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As Filed with the Securities and Exchange Commission on March 1, 1999
Registration No. 33-77322
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
POST-EFFECTIVE AMENDMENT NO. 5
SECURITY VARILIFE SEPARATE ACCOUNT
(SECURITY ELITE BENEFIT)
(Exact Name of Registrant)
SECURITY BENEFIT LIFE INSURANCE COMPANY
(Name of Depositor)
700 SW Harrison Street
Topeka, Kansas 66636-0001
(Address of Depositor's Principal Executive Office)
Copies to:
Amy J. Lee Jeffrey S. Puretz
Associate General Counsel Dechert Price & Rhoads
Security Benefit Group Building 1775 Eye Street, N.W.
700 SW Harrison Street Washington, D.C. 20006
Topeka, Kansas 66636-0001
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on April 30, 1999 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a) (1)
[X] on April 30, 1999 pursuant to paragraph (a) (1) of Rule 485
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Filing Fee: None
Title of Securities Being Registered: Interests in a separate account under
individual flexible premium variable life insurance policies.
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SECURITY ELITE BENEFIT
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
ISSUED BY SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON STREET
TOPEKA, KANSAS 66636-0001
1-800-888-2461
This Prospectus describes Security Elite Benefit, a flexible premium
variable life insurance policy ("the "Policy," or "the "Policies") offered by
Security Benefit Life Insurance Company ("Security Benefit"). As long as the
Policy remains in force, it provides lifetime insurance protection on the
Insured named in the Policy through the Maturity Date. The Policy provides
maximum flexibility in connection with premium payments and death benefits by
permitting you, subject to certain restrictions, to vary the frequency and
amount of premium payments and to increase or decrease the death benefit payable
under the Policy. This flexibility allows you to provide for changing insurance
needs under a single insurance policy. You may surrender the Policy for its Net
Cash Surrender Value.
You may allocate net premium payments to one or more of the Variable
Accounts that comprise a separate account of Security Benefit called the
Security Varilife Separate Account), or to the Fixed Account of Security
Benefit. Any portion of a net premium allocated to one or more of the Variable
Accounts is invested in the corresponding Series of the SBL Fund. The Variable
Accounts and the corresponding Series of the Fund available under the policy are
listed below:
* Growth (Series A) * Global Aggressive
Bond (Series K)
* Growth-Income (Series B) * Specialized Asset
Allocation (Series M)
* Money Market (Series C) * Managed Asset
Allocation (Series N)
* Worldwide Equity * Equity Income
(Series D) (Series O)
* High Grade Income * Social Awareness
(Series E) (Series S)
* Mid Cap (Series J)
Amounts that you allocate to the Variable Accounts WILL VARY BASED UPON THE
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS TO WHICH THE ACCUMULATED VALUE
IS ALLOCATED. No minimum amount of Accumulated Value is guaranteed.
Amounts that you allocate to the Fixed Account will accrue interest at rates
declared by Security Benefit.
You may choose from two death benefit options.Under Option A, the death
benefit remains fixed at the Specified Amount that you select (or, if greater,
it equals Accumulated Value multiplied by a certain percentage). Under Option B,
the death benefit equals the Specified Amount that you select plus Accumulated
Value (or, if greater, Accumulated Value multiplied by a certain percentage).
Under Option B, if you allocate Accumulated Value to the Variable Accounts the
death benefit will vary daily with the investment performance of the Variable
Accounts. Under either option, for so long as the Policy remains in force, the
death benefit will never be less than the current Specified Amount.
You may return the Policy according to the terms of its Free-Look Right (see
"Right to Examine a Policy -- Free-Look Right," page 19). During the Free-Look
Right, net premium payments allocated to the Separate Account will be invested
in the Money Market Variable Account.
It may not be advantageous to replace existing insurance with the Policy.
This Prospectus generally describes only the portion of the Policy involving
the Variable Accounts. For a brief summary of the Fixed Account, see "The Fixed
Account," page 26.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THE PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE SBL FUND. YOU
SHOULD READ THE PROSPECTUS CAREFULLY AND RETAIN THEM FOR FUTURE REFERENCE.
THE POLICY INVOLVES RISK, INCLUDING LOSS OF PRINCIPAL AND IS NOT A DEPOSIT OR
OBLIGATION OF, OR GUARANTEED OR ENDORSED BY, ANY BANK. THE POLICY IS NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
PROSPECTUS DATED MAY 1, 1999
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TABLE OF CONTENTS
Page
IMPORTANT TERMS................................................ 5
SUMMARY OF THE POLICY.......................................... 6
Purpose of the Policy..................................... 7
Policy Values............................................. 7
The Death Benefit......................................... 7
Premium Features.......................................... 7
Allocation Options........................................ 7
Transfer of Accumulated Value............................. 8
Policy Loans.............................................. 8
Free-Look Right........................................... 8
Surrender Right........................................... 8
Partial Withdrawal Benefits............................... 8
Charges and Deductions.................................... 8
Premium Tax........................................... 8
Deductions from Accumulated Value..................... 8
Deductions from the Variable Accounts................. 8
Tax Treatment of Policy............................... 9
The Fixed Account......................................... 9
Contacting Security Benefit............................... 9
INFORMATION ABOUT SECURITY BENEFIT AND THE SEPARATE ACCOUNT.... 9
Security Benefit Life Insurance Company................... 9
Year 2000 Compliance...................................... 9
Security Varilife Separate Account........................ 10
SBL Fund.................................................. 10
Series A.................................................. 11
Series B.................................................. 11
Series C.................................................. 11
Series D.................................................. 11
Series E.................................................. 11
Series J.................................................. 11
Series K.................................................. 11
Series M.................................................. 11
Series N.................................................. 11
Series O.................................................. 11
Series S.................................................. 11
The Investment Adviser.................................... 11
THE POLICY..................................................... 11
Application for a Policy.................................. 11
Premiums.................................................. 12
Guaranteed Death Benefit Premium.......................... 13
Allocation of Net Premiums................................ 13
Dollar Cost Averaging Option.............................. 13
Asset Reallocation Option................................. 14
Transfer of Accumulated Value............................. 14
Death Benefit............................................. 15
Option A.............................................. 15
Option B.............................................. 15
Examples of Options A and B........................... 15
Changes in Death Benefit Option........................... 15
Changes in Specified Amount............................... 16
Increases............................................. 16
Decreases............................................. 16
Policy Values............................................. 16
Accumulated Value..................................... 16
Net Cash Surrender Value.............................. 17
Determination of Accumulated Value........................ 17
Policy Loans.............................................. 17
Benefits at Maturity...................................... 18
Surrender................................................. 18
Partial Withdrawal Benefits............................... 18
Right to Examine a Policy--Free-Look Right................ 19
Lapse..................................................... 19
Reinstatement............................................. 19
CHARGES AND DEDUCTIONS......................................... 19
Premium Tax............................................... 19
State and Local Premium Tax Charge.................... 20
Deductions from Accumulated Value......................... 20
Cost of Insurance..................................... 20
Optional Insurance Benefits Charges................... 20
Deductions from the Variable Accounts..................... 20
Administrative Charge................................. 20
Mortality and Expense Risk Charge..................... 20
Other Charges............................................. 20
Guarantee of Certain Charges.............................. 21
OTHER INFORMATION.............................................. 21
Federal Income Tax Considerations......................... 21
Diversification Requirements.......................... 21
Tax Treatment of Policies............................. 22
Conventional Life Insurance Policies.................. 22
Modified Endowment Contracts.......................... 22
Reasonableness Requirement for Charges................ 23
Accelerated Benefit for Terminal Illness.............. 23
Other................................................. 23
Charge for Security Benefit Income Taxes.................. 24
Voting of Fund Shares..................................... 24
Disregard of Voting Instructions.......................... 24
Report to Owners.......................................... 24
Substitution of Investments............................... 24
Changes to Comply With Law................................ 25
PERFORMANCE INFORMATION........................................ 25
THE FIXED ACCOUNT.............................................. 26
General Description....................................... 26
Death Benefit............................................. 26
Policy Charges............................................ 26
Transfers, Surrenders, Withdrawals, and Policy Loans...... 26
MORE ABOUT THE POLICY.......................................... 27
Ownership................................................. 27
Joint Owners.......................................... 27
Beneficiary............................................... 27
Exchange of Insured....................................... 27
Exchange of Policy During First 24 Months................. 27
The Contract.............................................. 27
Payments.................................................. 27
Assignment................................................ 28
Errors on the Application................................. 28
Incontestability.......................................... 28
Payment in Case of Suicide................................ 28
Participating............................................. 28
Policy Illustrations...................................... 28
Payment Plan.............................................. 28
Optional Insurance Benefits............................... 29
Waiver of Monthly Deduction Rider..................... 29
Accelerated Benefit Rider for Terminal Illness........ 29
Level Term Insurance Rider............................ 29
Extended Guaranteed Death Benefit Rider............... 29
Distribution of the Policy................................ 29
MORE ABOUT SECURITY BENEFIT.................................... 30
Management................................................ 30
State Regulation.......................................... 31
Telephone Transfer Privileges............................. 32
Legal Proceedings......................................... 32
Legal Matters............................................. 32
Registration Statement.................................... 32
Experts................................................... 32
Financial Statements...................................... 32
APPENDIX ...................................................... 59
ILLUSTRATIONS.................................................. 60
THIS IS A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY. ITS PURPOSE IS TO
PROVIDE INSURANCE PROTECTION FOR THE BENEFICIARY NAMED IN THE POLICY. THIS
POLICY IS NOT IN ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN
OF A MUTUAL FUND.
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You may not be able to purchase the Policy in your state. You should not
consider this Prospectus to be an offering if the Policy may not be lawfully
offered in your state. You should only rely upon information contained in this
Prospectus or that we have referred you to. We have not authorized anyone to
provide you with information that is different.
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IMPORTANT TERMS
ACCUMULATED VALUE -- The total value of the amounts in the Variable Accounts of
the Separate Account and the Fixed Account for the Policy as well as any amount
set aside in the Loan Account to secure Policy Debt as of any Valuation Date.
AGE -- The Insured's age as of his or her last birthday as of the Policy Date,
increased by the number of complete Policy Years elapsed.
BENEFICIARY -- The person or persons you named in the application or later
designated to receive the death benefit proceeds upon the death of the Insured.
EXTENDED GUARANTEED DEATH BENEFIT RIDER -- A Planned Periodic Premium in an
amount specified by Security Benefit which if paid in advance on at least a
monthly basis will keep the Policy in force beyond the first five Policy Years
even if Net Cash Surrender Value is insufficient to cover the monthly deduction
on any Monthly Payment Date. The length of the Extended Guaranteed Death Benefit
Period will vary according to the Age of the Insured on the Policy Date. At all
times during the Extended Guaranteed Death Benefit Period, the amount of
premiums you have paid on the Policy less any outstanding Policy Debt and any
Partial Withdrawals must be greater than or equal to the monthly pro rata share
of the Extended Guaranteed Death Benefit Premium multiplied by the number of
Policy Months the Policy has been in force. The Extended Guaranteed Death
Benefit Rider is an optional insurance benefit that you may elect to add to the
Policy by rider. See "Optional Insurance Benefits," page 29. This premium is not
applied to purchase the Rider, but is applied to the Policy and may be the same
as the Planned Periodic Premium.
FIXED ACCOUNT -- An account that is part of Security Benefit's General Account
to which you may allocate all or a portion of net premium payments for
accumulation at a fixed rate of interest (which may not be less than 4.0%)
declared by Security Benefit.
GENERAL ACCOUNT -- All assets of Security Benefit other than those allocated to
the Separate Account or to any other separate account of Security Benefit.
GUARANTEED DEATH BENEFIT PREMIUM -- A Planned Periodic Premium in an amount
specified by Security Benefit which if paid in advance on at least a monthly
basis will keep the Policy in force during the first five Policy Years even if
during that period Net Cash Surrender Value is insufficient to cover the monthly
deduction on any Monthly Payment Date. At all times during the first five Policy
Years, the amount of premiums you have paid on the Policy, less any outstanding
Policy Debt and any Partial Withdrawals, must be greater than or equal to the
monthly pro rata share of the Guaranteed Death Benefit Premium multiplied by the
number of Policy months the Policy has been in force.
HOME OFFICE -- The SEB Administration Department at Security Benefit's office,
700 SW Harrison Street, Topeka, Kansas 66636-0001.
INSURED -- The person upon whose life the Policy is issued and whose death is
the contingency upon which the death benefit proceeds are payable.
LOAN ACCOUNT -- An account to which amounts are transferred from the Variable
Accounts and the Fixed Account as collateral for Policy loans.
MATURITY DATE -- The Policy Anniversary on which the Insured is Age 95.
MONTHLY PAYMENT DATE -- The day each month on which the monthly deduction is due
against the Accumulated Value. The first Monthly Payment Date is the Policy
Date.
NET CASH SURRENDER VALUE -- Accumulated Value less Policy Debt.
PLANNED PERIODIC PREMIUM -- The premium determined by the Policyowner as a level
amount planned to be paid at fixed intervals over a specified period of time.
POLICY DATE -- The date used to determine the Monthly Payment Date, Policy
Months, Policy Years, and Policy Monthly, Quarterly, Semiannual, and Annual
Anniversaries. It is usually the date the initial premium is received at
Security Benefit's Home Office.
POLICY DEBT -- The unpaid loan balance including accrued loan interest.
POLICYOWNER OR OWNER -- The person who owns the Policy. The Policyowner will be
the Insured unless otherwise stated in the application. If the Policy has been
absolutely assigned, the assignee becomes the Owner. A collateral assignee is
not the Owner.
SPECIFIED AMOUNT -- The amount chosen by the Owner on which the initial death
benefit is based. The Specified Amount may be increased or decreased under
certain circumstances.
VALUATION DATE -- Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
VALUATION PERIOD -- The period that starts at the close of a Valuation Date and
ends at the close of the next succeeding Valuation Date.
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SUMMARY OF THE POLICY
This summary provides a brief overview of the more significant aspects of the
Policy. Further detail is provided in this Prospectus and in the Policy. Unless
the context indicates otherwise, the discussion in this summary and the
remainder of the Prospectus relates to the portion of the Policy involving the
Separate Account. The Fixed Account is briefly described under "The Fixed
Account," page 26 and in the Policy.
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DIAGRAM OF POLICY
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PREMIUM PAYMENTS
* You can vary amount and frequency.
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[ARROW POINTING DOWN]
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DEDUCTIONS FROM PREMIUMS
* Premium Tax based upon the actual rate in the state of residence.
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[ARROW POINTING DOWN]
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NET PREMIUM
*You direct how net premium payments are to be allocated among the Fixed Account
and the Variable Accounts. Each of the Variable Accounts invests exclusively in
a Series of SBL Fund, which Series offer investments in diversified portfolios
of stocks, bonds, money market instruments, a combination of these securities
or in securities of foreign issuers. (See page 10.)
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DEDUCTIONS FROM ASSETS
*The monthly deduction for cost of insurance and cost of any riders is deducted
from a Policy's Accumulated Value.
*A daily charge at an annual rate of 0.90% is deducted from the Variable
Accounts for mortality and expense risks. A daily charge at the annual rate of
0.35% is deducted from the Variable Accounts for administration and maintenance
of the Policies. These charges are not deducted from Fixed Account assets. (See
page 20.)
*Investment advisory fees and other fund expenses are deducted from the Series
of SBL Fund. (See page 20.)
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[LEFT, CENTER AND RIGHT ARROW POINTING DOWN]
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LIVING BENEFITS
*Within the first 24 months after the Policy Date, subject to certain
restrictions, the policyowner may exchange the policy issued and made available
for exchange by Security Benefit
*The policy may be surrendered at any time for its Net Cash Surrender Value with
no surrender charge. (See page 18).
*Partial withdrawals are available on and after the first Policy Anniversary
(subject to certain restrictions). The death benefit will be reduced by at
least the amount of the partial withdrawal. (See page 18.)
*Up to six free transfers may be made each year among the Variable Accounts.
(See page 14.)
*Accelerated payment of up to 50% of the Specified Amount (subject to a maximum
benefit of the lesser of $250,000 or 50% of the Specified Amount less any
policy debt) is available under certain conditions to insureds suffering from
terminal illness. (See page 29.)
RETIREMENT BENEFITS
*For loans outstanding during Policy Years one through ten, the net loan
interest rate is 2%. For loans outstanding after the first ten Policy Years,
the net loan interest rate is currently 0%. (See page 17.)
*Payments may be taken under one or more of five different payment options. (See
page 28.)
DEATH BENEFITS
*Level Term Insurance Rider providing additional death benefit coverage for
family members and/or business associates is available. (See page 29.)
*Available as lump sum or under the five payment methods available as retirement
benefits. (See page 28.)
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PURPOSE OF THE POLICY
The Policy offers you insurance protection on the life of the Insured
through the Maturity Date as long as the Policy is in force. Like traditional
fixed life insurance, the Policy provides for a death benefit equal to its
Specified Amount, accumulation of cash value, and surrender and loan privileges.
Unlike traditional fixed life insurance, the Policy offers a choice of
allocation alternatives and an opportunity for the Policy's Accumulated Value
and, if elected by the Policyowner and under certain circumstances, its death
benefit to grow based on investment results. The Policy is a flexible premium
policy, so that, unlike many other insurance policies and subject to certain
limitations, you may choose the amount and frequency of premium payments.
POLICY VALUES
You may allocate net premium payments among the various Variable Accounts or
to the Fixed Account.
Depending on the investment experience of the selected Variable Accounts,
the Accumulated Value may increase or decrease on any day. The death benefit may
or may not increase or decrease depending upon several factors, including the
death benefit option selected by you, although the death benefit will never
decrease below the Specified Amount provided the Policy is in force. There is no
guarantee that the Policy's Accumulated Value and death benefit will increase.
You bear the investment risk on that portion of the net premiums and Accumulated
Value allocated to the Separate Account.
The Policy will remain in force until the earliest of the Maturity Date, the
death of the Insured, or a full surrender of the Policy, unless, before any of
these events, Net Cash Surrender Value is insufficient to pay the current
monthly deduction on a Monthly Payment Date and a Grace Period expires without
sufficient additional premium payment or loan repayment by the Policyowner. A
Policy will not lapse, however, during the first five Policy Years if the
Guaranteed Death Benefit Premium is in effect, or for a period of 10 to 30
Policy Years (depending on the Age of the Insured on the Policy Date) after the
first five Policy Years if the Extended Guaranteed Death Benefit Rider is in
force.
THE DEATH BENEFIT
You may elect one of two Options to calculate the amount of death benefit
payable under the Policy. Under Option A, the death benefit will be equal to the
Specified Amount of the Policy or, if greater, Accumulated Value multiplied by a
death benefit percentage. Under Option B, the death benefit will be equal to the
Specified Amount of the Policy plus the Accumulated Value (determined as of the
date of the Insured's death) or, if greater, Accumulated Value multiplied by a
death benefit percentage. You should choose Option A if you are seeking to have
favorable investment performance reflected in increasing Accumulated Value. You
should choose Option B if you are seeking favorable investment performance
reflected in increasing insurance coverage. You may change the death benefit
option subject to certain conditions. See "Death Benefit" and "Changes in Death
Benefit Option," pages 15 and 15.
PREMIUM FEATURES
Security Benefit requires you to pay an initial premium equal to at least
1/12 of Guaranteed Death Benefit Premium for the first Policy Year. Thereafter,
subject to certain limitations, you may choose the amount and frequency of
premium payments. The Policy, therefore, provides you with the flexibility to
vary premium payments to reflect varying financial conditions.
When applying for a Policy, you will determine a Planned Periodic Premium
that provides for the payment of level premiums over a specified period of time.
You may pay additional premiums monthly under a Secur-O-Matic plan. Under a
Secur-O-Matic plan you authorize Security Benefit to withdraw premiums from your
checking account on the 7th, 14th, 21st or 28th of each month. The minimum
initial premium required must be paid before Security Benefit will accept a
Secur-O-Matic plan.
The amount, frequency, and period of time over which a Policyowner pays
premiums may affect whether or not the Policy will be classified as a Modified
Endowment Contract, which is a type of life insurance contract subject to
different tax treatment for certain pre-death distributions. For more
information on the tax treatment of life insurance contracts, including those
classified as Modified Endowment Contracts, see "Federal Income Tax
Considerations," page 21.
Payment of the Planned Periodic Premiums will not guarantee that a Policy
will remain in force. Instead, the duration of the Policy depends upon the
Policy's Accumulated Value. Even if Planned Periodic Premiums are paid, the
Policy will lapse any time Accumulated Value less Policy Debt is insufficient to
pay the current monthly deduction and a Grace Period expires without sufficient
payment, unless the Guaranteed Death Benefit Premium or Extended Guaranteed
Death Benefit Rider is in effect. Any premium payment must be for at least $50.
Security Benefit also may reject or limit any premium payment that would result
in an immediate increase in the net amount at risk under the Policy, although
such a premium may be accepted with satisfactory evidence of insurability.
ALLOCATION OPTIONS
You may allocate Net Premium Payments among the Variable Accounts. The
Variable Accounts invest in diversified portfolios of a mutual fund. The
portfolios include stocks, bonds, money market instruments, or a combination of
these securities, or in securities of foreign issuers. Each of the Variable
Accounts invests exclusively in shares of a designated portfolio ("Series") of
the SBL Fund (the "Fund"). Each Series of the Fund has a different investment
objective. The Variable Accounts and the corresponding Series of the Fund are:
the Growth Variable Account (Series A); the Growth-Income Variable Account
(Series B); the Money Market Variable Account (Series C); the Worldwide Equity
Variable Account (Series D); the High Grade Income Variable Account (Series E);
the Mid Cap Variable Account (Series J); the Global Aggressive Bond Variable
Account (Series K); the Specialized Asset Allocation Variable Account (Series
M); the Managed Asset Allocation Variable Account (Series N); the Equity Income
Variable Account (Series O); and the Social Awareness Variable Account (Series
S). See "SBL Fund," page 10. Security Management Company, LLC, is the Investment
Adviser of each of the Series, subject to the direction and control of the
Fund's Board of Directors. Security Management Company, LLC is a limited
liability company, which is controlled by Security Benefit. The Adviser has
engaged OppenheimerFunds, Inc. to serve as Sub-Adviser of Series D. The
Investment Manager has also engaged T. Rowe Price Associates, Inc. to serve as
Sub-Adviser of Series N and O and Meridian Investment Management Corporation to
provide investment advisory and analytic research services to Series M.
The Policyowner may choose to allocate net premium payments among the eleven
Variable Accounts constituting the Separate Account, and to the Fixed Account.
TRANSFER OF ACCUMULATED VALUE
You may transfer Accumulated Value among the Variable Accounts and, subject
to certain other limitations, between the Variable Accounts and the Fixed
Account. You may make transfers by telephone if the Telephone Transfer section
of the application or an Authorization for Telephone Requests form has been
properly completed, and signed and filed at Security Benefit's Home Office. See
"Transfer of Accumulated Value," page 14.
POLICY LOANS
You may borrow from Security Benefit up to 80% of the Policy's Accumulated
Value, subject to a minimum loan of $1,000. You may borrow an amount in excess
of 80% of Accumulated Value on Policies issued in certain states, as required by
applicable state law. The Policy will be the only security required for a loan.
See "Policy Loans," page 17.
The amount of any Policy Debt is subtracted from the death benefit or from
the Accumulated Value upon surrender. See "Policy Loans," page 17. The Policy
will lapse when Net Cash Surrender Value is insufficient to cover the current
monthly deduction on a Monthly Payment Date, and a Grace Period expires without
a sufficient premium or repayment of Policy Debt.
FREE-LOOK RIGHT
You may obtain a full refund of the premium paid if the Policy is returned
within 20 days after you receive it or 45 days after the application for the
Policy is completed, whichever is later. During the Free-Look Period, net
premiums will be allocated to the Money Market Variable Account. See "Allocation
of Net Premiums," page 13.
SURRENDER RIGHT
You can surrender the Policy during the life of the Insured and receive its
Net Cash Surrender Value, which is equal to the Accumulated Value less any
outstanding Policy Debt.
PARTIAL WITHDRAWAL BENEFITS
You may make a Partial Withdrawal on and after the last day of the first
Policy Year. You may make up to four "Partial Withdrawals" of Net Cash Surrender
Value each Policy Year after the first Policy Year. A Partial Withdrawal may
decrease the Specified Amount on a Policy on which you have elected death
benefit Option A, and will decrease the death benefit if the death benefit is
greater than the Specified Amount under either Option A or B. See "Partial
Withdrawal Benefits," page 18.
Each Partial Withdrawal must be for at least $500. After the withdrawal the
Policy's Net Cash Surrender Value must be at least $1,000, plus an amount equal
to the sum of the monthly deductions scheduled to be deducted from the Policy's
Accumulated Value in the 36-month period immediately following a Partial
Withdrawal.
CHARGES AND DEDUCTIONS
PREMIUM TAX
Security Benefit deducts a premium tax from each premium payment under a
Policy prior to allocation of the net premium to the Policyowner's Accumulated
Value. The premium tax consists of the following item:
* Security Benefit assesses a state and local premium tax charge against
each premium to pay applicable state and local premium taxes, currently ranging
from .75% to 5%. However premium tax rates are subject to change by a
governmental entity.
DEDUCTIONS FROM ACCUMULATED VALUE
Security Benefit deducts a charge called the monthly deduction from a
Policy's Accumulated Value on each Monthly Payment Date. The monthly deduction
consists of the following items:
* COST OF INSURANCE: This monthly charge compensates Security Benefit for
providing life insurance coverage for the Insured. The amount of the charge is
equal to a current cost of insurance rate multiplied by the net amount at risk
under a Policy at the beginning of the Policy Month.
* OPTIONAL INSURANCE BENEFITS CHARGES: The monthly deduction includes
charges for any optional insurance benefits added to the Policy by Rider.
DEDUCTIONS FROM THE VARIABLE ACCOUNTS
* ADMINISTRATIVE CHARGE: Security Benefit deducts a daily administrative
charge from the average daily net assets of each Variable Account. The daily
administrative charge is equal to an annual rate of .35% in the first ten Policy
Years and .25% thereafter. Security Benefit, however, reserves the right to
charge up to an annual rate of .35% in all Policy Years. The administrative
charge is assessed to reimburse Security Benefit for the expenses associated
with administration and maintenance of the Policies.
* MORTALITY AND EXPENSE RISK CHARGE: Security Benefit deducts a daily charge
from the assets of each Variable Account for mortality and expense risks assumed
by Security Benefit. This charge is equal to an annual rate of .90% of the
average daily net assets of each Variable Account in the first ten Policy Years
and .70% thereafter. Security Benefit, however, reserves the right to charge up
to .90% in all Policy Years.
Security Benefit pays the operating expenses of the Separate Account. The
Fund pays the investment advisory fees and operating expenses of the Fund. For a
description of these charges, see "Charges and Deductions," page 19.
TAX TREATMENT OF POLICY
The Policy is intended to produce benefits normally associated with life
insurance. See "Federal Income Tax Considerations," page 21, for details.
THE FIXED ACCOUNT
You may allocate all or a portion of net premium payments and transfer
Accumulated Value to the Fixed Account. Amounts allocated to the Fixed Account
are held in Security Benefit's General Account. Security Benefit guarantees that
the Accumulated Value allocated to the Fixed Account will be credited interest
monthly at a rate equivalent to an effective annual rate of 4%. In addition,
Security Benefit may in its sole discretion pay interest in excess of the
guaranteed amount. See "The Fixed Account," page 26.
CONTACTING SECURITY BENEFIT
You should direct all written requests, notices, and forms required by the
Policies, and any questions or inquiries to Security Benefit's SEB
Administration Department at 700 SW Harrison Street, Topeka, Kansas 66636-0001.
INFORMATION ABOUT SECURITY BENEFIT AND
THE SEPARATE ACCOUNT
SECURITY BENEFIT LIFE INSURANCE COMPANY
Security Benefit is a stock life insurance company organized under the laws
of the State of Kansas. It was organized originally as a fraternal benefit
society and commenced business February 22, 1892. It became a mutual life
insurance company under its present name on January 2, 1950. On July 31, 1998,
the Company converted from a mutual life insurance company to a stock life
insurance company ultimately controlled by Security Benefit Mutual Holding
Company, a Kansas mutual holding company. Membership interests of persons who
were Policyowners as of July 31, 1998 became membership interests in Security
Benefit Mutual Holding Company as of that date, and persons who acquire policies
from the Company after that date automatically become members in the mutual
holding company.
Security Benefit offers variable life insurance policies, fixed and variable
annuity contracts, as well as financial and retirement services. It is admitted
to do business in the District of Columbia, and in all states except New York.
As of December 31, 1998, Security Benefit had total assets of approximately $7.9
billion. Together with its subsidiaries, Security Benefit has total funds under
management of approximately $8.8 billion.
The Principal Underwriter for the Policies is Security Distributors, Inc.
("SDI"), 700 SW Harrison Street, Topeka, Kansas 66636-0001. SDI is registered as
a broker/dealer with the SEC and is a wholly-owned subsidiary of Security
Benefit Group, Inc., a financial services holding company wholly owned by
Security Benefit.
YEAR 2000 COMPLIANCE
Like other insurance companies, as well as other financial and business
organizations around the world, Security Benefit or SBL Fund could be adversely
affected if the computer systems used by Security Benefit or the Fund's
Investment Adviser, and other service providers, in performing their
administrative functions do not properly process and calculate date-related
information and data before, during and after January 1, 2000. Some computer
software and hardware systems currently cannot distinguish between the year 2000
and the year 1900 or some other date because of the way date fields were
encoded. This is commonly known as the "Year 2000 Problem." If not addressed,
the Year 2000 Problem could impact (i) the administrative services provided by
Security Benefit with respect to the Policy and (ii) the management services
provided to SBL Fund by the Investment Adviser, as well as transfer agency,
accounting, custody, distribution and other services provided to the Fund.
Security Benefit and the Investment Adviser have adopted a plan to be "Year
2000 Compliant" with respect to both their internally built systems as well as
systems provided by external vendors. We consider a system Year 2000 Compliant
when it is able to correctly process, provide, and/or receive data before,
during and after the Year 2000. Security Benefit and the Investment Adviser's
overall approach to addressing the Year 2000 issue is as follows: (1) to
inventory their internal and external hardware, software, telecommunications and
data transmissions to customers and conduct a risk assessment with respect to
the impact that a failure on any such system would have on its business
operations; (2) to modify or replace their internal systems and obtain vendor
certifications of Year 2000 compliance for systems provided by vendors or
replace such systems that are not Year 2000 Compliant; and (3) to implement and
test their systems for Year 2000 compliance. Security Benefit and the Investment
Adviser have completed the inventory of their internal and external systems and
have made substantial progress toward completing the modification/replacement of
its internal systems as well as toward obtaining Year 2000 Compliant
certifications from its external vendors. Overall systems testing commenced in
early 1998 and will extend into the first six months of 1999.
Although Security Benefit and the Investment Adviser have taken steps to
ensure that their systems will function properly before, during and after the
Year 2000, external vendors provide their key operating systems and information
sources which creates uncertainty to the extent Security Benefit and the
Investment Adviser are relying on the assurance of such vendors as to whether
their systems will be Year 2000 Compliant. The costs or consequences of
incomplete or untimely resolution of the Year 2000 issue are unknown to Security
Benefit and the Investment Adviser at this time but could have a material
adverse impact on the operations of the Security Benefit, the separate account,
the underlying Fund and the Investment Adviser.
The Year 2000 Problem is also expected to impact companies, which may
include issuers of portfolio securities held by SBL Fund, to varying degrees
based upon various factors, including, but not limited to, the company's
industry sector and degree of technological sophistication. The Fund and the
Investment Adviser are unable to predict what impact, if any, the Year 2000
Problem will have on issuers of the portfolio securities held by the Fund.
SECURITY VARILIFE SEPARATE ACCOUNT
The Security Varilife Separate Account ("Separate Account") is a separate
investment account of Security Benefit used only to support the variable death
benefits and policy values of variable life insurance policies. The assets in
the Separate Account are kept separate from the General Account assets and other
separate accounts of Security Benefit.
Security Benefit owns the assets in the Separate Account and is required to
maintain sufficient assets in the Separate Account to meet anticipated
obligations of the Policies funded by the Account. The Separate Account is
divided into subaccounts called Variable Accounts. The income, gains, or losses
of the Separate Account are credited to or charged against the assets of the
Separate Account without regard to the other income, gains, or losses of
Security Benefit. Assets in the Separate Account attributable to the reserves
and other liabilities under the Policies are not chargeable with liabilities
arising from any other business that Security Benefit conducts. Security Benefit
may transfer to its General Account any assets which exceed anticipated
obligations of the Separate Account. All obligations arising under the Policy
are general corporate obligations of Security Benefit. Security Benefit may
invest its own assets in the Separate Account for other purposes, but not to
support Policies other than variable life insurance policies, and may accumulate
in the Separate Account proceeds from various Policy charges and investment
results applicable to those assets.
Security Benefit established the Separate Account on September 13, 1993,
under Kansas law under the authority of the Board of Directors of Security
Benefit. The Separate Account is registered as a unit investment trust with the
SEC. Such registration does not involve any supervision by the SEC of the
administration or investment practices or policies of the Account.
Each Variable Account invests exclusively in shares of a designated Series
of the Fund. Security Benefit may in the future establish additional Variable
Accounts within the Separate Account, which may invest in other Series of the
Fund or in other securities or other investment vehicles.
SBL FUND
The Fund is a diversified, open-end management investment company of the
series type. The Fund is registered with the SEC under the Investment Company
Act of 1940. Such registration does not involve supervision by the SEC of the
investments or investment policy of the Fund. Each Series of the Fund pursues
different investment objectives and policies. Security Benefit purchases shares
of each Series for the corresponding Variable Account at net asset value (i.e.,
without sales load). All dividends and capital gains distributions received from
a Series are automatically reinvested in such Series at net asset value, unless
Security Benefit, on behalf of the Separate Account, elects otherwise. Fund
shares will be redeemed by Security Benefit at their net asset value to the
extent necessary to make payments under the Policies.
Shares of the Fund currently are offered only for purchase by separate
accounts of Security Benefit to serve as an investment medium for variable life
insurance policies and for variable annuity contracts issued by Security
Benefit. Thus, the Fund serves as an investment medium for both variable life
insurance policies and variable annuity contracts. This is called "mixed
funding." Shares of the Fund may also be sold in the future to separate accounts
of other insurance companies, both affiliated and not affiliated with Security
Benefit. This is called "shared funding." Security Benefit currently does not
foresee any disadvantages to Policyowners arising from either mixed or shared
funding; however, due to differences in tax treatment or other considerations,
it is theoretically possible that the interests of owners of various contracts
for which the Fund serves as an investment medium might at some time be in
conflict. However, Security Benefit, the Fund's Board of Directors, and any
other insurance companies that participate in the Fund in the future are
required to monitor events in order to identify any material conflicts that
arise from the use of the Fund for mixed and/or shared funding. The Fund's Board
of Directors are required to determine what action, if any, should be taken in
the event of such a conflict. If such a conflict were to occur, Security Benefit
might be required to withdraw the investment of one or more of its separate
accounts from the Fund. This might force the Fund to sell securities at
disadvantageous prices.
The investment objective of each Series of the Fund is described below.
There can be no assurance that any Series will achieve its objective. More
detailed information is contained in the accompanying Prospectus of the Fund,
including information on the risks associated with the investments and
investment techniques of each of the Series.
THE FUND'S PROSPECTUS ACCOMPANIES THIS PROSPECTUS AND SHOULD BE READ CAREFULLY
BEFORE INVESTING.
SERIES A -- Amounts allocated to the Growth Variable Account are invested in
Series A. Series A seeks long-term capital growth by investing primarily in a
broadly diversified portfolio of common stocks.
SERIES B -- Amounts allocated to the Growth Income Variable Account are
invested in Series B. Series B seeks long-term growth of capital with secondary
emphasis on income.
SERIES C -- Amounts allocated to the Money Market Variable Account are
invested in Series C. Series C seeks a high level of current income consistent
with preserving capital by investing in money market securities with varying
maturities.
SERIES D -- Amounts allocated to the Worldwide Equity Variable Account are
invested in Series D. Series D seeks long-term growth of capital primarily
through investment in common stocks and equivalents of companies in foreign
countries and the United States.
SERIES E -- Amounts allocated to the High Grade Income Variable Account are
invested in Series E. Series E seeks to provide current income with security of
principal by investing in a broad range of debt securities, including U.S. and
foreign corporate debt securities and securities issued by the U.S. and foreign
governments.
SERIES J -- Amounts allocated to the Mid Cap Variable Account are invested
in Series J. Series J seeks capital appreciation by investing primarily in a
broadly diversified portfolio of common stocks.
SERIES K -- Amounts allocated to the Global Aggressive Bond Variable Account
are invested in Series K. Series K seeks high current income and, as a secondary
objective, capital appreciation by investing primarily in a broad range of debt
securities, including U.S. and foreign high yield, lower-rated debt securities
(commonly known as "junk bonds").
SERIES M -- Amounts allocated to the Specialized Asset Allocation Variable
Account are invested in Series M. Series M seeks high total return consisting of
capital appreciation and current income. Series M seeks this objective by
following an asset allocation strategy that contemplates shifts among a wide
range of investment categories and market sectors, including equity and debt
securities of U.S. and foreign issuers.
SERIES N -- Amounts allocated to the Managed Asset Allocation Variable
Account are invested in Series N. Series N seeks a high level of total return by
investing primarily in a diversified portfolio of debt and equity securities of
U.S. and foreign issuers.
SERIES O -- Amounts allocated to the Equity Income Variable Account are
invested in Series O. Series O seeks to provide substantial dividend income and
also capital appreciation by investing primarily in dividend-paying common
stocks of established companies.
SERIES S -- Amounts allocated to the Social Awareness Variable Account are
invested in Series S. Series S seeks capital appreciation by investing in
various types of securities which meet certain social criteria established for
the Series.
THE INVESTMENT ADVISER
Security Management Company, LLC, located at 700 SW Harrison Street, Topeka,
Kansas 66636, serves as Investment Adviser to each Series of the Fund. Security
Management Company, LLC is registered with the SEC as an investment adviser.
Security Management Company, LLC formulates and implements continuing programs
for the purchase and sale of securities in compliance with the investment
objective, policies, and restrictions of each Series and is responsible for the
day-to-day decisions to buy and sell securities for the Series, except Series D,
N and O. With respect to Series M, the foregoing responsibilities are divided
between the Investment Adviser and a Sub-Adviser. See the accompanying SBL Fund
prospectus for details. The Investment Adviser has engaged OppenheimerFunds,
Inc., Two World Trade Center, New York, New York 10048, to provide investment
advisory services to Series D of the Fund. The Investment Adviser has engaged T.
Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, Maryland 21202 to
provide investment advisory services to Series N and O. The Investment Adviser
has also engaged Meridian Investment Management Corporation, 12835 East Arapahoe
Road, Tower II, 7th Floor, Englewood, Colorado 80112, to provide investment
advisory and analytic research services to Series M.
THE POLICY
The variable life insurance benefits provided by the Policies are funded
through your Accumulated Value in the Separate Account and the Fixed Account.
The information included below describes the benefits, features, charges, and
other major provisions of the Policies.
APPLICATION FOR A POLICY
The Policy is designed to meet the needs of individuals and for corporations
who wish to provide coverage and benefits for key employees. If you wish to
purchase the Policy you may submit an application to Security Benefit. A Policy
can be issued on the life of an Insured for Ages 18 up to and including Age 85
with evidence of insurability satisfactory to Security Benefit. The Insured's
Age is calculated as of the Insured's last birthday as of the Policy Date.
Acceptance is subject to Security Benefit's underwriting, and Security Benefit
reserves the right to request additional information and to reject an
application.
Each Policy is issued with a Policy Date, which is the date used to
determine the Monthly Payment Date, Policy Months, Policy Years, and Policy
Monthly, Quarterly, Semiannual and Annual Anniversaries. If the application is
accompanied by all or a portion of the initial premium and is accepted by
Security Benefit, the Policy Date is usually the date the application and
premium payment were received at Security Benefit's Home Office. If an
application is not accompanied by all or a portion of the initial premium
payment, the Policy Date is usually the date the application is accepted by
Security Benefit. Security Benefit first becomes obligated under the Policy on
the date the total initial premium is received or on the date the application is
accepted, whichever is later. Security Benefit will take any monthly deductions
due on the Monthly Payment Date on or next following the date Security Benefit
becomes obligated. The initial premium must be received within 20 days after the
Policy is issued, although Security Benefit may waive the 20-day requirement at
its discretion. If Security Benefit does not receive the initial premium or the
application is rejected by Security Benefit, the Policy will be canceled and any
partial premium received will be refunded.
Subject to Security Benefit's approval, a Policy may be backdated, but the
Policy Date may not be more than six months prior to the date of the
application. Backdating can be advantageous if the Insured's lower issue Age
results in lower cost of insurance rates. If the Policy is backdated, the
minimum initial premium required will include sufficient premium to cover the
backdating period. Monthly deductions will be made for the period the Policy
Date is backdated.
Insured's are assigned to underwriting (risk) classes which are used in
calculating the cost of insurance charges. In assigning Insureds to underwriting
classes, Security Benefit will normally use the medical or paramedical
underwriting method, which may require a medical examination of a proposed
Insured, although other forms of underwriting may be used when deemed
appropriate by Security Benefit.
PREMIUMS
The Policy is a flexible-premium policy, and it provides considerable
flexibility, subject to the limitations described below, to pay premiums at your
discretion. Security Benefit usually requires a Policyowner to pay a minimum
initial premium equal to at least 1/12 of the Guaranteed Death Benefit Premium
for the first Policy Year, which will be based upon the Policy's Specified
Amount and Death Benefit Option, any Riders added to the Policy, and the Age,
gender (unless unisex cost of insurance rates apply, see "Cost of Insurance,"
page 20), rating class, and underwriting class of the Insured. Thereafter,
subject to the limitations described below, a Policyowner may choose the amount
and frequency of premium payments. The Policy, therefore, provides you with the
flexibility to vary premium payments to reflect varying financial conditions.
Security Benefit may reduce the minimum initial premium required under certain
circumstances, such as for a group or sponsored arrangement.
When applying for a Policy, you will determine a Planned Periodic Premium
that provides for the payment of level premiums over a specified period of time.
Additional premiums may be paid monthly under the Secur-O-Matic plan where you
authorize Security Benefit to withdraw premiums from your checking account each
month on the 7th, 14th, 21st, or 28th day of each month. The minimum initial
premium required must be paid before Security Benefit will accept the
Secur-O-Matic plan.
The amount, frequency and period of time over which a Policyowner pays
premiums may affect whether the Policy will be classified as a modified
endowment contract, which is a type of life insurance contract subject to
different tax treatment for certain pre-death distributions than conventional
life insurance contracts. Accordingly, variations from the Planned Periodic
Premiums on a Policy that is not otherwise a modified endowment contract may
result in the Policy becoming a modified endowment contract for tax purposes.
Payment of the Planned Periodic Premium will not guarantee that a Policy
will remain in force. Instead, the duration of the Policy depends upon the
Policy's Accumulated Value. Even if Planned Periodic Premiums are paid, the
Policy will lapse at any time Accumulated Value less Policy Debt is insufficient
to pay the current monthly deduction and a Grace Period expires without
sufficient payment, unless the Guaranteed Death Benefit Premium provision or
Extended Guaranteed Death Benefit Rider is in effect. See "Guaranteed Death
Benefit Premium" below, "Lapse," page 19 and "Optional Insurance Benefits," page
29.
Any premium payment must be for at least $50. Security Benefit also may
reject or limit any premium payment that would result in an immediate increase
in the net amount at risk under the Policy, although such a premium may be
accepted with satisfactory evidence of insurability. See "Cost of Insurance,"
page 20. A premium payment would result in an immediate increase in the net
amount at risk if the death benefit under a Policy is, or upon acceptance of the
premium would be, equal to a Policyowner's Accumulated Value multiplied by a
death benefit percentage. See "Death Benefit," page 15. If satisfactory evidence
of insurability is not received, the payment, or portion thereof may be
returned. All or a portion of a premium payment will be rejected and returned to
the Policyowner if it would exceed the maximum premium limitations prescribed by
federal tax law, as determined by Security Benefit.
Security Benefit will deduct a premium tax from each premium payment. See
"Charges and Deductions," page 19. The remainder of the premium, known as the
net premium, will be allocated as described below under "Allocation of Net
Premiums." Additional payments will first be treated as additional premium
payments unless a Policyowner indicates that the payment is a repayment of
Policy Debt.
GUARANTEED DEATH BENEFIT PREMIUM
You may decide to pay the Guaranteed Death Benefit Premium. If you pay the
Guaranteed Death Benefit Premium in advance on at least a monthly basis you will
keep the Policy in force during the first five Policy Years even if during that
period Net Cash Surrender Value is insufficient to cover the monthly deduction
on any Monthly Payment Date. The Guaranteed Death Benefit Premium is a Planned
Periodic Premium in an amount determined by Security Benefit based upon the
Policy's Specified Amount and Death Benefit Option, any Riders added to the
Policy, and the Age, gender (unless unisex cost of insurance rates apply),
rating class, and underwriting class of the Insured. Security Benefit will send
a reminder notice if the amount of premiums paid on a Policy, less outstanding
Policy Debt and any Partial Withdrawals, is less than an amount equal to the
monthly Guaranteed Death Benefit Premium times the number of Policy Months the
Policy has been in force. The Guaranteed Death Benefit will no longer be in
effect and may not be reinstated if the required payment is not made within 61
days, measured from the date of notice. A Policy Loan taken in the first five
Policy Years may cause the Guaranteed Death Benefit to terminate. As a result,
the Policy will not have the protection from lapse provided by the Guaranteed
Death Benefit Premium during the first five Policy Years. See "Lapse," page 19
and, for a discussion of the Extended Guaranteed Death Benefit Premium Rider,
see "Optional Insurance Benefits," page 29.
ALLOCATION OF NET PREMIUMS
In the application for the Policy, you select the Variable Accounts or the
Fixed Account to which net premium payments will be allocated. During the
Free-Look Period, net premiums will be allocated to the Money Market Variable
Account, which invests in Series C of the Fund (except for amounts allocated to
the Loan Account to secure a Policy loan). The Accumulated Value will be
automatically allocated according to your instructions contained in the
application the later of 20 days after the Policy is issued or 45 days after the
application is completed, or, if longer, upon receipt of the minimum initial
premium (the "Free-Look Period"). Net premiums received after the Free-Look
Period will be allocated upon receipt among the Variable Accounts and the Fixed
Account according to your most recent instructions. Available allocation
alternatives include the eleven Variable Accounts and the Fixed Account.
You may change the allocation of net premiums by submitting a proper written
request to Security Benefit's Home Office. The minimum amount that you may
allocate to a Variable Account or the Fixed Account is the greater of $25 or 10%
of the net premium. Security Benefit allows allocation of only a whole
percentage of net premium. You may change net premium allocation instructions by
telephone if the Telephone Transfer Section of the application or an
Authorization for Telephone Requests form has been properly completed, signed
and filed at Security Benefit's Home Office. Security Benefit reserves the right
to discontinue telephone net premium allocation instructions.
