As filed with the Securities and Exchange Commission on February 29, 2000
Registration No. 333-72753
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
Post-Effective Amendment No. 1
----------------
SECURITY LIFE SEPARATE ACCOUNT Ll
(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)
---------------------------
It is proposed that this filing will become effective:
___ on April 15, 1999 pursuant to paragraph (a) of Rule 485
_X_ 60 days after filing pursuant to paragraph (a) of Rule 485
___ on May 1, 1999 pursuant to paragraph (b) of Rule 485
___ immediately upon filing pursuant to paragraph (b) of Rule 485 this
post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of securities being registered: Variable Survivorship life insurance
policy.
Approximate date of proposed public offering: as soon as practicable after the
effective date of this Registration Statement.
Form V-91-00
<PAGE>
SECURITY LIFE SEPARATE ACCOUNT Ll (File No. 333-72753)
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 Ll
3 Inapplicable
4 Security Life of Denver Insurance Company
5, 6 Security Life Separate Account Ll
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, Deductions and Refunds;
Surrender; Partial Withdrawals; Guaranteed
Interest Division; 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
Variable Survivorship Policy; General Policy
Provisions; Guaranteed Interest Division
11, 12 Security Life Separate Account Ll
13 Policy Summary; Charges, Deductions and Refunds; and
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; General Policy
Provisions; Applying for a Policy
16 Premiums; Investment Date and Allocation of Net
Premiums; How We Calculate Accumulation Unit Values
17 Premium Payments Affect Your Coverage;
Surrender; Partial Withdrawals
18 Policy Summary; Tax Considerations; Detailed
Information about the Variable Survivorship Policy;
Security Life Separate Account Ll; Persistency
Refund
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 Ll; Detailed Information about
the Variable Survivorship 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-89-2 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 Variable Survivorship Policy
47, 48, 49, 50 Inapplicable
51 Detailed Information about the Variable
Survivorship 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
VARIABLE SURVIVORSHIP 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, deductions, and refunds beginning on page
42 in this prospectus.
You should read this prospectus and keep it for future reference. A prospectus
for each underlying investment 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.
We offer other products to insure the lives of two people which may or may not
better match your needs and interests.
Replacing your existing life insurance policy(ies) with this policy may not be
beneficial to you.
YOUR POLICY
o is a flexible premium variable joint and survivor universal life
insurance policy;
o is issued on two lives on whom insurance coverage may continue, in
whole or in part, until both have died;
o is issued by Security Life of Denver Insurance Company; o is
guaranteed not to lapse during the first five policy years if you meet
certain requirements; and
o is returnable by you during the free look period if you are not
satisfied.
YOUR 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; and
o can be invested in as many as eighteen investment options over the
policy's lifetime.
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 surrender value under the variable
division. The value varies with the value of the underlying investment
portfolio;
o has a minimum guaranteed rate of return for amounts in the
guaranteed interest division; and
o is subject to specified expenses and charges including possible
surrender charges.
DEATH PROCEEDS
o are paid if the policy is still in force at the second death of the
two insured people;
o are equal to the death benefit minus an outstanding policy loan,
accrued loan interest and unpaid charges incurred before the second
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; and
o enhanced death benefit corridor option - available with either option
1 or option 2 to increase death benefit coverage based on life
expectancy with sufficient account value; 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 GOVERNMENT AGENCY.
DATE OF PROSPECTUS MAY 1, 2000
Form V-91-00
<PAGE>
ISSUED BY: Security Life of Denver UNDERWRITTEN BY: ING America Equities, Inc.
Insurance Company 1290 Broadway
ING 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
P.O. Box 173888
Denver, CO 80217-3888
(800) 848-6362
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Variable Survivorship 2
<PAGE>
TABLE OF CONTENTS
POLICY SUMMARY.................................................................4
Your Policy............................................................4
Free Look Period.......................................................4
Premium Payments.......................................................4
Charges and Deductions.................................................4
Fees and Expenses of the Investment Portfolios.........................6
Guaranteed Interest Division...........................................7
Policy Values..........................................................7
Transfers of Account Value.............................................7
Special Policy Features................................................7
Policy Modification, Termination and Continuation Features.............8
Policy Maturity........................................................8
Death Benefits.........................................................8
How the Policy Works...................................................9
Tax Considerations....................................................10
SECURITY LIFE, THE SEPARATE ACCOUNT
AND THE INVESTMENT OPTIONS............................................10
Security Life of Denver Insurance Company.............................10
Security Life Separate Account Ll.....................................10
Investment Portfolio Objectives.......................................11
Guaranteed Interest Division..........................................14
Maximum Number of Investment Options..................................15
DETAILED INFORMATION ABOUT THE
VARIABLE SURVIVORSHIP POLICY..........................................15
Applying for a Policy.................................................15
Temporary Insurance...................................................15
Policy Issuance.......................................................16
Premiums..............................................................16
Premium Payments Affect Your Coverage.................................18
Death Benefits........................................................19
Riders................................................................24
Special Features......................................................26
Policy Values.........................................................28
Transfers of Account Value............................................30
Dollar Cost Averaging.................................................30
Automatic Rebalancing.................................................31
Policy Loans..........................................................32
Partial Withdrawals...................................................33
Lapse.................................................................34
Reinstatement.........................................................36
Surrender.............................................................36
General Policy Provisions.............................................36
Free Look Period..................................................36
Your Policy.......................................................37
Age...............................................................37
Ownership.........................................................37
Beneficiary(ies)..................................................37
Collateral Assignment.............................................38
Incontestability..................................................38
Misstatements of Age or Gender....................................38
Suicide...........................................................38
Transaction Processing............................................38
Notification and Claims Procedures................................39
Telephone Privileges..............................................39
Non-participation.................................................39
Distribution of the Policies......................................39
Advertising Practices and Sales Literature........................40
Settlement Provisions.............................................40
Administrative Information About the Policy...........................40
CHARGES, DEDUCTIONS AND REFUNDS...............................................42
Deductions from Premiums..............................................42
Daily Deductions from the Separate Account............................43
Monthly Deductions from Account Value.................................43
Policy Transaction Fees...............................................45
Persistency Refund....................................................45
Surrender Charge......................................................46
Group or Sponsored Arrangements and Corporate
Purchasers........................................................47
TAX CONSIDERATIONS............................................................47
Tax Status of the Policy..............................................48
Diversification Requirements..........................................48
Tax Treatment of Policy Death Benefits................................48
Modified Endowment Contracts..........................................49
Multiple Policies.....................................................49
Distributions Other than Death Benefits from
Modified Endowment Contracts......................................49
Distributions Other than Death Benefits from
Policies That Are Not Modified Endowment
Contracts.........................................................49
Investment in the Policy..............................................49
Policy Loans..........................................................50
Section 1035 Exchanges................................................50
Tax-exempt Policy Owners..............................................50
Possible Tax Law Changes..............................................50
Changes to Comply with the Law........................................50
Other.................................................................50
ILLUSTRATIONS OF DEATH BENEFITS,
ACCOUNT VALUES, CASH SURRENDER
VALUES AND ACCUMULATED PREMIUMS.......................................52
ADDITIONAL INFORMATION........................................................56
Directors and Officers................................................56
Regulation............................................................57
Legal Matters.........................................................57
Legal Proceedings.....................................................57
Experts...............................................................57
Registration Statement................................................57
INDEX OF SPECIAL TERMS........................................................58
FINANCIAL STATEMENTS..........................................................59
APPENDIX A....................................................................60
APPENDIX B....................................................................61
APPENDIX C....................................................................62
- --------------------------------------------------------------------------------
Variable Survivorship 3
<PAGE>
POLICY SUMMARY
YOUR POLICY
Your policy provides life insurance protection on the lives of two insured
people and insurance coverage may continue until both have died. The policy
includes the basic policy, applications, and any riders or endorsements. As long
as the policy remains in force, we pay a death benefit after the second death of
the insured people. While your policy is in force, you may access a portion of
your policy value by taking loans or partial withdrawals. You may surrender your
policy for its net cash surrender value. At the policy anniversary nearest the
younger insured person's 100th birthday, you may elect to continue the policy
under the continuation of coverage option. SEE CONTINUATION OF COVERAGE, PAGE
27.
