As filed with the Securities and Exchange Commission on November 8, 1999
Registration No. 333-_________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
Initial Registration
-----------------
SECURITY LIFE SEPARATE ACCOUNT L1
(Exact Name of Trust)
SECURITY LIFE OF DENVER INSURANCE COMPANY
(Name of Depositor)
1290 Broadway
Denver, Colorado 80203-5699
(Address of Depositor's Principal Executive Offices)
Copy to:
GARY W. WAGGONER, ESQ. KIMBERLY J. SMITH, ESQ.
Security Life of Denver Insurance Company Sutherland Asbill & Brennan LLP
1290 Broadway 1275 Pennsylvania Avenue, NW
Denver, Colorado 80203-5699 Washington, D.C. 20004-2415
(202) 383-0314
(Name and Address of Agent for Service)
----------------------------
Title of securities being registered: Corporate variable life insurance
policies.
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Form V-112-00
<PAGE>
SECURITY LIFE SEPARATE ACCOUNT L1 (File No. 333-_________)
Cross-Reference Table
Form N-8B-2 Item No. Caption in Prospectus
1, 2 Cover; Security Life of Denver
Insurance Company; Security Life Separate
Account L1
3 Inapplicable
4 Security Life of Denver Insurance Company
5, 6 Security Life Separate Account L1
7 Inapplicable
8 Financial Statements
9 Inapplicable
10(a), (b), (c), (d), (e) Policy Summary; Policy Values, Determining
the Value in the Variable Division;
Charges and Deductions; Surrender; Partial
Withdrawals; Transfers of Account Value;
Right to Exchange Policy; Lapse;
Reinstatement; Premiums
10(f) Voting Privileges; Right to Change
Operations
10(g), (h) Right to Change Operations
10(i) Tax Considerations; Detailed Information
about the Corporate Variable Universal
Life Policy; General Policy Provisions;
11, 12 Security Life Separate Account L1
13 Policy Summary; Charges and Deductions;
Group or Sponsored Arrangements and
Corporate Purchasers
ii
<PAGE>
Form N-8B-2 Item No. Caption in Prospectus
14, 15 Policy Summary; Free Look Period or Right
to Examine Policy Period; General Policy
Provisions; Applying for a Policy
16 Premiums; Allocation of Net Premiums; How
We Calculate Accumulation Unit Values
17 Surrender; Partial Withdrawals
18 Policy Summary; Tax Considerations;
Detailed Information about the Corporate
Variable Universal Life Policy; Security
Life Separate Account L1
19 Reports to Owners; Notification and
Claims Procedures; Performance Information
(Appendix C)
20 See 10(g) & 10(a)
21 Policy Loans
22 Policy Summary; Premiums; Grace Period;
Security Life Separate Account L1;
Detailed Information about the Corporate
Variable Universal Life Policy
23 Inapplicable
24 Inapplicable
25 Security Life of Denver Insurance Company
26 Inapplicable
27, 28, 29, 30 Security Life of Denver Insurance Company
31, 32, 33, 34 Inapplicable
35 Inapplicable
36 Inapplicable
iii
<PAGE>
Form N-8B-2 Item No. Caption in Prospectus
37 Inapplicable
38, 39, 40, 41(a) General Policy Provisions; Distribution
of the Policies; Security Life of Denver
Insurance Company
41(b), 41(c), 42, 43 Inapplicable
44 Determining the Value in the Variable
Division; How We Calculate Accumulation
Unit Values
45 Inapplicable
46 Partial Withdrawals; Detailed Information
about the Corporate Variable Universal
Life Policy
47, 48, 49, 50 Inapplicable
51 Detailed Information about the Corporate
Variable Universal Life Policy
52 Determining the Value in the Variable
Division; Right to Change Operations
53(a) Tax Considerations
53(b), 54, 55 Inapplicable
56, 57, 58 Inapplicable
59 Financial Statements
iv
<PAGE>
Prospectus
CORPORATE VARIABLE UNIVERSAL LIFE
A FLEXIBLE PREMIUM
VARIABLE UNIVERSAL LIFE INSURANCE POLICY
issued by
SECURITY LIFE OF DENVER INSURANCE COMPANY
AND
SECURITY LIFE SEPARATE ACCOUNT L1
Consider carefully the policy charges and deductions beginning on page 41 in
this prospectus.
You should read this prospectus and keep it for future reference. A prospectus
for each underlying fund portfolio must accompany and should be read together
with this prospectus.
This policy is not available in all jurisdictions. This policy is not offered in
any jurisdiction where this type of offering is not legal. Depending on the
state where it is issued, policy features may vary. You should rely only on the
information contained in this prospectus. We have not authorized anyone to
provide you with information that is different.
Replacing your existing life insurance policy(ies) with this policy may not be
beneficial to you.
Your Policy
o is a flexible premium variable universal life insurance policy
o is issued by Security Life of Denver Insurance Company
o is designed primarily for use on a multi-life basis when the
insured people share a common employment or business
relationship
o is returnable by you during the free look period or right to
examine policy period if you are not satisfied.
YOUR POLICY PREMIUM PAYMENTS
o are flexible, so the premium amount and frequency may vary
o are allocated to variable investment options and the
guaranteed interest division based on your instructions
o are invested in shares of the underlying investment portfolios
under each variable investment option.
YOUR ACCOUNT VALUE
o is the sum of your holdings in the variable division, the
guaranteed interest division and the loan division
o has no guaranteed minimum cash value under the variable
division. The value varies with the value of the underlying
investment portfolio
o has a minimum guaranteed rate of return if you have an
amount in the guaranteed interest division and
o is subject to various expenses and charges.
DEATH PROCEEDS
o are paid if the policy is in force when the insured person dies
o are equal to the death benefit minus outstanding policy loans,
accrued loan interest and unpaid charges incurred before the
insured person dies
o are calculated under your choice of options;
* Option 1- a fixed minimum death benefit
* Option 2- a stated death benefit plus your account value
* Option 3- a stated death benefit plus the sum of the
premiums you have paid minus partial withdrawals and
o are generally not federally income taxed if your policy continues
to meet the federal income tax definition of life insurance.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS LIFE INSURANCE POLICY IS NOT A BANK DEPOSIT OR OBLIGATION, FEDERALLY
INSURED, OR BACKED BY ANY BANK OR GOVERNMENTAL AGENCY.
DATE OF PROSPECTUS _____________, _____
Form V-112-00
<PAGE>
ISSUED BY: Security Life of Denver UNDERWRITTEN BY: ING America Equities, Inc.
Insurance Company 1290 Broadway
Security Life Center Denver, CO 80203-5699
1290 Broadway (303) 860-2000
Denver, CO 80203-5699
(800) 525-9852
THROUGH ITS: Security Life Separate Account L1
ADMINISTERED BY: Customer Service Center
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 2
<PAGE>
TABLE OF CONTENTS
POLICY SUMMARY.................................................................6
Your Policy...............................................................6
Free Look Period or Right to Examine Policy
Period................................................................6
Your Policy Premiums......................................................6
Allocation of Net Premiums............................................6
Charges and Deductions....................................................7
Deductions from Premiums..............................................7
Annual Deductions.....................................................7
Deductions from the Variable Divisions................................7
Monthly Deductions from Your Account
Value............................................................7
Policy Transaction Fees...............................................7
Fees and Expenses of the Investment Portfolios............................8
Investment Portfolio Annual Expenses..................................8
Variable Division........................................................10
Policy Values............................................................10
Your Account Value in the Variable Divisions.........................10
Transfers of Account Value...............................................11
Special Policy Features..................................................11
Dollar Cost Averaging................................................11
Automatic Rebalancing................................................11
Loans................................................................11
Partial Withdrawals..................................................11
Policy Modification, Termination and Continuation
Features.............................................................11
Right to Exchange Policy.............................................11
Surrender............................................................11
Lapse................................................................11
Reinstatement........................................................11
Policy Maturity......................................................11
Continuation of Coverage.............................................12
Death Benefits...........................................................12
Tax Considerations.......................................................12
INFORMATION ABOUT SECURITY LIFE, THE
SEPARATE ACCOUNT, THE INVESTMENT
OPTIONS AND THE GUARANTEED
INTEREST DIVISION........................................................12
Security Life of Denver Insurance Company................................12
Year 2000 Preparedness...................................................13
Security Life Separate Account L1........................................13
Separate Account Structure...........................................13
Order of Separate Account Liabilities................................13
Variable Investment Options..........................................13
Investment Portfolios................................................14
Objectives of the Investment Portfolios..................................14
The Guaranteed Interest Division.........................................18
DETAILED INFORMATION ABOUT THE
CORPORATE VARIABLE UNIVERSAL LIFE
POLICY...................................................................18
Applying for a Policy....................................................18
Policy Issuance......................................................18
Definition of Life Insurance.........................................19
Temporary Insurance......................................................19
Premiums.................................................................19
Scheduled Premiums...................................................19
Unscheduled Premium Payments.........................................20
Target Premium.......................................................20
Allocation of Net Premiums...........................................20
Premium Payments Affect Your Coverage....................................20
Modified Endowment Contracts.........................................21
Death Benefits...........................................................21
Base Death Benefit...................................................23
Death Benefit Options................................................23
Changes in Death Benefit Options.....................................24
Changes in Death Benefit Amounts.....................................24
Adjustable Term Insurance Rider..........................................25
Special Features.........................................................26
Right to Exchange Policy.............................................26
Policy Maturity......................................................26
Continuation of Coverage.............................................27
Policy Values............................................................27
Account Value........................................................27
Net Account Value....................................................27
Determining the Value in the Variable
Division........................................................27
How We Calculate Accumulation Unit Values............................28
Transfers of Account Value...............................................29
Excessive Trading....................................................29
Guaranteed Interest Division Transfers...............................29
Dollar Cost Averaging....................................................29
Changing Dollar Cost Averaging.......................................30
Terminating Dollar Cost Averaging....................................30
Automatic Rebalancing....................................................30
Changing Automatic Rebalancing.......................................31
Terminating Automatic Rebalancing....................................31
Policy Loans.............................................................31
Loan Repayment.......................................................32
Loans and Your Benefits..............................................31
Partial Withdrawals......................................................31
Partial Withdrawals under Death Benefit
Option 1........................................................31
Partial Withdrawals under Death Benefit
Option 2........................................................32
Partial Withdrawals under Death Benefit
Option 3........................................................33
Stated Death Benefit and Target Death Benefit
Reductions......................................................33
Partial Withdrawal Mechanics.........................................33
Lapse....................................................................33
Grace Period.........................................................33
Reinstatement............................................................34
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 3
<PAGE>
Surrender................................................................34
General Policy Provisions................................................34
Free Look Period or Right to Examine Policy
Period..........................................................34
Your Policy..........................................................35
Age ................................................................35
Ownership............................................................35
Beneficiary(ies).....................................................35
Collateral Assignment................................................36
Incontestability.....................................................36
Misstatements of Age or Gender.......................................36
Suicide..............................................................36
Transaction Processing...............................................36
Notification and Claims Procedures...................................37
Telephone Privileges.................................................37
Non-participation....................................................37
Distribution of the Policies.........................................37
Advertising Practices and Sales Literature...........................38
Settlement Provisions................................................39
Administrative Information About the Policy..............................39
Voting Privileges....................................................39
Material Conflicts...................................................40
Right to Change Operations...........................................40
Reports to Owners....................................................41
CHARGES AND DEDUCTIONS........................................................41
Deductions from Premiums.................................................41
Tax Charges..........................................................41
Sales Charge.........................................................42
Annual Deduction.........................................................42
Deferred Sales Charge................................................42
Daily Deductions from the Variable Account...............................42
Mortality and Expense Risk Charge....................................42
Monthly Deductions from Your Account Value...............................42
Monthly Administrative Charge........................................43
Cost of Insurance Charge.............................................43
Guaranteed Issue.....................................................44
Changes in Monthly Charges...........................................44
Continuation of Coverage Administrative Fee..........................44
Policy Transaction Fees..................................................44
Partial Withdrawals..................................................44
Transfers............................................................44
Illustrations........................................................44
Premium Allocation Change............................................44
Group or Sponsored Arrangements or Corporate
Purchasers...........................................................44
Other Charges............................................................45
TAX CONSIDERATIONS............................................................45
Tax Status of the Policy.................................................45
Diversification Requirements.............................................45
Tax Treatment of Policy Death Benefits...................................46
Modified Endowment Contracts.............................................46
Multiple Policies........................................................46
Distributions Other than Death Benefits from
Modified Endowment Contracts.........................................46
Distributions Other than Death Benefits from
Policies That Are Not Modified Endowment
Contracts............................................................47
Investment in the Policy.................................................47
Policy Loans.............................................................47
Section 1035 Exchanges...................................................47
Tax-exempt Policy Owners.................................................47
Possible Tax Law Changes.................................................47
Changes to Comply with the Law...........................................47
Other....................................................................48
ILLUSTRATIONS.................................................................49
ADDITIONAL INFORMATION........................................................53
Directors and Officers...................................................53
Regulation...............................................................56
Legal Matters............................................................56
Legal Proceedings........................................................56
Experts..................................................................56
Registration Statement...................................................56
FINANCIAL STATEMENTS..........................................................57
APPENDIX A....................................................................58
APPENDIX B....................................................................59
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Corporate Variable Universal Life 4
<PAGE>
INDEX OF SPECIAL TERMS
The following special terms are used in this prospectus. We explain each term on
the page(s) listed in the body of this prospectus and in the summary, if
applicable:
Account value.................................................................10
Accumulation unit.............................................................27
Accumulation unit value.......................................................28
Adjustable term insurance rider...............................................21
Age.......................................................................18, 35
Base death benefit............................................................23
Beneficiary(ies)..............................................................12
Customer service center........................................................2
Death proceeds................................................................23
Free look period..............................................................34
General account...............................................................13
Guaranteed interest division..................................................18
Initial premium...............................................................18
Insured.......................................................................18
Investment date...............................................................18
Investment option.............................................................18
Loan division.................................................................10
Monthly processing date.......................................................24
Net account value.............................................................10
Net amount at risk............................................................10
Net premium...................................................................20
Owner.........................................................................35
Partial withdrawal............................................................32
Policy.....................................................................6, 13
Policy date...................................................................19
Policy loan...................................................................31
Portfolios....................................................................14
Rider.........................................................................25
Scheduled premium.............................................................19
Segment.......................................................................25
Separate account..............................................................13
Stated death benefit..........................................................19
Target death benefit..........................................................25
Target premium................................................................20
Total death benefit...........................................................25
Transaction date..............................................................28
Valuation date................................................................10
Valuation period..........................................................10, 28
Variable division.............................................................13
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Corporate Variable Universal Life 5
<PAGE>
POLICY SUMMARY
THIS SUMMARY HIGHLIGHTS SOME OF THE IMPORTANT POINTS ABOUT YOUR POLICY. THE
POLICY IS MORE FULLY DESCRIBED IN THE ATTACHED, COMPLETE PROSPECTUS. PLEASE READ
THE PROSPECTUS CAREFULLY. "WE," "US," "OUR," AND THE "COMPANY" REFER TO SECURITY
LIFE OF DENVER INSURANCE COMPANY. "YOU" AND "YOUR" REFER TO THE POLICY OWNER.
THE OWNER IS THE INDIVIDUAL, ENTITY, PARTNERSHIP, REPRESENTATIVE OR PARTY WHO
MAY EXERCISE ALL RIGHTS OVER THE POLICY AND RECEIVE THE POLICY BENEFITS DURING
THE INSURED PERSON'S LIFETIME.
STATE VARIATIONS ARE COVERED IN A SPECIAL POLICY FORM FOR USE IN THAT STATE.
THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. YOUR ACTUAL POLICY
AND RIDERS ARE THE CONTROLLING DOCUMENTS. IF YOU WOULD LIKE TO REVIEW A COPY OF
THE POLICY AND RIDERS, CONTACT OUR CUSTOMER SERVICE CENTER.
YOUR POLICY
This policy is available only to groups of ten or more insured people with a
minimum aggregate group first year premium must total at least $250,000. We
generally require a minimum target death benefit of $50,000 per policy. We may
reduce the minimum target death benefit if the average target death benefit at
policy issuance for the group is at least $50,000.
Your policy provides life insurance protection on the insured person. The policy
includes the basic policy, applications, and riders or endorsements. As long as
the policy remains in force, we pay a death benefit at the death of the insured
person. While your policy is in force, you may access your policy value by
taking loans or partial withdrawals. You may also surrender your policy for its
surrender value. When the insured person reaches age 100, the policy can be
surrendered or continued under the continuation of coverage option. SEE
CONTINUATION OF COVERAGE, PAGE 27.
We designed this policy primarily for use on a multi-life basis where the
insured people share common employment or a business relationship. The policy
may be owned individually or by a corporation, trust, association or similar
entity.
Life insurance is not a short-term investment. You should evaluate your need for
life insurance coverage and this policy's long-term investment potential and
risks before purchasing a policy.
FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD
Within limits as specified by state law, you have the right to examine your
policy and return it for a refund of premiums paid or the account value if you
are not satisfied for any reason. The policy is then void. SEE FREE LOOK PERIOD
OR RIGHT TO EXAMINE POLICY PERIOD, PAGE 34.
YOUR POLICY PREMIUMS
The policy is a flexible premium policy because the amount and frequency of the
premium payments you make may vary within limits. You must make premium
payments:
o for us to issue your policy; and
o sufficient to keep your policy in force.
On your application, you choose how much and how often you want to pay premiums.
Depending on your choices, it may not be enough to keep your policy or riders in
force. The amount of premium you pay affects the length of time your policy
stays in force. SEE PREMIUMS, PAGE 19.
ALLOCATION OF NET PREMIUMS
This policy has premium-based charges which are subtracted from your payments.
We add the balance, or the net premium, to your policy based on your investment
instructions. You may allocate the net premiums among one or more variable
investment options and the guaranteed interest division.
We apply the net premium payments to your policy after we:
o receive your initial premium;
o have the information we require;
o approve your policy application; and
o issue your policy.
You need to allocate your premiums to your investment choices in percentages
that are whole numbers and which total 100%. SEE ALLOCATION OF NET PREMIUMS,
PAGE 20.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 6
<PAGE>
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
We make the following deductions from each premium payment you make:
1. Tax charges -- We currently deduct a charge of 2.5% of premiums for
state and local taxes. We currently deduct a charge of 1.5% of each
premium to cover our estimated cost of the federal income tax treatment
of deferred acquisition costs. SEE TAX CHARGES, PAGE 41.
2. Sales charge -- We deduct a percentage of each premium to cover a
portion of our expenses in selling your policy. This charge is 2% of
premiums you have paid in the first policy year and 0.5% of the
premiums you have paid for each policy year beyond the first. SEE
DEDUCTIONS FROM PREMIUMS, PAGE 41.
ANNUAL DEDUCTIONS
The deferred sales charge is based on a percentage of premium and is deducted
from account value at the beginning of each policy year for nine years after
each year of premium payments. It applies to the first ten years of premium
payments made. The deduction applies to each segment separately. SEE DEFERRED
SALES CHARGE, PAGE 42, AND CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
DEDUCTIONS FROM THE VARIABLE DIVISION
We assess a mortality and expense risk charge of 0.20% per year or 0.000548% per
day against the variable divisions. This charge compensates us for mortality and
expense risks under the policies. SEE DAILY DEDUCTIONS FROM THE SEPARATE
ACCOUNT, PAGE 42.
MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE
We deduct the following charges from your account value at the beginning of each
policy month:
1. Monthly administrative charge -- $12 per month for the first policy
year, then $6 per month for each policy year beyond that.
2. Cost of insurance charge -- Based on the net amount at risk on the life
of the insured person. The amount of this charge differs for:
o the segments of the base death benefit; and
o the adjustable term insurance rider.
SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42.
POLICY TRANSACTION FEES
We deduct policy transaction fees from your account value at the time of the
transaction.
The following are the current transaction fees. SEE POLICY TRANSACTION FEES,
PAGE 44.
1. Partial withdrawal fee -- $25.
2. Transfer fee -- We allow twelve free transfers among investment options
per policy year. For each transfer beyond that, a $10 fee may apply.
3. Illustrations -- You may request one free illustration per policy year.
For each illustration beyond that, a $25 fee may apply.
4. Premium Allocation Change -- You may make five free premium allocation
changes per policy year. For each premium allocation change beyond
that, a $25 fee may apply.
5. Continuation of Coverage -- We will charge a one-time $200
administrative fee when the insured person turns age 100 to activate
continued coverage.
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Corporate Variable Universal Life 7
<PAGE>
FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS
The separate account purchases shares of the investment portfolios at net asset
value. This price reflects investment management fees and other direct expenses
that are deducted from the portfolio assets. The following table describes these
investment management fees and other direct expenses of the investment
portfolios. The fees and expenses are shown in both gross amounts and net
amounts shown after any expenses or fees have been voluntarily absorbed by the
investment portfolio advisers.
INVESTMENT PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET
ASSETS) /1/
<TABLE>
<CAPTION>
Fees and
Investment Total Expenses Total Net
Management Other Portfolio Waived or Portfolio
Portfolio Fees Expenses Expenses Reimbursed Expenses
<S> <C> <C> <C> <C> <C>
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67% NA 0.67%
AIM V.I. Government Securities Fund 0.50% 0.26% 0.76% NA 0.76%
THE ALGER AMERICAN FUND
Alger American Growth Portfolio 0.75% 0.04% 0.79% NA 0.79%
Alger American MidCap Growth Portfolio 0.80% 0.04% 0.84% NA 0.84%
Alger American Small Capitalization Portfolio 0.85% 0.04% 0.89% NA 0.89%
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio 0.59% 0.09% 0.68% NA 0.68%/3/
VIP Overseas Portfolio 0.74% 0.17% 0.91% NA 0.91%/3/
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Index 500 Portfolio 0.24% 0.11% 0.35% 0.07% 0.28%/4/
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund 0.75% 0.42% 1.17%/2/ 0.24%/5/ 0.93%
INVESCO VIF-High Yield Fund 0.60% 0.47% 1.07% NA 1.07%
INVESCO VIF-Small Company Growth Fund 0.75% 11.92% 12.67%/2/ 10.80%/6/ 1.87%
INVESCO VIF-Total Return Fund 0.75% 0.49% 1.24%/2/ 0.07%/7/ 1.17%
INVESCO VIF-Utilities Fund 0.60% 1.24% 1.84%/2/ 0.76%/8/ 1.08%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST /11/
Limited Maturity Bond Portfolio 0.65% 0.11% 0.76% NA 0.76%
Partners Portfolio 0.78% 0.06% 0.84% NA 0.84%
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund 1.00% 0.15% 1.15% NA 1.15%
Worldwide Emerging Markets Fund 1.00% 0.61% 1.61%/2/ 0.11%/9/ 1.50%
Worldwide Real Estate Fund 1.00% 4.32% 5.32%/2/ 4.43%/10/ 0.89%
</TABLE>
/1/ The preceding portfolio expense information was provided to us by the
portfolios, and we have not independently verified such information. These
portfolio expenses are not direct charges against division assets or reduction
from contract values; rather these portfolio expenses are taken into
consideration in computing each underlying portfolio's net asset value, which is
the share price used to calculate the unit values of the divisions. For a more
complete description of the portfolios' costs and expenses, see the prospectuses
for the portfolios.
/2/ Certain expenses of the Fund are being voluntarily absorbed by the Funds.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 8
<PAGE>
/3/ A Portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into arrangements
with their custodian whereby credits realized, as a result of uninvested cash
balances were used to reduce custodian expenses. Including these reductions, the
total portfolio expenses presented in the table would have been 0.66% for Growth
Portfolio and 0.89% for Overseas portfolio.
/4/ FMR agreed to reimburse a portion of Index 500 Portfolio's expenses during
the period. Without this reimbursement, the funds' total portfolio expenses
would have been 0.35%.
/5/ Certain expenses of the VIF-Equity Income Fund (formerly VIF-Industrial
Income Fund) are being absorbed voluntarily by INVESCO Funds Group, Inc.
pursuant to a commitment to the Fund. After absorption, the VIF-Equity Income
Fund's "Other Expenses" and "Total Portfolio Expenses" were 0.18% and 0.93%
respectively. This commitment can be changed at any time following consultation
with the board of directors.
/6/ Certain expenses of the VIF-Small Company Growth Fund are being absorbed
voluntarily by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund.
After absorption, the VIF-Small Company Growth Fund's "Other Expenses" and
"Total Portfolio Expenses" were 1.12% and 1.87% respectively. This commitment
can be changed at any time following consultation with the board of directors.
/7/ Certain expenses of the VIF-Total Return Fund are being absorbed voluntarily
by INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After
absorption, the VIF-Total Return Fund's "Other Expenses" and "Total Portfolio
Expenses" were 0.42% and 1.17% respectively. This commitment can be changed at
any time following consultation with the board of directors.
/8/ Certain expenses of the VIF-Utilities Fund are being absorbed voluntarily by
INVESCO Funds Group, Inc. pursuant to a commitment to the Fund. After
absorption, the VIF-Utilities Fund's "Other Expenses" and "Total Portfolio
Expenses" were 0.48% and 1.08% respectively. This commitment can be changed at
any time following consultation with the board of directors.
/9/ Van Eck Associates Corporation (the "Advisor") absorbed expenses exceeding
1.50% of the Fund's average daily net assets. Due to this arrangement, the
actual expenses incurred were "Total Portfolio Expenses" of 1.50%. The Adviser
has voluntarily agreed to limit the Worldwide Emerging Markets Fund's total
annual operating expenses to 1.30% of the Fund's average daily net assets.
/10/ Van Eck Associates Corporation (the "Advisor") waived its management fees
and assumed certain expenses for the period January 1, 1998 to February 28,
1998. The Advisor also assumed expenses exceeding 1.00% of the Fund's average
daily net assets for the period March 1,1998 to December 31, 1998. The Fund's
expenses were also reduced by a fee arrangement based on cash balances left on
deposit with the custodian and a directed brokerage arrangement where the fund
directs certain portfolio trades to a broker that, in turn, pays a portion of
the Fund's expenses. Due to this arrangement the actual expenses incurred were
"Investment Management Fees" of 0.00%, "Other Expenses" of 0.89% and "Total
Portfolio Expenses" of 0.89%.
/11/ Neuberger Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust. The
figures reported under "Investment Management and Administration Fees" include
the aggregate of the administration fees paid by the Portfolio and the
management fees paid by its corresponding Series. Similarly, the "Other
Expenses" includes all other expenses of the Portfolio and its corresponding
Series. See "Expenses" in the Trust's Prospectus. Expenses may reflect expense
reimbursement. NBMI has undertaken to reimburse certain operating expenses,
including compensation of NBMI and excluding taxes, interest, extraordinary
expense, brokerage commissions and transaction costs, that exceed, in the
aggregate, 1% of the Portfolios' average daily net asset value. These expense
reimbursement policies are subject to termination upon 60 days written notice to
the Portfolios.
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Corporate Variable Universal Life 9
<PAGE>
VARIABLE DIVISION
If you invest in any of the following variable investment options, depending on
market conditions, you may make or lose money. These investment options are
described in the prospectuses for the underlying investment portfolios. SEE
OBJECTIVES OF THE INVESTMENT PORTFOLIOS, PAGE 14.
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Capital Appreciation Fund
AIM V.I. Government Securities Fund
THE ALGER AMERICAN FUND
Alger American Growth Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND & VARIABLE INSURANCE PRODUCTS FUND II
VIP Growth Portfolio
VIP Overseas Portfolio
VIP II Index 500 Portfolio
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund
INVESCO VIF-High Yield Fund
INVESCO VIF-Small Company Growth Fund
INVESCO VIF-Total Return Fund
INVESCO VIF-Utilities Fund
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman AMT Limited Maturity Bond Portfolio
Neuberger Berman AMT Partners Portfolio
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Bond Fund
Van Eck Worldwide Emerging Markets Fund
Van Eck Worldwide Real Estate Fund
POLICY VALUES
Your account value is the amount you have in the guaranteed interest division,
plus the amount you have in each variable investment option. If you have an
outstanding policy loan, your account value includes the amount in the loan
division. The loan division is part of our general account specifically designed
to hold money used as collateral for loans and loan interest. The general
account contains all of our assets other than those held in the variable
account, or our other separate accounts.
Your account value reflects:
o net premiums;
o deductions for charges;
o the investment performance of the amounts you have in the variable
investment options;
o interest earned on the amount you have in the guaranteed interest
division;
o interest earned on the amount you have in the loan division; and
o partial withdrawals.
We subtract charges and partial withdrawals you take from your account value.
You make a partial withdrawal when you withdraw part of your net account value.
Partial withdrawals may reduce the amount of base death benefit.
Your net account value is equal to the account value minus the amount of your
outstanding policy loans and accrued loan interest, if any. Your surrender value
is the same as your net account value.
YOUR ACCOUNT VALUE IN THE VARIABLE DIVISION
Accumulation units are the way we measure value in the variable division.
Accumulation unit value is the value of a unit of a variable investment option
on the valuation date. Each variable investment option has a different
accumulation unit value. SEE DETERMINING THE VALUE IN THE VARIABLE DIVISION,
PAGE 27.
On each valuation date, we determine the accumulation unit values. The
accumulation unit value for each variable investment option reflects the
investment performance of the underlying investment portfolio during the
valuation period. The valuation period is the time beginning at 4:00 p.m.
Eastern time on a valuation date and ending at 4:00 p.m. Eastern time on the
next valuation date. Each accumulation unit value reflects asset-based charges
under the policy, and the expenses of the investment portfolios. SEE HOW WE
CALCULATE ACCUMULATION UNIT VALUES FOR EACH DIVISION, PAGE 28.
The valuation date is each date for which the net asset value of the investment
portfolio shares and unit values of the divisions are determined. Valuation
dates are each day the New York Stock Exchange and the company's customer
service center are open for business and a corresponding investment portfolio
values its shares, or as required by law.
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Corporate Variable Universal Life 10
<PAGE>
TRANSFERS OF ACCOUNT VALUE
You may make up to twelve free transfers among the variable divisions or to the
guaranteed interest division per policy year. We may charge $10 for each
transfer over twelve you make in a policy year. This charge does not apply to
automatic rebalancing or dollar cost averaging transfers. There are restrictions
on transfers from the guaranteed interest division. SEE TRANSFERS OF ACCOUNT
VALUE, PAGE 29.
SPECIAL POLICY FEATURES
DOLLAR COST AVERAGING
Dollar cost averaging is a systematic plan of transferring account values to
selected variable investment options. It is intended to protect your policy's
value from short-term price fluctuations. However, dollar cost averaging does
not assure a profit, nor does it protect against a loss in a declining market.
Dollar cost averaging is free. SEE DOLLAR COST AVERAGING, PAGE 29.
AUTOMATIC REBALANCING
Automatic rebalancing periodically reallocates your net account value among the
investment options to maintain your specified distribution of account value
among those divisions. Automatic rebalancing is free. SEE AUTOMATIC REBALANCING,
PAGE 30.
LOANS
You may take loans against your policy's net account value. We charge an annual
loan interest rate of 3.25%. We credit an annual interest rate of 3% on amounts
held in the loan division as collateral for your loan. SEE POLICY LOANS, PAGE
31.
PARTIAL WITHDRAWALS
You may withdraw part of your net account value any time after your first policy
year. You may make only one partial withdrawal per policy year. Partial
withdrawals may reduce the death benefit and will reduce your account value. SEE
PARTIAL WITHDRAWALS, PAGE 32.
POLICY MODIFICATION, TERMINATION AND CONTINUATION FEATURES
RIGHT TO EXCHANGE POLICY
For 24 months after the policy date you can exchange your policy for a
guaranteed policy, unless state law requires differently. The right to exchange
your policy is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 26.
SURRENDER
You may surrender your policy at any time while the insured person is living.
We calculate your surrender value on the valuation date we receive your request
and policy at our customer service center. All insurance coverage ends on the
date we receive your request. You must return your policy or a lost policy form
to us. SEE SURRENDER, PAGE 34.
LAPSE
In general, insurance coverage continues as long as your policy's net account
value is enough to pay the monthly deductions. SEE LAPSE, PAGE 33.
REINSTATEMENT
You may reinstate your policy and its riders within five years of its lapse if
you still own the policy and the insured person is still living.
You will need to give proof that the insured person continues to be insurable.
You will also need to pay required reinstatement premiums.
We will reinstate any policy loans existing when coverage ended, with accrued
loan interest to the date of the lapse. SEE REINSTATEMENT, PAGE 34.
POLICY MATURITY
If the insured person is still living on the maturity date or the policy
anniversary nearest the date when the insured person reaches age 100 and you do
not choose continuation of coverage, you must surrender your policy and we will
pay the net account value. Your policy then ends. SEE POLICY MATURITY, PAGE 26.
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Corporate Variable Universal Life 11
<PAGE>
CONTINUATION OF COVERAGE
If the insured person is still living at age 100, you may either surrender your
policy or choose the continuation of coverage feature. If the continuation of
coverage feature becomes effective, we will deduct a one-time administrative fee
of $200 and keep your policy in force. SEE CONTINUATION OF COVERAGE, PAGE 27.
DEATH BENEFITS
At the insured person's death, we pay death proceeds to the beneficiary(ies) if
your policy is still in force. The beneficiary(ies) is(are) the person or people
you name to receive the death proceeds. The death proceeds equal the base death
benefit plus amounts payable by rider, minus the amount of any outstanding
policy loan on your policy and accrued loan interest. Based on the death benefit
option you have chosen, the base death benefit varies.
The base death benefit does not include any adjustable term insurance rider you
may have on your policy. The target death benefit includes any adjustable term
insurance rider you may have on your policy plus your base death benefit. The
total death benefit is at least equal to or greater than your target death
benefit. The death benefit at issue may vary from the stated death benefit plus
adjustable term insurance coverage for some 1035 exchanges.