DOLLAR COST AVERAGING OPTION
Security Benefit currently offers an option under which you may dollar cost
average your Accumulated Value by authorizing Security Benefit to make periodic
transfers of Accumulated Value from any one Variable Account to one or more of
the other Variable Accounts. Dollar cost averaging is a systematic method of
investing in which securities are purchased at regular intervals in fixed dollar
amounts so that the cost of the securities gets averaged over time and possibly
over various market values. The option will result in the transfer of
Accumulated Value to one or more Variable Accounts. Amounts transferred under
this option will be credited at the Variable Account price as of the end of the
Valuation Dates on which the transfers are effected. Since the price of a
Variable Account's Accumulation Units will vary, the amounts allocated to a
Variable Account will result in the crediting of a greater number of units when
the Accumulation Unit price is low and a lesser number of units when the
Accumulation Unit price is high. Similarly, the amounts transferred from a
Variable Account will result in a debiting of a greater number of units when the
Accumulation Unit price is low and a lesser number of units when the
Accumulation Unit price is high. Dollar cost averaging does not guarantee
profits, nor does it assure that you will not have losses.
You may request a Dollar Cost Averaging Request form from the SEB
Administration Department. On the form, you must designate whether Accumulated
Value is to be transferred on the basis of a specific dollar amount, a fixed
period or earnings only, the Variable Accounts to and from which the transfers
will be made, the desired frequency of the transfers, which may be on a monthly
or quarterly basis, and the length of time during which the transfers shall
continue or the total amount to be transferred over time.
To elect the Dollar Cost Averaging Option, your Accumulated Value must be at
least $10,000 and a Dollar Cost Averaging Request in proper form must be
received by Security Benefit at its Home Office. You may not have Dollar Cost
Averaging and Asset Reallocation Options in effect at the same time. After
Security Benefit has received a Dollar Cost Averaging Request in proper form at
its Home Office, Security Benefit will transfer Accumulated Value in the amounts
you designate from the Variable Account from which transfers are to be made to
the Variable Account or Accounts you have chosen. The minimum amount that may be
transferred from any Variable Account is $100. After the Free-Look Period,
Security Benefit will effect the first transfer on the monthly or quarterly
anniversary, whichever corresponds to the period you selected, of the date of
receipt at Security Benefit's Home Office of a Dollar Cost Averaging Request in
proper form, until the total amount elected has been transferred, until
Accumulated Value in the Variable Account from which transfers are made has been
depleted, or until the Policy enters the Grace Period. Amounts periodically
transferred under this option are not currently subject to any transfer charges
that may be imposed by Security Benefit.
You may instruct Security Benefit at any time to terminate the option by
written request to Security Benefit's Home Office. In that event, the
Accumulated Value in the Variable Account that has not been transferred will
remain in that Variable Account, subject to monthly deductions, unless you
instruct otherwise. If you wish to continue transferring on a Dollar Cost
Averaging basis after the expiration of the applicable period, the total amount
elected has been transferred, or the Variable Account has been depleted, or
after the Dollar Cost Averaging Option has been canceled, you must complete a
new Dollar Cost Averaging Request and send it to Security Benefit's Home Office.
The Accumulated Value at the time the request is made must be at least $10,000.
Security Benefit may discontinue, modify, or suspend the Dollar Cost Averaging
Option at any time.
Accumulated Value may also be dollar cost averaged to or from the Fixed
Account subject to certain restrictions described in "The Fixed Account," page
26.
ASSET REALLOCATION OPTION
Security Benefit currently offers an option under which you may authorize
Security Benefit to automatically transfer your Accumulated Value each quarter
to maintain a particular percentage allocation among the Variable Accounts. The
Accumulated Value allocated to each Variable Account will grow or decline in
value at different rates during the quarter. Asset Reallocation automatically
reallocates the Accumulated Value in the Variable Accounts each quarter to the
allocation you select. Asset Reallocation is intended to transfer Accumulated
Value from those Variable Accounts that have increased in value to those
Variable Accounts that have declined in value. Over time, this method of
investing may help you buy low and sell high, although there can be no assurance
of this. This reallocation method does not guarantee profits, nor does it assure
that you will not have losses. If you choose this option, it is possible that
Accumulated Value may, at any time, be less than the Accumulated Value that you
would have experienced had the Option not been selected.
To elect the Asset Reallocation Option, the Accumulated Value must be at
least $10,000 and an Asset Reallocation Request in proper form must be received
by Security Benefit at its Home Office. You may request an Asset Reallocation
Request form. On the form, you must indicate the applicable Variable Accounts
and the percentage of Accumulated Value to be reallocated on a quarterly basis
to each Variable Account. If the Asset Reallocation Option is elected, all
Accumulated Value that is invested in the Variable Accounts must be included in
Asset Reallocation. You may not have Dollar Cost Averaging and Asset
Reallocation Options in effect at the same time.
The Asset Reallocation Option will result in the transfer of Accumulated
Value to one or more of the Variable Accounts on the date of Security Benefit's
receipt of the Asset Reallocation Request in proper form and on each quarterly
anniversary of that date thereafter. The amounts transferred will be credited at
the Variable Account Accumulation Unit price as of the end of the Valuation
Dates on which the transfers are effected. Amounts periodically transferred
under this option are not currently subject to any transfer charges that may be
imposed by Security Benefit.
You may instruct Security Benefit at any time to terminate this option by
written request to Security Benefit's Home Office. In that event, the
Accumulated Value in the Variable Accounts that has not been transferred will
remain in those Variable Accounts, subject to monthly deductions, regardless of
the percentage allocation unless you instruct otherwise. If you wish to continue
Asset Reallocation after it has been canceled, you may complete a new Asset
Reallocation Request form and send it to Security Benefit's Home Office. The
Accumulated Value must be at least $10,000 at the time the request is made.
Security Benefit may discontinue, modify, or suspend, and reserves the right to
charge a fee for the Asset Reallocation Option at any time.
Accumulated Value invested in the Fixed Account may be included in the Asset
Reallocation Program, subject to the restrictions on transfers from the Fixed
Account as described in "The Fixed Account," page 26.
TRANSFER OF ACCUMULATED VALUE
After the Free-Look Period you may transfer the Accumulated Value among the
Variable Accounts upon proper written request to Security Benefit's Home Office.
You may transfer Accumulated Value (other than transfers in connection with the
Dollar Cost Averaging or Asset Reallocation Options) by telephone if the
Telephone Transfer section of the application or an Authorization for Telephone
Requests form has been properly completed, signed and filed at Security
Benefit's Home Office. The minimum transfer amount is $500, except that this
minimum amount does not apply to transfers under the Dollar Cost Averaging and
Asset Reallocation Options. Currently, there are no limitations on the number of
transfers between Variable Accounts, nor any minimum amount required to be
remaining in a given Variable Account after a transfer (except as required under
the Dollar Cost Averaging and Asset Reallocation Options). However, no transfer
may be made if a Policy is in the Grace Period and a payment required to avoid
lapse is not paid. See "Lapse," page 19. No charges are currently imposed upon
such transfers; however, Security Benefit reserves the right to allow six free
transfers in any Policy Year and to charge $25 for each additional transfer.
Security Benefit further reserves the right at a future date to limit the size
of transfers and remaining balances, to limit the number and frequency of
transfers, and to discontinue telephone transfers.
After the Free-Look Period you may transfer Accumulated Value from the
Variable Accounts to the Fixed Account; however, transfers from the Fixed
Account to the Variable Accounts are restricted as described in "The Fixed
Account," page 26.
DEATH BENEFIT
When the Policy is issued, Security Benefit will determine the initial
amount of insurance based on the instructions provided in the application. That
amount will be shown on the specifications page of the Policy and is called the
"Specified Amount." The minimum Specified Amount at issuance of a Policy is
$100,000. Security Benefit may reduce the minimum Specified Amount required at
issuance under certain circumstances, such as for a group or sponsored
arrangement.
For so long as the Policy remains in force, Security Benefit will, upon
proof of the death of an Insured, pay death benefit proceeds to a named
Beneficiary. Death benefit proceeds will consist of the death benefit under the
Policy, plus any insurance proceeds provided by Rider, reduced by any
outstanding Policy Debt (and, if in the Grace Period, any overdue charges).
You may select one of two death benefit options: Option A or Option B.
Generally, an applicant designates the death benefit option in the application.
If no option is designated, Security Benefit will assume you selected Option A.
Subject to certain restrictions, you can change the death benefit option
selected. So long as the Policy remains in force, the death benefit under either
option will never be less than the Specified Amount of the Policy.
OPTION A. Under Option A, the death benefit will be equal to the Specified
Amount of the Policy or, if greater, Accumulated Value (determined as of the end
of the Valuation Period during which the Insured dies) multiplied by a death
benefit percentage. The death benefit percentages vary according to the Age of
the Insured and will be at least equal to the cash value corridor in Section
7702 of the Internal Revenue Code, which addresses the definition of a life
insurance policy for tax purposes. The death benefit percentage is 250% for an
Insured at Age 40 or under, and it declines for older Insureds. A table showing
the death benefit percentages is in the Appendix to this Prospectus and in the
Policy. If you seek favorable investment performance reflected in increasing
Accumulated Value rather than increasing insurance coverage, you should choose
Option A.
OPTION B. Under Option B, the death benefit will be equal to the Specified
Amount of the Policy plus the Accumulated Value (determined as of the end of the
Valuation Period during which the Insured dies) or, if greater, Accumulated
Value multiplied by a death benefit percentage. The specified percentage is the
same as that used in connection with Option A and as stated in the Appendix. The
death benefit under Option B will always vary as Accumulated Value varies.
Therefore, if you seek favorable investment performance reflected in increased
insurance coverage, you should choose Option B.
EXAMPLES OF OPTIONS A AND B. The following examples demonstrate the
determination of death benefits under Options A and B. The examples show three
Policies -- Policies I, II, and III -- with the same Specified Amount, but
Accumulated Values that vary as shown, and which assume an Insured is Age 40 at
the time of death and that there is no outstanding Policy Debt.
POLICY I POLICY II POLICY III
Specified Amount $100,000 $100,000 $100,000
Accumulated Value
on Date of Death $ 25,000 $ 50,000 $ 75,000
Death Benefit Percentage 250% 250% 250%
Death Benefit Under Option A $100,000 $125,000 $187,500
Death Benefit Under Option B $125,000 $150,000 $187,500
Under Option A, the death benefit for Policy I is equal to $100,000, since
the death benefit is the greater of the Specified Amount ($100,000) or the
Accumulated Value at the date of death multiplied by the death benefit
percentage ($25,000 x 250% = $62,500). In contrast, for both Policies II and III
under Option A, the Accumulated Value multiplied by the death benefit percentage
($50,000 x 250% = $125,000 for Policy II; $75,000 x 250% = $187,500 for Policy
III) is greater than the Specified Amount ($100,000), so the death benefit is
equal to the higher value. Under Option B, the death benefit for Policy I is
equal to $125,000 since the death benefit is the greater of Specified Amount
plus Accumulated Value ($100,000 + $25,000 = $125,000) or the Accumulated Value
multiplied by the death benefit percentage ($25,000 x 250% = $62,500).
Similarly, in Policy II, Specified Amount plus Accumulated Value ($100,000 +
$50,000 = $150,000) is greater than Accumulated Value multiplied by the death
benefit percentage ($50,000 x 250% = $125,000). In contrast, in Policy III, the
Accumulated Value multiplied by the death benefit percentage ($75,000 x 250% =
$187,500) is greater than the Specified Amount plus Accumulated Value ($100,000
+ $75,000 = $175,000), so the death benefit is equal to the higher value.
All calculations of death benefit will be made as of the end of the
Valuation Period during which the Insured dies. Death benefit proceeds may be
paid to a Beneficiary in a lump sum or under a payment plan offered under the
Policy. Consult the Policy for details.
CHANGES IN DEATH BENEFIT OPTION
You may request that the death benefit option under the Policy be changed
from Option A to Option B, or from Option B to Option A. You may change death
benefit options only once per Policy Year, and requests should be made in
writing to Security Benefit's Home Office. You may change from Option B to
Option A without evidence of insurability; a change from Option A to Option B
requires evidence of insurability satisfactory to Security Benefit. The
effective date of any such change shall be the Monthly Payment Date on or next
following Security Benefit's acceptance of the request.
A change in the death benefit from Option A to Option B will result in a
reduction in the Specified Amount of the Policy by the amount of the Policy's
Accumulated Value, with the result that the death benefit payable under Option B
at the time of the change will equal that which would have been payable under
Option A immediately prior to the change. The change in option will affect the
determination of the death benefit from that point on since Accumulated Value
will then be added to the new Specified Amount, and the death benefit will then
vary with Accumulated Value. This change will not be permitted if it would
result in a Specified Amount of less than $100,000 although Security Benefit
reserves the right to waive this minimum under certain circumstances, such as
for a group or sponsored arrangement. No charge is currently made on a change
from Option A to Option B.
A change in the death benefit option from Option B to Option A will result
in an increase in the Specified Amount of the Policy by the amount of the
Policy's Accumulated Value, with the result that the death benefit payable under
Option A at the time of the change will equal that which would have been payable
under Option B immediately prior to the change. However, the change in option
will affect the determination of the death benefit from that point on since the
Accumulated Value will no longer be added to the Specified Amount in determining
the death benefit. From that point on, the death benefit will equal the new
Specified Amount (or, if higher, the Accumulated Value times the applicable
specified percentage). No charge is currently made on a change from Option B to
Option A.
A change in death benefit option may affect the monthly cost of insurance
charge since this charge varies with the net amount at risk, which generally is
the amount by which the death benefit exceeds Accumulated Value. See "Cost of
Insurance," page 20. Assuming that the Policy's death benefit would not be equal
to Accumulated Value times a death benefit percentage under either Option A or
B, changing from Option B to Option A will generally decrease the net amount at
risk, and therefore decrease the cost of insurance charges. Changing from Option
A to Option B will generally result in a net amount at risk that remains level.
Such a change, however, will result in an increase in the cost of insurance
charges over time, since the cost of insurance rates increase with the Insured's
Age.
CHANGES IN SPECIFIED AMOUNT
You may request an increase or decrease in the Specified Amount under a
Policy after the first Policy Year subject to approval from Security Benefit.
You may change the Specified Amount only once per Policy Year. Increasing the
Specified Amount could increase the death benefit under a Policy, and decreasing
the Specified Amount could decrease the death benefit. The amount of change in
the death benefit will depend, among other things, upon the death benefit option
chosen by you and the degree to which the death benefit under a Policy exceeds
the Specified Amount prior to the change. Changing the Specified Amount could
affect the subsequent level of the death benefit while the Policy is in force
and the subsequent level of Policy values. An increase in Specified Amount may
increase the net amount at risk under a Policy, which will increase your cost of
insurance charge. Conversely, a decrease in Specified Amount may decrease the
net amount at risk, which will decrease your cost of insurance charge. An
increase in Specified Amount made while the Guaranteed Death Benefit Premium or
Extended Guaranteed Death Benefit Rider is in effect will increase the
respective premium requirements for these benefits.
You may request an increase or decrease in Specified Amount by written
application to Security Benefit's Home Office. It will become effective on the
Monthly Payment Date on or next following Security Benefit's acceptance of the
request. If you are not the Insured, Security Benefit will also require the
consent of the Insured before accepting a request.
INCREASES. Security Benefit will require additional evidence of insurability
satisfactory to Security Benefit for an increase in Specified Amount. No charge
is currently made in connection with an increase in Specified Amount.
DECREASES. Any decrease in Specified Amount will first be applied to the
most recent increases, then the next most recent increases successively, and
finally to the original Specified Amount. Security Benefit will not permit a
decrease if the Specified Amount would fall below $100,000. Although Security
Benefit reserves the right to waive the minimum Specified Amount under certain
circumstances, such as for a group or sponsored arrangement. No charge is
currently made in connection with a decrease. If a decrease in the Specified
Amount would result in total premiums paid exceeding the premium limitations
prescribed under tax law to qualify the Policy as a life insurance contract,
Security Benefit will refund the Policyowner the amount of such excess above the
premium limitations, as determined by Security Benefit.
Security Benefit reserves the right to disallow a requested decrease, and
will not permit a requested decrease, among other reasons, (1) if compliance
with the guideline premium limitations under tax law resulting from the
requested decrease would result in immediate termination of the Policy, or (2)
if, to effect the requested decrease, payments to you would have to be made from
Accumulated Value for compliance with the guideline premium limitations, and the
amount of such payments would exceed the Net Cash Surrender Value under the
Policy.
POLICY VALUES
ACCUMULATED VALUE. The Accumulated Value is the sum of the amounts under the
Policy held in each Variable Account of the Separate Account and the Fixed
Account, as well as the amount set aside in Security Benefit's Loan Account to
secure any Policy Debt.
On each Valuation Date, Security Benefit will adjust the portion of the
Accumulated Value allocated to any particular Variable Account to reflect the
investment experience of that Variable Account and deduction of the
administrative and mortality and expense risk charges from that Variable
Account. On each Monthly Payment Date, Security Benefit will also adjust the
portion of the Accumulated Value allocated to a particular Variable Account to
reflect the assessment of the monthly deduction. See "Determination of
Accumulated Value," below. No minimum amount of Accumulated Value is guaranteed.
You bear the risk for the investment experience of Accumulated Value allocated
to the Variable Accounts.
NET CASH SURRENDER VALUE. The Net Cash Surrender Value of the Policy equals
the Accumulated Value less any outstanding Policy Debt. The Owner can surrender
a Policy at any time while the Insured is living and receive its Net Cash
Surrender Value. See "Surrender," page 18.
DETERMINATION OF ACCUMULATED VALUE
Although the death benefit under a Policy can never be less than the
Policy's Specified Amount, the Accumulated Value will vary to a degree that
depends upon several factors, including investment performance of the Variable
Accounts to which Accumulated Value has been allocated, payment of premiums, the
amount of any outstanding Policy Debt, Partial Withdrawals, and the charges
assessed in connection with the Policy. There is no guaranteed minimum
Accumulated Value and you bear the entire investment risk relating to the
investment performance of Accumulated Value allocated to the Variable Accounts.
Security Benefit will invest the amounts allocated to the Variable Accounts
in shares of the corresponding Series of the Fund. The investment performance of
the Variable Accounts will reflect increases or decreases in the net asset value
per share of the corresponding Series and any dividends or distributions
declared by a Series. Any dividends or distributions from any Series of the Fund
will be automatically reinvested in shares of the same Series, unless Security
Benefit, on behalf of the Separate Account, elects otherwise.
Assets in the Variable Accounts are divided into accumulation units, which
are a measure of value used for bookkeeping purposes. When you allocate net
premiums to a Variable Account, the Policy is credited with accumulation units.
In addition, other transactions including loans, surrenders, Partial
Withdrawals, transfers, and assessment of charges against the Policy affect the
number of accumulation units credited to a Policy. The number of units credited
or debited in connection with any such transaction is determined by dividing the
dollar amount of such transactions by the unit price of the affected Variable
Account. The unit price of each Variable Account is determined on each Valuation
Date. The number of units credited will not change because of subsequent changes
in unit price.
The price of each Variable Account's units initially was $10. The unit price
of a Variable Account on any Valuation Date is calculated by adjusting the unit
price from the previous Valuation Date for (1) the investment performance of the
Variable Account, which is based upon the investment performance of the
corresponding Series of the Fund, (2) any dividends or distributions paid by the
corresponding Series, (3) the charges, if any, that may be assessed by Security
Benefit for income taxes attributable to the operation of the Variable Account,
(4) the mortality and expense risk charge deducted from the average daily net
assets of the Variable Account, and (5) the administrative charge deducted from
the average daily net assets of the Variable Account.
POLICY LOANS
You may borrow money from Security Benefit using the Policy as the only
security for the loan by submitting a proper written request to Security
Benefit's Home Office. You may take a loan any time a Policy is in force. The
minimum loan amount is $1,000. The maximum loan amount is 80% of Accumulated
Value. You may borrow an amount in excess of 80% of Accumulated Value, and the
minimum loan amount may be less, on Policies issued in certain states as
required by applicable state law.
When you take a loan, an amount equal to the loan is transferred out of your
Accumulated Value in the Variable Accounts and the Fixed Account into the Loan
Account to secure the loan. Unless you request otherwise, loan amounts will be
deducted from the Variable Accounts and the Fixed Account in the proportion that
each bears to the Net Cash Surrender Value.
For Policy Debt outstanding in the first ten Policy Years, the Policy loan
interest rate is 8.0% per year and for Policy Debt outstanding thereafter, is
currently 6.0% per year (Security Benefit reserves the right to charge up to
6.50% per year), which is equivalent to an annual effective rate of 8.0% and
6.0%, respectively. Security Benefit will credit interest monthly on amounts
held in the Loan Account to secure the loan at an annual rate of 6.0%.
You may repay all or part of the loan at any time while the Policy is in
force. Interest on a loan is accrued daily, and is due for the prior year on
each Policy Anniversary. If interest is not paid when due, it will be added to
the amount of the loan principal and interest will begin accruing thereon from
that date. An amount equal to the loan interest charged will be transferred to
the Loan Account from the Variable Accounts and Fixed Account on a proportional
basis.
Upon receipt of any loan repayment, Security Benefit will transfer an amount
equal to the repayment from the Loan Account into the Variable Accounts and
Fixed Account in accordance with the most recent premium allocation instructions
unless otherwise requested. In addition, Security Benefit will transfer any
interest earned on the loan balance held in the Loan Account on each Policy
Anniversary to each of the Variable Accounts and Fixed Account in accordance
with your most recent premium allocation instructions.
While the amount to secure the loan is held in the Loan Account, you forgo
the investment experience of the Variable Accounts and the current interest rate
of the Fixed Account on the loaned amount. Thus a loan, whether or not repaid,
will have a permanent effect on the Policy's values and may have an effect on
the amount and duration of the death benefit. If not repaid, the Policy Debt
will be deducted from the amount of death benefit paid upon the death of the
Insured, the Accumulated Value paid upon surrender or maturity, or the refund of
premium upon exercise of the Free-Look Right.
A loan may affect the length of time the Policy remains in force. The Policy
will lapse when Net Cash Surrender Value is insufficient to cover the monthly
deduction against the Policy's Accumulated Value on any Monthly Payment Date,
and the minimum payment required is not made during the Grace Period. Moreover,
the Policy may enter the Grace Period more quickly when a loan is outstanding,
because the loaned amount is not available to cover the monthly deduction.
Additional payments or repayment of a portion of Policy Debt may be required to
keep the Policy in force. See "Lapse," page 19.
A loan will not be treated as a distribution from the Policy, and will not
result in taxable income to the Policyowner unless the Policy is a Modified
Endowment Contract, in which case a loan will be treated as a distribution that
may give rise to taxable income.
For information on the tax treatment of loans, see "Federal Income Tax
Considerations," page 21.
BENEFITS AT MATURITY
If the Insured is living on the Policy Anniversary next following the
Insured's Age 95, Security Benefit will pay you, as an endowment benefit, the
Net Cash Surrender Value. Payment ordinarily will be made within seven days of
the Policy Anniversary, although payments may be postponed in certain
circumstances. See "Payments," page 27.
SURRENDER
You may fully surrender a Policy at any time during the life of the Insured.
The amount received in the event of a full surrender is the Policy's Net Cash
Surrender Value, which is equal to its Accumulated Value less any outstanding
Policy Debt.
You may surrender a Policy by sending a written request together with the
Policy to Security Benefit's Home Office. Security Benefit will determine the
proceeds as of the end of the Valuation Period during which the request for a
surrender is received. At various times, requests may be made to surrender a
policy for which good payment has not yet been received. Accordingly, payment of
surrender proceeds may be delayed until such time as good payment has been
collected, which may take up to 15 days. You may elect to have the proceeds paid
in cash or applied under a payment plan offered under the Policy. See "Payment
Plan," page 28. For information on the tax effects of a surrender of a Policy,
see "Federal Income Tax Considerations," page 21.
PARTIAL WITHDRAWAL BENEFITS
Security Benefit offers a partial surrender benefit by which you can obtain
a portion of the Net Cash Surrender Value: the Partial Withdrawal Benefit. The
Partial Withdrawal Benefit is available on and after the last day of the first
Policy Year. Under this Benefit, you may make up to four "Partial Withdrawals"
of Net Cash Surrender Value each Policy Year after the first Policy Year.
A Partial Withdrawal must be for at least $500, and the Policy's Net Cash
Surrender Value after the withdrawal must be at least $1,000, plus an amount
equal to the sum of the monthly deductions scheduled to be deducted from the
Policy's Accumulated Value in the 36-month period immediately following a
Partial Withdrawal. In addition, the amount of a Partial Withdrawal is further
limited on Policies on which you choose death benefit Option A so that the
withdrawal will not cause the Specified Amount to be less than $100,000,
although Security Benefit reserves the right to waive the minimum Specified
Amount under certain circumstances, such as for a group or sponsored
arrangement.
You may make a Partial Withdrawal by submitting a proper written request to
Security Benefit's Home Office. At various times, requests may be made to
withdraw Accumulated Value for which good payment has not yet been received.
Accordingly, Security Benefit may delay payment of a Partial Withdrawal until
such time as good payment has been collected, which may take up to 15 days. As
of the effective date of any withdrawal, your Accumulated Value and Net Cash
Surrender Value will be reduced by the amount of the withdrawal. The amount of
the withdrawal will be allocated proportionately to the Policyowner's Value in
the Variable Accounts and the Fixed Account unless otherwise requested by you.
If the Insured dies after the request for a withdrawal is sent to Security
Benefit and prior to the withdrawal being effected, the amount of the withdrawal
will be deducted from the death benefit proceeds, which will be determined
without taking into account the withdrawal. No fee is currently charged for a
Partial Withdrawal.
When a Partial Withdrawal is made on a Policy on which you have selected
death benefit Option A, the Specified Amount under the Policy is decreased by
the lesser of (1) the amount of the Partial Withdrawal or (2) if the death
benefit prior to the withdrawal is greater than the Specified Amount, the
amount, if any, by which the Specified Amount exceeds the difference between the
death benefit and the amount of the Partial Withdrawal. A Partial Withdrawal
will not change the Specified Amount of a Policy on which you have selected
death benefit Option B. However, assuming that the death benefit is not equal to
Accumulated Value times a death benefit percentage, the Partial Withdrawal will
reduce the death benefit by the amount of the Partial Withdrawal. To the extent
the death benefit is based upon the Accumulated Value times the death benefit
percentage applicable to the Insured, a Partial Withdrawal may cause the death
benefit to decrease by an amount greater than the amount of the Partial
Withdrawal. See "Death Benefit," page 15.
For information on the tax treatment of Partial Withdrawals, see "Federal
Income Tax Considerations," page 21.
RIGHT TO EXAMINE A POLICY -- FREE-LOOK RIGHT
The Policyowner has a Free-Look Right, under which the Policy may be
returned within 20 days after the Policyowner receives it, or within 45 days
after the Owner completes the application for insurance, whichever is later. To
exercise the Free-Look Right, the Policy can be mailed or delivered to Security
Benefit or its agent. The returned Policy will be treated as if Security Benefit
never issued it, and Security Benefit will promptly refund the full amount of
the premium paid. If the Owner has taken a loan during a Free-Look Period, the
Policy Debt will be deducted from the amount refunded. During the Free-Look
Period, net premiums will be allocated to the Money Market Variable Account,
which invests in Series C of the Fund (except for amounts allocated to the Loan
Account to secure a Policy loan). See "Allocation of Net Premiums," page 13.
LAPSE
The Policy will lapse only when the Net Cash Surrender Value is insufficient
to cover the current monthly deduction against the Policy's Accumulated Value on
any Monthly Payment Date, and a Grace Period expires without the Policyowner
making a sufficient payment. If Net Cash Surrender Value is insufficient to
cover the current monthly deduction on a Monthly Payment Date, the Owner must
pay during the Grace Period a minimum of three times the full monthly deduction
due on the Monthly Payment Date when the insufficiency occurred to avoid
termination of the Policy. Security Benefit will not accept any payment if it
would cause the Policyowner's total premium payments to exceed the maximum
permissible premium for the Policy's Specified Amount under the Internal Revenue
Code. This is unlikely to occur unless the Policyowner has outstanding Policy
Debt, in which case he or she could repay a sufficient portion of the Policy
Debt to avoid termination. In this instance, the Policyowner may wish to repay a
portion of Policy Debt to avoid recurrence of the potential lapse. If premium
payments have not exceeded the maximum permissible premiums for the Policy's
Specified Amount, the Policyowner may wish to make larger or more frequent
premium payments to avoid recurrence of the potential lapse.
If Net Cash Surrender Value is insufficient to cover the monthly deduction
on a Monthly Payment Date, Security Benefit will deduct the amount that is
available. Security Benefit will notify the Policyowner (and any assignee of
record) of the payment required to keep the Policy in force. The Policyowner
will then have a "Grace Period" of 61 days, measured from the date the notice is
sent, to make the required payment. The Policy will remain in force through the
Grace Period. Failure to make the required payment within the Grace Period will
result in termination of coverage under the Policy, and the Policy will lapse
with no value. If the required payment is made during the Grace Period, any
premium paid will be allocated among the Variable Accounts of the Separate
Account and the Fixed Account in accordance with the Policyowner's current
premium allocation instructions. Any monthly deduction due will be charged to
the Variable Accounts and the Fixed Account on a proportionate basis. If the
Insured dies during the Grace Period, the death benefit proceeds will equal the
amount of the death benefit immediately prior to the commencement of the Grace
Period, reduced by any unpaid monthly deductions and any Policy Debt, unless the
Guaranteed Death Benefit Premium or Extended Guaranteed Death Benefit Rider is
in effect, in which case, the death benefit will not be reduced by any unpaid
monthly deductions.
REINSTATEMENT
Security Benefit will reinstate a lapsed Policy (but not a Policy which has
been surrendered for its Net Cash Surrender Value) at any time within three
years after the end of the Grace Period, but before the Maturity Date provided
Security Benefit receives the following: (1) a written application from the
Policyowner; (2) evidence of insurability satisfactory to Security Benefit; and
(3) payment of all monthly deductions that were due and unpaid during the Grace
Period, and payment of a premium at least sufficient to keep the Policy in force
for three months after the date of reinstatement.
When the Policy is reinstated, the Accumulated Value will be equal to the
Accumulated Value on the date of the lapse subject to the following: If the
Policy is reinstated after the first Monthly Payment Date following lapse, the
Accumulated Value will be reduced by the amount of Policy Debt on the date of
lapse and no Policy Debt will exist on the date of the reinstatement. If the
Policy is reinstated on the Monthly Payment Date next following lapse, any
Policy Debt on the date of lapse will also be reinstated. No interest on amounts
held in Security Benefit's Loan Account to secure Policy Debt will be paid or
credited between lapse and reinstatement. Reinstatement will be effective as of
the Monthly Payment Date on or next following the date of approval by Security
Benefit, and Accumulated Value minus, if applicable, Policy Debt will be
allocated among the Variable Accounts and the Fixed Account in accordance with
the Policyowner's most recent premium allocation instructions.
CHARGES AND DEDUCTIONS
PREMIUM TAX
Security Benefit deducts a premium tax from each premium payment under a
Policy prior to allocation of the net premium to your Accumulated Value. The
premium tax consists of the following item:
STATE AND LOCAL PREMIUM TAX CHARGE. Security Benefit assesses a charge
against each premium to pay applicable state and local premium taxes. Premium
taxes vary from state to state, and in some instances, among municipalities.
Premium tax rates currently range from .75% to 5%, but are subject to change by
a governmental entity.
DEDUCTIONS FROM ACCUMULATED VALUE
Security Benefit deducts a charge called the monthly deduction from a
Policy's Accumulated Value in the Variable Accounts and Fixed Account beginning
on the Monthly Payment Date on or next following the date Security Benefit first
becomes obligated under the Policy, and on each Monthly Payment Date thereafter.
The monthly deduction consists of the following items:
COST OF INSURANCE. This monthly charge compensates Security Benefit for the
anticipated cost of paying death benefits in excess of Accumulated Value to
Beneficiaries of Insureds who die. The amount of the charge is equal to a
current cost of insurance rate multiplied by the net amount at risk under a
Policy at the beginning of the Policy Month. The net amount at risk for these
purposes is equal to the amount of death benefit payable at the beginning of the
Policy Month divided by 1.0032737 (a discount factor to account for return
deemed to be earned during the month) less the Accumulated Value at the
beginning of the Policy Month.
The Policy contains guaranteed cost of insurance rates that may not be
increased. The guaranteed rates are no greater than certain of the 1980
Commissioners Standard Ordinary Mortality Tables (and where unisex cost of
insurance rates apply, the 1980 Commissioners Ordinary Mortality Table B). These
rates are based on the Age, rating class (determined by tobacco use), and
underwriting class of the Insured. They are also based on the gender of the
Insured, except that unisex rates are used where appropriate under applicable
law, including in the State of Montana and in Policies purchased by employers
and employee organizations in connection with employment-related insurance or
benefit programs. As of the date of this Prospectus, Security Benefit charges
"current rates" that are lower (i.e., less expensive) than the guaranteed rates,
and Security Benefit may also charge current rates in the future. Like the
guaranteed rates, the current rates also vary with the Age, gender, rating
class, and underwriting class of the Insured. In addition, they also vary with
the size of the Specified Amount, and the policy duration. Policies with
Specified Amounts in excess of $250,000 receive more favorable rates than
Policies with smaller Specified Amounts. The cost of insurance rate generally
increases with the Age of the Insured.
If there have been increases in the Specified Amount, then for purposes of
calculating the cost of insurance charge, the Accumulated Value will first be
applied to the initial Specified Amount. If the Accumulated Value exceeds the
initial Specified Amount divided by 1.0032737, the excess will then be applied
to any increase in Specified Amount in the order of the increases. If the death
benefit equals Accumulated Value multiplied by the applicable death benefit
percentage, any increase in Accumulated Value will cause an automatic increase
in the death benefit. The underwriting class and duration for such increase will
be the same as that used for the most recent increase in Specified Amount (that
has not been eliminated through a subsequent decrease in Specified Amount).
OPTIONAL INSURANCE BENEFITS CHARGES. The monthly deduction will include
charges for any optional insurance benefits added to the Policy by Rider. See
"Optional Insurance Benefits," page 29.
DEDUCTIONS FROM THE VARIABLE ACCOUNTS
ADMINISTRATIVE CHARGE. Security Benefit deducts a daily administrative
charge from the average daily net assets of each Variable Account. The daily
administrative charge is equal to an annual rate of .35% in the first ten Policy
Years and .25% thereafter. Security Benefit, however, reserves the right to
charge up to an annual rate of .35% in all Policy Years. The administrative
charge is assessed to reimburse Security Benefit for the expenses associated
with administration and maintenance of the Policies. Security Benefit does not
expect to profit from this charge.
MORTALITY AND EXPENSE RISK CHARGE. Security Benefit deducts a daily charge
from the assets of each Variable Account for mortality and expense risks assumed
by Security Benefit. This charge is equal to an annual rate of .90% of the
average daily net assets of each Variable Account in the first ten Policy Years
and .70% thereafter. Security Benefit, however, reserves the right to charge up
to .90% in all Policy Years.
The mortality and expense risk charge is assessed to compensate Security
Benefit for assuming certain mortality and expense risks under the Policies. The
mortality risk assumed is that Insureds, as a group, may live for a shorter
period of time than estimated and, therefore, the cost of insurance charges
specified in the Policy will be insufficient to meet actual claims. The expense
risk assumed is that other expenses incurred in issuing and administering the
Policies and operating the Separate Account will be greater than the charges
assessed for such expenses. Security Benefit will realize a gain from this
charge to the extent it is not needed to provide the mortality benefits and
expenses under the Policies, and will realize a loss to the extent the charge is
not sufficient. Security Benefit may use any profit derived from this charge for
any lawful purpose, including promotional expenses.
OTHER CHARGES
Security Benefit may charge the Variable Accounts for federal income taxes
incurred by Security Benefit that are attributable to the Separate Account and
its Variable Accounts. No such charge is currently assessed. See "Charge for
Security Benefit Income Taxes," page 24.
Security Benefit bears the operating expenses of the Separate Account.
Each Variable Account purchases shares of the corresponding Series of the
underlying Fund. Each Series incurs certain charges including the investment
advisory fee and certain operating expenses. The Fund is a corporation that is
governed by its Board of Directors. The Fund's advisory fees and its expenses
are not fixed or specified under the terms of the Policy.The prospectus of the
Fund more fully describes the advisory fees and other expenses.
GUARANTEE OF CERTAIN CHARGES
Security Benefit guarantees that certain charges will not increase. This
includes the charge for mortality and expense risks, the administrative charge,
and the guaranteed cost of insurance rates.
OTHER INFORMATION
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion provides a general description of the federal
income tax considerations relating to the Policy. This discussion is based upon
Security Benefit's understanding of the present federal income tax laws as they
are currently interpreted by the Internal Revenue Service ("IRS"). This
discussion is not intended as tax advice. Because of the inherent complexity of
such laws, and the fact that tax results will vary according to the particular
circumstances of the individual involved, you may need tax advice if you are
contemplating the purchase of the Policy. It should, therefore, be understood
that these comments concerning federal income tax consequences are not an
exhaustive discussion of all tax questions that might arise under the Policy,
and that special rules which are not discussed herein may apply in certain
situations. Moreover, no representation is made as to the likelihood of
continuation of federal income tax or estate or gift tax laws, or of the current
interpretations by the IRS or the courts. Future legislation may adversely
affect the tax treatment of life insurance policies or other tax rules described
in this discussion or that relate directly or indirectly to life insurance
policies. Finally, these comments do not take into account any state or local
income tax considerations which may be involved in the purchase of the Policy.
While Security Benefit believes that the Policy meets the statutory
definition of life insurance, and hence will receive federal income tax
treatment consistent with that of fixed life insurance, the area of the tax law
relating to the definition of life insurance does not explicitly address all
relevant issues (including, for example, the treatment of the Guaranteed Death
Benefit Premium and Extended Guaranteed Death Benefit Rider). Security Benefit
reserves the right to make changes to the Policy if changes are deemed
appropriate by Security Benefit to attempt to assure qualification of the Policy
as a life insurance contract. If a Policy were determined not to qualify as life
insurance, the Policy would not provide the tax advantages normally provided by
life insurance. The discussion below summarizes the tax treatment of life
insurance contracts. The death benefit under a Policy should be excludable from
the gross income of the Beneficiary (whether the Beneficiary is a corporation,
individual or other entity) under Section 101(a)(1) of the Internal Revenue Code
("IRC") for purposes of the regular federal income tax and the owner generally
should not be deemed to be in constructive receipt of the cash values, including
increments thereof, under the Policy until a full surrender thereof, maturity of
the Policy, or Partial Withdrawal. In addition, certain Policy loans may be
taxable in the case of Policies that are Modified Endowment Contracts.
Prospective Policyowners that intend to use Policies to fund deferred
compensation arrangements for their employees are urged to consult their tax
advisors with respect to the tax consequences of such arrangements. Prospective
corporate owners should consult their tax advisors about the treatment of life
insurance in their particular circumstances for purposes of the alternative
minimum tax applicable to corporations and the environmental tax under IRC
Section 59A.
DIVERSIFICATION REQUIREMENTS. To comply with regulations under Section
817(h) of the IRC, each Series of the Fund is required to diversify its
investments. Generally, a Series is required to diversify its investments so
that on the last day of each quarter of a calendar year, no more than 55% of the
value of its assets is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any three
investments, and no more than 90% is represented by any four investments.
Securities of a single issuer generally are treated for purposes of Section
817(h) as a single investment. However, for this purpose, each U.S. Government
agency or instrumentality is treated as a separate issuer, and any security
issued, guaranteed, or insured (to the extent so guaranteed or insured) by the
U.S. or by an agency or instrumentality of the U.S. is treated as a security
issued by the U.S. Government or its agency or instrumentality, whichever is
applicable.
In certain circumstances, owners of variable life insurance contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
contract owner's gross income. The IRS has stated in published rulings that a
variable contract owner will be considered the owner of separate account assets
if the contract owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department also announced, in connection with the issuance of regulations
concerning diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset account may cause the investor (i.e., the Policyowner), rather
than the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular subaccounts without being treated as owners of the
underlying assets." As of the date of this Prospectus, no such guidance has been
issued.
Security Benefit does not know what standards will be set forth, if any, in
the regulations or rulings which the Treasury Department has stated it expects
to issue. Security Benefit therefore reserves the right to modify the Policy, as
deemed appropriate by Security Benefit, to attempt to prevent a Policyowner from
being considered the owner of a pro rata share of the assets of the Separate
Account. Moreover, in the event that regulations or rulings are adopted, there
can be no assurance that the Series will be able to operate as currently
described in the Prospectus, or that the Fund will not have to change any
Series` investment objective or investment policies.
TAX TREATMENT OF POLICIES. The Technical and Miscellaneous Revenue Act of
1988 established a new class of life insurance contracts referred to as Modified
Endowment Contracts. With the enactment of this legislation, the Policies will
be treated for tax purposes in one of two ways. Policies that are not classified
as Modified Endowment Contracts will be taxed as conventional life insurance
contracts, as described below. Taxation of pre-death distributions from Policies
that are classified as Modified Endowment Contracts is somewhat different, as
described below.
A life insurance contract becomes a "Modified Endowment Contract" if, at any
time during the first seven contract years, the sum of actual premiums paid
exceeds the sum of the "seven-pay premium." Generally, the "seven-pay premium"
is the level annual premium, such that if paid for each of the first seven
years, will fully pay for all future death and endowment benefits under a
contract. For example, if the "seven-pay premiums" were $1,000, the maximum
premiums that could be paid during the first seven years to avoid "Modified
Endowment" treatment would be $1,000 in the first year, $2,000 through the first
two years, and $3,000 through the first three years, etc. Under this test, a
Policy may or may not be a Modified Endowment Contract, depending on the amount
of premium paid during each of the Policy's first seven contract years. Changes
in death benefits under, or in other terms of, a Policy may require "retesting"
of a Policy to determine if it is to be classified as a Modified Endowment
Contract.
CONVENTIONAL LIFE INSURANCE POLICIES. If a Policy is not a Modified
Endowment Contract, upon full surrender or maturity of a Policy for its Net Cash
Surrender Value, the excess, if any, of the Net Cash Surrender Value plus any
outstanding Policy Debt over the cost basis under a Policy will be treated as
ordinary income for federal income tax purposes. Such a Policy's cost basis will
usually equal the premiums paid less any premiums previously recovered in
Partial Withdrawals. Under Section 7702 of the IRC, if a Partial Withdrawal
occurring within 15 years of the Policy Date is accompanied by a reduction in
benefits under the Policy, special rules apply to determine whether part or all
of the cash received is paid out of the income of the Policy and is taxable.
Cash distributed to a Policyowner on Partial Withdrawals occurring more than 15
years after the Policy Date will be taxable as ordinary income to the
Policyowner to the extent that it exceeds the cost basis under a Policy. It is
believed that the Guaranteed Death Benefit Premium and Extended Guaranteed Death
Benefit Rider features of the Policy should not result in a deemed distribution
under the Policy, but, to date, the IRS has not issued guidance regarding the
tax treatment of features similar to these features; accordingly, the law on
this point cannot be regarded as fully settled. If a Rider providing level term
insurance for a business associate is added to a Policy, the you may be deemed
to receive distributions under the Policy equal to the cost of the level term
insurance deducted from Accumulated Value, which may give rise to taxable
income.
Security Benefit also believes that loans received under Policies that are
not Modified Endowment Contracts will be treated as indebtedness of the owner,
and that no part of any loan under the Policy will constitute income to the
Owner unless the Policy is surrendered or upon maturity of the Policy. Interest
paid (or accrued by an accrual basis taxpayer) on a loan under a Policy that is
not a Modified Endowment Contract may be deductible, subject to several
limitations, depending on the use to which the proceeds are put and the tax
rules applicable to you . If, for example, the loan proceeds are used by an
individual for business or investment purposes, all or part of the interest
expense may be deductible. Generally, if the Policy loan is used for personal
purposes by an individual, the interest expense is not deductible. The
deductibility of loan interest (whether incurred under a Policy loan or on other
indebtedness) also may be subject to other limitations. For example, where the
interest is paid (or accrued by an accrual basis taxpayer) on a loan under a
Policy covering the life of an officer, employee, or person financially
interested in your trade or business, the interest may be deductible to the
extent that the interest is attributable to the first $50,000 of the Policy
Debt. Other tax law provisions may limit the deduction of interest payable on
loan proceeds that are used to purchase or carry certain life insurance
policies.
MODIFIED ENDOWMENT CONTRACTS. Pre-death distributions from Modified
Endowment Contracts may give rise to taxable income. Upon full surrender or
maturity of the Policy, you would recognize ordinary income for federal income
tax purposes equal to the amount by which the Net Cash Surrender Value plus
Policy Debt exceeds the investment in the Policy (usually the premiums paid plus
certain pre-death distributions that were taxable less any premiums previously
recovered that were excludable from gross income). Upon Partial Withdrawals and
Policy loans, you would recognize ordinary income to the extent allocable to
income (which includes all previously non-taxed gains) on the Policy. The amount
allocated to income is the amount by which the Accumulated Value of the Policy
exceeds investment in the Policy immediately before the distribution. Under a
tax law provision, if two or more policies which are classified as Modified
Endowment Contracts are purchased from any one insurance company, including
Security Benefit, during any calendar year, all such policies will be aggregated
for purposes of determining the portion of the pre-death distribution allocable
to income on the policies and the portion allocable to investment in the
policies.
Amounts received under a Modified Endowment Contract that are included in
gross income are subject to an additional tax equal to 10% of the amount
included in gross income, unless an exception applies. The 10% additional tax
does not apply to any amount received: (i) when the taxpayer is at least 59 1/2
years old; (ii) which is attributable to the taxpayer becoming disabled; or
(iii) which is part of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his
or her beneficiary.
If a Policy was not originally a Modified Endowment Contract but becomes
one, under Treasury Department regulations which are yet to be prescribed,
pre-death distributions received in anticipation of a failure of a Policy to
meet the seven-pay premium test are to be treated as pre-death distributions
from a Modified Endowment Contract (and, therefore, are to be taxable as
described above) even though, at the time of the distribution(s) the Policy was
not yet a Modified Endowment Contract. For this purpose, pursuant to the IRC,
any distribution made within two years before the Policy is classified as a
Modified Endowment Contract shall be treated as being made in anticipation of
the Policy's failing to meet the seven-pay premium test.
It is unclear whether interest paid (or accrued by an accrual basis
taxpayer) on Policy Debt with respect to a Modified Endowment Contract
constitutes interest for federal income tax purposes. If it does constitute
interest, it may be deductible, subject to several limitations, depending on the
use to which the proceeds are put and the tax rules applicable to you. If, for
example, the loan proceeds are used by an individual for business or investment
purposes, all or part of the interest expense may be deductible. Generally, if
the Policy loan is used for personal purposes by an individual, the interest
expense is not deductible. The deductibility of loan interest (whether incurred
under a Policy loan or on other indebtedness) also may be subject to other
limitations. For example, where the interest is paid (or accrued by an accrual
basis taxpayer) on a loan under a Policy covering the life of an officer,
employee, or person financially interested in your trade or business , the
interest may be deductible to the extent that the interest is attributable to
the first $50,000 of the Policy Debt. Other tax law provisions may limit the
deduction of interest payable on loan proceeds that are used to purchase or
carry certain life insurance policies.
REASONABLENESS REQUIREMENT FOR CHARGES. Another provision of the tax law
deals with allowable charges for mortality costs and other expenses that are
used in making calculations to determine whether a contract qualifies as life
insurance for federal income tax purposes. These calculations must be based upon
(i) mortality charges that meet the reasonable mortality charge requirements set
forth in the IRC and (ii) other charges reasonably expected to be actually paid.