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
Within limits as specified by state law, you have the right to examine your
policy and return it for a refund of all premium payments we have received from
you or the account value, if you are not satisfied for any reason. The policy is
then void. SEE FREE LOOK PERIOD, PAGE 36.
PREMIUM PAYMENTS
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;
o sufficient to keep your policy in force; and
o as necessary to continue certain benefits.
The amount of premium you pay affects the length of time your policy stays in
force. SEE PREMIUMS, PAGE 16.
ALLOCATION OF NET PREMIUMS
This policy has premium-based charges which are subtracted from your payments.
We add the balance, or net premium, to your policy based on your investment
instructions. You may allocate the net premium among one or more variable
investment options and the guaranteed interest division. SEE ALLOCATION OF NET
PREMIUMS, PAGE 18.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
SALES CHARGE -- We deduct a percentage of each premium to cover a portion of our
expenses in selling your policy. This charge is based on the length of time
since your policy or a segment became effective.
Sales Charge Percentage
Policy or Up to Policy or Above Policy or
Segment Segment Segment
Year Target Premium Target Premium
1 - 5 5.5% 2%
6 + 2% 2%
SEE DEDUCTIONS FROM PREMIUMS, PAGE 42.
- --------
This summary highlights some of the important points about your policy. The
policy is more fully described in the attached, complete prospectus. Please read
it 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
people's lifetimes.
State variations are covered in a special policy form used in that state. This
prospectus provides a general description of the policy. Your actual policy and
any riders are the controlling documents. If you would like to review a copy of
the policy and riders, contact our customer service center, your agent or
registered representative.
- --------------------------------------------------------------------------------
Variable Survivorship 4
<PAGE>
CHARGES
Other Than Investment Portfolio Annual Expenses and Sales Charge
(SEE CHARGES, DEDUCTION AND REFUNDS, PAGE 42)
<TABLE>
<S> <C> <C>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
Tax Charges Each premium payment 2.5% for state and local taxes; 1.5% for
estimated federal income tax
treatment of deferred acquisition
costs.
Surrender Charge First nine policy or segment Percentage of surrender target
years premium based on insured people's
ages at policy date.
Mortality & Expense Risk Charge Daily from variable investment 0.002055% daily (0.75% annually)
options
Policy Charge Monthly from account value $15 per month for first ten
policy years and $9 per month
thereafter.
Monthly Administrative Charge Monthly from account value $0.07 - $0.95 per $1,000 death benefit
for the first ten policy years. $0.023
per $1,000 death benefit for each
policy year after the tenth. Applies to
first $2,500,000 of death benefit.
Cost of Insurance Charge Monthly from account value Varies based on current cost of
insurance rates and net amount at risk
on the lives of the insured people.
Includes adjustable term insurance
rider.
Guaranteed Minimum Death Monthly from account value $0.005 per $1,000 of stated death
Benefit benefit per month.
Rider Charges Monthly from account value Varies depending on the rider benefit
you choose, except the adjustable term
insurance rider.
Transfer Fee Transaction date from account Twelve free transfers per policy
value year, then $25 per transfer.
Partial Withdrawal Fee Transaction date from account Up to $25.
value
Illustrations Transaction date from account One free illustration per policy
value year, then a $25 fee may apply.
Premium Allocation Change Transaction date from account Twelve free premium allocation
value changes per policy year, then $25 per
change.
Continuation of Coverage Policy anniversary nearest One-time $400 administrative fee.
younger insured person's 100th
birthday
</TABLE>
VARIABLE DIVISION
If you invest in any of the variable investment options under the variable
division, you may make or lose money depending on market conditions. The
variable investment options are described in the prospectuses for the underlying
investment portfolios. Each investment portfolio has its own investment
objective. SEE INVESTMENT PORTFOLIO OBJECTIVES, PAGE 11.
- --------------------------------------------------------------------------------
Variable Survivorship 5
<PAGE>
FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS
The separate account purchases shares of the underlying investment portfolios,
or series, at net asset value. This price reflects investment management fees
and other expenses that are deducted from the portfolio assets. This table
describes these fees and expenses in gross amounts and in net amounts waived or
reimbursed after any expenses or fees have been absorbed by the investment
portfolio advisers.
[TO BE UPDATED BY AMENDMENT.]
INVESTMENT PORTFOLIO ANNUAL EXPENSES
(AS A PERCENTAGE OF PORTFOLIO AVERAGE NET ASSETS)
<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 % % % % %
AIM V.I. Government Securities Fund % % % % %
THE ALGER AMERICAN FUND
Alger American Growth Portfolio % % % % %
Alger American Leveraged AllCap Portfolio % % % % %
Alger American MidCap Growth Portfolio % % % % %
Alger American Small Capitalization Portfolio % % % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio % % % % %
VIP Money Market Portfolio % % % % %
VIP Overseas Portfolio % % % % %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio % % % % %
VIP II Index 500 Portfolio % % % % %
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund (formerly VIF-Industrial Income Portfolio) % % % % %
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
Growth Portfolio % % % % %
Limited Maturity Bond Portfolio % % % % %
Partners Portfolio % % % % %
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund % % % % %
Worldwide Emerging Markets Fund % % % % %
Worldwide Hard Assets Fund % % % % %
Worldwide Real Estate Fund % % % % %
</TABLE>
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Variable Survivorship 6
<PAGE>
GUARANTEED INTEREST DIVISION
The guaranteed interest division guarantees principal and is part of our general
account. Any amount you direct into the guaranteed interest division is credited
with interest at a fixed rate. SEE GUARANTEED INTEREST DIVISION, PAGE 14.
POLICY VALUES
Your policy 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. SEE POLICY VALUES, PAGE 28 AND PARTIAL WITHDRAWALS, PAGE 33.
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 one 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 28.