There is no minimum stated death benefit to issue a policy. Generally, there is
a minimum target death benefit of $50,000 per policy. SEE DEATH BENEFITS, PAGE
21.
You may change your stated death benefit amount while your policy is in force,
subject to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
TAX CONSIDERATIONS
Under current federal income tax law, death benefits of life insurance policies
generally are not subject to income tax. In order for this treatment to apply,
the policy must qualify as a life insurance contract. We believe it is
reasonable to conclude that the policy will qualify as a life insurance
contract. SEE TAX STATUS OF THE POLICY, PAGE 45.
Assuming the policy qualifies as a life insurance contract, under current
federal income tax law, your account value earnings are generally not subject to
income tax as long as they remain within your policy. However depending on
circumstances, the following events may cause taxable consequences for you:
o partial withdrawals;
o surrender; or
o lapse.
In addition to the events listed above, if your policy is a modified endowment
contract, loans against or secured by the policy may cause income taxation. A
penalty tax may be imposed on a distribution from a modified endowment contract
as well. SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 46.
You should consult a qualified legal or tax adviser before you purchase your
policy.
INFORMATION ABOUT SECURITY LIFE, THE SEPARATE ACCOUNT, THE INVESTMENT OPTIONS
AND THE GUARANTEED INTEREST DIVISION
SECURITY LIFE OF DENVER INSURANCE COMPANY
Security Life of Denver Insurance Company ("Security Life") is a stock life
insurance company organized under the laws of the State of Colorado in 1929. Our
headquarters are located at 1290 Broadway, Denver, Colorado 80203-5699. We are
admitted to do business in the District of Columbia and all states except New
York. At the close of 1998, the company and its consolidated subsidiaries had
over $174.3 billion of life insurance in force. As of December 31, 1998, our
total assets were over $10.0 billion, and our shareholder's equity was over $926
million.
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Corporate Variable Universal Life 12
<PAGE>
We have a complete line of life insurance products, including:
o annuities;
o individual life;
o group life;
o pension products; and
o market life reinsurance.
Security Life is a wholly owned indirect subsidiary of ING Groep, N.V. ("ING").
ING is one of the world's three largest diversified financial services
organizations. ING is headquartered in Amsterdam, The Netherlands. It has
consolidated assets over $461.8 billion on a Dutch (modified U.S.) generally
accepted accounting principles basis, as of December 31, 1998.
The principal underwriter and distributor for our policies is ING America
Equities, Inc. ING America Equities is a stock corporation organized under the
laws of the State of Colorado in 1993. It is a wholly owned subsidiary of
Security Life and is a registered broker-dealer with the SEC and the NASD. ING
America Equities, Inc. is located at 1290 Broadway, Denver, Colorado 80203-5699.
YEAR 2000 PREPAREDNESS
Security Life of Denver Insurance Company is aware of the computer problems that
may exist surrounding the Year 2000. Our senior management is committed to
ensuring that information processing and delivery systems will be Year 2000
compliant before December 31, 1999.
Our project team implemented the Year 2000 project plan which included the
analysis, remediation and testing of our in-house source code. We followed our
normal project management methodology, including communication with senior
management on a monthly and as-needed basis and we allocated sufficient funds to
ensure Year 2000 processing capabilities. On June 28, 1999, the analysis,
remediation and system testing phases of the plan were completed. We will
continue to do precautionary testing throughout 1999.
Security Life has developed a contingency plan with established manual
procedures that we believe will allow us to continue to do business in the event
our systems do not perform as expected. However, there is no assurance Security
Life's efforts will be successful, or that interaction with other service
providers will not impact our services.
SECURITY LIFE SEPARATE ACCOUNT L1
SEPARATE ACCOUNT STRUCTURE
We established Security Life Separate Account L1 (the "separate account") on
November 3, 1993, under Colorado's insurance law. It is a unit investment trust,
registered with the SEC under the Investment Company Act of 1940. The SEC does
not supervise our management of the separate account or Security Life.
The variable account is a separate investment account. We keep the separate
account assets separate from our general account and other separate accounts. It
is used to support our variable life insurance policies and for other purposes
allowed by law and regulation. We may offer other variable life insurance
contracts with different benefits and charges that invest in the variable
account. We do not discuss these contracts in this prospectus. The variable
account may invest in other securities not available for the policy described in
this prospectus. The general account contains all of our assets other than those
held in the separate account or other separate accounts.
The company owns all the assets in the separate account. We credit gains to or
charge losses against the separate account without regard to performance of
other investment accounts.
ORDER OF SEPARATE ACCOUNT LIABILITIES
State law provides that we may not charge general account liabilities against
separate account assets equal to its reserves and other liabilities. This means
that in the event we were ever to become insolvent, the separate account assets
will be used first to pay separate account policy claims. Only if assets remain
in the separate account after these claims have been satisfied can these assets
be used to pay other policy owners and our creditors.
The separate account may have liabilities from assets credited to other variable
life policies offered by the separate account. If the assets of the separate
account are greater than required reserves and policy liabilities, we may
transfer the excess to our general account.
VARIABLE INVESTMENT OPTIONS
The separate account has several divisions. Each investment option invests in
shares of a matching
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Corporate Variable Universal Life 13
<PAGE>
investment portfolio. Each investment portfolio has its own investment
objective. This means that the investment performance of a policy depends on the
performance of the investment portfolios you choose. These investment portfolios
are not available directly to individual investors. They are available only as
the underlying investments for variable annuity and variable life insurance
contracts and certain pension accounts.
INVESTMENT PORTFOLIOS
Each of the investment portfolios is a separate series of an open-end management
investment company. The investment company receives investment advice from a
registered investment adviser who is not associated with us.
The investment portfolios sell shares to separate accounts of insurance
companies. These insurance companies may or may not be affiliated with us. This
is known as "shared funding." Investment portfolios may sell shares as the
underlying investment for both variable annuity and variable life insurance
contracts. This process is known as "mixed funding."
The investment portfolios may sell shares to certain qualified pension and
retirement plans that qualify under Section 401 of the Internal Revenue Code
("IRC"). As a result, a material conflict of interest may arise between
insurance companies, owners of different types of contracts and retirement
plans, or their participants.
If there is a material conflict, we will consider what should be done, including
removing the investment portfolio from the separate account. There are certain
risks with mixed and shared funding, and with selling shares to qualified
pension and retirement plans. See the investment portfolios' prospectuses.
OBJECTIVES OF THE INVESTMENT PORTFOLIOS
Each investment portfolio has a different investment objective that it tries to
achieve by following its own investment strategy. The objectives and policies of
each investment portfolio affect its return and its risks. With this prospectus,
you must receive the current prospectus for each investment portfolio. We
summarize the investment objectives for each investment portfolio here. You
should read each investment portfolio prospectus.
Certain investment portfolios offered under this policy have investment
objectives and policies similar to other funds managed by the portfolio's
investment adviser. The investment results of a portfolio may be higher or lower
than those of other funds managed by the same adviser. There is no assurance,
and no representation is made, that the investment results of any investment
portfolio will be comparable to those of another fund managed by the same
investment adviser.
Some investment portfolio advisers (or their affiliates) may pay us compensation
for servicing, administration or other expenses. Currently, these advisers
include AIM Advisors, Inc.; Fidelity Management & Research Company; Fred Alger
Management, Inc.; INVESCO Funds Group, Inc.; Neuberger Berman Management Inc.;
and Van Eck Associates Corporation. The amount of compensation is usually based
on the aggregate assets of the investment portfolio from contracts that we issue
or administer. Some advisers may pay us more than others.
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. is a registered, open-end, series, management
investment company. A I M Advisors, Inc., ("AIM") serves as each fund's
investment adviser. AIM has acted as an investment adviser since its
organization in 1976. Today, AIM, together with its subsidiaries, advises or
manages over 110 investment portfolios encompassing a broad range of investment
objectives.
AIM V.I. Capital Appreciation Fund -- seeks growth of capital through
investment in common stocks, with emphasis on medium- and small-sized
growth companies.
AIM V.I. Government Securities Fund -- seeks to achieve high current income
consistent with reasonable concern for safety of principal by investing in
debt securities issued, guaranteed or otherwise backed by the United States
Government.
THE ALGER AMERICAN FUND
The Alger American Fund is a registered investment company organized on April 6,
1988. It is a multi-series Massachusetts business trust. The Fund's
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Corporate Variable Universal Life 14
<PAGE>
investment manager is Fred Alger Management, Inc., which has provided investment
advisory services since 1964.
Alger American Growth Portfolio -- seeks long-term capital appreciation.
The portfolio focuses on growing companies that generally have broad
product lines, markets, financial resources and depth of management. Under
normal circumstances, the portfolio invests primarily in equity securities
of large companies. The portfolio considers a large company to have a
market capitalization of $1 billion or greater.
Alger American MidCap Growth Portfolio -- seeks long-term capital appreciation.
The portfolio focuses on midsize companies with promising growth potential.
Under normal circumstances, the portfolio invests primarily in equity
securities of companies having a market capitalization within the range of
companies in the S&P(R) MidCap 400 Index.
Alger American Small Capitalization Portfolio --seeks long-term capital
appreciation.
The portfolio focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace. Under normal circumstances, the portfolio invests primarily in
equity securities of small capitalization companies. A small capitalization
company is one that has a market capitalization within the range of the
Russell(R) 2000 Growth Index or the S&P(R) SmallCap 600 Index.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND VARIABLE INSURANCE PRODUCTS FUND
II
Fidelity Variable Insurance Products Fund ("VIP" established November 13, 1981)
and Variable Insurance Products Fund II ("VIP II" established March 21, 1988)
are open-end, diversified, management investment companies. These funds are
organized as Massachusetts business trusts.
Fidelity Management & Research Company ("FMR") manages and provides investment
and other services to the funds named here. However, Bankers Trust Company also
provides sub-advisory services for VIP II Index 500 Portfolio. FMR is the
management arm of Fidelity Investments(R), which was established in 1946, and is
one of America's largest mutual fund managers.
VIP Growth Portfolio -- seeks capital appreciation.
FMR's principal investment strategies include:
o Investing primarily in common stocks.
o Investing in companies that it believes have above-average growth
potential (stocks of these companies are often called "growth"
stocks).
o Investing in domestic and foreign issuers.
o Using fundamental analysis of each issuer's financial condition
and industry position and market and economic conditions to select
investments.
VIP Overseas Portfolio -- seeks long-term growth of capital.
FMR's principal investment strategies include:
o Investing at least 65% of total assets in foreign securities.
o Investing primarily in common stocks.
o Allocating investments across countries and regions considering
the size of the market in each country and region relative to the
size of the international market as a whole.
o Using fundamental analysis of each issuer's financial condition
and industry position and market and economic conditions to select
investments.
VIP II Index 500 Portfolio -- seeks investment results that correspond to the
total return of common stocks publicly traded in the United States as
represented by the S&P(R) 500.
Bankers Trust Company (BT)'s principal investment strategies include:
o Investing at least 80% of assets in common stocks included in the
S&P(R) 500.
o Lending securities to earn income for the fund.
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO Variable Investment Funds, Inc. is a registered, open-end management
investment company. It was organized as a Maryland corporation on August 19,
1993. It is currently made
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Corporate Variable Universal Life 15
<PAGE>
up of ten diversified investment portfolios. Five of these investment portfolios
are described here.
INVESCO Funds Group, Inc. is the Funds' investment adviser. As the adviser, it
is mostly responsible for providing the portfolios with investment management,
various administrative services, and supervising the Fund's daily business
affairs.
INVESCO Capital Management, Inc. sub-advises the Total Return Fund. "VIF" refers
to INVESCO Variable Investment Fund. INVESCO Distributors, Inc. ("IDI"),
provides distribution services for the INVESCO Variable Investment Funds, Inc.
INVESCO VIF-Equity Income Fund (Formerly, INVESCO VIF-Industrial Income
Portfolio) -- seeks high current income, with growth of capital as a
secondary objective.
The fund normally invests at least 65% of its assets in dividend-paying
common and preferred stocks, although in recent years that percentage has
been somewhat higher. Stocks held by the fund generally are expected to
produce a relatively high level of income and a consistent, stable return.
Although it focuses on the stocks of larger companies with a strong record
of paying dividends, the fund also may invest in companies that have not
paid regular dividends. The fund's equity investments are limited to stocks
that can be traded easily in the United States; it may, however, invest in
foreign securities in the form of American Depository Receipts (ADRs).
The rest of the fund's assets are invested in debt securities, generally
corporate bonds that are rated investment grade or better. The fund also
may invest up to 15% of its assets in lower-grade debt securities commonly
known as "junk bonds", which generally offer higher interest rates, but are
riskier investments than investment grade securities.
INVESCO VIF-High Yield Fund -- seeks to provide a high level of current income.
It invests substantially all of its assets in lower-rated debt securities,
commonly called "junk bonds," and preferred stock, including securities
issued by foreign companies. Although these securities carry with them
higher risks, they generally provide higher yields-- and therefore higher
income--than higher-rated debt securities.
INVESCO VIF-Small Company Growth Fund --seeks investment growth over the long
term.
The fund normally invests at least 80% of its assets in equity securities
of companies with market capitalizations of $1 billion or less. INVESCO
uses a bottom-up investment approach to the fund's investment portfolio,
focusing on companies that are in the developing stages of their life
cycles. Using this approach, INVESCO tries to identify companies that it
believes are undervalued in the marketplace, have earnings which may be
expected to grow faster than the U.S. economy in general, and/or offer the
potential for accelerated earnings growth due to rapid growth of sales, new
products, management changes, or structural changes in the economy. The
prices of securities issued by these small companies tend to rise and fall
more rapidly than those of more established companies.
The remainder of the fund's assets can be invested in a wide range of
securities that may or may not be issued by small companies. In addition to
equity securities, the fund can invest in foreign securities and debt
securities, including so-called "junk bonds."
INVESCO VIF-Total Return Fund -- seeks to provide high total return through both
growth and current income.
It normally invests at least 30% of its assets in common stocks of
companies with a strong history of paying regular dividends and 30% of its
assets in debt securities. Debt securities include obligations of the
United States Government and government agencies. The remaining 40% of the
fund is allocated among these and other investments at INVESCO's
discretion, based upon current business, economic and market conditions.
INVESCO VIF-Utilities Fund -- seeks capital appreciation and income.
The fund normally invests at least 80% of its assets in companies doing
business in the utilities economic sector. The remainder of the fund's
assets are not required to be invested in the utilities economic sector.
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Corporate Variable Universal Life 16
<PAGE>
The fund is aggressively managed. Although the fund can invest in debt
securities, it primarily invests in equity securities that INVESCO believes
will rise in price faster than other investments, as well as options and
other investments whose value is based upon the values of equity
securities.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust (the "Trust,") is a registered,
open-end management investment company. It was organized as a Delaware business
trust on May 23, 1994. The Trust is made up of separate portfolios
("Portfolios"), each of which invests all of its net investable assets in a
matching series ("Series") of Advisers Managers Trust ("Managers Trust").
Managers Trust is a diversified, open-end management investment company
organized as a New York common law trust on May 24, 1994.
This master feeder structure is different from that of many other investment
companies which directly purchase and manage their own securities portfolios.
Neuberger Berman Management Incorporated acts as investment manager to Managers
Trust. Neuberger Berman, LLC is the sub-adviser.
The investments for the Portfolio are managed by the same portfolio manager(s)
who manage one or more other mutual funds that have similar names, investment
objectives and investment styles as the Portfolio. You should be aware that the
Portfolio is likely to differ from the other mutual funds in size, cash flow
pattern and tax matters. Accordingly, the holdings and performance of the
Portfolio can be expected to vary from those of the other mutual funds.
Shares of the separate Portfolios of Neuberger Berman Advisers Management Trust
are sold only through the currently effective prospectus and are not available
to the general public. Shares of the AMT Portfolios may be purchased only by
life insurance companies to be used with their separate accounts which fund
variable annuity and variable life insurance policies.
Neuberger Berman Limited Maturity Bond Portfolio -- seeks the highest available
current income consistent with liquidity and low risk to principal; total
return is the secondary goal.
The Limited Maturity Bond Portfolio invests mainly in investment-grade
bonds and other debt securities from U.S. Government and corporate issuers.
These may include mortgage-and asset-backed securities.
The portfolio may invest up to 10% of its net assets, measured at the time
of investment, in below investment grade fixed income securities, or
comparable unrated securities.
The Limited Maturity Bond Portfolio maintains an average portfolio duration
of four years or less. However, the series may invest in securities of any
duration.
Neuberger Berman Partners Portfolio -- seeks growth of capital. The Portfolio
invests mainly in common stocks of mid-to large-capitalization companies.
Its investment program seeks securities believed to be undervalued based on
strong fundamentals, including low price to earnings ratio, consistent cash
flow, and the company's track record through all points of the market
cycle.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on January 7, 1987. On April 12, 1995, Van Eck Investment Trust
changed its name to Van Eck Worldwide Insurance Trust. Van Eck Associates
Corporation serves as investment adviser and manager to the funds.
Van Eck Worldwide Bond Fund -- seeks high total return--income plus capital
appreciation--by investing globally, primarily in a variety of debt
securities.
Van Eck Worldwide Emerging Markets Fund --seeks long term capital appreciation
by investing in equity securities in emerging markets around the world.
Van Eck Worldwide Real Estate Fund -- seeks high total return by investing in
equity securities of companies that own significant real estate or
principally do business in real estate.
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Corporate Variable Universal Life 17
<PAGE>
THE GUARANTEED INTEREST DIVISION
You may allocate all or a part of the net premiums and transfers of your net
account value into the guaranteed interest division. The guaranteed interest
division is part of our general account which guarantees principal. It pays
interest at a fixed rate that we declare.
The general account supports our non-variable insurance and annuity obligations.
We have not registered interests in the guaranteed interest division under the
Securities Act of 1933. Also, we have not registered the guaranteed interest
division or the general account as an investment company under the Investment
Company Act of 1940 (because of exemptive and exclusionary provisions). This
means that the general account, the guaranteed interest division and its
interests are generally not subject to regulation under these Acts.
The SEC staff has not reviewed the disclosures included in this prospectus
relating to the general account and the guaranteed interest division. These
disclosures, however, may be subject to certain requirements of the federal
securities law regarding accuracy and completeness of statements made in this
prospectus.
The amount you have in the guaranteed interest division is the sum of net
premiums you allocate to that division, plus transfers you made to the
guaranteed interest division, plus interest earned.
Amounts you transfer out of or withdraw from the guaranteed interest division
reduce this amount. It is also reduced by deductions for charges from your
account value allocated to the guaranteed interest division.
We declare the interest rate that applies to all amounts in the guaranteed
interest division. These interest rates are never less than the minimum
guaranteed interest rate of 3% and will be in effect for periods of at least
twelve months. Interest compounds daily at an effective annual rate that equals
the declared rate. We credit interest to the guaranteed interest division on a
daily basis. We pay interest regardless of the actual investment performance of
our account. We bear all of the investment risk for the guaranteed interest
division.
DETAILED INFORMATION ABOUT THE CORPORATE VARIABLE UNIVERSAL LIFE POLICY
This prospectus describes our standard Corporate variable universal life
insurance policy. There may be differences in the policy because of state
requirements where we issue your policy. We will describe any such differences
in your policy.
The illustrations beginning on page 51 are to show how the policies work.
APPLYING FOR A POLICY
You purchase this variable universal life policy by submitting an application to
us. On the policy date, the insured person must be no less than 15 years of age
and no older than age 85. The insured person is the person on whose life we
issue a policy and upon whose death we pay death proceeds. Age is the insured
person's age on the birthday nearest the policy date plus the number of
completed policy years since the policy date.
We may back-date the policy up to six months to allow the insured person to give
proof of a younger age for the purposes of your policy.
POLICY ISSUANCE
Before we issue a policy or apply your net premium to your policy, we require
satisfactory evidence of insurability of the insured person and payment of your
initial premium. Investment options include the variable and the guaranteed
interest divisions, but not the loan division. This evidence may include
completion of all underwriting and issue requirements.
The investment date is the first date we apply your net premium payments to your
policy. Your initial premium is the premium we must receive before coverage can
begin. The initial premium is the first premium we receive and apply to your
policy. It must be equal to at least the sum of the scheduled premiums which are
due from your policy date through your investment date.
This policy is available only to groups of ten or more insured people with a
minimum total group first year premium of at least $250,000. We generally
require
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Corporate Variable Universal Life 18
<PAGE>
a minimum target death benefit of $50,000 per policy. We may reduce the minimum
target death benefit if the average target death benefit at policy issuance for
the group or sponsored arrangement is at least $50,000. Our underwriting and
reinsurance procedures in effect at the time you apply limit the maximum stated
and target death benefit.
The policy date as shown on your policy schedule determines:
o monthly processing dates;
o policy months;
o policy years; and
o policy anniversaries.
It is not affected by the date you receive the policy. The policy date may be
different from the date we receive your first premium payment. If the policy
date is earlier, we charge monthly deductions from the policy date. The policy
date is:
o the date you designate on your application, subject to our approval; or
o the back-date of the policy to save age, if we permit this for your
policy.
If there is no designated date or back-date, the policy date is the date all
underwriting and administrative requirements have been met if we have received
your initial premium before we issue your policy.
DEFINITION OF LIFE INSURANCE
The federal income tax definition of life insurance is the cash value
accumulation test. SEE TAX STATUS OF THE POLICY, PAGE 45.
TEMPORARY INSURANCE
If you apply and qualify, we may issue temporary insurance in an amount equal to
the face amount of insurance for which you applied. The maximum amount of
temporary insurance for binding limited life insurance coverage is $3 million,
which includes any in force coverage with us. This temporary insurance is in
force as long as you meet all requirements.
Coverage begins when:
1. you have completed and signed our binding
limited life insurance coverage form;
2. we receive and accept a premium payment of at least your scheduled
premium (selected on your application); and
3. part I of the application is completed.
Binding limited life insurance coverage ends on the earliest of:
o the date we return your premiums;
o five days after we mail notice of termination to the address on your
application;
o the date your policy coverage starts;
o the date we refuse to issue you a policy based on your application; or
o 90 days after you sign our binding limited life insurance coverage
form.
There is no death benefit under the temporary insurance agreement if:
o there is a material misrepresentation in your answers on the binding
limited life insurance coverage form;
o there is a material misrepresentation in statements on your
application;
o the person or persons intended to be the insured people die by suicide
or self- inflicted injury; or
o the bank does not honor your premium check.
PREMIUMS
You may choose the amount and frequency of premium payments, within limits.
SCHEDULED PREMIUMS
Your premiums are flexible. You may select your scheduled (planned) premium
(within our limits) when you apply for your policy. The scheduled premium, shown
in your policy and schedule, is the amount you choose to pay over a stated time
period. THIS AMOUNT MAY OR MAY NOT BE ENOUGH TO KEEP YOUR POLICY IN FORCE. You
may receive premium reminder notices for the scheduled premium on a monthly,
quarterly, semiannual, or annual basis. You are not required to pay the
scheduled premium.
Alternatively, you may choose to pay your premium by electronic funds transfer
each month. This option is not available for your initial premium. The financial
institution that makes your electronic funds transfer may charge for this
service.
You can change the amount of your scheduled premium within our minimum and
maximum limits at
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Corporate Variable Universal Life 19
<PAGE>
any time. If you fail to pay your scheduled premium or if you change the amount
of your scheduled premium, your policy performance will be affected.
UNSCHEDULED PREMIUM PAYMENTS
Generally speaking, you may make unscheduled premium payments at any time,
however:
1. We may limit the amount of your unscheduled premium payments that would
result in an increase in the base death benefit amount required by the
federal income tax law definition of life insurance. We may require
satisfactory evidence that the insured person is insurable at the time
that you make the unscheduled premium payment if the death benefit is
increased due to your unscheduled premium payments.
2. We may require proof that the insured person is insurable if your
unscheduled premium payment will cause the net amount at risk to
increase; and
3. We will return premium payments which are greater than the "seven-pay"
limit for your policy if your payment would cause your policy to become
a modified endowment contract, unless you send us notice acknowledging
the new modified endowment contract status for your policy.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 46 AND CHANGES TO COMPLY WITH THE LAW,
PAGE 47.
If you have an outstanding policy loan and you make an unscheduled payment, we
will consider this payment a loan repayment, unless you tell us otherwise. If
your payment is a loan repayment, we do not take out tax or sales charges.
Unscheduled premiums for more than $10,000 require proof of insurability of the
insured person.
TARGET PREMIUM
Target premiums are not based on the scheduled premium. Target premiums are
actuarially determined based on the age, sex and premium class of the insured
person. The target premium for your policy and any segments added since the
policy date are listed in the schedule we will provide to you. SEE PREMIUMS,
PAGE 19.
ALLOCATION OF NET PREMIUMS
The net premium is the balance remaining after we take tax and sales charges
(excluding the deferred sales charge) from your premium payment. We add the net
premium to your account value according to your instructions.
We apply the initial net premium to your policy after:
a) we receive the amount of premium required for your insurance coverage
to begin;
b) all issue requirements have been met and received by our customer
service center;
c) we approve your policy application; and
d) your policy is issued.
All amounts you designated for the guaranteed interest division will be
allocated to that division. If your state requires return of your premium during
the free look period we invest amounts you have designated for the variable
investment option into the Money Market Portfolio until 15 days after we issue
your policy (deemed delivery time, plus a typical free look period which varies
by state). If your state provides for return of account value during the free
look period we invest amounts you designated for the variable investment options
directly into your selected investment portfolios. SEE FREE LOOK PERIOD OR RIGHT
TO EXAMINE POLICY PERIOD, PAGE 34.
We allocate premium payments received after we apply your initial net premium
payment to your policy on the valuation date of receipt. We always use your most
recent premium allocation instructions. Your instructions must specify
percentages that are whole numbers totaling 100%.
You may make five free premium allocation changes per year. After the five free
premium allocation changes, we may charge you $25 for each additional allocation
change per policy year. The $25 fee is withdrawn from each investment division
pro rata to the amount in each division.
PREMIUM PAYMENTS AFFECT YOUR COVERAGE
Your coverage lasts only as long as your net account value is enough to pay the
monthly charges and your account value is more than your outstanding policy loan
plus accrued loan interest. If these conditions are no longer met, your policy
will enter the 61-day grace period and you must make a premium payment
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Corporate Variable Universal Life 20
<PAGE>
to avoid lapse. SEE LAPSE, PAGE 33, AND GRACE PERIOD, PAGE 33.
MODIFIED ENDOWMENT CONTRACTS
There are special federal income tax rules for distributions from certain life
insurance policies known as "modified endowment contracts." These rules apply to
distributions such as policy loans, surrenders, and partial withdrawals.
Whether or not these rules apply depends upon whether or not the premiums you
paid are greater than the "seven-pay" limit. SEE MODIFIED ENDOWMENT CONTRACTS,
PAGE 46.
If we find that your scheduled premium causes your policy to be a modified
endowment contract on your policy date, we will require you to acknowledge that
you know the policy is a modified endowment contract. We will issue your policy
based on the scheduled premium you selected. If you do not want your policy to
be issued as a modified endowment contract, you may reduce your scheduled
premium to a level which does not cause your policy to be a modified endowment
contract. We will then issue your policy based on the revised scheduled premium.
DEATH BENEFITS
You can decide the amount of insurance you need, now and in the future. You can
combine the long-term advantages of permanent life insurance base coverage with
the flexibility and short-term advantages of term life insurance. Both permanent
and term life insurance are available under your one Corporate policy.
When we issue your policy, we base the initial insurance coverage on the
instructions in your application. The initial death benefit is the stated death
benefit amount. You can add an adjustable term insurance rider for additional
insurance coverage.
Death benefits are valued as of the date of death of the insured person. The
stated death benefit is the permanent element of your policy. The adjustable
term insurance rider is the term insurance element of your policy.
The adjustable term insurance rider acts as a bridge. It provides term insurance
coverage which automatically adjusts to fill the gap between your total death
benefit and your base death benefit depending on which death benefit option you
choose. Generally, your target death benefit may be no less than $50,000 to
issue your policy.
It may be to your economic advantage to include part of your insurance coverage
under the adjustable term insurance rider. Both the cost of insurance under the
adjustable term insurance rider and the cost of insurance for the base death
benefit are deducted monthly from your account value and generally increase with
the age of the insured person. Use of the adjustable term insurance rider may
reduce sales compensation. SEE ADJUSTABLE TERM INSURANCE RIDER, PAGE 25.
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Corporate Variable Universal Life 21
<PAGE>
DEATH BENEFIT SUMMARY
THIS CHART ASSUMES NO DEATH BENEFIT OPTION CHANGES, INCREASES OR DECREASES IN
STATED OR TARGET DEATH BENEFIT AND THAT PARTIAL WITHDRAWALS ARE LESS THAN THE
PREMIUM PAID.
<TABLE>
<CAPTION>
OPTION 1 OPTION 2 OPTION 3
============== =================================== =================================== =======================================
<S> <C> <C> <C>
STATED The amount of policy death The amount of policy death The amount of policy death
DEATH benefit at issue, not including benefit at issue, not including benefit at issue, not including
BENEFIT rider coverage. This amount rider coverage. This amount rider coverage. This amount
stays level throughout the life of stays level throughout the life of stays level throughout the life of
the contract. the contract. the contract.
BASE DEATH The greater of the stated death The greater of the stated death The greater of the stated death
BENEFIT benefit or the account value benefit plus the account value, benefit plus the sum of all
multiplied by the death benefit or the account value multiplied premiums you have paid minus
corridor factor. by the death benefit corridor partial withdrawals you have
factor. taken, or the account value
multiplied by the death benefit
corridor factor.
TARGET Stated death benefit plus Stated death benefit plus Stated death benefit plus
DEATH adjustable term insurance rider adjustable term insurance rider adjustable term insurance rider
BENEFIT benefit. This amount remains benefit. This amount remains benefit. This amount remains
level throughout the life of the level throughout the life of the level throughout the life of the
policy. policy. policy.
TOTAL DEATH This is the total death proceeds. This is the total death proceeds. This is the total death proceeds.
BENEFIT It is the greater of the target It is the greater of the target It is the greater of the target
death benefit or the base death death benefit plus the account death benefit plus the sum of all
benefit. value, or the base death benefit. premiums you have paid minus
partial withdrawals you have
taken, or the base death benefit.
ADJUSTABLE The adjustable term insurance The adjustable term insurance The adjustable term insurance
TERM rider benefit is the total death rider benefit is the total death rider benefit is the total death
INSURANCE benefit minus base death benefit, benefit minus the base death benefit minus the base death
RIDER but it will not be less than zero. benefit, but it will not be less benefit, but it will not be less
BENEFIT If the account value multiplied than zero. If the account value than zero. If the account value
by the death benefit corridor multiplied by the death benefit multiplied by the death benefit
factor is greater than the stated corridor factor is greater than the corridor factor is greater than the
death benefit, the adjustable stated death benefit plus the stated death benefit plus the sum
term insurance benefit will be account value, the adjustable of all premiums you have paid
decreased. It will be decreased term insurance rider benefit will minus partial withdrawals you
so that the sum of the base death be decreased. It will be have taken, the adjustable term
benefit and the adjustable term decreased so that the sum of the insurance rider benefit will be
insurance rider benefit is not base death benefit and the decreased. It will be decreased
greater than the target death adjustable term insurance rider so that the sum of the base death
benefit. If the base death benefit benefit is not greater than the benefit and the adjustable term
becomes greater than the target target death benefit plus the insurance rider benefit is not
death benefit, then the adjustable account value. If the base death greater than the target death
term insurance rider benefit is benefit becomes greater than the benefit plus the sum of all
zero. target death benefit plus the premiums you have paid minus
account value, then the partial withdrawals you have
adjustable term insurance rider taken. If the base death benefit
benefit is zero. becomes greater than the target
death benefit plus the sum of all
premiums you have paid minus partial
withdrawals you have taken, then the
adjustable term insurance rider benefit
is zero.
</TABLE>
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Corporate Variable Universal Life 22
<PAGE>
BASE DEATH BENEFIT
Your base death benefit can be different from your stated death benefit as a
result of:
o your choice of death benefit option;
o a change in your death benefit option;
o increases to satisfy the federal income tax law definition of life
insurance;
o partial withdrawals;
o increases or decreases in the stated death benefit; or
o a transaction which causes the base death benefit to change.
As long as your policy is in force, we will pay the death proceeds to your
beneficiary when the insured person dies. The beneficiary(ies) is(are) the
person (people) you name to receive the death proceeds from your policy. The
death proceeds are:
o your base death benefit; plus
o any rider benefits; minus
o your outstanding policy loan with accrued loan interest; minus
o outstanding policy charges due before the insured person's date of
death.
There could be outstanding policy charges if the insured dies while your policy
is in the grace period.
DEATH BENEFIT OPTIONS
You have a choice of three death benefit options: option 1, option 2 or option 3
(described below). You may choose death benefit option 3 only prior to the issue
of your policy. Your choice may result in your having a base death benefit which
is greater than your stated death benefit. You may change your death benefit
option after the policy date and before the continuation of coverage feature
begins. SEE CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24 AND SEE CONTINUATION OF
COVERAGE, PAGE 27.
Under death benefit option 1, your base death benefit is the greater of:
1. your stated death benefit on the date of the insured person's death; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
Under death benefit option 2, your base death benefit is the greater of:
1. your stated death benefit plus your account value on the date of the
insured person's death; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
Under option 1 positive investment performance is generally reflected in a
reduced net amount at risk. This lowers your policy's total cost of insurance
charges. Option 1 offers insurance coverage that is a set amount with
potentially lower cost of insurance charges over time. Under option 2,
investment performance is reflected in your insurance coverage.
Under death benefit option 3, the base death benefit is the greater of:
1. your stated death benefit plus the sum of all premiums you have paid
minus partial withdrawals you have taken under your policy; or
2. your account value on the date of the insured person's death multiplied
by the appropriate factor from the definition of life insurance factors
shown in Appendix A.