The Treasury Department is expected to promulgate regulations governing
reasonableness standards for mortality and other charges. The area of the law
relating to reasonableness standards for mortality and other charges is
currently based on statutory language and IRS pronouncements which do not
explicitly address all relevant issues. Accordingly, while Security Benefit
believes that the mortality costs and other expenses used in making calculations
to determine whether the Policy qualifies as life insurance meet the current
standards, it cannot offer complete assurance since the law in this area is not
fully developed. It is possible that future regulations will contain standards
that would require Security Benefit to modify its mortality and other charges
used for the purposes of the calculations in order to retain the qualification
of the Policy as life insurance for federal income tax purposes, and Security
Benefit reserves the right to make any such modifications.
ACCELERATED BENEFIT FOR TERMINAL ILLNESS. An Accelerated Benefit for
Terminal Illness Rider (the "Accelerated Benefit Rider") is available in
connection with the Policy. Benefits under the Accelerated Benefit Rider may be
taxable. In addition, there may be a question as to whether a life insurance
policy that has an accelerated living benefits rider can meet certain technical
aspects of the definition of "life insurance contract" under the IRC. The IRS
has issued proposed regulations, and legislation has been introduced, providing
(i) that accelerated living benefits which meet certain requirements can be
received without incurring a federal income tax and (ii) for the treatment of
accelerated living benefits riders under the definitional requirements of a life
insurance contract. The precise rules which will be incorporated in any final
regulations or legislation are not known. Security Benefit reserves the right to
(but is not obligated to) modify the Accelerated Benefit Rider to conform with
the rules under any final regulations or legislation. Policyowners considering
adding an Accelerated Benefit Rider or exercising rights under that rider should
first consult a qualified tax advisor.
OTHER. Federal estate and gift and state and local estate, inheritance, and
other tax consequences of ownership or receipt of Policy proceeds depend on the
jurisdiction and the circumstances of each owner or Beneficiary.
You should consult a qualified tax advisor for complete information on
federal, state, local and other tax considerations.
SECURITY BENEFIT DOES NOT MAKE ANY GUARANTEE REGARDING THE TAX STATUS OF ANY
POLICY.
CHARGE FOR SECURITY BENEFIT INCOME TAXES
For federal income tax purposes, variable life insurance generally is
treated in a manner consistent with fixed life insurance. Security Benefit will
review the question of a charge to the Separate Account for Security Benefit's
federal income taxes periodically. Security Benefit may deduct a charge for any
federal income taxes incurred by Security Benefit that are attributable to the
Separate Account. This might become necessary if the tax treatment of Security
Benefit is ultimately determined to be other than what Security Benefit
currently believes it to be, if there are changes made in the federal income tax
treatment of variable life insurance at the insurance company level, or if there
is a change in Security Benefit's tax status.
Under current laws, Security Benefit may incur state and local taxes (in
addition to premium taxes) in several states. At present, these taxes are not
significant. If there is a material change in applicable state or local tax
laws, Security Benefit reserves the right to charge the Account for such taxes,
if any, attributable to the Account.
VOTING OF FUND SHARES
In accordance with its view of present applicable law, Security Benefit will
exercise voting rights attributable to the shares of each Series of the Fund
held in the Variable Accounts at any regular and special meetings of the
shareholders of the Fund on matters requiring shareholder voting under the
Investment Company Act of 1940. Security Benefit will exercise these voting
rights based on instructions received from persons having the voting interest in
corresponding Variable Accounts of the Separate Account. However, if the
Investment Company Act of 1940 or any regulations thereunder should be amended,
or if the present interpretation thereof should change, and as a result Security
Benefit determines that it is permitted to vote the shares of the Fund in its
own right, it may elect to do so.
The person having the voting interest under a Policy is the Policyowner.
Unless otherwise required by applicable law, the number of votes as to which you
will have the right to instruct will be determined by dividing your Accumulated
Value in a Variable Account by the net asset value per share of the
corresponding Series of the Fund. Fractional votes will be counted. The number
of votes as to which you will have the right to instruct will be determined as
of the date coincident with the date established by the Fund for determining
shareholders eligible to vote at the meeting of the Fund. If required by the
Securities and Exchange Commission, Security Benefit reserves the right to
determine in a different fashion the voting rights attributable to the shares of
the Fund based upon the instructions received from Policyowners. Voting
instructions may be cast in person or by proxy.
Voting rights attributable to your Accumulated Value held in each Variable
Account for which no timely voting instructions are received will be voted by
Security Benefit in the same proportion as the voting instructions which are
received in a timely manner for all Policies participating in that Variable
Account. Security Benefit will also exercise the voting rights from assets in
each Variable Account which are not otherwise attributable to Policyowners, if
any, in the same proportion as the voting instructions which are received in a
timely manner for all Policies participating in that Variable Account and
generally will exercise voting rights attributable to shares of Series of the
Fund held in its General Account, if any, in the same proportion as votes cast
with respect to shares of Series of the Fund held by the Separate Account and
other separate accounts of Security Benefit, in the aggregate.
DISREGARD OF VOTING INSTRUCTIONS
Security Benefit may, when required by state insurance regulatory
authorities, disregard voting instructions if the instructions require that
voting rights be exercised so as to cause a change in the subclassification or
investment objective of a Series or to approve or disapprove an investment
advisory contract. In addition, Security Benefit itself may disregard voting
instructions of changes initiated by Policyowners in the investment policy or
the investment adviser (or portfolio manager) of a Series, provided that
Security Benefit's disapproval of the change is reasonable and is based on a
good faith determination that the change would be contrary to state law or
otherwise inappropriate, considering the Series' objectives and purpose, and
considering the effect the change would have on Security Benefit. In the event
Security Benefit does disregard voting instructions, a summary of that action
and the reasons for such action will be included in the next report to
Policyowners.
REPORT TO OWNERS
Security Benefit will send to you, at least annually, a statement setting
forth a summary of the transactions which occurred during the year and
indicating the death benefit, Specified Amount, Accumulated Value, Net Cash
Surrender Value, and any Policy Debt. In addition, the statement will indicate
the allocation of Accumulated Value among the Fixed Account and the Variable
Accounts and any other information required by law. Confirmations will be sent
out upon premium payments, transfers, loans, loan repayments, withdrawals, and
surrenders.
You will also receive an annual and a semiannual report containing financial
statements for the Fund, which will include a list of the portfolio securities
of the Fund, as required by the Investment Company Act of 1940, and/or such
other reports as may be required by federal securities law.
SUBSTITUTION OF INVESTMENTS
Security Benefit reserves the right, subject to compliance with the law as
then in effect, to make additions to, deletions from, or substitutions for the
securities that are held by the Separate Account or any Variable Account or that
the Separate Account or any Variable Account may purchase. If shares of any or
all of the Series of the Fund should no longer be available for investment, or
if, in the judgment of Security Benefit's management, further investment in
shares of any or all Series of the Fund should become inappropriate in view of
the purposes of the Policies, Security Benefit may substitute shares of another
Series of the Fund or of a different fund for shares already purchased, or to be
purchased in the future under the Policies.
Where required, Security Benefit will not substitute any shares attributable
to your interest in a Variable Account or the Separate Account without notice,
your approval, or prior approval of the Securities and Exchange Commission and
without following the filing or other procedures established by applicable state
insurance regulators.
Security Benefit also reserves the right to establish additional Variable
Accounts of the Separate Account, each of which would invest in a new Series of
the Fund, or in shares of another investment company, a series thereof, or
suitable investment vehicle, with a specified investment objective. New Variable
Accounts may be established when, in the sole discretion of Security Benefit,
marketing needs or investment conditions warrant, and any new Variable Accounts
will be made available to existing Policyowners on a basis to be determined by
Security Benefit. Security Benefit may also eliminate one or more Variable
Accounts if, in its sole discretion, marketing, tax, or investment conditions so
warrant.
In the event of any such substitution or change, Security Benefit may, by
appropriate endorsement, make such changes in this and other policies as may be
necessary or appropriate to reflect such substitution or change. If deemed by
Security Benefit to be in the best interests of persons having voting rights
under the Policies, the Separate Account may be operated as a management
investment company under the Investment Company Act of 1940 or any other form
permitted by law, it may be deregistered under that Act in the event such
registration is no longer required, or it may be combined with other separate
accounts of Security Benefit or an affiliate thereof. Subject to compliance with
applicable law, Security Benefit also may combine one or more Variable Accounts
and may establish a committee, board, or other group to manage one or more
aspects of the operation of the Separate Account.
CHANGES TO COMPLY WITH LAW
Security Benefit reserves the right to make any change without consent of
Policyowners to the provisions of the Policy to comply with, or give
Policyowners the benefit of, any Federal or State statute, rule, or regulation,
including but not limited to, requirements for life insurance contracts under
the Internal Revenue Code, under regulations of the United States Treasury
Department or any state.
PERFORMANCE INFORMATION
Performance information for the Variable Accounts of the Separate Account
may appear in advertisements, sales literature, or reports to you or prospective
purchasers. Performance information in advertisements or sales literature may be
expressed in any fashion permitted under applicable law, which may include
presentation of a change in your Accumulated Value attributable to the
performance of one or more Variable Accounts, or as a change in your death
benefit. Performance quotations may be expressed as a change in your Accumulated
Value over time or in terms of the average annual compounded rate of return on
your Accumulated Value, based upon a hypothetical Policy in which premiums have
been allocated to a particular Variable Account over certain periods of time
that will include one, five and ten years, or from the commencement of operation
of the Variable Account if less than one, five, or ten years. Performance
information based upon a hypothetical Policy may also be quoted for periods
beginning prior to the availability of the Policies based upon performance of
the Fund and the charges under the Policy. Any such quotation may reflect the
deduction of all applicable charges to the Policy including premium tax, the
cost of insurance, the administrative charge, and the mortality and expense risk
charge. Performance information for the Fund may be simultaneously shown.
Performance information for a Variable Account may be compared, in
advertisements, sales literature, and reports to Policyowners to, among other
things: (i) other variable life separate accounts or investment, savings, or
insurance products tracked by research firms, rating services, companies,
publications, or persons who rank separate accounts or investment products on
overall performance or other criteria; and (ii) the Consumer Price Index
(measure for inflation) to assess the real rate of return from the purchase of a
Policy. Reports and promotional literature may also contain Security Benefit's
rating or a rating of Security Benefit's claim-paying ability as determined by
firms that analyze and rate insurance companies and by nationally recognized
statistical rating organizations, and may show the effects of tax-deferred
compounding your rate of return, on Accumulated Value or returns in general, and
may include a comparison at various points in time of the return on the Policy
or tax-deferred returns in general with the return on a taxable basis.
Performance information for any Variable Account of the Separate Account
reflects only the performance of a hypothetical Policy whose Accumulated Value
is allocated to the Variable Account during a particular time period on which
the calculations are based. Performance information should be considered in
light of the investment objectives and policies, characteristics and quality of
the Series of the Fund in which the Variable Account invests, and the market
condition during the given period of time, and should not be considered as
representative of what may be achieved in the future.
THE FIXED ACCOUNT
You may allocate all or a portion of your net premium payments and transfer
Accumulated Value to the Fixed Account of Security Benefit. Amounts allocated to
the Fixed Account become part of the "General Account" of Security Benefit,
which supports insurance and annuity obligations. Because of exemptive and
exclusionary provisions, interests in the Fixed Account have not been registered
under the Securities Act of 1933, and the Fixed Account has not been registered
as an investment company under the Investment Company Act of 1940. Accordingly,
neither the Fixed Account nor any interest therein is generally subject to the
provisions of these Acts and, as a result, the staff of the Securities and
Exchange Commission has not reviewed the disclosure in this Prospectus relating
to the Fixed Account. Disclosures regarding the Fixed Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in the
Prospectus. For more details regarding the Fixed Account, see the Policy itself.
GENERAL DESCRIPTION
Amounts allocated to the Fixed Account become part of the General Account of
Security Benefit, which consists of all assets owned by Security Benefit, other
than those in the Separate Account and other separate accounts of Security
Benefit. Subject to applicable law, Security Benefit has sole discretion over
the investment of the assets of its General Account.
You may elect to allocate net premium payments to the Fixed Account, the
Separate Account, or both. You may also transfer Accumulated Value from the
Variable Accounts of the Separate Account to the Fixed Account, or from the
Fixed Account to the Variable Accounts, subject to the limitations described
below. Security Benefit guarantees that the Accumulated Value in the Fixed
Account will be credited with a minimum interest rate of .32737% per month,
compounded monthly, for a minimum effective annual rate of 4%. Such interest
will be paid regardless of the actual investment experience of the Fixed
Account. In addition, Security Benefit may in its sole discretion pay interest
at a rate ("Current Rate") that exceeds 4%. (The portion of your Accumulated
Value that has been used to secure Policy Debt will be credited with an interest
rate of .48676% per month, compounded monthly, for an effective annual rate of
6%.)
Accumulated Value allocated or transferred to the Fixed Account during one
month may be credited with a different Current Rate than amounts allocated or
transferred to the Fixed Account in another month. Therefore, at any given time,
various portions of your Accumulated Value allocated to the Fixed Account may be
earning interest at different Current Rates, depending upon the month during
which such portions were originally allocated or transferred to the Fixed
Account. Security Benefit bears the full investment risk for the Accumulated
Value allocated to the Fixed Account.
DEATH BENEFIT
The death benefit under the Policy will be determined in the same fashion
for a Policyowner who has Accumulated Value in the Fixed Account as for a
Policyowner who has Accumulated Value in the Variable Accounts. The death
benefit under Option A will be equal to the Specified Amount of the Policy or,
if greater, Accumulated Value multiplied by a death benefit percentage. Under
Option B, the death benefit will be equal to the Specified Amount of the Policy
plus the Accumulated Value or, if greater, Accumulated Value multiplied by a
death benefit percentage. See "Death Benefit," page 15.
POLICY CHARGES
The mortality and expense risk and administrative charges are not assessed
against Accumulated Value allocated to the Fixed Account. Other policy charges
will be the same for Policyowners who allocate net premiums or transfer
Accumulated Value to the Fixed Account as for Policyowners who allocate net
premiums to the Variable Accounts. These charges consist of the premium tax,
consisting of the state and local premium tax charge, and the deductions from
Accumulated Value, including the charges for the cost of insurance, and the
charge for any optional insurance benefits added by rider. Any amounts that
Security Benefit pays for income taxes allocable to the Variable Accounts will
not be charged against the Fixed Account. In addition, the operating expenses of
the Variable Accounts, as well as the investment advisory fee charged by the
Fund, will not be paid directly or indirectly by you to the extent the
Accumulated Value is allocated to the Fixed Account; however, you will not
participate in the investment experience of the Variable Accounts.
TRANSFERS, SURRENDERS, WITHDRAWALS, AND POLICY LOANS
Amounts may be transferred after the Free-Look Period from the Variable
Accounts to the Fixed Account and from the Fixed Account to the Variable
Accounts, subject to the following limitations. You may transfer from the Fixed
Account to the Variable Accounts in any Policy Year not more than the greater of
one third of the Accumulated Value in the Fixed Account at the time of the
transfer, $5,000 or 120% of the Accumulated Value transferred from the Fixed
Account during the previous Policy Year. Accumulated Value in the Fixed Account
may be transferred pursuant to the Dollar Cost Averaging or Asset Reallocation
Options subject to this limitation. The minimum amount that may be transferred
is $500, except that this minimum does not apply to transfers under the Dollar
Cost Averaging or Asset Reallocation Options. Currently, there is no charge
imposed upon transfers; however, Security Benefit reserves the right to assess a
charge of $25 per transfer in the future to the extent transfers exceed six in
any Policy Year and to impose other limitations on the number of transfers, the
amount of transfers, and the amount remaining in the Fixed Account or Variable
Accounts after a transfer.
You may also make full surrenders and Partial Withdrawals to the same extent
as a Policyowner who has invested in the Variable Accounts. See "Surrender,"
page 18 and "Partial Withdrawal Benefits," page 18. Policyowners allocating
Accumulated Value in the Fixed Account may borrow up to 80% of Net Cash
Surrender Value. See "Policy Loans," page 17. Transfers, surrenders, and
withdrawals payable from the Fixed Account, and Policy loans made from Contract
Value allocated to the Fixed Account, may be delayed for up to six months.
MORE ABOUT THE POLICY
OWNERSHIP
The Policyowner is the individual named as such in the application or in any
later change shown in Security Benefit's records. While the Insured is living,
the Policyowner alone has the right to receive all benefits and exercise all
rights that the Policy grants or Security Benefit allows.
JOINT OWNERS. If more than one person is named as Policyowner, they are
joint owners. Any Policy transaction requires the signature of all persons named
jointly. Unless otherwise provided, if a joint owner dies, ownership passes to
the surviving joint owner(s). When the last joint owner dies, ownership passes
through that person's estate, unless otherwise provided.
BENEFICIARY
The Beneficiary is the individual named as such in the application or any
later change shown in Security Benefit's records. You may change the Beneficiary
at any time during the life of the Insured by written request, which must be
received by Security Benefit at its Home Office. The change will be effective as
of the date this form is signed. Contingent and/or concurrent Beneficiaries may
be designated. You may designate a permanent Beneficiary, whose rights under the
Policy cannot be changed without his or her consent. Unless otherwise provided,
if no designated Beneficiary is living upon the death of the Insured, you or
your estate is the Beneficiary.
Security Benefit will pay the death benefit proceeds to the Beneficiary.
Unless otherwise provided, in order to receive proceeds at the Insured's death,
the Beneficiary must be living at the time of the Insured's death.
EXCHANGE OF INSURED
After the first Policy Year and subject to approval from Security Benefit,
you may exchange the named Insured on the Policy upon written application,
evidence of insurability satisfactory to Security Benefit, and payment of a
charge of $100. The exchange is effective the first Monthly Payment Date on or
after the exchange is approved. Coverage on the new Insured will become
effective on the exchange date. Coverage on the current Insured will terminate
on the day preceding the exchange date. The Policy Date will not be changed
unless the new Insured was born after the Policy Date. In such case, the Policy
Date will be changed to the Policy anniversary on or next following the birth
date of the new Insured. The cost of insurance charge will be based on the new
Insured's Age, gender, risk class and underwriting class.
Security Benefit reserves the right to disallow a requested exchange of the
named Insured, and will not permit a requested exchange, among other reasons,
(1) if compliance with the guideline premium limitations under tax law resulting
from the exchange of Insured would result in the immediate termination of the
Policy, or (2) if, to effect the requested exchange of Insured, payments to you
would have to be made from Accumulated Value for compliance with the guideline
premium limitations, and the amount of such payments would exceed the Net Cash
Surrender Value under the Policy.
A fee of $100 will be charged to cover the costs of processing the exchange
of Insured. This amount will not be credited to or deducted from Accumulated
Value, but must be paid directly to Security Benefit by you before the request
for an exchange of Insured will be processed.
EXCHANGE OF POLICY DURING FIRST 24 MONTHS
During the first 24 months following the Policy Date, if the Policy has not
lapsed, you may exchange the Policy for a fixed-benefit life insurance policy
issued and made available for exchange by Security Benefit. The exchange will be
made without evidence of insurability, and the new policy will have the same
Specified Amount, Policy Date, Age, rating class and underwriting class for the
Insured as the exchanged Policy.
An exchange will be effective on the Monthly Payment Date following Security
Benefit's receipt of written notice of your request to exchange in proper form
and payment of any fee. Security Benefit reserves the right to charge a fee of
up to $200 to effect an exchange. This fee will not be deducted from Accumulated
Value, but must be paid directly to Security Benefit. Any outstanding Policy
Debt must be repaid on or before the effective date of the exchange.
THE CONTRACT
This Policy is a contract between you and Security Benefit. The entire
contract consists of the Policy, a copy of the initial application, all
subsequent applications to change the Policy, and endorsements, all Riders, and
all additional Policy information sections (Specifications Pages) added to the
Policy.
PAYMENTS
Security Benefit will pay death benefit proceeds, Net Cash Surrender Value
on surrender, Partial Withdrawals, and loan proceeds based on allocations made
to the Variable Accounts, and will effect a transfer between Variable Accounts
or from a Variable Account to the Fixed Account within seven days after Security
Benefit receives all the information needed to process a payment.
However, Security Benefit can postpone the calculation or payment of such a
payment or transfer of amounts based on investment performance of the Variable
Accounts if:
* The New York Stock Exchange is closed on other than customary weekend and
holiday closing or trading on the New York Stock Exchange is restricted as
determined by the SEC; or
* An emergency exists, as determined by the SEC, as a result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the Account's net assets; or
* The SEC by order permits postponement for the protection of Policyowners.
ASSIGNMENT
You may assign a Policy as collateral security for a loan or other
obligation. No assignment will bind Security Benefit unless the original, or a
copy, is received at Security Benefit's Home Office, and will be effective only
when recorded by Security Benefit. An assignment does not change the ownership
of the Policy. However, after an assignment, the rights of any Policyowner or
Beneficiary will be subject to the assignment. The entire Policy, including any
attached payment option or Rider, will be subject to the assignment. Security
Benefit will rely solely on the assignee's statement as to the amount of the
assignee's interest. Security Benefit will not be responsible for the validity
of any assignment. Unless otherwise provided, the assignee may exercise all
rights this Policy grants except (a) the right to change the Policyowner or
Beneficiary; and (b) the right to elect a payment option. Assignment of a Policy
that is a Modified Endowment Contract may generate taxable income. (See "Federal
Income Tax Considerations," page 21.)
ERRORS ON THE APPLICATION
If the Age or gender of the Insured has been misstated, the death benefit
under this Policy will be the greater of that which would be purchased by the
most recent cost of insurance charge at the correct Age and gender, or the death
benefit derived by multiplying Accumulated Value by the death benefit percentage
for the correct Age and gender. If the Insured's Age, or gender is misstated in
the application, the Accumulated Value will be modified by recalculating all
prior cost of insurance charges and other monthly deductions based on the
correct Age and gender. If unisex cost of insurance rates apply, no adjustment
will be made for a misstatement of gender. See "Cost of Insurance," page 20.
INCONTESTABILITY
Security Benefit may contest the validity of this Policy if any material
misstatements are made in the application. However, this Policy will be
incontestable after the expiration of the following: the initial Specified
Amount cannot be contested after the Policy has been in force during the
Insured's lifetime for two years from the date the Policy was issued; if the
Insured is changed, the Policy cannot be contested after it has been in force
during the new Insured's lifetime for two years from the effective date of the
exchange; and an increase in the Specified Amount cannot be contested after the
increase has been in force during an Insured's lifetime for two years from its
effective date.
PAYMENT IN CASE OF SUICIDE
If the Insured dies by suicide, while sane or insane, within two years from
the Policy Date, Security Benefit will limit the death benefit proceeds to the
premium payments less any withdrawal amounts and less any Policy Debt. If the
Insured has been changed and the new Insured dies by suicide, while sane or
insane, within two years of the exchange date, the death benefit proceeds will
be limited to the Net Cash Surrender Value as of the exchange date, plus the
premiums paid since the exchange date, less the sum of any increases in Debt,
withdrawal amounts, and any dividends paid in cash since the exchange date. If
an Insured dies by suicide, while sane or insane, within two years of the
effective date of any increase in the Specified Amount, Security Benefit will
refund the cost of insurance charges made with respect to such increase.
PARTICIPATING
The Policy is participating and will share in the surplus earnings of
Security Benefit. However, the current dividend scale is zero, and Security
Benefit does not anticipate that dividends will be paid. Any dividends that do
become payable will be paid in cash.
POLICY ILLUSTRATIONS
Upon request, Security Benefit will send you an illustration of future
benefits under the Policy based on both guaranteed and current cost factor
assumptions. However, Security Benefit reserves the right to charge a fee for
requests for illustrations in excess of one per Policy year.
PAYMENT PLAN
Maturity, surrender, or withdrawal benefits may be used to purchase a
payment plan providing monthly income for the lifetime of the Insured, and death
benefit proceeds may be used to purchase a payment plan providing monthly income
for the lifetime of the Beneficiary. The monthly payments consisting of proceeds
plus interest will be paid in equal installments for a period not to exceed 20
years. The purchase rates for the payment plan are guaranteed not to exceed
those shown in the Policy, but from time to time Security Benefit may establish
current rates that are lower (i.e., providing greater income). This benefit is
not available if the income would be less than $25 a month. Maturity, surrender,
or withdrawal benefits or death benefit proceeds may be used to purchase any
other payment plan that Security Benefit makes available at that time.
OPTIONAL INSURANCE BENEFITS
Subject to certain requirements, you may elect to add one or more of the
following optional insurance benefits to the Policy by a Rider at the time of
application for a Policy. These optional benefits are described briefly below.
The cost of any additional insurance benefits will be deducted as part of the
monthly deduction against Accumulated Value. See "Charges and Deductions," page
19. The amounts of these benefits are fully guaranteed at issue. Certain
restrictions may apply and are described in the applicable Rider. An insurance
agent authorized to sell the Policy can describe these extra benefits further.
Samples of the provisions are available from Security Benefit upon written
request. Certain Riders are not available in all states. For information
relating to the federal income tax aspects of purchasing a Policy Rider, see
"Federal Income Tax Considerations," page 21.
WAIVER OF MONTHLY DEDUCTION RIDER. This Rider provides for the waiver of the
monthly deduction in the event the Insured is disabled for a period of six
months or longer prior to age 65.
ACCELERATED BENEFIT RIDER FOR TERMINAL ILLNESS. This Rider provides for
payment of up to the lesser of (i) 50% of the Specified Amount less any Policy
Debt or (ii) $250,000, upon receipt of satisfactory proof of terminal illness.
Such terminal illness must first be diagnosed while the Policy is in force. The
payment amount requested will be reduced by an actuarial discount which
compensates Security Benefit for interest not earned as a result of early
payment of a portion of the death benefit under the Policy. Premium payments
made after the payment of the Accelerated Benefit must be allocated to the Fixed
Account. Accelerated Benefit payments will not be made for less than $25,000
and, for any one Insured, will not be made for more than $500,000 under all
policies issued by Security Benefit. Security Benefit may charge a fee of up to
$200 to cover the costs of administration at the time of payment of an
Accelerated Benefit.
LEVEL TERM INSURANCE RIDER. This Rider provides level term insurance for a
family member and may not be issued on the Insured. The maximum amount of
insurance that may be provided under the Rider is an amount equal to the
Specified Amount under the Policy. Up to five Level Term Insurance Riders may be
added to a Policy.
EXTENDED GUARANTEED DEATH BENEFIT RIDER. You may elect to extend the
Guaranteed Death Benefit beyond the first five Policy Years by adding this Rider
to the Policy at the time of application. This Rider provides an Extended
Guaranteed Death Benefit Premium which, if paid in advance on at least a monthly
basis, will keep the Policy in force beyond the first five Policy Years even if
Net Cash Surrender Value is insufficient to cover the monthly deduction on any
Monthly Payment Date. The length of the Extended Guaranteed Death Benefit period
is 10 to 30 Policy Years (depending on the Age of the Insured on the Policy
Date). The amount of the Extended Guaranteed Death Benefit Premium is determined
by Security Benefit based upon the Policy's Specified Amount and Death Benefit
Option, any Riders added to the Policy, and the Age, gender (unless unisex cost
of insurance rates apply), rating class, and underwriting class of the Insured.
Security Benefit will send a reminder notice if the amount of premiums paid on a
Policy to which this Rider has been added, less outstanding Policy Debt and any
Partial Withdrawals, is less than an amount equal to the monthly Extended
Guaranteed Death Benefit Premium times the number of Policy Months the Policy
has been in force. If the required payment is not made within 61 days, measured
from the date of the notice, the Extended Guaranteed Death Benefit will no
longer be in effect and may not be reinstated. A Policy Loan taken while the
Extended Guaranteed Death Benefit Rider is in effect may cause this benefit to
terminate. As a result, the Policy will not have the protection from lapse
provided by the Extended Guaranteed Death Benefit Rider. The Extended Guaranteed
Death Benefit Premium is not applied to purchase the Rider, but is applied to
the Policy and may be the same as the Planned Periodic Premium.
DISTRIBUTION OF THE POLICY
Security Distributors, Inc. ("SDI") is principal underwriter (distributor)
of the Policies. SDI is registered as a broker/ dealer with the SEC and is a
member of the National Association of Securities Dealers ("NASD"). SDI acts as
principal underwriter under a Distribution Agreement with Security Benefit.
Security Benefit and SDI have Sales Agreements with various broker/dealers
under which the Policy will be sold by registered representatives of the
broker/dealers. The registered representatives are required to be authorized
under applicable state regulations to sell Variable Life Insurance. The
broker/dealers are required to be registered with the SEC and members of the
NASD. The compensation payable to a broker/dealer for sales of the Policy may
vary with the Sales Agreement, but is not expected to exceed 2% of premium and
3% of the monthly cost of insurance charge. Broker/dealers may also receive
annual compensation of up to .20% of Accumulated Value less Policy Debt,
depending upon the circumstances. This annual compensation will be computed and
payable monthly. In addition, Security Benefit may also pay override payments,
expense allowances, bonuses, wholesaler fees, and training allowances.
Registered representatives earn commissions from the broker/dealers with whom
they are affiliated for selling Security Benefit's Policies. Compensation
arrangements vary among broker/dealers. In addition, registered representatives
who meet specified production levels may qualify, under sales incentive programs
adopted by Security Benefit, to receive non-cash compensation such as
expense-paid trips, expense-paid educational seminars and merchandise. Security
Benefit makes no separate deductions, other than previously described, from
premiums to pay sales commissions or sales expenses.
<PAGE>
MORE ABOUT SECURITY BENEFIT
MANAGEMENT
The directors and officers of Security Benefit are listed below, together
with information as to their principal occupations during the past five years
and certain other current affiliations. Unless otherwise indicated, the business
address of each director and officer is c/o Security Benefit Life Insurance
Company, 700 SW Harrison Street, Topeka, Kansas 66636.
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION LAST FIVE YEARS
<S> <C>
Howard R. Fricke Chairman of the Board, Chief Executive Officer and Director, Security
Chief Executive Officer and Director Benefit Life Insurance Company from March 1988 to present. Chairman of
the Board, President, Chief Executive Officer and Director, Security
Benefit Life Insurance Company from February 1988 to March 1998.
Thomas R. Clevenger Consultant, Investments, Wichita, Kansas since 1990; President, Fourth
Director Financial Corporation, Topeka, Kansas prior to 1990.
P.O. Box 8514
Wichita, KS 67208
Sister Loretto Marie Colwell President and Chief Executive Officer, St. FrancisHospital and Medical
Director Center, Topeka, Kansas since 1991; various senior management and
1700 SW 7th Street marketing positions, St. James Community Hospital, Butte, Montana prior
Topeka, KS 66606 to 1991.
John C. Dicus Chairman of the Board, Capitol Federal Savings and Loan Association, Topeka,
Director Kansas.
700 Kansas Avenue
Topeka, KS 66603
Steven J. Douglass President and Chief Executive Officer, Payless ShoeSource, Inc., Topeka,
3231 E. 6th Street Kansas, since April 1996; various senior management positions, May
Topeka, KS 66607 Department Stores, Inc., St. Louis, Missouri prior to 1996.
William W. Hanna Director, Chief Operating Officer and President, Koch Industries, Inc.,
Director Wichita, Kansas.
P.O. Box 2256
Wichita, Kansas 67201
John E. Hayes Retired 1998 to present. Chairman of the Board, President and Chief
Director Executive Officer, Western Resources, Inc., Topeka, Kansas 1989 to 1998;
200 Gulf Blvd. Chairman, President and Chief Executive Officer, Southwestern Bell Telephone
Belleair Shore, FL 33786 Company, Topeka, Kansas prior to 1989.
Laird G. Noller President, Noller Automotive Group, Topeka, Kansas.
Director
2245 Topeka Boulevard
Topeka, KS 66611
Frank C. Sabatini Chairman of the Board, Capital City Bank, Topeka, Kansas.
Director
120 SW 6th Street
Topeka, KS 66603
Robert C. Wheeler President, Hill's Pet Nutrition, Inc., Topeka, Kansas.
Director
P.O. Box 148
Topeka, KS 66601
Kris A. Robbins President and Chief Operating Officer, Security Benefit Life Insurance
President and Chief Operating Officer Company since March 1998; Executive Vice President and Chief Operating
Officer, Security Benefit Life Insurance Company from July 1997 to March
1998; various senior management positions, Providian Corp., Louisville,
Kentucky from 1985 to 1997.
Malcolm E. Robinson Senior Vice President and Assistant to the President,
Senior Vice President and Assistant to the President Security Benefit Life Insurance Company.
Richard K Ryan Senior Vice President, Security Benefit Life Insurance Company.
Senior Vice President, Product and Market Development
Donald J. Schepker Senior Vice President, Chief Financial Officer and Treasurer,
Senior Vice President, Chief Financial Officer, Security Benefit Life Insurance Company.
and Treasurer
Roger K. Viola Senior Vice President, General Counsel and Secretary,
Senior Vice President, General Counsel and Secretary Security Benefit Life Insurance Company.
Greg Garvin Senior Vice President, Sales and Distribution, Security Benefit Life
Senior Vice President, Sales and Distribution Insurance Company from December 1998 to present; Vice President, Security
Benefit Life Insurance Company, April 1998 to December 1998;
Vice President Aegon/Commonwealth General, Louisville, KY from 1996-
1998; Executive Vice President, Consenco/Bankmark, Louisville, KY, 1993
to 1996; President, Investor Life Services/USFG, Cincinnati, OH 1988 to
1993; President, Goldome Agency, Buffalo, NY from 1983 to 1988.
James R. Schmank Senior Vice President, Security Benefit Life Insurance Company.
Senior Vice President
Venette K. Davis Senior Vice President, Market Implementation, Security Benefit Life
Senior Vice President, Market Implementation Insurance Company.
J. Craig Anderson Senior Vice President, Human Resources, Security Benefit Life Insurance
Senior Vice President, Human Resources Company from March 1998 to present; Vice President, Human Resources,
Security Benefit Life Insurance Company, June 1996 to March 1998; Vice
President and Associate Counsel, Security Benefit Life Insurance Company,
1985 to June 1996.
</TABLE>
OFFICERS AND DIRECTORS OF SBL WHO ARE ALSO CONNECTED WITH THE FUND OR ITS
AFFILIATED PERSONS:
<TABLE>
<CAPTION>
<S> <C>
John D. Cleland Senior Vice President and Managing Member Representative,
Security Management Company, LLC
James R. Schmank President and Managing Member Representative,
Security Management Company, LLC
</TABLE>
No officer or director listed above receives any compensation from the
Separate Account. No separately allocable compensation has been paid by Security
Benefit or any of its affiliates to any person listed for services rendered to
the Account.
<PAGE>
STATE REGULATION
Security Benefit is subject to the laws of the State of Kansas governing
insurance companies, and to regulation by the Commissioner of Insurance of the
State of Kansas. In addition, it is subject to the insurance laws and
regulations of the other states and jurisdictions in which it is licensed or may
become licensed to operate. Security Benefit must file an Annual Statement in a
prescribed form with the Kansas Commissioner of Insurance and with regulatory
authorities of other states on or before March 1 in each year. This statement
covers the operations of Security Benefit for the preceding year and its
financial condition as of December 31 of that year. Security Benefit's affairs
are subject to review and examination at any time by the Commissioner of
Insurance or his or her agents, and subject to full examination of Security
Benefit's operations at periodic intervals.
TELEPHONE TRANSFER PRIVILEGES
You may request a transfer of Accumulated Value and may request changes to
an existing Dollar Cost Averaging or Asset Reallocation Option by telephone if
the Telephone Transfer Section of the application or an Authorization for
Telephone Requests form ("Telephone Authorization") has been completed, signed,
and filed at Security Benefit's Home Office. Security Benefit has established
procedures to confirm that instructions communicated by telephone are genuine
and may be liable for any losses due to fraudulent or unauthorized instructions
if it fails to comply with its procedures. Security Benefit's procedures require
that any person requesting a transfer by telephone provide the Policy Account
Number and the Owner's Tax Identification Number, and such instructions must be
received on a recorded line.
Telephone instructions received by Security Benefit by 3:00 p.m. Central
time on any Valuation Date will be effected as of the end of that Valuation Date
in accordance with your instructions (presuming that the Free-Look Period has
expired). Security Benefit reserves the right to deny any telephone transfer or
request. If all telephone lines are busy (which might occur, for example, during
periods of substantial market fluctuations), you might not be able to request
transfers and loans by telephone, and would have to submit written requests.
By authorizing telephone transfers, you authorize Security Benefit to accept
and act upon telephonic instructions for transfers involving your Policy, and
agrees that neither Security Benefit, nor any of its affiliates will be liable
for any loss, damages, cost, or expense (including attorney's fees) arising out
of any requests effected, provided that Security Benefit complied with its
procedures. As a result of this policy on telephone requests, you may bear the
risk of loss arising from the telephone transfer privileges. Security Benefit
may discontinue, modify, or suspend the telephone transfer privilege at any
time.
LEGAL PROCEEDINGS
There are no legal proceedings pending to which the Separate Account is a
party, or which would materially affect the Separate Account.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Policies
described in this Prospectus and the organization of Security Benefit, its
authority to issue the Policies under Kansas law, and the validity of the forms
of the Policies under Kansas law have been passed on by Amy J. Lee, Associate
General Counsel of Security Benefit.
REGISTRATION STATEMENT
A Registration Statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this Prospectus. This
Prospectus does not include all of the information set forth in the Registration
Statement, as portions have been omitted pursuant to the rules and regulations
of the SEC. The omitted information may be obtained at the SEC's principal
office in Washington, D.C., upon payment of the SEC's prescribed fees and may
also be obtained at the SEC's web site, http://www.sec.gov.
EXPERTS
The Consolidated Financial Statements for Security Benefit Corp and
subsidiaries, including Security Benefit, at December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998 and Security
Varilife Separate Account at December 31, 1998 and for each of the three years
in the period ended December 31, 1998 appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon, appearing elsewhere herein and
in the Registration Statement, and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
Financial Statements for the Separate Account at December 31, 1998 and for
each of the three years in the period ended December 31, 1998 and the
Consolidated Financial Statements of Security Benefit Corp and subsidiaries at
December 31, 1998, and 1997 and for each of the three years in the period ended
December 31, 1998, are set forth herewith starting on page 33. The most current
financial statements of Security Benefit Corp and subsidiaries are those as of
the end of the most recent fiscal year. Security Benefit does not prepare
financial statements on a basis consistent with and comparable to its annual
statements on an interim basis and believes that any incremental benefit to
prospective policy holders that may result from preparing and delivering more
current financial statements, though unaudited, does not justify the additional
cost that would be incurred. In addition, Security Benefit represents that there
have been no adverse changes in the financial condition or operations of
Security Benefit between the end of the most current fiscal year and the date of
this Prospectus.
The Financial Statements of Security Benefit should be distinguished from
the Financial Statements of the Separate Account, and should be considered only
as bearing upon the ability of Security Benefit to meet its obligations under
the Policies.
<PAGE>
Report of Independent Auditors
The Contract Owners of Security Varilife
Separate Account and the Board of Directors
of Security Benefit Life Insurance Company
We have audited the accompanying balance sheet of Security Varilife Separate
Account (the Account) (comprised of the individual series indicated therein) as
of December 31, 1998, and the related statements of operations and changes in
net assets for each of the three years in the period then ended. These financial
statements are the responsibility of the Account'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. Our procedures included
confirmation of investments owned as of December 31, 1998 by correspondence with
the transfer agent. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of the individual series of the
Security Varilife Separate Account at December 31, 1998, and the results of
their operations and changes in their net assets for each of the three years in
the period then ended in conformity with generally accepted accounting
principles.
February 5, 1999
<PAGE>
Security Varilife Separate Account
Balance Sheet
December 31, 1998
(DOLLARS IN THOUSANDS - EXCEPT PER SHARE AND UNIT VALUES)
ASSETS
Investments:
SBL Fund:
Series A (Growth Series) - 60,613 shares at net asset value of
$34.27 per share (cost, $1,729) ................................. $2,077
Series B (Growth-Income Series) - 8,586 shares at net asset value
of $39.68 per share (cost, $348) ................................ 341
Series C (Money Market Series) - 5,669 shares at net asset value of
$12.53 per share (cost, $72) .................................... 71
Series D (Worldwide Equity Series) - 46,709 shares at net asset
value of $6.74 per share (cost, $301) ........................... 315
Series E (High Grade Income Series) - 8,488 shares at net asset
value of $12.42 per share (cost, $103) .......................... 105
Series J (Emerging Growth Series) - 12,365 shares at net asset
value of $22.51 per share (cost, $248) .......................... 278
Series K (Global Aggressive Bond Series) - 3,619 shares at net
asset value of $9.56 per share (cost, $37) ...................... 35
Series M (Specialized Asset Allocation Series) - 6,341 shares at
net asset value of $12.87 per share (cost, $75) ................. 82
Series N (Managed Asset Allocation Series) - 2,442 shares at net
asset value of $16.01 per share (cost, $29) ..................... 39
Series O (Equity Income Series) - 20,227 shares at net asset value
of $18.35 per share (cost, $313) ................................ 371
Series S (Social Awareness Series) - 1,003 shares at net asset
value of $28.40 per share (cost, $22) ........................... 29
-----
Total assets $3,743
=====
<PAGE>
NET ASSETS
Net assets are represented by (NOTE 3):
NUMBER UNIT
OF UNITS VALUE AMOUNT
------------------------------
Growth Series:
Accumulation units .......................... 83,617 $24.84 $2,077
Growth-Income Series:
Accumulation units .......................... 17,727 19.22 341
Money Market Series:
Accumulation units .......................... 6,041 11.76 71
Worldwide Equity Series:
Accumulation units .......................... 20,982 15.00 315
High Grade Income Series:
Accumulation units .......................... 7,916 13.32 105
Emerging Growth Series:
Accumulation units .......................... 14,754 18.87 278
Global Aggressive Bond Series:
Accumulation units .......................... 2,627 13.17 35
Specialized Asset Allocation Series:
Accumulation units .......................... 5,836 13.98 82
Managed Asset Allocation Series:
Accumulation units .......................... 2,409 16.22 39
Equity Income Series:
Accumulation units .......................... 19,752 18.79 371
Social Awareness Series:
Accumulation units .......................... 1,277 22.97 29
------
Total net assets $3,743
======
SEE ACCOMPANYING NOTES.
<PAGE>
Security Varilife Separate Account
Statement of Operations and Changes in Net Assets
Year ended December 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH
GROWTH- MONEY WORLDWIDE GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 8 $ 5 $ 1 $ 4 $ 5 $ 2
Expenses (NOTE 2):
Mortality and expense risk
fee - - - - - -
Administrative fee and
insurance costs (132) (38) (11) (48) (5) (47)
---------------------------------------------------------------------------
Net investment gain (loss) (124) (33) (10) (44) - (45)
Capital gain distributions 104 30 - 21 1 24
Realized gain on investments 59 7 2 1 - 8
Unrealized appreciation
(depreciation) on
investment 215 (23) - 24 1 6
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 378 14 2 46 2 38
---------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 254 (19) (8) 2 2 (7)
Net assets at beginning of year 1,320 278 46 227 86 222
Variable account deposits
(NOTES 2 AND 3) 547 101 199 102 20 83
Terminations and withdrawals
(NOTES 2 AND 3) (29) (16) (165) (13) (2) (18)
Mortality adjustment (15) (3) (1) (3) (1) (2)
---------------------------------------------------------------------------
Net assets at end of year $2,077 $341 $ 71 $315 $105 $278
===========================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SPECIALIZED MANAGED
AGGRESSIVE ASSET ASSET EQUITY SOCIAL
BOND ALLOCATION ALLOCATION INCOME AWARENESS
SERIES SERIES SERIES SERIES SERIES
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions $ 3 $ 2 $ 1 $ 5 $ -
Expenses (NOTE 2):
Mortality and expense risk
fee - - - - -
Administrative fee and
insurance costs (1) (4) (2) (18) (1)
-------------------------------------------------------------
Net investment gain (loss) 2 (2) (1) (13) (1)
Capital gain distributions 1 4 - 12 1
Realized gain on investments - - 1 17 1
Unrealized appreciation
(depreciation) on
investments (2) 4 4 (2) 5
-------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1) 8 5 27 7
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 1 6 4 14 6
Net assets at beginning of year 24 57 31 302 24
Variable account deposits
(NOTES 2 AND 3) 12 20 4 91 3
Terminations and withdrawals
(NOTES 2 AND 3) (2) - - (33) (4)
Mortality adjustment - (1) - (3) -
-------------------------------------------------------------
Net assets at end of year $35 $82 $39 $371 $29
=============================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Security Varilife Separate Account
Statement of Operations and Changes in Net Assets
Year ended December 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH
GROWTH- MONEY WORLDWIDE GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 5 $ 5 $ 3 $ 4 $ 5 $ 1
Expenses (NOTE 2):
Mortality and expense risk
fee (7) (2) - (2) (1) (2)
Administrative fee and
insurance costs (77) (21) (10) (28) (5) (31)
---------------------------------------------------------------------------
Net investment gain (loss) (79) (18) (7) (26) (1) (32)
Capital gain distributions 49 13 - 10 - 5
Realized gain (loss) on
investments 43 11 (1) 8 - 15
Unrealized appreciation
(depreciation) on
investments 89 10 - (13) 2 16
---------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 181 34 (1) 5 2 36
---------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 102 16 (8) (21) 1 4
Net assets at beginning of year 502 113 31 150 69 157
Variable account deposits
(NOTES 2 AND 3) 752 153 426 124 18 108
Terminations and withdrawals
(NOTES 2 AND 3) (36) (4) (403) (26) (2) (47)
---------------------------------------------------------------------------
Net assets at end of year $1,320 $278 $ 46 $227 $86 $222
===========================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SPECIALIZED MANAGED
AGGRESSIVE ASSET ASSET EQUITY SOCIAL
BOND ALLOCATION ALLOCATION INCOME AWARENESS
SERIES SERIES SERIES SERIES SERIES
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions $ 2 $ 1 $ - $ 2 $ -
Expenses (NOTE 2):
Mortality and expense risk
fee - - - (2) -
Administrative fee and
insurance costs (1) (3) (1) (13) (1)
-------------------------------------------------------------
Net investment gain (loss) 1 (2) (1) (13) (1)
Capital gain distributions 1 1 - 3 1
Realized gain (loss) on
investments - - - 4 -
Unrealized appreciation
(depreciation) on
investments (1) 1 4 46 2
-------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments - 2 4 53 3
-------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 1 - 3 40 2
Net assets at beginning of year 13 36 23 141 12
Variable account deposits
(NOTES 2 AND 3) 10 21 5 121 13
Terminations and withdrawals
(NOTES 2 AND 3) - - - - (3)
-------------------------------------------------------------
Net assets at end of year $24 $57 $31 $302 $24
============================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
Security Varilife Separate Account
Statement of Operations and Changes in Net Assets
Year ended December 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HIGH
GROWTH- MONEY WORLDWIDE GRADE EMERGING
GROWTH INCOME MARKET EQUITY INCOME GROWTH
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dividend distributions $ 3 $ 2 $ 1 $ 3 $ 3 $ -
Expenses (NOTE 2):
Mortality and expense risk
fee (3) (1) (1) (1) - (1)
Administrative fee and
insurance costs (31) (10) (7) (9) (4) (15)
----------------------------------------------------------------------------
Net investment loss (31) (9) (7) (7) (1) (16)
Capital gain distributions 19 9 - 3 - 4
Realized gain on
investments 14 5 3 2 - 2
Unrealized appreciation
(depreciation) on
investments 32 (3) (1) 3 (3) 8
----------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 65 11 2 8 (3) 14
----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 34 2 (5) 1 (4) (2)
Net assets at beginning of
year 201 61 143 17 39 53
Variable account deposits
(NOTES 2 AND 3) 278 57 401 133 34 112
Terminations and withdrawals
(NOTES 2 AND 3) (11) (7) (508) (1) - (6)
----------------------------------------------------------------------------
Net assets at end of year $502 $113 $ 31 $150 $69 $157
============================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
<TABLE>
<CAPTION>
GLOBAL SPECIALIZED MANAGED
AGGRESSIVE ASSET ASSET EQUITY SOCIAL
BOND ALLOCATION ALLOCATION INCOME AWARENESS
SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend distributions $ 1 $ - $ - $ - $ -
Expenses (NOTE 2):
Mortality and expense risk
fee - - - (1) -
Administrative fee and
insurance costs (1) (1) - (2) -
------------------------------------------------------------
Net investment loss - (1) - (3) -
Capital gain distributions - - - - -
Realized gain on - - - - 1
investments
Unrealized appreciation
(depreciation) on
investments 1 3 2 14 -
------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1 3 2 14 1
------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations 1 2 2 11 1
Net assets at beginning of
year - 1 - - 3
Variable account deposits
(NOTES 2 AND 3) 12 34 21 130 13
Terminations and withdrawals
(NOTES 2 AND 3) - (1) - - (5)
------------------------------------------------------------
Net assets at end of year $13 $36 $23 $141 $12
============================================================
</TABLE>
<PAGE>
Security Varilife Separate Account
Notes to Financial Statements
December 31, 1998, 1997 and 1996
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Security Varilife Separate Account (the Account) is a separate account of
Security Benefit Life Insurance Company (SBL). The Account is registered as a
unit investment trust under the Investment Company Act of 1940, as amended. All
activity in the account relates to Security Elite Benefit, a variable life
product sold by SBL. Deposits received by the Account are invested in the SBL
Fund, a mutual fund not otherwise available to the public. As directed by the
owners, amounts deposited may be invested in shares of Series A (Growth Series -
emphasis on capital appreciation), Series B (Growth-Income Series - emphasis on
capital appreciation with secondary emphasis on income), Series C (Money Market
Series - emphasis on capital preservation while generating interest income),
Series D (Worldwide Equity Series - emphasis on long-term capital growth through
investment in foreign and domestic common stocks and equivalents), Series E
(High Grade Income Series - emphasis on current income with security of
principal), Series J (Emerging Growth Series - emphasis on capital
appreciation), Series K (Global Aggressive Bond Series - emphasis on high
current income with secondary emphasis on capital appreciation), Series M
(Specialized Asset Allocation Series - emphasis on high total return consisting
of capital appreciation and current income), Series N (Managed Asset Allocation
Series - emphasis on high level of total return), Series O (Equity Income Series
emphasis on substantial dividend income and capital appreciation) and Series S
(Social Awareness Series emphasis on capital appreciation).