The accumulation unit value for each variable investment underlying option
reflects the investment performance of the matching investment portfolio during
the valuation period. Each accumulation unit value reflects asset-based charges
under the policy and the expenses of the investment portfolios. SEE DETERMINING
THE VALUE IN THE VARIABLE DIVISION, PAGE 28 AND HOW WE CALCULATE ACCUMULATION
UNIT VALUES, PAGE 29.
TRANSFERS OF ACCOUNT VALUE
With some limitations, you may make twelve free transfers among the variable
investment options or to the guaranteed interest division each policy year. We
charge $25 for each transfer over twelve in a policy year. SEE TRANSFERS OF
ACCOUNT VALUE, PAGE 30 AND POLICY TRANSACTION FEES, PAGE 45.
SPECIAL POLICY FEATURES
DESIGNATED DEDUCTION OPTION
You may designate one investment option from which we will deduct your monthly
deductions. SEE DESIGNATED DEDUCTION OPTION, PAGE 26.
RIDERS
You may attach additional benefits to your policy by rider. In most cases, we
deduct a monthly charge from your account value for these benefits. SEE RIDERS,
PAGE 24.
DOLLAR COST AVERAGING
Dollar cost averaging is a systematic plan of transferring account values to
selected 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 30.
AUTOMATIC REBALANCING
Automatic rebalancing periodically reallocates your net account value among your
selected investment options to maintain your specified distribution of account
value among those investment options. Automatic rebalancing is free. SEE
AUTOMATIC REBALANCING, PAGE 31.
LOANS
You may take loans against your policy's net cash surrender value. We charge an
annual loan interest rate of 3.75%. We credit an annual interest rate of 3% on
amounts held in the loan division as collateral for your loan. Beginning in your
eleventh policy year, where permitted by state law, we may include amounts in
the loan division for calculation of your policy's persistency refund. SEE
POLICY LOANS, PAGE 32.
PARTIAL WITHDRAWALS
You may withdraw part of your net cash surrender value any time after your first
policy anniversary. You may make only one partial withdrawal per policy year.
Partial withdrawals may reduce your policy's death benefit and will reduce your
account value. SEE PARTIAL WITHDRAWALS, PAGE 33.
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Variable Survivorship 7
<PAGE>
PERSISTENCY REFUND
After your tenth policy anniversary, where permitted by state law, we add a
persistency refund to your account value. SEE PERSISTENCY REFUND, PAGE 45.
POLICY MODIFICATION, TERMINATION AND CONTINUATION FEATURES
RIGHT TO EXCHANGE POLICY
For 24 months after the policy date you may exchange your policy for a
guaranteed policy, unless state law requires differently. The transfer to make
this exchange is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 27.
POLICY SPLIT OPTION
Under certain circumstances, you may split your policy into two separate life
insurance policies each insuring the life of one insured person under certain
circumstances. This split may occur upon divorce between the two insured people,
business dissolution, or a possible adverse future change in the tax law, unless
state law requires otherwise. The policy split option is free. SEE POLICY SPLIT
OPTION, PAGE 26.
SURRENDER
You may surrender your policy for its net cash surrender value at any time
before the second death of the insured people. All insurance coverage ends on
the date we receive your request. SEE SURRENDER, PAGE 36.
LAPSE
In general, insurance coverage continues as long as your net cash surrender
value is enough to pay the monthly deductions. However, your policy and its
riders are guaranteed not to lapse during the first five years of your policy if
the conditions of the special continuation period have been met. SEE LAPSE, PAGE
34 AND SPECIAL CONTINUATION PERIOD, PAGE 17.
REINSTATEMENT
You may reinstate your policy and its riders within five years of its lapse if
you still own the policy and the insured people meet the same underwriting
requirements as at policy issue.
You will need to give proof of insurability as at policy issue. You will also
need to pay required reinstatement premiums.
If the guaranteed minimum death benefit lapses and you do not correct it, this
feature terminates. Once it terminates, you cannot reinstate this feature.
We will reinstate any policy loan existing when coverage ended with accrued loan
interest to the date of the lapse. SEE REINSTATEMENT, PAGE 36.
POLICY MATURITY
If at least one of the insured people is still living on the maturity date or
the policy anniversary nearest the younger insured person's 100th birthday and
you do not choose the continuation of coverage feature, you must surrender your
policy. We will pay the net account value. SEE POLICY MATURITY, PAGE 27.
CONTINUATION OF COVERAGE
At the policy anniversary nearest the younger insured person's 100th birthday,
you may choose to let the continuation of coverage feature become effective. If
you do so, we will deduct a one-time administrative fee of $400 and keep your
policy in force. SEE CONTINUATION OF COVERAGE, PAGE 27.
DEATH BENEFITS
After the second death of the two insured people, we pay death proceeds to the
beneficiary(ies) if your policy is still in force. Based on the death benefit
option you have chosen, the base death benefit varies.
We generally require a minimum target death benefit of $250,000 to issue your
policy. If you have an adjustable term insurance rider, the minimum stated death
benefit to issue a policy is $100,000, as long as your target death benefit is
at least $250,000.
You may change your death benefit amount while your policy is in force, subject
to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 22.
- --------------------------------------------------------------------------------
Variable Survivorship 8
<PAGE>
How the Policy Works
<TABLE>
<S> <C> <C>
YOUR PREMIUM Premium Deductions
You make a premium ---------------------------->
payment
o sales charge
o tax charges
<----------------------------
NET PREMIUM
We allocate the net
premium to the investment
options you choose
|
|
-----------------------------------------
| |
\/ \/
GUARANTEED VARIABLE INVESTMENT INVESTMENT PORTFOLIOS The investment
INTEREST DIVISION OPTIONS The variable investment manager deducts
Amounts you allocate Amounts you allocate are <-- options invest in investment
are held in our general account held in our separate account --> investment portfolios ------> management fees
| | and other
----------------------------------------- portfolio expenses
|
|
o persistency refund |
o refund of sales Refunds |
charge (if ------------>| Monthly Deductions o policy charge
surrendered in years | ---------------------> o cost of insurance
1 - 3) | | charge
| | o monthly administrative
\/ | charge
ACCUMULATED VALUE | o rider charges
The total value of your --|
policy |
| | Separate Account
| | Deductions
| |---------------------> o mortality and expense
\/ | risk charge
LOAN DIVISION |
Amount set aside to |
secure a policy loan |
|
| Transaction Fees o partial withdrawal fee
---------------------> o transfer fee
o illustration fee
o premium allocation
change charge
o continuation of
coverage fee
</TABLE>
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Variable Survivorship 9
<PAGE>
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 48.
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, if your policy is a modified endowment contract, a loan 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 49.
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.
You should consult a qualified legal or tax adviser before you purchase your
policy.
SECURITY LIFE, THE SEPARATE ACCOUNT AND THE INVESTMENT OPTIONS
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 1999, the company and its consolidated subsidiaries had
over $XXX.X billion of life insurance in force. As of December 31, 1999, our
total assets were over $XX.X billion, and our shareholder's equity was over $XXX
million.
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 $XXX.X billion on a Dutch (modified U.S.) generally
accepted accounting principles basis, as of December 31, 1999.
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 registered as a broker-dealer with the SEC and the NASD.