Therefore, the base death benefit generally will increase as you pay premiums,
and decrease as you take partial withdrawals. In no event will your base death
benefit be less than your stated death benefit.
Federal income tax law requires that your death benefit be at least as much as
your account value multiplied by a factor defined by law. This factor is based
on:
o the insured person's age; and
o the insured person's gender.
We will adjust your policy to continue to qualify as life insurance under the
federal income tax laws in existence at the time the policy was issued.
If the insured person is 100 years of age or older and the continuation of
coverage feature is in effect, only death benefit option 1 is available.
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Corporate Variable Universal Life 23
<PAGE>
CHANGES IN DEATH BENEFIT OPTIONS
You may request a change in your death benefit option after the policy date and
before the continuation of coverage feature. A death benefit option change
applies to your entire stated or base death benefit. You may change from death
benefit option 1 to option 2, or from option 2 to option 1. You may also change
from death benefit option 3 to option 1. You may not change from death benefit
option 3 to option 2. You may choose death benefit option 3 only prior to the
issue of your policy.
Your death benefit option change is effective on your next monthly processing
date after we accept and approve your requested change, so long as at least five
days remain before your monthly processing date. If fewer than five days remain
before your monthly processing date, your death benefit option change is
effective on your next monthly processing date.
After we approve your request, we send a new policy schedule page to you. You
should attach it to your policy. We may ask you to return your policy to our
customer service center so that we can note the change in your schedule.
For you to change from death benefit option 1 to option 2, you must provide to
us proof that the insured person is insurable under our normal rules of
underwriting for your policy class.
We may not allow a change to your death benefit option if it reduces the target
death benefit below the minimum we require to issue your policy.
On the effective date of your option change, your stated death benefit is
changed as follows:
Change Change Stated Death Benefit
From To Following Change:
---- -- -----------------
Option 1 Option 2 your stated death benefit before the change minus your
account value as of the effective date of the change.
Option 2 Option 1 your stated death benefit before the change plus your
account value as of the effective date of the change.
Option 3 Option 1 your stated death benefit before the change plus (a)
the sum of the premiums you have paid, minus (b)
partial withdrawals you have taken as of the effective
date of the change.
We increase or decrease your stated death benefit to keep the net amount at risk
the same on the date of your death benefit option change. Additionally, there is
no change to the amount of term insurance if you have an adjustable term
insurance rider. SEE COST OF INSURANCE CHARGE, PAGE 43.
If you change your death benefit option, we adjust the stated death benefit for
each of your segments by allocating your account value to each benefit segment.
For example, if you change from death benefit option 1 to option 2, your stated
death benefit is decreased by the amount of your account value allocation to
that segment. If you change from death benefit option 2 to option 1, your stated
death benefit is increased by the amount allocated to that segment. We do not
adjust the target premium when you change your death benefit option.
CHANGES IN DEATH BENEFIT AMOUNTS
You may increase the target or stated death benefit while your policy is in
force and before the policy anniversary when the insured person turns age 86.
You may request a decrease in the stated death benefit only after your first
policy anniversary.
Contact our customer service center to request an increase or decrease in death
benefit. The request is effective as of the next monthly processing date after
we receive your request and approve it. On the monthly processing date, we
deduct the monthly deductions from your account value. Any requested change in
your coverage must be for at least $1,000.
After we approve your request, we will send you a new schedule page.
Keep the new schedule with your policy. We may ask you to send your policy to us
so that we can note the change in your schedule.
We may not approve a requested change if it will disqualify your policy as life
insurance under federal income tax law. If we disapprove a change for any
reason, we provide you with a notice of our decision.
SEE TAX CONSIDERATIONS, PAGE 45.
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Corporate Variable Universal Life 24
<PAGE>
If you decrease your death benefit, you may not decrease your target death
benefit below the minimum we require to issue your policy.
There may be tax consequences as a result of a decrease in your death benefit.
SEE TAX STATUS OF THE POLICY, PAGE 45 AND MODIFIED ENDOWMENT CONTRACTS, PAGE 46.
Requested reductions in the death benefit will first be applied to decrease the
target death benefit. We decrease your stated death benefit only after your
adjustable term insurance rider coverage is reduced to zero. If you have more
than one segment, we divide subsequent decreases in stated death benefit among
your benefit segments pro rata unless state law requires differently.
You must provide satisfactory evidence that the insured person is still
insurable in order to increase your death benefit.
Unless you tell us differently, we assume any request you make for an increase
in your target death benefit is also a request for an increase to the stated
death benefit. Thus, the amount of your adjustable term insurance rider will not
change. You may change the target death benefit once in a policy year.
The initial death benefit segment, or first segment, is the stated death benefit
on the effective date of the policy. An increase in the stated death benefit
(other than one caused by an option change) will cause a new segment to be
created. The segment year begins on the segment effective date and ends one year
later. The following may apply to each new segment:
o a new sales charge;
o a new deferred sales charge;
o new cost of insurance charges, guaranteed and current;
o a new incontestability period;
o a new suicide exclusion period; and
o a new target premium.
A requested increase in your stated death benefit creates a new segment. Once we
create a new segment, it is permanent unless state law requires differently. If
an option change causes the stated death benefit to increase, no new segment is
created. Instead, the size of each existing segment(s) is(are) changed. If it
causes the stated death benefit to decrease, each segment is decreased.
To determine the applicable sales charge and deferred sales charge, premiums you
pay after an increase are applied to your policy segments in the same proportion
as the target premiums for each segment bears to the sum of the target premium
for all segments. For each coverage segment, your schedule shows your target
premiums.
We allocate the net amount at risk among segments in the same proportion that
each segment bears to the total stated death benefit.
ADJUSTABLE TERM INSURANCE RIDER
You may increase your death proceeds by adding an adjustable term insurance
rider on the insured person's life. A rider changes benefits under your policy.
As the name suggests, the adjustable term insurance rider adjusts over time.
You specify a target death benefit when you apply for this rider. The target
death benefit can be level or can be scheduled to change at the beginning of any
policy year.
The death benefit for the adjustable term insurance rider is the difference
between your total death benefit and your base death benefit. The death benefit
automatically adjusts daily as your base death benefit changes. Total death
benefit depends on which death benefit option is in effect:
OPTION 1: If option 1 is in effect, the total death benefit is the
greater of:
a. the target death benefit; or
b. the account value multiplied by the appropriate factor
from the death benefit corridor factors in the policy.
OPTION 2: If option 2 is in effect, the total death benefit is the
greater of:
a. the target death benefit plus the account value; or
b. the account value multiplied by the appropriate factor
from the death benefit corridor factors in the policy.
OPTION 3: If option 3 is in effect, the total death benefit is the
greater of:
a. the target death benefit plus the sum of the premiums you
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Corporate Variable Universal Life 25
<PAGE>
have paid minus partial withdrawals you have taken; or
b. the account value multiplied by the appropriate factor
from the death benefit corridor factors in the policy.
For example, under option 1, assume your base death benefit increases as a
result of an increase in your account value. The adjustable term insurance rider
adjusts to provide death proceeds equal to your total death benefit in each
year:
Base Death Total Death Adjustable Term
Benefit Benefit Insurance Rider Amount
------- ------- ----------------------
$201,500 $250,000 $48,500
202,500 250,000 47,500
202,250 250,000 47,750
It is possible that the amount of your adjustable term insurance may be zero if
your base death benefit increases enough. Using the same example, if the base
death benefit under your policy grew to $250,000 or more, the adjustable term
insurance would be zero.
The adjustable term insurance can never be less than zero. Even when the
adjustable term insurance is reduced to zero, your rider remains in effect until
you remove it from your policy. Therefore, if later the base death benefit is
reduced below your target death benefit, the adjustable term insurance rider
amount reappears to maintain the total death benefit.
You may change the target death benefit schedule after it is issued, based on
our rules. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
We may deny any future, scheduled increases to your target death benefit if you
cancel a scheduled change, or if you ask for an unscheduled decrease in your
target death benefit.
Partial withdrawals, changes from death benefit option 1 to option 2 and base
decreases may reduce the amount of your target death benefit. SEE PARTIAL
WITHDRAWALS, PAGE 32, AND CHANGES IN DEATH BENEFIT OPTIONS, PAGE 24.
The only charge for this coverage is the cost of insurance charge. Instead, we
deduct a monthly cost of insurance charge from your account value. The cost of
insurance for this rider is calculated as the monthly cost of insurance rate for
the rider coverage multiplied by the adjustable term death benefit in effect
that month. The cost of insurance rates will be determined by us from time to
time. They will be based on the issue age, gender, and premium class of the
person insured, as well as the length of time since your policy date. The
monthly guaranteed maximum cost of insurance rates for this rider will be in the
policy. SEE COST OF INSURANCE CHARGE, PAGE 43.
There are no deferred sales charges for this coverage. The total charge that you
pay may be less if you have coverage under an adjustable term insurance rider
instead of the base death benefit. If the target death benefit is increased by
you after the rider is issued, we use the same cost of insurance rate schedule
for the entire coverage for this rider. These rates are based on the original
premium class even though satisfactory new evidence of insurability is given to
us for the increased schedule.
Not all policy features apply to the adjustable term insurance rider. Under this
rider, there is no surrender value and policy loans are not available. The
adjustable term insurance rider does not contribute to the policy account value
nor to investment performance under your policy. The adjustable term insurance
rider provides benefits only at the insured person's death.
SPECIAL FEATURES
RIGHT TO EXCHANGE POLICY
During the first 24 months after your policy date, you have the right to
exchange your policy for a guaranteed policy, unless state law requires
differently. To do this, we transfer the amount you have in the variable
division to the guaranteed interest division. We allocate all of your future net
premiums to the guaranteed interest division. We do not allow any future
payments or transfers to the variable division after you exercise this right.
We will not charge you for this exchange. SEE THE GUARANTEED INTEREST DIVISION,
PAGE 18.
POLICY MATURITY
If the insured person reaches age 100 and you do not want the continuation of
coverage feature, you may surrender the policy for the net account value. Your
policy then ends. Some part of this payment may be taxable. You should consult
your tax adviser.
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Corporate Variable Universal Life 26
<PAGE>
CONTINUATION OF COVERAGE
The continuation of coverage feature allows your insurance coverage to continue
beyond when the insured person reaches age 100. If you allow the continuation of
coverage feature to become effective, we:
o transfer your net account value (excluding the amount in the loan
division) into the guaranteed interest division;
o charge a one-time $200 administrative fee to your policy to cover
future expenses;
o terminate the adjustable term insurance rider and the target death
benefit becomes the stated death benefit;
o convert death benefit option 2 or 3 to death benefit option 1, if
applicable; and
o terminate investment features.
The adjustable term insurance rider then terminates. If you have no adjustable
term insurance rider coverage, your stated death benefit is unchanged. You may
make no further premium payments.
Your insurance coverage continues until the insured person's death, unless the
policy lapses or is surrendered. However, we deduct no further cost of insurance
charges and your monthly deductions cease. SEE CONTINUATION OF COVERAGE
ADMINISTRATIVE FEE, PAGE 44.
Your net account value may not be transferred into the variable division after
the insured person reaches age 100.
During the continuation of coverage period, you may take policy loans or partial
withdrawals from your policy.
If you have outstanding policy loans, interest continues to accrue. If you fail
to make sufficient loan or loan interest payments, it is possible that the loan
plus accrued interest may become greater than your account value and cause your
policy to lapse. To avoid this, you may repay loans and make loan interest
payments during the continuation of coverage period. However, we will not accept
additional premium payments.
If you wish to stop coverage after the continuation of coverage feature begins,
you may surrender your policy and receive the net account value. All other
consequences of surrender apply. SEE SURRENDER, PAGE 34. The continuation of
coverage feature may not be available in all states. If a state has approved
this feature, it is automatic and you do not need to take any action to activate
it.
The tax consequences of coverage continuing beyond when the insured person
reaches age 100 are uncertain. You should consult a tax adviser as to those
consequences.
POLICY VALUES
ACCOUNT VALUE
Your account value is the total amount you have in the guaranteed interest
division, the variable division, and the loan division. Your account value
reflects:
o net premiums;
o deductions for charges;
o partial withdrawals;
o investment performance of the variable divisions;
o interest earned on the amount you have in the guaranteed interest
division; and
o interest earned on the amount you have in the loan division.
NET ACCOUNT VALUE
Your policy's net account value is your account value minus the amount of your
outstanding policy loans and accrued loan interest, if any. Your surrender value
is the same as your net account value.
DETERMINING THE VALUE IN THE VARIABLE DIVISION
The amounts included in the variable division are measured by accumulation units
and accumulation unit values.
The value of a variable investment option is the accumulation unit value for
that option times the number of accumulation units you own in that option. Each
variable investment option has a different accumulation unit value.
You purchase accumulation units whenever you allocate premium or make transfers
to a variable investment option. This includes transfers from the loan division.
The valuation date is each date for which the net asset value of the investment
portfolio shares and
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Corporate Variable Universal Life 27
<PAGE>
unit values of the variable investment options are determined. Valuation dates
are each day the New York Stock Exchange and the company's customer service
center are open for business and a corresponding investment portfolio values its
shares, or as required by law.
We redeem accumulation units:
o when you take a partial withdrawal;
o when amounts are transferred from a variable investment option
(including transfers to the loan division);
o for the monthly deductions from your account value;
o for policy transaction charges;
o on surrender; and
o to pay the death benefit after the insured person dies.
We calculate the number of variable investment option accumulation units
purchased or redeemed by:
1. dividing the dollar amount of your transaction by:
2. the accumulation unit value calculated at the close of business on the
valuation date of the transaction.
The accumulation unit value is the value determined as of each valuation date.
The accumulation unit value of each variable investment option varies with the
investment performance of the underlying portfolio. It reflects:
o investment income;
o realized and unrealized capital gains and losses;
o investment portfolio expenses; and
o daily mortality and expense risk charges we take from the separate
account.
SEE HOW WE CALCULATE ACCUMULATION UNIT VALUES, PAGE 28.
The date of a transaction is the date we receive your premium or transaction
request at our customer service center, so long as the date of receipt is a
valuation date. Each valuation date ends at 4:00 p.m. Eastern time. We use the
accumulation unit value which is next calculated after we receive your premium
or transaction request and we use the number of accumulation units attributable
to your policy on the date of receipt.
We take monthly deductions from your account value as of the monthly processing
date. If your monthly processing date is not a valuation date, the monthly
deduction is processed on the next valuation date.
The value of amounts allocated to the variable investment option goes up or down
depending on investment performance.
FOR AMOUNTS IN THE VARIABLE INVESTMENT OPTIONS, THERE IS NO GUARANTEED MINIMUM
CASH VALUE.
HOW WE CALCULATE ACCUMULATION UNIT VALUES
We determine accumulation unit values on each valuation date.
We generally set the accumulation unit value for a variable investment option at
$10 when the investment option is first opened. After that, the accumulation
unit value on any valuation date is:
1. the accumulation unit value for the preceding valuation date multiplied
by
2. the accumulation experience factor for that division for the valuation
period.
Every valuation period begins at 4:00 p.m. Eastern time on a valuation date and
ends at 4:00 p.m. Eastern time on the next valuation date.
We calculate an accumulation experience factor for each variable investment
option every valuation date as follows:
1. We take the share value of the underlying portfolio shares in the
division as reported to us by the investment portfolio managers as of
the close of business on that valuation date.
2. We add dividends or capital gain distributions declared per share and
reinvested by the investment portfolio on the date that the share value
is affected. If applicable, we subtract a charge for taxes from this
amount.
3. We divide the remaining amount by the value of the shares in the
underlying investment portfolio for the variable division at the close
of business on the previous valuation date.
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Corporate Variable Universal Life 28
<PAGE>
4. We then subtract a charge for the mortality and expense risk which we
assume under your policy. The daily charge is 0.000548% of the
accumulation unit value. This is an annual rate of 0.20% of the
accumulation unit value. If the previous day was not a valuation date,
the charge is multiplied by the additional number of days since the
prior valuation date.
The result of these calculations is the accumulation experience factor for the
valuation period.
TRANSFERS OF ACCOUNT VALUE
You may make up to twelve free transfers among the variable investment options,
or the guaranteed interest division, in each policy year. You may not make
transfers until after your free look period ends if your state requires a refund
of premium during the free look period.
We do not limit your number of transfers, but we may charge a $10 fee for each
transfer that you make after the first twelve in each policy year. We do not
include transfers for automatic rebalancing or dollar cost averaging toward your
twelve free transfers. You may not make transfers during the continuation of
coverage period.
You may make transfer requests in writing, or by telephone if you have telephone
privileges, to our customer service center. Your transfer takes effect on the
valuation date we receive your request. The minimum amount you may transfer is
$100. This minimum does not need to come from one division or be transferred to
one division as long as the total amount you transfer is at least $100. However,
if the amount remaining in a variable division is less than $100 when you make a
transfer request, we transfer the entire amount out of that division.
EXCESSIVE TRADING
Excessive trading activity can disrupt investment portfolio management
strategies and increase portfolio expenses by causing:
o increased trading and transaction costs;
o disruption of planned investment strategies;
o forced and unplanned portfolio turnover;
o lost opportunity costs; and
o the investment portfolios to have large asset swings that decrease
their ability to provide maximum investment return to all policyowners.
In response to excessive trading, we may place restrictions or refuse transfers
made by third-party agents acting on behalf of owners such as a market timing
service. We will refuse or place restrictions on transfers when we determine, in
our sole discretion, that transfers are harmful to the investment portfolios, or
to policyowners as a whole.
GUARANTEED INTEREST DIVISION TRANSFERS
Transfers into the guaranteed interest division are not restricted.
You may transfer from the guaranteed interest division only in the first 30 days
of each policy year. Transfer requests received within 30 days before your
policy anniversary are deemed to occur on your policy anniversary. A request
received by us within 30 days after your policy anniversary is effective as of
the valuation date we receive it. Transfer requests made at any other time will
not be processed.
Transfers from the guaranteed interest division are limited to the largest of:
o 25% of your guaranteed interest division balance at the time of your
first transfer or withdrawal out of it in that policy year;
o the sum of the amounts you have transferred and withdrawn from the
guaranteed interest division in the prior policy year; or
o $100.
DOLLAR COST AVERAGING
If your policy has at least $10,000 invested in either the Money Market
Portfolio, or the Neuberger Berman AMT Limited Maturity Bond Portfolio, you can
elect dollar cost averaging. The main goal of dollar cost averaging is to
protect your policy values
from short-term price changes.
DOLLAR COST AVERAGING DOES NOT ASSURE A PROFIT NOR DOES IT PROTECT YOU AGAINST A
LOSS IN A DECLINING MARKET.
This systematic plan of transferring account values is intended to reduce the
risk of investing too much when the price of an investment portfolio's shares is
high. It also reduces the risk of investing too little when the price of an
investment portfolio's shares is low.
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Corporate Variable Universal Life 29
<PAGE>
Since you transfer the same dollar amount to other divisions each period, you
purchase more units in a division if the unit value is low, and you purchase
fewer units if the unit value is high.
You may add dollar cost averaging to your policy at any time. The first dollar
cost averaging date must be at least five days after we receive your dollar cost
averaging request. Dollar cost averaging cannot begin until after the end of
your free look period if your state requires refund of all premiums paid during
the free look period.
With dollar cost averaging, you designate either a dollar amount, or a
percentage of your account value, for automatic transfer from either the
investment option invested in either the Money Market Portfolio or the Neuberger
Berman AMT Limited Maturity Bond Portfolio for automatic transfer. Each period,
we automatically transfer the amount you select from your chosen source
investment option to one or more other variable investment options. You may not
make transfers to or from the guaranteed interest division or the loan division
under dollar cost averaging.
The minimum percentage you may transfer to any one investment option is 1% of
the total amount you transfer to all investment options you select. You must
transfer at least $100 for each dollar cost averaging transfer.
Dollar cost averaging may occur on the same day of the month either monthly,
quarterly, semi-annually, or annually. Unless you tell us otherwise, dollar cost
averaging automatically takes place monthly, on the monthly processing date.
We do not count dollar cost averaging transfers toward your twelve free
transfers per policy year. There is no charge for this feature.
You may have both dollar cost averaging and automatic rebalancing at the same
time. The dollar cost averaging division from which your transfer will be taken
cannot be included in your automatic rebalancing program.
CHANGING DOLLAR COST AVERAGING
You may change your dollar cost averaging program one time per policy year. If
you have telephone privileges, you may make changes to the dollar cost averaging
program by telephoning our customer service center. SEE TELEPHONE PRIVILEGES,
PAGE 37.
TERMINATING DOLLAR COST AVERAGING
You may cancel dollar cost averaging by sending satisfactory notice to our
customer service center. We must receive it at least five days before the next
dollar cost averaging date.
Dollar cost averaging will terminate if:
1. you specify a termination date; or
2. your balance remaining in the investment option from which your dollar
cost averaging transfers are taken reaches a dollar amount you set; or
3. on any dollar cost averaging date, the amount in the investment option
from which you want to make a transfer is equal to or less than the
amount to be transferred. We will transfer the remaining amount and
dollar cost averaging ends.
AUTOMATIC REBALANCING
Automatic rebalancing provides you with a method for maintaining a consistent
approach to investing account values over time, and simplifying the process of
asset allocation by dividing amounts among the investment options you have
chosen.
Transfers made for automatic rebalancing do not count toward your twelve free
transfers per policy year. There is no charge for this feature.
If you choose this feature, on each rebalancing date we transfer amounts among
the investment options to match your pre-set automatic rebalancing allocation
percentages. After the transfers, the ratio of your account value in each
division to your total account value for all investment options included in
automatic rebalancing matches the automatic rebalancing allocation percentage
for that investment option. This action rebalances the amounts in the investment
options that do not match your set allocation. This happens if an investment
option outperforms other investment options for that time period.
You may choose the automatic rebalancing feature on your application or later by
completing our customer service form. Automatic rebalancing may occur on the
same day of the month either monthly, quarterly, semi-annually, or annually. If
you do not
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Corporate Variable Universal Life 30
<PAGE>
specify, automatic rebalancing will occur on the last valuation date of a
calendar quarter.
If you choose automatic rebalancing on your policy application, the first
transfer occurs on the date you select (after your free look period if your
state requires return of all premiums paid during the free look period). If you
elect this feature after your policy date, we process the first transaction on
the date you have requested. If you requested no date, processing is on the last
valuation date of the calendar quarter we receive your notice at our customer
service center.
You may have both automatic rebalancing and dollar cost averaging at the same
time. The investment option from which your dollar cost averaging transfers are
taken cannot be included in your automatic rebalancing allocating program. You
may not include the loan division in your automatic rebalancing allocations.
CHANGING AUTOMATIC REBALANCING
You may change your allocation percentages for automatic rebalancing at any
time. Your allocation change is effective on the valuation date that we receive
it at our customer service center. If you reduce the amount allocated to the
guaranteed interest division, it is considered a transfer from that division.
You must meet the requirements for the maximum transfer amount and time
limitations on transfers from the guaranteed interest division. SEE TRANSFERS OF
ACCOUNT VALUE, PAGE 29.
TERMINATING AUTOMATIC REBALANCING
You may terminate automatic rebalancing at any time, as long as we receive your
notice of termination at least five days before the next automatic rebalancing
date.
POLICY LOANS
You may borrow against your policy at any time after the first monthly
processing date by using your policy as security for a loan, or as otherwise
required by law. The amount you borrow is called a policy loan. Your policy loan
is:
1. the total amount you borrow from your policy; plus
2. any policy loan interest that is capitalized when due; minus
3. policy loan repayments you make.
Unless state law requires differently, new policy loans must be at least $100.
The maximum amount you can borrow on any valuation date, unless required
differently by state law, is your net account value minus the monthly deductions
to your next policy anniversary or 13 monthly deductions if you take a loan
within thirty days before your next policy anniversary.
Your request for a policy loan must be directed to our customer service center.
If you have telephone privileges, you may request a policy loan for less than
$25,000 by telephoning our customer service center. SEE TELEPHONE PRIVILEGES,
PAGE 37.
When you request a loan you may specify one investment option from which the
loan will be taken. If you do not specify one, the loan will be taken
proportionately from each active investment option you have.
When you take a policy loan, we transfer an amount equal to your policy loan
from the specified investment option proportionately or from the variable and
the guaranteed interest divisions to the loan division. We follow this same
process for loan interest due at your policy anniversary. We credit the loan
division with interest at an annual rate of 3%.
The loan division is part of our general account, separate from the guaranteed
interest division.
Loan interest charges on your policy loan accrue daily at an annual interest
rate of 3.25%. Interest is due in arrears on each policy anniversary. If you do
not pay your interest when it is due, we add it to your policy loan.
If you request an additional loan, we add the amount you request to your
existing outstanding policy loan. This way, there is only one loan outstanding
on your policy at any time.
Policy loans may cause your policy to lapse if your net account value is not
enough to pay all deductions each month. SEE LAPSE, PAGE 33.
Policy loans may have tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH
BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM
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Corporate Variable Universal Life 31
<PAGE>
POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
LOAN REPAYMENT
You may repay all or part of your policy loan at any time. We assume that any
payments you make, other than scheduled premiums, are policy loan repayments.
You must tell us otherwise if you want additional payments to be premium
payments.
When you make a loan repayment, we transfer an amount equal to your repayment
from the loan division, the variable investment options and the guaranteed
interest division in the same proportion as your current premium allocation,
unless you tell us otherwise.
LOANS AND YOUR BENEFITS
Taking a loan decreases the amount you have in the variable division. Accruing
loan interest will change your net account value as compared to what it would
have been if you did not take a loan.
Even if you repay your loan, it has a permanent effect on your account value.
The benefits under your policy may be affected.
The loan is a first lien on your policy. If you do not repay your policy loan,
we deduct your outstanding policy loan and accrued loan interest from the death
benefit payable, the surrender value payable.
The policy lapses when the account value minus policy loans and accrued loan
interest is not enough to cover your monthly deductions. If your policy lapses
with a loan outstanding, you may have adverse tax consequences. SEE
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE
46, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT
MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
If you use the continuation of coverage feature and you have a policy loan, loan
interest continues to accrue. If you do not make loan payments your policy could
lapse.
PARTIAL WITHDRAWALS
You may request a partial withdrawal on any valuation date after your first
policy anniversary by contacting our customer service center. You make a partial
withdrawal when you withdraw part of your net account value. If your request is
by telephone, the partial withdrawal must be for an amount less than $25,000 and
may not cause a decrease in your death benefit; otherwise, your request must be
in writing. SEE TELEPHONE PRIVILEGES, PAGE 37.
You may take only one partial withdrawal per policy year.
The minimum partial withdrawal you may take is $100. The maximum partial
withdrawal you may take is the amount which leaves $500 as your net account
value. If you request a withdrawal of more than this maximum, we require you to
surrender your policy. When you take a partial withdrawal, we deduct your
withdrawal amount plus any service fee from your account value. SEE CHARGES,
PAGE 41.
Partial withdrawals may have adverse tax consequences. SEE DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 47.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1
If you selected death benefit option 1, and if no more than fifteen years have
passed since your policy date and the insured person is not yet age 81, you may
make a partial withdrawal of up to the greater of 10% of your account value, or
5% of your stated death benefit without decreasing the stated death benefit.
Otherwise amounts you withdraw will reduce your stated death benefit by the
amount of the withdrawal unless your policy death benefit has been increased due
to the federal income tax definition of life insurance.
If your policy death benefit has been increased due to the federal income tax
definition of life insurance at the time of the partial withdrawal, then at
least part of your partial withdrawal may be made without reducing your stated
death benefit.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 2
If you have selected death benefit option 2, a partial withdrawal does not
reduce your stated death benefit or target death benefit. However, we reduce the
total death benefit by at least the partial withdrawal amount because your
account value is reduced.
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Corporate Variable Universal Life 32
<PAGE>
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 3
If you have selected death benefit option 3 and your partial withdrawal is less
than the total of premiums you have paid less the total of your prior partial
withdrawals, then your stated death benefit will not be reduced. However, your
total death benefit will be reduced by at least the amount of your partial
withdrawal.
If your partial withdrawal is more than the amount of premiums you have paid
less the total of your prior partial withdrawals, then the excess is treated in
the same manner as partial withdrawals under death benefit option 1. SEE PARTIAL
WITHDRAWALS UNDER DEATH BENEFIT OPTION 1, PAGE 32.
STATED DEATH BENEFIT AND TARGET DEATH BENEFIT REDUCTIONS
Generally, we reduce the stated death benefit by the amount of the partial
withdrawal. A partial withdrawal may reduce your target death benefit.
Partial withdrawals do not reduce the stated death benefit if your base death
benefit has been increased to qualify your policy as life insurance under the
federal income tax laws, if you withdraw an amount that is no greater than the
amount that reduces your account value to a level which no longer requires your
base death benefit to be increased to qualify as life insurance for federal
income tax law purposes. SEE TAX STATUS OF THE POLICY, PAGE 45.
We require a minimum target death benefit to issue your policy. You are not
allowed to take a partial withdrawal if it reduces your target death benefit
below this minimum. SEE GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS,
PAGE 44.
PARTIAL WITHDRAWAL MECHANICS
Unless you tell us otherwise, we will make a partial withdrawal from the
guaranteed interest division and the variable division in the same proportion
that each has to your net account value immediately before your withdrawal. The
amount withdrawn from the guaranteed interest division may not be for more than
your total withdrawal multiplied by the ratio of your account value in the
guaranteed interest division to your total net account value immediately before
the partial withdrawal transaction.
We will send a new schedule page for your policy showing the effect of your
withdrawal if there is any change to your stated death benefit or your target
death benefit. Or, to make this change, we may ask that you return the policy to
our customer service center.
Your withdrawal and any reductions in the death benefits are effective as of the
valuation date on which we receive your request. SEE DISTRIBUTIONS OTHER THAN
DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS, PAGE 47.
LAPSE
Your insurance coverage continues as long as your net account value is enough to
pay all deductions each month.
In any policy year, if you have an outstanding policy loan, your policy will
lapse if the loan plus the accrued interest owed is more than the account value.
After the insured person reaches age 100 and if the continuation of coverage
feature is active, the policy could lapse even though there are no further
monthly deductions.
GRACE PERIOD
Your policy enters the 61-day lapse grace period if, on a monthly processing
date your net account value is zero (or less).
We notify you that the policy is in a grace period at least 30 days before the
grace period ends. We provide this notice to you, or a person to whom you have
assigned your policy, at the last address in our records. We notify you of the
required premium payment necessary to prevent your policy from lapsing. This
amount is generally the amount of past due charges, plus the amount that covers
your estimated monthly policy deductions for the next two months. If the insured
person dies during the grace period, we pay death proceeds to your
beneficiary(ies) with reductions for policy loans, accrued loan interest, and
monthly deductions owed.
If we receive payment of the required amount before the end of the grace period,
we apply it to your account value in the same manner as your other premium
payments, then we take the overdue deductions from your account balance.
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Corporate Variable Universal Life 33
<PAGE>
If you do not pay the full amount required within the 61-day grace period, your
policy (and rider) lapse without value. We then withdraw your remaining account
balance from the variable and guaranteed interest divisions. We deduct amounts
you owe us and inform you that the policy has ended.
REINSTATEMENT
If you do not pay enough premium before the end of the grace period, your policy
lapses. You may reinstate your policy and rider within five years after the
grace period ends.
Unless state law requires differently, we will reinstate your policy and rider
if:
1. you have not surrendered your policy for its surrender value;
2. you provide satisfactory evidence to us that the insured person is
still insurable according to our normal rules of underwriting; and
3. we receive enough premium from you to keep your policy and rider in
force from the beginning to the end of the grace period and for two
months after the reinstatement date.
Reinstatement is effective as of the monthly processing date following our
approval of your reinstatement application. If you had a policy loan when
coverage ended, we reinstate it with accrued loan interest to the date of lapse.
The cost of insurance charges in effect at the time of reinstatement for the age
of the insured person are adjusted to reflect the time since the lapse.
We apply the net premiums received after reinstatement according to the premium
allocation instructions in effect at the start of the grace period, unless you
tell us otherwise.
SURRENDER
You may surrender your policy for its surrender value any time while the insured
person is living. You do this by sending a written request and your policy or a
lost policy form to our customer service center.
We compute your surrender value as of the valuation date we receive your
surrender request and policy at our customer service center. All insurance
coverage ends on the date we receive your surrender request and policy. SEE
POLICY VALUES, PAGE 10.
We do not pro-rate or add back charges and expenses to your account value which
we deducted on the monthly anniversary before the date your surrender is
processed.
A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 46, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 47.
GENERAL POLICY PROVISIONS
FREE LOOK PERIOD OR RIGHT TO EXAMINE POLICY PERIOD
You have the right to examine your policy. The right to examine your policy (or
free look period) starts on the date you receive your policy. If for any reason
you do not want it, you may return your policy to us or your registered
representative within the period shown in the policy. If you return your policy
to us within your state's specified time limit, we will consider it canceled as
of your policy date.
If you cancel your policy during this free look period, you will receive a
refund as determined by state law.
Generally, there are two types of free look refunds. Some states require a
return of all premiums paid while others permit payment of the account value
plus a refund of all charges deducted. Your policy will specify what free look
refund applies in your state. The type of free look refund allowed in your state
will affect when your initial net premium and additional net premiums paid
before the end of the free look period are invested into the variable division.
If your state requires us to return the premiums paid if you cancel your policy
during the free look period, that portion of the net premiums you paid during
the free look period allocated to the variable investment options will be held
in the division investing in the Money Market Portfolio for 15 days after we
issue your policy (five days deemed delivery time plus a
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Corporate Variable Universal Life 34
<PAGE>
typical free look period of 10 days), unless state law requires otherwise.
At the end of 15 days, your account value will be allocated among your chosen
variable investment options, based on your most recent premium allocation
instructions.