Under the terms of the investment advisory contracts, portfolio investments of
the underlying mutual fund are made by Security Management Company, LLC (SMC), a
limited liability company controlled by its members, SBL and Security Benefit
Group, Inc., a wholly-owned subsidiary of SBL. SMC has engaged T. Rowe Price
Associates, Inc. to provide sub-advisory services for the Managed Asset
Allocation Series and the Equity Income Series and Meridian Investment
Management Corporation to provide sub-advisory services for the Specialized
Asset Allocation Series, and Strong Capital Management, Inc. to provide
sub-advisory services to the Small Cap Series. Lexington Management Corporation
(LMC) served as sub-advisor for the Worldwide Equity Series until November 1,
1998, when LMC was replaced by OppenheimerFunds, Inc. Effective December 31,
1998, LMC resigned as sub-advisor for Global Aggressive Bond Series, which
thereafter will be advised by SMC.
INVESTMENT VALUATION
Investments in mutual fund shares are carried in the balance sheet at market
value (net asset value of the underlying mutual fund). The first-in, first-out
cost method is used to determine realized gains and losses. Security
transactions are accounted for on the trade date.
The cost of investments purchased and proceeds from investments sold during the
year ended December 31 were as follows
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ------------------------- ------------------------
PROCEEDS PROCEEDS PROCEEDS
COST OF FROM COST OF FROM COST OF FROM
PURCHASES SALES PURCHASES SALES PURCHASES SALES
---------------------- ------------------------- ------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Growth Series ..................... $694 $211 $847 $161 $312 $ 56
Growth-Income Series .............. 155 76 186 42 70 20
Money Market Series ............... 263 240 436 420 426 543
Worldwide Equity Series ........... 131 68 156 74 144 15
High Grade Income Series .......... 25 7 24 9 38 5
Emerging Growth Series ............ 147 105 127 93 124 30
Global Aggressive Bond Series ..... 15 2 14 2 13 1
Specialized Asset Allocation Series 26 5 24 4 35 2
Managed Asset Allocation Series ... 5 2 5 1 22 1
Equity Income Series .............. 109 55 128 17 131 4
Social Awareness Series ........... 4 5 17 7 14 6
</TABLE>
REINVESTMENT OF DIVIDENDS
Dividend and capital gain distributions paid by the mutual fund to the Account
are reinvested in additional shares of each respective series. Dividend income
and capital gain distributions are recorded as income on the ex-dividend date.
FEDERAL INCOME TAXES
The operations of the account are part of the operations of SBL. Under current
law, no federal income taxes are allocated by SBL to the operations of the
Account.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. SECURITY VARILIFE SEPARATE ACCOUNT CONTRACT CHARGES
SBL deducts a daily administrative charge equal to an annual rate of .35% of the
average daily net assets of each account. Mortality and expense risks assumed by
SBL are compensated for by a fee equivalent to an annual rate of .90% of the
average daily net assets of each account.
A deduction for cost of insurance and cost of any riders also is made monthly
and is equal to a current cost of insurance rate multiplied by the net amount at
risk under a policy at the beginning of the policy month. The net amount at risk
for these purposes is equal to the amount of death benefit payable at the
beginning of the policy month divided by 1.0032737 less the accumulated value at
the beginning of the month. These charges amounted to $297,000, $185,000 and
$78,000 during 1998, 1997 and 1996, respectively.
When applicable, an amount for state and local premium taxes is deducted from
each premium payment as provided by pertinent state law.
3. SUMMARY OF UNIT TRANSACTIONS
UNITS
----------------------------------
YEAR ENDED DECEMBER 31
1998 1997 1996
----------------------------------
(IN THOUSANDS)
Growth Series:
Account deposits ....................... 25 40 19
Terminations, withdrawals and expenses . 7 6 3
Growth-Income Series:
Account deposits ....................... 5 10 4
Terminations, withdrawals and expenses . 3 2 1
Money Market Series:
Account deposits ....................... 17 38 37
Terminations, withdrawals and expenses . 15 37 48
Worldwide Equity Series:
Account deposits ....................... 7 10 12
Terminations, withdrawals and expenses . 4 4 1
High Grade Income Series:
Account deposits ....................... 2 2 3
Terminations, withdrawals and expenses 1 1 -
Emerging Growth Series:
Account deposits ....................... 5 7 9
Terminations, withdrawals and expenses . 4 5 2
Global Aggressive Bond Series:
Account deposits ....................... 1 1 1
Terminations, withdrawals and expenses . - - -
Specialized Asset Allocation Series:
Account deposits ....................... 2 2 3
Terminations, withdrawals and expenses . - - -
Managed Asset Allocation Series:
Account deposits ....................... - - 2
Terminations, withdrawals and expenses . - - -
Equity Income Series:
Account deposits ....................... 5 8 10
Terminations, withdrawals and expenses . 3 1 -
Social Awareness Series:
Account deposits ....................... - 1 1
Terminations, withdrawals and expenses . - - -
<PAGE>
Report of Independent Auditors
The Board of Directors
Security Benefit Corp.
We have audited the accompanying consolidated balance sheets of Security Benefit
Corp. and Subsidiaries (the Company) as of December 31, 1998 and 1997 and the
related consolidated statements of income, changes in stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1998.
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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Security Benefit
Corp. and Subsidiaries at December 31, 1998 and 1997 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
February 5, 1999
<PAGE>
Security Benefit Corp. and Subsidiaries
Consolidated Balance Sheets
DECEMBER 31
1998 1997
---------------------------
(IN THOUSANDS)
ASSETS
Investments:
Securities available-for-sale:
Fixed maturities ............................. $2,120,369 $1,650,324
Equity securities ............................ 158,291 120,508
Fixed maturities held-to-maturity .............. 264,283 452,411
Mortgage loans ................................. 57,400 64,251
Real estate .................................... 2,875 3,056
Policy loans ................................... 88,385 85,758
Cash ........................................... 28,419 30,896
Other invested assets .......................... 49,308 42,395
---------------------------
Total investments ................................ 2,769,330 2,449,599
Accrued investment income ........................ 31,740 30,034
Accounts receivable .............................. 18,616 22,227
Reinsurance recoverable .......................... 407,891 397,519
Property and equipment, net ...................... 20,869 19,669
Deferred policy acquisition costs ................ 168,483 159,441
Other assets ..................................... 17,381 15,537
Separate account assets .......................... 4,416,194 3,716,639
---------------------------
$7,850,504 $6,810,665
===========================
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Policy reserves and annuity account values ..... $2,699,894 $2,439,713
Policy and contract claims ..................... 9,768 10,955
Other policyholder funds ....................... 20,496 21,582
Accounts payable and accrued expenses .......... 47,168 35,343
Income taxes payable ........................... 24,622 10,960
Deferred income tax liability .................. 60,109 58,261
Long-term debt and other borrowings ............ 60,000 65,000
Other liabilities .............................. 14,276 17,331
Separate account liabilities ................... 4,416,194 3,716,639
---------------------------
Total liabilities ................................ 7,352,527 6,375,784
Stockholder's equity:
Preferred stock, $0.001 par value, 10,000,000
shares authorized, no shares issued or
outstanding .................................... - -
Common stock:
Class A shares, $0.001 par value, 200,000,000
shares authorized, no shares issued or
outstanding .................................. - -
Class B shares, $0.001 par value, 50,000,000
shares authorized, 1,000 shares issued and
outstanding .................................. - -
Retained earnings .............................. 467,877 409,432
Accumulated other comprehensive income, net .... 30,100 25,449
---------------------------
Total stockholder's equity ....................... 497,977 434,881
---------------------------
$7,850,504 $6,810,665
===========================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Corp. and Subsidiaries
Consolidated Statements of Income
YEAR ENDED DECEMBER 31
1998 1997 1996
------------------------------------
(IN THOUSANDS)
Revenues:
Insurance premiums and other
considerations ...................... $ 24,187 $ 24,640 $ 28,848
Net investment income ................. 174,048 184,975 194,783
Asset based fees ...................... 88,721 72,025 55,977
Other product charges ................. 7,749 9,163 10,470
Realized gains (losses) on investments. 4,261 4,929 (244)
Other revenues ........................ 17,307 21,389 24,391
------------------------------------
Total revenues .......................... 316,273 317,121 314,225
Benefits and expenses:
Annuity and interest sensitive
life benefits:
Interest credited to account
balances ......................... 94,552 102,640 108,705
Benefit claims in excess of
account balances .................... 4,662 4,985 7,541
Traditional life insurance benefits.... 12,617 17,472 18,222
Supplementary contract payments........ 9,694 9,660 11,121
Increase in traditional life reserves.. 1,699 7,050 8,580
Other benefits ........................ 13,227 7,801 11,416
------------------------------------
Total benefits .......................... 136,451 149,608 165,585
Commissions and other operating expenses. 65,755 59,576 52,044
Amortization of deferred policy
acquisition costs ..................... 25,447 26,179 25,930
Interest expense ........................ 5,075 5,305 4,285
Other expenses .......................... 3,354 3,381 1,667
------------------------------------
Total benefits and expenses ............. 236,082 244,049 249,511
------------------------------------
Income before income taxes .............. 80,191 73,072 64,714
Income taxes ............................ 21,746 21,567 20,871
------------------------------------
Net income .............................. $ 58,445 $ 51,505 $ 43,843
====================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholder's Equity
ACCUMULATED
OTHER
COMMON RETAINED COMPREHENSIVE
STOCK EARNINGS INCOME TOTAL
--------------------------------------------
Balance at December 31, 1995 ..... $- $314,084 $11,607 $325,691
Comprehensive income:
Net income ................... - 43,843 - 43,843
Unrealized gains (losses), net - - (12,086) (12,086)
-------
Comprehensive income ........... 31,757
--------------------------------------------
Balance at December 31, 1996 ..... - 357,927 (479) 357,448
Comprehensive income:
Net income ................... - 51,505 - 51,505
Unrealized gains (losses), net - - 25,928 25,928
-------
Comprehensive income ........... 77,433
--------------------------------------------
Balance at December 31, 1997 ..... - 409,432 25,449 434,881
Comprehensive income:
Net income ................... - 58,445 - 58,445
Unrealized gains (losses), net - - 4,651 4,651
-------
Comprehensive income ........... 63,096
--------------------------------------------
Balance at December 31, 1998 ..... $- $467,877 $30,100 $497,977
============================================
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1998 1997 1996
--------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ................................................ $ 58,445 $ 51,505 $ 43,843
Adjustments to reconcile net income to net cash provided by
operating activities:
Annuity and interest sensitive life products:
Interest credited to account balances ............... 94,552 102,640 108,705
Charges for mortality and administration ............ (297) (10,582) (13,115)
Increase (decrease) in traditional life policy reserves 1,699 (3,101) 10,697
Increase (decrease) in accrued investment income ...... (1,706) 2,127 (1,538)
Policy acquisition costs deferred ..................... (34,068) (37,999) (36,865)
Policy acquisition costs amortized .................... 25,447 26,179 25,930
Accrual of discounts on investments ................... (2,708) (2,818) (3,905)
Amortization of premiums on investments ............... 8,452 9,138 11,284
Depreciation and amortization ......................... 4,441 3,959 3,748
Other ................................................. 11,286 (8,444) (3,379)
--------------------------------------
Net cash provided by operating activities ................. 165,543 132,604 145,405
INVESTING ACTIVITIES
Sale, maturity or repayment of investments:
Fixed maturities available-for-sale ..................... 436,773 368,901 870,240
Fixed maturities held-to-maturity ....................... 157,729 124,013 58,874
Equity securities available-for-sale .................... 13,293 48,495 3,643
Mortgage loans .......................................... 8,924 3,739 12,545
Real estate ............................................. - 946 2,935
Separate account assets ................................. - 9,180 5,214
Other invested assets ................................... 2,929 7,865 26,293
--------------------------------------
619,648 563,139 979,744
Acquisition of investments:
Fixed maturities available-for-sale ..................... (878,753) (219,736) (936,376)
Fixed maturities held-to-maturity ....................... (1,287) (1,188) (52,422)
Equity securities available-for-sale .................... (42,641) (67,004) (68,222)
Mortgage loans .......................................... (2,054) (1,447) (4,538)
Real estate ............................................. (756) (712) (2,637)
Other invested assets ................................... (7,441) (7,518) (22,782)
--------------------------------------
(932,932) (297,605) (1,086,977)
Purchase of property and equipment ........................ (4,617) (4,144) (1,879)
Net increase in policy loans .............................. (2,627) (8,654) (6,370)
Net cash transferred per coinsurance agreement ............ - (218,043) -
--------------------------------------
Net cash provided by (used in) investing activities ....... (320,528) 34,693 (115,482)
FINANCING ACTIVITIES
Issuance of long-term debt ................................ - - 65,000
Repayment of long-term debt ............................... (5,000) - -
Annuity and interest sensitive life products:
Deposits credited to account balances ................... 475,522 167,517 202,129
Withdrawals from account balances ....................... (318,014) (312,228) (305,530)
--------------------------------------
Net cash provided by (used in) financing activities ....... 152,508 (144,711) (38,401)
--------------------------------------
Increase (decrease) in cash ............................... (2,477) 22,586 (8,478)
Cash at beginning of year ................................. 30,896 8,310 16,788
--------------------------------------
Cash at end of year ....................................... $ 28,419 $ 30,896 $ 8,310
======================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest ............................................... $ 5,443 $ 5,307 $ 2,966
======================================
Income taxes ........................................... $ 8,269 $ 27,920 $ 16,213
======================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
Security Benefit Corp. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND ORGANIZATION
The operations of Security Benefit Corp. (SBC or the Company) consist primarily
of marketing and distributing annuities, mutual funds, life insurance and
related products throughout the United States. The Company and/or its
subsidiaries offer a diversified portfolio of investment products comprised
primarily of individual and group annuities and mutual fund products through
multiple distribution channels. In recent years, the Company's new business
activities increasingly have been concentrated in the individual flexible
premium variable annuity markets.
The Company was formed on July 31, 1998 in conjunction with the conversion of
Security Benefit Life Insurance Company (SBL) from a mutual life insurance
company to a stock life insurance company under a mutual holding company
structure pursuant to a Plan of Conversion (the Conversion). In connection with
the Conversion, the Company, a Kansas domiciled intermediate stock holding
company, and Security Benefit Mutual Holding Company (SBMHC), a Kansas domiciled
mutual holding company, were formed. On the same date, all of the initial shares
of common stock of SBL, except for shares issued to SBL Directors in accordance
with Kansas law, were issued to SBC. In addition, all of the initially issued
shares of common stock of SBC, consisting of 1,000 shares of Class B common
stock, were issued to SBMHC. As a result of the Conversion, SBMHC indirectly
owned, through its ownership of SBC, all of the issued and outstanding common
stock of SBL (except shares required by law to be held by SBL Directors). In
accordance with Kansas law, SBMHC must at all times hold at least 51% of the
voting stock of SBC. The consolidated financial statements of the Company
reflect the combination of SBC and SBL at historical cost on a basis similar to
a pooling of interest and, accordingly, the accompanying consolidated financial
statements include accounts and operations of SBL for all periods presented.
BASIS OF PRESENTATION
The consolidated financial statements include the operations and accounts of the
Company and its wholly-owned subsidiaries including SBL, Security Management
Company, LLC and Security Benefit Group, Inc. (which includes First Security
Benefit Life Insurance and Annuity Company of New York; Security Distributors,
Inc.; Security Benefit Academy, Inc.; and Creative Impressions, Inc.).
Significant intercompany transactions have been eliminated in consolidation.
ACCOUNTING CHANGE
In 1998, the Company adopted Statement of Financial Accounting Standards (SFAS)
Statement No. 130, "Reporting Comprehensive Income." Statement No. 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or stockholder's equity. Statement No. 130 requires
unrealized gains or losses on the Company's available-for-sale securities, which
prior to adoption were reported separately in equity, to be included in other
comprehensive income.
USE OF ESTIMATES
The preparation of consolidated financial statements requires management to make
estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
INVESTMENTS
Fixed maturities are classified as either held-to-maturity or
available-for-sale. Fixed maturities are classified as held-to-maturity when the
Company has the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accrual of discounts. Fixed maturities not
classified as held-to-maturity and equity securities are classified as
available-for-sale. Equity securities are comprised of common stock, preferred
stock and mutual funds.
Securities available-for-sale are reported in the accompanying consolidated
financial statements at fair value. Any valuation changes resulting from changes
in the fair value of these securities are reflected as a component of
accumulated other comprehensive income. These unrealized gains or losses in
accumulated other comprehensive income are reported, net of taxes and
adjustments to deferred policy acquisition costs.
The amortized cost of fixed maturities is adjusted for amortization of premiums
and accrual of discounts. Premiums and discounts are recognized over the
estimated lives of the assets adjusted for prepayment activity. Distributions
from mutual funds are included in investment income. Realized gains and losses
on sales of investments are recognized in revenues on the
specific-identification method.
Mortgage loans are reported at amortized cost. Real estate investments are
carried at the lower of depreciated cost or estimated realizable value. Policy
loans are reported at unpaid principal. Investments accounted for by the equity
method include investments in, and advances to, various joint ventures and
partnerships.
The operations of the Company are subject to risk resulting from interest rate
fluctuations to the extent that there is a difference between the amount of the
Company's interest-earning assets and the amount of interest-bearing liabilities
that are prepaid/withdrawn, mature or reprice in specified periods. The
principal objective of the Company's asset/liability management activities is to
provide maximum levels of net investment income while maintaining acceptable
levels of interest rate and liquidity risk and while facilitating the funding
needs of the Company. The Company periodically may use derivative financial
instruments to modify its interest rate sensitivity to levels deemed to be
appropriate based on the Company's current economic outlook.
Such derivative financial instruments are for purposes other than trading and
are classified as available-for-sale in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Accordingly,
these instruments are stated at fair value with the change in fair value
reported as a component of accumulated other comprehensive income.
DEFERRED POLICY ACQUISITION COSTS
To the extent recoverable from future policy revenues and gross profits,
commissions and other policy-issue, underwriting and marketing costs that are
primarily related to the acquisition or renewal of life insurance and deferred
annuity business have been deferred.
Traditional life insurance deferred policy acquisition costs are being amortized
in proportion to premium revenues over the premium-paying period of the related
policies using assumptions consistent with those used in computing policy
benefit reserves.
For interest sensitive life and deferred annuity business, deferred policy
acquisition costs are amortized in proportion to the present value (discounted
at the crediting rate) of expected gross profits from investment, mortality and
expense margins. That amortization is adjusted retrospectively when estimates of
current or future gross profits to be realized from a group of products are
revised. Deferred policy acquisition costs are adjusted for the impact on
estimated gross profits of net unrealized gains and losses on securities.
PROPERTY AND EQUIPMENT
Property and equipment, including home-office real estate, furniture and
fixtures, and data-processing hardware and related systems, are recorded at
cost, less accumulated depreciation. The provision for depreciation of property
and equipment is computed using the straight-line method over the estimated
lives of the related assets.
SEPARATE ACCOUNTS
The separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for the benefit of
contractholders who bear the investment risk. The separate account assets and
liabilities are carried at fair value. Revenues and expenses related to separate
account assets and liabilities, to the extent of benefits paid or provided to
the separate account contractholders, are excluded from the amounts reported in
the consolidated statements of income. Investment income and gains or losses
arising from separate accounts accrue directly to the contractholders and,
therefore, are not included in investment earnings in the accompanying
statements of income. Revenues to the Company from the separate accounts consist
principally of contract maintenance charges, administrative fees, and mortality
and expense risk charges.
POLICY RESERVES AND ANNUITY ACCOUNT VALUES
Liabilities for future policy benefits for traditional life products are
computed using a net level-premium method, including assumptions as to
investment yields, mortality and withdrawals, and other assumptions that
approximate expected experience.
Liabilities for future policy benefits for interest sensitive life and deferred
annuity products represent accumulated contract values without reduction for
potential surrender charges and deferred front-end contract charges that are
amortized over the life of the policy. Interest on accumulated contract values
is credited to contracts as earned. Crediting rates ranged from 3.4% to 8%
during 1998, from 3.8% to 7.25% during 1997 and from 3.5% to 7.25% during 1996.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
the financial reporting and income tax bases of assets and liabilities and are
measured using the enacted tax rates and laws. Deferred income tax expenses or
credits reflected in the Company's statements of income are based on the changes
in deferred tax assets or liabilities from period to period (excluding
unrealized gains and losses on securities available-for-sale).
RECOGNITION OF REVENUES
Traditional life insurance products include whole life insurance, term life
insurance and certain annuities. Premiums for these traditional products are
recognized as revenues when due. Revenues from interest sensitive life insurance
products and deferred annuities consist of policy charges for the cost of
insurance, policy administration charges and surrender charges assessed against
contractholder account balances during the period.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash: The carrying amounts reported in the balance sheet for these
instruments approximate their fair values.
Investment securities: Fair values for fixed maturities are based on quoted
market prices if available. For fixed maturities not actively traded, fair
values are estimated using values obtained from independent pricing services
or estimated by discounting expected future cash flows using a current
market rate applicable to the yield, credit quality and maturity of the
investments. The fair values for equity securities are based on quoted
market prices.
Mortgage loans and policy loans: Fair values for mortgage loans and policy
loans are estimated using discounted cash flow analyses based on market
interest rates for similar loans to borrowers with similar credit ratings.
Loans with similar characteristics are aggregated for purposes of the
calculations. The carrying amounts reported in the consolidated balance
sheets approximate their fair values.
Investment-type contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using the assumption
reinsurance method, whereby the amount of statutory profit the assuming
company would realize from the business is calculated. Those amounts are
then discounted at a rate of return commensurate with the rate presently
offered by the Company on similar contracts.
Long-term debt: Fair values for long-term debt are estimated using
discounted cash flow analyses based on current borrowing rates for similar
types of borrowing arrangements.
2. INVESTMENTS
Information as to the amortized cost, gross unrealized gains and losses, and
fair values of the Company's portfolio of fixed maturities and equity securities
at December 31, 1998 and 1997 is as follows:
DECEMBER 31, 1998
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------------------------------------------------
(IN THOUSANDS)
AVAILABLE-FOR-SALE
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies ............ $ 204,414 $ 5,254 $ 8 $ 209,660
Obligations of states and
political subdivisions .. 27,583 2,310 - 29,893
Corporate securities ...... 1,053,782 33,400 10,716 1,076,466
Mortgage-backed securities 628,020 12,530 2,550 638,000
Asset-backed securities ... 166,144 2,113 1,907 166,350
--------------------------------------------------
Totals .................... $2,079,943 $55,607 $15,181 $2,120,369
==================================================
Equity securities ......... $ 140,999 $18,271 $ 979 $ 158,291
==================================================
HELD-TO-MATURITY
Obligations of states and
political subdivisions .. 61,473 $ 3,196 $ - $ 64,669
Corporate securities ...... 93,413 7,718 360 100,771
Mortgage-backed securities 96,987 1,640 - 98,627
Asset-backed securities ... 12,410 289 - 12,699
--------------------------------------------------
Totals .................... $ 264,283 $12,843 $ 360 $ 276,766
==================================================
DECEMBER 31, 1997
--------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
--------------------------------------------------
(IN THOUSANDS
AVAILABLE-FOR-SALE
U.S. Treasury securities
and obligations of U.S.
government corporations
and agencies ............ $ 214,088 $ 3,313 $ - $ 217,401
Obligations of states and
political subdivisions .. 24,008 1,365 8 25,365
Corporate securities ...... 742,123 27,986 1,674 768,435
Mortgage-backed securities 510,991 11,429 2,137 520,283
Asset-backed securities ... 117,907 1,030 97 118,840
--------------------------------------------------
Totals .................... $1,609,117 $45,123 $3,916 $1,650,324
==================================================
Equity securities ......... $ 109,763 $11,220 $ 475 $ 120,508
==================================================
HELD-TO-MATURITY
Obligations of states and
political subdivisions .. $ 74,802 $ 2,094 $ 30 $ 76,866
Corporate securities ...... 108,609 5,295 201 113,703
Mortgage-backed securities 227,131 2,725 364 229,492
Asset-backed securities ... 41,869 297 1 42,165
--------------------------------------------------
Totals .................... $ 452,411 $10,411 $ 596 $ 462,226
==================================================
The prior-year financial statements have been reclassified to conform to the
requirements of FASB Statement No. 130. After making these balance sheet
reclassifications, the following amounts were included in accumulated other
comprehensive income for the years ended December 31, 1998, 1997 and 1996:
1998 1997 1996
-------------------------------
Unrealized holding gains (losses) arising
during the year ............................ $10,523 $60,638 $(37,942)
Less: Realized gains (losses) included in
net income ................................. 4,757 4,929 (244)
-------------------------------
Other comprehensive income (loss), before
deferred taxes and the unlocking of
deferred policy acquisition costs ......... 5,766 55,709 (37,698)
Deferred income taxes ........................ (2,033) (13,913) 6,203
Unlocking of deferred policy acquisition costs 918 (15,868) 19,409
-------------------------------
Other comprehensive income (loss), net ....... $ 4,651 $25,928 $(12,086)
===============================
The amortized cost and fair value of fixed maturities at December 31, 1998, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalties.
AVAILABLE-FOR-SALE HELD-TO-MATURITY
----------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------------------------------------------
(IN THOUSANDS)
Due in one year or less ....... $ 48,041 $ 48,326 $ 1,508 $ 1,528
Due after one year through
five years .................. 176,414 180,716 8,485 8,977
Due after five years through
10 years .................... 567,478 579,461 36,368 38,562
Due after 10 years ............ 493,846 507,516 108,525 116,373
Mortgage-backed securities .... 628,020 638,000 96,987 98,627
Asset-backed securities ....... 166,144 166,350 12,410 12,699
----------------------------------------------
$2,079,943 $2,120,369 $264,283 $276,766
==============================================
The composition of the Company's portfolio of fixed maturities by quality rating
at December 31, 1998 is as follows:
QUALITY RATING CARRYING AMOUNT %
--------------------------------------------------
(IN THOUSANDS)
AAA ................. $1,055,819 44.3%
AA .................. 215,520 9.0
A ................... 469,855 19.7
BBB ................. 422,600 17.7
Noninvestment grade . 220,858 9.3
--------- -----
$2,384,652 100.0%
========= =====
Major categories of net investment income for the years ended December 31, 1998,
1997 and 1996 are summarized as follows:
1998 1997 1996
-----------------------------------
(IN THOUSANDS)
Interest on fixed maturities ............. $154,529 $167,646 $174,592
Dividends and distributions on equity
securities ............................. 10,945 7,358 5,817
Interest on mortgage loans ............... 5,388 6,017 6,680
Interest on policy loans ................. 5,381 6,282 6,372
Interest on short-term investments ....... 2,377 2,221 1,487
Other .................................... 865 (166) 4,199
-----------------------------------
Total investment income .................. 179,485 189,358 199,147
Less investment expenses ................. 5,437 4,383 4,364
-----------------------------------
Net investment income .................... $174,048 $184,975 $194,783
===================================
Proceeds from sales of fixed maturities and equity securities and related
realized gains and losses, including valuation adjustments, for the years ended
December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996
----------------------------------
(IN THOUSANDS)
Proceeds from sales $196,849 $333,498 $393,189
Gross realized gains 9,801 11,889 9,407
Gross realized losses 4,939 6,640 9,723
Net realized gains (losses), net of associated amortization of deferred policy
acquisition costs, for the years ended December 31, 1998, 1997 and 1996 consist
of the following:
1998 1997 1996
--------------------------------
(IN THOUSANDS)
Fixed maturities ............................ $2,976 $ 861 $(1,329)
Equity securities ........................... 1,886 4,388 1,013
Other ....................................... (105) (320) 72
--------------------------------
............................................ 4,757 4,929 (244)
Amortization of deferred policy acquisition
costs ..................................... (496) - -
--------------------------------
Net realized gains (losses) ................. $4,261 $4,929 $ (244)
================================
There were no deferred losses at December 31, 1998 or 1997 resulting from
terminated and expired futures contracts. There were no outstanding agreements
to sell securities at December 31, 1998, 1997 or 1996. The notional amount of
interest rate exchange agreements outstanding at December 31, 1998 was
$88,450,000. These agreements have maturities ranging from September 2002 to
December 2005. Under these agreements, the Company receives variable interest
rates based on the three-month LIBOR rate and pays fixed interest rates ranging
from 5.54% to 7.5%.
The Company has a diversified portfolio of commercial and residential mortgage
loans outstanding in 14 states. The loans are somewhat geographically
concentrated in the midwestern and southwestern United States with the largest
outstanding balances at December 31, 1998 being in the states of Kansas (31%),
Iowa (16%) and Texas (14%).
3. EMPLOYEE BENEFIT PLANS
Substantially all Company employees are covered by a qualified, noncontributory
defined benefit pension plan sponsored by the Company and certain of its
affiliates. Benefits are based on years of service and an employee's highest
average compensation over a period of five consecutive years during the last 10
years of service. The Company's policy has been to contribute funds to the plan
in amounts required to maintain sufficient plan assets to provide for accrued
benefits. In applying this general policy, the Company considers, among other
factors, the recommendations of its independent consulting actuaries, the
requirements of federal pension law and the limitations on deductibility imposed
by federal income tax law. Plan assets are invested in public mutual funds with
varying investment objectives which are managed by an affiliated entity.
Unrealized gains on plan assets were $669,000 and $628,000 at December 31, 1998
and 1997, respectively.
In addition to the Company's defined benefit pension plan, the Company provides
certain medical and life insurance benefits to full-time employees who have
retired after the age of 55 with five years of service. The plan is
contributory, with retiree contributions adjusted annually, and contains other
cost-sharing features such as deductibles and coinsurance. Contributions vary
based on the employee's years of service earned after age 40. The Company's
portion of the costs is frozen after 2002 with all future cost increases passed
on to the retirees. Retirees in the plan prior to July 1, 1993 are covered 100%
by the Company.
The following table sets forth the plans' funded status and amounts recognized
in the financial statements at December 31 and for the years then ended:
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
-------------------------------------------
Benefit obligation at year end ... $(13,306) $(12,487) $(4,962) $(4,361)
Fair value of plan assets at year
end ............................ 11,363 11,279 - -
-------------------------------------------
Funded status of the plan ........ $ (1,943) $ (1,208) $(4,962) $(4,361)
===========================================
Accrued benefit cost recognized in
the consolidated balance sheets $ (253) $ (404) $(5,323) $(5,053)
Net periodic benefit cost ........ 719 1,999 474 786
Benefits paid .................... 2,475 1,563 197 170
Contributions .................... 870 865 - -
PENSION BENEFITS OTHER BENEFITS
1998 1997 1998 1997
---------------------------------------
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate ........................ 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets ....... 9.00% 9.00% - -
Rate of compensation increase ........ 4.50% 4.50% - -
The annual assumed rate of increase in the per capita cost of covered benefits
is 8% for 1998 and 9% for 1997, and is assumed to decrease gradually to 5% for
2001 and remain at that level thereafter.
The health care cost trend rate has a significant effect on the amount reported.
For example, increasing the assumed health care cost trend rates by one
percentage point each year would increase the accumulated postretirement benefit
obligation as of December 31, 1998 by $228,000 and the aggregate of the service
and interest cost components of net periodic postretirement benefit cost for
1998 by $68,000.
The Company has a profit-sharing and savings plan for which substantially all
employees are eligible after one year of employment with the Company. Company
contributions to the profit-sharing and savings plan charged to operations were
$2,176,000, $2,065,000 and $1,783,000 for 1998, 1997 and 1996, respectively.
4. REINSURANCE
The Company assumes and cedes reinsurance with other companies to provide for
greater diversification of business, to allow management to control exposure to
potential losses arising from large risks, and to provide additional capacity
for growth. Life insurance in force ceded at December 31, 1998 and 1997 was $7.0
billion and $7.4 billion, respectively.
Principal reinsurance transactions for the years ended December 31, 1998, 1997
and 1996 are summarized as follows:
1998 1997 1996
------------------------------------------
(IN THOUSANDS)
Reinsurance ceded:
Premiums paid .................. $46,391 $33,872 $25,442
==========================================
Commissions received ........... $ 5,647 $ 5,173 $ 4,669
==========================================
Claim recoveries ............... $20,166 $12,136 $ 5,235
==========================================
In the accompanying financial statements, premiums, benefits, settlement
expenses and deferred policy acquisition costs are reported net of reinsurance
ceded; policy liabilities and accruals are reported gross of reinsurance ceded.
The Company remains liable to policyholders if the reinsurers are unable to meet
their contractual obligations under the applicable reinsurance agreements. To
minimize its exposure to significant losses from reinsurance insolvencies, the
Company evaluates the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of reinsurers. At December 31, 1998 and
1997, the Company had established receivables totaling $407,891,000 and
$397,519,000, respectively, for reserve credits, reinsurance claims and other
receivables from its reinsurers. Substantially all of these receivables are
collateralized by assets of the reinsurers held in trust. The amount of
reinsurance assumed is not significant.
In 1997, the Company transferred, through a 100% coinsurance agreement, $318
million in policy reserves and claim liabilities reduced by a ceding commission
of $63 million and other related items. The agreement related to a block of
universal life and traditional life insurance business. The Company recorded a
pretax gain of $14.625 million which is deferred in other liabilities and
amortized to income over the estimated life of the business transferred,
estimated to be 15 years. Amortization of this deferred gain during 1998
amounted to $1,358,000.
5. INCOME TAXES
The Company files a life/nonlife consolidated federal income tax return with
SBMHC. The provision for income taxes includes current federal income tax
expense or benefit and deferred income tax expense or benefit due to temporary
differences between the financial reporting and income tax bases of assets and
liabilities. Such differences relate principally to liabilities for future
policy benefits and accumulated contract values, deferred compensation, deferred
policy acquisition costs, postretirement benefits, deferred selling commissions,
depreciation expense and unrealized gains (losses) on securities
available-for-sale.
Income tax expense (benefit) consists of the following for the years ended
December 31, 1998, 1997 and 1996:
1998 1997 1996
------------------------------------------
(IN THOUSANDS)
Current ........................... $21,931 $ 32,194 $12,528
Deferred .......................... (185) (10,627) 8,343
------------------------------------------
$21,746 $ 21,567 $20,871
==========================================
The provision for income taxes differs from the amount computed at the statutory
federal income tax rate due primarily to dividends-received deductions and tax
credits.
Net deferred tax assets or liabilities consist of the following:
DECEMBER 31
1998 1997
------------------------
(IN THOUSANDS)
Deferred tax assets:
Future policy benefits ............................ $ 5,432 $ 9,869
Employee benefits ................................. 8,110 6,487
Deferred gain on coinsurance agreement ............ 4,475 4,970
Other ............................................. 11,762 8,747
------------------------
Total deferred tax assets ........................... 29,779 30,073
DECEMBER 31
1998 1997
------------------------
(IN THOUSANDS)
Deferred tax liabilities:
Deferred policy acquisition costs ................ $55,540 $53,173
Net unrealized appreciation on securities
available-for-sale ............................. 20,034 18,115
Deferred gain on investments ..................... 7,772 8,378
Depreciation ..................................... 1,499 1,935
Other ............................................ 5,043 6,733
------------------------
Total deferred tax liabilities ...................... 89,888 88,334
------------------------
Net deferred tax liabilities ........................ $60,109 $58,261
========================
6. CONDENSED FAIR VALUE INFORMATION
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires
disclosures of fair value information about financial instruments, whether
recognized or not recognized in a company's balance sheet, for which it is
practicable to estimate that value. The methods and assumptions used by the
Company to estimate the following fair value disclosures for financial
instruments are set forth in NOTE 1.
SFAS No. 107 excludes certain insurance liabilities and other nonfinancial
instruments from its disclosure requirements. However, the liabilities under all
insurance contracts are taken into consideration in the Company's overall
management of interest rate risk that minimizes exposure to changing interest
rates through the matching of investment maturities with amounts due under
insurance contracts. The fair value amounts presented herein do not include an
amount for the value associated with customer or agent relationships, the
expected interest margin (interest earnings in excess of interest credited) to
be earned in the future on investment-type products or other intangible items.
Accordingly, the aggregate fair value amounts presented herein do not
necessarily represent the underlying value of the Company; likewise, care should
be exercised in deriving conclusions about the Company's business or financial
condition based on the fair value information presented herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Liabilities:
Supplementary contracts without life contingencies $ 27,105 $ 27,353 $ 29,890 $ 30,189
Individual and group annuities ................... 2,147,665 2,005,939 1,894,605 1,713,509
Long-term debt ................................... 60,000 69,909 65,000 71,793
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company leases various equipment under several operating lease agreements.
Total expense for all operating leases amounted to $1,155,000, $1,018,000 and
$1,108,000 during 1998, 1997 and 1996, respectively. The Company has aggregate
future lease commitments at December 31, 1998 of $4,406,000 for noncancelable
operating leases consisting of $1,272,000 in 1999, $1,231,000 in 2000,
$1,082,000 in 2001, and $821,000 in 2002. There are no noncancelable lease
commitments beyond 2002.
In addition, in 2001, under the terms of one of the operating leases, the
Company has the option to renew the lease for another five years, purchase the
asset for approximately $4.7 million, or return the asset to the lessor and pay
a termination charge of approximately $3.7 million.
In connection with its investments in low-income housing partnerships, the
Company is committed to invest additional capital of $9,190,000
in 1999.
Guaranty fund assessments are levied on the Company by life and health guaranty
associations in most states in which it is licensed to cover losses of
policyholders of insolvent or rehabilitated insurers. In some states, these
assessments can be partially recovered through a reduction in future premium
taxes. The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based on information from the
National Organization of Life and Health Guaranty Association and information
from the various state guaranty associations, the Company believes that it is
probable that these insolvencies will result in future assessments. The Company
regularly evaluates its reserve for these insolvencies and updates its reserve
based on the Company's interpretation of information recently received. The
associated costs for a particular insurance company can vary significantly based
on its premium volume by line of business in a particular state and its
potential for premium tax offset. The Company accrued no additional reserves for
these insolvencies in 1998. At December 31, 1998, the Company has reserved
$2,142,000 to cover current and estimated future assessments, net of related
premium tax credits.
8. LONG-TERM DEBT AND OTHER BORROWINGS
The Company has a $61.5 million line-of-credit facility from the Federal Home
Loan Bank of Topeka. Any borrowings in connection with this facility bear
interest at 0.1% over the Federal Funds rate. No amounts were outstanding at
December 31, 1998 and 1997.
The Company has two separate $5 million advances from the Federal Home Loan Bank
of Topeka. The advances are due February 26, 1999 and February 28, 2001 and
carry interest rates of 5.76% and 6.04%, respectively.
In May 1996, the Company issued $50 million of 8.75% surplus notes maturing on
May 15, 2016. The surplus notes were issued pursuant to Rule 144A under the
Securities Act of 1933. The surplus notes have repayment conditions and
restrictions whereby each payment of interest on or principal of the surplus
notes may be made only with the prior approval of the Kansas Insurance
Commissioner and only out of surplus funds that the Kansas Insurance
Commissioner determines to be available for such payment under the Kansas
Insurance Code.
9. RELATED-PARTY TRANSACTIONS
The Company owns shares of mutual funds managed by Security Management Company,
LLC with net asset values totaling $108,285,000 and $85,950,000 at December 31,
1998 and 1997, respectively. These amounts are included in equity securities on
the consolidated balance sheets.
10. STATUTORY INFORMATION
SBL and its insurance subsidiary prepare statutory-basis financial statements in
accordance with accounting practices prescribed or permitted by the Kansas and
New York Insurance regulatory authorities, respectively. Accounting practices
used to prepare statutory-basis financial statements for regulatory filings of
life insurance companies differ in certain instances from generally accepted
accounting principles (GAAP). Prescribed statutory accounting practices include
a variety of publications of the National Association of Insurance Commissioners
(NAIC), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed; such practices may differ from state to state, may differ from
company to company within a state and may change in the future. In addition, in
March 1998, the NAIC adopted the codification of Statutory Accounting Principles
(the Codification). Once implemented, the definitions of what comprises
prescribed versus permitted statutory accounting practices may result in changes
to accounting policies that insurance enterprises use to prepare their statutory
financial statements. The implementation date is ultimately dependent on an
insurer's state of domicile. The Company does not expect a material impact on
its statutory financial statements resulting from the implementation of
codification. Statutory capital and surplus of the insurance operations are
$427,350,000 and $382,005,000 at December 31, 1998 and 1997, respectively.
Statutory net income of the insurance operations are $50,371,000, $42,950,000
and $37,946,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
11. IMPACT OF YEAR 2000 (UNAUDITED)
Over the past few years, the Company has been assessing the potential impact of
the year 2000 on its systems, procedures, customers and business processes. The
year 2000 assessment provided information used to determine what system
components needed to be changed or replaced to minimize the impact of the
calendar change from 1999 to 2000.
The Company will continue to use internal and external resources to modify,
replace and test the year 2000 changes. All identified modifications to critical
operating systems have been completed as of December 31, 1998, and the Company
continues to validate completed systems to ensure ongoing compliance. Management
estimates 100% of the identified modifications to other less-important operating
systems will be completed by June 30, 1999. In any event, all identified
modifications are expected to be completed prior to any anticipated impact on
Company operations. Total costs of the modifications have been immaterial to the
Company's operations and have been expensed as incurred.
The Company does face the risk that one or more of its critical suppliers or
customers (external relationships) will not be able to interact with the Company
due to the third party's inability to resolve its own year 2000 issues. The
Company completed an inventory of external relationships, is engaged in
discussions with such third parties and is requesting information as to those
parties' year 2000 plans and states of readiness. The Company, however, is
unable to predict with certainty to what extent its external relationships will
be year 2000 ready. However, third-party vendors of the Company's primary
administrative systems have represented to the Company that the systems are or
will be year 2000 ready.
While the Company believes that it has addressed its year 2000 concerns, the
Company has begun to strengthen its contingency/recovery plans aimed at ensuring
the continuity of critical business functions before, on and after December 31,
1999. The Company expects contingency/recovery planning to be substantially
complete by July 1, 1999. The year 2000 contingency plans will be reviewed
periodically throughout 1999 and revised as needed. The Company believes its
year 2000 contingency plans, coupled with existing disaster recovery and
business resumption plans, minimize the impact year 2000 issues may have on its
business and customers.
<PAGE>
APPENDIX
DEATH BENEFIT PERCENTAGES
AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE AGE PERCENTAGE
0-40 250% 50 185% 60 130% 70 115%
41 243 51 178 61 128 71 113
42 236 52 171 62 126 72 111
43 229 53 164 63 124 73 109
44 222 54 157 64 122 74 107
45 215 55 150 65 120 75-90 105
46 209 56 146 66 119 91 104
47 203 57 142 67 118 92 103
48 197 58 138 68 117 93 102
49 191 59 134 69 116 94 101
<PAGE>
- --------------------------------------------------------------------------------
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 SW HARRISON STREET, TOPEKA, KANSAS 66636
SECURITY ELITE BENEFIT
A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
IMPORTANT INFORMATION ABOUT THIS ILLUSTRATION
Security Elite Benefit is a flexible premium variable life insurance policy
offered by Security Benefit. Under the policy, net premiums and Accumulated
Value may be allocated among eleven underlying investment accounts ("Variable
Accounts") and the Fixed Account of Security Benefit.
THE PURPOSE OF THIS ILLUSTRATION IS TO SHOW HOW THE PERFORMANCE OF THE
VARIABLE ACCOUNTS COULD AFFECT THE DEATH BENEFITS, ACCUMULATED VALUES AND NET
CASH SURRENDER VALUES OF A HYPOTHETICAL POLICY OVER AN EXTENDED PERIOD OF TIME
ASSUMING HYPOTHETICAL RATES OF RETURN EQUIVALENT TO CONSTANT GROSS ANNUAL RATES
OF 0%, 6% AND 12% (AFTER ANY DEDUCTION FOR EXPENSES AND CHARGES SHOWN BELOW).
The rates of return shown on these tables are hypothetical and should not be
deemed a representation of past rates of return, or a projection or prediction
of future 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 premium allocation
chosen by the Policyowner. The policies illustrated include the following:
1. Male, age 40, Preferred Rating Class (based on tobacco use), Option A,
$10,000 annual premium, Current Cost of Insurance Rates and Current
Mortality and Expense Risk and Administrative Charges (page 61).
2. Male, age 40, Preferred Rating Class (based on tobacco use), Option A,
$10,000 annual premium, Guaranteed Cost of Insurance Rates and Guaranteed
Mortality and Expense Risk and Administrative Charges (page 62).
3. Male, age 40, Preferred Rating Class (based on tobacco use), Option B,
$25,000 annual premium, Current Cost of Insurance Rates and Current
Mortality and Expense Risk and Administrative Charges (page 63).
