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Supplement dated January 31, 1997
to the Prospectus Dated April 1, 199 6 for
Lincoln National Variable Annuity Account H
American Legacy II Variable Annuity Contract
Lincoln National Life Insurance Company ("Lincoln Life") is offering an enhanced
guaranteed minimum death benefit ("EGMDB") with the American Legacy II variable
annuity contract (the "Contract") described in the attached prospectus. The
EGMDB, which is not yet available in all states, is available only for Non-
Qualified Contracts and Contracts sold as Individual Retirement Annuities (IRA)
under IRS Code Section 408. The EGMDB is an alternative to the guaranteed
minimum death benefit ("GMDB") described in the prospectus under the heading
"Death benefit before the annuity commencement date." Under the EGMDB, if the
annuitant dies before the annuity commencement date the death benefit payable is
the amount equal to the greater of: (1) Contract value as of the day on which
Lincoln Life approves the payment of the claim; or (2) the highest Contract
value which the Contract attains on any policy anniversary date between the time
the EGMDB takes effect and the annuitant's age 75, as adjusted for any purchase
payments, withdrawals, or partial annuitizations made, or premium taxes deducted
after the date of the highest Contract value.
There is a daily charge for the EGMDB for so long as your election remains in
effect. This charge is at the annual rate of 0.15% of net asset value in
Variable Annuity Account H ("VAA"). THIS CHARGE IS IN ADDITION TO the charges
described in the Prospectus under the heading "Charges and other deductions" and
in the synopsis under the question "What charges are associated with this
contract?" See the Expense Table below for Contracts with the EGMDB for more
information.
Election Procedures. If you purchase a Contract after January 1, 1997 you can
elect the EGMDB only at the time of purchase by completing the EGMDB election
form provided by Lincoln Life. The benefit will take effect as of the time of
fund valuation on the next policy anniversary date following the election of
this benefit, and we will begin deducting the charge for the EGMDB as of that
date. If this benefit is selected on the policy anniversary date or at time of
application, the EGMDB takes effect at the time of fund valuation on that date.
If you elect the EGMDB, you may discontinue the benefit at any time by sending a
written request to Lincoln Life. The benefit will be discontinued effective at
the time of fund valuation on the next policy anniversary date after we receive
the request, and we will cease deducting the charge for the benefit as of that
date. If the benefit is discontinued on the policy anniversary date, the benefit
and the charge will terminate at the time of fund valuation on that date. If you
discontinue the benefit, it cannot be reinstated. If you do not elect the EGMDB
or you discontinue the benefit after electing it, the GMDB described in the
prospectus under the heading "Death benefit before the annuity commencement
date" will apply instead and will determine what death benefit is payable.
If you purchased a Contract prior to January 1, 1997, you can elect the EGMDB
during a limited period ending six months after the benefit is approved in your
state or ending December 31, 1997, whichever is later. Please see your
registered sales representative for assistance.
Expense Table for Contracts with the EGMDB. The prospectus includes an Expense
Table which shows the fees and charges applicable to a Contract without the
EGMDB. The same fees
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and charges apply to a Contract with the EGMDB, except that an additional charge
is deducted from VAA for this benefit. The annual expenses for VAA for a
Contract with the EGMDB are restated below to show all applicable VAA charges
and expenses:
Variable Annuity Account H annual expenses for EGMDB:
(As a percentage of average account value for each subaccount):
For each subaccount*
Mortality and expense risk fees 1.25%
EGMDB charge 0.15%
Account fees and expenses 0.10%
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Total VAA annual expenses 1.50%
*The VAA is divided into eight separately-named subaccounts, each of which, in
turn, invests purchase payments in its respective fund.
Please see the Expense Table in the attached prospectus for a discussion of
other Contract fees and charges, as well as fees and expenses for the eight
funds underlying VAA.
Examples. The following examples show fees and expenses for a Contract WITH THE
EGMDB, reflecting the expenses both of the VAA and of the eight funds shown in
the Expense Table in the prospectus.
If you purchase a Contract WITH THE EGMDB and surrender your Contract at the end
of the applicable time period, you would pay the following expenses* on a $1,000
investment, assuming a 5% annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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1. Growth $ 80 $ 112 $ 137 $ 231
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2. International 83 122 153 263
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3. Growth-Income 80 112 136 229
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4. Asset Allocation 81 114 139 235
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5. High-Yield Bond 81 114 140 236
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6. Bond Fund** 82 117 145 247
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7. U.S. Govt./AAA-Rated
Securities 81 114 140 236
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8. Cash Management 80 112 137 231
If you purchase a Contract WITH THE EGMDB and do not surrender your contract,
you would pay the following expenses* on a $1,000 investment, assuming a 5%
annual return:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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1. Growth $ 20 $ 62 $ 107 $ 231
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2. International 23 72 123 263
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<TABLE>
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<S> <C> <C> <C> <C>
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3. Growth-Income 20 62 106 229
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4. Asset Allocation 21 64 109 235
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5. High-Yield Bond 21 64 110 236
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6. Bond Fund** 22 67 115 247
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7. U.S. Govt./AAA-Rated
Securities 21 64 110 236
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8. Cash Management 20 62 107 231
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* These expenses, calculated as mandated by the SEC, reflect the annual
Contract fee as the ratio of the total Contract fees collected in the most
recent fiscal year to the total average net assets of the account.
** These expenses are estimated amounts for the fiscal year ended November 30,
1996.
These examples are provided to assist you in understanding the various costs and
expenses that you will bear directly or indirectly IF YOU ELECT THE EGMDB. Part
of the data used to produce the figures in the examples was supplied by the
underlying portfolio company (Series) through the VAA's principal underwriter,
American Funds Distributors, Inc. We have not independently verified this
information. For more complete descriptions of the various costs and expenses
involved, see Charges and other deductions in this Prospectus, and Fund
Organization and Management in the Prospectus for the Series. Premium taxes may
also be applicable, although they do not appear in the table. The examples
should not be considered a representation of past or future expenses. Actual
expenses may be more or less than those shown. The examples are unaudited.
Commissions. The following sentence is added to the section of the prospectus
titled "Commissions":
From time to time, additional incentives (up to 0.05% annually of the
variable account value while the EGMDB is in effect) may be provided to
dealers maintaining certain sales volume levels. These incentives are not
deducted from purchase payments or contract value; they are paid by Lincoln
Life.
Please see the attached prospectus for more information about the Contract.