If your state requires us to return your account value plus a refund of all
charges deducted, that portion of your premiums paid that you have allocated to
the variable investment options will be invested according to your most recent
premium allocation instructions on the date we issue your policy.
Amounts you allocated to the guaranteed interest division will be invested into
that division when we issue your policy if you have made a premium payment and
have no outstanding information or document requests from us. Once we have
applied your net premium to your selected investment options, you may transfer
funds between investment options and activate policy investment features such as
automatic rebalancing or dollar cost averaging.
YOUR POLICY
Some groups under this policy may choose to use a master policy and certificate
rather than a series of individual policies.
The entire contract between you and us is the combination of:
o the policy (or certificate);
o a copy of your original application and any applications for benefit
increases or decreases;
o the adjustable term insurance rider;
o endorsements;
o schedule pages; and
o reinstatement applications.
If you make a change to your coverage, we give you a copy of your changed
application and new schedules. If you send us your policy, we attach these items
to your policy and return it to you. Otherwise, you need to attach them to your
policy.
Unless there is fraud, we consider all statements made in an application to be
representations and not guarantees. We use no statement to deny a claim, unless
it is in an application.
A president or an officer of our company and our secretary or assistant
secretary must sign all changes or amendments we make to your policy. No other
person may change the terms or conditions of your policy.
AGE
We issue your policy at the insured person's age stated in your policy schedule.
This is based on the insured person's age as of the nearest birth date to the
policy date. We determine the insured person's age at any given time by adding
the number of completed policy years to the age calculated at issue and shown in
the schedule. At issue of your policy, the insured person must be no less than
age 15 and no more than age 85.
OWNERSHIP
The original owner is the person named as the owner in the policy application.
The owner can exercise all rights and receive the benefits during the insured
person's lifetime before the maturity date. This includes the right to change
the owner, beneficiaries, or method to pay proceeds.
As a matter of law, all rights of ownership are limited by the rights of any
person who has been assigned rights under the policy, and any irrevocable
beneficiary(ies).
You may name a new owner by giving us written notice. The effective date of the
change to the new owner is the date the prior owner signs the notice. However,
we will not be liable for any action we take before a change is recorded at our
customer service center. A change in ownership may cause the prior owner to
recognize taxable income on gain under the policy.
BENEFICIARY(IES)
You, as owner, name the beneficiary(ies) when you apply for your policy. The
primary beneficiary(ies) who survives the insured person receives the death
proceeds. Other surviving beneficiary(ies) receive death proceeds only if there
is no surviving primary beneficiary(ies). If more than one beneficiary(ies)
survives the insured person, they share the death proceeds equally, unless you
have told us otherwise. If none of your policy beneficiaries has survived the
insured person, we pay the death proceeds to you, or to your estate as owner.
Once you tell us who the beneficiary(ies) is/are, we keep this information on
file. You may name a new
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Corporate Variable Universal Life 35
<PAGE>
beneficiary during the insured person's lifetime. We pay the death proceeds to
the most recent beneficiary(ies) whom you have most recently named and which we
have on record. We do not make multiple payments.
COLLATERAL ASSIGNMENT
You may assign your policy as security by sending written notice to us. After we
record the assignment, your rights as owner and the beneficiary's(ies') rights
(unless the beneficiary(ies) was made an irrevocable beneficiary(ies) under an
earlier assignment) are subject to the assignment. It is your responsibility to
make sure the assignment is valid.
INCONTESTABILITY
After your policy has been in force while the insured person is alive for two
years from your policy date, we will not question the validity of the statements
in your application. After your policy has been in force while the insured
person is alive for two years from the effective date of any new segment or from
the effective date of an increase in any other benefit, we will not contest the
statements in your application for the new segment or other benefit increase.
After this policy has been in force while the insured person is alive for two
years from the effective date of any reinstatement, we will not contest the
statements in your application for reinstatement.
MISSTATEMENTS OF AGE OR GENDER
If the insured person's age or gender has been misstated, we adjust the death
benefit. We adjust death benefits to the amount which would have been purchased
for the insured person's correct age and gender. We base the adjusted death
benefit on the cost of insurance charges deducted from your account value on the
last monthly processing date before the insured person's death, or as otherwise
required by state law.
If unisex cost of insurance rates apply, we do not make any adjustments for a
misstatement of gender.
SUICIDE
If the insured person commits suicide, while that insured person is sane or
insane within two years of your policy date, unless otherwise required by state
law, we limit death benefits to:
1. the total of all premiums paid to the time of death; minus
2. the amount of outstanding policy loans and accrued loan interest; minus
3. any partial withdrawals you have taken.
If the insured person has been changed, and the new insured person dies by
suicide within two years of the change date, we then limit the death benefit to:
1. your net account value as of the change date; plus
2. the premiums you paid since the change date; minus
3. the sum of any increases in policy loans, accrued loan interest, and
partial withdrawals taken since the change date.
We make a limited payment to the beneficiary(ies) for a new segment or other
increase if the insured person commits suicide, while sane or insane within two
years of the effective date of a new segment, or within two years of an increase
in any other benefit, unless otherwise required by state law. The limited
payment we make is equal to the cost of insurance and monthly expense charges
which were deducted for such increase.
TRANSACTION PROCESSING
Generally, within seven days of when we receive all information required to
process a payment, we pay:
o death proceeds;
o surrender value;
o partial withdrawals; and
o loan proceeds.
We may delay processing these transactions if:
o the NYSE is closed for trading;
o trading on the NYSE is restricted by the SEC;
o there is an emergency so that it is not reasonably possible to sell
securities in the variable divisions or to determine the value of an
investment division's assets; or
o a governmental body with jurisdiction over the separate account allows
suspension by its order.
SEC rules and regulations determine whether or not these conditions exist.
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Corporate Variable Universal Life 36
<PAGE>
We execute transfers among the variable investment options as of the valuation
date of our receipt of your request at our customer service center.
We determine death proceeds as of the insured person's date of death. The death
proceeds are not affected by subsequent changes in the value of the variable
investment options. We pay interest at our stated rate (or at a higher rate if
required by law) from the insured person's date of death to the date of payment.
We may delay payment from our guaranteed interest division for up to six months,
unless state law requires otherwise, of:
o surrender proceeds;
o withdrawal amounts; or
o loan amounts.
We pay interest at our declared rate (or at a higher rate if required by law)
from the date we receive the request if we delay payment more than 30 days.
NOTIFICATION AND CLAIMS PROCEDURES
Except for certain authorized telephone requests, we must receive in writing any
election, designation, change, assignment or request made by the owner.
You must use a form acceptable to us. We are not liable for actions taken before
we receive and record the written notice. We may require you to return your
policy for certain policy changes or if you surrender it.
If the insured person dies while your policy is in force, please let us or your
registered representative know as soon as possible. We will immediately send you
instructions on how to make a claim. As proof of the deceased insured person's
death, we may require you to provide proof of the deceased insured person's age,
and a certified copy of the deceased insured person's death certificate.
The beneficiary(ies) and the deceased insured person's next of kin may need to
sign authorization forms. These forms allow us to get information about the
deceased insured person. This information may include medical records of doctors
and hospitals used by the deceased insured person.
TELEPHONE PRIVILEGES
Telephone privileges are automatically provided to you and your agent or
registered representative, unless you decline it on the application or contact
our customer service center. Telephone privileges allow you or your
agent/registered representative, if applicable, to call our customer service
center to:
o make transfers;
o change premium allocations;
o change features in your dollar cost averaging and automatic rebalancing
programs;
o request partial withdrawals; or
o request a policy loan.
Our customer service center uses reasonable procedures to make sure that
instructions received by telephone are genuine. These procedures may include:
1. requiring some form of personal identification;
2. providing written confirmation of any transactions; and
3. tape recording telephone calls.
By accepting automatic telephone privileges, you authorize us to record your
telephone calls to us. If we use reasonable procedures to confirm instructions,
we are not liable for losses due to unauthorized or fraudulent instructions. We
may discontinue this privilege at any time.
NON-PARTICIPATION
Your policy does not participate in the surplus earnings of Security Life.
DISTRIBUTION OF THE POLICIES
The principal underwriter (distributor) for our policies is ING America
Equities, Inc. ING America Equities, Inc. is a wholly owned subsidiary of
Security Life. It is registered as a broker-dealer with the SEC and the NASD. We
pay ING America Equities, Inc. for acting as the principal underwriter under a
distribution agreement.
We sell our policies through registered representatives of other broker-dealers
including, but not limited to:
1. VESTAX Securities Corporation, a subsidiary of ING America Insurance
Holdings, Inc.;
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Corporate Variable Universal Life 37
<PAGE>
2. Locust Street Securities, Inc., an affiliate of Security Life of Denver
Insurance Company;
3. Multi-Financial Services, Inc., an affiliate of Security Life of
Denver Insurance Company; and
4. IFG Network Securities, Inc., a subsidiary of Investors Financial
Group, Inc., which is a subsidiary of ING America Insurance Holdings,
Inc.
These broker-dealers have entered into selling agreements with us. They are
registered with the SEC and the NASD.
Under these selling agreements, we pay a distribution allowance to
broker-dealers, who then pay commissions to the registered representative who
sells this policy. During the first policy year, the distribution allowance may
be up to 12% of the target premium that you paid, with no allowance on premiums
that you paid over your first target premium. For policy years two through four,
the distribution allowance may be up to 10% of the target premium, with no
allowance on premiums you have paid over the target premium. For policy years
five through ten, the distribution allowance may equal up to 2% of the target
premiums that you have paid, with no allowance on premiums you have paid over
target premium. After the tenth policy year, there is no distribution allowance.
Broker-dealers may receive annual renewal payments of up to 0.20% of the net
account value beginning in the first year of your policy.
Compensation arrangements vary among broker-dealers and depend on particular
circumstances. In addition to the above-described compensation, we may pay:
o wholesaler fees and marketing allowances; and
o training allowances.
We pay all distribution and other allowances from our resources which includes
sales charges deducted from premiums.
ADVERTISING PRACTICES AND SALES LITERATURE
We may use advertisements and sales literature to promote this product,
including:
o articles on variable life insurance and other information published in
business or financial publications;
o indices or rankings of investment securities; and
o comparisons with other investment vehicles, including tax
considerations.
We may use information regarding the past performance of the variable investment
options. Past performance is not indicative of future performance of the
investment options or the policies and is not reflective of the actual
investment experience of policyowners.
We may feature certain investment options and their managers, as well as
describe asset levels and sales volumes for our products. We may refer to past,
current, or prospective economic trends and investment performance or other
information we believe may be of interest to our customers.
SETTLEMENT PROVISIONS
You may elect to have the beneficiary(ies) receive the death proceeds other than
in one payment. If you make this election, you must do so during the insured
person's lifetime. If you have not made this election, the beneficiary(ies) may
do so within 60 days after we receive proof of the insured person's death.
You may take your surrender value in other than one payment.
The investment performance of the variable divisions does not affect payments
under these settlement options. Instead, interest accrues at a fixed rate based
on the option you choose. Payment options are subject to our rules at the time
you make your selection. A periodic payment must be at least $20. Currently,
these alternate payment options are available if the proceeds are $2,000 or
more.
Option I: PAYOUTS FOR A DESIGNATED PERIOD: Payout payments may be made on
a monthly, quarterly, semi-annual, or annual basis for a period
from five to thirty years. The installment dollar amounts are equal
except for any excess interest. Settlement Option Table I in your
policy shows the amount of the first monthly payout for each $1,000
of account value applied.
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Corporate Variable Universal Life 38
<PAGE>
Option II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD:
Payout payments may be made on a monthly, quarterly, semi-annual,
or annual basis throughout the lifetime of the person receiving the
payment, or if longer for guaranteed periods of five, ten, fifteen,
or twenty years. You choose the length of time to receive the
guaranteed payments. If you choose a longer guaranteed period, the
amount of your periodic payments will be lower.
The installment dollar amounts are equal except for any excess
interest. The Settlement Option Table II in your policy shows the
amount of the first monthly payout for each $1,000 of account value
applied. This option is available only for the ages shown in this
table.
Option III: HOLD AT INTEREST: Amounts may be left on deposit with us to be
paid at the death of the person you choose to receive the payment,
or at a chosen earlier date. We will pay interest at our declared
rate on any unpaid balance (or at a higher rate if required by
law). You may choose interest to be accumulated or be paid on a
monthly, quarterly, semi-annual, or annual basis.
You may not leave money on deposit for more than 30 years.
Option IV: PAYOUTS OF A DESIGNATED AMOUNT: Payouts will be made until
proceeds, including interest, are exhausted. Interest is at a rate
we declare (or at a higher rate as required by law). Payout payment
choices are on a monthly, quarterly, semi-annual, or annual basis.
Option V: OTHER: You, as owner, may ask us to apply money under any
options we offer at the time we pay the benefit.
The beneficiary(ies) or other person (successor to the beneficiary(ies)) who has
the right to receive payments may name someone else to receive amounts that we
would otherwise pay to the beneficiary's(ies') estate if he/she/they die(s). The
person who has the right to receive payment may name another person, at any
time. Designating another person to receive payment may have income, gift or
estate tax consequences. Consult a professional tax adviser before making this
designation.
We must approve an arrangement that involves someone who is to receive payment
who is not a human being (for example, a corporation). We must approve a
situation involving a person who is to receive payment while acting on behalf of
another, called a fiduciary. We base the details of all arrangements on our
rules at the time the arrangements are effective. This includes rules on the:
o minimum amount we pay under an option;
o minimum amounts for installment payments;
o withdrawal rights;
o right to receive payments over time, which we may offer as a lump sum
payment;
o naming of people who have the right to receive payment and their
successors; and
o proof of age and survival.
ADMINISTRATIVE INFORMATION ABOUT THE POLICY
VOTING PRIVILEGES
We invest the variable division's assets in shares of investment portfolios. We
are the legal owner of the shares held in the separate account and we have the
right to vote on certain issues. Among other things, we may vote on issues
described in the fund's current prospectus, or issues requiring a vote by
shareholders under the Investment Company Act of 1940.
Even though we own the shares, we give you the opportunity to tell us how to
vote the number of shares attributable to your account value.
We count fractional shares. If you have a voting interest, we send you proxy
material and a form on which to give us your voting instructions.
Each investment portfolio's shares have the right to one vote. The votes of all
investment portfolios are cast together on a collective basis, except on issues
for which the interests of the portfolios differ. In these cases, voting is done
on a portfolio-by-portfolio basis.
Examples of issues that require a portfolio-by-portfolio vote are:
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Corporate Variable Universal Life 39
<PAGE>
1. changes in the fundamental investment policy of a particular investment
portfolio; or
2. approval of an investment advisory agreement.
We vote the shares in accordance with your instructions at meetings of
investment portfolio shareholders. We vote any investment portfolio shares that
are not attributable to policies, and any investment portfolio shares for which
the owner does not give us instructions, the same way we vote as if we did
receive owner instructions.
We reserve the right to vote investment portfolio shares without getting
instructions from policy owners if the federal securities laws, regulations, or
their interpretations change to allow this.
You may instruct us only on matters relating to the investment portfolios
corresponding to divisions in which you have invested assets as of the record
date set by the investment portfolio's Board for the portfolio's shareholders
meeting. We determine the number of investment portfolio shares in each division
that we attribute to your policy by dividing your account value allocated to
that division by the net asset value of one share of the matching investment
portfolio.
MATERIAL CONFLICTS
We are required to track events to identify any material conflicts arising from
using investment portfolios for both variable life and variable annuity separate
accounts. The boards of the investment portfolios, Security Life, and other
insurance companies participating in the investment portfolios, have this same
duty. There may be a material conflict if:
o state insurance law or federal income tax law changes;
o investment management of an investment portfolio changes; or
o voting instructions given by owners of variable life insurance policies
and variable annuity contracts differ.
The investment portfolios may sell shares to certain qualified pension and
retirement plans qualifying under Code Section 401. These include cash or
deferred arrangements under Code Section 401(k). Therefore, there is a
possibility that a material conflict may arise between the interests of owners
in general, or between certain classes of owners, and these retirement plans or
participants in these retirement plans.
If there is a material conflict, we have the duty to determine appropriate
action, including removing the portfolios involved from our variable investment
options. We may take other action to protect policy owners. This could mean
delays or interruptions of the variable operations.
When state insurance regulatory authorities require us, we may ignore voting
instructions relating to changes in an investment portfolio's adviser or its
investment policies. If we do ignore voting instructions, we give you a summary
of our actions in the next semi-annual report to owners.
Under the Investment Company Act of 1940, we must get your approval for certain
actions involving our separate account. In this case, you have one vote for
every $100 of value you have in the variable divisions. We cast votes credited
to amounts in the variable divisions, but not credited to policies in the same
proportion as votes cast by owners.
RIGHT TO CHANGE OPERATIONS
Subject to state limitations, we may from time to time make any of the following
changes to our separate account:
1. Change the investment objective.
2. Offer additional investment options which will invest in portfolios we
find appropriate for policies we issue.
3. Eliminate variable investment options.
4. Combine two or more variable investment options.
5. Substitute a new investment portfolio for a portfolio in which the
division currently invests. A substitution may become necessary if, in
our judgment:
o a portfolio no longer suits the purposes of your policy;
o there is a change in laws or regulations;
o there is a change in a portfolio's investment objectives
or restrictions;
o the portfolio is no longer available for investment; or
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Corporate Variable Universal Life 40
<PAGE>
o another reason we deem a substitution is appropriate.
6. Transfer assets related to your policy class to another separate
account.
7. Withdraw the separate account from registration under the 1940 Act.
8. Operate the separate account as a management investment company under
the 1940 Act.
9. Cause one or more divisions to invest in a mutual fund other than, or
in addition to, the investment portfolios.
10. Stop selling these policies.
11. End any employer or plan trustee agreement with us under the
agreement's terms.
12. Limit or eliminate any voting rights for the separate account.
13. Make any changes required by the 1940 Act, or its rules or regulations.
We will not make a change until it is effective with the SEC and approved by the
appropriate state insurance departments, if necessary. We will notify you of
changes. If you wish to transfer the amount you have in the affected option to
another variable investment option, or to the guaranteed interest division, you
may do so free of charge. Just notify us at our customer service center.
REPORTS TO OWNERS
At the end of each policy year we send a report to you that shows:
o your total net policy death benefit (your stated death benefit plus
adjustable term insurance rider death benefit, if any);
o your account value;
o your policy loan if any, plus accrued interest;
o your surrender value;
o information about the variable investment options; and
o your account transactions during the previous year showing net
premiums, transfers, deductions, loans, or withdrawals.
We also send semi-annual reports with financial information on the investment
portfolios, including a list of the investment holdings of each portfolio, to
you.
We send confirmation notices to you throughout the year for certain policy
transactions.
CHARGES AND DEDUCTIONS
The amount of a charge may not exactly correspond to the cost incurred by us to
provide the service or benefits associated with the particular policy. Many
charges are not at "cost". For example, the sales charges may not cover all of
the sales and distribution expenses actually incurred by us. Proceeds from other
charges, including the mortality and expense risk charge or cost of insurance
charges, may be used in part to cover such expenses.
DEDUCTIONS FROM PREMIUMS
We consider any payment we receive to be a premium if the insured person is not
yet age 100 and you do not have an outstanding policy loan. After we deduct
certain expenses from your premium payment, we add the remaining net premium to
your account value.
TAX CHARGES
We pay state and local taxes in almost all states. These taxes vary in amount
from state to state and may vary from jurisdiction to jurisdiction within a
state. Currently, state and local taxes range from 0% to 5%. We currently deduct
2.5% of each premium payment you make to cover these taxes which approximates
the average tax rate we expect to pay.
We currently deduct 1.5% of each premium payment you make to cover our estimated
costs for the federal income tax treatment of deferred acquisition costs. This
cost is determined solely by the amount of life insurance premiums we receive.
We reserve the right to increase or decrease your premium expense charge for
taxes as a result of changes in the tax law, within limits set by state law. We
also reserve the right to increase or decrease your premium expense charge for
the federal income tax treatment of deferred acquisition costs based on any
change in that cost to us.
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Corporate Variable Universal Life 41
<PAGE>
SALES CHARGE
We deduct a percentage from each of your premium payments to compensate us for
the costs we incur in selling the policies. This charge is 2% of the premiums
you pay in the first policy year and 0.5% of the premiums you pay for each
policy year beyond the first.
The sales charge covers the costs of distribution, preparing our sales
literature, promotional expenses, and other direct and indirect expenses. The
amount charged is not specifically related to sales expenses in a particular
year.
ANNUAL DEDUCTION
DEFERRED SALES CHARGE
We deduct a deferred sales charge that is based on a percentage of the premium
payments you make in each of the first ten policy years, up to your target
premium, as specified in your schedule pages. The charge is based on premium
payments, but is deducted from your account value in equal installments on each
of the ten policy anniversaries following the date on which you make the premium
payment. Each policy segment has its own target premium and deferred sales
charge. We allocate your premium payments to determine the deferred sales
charges under your policy if you have more than one segment. SEE CHANGES IN
DEATH BENEFIT AMOUNTS, PAGE 24.
The deferred sales charge compensates us for a portion of the costs we incur in
selling the policies. There is no deferred sales charge on premiums which are in
excess of the target premium. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 24.
Deferred Sales
Policy or Charge as a Deducted at
Segment Year Percentage of Beginning of
Premium Paid Target Premium Policy Years
------------ ------------ --------------
1 2% 2 - 10
2 1.5% 3 - 11
3 1.5% 4 - 12
4 1.5% 5 - 13
5 0.25% 6 - 14
6 0.25% 7 - 15
7 0.25% 8 - 16
8 0.25% 9 - 17
9 0.25% 10 - 18
10 0.25% 11 - 19
DAILY DEDUCTIONS FROM THE VARIABLE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct a charge each day for the mortality and expense risks we assume. This
charge is 0.000548% per day of the amount you have in the variable divisions.
This is an annual rate of 0.20%.
The mortality risk we assume is that insured people, as a group, may live less
time than we estimated. We assume risk that expenses we incur in issuing and
administering the policies and in operating the variable divisions are greater
than the amount we estimated when we set these charges.
The mortality and expense risk charge does not apply to your account value which
is invested in the guaranteed interest division or the loan division.
MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE
We deduct charges from your account value on each monthly processing date. You
have the option to designate a single withdrawal investment option from which we
will take your monthly deductions. You may make this designation at policy
application or later. You may not use the loan division as your designated
withdrawal investment option from which to deduct monthly deductions.
If you do not choose a withdrawal investment option from which to deduct monthly
deductions, or if the amount in your designated withdrawal investment option is
not enough to cover the monthly deductions, these charges are taken from the
variable and guaranteed interest divisions in the same proportion that your
account value in each division has to your total net account value as of the
monthly processing date.
If you change your designated withdrawal investment option from which monthly
deductions are deducted, we consider this a premium allocation change for which
there may be a charge. SEE POLICY TRANSACTION FEES, PAGE 44.
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Corporate Variable Universal Life 42
<PAGE>
DIVISIONS FROM WHICH WE DEDUCT CHARGES
<TABLE>
<CAPTION>
MONTHLY CHARGES: COST OF
INSURANCE CHARGES AND LOANS AND
ADMINISTRATION FEES TRANSACTION FEES PARTIAL WITHDRAWALS
<S> <C> <C> <C>
- ----------- ----------------------------------------- --------------------------- -----------------------------------
CHOICE May choose one withdrawal investment Proportionally among May choose any withdrawal
option, including guaranteed interest variable and guaranteed investment options or combination
division interest divisions of investment options, subject to
requirements
- ----------- ----------------------------------------- --------------------------- -----------------------------------
DEFAULT Proportionally among variable investment Proportionally among Proportionally among variable
option and guaranteed interest division variable investment options investment options and guaranteed
and guaranteed interest interest division
division
</TABLE>
MONTHLY ADMINISTRATIVE CHARGE
For this policy, we charge an administrative charge of $12 per month for the
first policy year and $6 per month for each policy year beyond that. The monthly
administrative charge is designed to compensate us for ongoing costs such as:
o premium billing and collections;
o claim processing;
o policy transactions;
o record keeping;
o reporting and communications with policy owners; and
o other expenses and overhead.
COST OF INSURANCE CHARGE
The cost of insurance charge compensates us for the ongoing costs of providing
insurance coverage under the policy, including the expected cost of paying death
proceeds that are more than your account value at the insured person's death.
The cost of insurance rates may depend on the:
o issue age of the insured people in the group;
o risk class of the insured people in the group;
o size of the group; and
o total premium the group pays.
The cost of insurance charge is equal to our current monthly cost of insurance
rate times the net amount at risk for each portion of your death benefit. We
calculate the net amount at risk monthly, at the beginning of each policy month.
For the base death benefit, the net amount at risk is calculated using the
difference between the current base death benefit and your account value. We
determine the amount of your account value after we deduct your policy charges
due on that date, other than cost of insurance charges for the base death
benefit and adjustable term insurance rider.
If your base death benefit at the beginning of a month increases (due to
requirements of the federal income tax law definition of life insurance), the
net amount at risk for your base death benefit for that month also increases.
Similarly, the net amount at risk for your adjustable term insurance rider
decreases. This means that the amount of your cost of insurance charge varies
from month to month with changes in your net amount at risk, changes in the
death benefit and with the increasing age of the insured person. We allocate the
net amount at risk to any segments in the same proportion that each segment has
to the total stated death benefit for all coverage segments as of the monthly
processing date.
We apply unisex rates where appropriate under the law. This currently includes
the State of Montana and policies purchased by employers and employee
organizations in connection with employment-related insurance or benefit
programs.
Separate cost of insurance rates apply to each segment of the base death benefit
and your adjustable term insurance rider.
These rates are never more than the guaranteed maximum rates shown in your
policy; however, they may change from time to time. The guaranteed maximum rates
for base coverage are based on the 1980 Commissioner's Standard Ordinary Sex
Distinct Mortality Table.
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Corporate Variable Universal Life
43
<PAGE>
The maximum rates for the initial and any new segment will be printed in the
schedule which we will provide to you. This may result in higher cost of
insurance charges than those that would apply if the policy were on an
individual instead of group basis.
GUARANTEED ISSUE
We only offer this policy on a guaranteed issue basis. We issue these policies
up to a preset face amount with evidence of insurability requirements.
CHANGES IN MONTHLY CHARGES
Changes we make in the cost of insurance charges or charges for additional
benefits are for a class of insured persons. We base the new charge on changes
in expectations about:
o investment earnings;
o mortality;
o the time policies remain in effect;
o expenses; and
o taxes.
New monthly charges will never be more than the guaranteed maximum rates shown
in your policy.
CONTINUATION OF COVERAGE ADMINISTRATIVE FEE
When the insured person reaches age 100, if your policy has not been
surrendered, the continuation of coverage period begins. We will charge a
one-time administrative fee of $200. This charge compensates us for maintaining
and servicing your policy until the death of the insured person. We then no
longer charge you a monthly administrative fee.
POLICY TRANSACTION FEES
We also charge fees for certain transactions you may make under your policy. We
take these fees from the variable and the guaranteed interest divisions in the
same proportion that your account value in each division has to your net account
value immediately after the transaction.
PARTIAL WITHDRAWALS
We deduct a service fee of $25 of the amount you request from your account value
for each partial withdrawal you take to cover our costs. SEE PARTIAL
WITHDRAWALS, PAGE 32.
TRANSFERS
There may be a $10 fee for each additional transfer over twelve per policy year
to cover our costs. If you include multiple transfers in one request, it counts
as one transfer. There is no transfer fee if you are exercising the right to
exchange feature in your policy. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29, AND
RIGHT TO EXCHANGE POLICY, PAGE 26.
ILLUSTRATIONS
The first policy illustration you request in a policy year is free. After that,
we may charge a fee of up to $25 for each additional policy illustration you
request.
PREMIUM ALLOCATION CHANGE
You may make five free premium allocation changes per policy year. After the
five free premium allocation changes, we may charge you $25 for each additional
premium allocation change per policy year. If you change your designated
withdrawal investment option, we consider this a premium allocation charge for
which there may be a charge. SEE MONTHLY DEDUCTIONS FROM YOUR ACCOUNT VALUE,
PAGE 42.
GROUP OR SPONSORED ARRANGEMENTS
OR CORPORATE PURCHASERS
Groups of individuals, corporations or other institutions may purchase this
policy. For some group or sponsored arrangements including employees and certain
family members of employees of Security Life of Denver, its affiliates and
appointed sales agent or special exchange programs which we may offer from time
to time, we may reduce or waive the:
o administrative charge;
o minimum target death benefit;
o target premium;
o sales charges;
o cost of insurance charges; or
o other charges normally assessed.
We can reduce or waive these items due to expected economies based on the
characteristics of the group or sponsored arrangement or with a corporate
purchaser. Group arrangements include those in which there is a trustee, an
employer or an association. The group may either purchase policies covering a
group of individuals or endorse a policy to
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Corporate Variable Universal Life 44
<PAGE>
a group of individuals. Sponsored arrangements include those in which an
employer or association allows us to offer policies to its employees or members
on an individual basis.
Our sales, administration and mortality costs generally vary with the size and
stability of the group, among other factors which we take into account when we
reduce charges. We make reductions to charges based on our rules in effect when
we approve a policy application. We may change these rules from time to time.
We will not be unfairly discriminatory in the variation in the administrative
charge, or other charges, fees and privileges. These variations are based on
differences in costs or services.
OTHER CHARGES
Under current law, we pay no tax on investment income and capital gains included
in variable life insurance policy reserves. This means that no charge is
currently made to any variable division for our federal income taxes. If the tax
law changes and we have federal income tax chargeable to the variable divisions,
we may make such a charge in the future.
TAX CONSIDERATIONS
The following summary provides a general description of the federal income tax
considerations associated with the policy and does not purport to be complete or
to cover all tax situations. This discussion is not intended as tax advice.
Counsel or other competent tax advisers should be consulted for more complete
information. This discussion is based upon our understanding of the present
federal income tax laws. No representation is made as to the likelihood of
continuation of the present federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
This policy is designed to qualify as a life insurance contract under the
Internal Revenue Code. All terms and provisions of the policy shall be construed
in a manner which is consistent with that design. In order to qualify as a life
insurance contract for federal income tax purposes and to receive the tax
treatment normally accorded life insurance contracts under federal tax law, a
policy must satisfy certain requirements which are set forth in Internal Revenue
Code Section 7702. However, there is very little guidance, with respect to
policies issued on a substandard basis. Nevertheless, we believe it is
reasonable to conclude that our policies satisfy the applicable requirements. If
it is subsequently determined that a policy does not satisfy the applicable
requirements, we will take appropriate and reasonable steps to bring the policy
into compliance with such requirements and we reserve the right to restrict
policy transactions or modify your policy in order to do so.
Specifically this policy must meet the requirements of the "cash value
accumulation test" as specified in Code Section 7702.
Under the cash value accumulation test, there is no limit to the amount that may
be paid in premiums as long as there is enough death benefit in relation to
account value at all times. The death benefit at all times must be at least
equal to an actuarially determined factor, depending on the insured person's age
and sex at any point in time, multiplied by the account value. SEE APPENDIX A,
PAGE 58, FOR A TABLE OF THE CASH VALUE ACCUMULATION TEST FACTORS.
We will at all times assure that the policy meets the statutory definition which
qualifies the policy as life insurance for federal income tax purposes. In
addition, as long as the policy remains in force, increases in account value as
a result of interest or investment experience will not be subject to federal
income tax unless and until there is a distribution from the policy, such as a
partial withdrawal or loan. SEE TAX TREATMENT OF POLICY DEATH BENEFITS, PAGE 46.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the Code Section 7702 tests, Code Section 817(h) requires
separate account investments, such as our variable account, to be adequately
diversified. The Treasury has issued regulations which set the standards for
measuring the adequacy of any diversification. To be adequately diversified,
each variable division must meet certain tests. If your variable life policy is
not adequately diversified under these regulations, it is not treated as life
insurance under Code Section 7702. You would then be subject to federal income
tax on your policy income as you earn it. Our variable divisions'
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 45
<PAGE>
investment portfolios have promised they will meet the diversification standards
that apply to your policy.
In certain circumstances, you, as owner of a variable life insurance contract,
may be considered the owner for federal income tax purposes of the separate
account assets used to support your contract. Any income and gains from the
separate account assets are includable in the gross income from your policy
under these circumstances. The IRS has stated in published rulings that a
variable contract owner is considered the owner of separate account assets if
the contract owner has "indicia of ownership" in those assets. "Indicia of
ownership" includes the ability to exercise investment control over the assets.
Your ownership rights under your policy are similar to, but different in some
ways from those described by the IRS in rulings in which it determined that
policy owners are not owners of separate account assets. For example, you have
flexibility in allocating your premium payments and in your policy values. These
differences could result in the IRS treating you as the owner of a pro rata
share of the variable account assets. We do not know what standards will be set
forth in the future, if any, in Treasury regulations or rulings. We reserve the
right to modify your policy, as necessary, to try to prevent you from being
considered the owner of a pro rata share of the variable account assets, or to
otherwise qualify your policy for favorable tax treatment.
The following discussion assumes that the policy will qualify as a life
insurance contract for federal income tax purposes.
TAX TREATMENT OF POLICY DEATH BENEFITS
We believe that the death benefit under a policy is generally excludable from
the gross income of the beneficiary(ies) under section 101(a)(1) of the Code.
However, there are exceptions to this general rule. Additionally, federal and
local transfer, estate inheritance, and other tax consequences of ownership or
receipt of policy proceeds depend on the circumstances of each policy owner or
beneficiary(ies). A tax adviser should be consulted about these consequences.
Generally, the policy owner will not be taxed on any of the policy cash value
until there is a distribution. When distributions from a policy occur, or when
loans are taken from or secured by a policy, the tax consequences depend on
whether or not the policy is a "modified endowment contract."