4. Male, age 40, Preferred Rating Class (based on tobacco use), Option B,
$25,000 annual premium, Guaranteed Cost of Insurance Rates and Guaranteed
Mortality and Expense Risk and Administrative Charges (page 64).
The values would be different from those shown if the gross annual
investment rates of return averaged 0%, 6% or 12% over a period of years, but
also fluctuated above or below those averages for individual policy years.
The fourth column of each table, labeled "Total Premiums Paid Plus Interest
at 5%," shows the amount that would accumulate if an amount equal to the annual
premium (after taxes) were invested to earn interest at 5% compounded annually.
These illustrations assume that no policy loans have been made. No
representation can be made by Security Benefit that the assumed rates of return
can be achieved for any one year or sustained over any period of time. These
illustrations assume that all premiums are paid when due and that no policy
loans have been made. A POLICY MAY LAPSE DUE TO INSUFFICIENT PREMIUMS, EXCESSIVE
LOANS OR WITHDRAWALS, OR POOR FUND PERFORMANCE.
The amounts shown for the Death Benefits and Net Cash Surrender Values
reflect the fact that the net investment return on the Variable Accounts is
lower than the gross investment return on the assets as a result of charges
levied against the Accounts, including "Current" or "Guaranteed" daily mortality
and expense risk charges. (The "Current" mortality and expense charge is equal
to an annual rate of .90% of the average daily net assets of each Account in the
first ten Policy Years and .70% thereafter, and the "Guaranteed" rate is .90%
for all Policy Years. The "Current" administrative charge is equal to an annual
rate of .35% in the first ten Policy Years and .25% thereafter, and the
"Guaranteed" rate is .35% in all Policy Years.) These values also take into
account the following: (i) a premium load of 2.5%, although the premium load may
be more or less than this amount depending on the state in which the policy is
issued; and, (ii) a "Current" or "Guaranteed" monthly charge for cost of
insurance. (The illustrations based on "CURRENT COST OF INSURANCE RATE AND
CURRENT MORTALITY AND EXPENSE RISK AND ADMINISTRATIVE CHARGES" assume that the
charges currently assessed by Security Benefit are charged throughout the life
of the policy. The illustrations based on "GUARANTEED COST OF INSURANCE RATES
AND GUARANTEED MORTALITY AND EXPENSE RISK AND ADMINISTRATIVE CHARGES" assume
that the maximum monthly charges permitted under the policy are assessed
throughout the life of the policy). In addition, the values reflect other
charges that are paid by the underlying Fund in which the Accounts invest,
including investment advisory fees, which are indirectly borne by the Accounts.
The expenses of the Fund are not fixed or specified under the terms of the
policy and are described in the Fund Prospectus. The expenses of the Fund are
assumed to be equal to an annual rate of .90% of the aggregate average daily net
assets of the Fund. The amounts shown would differ if unisex rates were used or
if the insured were female and female rates were used. The amounts would also
differ if the insured were a tobacco user and standard rates were used.
The total Fund expense of .90% is an estimated average expense of the
expenses associated with the Series available under the Policy. For the year
ended December 31, 1998, the total expenses of each Series of the Fund were the
following percentages of the average daily net assets of the Series: 0.81% for
Series A, 0.80% for Series B; 0.57% for Series C; 1.26% for Series D; 0.83% for
Series E; 0.82% for Series J; 1.65% for Series K; 1.24% for Series M; 1.22% for
Series N; 1.08% for Series O; and 0.82% for Series S. Accordingly, existing
Series, which have lower expenses, were given more weight in determining the
amount of the Fund's assumed expenses than were the new Series which have higher
expenses. The estimated Fund expense of .90% may be more or less than the Fund
expenses incurred depending on the actual expenses of the Series underlying the
Variable Account to which Accumulated Value is allocated.
After deductions of the charges and Fund expenses described above, the
illustrated gross annual investment rates of return of 0%, 6%, and 12%
correspond to approximate net annual rates of -2.14%, 3.73%, and 9.60% in the
tables based on guaranteed charges. In the tables based on current charges, the
illustrated gross annual investment rates of return of 0%, 6% and 12% correspond
to approximate net annual rates of -2.14%, 3.73%, and 9.60% in the first ten
Policy Years and -1.84%, 4.05% and 9.94% thereafter. The hypothetical values
shown in the tables do not reflect any charges against the Variable Accounts for
income taxes that may be attributable to the Variable Accounts in the future,
since Security Benefit is not currently making these charges. In the event that
these charges are to be made, the gross annual investment rate would have to
exceed 0%, 6% or 12% by an amount sufficient to cover the tax charges in order
to produce the death benefits and Net Cash Surrender Values illustrated.
This illustration reflects Security Benefit's current interpretation of
Internal Revenue Code Section 7702 and 7702A and may not reflect a Policyowner's
actual tax consequences. Based upon comparison of annual premium and future
benefits under our current interpretation, this policy will not be subject to
tax treatment as a modified endowment contract if the premiums as illustrated
are paid when scheduled. The tests were done based on the values under the
illustration bases. Tests done under other bases may produce different results.
It is suggested that a Policyowner consult his or her professional tax advisor
regarding the interpretation of the current and proposed tax laws. Additional
information about the policy, including a description of death benefits,
transfers, partial withdrawal benefits, and policy loans, is contained under
"Summary of the Policy" and "The Policy" in this prospectus.
We will furnish upon request a comparable illustration reflecting the
proposed Insured's Age, gender (unless unisex rates apply), Underwriting Class,
Rating Class, Specified Amount, Death Benefit Option and premium amounts
requested. In addition, upon request, illustrations will be furnished reflecting
allocation of premiums to specified Variable Accounts. Such illustrations will
reflect the expenses of the Series of the Fund in which the Variable Account
invests.
THIS ILLUSTRATION IS VALID ONLY AS PART OF THE PROSPECTUS AND ONLY IF ALL PAGES
ARE INCLUDED
- --------------------------------------------------------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 HARRISON, TOPEKA, KS 66636
SECURITY ELITE BENEFIT
A Flexible Premium Variable Life Insurance Policy
Illustration for: Male, Age 40, Preferred
Initial Specified Amount: $750,000, Option A
Initial Annual Premium: $10,000
BASED ON CURRENT COST OF INSURANCE RATES AND CURRENT MORTALITY
AND EXPENSE RISK AND ADMINISTRATIVE CHARGES
<TABLE>
<CAPTION>
0% HYPOTHETICAL GROSS 6% HYPOTHETICAL GROSS 12% HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
TOTAL
PREMIUMS
END OF PAID PLUS NET CASH NET CASH NET CASH
POLICY ANNUAL INTEREST SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR AGE PREMIUMS AT 5% VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
---- --- -------- ----- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $10,000 $10,500 $9,016 $750,000 $9,572 $750,000 $10,128 $750,000
2 42 $10,000 $21,525 $16,720 $750,000 $18,349 $750,000 $20,043 $750,000
3 43 $10,000 $33,101 $24,277 $750,000 $27,473 $750,000 $30,936 $750,000
4 44 $10,000 $45,256 $31,689 $750,000 $36,961 $750,000 $42,901 $750,000
5 45 $10,000 $58,019 $38,959 $750,000 $46,824 $750,000 $56,046 $750,000
6 46 $10,000 $71,420 $46,089 $750,000 $57,080 $750,000 $70,487 $750,000
7 47 $10,000 $85,491 $53,084 $750,000 $67,742 $750,000 $86,350 $750,000
8 48 $10,000 $100,266 $59,944 $750,000 $78,828 $750,000 $103,777 $750,000
9 49 $10,000 $115,779 $66,672 $750,000 $90,353 $750,000 $122,921 $750,000
10 50 $10,000 $132,068 $73,272 $750,000 $102,337 $750,000 $143,951 $750,000
11 51 $10,000 $149,171 $79,990 $750,000 $115,147 $750,000 $167,564 $750,000
12 52 $10,000 $167,130 $86,600 $750,000 $128,506 $750,000 $193,583 $750,000
13 53 $10,000 $185,986 $93,102 $750,000 $142,437 $750,000 $222,253 $750,000
14 54 $10,000 $205,786 $99,500 $750,000 $156,966 $750,000 $253,844 $750,000
15 55 $10,000 $226,575 $105,793 $750,000 $172,117 $750,000 $288,653 $750,000
16 56 $10,000 $248,404 $111,985 $750,000 $187,918 $750,000 $327,010 $750,000
17 57 $10,000 $271,324 $118,077 $750,000 $204,395 $750,000 $369,273 $750,000
18 58 $10,000 $295,390 $124,071 $750,000 $221,579 $750,000 $415,843 $750,000
19 59 $10,000 $320,660 $129,967 $750,000 $239,500 $750,000 $467,158 $750,000
20 60 $10,000 $347,193 $135,768 $750,000 $258,188 $750,000 $523,701 $750,000
20 60 $10,000 $347,193 $135,768 $750,000 $258,188 $750,000 $523,701 $750,000
25 65 $10,000 $501,135 $162,493 $750,000 $363,676 $750,000 $903,372 $1,102,114
30 70 $10,000 $697,609 $182,990 $750,000 $491,363 $750,000 $1,510,659 $1,752,365
</TABLE>
All Premiums illustrated are assumed to be paid at the beginning of the policy
year.
This illustration assumes that no policy loans or withdrawals have been made.
- --------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. 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 TO VARIABLE ACCOUNTS BY THE OWNER AND THE EXPERIENCE OF THE
ACCOUNTS. NO REPRESENTATION CAN BE MADE BY SECURITY BENEFIT LIFE, THE SEPARATE
ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
THIS ILLUSTRATION IS VALID ONLY AS PART OF THE PROSPECTUS AND ONLY IF ALL PAGES
ARE INCLUDED
- --------------------------------------------------------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 HARRISON, TOPEKA, KS 66636
SECURITY ELITE BENEFIT
A Flexible Premium Variable Life Insurance Policy
Illustration for: Male, Age 40, Preferred
Initial Specified Amount: $750,000, Option A
Initial Annual Premium: $10,000
BASED ON GUARANTEED COST OF INSURANCE RATES AND GUARANTEED MORTALITY
AND EXPENSE RISK AND ADMINISTRATIVE CHARGES
<TABLE>
<CAPTION>
0% HYPOTHETICAL GROSS 6% HYPOTHETICAL GROSS 12% HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
TOTAL
PREMIUMS
END OF PAID PLUS NET CASH NET CASH NET CASH
POLICY ANNUAL INTEREST SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR AGE PREMIUMS AT 5% VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
---- --- -------- ----- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1 41 $10,000 $10,500 $7,804 $750,000 $8,321 $750,000 $8,840 $750,000
2 42 $10,000 $21,525 $15,329 $750,000 $16,840 $750,000 $18,413 $750,000
3 43 $10,000 $33,101 $22,576 $750,000 $25,558 $750,000 $28,789 $750,000
4 44 $10,000 $45,256 $29,538 $750,000 $34,474 $750,000 $40,036 $750,000
5 45 $10,000 $58,019 $36,210 $750,000 $43,586 $750,000 $52,232 $750,000
6 46 $10,000 $71,420 $42,580 $750,000 $52,883 $750,000 $65,454 $750,000
7 47 $10,000 $85,491 $48,641 $750,000 $62,365 $750,000 $79,799 $750,000
8 48 $10,000 $100,266 $54,390 $750,000 $72,030 $750,000 $95,373 $750,000
9 49 $10,000 $115,779 $59,815 $750,000 $81,872 $750,000 $112,290 $750,000
10 50 $10,000 $132,068 $64,905 $750,000 $91,885 $750,000 $130,676 $750,000
11 51 $10,000 $149,171 $69,634 $750,000 $102,050 $750,000 $150,664 $750,000
12 52 $10,000 $167,130 $73,974 $750,000 $112,342 $750,000 $172,395 $750,000
13 53 $10,000 $185,986 $77,888 $750,000 $122,734 $750,000 $196,029 $750,000
14 54 $10,000 $205,786 $81,336 $750,000 $133,190 $750,000 $221,744 $750,000
15 55 $10,000 $226,575 $84,281 $750,000 $143,684 $750,000 $249,750 $750,000
16 56 $10,000 $248,404 $86,683 $750,000 $154,183 $750,000 $280,286 $750,000
17 57 $10,000 $271,324 $88,507 $750,000 $164,661 $750,000 $313,634 $750,000
18 58 $10,000 $295,390 $89,731 $750,000 $175,107 $750,000 $350,130 $750,000
19 59 $10,000 $320,660 $90,300 $750,000 $185,481 $750,000 $390,140 $750,000
20 60 $10,000 $347,193 $90,144 $750,000 $195,732 $750,000 $434,086 $750,000
20 60 $10,000 $347,193 $90,144 $75,000 $195,732 $750,000 $434,086 $750,000
25 65 $10,000 $501,135 $75,073 $75,000 $242,750 $750,000 $730,712 $891,469
30 70 $10,000 $697,609 $23,051 $75,000 $274,104 $750,000 $1,191,698 $1,382,370
</TABLE>
All Premiums illustrated are assumed to be paid at the beginning of the policy
year.
This illustration assumes that no policy loans or withdrawals have been made.
- --------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. 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 TO VARIABLE ACCOUNTS BY THE OWNER AND THE EXPERIENCE OF THE
ACCOUNTS. NO REPRESENTATION CAN BE MADE BY SECURITY BENEFIT LIFE, THE SEPARATE
ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
THIS ILLUSTRATION IS VALID ONLY AS PART OF THE PROSPECTUS AND ONLY IF ALL PAGES
ARE INCLUDED
- --------------------------------------------------------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 HARRISON, TOPEKA, KS 66636
SECURITY ELITE BENEFIT
A Flexible Premium Variable Life Insurance Policy
Illustration for: Male, Age 40, Preferred
Initial Specified Amount: $750,000, Option B
Initial Annual Premium: $25,000
BASED ON CURRENT COST OF INSURANCE RATES AND CURRENT MORTALITY
AND EXPENSE RISK AND ADMINISTRATIVE CHARGES
<TABLE>
<CAPTION>
0% HYPOTHETICAL GROSS 6% HYPOTHETICAL GROSS 12% HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
TOTAL
PREMIUMS
END OF PAID PLUS NET CASH NET CASH NET CASH
POLICY ANNUAL INTEREST SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR AGE PREMIUMS AT 5% VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
---- --- -------- ----- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $25,000 $26,250 $23,322 $773,322 $24,736 $774,736 $26,150 $776,150
2 42 $25,000 $53,813 $44,992 $794,992 $49,206 $799,206 $53,587 $803,587
3 43 $25,000 $82,753 $66,200 $816,200 $74,589 $824,589 $83,658 $833,658
4 44 $25,000 $113,141 $86,954 $836,954 $100,921 $850,921 $116,619 $866,619
5 45 $25,000 $145,048 $107,264 $857,264 $128,235 $878,235 $152,745 $902,745
6 46 $25,000 $178,550 $127,140 $877,140 $156,570 $906,570 $192,341 $942,341
7 47 $25,000 $213,728 $146,591 $896,591 $185,962 $935,962 $235,741 $985,741
8 48 $25,000 $250,664 $165,626 $915,626 $216,451 $966,451 $283,309 $1,033,309
9 49 $25,000 $289,447 $184,254 $934,254 $248,079 $998,079 $335,446 $1,085,446
10 50 $25,000 $330,170 $202,484 $952,484 $280,888 $1,030,888 $392,591 $1,142,591
11 51 $25,000 $372,928 $220,995 $970,996 $315,881 $1,065,881 $456,611 $1,206,611
12 52 $25,000 $417,825 $239,166 $989,166 $352,291 $1,102,291 $526,994 $1,276,994
13 53 $25,000 $464,966 $257,003 $1,007,003 $390,175 $1,140,175 $604,371 $1,354,371
14 54 $25,000 $514,464 $274,511 $1,024,511 $429,593 $1,179,593 $689,438 $1,439,439
15 55 $25,000 $566,437 $291,697 $1,041,697 $470,607 $1,220,607 $782,960 $1,532,960
16 56 $25,000 $621,009 $308,567 $1,058,567 $513,281 $1,263,281 $885,777 $1,635,777
17 57 $25,000 $678,310 $325,126 $1,075,126 $557,683 $1,307,683 $998,811 $1,748,811
18 58 $25,000 $738,475 $341,380 $1,091,380 $603,883 $1,353,883 $1,123,080 $1,873,080
19 59 $25,000 $801,649 $357,335 $1,107,335 $651,954 $1,401,954 $1,259,699 $2,009,699
20 60 $25,000 $867,981 $372,996 $1,122,996 $701,970 $1,451,970 $1,409,895 $2,159,895
20 60 $25,000 $867,981 $372,996 $1,122,996 $701,970 $1,451,970 $1,409,895 $2,159,895
25 65 $25,000 $1,257,836 $445,938 $1,195,938 $982,891 $1,732,891 $2,415,439 $3,165,439
30 70 $25,000 $1,750,401 $506,957 $1,256,958 $1,319,266 $2,069,266 $4,023,324 $4,773,324
</TABLE>
All Premiums illustrated are assumed to be paid at the beginning of the policy
year.
This illustration assumes that no policy loans or withdrawals have been made.
- --------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. 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 TO VARIABLE ACCOUNTS BY THE OWNER AND THE EXPERIENCE OF THE
ACCOUNTS. NO REPRESENTATION CAN BE MADE BY SECURITY BENEFIT LIFE, THE SEPARATE
ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
THIS ILLUSTRATION IS VALID ONLY AS PART OF THE PROSPECTUS AND ONLY IF ALL PAGES
ARE INCLUDED
- --------------------------------------------------------------------------------
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
700 HARRISON, TOPEKA, KS 66636
SECURITY ELITE BENEFIT
A Flexible Premium Variable Life Insurance Policy
Illustration for: Male, Age 40, Preferred
Initial Specified Amount: $750,000, Option B
Initial Annual Premium: $25,000
BASED ON GUARANTEED COST OF INSURANCE RATES AND GUARANTEED MORTALITY
AND EXPENSE RISK AND ADMINISTRATIVE CHARGES
<TABLE>
<CAPTION>
0% HYPOTHETICAL GROSS 6% HYPOTHETICAL GROSS 12% HYPOTHETICAL GROSS
ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN ANNUAL INVESTMENT RETURN
TOTAL
PREMIUMS
END OF PAID PLUS NET CASH NET CASH NET CASH
POLICY ANNUAL INTEREST SURRENDER DEATH SURRENDER DEATH SURRENDER DEATH
YEAR AGE PREMIUMS AT 5% VALUE BENEFIT VALUE BENEFIT VALUE BENEFIT
---- --- -------- ----- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 41 $25,000 $26,250 $22,096 $772,096 $23,470 $773,470 $24,846 $774,846
2 42 $25,000 $53,813 $43,586 $793,586 $47,680 $797,680 $51,938 $801,938
3 43 $25,000 $82,753 $64,476 $814,476 $72,648 $822,648 $81,481 $831,481
4 44 $25,000 $113,141 $84,764 $834,764 $98,388 $848,388 $113,698 $863,698
5 45 $25,000 $145,048 $104,449 $854,449 $124,915 $874,915 $148,829 $898,829
6 46 $25,000 $178,550 $123,521 $873,521 $152,234 $902,234 $187,130 $937,130
7 47 $25,000 $213,728 $141,979 $891,979 $180,359 $930,359 $228,891 $978,891
8 48 $25,000 $250,664 $159,821 $909,821 $209,307 $959,307 $274,428 $1,024,428
9 49 $25,000 $289,447 $177,038 $927,038 $239,084 $989,084 $324,081 $1,074,081
10 50 $25,000 $330,170 $193,621 $943,621 $269,699 $1,019,699 $378,220 $1,128,220
11 51 $25,000 $372,928 $209,547 $959,547 $301,144 $1,051,145 $437,238 $1,187,238
12 52 $25,000 $417,825 $224,785 $974,785 $333,406 $1,083,406 $501,557 $1,251,557
13 53 $25,000 $464,966 $239,299 $989,299 $366,462 $1,116,462 $571,632 $1,321,632
14 54 $25,000 $514,464 $253,046 $1,003,046 $400,281 $1,150,281 $647,953 $1,397,953
15 55 $25,000 $566,437 $265,990 $1,015,990 $434,837 $1,184,837 $731,065 $1,481,065
16 56 $25,000 $621,009 $278,089 $1,028,089 $470,098 $1,220,099 $821,559 $1,571,559
17 57 $25,000 $678,310 $289,309 $1,039,309 $506,038 $1,256,038 $920,090 $1,670,090
18 58 $25,000 $738,475 $299,633 $1,049,633 $542,642 $1,292,642 $1,027,391 $1,777,391
19 59 $25,000 $801,649 $309,006 $1,059,006 $579,861 $1,329,861 $1,144,227 $1,894,227
20 60 $25,000 $867,981 $317,360 $1,067,360 $617,627 $1,367,627 $1,271,421 $2,021,421
20 60 $25,000 $867,981 $317,360 $1,067,360 $617,627 $1,367,627 $1,271,421 $2,021,421
25 65 $25,000 $1,257,836 $340,656 $1,090,656 $811,126 $1,561,127 $2,096,555 $2,846,555
30 70 $25,000 $1,750,401 $322,829 $1,072,829 $999,216 $1,749,216 $3,351,554 $4,101,554
</TABLE>
All Premiums illustrated are assumed to be paid at the beginning of the policy
year.
This illustration assumes that no policy loans or withdrawals have been made.
- --------------------------------------------------------------------------------
THE HYPOTHETICAL INVESTMENT RATES SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS
ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE INTERPRETED AS A REPRESENTATION OF PAST
OR FUTURE INVESTMENT RESULTS. 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 TO VARIABLE ACCOUNTS BY THE OWNER AND THE EXPERIENCE OF THE
ACCOUNTS. NO REPRESENTATION CAN BE MADE BY SECURITY BENEFIT LIFE, THE SEPARATE
ACCOUNT OR THE FUND THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR
ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
- --------------------------------------------------------------------------------
THIS ILLUSTRATION IS VALID ONLY AS PART OF THE PROSPECTUS AND ONLY IF ALL PAGES
ARE INCLUDED
- --------------------------------------------------------------------------------
<PAGE>
PART II. ADDITIONAL INFORMATION NOT REQUIRED IN PROSPECTUS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet.
The Security Elite Benefit Prospectus consisting of 63 pages (including
illustrations).
The undertaking to file reports.
The signatures.
Written consent of the following persons (included in the exhibits shown
below):
Ernst & Young LLP, Independent Auditors
The following exhibits:
1. (1) Certified resolution of the Board of Directors of the Depositor dated
September 13, 1993.
(2) Not applicable.
(3) (a) Distribution Agreement Between Security Benefit Life Insurance
Company and Security Distributors, Inc.
(b) Form of Selling Agreement Between Security Distributors, Inc.
and Various Broker/Dealers.
(c) Not applicable
(4) Not applicable.
(5) (a) Flexible Premium Variable Life Insurance Policy.
(b) Accelerated Benefit for Terminal Illness Rider.
(c) Waiver of Monthly Deduction Rider.
(d) Extended Guaranteed Death Benefit Rider.
(e) Annual Renewable and Convertible Level Term Insurance Rider.
(6) (a) Articles of Incorporation of Security Benefit Life Insurance
Company.(b)
(b) Bylaws of Security Benefit Life Insurance Company.(b)
(7) Not applicable.
(8) Not applicable.
(9) Purchase Agreement between Security Benefit Life Insurance Company
and SBL Fund.
(10) Application for Flexible Premium Variable Life Insurance Policy and
General Questionnaire.(a)
2. Opinion and Consent of legal officer of Security Benefit as to the
legality of the Policies being registered.
3. Not applicable.
4. Not applicable.
5. Not applicable.
6. Consent of Independent Auditors.
7. Opinion of Actuary.
8. Memorandum Describing Issuance, Transfer, and Redemption Procedures.
9. Not applicable.
10. Powers of Attorney.
(a) Incorporated herein by reference to the Exhibits filed with Post-Effective
Amendment No. 3 to Registrant's Registration Statement 33-77322 (April 30,
1997).
(b) Incorporated herein by reference to the Exhibits filed with Variflex
Separate Account Post-Effective Amendment No. 20 under the Securities Act
of 1933 and Amendment No. 19 under the Investment Company Act of 1940 to
Registration Statement No. 2-89328 (November 1, 1998).
<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 hereinafter duly adopted pursuant to authority
conferred in that section.
Pursuant to Statute 26(e)(2)(A) of the Investment Company Act of 1940, the
Depositor hereby represents that the fees and charges deducted under the
Contract, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by the Depositor.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
Security Varilife Separate Account (Security Elite Benefit), certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to rule 485(a) under the Securities Act of 1933 and has duly caused
this registration statement to be signed on its behalf by the undersigned
thereunto as duly authorized, in the City of Topeka, and State of Kansas on this
26th day of February, 1999.
SIGNATURES AND TITLES
Howard R. Fricke SECURITY BENEFIT LIFE INSURANCE COMPANY
Director, Chairman of the Board (The Depositor)
and Chief Executive Officer
By: ROGER K. VIOLA
-------------------------------------------
Thomas R. Clevenger Roger K. Viola, Senior Vice President,
Director General Counsel and Secretary as
Attorney-In-Fact for the Officers and
Sister Loretto Marie Colwell Directors Whose Names Appear Opposite
Director
SECURITY VARILIFE SEPARATE ACCOUNT
John C. Dicus (The Registrant)
Director
By: SECURITY BENEFIT LIFE INSURANCE COMPANY
Steven J. Douglass (The Depositor)
Director
By: HOWARD R. FRICKE
William W. Hanna ---------------------------------------
Director Howard R. Fricke, Chairman of the Board
and Chief Executive Officer
John E. Hayes, Jr.
Director By: DONALD J. SCHEPKER
---------------------------------------
Laird G. Noller Donald J. Schepker, Senior Vice
Director President, Chief Financial Officer
and Treasurer
Frank C. Sabatini
Director (ATTEST): ROGER K. VIOLA
---------------------------------
Robert C. Wheeler Roger K. Viola, Senior Vice
Director President, General Counsel
and Secretary
Date: February 26, 1999
<PAGE>
EXHIBIT INDEX
(1) (1) Certified Resolution of the Board of Directors of the Depositor
dated September 13, 1993.
(2) None
(3) (a) Distribution Agreement Between Security Benefit Life Insurance
Company and Security Distributors, Inc.
(b) Form of Selling Agreement Between SDI and various Broker/Dealers.
(c) None
(4) None
(5) (a) Flexible Premium Variable Life Insurance Policy
(b) Accelerated Benefit for Terminal Illness Rider
(c) Waiver of Monthly Deduction Rider
(d) Extended Guaranteed Death Benefit
(e) Annual Renewable and Convertible Level Term Insurance Rider
(6) (a) None
(b) None
(7) None
(8) None
(9) Purchase Agreement between Security Benefit Life Insurance
Company and SBL Fund
(10) None
(2) Opinion of Counsel
(3) None
(4) None
(5) None
(6) Consent of Independent Auditors
(7) Opinion of Actuary
(8) Memorandum Describing Issuance, Transfer, and Redemption
Procedures
(9) None
(10) Powers of Attorney
<PAGE>
RESOLUTION TO ESTABLISH SEPARATE ACCOUNT
RESOLVED, that Security Benefit Life Insurance Company ("SBL") shall establish
separate accounts in accordance with and under the provisions of Sections 40-436
and 40-437 of the Kansas Statutes Annotated, such separate accounts to be known
as the SBL Variable Life Accounts A and B, or such other appropriate designation
as may be determined by the appropriate officers of SBL (hereinafter referred to
as the "Accounts"), and that hereafter each of the Accounts shall be deemed to
be and shall be established as a separate account in accordance with and under
the provisions of said Sections 40-436 and 40-437 as heretofore or hereafter
amended.
FURTHER RESOLVED, that variable life insurance contracts, including group
contracts (which shall provide that part or all of the benefits and payments
thereunder will reflect the investment experience of SBL Fund or of another
investment company established to fund variable annuity or variable life
insurance contracts) are hereby approved and adopted for use by SBL, such
contracts to contain the terms and conditions which the appropriate officers of
SBL shall deem necessary, prudent and in the best interests of SBL.
FURTHER RESOLVED, that such variable life insurance contracts shall be issued
and established in as many Series as the appropriate officers of SBL may, from
time to time, deem necessary to establish.
FURTHER RESOLVED, that in accordance with Section 40-436(c) of the Kansas
Statutes Annotated, the income, if any, and gains and losses, whether realized
or unrealized, from assets allocated to each Account, shall be, in accordance
with the applicable contract, credited to or charged against the Account without
regard to other income, gains or losses of SBL.
FURTHER RESOLVED, that the appropriate officers of SBL be, and they hereby are,
authorized and directed to do any and all things necessary to:
(a) Register each Account as a unit investment trust under the Investment
Company Act of 1940 (the "1940 Act"), as amended;
(b) Register the variable life insurance contracts, in such amounts as the
appropriate officers of SBL shall from time to time deem necessary or in
an indefinite amount under the Securities Act of 1933 (the "1933 Act");
and
(c) Take all other action necessary to comply with the 1940 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the 1933 Act,
including without limitation, the filing of an application or applications
for exemptions from the 1940 Act as the appropriate officers of SBL or as
counsel shall deem necessary or advisable.
FURTHER RESOLVED, that the President of the Company, or in his absence, a Vice
President, be and each of them is hereby authorized, empowered and directed to
sign a form of Notification of Registration under the 1940 Act, and such
Registration Statements as may be required by the 1940 Act and the 1933 Act, in
the name of the Accounts by SBL as sponsor and depositor, and that the
appropriate officers of SBL be, and they hereby are, fully authorized, empowered
and directed to execute and cause to be filed for and on behalf of the Accounts
and SBL said Notification of Registration and said Registration Statements, and
that the appropriate officers of SBL be, and they hereby are, fully authorized
and empowered to execute and cause to be filed, for and on behalf of the
Accounts and SBL, and the President and each Vice President of SBL is hereby
fully authorized and empowered to execute in the name of the Accounts and SBL,
such amendments to, and such instruments, exhibits and documents in connection
with, said Notification of Registration and said Registration Statements, as
they, or any of them, may, upon advice of counsel, deem necessary or advisable.
CERTIFICATION
The undersigned hereby certifies that he is the duly elected Senior Vice
President, Secretary and General Counsel of SECURITY BENEFIT LIFE INSURANCE
COMPANY, a corporation organized and existing under the laws of the State of
Kansas. The Executive Committee of the Board of Directors of said SECURITY
BENEFIT LIFE INSURANCE COMPANY did hereby adopt the aforesaid stated resolution
at their meeting held September 13, 1993:
Dated this 3rd day of March, 1994.
ROGER K. VIOLA
------------------------------
Roger K. Viola
Senior Vice President,
Secretary and General Counsel
(Corporate Seal)
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this _____ day of December, 1993, between SECURITY
BENEFIT LIFE INSURANCE COMPANY, a Kansas corporation, (hereinafter the
"Company") and SECURITY DISTRIBUTORS, INC., a Kansas corporation, (hereinafter
the "Distributor"),
WITNESSETH:
WHEREAS, the Company is engaged in business as a mutual life insurance
company;
WHEREAS, the Company, on its behalf and on behalf of Security Varilife
Separate Account (hereinafter the "Separate Account"), a segregated asset
account of the Company, entered into a Purchase Agreement with SBL Fund
(hereinafter the "Fund"), pursuant to which the Fund will serve as an investment
vehicle for the variable life insurance policies issued from the Separate
Account;
WHEREAS, the Distributor is a broker-dealer registered with the Securities
and Exchange Commission (hereinafter the "SEC") under the Securities Exchange
Act of 1934, as amended, and a member of the National Association of Securities
Dealers, Inc.,
WHEREAS, the Company desires to retain the Distributor to solicit for sale,
and accept applications for variable life insurance policies issued by the
Separate Account (hereinafter the "Variable Policies") for submission to the
Company, provided there is an effective registration statement relating to said
Variable Policies, and to deliver the Variable Policies after sales;
WHEREAS, the Distributor is willing to act as principal underwriter for the
Company to offer for sale, sell and deliver after sale, the Variable Policies;
NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties agree as follows:
ARTICLE 1. EMPLOYMENT OF DISTRIBUTOR. The Company hereby employs the
Distributor to act as principal underwriter for the Variable Policies and hereby
agrees that during the term of this Distribution Agreement (hereinafter the
"Agreement"), or until any termination thereof, the Distributor shall have the
exclusive right to offer for sale and to distribute any and all Variable
Policies offered by the Company. The Distributor hereby accepts such employment
and agrees to act as the distributor of the Variable Policies offered or to be
offered by the Company during the period this Agreement is in effect and agrees
during such period to offer for sale such Variable Policies as long as such
Variable Policies remain available for sale, and an effective registration
statement is on file with the SEC, unless the Distributor is unable legally to
make such offer for sale as the result of any law or governmental regulation.
ARTICLE 2. COMPENSATION. Commissions in the amounts set forth on Schedule A
of this Agreement for the sale of Variable Policies, shall be payable monthly,
except that in the event that a Variable Policy is returned to the Company
within the "free look" period, the Distributor agrees to promptly repay the full
amount of such commissions to the Company.
ARTICLE 3. ALLOCATION OF EXPENSES AND CHARGES. During the period this
Agreement is in effect, the Company shall pay all costs and expenses in
connection with registration of the Separate Account under the Investment
Company Act of 1940 (hereinafter the "1940 Act") and the registration of
interests in the Variable Policies under the Securities Act of 1933 (hereinafter
the "1933 Act"), including all expenses in connection with the preparation and
printing of any registration statements and prospectuses necessary for
registration thereunder but excluding any additional costs and expenses incurred
in furnishing the Distributor with prospectuses. The Company shall also pay all
costs, expenses and fees incurred in connection with the qualification of the
Variable Policies under the applicable insurance and Blue Sky laws of the states
in which the Variable Policies are offered.
During the period this Agreement is in effect, the Distributor will pay or
reimburse the Company for:
(a) All costs and expenses of printing and mailing prospectuses (other than
for existing policyholders) and confirmations (except for reinvest dividends),
and all costs and expenses of preparing, printing and mailing advertising
material, sales literature, circulars, applications, and other materials used or
to be used in connection with the offering for sale and the sale of Variable
Policies; and
(b) All clerical and administrative costs in processing the applications for
and in connection with the sale of Variable Policies.
The Distributor agrees to submit to the Company for its prior approval all
advertising material, sales literature, circulars and any other material which
the Distributor proposes to use in connection with the offering for sale of
Variable Policies.
ARTICLE 4. AGREEMENTS SUBJECT TO APPLICABLE LAW AND REGULATIONS. The parties
hereto agree that all provisions of this Agreement will be performed in strict
accordance with the requirements of the 1940 Act, the 1933 Act, the Securities
Exchange Act of 1934, and the rules and regulations of the SEC under said
statutes; and in strict accordance with all applicable state Blue Sky and
insurance laws and the rules and regulations thereunder; and in strict
accordance with the provisions of the Articles of Incorporation and Bylaws of
the Company.
ARTICLE 5. DURATION AND TERMINATION OF AGREEMENT. This Agreement shall become
effective on the date that the Variable Policies prospectuses, reflecting the
underwriting arrangements provided by this Agreement, shall become effective
under the 1933 Act, and shall continue in force unless terminated as provided
herein. This Agreement may be terminated as follows:
(a) at the option the Company upon 60 days' written notice to the
Distributor;
(b) at the option of the Distributor upon 60 day's written notice to the
Company; and
(c) upon the mutual agreement by both parties to this Agreement.
Furthermore, this Agreement shall terminate automatically in the event of its
assignment. As used in the preceding sentence, the word "assignment" shall have
the meaning set forth in Section 2(a)(4) of the 1940 Act.
ARTICLE 6. ASSIGNABILITY. This Agreement shall be nonassignable by the
parties hereto, except that a party may assign its rights to any subsidiary of
or any company under common control with the party, provided that the assignee
is duly licensed and otherwise competent to perform all functions required of
the party under this Agreement.
ARTICLE 7. MODIFICATION OF AGREEMENT. This Agreement may not be modified in
any way except by written agreement signed by the Company and the Distributor.
ARTICLE 8. HEADINGS. The headings in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
ARTICLE 9. SEVERABILITY. If any provision or provisions 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.
ARTICLE 10. NOTICE. Any notice required or permitted to be given hereunder to
either of the parties hereto shall be deemed to have been given if mailed by
certified or registered mail in a postage prepaid envelope addressed to the
respective party as follows, unless any such party has notified the other party
hereto that notices hereafter intended for such party shall be mailed to some
other address, in which event notices thereafter shall be addressed to such
party at the address designated in such request:
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66636
Security Distributors, Inc.
700 SW Harrison Street
Topeka, KS 66636
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective corporate officers thereto duly authorized on the
day, month and year first above written.
SECURITY BENEFIT LIFE INSURANCE COMPANY
By:
---------------------------------
Howard R. Fricke
President and CEO
Attest:
-------------------------
Roger K. Viola
Secretary
SECURITY DISTRIBUTORS, INC.
By:
------------------------------------
Howard R. Fricke
President and CEO
Attest:
-------------------------
Amy J. Lee
Secretary
<PAGE>
[SBL LOGO]
SECURITY BENEFIT LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------------
A Member of The Security 700 SW Harrison St.
Benefit Group of Companies Topeka, Kansas 66636-0001
785-431-3000
MARKETING ORGANIZATION AGREEMENT
SECURITY BENEFIT LIFE INSURANCE COMPANY
SECURITY DISTRIBUTORS, INC.
PRODUCT AUTHORIZATION
Fixed Products |_|
Variable Products |_|
MARKETING ORGANIZATION: ________________________________________________
This Agreement is entered into between Security Benefit Life Insurance Company,
a Kansas mutual life insurance company, Security Distributors, Inc. (solely in
its capacity as underwriter of the Variable Products), collectively referred to
herein as "SBL," and the undersigned, referred to herein as the "Marketing
Organization."
I. APPOINTMENTS AND DUTIES
A. APPOINTMENT. Subject to the terms and conditions of this contract,
Marketing Organization is appointed to solicit, and to recommend for
appointment Agents/Representatives and Marketing Organizations
(referred to herein as "Marketer(s)") to solicit applications for the
fixed annuity and fixed life insurance contracts ("Fixed Products")
and/or variable annuity and variable life insurance contracts
("Variable Products") more specifically described in the Commission
Schedule(s) attached hereto from time to time and incorporated by
reference (collectively referred to as the "Products"), to deliver the
contracts, to collect the initial premiums thereon, and to service the
business.
Marketing Organization hereby accepts such appointment and confirms
that it will abide by the terms and conditions of this Agreement and
any sales manuals and/or rules and practices of SBL. Marketing
Organization will endeavor to promote SBL's interests and those mutual
interests of Marketing Organization and SBL as contemplated by this
Agreement and shall at all times conduct itself, and insure that its
employees and Marketers conduct themselves so as not to adversely
affect the business reputation or good standing of either the
Marketing Organization or SBL.
B. SALES FORCE. Marketing organization shall have the authority to
recruit, train and supervise Marketers for the sale of the Products.
Appointment of any Marketer shall be subject to prior approval of SBL.
SBL reserves the right to require termination of any Marketer's right
to sell any of the Products and to cancel the appointment of any
Marketer. Marketing Organization shall be responsible for any Marketer
appointed hereunder complying with the terms, conditions, and
limitations as set forth in this Agreement and any sales manuals
and/or rules and practices of SBL.
With respect to sales of Fixed Products, unless otherwise agreed in
writing by the parties, any and all agreements with Marketers shall be
made directly with SBL in writing on SBL's form and shall not become
effective until they are approved and executed by SBL and the Marketer
is licensed in accordance with Section III of this Agreement.
Marketing Organization shall not have authority to modify or amend any
such agreements. With respect to sales of Variable Products, any and
all agreements with Marketers shall be made between the Marketing
Organization and its Marketers, provided however, that SBL reserves
the right to require any Marketer to sign an agreement acknowledging
that no compensation is payable by SBL to the Marketer. SBL may, at
SBL's option, refuse to contract with any proposed Marketer and may at
any time terminate any agreement with any Marketer.
C. INDEPENDENT CONTRACTOR. Marketing Organization will be an independent
contractor and nothing contained herein shall be construed as creating
the relationship of employer-employee between SBL and Marketing
Organization. Marketing Organization will be acting as an independent
contractor only, and not as a partner, associate, or affiliate of SBL.
Marketing Organization will be free to exercise its own judgment as to
the time and manner of performing the services authorized by this
Agreement subject to such rules and regulations as may be adopted from
time to time by SBL.
D. LIMITATIONS OF AUTHORITY. Marketing Organization's authority shall
extend no further than as is stated in this Agreement. Marketing
Organization shall not (1) make, alter, modify, waive or change any
question, statement or answer on any application for insurance, the
terms of any receipt given thereon, or the terms of any policy or
contract; (2) extend or waive any provision of any policy or contract
or the time for payment of premiums; (3) guarantee dividends; (4)
deliver any policy unless the applicant is at the time in good health
and insurable condition; (5) incur any debts or liability for or
against SBL; or (6) receive any money for SBL except as herein stated.
9482 (R7-97) 32-94821-00
<PAGE>
E. COLLECTION OF MONEY. Marketing Organization is not authorized to
accept any premium for SBL except initial policy premiums, unless SBL
provides otherwise in writing. All customer checks should be made
payable directly to SBL. Receipts for premiums must be on the forms
furnished by SBL for that purpose. Marketing Organization shall
immediately remit to SBL all money received or collected on SBL's
behalf, and such money shall be considered as SBL's funds held in
trust by Marketing Organization. SBL will not accept premium payments
in the form of checks drawn on Marketing Organization or Marketer
accounts.
F. RECORDS. Marketing Organization agrees to maintain proper records and
accounts of business transacted under this contract, including but not
limited to, records of all written sales proposals made, applications
taken, money collected, policies issued and delivered, and all service
to policy owners on SBL's behalf. All such records shall be made
available to SBL or SBL's representatives, with or without prior
notice, during business hours.
II. COMPENSATION
A. COMPENSATION TO MARKETING ORGANIZATION. As full compensation, SBL will
pay Marketing Organization or its affiliated insurance agency (if
applicable) commissions as described in the attached Commission
Schedule(s) for policies sold by Marketers assigned to Marketing
Organization. There shall be no additional compensation or
reimbursement to Marketing Organization for services performed or
expenses incurred. Marketing Organization shall be responsible for and
shall pay all expenses Marketing Organization incurs in the
performance of this Agreement. Further, SBL may amend any Commission
Schedule at any time by giving Marketing Organization written notice
of such change. Any changes SBL may make to the Commission Schedule
will apply only to those policies issued on or after the effective
date of the changes.
The rate of commissions or right to receive compensation on any policy
or contract (1) not listed in this Agreement, (2) requiring special
underwriting, or (3) obtained through a lead furnished by SBL, shall
be governed by SBL's rules and practices in effect at that time and
shall eventually be covered by a separate agreement between Marketing
Organization and SBL, by written amendment to this Agreement, or by
written notice to Marketing Organization.
B. COMPENSATION TO MARKETERS. This Agreement is not intended to benefit
in any manner whatsoever the Marketers or any other entity as a
third-party beneficiary. With respect to sales of Fixed Products,
payment of compensation by SBL to Marketers will be made only pursuant
to the terms of a separate written Agreement between SBL and Marketer.
With respect to the sales of Variable Products, SBL will pay no
compensation to Marketers; payment of compensation to Marketers, if
any, will be made only pursuant to the terms of a separate written
Agreement between the Marketing Organization and Marketer.
C. PROVISIONS RELATING TO COMPENSATION. Neither Marketing Organization
nor any Marketer assigned to Marketing Organization shall withhold
compensation from any premiums or contributions submitted to SBL. No
commissions will be payable on premiums or contributions which shall
be refunded for any reason, and Marketing Organization shall refund to
SBL any commission paid to Marketing Organization on any such premiums
or contributions. SBL shall not, under any circumstances whatsoever,
pay or allow any rebate of commissions in any manner, directly or
indirectly.
III. COMPLIANCE
A. GENERAL REQUIREMENTS. Marketing Organization agrees to abide by all
applicable local, state and federal laws and regulations as well as
the rules and regulations of the National Association of Securities
Dealers, Inc. (NASD) and the Securities and Exchange Commission in
conducting business under this Agreement. Marketing Organization shall
insure that all of its Marketers comply with all such rules, laws, and
regulations.
B. LICENSING. Marketing Organization agrees that neither it nor its
Marketers will solicit or submit applications for any of the Products
unless Marketing Organization, its affiliated insurance agency (if
applicable), and its Marketers are properly licensed under all
applicable state insurance laws. Marketing Organization shall be
responsible for each Marketer becoming so licensed and shall notify
SBL if any Marketer ceases to be so licensed.
WITH RESPECT TO SALES OF VARIABLE PRODUCTS: (1) Marketing Organization
hereby confirms that it is a member in good standing of the National
Association of Securities Dealers, Inc., hereinafter called "NASD,"
and further agrees to notify SBL if it ceases to be a member of the
NASD, (2) Marketing Organization agrees to abide by the applicable
Rules of Fair Practice of the NASD which rules are incorporated herein
as if set forth in full, (3) Marketing Organization represents that
the signing of this agreement is a representation to SBL that
Marketing Organization is a properly registered Broker/Dealer under
the Securities Exchange Act of 1934, and (4) Marketing Organization
shall insure that all Marketers recruited by Marketing Organization to
sell the Variable Products shall be duly registered pursuant to
applicable state and federal securities laws and regulations and shall
notify SBL if any Marketer ceases to be so registered.
Marketing Organization will be responsible to secure and provide to
SBL adequate proof of any licenses, securities registration, bonds or
other requirements or qualifications as may be required by SBL or the
state or states where Marketing Organization and its affiliated
insurance agency (if applicable) is authorized to solicit insurance
and securities.
C. PRINTED MATTER. SBL will furnish Marketing Organization all
prospectuses, reports, applications and other printed matter necessary
to conduct the business anticipated hereunder with respect to SBL's
Products. Advertising material of any nature not supplied by SBL shall
be used by Marketing Organization only after Marketing Organization
has received SBL's written approval. Likewise, Marketing Organization
may use SBL's name and trademark, or those of any affiliated
companies, only with SBL's written approval.
IV. SBL'S RIGHT OF ACTION
A. CHANGES. SBL may at any time and from time to time (1) change or
modify this Agreement, (2) modify or amend any prospectus, policy
form, or contract, (3) change sales charges, (4) modify or alter the
conditions or terms under which any Product may be sold or regulate
its sale in any way, (5) discontinue or withdraw any Product from any
state, without prejudice to continue such Product elsewhere or (6)
cease doing business in any state.
B. RIGHTS OF REJECTION AND SETTLEMENT. SBL reserves the right to reject
any application or refund any money submitted by Marketers assigned to
Marketing Organization. In the event of such rejection or refund,
Marketing Organization's commission on such shall be refunded as
described previously by being charged against Marketing Organization's
earnings or, upon demand, by payment directly to SBL. It is the
intention of the parties to this Agreement that Marketing Organization
shall be entitled to receive commissions only upon premiums or
contributions received in cash and retained by SBL.
C. RIGHT OF OFFSET OF INDEBTEDNESS. Any advance, loan, annualization of
compensation, or extension of credit from SBL to Marketing
Organization and to Marketers appointed by or assigned to Marketing
Organization, or any loss or liability incurred by SBL as a result of
the actions of Marketing Organization or its affiliated insurance
agency (if applicable) shall constitute a general indebtedness of
Marketing Organization to SBL. The entire indebtedness, as shown in
SBL's ledger accounts, may be deemed due and payable at any time and
SBL may exercise any rights or remedies to collect such indebtedness,
including but not limited to, charging to Marketing Organization all
attorney's fees or other collection expenses, as permitted by law.
