan if you ask us to do so.
AL 131B
II-182
<PAGE>
If: (1) the new contract is either on the Life Paid Up at Age 85 plan or
has a premium period at least as long as for that plan; (2) this contract has a
benefit for waiving or paying premiums in the event of disability; and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put the benefit in the new contract. The benefit, if any, in the new
contract will be the same one, with the same provisions, that we put in other
contracts like it on its contract date. In this paragraph, when we use the
phrase other contracts like it, we mean contracts we would regularly issue on
the same plan and for the same rating class, amount, issue age and sex.
We will not deny a benefit for waiving or paying premiums that we would
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive or pay any premium under a new contract unless it has a
benefit for waiving or paying premiums in the event of disability. This will be
so even if we have waived or paid premiums under this contract.
CHANGES
You may be able to have this benefit changed to a new contract of life
insurance (either with us or with a subsidiary of ours) other than in accord
with the requirements for exchange that we state above. Or you may be able to
exchange this benefit for an increase in the amount of insurance under this
contract. But any change may be made only if we consent, and will be subject to
conditions and charges that are then determined.
MISCELLANEOUS PROVISIONS
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the contract anniversary at
the end of the term period for this benefit.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the date the contract is surrendered under its Cash Value Option, if it
has one;
3. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is changed;
and
4. the date the contract ends for any other reason.
Further, if you ask us in writing, and we agree, we will cancel the benefit
as of the first monthly date on or after we receive your request. Contract
premiums and monthly charges due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
AL 131B
II-183
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EXHIBIT 1.A.(13)(f)
RIDER FOR INTERIM TERM INSURANCE BENEFIT
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay the beneficiary an amount under this benefit if we receive due
proof that the Insured died on or after the date of the benefit but before the
contract date. But our payment is subject to the provisions of the benefit and
of the rest of this contract. The amount of the benefit is equal to the amount
of insurance provided by the contract on the contract date. We show the contract
date and the date of the benefit on the contract data pages.
CHANGES IN CONTRACT PROVISIONS
This contract has a Suicide Exclusion and an Incontestability provision. In
each of them, we refer to a period of time that extends from the issue date. But
for each of them we will count the time from the date of this benefit, not from
the issue date.
This contract might have a benefit for the payment of scheduled premiums by
us in the event of disability; it might have one that provides accidental death
coverage. If so, we might refer in either or both of those benefits to the
contract date. But we will use the date of this benefit, not the contract date.
The first scheduled contract premium is due on the contract date. We will
grant 31 days of grace for paying it. This will be so even though we state
otherwise under Grace Period.
Except for the changes we describe above, all the provisions of this
contract will be in effect on and after the contract date if the Insured is then
living, as if the contract did not have this benefit. The benefit will not make
any dividend or any contract value that may be provided by the contract
available any sooner.
BENEFIT PREMIUM
We show the premium for this benefit on the contract data pages. This
premium is to be paid on or before the date of the benefit. It is not the
scheduled premium for the contract. Neither the benefit nor the premium for it
provides any insurance, or changes premiums payable, on or after the contract
date.
PREMIUM ADJUSTMENT
The Insured might die before the contract date. If so, we will return that
part of the premium for this benefit that is more than was needed to pay for the
benefit through the date of death. We will add the amount we return to the
amount we would otherwise pay under the benefit.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ ISABELLE L. KIRCHNER
-------------------------------
Secretary
AL 160B
II-184
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EXHIBIT 1.A.(13)(g)
RIDER FOR OPTION TO PURCHASE ADDITIONAL INSURANCE ON LIFE OF INSURED
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
You have the right under this benefit to buy more insurance on the
Insured's life. You may do this for certain normal option dates and advance
option dates, as we explain below. You will not have to prove that the Insured
is insurable. We will provide term insurance for a period before any advance
option dates as we state under Term Insurance below. But these promises are
subiect to all the provisions of the benefit and of the rest of this contract.
NORMAL OPTION DATES
These are the anniversaries of this contract on which the Insured's
attained age is 25, 28, 31, 34, 37, 40, 43, 46, 49 and 52.
You may buy a new contract for each normal option date if these four
statements apply: (1) You have not used your right for that date by buying a new
contract on an advance option date (we explain this below). (2) The Insured
signs an application for the new contract, and you sign it, too, if you are not
the Insured. (3) We receive the application and the first premium, less the
premium credit that we describe below, at our Home Office not more than 31 days
after the normal option date. (4) On the normal option date, or, if later, the
date we receive the application, the Insured is living and this contract is in
force and not in default past its days of grace. The new contract will take
effect on the later of those two dates. That date will be its contract date.
Your right to buy the new contract will end on the 31st day after the
normal option date. But this will not change your right to buy a new contract
for any later normal or advance option date.
ADVANCE OPTION DATES
Except as we state in the next paragraph, an advance option date is the
date three months after any of these events:
1. The Insured's marriage.
2. While the Insured is living, the birth of a live child of the Insured
for whom the Insured accepts legal responsibility.
3. The Insured's legal adoption of a child.
But the event must take place: (1) on or after the later of the date of
this contract and the date of Part 1 of its application; and (2) not later than
the date that is one month before the contract anniversary on which the
Insured's attained age is 52. If the event takes place less than three months
before that anniversary, the related advance option date will be that
anniversary and not the date three months after the event.
You may buy a new contract for each advance option date if these four
statements apply: (1) The Insured signs an application for the new contract, and
you sign it, too, if you are not the Insured. (2) We receive the application and
the first premium, less the premium credit that we describe below, at our Home
Office not later than the advance option date. (3) The Insured is living on the
advance option date. (4) This contract is in force on that date and not in
default past its days of grace. The new contract will take effect on the advance
option date. That will be its contract date.
Your right to buy the new contract will end on the advance option date, But
this will not change your right to buy a new contract for any later normal or
advance option date.
Each time you buy a new contract for an advance option date, you will have
used your right to buy a new contract for the next normal option date, if any,
for which you could otherwise have bought one. But even if you have used your
right to buy for all normal option dates, advance option dates may still occur
as we state above. If we let you combine two or more new contracts you can buy
under this benefit into one, you will use your right to buy new contracts for
the same number of future normal option dates as if the new contracts had not
been combined.
AL 140B
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<PAGE>
TERM INSURANCE
For each event that gives rise to an advance option date, we will
automatically provide term insurance on the Insured's life, as long as this
contract is in force. Its amount will be the option amount. We will pay that
amount if the Insured dies on or after the date of the event but before: (1)
the advance option date; or (2) the date this benefit ends, if sooner. We will
include it in the proceeds of this contract. But if this contract limits or
excludes war or aviation risks, the term insurance will limit or exclude them in
the same way.
CONTRACT SPECIFICATIONS
The new contract you buy for a normal option date or advance option date
will be in the same rating class as this contract.
If this contract limits or excludes war or aviation risks, we have the
right to limit or exclude them in the new contract. too. If we do so, the
provision in the new contract will be the same one that we put in other
contracts like the new one on its contract date. We will set the issue age and
the premiums for the new contract in accord with our regular rules in use on its
contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the Insured; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than the option
amount for this benefit which we show on the contract data pages. The face
amount you want might be less than the smallest amount we would regularly issue
on the plan you wish. In that case we will issue a new contract for as low as
$10,000 on the Life Paid Up at Age 85 plan if you ask us to do so.
If: (1) the new contract is either on the Life Paid Up at Age 85 plan or
has a premium period at least as long as for that plan; (2) this contract has a
benefit for waiving or paving premiums in the event of disability; and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put that kind of benefit in the new contract, as we state in General
below.
We will not deny a benefit for waiving or paying premiums that we would
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive or pay any premium under the new contract unless it has a
benefit for waiving or paying premiums in the event of disability. This will be
so even if we have waived or paid premiums under this contract.
If this contract has an accidental death benefit, or an accidental death
and dismemberment benefit, and we would regularly issue contracts like the new
contract with that benefit, we will put that kind of benefit in the new
contract, as we state in General below. But: (1) you must ask for it when you
apply for the new contract; and (2) the amount of any accidental death benefit
in the new contract will not be more than the face amount of the new contract.
General: Any benefit for waiving or paying premiums in event of disability
and any accidental death benefit or accidental death and dismemberment benefit
in the new contract will be the same one that we put in other contracts like it
on its contract date. In any of these paragraphs, when we use the phrases other
contracts like it and other contracts like the new contract, we mean contracts
we would regularly issue on the same plan and for the same rating class, amount,
issue age and sex.
AL 140B
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<PAGE>
CHANGES
On a normal or advance option date you may be able to buv a new contract of
life insurance (either with us or with a subsidiary of ours) other than in
accord with the requirements that we state above. Or you may be able to use the
option to increase the amount of insurance under this contract. But either may
be done only if we consent, and will be subject to conditions and charges that
are then determined.
PREMIUM CREDIT
We will allow a premium credit on the first premium for the new contract.
The credit will be at least $1 for each full Sl,000 of face amount of the new
contract. If: (l) the new contract calls for premiums to be paid more often than
annually; and (2) the credit would be more than that first premium, you may
choose to have premiums paid less often to get the full credit.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund. The
premiums for this benefit stop on the contract anniversary on which the
Insured's attained age is 52.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages. The
charges for this benefit stop on the contract anniversary on which the Insured's
attained age is 52.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the 31st day after the contract anniversary on which the Insured's
attained age is 52;
3. the date the contract is surrendered under its Cash Value Option, if it
has one; and
4. the date the contract ends for any other reason.
Further, if you ask us in writing, and we agree, we will cancel the benefit
as of the first monthly date on or after which we receive your request. Contract
premiums and monthly charges due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America.
By /s/ [SPECIMEN]
Secretary
II-187
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EXHIBIT 1.A.(13)(i)
RIDER FOR LEVEL TERM INSURANCE BENEFIT ON DEPENDENT CHILDREN
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that a
dependent child died: (1) before the term insurance provided by the benefit on
his or her life ends; and (2) while this contract is in force and not in default
past the last day of the grace period. But our payment is subject to all the
provisions of the benefit and of the rest of this contract.
The phrase dependent child means the insured's child, stepchild or legally
adopted child who: (1) has reached the 15th day of life; and (2) has not reached
the first contract anniversary after his or her 25th birthday; and either (3) is
named in the application for this contract and on the date of the application
has not reached his or her 18th birthday; or (4) is acquired by the Insured
after the date of the application but before the child's 18th birthday.
We show the amount of term insurance under this benefit on the contract
data pages. The insurance on each dependent child's life will end on the
earlier of: (1) the end of the day before the first contract anniversary after
the child's 25th birthday; and (2) the end of the day before the first contract
anniversary after the Insured's 65th birthday.
PAID-UP INSURANCE
PAID-UP INSURANCE ON DEPENDENT CHILDREN
The Insured might die while this contract is in force and not in default
past the last day of the grace period. In this case, any term insurance provided
by this benefit on a dependent child's life will become paid-up term insurance.
While this paid-up insurance is in effect, the contract will remain in force.
The paid-up insurance will have cash values but no loan value.
If this benefit becomes paid-up, it may be surrendered for its net cash
value. This will be the net value on the date of surrender of the paid-up
insurance. But, within 30 days after a contract anniversary, the net cash value
will not be less than it was on that anniversary. To compute this net cash
value, we use the Commissioners 1980 Standard Ordinary Mortality Table. We use
continuous functions based on age last birthday. We use an effective interest
rate of 4% a year.
We will usually pay any cash value promptly. But we have the right to
postpone paying it for up to six months. If we do so for more than 30 days, we
will pay interest at the rate of 3% a year. If we are asked for the values which
apply, we will furnish them.
CONVERSION OF INSURANCE ON DEPENDENT CHILDREN
RIGHT TO CONVERT
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance on his or her life. It will not be necessary to prove that the
child is insurable.
CONDITIONS
The right to obtain a new contract is subject to all these conditions: (1) The
insurance on the child must end while this contract is in force and not in
default past the last day of the grace period. (2) The amount of the new
contract must meet the minimum as we describe under Contract Specifications. (3)
We must have a written application for the new contract at our Home Office no
later than the date the insurance on the child ends.
AL 182B
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<PAGE>
The new contract will not take effect unless the premium for it is paid
while the child is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that the insurance under the new
contract took effect on its contract date.
CONTRACT DATE
The date of the new contract will be the day after the date the insurance
on the dependent child ends.
CONTRACT SPECIFICATIONS
The new contract will be in the standard rating class. We will set the issue
age and the premiums for the new contract in accord with our regular rules in
use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the child; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any
later premium; or (5) one with supplementary benefits other than the benefit to
which we refer later in these paragraphs.
Its face amount will be the amount asked for in the application. But,
except as we state below, that amount must be an amount we would regularly issue
for the plan chosen. And it cannot be less than $5,000 or more than five times
the amount of insurance on the child's life under this benefit. The face amount
asked for might be less than the smallest amount we would regularly issue on the
plan requested. In that case we will issue a new contract for as low as $5.000
on the Life Paid Up at Age 85 plan (Life Paid Up at Age 65 plan if the issue age
for the new contract is less than 15 years) if we are asked to do so.
If: (1) the new contract is on the Life Paid Up at Age 85 plan or has a
premium period at least as long as for that plan; or (2) the new contract is on
the Life Paid Up at Age 65 plan because the issue age for it is less than 15
years; and (3) we would include in other contracts like the new contract a
benefit for waiving or paying premiums in the event of disability of the person
insured, here is what we will do. Even though this contract does not have that
benefit on the life of that child, we will put it in a new contract on his or
her life. The benefit, if any, in the new contract will be the same one, with
the same provisions, that we put in other contracts like it on its contract
date. In this paragraph, when we use the phrases other contracts like it and
other contracts like the new contract, we mean contracts we would regularly
issue on the same plan and for the same rating class, amount, issue age and sex.
We will not waive or pay any premium under a new contract unless the
disability started on or after its contract date. And we will not waive or pay
any premium under a new contract unless it has a benefit for waiving or paying
premiums in the event of disability. This will be so even if we have waived or
paid premiums under this contract.
CHANGES
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance (either with us or with a subsidiary of ours) other than in
accord with the requirements we state in this form. But this kind of change may
be made only if we consent, and will be subject to conditions and charges that
are then determined.
MISCELLANEOUS PROVISIONS
BENEFICIARY
The word beneficiary where we use it in this contract without qualification
means the beneficiary for insurance payable upon the death of the Insured.
Unless we endorse this contract to say otherwise, these two statements will
apply: (1) The beneficiary for insurance payable upon the death of a dependent
child will be the Insured if living, otherwise the beneficiary for this
insurance named in the application. (2) If no such beneficiary is living when
insurance under this benefit becomes payable we will make the payment in one sum
to the estate of the later to die of the insured and such beneficiary.
AL 182B
II-189
<PAGE>
The beneficiary for insurance payable upon the death of a dependent child
may be changed. The request must be in writing and in a form that meets our
needs. It will take effect only when we file it at our Home Office; this will be
after the contract is sent to us to be endorsed, if we ask for it. Then any
previous beneficiary's interest in such insurance will end as of the date of the
request. It will end then even if the child is not living when we file the
request. Any beneficiary's interest is subject to the rights of any assignee of
whom we know. When a beneficiary is designated, any relationship shown is to the
insured, unless otherwise stated.
REINSTATEMENT
If this contract is reinstated, it will not include the insurance that we
provide under this benefit on the dependent children unless you give us any
facts we need to satisfy us that each child who is to be insured on or within 15
days after the date of reinstatement is insurable for the benefit. If you do not
give us the facts we need for any child, the benefit may be reinstated if all
the other conditions are met to reinstate the contract. But you must send the
contract to us to be endorsed to show that the child is not insured under the
benefit.
CONTRACT VALUE OPTIONS
If this contract has a Contract Value Options provision, it will apply only
during the Insured's lifetime. Any extended or reduced paid-up insurance that
may be described there is on the life of the Insured only.
CONTRACT LOANS
If this contract has a Loans provision. we will not consider any contract
debt when we determine the amount payable, if any, at the death of a dependent
child.
INCONTESTABILITY
Except for non-payment of premium, we will not contest this benefit with
respect to the insurance on any dependent child's life after it has been in
force during the child's lifetime for two years from the issue date.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the earlier of the death of
the Insured and the first contract anniversary after the Insured's 65th
birthday.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default, it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the day before the first contract anniversary after the
Insured's 65th birthday;
3. the date the contract is surrendered under its Cash Value Option, if it
has one, or the paid-up insurance, if any, under the benefit is surrendered; and
4. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, and we agree, we
will cancel the benefit as of the first monthly date on or after we receive your
request. Contract premiums and monthly charges due then and later will be
reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ ISABELLE L. KIRCHNER
--------------------------
Secrerary
AL 182B
II-190
EXHIBIT 1.A.(13)(j)
RIDER FOR LEVEL TERM INSURANCE BENEFIT ON DEPENDENT CHILDREN
This benefit is a part of this contract only if it Is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that a
dependent child died: (1) before the term insurance provided by the benefit on
his or her life ends; and (2) while this contract is in force and not in default
past the last day of the grace period. But our payment is subject to all the
provisions of the benefit and of the rest of this contract.