Special rules also apply if you are subject to the alternative minimum tax. You
should consult a tax adviser if you are subject to the alternative minimum tax.
MODIFIED ENDOWMENT CONTRACTS
Under the Internal Revenue Code, certain life insurance contracts are classified
as "modified endowment contracts," and are given less favorable tax treatment
than other life insurance contracts. Due to the flexibility of the policies as
to premiums and benefits, the individual circumstances of each policy will
determine whether or not it is classified as a modified endowment contract. The
rules are too complex to be summarized here, but generally depend on the amount
of premiums paid during the first seven policy years. Certain changes in a
policy after it is issued could also cause it to be classified as a modified
endowment contract. A current or prospective policy owner should consult with a
competent adviser to determine whether or not a policy transaction will cause
the policy to be classified as a modified endowment contract.
MULTIPLE POLICIES
All modified endowment contracts that are issued by us (or our affiliates) to
the same policy owner during any calendar year are treated as one modified
endowment contract for purposes of determining the amount includable in the
policy owner's income when a taxable distribution occurs.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS
Once a policy is classified as a modified endowment contract, the following tax
rules apply both prospectively and to any distributions made in the prior two
years:
1. All distributions other than death benefits, including distributions
upon surrender and
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 46
<PAGE>
withdrawals, from a modified endowment contact will be treated first as
distributions of gain taxable as ordinary income and as tax-free
recovery of the policy owner's investment in the policy only after all
gain has been distributed.
2. Loans taken from or secured by a policy classified as a modified
endowment contract are treated as distributions and taxed first as
distributions of gain taxable as ordinary income and as tax-free
recovery of the policy owner's investment in the policy only after all
gain has been distributed.
3. A 10% additional income tax penalty may be imposed on the distribution
amount subject to income tax. Consult a tax adviser to determine
whether or not you may be subject to this penalty tax.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS
Distributions other than death benefits from a policy that is not classified as
a modified endowment contract are generally treated first as a recovery of the
policy owner's investment in the policy. Only after the recovery of all
investment in the policy, is there taxable income. However, certain
distributions which must be made in order to enable the policy to continue to
qualify as a life insurance contract for federal income tax purposes, if policy
benefits are reduced during the first fifteen policy years, may be treated in
whole or in part as ordinary income subject to tax.
Loans from or secured by a policy that is not a modified endowment contract are
generally not treated as distributions. Finally, neither distributions from, nor
loans from or secured by, a policy that is not a modified endowment contract are
subject to the 10% additional income tax.
INVESTMENT IN THE POLICY
Your investment in the policy is generally the total of your aggregate premiums.
When a distribution is taken from the policy other than a policy loan, your
investment in the policy is reduced by the amount of the distribution that is
tax free.
POLICY LOANS
In general, interest on a policy loan will not be deductible. Before taking out
a policy loan, you should consult a tax adviser as to the tax consequences.
SECTION 1035 EXCHANGES
Code Section 1035 generally provides that no gain or loss shall be recognized on
the exchange of one life insurance policy for another life insurance policy, or
for an endowment or annuity contract. We accept 1035 exchanges with outstanding
loans. Special rules and procedures apply to Section 1035 exchanges. If you wish
to take advantage of Section 1035, you should consult your tax adviser.
TAX-EXEMPT POLICY OWNERS
Special rules may apply to a policy that is owned by a tax-exempt entity.
Tax-exempt entities should consult their tax adviser regarding the consequences
of purchasing and owning a policy. These consequences could include an effect on
the tax-exempt status of the entity and the possibility of the unrelated
business income tax.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative action is uncertain, there is always the
possibility that the tax treatment of the policy could be changed by legislation
or otherwise. You should consult a tax adviser with respect to legislative
developments and their effect on the policy.
CHANGES TO COMPLY WITH THE LAW
So that your policy continues to qualify as life insurance under the Code, we
reserve the right to refuse to accept all or part of your premium payments, or
to change your death benefit. We may refuse to allow you to make partial
withdrawals that would cause your policy to fail to qualify as life insurance.
We also may:
o make changes to your policy or its riders; or
o take distributions from your policy to the
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 47
<PAGE>
degree that we deem necessary to qualify your policy as life insurance
for tax purposes.
If we make any change of this type, it applies the same way to all affected
policies. We will give you advance notice of this change.
The tax law limits the mortality charge used to calculate whether your policy
qualifies as life insurance for federal income tax purposes. We must base these
calculations on reasonable mortality charges expected to be paid. The Treasury
issued proposed regulations on what it considers reasonable mortality charges.
We believe that the charges used for your policy should meet the Treasury's
current requirement for "reasonableness." We reserve the right to make changes
to the mortality charges used in the calculation if future regulations have
standards which make changes necessary in order to continue to qualify your
policy as life insurance for federal income tax purposes.
Additionally, assuming that you do not want your policy to be or to become a
modified endowment contract, we include a policy endorsement under which we have
the right to amend your policy, including riders. We do this to attempt to
enable your policy to continue to meet the seven-pay test for federal income tax
purposes. If the policy premium you pay is more than the seven-pay limit, we
have the right to remove any excess premium or to make any appropriate
adjustments to your policy's account value and death benefit. It is not clear,
however, whether we can take effective action pursuant to this endorsement under
all possible circumstances to prevent a policy that has exceeded the premium
limitation from being classified as a modified endowment contract.
Any increase in your death benefit will cause an increase in your cost of
insurance charges.
OTHER
Policy owners may use our policies in various arrangements, including:
o qualified plans;
o non-qualified deferred compensation or salary continuance plans;
o split dollar insurance plans;
o executive bonus plans;
o retiree medical benefit plans; and
o other plans.
The tax consequences of these plans may vary depending on the particular facts
and circumstances of each arrangement. If you want to use any of your policies
in this type of arrangement, you should consult a qualified tax adviser
regarding the tax issues of your particular arrangement.
In recent years, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new policy or a
change in an existing policy should consult a tax adviser.
The IRS requires us to withhold income taxes from any portion of the amounts
individuals receive in a taxable transaction. We do not withhold income taxes if
you elect in writing not to have withholding apply. If the amount withheld for
you is insufficient to cover income taxes, you may have to pay income taxes and
possibly penalties later.
The transfer of the policy or designation of a beneficiary may have federal,
state, and/or local transfer and inheritance tax consequences, including the
imposition of gift, estate, and generation-skipping transfer taxes. For example,
the transfer of the policy to, or the designation as a beneficiary of, or the
payment of proceeds to a person who is assigned to a generation which is two or
more generations below the generation assignment of the policy owner may have
generation skipping transfer tax consequences under federal tax law. The
individual situation of each policy owner or beneficiary will determine the
extent, if any, to which federal, state, and local transfer and inheritance
taxes may be imposed and how ownership or receipt of policy proceeds will be
treated for purposes of federal, state and local estate, inheritance, generation
skipping and other taxes.
YOU SHOULD CONSULT QUALIFIED LEGAL OR TAX ADVISERS FOR COMPLETE INFORMATION ON
FEDERAL, STATE, LOCAL, AND OTHER TAX CONSIDERATIONS.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 48
<PAGE>
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES, SURRENDER VALUES, AND
ACCUMULATED PREMIUMS
The following tables are intended to show how the policy works. This includes
how benefits and values can vary over a long period of time. Each table also
compares these values with total premiums paid with interest. The policies
illustrated include:
<TABLE>
<CAPTION>
Definition
Death of Life Stated Target
Smoker Benefit Insurance Death Death
Gender Age Status Option Test Benefit Premium Benefit
- ------ --- ------ ------ ---- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Male 45 Non-smoker 1 CVAT 300,000 $5,750 300,000
Male 45 Non-smoker 1 CVAT 150,000 $5,750 300,000
</TABLE>
The tables show how death benefits, account values, and surrender values of a
hypothetical policy could vary over an extended period of time, assuming the
variable divisions had constant hypothetical gross annual investment returns of
0%, 6%, or 12% over the periods indicated in each table. Values would differ
from those shown in the tables if the annual investment returns were not
constant. The amounts shown would differ if we had used female or unisex rates.
These illustrations assume there are no policy loans.
We illustrate premium payments as if they were made at the beginning of the
year. The third column of each table shows what would happen if an amount equal
to the assumed premiums earned interest, after taxes, of 5% compounded annually.
The net investment return on your policy is lower than the gross investment
return on the variable division. This is due to the mortality and expense risk
charge, and the portfolio charge for management fees and portfolio expenses. We
show the effect of the net investment return in the amounts for death benefits,
account values and surrender values.
The tables reflect annual investment management fees of 0.65% of the portfolios'
aggregate average daily net assets. This hypothetical rate is a simple average
of the investment advisory fees applying to the investment portfolios for the
year ending December 31, 1998. We assume other portfolio expenses at the rate of
0.29% of the portfolios' average daily net assets. This is an average of all the
portfolios' other expenses for the year ending December 31, 1998, after any
absorption by investment portfolio managers has been made. The average of all
portfolios' total expenses is 0.94%.
Actual fees vary by portfolio. The portfolio fees and expenses used in the
illustrations are the net amounts shown after absorption of fees and expenses by
the portfolio's investment manager. Absent such absorption, the total average
investment management fees, average other portfolio expenses and the average of
all portfolios' total expenses used in the illustrations would have been higher
(0.72%, 1.15% and 1.87%, respectively). The tables assume that the current
expense reimbursement arrangements will continue. However, they may not continue
through 1999.
The effect of these portfolio charges and expenses, and mortality and expense
risk charges results in a net rate of return of:
o (1.14)% on a 0% gross rate of return;
o 4.85% on a 6% gross rate of return; and
o 10.84% on a 12% gross rate of return.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 49
<PAGE>
The tables assume that charges have been deducted including deductions for
premiums, cost of insurance rider charges, monthly deductions and administrative
and sales charges. The tables show charges at our current rates. The tables also
show charges at the maximum rates we guarantee in our policies. SEE MONTHLY
DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 42. The tables reflect that we do not
currently charge against the separate account for state or federal taxes. If we
charge for the taxes in the future, it will take a higher gross rate of return
than the rates shown to produce the same death benefits, account values, and
surrender values.
If we are asked to do so, we will give you a comparable personal illustration
based on:
o each insured person's age and gender;
o standard premium class assumptions;
o initial stated death benefit;
o the chosen death benefit option;
o scheduled premiums consistent with your policy form; and
o special features elected on your policy.
For individual policies, at issue we deliver an individualized illustration
showing the scheduled premium you chose and the insured person's actual risk
class. This Corporate policy is issued only to groups. For this policy, we
deliver an illustration similar to the individualized illustration. However,
this illustration shows a single life scheduled premium and risk class that is
representative of the particular group covered by this policy. We base these
hypothetical future benefits on both guaranteed and current cost factor
assumptions and actual account value.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 50
<PAGE>
[to be filed by amendment]
PROSPECT: INSURED PERSON'S NAME
MALE 45 NON-TOBACCO USER PRESENTED BY:
SECURITY LIFE
CORPORATE VARIABLE UNIVERSAL LIFE
STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $5,750.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING GUARANTEED CHARGES
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
-----------0.00%-------- ---------12.00%--------- -----------6.00%----------
PREMIUM CASH CASH CASH
ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH
YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5750
2 5750
3 5750
4 5750
5 5750
6 5750
7 5750
8 5750
9 5750
10 5750
15 5750
20 5750
25 5750
30 5750
AGE 65 5750
</TABLE>
THE EXPENSE CHARGES AND COST OF INSURANCE RATES WILL NEVER BE GREATER THAN THOSE
WHICH WERE USED TO CALCULATE THE ABOVE VALUES.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO THE DIVISIONS OF
THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND THE INVESTMENT
EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT THESE
HYPOTHETICAL GROSS INVESTMENT RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT
AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN
A DIFFERENT FREQUENCY THAN SHOWN.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 51
<PAGE>
[to be filed by amendment]
PROSPECT: INSURED PERSON'S NAME:
MALE 45 NON-TOBACCO USER PRESENTED BY:
SECURITY LIFE
CORPORATE LAST SURVIVOR UNIVERSAL LIFE
STATED DEATH BENEFIT: $300,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $5,750.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING CURRENT CHARGES
Assuming Hypothetical Gross Investment Return of:
<TABLE>
<CAPTION>
--------0.00%------ ---------12.00%--------- ----------6.00%--------
PREMIUM CASH CASH CASH
ACCUMULATED ACCOUNT SURR DEATH ACCOUNT SURR DEATH ACCOUNT SURR DEATH
YEAR PREMIUMS AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5750
2 5750
3 5750
4 5750
5 5750
6 5750
7 5750
8 5750
9 5750
10 5750
15 5750
20 5750
25 5750
30 5750
AGE 65 5750
</TABLE>
THE CURRENT COST OF INSURANCE RATES ARE SUBJECT TO CHANGE. ACCOUNT VALUES WILL
VARY FROM THOSE ILLUSTRATED IF ACTUAL RATES DIFFER FROM THOSE ASSUMED. CURRENT
MORTALITY CHARGE RATES ARE BASED ON CURRENT MORTALITY EXPERIENCE AND ARE NOT
DEPENDENT UPON FUTURE IMPROVEMENTS IN UNDERLYING MORTALITY.
THE HYPOTHETICAL GROSS RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND SHOULD
NOT BE DEEMED AS A REPRESENTATION OF PAST OR FUTURE INVESTMENT RESULTS. ACTUAL
INVESTMENT RESULTS AND POLICY CHARGES MAY BE MORE OR LESS THAN THOSE SHOWN AND
WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE TO
THE DIVISIONS OF THE VARIABLE ACCOUNT AND THE GUARANTEED INTEREST DIVISION AND
THE INVESTMENT EXPERIENCE OF THE DIVISIONS. NO REPRESENTATION CAN BE MADE THAT
THESE HYPOTHETICAL GROSS INVESTMENTS RETURNS CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
THE DEATH BENEFIT, ACCOUNT VALUE AND CASH SURRENDER VALUE FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL GROSS ANNUAL RATES OF RETURN AVERAGED
0.00%, 12.00% AND 6.00% OVER A PERIOD OF YEARS BUT VARIED ABOVE OR BELOW THAT
AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE DIFFERENT IF PREMIUMS WERE PAID IN
A DIFFERENT FREQUENCY THAN SHOWN.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 52
<PAGE>
ADDITIONAL INFORMATION
DIRECTORS AND OFFICERS
Set forth below is information regarding the directors and principal officers of
Security Life of Denver Insurance Company. Security Life's address, and the
business address of each person named, except as noted with one or two asterisks
(*/**), is Security Life Center, 1290 Broadway, Denver, Colorado 80203-5699. The
business address of each person denoted with one asterisk (*) is ING North
America Insurance Corporation, 5780 Powers Ferry Road, Atlanta, Georgia
30327-4390. The business address of each person denoted with two asterisks (**)
is Security Life of Denver Insurance Company, 9140 Arrowpoint Blvd., Suite 400,
Charlotte, North Carolina 28273.
Name and Principal
Business and Address Position and Offices with Security Life of Denver
Stephen M. Christopher Chairman, President and Chief Executive Officer
Thomas F. Conroy Director, President, ING Reinsurance
Michael W. Cunningham* Director, Executive Vice President
Linda B. Emory* Director
Jess A. Skriletz Chief Executive Officer and General Manager, ING
Reinsurance and ING Institutional Markets
Gregory G. McGreevey President, ING Institutional Markets
Jerome J. Cwiok Executive Vice President and Chief Operations
Officer
James L. Livingston, Jr. Executive Vice President and Chief Financial
Officer
Jeffrey R. Messner Executive Vice President and Chief Marketing
Officer
John R. Barmeyer* Senior Vice President, Chief Legal Officer
Wayne D. Bidelman Senior Vice President, CCRC
Eugene L. Copeland Senior Vice President and General Counsel, ING
Reinsurance
Arnold A. Dicke Senior Vice President, Chief Actuary, ING
Reinsurance
Charles LeDoyen** Senior Vice President, Structured Settlements
Terry L. Morrison Senior Vice President, New Business Operations
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 53
<PAGE>
Name and Principal
Jeffery W. Seel* Senior Vice President, Chief Investment Officer
Mark A. Smith Senior Vice President, Customer Service
Operations
Lawrence D. Taylor Senior Vice President, Chief Actuary
William D. Tyler* Senior Vice President, Chief Information Officer
Katherine Anderson Vice President, Chief Product Actuary, ING
Reinsurance
Evelyn A. Bentz Vice President, M Financial Sales
Joseph H. Bradford, III Vice President, Communications
Thomas Kirby Brown, Jr. Vice President, Operations, ING Institutional
Markets
Douglas W. Campbell Vice President, Agency Sales
Kim M. Curley Vice President, Valuation
Stanley F. Eckert Vice President, National Marketing
Shari A. Enger Vice President and Controller
Larry D. Erb Vice President, Information Technology
Nathan E. Eshelman Vice President, Product Development
Martha K. Evans Vice President, Variable Operations
Fitz E. Fisher Vice President, Information Technology
Craig Fowler Vice President, Risk Management and Chief
Actuary, ING Institutional Markets
Deborah B. Holden* Vice President, Corporate Benefits
Brian Holland Vice President, Domestic and International Risk
Management
Thomas D. Hull Vice President, Product Development
Kenneth R. Kiefer** Vice President, Structured Settlements,
Operations
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 54
<PAGE>
Name and Principal
Stephen F. Kraysler Vice President, Structured Reinsurance
C. Lynn McPherson* Vice President
Sue A. Miskie Vice President, Corporate Services
David S. Pendergrass* Vice President and Treasury Officer
Stephen R. Pryde Vice President, Business Operations
Christiaan M. Rutten Vice President, International Reinsurance
Shelley Ray Schaal-Pettet Vice President, Human Resources
Casey J. Scott Vice President, National Marketing
Alan C. Singer Vice President, Customer Relations and Regulatory
Compliance
Jerome M. Strop Vice President, Strategic Marketing
Gary W. Waggoner Vice President, General Counsel and Corporate
Secretary
Amy L. Winsor Vice President and Treasurer
William Wojciechowski* Vice President, CCRC
Jay Thomas Wolfmeier Vice President and Chief Underwriter
Eric G. Banta Assistant Secretary
Roger O. Beebe Actuarial Officer
John B. Dickinson Actuarial Officer
Relda A. Fleshman Deputy General Counsel
Shirley A. Knarr Actuarial Officer
Glen E. Stark Actuarial Officer
William J. Wagner Actuarial Officer
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 55
<PAGE>
REGULATION
We are regulated and supervised by the Division of Insurance of the Department
of Regulatory Agencies of the State of Colorado which periodically examines our
financial condition and operations. In addition, we are subject to the insurance
laws and regulations in every jurisdiction in which we do business. As a result,
the provisions of this policy may vary somewhat from jurisdiction to
jurisdiction.
We are required to submit annual statements, including financial statements, of
our operations and finances to the insurance departments of the various
jurisdictions in which we do business to determine solvency and compliance with
state insurance laws and regulations.
We are also subject to various federal securities laws and regulations.
LEGAL MATTERS
The legal matters in connection with the policy described in this prospectus
have been passed on by the General Counsel of Security Life. Sutherland Asbill &
Brennan LLP has provided advice on certain matters relating to the federal
securities laws.
LEGAL PROCEEDINGS
Security Life, as an insurance company, is ordinarily involved in litigation. We
do not believe that any current litigation is material to Security Life's
ability to meet its obligations under the policy or to the variable account, and
we do not expect to incur significant losses from such actions. ING America
Equities, Inc., the principal underwriter and distributor of the policy, is not
engaged in any litigation of any material nature.
EXPERTS
Actuarial matters in this prospectus have been examined by Lawrence D. Taylor,
F.S.A., M.A.A.A., who is Senior Vice President and Chief Actuary of Security
Life. His opinion on actuarial matters is filed as an exhibit to the
Registration Statement we filed with the SEC. [to be filed by amendment]
REGISTRATION STATEMENT
We have filed a Registration Statement relating to the Variable Account and the
variable life insurance policy described in this prospectus with the SEC. The
Registration Statement, which is required by the Securities Act of 1933,
includes additional information that is not required in this prospectus under
the rules and regulations of the SEC. The additional information may be obtained
from the SEC's principal office in Washington, DC. There is a charge for this
material.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 56
<PAGE>
FINANCIAL STATEMENTS
[to be filed by amendment]
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 57
<PAGE>
APPENDIX A [to be filed by amendment]
FACTORS FOR THE
CASH VALUE ACCUMULATION TEST
FOR A LIFE INSURANCE POLICY
<TABLE>
<CAPTION>
Attained Attained Attained
Age Male Female Unisex Age Male Female Unisex Age Male Female Unisex
--- ---- ------ ------ --- ---- ------ ------ --- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0
1 34 67
2 35 68
3 36 69
4 37 70
5 38 71
6 39 72
7 40 73
8 41 74
9 42 75
10 43 76
11 44 77
12 45 78
13 46 79
14 47 80
15 48 81
16 49 82
17 50 83
18 51 84
19 52 85
20 53 86
21 54 87
22 55 88
23 56 89
24 57 90
25 58 91
26 59 92
27 60 93
28 61 94
29 62 95
30 63 96
31 64 97
32 65 98
33 66 99
100
</TABLE>
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 58
<PAGE>
APPENDIX B [to be filed by amendment]
PERFORMANCE INFORMATION
POLICY PERFORMANCE
The following hypothetical illustrations demonstrate how the actual investment
experience of each variable investment option of the variable account affects
the cash surrender value, account value and death benefit of a policy. These
hypothetical illustrations are based on the actual historical return of each
portfolio as if a policy had been issued on the date indicated. Each portfolio's
Annual Total Return is based on the total return calculated for each fiscal
year. These Annual Total Return figures reflect the portfolio's management fees
and other operating expenses but do not reflect the policy level or Variable
Account asset-based charges and deductions, which if reflected, would result in
lower total return figures than those shown.
The illustrations are based on the payment of a $5,750 annual premium, paid at
the beginning of each year, for a hypothetical policy with a $300,000 face
amount death benefit Option 1, issued on a preferred, nonsmoker male, Age 45. It
is assumed that all premiums are allocated to the investment option illustrated
for the period shown. The benefits are calculated for a specific date. The
amount and timing of premium payments and the use of other policy features, such
as policy loans, would affect individual policy benefits.
The amounts shown for the cash surrender values, account values and death
benefits take into account the charges against premiums, current cost of
insurance and monthly deductions, the daily charge against the Variable Account
for mortality and expense risks, and each portfolio's charges and expenses. See
Charges, page 41. This prospectus also contains illustrations based on assumed
rates of return. See Illustrations of Death Benefits, Account Values, Surrender
Values and Accumulated Premiums, page 49.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 59
<PAGE>
HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment]
Nonsmoker Male Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
- --------------------------------------------------------------------------------
AIM VI CAPITAL APPRECIATION FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
AIM VI GOVERNMENT SECURITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP OVERSEAS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
FIDELITY VIP II INDEX 500 PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF EQUITY INCOME FUND
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF HIGH YIELD FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 60
<PAGE>
HYPOTHETICAL ILLUSTRATIONS [to be filed by amendment]
Nonsmoker Male Age 50
Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $12,500
INVESCO VIF SMALL COMPANY GROWTH FUND
Year Annual Total Cash Surrender Account Death
Ended Return * Value Value Benefit
INVESCO VIF TOTAL RETURN FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
INVESCO VIF UTILITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
NEUBERGER BERMAN AMT LIMITED MATURITY BOND PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
NEUBERGER BERMAN AMT PARTNERS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE BOND FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE EMERGING MARKETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
VAN ECK WORLDWIDE REAL ESTATE FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
- --------------------------------------------------------------------------------
Corporate Variable Universal Life 61
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission such supplementary and periodic information,
documents, and reports as may be prescribed by any rule or regulation of the
Commission heretofore or hereafter duly adopted pursuant to authority conferred
in that section.
UNDERTAKING REGARDING INDEMNIFICATION
Please refer to the Articles of Incorporation listed as Exhibits 1.A(6)(a) and
1.A(6)(b-g) and the By-Laws listed as Exhibits 1.A(6)(h) and 1.A(6)(h)(i).
Security Life of Denver's (the "corporation") Certificate of Incorporation and
bylaws provide that the corporation shall have every power and duty of
indemnification of directors, officers, employees and agents, without
limitation, provided by the laws of the state of Colorado. Under Colorado law,
the corporation has the power to indemnify such persons against expenses,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with any threatened, pending or completed action,
suit or proceeding, if such person acted in good faith and in a manner which
that person reasonably believed to be in or not opposed to the best interest of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In the case of actions by
or in the right of the corporation, such indemnification cannot be made where
such person is adjudged liable to the corporation, except pursuant to a court
order. The corporation is required to indemnify directors, officers, employees
and agents against expense actually and reasonably incurred in connection with
actions where such persons have been successful on the merits or otherwise in
defense of such actions.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the securities and Exchange
commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling preceding, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
UNDERTAKING REQUIRED BY SECTION 26(E)(2)(A) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED
Security Life of Denver Insurance Company represents that the fees and charges
deducted under the Policy, in the aggregate, are reasonable in relation to the
services rendered, the expenses expected to be incurred and the risks assumed by
the Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
Cross-Reference table.
The prospectus.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 1
<PAGE>
The undertaking to file reports.
The undertaking regarding indemnification.
The undertaking required by Section 26(e)2(A) of the Investment Company Act
of 1940, as amended.
The signatures.
Written consents of the following persons:
Lawrence D. Taylor (See Exhibit 6B). [To be filed by amendment]
Ernst & Young, L.L.P. (See Exhibit 7A). [To be filed by amendment]
Sutherland Asbill & Brennan, LLP (See Exhibit 7B). [To be filed by
amendment]
The following exhibits:
1.A (1) Resolution of the Executive Committee of the Board of Directors of
Security Life of Denver Insurance Company ("Security Life of Denver")
authorizing the establishment of the Registrant./1/
(2) Not Applicable.
(3) (a) Security Life of Denver Distribution Agreement./1/
(b) Specimen Amendment to Broker/Dealer Supervisory and Selling
Agreement for Variable Contracts with Compensation Schedule. [To
be filed by amendment]
(c) Commission Schedule for Policies.[To be filed by amendment]
(4) Not Applicable.
(5) (a) Specimen Corporate Variable Universal Life Insurance Policy
(Form No. 2505(VUL)-3/00).
(b) Specimen Adjustable Term Insurance Rider (Form No. R2006-3/00).
(c) Certificate of Insurance.
(6) (a) Security Life of Denver's Restated Articles of Incorporation./1/
(b-g) Amendments to Articles of Incorporation through
June 12, 1987./1/
(h) Security Life of Denver's By-Laws./1/
(i) Bylaws of Security Life of Denver Insurance Company
(Restated with Amendments through September 30, 1997)./2/
(7) Not Applicable.
(8) (a) Participation Agreements
(i) Participation Agreement by and among AIM Variable
Insurance Funds, Inc., Life Insurance Company, on Behalf
of Itself and its Separate Accounts and Name of
Underwriter of Variable Contracts and Policies./3/
(ii) Sales Agreement by and among The Alger American Fund, Fred
Alger Management, Inc., and Security Life of Denver
Insurance Company./1/
(iii) Sales Agreement by and among Neuberger & Berman Advisers
Management Trust, Neuberger & Berman Management
Incorporated, and Security Life of Denver Insurance
Company./1/
(iv) Participation Agreement among Variable Insurance Products
Fund, Fidelity Distributors Corporation and Security Life
of Denver Insurance Company./1/
(v) Participation Agreement among Variable Insurance Products
Fund II, Fidelity Distributors Corporation and Security
Life of Denver Insurance Company./1/
(vi) Participation Agreement among INVESCO Variable Investment
Funds, Inc., INVESCO Funds Group, Inc., and Security Life
of Denver Insurance Company./1/
(vii) Participation Agreement between Van Eck Investment Trust
and the Trust's investment adviser, Van Eck Associates
Corporation, and Security Life of Denver Insurance
Company./1/
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 2
<PAGE>
(b) (i) Third Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable
Investment Funds, Inc. and INVESCO Funds Group, Inc./4/
(ii) Fourth Amendment to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors Corporation
and Security Life of Denver Insurance Company./4/
(iii) Fourth Amendment to Participation Agreement among Variable
Insurance Products Fund II, Fidelity Distributors
Corporation and Security Life of Denver Insurance
Company./4/
(iv) Amendment No. 2 to Participation Agreement among AIM
Variable Insurance Funds, Inc., Security Life of Denver
Insurance Company and ING America Equities, Inc./4/
(v) Fourth Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable
Investment Funds, Inc. and INVESCO Funds Group, Inc.
(vi) Amendment No. 3 to Participation Agreement among AIM
Variable Insurance Funds, Inc., Security Life of Denver
Insurance Company and ING America Equities, Inc.
(9) Not Applicable.
(10) Specimen Guaranteed Issue Variable Life Insurance
Application with Guaranteed Issue Binding Limited Life
Insurance Coverage Form (Form Nos. Q2009-11/97 and
Q-1112 B-6/98).
2. Included as Exhibit 1.A(5) above.
3.A Opinion and consent of Gary W. Waggoner as to securities being registered.
4. Not Applicable.
5. Not Applicable.
6.A Opinion and consent of Lawrence D. Taylor.[To be filed by amendment]
7.A Consent of Ernst & Young L.L.P. [To be filed by amendment]
B Consent of Sutherland Asbill & Brennan LLP. [To be filed by amendment]
8. Not Applicable.
11. Issuance, Transfer and Redemption Procedures Memorandum.[To be filed by
amendment]
- ---------------
/1/ Incorporated herein by reference to Post-Effective Amendment No. 7 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on April 27, 1998 (File No. 33-74190).
/2/ Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on October 29, 1998 (File No. 33-74190).
/3/ Incorporated herein by reference to Post-Effective Amendment No. 6 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on March 2, 1998 (File No. 33-74190).
/4/ Incorporated herein by reference to the Pre-Effective Amendment No. 2 to
the Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account L1, filed with the
Securities and Exchange Commission on May 10, 1999 (File No. 333-72753).
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Security Life of
Denver Insurance Company and the Registrant, Security Life Separate Account L1,
have duly caused this Registration Statement to be signed on their behalf by the
undersigned, hereunto duly authorized, and their seal to be hereunto fixed and
attested, all in the City and County of Denver and the State of Colorado on the
8th day of November, 1999.
SECURITY LIFE OF DENVER INSURANCE COMPANY
(Depositor)
BY: /s/ Stephen M. Christopher
--------------------------
Stephen M. Christopher
President
(Seal)
ATTEST:
/s/ Gary W. Waggoner
- --------------------
Gary W. Waggoner
SECURITY LIFE SEPARATE ACCOUNT L1
(Registrant)
BY: SECURITY LIFE OF DENVER INSURANCE
COMPANY
(Depositor)
BY: /s/ Stephen M. Christopher
--------------------------
Stephen M. Christopher
President
(Seal)
ATTEST:
/s/ Gary W. Waggoner
- --------------------
Gary W. Waggoner
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities with
Security Life of Denver Insurance Company and on the date indicated.
PRINCIPAL EXECUTIVE OFFICERS:
/s/ Stephen M. Christopher
- -----------------------------
Stephen M. Christopher
President, Chief Executive Officer and Director
/s/ James L .Livingston, Jr.
- -----------------------------
James L .Livingston, Jr.
Executive Vice President and Chief Financial Officer
PRINCIPAL ACCOUNTING OFFICER:
/s/ Shari A. Enger
- -----------------------------
Shari A. Enger
Vice President and Controller
DIRECTORS:
/s/ Thomas F. Conroy
- -----------------------------
Thomas F. Conroy
/s/ Linda B. Emory
- -----------------------------
Linda B. Emory
Michael W. Cunningham
/s/ Michael W. Cunningham
- -----------------------------
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
1.A(3)(b)(v) Fourth Amendment to Participation Agreement among Security
Life of Denver Insurance Company, INVESCO Variable Investment
Funds, Inc. and INVESCO Funds Group, Inc.
1.A(3)(b)(vi) Amendment No. 3 to Participation Agreement among AIM Variable
Insurance Funds, Inc., Security Life of Denver Insurance
Company and ING America Equities, Inc.
1.A(5)(a) Specimen Corporate Variable Universal Life Insurance Policy
(Form No. 2505 (VUL)-3/00).
1.A(5)(b) Specimen Adjustable Term Insurance Rider (Form No.
R2006-3/00).
1.A(5)(c) Certificate of Insurance.
1.A(10) Specimen Guaranteed Issue Variable Universal Life Insurance
Application with Guaranteed Issue Binding Limited Life
Insurance Coverage Form (Form Nos. Q2009-11/97 and Q-1112
B-6/98).
3.A Opinion and consent of Gary W. Waggoner as to securities being
registered.
- --------------------------------------------------------------------------------
Corporate Variable Universal Life II - 6
Exhibht 1.A(3)(b)(v)
FOURTH AMENDMENT TO PARTICIPATION AGREEMENT
THIS AGREEMENT is made by and among Security Life of Denver Insurance
Company, a life insurance company organized under the laws of the State of
Colorado ("Insurance Company"), INVESCO Variable Investment Funds, Inc., a
Maryland corporation (the "Company"), and INVESCO Funds Group, Inc., a Delaware
corporation ("INVESCO") (collectively, the "Parties).
WHEREAS, the Parties executed a participation agreement dated August
26, 1994 (the "Participation Agreement"), governing how shares of the Company's
portfolios are to be made available to certain variable life insurance and/or
variable annuity contracts (the "Contracts") offered by the Insurance Company
through certain separate accounts (the "Separate Accounts");
WHEREAS, the various Contracts for which shares are purchased are
listed in Schedule B of the Participation Agreement;
WHEREAS, the Parties have agreed that it is in their interests to add
an additional Contract funded by the Separate Accounts;
NOW THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Company and INVESCO agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule B an amended Schedule B in the form attached hereto which adds
the Variable Survivorship Universal Life Policy to the list of Contracts funded
by the Separate Accounts.