ING America Equities, Inc. is located at 1290 Broadway, Denver, Colorado
80203-5699.
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 separate account is used to support our variable life insurance policies and
for other purposes allowed by law and regulation. We keep the separate account
assets separate from our general account and other separate accounts. We may
offer other variable life insurance contracts with different benefits and
charges that invest in the separate account. We do
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Variable Survivorship 10
<PAGE>
not discuss these contracts in this prospectus. The separate account may invest
in other securities not available for the policy described in this prospectus.
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 if we were ever to become insolvent, the separate account assets will be
used first to pay separate account policy claims. Only if separate account
assets remain after these claims have been satisfied can these assets be used to
pay other policy owners and 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.
INVESTMENT OPTIONS
Investment options include the variable and the guaranteed interest divisions,
but not the loan division. The separate account has several variable investment
options which invest in shares of underlying investment portfolios. This means
that the investment performance of a policy depends on the performance of the
investment portfolios you choose. Each investment portfolio has its own
investment objective. These investment portfolios are not available directly to
individual investors. They are available only as 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.
INVESTMENT PORTFOLIO OBJECTIVES
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 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 or less than others.
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Variable Survivorship 11
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<S> <C> <C>
VARIABLE INVESTMENT OPTION INVESTMENT COMPANY/ INVESTMENT OBJECTIVE
ADVISER/ MANAGER/
SUB-ADVISER
V.I. Capital Appreciation Fund AIM Variable Insurance Seeks growth of capital through investment in
Funds, Inc./ AIM Advisors, common stocks, with emphasis on medium- and
Inc. small-sized growth companies.
V.I. Government Securities AIM Variable Insurance Seeks to achieve high current income consistent with
Fund Funds, Inc./ AIM Advisors, reasonable concern for safety of principal by investing
Inc. in debt securities issued, guaranteed or otherwise
backed by the United States Government.
American Growth Portfolio The Alger American Fund Seeks long-term capital appreciation by focusing on
growing companies that generally have broad product
lines, markets, financial resources and depth of
management.
American Leveraged AllCap The Alger American Fund Seeks long-term capital appreciation by investing in
Portfolio the equity securities of companies of any size which
demonstrate promising growth potential.
American MidCap Growth The Alger American Fund Seeks long-term capital appreciation by focusing on
Portfolio midsize companies with promising growth
potential.
American Small Capitalization The Alger American Fund Seeks long-term capital appreciation by
focusing on Portfolio small,
fast-growing companies that offer
innovative products, services or
technologies to a rapidly expanding
marketplace.
VIP Growth Portfolio Fidelity Variable Insurance Seeks capital appreciation by investing in common
Products Fund and Variable stocks of companies that it believes have
Insurance Products Fund II/ above-average growth potential, either domestic or
Fidelity Management & foreign issuers.
Research Company
VIP Money Market Portfolio Fidelity Variable Insurance Seeks as high a level of current income as is consistent
Products Fund and Variable with the preservation of capital and liquidity by
Insurance Products Fund II/ investing in U.S. dollar-denominated money market
Fidelity Management & securities, including U.S. Government securities and
Research Company repurchase agreements, and entering into reverse
repurchase agreements.
VIP Overseas Portfolio Fidelity Variable Insurance Seeks long-term growth of capital by investing at least
Products Fund and Variable 65% of total assets in
foreign securities. Insurance Products Fund II/
Fidelity Management & Research Company
VIP II Asset Manager Portfolio Fidelity Variable Insurance Seeks high total return with reduced risk over the long
Products Fund and Variable term by allocating its
assets among stocks, bonds, and Insurance Products Fund
II/ short-term instruments. Fidelity Management &
Research Company
</TABLE>
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Variable Survivorship 12
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<S> <C> <C>
Variable Investment Opion Investment Company/ Investment Objective
Adviser/ Manager/
Sub-Adviser
VIP II Index 500 Portfolio Fidelity Variable Insurance Seeks investment results that correspond to the total
Products Fund and Variable return of common stocks publicly traded in the United
Insurance Products Fund II/ States as represented by the S&P(R)500.
Fidelity Management
Research Company/ Bankers
Trust Company
VIF-Equity Income Fund INVESCO Variable Seeks high current income, with growth of capital as a
Investment Funds, Inc./ secondary objective by investing at least 65% of its
INVESCO Funds Group, assets in dividend-paying common and preferred
Inc. stocks. The rest of the fund's assets are invested in
debt securities, and lower-grade debt securities.
VIF-High Yield Fund INVESCO Variable Seeks to provide a high level of current income by
Investment Funds, Inc./ investing substantially all of its assets in lower-rated
INVESCO Funds Group, debt securities and preferred stock, including securities
Inc. issued by foreign companies.
VIF-Small Company Growth INVESCO Variable Seeks investment growth over the long term by
Fund Investment Funds, Inc./ investing at least 80% of its assets in equity securities
INVESCO Funds Group, of companies with market capitalizations of $1 billion
Inc. or less. 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.
VIF-Total Return Fund INVESCO Variable Seeks to provide high total return through both growth
Investment Funds, Inc./ and current income by investing at least 30% of its
INVESCO Capital assets in common stocks of companies with a strong
Management, Inc. history of paying regular dividends and 30% of its
assets in debt securities. 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.
VIF-Utilities Fund INVESCO Variable Seeks capital appreciation and income by investing at
Investment Funds, Inc./ least 80% of its assets in companies doing business in
INVESCO Capital the utilities economic sector. The remainder of the
Management, Inc. fund's assets are not required to be invested in the
utilities economic sector.
Growth Portfolio Neuberger Berman Advisers Seeks growth of capital by investing mainly in
Management Trust/ common mid-capitalization companies.
Neuberger Berman
Management Inc./ Neuberger
Berman, LLC
</TABLE>
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Variable Survivorship 13
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<S> <C> <C>
Variable Investment Option Investment Company/ Investment Objective
Adviser/ Manager/
Sub-Adviser
Limited Maturity Bond Neuberger Berman Advisers Seeks the highest available current income consistent
Portfolio Management Trust/ with liquidity and low risk to principal by investing
Neuberger Berman mainly in investment-grade bonds and other debt
Management Inc./ Neuberger securities from U.S. Government and corporate
Berman, LLC issuers.
Partners Portfolio Neuberger Berman Advisers Seeks growth of capital by investing mainly in
Management Trust/ common stocks of mid- to large-capitalization
Neuberger Berman companies.
Management Inc. Neuberger
Berman, LLC
Worldwide Bond Fund Van Eck Worldwide Seeks high total return--income plus capital
Insurance Trust/ Van Eck appreciation--by investing globally, primarily in a
Associates Corporation variety of debt securities
Worldwide Emerging Markets Van Eck Worldwide Seeks long term capital appreciation by investing in
Fund Insurance Trust/ Van Eck equity securities in emerging markets around the
Associates Corporation world.
Worldwide Hard Assets Fund Van Eck Worldwide Seeks long term capital appreciation by investing
Insurance Trust/ Van Eck primarily in "hard asset securities." Hard assets
Associates Corporation include precious metals, natural resources, real estate
and commodities. Income is a secondary consideration.