The phrase dependent child means the Insured's child, stepchild or legally
adopted child who: (1) has reached the 15th day of life; and (2) has not
reached the first contract anniversary after his or her 25th birthday; and
either (3) just before the contract date of this contract was insured under the
earlier contract from which this contract was exchanged or changed; or (4) is
acquired by the Insured on or after the date of this contract but before the
child's 18th birthday.
We show the amount of term insurance under this benefit on the contract
data pages. The insurance on each dependent child's life will end on the earlier
of: (1) the end of the day before the first contract anniversary after the
child's 25th birthday; and (2) the end of the day before the first contract
anniversary after the Insured's 65th birthday.
PAID-UP INSURANCE
PAID-UP INSURANCE ON DEPENDENT CHILDREN
The Insured might die while this contract is in force and not in default
past the last day of the grace period. In this case, any term insurance provided
by this benefit on a dependent child's life will become paid-up term insurance.
While this paid-up insurance is in effect, the contract will remain in force.
The paid-up insurance will have cash values but no loan value.
If this benefit becomes paid-up, it may be surrendered for its net cash
value. This will be the net value on the date of surrender of the paid-up
insurance. But, within 30 days after a contract anniversary, the net cash value
will not be less than it was on that anniversary. To compute this net cash
value, we use the Commissioners 1980 Standard Ordinary Mortality Table. We use
continuous functions based on age last birthday. We use an effective interest
rate of 4% a year.
We will usually pay any cash value promptly. But we have the right to
postpone paying it for up to six months. If we do so for more than 30 days, we
will pay interest at the rate of 3% a year. If we are asked for the values which
apply, we will furnish them.
CONVERSION OF INSURANCE ON DEPENDENT CHILDREN
RIGHT TO CONVERT
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance on his or her life. It will not be necessary to prove that the
child is insurable.
CONDITIONS
The right to obtain a new contract is subject to all these conditions: (1)
The insurance on the child must end while this contract is in force and not in
default past the last day of the grace period. (2) The amount of the new
contract must meet the minimum as we describe under Contract Specifications. (3)
We must have a written application for the new contract at our Home Office no
later than the date the insurance on the child ends.
AL 184B
II-191
<PAGE>
The new contract will not take effect unless the premium for it is paid
while the child is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that the insurance under the new
contract took effect on its contract date.
CONTRACT DATE
The date of the new contract will be the day after the date the insurance
on the dependent child ends.
CONTRACT SPECIFICATIONS
The new contract will be in the standard rating class. We will set the
issue age and the premiums for the new contract in accord with our regular rules
in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the child; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount asked for in the application. But,
except as we state below, that amount must be an amount we would regularly issue
for the plan chosen. And it cannot be less than $5,000 or more than five times
the amount of insurance on the child's life under this benefit. The face amount
asked for might be less than the smallest amount we would regularly issue on the
plan requested. In that case we will issue a new contract for as low as $5,000
on the Life Paid Up at Age 85 plan (Life Paid Up at Age 65 plan if the issue age
for the new contract is less than 15 years) if we are asked to do so.
If: (1) the new contract is on the Life Paid Up at Age 85 plan or has a
premium period at least as long as for that plan; or (2) the new contract is on
the Life Paid Up at Age 65 plan because the issue age for it is less than 15
years; and (3) we would include in other contracts like the new contract a
benefit for waiving or paying premiums in the event of disability of the person
insured, here is what we will do. Even though this contract does not have that
benefit on the life of that child, we will put it in a new contract on his or
her life. The benefit, If any, in the new contract will be the same one, with
the same provisions, that we put in other contracts like it on its contract
date. In this paragraph, when we use the phrases other contracts like it and
other contracts like the new contract, we mean contracts we would regularly
issue on the same plan and for the same rating class, amount, issue age and sex.
We will not waive or pay any premium under a new contract unless the
disability started on or after its contract date. And we will not waive or pay
any premium under a new contract unless it has a benefit for waiving or paying
premiums in the event of disability. This will be so even if we have waived or
paid premiums under this contract.
CHANGES
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance (either with us or with a subsidiary of ours) other than in
accord with the requirements we state in this form. But this kind of change may
be made only if we consent, and will be subject to conditions and charges that
are then determined.
MISCELLANEOUS PROVISIONS
BENEFICIARY
The word beneficiary where we use it in this contract without qualification
means the beneficiary for insurance payable upon the death of the Insured.
Unless we endorse this contract to say otherwise, these two statements will
apply: (1) The beneficiary for insurance payable upon the death of a dependent
child will be the Insured if living, otherwise the beneficiary for insurance
payable upon the death of the Insured. (2) If no such beneficiary is living when
insurance under this benefit becomes payable, we will make the payment in one
sum to the estate of the later to die of the Insured and such beneficiary.
AL 184B
II-192
<PAGE>
The beneficiary for insurance payable upon the death of a dependent child
may be changed. The request must be in writing and in a form that meets our
needs. It will take effect only when we file it at our Home Office; this will be
after the contract is sent to us to be endorsed, if we ask for it. Then any
previous beneficiary's interest in such insurance will end as of the date of the
request. It will end then even if the child is not living when we file the
request. Any beneficiary's interest is subject to the rights of any assignee of
whom we know. When a beneficiary is designated, any relationship shown is to the
Insured, unless otherwise stated.
REINSTATEMENT
If this contract Is reinstated, it will not include the insurance that we
provide under this benefit on the dependent children unless you give us any
facts we need to satisfy us that each child who is to be insured on or within 15
days after the date of reinstatement is insurable for the benefit. If you do
not give us the facts we need for any child, the benefit may be reinstated if
all the other conditions are met to reinstate the contract. But you must send
the contract to us to be endorsed to show that the child is not insured under
the benefit.
CONTRACT VALUE OPTIONS
If this contract has a Contract Value Options provision, it will apply only
during the Insured's lifetime. Any extended or reduced paid-up insurance that
may be described there is on the life of the Insured only.
CONTRACT LOANS
If this contract has a Loans provision, we will not consider any contract
debt when we determine the amount payable, if any, at the death of a dependent
child.
INCONTESTABILITY
Except for non-payment of premium, we will not contest this benefit with
respect to the insurance on any dependent child's life after it has been in
force during the child's lifetime for two years from: (1) the date the level
term insurance benefit on dependent children began under the earliest contract;
or, if later, (2) the date of any rider that added the child for coverage under
any such earlier contract. But, in any case, if there was a later reinstatement
of any such earlier contract, then the two years will start on the date of the
most recent reinstatement.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit under Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the earlier of the death of
the Insured and the first contract anniversary after the Insured's 65th
birthday.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the day before the first contract anniversary after the
Insured's 65th birthday;
3. the date the contract is surrendered under its Cash Value Option, if it
has one, or the paid-up insurance, if any, under the benefit is surrendered; and
4. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, and we agree, we
will cancel the benefit as of the first monthly date on or after we receive your
request. Contract premiums and monthly charges due then and later will be
reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
AL 184B
II-193
EXHIBIT 1.A.(13)(k)
RIDER FOR LEVEL TERM INSURANCE BENEFIT ON DEPENDENT CHILDREN
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that a
dependent child died: (1) before the term insurance provided by the benefit on
his or her life ends; and (2) while this contract is in force and not in default
past the last day of the grace period. But our payment is subject to all the
provisions of the benefit and of the rest of this contract.
The phrase dependent child means the Insured's child, stepchild or legally
adopted child who: (1) has reached the 15th day of life; and (2) has not
reached the first contract anniversary after his or her 25th birthday; and
either (3) is named in the application for change which is attached to and made
a part of this contract, and on the date of the request has not reached his or
her 18th birthday; or (4) is acquired by the Insured after the date of the
request but before the child's 18th birthday.
We show the amount of term insurance under this benefit on the contract
data pages. The insurance on each dependent child's life will end on the earlier
of: (1) the end of the day before the first contract anniversary after the
child's 25th birthday; and (2) the end of the day before the first contract
anniversary after the Insured's 65th birthday.
PAID-UP INSURANCE
PAID-UP INSURANCE ON DEPENDENT CHILDREN
The Insured might die while this contract is in force and not in default
past the last day of the grace period. In this case, any term insurance provided
by this benefit on a dependent child's life will become paid-up term insurance.
While this paid-up insurance is in effect, the contract will remain in force.
The paid-up insurance will have cash values but no loan value.
If this benefit becomes paid-up, it may be surrendered for its net cash
value. This will be the net value on the date of surrender of the paid-up
insurance. But, within 30 days after a contract anniversary, the net cash value
will not be less than it was on that anniversary. To compute this net cash
value, we use the Commissioners 1980 Standard Ordinary Mortality Table. We use
continuous functions based on age last birthday. We use an effective interest
rate of 4% a year.
We will usually pay any cash value promptly. But we have the right to
postpone paying it for up to six months. If we do so for more than 30 days, we
will pay interest at the rate of 3% a year. If we are asked for the values which
apply, we will furnish them.
CONVERSION OF INSURANCE ON DEPENDENT CHILDREN
RIGHT TO CONVERT
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance on his or her life. It will not be necessary to prove that the
child is insurable.
CONDITIONS
The right to obtain a new contract is subject to all these conditions: (1)
The insurance on the child must end while this contract is in force and not in
default past the last day of the grace period. (2) The amount of the new
contract must meet the minimum as we describe under Contract Specifications. (3)
We must have a written application for the new contract at our Home Office no
later than the date the insurance on the child ends.
AL 185B
II-194
<PAGE>
The new contract will not take effect unless the premium for it is paid
while the child is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that the insurance under the new
contract took effect on its contract date.
CONTRACT DATE
The date of the new contract will be the day after the date the insurance
on the dependent child ends.
CONTRACT SPECIFICATIONS
The new contract will be in the standard rating class. We will set the
issue age and the premiums for the new contract in accord with our regular
rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the child; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount asked for in the application. But,
except as we state below, that amount must be an amount we would regularly issue
for the plan chosen. And it cannot be less than $5,000 or more than five times
the amount of insurance on the child's life under this benefit. The face amount
asked for might be less than the smallest amount we would regularly issue on the
plan requested. In that case we will issue a new contract for as low as $5,000
on the Life Paid Up at Age 85 plan (Life Paid Up at Age 65 plan if the issue age
for the new contract is less than 15 years) if we are asked to do so.
If (1) the new contract is on the Life Paid Up at Age 85 plan or has a
premium period at least as long as for that plan; or (2) the new contract is on
the Life Paid Up at Age 65 plan because the issue age for it is less than 15
years; and (3) we would include in other contracts like the new contract a
benefit for waiving or paying premiums in the event of disability of the person
insured, here is what we will do. Even though this contract does not have that
benefit on the life of that child, we will put it in a new contract on his or
her life. The benefit, if any, in the new contract will be the same one, with
the same provisions, that we put in other contracts like it on its contract
date. In this paragraph, when we use the phrases other contracts like it and
other contracts like the new contract, we mean contracts we would regularly
issue on the same plan and for the same rating class, amount, issue age and sex.
We will not waive or pay any premium under a new contract unless the
disability started on or after its contract date. And we will not waive or pay
any premium under a new contract unless it has a benefit for waiving or paying
premiums in the event or disability. This will be so even if we have waived or
paid premiums under this contract.
CHANGES
If the insurance on a dependent child ends as we state in the last
paragraph under benefit above, that child may be able to obtain a new contract
of life insurance (either with us or with a subsidiary of ours) other than in
accord with the requirements we state in this form. But this kind of change may
be made only if we consent, and will be subject to conditions and charges that
are then determined.
MISCELLANEOUS PROVISIONS
BENEFICIARY
The word beneficiary where we use it in this contract without qualification
means the beneficiary for insurance payable upon the death of the Insured.
Unless we endorse this contract to say otherwise, the beneficiary for
insurance payable upon the death of a dependent child will be the Insured if
living, otherwise the estate of the Insured.
AL 185B
II-195
<PAGE>
The beneficiary for insurance payable upon the death of a dependent child
may be changed. The request must be in writing and in a form that meets our
needs, it will take effect only when we file it at our Home Office; this will
be after the contract is sent to us to be endorsed, if we ask for it. Then any
previous beneficiary's interest in such insurance will end as of the date of the
request. It will end then even if the child is not living when we file the
request. Any beneficiary's interest is supject to the rights of any assignee of
whom we know. When a beneficiary is designated, any relationship shown is to the
insured, unless otherwise stated.
REINSTATEMENT
If this contract is reinstated, it will not include the insurance that we
provide under this benefit on the dependent children unless you give us any
facts we need to satisfy us that each child who is to be insured on or within
15 days after the date of reinstatement is insurable for the benefit. If you do
not give us the facts we need for any child, the benefit may be reinstated if
all the other conditions are met to reinstate the contract. But you must send
the contract to us to be endorsed to show that the child is not insured under
the benefit.
CONTRACT VALUE OPTIONS
If this contract has a Contract Value Options provision, it will apply only
during the Insured's lifetime. Any extended or reduced paid-up insurance that
may be described there is on the life of the Insured only.
CONTRACT LOANS
If this contract has a Loans provision, we will not consider any contract
debt when we determine the amount payable, if any, at the death of a dependent
child.
INCONTESTABILITY
Except for non-payment of premium, we will not contest this benefit with
respect to the insurance on any dependent child's life after it has been in
force during the child's lifetime for two years from the issue date.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the earlier of the death of
the Insured and the first contract anniversary after the Insured's 65th
birthday.
TERMINATION
This benefit will end on the earliest of
1. the end of the last day of grace if the contract is in default; it
will not continue if a benefit takes effect under any contract value
options provision that may be in the contract:
2. the end of the day before the first contract anniversary after the
Insured's 65th birthday:
3. the date the contract is surrendered under its Cash Value Option,
if it has one, or the paid-up insurance, if any, under the benefit is
surrendered; and
4. the date the contract ends for any other reason.
Further if you ask us in writing in the premium period, and we agree, we
will cancel the benefit as of the first monthly date on or after we receive your
request. Contract premiums and monthly charges due then and later will be
reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America.
By /s/ DOROTHY K. LIGHT
Secretary
AL 185B
II-196
- -------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(l)
ENDORSEMENTS
(Only we can endorse this contract.)
This endorsement is attached to and made a part of this contract on the
contract date:
In this contract, we use the phrase the insured spouse. When we do, we mean
the Insured's spouse who is named for coverage in the request for change, even
though we state otherwise in the contract. The request for change resulted in
our issuing the contract; it is attached to and made a part of the contract.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
ORD 86308--88
II-197
EXHIBIT 1.A.(13)(m)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
This contract was reinstated on the date of this rider. But we did not have
the facts we needed to satisfy us that the child, ___________________________,
whose date of birth is ____________________ was insurable. Therefore, that child
will not be insured under this contract on or after the date of this rider. This
will be so even though the contract or an application related to it may refer to
the child. This will still be so if you apply to reinstate the contract again in
the future and you then refer to the child.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Effective Date Attest
ORD 86310--88
II-198
EXHIBIT 1.A.(13)(n)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
MODIFICATION OF INSURED'S WAIVER OF PREMIUM BENEFIT PROVISION
There is an impairment of the Insured's eyesight. If he or she becomes
disabled as a result of the loss of eyesight, here is what will apply for that
disability. We will not allow benefits under any benefit for waiving premiums in
the event of disability in (1) this contract, or (2) any other contract on the
Insured's life to which you change or for which you exchange this contract or
any of its benefits.
Rider attached to and made a part of this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
ORD 86312--88
II-199
EXHIBIT 1.A.(13)(o)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
TERMINATION OF BENEFIT
We agree that the benefit _________________________, will end as of
_______________________. Then all references in this contract to that benefit
will no longer apply. The monthly charges for that benefit will not be
deductible on or after that date.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
ORD 86313--88
Date Attest
II-200
EXHIBIT 1.A.(13)(p)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
- -------------------------------------------------------------------------------
VARIABLE REDUCED PAID-UP INSURANCE
This contract is no longer in force on a premium paying basis. It is being
kept in force as variable reduced paid-up insurance on the Insured's life, as we
state under Contract Value Options in the contract.
The new amount of insurance and its effective date are shown in the
attached Table of Values. Unless otherwise stated in the table, any contract
debt was deducted when we computed the net cash value that was used to provide
the reduced paid-up insurance.
The cash value of the variable reduced paid-up insurance will continue to
vary according to the investment results in the separate account. There is no
guaranteed minimum cash value under this option.