Executed this 3rd day of November, 1999.
ATTEST: INVESCO Variable Investment Funds, Inc.
BY: /s/ Ronald L. Grooms
Ronald L. Grooms
Senior Vice President
ATTEST: Security Life of Denver Insurance Company
BY: /s/ Gary W. Waggoner
ATTEST: INVESCO Funds Group, Inc.
BY: /s/ Ronald L. Grooms
Ronald L. Grooms
Senior Vice President
-1-
<PAGE>
SCHEDULE B
Contracts
<TABLE>
<S> <C>
1. The Exchequer Variable Annuity (Flexible Premium Deferred Combination Fixed and
Variable Annuity Contract)
2. FirstLine (Flexible Premium Variable Life Insurance Policy)
3. Strategic Advantage Variable Universal Life (Flexible Premium Variable Universal Life Insurance
Policy)
4. FirstLine II Variable Universal Life (Flexible Premium Variable Universal Life Insurance
Policy)
5. Strategic Advantage II Variable Universal Life (Flexible Premium Variable Universal Life Insurance
Policy)
6. Variable Survivorship Universal Life (Flexible Premium Variable Universal Life Insurance
Policy)
7. Corporate Variable Universal Life (Flexible Premium Variable Universal Life Insurance
Policy)
</TABLE>
-2-
Exhibit 1.A(3)(b)(vi)
AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated December 3, 1997,
by and among AIM Variable Insurance Funds, Inc., a Maryland corporation,
Security Life of Denver Insurance Company, a Colorado life Insurance company and
ING America Equities, Inc., a Colorado corporation, is hereby amended as
follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
SCHEDULE A
<TABLE>
<CAPTION>
FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE
POLICIES UTILIZING THE FUNDS ACCOUNTS
<S> <C> <C>
AIM V.I. Government Securities Fund | Separate Account Al | o THE EXCHEQUER VARIABLE ANNUITY
- ---------------------------------------- ------------------- -------------------------------------
AIM V.I. Capital Appreciation Fund | Separate Account Ll | o FIRSTLINE VARIABLE UNIVERSAL LIFE
AIM V.I. Government Securities Fund | | o FIRSTLINE II VARIABLE UNIVERSAL LIFE
| | o STRATEGIC ADVANTAGE VARIABLE
| | UNIVERSAL LIFE
| | o STRATEGIC ADVANTAGE II VARIABLE
| | UNIVERSAL LIFE
| | o VARIABLE SURVIVORSHIP UNIVERSAL
| | LIFE
| | o CORPORATE VARIABLE UNIVERSAL
| | LIFE
- ---------------------------------------- ------------------- -------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Effective Date: November 1, 1999
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Robert H. Graham
Name: P. Michelle Grace Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE>
SECURITY LIFE OF DENVER INSURANCE COMPANY
Attest: /s/ Eric G. Banta By: /s/ Gary W. Waggoner
Name: Eric G. Banta Name: Gary W. Waggoner
Title: Assistant Secretary Title: Vice President
(SEAL)
ING AMERICA EQUITIES, INC.
Attest: /s/ Eric G. Banta By: /s/ James L. Livingston, Jr.
Name: Eric G. Banta Name: James L. Livingston, Jr.
Title: Assistant Secretary Title: President
(SEAL)
2 of 2
Exhibit 1.A(5)(a)
SECURITY LIFE OF DENVER
INSURANCE COMPANY
INSURED: JOHN DOE
POLICY DATE: March 1, 2000
POLICY NUMBER: 67000001
WE AGREE TO PAY the death benefit to the beneficiary upon the death of the
insured while this policy is in force.
WE ALSO AGREE to provide the other rights and benefits of the policy. These
agreements are subject to the provisions of the policy.
RIGHT TO EXAMINE PERIOD. You have the right to examine and return this policy
within 10 days after receipt. The policy may be returned by delivering or
mailing it to us at our Customer Service Center or to your registered
representative. Immediately upon return it will be deemed void as of the policy
date. Upon return of the policy to us, we will refund all premiums paid. If this
policy is a replacement policy as defined by state law where this policy is
delivered, you have the right to examine and return this policy within 20 days.
/s/ Gary W. Waggoner /s/ Stephen M. Christopher
Secretary President
In this policy "you" and "your" refer to the owner of the policy. "We", "us" and
"our" refer to Security Life of Denver Insurance Company.
THIS POLICY IS A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY.
THIS IS A NON-PARTICIPATING POLICY.
DEATH BENEFITS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY
INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. DEATH BENEFITS ARE PAYABLE BY US UPON THE DEATH OF THE
INSURED. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY YOU DURING
THE LIFETIME OF THE INSURED UNTIL THE POLICY ANNIVERSARY NEAREST THE INSURED'S
100TH BIRTH DATE.
SECURITY LIFE OF DENVER INSURANCE COMPANY
A Stock Company
Customer Service Center, P.O. Box 173888, Denver, Colorado 80217
Toll Free Number: 1(800) 848-6362
Form 2505 (VUL)-3/00
<PAGE>
TABLE OF CONTENTS
SCHEDULE.......................................................................5
DEFINITION OF TERMS............................................................6
INSURANCE COVERAGE PROVISIONS..................................................7
EFFECTIVE DATE OF COVERAGE..............................................7
BASE DEATH BENEFIT......................................................7
CHANGE IN REQUESTED INSURANCE COVERAGE..................................8
REQUESTED INCREASES IN COVERAGE..................................8
REQUESTED DECREASES IN COVERAGE..................................8
DEATH BENEFIT OPTION CHANGES.....................................8
CONTINUATION OF COVERAGE AFTER AGE 100..................................9
PAYOUT OF PROCEEDS.....................................................10
PREMIUM PROVISIONS............................................................10
INITIAL PREMIUM ALLOCATION.............................................10
SUBSEQUENT PREMIUM ALLOCATION..........................................11
CHANGES TO PREMIUM ALLOCATIONS.........................................11
SCHEDULED PREMIUMS.....................................................11
UNSCHEDULED PREMIUMS...................................................11
NET PREMIUM............................................................11
PREMIUM LIMITATION.....................................................12
FAILURE TO PAY PREMIUM.................................................12
SEPARATE ACCOUNT PROVISIONS...................................................12
THE SEPARATE ACCOUNT...................................................12
SEPARATE ACCOUNT INVESTMENT OPTIONS....................................12
CHANGES WITHIN THE SEPARATE ACCOUNT....................................13
GENERAL ACCOUNT PROVISIONS....................................................14
THE GENERAL ACCOUNT....................................................14
GUARANTEED INTEREST DIVISION...........................................14
LOAN DIVISION..........................................................14
Form 2505 (VUL)-3/00
Page 2
<PAGE>
TRANSFER PROVISIONS...........................................................14
ACCOUNT VALUE PROVISIONS......................................................14
ACCOUNT VALUES ON THE INVESTMENT DATE..................................15
ACCUMULATION UNIT VALUE................................................15
ACCUMULATION EXPERIENCE FACTOR.........................................15
ACCOUNT VALUE OF THE INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT........16
ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION......................16
ACCOUNT VALUE OF THE LOAN DIVISION.....................................17
DEDUCTIONS....................................................................17
MONTHLY DEDUCTION......................................................17
DEFERRED SALES LOAD....................................................17
COST OF INSURANCE......................................................18
LOAN PROVISIONS...............................................................18
POLICY LOANS...........................................................18
LOAN INTEREST..........................................................19
LOAN DIVISION..........................................................19
PARTIAL WITHDRAWAL PROVISIONS.................................................19
SURRENDER PROVISIONS..........................................................20
SURRENDER VALUE........................................................20
BASIS OF COMPUTATIONS..................................................20
FULL SURRENDERS........................................................20
GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS........................21
GRACE PERIOD...........................................................21
TERMINATION............................................................21
REINSTATEMENT..........................................................21
DEFERRAL OF PAYMENT....................................................22
Form 2505 (VUL)-3/00
Page 3
<PAGE>
GENERAL POLICY PROVISIONS.....................................................22
THE POLICY.............................................................22
CONTRACT CHANGES.......................................................22
PROCEDURES.............................................................23
OWNERSHIP..............................................................23
BENEFICIARIES..........................................................23
EXCHANGE RIGHT.........................................................23
COLLATERAL ASSIGNMENT..................................................23
INCONTESTABILITY.......................................................24
MISSTATEMENT OF AGE OR GENDER..........................................24
SUICIDE EXCLUSION......................................................24
PERIODIC REPORTS.......................................................24
ILLUSTRATION OF BENEFITS AND VALUES....................................24
NONPARTICIPATING.......................................................25
CUSTOMER SERVICE CENTER................................................25
PAYOUTS OTHER THAN AS ONE SUM.................................................25
ELECTION...............................................................25
PAYOUT OPTIONS.........................................................25
CHANGE AND WITHDRAWAL..................................................26
EXCESS INTEREST........................................................26
MINIMUM AMOUNTS........................................................26
SUPPLEMENTARY POLICY...................................................26
INCOME PROTECTION......................................................27
DEATH OF PRIMARY PAYEE.................................................27
PAYMENTS OTHER THAN MONTHLY............................................27
SETTLEMENT OPTION TABLES......................................................28
ADDITIONAL BENEFITS OR RIDERS, IF ANY, WILL BE LISTED IN THE SCHEDULE. THE
ADDITIONAL PROVISIONS WILL BE INSERTED IN THE POLICY.
Form 2505 (VUL)-3/00
Page 4
<PAGE>
SCHEDULE
(Schedule Effective Date: March 1,2000)
POLICY INFORMATION
<TABLE>
<S> <C> <C> <C>
Policy Number 67000001 Initial Stated Death Benefit $250,000.00
Adjustable Term Insurance Death Benefit $500,000.00*
Policy Date March 1, 2000 Target Death Benefit $750,000.00**
Insured JOHN DOE Additional Benefits:
Issue Age and Gender 35, Male Adjustable Term Insurance Rider
Death Benefit Option OPTION 1 Scheduled Premium $2,000.00 Annually
</TABLE>
Definition of Life Insurance Test: Cash Value Accumulation Test
Coverage will expire if premiums are insufficient to continue coverage. Coverage
will also be affected by partial withdrawals, policy loans, changes in the
current cost of insurance rates, the actual credited interest rate for the
Guaranteed Interest Division and the investment experience of the Separate
Account.
*This amount is the amount of adjustable term death benefit on the policy date.
This death benefit will vary from time to time, and may depend on your account
value. See the rider and policy for details.
**This amount is the target death benefit on the policy date. It may change at
the beginning of each policy year. See the schedule and rider for details.
CUSTOMER SERVICE CENTER: P.O. BOX 173888, DENVER, COLORADO 80217
TOLL FREE NUMBER 1(800) 848-6362
Form 2505 (VUL)-3/00
Page 5
<PAGE>
SCHEDULE (CONTINUED)
SEGMENT BENEFIT PROFILE
(SCHEDULE EFFECTIVE DATE: MARCH 1, 2000)
<TABLE>
<CAPTION>
DESCRIPTION SEGMENT STATED DEATH SEGMENT EFFECTIVE DATE SEGMENT GUIDELINE ANNUAL SEGMENT TARGET PREMIUM SEGMENT PREMIUM CLASS
BENEFIT AMOUNT PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Segment #1 $250,000 March 1, 2000 $1,445.24 $3,981.00 Standard Non Tobacco
</TABLE>
ADDITIONAL BENEFITS:
Adjustable Term Insurance Rider rating is the same as Segment #1
A segment is a block of death benefit coverage. The stated death benefit shown
on the schedule page at issue is Segment #1. Additional segments may be added to
the policy after issue to increase the death benefit. Each individual segment
added to the policy has its own cost of insurance charges and expense loads as
shown in the schedule. This is further defined in the Definition section of your
policy.
Form 2505 (VUL)-3/00
Page 5A
<PAGE>
SCHEDULE (CONTINUED)
EXPENSE CHARGES
A. PREMIUM EXPENSE CHARGE. This charge will equal the sum of a sales load
plus a deferred sales load plus a tax charge. See Net Premium provision
for details.
1. SALES LOAD: 0.50% OF EACH PREMIUM.
2. DEFERRED SALES LOAD
3. FEDERAL DEFERRED ACQUISITION COST TAX CHARGE AND OTHER CHARGES
(TAX CHARGE): 4.0% of each premium.
We reserve the right to increase or decrease the tax charges due to
any change in tax laws. We further reserve the right to increase or
decrease the tax charge for federal deferred acquisition cost tax due
to any change in the cost to us.
B. MONTHLY EXPENSE CHARGES: The monthly expense charge will equal the
following:
PER POLICY CHARGE: $12 per month for the first 12 months
$6 per month thereafter
ANNUAL MORTALITY AND EXPENSE RISK CHARGE
ANNUAL MORTALITY AND EXPENSE RISK CHARGE 0.15% (0.000411% per day)
Form 2505 (VUL)-3/00
Page 5B
<PAGE>
SCHEDULE (CONTINUED)
POLICYHOLDER TRANSACTION CHARGES
Requests for Sales Illustrations: We reserve the right to
charge a $25 fee for each
policy illustration over
one illustration per
policy year.
Partial Withdrawal Service Fee: See below.
Other Policy Transaction Charges: The charges for transfers
between divisions of the
Separate Account or
between the Guaranteed
Interest Division and the
Separate Account
Divisions; charges for
allocation changes; and
charges for other
Separate Account
management functions are
governed by the
prospectus in effect at
the time of the
transaction.
POLICY LOANS
Policy Loan Interest Rate: 3.25% per year
Guaranteed Interest Rate Credited To Loan Division: 3.00% per year
Minimum Loan Amount: $100
Maximum Loan Amount: See the Loan Provisions
section.
PARTIAL WITHDRAWALS
Minimum Partial Withdrawal Amount: $100
Maximum Partial Withdrawal Amount: Amount which will leave
$500 as the net account
value
Partial Withdrawal Service Fee: $25
Limit On Partial Withdrawals: One per policy year
GUARANTEED INTEREST DIVISION
Guaranteed Interest Rate For Guaranteed Interest Division: 3.00% per year
Form 2505 (VUL)-3/00
Page 5C
<PAGE>
SCHEDULE (CONTINUED)
The policy's base death benefit at any time will be at least equal to the
account value times the appropriate factor from this table.
DEFINITION OF LIFE INSURANCE
CASH VALUE ACCUMULATION TEST
DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
Insured's Attained Factor Insured's Factor Insured's Factor Insured's Factor
Age Attained Age Attained Age Attained Age
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 7.564 40 3.439 65 1.692 90
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
16 7.335 41 3.330 66 1.654 91
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
17 7.118 42 3.226 67 1.617 92
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
18 6.911 43 3.125 68 1.583 93
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
19 6.713 44 3.028 69 1.550 94
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
20 6.521 45 2.936 70 1.518 95
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
21 6.334 46 2.846 71 1.488 96
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
22 6.150 47 2.761 72 1.459 97
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
23 5.969 48 2.678 73 1.432 98
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
24 5.791 49 2.599 74 1.406 99
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
25 5.615 50 2.522 75 1.382 100 and older
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
26 5.441 51 2.449 76 1.359
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
27 5.271 52 2.378 77 1.338
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
28 5.104 53 2.311 78 1.318
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
29 4.940 54 2.246 79 1.299
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
30 4.781 55 2.184 80 1.281
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
31 4.626 56 2.125 81 1.264
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
32 4.476 57 2.068 82 1.248
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
33 4.330 58 2.014 83 1.233
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
34 4.188 59 1.962 84 1.218
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
35 4.052 60 1.912 85 1.205
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
36 3.920 61 1.864 86
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
37 3.793 62 1.818 87
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
38 3.670 63 1.774 88
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
39 3.553 64 1.732 89
- --------------------- ------------- ----------------- ------------ ------------------ ------------ ------------------ -------------
</TABLE>
Form 2505 (VUL)-3/00
Page 5D
<PAGE>
SCHEDULE (CONTINUED)
TABLE OF GUARANTEED RATES-SEGMENT #1
Guaranteed Maximum Cost of Insurance Rates Per $1000 of Net Amount at Risk
(These rates apply to the Base Policy.)
<TABLE>
<CAPTION>
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
Attained Age Monthly Cost of Attained Age Monthly Cost of Attained Age Monthly Cost of Attained Age Monthly Cost of
Insurance Rate Insurance Rate Insurance Rate Insurance Rate
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 0.11085 36 0.18670 57 1.04192 78 7.04089
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
16 0.12585 37 0.20004 58 1.13378 79 7.64551
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
17 0.13919 38 0.21505 59 1.23235 80 8.30507
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
18 0.14836 39 0.23255 60 1.34180 81 9.03761
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
19 0.15502 40 0.25173 61 1.46381 82 9.86724
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
20 0.15836 41 0.27424 62 1.60173 83 10.80381
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
21 0.15919 42 0.29675 63 1.75809 84 11.82571
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
22 0.15752 43 0.32260 64 1.93206 85 12.91039
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
23 0.15502 44 0.34929 65 2.12283 86 14.03509
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
24 0.15169 45 0.37931 66 2.32623 87 15.18978
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
25 0.14752 46 0.41017 67 2.54312 88 16.36948
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
26 0.14419 47 0.44353 68 2.77350 89 17.57781
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
27 0.14252 48 0.47856 69 3.02328 90 18.82881
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
28 0.14169 49 0.51777 70 3.30338 91 20.14619
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
29 0.14252 50 0.55948 71 3.62140 92 21.57655
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
30 0.14419 51 0.60870 72 3.98666 93 23.20196
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
31 0.14836 52 0.66377 73 4.40599 94 25.28174
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
32 0.15252 53 0.72636 74 4.87280 95 28.27411
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
33 0.15919 54 0.79730 75 5.37793 96 33.10677
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
34 0.16669 55 0.87326 76 5.91225 97 41.68475
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
35 0.17586 56 0.95591 77 6.46824 98 58.01259
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
99 83.33333
- ------------ ------------------- ------------ ------------------- ------------ ------------------- ------------ --------------------
</TABLE>
The rates shown are for a standard premium class. If the policy is based on a
premium class other than standard, the maximum cost of insurance rates will be
adjusted using the rating factor shown in the Segment Benefit Profile of the
Schedule for the premium class. If the premium class is a stated percentage
increase, the maximum cost of insurance rates will be determined by multiplying
the rates for a standard premium class shown above by the rating factor show in
the Segment Benefit Profile of the Schedule. If the premium class is a flat
amount per $1,000, the maximum cost of insurance rates will be determined by
adding the flat amount per $1,000 shown in the Segment Benefit Profile of the
Schedule to the rate per $1,000 for the standard premium class shown above. The
rates shown above are based on the 1980 Commissioners' Standard Ordinary Male
Smoker Composite Mortality Table (Male), age nearest birth date.
Form 2505
(VUL)-3/00 Page 5E
<PAGE>
DEFINITION OF TERMS
ACCOUNT VALUE - The sum of the amounts allocated to the investment options of
the Separate Account and to the Guaranteed Interest Division, as well as any
amount set aside in the Loan Division to secure a policy loan.
ACCUMULATION UNIT - A unit of measurement used to calculate the account value in
each investment option of the Separate Account.
ACCUMULATION UNIT VALUE - The value of an accumulation unit of each investment
option of the Separate Account. The accumulation unit value is determined as of
each valuation date.
AGE - The policy is issued at the age shown in the Schedule. Each issue age is
the age nearest birthday on the policy date.
BASE DEATH BENEFIT - The base death benefit is defined in the Base Death Benefit
provision of the policy.
CUSTOMER SERVICE CENTER - Our administrative office whose address is P. O. Box
173888, Denver, CO 80217.
INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT - The investment options available,
each of which invests in shares of one of the portfolios.
Five-Day deemed delivery time. Five (5) days from the day we mail you your
policy.
GENERAL ACCOUNT - The account that contains all of our assets other than those
held in the Separate Account or our other separate accounts.
GUARANTEED INTEREST DIVISION - Part of our General Account to which a portion of
the account value may be allocated and which provides guarantees of principal
and interest.
INVESTMENT DATE -The first time we allocate funds to your policy. We will
allocate the initial net premium to your policy at the end of the valuation
period during which the latest of the following requirements is satisfied: 1) we
receive the amount of premium required for coverage to begin under the policy;
2) we have approved the policy for issue, and 3) all issue requirements have
been met and received in our Customer Service Center.
LOAN DIVISION - Part of our General Account in which funds are set aside to
secure any outstanding policy loan and accrued loan interest when due.
MONTHLY PROCESSING DATE - The date each month on which the monthly deductions
from the account value are due. The first monthly processing date will be the
policy date or the investment date, if later. Subsequent monthly processing
dates will be the same date as the policy date each month thereafter. If that
date is not a valuation date, monthly processing will use the next calculated
accumulation unit value.
NET ACCOUNT VALUE - The amount of the account value minus any policy loan and
accrued loan interest. This is the same as your surrender value.
NET PREMIUM - The net premium equals the premium paid minus the premium expense
charges shown in the Schedule. These charges are deducted from the premium
before the premium is applied to your account value.
PARTIAL WITHDRAWAL - The withdrawal of a portion of your net account value from
the policy. The partial withdrawal may reduce the amount of base death benefit
in force.
POLICY LOAN - The sum of amounts you have borrowed from your policy, increased
by any policy loan interest capitalized when due, and reduced by any policy loan
repayments.
RIGHT TO EXAMINE PERIOD - The period of time within which the owner may examine
the policy and return it for a refund.
SCHEDULED PREMIUM - The premium amount that you specify on the application as
the amount you intend to pay at fixed intervals over a specified period of time.
Premiums may be paid on a monthly, quarterly, semiannual, or annual basis, as
you determine. You need not pay the scheduled premium and you may change it at
any time.
Form 2505 (VUL)-3/00
Page 6
<PAGE>
Also, within limits, you may pay less or more than the scheduled premium.
SEGMENT - The stated death benefit shown on the Segment Benefit Profile of the
Schedule is the initial segment, or Segment #1. Each increase in the stated
death benefit (other than due to an option change) is a new segment. Each new
segment will be shown separately on the Segment Benefit Profile of the Schedule.
The first year for a segment begins on the effective date of the segment and
ends one year later. Each subsequent year begins at the end of the prior segment
year. Each new segment may be subject to a new sales load, new cost of insurance
charges and new incontestability and suicide exclusion periods.
STATED DEATH BENEFIT -The sum of the segments under the policy. The stated death
benefit changes when there is an increase or a decrease or when a transaction on
the policy causes it to change (for example, a partial withdrawal under an
Option 1 base death benefit may cause the stated death benefit to change).
TARGET DEATH BENEFIT - The target death benefit for your policy is defined in
the Adjustable Term Insurance Rider, if any, attached to the policy.
VALUATION DATE - Each date as of which the net asset value of the shares of the
portfolios and unit values of the divisions are determined.
Except for days that a division's corresponding portfolio does not value its
shares, a valuation date is any day:
(a) The New York Stock Exchange ("NYSE") is open for trading and on which
Security Life's Customer Service Center is open for business; or
(b) as may be required by law.
VALUATION PERIOD - The period which begins at 4:00 p.m. Eastern Time on a
valuation date and ends at 4:00 p.m. Eastern Time on the next succeeding
valuation date.
Form 2505 9VUL)-3/00
Page 6a
<PAGE>
INSURANCE COVERAGE PROVISIONS
EFFECTIVE DATE
The policy date shown in the Schedule is the effective date for all coverage
provided in the original application. The policy date is the date from which we
measure policy years and determine the monthly processing date. The first
monthly processing date is the investment date. Future monthly processing dates
are the same calendar day of each month as the policy date unless this is not a
valuation date in which case the monthly processing date occurs on the next
valuation date. A policy anniversary occurs each year on the same month and day
as the policy date unless this is not a valuation date in which case the policy
anniversary occurs on the next valuation date. The effective date for new
segments and additional benefits is shown in the Schedule.
BASE DEATH BENEFIT
The base death benefit will be, at any time, determined as follows:
Option 1: Under Option 1, the base death benefit is the greater of:
(a) The stated death benefit; or
(b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
Option 2: Under Option 2, the base death benefit is the greater of:
(a) The stated death benefit plus the account value, or
(b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
Option 3: Under Option 3, the base death benefit is the greater of:
(a) The stated death benefit plus premiums paid less withdrawals, or
(b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
The stated death benefit and the death benefit option are shown in the Schedule.
This policy is designed to qualify as a life insurance contract under the
Internal Revenue Code. All terms and provisions of the policy shall be construed
in a manner consistent with that design. The base death benefit in force at any
time shall not be less than the amount of insurance necessary to achieve such
qualification under the applicable provisions of the Internal Revenue Code in
existence at the time the policy is issued. We reserve the right to amend the
policy or adjust the amount of insurance when required. We will send you a copy
of any policy amendment.
Form 2505 (VUL)-3/00
Page 7
<PAGE>
CHANGE IN REQUESTED INSURANCE COVERAGE
You may request that the insurance coverage be increased or decreased. Decreases
are not allowed before the first policy anniversary. The change in coverage may
not be for an amount less than $1,000. The effective date of the change will be
the monthly processing date immediately following the date your written
application is approved by us. After any change to the stated death benefit, you
will receive an amended Schedule reflecting the change, the benefit under any
riders, if applicable, the guaranteed cost of insurance rates, the guideline
annual premium and the new target premium.
REQUESTED INCREASES IN COVERAGE
Subject to our limits, you may request an increase in the stated death benefit
through attained age 75. An increase will become effective as of the monthly
processing date immediately following the date your written application is
approved by us. You must provide evidence satisfactory to us that the insured is
insurable according to our normal rules of underwriting for the applicable
premium class for this type of policy. This evidence will include an application
and may include required medical information. An increase will consist of a new
segment of stated death benefit . Each new segment will result in a new sales
load which will be deducted from the premium allocated to the new segment. A new
deferred sales load will be deducted from the premium. The new segment may also
be subject to new monthly expense charges, new cost of insurance charges and new
incontestability and suicide exclusion periods.
REQUESTED DECREASES IN COVERAGE
After the first policy anniversary, you may request a decrease in the stated
death benefit. We will limit the decrease such that, immediately after the
requested decrease:
(a) If there is no adjustable term insurance on the policy, the
stated death benefit is at least $50,000.
(b) If there is adjustable term insurance on the policy, the target
death benefit is at least $50,000.
A decrease will be effective as of the monthly processing date immediately
following the date your written application is approved by us. A decrease will
first reduce Adjustable Term Insurance Rider coverage, if attached to your
policy, and will then reduce each of the stated death benefit segments in the
same proportion as the stated death benefit is reduced.
DEATH BENEFIT OPTION CHANGES
Beginning with the first monthly processing date and ending with the policy
anniversary nearest the insured's 100th birth date, you may request to change
the death benefit option. This change will be effective as of the monthly
processing date next following approval. A death benefit option change applies
to the entire stated death benefit. We may not allow any change if it would
reduce the target death benefit below the minimum we require to issue this
policy at the time of reduction. Death benefit option changes from Option 1 to
Option 3, from Option 2 to Option 3 and from Option 3 to Option 2 are not
allowed. After the effective date of the change, the stated death benefit will
be changed according to the following table:
Form 2505 (JTVUL)-8/99
Page 8
<PAGE>
<TABLE>
<CAPTION>
OPTION CHANGE
FROM TO STATED DEATH BENEFIT FOLLOWING THE OPTION CHANGE EQUALS:
<S> <C> <C>
Option 1 Option 2 Stated death benefit prior to such change minus your account value as of the effective date of the change.
Option 2 Option 1 Stated death benefit prior to such change plus your account value as of the effective date of the change.
Option 3 Option 1 Stated death benefit prior to such change plus the sum of the premiums paid minus partial withdrawals
taken as of the effective date of the change.
</TABLE>
To determine the segment stated death benefit after an option change, your
account value will be allocated to each segment in the same proportion that
segment bears to the stated death benefit as of the effective date of the
change.
CONTINUATION OF COVERAGE AFTER AGE 100
If the policy is in force on the policy anniversary nearest the insured's 100th
birth date, the policy will continue pursuant to the terms of the policy. On
this date, the following will occur:
(a) The target death benefit on the policy anniversary nearest the insured's
100th birth date will then become the stated death benefit for the policy
and any remaining death benefit in force under the Adjustable Term
Insurance Rider will terminate.
(b) All other riders attached to the policy also will terminate.
(c) The portion of your account value invested in the investment options of
the Separate Account will be transferred into the Guaranteed Interest
Division and no further investment in the Separate Account will be
allowed.
(d) If the death benefit option in force on the policy is Option 2 or Option
3, the policy will be converted to death benefit Option 1 in accordance
with the procedures outlined in the Death Benefit Option Changes
provision of the policy. No further changes will be allowed to the death
benefit option.
After the policy anniversary nearest the insured's 100th birth date, no further
premiums will be accepted and no monthly deductions will be made. However, a
one-time administrative fee of $200 will be charged against the policy's account
value. We will continue to credit interest to the account value in the
Guaranteed Interest Division. Policy loans and withdrawals continue to be
available. Any existing policy loan will continue. Policy loan interest will
continue to accrue. Payments on policy loans and policy loan interest will be
accepted. The policy will enter the 61-day grace period if the surrender value
is zero or less.
If you do not want coverage to continue past the policy anniversary nearest the
insured's 100th birth date, the policy may be surrendered at that time, or
earlier.
Form 2505 (VUL)-3/00
Page 9
<PAGE>
PAYOUT OF PROCEEDS
Proceeds refer to the amount we will pay:
a) upon surrender of the policy; or
b) upon the death of the insured.
The proceeds upon surrender of this policy will be the net account value. The
amount of proceeds payable upon the death of the insured will be the base death
benefit in effect on the date of death, plus any amounts payable from any
additional benefits provided by rider, minus any outstanding policy loan
including accrued but unpaid interest, minus any unpaid monthly deductions
incurred prior to the date of death. The calculation of the death proceeds will
be computed as of the date of the insured's death.
We will determine the amount of proceeds payable upon the death of the insured
when we have received due proof of death and any other information which is
necessary to process the claim. Any proceeds we pay are subject to adjustments
as provided in the Misstatement of Age or Gender, Suicide Exclusion and
Incontestability provisions.
We will pay proceeds in one sum unless you request an alternate form of payment.
There are many possible methods of payment. The available payout options are
described in the Payouts Other Than As One Sum provision. Contact us or your
registered representative for additional information. Interest will be paid on
the one sum death proceeds from the date of death to the date of payment, or
until a payout option is selected. Interest will be at the rate we declare, or
at any higher rate required by law.
PREMIUM PROVISIONS
INITIAL PREMIUM ALLOCATION
If the 5-day deemed delivery time plus your right to examine period have not
ended on the investment date, net premium amounts designated for allocation to
investment options of the Separate Account will be allocated on the investment
date to the Money Market Division and any net premium amount designated for
allocation to the Guaranteed Interest Division will be allocated to that
division. Any additional net premium amounts received after the investment date
and before the end of the 5-day deemed delivery time plus your right to examine
period will be allocated in the same manner as the initial net premium, at the
end of the valuation period during which we receive the premium at our Customer
Service Center. On the valuation date immediately following the end of the 5-day
deemed delivery time plus your right to examine period, the balance of the
amount in the Money Market Division will be transferred to other investment
options of the Separate Account according to your allocation instructions. The
amounts allocated to the Guaranteed Interest Division will remain in that
division.
If the 5-day deemed delivery time plus your right to examine period has ended on
the investment date, initial net premium amounts will be allocated on the
investment date to investment options of the Separate Account and/or to the
Guaranteed Interest Division in accordance with your allocation instructions.
Form 2505 (JTVUL)-8/99
Page 10
<PAGE>
SUBSEQUENT PREMIUM ALLOCATIONS
After the initial premium allocation, all future scheduled and unscheduled
premiums will be allocated to the investment options of the Separate Account in
accordance with your allocation instructions. This allocation will occur at the
end of the valuation period during which we receive the premium at our Customer
Service Center.
CHANGES TO PREMIUM ALLOCATIONS
You may change your premium allocation in accordance with instructions included
in your annual policy prospectus. If the change causes a premium allocation
charge to be incurred according to the Schedule, we will deduct a charge from
the investment options of the Separate Account and from the Guaranteed Interest
Division as described in the prospectus in effect at the time of the
transaction.
SCHEDULED PREMIUMS
The scheduled premium as shown in the Schedule may be paid while this policy is
in force prior to the policy anniversary nearest the insured's 100th birth date.
You may increase or decrease the amount of the scheduled premium, subject to
limits we may set and provisions in the Premium Limitation section. Under
conditions provided in the Grace Period provision, you may be required to make
premium payments to keep the policy in force. You may pay premiums on a monthly
basis through an automated payment facility. All payment modes are subject to
our minimum requirements for the payment mode selected.
UNSCHEDULED PREMIUMS
You may make unscheduled premium payments at any time the policy is in force
prior to the policy anniversary nearest the insured's 100th birth date, subject
to the Premium Limitation section. Unless you tell us otherwise, these premium
payments will first be applied to reduce or pay off any existing policy loan
and, as such, premium expense charges will not be deducted.
NET PREMIUM
The net premium equals the premium paid minus the premium expense charge shown
in the Schedule. The premium expense charge is the sales load plus the tax
charge. The tax charge is the applicable tax percentage times the premium.
To determine the sales load, we multiply the applicable percentage sales load
times the premium allocated to the segment. There is a different percentage
sales load for the allocated premium that is below the segment target premium
than for the allocated premium that is above that segment target premium. The
Form 2505 (JTVUL)-8/99
Page 11
<PAGE>
applicable percentage sales load also depends on the segment year the premium is
received. Each premium received is allocated to the existing segments. (If there
is only one segment the entire premium is allocated to that segment.) Premiums
are allocated in the same proportion that the target premium of each segment
bears to the sum of the target premiums of all segments.