Worldwide Real Estate Fund Van Eck Worldwide Seeks high total return by investing in equity
securities Insurance Trust/ Van Eck of companies that
own significant real estate or that Associates Corporation
principally do business in real estate.
</TABLE>
GUARANTEED INTEREST DIVISION
You may allocate your net premium and transfer your net account value into the
guaranteed interest division. The guaranteed interest division guarantees
principal and is part of our general account. It pays interest at a fixed rate
that we declare.
The general account contains all of our assets other than those held in the
separate account (variable investment options) or other separate accounts.
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 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.
The amount you have in the guaranteed interest division is ail of the net
premium you allocate to that division, plus transfers you make 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.
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Variable Survivorship 14
<PAGE>
We declare the interest rate that applies to all amounts in the guaranteed
interest division. This interest rate is never less than the minimum guaranteed
interest rate of 3% and will be in effect for 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.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
There are three divisions: the variable division, the guaranteed interest
division and the loan division. Under the variable division, there are numerous
variable investment options with corresponding underlying investment portfolios.
SEE SECURITY LIFE SEPARATE ACCOUNT L1, PAGE 10 AND INVESTMENT PORTFOLIO
OBJECTIVES, PAGE 11.
You may invest in a total of eighteen investment options over the life of your
policy. Investment options include the variable and the guaranteed interest
divisions, but not the loan division.
As an example, if you have had funds in seventeen variable investment options
and the guaranteed interest division, these are the only investment options to
which you may later add or transfer funds. However, you could still take a
policy loan and access the loan division.
You may want to use fewer investment options in the early years of your policy,
so that you can invest in others in the future. If you invest in eighteen
variable investment options, you will not be able to invest in the guaranteed
interest division.
DETAILED INFORMATION ABOUT THE VARIABLE SURVIVORSHIP POLICY
This prospectus describes our standard Variable Survivorship 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 52 show how the policies work.
We offer other products to insure the lives of two people which may or may not
better match your needs and interests.
APPLYING FOR A POLICY
You purchase this variable universal life policy by submitting an application to
us. On the policy date, the joint equivalent age of the two insured people must
be no less than 15 and no more than age 85. The individual age of each insured
person must be no more than 90 years of age on the policy date. There is no
maximum age difference between the two insured people. The insured people are
the two people on whose lives we issue the policy. The insured people share some
relationship and commonly include, among others: husband and wife; business
partners; parent and child; grandparent and grandchild; and siblings. Upon the
second death of the insured people we pay the death proceeds. SEE AGE, PAGE 37.
You may request that we back-date the policy up to six months to allow either or
both of the insured people to give proof of a younger age for the purposes of
your policy.
We may reduce the minimum death benefit for group or sponsored arrangements and
corporate purchasers. Our underwriting and reinsurance procedures in effect at
the time you apply limit the maximum death benefit.
TEMPORARY INSURANCE
If you apply and qualify, we may issue temporary insurance in an amount equal to
the face amount of the permanent insurance for which you applied. The maximum
amount of temporary insurance for binding limited life insurance coverage is $3
million, which includes any other in-force coverage you have with us.
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Variable Survivorship 15
<PAGE>
Temporary 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 complete.
Temporary life insurance coverage ends on the earliest of:
o the date we return your premium payments;
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 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.
POLICY ISSUANCE
Before we issue a policy, we require satisfactory evidence of insurability of
both insured people and payment of your initial premium. This evidence may
include a medical examination and completion of all underwriting and issue
requirements.
The policy date 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 date we receive your
initial premium.
The policy date is determined one of three ways:
1. the date you designate on your application,
subject to our approval;
2. the back-date of the policy to save age,
subject to our approval and state law; or
3. if there is no designated date or back-date,
the policy date is:
o the date all underwriting and administrative requirements have
been met if we receive your initial premium before we issue your
policy; or
o the date we receive your initial premium if it is after we
approve your policy for issue.
DEFINITION OF LIFE INSURANCE
We apply a test to make sure that your policy meets the federal tax definition
of life insurance. The guideline premium/cash value corridor test applies to
your policy. We may limit premium payments relative to your policy death benefit
under this test. SEE TAX STATUS OF THE POLICY, PAGE 48.
PREMIUMS
You may choose the amount and frequency of premium payments, within limits. You
cannot make premium payments after the second death of the insured people or the
continuation of coverage period begins. SEE CONTINUATION OF COVERAGE, PAGE 27
We consider any payment we receive to be a premium if you do not have an
outstanding loan and your policy is not in the continuation of coverage period.
After we deduct certain expenses from your premium payment, we add the remaining
net premium to your account value.
SCHEDULED PREMIUMS
Your premiums are flexible. You may select your scheduled 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.
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Variable Survivorship 16
<PAGE>
You may receive premium reminder notices for the scheduled premium on a
quarterly, semiannual or annual basis. You are not required to pay the scheduled
premium.
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 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. During the special continuation period, your scheduled premium should
not be less than the minimum annual premium shown in your policy. If you want
the guaranteed minimum death benefit, your scheduled premium should not be less
than the guarantee period annual premium shown in your policy. SEE GUARANTEED
MINIMUM DEATH BENEFIT, PAGE 23.
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 people are 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 at least one
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 have acknowledged in writing
the new modified endowment contract status for your policy.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 49 AND CHANGES TO COMPLY WITH THE LAW,
PAGE 50.
If you have an outstanding policy loan and you make an unscheduled payment, we
will consider it a loan repayment, unless you tell us otherwise. If your payment
is a loan repayment, we do not take out tax or sales charges which apply to
premium payments.
TARGET PREMIUM
Target premiums are not based on the scheduled premium. Target premiums are
actuarially determined based on the ages, genders, ratings and premium classes
of the insured people. The target premium is used in determining the sales
charge and sales compensation we pay our agents/registered representatives. It
may or may not be enough to keep your policy in force. You are not required to
pay target premium and there is no penalty for paying more or less. The target
premium for your policy and any segments added since the policy date are listed
in the policy schedule we provide to you. SEE PREMIUMS, PAGE 16.
MINIMUM ANNUAL PREMIUM
To qualify for the special continuation period, you must pay a minimum annual
premium during each of your first five policy years.
Your minimum annual premium is based on:
o each insured person's age, gender, premium class and any rating;
o the stated death benefit of your policy; and
o any riders you have on your policy.
Your minimum annual premium is shown in the schedule pages of your policy. We
may reduce the minimum annual premium for group, or sponsored arrangements or
for corporate purchasers.
SPECIAL CONTINUATION PERIOD
The special continuation period is the first five policy years. Under the
special continuation period, we guarantee that your policy will not lapse,
regardless of its net cash surrender value, if on a monthly processing date:
o the sum of all premiums you have paid, minus partial withdrawals that
you have taken, minus policy loans that you have taken, including
accrued loan interest is greater than or equal to;
o the minimum monthly premiums for each policy month, from the first
month of your policy through the current policy monthly processing
date.
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Variable Survivorship 17
<PAGE>
The minimum monthly premium is one-twelfth of the minimum annual premium.