The death benefit under this option may change from day to day, but it will
never be less than the amount determined as of the day of default. The death
benefit will increase if investment results are in excess of the assumed rate or
mortality charges lower than the maximum rate. The death benefit will decrease
if investment results are less than the assumed rate, but it will not decrease
below the amount determined on the day of default.
As of the effective date shown in the table each of these items no longer
applies: (1) the Tabular Contract Fund Values and Tabular Cash Values shown on
page 4 in the contract; (2) any supplementary benefits or other extra benefits
that were made a part of the contract by rider or endorsement; and (3) any
provisions of the contract that do not apply to the reduced paid-up insurance.
If this contract is reinstated, the contract fund that applies upon
reinstatement is as we state under Premium Payment and Reinstatement. The cash
value and net cash value will be as we state under Contract Value Options.
The attached table shows values at the ends of contract years. If we need
to compute values at some time during a contract year, we will count the time
since the start of the year. We will let you know the values for other durations
if you ask for them.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America
By /s/ SPECIMEN
----------------------------
Secretary
Date Attest
ORD 86329--88
II-201
EXHIBIT 1.A.(13)(q)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
- -------------------------------------------------------------------------------
AVIATION RISK EXCLUSION
CONDITIONS OF EXCLUSION
We will pay the limited payment we describe below, and not what we would
otherwise pay, if: (1) the Insured dies as a result of travel by, or descent
from, any aircraft; and (2) the Insured had any duties or acted in any capacity
other than as a passenger at any time during the flight.
But this exclusion will not apply if all these statements are true of the
aircraft: (1) It has fixed wings and a permitted gross takeoff weight of at
least 75,000 pounds. (2) It is operated by an air carrier that is certificated
under the laws of the United States or Canada to carry passengers to or from
places in those countries. (3) It is not being operated for any armed forces for
training or other purposes.
As used here, the word aircraft includes rocket craft or any other vehicle
for flight in or beyond the earth's atmosphere.
LIMITED PAYMENT
The limited payment will be: (1) the sum of the premiums that were paid for
this contract minus any expense and insurance charges made for insurance
coverage on persons other than the Insured, minus (2) any contract debt, minus
(3) any withdrawals made under the contract. But if the reserve for the
contract, when computed as we state under Reserves, is greater than the amount
we describe here, the limited payment will be equal to the reserve. Also, the
limited payment will never be more than we would have paid if this exclusion
were not in the contract.
The limited payment will be payable to the beneficiary for insurance
otherwise payable upon the Insured's death.
REDUCED PAID-UP, EXTENDED AND OTHER INSURANCE ON THE INSURED'S LIFE
This exclusion also applies to any reduced paid-up or extended insurance
that might be in force under the Contract Value Options, if any. We will put the
exclusion in any contract on the Insured's life to which you change, or for
which you exchange, this contract or any of its benefits.
PAID-UP INSURANCE ON OTHER PERSONS
This contract might include insurance on the life of someone other than the
Insured. And it might have a provision that makes that insurance paid-up if the
Insured dies. This exclusion will not affect any such provision.
EFFECT OF INCONTESTABILITY
In any case where this exclusion applies, the Incontestability provision of
this contract will not be deemed to make us pay more than as we state under
Limited Payment.
RESERVES
We might have to compute a reserve to find the limited payment. If so, the
reserve will be equal to the contract value on the date of the Insured's death
less any contract debt adjusted for unearned loan interest.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Effective Date Attest
ORD 86325--88 Printed in U.S.A.
II-202
EXHIBIT 1.A.(13)(r)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
- -------------------------------------------------------------------------------
MILITARY AVIATION RISK EXCLUSION
CONDITIONS OF EXCLUSION
We will pay the limited pavment we describe below, and not what we would
otherwise pay, if: (1) the Insured dies as a result of travel by, or descent
from, any aircraft operated by or for any armed forces; and (2) the Insured had
any duties or acted in any capacity other than as a passenger at any time during
the flight. As used here, the word aircraft includes rocket craft or any other
vehicle for flight in or beyond the earth's atmosphere.
LIMITED PAYMENT
The limited payment will be: (1) the sum of the premiums that were paid for
this contract minus any expense and insurance charges made for insurance
coverage on persons other than the Insured, minus (2) any contract debt, minus
(3) any withdrawals made under the contract. But if the reserve for the
contract, when computed as we state under Reserves, is greater than the amount
we describe here, the limited payment will be equal to the reserve. Also, the
limited payment will never be more than we would have paid if this exclusion
were not in the contract.
The limited payment will be payable to the beneficiary for insurance
otherwise payable upon the Insured's death.
REDUCED PAID-UP, EXTENDED AND OTHER INSURANCE ON THE INSURED'S LIFE
This exclusion also applies to any reduced paid-up or extended insurance
that might be in force under the Contract Value Options, if any. We will put the
exclusion in any contract on the Insured's life to which you change, or for
which you exchange, this contract or any of its benefits.
PAID-UP INSURANCE ON OTHER PERSONS
This contract might include insurance on the life of someone other than the
Insured. And it might have a provision that makes that insurance paid-up if the
Insured dies. This exclusion will not affect any such provision.
EFFECT OF INCONTESTABILITY
In any case where this Exclusion applies, the Incontestability provision of
this contract will not be deemed to make us pay more than as we state under
Limited Payment.
RESERVES
We might have to compute a reserve to find the limited payment. If so, the
reserve will be equal to the contract value on the date of the Insured's death
less any contract debt adjusted for unearned loan interest.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Effective Date Attest
ORD 86326--88 Printed in U.S.A.
II-203
EXHIBIT 1.A.(13)(s)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
- -------------------------------------------------------------------------------
WAR RISK EXCLUSION
CONDITIONS OF EXCLUSION
We will pay the limited payment we describe below, and not what we would
otherwise pay, if the Insured's death results from any one or more of the
following causes: (1) war; (2) any act of war; or (3) the special hazards due to
service in the armed forces of any country(ies).
But this exclusion will not apply unless all these conditions exist: (1)
The cause of death occurs while the Insured is in the armed forces of any
country(ies) at war. (2) The cause of death occurs while the Insured is outside
the Home Areas. (3) The death occurs (a) outside the Home Areas, or (b) within
six months after the Insured's return to the Home Areas while in such forces or
within six months after the end of service in such forces, whichever is earlier.
As used here, the word war means declared or undeclared war and includes
resistance to armed aggression. The phrase Home Areas means the fifty states of
the United States of America, the District of Columbia, The Commonwealth of
Puerto Rico, The Virgin Islands of the United States, or Canada.
LIMITED PAYMENT
The limited payment will be: (1) the sum of the premiums that were paid for
this contract minus any expense and insurance charges made for insurance
coverage on persons other than the Insured, minus (2) any contract debt, minus
(3) any withdrawals made under the contract. But if the reserve for the
contract, when computed as we state under Reserves, is greater than the amount
we describe here, the limited payment will be equal to the reserve. Also, the
limited payment will never be more than we would have paid if this exclusion
were not in the contract.
The limited payment will be payable to the beneficiary for insurance
otherwise payable upon the Insured's death.
REDUCED PAID-UP, EXTENDED AND OTHER INSURANCE ON THE INSURED'S LIFE
This exclusion also applies to any reduced paid-up or extended insurance
that might be in force under the Contract Value Options, if any. We will put the
exclusion in any contract on the Insured's life to which you change, or for
which you exchange, this contract or any of its benefits.
PAID-UP INSURANCE ON OTHER PERSONS
This contract might include insurance on the life of someone other than the
Insured. And it might have a provision that makes that insurance paid-up if the
Insured dies. This exclusion will not affect any such provision.
EFFECT OF INCONTESTABILITY
In any case where this exclusion applies, the Incontestability provision of
this contract will not be deemed to make us pay more than as we state under
Limited Payment.
RESERVES
We might have to compute a reserve to find the limited payment. If so the
reserve will be equal to tne contract value on the date of the Insured's death
less any contract debt adjusted for unearned loan interest.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Attest
ORD 86327--88
II-204
EXHIBIT 1.A.(13)(t)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
- --------------------------------------------------------------------------------
REDUCED PAID-UP INSURANCE
This contract is no longer in force on a premium paying basis. It is being
kept in force as reduced paid-up insurance on the Insured's life, as we state
under Contract Value Options in the contract.
The new amount of insurance and its effective date are shown in the
attached Table of Values. Unless otherwise stated in the table, any contract
debt was deducted when we computed the net cash value that was used to provide
the reduced paid-up insurance.
As of the effective date shown in the table each of these items no longer
applies: (1) the Tablular Contract Fund Values and Tabular Cash Values shown on
page 4 in the contract; (2) any supplementary benefits or other extra benefits
that were made a part of the contract by rider or endorsement; (3) any of the
provisions of the contract that apply to the varying of the insurance amount or
cash value due to investment results in the separate account; and (4) any
provisions of the contract that do not apply to the reduced paid-up insurance.
If this contract is reinstated, the contract fund that applies upon
reinstatement is as we state under Premium Payment and Reinstatement. The cash
value and net cash value will be as we state under Contract Value Options.
The attached table shows values at the ends of contract years. If we need
to compute values at some time during a contract year, we will count the time
since the start of the year. We will let you know the values for other durations
if you ask for them.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Date Attest
ORD 86328--88
II-205
EXHIBIT 1.A.(13)(u)
[PRUDENTIAL LOGO]
Insured Rider for Policy No.
OPTION TO EXCHANGE POLICY
PREMIUM
We grant this option in consideration of payment now of an extra single
premium of $XXX.XX. The Premium Adjustment provision of this contract will not
apply to this premium.
RIGHT TO EXCHANGE
You may be able to exchange this contract for a new contract of life
insurance on the life of a new Insured.
EXCHANGE DATE
The phrase exchange date means the date you choose in your request for the
exchange. It may not be more than 31 days after the date of your request; it may
not be a date on which this contract is in default.
CONDITIONS
Your right to make this exchange is subject to all these conditions:
1. The new Insured (a) was living on the contract date of this contract and
(b) has not reached his or her 70th birthday as of the exchange date.
2. You will apply to be the owner of the new contract.
3. On the exchange date, we must not be waiving premiums under any benefit
in this contract for waiving them in the event of disability.
4. You must give us any facts we need to satisfy us that the new Insured is
insurable for the new contract.
5. You must satisfy us that you have an insurable interest in the new
Insured's life.
6. You must ask for the exchange and apply for the new contract in forms
that meet our needs; the new Insured, as the person proposed for coverage, must
join with you in signing the application.
7. We must have your request, the application, this contract, and any
payment required under Charge for Exchange and under Miscellaneous, at our Home
Office within the 31 day period ending on the exchange date.
The new contract will take effect on the exchange date only if we approve
its issue and both the Insured and the new Insured are living on the exchange
date. If the new contract takes effect, this contract will end just before the
exchange date.
CONTRACT DATE
The contract date of the new contract will be the same as the contract date
of this one.
CONTRACT SPECIFICATIONS
The new contract will be on the same plan as this contract if on the
contract date we regularly issued contracts on this plan for the same rating
class, amount, issue age, and sex as the new contract. If this plan is not
available, the new contract may be on any plan we consent to or on the Life Paid
Up at Age 85 plan.
Its face amount will be the amount you ask for in the application. But that
amount (1) must be an amount we regularly issued on its contract date, and (2)
cannot be more than the face amount of this contract.
We will set the new Insured's issue age in accord with our regular rules
that were in use on the contract date of the new contract. We will base the
premiums on the new Insured's age and sex. To compute the premiums, we will
use: (1) our rates that were in use on the contract date of the new contract;
and (2) the new Insured's rating class as of the exchange date.
The new contract may not be one with extra benefits except as we state
under Miscellaneous.
ORD 86306--88
II-206
<PAGE>
We will endorse the new contract to show that the period we state in its
incontestability provision and in its Suicide Exclusion will start on the
exchange date, not on the date of the new contract. The endorsement will also
state how we will compute the amount to be paid under the new contract if (1) we
have a legal basis for contesting it, or (2) deatn results from suicide in the
stated period. We describe how we will compute that amount under Miscellaneous.
In issuing the new contract, we have the right to limit or exclude any war
and aviation risks, in accord with our rules in use on the exchange date.
CONTRACT FUND
The contract fund of this contract will become the contract fund of the new
contract. If this contract and the new contract have premium accounts, the
premium account of this contract will become the premium account of the new
contract.
CHARGE FOR EXCHANGE
If the contract fund and premium account of the new contract are such that
it would be in default on the exchange date, we will charge you a premium
sufficient to bring it out of default.
SURRENDER CHARGES
If the new contract is surrendered, we will determine its net cash value
using the greater of the surrender charges that would apply under the old and
new contracts.
MISCELLANEOUS
The new contract may have supplementary benefits or other extra benefits
only if we consent. If we consent, you must give us any facts we need to satisfy
us that the new Insured is insurable for the benefit(s). And we must be paid any
charge we may then require.
If this contract has contract debt at the time of the exchange, the debt
may be paid back or it may be transferred to the new contract. But if the debt
would be more than the loan value of the new contract on the exchange date, the
excess must be paid to us.
To compute the amount to be paid under the new contract if (1) we have a
legal basis for contesting it, or (2) death results from suicide in the stated
period, here is what we will do. First, we will identify the part of the
Contract Fund of the new contract that came from this contract on the exchange
date. We will add to that the amount of the charge, if any, for the exchange
and any premiums paid on the new contract and we will subtract any contract
debt. If the new Insured is living we will make this computation as of the date
of the new contract is ended. Otherwise we will do so as of the date of his or
her death.
The net cash value of the new contract as of the date of computation might
be more than the amount determined above. If so, we will pay that value instead.
OTHER EXCHANGES
You may be able to exchange this contract other than in accord with the
requirements we state in this rider. But this may be done only if we consent,
and will be subject to conditions and charges that are then determined.
Rider attached to and made a part of this contract
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
Secretary
Effective Date Attest
ORD 863O6--88
II-207
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(v)
ENDORSEMENTS
(Only we can endorse this contract.)
ALTERATION OF TEXT
The provision of this policy entitled "Ownership and Control" is replaced
at issue by the following:
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise, while the Insured is
living and less than 21 years of age the owner of the contract is the applicant
for it. But if the applicant is not living the owner, except as we state below,
is the beneficiary(ies) who at the time would be entitled to any proceeds
arising from the Insured's death. If there is no such beneficiary at the time,
the owner is the Insured. A beneficiary named by the Insured will not replace
the Insured as owner.
After the Insured is 21 years of age, the owner is the Insured.
While the Insured is living the owner alone is entitled to any contract
benefit and value, and to the exercise of any right and privilege granted by the
contract or by us. This includes, but is not limited to, these rights: (1) to
assign the contract; and (2) to change any subsequent owner. A request for such
a change must be in writing to us at our Home Office and in a form that meets
our needs. The change will take effect only when we endorse the contract to show
it.
If the owner is the Insured, but he or she (1) is not able, due to age, to
exercise rights, and (2) has no legal guardian to do so, we have the right to
let a person who appears to us to be responsible for the Insured's support or
welfare, act for the Insured. We will not do so unless the action appears to us
to be for the Insured's benefit.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
--------------------------------
Secretary
ORD 86309--88
II-208
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(W)
[The PRUDENTIAL LOGO]
Insured Rider for Policy No.
JOHN DOE xx xxx xxx
---------------------------------------------------
This contract is issued as a conversion from an earlier contract.
The period we state under Incontestability in this contract will start on
the issue date of the earlier contract. But if that contract was reinstated
before the date of this contract, for each reinstatement we will have the right
to use as a basis for a contest of this contract the statements that were made
to us at the time. The period during which we will have that right will be the
period we state under Incontestability in this contract; it will start on the
date of the reinstatement.
The period we state under Suicide Exclusion in this contract will start on
the issue date of the earlier contract.
Rider attached to and made a part of this contract on the Contract Date
The Prudential Insurance Company of America,
The Prudential Insurance Company of America,
By /s/ SPECIMEN
--------------------------------
Secretary
ORD 86311--881
II-209
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(x)
ENDORSEMENTS
(Only we can endorse this contract.)
Any reference, in any provision of this contract, to the sex of any person
will be ignored except for the purpose of identification. For any settlement
payable for the lifetime of one or more payees, the female rates we show in the
contract will apply to both male and female payees.
Not withstanding anything in this contract to the contrary, when the
contract is in default, it will stay in force as reduced paid-up insurance.
BASIS OF COMPUTATION
MORTALITY TABLES DESCRIBED
We base all net premiums and net values to which we refer in this contract
on the Insured's issue age and on the length of time since the contract date. We
use the Commissioners 1980 Standard Ordinary Non-Smokers Mortality Table B and
continuous functions based on age last birthday.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, and reduced paid-up insurance
we exclude the value of any supplementary benefits and any other extra benefits
added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality table and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
--------------------------------
Secretary
ORD 86303--88
II-210
EXHIBIT 1.A.(13)(y)
- --------------------------------------------------------------------------------
ENDORSEMENTS
(Only we can endorse this contract.)