SBL may deduct any amounts Marketing Organization owes SBL now or in
the future, as a result of this or any other contract with the
Company, from any compensation due Marketing Organization. Marketing
Organization hereby assigns, transfers and sets over to SBL any monies
that from time to time may become due to Marketing Organization from
SBL under this contract or otherwise to secure any debt to SBL.
V. TERMINATION
A. VOLUNTARY TERMINATION. Either of the parties hereto may terminate this
Agreement, without stating any cause, by mailing to the other party at
their last known address a notice of termination which shall be
effective fifteen days from mailing.
B. AUTOMATIC TERMINATION. This Agreement terminates automatically (1) if
Marketing Organization is an individual, upon Marketing Organization's
death, (2) if a partnership, upon the death of any partner or change
in the partners composing the firm, or dissolution of the partnership
for any reason, (3) if a corporation, upon Marketing Organization's
dissolution or disqualification to perform the duties anticipated
hereunder, (4) upon revocation, termination, suspension or nonrenewal
of Marketing Organization's securities registration or insurance
licenses by any state in which Marketing Organization is required by
law to maintain such a license in order to perform its duties under
this Agreement, (5) with respect to the Variable Products, upon
Marketing Organization's ceasing to be an NASD registered
broker/dealer in good standing (this includes any suspension of
Marketing Organization's membership), or (5) upon Marketing
Organization's filing a petition for bankruptcy or one being filed for
Marketing Organization, upon Marketing Organization being adjudged
bankrupt, or upon Marketing Organization's executing a general
assignment for the benefit of creditors.
C. TERMINATION FOR CAUSE. Marketing Organization's rights under this
contract, including the right to any further payment of any type of
compensation, either during or after the termination of this contract,
shall automatically and completely cease if any of the following occur
at any time: (1) Marketing Organization violates any of the terms
hereof, (2) Marketing Organization violates any law or regulation
relating to the activities anticipated hereunder, (3) Marketing
Organization induces or attempts to induce any Marketer and/or person
under contract with SBL to terminate the contractual relationship or
cease doing business or producing for SBL, (4) Marketing Organization
initiates or induces any misappropriation or commingling of Marketing
Organization's and SBL's funds, or (5) Marketing Organization engages
in any fraudulent act or misrepresentation. In determining cause for
termination, SBL shall use its sole discretion and shall notify
Marketing Organization in writing of SBL's decision.
D. RETURN OF SBL PROPERTY. Upon termination of this contract, Marketing
Organization agrees to return any equipment, supplies, printed
materials or other property, including, but not limited to,
policyholder lists and policyholder records SBL has furnished
Marketing Organization. Marketing Organization acknowledges that any
policyholder lists or records in Marketing Organization's possession
are SBL's property, and that the Company has a continuing proprietary
interest in the lists and records relating to its policyholders.
VI. THIRD PARTY COMPLAINTS AND LITIGATION
A. NOTIFICATION AND COOPERATION. SBL and Marketing Organization will
promptly notify the other if either of them becomes aware of any
arbitration, litigation, judicial proceeding, insurance department or
other governmental agency inquiry or complaint, regulatory or
administrative investigation or proceeding, or customer complaint or
demand, which directly or indirectly involves the rights and
obligations of the parties under this Agreement. SBL and Marketing
Organization each agree to cooperate fully with the other with respect
to any matter referred to in this Section VI.
B. DEFENSE OF ACTIONS. If any legal action is brought by a third party
against SBL or Marketing Organization, or both, which is based in
whole or in part on any alleged act, fault or failure of Marketing
Organization in connection with this Agreement, SBL may require
Marketing Organization to defend SBL in such action, or, SBL may
defend any such action and expend such sums, including attorneys'
fees, to be reimbursed by Marketing Organization in accordance with
Section VI.E. below.
C. SERVICE OF PROCESS. Marketing Organization shall transmit to the
attention of SBL's Legal Counsel at 700 Harrison, Topeka, Kansas
66636, by certified mail within 24 hours after receipt, any paper
served upon Marketing Organization in connection with any proceeding,
hearing or action, whether legal or otherwise, by or against SBL. Any
failure on Marketing Organization's part to comply with this provision
which causes additional loss or expense to SBL shall be reimbursed by
Marketing Organization to SBL.
D. SETTLEMENT. SBL has the right to settle any claim against SBL, and any
claim made against SBL and Marketing Organization jointly, arising out
of this Agreement or any other agreement between SBL and Marketing
Organization now or hereafter existing, and SBL's determination as to
any such matter will be final and binding. In any action brought
jointly against SBL and Marketing Organization which is based in whole
or in part on any alleged act, fault or failure of Marketing
Organization, Marketing Organization shall not settle such action or
any portion thereof except with the express, written consent of SBL.
E. INDEMNIFICATION. Marketing Organization shall indemnify and hold SBL
harmless from any liability, loss, cost, claim or damaged caused by
the negligence or misconduct of Marketing Organization, its affiliated
insurance agency (if applicable), Marketers and/or either of their
officers, directors and employees. Marketing Organization shall
reimburse SBL for any legal or other expenses reasonably incurred by
SBL in connection with its investigation and defense of any such loss,
cost, claim, damage or liability, or of any proceeding or action
resulting from those matters.
VII. GENERAL PROVISIONS
A. CONFIDENTIALITY. Marketing Organization will treat all matters
relating to SBL's business as confidential information, and not
divulge any information in any way to other entities during or after
the term of this contract.
B. WAIVER. SBL's forbearance or failure to exercise any rights hereunder
or insist upon strict compliance herewith shall not constitute a
waiver of any right, condition, or obligation of Marketing
Organization under this Agreement.
C. PRIOR AGREEMENTS. This Agreement shall supersede any and all prior
agreement(s) between Marketing Organization and SBL in relation to
sales of Products after this Agreement becomes effective; it being
understood, however, that all obligations to SBL previously incurred
or assumed by SBL and liens created in connection therewith still
exist and shall attach hereto.
D. ASSIGNMENT. Neither this Agreement nor any of the benefits to accrue
hereunder shall be assigned or transferred, either in whole or in
part, without SBL's prior written consent. Any assignments shall be
subject to a first lien to SBL for any indebtedness owed to SBL.
E. NOTICES. All notices required or permitted to be given under this
contract shall be in writing and shall be delivered personally or
mailed to an officer of the party receiving such notice at its home
office at the address set forth above.
F. GOVERNING LAW. This contract shall be construed to be in accordance
with the laws of the State of Kansas.
H. ENTIRE AGREEMENT. The foregoing provisions, the attached Commission
Schedules and any rate books, manuals, or bulletins issued by SBL in
connection with this Agreement constitute the entire agreement between
the parties and SBL shall not be bound by any other promise,
agreement, understanding or representation unless it is made by an
instrument in writing, signed by all of the parties or is in the form
of a written notice from SBL to Marketing Organization which expresses
by its terms an intention to modify this Agreement.
I. SEVERABILITY. If it should appear that any term of this contract is in
conflict with any rule of law, statute, or regulation in effect in any
state where Marketing Organization writes or solicits business for
SBL, then any such term shall be deemed inoperative and null and void
insofar as it may be in conflict therewith and shall be deemed
modified to conform to such rule of law, statute or regulation. The
existence of any such apparent conflict shall not invalidate the
remaining provisions of this contract.
J. EFFECTIVE DATE. This Agreement shall take effect shown below, if
Marketing Organization has been duly licensed in the appropriate
jurisdiction(s) to perform the functions anticipated herein.
MARKETING ORGANIZATION SECURITY BENEFIT LIFE INSURANCE COMPANY
By RICHARD K RYAN
- -------------------------------------- ---------------------------------
Print Name of Marketing Organization
|_| Individual |_| Partnership Title SENIOR VICE PRESIDENT
|_| Corporation ---------------------------------
Date
- -------------------------------------- ---------------------------------
Print Name of Principal Officer
if a Partnership or Corporation SECURITY DISTRIBUTORS, INC.
By By RICHARD K RYAN
----------------------------------- ---------------------------------
Signature of Individual
or Principal Officer Title PRESIDENT
---------------------------------
Date Date
--------------------------------- ---------------------------------
APPROVED BY:
- --------------------------------------
Print Name of Sponsoring Marketing
Organization (if applicable)
By
-----------------------------------
Signature of Principal Officer
Effective Date of Agreement __________
32-94821-00
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
A MUTUAL COMPANY/FOUNDED IN 1892/TOPEKA, KS
THE COMPANY'S PROMISE
In consideration of the Premiums paid and the attached application, Security
Benefit Life Insurance Company, subject to the terms of this Policy, will pay
the benefit of this Policy according to its provisions when due proof of
death, satisfactory to the Company, is received at our Home Office at 700
Harrison, Topeka, Kansas, 66636-0001.
LEGAL CONTRACT
PLEASE READ YOUR CONTRACT CAREFULLY. It is a legal Contract between the Owner
and the Company, Security Benefit Life Insurance Company. The Policy's table
of contents is on page 2.
FREE LOOK RIGHT
This Policy may be returned within (1) 20 days after the Owner receives it,
or (2) 45 days after the application is signed, whichever is later, by
delivering or mailing it to the Home Office or the agent through whom it was
purchased. Immediately on such delivery or mailing, the Policy shall be
deemed void from the beginning. All premiums paid on the Policy will be
refunded to the Owner.
The Company, when used in this Policy, means Security Benefit Life Insurance
Company.
[ROGER K. VIOLA] [HOWARD R. FRICKE]
Secretary President
A BRIEF DESCRIPTION OF THIS POLICY
This is a Flexible Premium VARIABLE LIFE INSURANCE POLICY
- The Policy proceeds are payable if the Insured dies before the Maturity
Date and while the Policy is in force.
- The Net Cash Surrender Value, if any, is payable on the Maturity Date if
the Insured is alive and the Policy is in force.
- Flexible Premiums are payable during the life of the Insured to the
Maturity Date.
- This Policy is participating.
THIS POLICY'S ACCUMULATED VALUE IN THE SEPARATE ACCOUNT IS BASED ON THE
INVESTMENT EXPERIENCE OF THAT ACCOUNT, AND MAY INCREASE OR DECREASE DAILY. IT IS
NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER
SPECIFIED CONDITIONS. SEE THE DEATH BENEFIT PROVISIONS FOR DETAILS.
[LOGO] SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 Harrison, Topeka, KS 66636-0001 (913) 295-3000
71-85010-00
8501 (1-94) BP 850111
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
DEFINITIONS......................................... 5
OWNERSHIP AND BENEFICIARY PROVISIONS................ 6
OWNERSHIP...................................... 6
JOINT OWNERSHIP................................ 6
CHANGE OF OWNERSHIP............................ 6
ASSIGNMENT..................................... 6
BENEFICIARY DESIGNATION AND HOW TO CHANGE IT... 6
DISTRIBUTION OF PROCEEDS....................... 6
PREMIUM PAYMENT PROVISIONS.......................... 7-9
PAYMENT OF PREMIUMS............................ 7
PREMIUM ALLOCATION............................. 7
PREMIUM LIMITATION............................. 7, 8
GRACE PERIOD AND LAPSE......................... 8
MINIMUM DEATH BENEFIT GUARANTEE................ 8
NONFORFEITURE OPTIONS.......................... 9
REINSTATEMENT.................................. 9
ACCUMULATED VALUE PROVISIONS........................ 10, 11
ACCUMULATED VALUE.............................. 10
FIXED ACCOUNT ACCUMULATED VALUE................ 10
FIXED ACCOUNT INTEREST CREDITING............... 10
SEPARATE ACCOUNT ACCUMULATED VALUE............. 10
DETERMINING ACCUMULATION UNITS................. 10, 11
ACCUMULATION UNIT VALUE........................ 11
FLUCTUATION OF VALUES.......................... 11
SPLITTING UNITS................................ 11
TRANSFER PROVISIONS................................. 12
TRANSFERS...................................... 12
TRANSFER CHARGE................................ 12
CHARGE AND DEDUCTION PROVISIONS..................... 12-14
FEDERAL & STATE INCOME TAX CHARGE.............. 12
PREMIUM LOAD................................... 12
MONTHLY DEDUCTION.............................. 12
COST OF INSURANCE CHARGE....................... 13
DEDUCTIONS FROM VARIABLE ACCOUNTS.............. 13
ADMINISTRATIVE CHARGE.......................... 13
MORTALITY AND EXPENSE RISK CHARGE.............. 14
MATURITY, SURRENDER AND WITHDRAWAL PROVISIONS....... 14
MATURITY BENEFIT............................... 14
RIGHT TO SURRENDER............................. 14
NET CASH SURRENDER VALUE....................... 14
PARTIAL WITHDRAWALS............................ 14, 15
LOAN PROVISIONS..................................... 15
POLICY LOANS................................... 15
LOAN INTEREST.................................. 15
LOAN ACCOUNT................................... 15
LOAN REPAYMENTS................................ 15
DEATH BENEFIT PROVISIONS............................ 16-18
SPECIFIED AMOUNT............................... 16
CHANGE IN SPECIFIED AMOUNTS.................... 16
DEATH BENEFIT OPTIONS.......................... 16
OPTION A....................................... 17
OPTION B....................................... 17
GUIDELINE MINIMUM DEATH BENEFIT................ 17
CHANGE IN DEATH BENEFIT OPTION................. 17
DEATH BENEFIT PROCEEDS......................... 17-18
POLICY PROCEEDS PROVISIONS.......................... 18, 19
HOW PROCEEDS MAY BE PAID....................... 18
OPTIONAL SETTLEMENT OPTIONS.................... 18, 19
ADDITIONAL PROVISIONS FOR PAYMENT OF PROCEEDS.. 19
PAYMENT PROVISIONS.................................. 20
PAYMENT FROM THE VARIABLE ACCOUNTS............. 20
PAYMENTS FROM THE FIXED ACCOUNT................ 20
GENERAL PROVISIONS.................................. 20-23
THE CONTRACT................................... 20
INCONTESTABILITY............................... 21
MISSTATEMENT OF AGE AND SEX.................... 21
SUICIDE EXCLUSION.............................. 21
EFFECTIVE DATE................................. 21
DATE OF TERMINATION............................ 21
DATES.......................................... 21
RIGHT TO EXCHANGE POLICY....................... 22
CLAIMS OF CREDITORS............................ 22
RECEIVED BY THE COMPANY........................ 22
EXCHANGE OF INSURED............................ 22, 23
POLICY STATEMENTS.............................. 23
COMPLIANCE..................................... 23
PARTICIPATING.................................. 23
BASIS OF VALUES................................ 23
SEPARATE ACCOUNT PROVISIONS......................... 24, 25
SEPARATE ACCOUNT DEFINED....................... 24
OWNERSHIP OF SEPARATE ACCOUNT.................. 24
FUND DEFINED................................... 24
ADDITION, DELETION OR SUBSTITUTION OF
INVESTMENTS.................................... 25
LIFE INCOME OPTIONS TABLES.......................... 26, 27
APPLICATION
ATTACHED TO AND A PART OF THIS POLICY..........
RIDERS OR ENDORSEMENTS (IF ANY)
ATTACHED TO AND A PART OF THIS POLICY
<PAGE>
- --------------------------------------------------------------------------------
SECURITY ELITE BENEFIT
VARIABLE UNIVERSAL LIFE POLICY SPECIFICATIONS
- --------------------------------------------------------------------------------
OWNER NAME: John Q. Doe POLICY NUMBER: Specimen
INSURED NAME: John Q. Doe POLICY DATE: February 1, 1994
AGE OF INSURED: 35 ISSUE DATE: February 1, 1994
ADDITIONAL INSURED: None MATURITY DATE: February 1, 2054
PRIMARY BENEFICIARY: Jane Q. Doe CLASS OF RISK: Preferred
CONTINGENT BENEFICIARY: John Q. Doe, Jr. BENEFIT OPTION: Option A
SPECIFIED AMOUNT OF INSURANCE: $750,000
MINIMUM SPECIFIED AMOUNT OF INSURANCE: $100,000
MINIMUM INITIAL PREMIUM: 1/12 of the first year Minimum Death Benefit Guaranteed
Premium
PLANNED PERIODIC PREMIUM: $6,300.00 Annually
INITIAL PREMIUM PAYMENT: $6,300.00 Annual
MINIMUM PERIODIC PREMIUM: $50
ANNUAL MINIMUM DEATH BENEFIT GUARANTEE PREMIUM: $6,300.00
GUIDELINE SINGLE PREMIUM: $99,090.00
GUIDELINE LEVEL PREMIUM: $9,000.00
OPTIONAL INSURANCE BENEFITS: None
NOTE: It is possible that coverage will expire prior to the maturity date shown.
Coverage will expire when the Net Cash Surrender Value is insufficient to pay
the charges assessed on a Monthly Payment Date. The Accumulated Value may be
based on the investment results of the Separate Account. The payment of
premiums, in any amount or frequency, will not guarantee that the Policy will
remain in force. The Policy will not lapse, however, if the Minimum Death
Benefit Guarantee Premium is in effect as discussed under the Premium Payment
Provisions.
- --------------------------------------------------------------------------------
POLICY SPECIFICATIONS (CONTINUED)
- --------------------------------------------------------------------------------
DEATH BENEFIT CORRIDOR PERCENTAGES
ATTAINED ATTAINED ATTAINED
AGE % AGE % AGE %
0-40 250 54 157 68 117
41 243 55 150 69 116
42 236 56 146 70 115
43 229 57 142 71 113
44 222 58 138 72 111
45 215 59 134 73 109
46 209 60 130 74 107
47 203 61 128 75-90 105
48 197 62 126 91 104
49 191 63 124 92 103
50 185 64 122 93 102
51 178 65 120 94 101
52 171 66 119
53 164 67 118
FIXED ACCOUNT MINIMUM GUARANTEED INTEREST RATE: 4%
VARIABLE ACCOUNTS:
Money Market
High Grade Income
Global Aggressive Bond
Income Growth
Equity Income
Managed Asset Allocation
Specialized Asset Allocation
Growth
Worldwide Equity
Social Awareness
Emerging Growth
LOAN ACCOUNT CREDITING RATE: 6%
POLICY LOAN INTEREST RATE PAYABLE IN ARREARS: 8% on Policy Debt outstanding
during the first 10 policy years and 6.5% on Policy Debt outstanding thereafter.
PREMIUM LOAD: The applicable premium tax percentage required by your residence.
ANNUAL MORTALITY & EXPENSE RISK CHARGE: 0.90%
ANNUAL ADMINISTRATIVE CHARGE: 0.35%
COST OF INSURANCE CHARGE: See Tables on Page 4 or 4A.
SURRENDER CHARGE: None
TRANSFER CHARGE: Up to $25
OPTIONAL INSURANCE BENEFITS GUARANTEED CHARGE: See Tables on Page 4 or 4A.
METHOD FOR DEDUCTIONS: Cost of Insurance charges, transfer charges, premium
taxes collected after the premiums are applied, and unallocated partial
withdrawals will be deducted pro rata from the Accumulated Value. Mortality and
expense risk and administrative charges are deducted daily from the assets of
each Variable Account.
NOTE: It is possible that coverage will expire prior to the maturity date shown.
Coverage will expire when the Net Cash Surrender Value is insufficient to pay
the charges assessed on a Monthly Payment Date. The Accumulated Value may be
based on the investment results of the Separate Account. The payment of
premiums, in any amount or frequency, will not guarantee that the Policy will
remain in force. The Policy will not lapse, however, if the Minimum Death
Benefit Guarantee is in effect as discussed under the Premium Payment
Provisions.
<PAGE>
TABLE OF GUARANTEED COST OF INSURANCE RATES
MONTHLY RATES PER $1,000
PREFERRED
<TABLE>
<CAPTION>
WAIVER OF MONTHLY WAIVER OF MONTHLY
ATTAINED LIFE RATES DEDUCTION PERCENTAGES* ATTAINED LIFE RATES DEDUCTION PERCENTAGE
AGE MALE FEMALE MALE FEMALE AGE MALE FEMALE MALE FEMALE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 0.1358 0.0800 1.08 2.54 58 0.9117 0.6433 21.52** 21.75**
19 0.1392 0.0825 1.08 2.54 59 1.0042 0.6858 22.57** 24.88**
20 0.1400 0.0842 1.08 2.54 60 1.1075 0.7358 5.94** 4.74**
21 0.1383 0.0858 1.19 2.76 61 1.2225 0.7975 5.15** 4.02**
22 0.1358 0.0867 1.30 2.97 62 1.3550 0.8742 4.12** 3.16**
23 0.1325 0.0883 1.41 3.19 63 1.5050 0.9683 4.04** 3.04**
24 0.1292 0.0900 1.53 3.41 64 1.6717 1.0742 4.36** 3.21**
25 0.1250 0.0917 1.64 3.63 65 1.8542 1.1883
26 0.1225 0.0942 1.83 4.03 66 2.0517 1.3067
27 0.1208 0.0958 2.01 4.44 67 2.2633 1.4275
28 0.1200 0.0983 2.20 4.85 68 2.4933 1.5525
29 0.1200 0.1017 2.39 5.26 69 2.7483 1.6917
30 0.1208 0.1042 2.57 5.67 70 3.0367 1.8550
31 0.1233 0.1075 2.81 6.34 71 3.3658 2.0542
32 0.1267 0.1108 3.04 7.00 72 3.7458 2.2983
33 0.1317 0.1150 3.27 7.67 73 4.1758 2.5908
34 0.1375 0.1200 3.51 8.34 74 4.6483 2.9275
35 0.1442 0.1258 3.74 9.01 75 5.1533 3.3033
36 0.1517 0.1342 4.09 9.61 76 5.6867 3.7100
37 0.1617 0.1442 4.44 10.20 77 6.2442 4.1458
38 0.1725 0.1550 4.79 10.80 78 6.8292 4.6175
39 0.1842 0.1667 5.13 11.40 79 7.4600 5.1400
40 0.1983 0.1808 5.48 11.99 80 8.1567 5.7342
41 0.2133 0.1958 6.09 12.65 81 8.9375 6.4175
42 0.2292 0.2108 6.70 13.31 82 9.8183 7.2050
43 0.2467 0.2258 7.30 13.97 83 10.7950 8.0933
44 0.2658 0.2408 7.91 14.63 84 11.8483 9.0725
45 0.2875 0.2575 8.52 15.29 85 12.9542 10.1317
46 0.3108 0.2750 9.46 16.00 86 14.0983 11.2633
47 0.3358 0.2942 10.40 16.71 87 15.2633 12.4658
48 0.3633 0.3142 11.34 17.42 88 16.4442 13.7400
49 0.3933 0.3367 12.29 18.13 89 17.6575 15.0958
50 0.4275 0.3617 13.23 18.84 90 18.9208 16.5442
51 0.4667 0.3892 14.26 19.37 91 20.2633 18.1183
52 0.5117 0.4208 15.29 19.91 92 21.7350 19.8775
93 23.4792 21.9458
53 0.5633 0.4558 16.32 20.45 94 25.8192 24.6025
54 0.6208 0.4917 17.35 20.99
55 0.6850 0.5300 18.38 21.53
56 0.7550 0.5683 19.42** 21.60**
57 0.8292 0.6058 20.47** 21.68**
</TABLE>
* Percentages of Total Monthly Deduction, based on attained age of the insured.
The charge is the waiver percentage multiplied by the monthly deduction for
the current month divided by 100.
** Premiums at these ages are renewal only.
<PAGE>
TABLE OF GUARANTEED COST OF INSURANCE RATES
MONTHLY RATES PER $1,000
STANDARD
<TABLE>
<CAPTION>
WAIVER OF MONTHLY WAIVER OF MONTHLY
ATTAINED LIFE RATES DEDUCTION PERCENTAGES* ATTAINED LIFE RATES DEDUCTION PERCENTAGE
AGE MALE FEMALE MALE FEMALE AGE MALE FEMALE MALE FEMALE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18 0.1842 0.0925 1.19 2.88 58 1.7092 0.9625 18.63** 21.04**
19 0.1900 0.0950 1.19 2.88 59 1.8550 1.0150 19.58** 21.81**
20 0.1933 0.0975 1.19 2.88 60 2.0175 1.0775 5.86** 4.70**
21 0.1933 0.0992 1.33 3.12 61 2.2008 1.1558 5.09** 4.00**
22 0.1900 0.1017 1.46 3.37 62 2.4075 1.2567 4.09** 3.15**
23 0.1867 0.1042 1.60 3.61 63 2.6383 1.3792 4.02** 3.03**
24 0.1817 0.1067 1.73 3.85 64 2.8908 1.5158 4.33** 3.20**
25 0.1758 0.1092 1.87 4.09 65 3.1583 1.6600
26 0.1725 0.1133 2.08 4.50 66 3.4383 1.8067
27 0.1708 0.1167 2.30 4.91 67 3.7283 1.9483
28 0.1708 0.1208 2.51 5.32 68 4.0325 2.0917
29 0.1733 0.1258 2.72 5.73 69 4.3625 2.2475
30 0.1775 0.1317 2.93 6.14 70 4.7267 2.4317
31 0.1833 0.1367 3.16 6.78 71 5.1358 2.6650
32 0.1908 0.1425 3.39 7.43 72 5.5983 2.9508
33 0.2008 0.1500 3.62 8.07 73 6.1108 3.2908
34 0.2125 0.1583 3.85 8.72 74 6.6725 3.6783
35 0.2267 0.1675 4.07 9.36 75 7.2725 4.1017
36 0.2433 0.1817 4.35 9.78 76 7.8858 4.5517
37 0.2642 0.1983 4.63 10.20 77 8.5017 5.0217
38 0.2875 0.2175 4.91 10.62 78 9.1242 5.5183
39 0.3142 0.2383 5.19 11.04 79 9.7750 6.0592
40 0.3450 0.2633 5.47 11.46 80 10.4758 6.6650
41 0.3783 0.2900 5.96 11.91 81 11.2467 7.3525
42 0.4150 0.3167 6.40 12.35 82 12.1008 8.1342
43 0.4550 0.3433 6.86 12.80 83 13.0242 9.0367
44 0.4992 0.3700 7.32 13.24 84 13.9858 10.0150
45 0.5458 0.3983 7.79 13.68 85 14.9533 11.0542
46 0.5942 0.4275 8.55 14.24 86 15.9033 12.1458
47 0.6467 0.4575 9.31 14.79 87 16.8783 13.2792
48 0.7033 0.4900 10.07 15.34 88 17.8942 14.4600
49 0.7650 0.5258 10.83 15.89 89 18.9042 15.6875
50 0.8333 0.5642 11.60 16.44 90 19.9233 17.0483
51 0.9108 0.6050 12.44 16.89 91 20.9833 18.5133
52 0.9983 0.6517 13.28 17.35 92 22.2125 20.1383
93 23.7892 22.0467
53 1.0975 0.7033 14.12 17.81 94 25.9392 24.6025
54 1.2058 0.7558 14.96 18.26
55 1.3217 0.8100 15.80 18.72
56 1.4442 0.8633 16.74** 19.49**
57 1.5733 0.9133 17.69** 20.27**
</TABLE>
* Percentages of Total Monthly Deduction, based on attained age of the insured.
The charge is the waiver percentage multiplied by the monthly deduction for
the current month divided by 100.
** Premiums at these ages are renewal only.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITIONS
- --------------------------------------------------------------------------------
Thefollowing definitions may be helpful in reading this Policy. Certain
additional terms are defined in the text.
AGE. The Insured's age as of his or her last birthday as of the Policy Date,
increased by the number of complete Policy years elapsed.
FREE LOOK PERIOD. The longer of 20 days after the Owner receives the Policy
or 45 days after the application is signed. During this period, the Owner has
the right to cancel the Policy as described on the cover page of the Policy.
INSURED. The person on whose life the Policy is issued.
IRS CODE. The Internal Revenue Code.
MONTHLY PAYMENT DATE. The day each month on which certain policy changes are
deducted from the Accumulated Value. This day is the monthly anniversary of the
Policy Date (defined below). The first Monthly Payment Date is the Policy Date.
OWNER. The person having rights to benefits under the Policy during the
lifetime of the Insured. The Owner may or may not be the Insured. The Owner is
shown in the application, which is made part of the Policy.
POLICY DATE. (Shown on Page 3.) Policy months, years and anniversaries and
the Monthly Payment Date are measured from this date.
POLICY DEBT. The principal of any loan outstanding against the Policy, plus
any accrued loan interest.
POLICY SPECIFICATIONS PAGES. Policy data described on pages 3 and 3A of the
Policy.
SBL. Security Benefit Life Insurance Company. Its Home Office is at 700
Harrison Street, Topeka, Kansas, 66636-0001.
VALUATION DATE. Each date on which the Separate Account is valued, which
currently includes each day that the New York Stock Exchange is open for
trading. The New York Stock Exchange is closed on weekends and on the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, July
Fourth, Labor Day, Thanksgiving Day, and Christmas Day.
VALUATION PERIOD. The period that starts at the close of a Valuation Date and
ends at the close of the next succeeding Valuation Date.
<PAGE>
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OWNERSHIP AND BENEFICIARY PROVISIONS
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OWNERSHIP
The Owner of this Policy is shown on Page 3. Unless otherwise provided, the
Owner has all rights in the Policy. If the applicant names someone other than
the applicant as Owner, the applicant has no rights in the Policy, unless later
changed by the Owner. If the Owner dies before the Insured, the Owner's estate
will become the Owner unless otherwise provided.
JOINT OWNERSHIP
If more than one person is named as Owner, they are joint owners. SBL will
require the signature of all Owners named jointly on any Policy transaction.
Unless otherwise provided, if a joint owner dies, ownership passes to the
surviving joint owner(s). When the last joint owner dies, ownership passes
through that person's estate, unless otherwise provided.
CHANGE OF OWNERSHIP
The Owner may designate a new owner by written notice acceptable to SBL. The
written consent of all irrevocable beneficiaries must be obtained prior to the
change. The change in ownership will take effect as of the date the notice was
signed. The change will be subject to any payment made or other action taken by
SBL before the change is recorded by SBL. SBL may require the Owner to submit
the Policy to be endorsed. A change of ownership does not require a change of
beneficiary.
ASSIGNMENT
This Policy may be assigned for any assignment to be binding on SBL, a signed
copy of it must be filed with SBL. SBL will not accept any assignment that does
not include the written consent of all irrevocable beneficiaries. SBL is not
responsible for the validity of any assignment. Any rights caused by the
assignment will be subject to any payments made or actions taken by SBL before
the assignment is recorded. Any Policy Debt will remain in effect after
assignment.
BENEFICIARY
BENEFICIARY DESIGNATION AND HOW TO CHANGE IT
The beneficiary is named in the application. However, the beneficiary may be
changed by the Owner during the Insured's lifetime. To make a change, written
notice acceptable to SBL must be received at the Home Office. SBL may require
the Owner to submit the Policy to be endorsed. The change will take effect as of
the date the request was signed. Any rights caused by the change will be subject
to any payments made or actions taken by SBL before the written request is
received.
DISTRIBUTION OF PROCEEDS
More than one primary beneficiary may be named and the share of proceeds each
beneficiary is to receive may be specified. The respective shares will be paid
to any primary beneficiary(s) alive at the death of the Insured. If none survive
the Insured, payment will be made to any contingent beneficiary(s) alive at the
death of the Insured. Surviving beneficiaries in the same class will receive
equal shares unless otherwise stated.
If no beneficiary survives the Insured, the Death Benefit Proceeds will be paid
to the Owner. If the Owner is the Insured, the Death benefit Proceeds will be
paid to the Insured's estate. If any beneficiary dies with twenty-four (24)
hours after the Insured, the Death Benefit Proceeds will be paid as if the
beneficiary died before the Insured.
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PREMIUM PAYMENT PROVISIONS
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PAYMENT OF PREMIUMS
This Policy will not be in force until a full minimum initial premium as shown
on page 3 has been paid.
All premiums should be paid at the Home Office of SBL or to an authorized agent
of SBL. The agent who sold this Policy is authorized to collect only the first
premium. A receipt will be furnished upon request.
No premium may be less than the Minimum Periodic Premium shown on page 3. All or
a part of a premium payment will be rejected and returned to the Owner if it
would exceed the maximum premium limits prescribed by federal tax law, as
determined by SBL.
PREMIUM ALLOCATION
The initial premium, less the Premium Loan, and any other premiums, less the
Premium Load, received by SBL during the Free Look Period will be allocated to
the Money Market Variable Account. After the Free Look Period, the Accumulated
Value in the Money Market Variable Account will be transferred to the Fixed and
Variable Accounts according to the premium allocation specified in the
application.
The Owner may allocate the premiums, less the Premium Load, to the Fixed Account
and Variable Accounts, subject to the following. The minimum allocation to any
of the Variable Accounts or the Fixed Account is the greater of $25 or $10% of
the net premium. Only whole percentage allocations will be allowed by SBL.
Upon written request, the Owner may change the premium allocation. Subsequent
premiums received by SBL, less the Premium Load, will be allocated to the Fixed
and Variable Accounts according to the Owner's most recent instructions.
PREMIUM LIMITATION
In order for this Policy to be treated as life insurance under the IRS Code, the
sum of the premiums paid less a portion of any withdrawals as defined in the IRS
Code may not exceed the greater of:
1) the Guideline Single Premium; or
2) the sum of the Guideline Level Premiums to the date of payment.
The amounts of the Guideline Premiums are shown on page 3. The Guideline
Premiums will change whenever there is a change in the Specified Amount of
insurance or in other policy benefits. Such change will be shown in an
Endorsement to Policy Specifications.
The Guideline Premiums are determined by SBL based upon the rules set forth in
the IRS Code. SBL intends to adjust the Guideline Premiums to conform to any
changes in the IRS Code.
In the event that a premium payment would exceed these limits, SBL reserves the
right to refund the excess payment to the Owner. Further, SBL reserves the right
to make distributions from the Policy to the extent SBL deems it necessary to
continue to qualify this Policy as life insurance under the IRS Code.
SBL reserves the right to require evidence of insurability, satisfactory to SBL
for any premium payment that would result in an increase in the difference
between the death benefit and the Accumulated Value.
GRACE PERIOD AND LAPSE
When the Net Cash Surrender Value on any Monthly Payment Date is not enough to
cover the current Monthly Deduction, SBL will notify the Owner at the Owner's
last known address and any assignee of record. SBL will deduct the amount that
is available. A minimum of three times the Monthly Deduction due when the
deficit occurred must be received by SBL within 61 days from the mailing date of
such notice. Upon receipt of the required payment, SBL will allocate the premium
payment, less the Premium Load, to the Variable Accounts and Fixed Account
according to the most recent premium allocation instructions. Any Monthly
Deduction due will be charged to the Variable Account and the Fixed Account on a
proportionate basis. The Policy will remain in force during this 61-day grace
period and no interest will be charged on the premium due.
If the required payment is not received within the 61-day grace period, this
Policy will lapse and will no longer be in force. If the Insured dies during the
grace period but before the premium is paid, the portion of the premium required
to provide insurance to the date of the Insured's death will be deducted from
the death benefit payable under this Policy.
MINIMUM DEATH BENEFIT GUARANTEE
1. If, during the first five Policy years, the amount of premiums paid on the
policy, less
(a) outstanding Policy Debt; less
(b) any Partial Withdrawals;
is greater than or equal to the monthly pro rata share of the Annual Minimum
Death Benefit Guarantee Premium times the number of policy months the Policy has
been in force;
then;
2. (a) during that period, the Policy will remain in force even if the Net Cash
Surrender Value is not enough to cover the Monthly Deduction on any Monthly
Payment Date; and
(b) the death benefit will be available upon the death of the Insured.
3. If, at any time during such 5 year period, the amount of premium paid; less
(a) outstanding Policy Debt; and (b) any partial withdrawals; is less than
the monthly pro rata share of the Annual Minimum Death Benefit Guarantee
Premium times the number of Policy months the Policy has been in force, SBL
will notify the Owner at the Owner's last known address and any assignee of
record; and
4. If the required payment is not received within 61 days from the date of the
notice; this Minimum Death Benefit Guarantee will lapse and may not be
reinstated. The Policy will be subject to lapse as described under Grace
period and Lapse above.
NONFORFEITURE OPTIONS
If premiums are not paid as scheduled, the Policy may be continued or
surrendered under one of the following options:
Continuation of Insurance (Extended Insurance) - Option 1. This Policy may be
continued at the same Specified Amount subject to the Grace Period and Lapse and
Charge and Deduction Provisions.
Full Surrender - Option 2. This Policy may be surrendered for its Net Cash
Surrender Value as described in the Maturity, Surrender and Withdrawal
Provisions.
If no option is selected by the Owner, Option 1 - Continuation of Insurance will
apply.
REINSTATEMENT
If the Policy has not been surrendered for cash, the Policy may be put back into
force within three years from the date of lapse. To reinstate the Policy, the
Owner must provide SBL with:
1. a written application;
2. evidence of insurability satisfactory to SBL;
3. payment of a premium sufficient to provide enough Accumulated Value to
cover the Monthly Deductions due at the time of lapse; and
4. payment of an extra premium sufficient to keep the Policy in force for
three months after reinstatement.
When this Policy is reinstated, the Accumulated Value will be equal to the
Accumulated Value on the date of lapse, subject to the following. If the Policy
is reinstated after the first Monthly Payment Date following lapse, the
Accumulated Value will be reduced by the amount of any Policy Debt on the date
of lapse. No Policy Debt will exist on the date of reinstatement. If the Policy
is reinstated on the Monthly Payment Date next following lapse, any Policy Debt
on the date of lapse will also be reinstated. The corresponding portion of the
Accumulated Value will be allocated to the Loan Account as described in the
Policy Loan Provision.
The effective date of the reinstated policy will be the first Monthly Payment
Date on or after the date SBL approves the reinstatement application. SBL will
allocate the Accumulated Value and the premium payment, less the Premium Load,
to the Separate Accounts and Fixed Account according to the Owner's most recent
premium allocation instructions.
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ACCUMULATED VALUE PROVISIONS
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ACCUMULATED VALUE
The Accumulated Value of this Policy on any date is equal to the sum of the
Policy's Accumulated Value in the Fixed and Variable Accounts plus any amount
set aside in the Loan Account to secure Policy Debt.
FIXED ACCOUNT
FIXED ACCOUNT ACCUMULATED VALUE
The Accumulated value in the Fixed Account on any date is:
1. the Accumulated Value in the Fixed Account on the prior Monthly Payment
Date increased by interest;
2. plus the amount of any premiums, less Premium Loan, received and
allocated to the Fixed Account since the last Monthly Payment Date,
increased by interest;
3. minus the Monthly Deduction and other deductions due, if any, and
assessed against the Fixed Account;
4. minus the amount of any withdrawals, or transfers from the Fixed Account
including transfers to the Loan Account, since the last Monthly Payment
Date, increased by interest; and
5. plus, the amount of any transfer to the Fixed Account, including
transfers from the Loan Account, since the last Monthly Payment Date,
increased by interest.
FIXED ACCOUNT INTEREST CREDITING
SBL will credit interest on the Accumulated Value in the Fixed Account at a rate
not less than the Fixed Account Minimum Guaranteed Interest Rate shown on page
3A. At SBL's discretion, SBL may credit a higher rate of interest from time to
time.
SEPARATE ACCOUNT
SEPARATE ACCOUNT ACCUMULATED VALUE
The Accumulated Value in the Separate Account is the sum of this Policy's
Accumulated Value in each of the Variable Accounts. Assets in the Variable
Accounts are divided into Accumulation Units. These units are a measure of value
used for bookkeeping purposes. This Policy's Accumulated Value in each Variable
Account is the product of the number of Accumulation Units for this Policy in
that Variable Account times the Accumulation Unit Value of the Variable Account.
DETERMINING ACCUMULATION UNITS
The number of Accumulation Units for this Policy in a specific Variable Account
is found by dividing: (1) the Accumulated Value of this Policy in the Variable
Account; by (2) the Accumulation Unit Value for the Variable Account. SBL
credits the Policy with Accumulation Units in a specific Variable Account as a
result of:
1. the amount of any premiums, less the Premium Load, received and allocated
to that Variable Account; and
2. transfers of Accumulated Value to that Variable Account, which includes
transfers from the Loan Account.
SBL debits Accumulation Units in a specific Variable Account as a result of:
1. transfers from that Variable Account, including transfers to the Loan
Account;
2. surrenders and withdrawals from that Variable Account; and
3. the Monthly Deduction, Mortality and Expense Risk charge, Administrative
charge, and other deductions due, if any, and assessed against that
Variable Account.
To find the number of Accumulation Units debited or credited in connection with
a transaction, SBL divides the dollar amount of the transaction by the
Accumulation Unit Value of the affected Variable Account.
The number of Accumulation Units will not change as a result of investment
performance.
ACCUMULATION UNIT VALUE
The Accumulation Unit Value is determined on each Valuation Date. The initial
Accumulation Unit Value for each Variable Account was set at $10. To calculate
the Accumulation Unit Value of a Variable Account on any Valuation Date, SBL
adjusts the Accumulation Unit Value from the prior Valuation Date for:
1. the investment performance of the Variable Account;
2. any dividends or distributions paid to the Variable Account;
3. charges, is any, that may be assessed by SBL for income taxes imposed on
the operation of the Variable Account;
4. the mortality and expense risk charge deducted from the Variable Account,
and
5. the administrative charge deducted from the Variable Account.
FLUCTUATION OF VALUES
The Accumulated Value of the Variable Accounts may be less than the total value
of the premiums allocated to them adjusted for withdrawals, conversions, and
benefits. SBL does not guarantee the investment performance of the portfolios in
which the Variable Accounts are invested.
SPLITTING UNITS
SBL has the right to split the value of any Accumulation Unit if SBL deems a
split to be in the best interest of the Owner and SBL. Any split made will be
made equitably and will have no material effect on the benefits and provisions
of the Policy.
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TRANSFER PROVISIONS
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TRANSFERS
After the Free Look Period, and while the Policy is in force, the Owner may
transfer the Accumulated Value, or a part of it, among the Fixed Account and
Variable Accounts subject to the following. The minimum amount that may be
transferred is $500 or, if less, the total Accumulated Value in the Variable
Account. No transfers may be made if the Policy is in a grace period and the
required premium has not been paid. The total amount that may be transferred
from the Fixed Account in a Policy Year is the greatest of:
1. $5,000; or
2. 1/3 of the Accumulated Value in the Fixed Account at the time of the
first transfer in the Policy Year; or
3. 120% of the dollar amount transferred from the Fixed Account in the prior
Policy Year.
SBL reserves the right for a period of time to allow transfers from the Fixed
Account in amounts that exceed the limits set forth above ("Waiver Period"). In
any Policy Year following such a Waiver Period, the total dollar amount that may
be transferred from the Fixed Account is the greatest of: 1 above; 2 above; or
3. 120% of the lesser of:
a. the dollar amount transferred from the Fixed Account in the prior
Policy Year; or
b. the maximum dollar amount that would have been allowed under the
transfer provisions above absent the Waiver Period.
SBL reserves the right at a future date to limit the size of transfers, and
impose other limits on the number of transfers, the amount of transfers, and the
amount left in the Fixed or Variable Accounts after a transfer.
TRANSFER CHARGE
A transfer charge (shown on Page 3A) for each extra transfer among the Variable
Accounts after the first six transfers in each Policy Year may be deducted from
the amount transferred to compensate SBL for the cost of processing the
transfer. The transfer charge will not be imposed on transfers that occur as a
result of policy loans or the exercise of exchange rights.
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CHARGE AND DEDUCTION PROVISIONS
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FEDERAL AND STATE INCOME TAX CHARGE
SBL reserves the right to make deductions from the Fixed Account and/or Variable
Accounts for federal and state income taxes.
PREMIUM LOAD
A Premium Load is deducted from each premium payment prior to the allocation of
the net premium to the Policy's Accumulated Value. The Premium Load consists of
a state and local premium tax charge to pay state and local premium tax charge
to pay state and local premium tax expense that applies. SBL reserves the right
to deduct premium taxes when due or any time thereafter.
MONTHLY DEDUCTION
A Monthly Deduction is deducted from the Policy's Accumulated Value on the
Policy Date and each Monthly Payment Date and is equal to the sum of the
following items:
1. the monthly Cost of Insurance charge; and
2. the monthly cost of any additional benefits provided by rider.
The Monthly Deduction will be charged proportionately to the Accumulated Value
in each Variable Account and the Fixed Account on the Monthly Payment Date.
COST OF INSURANCE CHARGE
Beginning on the Policy Date and monthly thereafter, there will be a charge
equal to the cost of insurance which applies to the following:
1. the initial Specified Amount; plus
2. each increase in the Specified Amount.
The monthly Cost of Insurance Charge for the death benefit payable under this
Policy is (1) multiplied by the result of (2) minus (3), where:
(1) is applicable current cost of insurance rate;
(2) is the death benefit on the first day of the Policy Month divided by
1.0032737; and
(3) is the Accumulated Value on the first day of the Policy Month before the
Monthly Deduction due.
The Cost of Insurance Rates are based on the Policy's Specified Amount and
duration, and the age, sex (unless unisex cost of insurance rates apply), rating
class, and underwriting class of the Insured. The current monthly cost of
insurance rates will be determined by SBL. These rates will not exceed the
guaranteed maximum monthly cost of insurance rates shown on page 4 or 4A. Any
changes in the Cost of Insurance Rates will apply uniformly to all insureds of
the same age, sex, rating class, underwriting class and Policy duration.
If there have been increases in the Specified Amount, then for purposes of the
Cost of Insurance Charge, the Accumulated Value will first be applied to the
initial Specified Amount. If the Accumulated Value exceeds the initial Specified
Amount divided by 1.0032737, the excess will then be applied to any increase in
Specified Amount in the order of increases. If the death benefit equals a
percentage of the Accumulated Value, any increase in Accumulated Value will
increase the death benefit. The Insured's rating class and the Policy duration
for such increase will be the same as that used for the most recent increase in
Specified Amount that has not ceased through a decrease in Specified Amount.
DEDUCTIONS FROM VARIABLE ACCOUNTS
The Administrative Charge and Mortality and Expense Risk Charge are deducted
from each Variable Account on a daily basis.
ADMINISTRATIVE CHARGE
SBL will deduct the Administrative Charge daily from the average daily net
assets of each Variable Account. The amount of this charge will not exceed the
amount shown on page 3A. The Administrative Charge is assessed to reimburse SBL
for the expenses to administer and maintain the Policy.
MORTALITY AND EXPENSE RISK CHARGE
SBL will deduct the Mortality and Expense Risk Charge daily from the average
daily net assets of each Variable Account. The Mortality and Expense Risk Charge
is to compensate SBL for assuming certain mortality and expense risks under the
Policy.
The amount of the Mortality and Expense Risk Charge will not exceed the amount
shown on page 3A.
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MATURITY, SURRENDER AND WITHDRAWAL PROVISIONS
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MATURITY BENEFIT
If the Insured is living on the Maturity Date and this Policy is then in force,
SBL will pay the Accumulated Value less Policy Debt to the Owner and this Policy
will cease. The Maturity Date is the Policy anniversary following the Insured's
95th birthday. The Maturity Date is shown on Page 3.
RIGHT TO SURRENDER
At any time during the lifetime of the Insured and prior to the Maturity Date,
the Owner may surrender the Policy by sending the Policy and a written request
to SBL. The amount paid upon surrender is the Net Cash Surrender Value at the
end of the Valuation Period during which the surrender request is received at
the Home Office. The Policy will cease as of the date SBL receives the surrender
request. The Owner may elect to have the amount paid in a lump sum or under a
payment option (see Policy Proceeds Provisions).