During the first five years of your policy if there is not enough net cash
surrender value to pay the monthly deductions and you have satisfied our
requirements, we do not allow your policy to lapse. We do not permanently waive
policy charges. Instead, we continue to deduct these charges which may result in
a negative net cash surrender value, unless you pay enough premium to prevent
this. The negative balance is your unpaid monthly deductions owing. At the end
of the special continuation period to avoid lapse of your policy you must pay
enough premium to bring the net cash surrender value to zero plus the amount
that covers your estimated monthly deductions for the following two months. SEE
LAPSE, PAGE 34.
INVESTMENT DATE AND ALLOCATION OF NET PREMIUMS
Net premium is the balance remaining after we take premium-based charges from
your premium payment.
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 at least equal to the sum of the scheduled premiums which are due from
your policy date through your investment date.
The investment date is the first date we apply the net premium we have received
to your policy. If we receive your initial premium after we approve your policy
for issue, the investment date is the date we receive your initial premium.
We apply net premiums we have received from you 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) we approve your policy for issue.
Amounts you designated for the guaranteed interest division will be allocated to
that division on the investment date. If your state requires the return of your
premium during the free look period, we initially invest amounts you have
designated for the variable division in the Fidelity VIP Money Market Portfolio.
We later transfer these amounts from the Money Market Portfolio to your selected
variable investment options, based on your most recent premium allocation
instructions, at the earlier of the following dates:
o five days after we mailed your policy plus your state free look period
has ended; or
o you have actually received your policy, we have received your delivery
receipt plus your state free look period has ended.
If your state provides for return of account value during the free look period
or no free look period, we invest amounts you designated for the variable
division directly into your selected variable investment options.
We allocate all later premium payments to your policy on the valuation date of
receipt. We use your most recent premium allocation instructions specified in
whole numbers totaling 100% and using up to eighteen investment options over the
life of your policy. SEE MAXIMUM NUMBER OF INVESTMENT OPTIONS, PAGE 15.
You may make twelve free premium allocation changes per year, after which a
transaction fee applies. If you change your designated deduction investment
option from which monthly deductions are taken, we consider this a premium
allocation change for which there may be a charge. SEE DESIGNATED DEDUCTION
OPTION, PAGE 26 AND POLICY TRANSACTION FEES, PAGE 45.
PREMIUM PAYMENTS AFFECT YOUR
COVERAGE
Unless you have the guaranteed minimum death benefit feature or your policy is
in the special continuation period, your coverage lasts only as long as your net
cash surrender value is enough to pay the monthly charges and your cash
surrender value is more than your outstanding policy loan plus accrued loan
interest. If you do not meet these conditions, your policy will enter the 61-day
grace period and you must make a premium payment to avoid lapse. SEE LAPSE, PAGE
34, AND GRACE PERIOD, PAGE 34.
If you pay your minimum premium each year during the first five policy years and
take no policy loan, we guarantee your policy and riders will not lapse during
the special continuation period, regardless of your net cash surrender value.
SEE SPECIAL CONTINUATION PERIOD, PAGE 17.
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Variable Survivorship 18
<PAGE>
Under the guaranteed minimum death benefit, the base death benefit portion of
your policy remains effective until the end of the guarantee period. The
guaranteed minimum death benefit feature does not apply to riders which can
lapse and terminate during the guarantee period. You must meet all conditions of
the guarantee. SEE GUARANTEED MINIMUM DEATH BENEFIT, PAGE 23.
MODIFIED ENDOWMENT CONTRACTS
There are special federal income tax rules for distributions from life insurance
policies which are modified endowment contracts. These rules apply to policy
loans, surrenders and partial withdrawals Whether or not these rules apply
depends upon whether or not the premiums we receive are greater than the
"seven-pay" limit.
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.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 49.
DEATH BENEFITS
As a joint and survivor universal life insurance policy, your policy has a joint
nature to the death benefit. We do not pay death proceeds until the second death
of the insured people. Your death benefit is calculated as of the date of the
second death of the insured people.
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 with your one policy.
When we issue your policy, we base the initial insurance coverage on the
instructions in your application. The death benefit at issue may vary from the
stated death benefit plus adjustable term insurance coverage for some 1035
exchanges. The stated death benefit is the permanent element of your policy. The
adjustable term insurance rider is the term insurance element of your policy.
SEE ADJUSTABLE TERM INSURANCE RIDER, PAGE 24.
Your death benefit is calculated as of the date of the second death of the
insured people.
We generally require a minimum target death benefit of $250,000 to issue a
policy. If you have an adjustable term insurance rider, the minimum stated death
benefit to issue a policy is $100,000, as long as your target death benefit is
at least $250,000. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 22.
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 people. Use of the adjustable term insurance rider may
reduce sales compensation, but may increase the monthly cost of insurance. SEE
ADJUSTABLE TERM INSURANCE RIDER, PAGE 24.
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Variable Survivorship 19
<PAGE>
DEATH BENEFIT SUMMARY
THIS CHART ASSUMES NO DEATH BENEFIT OPTION CHANGES AND NO REQUESTED OR SCHEDULED
INCREASES OR DECREASES IN STATED OR TARGET DEATH BENEFIT AND THAT PARTIAL
WITHDRAWALS ARE LESS THAN THE PREMIUM WE RECEIVE.
<TABLE>
OPTION 1 OPTION 2
<S> <C> <C>
STATED DEATH The amount of policy death benefit at issue, The amount of policy death benefit at issue, not
BENEFIT not including rider coverage. This amount rider coverage. This amount stays stays level
level throughout the life of the contract. throughout the life of the contract.
BASE DEATH The greater of the stated death benefit, or The greater of the stated benefit, plus the
BENEFIT the account value multiplied by the account or the account value multiplied
appropriate factor from the definition of life by the appropriate factor from the definition of
insurance factors. life insurance factors.
TARGET DEATH Stated death benefit plus adjustable term Stated death benefit plus adjustable term
BENEFIT insurance rider benefit. This amount insurance rider benefit. This amount remains
remains level throughout the life of the level throughout the life of the policy.
policy.
TOTAL DEATH This is the total death proceeds. It is the This is the total death proceeds. It is the
BENEFIT greater of the target death benefit or the greater of the target death benefit plus the
base death benefit. account value or the base death benefit.
ADJUSTABLE The adjustable term insurance rider benefit The adjustable term insurance rider benefit is
TERM is the total death benefit minus base death the death benefit minus the base death
INSURANCE benefit, but it will not be than zero. If benefit, but it will not be less than zero. If the
RIDER BENEFIT the account value multiplied by the death account value multiplied by the death benefit
benefit corridor factor is greater than the corridor factor is greater than the stated death
stated death benefit, the adjustable term benefit plus the account value, the adjustable
insurance benefit will be decreased. It will term insurance rider benefit will be decreased.
be decreased so that the sum of the base It will be decreased so that the sum of the base
death benefit and the adjustable term death benefit and the adjustable term insurance
insurance rider benefit is not greater than rider benefit is not greater than the target death
the target death benefit. If the base death benefit plus the account value. If the base
benefit becomes greater than the target death benefit becomes greater than the target
death benefit, then the adjustable term death benefit plus the account value, then the
insurance rider benefit is zero. adjustable term insurance rider benefit is zero.