Any reference, in any provision of this contract, to the sex of any person
will be ignored except for the purpose of identification. For any settlement
payable for the lifetime of one or more payees, the female rates we show in the
contract will apply to both male and female payees.
Not withstanding anything in this contract to the contrary, when the
contract is in default, it will stay in force as reduced paid-up insurance.
BASIS OF COMPUTATION
MORTALITY TABLES DESCRIBED
We base all net premiums and net values to which we refer in this contract
on the Insured's issue age and an the length of time since the contract date. We
use the Commissioners 1980 Standard Ordinary Smokers Mortality Table B and
continuous functions based on age last birthday.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, and reduced paid-up insurance
we exclude the value of any supplementary benefits and any other extra benefits
added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality table and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By /s/ A B C D
--------------------------------
Secretary
ORD 86304--88
II-211
- -------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(z)
ENDORSEMENTS
(Only we can endorse this contract.)
VOTING RIGHTS
We are a mutual life insurance company. Our principal Office is in Newark,
New Jersey, and we are incorporated in that State. By law, we have 24 directors.
This includes 16 elected by our policyholders (four each year for four year
terms), two of our Officers, and six public directors named by New Jersey's
Chief Justice.
The election is held on the first Tuesday in April from 10:00 A.M. to 2:00
P.M. in our Office at Prudential Plaza, Newark, N.J. After this contract has
been in force for one year, you may vote either in person or by mail. We will
send you a ballot if you ask for one. Just write to the Secretary at Prudential
Plaza, Newark, New Jersey 07101, at least 60 days before the election date. By
law, your request must show your name, address, policy number and date of birth.
Only individuals at least 18 years old may vote.
HOME OFFICE LOCATIONS
When we use the term Home Office, we mean any of these Prudential Offices:
CORPORATE OFFICE, NEWARK, N.J. NORTH CENTRAL HOME OFFICE,
MINNEAPOLIS, MINN.
EASTERN HOME OFFICE, SOUTH-CENTRAL HOME OFFICE,
FORT WASHINGTON, PA. JACKSONVILLE, FLA.
The Prudential Insurance Company of America,
By /s/ SPECIMEN
--------------------------------
Secretary
COMB 86184--88
II-212
- -------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(aa)
ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATION
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and sex
and on the length of time since the contract date; (2) we use the Commissioners
1980 Standard Ordinary Non-Smokers Mortality Table; and (3) we use continuous
functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Non-Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
these set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
--------------------------------
Secretary
ORD 86185--88
II-213
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(bb)
ENDORSEMENTS
(Only we can endorse this contract.)
BASIS OF COMPUTATION
MORTALITY TABLES DESCRIBED
Except as we state in the next paragraph, (1) we base all net premiums and
net values to which we refer in this contract on the Insured's issue age and sex
and on the length of time since the contract date; (2) we use the Commissioners
1980 Standard Ordinary Smokers Mortality Table; and (3) we use continuous
functions based on age last birthday.
For extended insurance, we base net premiums and net values on the
Commissioners 1980 Smokers Extended Term Insurance Table.
INTEREST RATE
For all net premiums and net values to which we refer in this contract we
use an effective rate of 4% a year.
EXCLUSIONS
When we compute net values, tabular values, reduced paid-up insurance and
extended insurance, we exclude the value of any supplementary benefits and any
other extra benefits added by rider to this contract.
VALUES AFTER 20 CONTRACT YEARS
Tabular values not shown on page 4 will be computed using the standard
nonforfeiture method and the mortality tables and interest rate we describe
above. We show the nonforfeiture factors in the contract data pages.
MINIMUM LEGAL VALUES
The cash, loan and other values in this contract are at least as large as
those set by law where it is delivered. Where required, we have given the
insurance regulator a detailed statement of how we compute values and benefits.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
--------------------------------
Secretary
ORD 86203--88
II-214
- -------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(cc)
RIDER FOR TERM INSURANCE BENEFIT ON LIFE OF
INSURED--DECREASING AMOUNT AFTER THREE YEARS
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
Insured died: (1) in the term period for the benefit; and (2) while this
contract is in force and not in default beyond the last day of the grace period.
Any proceeds under this contract that may arise from the Insured's death will
include this amount. But our payment is subject to all the provisions of the
benefit and of the rest of this contract.
We will use the table below to compute the amount we will pay. We show the
initial amount of term insurance under this benefit on the contract data pages.
We also show the term period for the benefit there. It starts on the contract
date, which we show on the first page. The anniversary at the end of the term
period is part of that period.
TABLE OF AMOUNTS OF INSURANCE
AMOUNTS PAYABLE
We show here the amount we will pay, based on the Insured's issue age, for
each $1,000 of initial amount of term insurance if death occurs in the contract
year ending with the anniversary shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ISSUE AGE
- ----------------------------------------------------------------------------------------------------------------------
ANNIVER-
SARY 18 19 20 21 22 23 24 25 26 27 28
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000
2 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
3 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
4 978 977 977 976 976 975 974 974 973 972 971
5 956 955 953 952 951 950 949 947 946 944 943
6 933 932 930 929 927 925 923 921 919 917 914
7 911 909 907 905 902 900 897 895 892 889 886
8 889 886 884 881 878 875 872 868 865 861 857
9 867 864 860 857 854 850 846 842 838 833 829
10 844 841 837 833 829 825 821 816 811 806 800
11 822 818 814 810 805 800 795 789 784 778 771
12 800 795 791 786 780 775 769 763 757 750 743
13 778 773 767 762 756 750 744 737 730 722 714
14 756 750 744 738 732 725 718 710 703 694 686
15 733 727 721 714 707 700 692 684 676 667 657
16 711 705 698 690 683 675 667 658 649 639 629
17 689 682 674 667 659 650 641 632 622 611 600
18 667 659 651 643 634 625 615 605 595 583 571
19 644 636 628 619 610 600 590 579 568 556 543
20 622 614 605 595 585 575 564 553 540 528 514
21 600 591 581 571 561 550 538 526 513 500 486
22 578 568 558 548 537 525 513 500 486 472 457
23 556 545 535 524 512 500 487 474 459 444 429
24 533 523 512 500 488 475 462 447 432 417 400
25 511 500 488 476 463 450 436 421 405 389 371
26 489 477 465 452 439 425 410 395 378 361 343
27 467 454 442 429 415 400 385 368 351 333 314
28 445 432 419 405 390 375 359 342 324 306 286
29 422 409 395 381 366 350 333 316 297 278 257
30 400 386 372 357 341 325 308 289 270 250 229
31 378 364 349 333 317 300 282 263 243 222 200
32 356 341 325 310 293 275 256 237 216 200 200
33 333 318 302 286 268 250 231 210 200 200 200
34 311 295 279 262 244 225 205 200 200 200 200
35 289 273 256 238 220 200 200 200 200 200 200
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AL 136B
II-215
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ISSUE AGE
- ----------------------------------------------------------------------------------------------------------------------
ANNIVER-
SARY 18 19 20 21 22 23 24 25 26 27 28
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 $267 $250 $232 $214 $200 $200 $200 $200 $200 $200 $200
37 245 227 209 200 200 200 200 200 200 200 200
38 222 204 200 200 200 200 200 200 200 200 *
39 200 200 200 200 200 200 200 200 200 *
40 200 200 200 200 200 200 200 200 *
41 200 200 200 200 200 200 200 *
42 200 200 200 200 200 200 *
43 200 200 200 200 200 *
44 200 200 200 200 *
45 200 200 200 *
46 200 200 *
47 200 *
*NO AMOUNT PAYABLE IF DEATH OCCURS
IN THIS CONTRACT YEAR OR ANY LATER CONTRACT YEAR.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ISSUE AGE
- ----------------------------------------------------------------------------------------------------------------------
ANNIVER-
SARY 29 30 31 32 33 34 35 36 37 38 39 40 41 42
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000
2 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 l000
3 1000 1000 1000 1000 l000 1000 1000 1000 1000 1000 1000 1000 1000 1000
4 971 970 969 968 967 966 964 963 962 960 958 957 955 952
5 941 939 938 935 933 931 929 926 923 920 917 913 909 905
6 912 909 906 903 900 897 893 889 885 880 875 870 864 857
7 882 879 875 871 867 862 857 852 846 840 833 826 818 810
8 853 849 844 839 833 828 821 815 808 800 792 783 773 762
9 824 818 813 806 800 793 786 778 769 760 750 739 727 714
10 794 788 781 774 767 759 750 741 731 720 708 696 682 667
11 765 758 750 742 733 724 714 704 692 680 667 652 636 619
12 735 727 719 710 700 690 679 667 654 640 625 609 591 571
13 706 697 688 677 667 655 643 630 615 600 583 565 546 524
14 676 667 656 645 633 621 607 593 577 560 542 522 500 476
15 647 636 625 613 600 586 571 556 538 520 500 478 455 429
16 618 606 594 581 567 552 536 518 500 480 458 435 409 381
17 588 576 563 548 533 517 500 481 462 440 417 391 364 333
18 559 546 531 516 500 483 464 444 423 400 375 348 318 286
19 529 515 500 484 467 448 429 407 385 360 333 304 273 238
20 500 485 469 452 433 414 393 370 346 320 292 261 227 200
21 471 455 438 419 400 379 357 333 308 280 250 217 200 200
22 441 424 406 387 367 345 322 296 269 240 208 200 200 200
23 412 394 375 355 333 310 286 259 231 200 200 200 200 200
24 382 364 344 323 300 276 250 222 200 200 200 200 200 *
25 353 333 313 290 267 241 214 200 200 200 200 200 *
26 324 303 281 258 233 207 200 200 200 200 200 *
27 294 273 250 226 200 200 200 200 200 200 *
28 265 243 219 200 200 200 200 200 200 *
29 235 212 200 200 200 200 200 200 *
30 206 200 200 200 200 200 200 *
31 200 200 200 200 200 200 *
32 200 200 200 200 200 *
33 200 200 200 200 *
34 200 200 200 *
35 200 200 *
36 200 *
*NO AMOUNT PAYABLE IF DEATH OCCURS
IN THIS CONTRACT YEAR OR ANY LATER CONTRACT YEAR.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
AL 136B
II-216
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ISSUE AGE
- -----------------------------------------------------------------------------------------------------------------------------------
ANNIVER-
SARY 43 44 45 46 47 48 49 50 51 52 53 54 55
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000 $1000
2 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
3 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
4 950 947 944 941 938 933 929 923 917 909 900 889 875
5 900 895 889 882 875 867 857 846 833 818 800 778 750
6 850 842 833 824 813 800 786 769 750 727 700 667 625
7 800 789 778 765 750 733 714 692 667 636 600 556 500
8 750 737 722 706 688 667 643 615 583 545 500 444 375
9 700 684 667 647 625 600 571 538 500 455 400 333 250
10 650 632 611 588 563 533 500 462 417 364 300 222 200
11 600 579 556 529 500 467 429 385 333 273 200 200 *
12 550 526 500 471 438 400 357 308 250 200 200 *
13 500 474 444 412 375 333 286 231 200 200 *
14 450 421 389 353 313 267 214 200 200 *
15 400 368 333 294 250 200 200 200 *
16 350 316 278 235 200 200 200 *
17 300 263 222 200 200 200 *
18 250 211 200 200 200 *
19 200 200 200 200 *
20 200 200 200 *
21 200 200 *
22 200 *
*NO AMOUNT PAYABLE IF DEATH OCCURS
IN THIS CONTRACT YEAR OR ANY LATER CONTRACT YEAR.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
You may be able to exchange this benefit for a new contract of life
insurance on the Insured's life. In any of these paragraphs, when we use the
phrase new contract we mean the contract for which the benefit may be exchanged.
You will not have to prove that the Insured is insurable.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
The amount we would have paid under this benefit if the Insured had died just
before the contract date of the new contract must be large enough to meet the
minimum for a new contract, as we describe under Contract Specifications. (2)
You must ask for the exchange in writing and in a form that meets our needs. (3)
You must send this contract to us to be endorsed. (4) We must have your request
and the contract at our Home Office while the benefit is in force and at least
five years before the end of its term period.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1) the insurance under the
new contract took effect on its contract date; and (2) this benefit ended just
before that contract date.
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be less than five years before the end of the term period for the benefit. And
it may not be more than 31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accord with our
regular rules in use on its contract date.
AL 136B
II-217
<PAGE>
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the Insured; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than 80% of the
amount we would have paid under this benefit if the Insured had died just before
the contract date of the new contract. (Since $10,000 is 80% of $12,500, the
amount we would have paid must be at least $12,500 for an exchange to be
possible.) The face amount you want might be less than the smallest amount would
regularly issue on the plan you wish. In that case we will issue a new contract
for as low as $10,000 on the Life Paid Up at Age 85 plan if you ask us to do so.
If: (1) the new contract is either on the Life Paid Up at Age 85 plan or
has a premium period at least as long as for that plan; (2) this contract has a
benefit for waiving or paying premiums in the event of disability; and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put the benefit in the new contract. The benefit, if any, in the new
contract will be the same one, with the same provisions, that we put in other
contracts like it on its contract date. In this paragraph, when we use the
phrase other contracts like it, we mean contracts we would regularly issue on
the same plan and for the same rating class, amount, issue age and sex.
We will not deny a benefit for waiving or paying premiums that we would
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive or pay any premium under a new contract unless it has a
benefit for waiving or paying premiums in the event of disability. This will be
so even if we have waived or paid premiums under this contract.
CHANGES
You may be able to have this benefit changed to a new contract of life
insurance (either with us or with a subsidiary of ours) other than in accord
with the requirements for exchange that we state above. Or you may be able to
exchange this benefit for an increase in the amount of insurance under this
contract. But any change may be made only if we consent, and will be subject to
conditions and charges that are then determined.
MISCELLANEOUS PROVISIONS
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the contract anniversary at
the end of the term period for this benefit.
AL 136B
II-218
<PAGE>
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default: it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the date the contract is surrendered under its Cash Value Option, if it
has one;
3. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is changed;
and
4. the date the contract ends for any other reason.
Further, if you ask us in writing, and we agree, we will cancel the benefit
as of the first monthly date on or after we receive your request. Contract
premiums and monthly charges due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
---------------------
Secretary
II-219
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(dd)
RIDER FOR RENEWABLE TERM INSURANCE BENEFIT ON LIFE OF INSURED
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
Insured died: (1) in the term period or in any renewal term period for the
benefit; and (2) while this contract is in force and not in default past its
days of grace. Any proceeds under this contract that may arise from the
Insured's death will include this amount. But our payment is subject to all the
provisions of the benefit and of the rest of this contract.
We show the amount of term insurance under this benefit on the contract
data pages. We also show the term period for the benefit there. It starts on the
contract date that we show on the first page.
RENEWAL
You may renew this benefit at the end of either its term period or a
renewal term period. You will not have to prove that the Insured is insurable.
All these conditions must be met:
1. A renewal term period must start not later than the contract anniversary
when the Insured's attained age is 70.
2. The contract must be in force and not in default beyond the last day of
the grace period.
In any of these paragraphs when we use the phrase renewal term period we
mean a term period for which this benefit may be renewed. Except as we state in
the next sentence, a renewal term period will be for the same number of years
that we show on page 3 for the term period of the benefit. But if a renewal term
period begins on the contract anniversary when the Insured's attained age is 66,
67, 68 or 69, that renewal term period will be for the number of years between
the Insured's attained age on that anniversary and age 70.
We show the amount(s) of renewal premiums on the contract data pages. We
base them on the Insured's issue age and sex and on the length of time from the
contract date to the due date of the first premium for the renewal term period.
The first of the premiums to be paid during a renewal term period will be due on
the anniversary at the end of the most recent of the term periods; the premium
period for the renewal term period will start on that date.
The anniversary at the end of the final renewal term period is part of that
term period.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
You may be able to exchange this benefit for a new contract of life
insurance on the Insured's life. In any of these paragraphs, when we use the
phrase new contract we mean the contract for which the benefit may be exchanged.
You will not have to prove that the Insured is insurable.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
You must ask for the exchange in writing and in a form that meets our needs. (2)
You must send this contract to us to be endorsed. (3) We must have your request
and the contract at our Home Office while this benefit is in force and not later
than the contract anniversary when the Insured's attained age is 70.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1 the insurance under the
new contract took effect on its contract date; and (2) this benefit ended just
before that contract date.