The Schedule shows: (1) the target premium for each segment; (2) the percentage
sales loads; (3) the deferred sales load; and (4) the tax percentage.
PREMIUM LIMITATION
We will refund any premium that causes your policy not to qualify as a life
insurance policy under the Internal Revenue Code. No premium may be paid after
the death of the insured. No premium may be paid after the policy anniversary
nearest the insured's 100th birth date.
FAILURE TO PAY PREMIUM
If you stop paying premiums prior to the policy anniversary nearest the
insured's 100th birth date, your coverage may lapse. See your Grace Period
provision for details.
SEPARATE ACCOUNT PROVISIONS
THE SEPARATE ACCOUNT
The Separate Account is an account established by us, pursuant to the laws of
the State of Colorado, to separate the assets funding the benefits for the class
of policies to which this policy belongs from the other assets of Security Life
of Denver Insurance Company.
The Separate Account is registered as a unit investment trust under the
Investment Company Act of 1940. All income, gains and losses, whether or not
realized, from assets allocated to the Separate Account are credited to or
charged against the Separate Account without regard to income, gains or losses
of our General Account. The assets of the Separate Account are our property but
are separate from our General Account and our other Separate Accounts. That
portion of the assets of the Separate Account which is equal to the reserves and
other policy liabilities with respect to the Separate Account is not chargeable
with liabilities arising out of any other business we may conduct or subject to
creditor claims against us.
SEPARATE ACCOUNT INVESTMENT OPTIONS
The Separate Account is divided into investment options, each of which invests
in a fund portfolio designed to meet the objectives of the investment option.
The current eligible investment options are shown in your annual policy
prospectus. We may, from time to time, add additional investment options. If we
do, you may be permitted to select from these other divisions subject to the
terms and conditions we may impose on those allocations.
Form 2505 (VUL)-3/00
Page 12
<PAGE>
We reserve the right to limit the number of divisions in which you may invest
over the life of the policy. This limit, if any, will be listed in the updated
policy prospectus provided to you each year.
CHANGES WITHIN THE SEPARATE ACCOUNT
When permitted by law, and subject to any required notice to you and approval of
the Securities and Exchange Commission ("SEC"), state regulatory authorities or
policy owners, we may from time to time make the following changes to the
Separate Account:
o Make additional investment options available. These investment
options will invest in portfolios we find suitable for the policy.
o Eliminate investment options from the Separate Account or combine 2
or more investment options.
o Substitute a new portfolio for the portfolio in which a investment
option invests. A substitution may become necessary if, in our
judgment, a portfolio no longer suits the purposes of the policy.
This may happen due to a change in laws or regulations, or a change
in a portfolio's investment objectives or restrictions. This may also
happen if the portfolio is no longer available for investment, or for
some other reason, such as a declining asset base.
o Transfer assets of the Separate Account, which we determine to be
associated with the class of policies to which your policy belongs,
to another Separate Account.
o Withdraw the Separate Account from registration under the Investment
Company Act of 1940.
o Operate the Separate Account as a management investment company under
the Investment Company Act of 1940.
o Invest one or more investment option in a mutual fund other than, or
in addition to, the portfolios.
o Discontinue the sale of policies.
o Terminate any employer or plan trustee agreement with us pursuant to
its terms.
o Restrict or eliminate any voting rights as to the Separate Account.
o Make any changes required by the Investment Company Act of 1940 or
the rules or regulations thereunder.
Form 2505 (VUL)-3/00
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GENERAL ACCOUNT PROVISIONS
THE GENERAL ACCOUNT
The General Account holds all of our assets other than those held in the
Separate Account or our other separate accounts. The Guaranteed Interest
Division is a part of our General Account.
GUARANTEED INTEREST DIVISION
The Guaranteed Interest Division is another division to which you may allocate
premiums or make transfers. The account value of the Guaranteed Interest
Division is equal to amounts allocated to this division plus any earned interest
minus deductions taken from this division. Interest is credited at the
guaranteed rate shown in the schedule or may be credited at a higher rate. Any
higher rate is guaranteed to be in effect for at least a 12-month period.
LOAN DIVISION
The Loan Division is the account that is set aside to secure the policy loan, if
any. See the Loan Provisions section for information.
TRANSFER PROVISIONS
After the initial premium allocation and until the policy anniversary nearest
the insured's 100th birth date, your account value in each division may be
transferred to any other investment option of the Separate Account or to the
Guaranteed Interest Division upon your request. One transfer from the Guaranteed
Interest Division into the variable divisions may be made during the first 30
days of each policy year. Additional limitations, requirements and charges for
transfers will be listed in and governed by your annual policy prospectus in
effect at the time of the transfer. We reserve the right to modify these
limitations, requirements and charges from time to time. On the policy
anniversary nearest the insured's 100th birth date, your account value in each
investment option of the Separate Account will be transferred into the
Guaranteed Interest Division and no further transfers will be allowed.
ACCOUNT VALUE PROVISIONS
The account value is the sum of the current amounts allocated to the investment
options of the Separate Account and to the Guaranteed Interest Division plus
your balance in the Loan Division.
Form 2505 (VUL)-3/00
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The account value is based on the premiums paid, policy and rider charges
assessed, loans and withdrawals taken, monthly deductions, premium expense
charges, transaction charges, and the investment experience or credited interest
of the divisions to which your account value is allocated.
Your net account value is equal to your account value minus any policy loan and
accrued but unpaid loan interest.
ACCOUNT VALUES ON THE INVESTMENT DATE
The account value of each investment option of the Separate Account and the
Guaranteed Interest Division as of the investment date is equal to:
a) The allocation to that division of the first net premium paid; minus
b) The portion of any monthly deductions allocated to that division due
on the investment date.
ACCUMULATION UNIT VALUE
The investment experience of an investment option of the Separate Account is
determined as of each valuation date. We use an accumulation unit value to
measure the experience of each of the Separate Account investment options during
a valuation period. We generally set the accumulation unit value at $10 when
each investment option is opened. The accumulation unit value for a valuation
date equals the accumulation unit value for the preceding valuation date
multiplied by the accumulation experience factor defined below for the valuation
period ending on the valuation date.
The number of units for a given transaction related to an investment option of
the Separate Account as of a valuation date is determined by dividing the dollar
value of that transaction by that division's accumulation unit value for that
date.
ACCUMULATION EXPERIENCE FACTOR
For each investment option of the Separate Account, the accumulation experience
factor reflects the investment experience of the portfolio in which that option
invests and the charges assessed against that investment option for a valuation
period. The accumulation experience factor is calculated as follows:
a) The net asset value of the portfolio in which that investment option
invests as of the end of the current valuation period; plus
b) The amount of any dividend or capital gains distribution declared and
reinvested in the portfolio in which that investment option invests
during the current valuation period; minus
c) A charge for taxes, if any.
d) The result of (a), (b) and (c) is then divided by the net asset value
of the portfolio in which that investment option invests as of the
end of the preceding valuation period.
e) The daily equivalent of the annual mortality and expense risk charge
shown in the Schedule for each day in the current valuation period is
then subtracted from the result obtained in (d).
Form 2505 (VUL)-3/00
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ACCOUNT VALUE OF THE INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT
On subsequent valuation dates after the investment date, your account value of
each investment options of the Separate Account is calculated as follows:
a) The number of accumulation units in an investment option as of the
beginning of the current valuation period multiplied by that option's
accumulation unit value for the current valuation period; plus
b) Any additional net premiums allocated to that investment option
during the current valuation period; plus
c) Any account value transferred to or minus any account value
transferred from the Separate Account during the current valuation
period (including the applicable portion of any transfer fee); minus
d) Any partial withdrawals allocated to the investment option and any
applicable withdrawal service fees which are allocated to the
Separate Account during the current valuation period; plus
e) Any amounts released from the Loan Division as a result of a loan or
loan interest payment, or minus amounts transferred to the Loan
Division as a result of any loans which are allocated to the Variable
Division during the current valuation period; minus
f) The portion of the monthly deduction allocated to the Separate
Account, if a monthly processing date occurs during the current
valuation period; minus
g) The deferred sales load, if any.
ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION
On valuation dates after the investment date, your account value of the
Guaranteed Interest Division is calculated as follows:
a) The account value of the Guaranteed Interest Division at the end of
the preceding valuation period plus interest at the declared rate
credited during the current valuation period; plus
b) Any additional net premiums allocated to the Guaranteed Interest
Division plus interest credited to these premiums during the current
valuation period; plus
c) Any account value transferred to or minus any account value
transferred from the Guaranteed Interest Division during the current
valuation period (including the applicable portion of any transfer
fee); minus
d) Any partial withdrawals taken and any applicable withdrawal service
fees which are allocated to the Guaranteed Interest Division during
the current valuation period; plus
e) Any amounts released from the Loan Division as a result of a loan or
loan interest payment, or minus amounts transferred to the Loan
Division as a result of any loans which are allocated to the
Guaranteed Interest Division during the current valuation period;
minus
f) The portion of the monthly deduction allocated to the Guaranteed
Interest Division, if a monthly processing date occurs during the
current valuation period; minus
g) The deferred sales load, if any.
Form 2505 (VUL)-3/00
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ACCOUNT VALUE OF THE LOAN DIVISION
On valuation dates after the investment date, your account value of the Loan
Division is equal to:
a) The account value of the Loan Division on the prior valuation date;
plus
b) Any interest credited to the Loan Division during the valuation
period; plus
c) An amount equal to any additional loans since the prior valuation
date; minus
d) Any loan repayments, including payment of loan interest; plus
e) The amount of accrued loan interest if the valuation date is a policy
anniversary; minus
f) The amount of interest credited to the Loan Division during the year
if the valuation date is a policy anniversary.
On policy anniversaries, any amount of interest credited to the Loan Division
during the year is transferred from the Loan Division to the Separate Account
and Guaranteed Interest Division according to your premium allocation then in
effect.
DEDUCTIONS
MONTHLY DEDUCTION
The monthly deduction is equal to:
a) The cost of insurance charges for this policy; plus
b) The monthly charges for any other additional benefits provided by
riders in force under the policy; plus
c) The monthly expense charges shown in the Schedule; plus
d) The policyholder transaction charges as described in the Schedule as
applicable.
The monthly deductions are allocated to the divisions of the Separate Account
and Guaranteed Interest Division as described in the prospectus in effect at the
time of the transaction. This deduction is taken from your account value as of
the monthly processing date. These deductions will display in periodic reports
that we send you at least once per policy year. After the policy anniversary
nearest the insured's 100th birth date no further monthly deductions will be
made, except policy transaction charges incurred after this date.
DEFERRED SALES LOAD
The deferred sales load will be deducted annually on each policy anniversary. It
is calculated based on a percentage of premiums paid in prior policy years up to
the target premium.
Form 2505 (VUL)-3/00
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COST OF INSURANCE
The cost of insurance for the policy is the sum of the cost of insurance for all
segments. A segment's cost of insurance is the cost of insurance rate for the
premium class for the segment multiplied by the net amount at risk allocated to
the segment. It is determined on a monthly basis.
The net amount at risk is (a) minus (b) where:
a) Is the base death benefit for all segments as of the monthly
processing date after the monthly deductions (other than cost of
insurance charges for the base death benefit, and any Adjustable Term
Insurance Rider), divided by the result of 1 plus the monthly
equivalent of the guaranteed interest rate for the Guaranteed
Interest Division as shown in the Schedule; and
b) Is your account value as of the monthly processing date after the
monthly deductions (other than the cost of insurance charges for the
base death benefit and any Adjustable Term Insurance Rider).
The net amount at risk will be allocated to a segment in the same proportion as
that segment's stated death benefit bears to the sum of the stated death
benefits for all segments.
The cost of insurance rate for each segment will be determined by us from time
to time. Different rates will apply to each segment. They will be based on the
age of the insured as of the effective date of segment coverage, the duration
since the coverage began and the segment premium class. Any change in rates will
apply to all individuals of the same premium class and whose policies have been
in effect for the same length of time. The rates will never exceed those rates
shown in the Table of Guaranteed Rates for the segment as adjusted for any
rating. These tables are in the Schedule.
LOAN PROVISIONS
POLICY LOANS
You may obtain a policy loan on or after the first monthly processing date. The
maximum amount you may borrow at any time equals the net account value on the
date of the loan request less all monthly deductions to the next policy
anniversary, or 13 monthly deductions if you take a loan within the 30 day
period before your next policy anniversary. The policy loan is a first lien on
your policy. The minimum amount you may borrow is shown in the Schedule. The
outstanding policy loan amount is equal to the loan amount as of the beginning
of the policy year plus new loans and minus loan repayments, plus accrued
interest.
LOAN INTEREST
The annual policy loan interest rate is shown in the Schedule. If a loan is
made, interest is due and payable at the end of the policy year. Thereafter,
interest on the loan amount is due annually at the end of each policy year until
the loan is repaid. If interest is not paid when due, it is added to the policy
loan.
If the policy loan amount and any accrued interest equals or exceeds the account
value, a premium sufficient to keep this policy in force must be paid as
provided in the Grace Period provision.
Form 2505 (VUL)-3/00
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LOAN DIVISION
When a policy loan is taken or when interest is not paid in cash when due, an
amount equal to the loan or unpaid loan interest respectively, is transferred
from the investment options of the Separate Account and the Guaranteed Interest
Division to the Loan Division to secure the loan. This amount will be deducted
from the investment options of the Separate Account and the Guaranteed Interest
Division in the same proportion that your account value in each investment
option bears to your net account value as of the date the transfer is effective
unless otherwise specified in your instructions to us. Your account value in the
Loan Division will be credited with interest at the interest rate for the Loan
Division shown in the Schedule.
When a loan repayment is made, an amount equal to the repayment is transferred
from the Loan Division to the Guaranteed Interest Division and the investment
options of the Separate Account in the same proportion as your current premium
allocation unless you request a different allocation in writing.
PARTIAL WITHDRAWAL PROVISIONS
You may apply for a partial withdrawal from your account value on any monthly
processing date after the first policy anniversary by writing to us at our
Customer Service Center. The minimum and maximum partial withdrawal amounts are
shown in the Schedule. When a partial withdrawal is made, the amount of the
withdrawal plus a service fee is deducted from your account value. The amount of
the service fee is shown in the Schedule. We limit the number of partial
withdrawals in a policy year. This number is shown in the Schedule.
The stated death benefit is reduced by the amount of the partial withdrawal
unless one of the following exceptions applies.
The stated death benefit is not reduced by a partial withdrawal taken when
the base death benefit has been increased to qualify your policy as life
insurance under the Internal Revenue Code and the amount withdrawn is not
greater than that which reduces your account value to the level which no
longer requires the base death benefit to be increased for Internal
Revenue Code purposes.
For a policy under an Option 1 death benefit, the stated death benefit is
not reduced by a partial withdrawal:
a) If no more than 15 years have elapsed since the policy date;
b) If the insured is not yet age 81; and
c) If the partial withdrawal taken is less than the greater of 10%
of your account value or 5% of the stated death benefit,
calculated immediately before the partial withdrawal. Any
additional amount withdrawn reduces your stated death benefit by
that additional amount.
For a policy under an Option 2 death benefit, a partial withdrawal does not
reduce your stated death benefit.
For a policy under an Option 3 death benefit, a partial withdrawal reduces your
stated death benefit by any amount of the partial withdrawal in excess of
premiums paid, less prior withdrawals, to the date of the partial withdrawal.
Any reduction in death benefit or account value will occur as of the date the
partial withdrawal occurs.
We will limit the amount of the partial withdrawal such that, immediately after
the requested withdrawal:
Form 2505 (VUL)-3/00
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a) If there is no adjustable term insurance on the policy, the stated
death benefit is at least $50,000.
b) If there is adjustable term insurance on the policy, the target death
benefit is at least $50,000.
You may specify how much of the withdrawal you wish taken from each investment
option of the Separate Account or from the Guaranteed Interest Division. You may
not withdraw from the Guaranteed Interest Division more than the total
withdrawal times the ratio of your account value in the Guaranteed Interest
Division to your net account value immediately prior to the withdrawal. Unless
you indicate otherwise, we will make the withdrawal from the amounts in the
Guaranteed Interest Division and the investment options of the Separate Account
in the same proportion that your account value in each investment option bears
to your net account value immediately prior to the withdrawal. The withdrawal
service fee deducted from your account value is deducted from each Variable
Division and the Guaranteed Interest Division as described in the prospectus in
effect at the time of the transaction.
We may send you a new Schedule to reflect the effect of the withdrawal if there
is any change to the stated death benefit. We may ask you to return your policy
to our Customer Service Center to make this change. The withdrawal and the
reductions in death benefits will be effective as of the valuation date after we
receive your request.
SURRENDER PROVISIONS
SURRENDER VALUE
The surrender value on any date will be your account value minus any policy loan
including accrued but unpaid loan interest.
BASIS OF COMPUTATIONS
The surrender value under the policy is not less than the minimum required as of
the policy date by the state in which your policy was delivered. A detailed
statement of the method of computation of policy values under the policy has
been filed with the insurance department of the state in which the policy was
delivered, if required.
FULL SURRENDERS
You may surrender your policy after the Right to Examine Period or at any time
during the lifetime of the insured and receive the surrender value. We will
compute the surrender value as of the next valuation date after we receive both
your request and the policy at our Customer Service Center. This policy will be
canceled as of the date we receive your request, and there will be no further
benefits under this policy. Once you surrender this policy, it cannot be
reinstated.
Form 2505 (VUL)-3/00
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GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS
GRACE PERIOD
If the net account value is zero or less on a monthly processing date, the
policy will enter a 61-day grace period:
We will give you a 61-day grace period from this monthly processing date to make
the required premium payment. The required premium payment then due must be paid
to keep the policy in force. If this amount is not received in full by the end
of the grace period, the policy will lapse without value. The required premium
payment will be equal to past due charges plus an amount we expect to be
sufficient to keep the policy and any riders in force for 2 months following
receipt of the required premium payment. If we receive at least the required
premium payment during the grace period, we will apply the net premium payment
to the policy and make deductions for the past due amounts.
Notice of the amount of the required premium payment will be mailed to you or
any assignee at the last known address at least 30 days before the end of the
grace period. If the insured dies during the grace period, we will deduct any
overdue monthly charges from the death proceeds of the policy.
TERMINATION
All coverage provided by this policy will end as of the earliest of:
a) The date the policy is surrendered;
b) The date of the death of the insured; or
c) The date the grace period ends without payment of the required
premium.
REINSTATEMENT
The policy and its riders may be reinstated within five years after the
beginning of the grace period. The reinstatement will be effective as of the
monthly processing date on or next following the date we approve your written
application.
We will reinstate the policy and any riders if the following conditions are met:
a) You have not surrendered the policy for its surrender value;
b) You submit evidence satisfactory to us that the insured and those
insured under any riders are still insurable according to our normal
rules of underwriting for the applicable underwriting class for this
type of policy; and
c) We receive payment of the amount of premium sufficient to keep the
policy and any riders in force from the beginning of the grace period
to the end of the expired grace period and for 2 months after the
date of reinstatement. We will let you know, at the time you request
reinstatement, the amount of premium needed for this purpose.
Form 2505 (VUL)-3/00
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We will reinstate any policy loan, with accrued loan interest to the end of the
grace period, which existed when coverage ended.
Upon reinstatement, the net premium received minus past due amounts will be
allocated to the investment options of the Separate Account and the Guaranteed
Interest Division according to the premium allocation percentages in effect at
the start of the grace period or as directed by you in writing at the time of
reinstatement.
DEFERRAL OF PAYMENT
Requests for transfers, withdrawals, policy loans or payment of proceeds for a
full surrender will be mailed within 7 days of receipt of the request in a form
acceptable to us. However, we may postpone the processing of any such Separate
Account transactions for any of the following reasons:
a) The New York Stock Exchange (NYSE) is closed, other than customary
weekend and holiday closings.
b) Trading on the NYSE is restricted by the Securities and Exchange
Commission (SEC).
c) The SEC declares that an emergency exists as a result of which
disposal of securities in the Separate Account is not reasonably
practicable to determine your account value in the divisions.
d) A governmental body having jurisdiction over the Separate Account by
order permits such suspension.
Rules and regulations of the SEC, if any, are applicable and will govern as to
whether conditions described in (b), (c), or (d) exist.
Death proceeds will be paid within 7 days of determination of the proceeds and
are not subject to deferment. We may defer for up to 6 months payment of any
surrender proceeds, withdrawal or loan amounts from the Guaranteed Interest
Division.
GENERAL POLICY PROVISIONS
THE POLICY
The policy, including the original application and applications for any
increases, decreases, riders, endorsements, any Schedule pages, and any
reinstatement applications make up the entire contract between you and us. A
copy of the original application will be attached to the policy at issue or at
delivery. A copy of any application as well as a new Schedule will be attached
or furnished to you for attachment to the policy at the time of any change in
coverage. In the absence of fraud, all statements made in any application will
be considered representations and not warranties. No statement will be used to
deny a claim unless it is in an application.
CONTRACT CHANGES
All changes made by us must be signed by our president or an officer and by our
secretary or assistant secretary. No other persons can change any of this
policy's terms and conditions.
Form 2505 (VUL)-3/00
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PROCEDURES
We must receive any election, designation, assignment or any other change
request you make in writing, except those specified on the application. It must
be in a form acceptable to us. We may require a return of the policy for any
change or for a full surrender. We are not liable for any action we take before
we receive and record the written request at our Customer Service Center.
In the event of the death of the insured, please notify us, or our agent, as
soon as possible. Upon notification to us, or our agent, instructions will be
sent to you or the beneficiary immediately. We may require proof of age and a
certified copy of the death certificate. We may require the beneficiary and next
of kin to sign authorizations as part of due proof. These authorization forms
allow us to obtain information about the decedent, including, but not limited
to, medical records of physicians and hospitals used by the decedent. Settlement
will be made upon receipt of due proof of death.
OWNERSHIP
The original owner is the person or entity named as the owner in the
application. You, as the owner, can exercise all rights and receive the benefits
until the death of the insured. This includes the right to change the owner,
beneficiaries, and methods for the payment of proceeds. All rights of the owner
are subject to the rights of any assignee and any irrevocable beneficiary.
You may name a new owner by sending written notice to us. The effective date of
the change to the new owner will be the date you sign the notice. The change
will not affect any payment made or action taken by us before recording the
change at our Customer Service Center.
BENEFICIARIES
The primary beneficiary surviving the insured will receive any death proceeds
which become payable. Surviving contingent beneficiaries are paid death proceeds
only if no primary beneficiary has survived the insured. If more than one
beneficiary in a class survives the insured, they will share the death proceeds
equally, unless your designation provides otherwise. If there is no designated
beneficiary surviving, you or your estate will be paid the death proceeds. The
beneficiary designation will be on file with us or at a location designated by
us. Until the death of the insured, you may name a new beneficiary. The
effective date of the change will be the date the request was signed. We will
pay proceeds to the most recent beneficiary designation on file. We will not be
subject to multiple payments.
EXCHANGE RIGHT
If, for any reason, within the first 2 policy years you want to exchange this
policy for a policy in which values do not vary with the investment experience
of the Separate Account, we will exchange this policy. The exchange will be
implemented by transferring your account value in all the Divisions of the
Separate Account to the Guaranteed Interest Division and removing your future
right to choose to allocate funds to the Divisions of the Separate Account. This
transfer will not be subject to the excess transfer charge. We will require a
return of this policy before this change will be processed.
COLLATERAL ASSIGNMENT
You may assign this policy as collateral security by written notice to us. Once
it is recorded with us, the rights of the owner and beneficiary are subject to
the assignment. It is your responsibility to make sure the assignment is valid.
Form 2505 (VUL)-3/00
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INCONTESTABILITY
After this policy has been in force during the insured's life from the policy
date, we will not contest the statements in the application attached at issue.
After this policy has been in force during the insured's life from the effective
date of any new segment or from the effective date of an increase in any other
benefit, we will not contest the statements in the application for the new
segment or other increase.
After this policy has been in force while the insured is alive for 2 years from
the effective date of any reinstatement, we will not contest the statements in
the application for such reinstatement.
MISSTATEMENT OF AGE OR GENDER
If the insured's age or gender has been misstated, the death benefit will be
adjusted. The death benefit will be that which the cost of insurance, which was
deducted from your Account Value on the last monthly processing date prior to
the insured's death, would have purchased for the insured's correct age and
gender. If the death benefit adjustment is made prior to death, the adjusted
benefit will be to an equitable amount determined by us. This adjustment will
reflect the death benefit for the correct age or gender.
SUICIDE EXCLUSION
If the insured commits suicide, while sane or insane, within 2 years of the
policy date, we will make a limited payment to the beneficiary. We will pay in
one sum the amount of all premiums paid to us during that time, minus any
outstanding policy loan (including accrued but unpaid interest) and partial
withdrawals. Coverage under the policy and all riders will then terminate.
If the insured commits suicide, while sane or insane, within 2 years of the
effective date of a new segment or of an increase in any other benefit, we will
make a limited payment to the beneficiary for the new segment or other increase.
This payment will equal the cost of insurance and any applicable monthly expense
charges deducted for such increase. Coverage under that segment will then
terminate.
PERIODIC REPORTS
We will send you, without charge, at least once each year a report that shows
the current account value, cash surrender value and premiums paid since the last
report. The report will also show the allocation of your account value as of the
date of the report and the amounts added to or deducted from your account value
of each division since the last report. The report will include any other
information that may be currently required by the insurance supervisory official
of the jurisdiction in which this policy is delivered.
ILLUSTRATION OF BENEFITS AND VALUES
We will send you, upon written request, a hypothetical illustration of future
death benefits and account values. This illustration will include the
information as required by the laws or regulations where this policy is
delivered. If you request more than one illustration during a policy year, we
reserve the right to charge a reasonable fee for each additional illustration.
The maximum amount of this fee is shown in the Schedule.
Form 2505 (VUL)-3/00
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NONPARTICIPATING
The policy does not participate in our surplus earnings.
CUSTOMER SERVICE CENTER
Our Customer Service Center is at the address shown in the Schedule. Unless you
are otherwise notified:
a) All requests and payments should be sent to us at our Customer
Service Center; and
b) All transactions are effective as of the valuation date the required
information is received at our Customer Service Center.
PAYOUTS OTHER THAN AS ONE SUM
ELECTION
During the insured's lifetime, you may elect to have the beneficiary receive the
proceeds other than in one sum. If you have not made an election, the
beneficiary may do so within 60 days after we receive due proof satisfactory to
us of the insured's death. You may also elect to take the net cash surrender
value of the policy upon its surrender other than in one sum. Satisfactory
written request must be received at our Customer Service Center before payment
can be made. A payee that is not a natural person may not be named without our
consent. The various methods of settlement are described in the following Payout
Options section.
PAYOUT OPTIONS
OPTION I. PAYOUTS FOR A DESIGNATED PERIOD. Payouts will be made in annual,
semi-annual, quarterly or monthly installments per year as elected for a
designated period, which may be 5 to 30 years. The installment dollar
amounts will be equal except for any excess interest as described below.
The amount of the first monthly payout for each $1,000 of account value
applied is shown in Settlement Option Table I.
OPTION II. LIFE INCOME WITH PAYOUTS FOR A DESIGNATED PERIOD. Payouts will
be made in annual, semi-annual, quarterly or monthly installments per year
throughout the payee's lifetime, or if longer, for a period of 5, 10, 15 or
20 years as elected. The installment dollar amounts will be equal except
for any excess interest as described below. The amount of the first monthly
payout for each $1,000 of account value applied is shown in Settlement
Option Table II. This option is available only for ages shown in the table.
Payouts for Payout Option II will be determined by using the 1983
Individual Annuity Mortality Table for the appropriate gender at 3 1/2%
interest.
OPTION III. HOLD AT INTEREST. Amounts may be left on deposit with us to be
paid upon the death of the payee or at any earlier date elected. Interest
on any unpaid balance will be at the rate declared by us or at any higher
rate required by law. Interest may be accumulated or paid in 1, 2, 4, or 12
installments per year, as elected. Money may not be left on deposit for
more than 30 years.
Form 2505 (VUL)-3/00
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OPTION IV. PAYOUTS OF A DESIGNATED AMOUNT. Payouts will be made until
proceeds, together with interest which will be at the rate declared by us
or at any higher rate required by law, are exhausted. Payouts will be made
in annual, semi-annual, quarterly or monthly equal installments per year,
as elected.
OPTION V. OTHER. Settlement may be made in any other manner as agreed upon
in writing between you (or the beneficiary) and us.
CHANGE AND WITHDRAWAL
You may change an election at any time before the death of the insured. If you
have given the beneficiary the right to make changes or withdrawals, or if the
beneficiary has elected the option, the beneficiary (as primary payee) may take
the actions below.
a) Changes may be made from Payout Options I, III, and IV to another
option.
b) Full withdrawals may be made under Payout Option III or IV. Partial
withdrawals of not less than $300 may be made under Payout Option
III.
c) Remaining installments under Payout Option I may be commuted at 3
1/2% interest and received in one sum.
d) Changes in any contingent payee designation may be made.
A written request must be sent to our Customer Service Center in writing to make
a change or withdrawal. We also may require that you send in the supplementary
policy. We may defer payment of commuted and withdrawable amounts for a period
up to 6 months.
EXCESS INTEREST
If we declare that Payout Options are to be credited with an interest rate above
that guaranteed, it will apply to Payout Options I, II, III, and IV. The
crediting of excess interest for one period does not guarantee the higher rate
for other periods. Any declared interest rate will be in effect for at least 12
months.
MINIMUM AMOUNTS
The minimum amount which may be applied under any option is $2,000. If the
payments to the payee are ever less than $20, we may change the frequency of
payments so as to result in payments of at least that amount.
SUPPLEMENTARY POLICY
When a payout option becomes effective, the policy will be surrendered in
exchange for a supplementary policy. It will provide for the manner of
settlement and rights of the payees. The supplementary policy's effective date
will be the date of death or the date of other settlement. The first payment
under Options I, II, and IV will be payable as of the effective date. The first
interest payment under Option III will be made as of the end of the interest
payment period elected. Subsequent payments will be made in accordance with the
frequency of payment elected. The supplementary policy may not be assigned or
payments made to another without our consent.
Form 2505 (VUL)-3/00
Page 26
<PAGE>
INCOME PROTECTION
Unless otherwise provided in the election, a payee does not have the right to
commute, transfer or encumber amounts held or installments to become payable. To
the extent provided by law, the proceeds, amount retained, and installments are
not subject to any payee's debts, policies, or engagements.
DEATH OF PRIMARY PAYEE
Upon the primary payee's death, any payments certain under Option I or II,
interest payments under Option III, or payments under Option IV will be
continued to the contingent payee; or, amounts may be released in one sum if
permitted by the policy. The final payee will be the estate of the last to die
of the primary payee and any contingent payee.
PAYMENTS OTHER THAN MONTHLY
The tables that follow show monthly installments for Options I and II. To arrive
at annual, semiannual, or quarterly payments, multiply the appropriate figures
by 11.813, 5.957 or 2.991 respectively. Factors for other periods certain or for
other options that may be provided by mutual agreement will be provided upon
reasonable request.