</TABLE>
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 your choice of the enhanced death benefit corridor option;
o increases or decreases in the stated death benefit; or
o a change in your death benefit option.
As long as your policy is in force, we will pay the death proceeds to your
beneficiary(ies) calculated at the date of the second death of the insured
people. 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 rider benefits; minus
o your outstanding policy loan with accrued loan interest; minus
o outstanding policy charges incurred before the second death of the
insured people.
There could be outstanding policy charges if the date of the second death of the
insured people happens while your policy is in the grace period or in the
five-year special continuation period.
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Variable Survivorship 20
<PAGE>
DEATH BENEFIT OPTIONS
You have a choice of two death benefit options: option 1 or option 2 (described
below). You may choose the enhanced death benefit corridor option in addition to
your death benefit option but only if you do so prior to the issue of your
policy. Your death benefit option 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 first policy anniversary and before the
continuation of coverage feature begins. SEE CHANGES IN DEATH BENEFIT OPTION 1
OR 2, PAGE 21.
If you choose death benefit option 1, your base death benefit is the greater of:
1. your stated death benefit on the date of the second death of the
insured people; or
2. your account value on the date of the second death of the insured
people multiplied by the appropriate factor from the definition of
life insurance factors shown in Appendix A.
Under option 1, positive investment performance generally reduces your net
amount at risk, which lowers your policy's cost of insurance charge. Option 1
offers insurance coverage that is a set amount with potentially lower cost of
insurance charges over time.
If you choose 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
second death of the insured people; or
2. your account value on the date of the second death of the insured
people multiplied by the appropriate factor from the definition of
life insurance factors shown in Appendix A.
Under option 2, investment performance is reflected in your insurance coverage.
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 younger insured person's age;
o the insured people's genders; and
o the guideline premium/cash value corridor test for the federal income
tax law definition of life insurance. SEE APPENDIX A, PAGE 60.
Death benefit option 2 is not available during the continuation of coverage
period. If you select option 2 on your policy, it automatically converts to
death benefit option 1 when the continuation of coverage period begins. SEE
CONTINUATION OF COVERAGE, PAGE 27.
CHANGES IN DEATH BENEFIT OPTIONS
You may request a change in your death benefit option at any time after your
policy date and before the continuation of coverage feature begins.
Your requested 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 one day remains before your monthly processing date and no additional
underwriting is required. If fewer than one day remains before your monthly
processing date, your death benefit option change will be effective on the
second following monthly processing date.
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.
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 make this change for you.
We may not approve a death benefit option change if it reduces the target or
stated death benefit below the minimum we require to issue your policy.
On the effective date of your option change, your stated death benefit changes
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.
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Variable Survivorship 21
<PAGE>
We increase or decrease your stated death benefit on the date of your death
benefit option change to keep the net amount at risk the same. There is no
change to the amount of term insurance if you have an adjustable term insurance
rider. SEE COST OF INSURANCE CHARGE, PAGE 44.
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 impose a surrender charge for any decrease in your stated death
benefit because you change your death benefit option. We do not adjust the
target premium when you change your death benefit option. SEE SURRENDER CHARGE,
PAGE 46.
Changing your death benefit option may reduce or increase your target death
benefit, as well as your stated death benefit.
ENHANCED DEATH BENEFIT CORRIDOR OPTION
You may elect the enhanced death benefit corridor option prior to the issuance
of your policy.
This option generally provides an opportunity for an increased death benefit on
the lives of the insured people at certain ages. Under death benefit option 1
and 2 to calculate your base death benefit value, the account value is
multiplied by a factor shown in Appendix A or B depending on whether or not you
elect this option. The result of this calculation is the base death benefit if
it exceeds the stated death benefit. Under the enhanced death benefit corridor
option, we calculate the base death benefit using the factors shown on Appendix
B. SEE DEATH BENEFIT OPTIONS, PAGE 20.
There is no charge for this feature. However, the same account value may
generate a higher base death benefit under policies with this option than on
policies not electing the option. Cost of insurance charges are based on the net
amount at risk, which is the difference between the account value and the base
death benefit. Therefore, as a result of the increased death benefit, the cost
of insurance charges may be higher for policies electing this option. Your
agent/registered representative can provide you with a personalized illustration
to show the difference between a policy with this option and one without it. If
your policy does not have sufficient account value, electing this option may
have no effect on the base death benefit.
Adding this option to your policy does not affect the operation of your policy's
riders, including the adjustable term insurance rider. When the base death
benefit is more than the stated death benefit, transactions which reduce your
account value (such as a partial withdrawal) also reduce the death benefit. The
dollar reduction to the death benefit under these circumstances is greater for
policies with the enhancement option than on those without the option.
Once elected, this option cannot be deleted from your policy. You may lose the
benefit of this option if your account value falls below the minimum level
needed to keep it in effect.
CHANGES IN DEATH BENEFIT AMOUNTS
You may want to increase your policy's target or stated death benefit. You may
do so while your policy is in force and before the policy anniversary when the
joint equivalent age of the insured people is 85.
Contact your agent/registered representative or our customer service center to
request a change in your policy's death benefit. The request is effective on the
next monthly processing date after we receive and approve your request. There
may be underwriting or other requirements which must be met before your request
can be approved. Your requested change must be for at least $1,000.
After we approve your request, we will send you a new policy schedule page which
includes the:
o stated death benefit;
o benefits under applicable riders;
o guaranteed cost of insurance rates of each segment;
o new surrender charge; and
o target death benefit schedule.
Keep the new schedule with your policy. We may ask you to send your policy to us
so that we can make the change for you.
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.
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Variable Survivorship 22
<PAGE>
SEE TAX CONSIDERATIONS, PAGE 47.
You may change your target death benefit once in a policy year.
The initial death benefit segment, or first segment, is the stated death benefit
on your policy's effective date. A requested increase in stated death benefit
will cause a new segment to be created. Once we create a new segment, it is
permanent unless state law requires differently. The segment year runs from the
segment effective date to its anniversary.
Each new segment may have:
o a new minimum annual premium during the special continuation period;
o a new sales charge;
o new surrender charges;
o new cost of insurance charges;
o a new incontestability period;
o a new suicide exclusion period; and
o a new target premium.
You may not reduce your death benefit in the first policy year. Requested
reductions in the death benefit will be applied first 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 decreases in stated death benefit among your benefit segments
pro rata unless state law requires differently.
There may be tax consequences as a result of a decrease in your death benefit,
as well as a possible surrender charge. SEE TAX STATUS OF THE POLICY, PAGE 48
AND MODIFIED ENDOWMENT CONTRACTS, PAGE 49.
You must provide satisfactory evidence that the insured people are still
insurable to increase your death benefit. Unless you tell us differently, we
assume your request for an increase in your target death benefit is also a
request for an increase to your stated death benefit. Thus, the amount of your
adjustable term insurance rider will not change.