AL 187B
II-220
<PAGE>
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be after the contract anniversary when the Insured's attained age is 70. And it
may not be more than 31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accord with our
regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the Insured; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than the amount
of term insurance for this benefit. The face amount you want might be less than
the smallest amount we would regularly issue on the plan you wish. In that case
we will issue a new contract for as low as $10,000 on the Life Paid Up at Age
85 plan if you ask us to do so.
If: (1) the new contract is either on the Life Paid Up at Age 85 plan or
has a premium period at least as long as for that plan; (2) this contract has a
benefit for waiving or paying premiums in the event of disability; and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put the benefit in the new contract. The benefit, if any, in the new
contract will be the same one, with the same provisions, that we put in other
contracts like it on its contract date. In this paragraph when we use the phrase
other contracts like it we mean contracts we would regularly issue on the same
plan and for the same rating class, amount, issue age and sex.
We will not deny a benefit for waiving or paying premiums that we would
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive or pay any premium under a new contract unless it has a
benefit for waiving or paying premiums in the event of disability. This will be
so even if we have waived or paid premiums under this contract.
CHANGES
You may be able to have this benefit changed to a new contract of life
insurance (either with us or with a subsidiary of ours) other than in accord
with the requirements for exchange which we state above. Or, you may be able to
exchange this benefit for an increase in the amount of insurance under this
contract. But any change may be made only if we consent, and will be subject to
conditions and charges that are then determined.
MISCELLANEOUS PROVISIONS
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the earlier of the death of
the Insured and the end of the first renewal term period.
AL 187B
II-221
<PAGE>
TERMINATION
This benefit will end on the earliest of.
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the date the contract is surrendered under its Cash Value Option, if it
has one;
3. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is changed;
4. the end of the day that is the first contract anniversary after the
Insured's 75th birthday; and
5. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, and we agree, we
will cancel the benefit as of the first monthly date on or after we receive your
request. Contract premiums and monthly charges due then and later will be
reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
----------------------
Secretary
AL 187B
II-222
- -------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(ee)
RIDER FOR LEVEL TERM INSURANCE BENEFIT ON LIFE OF INSURED SPOUSE
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
insured spouse died: (1) in the term period for the benefit; and (2) while this
contract is in force and not in default beyond the last day of the grace period.
We will pay this amount to the beneficiary for insurance payable upon the
insured spouse's death. But our payment is subject to all the provisions of the
benefit and of the rest of this contract. The phrase insured spouse means the
Insured's spouse named in the application for this contract.
We show the initial amount of term insurance under this benefit on the
contract data pages. We also show the term period for the benefit there. It
starts on the contract date, which we show on the first page. The anniversary at
the end of the term period is part of that period.
PAID-UP INSURANCE
PAID-UP INSURANCE ON LIFE OF INSURED SPOUSE
The Insured might die: (1) in the term period for this benefit; (2) while
this contract is in force and not in default past the last day of the grace
period; and (3) while the insured spouse is living. In this case, the insurance
on the life of the insured spouse under the benefit will become paid-up term
insurance. While the paid-up insurance is in effect, the contract will remain in
force until the end of the term period for the benefit. The paid-up insurance
will have cash values but no loan value.
If this benefit becomes paid-up, it may be surrendered for its net cash
value. This will be the net value on the date of surrender of the paid-up
insurance. But, within 30 days after a contract anniversary, the net cash value
will not be less than it was on that anniversary. We base this net cash value on
the insured spouse's age and sex. The insured spouse's age at any time will be
his or her age last birthday on the contract date plus the length of time since
that date. We use the Commissioners 1980 Standard Ordinary Mortality Table. We
use continuous functions based on age last birthday. We use an effective
interest rate of 4% a year.
We will usually pay any cash value promptly. But we have the right to
postpone paying it for up to six months. If we do so for more than 30 days, we
will pay interest at the rate of 3% a year. If we are asked for the values which
apply, we will furnish them.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
While the Insured is living, you may be able to exchange this benefit for a
new contract of life insurance on the life of the insured spouse. In any of
these paragraphs, when we use the phrase new contract we mean the contract for
which the benefit may be exchanged. You will not have to prove that the insured
spouse is insurable.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
The amount we would have paid under this benefit if the insured spouse had died
just before the contract date of the new contract must be large enough to meet
the minimum for a new contract, as we describe under Contract Specifications
(2) You must ask for the exchange in writing and in a form that meets our needs.
(3) You must send this contract to us to be endorsed. (4) We must have your
request and the contract at our Home Office while the benefit is in force and at
least five years before the end of its term period.
The new contract will not take effect unless the premium for it is paid
while the insured spouse is living and within 31 days after its contract date.
If the premium is paid as we state, it will be deemed that: (1) the insurance
under the new contract took effect on its contract date; and (2) this benefit
ended just before that contract date.
AL 186B
II-223
<PAGE>
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be less than five years before the end of the term period for the benefit. And
it may not be more than 31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the standard rating class. We will set the
issue age and the premiums for the new contract in accord with our regular rules
in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the insured spouse; or (3) one that includes or
provides for term insurance other than extended insurance; or (4) one with
premiums that increase after a stated time, if its first premium is less than
80% of any later premium; or (5) one with supplementary benefits other than the
benefit to which we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than 80% of the
amount we would have paid under this benefit if the insured spouse had died just
before the contract date of the new contract. (Since $10,000 is 80% of $12,500,
the amount we would have paid must be at least $12,500 for an exchange to be
possible.) The face amount you want might be less than the smallest amount we
would regularly issue on the plan you wish. In that case we will issue a new
contract for as low as $10,000 on the Life Paid Up at Age 85 plan if you ask us
to do so.
If: (1) the new contract is either on the Life Paid Up at Age 85 plan or
has a premium period at least as long as for that plan; and (2) we would include
in other contracts like it a benefit for waiving or paying premiums in the event
of disability, here is what we will do. Even though this contract does not have
that benefit on the life of the insured spouse, we will put it in a new
contract on his or her life. The benefit, if any, in the new contract will be
the same one, with the same provisions, that we put in other contracts like it
on its contract date. In this paragraph, when we use the phrase other contracts
like it, we mean contracts we would regularly issue on the same plan and for the
same rating class, amount, issue age and sex.
We will not waive or pay any premium under a new contract unless the
disability started on or after its contract date. And we will not waive or pay
any premium under a new contract unless it has a benefit for waiving or paying
premiums in the event of disability. This will be so even if we have waived or
paid premiums under this contract.
CHANGES
You may be able to have this benefit changed to a contract of life
insurance (either with us or with a subsidiary of ours) other than in accord
with the requirements for exchange that we state above. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
MISCELLANEOUS PROVISIONS
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise, while the Insured is
living the owner alone may exercise all ownership and control of this contract.
This includes, but is not limited to, these rights: (1) to assign the contract;
and (2) to change any subsequent owner. A request for such a change must be in
writing to us at our Home Office and in a form that meets our needs. The change
will take effect only when we endorse the contract to show it.
Unless we endorse this contract to say otherwise: (1) while any insurance
is in force after the Insured's death, the owner of the contract will be the
insured spouse; and (2) the owner alone will be entitled to (a) any contract
benefit and value, and (b) the exercise of any right and privilege granted by
the contract or by us. But any insurance payable upon the Insured's death will
be payable to the beneficiary for that insurance.
BENEFICIARY
The word beneficiary where we use it in this contract without qualification
means the beneficiary for insurance payable upon the death of the Insured.
Unless we endorse this contract to say otherwise, the beneficiary for
insurance payable upon the death of the insured spouse will be the Insured if
living, otherwise the estate of the insured spouse.
AL 186B
II-224
<PAGE>
The beneficiary for insurance payable upon the death of the insured spouse
may be changed. The request must be in writing and in a form that meets our
needs. It will take effect only when we file it at our Home Office; this will be
after the contract is sent to us to be endorsed, if we ask for it. Then any
previous beneficiary's interest in such insurance will end as of the date of the
request. It will end then even if the insured spouse is not living when we file
the request. Any beneficiary's interest is subject to the rights of any assignee
of whom we know.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated.
MISSTATEMENT OF AGE OR SEX
If the insured spouse's stated age or sex or both are not correct, we will
change each benefit and any amount payable to what the premium and charges would
have bought for the correct age and sex.
The Schedule of Premiums may show that premiums change or stop on a certain
date. We may have used that date because the insured spouse would attain a
certain age on that date. If we find that the issue age for the insured spouse
was wrong, we will correct that date.
SUICIDE EXCLUSION
If the insured spouse, whether sane or insane, dies by suicide within the
period which we state in the Suicide Exclusion under General Provisions and
while this benefit is in force, we will not pay the amount we describe under
benefit above. Instead, we will pay no more than the sum of the monthly charges
deducted for this benefit to the date of death plus the charge for applicable
taxes. We will make that payment in one sum.
REINSTATEMENT
If this contract is reinstated, it will not include the insurance that we
provide under this benefit on the life of the insured spouse unless we are given
any facts we need to satisfy us that the insured spouse is insurable for the
benefit.
CONTRACT VALUE OPTIONS
If this contract has a Contract Value Options provision, it will apply only
during the Insured's lifetime. Any extended or reduced paid-up insurance that
may be described there is on the life of the Insured only.
CONTRACT LOANS
If this contract has a Loans provision, we will not consider any contract
debt when we determine the amount payable, if any, at the death of the insured
spouse.
INCONTESTABILITY
Except for default, we will not contest this benefit after it has been in
force during the insured spouse's lifetime for two years from the issue date.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and monthly charges stop on the earliest of: (1) the death
of the Insured, (2) the death of the insured spouse, and (3) the contract
anniversary at the end of the term period for this benefit.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace of a premium in default; it will not
continue if a benefit takes effect under any contract value options provision
that may be in the contract;
2. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is changed;
3. the date the contract is surrendered under its Cash Value Option, if it
has one, or the paid-up insurance, if any, under the benefit is surrendered; and
4. the date the contract ends for any other reason.
AL 186B
II-225
<PAGE>
Further, if you ask us in writing, and we agree, we will cancel the benefit
as of the first monthly date on or after we receive your request. Contract
premiums and monthly charges due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ SPECIMEN
----------------------
Secretary
II-226
- --------------------------------------------------------------------------------
EX-1.A(13)(ff)(i)
SETTLEMENT OPTIONS TO PROVIDE ACCELERATION OF
DEATH BENEFITS
Subject to all the provisions of this rider and of the rest of the
contract, we will make available the payments described below if the Insured
becomes terminally ill, has an organ transplant, or is receiving care in a
nursing home.
DEFINITIONS
Convertible Proceeds.--The proceeds payable under this contract at the
death of the Insured, after adjustment for any contract debt, excluding any term
insurance arising from supplementary benefits (except level term insurance
riders still in the conversion period and for which we charge a premium).
Benefit Base.--The value we will use to determine the monthly benefit
payable under the terminal illness option or the nursing home option. It will be
computed based on the amount of convertible proceeds you elect to place under
the option and a reduced life expectancy, calculated by us, that recognizes the
Insured's eligibility for the benefit. We will also consider, when applicable:
1. expected future premiums;
2. future dividends according to the scale in effect when we make the
computation;
3. continuation of any reduction in contractually guaranteed charges;
4. continuation of the current rate of any excess interest credited on
contract values; and
5. an expense charge of up to $150.
The benefit base will be at least as great as the net cash value of the
contract multiplied by the percentage of the convertible proceeds placed under
the terminal illness option or the nursing home option, whichever is elected.
Eligible Organ Transplant Center.--A facility licensed or approved as an
organ transplant center by the state in which it is located.
Eligible Nursing Home.--An institution or special nursing unit of a
hospital which meets at least one of the following requirements:
1) it is Medicare approved as a provider of skilled nursing care
services; or
2) it is licensed as a skilled nursing home or as an intermediate care
facility by the state in which it is located; or
3) it meets all the requirements listed below:
a. it is licensed as a nursing home by the state in which it is located;
b. its main function is to provide skilled, intermediate, or custodial
nursing care;
c. it is engaged in providing continuous room and board accommodations
to 3 or more persons;
d. it is under the supervision of a registered nurse (RN) or licensed
practical nurse (LPN);
e. it maintains a daily medical record of each patient; and
f. it maintains control and records for all medications dispensed.
Institutions which primarily provide residential facilities are not
eligible nursing homes.
TERMINAL ILLNESS OPTION
If we receive evidence satisfactory to us, including certification by a
licensed physician, that the Insured's life expectancy is 6 months or less, you
may elect this option to provide equal monthly payments for 6 months. For each
$1,000 of benefit base, each payment will be at least $168.37, which assumes an
annual interest rate of 5%.
If the Insured dies before all the payments have been made, we will pay the
beneficiary in one sum the present value of the remaining payments, calculated
at the interest rate we used to determine those payments.
ORD 87241--89
II-227
<PAGE>
If you do not wish to receive monthly payments, you may elect to receive a
single sum of equivalent value.
ORGAN TRANSPLANT OPTION
You may elect this option if the Insured has a heart, liver, heart-lung, or
bone marrow transplant prescribed by a licensed physician as necessary due to
illness, injury, or infirmity. You may choose the amount you wish to receive, up
to the lesser of the cost of the transplant and 75% of the convertible proceeds,
but no more than $250,000. This amount will be paid to you in a single sum
unless you ask to be paid in instalments. In that case, we will pay the
equivalent amount in 6 monthly payments.
The transplant must be performed after the contract date in an eligible
organ transplant center. We must have your request for payment at our Home
Office no later than 90 days after the transplant has been performed.
NURSING HOME OPTION
If (1) the Insured is receiving care in an eligible nursing home and has
received such care continuously for the preceding six months, and (2) we receive
evidence satisfactory to us, including certification by a licensed physician,
that the Insured is expected to remain in the nursing home until death, you may
elect level monthly payments for the number of years shown in the table that
follows. For each $1,000 of benefit base, each payment will be at least the
minimum amount shown in that table, which assumes an annual interest rate of 5%.
ATTAINED AGE PAYMENT PERIOD MINIMUM MONTHLY PAYMENT FOR
OF INSURED IN YEARS EACH $1,000 OF BENEFIT BASE
64 and under 10 $10.50
65 - 67 8 12.56
68 - 70 7 14.02
71 - 73 6 15.99
74 - 77 5 18.74
78 - 81 4 22.89
82 - 86 3 29.80
87 and over 2 43.64
If the Insured dies before all the payments have been made, we will pay the
beneficiary in one sum the present value of the remaining payments, calculated
at the interest rate we used to determine those payments.
If we agree, you may elect a longer payment period than that shown in the
table; if you do, monthly payments will be reduced so that the present value of
the monthly payments for the longer payment period is equal to the present value
of the payments for the period shown in the table, calculated at an interest
rate of at least 5%.
We reserve the right to set a maximum monthly benefit that we will pay
under this option. If we set a maximum, it will be at least $5,000; we will
advise you of the amount before the payment period begins.
If you do not wish to receive monthly payments, you may elect to receive a
single sum of equivalent value.
EFFECT ON CONTRACT
The convertible proceeds will be reduced by any amount used under one of
these options.
If you use only a portion of your convertible proceeds under one of these
options, the contract will remain in force and reduced premiums will be payable.
For insurance included in the convertible proceeds, premiums, values, and the
amount of insurance will be reduced in the same proportion as the reduction in
convertible proceeds. Insurance not included in the convertible proceeds will be
unaffected.
If you use only a portion of your convertible proceeds under the terminal
illness option or the nursing home option, the remaining convertible proceeds
must be at least $25,000.
ORD 87241--89
II-228
<PAGE>
If you use all of your convertible proceeds under the terminal illness
option or the nursing home option, all other benefits under the contract based
on the Insured's life will end. Any insurance under the contract on the life of
someone other than the Insured will remain in effect and we will waive all
future premiums for this insurance.
CONDITIONS
Your right to receive payment under any of these options is subject to the
following conditions:
1. The contract must be in force other than as extended insurance.
2. You must elect the option in writing in a form that meets our needs.
3. The contract must not be assigned except to us as security for a loan.
4. We reserve the right to set a minimum of no more than $50,000 on the
amount of convertible proceeds you may place under an option.
5. You must send us the contract.
6. The primary purpose of life insurance is to meet your estate planning
needs. This benefit provides for the accelerated payment of life insurance
proceeds and is not intended to cause you to involuntarily invade proceeds
ultimately payable to the named beneficiary. Therefore, accelerated death
benefit proceeds will be made available to you on a voluntary basis only.
Accordingly:
(a) If you are required by law to exercise this option to satisfy the
claims of creditors, whether in bankruptcy or otherwise, you are not
eligible for this benefit.
(b) If you are required by a government agency to exercise this option
in order to apply for, obtain, or retain a government benefit or
entitlement, you are not eligible for this benefit.
RIGHT TO CANCEL
If you ask us in writing and send us the contract, we will cancel this
rider.