Form 2505 (VUL)-3/00
Page 27
<PAGE>
SETTLEMENT OPTION TABLES
SETTLEMENT OPTION TABLE I
(Per $1,000 of Net Proceeds)
- ---------------------- ---------------- ------------------- -----------------
No. of Monthly No. of Monthly
Years Payable Installments Years Payable Installments
- ---------------------- ---------------- ------------------- -----------------
1 $84.65 16 6.76
- ---------------------- ---------------- ------------------- -----------------
2 43.05 17 6.47
- ---------------------- ---------------- ------------------- -----------------
3 29.19 18 6.20
- ---------------------- ---------------- ------------------- -----------------
4 22.27 19 5.97
- ---------------------- ---------------- ------------------- -----------------
5 18.12 20 5.75
- ---------------------- ---------------- ------------------- -----------------
- ---------------------- ---------------- ------------------- -----------------
6 15.35 21 5.56
- ---------------------- ---------------- ------------------- -----------------
7 13.38 22 5.39
- ---------------------- ---------------- ------------------- -----------------
8 11.90 23 5.24
- ---------------------- ---------------- ------------------- -----------------
9 10.75 24 5.09
- ---------------------- ---------------- ------------------- -----------------
10 9.83 25 4.96
- ---------------------- ---------------- ------------------- -----------------
- ---------------------- ---------------- ------------------- -----------------
11 9.09 26 4.84
- ---------------------- ---------------- ------------------- -----------------
12 8.46 27 4.73
- ---------------------- ---------------- ------------------- -----------------
13 7.94 28 4.63
- ---------------------- ---------------- ------------------- -----------------
14 7.49 29 4.53
- ---------------------- ---------------- ------------------- -----------------
15 7.10 30 4.45
- ---------------------- ---------------- ------------------- -----------------
Form 2505 (VUL)-3/00
Page 28
<PAGE>
SETTLEMENT OPTION TABLE II
FEMALE
( Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birth date When First Installment Birth date When First Installments
Installment is Payable Installment is Payable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Female Certain Certain Certain Certain Female Certain Certain Certain Certain
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
15 3.19 3.19 3.19 3.19 41 3.76 3.76 3.75 3.73
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
16 3.20 3.20 3.20 3.20 42 3.80 3.80 3.78 3.77
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
17 3.22 3.22 3.21 3.21 43 3.84 3.84 3.82 3.81
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
18 3.23 3.23 3.23 3.23 44 3.88 3.88 3.86 3.84
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
19 3.24 3.24 3.24 3.24 45 3.93 3.92 3.91 3.88
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
20 3.26 3.26 3.26 3.25 46 3.98 3.97 3.95 3.92
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
21 3.27 3.27 3.27 3.27 47 4.03 4.02 4.00 3.97
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
22 3.29 3.29 3.29 3.28 48 4.08 4.07 4.05 4.01
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
23 3.31 3.30 3.30 3.30 49 4.13 4.12 4.10 4.06
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
24 3.32 3.32 3.32 3.32 50 4.19 4.18 4.15 4.11
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
25 3.34 3.34 3.34 3.33 51 4.25 4.24 4.21 4.16
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
26 3.36 3.36 3.35 3.35 52 4.32 4.30 4.26 4.21
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
27 3.38 3.38 3.37 3.37 53 4.38 4.36 4.33 4.27
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
28 3.40 3.40 3.39 3.39 54 4.46 4.43 4.39 4.32
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
29 3.42 3.42 3.41 3.41 55 4.53 4.51 4.46 4.38
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
30 3.44 3.44 3.43 3.43 56 4.61 4.58 4.53 4.44
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
31 3.46 3.46 3.46 3.45 57 4.70 4.66 4.60 4.51
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
32 3.49 3.48 3.48 3.48 58 4.79 4.75 4.68 4.57
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
33 3.51 3.51 3.51 3.50 59 4.88 4.84 4.76 4.64
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
34 3.54 3.54 3.53 3.52 60 4.99 4.93 4.84 4.70
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
35 3.57 3.56 3.56 3.55 61 5.09 5.03 4.93 4.77
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
36 3.60 3.59 3.59 3.58 62 5.21 5.14 5.02 4.84
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
37 3.63 3.62 3.62 3.61 63 5.33 5.25 5.12 4.91
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
38 3.66 3.65 3.65 3.64 64 5.46 5.37 5.21 4.98
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
39 3.69 3.69 3.68 3.67 65 5.60 5.50 5.31 5.05
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
40 3.73 3.72 3.71 3.70 66 5.75 5.63 5.42 5.12
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ------------- ----------
</TABLE>
Form 2505 (VUL)-3/00
Page 29
<PAGE>
SETTLEMENT OPTION TABLE II/FEMALE
(Continued)
( Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birth date When First Installment Birth date When First Installments
Installment is Payable Installment is Payable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Female Certain Certain Certain Certain Female Certain Certain Certain Certain
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- -------------- ---------- -----------
67 5.91 5.77 5.53 5.19 92 14.45 9.61 7.09 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
68 6.08 5.91 5.63 5.25 93 14.81 9.66 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
69 6.26 6.07 5.74 5.32 94 15.16 9.70 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
70 6.46 6.23 5.86 5.37 95 15.49 9.73 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
71 6.67 6.40 5.97 5.43 96 15.80 9.76 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
72 6.89 6.58 6.08 5.48 97 16.11 9.79 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
73 7.13 6.76 6.18 5.52 98 16.40 9.80 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
74 7.39 6.95 6.29 5.57 99 16.68 9.82 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
75 7.67 7.14 6.39 5.60 100 16.95 9.82 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
76 7.96 7.34 6.48 5.63 101 17.20 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
77 8.28 7.54 6.57 5.66 102 17.43 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
78 8.61 7.74 6.65 5.68 103 17.62 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
79 8.97 7.94 6.72 5.70 104 17.78 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
80 9.34 8.13 6.79 5.71 105 17.91 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
81 9.73 8.32 6.84 5.72 106 18.00
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
82 10.14 8.50 6.89 5.73 107 18.06
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
83 10.57 8.67 6.94 5.74 108 18.09
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
84 11.01 8.83 6.97 5.74 109 18.11
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
85 11.46 8.97 7.00 5.75 110 18.11
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
86 11.91 9.10 7.02 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
87 12.36 9.22 7.04 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
88 12.81 9.32 7.06 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
89 13.25 9.41 7.07 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
90 13.67 9.48 7.08 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
91 14.07 9.55 7.09 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ------------- ----------- ------------
</TABLE>
Form 2505 (VUL)-3/00
Page 30
<PAGE>
SETTLEMENT OPTION TABLE II
MALE
( Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birth date When First Installment Birth date When First Installments
Installment is Payable Installment is Payable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Male Certain Certain Certain Certain Male Certain Certain Certain Certain
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
15 3.28 3.28 3.27 3.27 41 4.01 4.00 3.97 3.94
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
16 3.29 3.29 3.29 3.28 42 4.06 4.04 4.01 3.98
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
17 3.31 3.31 3.30 3.30 43 4.11 4.09 4.06 4.02
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
18 3.32 3.32 3.32 3.32 44 4.16 4.14 4.11 4.06
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
19 3.34 3.34 3.34 3.33 45 4.22 4.20 4.16 4.11
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
20 3.36 3.36 3.35 3.35 46 4.28 4.25 4.21 4.16
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
21 3.38 3.38 3.37 3.37 47 4.34 4.31 4.27 4.21
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
22 3.40 3.40 3.39 3.39 48 4.41 4.38 4.33 4.26
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
23 3.42 3.42 3.41 3.41 49 4.48 4.44 4.39 4.31
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
24 3.44 3.44 3.43 3.43 50 4.55 4.51 4.45 4.36
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
25 3.46 3.46 3.45 3.45 51 4.62 4.58 4.52 4.42
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
26 3.49 3.48 3.48 3.47 52 4.70 4.66 4.58 4.48
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
27 3.51 3.51 3.50 3.49 53 4.79 4.74 4.65 4.54
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
28 3.54 3.53 3.53 3.52 54 4.88 4.82 4.73 4.60
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
29 3.56 3.56 3.55 3.54 55 4.97 4.91 4.80 4.66
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
30 3.59 3.59 3.58 3.57 56 5.07 5.00 4.88 4.72
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
31 3.62 3.62 3.61 3.60 57 5.17 5.10 4.97 4.78
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
32 3.65 3.65 3.64 3.62 58 5.29 5.20 5.05 4.85
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
33 3.68 3.68 3.67 3.65 59 5.41 5.31 5.14 4.91
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
34 3.72 3.71 3.70 3.68 60 5.53 5.42 5.23 4.97
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
35 3.75 3.75 3.73 3.72 61 5.67 5.54 5.33 5.04
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
36 3.79 3.78 3.77 3.75 62 5.81 5.67 5.42 5.10
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
37 3.83 3.82 3.81 3.78 63 5.97 5.80 5.52 5.16
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
38 3.87 3.86 3.85 3.82 64 6.13 5.94 5.62 5.22
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
39 3.92 3.90 3.89 3.86 65 6.31 6.08 5.72 5.28
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
40 3.96 3.95 3.93 3.90
- ---------------------- ------- -------- -------- -------- ---------------------- ----------- -------------- ---------- -------------
</TABLE>
Form 2505 (VUL)-3/00
Page 31
<PAGE>
SETTLEMENT OPTION TABLE II/MALE
(Continued)
(Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birth date When First Installment Birth date When First Installments
Installment is Payable Installment is Payable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Male Certain Certain Certain Certain Male Certain Certain Certain Certain
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
66 6.49 6.23 5.82 5.33 91 14.64 9.64 7.09 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
67 6.69 6.38 5.92 5.38 92 15.00 9.68 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
68 6.90 6.54 6.02 5.43 93 15.34 9.72 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
69 7.12 6.71 6.12 5.48 94 15.68 9.75 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
70 7.35 6.87 6.21 5.52 95 16.00 9.78 7.10 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
71 7.60 7.05 6.30 5.55 96 16.30 9.80 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
72 7.86 7.22 6.39 5.59 97 16.59 9.81 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
73 8.13 7.40 6.47 5.62 98 16.86 9.82 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
74 8.42 7.57 6.55 5.64 99 17.11 9.83 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
75 8.72 7.75 6.62 5.66 100 17.33 9.83 7.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
76 9.04 7.92 6.69 5.68 101 17.53 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
77 9.37 8.09 6.75 5.70 102 17.69 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
78 9.72 8.26 6.81 5.71 103 17.82 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
79 10.08 8.42 6.86 5.72 104 17.92 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
80 10.44 8.57 6.90 5.73 105 18.00 9.83
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
81 10.82 8.71 6.94 5.74 106 18.05
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
82 11.21 8.85 6.97 5.74 107 18.08
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
83 11.59 8.97 7.00 5.75 108 18.10
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
84 11.99 9.09 7.02 5.75 109 18.11
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
85 12.38 9.20 7.04 5.75 110 18.11
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
86 12.76 9.29 7.05 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
87 13.15 9.38 7.07 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
88 13.53 9.46 7.08 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
89 13.91 9.53 7.08 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
90 14.28 9.59 7.09 5.75
- ---------------------- ------- -------- -------- --------- ---------------------- ----------- ----------- ----------- -------------
</TABLE>
Form 2505 (VUL)-3/00
Page 32
<PAGE>
THIS POLICY IS A FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICY
THIS IS A NON-PARTICIPATING POLICY
DEATH BENEFITS AND OTHER VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE. THESE VALUES MAY
INCREASE OR DECREASE BASED ON INVESTMENT EXPERIENCE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. DEATH BENEFITS ARE PAYABLE BY US UPON THE DEATH OF THE
INSURED. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY YOU DURING
THE LIFETIME OF THE INSURED UNTIL THE POLICY ANNIVERSARY NEAREST THE INSURED'S
100TH BIRTH DATE.
TO OBTAIN INFORMATION OR MAKE A COMPLAINT, CONTACT
SECURITY LIFE OF DENVER INSURANCE COMPANY AT:
Customer Service Center
P. O. Box 173888
Denver, Colorado 80217
Toll Free Number: 1(800)848-6362
SECURITY LIFE OF DENVER INSURANCE COMPANY
A Stock Company
Form 2505 (VUL)-3/00
Exhibit 1.A(5)(b)
ADJUSTABLE TERM INSURANCE RIDER
This rider is a part of the policy to which it is attached if this rider is
shown in the Schedule. This rider must be read with all policy provisions. This
rider does not participate in our surplus earnings. The insured under this rider
is listed in the Schedule. This rider has no loan value. There is no surrender
charge applicable to this rider. The rider effective date is the policy date or,
if added later, the monthly processing date on or next following the date your
application for this rider is approved by us. The owner of the policy is the
owner of this rider.
THE DEATH BENEFIT. Subject to this rider's terms, we will pay the term death
benefit in force on the date of the insured's death. This benefit is payable to
the beneficiary.
The amount of term death benefit is the difference between the total death
benefit and the base death benefit provided by the policy. Total death benefit
depends on which death benefit option is in effect.
Option 1: If option 1 is in effect, the total death benefit is the greater
of
a) The target death benefit; or
b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
Option 2: If option 2 is in effect, the total death benefit is the greater
of:
a) The target death benefit plus the account value; or
b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
Option 3. If option 3 is in effect, the total death benefit is the greater
of:
a) The target death benefit plus premiums paid less withdrawals, or
b) The account value multiplied by the appropriate factor from the
Death Benefit Factors shown in the Schedule.
In no event will the term death benefit be less than zero. It is also not
increased or decreased by policy loan activity.
In your application for this rider you may request a pattern of increasing or
decreasing target death benefits. The actual target death benefit is subject to
our approval.
The target death benefit is shown in the Schedule attached to your policy. It
may be a constant amount or it may change at the beginning of a policy year. The
target death benefit may be reduced if there is a partial withdrawal.
If a partial withdrawal reduces the stated death benefit, the target death
benefit for the current year and all future years will be reduced by an amount
equal to the reduction in the stated death benefit. You will receive a new
Schedule reflecting the new target death benefit. See your policy for details.
The stated death benefit is defined in your policy.
Any requested decrease in the stated death benefit in the policy will eliminate
any future scheduled increases in the target death benefit. We may choose not to
eliminate these increases upon submission of evidence satisfactory to us that
the insured is still insurable according to our normal rules of underwriting for
their current premium classes.
R2006-3/00
<PAGE>
COST OF INSURANCE. The cost of insurance for this rider is determined on a
monthly basis. The cost is added to the policy's monthly deduction from the
account value as of each monthly processing date until this rider terminates.
The cost of insurance rates will be determined by us from time to time. They
will be based on the issue age, and premium classes of the insured as well as
the duration since the rider effective date. The cost of insurance for this
rider is calculated as the monthly cost of insurance rate multiplied by the
death benefit (in thousands) for this rider. The monthly guaranteed maximum cost
of insurance rates per $1,000 for this rider are shown in the Schedule on the
applicable table of guaranteed rates attached to your policy.
INCONTESTABILITY. After this rider has been in force while the insured is alive
for two years from the rider effective date, we will not contest the statements
in the application for this rider attached at the time the rider is issued.
After this rider has been in force while the insured is alive for two years from
the effective date of any increase in the amount of insurance, we will not
contest the statements in the application for the increase.
After this rider has been in force while the insured is alive for two years from
the effective date of any reinstatement of this rider, we will not contest the
statements in the application for such reinstatement of this rider.
SUICIDE EXCLUSION. If the policy terminates for suicide, this rider will then
terminate without value.
If the insured commits suicide, while sane or insane, within two years of the
rider effective date and the policy is not terminated due to this suicide, we
will terminate this rider and make a limited payment to the beneficiary for the
rider. We will pay in one sum the amount of the cost of insurance for this rider
which was deducted from the policy.
If the insured commits suicide, while sane or insane, within two years of the
effective date of an increase and the policy is not terminated due to this
suicide, we will terminate the increase and pay the cost of insurance associated
with the increase.
MISSTATEMENT OF AGE OR GENDER. If the insured's age or gender has been
misstated, the death benefit will be adjusted. The death benefit will be that
which the cost of insurance which was deducted from the policy value on the last
monthly processing date prior to the death of the insured would have purchased
for the insured's correct age or gender. If the death benefit adjustment is made
prior to the death of the insured, the adjusted benefit will be to an equitable
amount determined by us. The adjustment will reflect the death benefit for the
correct age or gender.
CHANGE IN AMOUNT OF COVERAGE. On any policy anniversary after the first rider
anniversary, the target death benefit under this rider may be changed. The
target death benefit may be increased or decreased by sending a written request
to our Customer Service Center. Any request for increased death benefits will
automatically be an increase to the stated death benefit as well as to the
target death benefit unless you specifically request an increase only to the
target death benefit. You may increase or decrease the target death benefit only
once each policy year. You may not increase insurance coverage provided by this
rider after attained age 75. Any change in coverage may not be for an amount
less than $1,000. Such change is subject to the following conditions:
a) Any requested decrease in target death benefit is subject to our approval.
Our approval may be conditioned on eliminating any future increases to the
target death benefit that are shown in the Schedule.
R2006-3/00
Page 2
<PAGE>
b) Any request for an increase must be applied for on a supplemental
application. The increase is subject to evidence satisfactory to us that
the insured is still insurable according to our normal rules of
underwriting for the current premium class for this type of rider. If
there is no change in premium class, the increase will be processed.
c) For any increase or addition to coverage, the effective date will be the
monthly processing date that falls on or next follows the date the
supplemental application is approved by us. For any decrease in coverage,
the effective date will be the monthly processing date that falls on or
next follows receipt of the written request to reduce coverage.
d) Any decrease in the total death benefit will first reduce adjustable term
insurance before stated death benefit is reduced.
For any change in coverage, a supplemental Schedule will be issued.
TERMINATION. This rider will terminate on the earliest of the following dates:
a) Expiration of the grace period of the policy.
b) Termination or surrender of the policy.
c) Receipt by us of a written request from you to cancel this rider on any
monthly processing date.
d) Policy anniversary nearest the insured's 100th birth date.
Any deduction for the cost of insurance after termination of this rider will not
be considered a reinstatement of this rider nor a waiver by us of the
termination. Any such deduction will be credited to the account value of the
policy as of the date of the deduction.
REINSTATEMENT. If you reinstate your policy under the Reinstatement provision in
the policy, this rider will be reinstated.
Signed for the company at Denver, Colorado
SECURITY LIFE OF DENVER INSURANCE COMPANY
/s/ Gary W. Waggoner
SECRETARY
R2006-3/00
Page 3
Exhibit 1.A(5)(c)
CERTIFICATE OF INSURANCE
POLICY NUMBER
INSURED
EFFECTIVE DATE
OWNER
FACE AMOUNT
ISSUE AGE
The Company certifies that it has issued the above numbered policy to the Owner.
This Certificate is provided only as a matter of notice. All insured benefits
are stated in the policy and are subject to all the provisions thereof and shall
continue only while the policy remains in force.
The face amount reflects the amount of insurance in force for the policy number
indicated as of the effective date shown.
Security Life of Denver Insurance Company
/s/ Mark A. Smith
Mark A. Smith
Vice President
Insurance Services Division
Exhibit 1.A(10)
[logo of ING Security Life] Security Life of Denver Insurance Company
Variable Life Customer Service Center
P.O. Box 173888
Denver, CO 80217-3885
1-800-848-6362
Fax: 303-860-2695
GUARANTEED ISSUE VARIABLE LIFE INSURANCE APPLICATION
_
1 |_| Check here if for PENSION or similar tax qualified plan. State plan type
in Special Instructions.
SECTION A - PROPOSED INSURED
<TABLE>
<S> <C> <C> <C> <C>
2 Name (First Middle Last) Birthdate (Mo/Day/Yr) Birthstate Sex
_ _
|_| M |_| F
Home Address (Street, Apt. No.) City State Zip Code
Social Security Number Home Phone ( ) Work Phone ( )
</TABLE>
3a Occupation:________________________________ 3b Date of Hire:_____________
4a Is Proposed Insured currently actively at work on a full time basis
performing all duties of Proposed Insured's regular occupation, at Proposed
Insured's customary place of employment for at least 30 hours per week?
_ _
|_| Yes |_| No If "No" explain:
____________________________________________________________________________
4b Has Proposed Insured: (1) been absent from work due to illness or medical
treatment for a period of 5 business days or more within the last 90 days;
or (2) been hospitalized for any reason during this same period?
_ _
|_| Yes |_| No If "Yes" explain:
____________________________________________________________________________
5 Has Proposed Insured used tobacco (cigarettes, cigars, chewing tobacco,
pipe, nicotine substitutes, etc.) or any other substance containing nicotine
within the last 12 months?
_ _
|_| Yes |_| No If "Yes," what type and frequency?
____________________________________________________________________________
6 Is this insurance to replace, or will it cause any change in, any existing
life insurance or annuity on any person proposed for coverage?
_ _
|_| Yes |_| No If "Yes" submit a completed replacement form with this
application.
SECTION B - OWNER (IF OTHER THAN PROPOSED INSURED)
7a Owner's Name and Address 7b Owner's Social Security Number
(or Tax I.D. Number)
7c Owner's Relationship to Proposed
Insured
1
Q2009-11/97 (Guaranteed Issue Application)
<PAGE>
SECTION C - BENEFICIARIES
8a Primary Beneficiary_______________________ Relationship to Insured_________
(or Trust information) Social Security Number (or Tax I.D. Number)________
8b Contingent Beneficiary____________________ Relationship to Insured_________
(or Trust information) Social Security Number (or Tax I.D. Number)________
SECTION D - BILLING
9 Employer's Name and Address 10 Mailing address (for Premium
Notices and Correspondence)
11 Payment Method: List bill 12 Premium Mode:
SECTION E - PLAN INFORMATION - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
13 Product 14 Policy Issue Date
(Mo/Day/Yr):________________________
15 Guaranteed Issue Version 16 Unisex Version
17 Stated Death Benefit
SECTION F - GUARANTEED MINIMUM DEATH BENEFIT OPTION
18 GUARANTEE PERIOD (SELECT ONE, IF OPTION DESIRED; OTHERWISE THERE WILL BE NO
GUARANTEED PERIOD)
_ _
|_| Later of ten years or proposed insured's age 65 |_| Lifetime of
proposed insured
Note: The Guarantee Period will terminate if:
a. You fail to pay the required Guarantee Period Annual premium defined in
your prospectus; or
b. Your Account Value on any Monthly Processing date is not diversified
according to the following rules:
1. No more than 35% of your Net Account Value may be invested in any one
division; and
2. Your Net Account Value must be invested in at least FIVE divisions.
You will satisfy these diversification requirements if: (i) you
participate in the Automatic Rebalancing feature defined in and governed
by the policy prospectus in effect at the time you elect the Guarantee
Period and your Automatic Rebalancing allocations comply with the
diversifications specified above; or (ii) you elect Dollar Cost Averaging
and direct the resulting transfers into at least four other Divisions
with no more than 35% of any transfer being to any one division.
There may be other circumstances that will cause the Guarantee Period to
terminate before its scheduled expiration date. See your prospectus for
further information.
2
Q2009-11/97 (Guaranteed Issue Application)
<PAGE>
SECTION G - PREMIUM INFORMATION
19 Initial Premium Allocation. Please allocate your Initial Premium to the
Guaranteed Interest Division and/or among the Variable Account Divisions.
Please use whole number percentages for each Division elected. You must
allocate at least 1% of your Premium Allocation to each Division in which
you elect to invest. The total must equal 100%.
_______% GUARANTEED INTEREST DIVISION
<TABLE>
<CAPTION>
VARIABLE ACCOUNT DIVISIONS
<S> <C> <C>
AIM INVESCO VAN ECK
_____% V.I. Government Securities _____% Equity Income _____% Worldwide Emerging Markets
_____% V.I. Capital Appreciation _____% High Yield _____% Worldwide Bond
_____% Utilities _____% Worldwide Real Estate
ALGER AMERICAN _____% Total Return
_____% Small Capitalization _____% VIF Small Company Growth
_____% MidCap Growth
_____% Growth NEUBERGER & BERMAN
_____% Limited Maturity Bond
FIDELITY INVESTMENTS _____% Partners Portfolio
_____% Growth Portfolio
_____% Overseas
_____% Index 500
</TABLE>
SECTION H - SUITABILITY
20 a. Have you, the Proposed Insured, and the Owner, if other than the
Proposed Insured, received a current Prospectus dated ________________
for the Variable Life Insurance policy applied for and current prospectus
_ _
for each of the Variable Account Divisions? |_| Yes |_| No
b. DO YOU UNDERSTAND THAT UNDER THE POLICY APPLIED FOR THE AMOUNT OR
DURATION OF THE DEATH BENEFIT MAY VARY UNDER SPECIFIED CONDITIONS; POLICY
VALUES MAY INCREASE OR DECREASE IN ACCORDANCE WITH THE INVESTMENT
EXPERIENCE OF INVESTMENT DIVISIONS IN A SEPARATE ACCOUNT, AND MAY
INCREASE IN ACCORDANCE WITH THE INTEREST CREDITED IN THE GUARANTEED
INTEREST DIVISION; AND THE AMOUNT PAYABLE AT THE FINAL POLICY DATE IS NOT
GUARANTEED BUT IS DEPENDENT ON THE AMOUNT THEN IN THE ACCOUNT VALUE?
_ _
|_| YES |_| NO
c. Do you understand that any personalized illustrations received are based
on hypothetical interest assumptions which may not be indicative of
actual future investment experience of our Separate Account or of actual
_ _
interest credited in our Guaranteed Interest Division? |_| Yes |_| No
d. With this in mind, is the policy in accord with your insurance objectives
_ _
and your anticipated financial needs? |_| Yes |_| No
21 Special Instructions
HOME OFFICE CORRECTIONS (INSURANCE COMPANY USE ONLY)
(NOT APPLICABLE IN NORTH DAKOTA, OREGON, PENNSYLVANIA, AND WEST VIRGINIA.)
3
Q2009-11/97 (Guaranteed Issue Application)
<PAGE>
<TABLE>
<CAPTION>
FRAUD WARNINGS (FOR ALL STATES EXCEPT OREGON)
<S> <C>
FOR APPLICANTS IN ALL STATES Any person who knowingly and with intent to injure, defraud, or deceive any insurance company,
EXCEPT COLORADO, CONNECTICUT, files an application, statement or claim containing any false, incomplete, or misleading information
PENNSYLVANIA AND VIRGINIA: may be guilty of insurance fraud.
FOR APPLICANTS IN COLORADO: IT IS UNLAWFUL TO KNOWINGLY PROVIDE FALSE, INCOMPLETE, OR MISLEADING FACTS OR INFORMATION TO AN
INSURANCE COMPANY FOR THE PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE COMPANY. PENALTIES MAY
INCLUDE IMPRISONMENT, FINES, DENIAL OF INSURANCE, AND CIVIL DAMAGES. ANY INSURANCE COMPANY OR AGENT
OF AN INSURANCE COMPANY WHO KNOWINGLY PROVIDES FALSE, INCOMPLETE, OR MISLEADING FACTS OR INFORMATION
TO A POLICYHOLDER OR CLAIMANT FOR THE PURPOSE OF DEFRAUDING OR ATTEMPTING TO DEFRAUD THE
POLICYHOLDER OR CLAIMANT WITH REGARD TO A SETTLEMENT OF AWARD PAYABLE FROM INSURANCE PROCEEDS SHALL
BE REPORTED TO THE COLORADO DIVISION OF INSURANCE WITHIN THE DEPARTMENT OF REGULATORY AGENCIES.
FOR APPLICANTS IN CONNECTICUT: Any person who knowingly and with intent to injure, defraud, or deceive any insurance company, files
an application, statement or claim containing any false, incomplete, or misleading information may
be guilty of insurance fraud as determined by a court of competent jurisdiction.
FOR APPLICANTS IN PENNSYLVANIA: Any person who knowingly and with intent to defraud any insurance company or other person files an
application for insurance or statement of claim containing any materially false information or
conceals for the purpose of misleading, information concerning any fact material thereto commits a
fraudulent insurance act, which is a crime and subjects such person to criminal and civil penalties.
FOR APPLICANTS IN VIRGINIA: Any person who with intent to defraud, or knowing that he is facilitating a fraud against an
insurer, submits an application, statement or files a claim containing false, or deceptive statement
may have violated state law.
</TABLE>
AGREEMENTS: All statements and answers in this application (which
includes supplements and amendments) are true and complete to the best of
my knowledge and belief. I also agree that:
1. The statements and answers in this application will be relied upon and form
the basis of any insurance.
2. No information will be considered as having been given to Security Life
unless it is written in this application. (THIS PARAGRAPH DOES NOT APPLY IN
THE STATES OF ALASKA, MAINE, MISSOURI, OREGON, SOUTH CAROLINA, SOUTH DAKOTA
AND WISCONSIN.)
3. No agent or any other unauthorized person can make or change any insurance
contract or give up any of Security Life's rights or requirements. Any
change must be in writing and signed by an officer of Security Life.
4. Security Life may amend this application by an appropriate notation in the
space designated "Home Office Corrections" in order to correct errors or
omissions or to conform the application with any policy that may be issued.
The acceptance of the policy constitutes a ratification of such amendments.
(THIS PARAGRAPH DOES NOT APPLY IN THE STATES OF NORTH DAKOTA, OREGON,
PENNSYLVANIA, AND WEST VIRGINIA.) In those states, including Maryland, where
change in amount, age at issue, classification, plan, premium, or benefit
requires the written consent of the applicant, no change may be ratified
except by a written acceptance. We reserve the right to make any changes
required by law.
5. INSURANCE UNDER POLICY APPLIED FOR - EXCEPT AS MAY BE PRO- VIDED IN ANY
COVERAGE PROVIDED BY A CONDITIONAL RECEIPT, NO POLICY OF INSURANCE WILL BE
IN FORCE UNTIL (1) THE FIRST POLICY PREMIUM IS PAID AND (2) THE POLICY IS
DELIVERED WHILE THE FACTS AND HEALTH CONDITION OF THE PROPOSED INSURED(S)
ARE AS REPRESENTED IN THIS APPLICATION. WHEN THESE CONDITIONS ARE SATISFIED,
THE POLICY AS DELIVERED WILL THEN TAKE EFFECT.
6. I certify, under penalty of perjury, that my social security/tax
identification number(s) is shown and is correct and that I am not subject
to back up withholding.
7. If the contract applied for is for a pension, profit-sharing, HR10, or other
tax qualified plan, any policy issued shall not be transferable other than
to the insurer, except as directed by the Plan Administrator. Other
applicable provisions may be added to the contract.
I know of nothing else affecting the risk. In addition to the Agreements above,
I have read and agree to the information and agreements contained in Section 21,
Special Instructions.
- -> Signature of Proposed Insured________________________ -> Date______________
- -> Signature of Owner___________________________________ -> Date______________
(If other than Proposed Insured)
- -> Name and Title of Owner______________________________________________________
(If owner is a business entity, print the business entity's name and the
title of person signing.)
- -> APPLICATION SIGNED BY PROPOSED INSURED OR OWNER (IF OTHER THAN PROPOSED
INSURED) IN: -> STATE ____________
AGENT USE ONLY (Please print)
Do you have knowledge or reason to believe that replacement of existing life
_ _
insurance or annuity may be involved? |_| Yes |_| No
If "Yes" please provide appropriate replacement forms.
<TABLE>
<S> <C> <C>
Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________
Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________
Signature of Agent/Registered Rep________________________________ Reg. Rep Number____________ % Split__________
</TABLE>
________________________________________ _____________________________________
Name of Broker/Dealer/Branch/OSJ Name of Broker/Dealer/Branch/OSJ
4
Q2009-11/97 (Guaranteed Issue Application)
<PAGE>
[Logo of Security Life] Security Life of Denver
Insurance Company
1290 Broadway
Denver, CO 80203-5699
Guaranteed Issue
Binding Limited Life Insurance Coverage
For premium(s) received from the employer in connection with the following
Guaranteed Issue Applications, Security Life provides a limited amount of life
insurance coverage for a short time while it decides whether to issue and
deliver the policy or certificate applied for. This coverage is subject to the
terms and conditions set out below.
<TABLE>
<CAPTION>
AMOUNT | AMOUNT
PROPOSED PREMIUM OF LIMITED | PROPOSED PREMIUM OF LIMITED
APP.# INSURED RECEIVED LIFE INS. | APP.# INSURED RECEIVED LIFE INS.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
______ _________________________ ________ ___________ | ______ _________________________ ________ ___________
</TABLE>
TERMS AND CONDITIONS
AMOUNT OF COVERAGE
If a Proposed Insured dies while this coverage is in effect, Security Life will
pay the Amount of Limited Life Insurance on the Proposed Insured set out above.
There is no premium waiver coverage.
DATE COVERAGE BEGINS
Coverage on the Proposed Insured under this agreement starts when a premium has
been accepted while the Proposed Insured is currently engaged in active
full-time work. Active full-time work is working at least 30 hours per week in a
normal capacity with no hospitalizations and no absences from work due to
illness or accident (except absences due to minor illnesses or accidents for no
more than 5 total days during the 3-month period).
DATE COVERAGE ENDS
The coverage on the Proposed Insured will end automatically on the EARLIEST of
the dates:
o Security Life returns the premium(s)
o Five days after Security Life mails a notice of termination to the owner's
address on the Application; or
o Coverage starts under any Security Life policy or certificate resulting from
Application.
Security Life may send the notice of return premium(s) at any time before
delivery of the policy or certificate.
There is no insurance coverage if:
o The Proposed Insured dies by suicide, or self-inflicted injury;
o The premium check is not honored; or
o The Proposed Insured is not currently engaged in active full-time work at
the time the premium is accepted.
BENEFICIARY
Any benefit will be paid to the beneficiary named in the application on the
Proposed Insured. If death is before such an application is completed, it will
be paid to (check one):
_
|_| Proposed Insured's estate, or
_
|_| Other __________________________________________________
Premiums for an application will be returned if: an application is not approved;
or a benefit is paid under this coverage; or any condition of the Guaranteed
Issue offer is not met.
No agent can waive or modify this coverage in any way.
- --------------------------------------------------------------------------------
No premium may be accepted if:
o the Proposed Insured is not currently engaged in active
full-time work; or
o any condition of the Guaranteed Issue offer is not met.
The amount of Limited Life Insurance shall be no more than the lesser of:
the amount specified in the Guaranteed Issue offer; or $3 million.
- --------------------------------------------------------------------------------
Agreed to on ______________________________, 19________
_____________________________________________(EMPLOYER)
By ____________________________________________________
Print employer's name and have officer sign.
Agent _________________________________________________
Q1112 B-6/98 HOME OFFICE COPY
Exhibit 3.A
November 8, 1999
Security Life of Denver
Insurance Company
Security Life Center
1290 Broadway
Denver, Colorado 80203-5699
Dear Sirs:
This opinion is furnished in connection with the Form S-6 Registration Statement
being filed by Security Life of Denver Insurance Company ("Security Life") under
the Securities Act of 1933, as amended (the "Act"), for the offering of
interests ("Interests") in Security Life Separate Account L1 ("Separate Account
L1") under the Flexible Premium Variable Life Insurance Policies ("Policies") to
be issued by Security Life. The securities being registered under the Act are to
be offered in the manner described in the Registration Statement.
I have examined or supervised the examination of all such corporate records of
Security Life and such other documents and such laws as I consider appropriate
as a basis for the opinion hereinafter expressed. On the basis of such
examination, it is my opinion that:
1. Security Life is a corporation duly organized and validly existing
under the laws of the State of Colorado.
2. Separate Account L1 was duly created as a separate investment account
of Security Life pursuant to the laws of the State of Colorado.
3. The assets of Separate Account L1 will be owned by Security Life. Under
Colorado law and the provisions of the Policies, the income, gains and
losses, whether or not realized, from assets allocated to Separate
Account L1 must be credited to or charged against such Account, without
regard to the other income, gains or losses of Security Life.
4. The Policies provide that the assets of Separate Account L1 may not be
charged with liabilities arising out of any other business Security
Life may conduct, except to the extent that assets of Separate Account
L1 exceed its liabilities arising under the Policies.
<PAGE>
November 8, 1999
Page 2
5. The Policies and the Interests in Separate Account L1 to be issued
under the Policies have been duly authorized by Security Life; and the
Policies, including the Interests therein, when issued and delivered,
will constitute validly issued and binding obligations of Security Life
in accordance with their terms.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Gary W. Waggoner
Gary W. Waggoner
Vice President, General Counsel
and Corporate Secretary