NET CASH SURRENDER VALUE
The Net Cash Surrender Value is the Accumulated Values less any Policy Debt.
PARTIAL WITHDRAWALS
Upon written request on and after the last day of the first Policy Year, while
the Insured is living, the Owner may withdraw a portion of the Net Cash
Surrender Value of this Policy as a partial withdrawal, subject to the following
limits. Up to four partial withdrawals may be made during each Policy Year. The
amount of a partial withdrawal may not be less than $500. The Net Cash Surrender
Value after a partial withdrawal must be at least $1,000 plus an amount equal to
the sum of the Monthly Deductions scheduled to be deducted from the Policy's
Accumulated Value in the 36-month period directly following a partial
withdrawal. The Specified Amount remaining in force after a partial withdrawal
may not be less than the Minimum Specified Amount shown on page 3. Partial
withdrawals are irrevocable.
The Accumulated Value and Net Cash Surrender Value will be reduced by the amount
of the partial withdrawal. The partial withdrawal amount will be allocated in
proportion to the Accumulated Value in the Fixed Account and Variable Account,
unless otherwise requested by the Owner.
If the Owner has selected death benefit Option A and the death benefit is equal
to the Specified Amount, the Specified Amount will be decreased by the amount of
the partial withdrawal.
If the Owner has selected death benefit Option A and the death benefit is
greater than the Specified Amount, the Specified Amount will be decreased by the
amount of the partial withdrawal that exceeds: 1) the death benefit; less 2) the
Specified Amount.
A partial withdrawal will not change the Specified Amount of the Policy if the
Owner has selected death benefit Option B.
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LOAN PROVISIONS
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POLICY LOANS
The Owner may request a loan while the Policy is in force. When the loan is
made, the Policy must be assigned to SBL to secure the loan. Any outstanding
Policy Debt will be deducted from the proceeds payable at the Insured's death,
on maturity, or on surrender.
The total amount that can be in the Loan Account is 80% of the Accumulated
Value. The minimum loan amount is $1,000.
LOAN INTEREST
Interest on Policy Debt will accrue daily and is payable in arrears at the
annual rate shown on page 3A. Interest not paid when due will bear interest at
the same rate. SBL will add any interest not paid when due to the outstanding
Policy Debt by: (1) deducting an amount equal to the loan interest from each
Variable Account and the Fixed Account on a proportionate basis; and (2)
transferring it to the Loan Account.
LOAN ACCOUNT
When a loan is taken, an amount equal to the loan is transferred out of the
Accumulated Value in the Fixed Account and Variable Accounts into the Loan
Account to secure the loan. Unless the Owner requests otherwise, loan amounts
will be deducted from the Fixed Account and Variable Accounts on a proportionate
basis, up to the amount available. SBL will credit interest monthly on amounts
in the Loan Account at the Loan Account Crediting Rate shown on page 3A.
Interest is compounded annually.
LOAN REPAYMENTS
Any part of the Policy Debt may be repaid at any time while this Policy is in
force. The minimum repayment SBL will accept is the lesser of $50 or the amount
of the outstanding Policy Debt. Upon receipt of any loan repayment, an amount
equal to the portion of any Policy Debt repaid, but not more than the amount in
the Loan Account, will be transferred from the Loan Account to the Fixed Account
and Variable Accounts according to the Owner's most recent instructions, unless
otherwise requested by the Owner in writing.
All funds received will be credited to this Policy as a premium unless clearly
marked for loan repayment.
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DEATH BENEFIT PROVISIONS
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SPECIFIED AMOUNT
The initial amount of insurance is designated in the application. This amount is
the Specified Amount and is shown on page 3. The Minimum Specified Amount is
shown on page 3.
CHANGE IN SPECIFIED AMOUNTS
Subject to certain limits, the Owner may increase or decrease the Specified
Amount of the Policy by written request acceptable to SBL. The Specified Amount
of the Policy may be changed only after the first Policy Year and only once per
Policy Year. SBL may limit the size of change in the Policy. The increase or
decrease in the Specified Amount will become effective on the Monthly Payment
Date on or following the date the written request is approved by SBL. An
Endorsement to Policy Specifications will be issued. This Endorsement will
include the following information:
- the effective date of the change in Specified Amount;
- the amount of the change and the new Specified Amount;
- the underwriting class; and
- the new Guideline Premiums.
If the Owner is not the Insured, SBL will require the consent of the Insured
before approving a request.
To Increase the Specified Amount, the Owner must provide new evidence of
insurability of the Insured satisfactory to SBL. An increase in the Specified
Amount will result in certain increased charges, which will be deducted from the
Accumulated Value of the Policy on each Monthly Payment Date.
The Specified Amount in force after any requested decrease may not be less than
the Minimum Specified Amount shown on the page 3. Also, if following the
decrease in Specified Amount, the Policy would not comply with the maximum
premium limits required by federal tax law, the decrease may be limited or
premiums may be returned to the Owner, to the extent required to meet these
limits. The request for a decrease will not be allowed if the resulting
Guideline Premiums required by federal tax law could cause an amount in excess
of the Net Cash Surrender Value to be distributed from the Policy. Existing
insurance will decrease or cease in the following order:
1. the most recent increase;
2. the next most recent increases in order; and
3. the original Specified Amount.
DEATH BENEFIT OPTIONS
The Policy provides two death benefit options (See Option A and Option B defined
below). The Owner has the right to select one of the options at the time of
application.
OPTION A
Under Option A, the death benefit is equal to the greater of: (1) the current
Specified Amount of the Policy; or (2) the Guideline Minimum Death Benefit
(described below) on the date of death. Under Option A, the death benefit will
remain level at the Specified Amount unless the Guideline Minimum Death Benefit
exceeds the current Specified Amount. At this point the amount of death benefit
will vary as the Accumulated Value varies.
OPTION B
Under Option B, the death benefit is equal to the greater of: (1) the current
Specified Amount plus the Accumulated Value of the Policy; or (2) the Guideline
Minimum Death Benefit (described below) on the date of death. Accordingly, under
Option B, the amount of death benefit varies as the Accumulated Value varies.
GUIDELINE MINIMUM DEATH BENEFIT
The Guideline Minimum Death Benefit at any time is the Accumulated Value times
the applicable Death Benefit Corridor Percent (shown on page 3A). The Death
Benefit Corridor Percents vary by the age of the Insured and will be at least
equal to the cash value corridor in Section 7702 of the IRS Code, which sets
forth the definition of a life insurance policy for tax purposes.
CHANGE IN THE DEATH BENEFIT OPTION
The Owner may change the death benefit option once per Policy Year after the
first Policy Year by written request acceptable to SBL. The effective date of
such change will be the Monthly Payment Date falling on or after the date the
change is approved by SBL.
If the Owner changes from Option B to Option A, the Specified Amount will be
increased by the amount of the Policy's Accumulated Value. If the Owner changes
from Option A to Option B, the Specified Amount will be decreased by the amount
of the Policy's Accumulated Value. A change from Option A to Option B will not
be allowed if it would result in a Specified Amount which is less than the
Minimum Specified Amount shown on page 3. The Owner must provide new evidence of
insurability of the Insured satisfactory to SBL when requesting a change from
Option A to Option B.
DEATH BENEFIT PROCEEDS
If the Insured dies while the Policy is in force, SBL will pay the Death Benefit
Proceeds of the Policy in accordance with the death benefit option (A or B) in
effect at the time of the Insured's death. The Death Benefit Proceeds consist
of: (1) the death benefit under the Policy as of the date of death; plus (2) any
additional benefits provided by rider; less (3) any outstanding Policy Debt;
and, (4) if in the grace period, less any overdue charges. If the Minimum Death
Benefit Guarantee is in effect as described in the Premium Payment Provisions,
the Death Benefit Proceeds will consist of the death benefit under the Policy as
of the date of death, plus any additional benefits provided by rider, reduced by
any outstanding Policy Debt. The amount of the death benefit payable will be
determined at the end of the Valuation Period during which the Insured's death
occurs. At the option of the Owner, the Death Benefit Proceeds can be paid in a
lump sum or pursuant to one of the settlement options set forth under the Policy
(see Policy Proceeds Provisions).
SBL will pay the Death Benefit Proceeds to the beneficiary after SBL receives,
at it Home Office: (1) proof of the Insured's death satisfactory to SBL; and (2)
such other information as SBL may reasonably require. The actual Death Benefit
Proceeds paid are subject to the conditions and adjustments defined in other
Policy provisions, such as General Provisions, Withdrawal Provisions and Policy
Loan Provisions. Death Benefit Proceeds will be paid to the surviving
beneficiary or beneficiaries specified in the application or as later changed.
If no beneficiary is chose, the Death Benefit Proceeds will be paid to the Owner
or, if the Owner is the Insured, the Owner's estate.
- --------------------------------------------------------------------------------
POLICY PROCEEDS PROVISIONS
- --------------------------------------------------------------------------------
HOW PROCEEDS MAY BE PAID
The Owner may elect to have Death Benefit Proceeds or an amount paid upon
surrender paid in one of the following ways instead of in a single sum. If the
Owner has not elected an option at the time of death of the Insured, the
beneficiary may choose one of the options. Election of an option must be made by
written notice to SBL. SBL will not honor an election which requires SBL to make
a periodic payment of less than $25.00.
OPTIONAL SETTLEMENT OPTIONS
1. DEPOSIT OPTION: The Death Benefit Proceeds are left on deposit with SBL with
interest at the rate of not less than 2% per year. Interest will be paid
annually, semiannually, quarterly or monthly as elected. Withdrawals of all
or part of the Death Benefit Proceeds may be made by the payee at any time,
except that any partial withdrawal must be at least $100.00.
2. FIXED PERIOD PAYMENT OPTION: The Death Benefit Proceeds are paid in annual,
semiannual, quarterly or monthly installments for a set number of years (not
more than 20) to be specified. Table A (see Settlement Options) shows the
minimum amount payable monthly per $1,000 of proceeds for each number of
years. An excess interest payment may be made at the end of each year
depending on the interest rate then in use by SBL.
3. FIXED AMOUNT PAYMENT OPTION: The Death Benefit Proceeds are paid in equal
annual, semiannual, quarterly or monthly installments until the amount
applied under this option, with interest, is fully pad. Interest on the
unpaid balance will be figured at a rate of not less than 2 1/2% per year.
The final installment will be the remaining sum left with SBL.
4. LIFETIME PAYMENT OPTION: The Death Benefit Proceeds are paid in equal
annual, semiannual, quarterly or monthly installments as shown in Table B
(see Settlement Options). A period of 0, 5, 10, 15 or 20 years may be
specified. Benefits will be paid for the length of the period, and afterward
for as long as the payee lives.
5. JOINT LIFETIME PAYMENT OPTIONS: The Death Benefit Proceeds are paid in equal
annual, semiannual, quarterly or monthly installments based on the lives of
two payees as shown in Table C. (See Settlement Options). Rates not shown
for Option 5 will be provided upon request. Benefits will be paid for the
length of the period and afterward for so long as both payees live.
The amount paid under each Settlement Option will reflect current settlement
rates in effect at the time of settlement. The current settlement rates will not
be less than the guaranteed rates. The guaranteed rates are based on interest
credited at 3 1/2% per year and the 1983 Table A individual annuity mortality
table updated for 45 years with factors from Projection Scale G.
Other reasonable provisions can be made for payment of the Death Benefit
Proceeds. Any such provisions must be agreed to by SBL.
ADDITIONAL PROVISIONS FOR PAYMENT OF PROCEEDS
The effective date of a settlement option is the date SBL applies the proceeds
under that option. The first payment is due on the effective date of the option
except in the case of the deposit option. Under the deposit option the first
interest payment will be made at the end of the period selected.
Amounts to be paid under a settlement option after the death of a payee will be
paid as due to the surviving or next succeeding payee. If no succeeding payee
was named or has survived, SBL will pay the present value of the remaining
payments, if any, in a single sum to the primary payee's estate. The present
value of any remaining payments is always less than the sum of those payments
because of the effects of compound interest.
Any additional interest earnings may be paid in the amount and by the method
determined by SBL.
When one of the settlement options is elected, the Owner may choose to increase
the income payable under the option. Such election must be in writing to SBL. A
cash payment must be sent with such election to provide the additional monthly
income. A cash payment including any required Premium Loan will be needed to
provide any monthly income increase. Cash payments applied under this provision
in excess of $100,000 must be approved by SBL.
Optional settlement options shall be available only with the consent of SBL if
the proposed payee is other than a natural person not acting as fiduciary.
- --------------------------------------------------------------------------------
PAYMENT PROVISIONS
- --------------------------------------------------------------------------------
PAYMENTS FROM THE VARIABLE ACCOUNTS
Within seven days after receipt of all the information needed to process a
payment, SBL will pay: (1) Death Benefit Proceeds; or (2) the Net Cash Surrender
Value on surrender, partial withdrawals, and loans based on allocations made to
the Variable Accounts. SBL will effect a transfer between Variable Accounts or
from a Variable Account to the Fixed Account. SBL reserves the right to suspend
or delay the payment of such a payment or transfer of amounts based on
investment performance of the Variable Account for any period during which:
1. The New York Stock Exchange is closed on other than customary weekend and
holiday closing; or
2. Trading on the New York Stock Exchange is restricted as determined by the
SEC; or
3. An emergency exists, as determined by the SEC, as a result of which: (a)
disposal of securities held in the Variable Account is not reasonably
practicable; or (b) it is not reasonably practicable to fairly determine the
value of the net assets of the Variable Accounts; or
4. The Securities and Exchange Commission, by order, permits postponement for
the protection of holders of securities.
Rules and regulations of the Securities and Exchange Commission will govern in
determining whether the conditions set forth above exist.
PAYMENTS FROM THE FIXED ACCOUNT
SBL further reserves the right to delay payment of the Net Cash Surrender Value
, any loans, any partial withdrawals, or any transfers from the Fixed Account
for up to six months from the date of request. This right is required by most
states. SBL will notify the Owner if there will be a delay.
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE CONTRACT
The entire contract between the Owner and the Company consists of this Policy,
the application(s) and any amendments, endorsements or riders attached to this
Policy. A copy of the application is attached at issue. In the absence of fraud,
all statements in an application shall be deemed representations and not
warranties. No statement shall be used to void this Policy or to defend against
a claim unless: (1) it is contained in the application or in a supplemental
application; and (2) a copy of such application is attached to the Policy when
issued or made a part of the Policy when changes in the Specified Amount become
effective. Any change in the Policy can be made only with the written consent of
the President, a Vice President, or the Secretary of SBL.
INCONTESTABILITY
This Policy will be incontestable by SBL after the expiration of the following:
(1) the initial Specified Amount cannot be contested after the Policy has been
in force during the Insured's lifetime for two years from the Issue Date; (2) if
the Insured is changed, the Policy cannot be contested after it has been in
force during the new Insured's lifetime for two years from the effective date of
the exchange; and (3) an increase in the Specified Amount cannot be contested
after the increase has been in force during an Insured's lifetime for two years
from its effective date.
MISSTATEMENT OF AGE AND SEX
If the age or the sex (unless unisex cost of insurance rates apply) of the
Insured has been incorrectly stated, the death benefit under this Policy will be
adjusted. The amount of the death benefit that will be paid is that which would
have been purchased at the correct age or sex.
SUICIDE EXCLUSION
If the Insured commits suicide, while sane or insane, within 2 years from the
Issue Date, a limited death benefit will be paid. The death benefit will be an
amount equal to the premiums paid for the Policy, less any partial withdrawals,
costs for riders, and any outstanding Policy Debt. If the Insured has been
changed and the new insured dies by suicide, while sane or insane, within two
years of the exchange date, no Death Benefit Proceeds will be paid. Instead, SBL
will: (1) return the Net Cash Surrender Value as of the exchange date; plus (2)
the premiums paid since the exchange date; less (3) the sum of any increase in
Policy Debt; less (4) any partial withdrawal amounts; and (5) any dividends paid
in cash since the exchange date. If an Insured dies by suicide, while sane or
insane, with two years of the effective date of any increase in the Specified
Amount, SBL will refund the cost of insurance charges made with respect to such
increase.
EFFECTIVE DATE
The Policy will be in force when each of the following conditions has been
satisfied during the lifetime of the Proposed Insured:
1. the application has been approved by SBL; and
2. a full minimum initial premium as shown on page 3 has been paid while the
Proposed Insured is alive and while the status of insurability of the
Proposed Insured is as stated in the application.
DATE OF TERMINATION
This Policy will terminate on the earliest of:
1. the date of the Insured's death;
2. the date of receipt of the Owner's request to surrender;
3. the Maturity Date;
4. the date of lapse.
DATES
Monthly Payment Dates, Policy Years, and Policy anniversaries are all measured
from the Policy Date. All deductions are made on the Monthly Payment Date. The
Monthly Payment Date is the same day of a calendar month as the Policy Date. The
contestable and suicide periods begin with the Issue Date. All dates are shown
on page 3.
RIGHT TO EXCHANGE POLICY
Subject to certain restrictions, during the first 24 months following the Policy
Date, if the Policy is then in force, the Owner may exchange this Policy for a
fixed-benefit life insurance policy issued and made available for exchange by
SBL. The exchange will be made without evidence of insurability. The policy
provisions and applicable charges for the new policy will be based on the same
age, rating class, and underwriting class of the Insured and Specified Amount
and Policy Date as under this Policy.
An exchange will be effective on the Monthly Payment Date following SBL's
receipt of written notice in proper form of the Owner's request to exchange and
payment of any fee. SBL reserves the right to charge a fee of up to $200 to
effect an exchange. This fee will not be deducted from Accumulated Value, but
must be paid directly by SBL. Any outstanding Policy Debt must be repaid on or
before the effective date of the exchange.
CLAIMS OF CREDITORS
The proceeds and any payment under this Policy are exempt from the claims of
creditors to the extent allowed by law.
RECEIVED BY THE COMPANY
The phrase "received by SBL" means receipt by SBL at its Home Office.
EXCHANGE OF INSURED
After the first Policy Year, the Owner may exchange the named Insured on this
Policy for a new insured. This exchange will be subject to the following
conditions:
1. the new insured must submit evidence of insurability acceptable to SBL;
2. the Owner must make written application for the exchange and return this
Policy for reissue; and
3. the Owner must pay $100 to cover the cost to administer processing the
exchange.
The charge of $100 will not be added to or deducted from the Accumulated Value.
This amount will be paid directly to SBL.
A request for an exchange if insured will be subject to the Guideline Premiums
Limitation as defined in the IRS Code. Such request will not be allowed if the
resulting Guideline Premiums could cause an amount in excess of the Net Cash
Surrender Value to be dispersed from the Policy.
The exchange date is the first Monthly Payment Date on or after the date the
exchange conditions are met. Coverage on the new insured will become effective
on the exchange date. Coverage on the current Insured will cease on the day
before the exchange date.
The Policy Date will not be changed unless the new insured was born after the
Policy Date. In that case, the new policy date will be the Policy anniversary on
or next following the birth date of the new insured. The Specified Amount will
not be affected by the exchange. If a different Specified Amount is desired on
the new insured, the Change in Specified Amounts provision of the Policy may be
used. Any debt or assignment outstanding against this Policy will not be
affected by the exchange.
The Cost of Insurance Rates for the new insured will be those which apply for
the new insured's age, sex (unless unisex cost of insurance rates apply), rating
class, and underwriting class, Specified Amount and Policy duration. Riders on
the new insured will be added only with consent of SBL and subject to SBL's
requirements.
POLICY STATEMENTS
At least once a year, SBL will send a statement showing the Specified Amount,
Accumulated Value, loan transactions, partial withdrawals, premiums paid and
charges as of the statement date. A report showing the current Accumulated Value
and Net Cash Surrender Value will be furnished at any time upon written request
from the Owner.
COMPLIANCE
SBL reserves the right to make any change to the provisions of this Policy to
comply with or give the Owner benefit of any federal or state statute, rule or
regulation. This includes, but is not limited to, requirements for life
insurance contracts under the IRS Code or the laws of any state. SBL will
provide the Owner with a copy of any such change and will also file such change
with the insurance regulatory officials of the state in which the contract is
delivered.
PARTICIPATING
The Policy is participating and will share in the surplus earnings of SBL. Any
dividends allocated by SBL to policies of this class will be apportioned
annually beginning at the end of the first Policy Year and, at the option of the
Owner, will be paid by: (1) applying the dividend toward payment of a premium;
or (2) paying the dividend in cash. If no option is chosen, the dividend will be
applied as a premium. However, the current dividend is zero. SBL does not expect
to pay dividends.
BASIS OF VALUES
A detailed statement showing how values are determined has been filed with the
state insurance department. All values are not less than the minimums required
by the law in the state in which the Policy is delivered. All values are based
on the 1980 Commissioners Standard Ordinary Mortality Tables, Age Last Birthday,
Male or Female, and Nonsmoker or Smoker and interest at the guaranteed rate
shown on page 3A. Where unisex cost of insurance rates apply, values are based
on the 1980 Commissioners Standard Ordinary Mortality Table B, Age Last
Birthday, Nonsmoker or Smoker and interest at the guaranteed rate shown on page
3A. Unisex rates are used where proper under applicable law and in policies
purchased by employers and employee organizations in connection with
employment-related insurance or benefit programs.
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT DEFINED
When used in this Policy, Separate Account means the Security Varilife Separate
Account. The Separate Account is a unit investment trust registered with the
SEC. It is also subject to the laws of the State of Kansas. The Separate Account
is divided into subaccounts, called Variable Accounts. The income, gains, and
losses from each of the Variable Accounts will be charged to it, without regard
to the performance of the other Variable Accounts.
SBL owns the assets in the Separate Account and is required to maintain
sufficient assets in the Separate Account to meet expected obligations of the
policies funded by the Account. The income, gains, or losses of the Separate
Account are credited to or charged against the assets of the Separate Account
without regard to the other income, gains, or losses of SBL. Assets in the
Separate Account set aside for the reserves and other liabilities under the
policies may not be charged with liabilities arising from any other business
that SBL conducts. SBL may transfer to its General Account any assets which
exceed expected obligations of the Separate Account. All obligations arising
under the Policy are general corporate obligations of SBL. SBL may invest its
own assets in the Separate Account for other purposes, but not to support
policies other than variable life insurance policies. SBL may accumulate in the
Separate Account proceeds from various policy charges and investment results
which apply to those assets.
The assets of the Separate Account shall be valued on each Valuation Date.
The investment policy of the Separate Account shall not be changed without the
approval of the Insurance Commissioner of the state of Kansas. The process for
securing such approval is on file with the Insurance Commissioner of your state.
OWNERSHIP OF SEPARATE ACCOUNT
SBL has exclusive and absolute ownership and control of the assets of the
Separate Account. SBL will send the Owner at least once each year a report
stating the number of Accumulation Units credited to the Owner's account, a
statement of investments held by each Series, proxy material and a voting form.
FUND DEFINED
The Variable Accounts of the Separate Account are invested wholly in the Series
of the mutual fund as shown on page 3A. The mutual fund is a diversified,
open-end management investment company registered under the Investment Company
Act of 1940. The mutual fund's advisory fees and its expenses are not fixed or
specified under the terms of the Policy.
ADDITION DELETION OR SUBSTITUTION OF INVESTMENTS
SBL reserves the right, subject to applicable law, and, if necessary, after
notice to and prior approval from the SEC and/or state insurance authorities, to
make additions to, deletions from, or substitutions for the investments held by
the Separate Account or that the Separate Account may purchase. The Separate
Account may, to the extent allowed by law, purchase other securities for other
contracts or permit a conversion between contracts upon request by the Owners.
SBL may, in its sole discretion, also establish additional subaccounts of the
Separate Account. Each subaccount would invest in shares corresponding to a new
portfolio of the mutual fund or in shares of another investment company having a
specified investment objective. SBL may, in its sole discretion, establish new
subaccounts or delete one or more of the subaccounts if marketing needs, tax
considerations or investment conditions warrant. Any new subaccounts may be made
available to existing Owners on a basis to be determined by SBL.
If any of these substitutions or changes are made, SBL may by proper endorsement
change the Policy to reflect the substitution or change. If SBL deems it to be
in the best interest of the Owners, and subject to any approvals that may be
required under the applicable law, the account may be operated as a management
company under the Investment Company Act of 1940. It may be deregistered under
that Act if registration is no longer required. Also, it may be combined with
other Company separate accounts. To the extent allowed by applicable law, SBL
may also transfer the assets of the Separate Account for the policies to another
separate account. Also, SBL may, when allowed by law, restrict or delete any
voting rights of Owners or other persons who have voting rights as to the
Separate Account. The Owner may be notified of any material change in the
investment policy of any series in which the Owner has an interest.
<PAGE>
SETTLEMENT OPTIONS
AMOUNTS PAYABLE PER $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
TABLE A-OPTION 2 TABLE B-OPTION 4-LIFE INCOME OPTIONS WITH
INCOME FOR A MONTHLY INSTALLMENTS FOR A FIXED TERM AND
FIXED PERIOD AFTERWARDS AS LONG AS THE PAYEE LIVES
PERIOD MONTHLY AGE OF PAYEE ON
OF YEARS PAYMENTS NEAREST BIRTHDAY 0 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS
----------------------
MALE
<S> <C> <C> <C> <C> <C> <C> <C>
1 $84.28 35 $ 3.53 $ 3.53 $ 3.53 $ 3.53 $3.52
2 42.66 36 3.56 3.56 3.56 3.55 3.55
3 28.79 37 3.59 3.59 3.59 3.58 3.57
4 21.86 38 3.62 3.62 3.62 3.61 3.60
5 17.70 39 3.65 3.65 3.65 3.64 3.63
6 14.93 40 3.69 3.69 3.68 3.67 3.66
7 12.95 41 3.72 3.72 3.72 3.71 3.69
8 11.47 42 3.76 3.76 3.75 3.74 3.73
9 10.32 43 3.80 3.80 3.79 3.78 3.76
10 9.39 44 3.84 3.84 3.83 3.82 3.80
11 8.64 45 3.88 3.88 3.87 3.86 3.84
12 8.02 46 3.93 3.92 3.92 3.90 3.87
13 7.49 47 3.97 3.97 3.96 3.94 3.91
14 7.03 48 4.02 4.02 4.01 3.99 3.96
15 6.64 49 4.07 4.07 4.06 4.03 4.00
16 6.30 50 4.13 4.12 4.11 4.08 4.05
17 6.00 51 4.19 4.18 4.16 4.14 4.09
18 5.73 52 4.25 4.24 4.22 4.19 4.14
19 5.49 53 4.31 4.30 4.28 4.25 4.19
20 5.27 54 4.38 4.37 4.35 4.31 4.25
55 4.45 4.44 4.41 4.37 4.30
56 4.52 4.51 4.48 4.43 4.36
57 4.60 4.59 4.56 4.50 4.42
58 4.68 4.67 4.64 4.57 4.47
59 4.47 4.76 4.72 4.65 4.53
60 4.87 4.85 4.81 4.72 4.60
61 4.97 4.95 4.90 4.80 4.66
62 5.07 5.05 5.00 4.89 4.72
63 5.19 5.17 5.10 4.97 4.79
64 5.31 5.29 5.20 5.06 4.85
65 5.44 5.41 5.32 5.15 4.92
66 5.58 5.55 5.44 5.24 4.98
67 5.73 5.69 5.56 5.34 5.05
68 5.89 5.84 5.69 5.44 5.11
69 6.06 6.00 5.82 5.54 5.17
70 6.24 6.17 5.97 5.64 5.23
71 6.43 6.35 6.11 5.74 5.29
72 6.63 6.53 6.26 5.84 5.35
73 6.84 6.73 6.41 5.94 5.40
74 7.07 6.94 6.57 6.04 5.45
75 7.31 7.16 6.74 6.14 5.50
76 7.57 7.39 6.90 6.23 5.54
77 7.85 7.64 7.08 6.33 5.58
78 8.15 7.90 7.25 6.42 5.61
79 8.47 8.18 7.43 6.50 5.64
80 8.81 8.47 7.61 6.59 5.67
81 9.18 8.78 7.79 6.66 5.70
82 9.57 9.10 7.97 6.73 5.72
83 10.00 9.44 8.15 6.80 5.73
84 10.45 9.79 8.33 6.86 5.74
85 10.95 10.17 8.50 6.92 5.74
</TABLE>
Option 4 is available only at the ages shown.
Annual, semiannual, or quarterly payments can be determined from Table A, B or C
by multiplying the monthly payment by 11.812854, 5.9572233, and 2.9914201
respectively.
<PAGE>
SETTLEMENT OPTIONS
AMOUNTS PAYABLE PER $1,000 OF PROCEEDS
TABLE B-OPTION 4-LIFE INCOME OPTIONS WITH
MONTHLY INSTALLMENTS FOR A FIXED TERM AND
AFTERWARDS AS LONG AS THE PAYEE LIVES
<TABLE>
<CAPTION>
AGE OF PAYEE ON
NEAREST BIRTHDAY 0 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS
----------------------
<S> <C> <C> <C> <C> <C> <C>
MALE
Option 4 is available only
at the ages shown.
Rates not shown for
Option 5 will be
provided on request.
Annual, semiannual, or
quarterly payments can
be determined from
Table A, B or C by
multiplying the monthly
payment by 11.812854,
5.9572233, and 2.9914201
respectively.
35 $ 3.40 $ 3.40 $ 3.40 $ 3.40 $3.39
36 3.42 3.42 3.42 3.42 3.41
37 3.44 3.44 3.44 3.44 3.44
38 3.47 3.47 3.47 3.46 3.46
39 3.49 3.49 3.49 3.49 3.48
40 3.52 3.52 3.52 3.51 3.51
41 3.55 3.54 3.54 3.54 3.53
42 3.57 3.57 3.57 3.57 3.56
43 3.60 3.60 3.60 3.60 3.59
44 3.64 3.64 3.63 3.63 3.62
45 3.67 3.67 3.67 3.66 3.65
46 3.70 3.70 3.70 3.69 3.68
47 3.74 3.74 3.74 3.73 3.72
48 3.78 3.78 3.77 3.77 3.75
49 3.82 3.82 3.81 3.80 3.79
50 3.86 3.86 3.86 3.85 3.83
51 3.91 3.91 3.90 3.89 3.87
52 3.95 3.95 3.95 3.93 3.91
53 4.00 4.00 3.99 3.98 3.96
54 4.06 4.05 4.05 4.03 4.00
55 4.11 4.11 4.10 4.08 4.05
56 4.17 4.17 4.16 4.14 4.10
57 4.23 4.23 4.22 4.19 4.15
58 4.30 4.29 4.28 4.25 4.21
59 4.37 4.36 4.35 4.32 4.27
60 4.44 4.44 4.42 4.38 4.33
61 4.52 4.51 4.49 4.45 4.39
62 4.60 4.59 4.57 4.52 4.45
63 4.69 4.68 4.65 4.60 4.52
64 4.78 4.77 4.74 4.68 4.58
65 4.88 4.87 4.84 4.76 4.65
66 4.99 4.98 4.93 4.85 4.72
67 5.10 5.09 5.04 4.94 4.79
68 5.23 5.21 5.15 5.04 4.86
69 5.36 5.34 5.27 5.14 4.94
70 5.50 5.48 5.39 5.24 5.01
71 5.65 5.62 5.53 5.35 5.08
72 5.82 5.78 5.67 5.46 5.15
73 5.99 5.95 5.81 5.57 5.22
74 6.19 6.14 5.97 5.68 5.29
75 6.39 6.33 6.13 5.80 5.35
76 6.61 6.54 6.30 5.91 5.41
77 6.85 6.76 6.48 6.03 5.47
78 7.10 6.99 6.66 6.14 5.52
79 7.38 7.25 6.85 6.25 5.57
80 7.67 7.52 7.05 6.35 5.61
81 8.00 7.80 7.25 6.45 5.65
82 8.35 8.11 7.45 6.55 5.68
83 8.73 8.44 7.66 6.64 5.70
84 9.14 8.80 7.86 6.73 5.72
85 9.59 9.17 8.07 6.81 5.73
</TABLE>
- --------------------------------------------------------------------------------
TABLE C - OPTION 5 - JOINT & LAST SURVIVOR - MONTHLY INSTALLMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEMALE MALE AGE
AGE 55 60 62 65 70
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Until last Death of Two 55 3.85 3.93 3.95 3.99 4.03
Payees per $1,000 of 60 3.98 4.10 4.15 4.21 4.29
benefit amount 62 4.03 4.18 4.23 4.30 4.40
65 4.11 4.28 4.35 4.45 4.59
70 4.21 4.45 4.54 4.69 4.92
</TABLE>
<PAGE>
A BRIEF DESCRIPTION OF THIS POLICY
This is a Flexible Premium VARIABLE LIFE INSURANCE POLICY
- The Policy proceeds are payable if the Insured dies before the Maturity
Date and while the Policy is in force.
- The Net Cash Surrender Value, if any, is payable on the Maturity Date if
the Insured is alive and the Policy is in force.
- Flexible Premiums are payable during the life of the Insured to the
Maturity Date.
- This Policy is participating.
THIS POLICY'S ACCUMULATED VALUE IN THE SEPARATE ACCOUNT IS BASED ON THE
INVESTMENT EXPERIENCE OF THAT ACCOUNT, AND MAY INCREASE OR DECREASE DAILY. IT IS
NOT GUARANTEED AS TO DOLLAR AMOUNT.
THE AMOUNT OR DURATION OF THE DEATH BENEFIT MAY BE VARIABLE OR FIXED UNDER
SPECIFIED CONDITIONS. SEE THE DEATH BENEFIT PROVISIONS FOR DETAILS.
[LOGO] SECURITY BENEFIT LIFE INSURANCE COMPANY
A Member of The Security Benefit Group of Companies
700 Harrison, Topeka, KS 66636-0001 (913) 295-3000
<PAGE>
TABLE OF GUARANTEED COST OF INSURANCE RATES
MONTHLY RATES PER $1,000
PREFERRED
<TABLE>
<CAPTION>
WAIVER OF WAIVER OF MONTHLY
MONTHLY DEDUCTION
ATTAINED LIFE DEDUCTION ATTAINED LIFE PERCENTAGES*
AGE RATE PERCENTAGES* AGE RATE
<S> <C> <C> <C> <C> <C> <C>
18 0.1242 1.37 58 0.8575 21.57**
19 0.1275 1.37 59 0.9392 23.03**
20 0.1292 1.37 60 1.0317 5.70**
21 0.1283 1.50 61 1.1358 4.92**
22 0.1258 1.63 62 1.2558 3.93**
23 0.1242 1.77 63 1.3942 3.84**
24 0.1217 1.91 64 1.5483 4.13**
25 0.1192 2.04 65 1.7150
26 0.1175 2.27 66 1.8950
27 0.1158 2.50 67 2.0867
28 0.1158 2.73 68 2.2925
29 0.1167 2.96 69 2.5217
30 0.1175 3.19 70 2.7992
31 0.1200 3.52 71 3.0975
32 0.1233 3.83 72 3.4242
33 0.1283 4.15 73 3.8183
34 0.1342 4.48 74 4.2542
35 0.1400 4.79 75 4.7277
36 0.1483 5.19 76 5.2193
37 0.1575 5.59 77 5.7367
38 0.1692 5.99 78 6.2833
39 0.1808 6.38 79 6.8758
40 0.1950 6.78 80 7.5333
41 0.2092 7.40 81 8.2733
42 0.2250 8.02 82 9.1117
43 0.2425 8.63 83 10.0458
44 0.2608 9.25 84 11.0583
45 0.2817 9.87 85 12.1283
46 0.3033 10.77 86 13.2442
47 0.3275 11.66 87 14.3983
48 0.3542 12.56 88 15.5850
49 0.3817 13.46 89 16.8200
50 0.4142 14.35 90 18.1208
51 0.4508 15.28 91 19.5158
52 0.4933 16.21 92 21.0583
53 0.5417 17.15 93 22.8975
54 0.5950 18.08 94 25.3433
55 0.6533 19.01
56 0.7167 19.86**
57 0.7850 20.71**
</TABLE>
* Percentages of Total Monthly Deduction, based on attained age of the insured.
The charge is the waiver percentage multiplied by the monthly deduction for
the current month divided by 100.
** Rates at these ages are for renewal only.
<PAGE>
TABLE OF GUARANTEED COST OF INSURANCE RATES
MONTHLY RATES PER $1,000
STANDARD
<TABLE>
<CAPTION>
WAIVER OF WAIVER OF
MONTHLY MONTHLY
ATTAINED LIFE DEDUCTION ATTAINED LIFE DEDUCTION
AGE RATE PERCENTAGES* AGE RATE PERCENTAGES*
<S> <C> <C> <C> <C> <C>
18 0.1658 1.53 58 1.5533 19.11**
19 0.1717 1.53 59 1.6783 20.03**
20 0.1742 1.53 60 1.8183 5.63**
21 0.1750 1.69 61 1.9767 4.87**
22 0.1733 1.84 62 2.1592 3.90**
23 0.1708 2.00 63 2.3633 3.82**
24 0.1667 2.15 64 2.5858 4.10**
25 0.1625 2.31 65 2.8225
26 0.1608 2.56 66 3.0667
27 0.1600 2.82 67 3.3175
28 0.1608 3.07 68 3.5767
29 0.1633 3.32 69 3.8558
30 0.1683 3.57 70 4.1658
31 0.1742 3.88 71 4.5192
32 0.1817 4.20 72 4.9217
33 0.1908 4.51 73 5.3717
34 0.2017 4.82 74 5.8675
35 0.2150 5.13 75 6.3958
36 0.2317 5.44 76 6.9367
37 0.2508 5.74 77 7.4800
38 0.2733 6.05 78 8.0317
39 0.2992 6.36 79 8.6108
40 0.3283 6.67 80 9.2417
41 0.3608 7.13 81 9.9417
42 0.3958 7.59 82 10.7242
43 0.4325 8.05 83 11.5917
44 0.4733 8.50 84 12.5075
45 0.5158 8.97 85 13.4517
46 0.5608 9.69 86 14.4058
47 0.6083 10.41 87 15.3967
48 0.6600 11.12 88 16.4367
49 0.7167 11.84 89 17.4975
50 0.7783 12.57 90 18.6367
51 0.8483 13.33 91 19.8525
52 0.9275 14.09 92 21.2383
53 1.0167 14.86 93 22.9650
54 1.1133 15.62 94 25.3433
55 1.2167 16.38
56 1.3242 17.29**
57 1.4358 18.21**
</TABLE>
* Percentages of Total Monthly Deduction, based on attained age of the insured.
The charge is the waiver percentage multiplied by the monthly deduction for
the current month divided by 100.
** Rates at these ages are for renewal only.
<PAGE>
SETTLEMENT OPTIONS
AMOUNTS PAYABLE PER $1,000 OF PROCEEDS
<TABLE>
<CAPTION>
TABLE A-OPTION 2 TABLE B-OPTION 4-LIFE INCOME OPTIONS WITH
INCOME FOR A MONTHLY INSTALLMENTS FOR A FIXED TERM AND
FIXED PERIOD AFTERWARDS AS LONG AS THE PAYEE LIVES
PERIOD MONTHLY AGE OF PAYEE ON
OF YEARS PAYMENTS NEAREST BIRTHDAY 0 YEARS 5 YEARS 10 YEARS 15 YEARS 20 YEARS
----------------------
MALE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 $84.28 35 $ 3.40 $ 3.40 $ 3.40 $ 3.40 $3.39
2 42.66 36 3.42 3.42 3.42 3.42 3.41
3 28.79 37 3.44 3.44 3.44 3.44 3.44
4 21.86 38 3.47 3.47 3.47 3.46 3.46
5 17.70 39 3.49 3.49 3.49 3.49 3.48
6 14.93 40 3.52 3.52 3.52 3.51 3.51
7 12.95 41 3.55 3.54 3.54 3.54 3.53
8 11.47 42 3.57 3.57 3.57 3.57 3.56
9 10.32 43 3.60 3.60 3.60 3.60 3.59
10 9.39 44 3.64 3.64 3.63 3..63 3.62
11 8.64 45 3.67 3.67 3.67 3.66 3.65
12 8.02 46 3.70 3.70 3.70 3.69 3.68
13 7.49 47 3.74 3.74 3.74 3.73 3.72
14 7.03 48 3.78 3.78 3.77 3.77 3.75
15 6.64 49 3.82 3.82 3.81 3.80 3.79
16 6.30 50 3.86 3.86 3.86 3.85 3.83
17 6.00 51 3.91 3.91 3.90 3.89 3.87
18 5.73 52 3.95 3.95 3.95 3.93 3.91
19 5.49 53 4.00 4.00 3.99 3.98 3.96
20 5.27 54 4.06 4.05 4.05 4.03 4.00
55 4.11 4.11 4.10 4.08 4.05
56 4.47 4.17 4.16 4.14 4.10
57 4.23 4.23 4.22 4.19 4.15
Option 4 is available only 58 4.30 4.29 4.28 4.25 4.21
at the ages shown. 59 4.37 4.36 4.35 4.32 4.27
Rates not shown for 60 4.44 4.44 4.42 4.38 4.33
Option 5 will be provided 61 4.52 4.51 4.49 4.45 4.39
on request. 62 4.60 4.59 4.57 4.52 4.45
63 4.69 4.68 4.65 4.60 4.52
Annual, semiannual, or 64 4.78 4.77 4.74 4.68 4.58
quarterly payments can
be determined from 65 4.88 4.87 4.84 4.76 4.65
Table A, B or C by 66 4.99 4.98 4.93 4.85 4.72
multiplying the monthly 67 5.10 5.09 5.04 4.94 4.79
payment by 11.812854, 68 5.23 5.21 5.15 5.04 4.86
5.9572233, and 69 5.36 5.34 5.27 5.14 4.94
2.9914201 respectively. 70 5.50 5.48 5.39 5.24 5.01
71 5.65 5.62 5.53 5.35 5.08
72 5.82 5.78 5.67 5.46 5.15
73 5.99 5.95 5.81 5.57 5.22
74 6.19 6.14 5.97 5.68 5.29
75 6.39 6.33 6.13 5.80 5.35
76 6.61 6.54 6.30 5.91 5.41
77 6.85 6.76 6.48 6.03 5.47
78 7.10 6.99 6.66 6.14 5.52
79 7.38 7.25 6.85 6.25 5.57
80 7.67 7.52 7.05 6.35 5.61
81 8.00 7.80 7.25 6.45 5.65
82 8.35 8.11 7.45 6.55 5.68
83 8.73 8.44 7.66 6.64 5.70
84 9.14 8.80 7.86 6.73 5.72
85 9.59 9.17 8.07 6.81 5.73
</TABLE>
- --------------------------------------------------------------------------------
TABLE C - OPTION 5 - JOINT & LAST SURVIVOR - MONTHLY INSTALLMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FEMALE MALE AGE
AGE 55 60 62 65 70
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Until last Death of Two 55 3.85 3.93 3.95 3.99 4.03
Payees per $1,000 of 60 3.98 4.10 4.15 4.21 4.29
benefit amount 62 4.03 4.18 4.23 4.30 4.40
65 4.11 4.28 4.35 4.45 4.59
70 4.21 4.45 4.54 4.69 4.92
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT PROVISIONS
- --------------------------------------------------------------------------------
ADDITION DELETION OR SUBSTITUTION OF INVESTMENTS
SBL reserves the right, subject to applicable law, and, if necessary, after
notice to and prior approval from the SEC and/or state insurance authorities, to
make additions to, deletions from, or substitutions for the investments held by
the Separate Account or that the Separate Account may purchase. The Separate
Account may, to the extent allowed by law, purchase other securities for other
contracts or permit a conversion between contracts upon request by the Owners.
SBL may, in its sole discretion, also establish additional subaccounts of the
Separate Account. Each subaccount would invest in shares corresponding to a new
portfolio of the mutual fund or in shares of another investment company having a
specified investment objective. SBL may, in its sole discretion, establish new
subaccounts or delete one or more of the subaccounts if marketing needs, tax
considerations or investment conditions warrant. Any new subaccounts may be made
available to existing Owners on a basis to be determined by SBL.
If any of these substitutions or changes are made, SBL may by proper endorsement
change the Policy to reflect the substitution or change. If SBL deems it to be
in the best interest of the Owners, and subject to any approvals that may be
required under the applicable law, the account may be operated as a management
company under the Investment Company Act of 1940. It may be deregistered under
that Act if registration is no longer required. Also, it may be combined with
other Company separate accounts. To the extent allowed by applicable law, SBL
may also transfer the assets of the Separate Account for the policies to another
separate account. Also, SBL may, when allowed by law, restrict or delete any
voting rights of Owners or other persons who have voting rights as to the
Separate Account. The Owner may be notified of any material change in the
investment policy of any series in which the Owner has an interest.
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY (SBL)
TOPEKA, KANSAS
ACCELERATED BENEFIT FOR TERMINAL ILLNESS RIDER
THIS RIDER IS ATTACHED TO AND MADE PART OF YOUR POLICY
ISSUE DATE _________________ POLICY NUMBER _______________
AN ACCELERATED BENEFIT RECEIVED UNDER THIS RIDER MAY BE TAXABLE FOR INFORMATION
RELATING TO THE FEDERAL INCOME TAX ASPECTS OF PURCHASING A POLICY, SEE "FEDERAL
INCOME TAX CONSIDERATIONS' IN THE PROSPECTUS.
ANY BENEFIT RECEIVED UNDER THIS RIDER MAY IMPACT YOUR ELIGIBILITY FOR MEDICAID
OR OTHER GOVERNMENT BENEFITS.
This Rider is not meant to cause access to proceeds to be payable to the
beneficiary. Therefore, this benefit is not available:
a) if either the Owner or Insured is required by law to use this benefit to
meet the claims of creditors, whether in bankruptcy or otherwise; or
b) if either the Owner or Insured is required by a government agency to use
this benefit in order to apply for, obtain or otherwise keep a government
benefit or entitlement.
ACCELERATED BENEFIT
The Owner may elect to receive, while the Insured is living, a portion of the
Policy's proceeds. SBL will pay an Accelerated Benefit if an Insured has been
diagnosed with a terminal illness for which there is no cure and is expected to
live 12 months or less.
DEFINITIONS
Accelerated Benefit Payment is the dollar amount of benefit the Owner will
receive under this Rider. This benefit is the Requested Amount less: (a) the
Actuarial Discount; (b) any fee to administer; and (c) any loan repayment.
Percent of Benefit is the percent that the Requested Amount bears to the
Specified Amount of the Policy as of the date SBL approves the Owner's request
for the Accelerated Benefit.
Requested Amount is the amount of the Policy proceeds the Owner requests.
The Requested Amount cannot exceed the least of: a) 50 percent of the Specified
Amount of the Policy less any Policy Debt; b) $250,000; or c) $500,000 for all
policies on the life of the Insured in force with SBL.
The Actuarial Discount will apply to the Requested Amount. This discount
reflects the early payment of the Requested Amount of the Policy. This discount
will be based on an annual interest rate declared by us and which is in effect
as of the date we approve your written request.
PAYMENT
The minimum Accelerated Benefit Payment amount is $25,000. This Benefit will be
paid either in a lump sum or any other payment plan available at the time of
payment. SBL WILL PAY THE ACCELERATED BENEFIT AMOUNT ONLY ONCE PER INSURED. If a
settlement option is selected and the Insured dies before all payments are made,
the remaining amount will be paid to the beneficiary.
IMPACT ON POLICY
After an Accelerated Benefit Payment is made, the Policy and all riders will
remain in force subject to the following changes. The Policy's Specified Amount,
Accumulated Value, if any, and Policy Debt will be reduced by the Percent of
Benefit.