Rider attached to and made a part of this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
--------------------
Secretary
ORD 87241--89
II-229
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(ff)(ii)
SETTLEMENT OPTIONS TO PROVIDE ACCELERATION OF DEATH BENEFITS
Subject to all the provisions of this rider and of the rest of the
contract, we will make the payments described below if the Insured is terminally
ill or is confined to a nursing home.
This rider is non-participating. Any dividend we pay under this contract
will be the same as the one we pay under a contract that is like this one in all
other respects but that does not have this rider.
DEFINITIONS
Convertible Proceeds.--The proceeds we would pay under this contract at the
death of the Insured, less any contract debt and any term insurance that comes
from supplementary benefits (except level term insurance riders still in the
conversion period and for which we charge a premium).
Benefit Base.--The value we will use to determine the monthly benefit we
will pay under the terminal illness option or the nursing home option. It will
be computed based on: (1) the amount of convertible proceeds you place under the
option; and (2) a reduced life expectancy. When we compute the life expectancy
and the benefit base, we will use our assumptions. We may change those
assumptions from time to time. We will consider, among other things, the
Insured's age and sex and which of the options is being applied for. We will
also consider, if they apply:
1. expected future premiums;
2. future dividends at the scale in effect when we make the computation;
3. continuation of any reduction in guaranteed charges;
4. continuation of the current rate of any excess interest credited on
contract values; and
5. a processing charge of up to $150.
The benefit base for an option will be at least as great as the net cash
value of the contract multiplied by the percentage of the convertible proceeds
placed under that option.
Eligible Nursing Home.--An institution or special nursing unit of a
hospital which meets at least one of the following requirements:
1) it is Medicare approved as a provider of skilled nursing care
services; or
2) it is licensed as a skilled nursing home or as an intermediate
care facility by the state in which it is located; or
3) it meets all the requirements listed below:
a. it is licensed as a nursing home by the state in which it is located;
b. its main function is to provide skilled, intermediate, or custodial
nursing care;
c. it is engaged in providing continuous room and board accommodations to 3
or more persons;
d. it is under the supervision of a registered nurse (RN) or licensed
practical nurse (LPN);
e. it maintains a daily medical record of each patient; and
f. it maintains control and records for all medications dispensed.
Institutions which primarily provide residential facilities are not
eligible nursing homes.
TERMINAL ILLNESS OPTION
To choose this option you must give us evidence that satisfies us that the
Insured's life expectancy is 6 months or less; part of that evidence must be a
certification by a licensed physician. This option provides equal monthly
payments for 6 months. For each $1,000 of benefit base, each payment will be at
least $168.37; this assumes an annual interest rate of 5%.
ORD 87241--90
II-230
<PAGE>
If the Insured dies before all the payments have been made, we will pay the
beneficiary in one sum. The one sum we pay will be the present value of the
payments that remain; we will compute the value based on the interest rate we
used to determine those payments.
If you do not want monthly payments, we will pay you the benefit base in
one sum if you ask us to.
NURSING HOME OPTION
You may choose this option if: (1) the Insured is confined to an eligible
nursing home and has been confined there for all of the preceding six months;
and (2) you give us evidence that satisfies us that the Insured is expected to
stay in the nursing home until death. Part of that evidence must be a
certification by a licensed physician. This option provides level monthly
payments for the number of years shown in the table that follows. For each
$1000 of benefit base, each payment will be at least the minimum amount shown in
the table. The table uses an annual interest rate of 5%; we may use a higher
rate.
ATTAINED AGE PAYMENT PERIOD MINIMUM MONTHLY PAYMENT FOR
OF INSURED IN YEARS EACH $1 ,000 OF BENEFIT BASE
64 and under 10 $10.50
65 - 67 8 12.56
68 - 70 7 14.02
71 - 73 6 15.99
74 - 77 5 18.74
78 - 81 4 22.89
82 - 86 3 29.80
87 and over 2 43.64
If the Insured dies before all the payments have been made, we will pay the
beneficiary in one sum. The one sum we pay will be the present value of the
payments that remain; we will compute the value based on the interest rate we
used to determine those payments.
If we agree, you may choose a longer payment period than that shown in the
table; if you do, monthly payments will be reduced so that the present
value of the payments is the same. We will use an interest rate of at least 5%.
We reserve the right to set a maximum monthly benefit that we will pay
under this option. If we do so, it will be at least $5,000.
If you do not want monthly payments, we will pay you the benefit base in
one sum if you ask us to.
EFFECT ON CONTRACT
The convertible proceeds will be reduced by any amount converted under one
of these options.
If you convert only a part of your convertible proceeds, the contract will
stay in force and premiums will be reduced. For insurance included in the
convertible proceeds, values and the amount of insurance will be reduced in the
same proportion as the reduction in convertible proceeds. The new premiums will
be the ones that would apply if the contract had been issued at the reduced
amount. Insurance not included in the convertible proceeds will not be affected.
If you convert only a part of your convertible proceeds, the convertible
proceeds that remain must be at least $25,000.
If you convert all of your convertible proceeds, all other benefits under
the contract based on the Insured's life will end. Any insurance under the
contract on the life of someone other than the Insured will stay in effect; we
will waive all future premiums for that insurance.
ORD 87241--90
II-231
<PAGE>
CONDITIONS
Your right to be paid under one of these options is subject to the
following conditions:
1. The contract must be in force other than as extended insurance.
2. You must choose the option in writing in a form that meets our needs.
3. The contract must not be assigned except to us as security for a loan.
4. We reserve the right to set a minimum of no more than $50,000 on the
amount of convertible proceeds you may place under an option.
5. You must send us the contract.
6. The main purpose of life insurance is to meet your estate planning
needs. This benefit provides for the accelerated payment of life insurance
proceeds. It is not meant to cause you to involuntarily invade proceeds
ultimately payable to the named beneficiary. Accelerated death benefits will be
made available to you on a voluntary basis only. Therefore:
(a) If you are required by law to use this option to meet the claims of
creditors, whether in bankruptcy or otherwise, you are not eligible
for this benefit.
(b) If you are required by a government agency to use this option in
order to apply for, obtain, or keep a government benefit or
entitlement, you are not eligible for this benefit.
RIGHT TO CANCEL
If you ask us in writing and send us the contract, we will cancel this
rider.
Rider attached to and made a part of this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ SUSAN L. BLOUNT
---------------------------
Secretary
ORD 87241--90
II-232
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(ff)(iii)
SETTLEMENT OPTIONS TO PROVIDE ACCELERATION OF DEATH BENEFITS
Subject to all the provisions of this rider and of the rest of the
contract, we will make the payments described below if the Insured is terminally
ill or needs an organ transplant.
This rider is non-participating. Any dividend we pay under this contract will be
the same as the one we pay under a contract that is like this one in all other
respects but that does not have this rider.
DEFINITIONS
Convertible Proceeds.--The proceeds we would pay under this contract at the
death of the Insured, less any contract debt and any term insurance (except
level term insurance still in the conversion period and for which we charge a
premium, or extended term insurance with at least one year remaining in the
term).
Benefit Base.--The amount we will pay under the terminal illness option or
the organ transplant option. It will be computed based on: (1) the amount of
convertible proceeds you place under the option, (2) a reduced life expectancy,
and (3) an interest rate no greater than the greater of:
(i) the yield on 90-day Treasury bills at the time of initial acceleration
of benefits, and
(ii) the current maximum adjustable policy loan interest rate based on the
greater of:
(a) Moody's Corporate Bond Yield Averages--Monthly Average Corporates--
published by Moody's Investors Service, Inc., or any successor
thereto, that is approved by the New York Superintendent of Insurance,
for the calendar month ending two month's before the date of
application for an accelerated payment, and
(b) the policy guaranteed cash value interest rate plus one percent per
annum.
When we compute the life expectancy and the benefit base, we will use our
assumptions. We may change those assumptions from time to time. We will
consider, among other things, the Insured's age and sex and which of the options
is being applied for. We will also consider, if they apply:
1. expected future premiums;
2. future dividends at the scale in effect when we make the computation;
3. continuation of any reduction in guaranteed charges;
4. continuation of the current rate of any excess interest credited on
contract values; and
5. a processing charge of up to $150.
The benefit base will be at least as great as the net cash value of the
contract multiplied by the percentage of the convertible proceeds placed under
the terminal illness option or the organ transplant option, whichever is
elected.
TERMINAL ILLNESS OPTION
To choose this option, you must give us evidence that satisfies us that the
Insured's life expectancy is 6 months or less; part of that evidence must be a
certification by a licensed physician.
We will pay you the benefit base in one sum.
ORGAN TRANSPLANT OPTION
To choose this option, you must give us evidence that satisfies us that the
Insured's life expectancy is 6 months or less unless the Insured receives a
vital organ transplant; part of that evidence must be a certification by a
licensed physician.
We will pay you the benefit base in one sum.
ORD 87241--91 NY
II-233
<PAGE>
EFFECT ON CONTRACT
The convertible proceeds will be reduced by any amount converted under one
of these options.
If you convert only a part of your convertible proceeds, the contract will
stay in force and premiums will be reduced. For insurance included in the
convertible proceeds, values and the amount of insurance will be reduced in the
same proportion as the reduction in convertible proceeds. The new premiums will
be the ones that would apply if the contract had been issued at the reduced
amount, and the existing provisions for premium payment will continue to apply.
Insurance not included in the convertible proceeds will not be affected.
If you convert only a part of your convertible proceeds, the convertible
proceeds that remain must be at least $25,000.
If you convert all of your convertible proceeds, all other benefits under
the contract based on the Insured's life will end. Any insurance under the
contract on the life of someone other than the Insured will stay in effect; we
will waive all future premiums for that insurance.
CONDITIONS
Your right to be paid under one of these options is subject to the
following conditions:
1. The contract must be in force other than as extended insurance in the
last year of its term.
2. You must choose the option in writing in a form that meets our needs.
3. The contract must not be assigned except to us as security for a loan.
4. The minimum amount of convertible proceeds you may place under an option
is the amount needed to provide a benefit of either 25% of the face amount of
the contract or $50,000, whichever is less.
5. You must send us the contract.
6. The main purpose of life insurance is to meet your estate planning
needs. This benefit provides for the accelerated payment of life insurance
proceeds. It is not meant to cause you to involuntarily invade proceeds
ultimately payable to the named beneficiary. Accelerated death benefits will be
made available to you on a voluntary basis only. Therefore:
(a) If you are required by law to use this option to meet the claims of
creditors, whether in bankruptcy or otherwise, you are not eligible
for this benefit.
(b) If you are required by a government agency to use this option in order
to apply for, obtain, or keep a government benefit or entitlement, you
are not eligible for this benefit.
RIGHT TO CANCEL
If you ask us in writing and send us the contract, we will cancel this
rider.
Rider attached to and made a part of this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ SPECIMEN
---------------------------
Secretary
ORD 87241--91 NY
II-234
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(gg)
RIDER FOR RENEWABLE TERM INSURANCE BENEFIT
ON LIFE OF INSURED SPOUSE
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
insured spouse died: (1) in the term period or in any renewal term period for
the benefit: and (2) while this contract is in force and not in default past the
last day of the grace period. We will pay this amount to the beneficiary for
insurance payable upon the insured spouse's death. But our payment is subject to
all the provisions of the benefit and of the rest of this contract. The phrase
insured spouse means the Insured's spouse named in the application for this
contract.
We show the amount of term insurance under this benefit on the contract
data pages. We also show the term period for the benefit there. It starts on the
contract date that we show on the first page.
RENEWAL
We will renew this benefit at the end of either its term period or a
renewal term period. You will not have to prove that the insured spouse is
insurable. All these conditions must be met:
1. A renewal term period must start not later than the contract anniversary
when the insured spouse's attained age is 69.
2. The contract must be in force and not in default past the last day of
the grace period.
3. We must be paid the first premium for a renewal term period as we
describe below.
In any of these paragraphs when we use the phrase renewal term period we
mean a term period for which this benefit may be renewed. Except as we state in
the next sentence, a renewal term period will be for the same number of years
that we show on page 3 for the term period of the benefit. But if a renewal term
period begins on the contract anniversary when the insured spouse's attained age
is 66, 67, 68 or 69, that renewal term period will be for the number of years
between the insured spouse's attained age on that anniversary and age 70.
We show the amounts of renewal premiums on the contract data pages. We base
them on the insured spouse's issue age and sex and on the length of time from
the contract date to the due date of the first premium for the renewal term
period. The first of the premiums to be paid during a renewal term period will
be due on the anniversary at the end of the most recent term period: the premium
period for the renewal term period will start on that date.
The anniversary at the end of the final renewal term period is part of that
term period.
PAID-UP INSURANCE
PAID-UP INSURANCE ON LIFE OF INSURED SPOUSE
The Insured might die: (1) in the term period or in any renewal term period
for this benefit: (2) while this contract is in force and not in default past
the last day of the grace period; and (3) while the insured spouse is living. In
this case, the insurance on the life of the insured spouse under the benefit
will become paid-up term insurance. While the paid-up insurance is in effect,
the contract will remain in force until the insured spouse's attained age 70.
The paid-up insurance will have cash values but no loan value.
If this benefit becomes paid-up, it may be surrendered for its net cash
value. This will be the net value on the date of surrender of the paid-up
insurance. But, within 30 days after a contract anniversary, the net cash value
will not be less than it was on that anniversary. We base this net cash value on
the insured spouse's age and sex. The insured spouse's age at any time will be
his or her age last birthday on the contract date plus the length of time since
that date. We use the Commissioners 1980 Standard Ordinary Mortality Table. We
use continuous functions based on age last birthday. We use an effective
interest rate of 4% a year.
AL 189D
II-235
<PAGE>
We will usually pay any cash value promptly. But we have the right to
postpone paying it for up to six months. If we do so for more than 30 days, we
will pay interest at the rate of 3% a year. If we are asked for the values which
apply, we will furnish them.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
While the Insured is living, you may be able to exchange this benefit for a
new contract of life insurance on the life of the insured spouse. You will not
have to prove that the insured spouse is insurable. When we use the phrase new
contract in this provision, we mean the contract for which the benefit may be
exchanged.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
You must ask for the exchange in writing and in a form that meets our needs. (2)
You must send this contract to us to be endorsed. (3) We must have your request
and the contract at our Home Office while this benefit is in force and not later
than the contract anniversary when the insured spouse's attained age is 65.
The new contract will not take effect unless the premium for it is paid
while the insured spouse is living and within 31 days after its contract date.
If the premium is paid as we state, it will be deemed that: (1) the insurance
under the new contract took effect on its contract date; and (2) this benefit
ended just before that contract date. We will return that part, if any, of the
last premium paid for the benefit that is more than was needed to pay premiums
to the contract date of the new contract.
PREMIUM CREDIT
If your request for a new contract is received at our Home Office before
the fifth anniversary of this contract, we will allow a credit on each premium
that is due or scheduled for payment during the first year of the new contract.
If, as of the date of the new contract, this contract has been in force for at
least one year, the credit will be equal to 10% of the premium for the new
contract, excluding any premium or charge for an extra risk. If, as of the date
of the new contract, this contract has been in force for less than one year, the
credit will be equal to the credit determined in the preceding sentence,
multiplied by the number of months for which this contract has been in force,
divided by twelve. We will apply the credit to each due or scheduled first-year
premium on the date we receive payment of the balance of that premium.
Example: You might request an exchange during the third year of this
contract. Let us assume that premiums due or scheduled under the new contract
resulting from the exchange would be $100 monthly (with no premium or charge for
an extra risk). We would apply a credit of $10 on each date on which we receive
payment of at least $90 for a monthly premium that is due or scheduled for
payment during the first year of the new contract. If you requested this
exchange after this contract had been in force for only 6 months, we would apply
a credit of $5 ($10 multiplied by 6, divided by 12) on each date on which we
receive payment of $95 for A monthly premium that is due or scheduled during the
first year of the new contract.
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be after the date to which premiums are paid for this benefit. It
may not be after the contract anniversary when the insured spouse's attained age
is 65. And it may not be more than 31 days before we have your request at our
Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the rating class we show for this benefit on
the contract data pages. We will set the issue age and the premiums for the new
contract in accordance with our regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the insured spouse; or (3) one that includes or
provides for term insurance other than extended insurance; or (4) one with
premiums that increase after a stated time, if its first premium is less than
80% of any later premium; or (5) one with supplementary benefits other than the
benefit to which we refer later in these paragraphs.
AL 189D
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<PAGE>
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than the
amount of term insurance for this benefit. The face amount you want might be
less than the smallest amount we would regularly issue on the plan you want. In
that case we will issue a new contract for as low as $10,000 on the Life Paid
Up at Age 85 plan if you ask us to do so.