Any change in Accumulated Value will be allocated to the Fixed Account and
Variable Accounts on a pro rata basis. Cost of Insurance charges will be
adjusted to reflect the reduced death benefit.
If there is any Policy Debt on the Policy as of the date SBL approves the
Owner's written request for the Rider Benefit, SBL will reduce the Requested
Amount in order to repay a portion of the Policy Debt equal to the Percent of
Benefit times the Policy Debt.
After the payment of the Accelerated Benefit, the Owner may not surrender the
Policy on which the Benefit has been paid.
ELIGIBILITY
The following conditions must be met prior to any Accelerated Benefit Payment
- - The Policy must be in force on the date the Owner's request for the benefit
is approved.
- - SBL must receive written proof, acceptable to SBL, that the Insured's life
expectancy is 12 months or less from the date of the written request for
the Rider Benefit. Proof must be certified by a licensed physician. SBL
reserves the right to obtain a second opinion form a licensed physician of
SBL's choice at SBL's expense.
For purposes of this requirement, licensed physician means a medical doctor
licensed in the United States who:
- is practicing within the scope of that license;
- is not the Insured or related to the Insured;
- is not the Owner or related to the Owner; and
- is not the Beneficiary or related thereto.
- - Owner must apply in writing for the Rider benefit on a form supplied by
SBL.
- - Written consent from any beneficiary is required in order to apply for such
Benefit.
- - Written consent from the Owner's spouse in community property states is
required in order to apply for such Benefit.
- - Written consent from any assignee must be obtained.
INCONTESTABILITY
This Rider is subject to the incontestability provision of the base Policy to
which it is attached.
EFFECTIVE DATE
This Rider is effective on the issue date specified.
GENERAL PROVISIONS
SBL may charge an administrative charge, not to exceed $200. This charge will be
deducted from the Requested Amount.
SBL will provide a claim form to the Owner within ten (10) business days of
receipt be SBL of a request for this Benefit.
SBL will issue an Endorsement to policy Specifications when an Accelerated
Benefit is paid under this rider.
SBL reserves the right to make any change to the provisions of this Rider to
comply with, or give the Owner the benefit of, any federal or state statute,
rules or regulation. This includes, but is not limited to, requirements relating
to life insurance contracts under the IRS code or the laws of any state. SBL
will provide the Owner with a copy of any such change and will also file such
change with the insurance regulatory officials of the state in which the
contract is delivered.
TERMINATION
This Rider will cease:
- - on the Owner's request;
- - on lapse or termination of the Policy; or
- - when an Accelerated Benefit is paid under this Rider.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY (SBL)
TOPEKA, KANSAS
WAIVER OF MONTHLY DEDUCTION RIDER
THIS RIDER IS ATTACHED TO AND MADE PART OF YOUR POLICY
ISSUE DATE POLICY NUMBER
FOR INFORMATION RELATING TO THE FEDERAL INCOME TAX ASPECTS OF PURCHASING A
POLICY, SEE "FEDERAL INCOME TAX CONSIDERATIONS' IN THE PROSPECTUS.
BENEFIT
Subject to this rider's terms, and upon receipt of proof acceptable to SBL that
the Insured has become totally disabled, SBL will waive any Monthly Deduction
for the base Policy and the cost of any other benefits added by rider which fall
due after total disability has continued for at least 6 consecutive months.
SBL will not waive any charges which fall due more than one year before SBL
receives proof of total disability. If total disability begins during the grace
period under the Policy, the required payment must be received by SBL before the
grace period expires in order to effect a valid claim under this rider.
The Age of the Insured when total disability begins will affect the period
during which deductions will be waived.
If total disability begins before the Policy anniversary when the Insured is age
60:
1. all Monthly Deductions will be waived which fall due: (a) beginning 6
months after total disability began; and (b) while total disability
continues; and
2. if total disability continues until the Policy anniversary when the Insured
is age 65, no further proof of disability is required.
If total disability begins after the Policy anniversary when the insured is age
60, but before the Policy anniversary when the Insured is age 63:
1. all Monthly Deductions will be waived which fall due: (a) beginning 6
months after total disability began; and (b) while total disability
continues; and
2. no Monthly Deductions will be waived past the Policy anniversary when the
Insured is age 65.
If total disability begins after the Policy anniversary when the Insured is age
63:
1. all Monthly Deductions will be waived which fall due: (a) beginning 6
months after total disability began; and (b) while total disability
continues; and
2. no Monthly Deductions will be waived after 24 Monthly Deductions have been
waived.
TOTAL DISABILITY
"Total disability" means disability of the Insured which:
1. is a result of bodily injury or disease, or mental disease;
2. begins while this rider is in force; and
3. completely prevents the Insured from working for pay or profit.
During the first 24 months of disability "working" means to engage in the
regular occupation, business or profession of the Insured. After 24 months it
means to engage in an occupation for which the Insured is or becomes reasonably
fitted by education, training, or experience.
"Working for pay or profit" includes attending school or college as a full-time
student, if that was the Insured's main occupation when the disability began.
EXCLUSIONS
No Monthly Deductions will be waived if the Insured's total disability results
from:
1. an act or incident of declared or undeclared war;
2. any bodily injury which occurred or disease which was first evident before
the Date of Issue of this rider. This clause will be used only if the total
disability begins within two years after the Date of Issue of this rider;
3. an intended self-inflicted injury;
4. use of an illegal or controlled substance.
NOTICE AND PROOF OF DISABILITY
No Monthly Deduction will be waived unless proof of disability is received by
SBL:
1. during the life of the Insured; and
2. while disability continues; or
3. as soon as reasonably possible.
From time to time after the Insured is disabled, SBL may require proof that
total disability has continued. This proof may include a medical exam, at SBL's
expense, by a physician SBL selects. After two years of continued total
disability, SBL will not require proof of total disability more often than once
a year.
INSURANCE CHARGES
The monthly Cost of Insurance Charge for this rider is a percentage of the
Monthly Deduction of the Policy. The percentage is based on the Age, sex (unless
unisex cost of insurance rates apply), and class of risk of the Insured.
The Waiver of Monthly Deduction Percentages are shown on the Table of Cost of
Insurance Rates in the Policy.
EFFECTIVE DATE
This rider is effective on the Policy Date unless otherwise stated. This rider
will terminate:
- - on SBL's receipt of the Owner's written request to terminate the rider; or
- - on lapse or termination of the Policy; or
- - on the Policy anniversary after the Insured becomes age 65.
Any claim for disability which occurred before such termination will not be
affected.
INCONTESTABILITY
SBL will not contest this rider after it has been in force, during the lifetime
of the Insured, for two years from the date of issue. Any period the Insured is
disabled is excluded.
GENERAL CONDITIONS
This rider is part of the Policy to which it is attached. All terms of the
Policy which do not conflict with this rider's terms apply to this rider.
SBL reserves the right to make any change to the provisions of this Rider to
comply with, or give the Owner the benefit of, any federal or state statute,
rule or regulation. This includes, but is not limited to, requirements relating
to life insurance contracts under the IRS Code or the laws of any state. SBL
will provide the Owner with a copy of any such change and will also file such
change with the insurance regulatory officials of the state in which the
contract is delivered.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY
TOPEKA, KANSAS
EXTENDED GUARANTEED DEATH BENEFIT RIDER
THIS RIDER IS ATTACHED TO AND MADE PART OF YOUR POLICY
POLICY NUMBER
FOR INFORMATION RELATING TO THE FEDERAL INCOME TAX ASPECTS OF PURCHASING A
POLICY, SEE "FEDERAL INCOME TAX CONSIDERATIONS' IN THE PROSPECTUS.
BENEFIT
This Policy will not lapse during the Guaranteed Period: (1) Subject to the
terms of this rider; and (2) while the Insured is alive and this rider is in
force; and (3) even if during the Guaranteed Period the Net Cash Surrender Value
is not enough to cover the Monthly Deduction on any Monthly Payment Date.
If the Insured dies while this rider is in force the Death Benefit Proceeds will
consist of: (1) the death benefit under the Policy as of the date of death; plus
(2) any additional benefits provided by rider, less any Policy Debt.
DEFINITIONS
Guaranteed Period is the period during which, if the terms of this rider are
met, the Policy is guaranteed not to lapse. The length of the Guaranteed Period
may be 10 to 30 Policy Years, based on the age of the Insured on the Policy
Date. If the Insured is 18 to 34 years of Age on the Policy Date, the Guaranteed
Period will be 30 Policy years. If the insured is 35 to 54 years of Age on the
Policy Date, the Guaranteed Period will be 30 Policy years. If the insured is 35
to 54 years of Age on the Policy Date, the Guaranteed Period will be the result
of 65 minus the Insured's Age on the Policy Date. If the Insured is 55 to 65
years of Age on the Policy Date, the Guaranteed Period will be 10 Policy years.
Extended Guaranteed Death Benefit Premium is the premium required to keep this
rider in force. The Extended Guaranteed Death Benefit Premium is based on the
Age, sex (unless unisex cost of insurance charges apply), rating class, and
underwriting class of the Insured and the Specified Amount and death benefit
option of the Policy. This premium is shown on page 3 of the Policy.
Policy changes include; (1) any increase or decrease in the Specified Amount;
(2) any change in the death benefit option; (3) the addition or deletion of a
rider; or (4) a change in the Insured's underwriting class. A Policy Change may
change the Extended Guaranteed Death Benefit Guarantee Premium. An additional
premium may be required upon any Policy Change to satisfy the Extended
Guaranteed Death Benefit Premium Requirements. SBL will issue an Endorsement to
Policy Specifications showing any change in the Extended Death Benefit Premium
after a Policy Change.
EXTENDED GUARANTEED DEATH BENEFIT PREMIUM REQUIREMENTS
This rider will remain in force as long as the amount of premiums paid on the
Policy less any Policy Debt and any partial withdrawals on any Monthly Payment
Date is greater than or equal to an amount equal to the monthly pro rata share
of the Extended Guaranteed Death Benefit Premium times the number of Policy
months the Policy has been in force.
SBL will deem the Extended Guarantee Death Benefit Premium requirements to be
satisfied if the Policy premiums are being applied by a waiver of premium rider
and there have been no Policy changes. If any Policy Changes have been made, the
amount of premium applied by a waiver of premium rider may not be enough to meet
the Extended Guaranteed Death Benefit Premium Requirements and extra premiums
may be required to maintain this rider in force.
NOTICE
SBL will send a written notice to the Owner at the Owner's last known address
and any assignee of record if the Extended Guaranteed Death Benefit Premium
Requirements are not satisfied on any Monthly Payment Date. If the premium
required to cover the Extended Guaranteed Death Benefit Premium Requirements is
not received by SBL within 61 days after the date the notice is mailed, this
rider will cease and will no longer be in force.
EFFECTIVE DATE
This rider is effective on the Policy Date shown on page 3 of the Policy.
This rider will terminate on the earliest of:
- the Owner's written request;
- the lapse or termination of the Policy;
- the date the Extended Guaranteed Death Benefit Requirements are not
satisfied; or
- the expiration of the Guaranteed Period.
This rider cannot be reinstated.
GENERAL CONDITIONS
This rider is part of the Policy to which it is attached. All terms of the
Policy which do not conflict with this rider's terms apply to this rider.
SBL reserves the right to make any change to the provisions of this Rider to
comply with, or give the Owner the benefit of, any federal or state statute,
rule or regulation. This includes, but is not limited to, requirements relating
to life insurance contracts under the IRS Code or the laws of any state. SBL
will provide the Owner with a copy of any such change and will also file such
change with the insurance regulatory officials of the state in which the
contract is delivered.
While this rider is in force, SBL may restrict the allocation of premiums and/or
transfers to certain subaccounts.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
<PAGE>
SECURITY BENEFIT LIFE INSURANCE COMPANY (SBL)
TOPEKA, KANSAS
ANNUAL RENEWABLE AND CONVERTIBLE LEVEL TERM INSURANCE RIDER
THIS RIDER IS ATTACHED TO AND MADE PART OF YOUR POLICY
ISSUE DATE POLICY NUMBER
FOR INFORMATION RELATING TO THE FEDERAL INCOME TAX ASPECTS OF PURCHASING A
POLICY, SEE "FEDERAL INCOME TAX CONSIDERATIONS" IN THE PROSPECTUS.
BENEFIT
If a Covered Person dies while this rider is in force, SBL will pay the Benefit
Amount for the Covered Person.
The Benefit Amount will be paid to the named beneficiary for the Covered Person
after SBL receives, at its Home Office: (1) proof of the Covered Person's death
satisfactory to SBL; and (2) such other information as SBL may require, within
reason. Unless the Owner requests otherwise, payment of the Benefit Amount will
be made in a lump sum.
DEFINITIONS
The Benefit Amount is equal to the Specified Amount of this rider less any
unpaid insurance charges for the Covered Person. The Benefit Amount for each
Covered Person is shown on page 3 of the Policy.
Covered Person means any of the individuals covered under this rider on the
Issue Date of this rider. This rider may cover up to five Covered Persons.
Covered Persons may be deleted from or, with evidence of insurability, added to
his rider. When this occurs, SBL will issue an Endorsement to Policy
Specifications for the Policy.
INSURANCE CHARGES
The insurance charges for this rider are calculated separately for each Covered
Person. The insurance charges for this rider will be added to the Monthly
Deduction under the Policy.
The guaranteed mortality rates are shown on the Table of Cost of Insurance Rates
attached to the Policy. The cost of insurance rates are based on the Covered
Person's age, sex (unless unisex cost of insurance rates apply), rating class
and underwriting class, and the Specified Amount an duration of the ride. The
cost of insurance rates will not exceed the guaranteed maximum month cost of
insurance rates shown on the Table of Cost of Insurance Rates in the Policy.
LAPSE AND REINSTATEMENT
If a premium is not paid by the end of the grace period as provided in the
Policy this rider will lapse and will no longer be in force as of the due date
of the premium. This rider may be reinstated any time within three (3) years of
the date of lapse, provided:
- - the Policy is in force or is reinstated at the time of reinstatement of this
rider; - new evidence of insurability of the Covered Persons satisfactory to SBL
provided; and - all premiums due for this rider are paid.
RENEWAL
Coverage under this rider may be renewed up to the rider anniversary next
following the Insured's age 95. Subject to the termination provisions of this
rider, coverage will be automatically renewed on each Covered person on each
rider anniversary date. Renewal premiums will not exceed the maximum guaranteed
premiums as described in the Insurance Charges Provision.
CONVERSION
While this rider is in force or within thirty (30) days of termination of the
Policy by death of the Insured, the Benefit Amount for this rider may be
converted to a new policy on any Covered Person's life at any time before such
Covered Persons become age 65. This rider may be converted during the first two
years it is in effect regardless of the Covered Person's age. The Owner must
submit written request for conversion in a form satisfactory to SBL. A Covered
Person may not convert if any insurance charges are due and unpaid. The Covered
Person's Benefit Amount for this rider will be cancelled on the new policy issue
date.
The amount of insurance under the new policy will be the same as the Covered
Person's Benefit Amount under this rider. A lower amount may be selected long as
it is not less then SBL's regular minimum limit at the time of conversion.
The new policy will be issued in the same rating class and underwriting class
and contain the same restrictions, if any, as this rider. The Covered Person may
choose between the following options with respect to the Age upon which the new
policy will be issued:
- - Conversion at Attained Age
The Covered Person may convert at any time before the Policy anniversary
next following the Insured's age 65. The policy date of the new policy will
be the date of conversion. The new policy may be any level premium life or
endowment plan which is issued and made available for conversion by SBL on
the new policy date for the Covered Person's age at conversion. The new
policy will go into effect when the first premium is paid under the new
policy.
- - Conversion from Rider Date
The policy date of the new policy will be the Issue Date of the rider. The
new policy may be any level premium life or endowment plan which is issued
are made available for conversion by SBL for the Covered Persons age on the
effective date of this rider. The new policy will be effective when the
greater of (a) or (b) is paid, where:
(a) Is the difference between the premiums which would have been due on
the rider for the Specified Amount of the new policy (from the rider
date to the conversion date) and the premiums which would have been
due on the new policy. This difference is adjusted for interest at the
rate of 6% per year from the due date of each premium to the date the
payment is made; and
(b) Is the cash value of the new policy which is shown on the table of
value of the new policy.
Riders will not be included in the new policy without SBL's consent at the time
of conversion. A waiver of deduction provision may be included in the new policy
if: (1) this rider contains a similar provision; (2) the Covered Person is not
totally and permanently disabled as of the new policy date; (3) the new policy
is on permanent plan of insurance; and (4) the Covered Person's age on the
effective date of the new policy is not greater than 55 years.
EFFECTIVE DATE
This rider is effective on the Policy Date unless otherwise stated.
This rider will terminate on the earliest of:
- - SBL's receipt of the Owner's written request for termination; - the lapse of
this rider; or - the lapse or termination of the Policy.
GENERAL CONDITIONS
The rider is part of the Policy to which it is attached. As applied to this
rider, the periods stated in the Policy's Incontestability and Suicide
Provisions will start with the Issue Date of this rider. All terms of this
Policy which do not conflict with this rider's terms apply to this rider.
SBL reserves the right to make any change to the provisions of this Rider to
comply with, or give the Owner the benefit of, any federal or state statute,
rule or regulation. This includes, but is not limited to, requirements relating
to life insurance contracts under the IRS Code or the laws of any state. SBL
will provide the Owner with a copy of any such change and will also file such
change with the insurance regulatory officials of the state in which the
contract is delivered.
SECURITY BENEFIT LIFE INSURANCE COMPANY
ROGER K. VIOLA
Secretary
<PAGE>
PURCHASE AGREEMENT
AGREEMENT made this _____ day of _______________ 1993, between SECURITY BENEFIT
LIFE INSURANCE COMPANY ("SBL") and SBL Fund (the "Fund"), both Kansas
corporations with principal offices at 700 Harrison Street, Topeka, Kansas:
WITNESSETH:
WHEREAS, the Fund is an open-end diversified, management investment company
registered under the Investment Company Act of 1940 which sells its shares
solely to SBL Variable Annuity and Variable Life separate accounts, and is able
and desirous of making shares of the Fund available to SBL as hereinafter
provided; and
WHEREAS, SBL desires to arrange for the acquisition of shares of the Fund as
required to meet the terms of Variable Life Insurance Policies with assets in
the Varilife separate account ("Varilife"), a separate account established by
SBL under K.S.A. 40-436 and 40-437, and a unit investment trust as defined in
the Investment Company Act of 1940, of which SBL is a sponsor; and
WHEREAS SBL will act as the Custodian of the assets of Varilife;
NOW, THEREFORE, in consideration of the mutual agreements made therein, SBL and
the Fund agree as follows:
1. The Fund agrees to sell to SBL on behalf of Varilife, upon demand and at the
net asset value in effect at the time of sale (as determined in accordance
with the Fund prospectus), a sufficient number of shares of the Fund to meet
the requirements of all such Variable Life Insurance Policies sold or issued
with assets in Varilife. No fee or commission shall be paid to the Fund, SBL
or any other person or entity in connection with the sale of shares of the
Fund to SBL on behalf of Varilife.
2. The Fund agrees to redeem shares of the Fund held by SBL on behalf of
Varilife, upon demand and at the net asset value in effect at the time the
shares are tendered for redemption (as determined in accordance with the
Fund prospectus) to meet the requirements of Variable Life Insurance
Policies sold or issued with assets in Varilife.
3. SBL agrees that it will cause Varilife to be registered under the Investment
Company Act of 1940 as a unit investment trust and will cause all the
Variable Insurance Policies offered to the public thereunder to be
registered under the Securities Act of 1933. SBL agrees further that it will
cause such Variable Life Insurance Policies to be filed with the Insurance
Departments of the various states of jurisdictions in which they are to be
offered and will also cause Variable Life Insurance Policies to be
registered or qualified under the Blue Sky Laws of the various states or
jurisdictions which, in the opinion of its counsel, require such a
registration or qualification, and it will otherwise comply to the best of
its ability with the laws of the Federal Government, the states or other
jurisdictions and regulations issued thereunder insofar as they may be
applicable to the sale and distribution of the Variable Life Insurance
Policies so as to permit the continued sale and distribution thereof.
4. The Fund agrees that it will:
(a) comply to the best of its ability with the Securities Act of 1933, the
Securities Act of 1934, and the Investment Company Act of 1940, and the
regulations pertaining to said Acts and the Blue Sky Laws of such states
or jurisdictions and regulations thereunder as, in the opinion of its
counsel, may be applicable to the offering of shares of the Fund, so as
to maintain the registration of the shares of the Fund thereunder and
permit the continued sale thereof; and
(b) make available to SBL information or material in its possession that may
be necessary for the registration or qualification of the Variable Life
Insurance Policies for sale under the laws of any of the various states
or jurisdictions in which such Variable Policies are being sold.
(c) supply and deliver to SBL a sufficient number of copies, together with
the necessary envelopes, of any and all notices, reports, proxies,
statements and any other material except prospectuses, which will be
sent from time to time to the holders of shares of the Fund so as to
provide a single copy, together with the necessary envelope, to each
holder of a Variable Life Insurance Policy, and
(d) furnish to SBL exact copies of the prospectus and Statement of
Additional Information of the Fund promptly, in such quantities as SBL
may require from time to time in the sale of Variable Life Insurance
Policies, after the same shall be filed and become available for use
under the Securities Act of 1933. When prospectuses and Statements of
Additional Information are so furnished in connection with the sale of
Variable Life Insurance Policies, the Fund may charge SBL the printing
cost applicable thereto.
5. The obligation of the Fund to sell its shares under this agreement for the
purpose of satisfying the requirement of the Variable Insurance Policies
from time to time is subject, at the time of such sale, to the condition
that:
(a) The unit investments trust (Varilife) is duly registered under the
Investment Company Act of 1940;
(b) Shares of the Fund are duly registered under the Securities Act of 1933,
and no stop order or injunction, law, rule or regulation prohibits the
sale or issuance of the shares of the Fund;
(c) The sale of Variable Life Insurance Policies by SBL is not in violation
of any Federal or State law relating to the registration or sale
thereof;
(d) Variable Life Insurance Policies will be offered by SBL through
broker/dealers (including Security Distributors, Inc.) who are
registered under the Securities Exchange Act of 1934 and who are members
in good standing of the National Association of Securities Dealers, Inc.
and other eligible financial institutions.
6. This agreement shall continue from year to year but may be terminated by
either party on ninety (90) days notice.
7. This agreement shall be construed in accordance with the laws of the State
of Kansas and is binding upon the parties hereto and their successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed and attested, all as of the day and year above written.
ATTEST: SECURITY BENEFIT LIFE
INSURANCE COMPANY
____________________________ By ____________________________________________
Roger K. Viola, Secretary Gary L. Eisenbarth, Executive Vice President
ATTEST: SBL FUND
____________________________ By ____________________________________________
Amy J. Lee, Secretary Michael J. Provines, President
<PAGE>
[SBG LOGO]
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Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
March 1, 1999
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66636-0001
Dear Sir/Madam:
This letter is with reference to the Registration Statement of Security Varilife
Separate Account (Security Elite Benefit) of which Security Benefit Life
Insurance Company (hereinafter "SBL") is the Depositor. Said Registration
Statement is being filed with the Securities and Exchange Commission for the
purpose of registering the flexible premium variable life insurance contracts
issued by SBL and the interests in the Security Varilife Separate Account under
such variable life insurance contracts which will be sold pursuant to an
indefinite registration.
I have examined the Articles of Incorporation and Bylaws of SBL, minutes of
meetings of its Board of Directors and other records, and pertinent provisions
of the Kansas insurance laws, together with applicable certificates of public
officials and other documents which I have deemed relevant. Based on the
foregoing, it is my opinion that:
1. SBL is duly organized and validly existing as a life insurance company under
the laws of the State of Kansas.
2. Security Varilife Separate Account has been validly created as a Separate
Account in accordance with the pertinent provisions of the insurance laws of
Kansas.
3. SBL has the power, and has validly and legally exercised it, to create and
issue the flexible premium variable life insurance contracts which are
administered within and by means of Security Varilife Separate Account.
4. The flexible premium variable life insurance contracts to be sold pursuant
to the indefinite registration, when issued, will represent binding
obligations of SBL in accordance with their terms providing said contracts
were issued for the consideration set forth therein and evidenced by
appropriate policies and certificates.
I hereby consent to the inclusion in the Registration Statement of my foregoing
opinion.
Respectfully submitted,
AMY J. LEE
Amy J. Lee
Vice President and Associate General Counsel
Security Benefit Life Insurance Company
<PAGE>
[SBG LOGO]
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Security Benefit Life Insurance Company 700 SW Harrison St.
Security Benefit Group, Inc. Topeka, Kansas 66636-0001
Security Distributors, Inc. (785) 431-3000
Security Management Company, LLC
May 23, 1994
Security Benefit Life Insurance Company
700 SW Harrison Street
Topeka, KS 66604
Dear Sir/Madam:
In my capacity as Assistant Actuary of the Actuarial-Life Product Development
Department of Security Benefit Life Insurance Company, I have provided actuarial
advice concerning:
The preparation of the pre-effective amendment Number 1 to the
registration statement on Form S-6, filed by Security Benefit Life
Insurance Company with the Securities and Exchange Commission under
the Securities Act of 1933 with respect to variable life insurance
policies (the "Registration Statement") and the preparation of the
policy forms for the variable life insurance policies described in the
Registration Statement (the "Policies").
It is my professional opinion that:
The illustration of death benefits, cash values and accumulated
premiums shown in the Appendix to the prospectus, based on the
assumptions stated in the illustrations and on two pages immediately
preceding the illustrations, are consistent with the provisions of the
Policies. The rate structure of the Policies has not been designed so
as to make the relationship between premiums and benefits, as shown in
the illustrations, appear to be correspondingly more favorable to the
prospective purchaser of the Policies at ages 40 and 50 in the
underwriting classes illustrated than to prospective purchasers of
Policies at other ages or underwriting classes.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
KEVIN HOWARD
Kevin Howard, A.S.A.
Assistant Actuary
Actuarial-Life Product Development
Security Benefit Life Insurance Company
<PAGE>
Security Benefit Life Insurance Company's
Description of Issuance, Transfer and Redemption
Procedures for Policies Pursuant to
Rule 6e-3(T)(b)(12)(iii)
This document set for the administrative procedures that will be followed by
Security Benefit Life Insurance Company ("Security Benefit") in connection with
the issuance of its Security Ultimate Benefit Policy and Security Varilife
Policy ("Policy"), the transfer of assets held under a Policy, and the
redemption by Policy Owners of their interests in said Policy.1
I. PURCHASE AND RELATED TRANSACTIONS
A. Premium Schedules and Underwriting Standards
Each Policy is a flexible premium variable life insurance policy. The Policy
provides lifetime insurance protection on the life of the Insured through the
Maturity Date for so long as the Policy is not surrendered or in default beyond
the grace period. A Policy Owner will have two elections in determining the
death benefit payable under a Policy. First, the Policy Owner will choose from
two death benefit qualification tests - the cash value accumulation test or the
guideline premium test. If the Policy Owner chooses the guideline premium test,
the Policy also permits the Policy Owner to choose from two death benefit
options, Option A and Option B. The Policy will be offered and sold pursuant to
an established mortality structure and underwriting standards in accordance with
state insurance laws which prohibit unfair discrimination among Policy Owners,
but allow cost of insurance rates to be based upon factors such as age, health
or occupation.
The minimum initial premium to purchase a Policy must be equal to at least
25% of the sum of the Policy's monthly deductions plus premium load for the
first year, which will be based upon the Policy's Face Amount and the Age,
smoking status, gender, and underwriting class of the Insured. Thereafter,
subject to certain limitations, a Policy Owner may choose the amount and
frequency of premium payments. Security Benefit may reduce the minimum initial
premium required under certain circumstances.
B. Application and Initial Premium Processing
Upon receipt of a completed application for a Policy, Security Benefit will
follow certain insurance underwriting (i.e, evaluation of risk) procedures
designed to determine whether the proposed insured is insurable. This process
may involve verification procedures and may require that further information be
provided by the applicant before a determination can be made. Security Benefit
will not become obligated under a Policy until an initial premium and a
completed application has been received by Security Benefit, and this
underwriting procedure has been completed.
1 Capitalized terms as used herein have the same meaning as in the prospectus
for a Policy.
After the Policy is issued, insurance coverage under the Policy will be
deemed to have begun as of the Policy Date. The Policy Date is usually the date
the application is accepted, or, if later, the date the premium is received and
accepted at Security Benefit's Home Office. The Policy Date is the date used to
determine Policy Years, Policy Months, and Policy Anniversaries.
C. Additional Premium Payments
The Policy is a flexible-premium policy, and it provides flexibility to pay
premiums at the Policy Owner's discretion. When applying for a Policy, a Policy
Owner will determine a Planned Periodic Premium that provides for the payment of
level premiums over a specified period of time. Each Policy Owner will receive a
premium reminder notice on either an annual, semi-annual, quarterly, or monthly
basis, at the option of the Policy Owner; however, the Policy Owner is not
required to pay Planned Periodic Premiums.
Payment of the Planned Periodic Premium will not guarantee that a Policy will
remain in force. Instead, the duration of the Policy depends upon the Policy's
Accumulated Value. Even if Planned Periodic Premiums are paid, the Policy will
lapse any time Accumulated Value less Policy Debt is insufficient to pay the
current monthly deduction and a grace period expires without sufficient payment.
Any premium payment must be for at least $50. Security Benefit also may reject
or limit any premium payment that would result in an immediate increase in the
net amount at risk under the Policy, although such a premium may be accepted
with satisfactory evidence of insurability.
D. Premium Allocation
A Policy Owner may allocate net premiums among the Variable Accounts and/or
the Fixed Account. The initial allocation must be made in the application for
the Policy. During the Free-Look Period (a limited period of time during which
the Policy Owner may return and cancel the Policy for a full refund of premiums
paid), all net premiums are allocated to the __________ Variable Account. The
Accumulated Value is allocated according to the Policy Owner's instructions the
later of 15 days after the Policy is issued or 45 days after the application is
signed, or, if longer, upon receipt of the minimum initial premium. The
Accumulated Value may be allocated to no more than ____ allocation alternatives
at any time. Those alternatives currently include seven Variable Accounts and a
Fixed Account.
Additional net premium payments will be allocated among the allocation
alternatives according to the Policy Owner's instructions. If the current
instructions would cause the Accumulated Value to be allocated to more than ____
allocation alternatives, the premium payment less the premium load will be
allocated to the Variable Accounts and Fixed Account in the same proportion as
the Accumulated Value in those accounts. A Policy Owner may change the
allocation of Accumulated Value by submitting a proper written request to
Security Benefit's Home Office.
E. Reinstatement
Security Benefit will reinstate a lapsed Policy (see "Policy Lapse,"
Section III.C. on page 13 of this document) at any time within five years after
the end of the grace period but before the Maturity Date, provided Security
Benefit receives the following: (1) a written application from the Policy Owner;
(2) evidence of insurability satisfactory to Security Benefit; and (3) a premium
equal to all monthly deductions that were due and unpaid during the grace
period, payment of a premium at least sufficient to keep the Policy in force for
three months after the date of reinstatement, and payment of any excess sales
load refunded to the Owner at the time the Policy lapsed.
When the Policy is reinstated, the Accumulated Value will be equal to the
Accumulated Value on the date of the lapse subject to the following; (1) if the
Policy is reinstated after the first Monthly Payment Date following lapse, the
Accumulated Value will be reduced by the amount of Policy Debt on the date of
lapse and no Policy Debt will exist on the date of reinstatement; (2) if the
Policy is reinstated on the Monthly Payment Date next following lapse, any
Policy Debt on the date of lapse will also be reinstated; and (3) no interest on
amounts held in Security Benefit's Loan Account to secure Policy Debt will be
paid or credited between lapse and reinstatement.
Reinstatement will be effective as of the Monthly Payment Date on or next
following the date of approval by Security Benefit, and Accumulated Value minus
Policy Debt will be allocated among the Variable Accounts and the Fixed Account
in accordance with the Policy Owner's current premium allocation instructions.
F. Policy Loans
A Policy Owner may borrow from Security Benefit an amount up to __% of the
Policy's Accumulated Value allocated to the Variable Accounts and __% of
Accumulated Value allocated to the Fixed Account and less the amount of any
underwriting surrender charge that would be imposed if the Policy were
surrendered on the date the loan is taken. The minimum loan that may be taken is
$____. A Policy is the only security required for a loan.
When a Policy Owner takes a loan, an amount equal to the loan is transferred
out of the Policy Owner's Accumulated Value in the Variable Accounts and the
Fixed Account on a proportional basis, unless the Policy Owner instructs
Security Benefit otherwise.
The interest rate on loans is __% a year for the first 10 years and __%
thereafter. Security Benefit will credit interest monthly on any Policy Debt to
secure the loan at an annual effective rate of __%. The Owner may repay all or
part of the loan at any time while the Policy is in force. If not repaid, the
Policy Debt will reduce the amount of death proceeds paid upon the death of the
Insured, the Cash Surrender Value paid upon surrender or maturity, or the refund
of premium upon exercise of the Free-Look Right.
A loan may affect the length of time the Policy remains in force. The Policy
will lapse when Accumulated Value minus Policy Debt is insufficient to cover the
monthly deduction against the Policy's Accumulated Value on any Monthly Payment
Date and the minimum payment required is not made during the __ day grace
period. Moreover, the Policy may enter the grace period more quickly when a loan
is outstanding, because the loaned amount is not available to cover monthly
deductions and charges.
II. TRANSFER AMONG INVESTMENT DIVISIONS
The Security Varilife Separate Account (the "Separate Account") is a separate
investment account of Security Benefit used to support the variable death
benefits and policy values of Security Benefit's life insurance policies. The
Separate Account currently is made up of seven Variable Account which invest in
shares of a corresponding series of the SBL Fund (the "Fund"), the investment
vehicle of the Separate Account. The Fund is registered with the SEC under the
Investment Company Act of 1940 as an open-end management investment company of
the series type. The series of the Fund, each of which has a different
investment objective, currently are Series A, Series B, Series C, Series D,
Series E, Series S, and Series J.
A Policy Owner may allocate Accumulated Value among the Variable Accounts in
any way he or she chooses. However, after the transfer, the Accumulated Value
may be allocated to no more than ____ allocation alternatives. No transfers are
allowed during the grace period if the required premium has not been paid. There
is currently no charge imposed upon transfers, and no limit to the number and
frequency of transfers permitted.
Accumulated Value may also be transferred from the Variable Accounts to the
Fixed Account. However, such a transfer will only be permitted in the Policy
Month preceding a Policy Anniversary except that Policy Owners residing in
Maryland, Connecticut, and Pennsylvania may make such transfers at any time
during the first 18 Policy Months. Transfers from the Fixed Account to the
Variable Accounts are also permitted, subject tot he following restrictions:
(1) the Policy Owner may not make more than __ transfers from the Fixed Account
to the Variable Accounts in any 12-month period; (2) if a Policy Owner has $____
or more in the Fixed Account, the Policy Owner may not transfer more than __% of
such amount to the Variable Accounts in any year.
III. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Net Cash Surrender Value
A Policy Owner can obtain a portion of the Net Cash Surrender Value under the
Partial Withdrawal Benefit. The Partial Withdrawal Benefit is available on and
after the first Policy Year. There is no limit on the number of Partial
Withdrawals. There is a $___ withdrawal fee for Partial Withdrawals. The fee
will be deducted from the Policy's Accumulated Value in the Fixed and Variable
Accounts in the same proportion as the withdrawal.
A Partial Withdrawal must be for at least $500, and the Policy's Net Cash
Surrender Value after the withdrawal must be at least $1,000. If there is any
Policy Debt, the amount that can be withdrawn is also limited to the excess, if
any, of the Cash Surrender Value immediately prior to the withdrawal over the
result of the Debt divided by __%.
When a Partial Withdrawal is made on a Policy on which the Owner has selected
the cash value accumulation test or the guideline premium test death benefit
Option A, the Face Amount under the Policy is decreased by the lesser of (1) the
amount of the Partial Withdrawal or (2) if the death benefit prior to the
withdrawal is greater than the Face Amount, the amount, if any, by which the
Face Amount exceeds the difference between the death benefit and the amount of
the Partial Withdrawal. A Partial Withdrawal will not change the Face Amount of
a Policy on which the Owner has selected death benefit Option B. However,
assuming that the death benefit is not equal to Accumulated Value times a death
benefit percentage, the Partial Withdrawal will reduce the death benefit by the
amount of the Partial Withdrawal. To the extent the death benefit is based upon
the Accumulated Value times the death benefit percentage applicable to the
Insured, a Partial Withdrawal may cause the death benefit to decrease by an
amount greater than the amount of the Partial Withdrawal.
A Policy Owner may elect to receive systematic Partial Withdrawals after the
first Policy Year. He or she may request a specified dollar amount and the
desired frequency of the systematic Partial Withdrawals, which may be monthly,
quarterly, semi-annually or annually. Each systematic withdrawal must be at
least $___. The $___ withdrawal fee is currently waived on each systematic
withdrawal after the first systematic withdrawal. Systematic Partial Withdrawals
will be allocated proportionately from the Policy Owner's Accumulated Value in
the Variable Accounts and the Fixed Account. If a systematic Partial Withdrawal
would cause the Net Cash Surrender Value to fall below $___, the amount
withdrawn will be reduced to the amount available and systematic Partial
Withdrawals will automatically terminate. The Policy Owner will be notified of
the termination. Systematic Partial Withdrawals may be stopped or modified by
the Policy Owner upon proper written request received by Security Benefit at
least 30 days in advance.
A Policy Owner may surrender the Policy while the Policy is in force for its
Net Cash Surrender Value. If the Policy is surrendered in the first __ years
following its issuance, the Policy Owner will also receive a refund of excess
sales load deducted from premium paid, if any.
B. Death Claims
Upon the death of the Insured, Security Benefit will pay to a named
Beneficiary death benefit proceeds, either in a lump sum or under a payment plan
offered under the Policy. The proceeds will be the death benefit under the
Policy reduced by adjustments for any outstanding Policy Debt.
Under the guideline premium death benefit qualification test Option A, the
death benefit will be equal to the Face Amount of the Policy or, if greater,
Accumulated Value multiplied by a death benefit percentage. Under Option B, the
death benefit will be equal to the Face Amount of the Policy plus the
Accumulated Value, or if greater, Accumulated Value multiplied by a death
benefit percentage. The specified percentages vary according to the age of the
Insured, and are shown in a table in the Policy. Under the cash value
accumulation death benefit qualification test, the death benefit will be equal
to the Face Amount or, if greater, the Accumulated Value divided by the "net
single premium" that would purchase one dollar of future benefits under the
Policy. Generally, the cash value accumulation test requires that under the
terms of a life insurance policy, the death benefit must be sufficient so that
the cash surrender value, as defined in Section 7702 of the Internal Revenue
Code, does not at any time exceed the net single premium required to fund the
future benefits under the policy. The net single premiums under the Policy vary
according to the Age, sex, and underwriting classification of the Insured, and
the resulting death benefit determined by using the net single premiums will be
at least equal to the amount required for the Policy to be deemed life insurance
under Section 7702 of the Internal Revenue Code. The net single premium is
calculated using a ___ percent interest rate, or if higher, the contractually
guaranteed interest rate and using mortality charges specified in the prevailing
insurance commissioners standard tables as of the time the Policy is issued.
A Policy Owner may request an increase or decrease in the Face Amount under a
Policy subject to approval from Security Benefit. A change in Face Amount may
only be made once per year after the fifth Policy Year. A decrease in face
amount may only be made after the fifth Policy Year, or after the fifth Policy
Year following the last increase in Face Amount. Such a change may change the
death benefit, depending, among other things, upon the death benefit under a
Policy exceeds the Face Amount prior to the change. A change in the Face Amount
may affect the net amount at risk under a Policy, which may affect a Policy
Owner's cost of insurance charge. For these purposes, the net amount at risk is
equal to the death benefit less the Policy Owner's Accumulated Value.
Any request for a change in Face Amount must be in writing at Security
Benefit's Home Office. In the case of a request for an increase, additional
evidence of insurability satisfactory to Security Benefit will also be required.
C. Policy Lapse
If the Accumulated Value less Policy Debt of a Policy is insufficient to
cover deductions and charges on a Monthly Payment Date, Security Benefit will
give written notice to the Policy Owner that is an amount shown in the notice
(which will be sufficient to cover the deduction amount(s) due) is not paid
within __ days (the "grace period"), the Policy Owner faces a danger of lapse.
The Policy will remain in force through the grace period, but if no payment is
forthcoming, it will terminate at the end of the grace period. In order to avoid
termination, the Policy Owner must pay an amount equal to three time the charges
and deductions due on the monthly payment date in which the insufficiency
occurred. If the Policy terminates at the end of the grace period during the
first two years following issuance of the Policy, Security Benefit will refund
excess sales load deducted from premiums paid, if any.
If the required payment is made during the grace period, such payment will be
allocated among the Variable Accounts and the Fixed Account in accordance with
the Policy Owner's allocation instructions. If the Insured dies during the grace
period, the death benefit proceeds will equal the amount of the death benefit
immediately prior to the commencement of the grace period, reduced by any unpaid
monthly deductions and charges due, any Policy Debt and any sales load
previously refunded.
A lapsed Policy may be reinstated at any time within five years after the end
of the grace period but before the Maturity Date. See "Reinstatement,"
Section I.E. on page 5 of this document.
C. Policy Loans
See Section I.F. on page 6 of this document.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 5, 1999, with respect to the consolidated
financial statements of Security Benefit Corp. and Subsidiaries and the
financial statements of Security Varilife Separate Account included in
Post-Effective Amendment No. 5 to the Registration Statement under the
Securities Act of 1933 (Registration No. 33-77322) on Form S-6 for the
Prospectus of Security Elite Benefit Flexible Premium Variable Insurance Policy.
Ernst & Young LLP
Kansas City, Missouri
March 1, 1999
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SEDGWICK)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Thomas R. Clevenger, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January, 1999.
THOMAS R. CLEVENGER
-------------------------------------
Thomas R. Clevenger
SUBSCRIBED AND SWORN to before me this 20th day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Sister Loretto Marie Colwell, being a Director of SECURITY BENEFIT LIFE
INSURANCE COMPANY, by these presents do make, constitute and appoint Howard R.
Fricke, James R. Schmank and Roger K. Viola, and each of them, my true and
lawful attorneys, each with full power and authority for me and in my name and
behalf to sign Registration Statements, any amendments thereto and any
applications for exemptive relief filed pursuant to the Investment Company Act
of 1940 or the Securities Act of 1933, as amended, and any instrument or
document filed as part thereof, or in connection therewith or in any way related
thereto, in connection with Variable Life Contracts offered, issued or sold by
SECURITY BENEFIT LIFE INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE
ACCOUNT (SECURITY ELITE BENEFIT) with like effect as though said Registration
Statements and other documents had been signed and filed personally by me in the
capacity aforesaid. Each of the aforesaid attorneys acting alone shall have all
the powers of all of said attorneys. I hereby ratify and confirm all that the
said attorneys, or any of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 16th day of January, 1999.
SISTER LORETTO MARIE COLWELL
-------------------------------------
Sister Loretto Marie Colwell
SUBSCRIBED AND SWORN to before me this 16th day of January, 1999.
JULIA A. SMRHA
-------------------------------------
Notary Public
My Commission Expires:
7/8/2000
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John C. Dicus, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January, 1999.
JOHN C. DICUS
-------------------------------------
John C. Dicus
SUBSCRIBED AND SWORN to before me this 20th day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Steven J. Douglass, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of January, 1999.
STEVEN J. DOUGLASS
-------------------------------------
Steven J. Douglass
SUBSCRIBED AND SWORN to before me this 19th day of January, 1999.
NANCY A. LEWIS
-------------------------------------
Notary Public
My Commission Expires:
10/16/99
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Howard R. Fricke, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint James R. Schmank and
Roger K. Viola, and each of them, my true and lawful attorneys, each with full
power and authority for me and in my name and behalf to sign Registration
Statements, any amendments thereto and any applications for exemptive relief
filed pursuant to the Investment Company Act of 1940 or the Securities Act of
1933, as amended, and any instrument or document filed as part thereof, or in
connection therewith or in any way related thereto, in connection with Variable
Annuity Contracts offered, issued or sold by SECURITY BENEFIT LIFE INSURANCE
COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE BENEFIT) with
like effect as though said Registration Statements and other documents had been
signed and filed personally by me in the capacity aforesaid. Each of the
aforesaid attorneys acting alone shall have all the powers of all of said
attorneys. I hereby ratify and confirm all that the said attorneys, or any of
them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of January, 1999.
HOWARD R. FRICKE
-------------------------------------
Howard R. Fricke
SUBSCRIBED AND SWORN to before me this 19th day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, W. W. Hanna, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of January, 1999.
W. W. HANNA
-------------------------------------
W. W. Hanna
SUBSCRIBED AND SWORN to before me this 19th day of January, 1999.
CAROLYN R. SOUDERS
-------------------------------------
Notary Public
My Commission Expires:
7/21/99
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF FLORIDA )
) ss.
COUNTY OF PINELLAS)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, John E. Hayes, Jr., being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 27th day of January, 1999.
JOHN E. HAYES, JR.
-------------------------------------
John E. Hayes, Jr.
SUBSCRIBED AND SWORN to before me this 27th day of January, 1999.
PAMELA MURRAY
-------------------------------------
Notary Public
My Commission Expires:
3/2/2000
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF DOUGLAS)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Laird G. Noller, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of January, 1999.
LAIRD G. NOLLER
-------------------------------------
Laird G. Noller
SUBSCRIBED AND SWORN to before me this 25th day of January, 1999.
ANNETTE E. CRIPPS
-------------------------------------
Notary Public
My Commission Expires:
7/8/2001
- ----------------------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Frank C. Sabatini, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 21st day of January, 1999.
FRANK C. SABATINI
-------------------------------------
Frank C. Sabatini
SUBSCRIBED AND SWORN to before me this 21st day of January, 1999.
PATRICIA A. CLARK
-------------------------------------
Notary Public
My Commission Expires:
3/5/2002
- -----------------------
<PAGE>
POWER OF ATTORNEY
STATE OF KANSAS )
) ss.
COUNTY OF SHAWNEE)
KNOW ALL MEN BY THESE PRESENTS:
THAT I, Robert C. Wheeler, being a Director of SECURITY BENEFIT LIFE INSURANCE
COMPANY, by these presents do make, constitute and appoint Howard R. Fricke,
James R. Schmank and Roger K. Viola, and each of them, my true and lawful
attorneys, each with full power and authority for me and in my name and behalf
to sign Registration Statements, any amendments thereto and any applications for
exemptive relief filed pursuant to the Investment Company Act of 1940 or the
Securities Act of 1933, as amended, and any instrument or document filed as part
thereof, or in connection therewith or in any way related thereto, in connection
with Variable Life Contracts offered, issued or sold by SECURITY BENEFIT LIFE
INSURANCE COMPANY and any SECURITY VARILIFE SEPARATE ACCOUNT (SECURITY ELITE
BENEFIT) with like effect as though said Registration Statements and other
documents had been signed and filed personally by me in the capacity aforesaid.
Each of the aforesaid attorneys acting alone shall have all the powers of all of
said attorneys. I hereby ratify and confirm all that the said attorneys, or any
of them, may do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of January, 1999.
ROBERT C. WHEELER
-------------------------------------
Robert C. Wheeler
SUBSCRIBED AND SWORN to before me this 20th day of January, 1999.
NANCY G. DEBACKER
-------------------------------------
Notary Public
My Commission Expires:
12/15/99
- -----------------------