If (1) the new contract is either on the Life Paid Up at Age 85 plan or has
a premium period at least as long as for that plan, and (2) we would include in
other contracts like it a benefit for waiving premiums in the event of
disability, here is what we will do. Even though this contract does not have
that kind of benefit on the life of the insured spouse, we will put that kind of
benefit in the new contract on his or her life. The benefit, if any, in the new
contract will be the same one, with the same provisions, that we put in other
contracts like it on its contract date. In this paragraph, when we refer to
other contracts, we mean contracts we would regularly issue on the same plan as
the new contract and for the same rating class, amount, issue age and sex.
We will not waive or pay any premium under the new contract unless the
disability started on or after its contract date. And we will not waive or pay
any premium under the new contract unless it has a benefit for waiving or paying
premiums in the event of disability. This will be so even if we have waived or
paid premiums under this contract.
MISCELLANEOUS PROVISIONS
CHANGES
You may be able to have this benefit changed to a contract of life
insurance (either with us or with a subsidiary of ours) other than in accordance
with the requirements for exchange that we state above. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
OWNERSHIP AND CONTROL
Unless we endorse this contract to say otherwise, while the Insured is
living the owner alone may exercise all ownership and control of this contract.
This includes, but is not limited to, these rights: (1) to assign the contract;
and (2) to change any subsequent owner. A request for such a change must be in
writing to us at our Home Office and in a form that meets our needs. The change
will take effect only when we endorse the contract to show it.
Unless we endorse this contract to say otherwise: (1) while any insurance
is in force after the Insured's death, the owner of the contract will be the
insured spouse; and (2) the owner alone will be entitled to (a) any contract
benefit and value, and (b) the exercise of any right and privilege granted by
the contract or by us. But any insurance payable upon the Insured's death will
be payable to the beneficiary for that insurance.
BENEFICIARY
The word beneficiary where we use it in this contract without qualification
means the beneficiary for insurance payable upon the death of the Insured.
Unless we endorse this contract to say otherwise, the beneficiary for
insurance payable upon the death of the insured spouse will be the Insured if
living, otherwise the estate of the insured spouse.
The beneficiary for insurance payable upon the death of the insured spouse
may be changed. The request must be in writing and in a form that meets our
needs. It will take effect only when we file it at our Home Office; this will be
after the contract is sent to us to be endorsed, if we ask for it. Then any
previous beneficiary's interest in such insurance will end as of the date of the
request. It will end then even if the insured spouse is not living when we file
the request. Any beneficiary's interest is subject to the rights of any assignee
we know of.
When a beneficiary is designated, any relationship shown is to the Insured,
unless otherwise stated.
AL 189D
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<PAGE>
MISSTATEMENT OF AGE OR SEX
If the insured spouse's stated age or sex or both are not correct, we will
change each benefit and any amount payable to what the premium and charges would
have bought for the correct age and sex.
The Schedule of Premiums may show that premiums change or stop on a certain
date. We may have used that date because the insured spouse would attain a
certain age on that date. If we find that the issue age for the insured spouse
was wrong, we will correct that date.
SUICIDE EXCLUSION
If the insured spouse, whether sane or insane, dies by suicide within the
period which we state in the Suicide Exclusion under General Provisions, we will
not pay the amount we describe under Benefit above. Instead, we will pay no more
than the sum of the monthly charges deducted for this benefit. We will make that
payment in one sum.
REINSTATEMENT
If this contract is reinstated, it will not include the insurance that we
provide under this benefit on the life of the insured spouse unless we are given
any facts we need to satisfy us that the insured spouse is insurable for the
benefit.
CONTRACT VALUE OPTIONS
If this contract has a Contract Value Options provision, it will apply only
during the Insured's lifetime. Any extended or reduced paid-up insurance that
may be described there is on the life of the Insured only.
CONTRACT LOANS
If this contract has a Loans provision, we will not consider any contract
debt when we determine the amount payable, if any, at the death of the insured
spouse.
INCONTESTABILITY
Except for default, we will not contest this benefit after it has been in
force during the insured spouse's lifetime for two years from the issue date.
BENEFIT PREMIUMS
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of the charge is included in the Schedule of
Monthly Deductions from the Contract Fund in the contract data pages.
Benefit premiums and charges stop on the earliest of: (1) the death of the
Insured, (2) the death of the insured spouse, and (3) the first contract
anniversary that follows the end of the final renewal term period.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is
changed;
3. the date the contract is surrendered under its Cash Value Option, if it
has one, or the paid-up insurance, if any, under the benefit is
surrendered;
4. the end of the day that is the first contract anniversary after the
insured spouse's 70th birthday; and
5. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, we will cancel the
benefit as of the first monthly date on or after we receive your request.
Contract premiums and monthly charges due then and later will be reduced
accordingly.
THIS SUPPLEMENTARY BENEFIT RIDER ATTACHED TO THIS CONTRACT ON THE CONTRACT
DATE
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
---------------------------
Secretary
AL 189D
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EXHIBIT 1.A.(13)(hh)
RIDER FOR LEVEL TERM INSURANCE BENEFIT
ON LIFE OF INSURED--PREMIUM INCREASES ANNUALLY
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data page(s).
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
Insured died: (1) in the term period for the benefit; and (2) while this
contract is in force and not in default past the last day of the grace period.
Any proceeds under this contract that may arise from the Insured's death will
include this amount. But our payment is subject to all the provisions of the
benefit and of the rest of this contract.
We show the amount of term insurance under this benefit on the contract
data page(s). We also show the term period for the benefit there. It starts on
the contract date, which we show on the first page. The anniversary at the end
of the term period is part of that period.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
You may be able to exchange this benefit for a new contract of life
insurance on the Insured's life. You will not have to prove that the Insured is
insurable. When we use the phrase new contract in this provision, we mean the
contract for which the benefit may be exchanged.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
You must ask for the exchange in writing and in a form that meets our needs. (2)
You must send this contract to us to be endorsed. (3) We must have your request
and the contract at our Home office while the benefit is in force and not later
than the second to occur of (a) the fifth contract anniversary; and (b) the
contract anniversary on which the Insured's attained age is 65.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1) the insurance under the
new contract took effect on its contract date; and (2) this benefit ended just
before that contract date.
PREMIUM CREDIT
If your request for a new contract is received at our Home Office before
the fifth anniversary of this contract, we will allow a credit on each premium
that is due or scheduled for payment during the first year of the new contract.
If, as of the date of the new contract, this contract has been in force for at
least one year, the credit will be equal to 10% of the premium for the new
contract, excluding any premium or charge for an extra risk. If, as of the date
of the new contract, this contract has been in force for less than one year, the
credit will be equal to the credit determined in the preceding sentence,
multiplied by the number of months for which this contract has been in force,
divided by twelve. We will apply the credit to each due or scheduled first-year
premium on the date we receive payment of the balance of that premium.
Example: You might request an exchange during the third year of this
contract. Let us assume that premiums due or scheduled under the new contract
resulting from the exchange would be $100 monthly, (with no premium or charge
for an extra risk). We would apply a credit of $10 on each date on which we
receive payment of at least $90 for a monthly premium that is due or scheduled
for payment during the first year of the new contract. If you requested this
exchange after this contract had been in force for only 6 months, we would apply
a credit of $5 ($10 multiplied by 6, divided by 12) on each date on which we
receive payment of $95 for a monthly premium that is due or scheduled during the
first year of the new contract.
AL 188 D
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<PAGE>
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be after the date to which premiums are paid for this benefit. It
may not be later than the second to occur of (a) the fifth contract anniversary;
and (b) the contract anniversary on which the Insured's attained age is 65. And
it may not be more than 31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accordance with our
regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; or (2) one that
insures anyone in addition to the Insured; or (3) one that includes or provides
for term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium; or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than the amount
of term insurance for this benefit. The face amount you want might be less than
the smallest amount we would regularly issue on the plan you want. In that case
we will issue a new contract for as low as $10,000 on the Life Paid Up at Age
85 plan if you ask us to do so.
If (1) the new contract is either on the Life Paid Up at Age 85 plan or has
a premium period at least as long as for that plan, (2) this contract has a
benefit for waiving or paying premiums in the event of disability, and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put that kind of benefit in the new contract. The benefit, if any, in the
new contract will be the same one, with the same provisions, that we put in
other contracts like it on its contract date. In this paragraph, when we refer
to other contracts, we mean contracts we would regularly issue on the same plan
as the new contract and for the same rating class, amount, issue age and sex.
We will not deny a benefit for waiving or paying premiums that we would~
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive any premium under the new contract unless it has a
benefit for waiving premiums in the event of disability. This will be so even if
we have waived premiums under this contract.
MISCELLANEOUS PROVISIONS
CHANGES
You may be able to have this benefit changed to a new contract of life
insurance (either with us or with a subsidiary of ours) other than in accordance
with the requirements for exchange that we state above. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the Schedule of Premiums in the
contract data pages. From each premium payment, we make the deductions shown
under Schedule of Deductions from Premium Payments in these pages and the
balance is the invested premium amount which is added to the contract fund.
Benefit premiums and monthly charges stop on the contract anniversary at the end
of the term period for this benefit.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is included in the Schedule of
Monthly Deductions from the contract fund.
AL 188 D
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<PAGE>
TERMINATION
This benefit will end on the earliest of:
1. the end of its term period;
2. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
3. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is
changed;
4. the date the contract is surrendered under its Cash Value Option, if it
has one; and
5. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, we will cancel the
benefit as of the first monthly date on or after we receive your request.
Contract premiums and monthly charges due then and later will be reduced
accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ SPECIMEN
-------------------------------
Secretary
AL 188 D
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EXHIBIT 1.A.(13)(ii)
RIDER FOR TERM INSURANCE BENEFIT ON LIFE OF
INSURED--DECREASING AMOUNT
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
We will pay an amount under this benefit if we receive due proof that the
Insured died: (1) in the term period for the benefit: and (2) while this
contract is in force and not in default beyond the last day of the grace period.
Any proceeds under this contract that may arise from the Insured's death will
include this amount. But our payment is subject to all the provisions of the
benefit and of the rest of this contract.
We show the initial Amount of Term Insurance under this benefit on the
contract data pages. We also show the term period for the benefit there. It
starts on the contract date, which we show on the first page. The anniversary at
the end of the term period is part of that period.
AMOUNTS PAYABLE
The amount we will pay depends on when death occurs. In the Table of
Amounts of Insurance on the contract data pages we show the amount we will pay
if death occurs in a given contract year.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT
You may be able to exchange this benefit for a new contract of life
insurance on the Insured's life. You will not have to prove that the Insured is
insurable. When we use the phrase new contract in this provision, we mean the
contract for which this benefit may be exchanged.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
The amount we would have paid under this benefit if the Insured had died just
before the contract date of the new contract must be large enough to meet the
minimum for a new contract, as we describe under Contract Specifications. (2)
You must ask for the exchange in writing and in a form that meets our needs. (3)
You must send this contract to us to be endorsed. (4) We must have your request
and the contract at our Home Office while the benefit is in force and at least
five years before the end of its term period.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1) the insurance under the
new contract took effect on its contract date: and (2) this benefit ended just
before that contract date.
PREMIUM CREDIT
If your request for a new contract is received at our Home Office before
the fifth anniversary of this contract, we will allow a credit on each premium
that is due or scheduled for payment during the first year of the new contract.
If, as of the date of the new contract, this contract has been in force for at
least one year, the credit will be equal to 10% of the premium for the new
contract, excluding any premium or charge for an extra risk. If, as of the date
of the new contract, this contract has been in force for less than one year, the
credit will equal to the credit determined in the preceding sentence, multiplied
by the number of months for which this contract has been in force, divided by
twelve. We will apply the credit to each due or scheduled first-year premium on
the date we receive payment of the balance of that premium.
Example: You might request an exchange during the third year of this
contract. Let us assume that premiums due or scheduled under the new contract
resulting from the exchange would be $100 monthly (with no premium or charge
for an extra risk). We would apply a credit of $10 on each date on which we
receive payment of a least $90 for a monthly premium that is due or scheduled
for payment during the first year of the new contract. If you requested this
exchange after this contract had been in force for only 6 months, we would apply
a credit of $5 ($10 multiplied by 6, divided by 12) on each date on which we
receive payment of $95 for a monthly premium that is due or scheduled during the
first year of the new contract.
AL 130E
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<PAGE>
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be less than five years before the end of the term period for the benefit. And
it may not be more than 31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accordance with our
regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract: or (2) one that
insures anyone in addition to the Insured: or (3) one that includes or provides
for term insurance other than extended insurance: or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium: or (5) one with supplementary benefits other than the benefit to which
we refer later in these paragraphs.
Its face amount will be the amount you ask for in your request. But except
as we state below, that amount must be an amount we would regularly issue for
the plan you choose. And it cannot be less than $10,000 or more than 80% of an
amount we would have paid under this benefit if the Insured had died just before
the contract date of the new contract. (Since $10,000 is 80% of $12,500, the
amount we would have paid must be at least $12,500 for an exchange to be
possible.) The face amount you want might be less than the smallest amount we
would regularly issue on the plan you wish. In that case we will issue a new
contract for as low as $10,000 on the Life Paid Up at Age 85 plan if you ask us
to do so.
If (1) the new contract is either on the Life Paid Up at Age 85 plan or has
a premium period at least as long as for that plan, (2) this contract has a
benefit for waiving or paying premiums in the event of disability, and (3) we
would include that kind of benefit in other contracts like the new contract, we
will put that kind of benefit in the new contract. The benefit, if any, in the
new contract will be the same one, with the same provisions, that we put in
other contracts like it on its contract date. In this paragraph, when we refer
to other contracts, we mean contracts we would regularly issue on the same plan
as the new contract and for the same rating class, amount, issue age and sex.
We will not deny a benefit for waiving or paying premiums that we would
have allowed under this contract, and that we would otherwise allow under the
new contract, just because disability started before the contract date of the
new contract. But any premium to be waived or paid for that disability under the
new contract must be at the frequency that was in effect for this contract when
the disability started.
We will not waive or pay any premium under a new contract unless it has a
benefit for waiving or paying premiums in the event of disability. This will be
so even if we have waived or paid premiums under this contract.
CHANGES
You may be able to have this benefit changed to a new contract of life
insurance (either with us or with a subsidiary of ours) other than in accord
with the requirements for exchange that we state above. But any change may be
made only if we consent, and will be subject to conditions and charges that are
then determined.
AL 130E
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<PAGE>
MISCELLANEOUS PROVISIONS
BENEFIT PREMIUMS AND CHARGES
We show the premiums for this benefit in the contract data pages. From each
premium payment, we make the deductions as shown in these pages and the balance
is the invested premium amount which is added to the contract fund.
The monthly charge for this benefit is deducted on each monthly date from
the contract fund. The amount of that charge is also shown on the contract data
pages.
Benefit premiums and monthly charges stop on the contract anniversary at
the end of the tern period for this benefit.
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the last day before the contract date of any other contract
(a) for which the benefit is exchanged, or (b) to which the benefit is
changed;
3. the date the contract is surrendered under its Cash Value Option, if it
has one; and
4. the date the contract ends for any other reason.
Further, if you ask us in writing in the premium period, we will cancel the
benefit as of the first monthly date on or after we receive your request.
Contract premiums and monthly charges due then and later will be reduced
accordingly.
This Supplementary Benefit rider attached to this contract on the Contract
Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
---------------------------
Secretary
AL 130E
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EXHIBIT 1.A.(13)(jj)
RIDER FOR A LEVEL PREMIUM OPTION
This is a modified premium contract. On the contract change date (see
Contract Change Date) the basic premium may increase to an amount no greater
than that shown in the Schedule of Premiums in the contract data pages. This
rider describes a level premium option which guarantees the basic level premium
(excluding additional premiums for any supplementary benefits) will not change
on the contract change date. But this is subject to all the provisions of this
rider and of the rest of the contract.
BASIC LEVEL PREMIUMS
We show the amount and frequency of the basic level premium in the Optional
Schedule Of Level Premiums included in this rider. An increase or decrease in
the face amount will change the basic level premiums.
SCHEDULED LEVEL PREMIUMS
The scheduled level premiums are equal to the basic level premiums plus the
charge for applicable taxes. The scheduled level premiums will change if the
basic level premiums change or the charge for applicable taxes change. We show
the amount of the first scheduled level premium in the level premium schedule.
The scheduled level premium is the minimum premium required, at the
frequency chosen, to continue the contract in full force and to guarantee the
basic premium will not increase on the contract change date. This assumes you
pay all level scheduled premiums when due, you make no withdrawals, and any
contract debt does not exceed the cash value.
LEVEL PREMIUM ACCOUNT
On the contract date, the level premium account is equal to the invested
premium amount credited on that date, minus the basic level premium then due,
plus the charge for payment processing. On any other day, the level premium
account is equal to:
1. what it was on the prior day; plus
2. if the premium account was greater than zero on the prior day, interest
on the excess at 4% a year; minus
3. if the premium account was less than zero on the prior day, interest on
the deficit at 4% a year; plus
4. any invested premium amount credited on that day; minus
5. any basic level premium due on that day less the charge for payment
processing; minus
6. any withdrawals on that day.
On the contract change date, we will look at the level premium account
described above. If the level premium account is zero or greater, we will not
increase the basic premium from the amount shown in the schedule of level basic
premiums. We may charge less. If the level premium account is less than zero, we
will proceed as described under Contract Change Date(s).
If level scheduled premiums that are due are not paid, or if smaller
payments are made, the premium may increase on the contract change date.
Payment of the level scheduled premium is at your option. We will bill you
for the level scheduled premium if you ask us.
ORD 88705-92
II-245
<PAGE>
This rider does not change the guarantees associated with the payment of
scheduled premiums as described under Premium Payment And Reinstatement.
Rider attached to and made a part of this contract on the Contract Date.
The Prudential Insurance Company of America,
By /s/ SPECIMEN
-------------------------
Secretary
ORD 88705-92
II-246
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(kk)
PAYMENT OF UNSCHEDULED PREMIUM BENEFIT
TOTAL DISABILITY BENEFIT
Under this rider we will pay the unscheduled premiums described below into
the contract for you on the scheduled premium due dates while the Insured
remains totally disabled. But this is subject to all the provisions of this
benefit and of the rest of this contract.
DISABILITY DEFINED
When we use the words disability and disabled in this benefit we mean
total disability and totally disabled. Here is how we define them: (1) until the
Insured has stayed disabled for two years, we mean that he or she cannot, due to
sickness or injury, do any of the duties of his or her regular occupation; but
(2) after the Insured has stayed disabled for two years, we mean that he or she
cannot, due to sickness or injury, do any gainful work for which he or she is
reasonably fitted by education, training, or experience.
Except for what we state in the next sentence, we will at no time regard an
Insured as disabled who is doing gainful work for which he or she is reasonably
fitted by education, training, or experience. We will regard an Insured as
disabled, even if working or able to work, if he or she incurs, during a period
in which premiums are eligible to be paid by us as we describe below, one of the
following: (1) permanent and complete blindness of both eyes; or (2) physical
severance of both hands at or above the wrists or both feet at or above
the ankles; or (3) physical severance of one hand at or above the wrist and one
foot at or above the ankle.
CONDITIONS
1. The Insured must become disabled while this contract is in force and not
in default past its days of grace.
2. The Insured must become disabled after the first contract year. If the
Insured's issue age is less than 5, the Insured must become disabled on
or after the first contract anniversary following his or her
5th birthday.
3. The Insured must become disabled before the first contract anniversary
following his or her 65th birthday.
4. The Insured must stay disabled for a period of at least 6 months while
living.
UNSCHEDULED PREMIUMS ELIGIBLE TO BE PAID BY US
If the Insured becomes disabled as described above, we will pay an
unscheduled premium on each scheduled premium due date that occurs while the
Insured remains disabled and prior to the first contract anniversary following
his or her 65th birthday. In determining whether a due date occurs we will use
the scheduled premium frequency in effect when the Insured becomes disabled. The
total amount of unscheduled premiums we will pay in a contract year (the annual
benefit amount) is described below.
The amount of each unscheduled premium we pay will depend on the frequency
with which scheduled premiums are due. If the scheduled premiums are due
annually, each unscheduled premium we pay will equal the benefit amount. If the
scheduled premiums are due other than annually, each unscheduled premium payment
will be correspondingly smaller.
ANNUAL BENEFIT AMOUNT
If the Insured becomes disabled during the first contract year, the annual
benefit amount for that period of disability is zero.
If the Insured becomes disabled during the second contract year, the annual
benefit amount for that period of disability is equal to the smaller of: (1) the
maximum annual benefit amount shown for this benefit in the contract data pages,
and (2) the amount in the premium account (the premium account is described
elsewhere in this contract) at the start of the second contract year.
0RD 88966--93
II-247
<PAGE>
If the Insured becomes disabled after the second contract year, the annual
benefit amount for a period of disability will be the amount determined at the
start of the contract year in which the Insured becomes disabled. It is equal to
the smallest of: (1) the maximum annual benefit amount shown in the contract
data pages, (2) the amount in the premium account divided by the number of whole
years from the contract date, and (3) the annual benefit amount for the
preceding contract year. The benefit amount may decrease only on a contract
anniversary. It will never increase.
If the annual benefit amount determined at the start of the second contract
year is less than $50, we will consider it to be zero. If any subsequent benefit
amount is less than one-half of the benefit amount determined at the start of
the second contract year, we will consider it to be zero.
EXCEPTIONS
We will not pay any unscheduled premiums if the Insured becomes disabled
from: (1) an injury he causes to himself, or she causes to herself, on purpose;
or (2) sickness or injury due to service on or after the contract date in the
armed forces of any country(ies) at war. The word war means declared or
undeclared war and includes resistance to armed aggression.
SUCCESSIVE DISABILITIES
Here is what happens if the Insured becomes disabled (even in the first
contract year), then gets well, and then becomes disabled again. In this case,
we will not apply the six-month period that would otherwise be required by
Condition (4) and will consider the second period of disability to be part of
the first period unless: (1) the Insured has done gainful work, for which he or
she is reasonably fitted, for at least six months between the periods; or (2)
the Insured became disabled the second time from an entirely different cause.
If we do not apply the six-month period required by Condition (4), we also
will not count the days when there was no disability as part of the two year
period when disability means the Insured cannot do any of the duties of his or
her regular occupation.
NOTICE AND PROOF OF CLAIM
Notice and proof of any claim must be given to us, if possible, while the
Insured is living and disabled. We may also require proof at reasonable times
that the Insured is still disabled. After he or she has been disabled for two
years, we will not ask for proof of continued disability more than once a year.
As a part of any proof, we have the right to require that the Insured be
examined at our expense by doctors of our choice.
WHEN WE WILL STOP PAYING ELIGIBLE UNSCHEDULED PREMIUMS
We will stop paying unscheduled premiums that we would otherwise pay if:
(1) we ask for proof that the Insured is disabled and we do not receive it; or
(2) we require that the Insured be examined and he or she fails to do so.
CHARGES
The monthly deduction from the contract fund for this benefit during any
contract year will be the annual benefit amount for that contract year times the
monthly rate. The monthly rate is shown in the contract data pages. Monthly
deductions begin on the first contract anniversary.
ADDITIONAL UNSCHEDULED PREMIUMS DURING DISABILITY
You may make additional unscheduled premium payments as provided in the
Unscheduled Premiums section of the contract even when we are paying unscheduled
premiums under this benefit. These unscheduled premiums will not change the
benefit amount during that period of disability.
REINSTATEMENT OF BENEFIT
If the conditions for reinstating this contract are met, this benefit may
also be reinstated. To reinstate the full benefit, we must be paid an amount
sufficient to restore the premium account to what it would have been had the
contract not lapsed.
ORD 88966--93
II-248
<PAGE>
TERMINATION
This benefit will end on the earliest of:
1. the end of the last day of grace if the contract is in default; it will
not continue if a benefit takes effect under any contract value options
provision that may be in the contract;
2. the end of the day before the first contract anniversary following the
Insured's 65th birthday;
3. the date the contract is surrendered under its Cash Value Option, if it
has one;
4. the contract anniversary on which the annual benefit amount is deemed to
be zero, as described under Annual Benefit Amount; and
5. the date the contract ends for any other reason.
CANCELLATION OF RIDER
If you ask us in writing, we will cancel this rider as of the date of your
request.
RIDER ATTACHED TO AND MADE A PART OF THIS CONTRACT ON THE CONTRACT DATE.
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
---------------------------
Secretary
ORD 88966--93
II-249
- --------------------------------------------------------------------------------
EXHIBIT 1.A.(13)(ll)
RIDER FOR SCHEDULED TERM INSURANCE BENEFIT
ON LIFE OF INSURED
This benefit is a part of this contract only if it is included in the list
of supplementary benefits on the contract data pages.
BENEFIT
If we receive due proof that the Insured died while this rider was in
force, we will include the amount of this benefit in any proceeds under the
contract that may arise from that death. But our payment is subject to all the
provisions of the benefit and of the rest of this contract.
We show the Schedule of Benefit Amounts on the contract data pages.
RIDER PREMIUMS AND CHARGES
We show the premiums for this rider on the contract data pages. From each
premium payment, we make the deductions as shown in these pages and the balance
is the invested premium amount which is added to the contract fund.
The monthly charge for this rider is deducted on each monthly date from the
contract fund. (See the contract data pages.)
REQUESTED CHANGES IN SCHEDULE OF BENEFIT AMOUNTS
You may change the Schedule of Benefit Amounts once each contract year,
while this rider is in force. You may do so subject to the following conditions:
1. You must ask for the change in writing and in a form that meets our
needs.
2. The change must be one permitted by our then current underwriting rules.
3. For an increase, you must give us any facts we need to satisfy us that
the Insured is insurable for the amount of the increase in the rating
class in effect at issue as shown on page 3. We will not approve an
increase if we are paying premiums according to any payment of premiums
benefit that may be included in the contract.
4. You must pay us any required underwriting fee.
5. You must send us the contract to be endorsed.
CONVERSION TO ANOTHER PLAN OF INSURANCE
RIGHT TO CONVERT CONDITIONS
You may be able to exchange all or part of the term insurance under this
Benefit for a new contract of life insurance on the Insured's life. You will not
have to prove that the Insured is insurable. When we use the phrase new contract
in this provision, we mean the contract for which the term insurance may be
exchanged.
CONDITIONS
Your right to make this exchange is subject to all these conditions: (1)
You must ask for the exchange in writing and in a form that meets our needs.
(2) You must send this contract to us to be endorsed. (3) We must have your
request and the contract at our Home Office while this rider is in force and not
later than the second to occur of (a) the fifth contract anniversary; and (b)
the contract anniversary on which the Insured's attained age is 65. (4) This
Benefit amount will be reduced by the exchanged amount of term insurance and
premiums will be reduced accordingly.
The new contract will not take effect unless the premium for it is paid
while the Insured is living and within 31 days after its contract date. If the
premium is paid as we state, it will be deemed that: (1) the insurance under the
new contract took effect on its contract date; and (2) the exchanged amount of
term insurance ended just before that contract date. With respect to the part of
the last premium that was used to pay for the exchanged amount of term
insurance, we will return any of such part that is more than was needed
to pay premiums to the contract date of the new contract.
AL 193
II-250
<PAGE>
CONTRACT DATE
The date of the new contract will be the date you ask for in your request.
But it may not be more than 61 days after the date of your request. It may not
be later than the second to occur of (a) the fifth contract anniversary; and (b)
the one on which the Insured's attained age is 65. And it may not be more than
31 days before we have your request at our Home Office.
CONTRACT SPECIFICATIONS
The new contract will be in the same rating class as this contract. We will
set the issue age and the premiums for the new contract in accordance with our
regular rules in use on its contract date.
The new contract may be on any life or endowment plan we would regularly
issue on its contract date for the same rating class, amount, issue age and sex.
But it cannot be any of these: (1) a single premium contract; (2) one that
insures anyone in addition to the Insured; (3) one that includes or provides for
term insurance other than extended insurance; or (4) one with premiums that
increase after a stated time, if its first premium is less than 80% of any later
premium.
The new contract's face amount will be the amount you ask for in your
request. It must be at least $10,000 and not more than the amount of term
insurance that would have been in force under this Benefit on the contract date
of the new contract if there had been no exchange. The face amount you want
might be less than the smallest amount we would regularly issue on the plan you
wish. In that case we will issue a new contract for as low as $10,000 on the
Life Paid Up at Age 85 plan if you ask us to do so.
The new contract may have supplementary benefits only if you give us any
facts we need to satisfy us that the Insured is insurable for the benefit(s),
and if we consent.
MISCELLANEOUS PROVISIONS
CHANGES
You may be able to have this Benefit changed to a new contract of life
insurance other than in accord with the requirements for exchange that we state
above. But any change may be made only if we consent, and will be subject to
conditions and charges that are then determined.
SUICIDE
The Suicide Exclusion provision of the contract applies to this rider as
issued.
The following statement applies only with respect to any increase
in coverage that results from a request you make in accordance with this rider.
If the Insured, whether sane or insane, dies by suicide within two years from
the date of your application for the increase, we will pay no more than the sum
of the premiums paid for the increase.
TERMINATION
This rider will end on the earliest of:
1. the end of the last year for which a benefit is shown in the Schedule of
Benefit Amounts;
2. the end of the last day before the contract date of any other contract
for which the term insurance under this Benefit is exchanged or changed;
but this applies only if the amount of term insurance left under the
benefit after the exchange or change is less than the minimum allowed by
our rules;
3. the end of the last day of grace if the contract is in default;
4. the date the contract is surrendered under its Cash Value Option, if it
has one; and
5. the date the contract ends for any other reason.
Further, if you ask us in writing, we will cancel the rider as of the last
monthly date on or before the date we receive your request. If we do so, or if
the rider ends as we describe in 2 above, contract premiums and monthly charges
due then and later will be reduced accordingly.
This Supplementary Benefit rider attached to this contract on the Contract Date
The Prudential Insurance Company of America,
By /s/ DOROTHY K. LIGHT
------------------------
Secretary
AL 193
II-251
Exhibit 3
April 25, 1997
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
Gentlemen:
In my capacity as Chief Counsel, Variable Products, Law Department of The
Prudential Insurance Company of America, I have reviewed the establishment on
August 11, 1987 of The Prudential Variable Appreciable Account (the "Account")
by the Finance Committee of the Board of Directors of The Prudential Insurance
Company of America ("Prudential") as a separate account for assets applicable to
certain variable life insurance contracts, pursuant to the provisions of Section
17B:28-7 of the Revised Statutes of New Jersey. I am responsible for oversight
of the preparation and review of the Registration Statements on Form S-6, as
amended, filed by Prudential with the Securities and Exchange Commission
(Registration No. 33-20000, Registration No. 33-25372 and Registration No.
33-61079) under the Securities Act of 1933 for the registration of certain
variable appreciable life insurance contracts issued with respect to the
Account.
I am of the following opinion:
1. Prudential is a corporation duly organized under the laws of the State
of New Jersey and is a validly existing corporation.
2. The Account has been duly created and is validly existing as a
separate account pursuant to the aforesaid provisions of New Jersey
law.
3. The portion of the assets held in the Account equal to the reserve and
other liabilities for variable benefits under the variable appreciable
life insurance contracts is not chargeable with liabilities arising
out of any other business Prudential may conduct.
4. The variable appreciable life insurance contracts are legal and
binding obligations of Prudential, in accordance with their terms.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as I judged to be necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/
- -----------------------------
Clifford E. Kirsch
II-252
Exhibit 6
April 25, 1997
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
Prudential Plaza
Newark, New Jersey 07102-3777
To Prudential:
This opinion is furnished in connection with the registration by The Prudential
Insurance Company of America of variable appreciable life insurance contracts
("Contracts") under the Securities Act of 1933. The prospectus included in
Post-Effective Amendment No.19 to the Registration Statement No. 33- 20000 on
Form S-6 describes the Contracts. I have reviewed the two Contract forms and I
have participated in the preparation and review of the Registration Statement
and Exhibits thereto. In my opinion:
(1) The illustrations of cash surrender values and death benefits included
in the section of the prospectus entitled "Hypothetical Illustrations
of Death Benefits and Cash Surrender Values", based on the assumptions
stated in the illustrations, are consistent with the provisions of the
respective forms of the Contracts. The rate structure of the Contracts
has not been designed so as to make the relationship between premiums
and benefits, as shown in the illustrations, appear more favorable to
a prospective purchaser of a Contract issued on a male age 35, than to
prospective purchasers of Contracts on males of other ages or on
females.
(2) The illustrations of the effect of a Contract loan on the cash
surrender value included in the section of the prospectus entitled
"Contract Loans", based on the assumptions stated in the illustration,
is consistent with the provisions of the Form A Contract.
(3) The deduction in an amount equal to 1.25% of each premium is a
reasonable charge in relation to the additional income tax burden
imposed upon The Prudential Insurance Company of America as the result
of the enactment of Section 848 of the Internal Revenue Code. In
reaching that conclusion a number of factors were taken into account
that, in my opinion, were appropriate and which resulted in a
projected after-tax rate of return that is a reasonable rate to use in
discounting the tax benefit of the deductions allowed in Section 848
in taxable years subsequent to the year in which the premiums are
received.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to my name under the heading "Experts" in the
prospectus.
Very truly yours,
/s/
- ---------------------------------
Pam A. Schiz, FSA, MAAA
Actuarial Director
The Prudential Insurance
Company of America
II-253
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