We allocate the net amount at risk among segments in the same proportion that
each segment bears to the total stated death benefit. Premiums we receive after
an increase are applied to your policy segments in the same proportion as the
target premium for each segment bears to the target premium for all segments.
Sales charges are deducted from each segment's premium based on the length of
time that segment has been effective.
If a death benefit 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.
GUARANTEED MINIMUM DEATH BENEFIT
Usually, your coverage lasts only as long as your net cash surrender value is
enough to pay the monthly charges and your cash surrender value is more than
your outstanding policy loan plus accrued loan interest. Your net cash surrender
value depends on:
1. timing and amount of any premium payments;
2. the investment performance of the variable investment options;
3. the interest you earn in the guaranteed interest division;
4. the amount of your monthly charges;
5. partial withdrawals you take; and
6. loan activity you may have.
The guaranteed minimum death benefit may be put in force only at policy issue.
This option extends the period that your policy's stated death benefit remains
in effect even if the variable investment options perform poorly. It has a
guarantee period that lasts until the continuation of coverage period begins, so
long as you meet all requirements.
The guaranteed minimum death benefit coverage does not apply to riders,
including the adjustable term insurance rider. Therefore, if your net cash
surrender value is not enough to pay the deductions as they come due on your
policy and if your policy is no longer in the special continuation period, only
the stated death benefit portion of your coverage is guaranteed to stay in
force.
Charges for your guaranteed minimum death benefit and base coverage are deducted
each month to the extent that there is sufficient net account value to pay these
charges. If there is not sufficient net account value to pay a charge, it is
permanently waived. Deduction of charges will resume once there is sufficient
net account value.
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Variable Survivorship 23
<PAGE>
The guaranteed minimum death benefit feature is not available in some states.
If you choose the guaranteed minimum death benefit feature, we charge a
guaranteed maximum rate of $0.005 per $1,000 of your stated death benefit each
month during the guarantee period.
REQUIREMENTS TO MAINTAIN THE GUARANTEE PERIOD
To qualify for the guaranteed minimum death benefit you must pay an annual
premium higher than the minimum annual premium. This higher premium is called
the guarantee period annual premium. The guarantee period monthly premium is
one-twelfth of the guarantee period annual premium. Your net account value must
meet certain diversification requirements.
Your guarantee period annual premium is based on a percentage of the guideline
level premium calculated under the federal tax laws. Your guideline level annual
premium depends on:
o your policy's target death benefit;
o each insured person's age, gender, premium class and underwriting
characteristics;
o the death benefit option you chose;
o additional rider coverage on your policy; and
o other additional benefits on your policy.
At each monthly processing date we test to see if you have paid enough premium
to keep your guarantee in place. We calculate:
o actual premiums we receive; minus
o the amount of any partial withdrawals you make; minus
o policy loan amounts you take with accrued loan interest. This amount
must equal or exceed;
o the sum of the guarantee period monthly premium payments for each
policy month starting with your first policy month through the end of
the policy month that begins on the current monthly processing date.
You must continually meet the requirements of the guarantee period for this
feature to remain in effect. We show the guarantee period annual premium on your
policy schedule. If your policy benefits increase, the guarantee period annual
premium increases.
In addition, the guarantee period ends if your net account value on any monthly
processing date is not diversified as follows:
1. your net account value is invested in at least five investment
options; and
2. no more than 35% of your net account value is in any one investment
option.
Your policy will continue to meet the diversification requirements if:
1. you have automatic rebalancing and you meet the two diversification
tests listed above; or
2. you have dollar cost averaging which results in transfers into at
least four investment options with no more than 35% of any transfer
directed to any one.
SEE DOLLAR COST AVERAGING, PAGE 30, AND AUTOMATIC REBALANCING, PAGE 31.
If you choose the guaranteed minimum death benefit, you must make sure your
policy satisfies the premium test and diversification test. If you fail to
satisfy either test and you do not correct it, this feature terminates. Once it
terminates, you cannot reinstate the guaranteed minimum death benefit feature.
The guarantee period annual premium then no longer applies to your policy.
RIDERS
Your policy may include benefits, which we attach by use of a rider. A rider
adds an additional cost to your policy. If applicable, we deduct a monthly
charge from your account value for each rider you choose. You may cancel these
rider benefits at any time.
Periodically we may offer other riders than those listed here. You should
contact your agent/registered representative for a complete list of the riders
now available.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 49, FOR INFORMATION ON THE POSSIBLE TAX
EFFECTS OF ADDING OR CANCELING THESE BENEFITS.
ADJUSTABLE TERM INSURANCE RIDER
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Variable Survivorship 24
<PAGE>
We generally require a minimum target death benefit of $250,000 to issue a
policy. If you have an adjustable term insurance rider, the minimum stated death
benefit to issue a policy is $100,000, as long as your target death benefit is
at least $250,000.
You may increase your death proceeds by adding an adjustable term insurance
rider. This rider allows you to schedule the pattern of death benefits
appropriate for anticipated needs. The amount we pay is the term death benefit
in force at the time of the second death of the two people. As the name
suggests, the adjustable term insurance rider adjusts over time to maintain your
desired level of coverage.
You specify a target death benefit when you apply for this rider. The target
death benefit can be level for the life of your policy or can be scheduled to
change at the beginning of a selected policy year(s). SEE DEATH BENEFITS, PAGE
19.
We generally restrict your target death benefit to an amount not more than ten
times your stated death benefit at issue. Under certain circumstances, we will
be willing to allow you to specify a target death benefit of up to twenty-two
times your stated death benefit during the first four policy years. After this
four-year period, the normal target death benefit maximum would apply.
The adjustable term insurance rider death benefit is the difference between your
target death benefit and your base death benefit, but not less than zero. The
rider's death benefit automatically adjusts daily as your base death benefit
changes. Your death benefits depend 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.
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 target death benefit in each
year:
Base Death Target 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.
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 drops below your target death benefit, the adjustable term
insurance rider amount reappears to maintain your desired 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 22.
We may deny 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 your target death benefit. SEE PARTIAL WITHDRAWALS, PAGE 33
AND CHANGES IN DEATH BENEFIT OPTIONS, PAGE 21.
There is no defined premium for a given amount of adjustable term insurance
coverage. 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 at the monthly processing date. The cost of insurance
rates are determined by us from time to time. They are based on the issue ages,
genders, ratings and premium classes of the insured people, as well as your
policy date.
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.
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Variable Survivorship 25
<PAGE>
These rates are based on the original premium classes even though satisfactory
new evidence of insurability is required for the increased schedule. The monthly
guaranteed maximum cost of insurance rates for this rider will be stated in the
policy. SEE COST OF INSURANCE CHARGE, PAGE 44.
The only charge for this rider is the cost of insurance charge because there is
no sales or surrender charge for this rider. The total charges that you pay may
be less if you have greater coverage under an adjustable term insurance rider
rather than as base death benefit.
However, not all policy features apply to the adjustable term insurance rider.
The adjustable term insurance rider does not contribute to the policy account
value and there is no surrender value. It does not affect investment performance
and cannot be used toward a policy loan. The adjustable term insurance rider
provides benefits only at the second death of the insured people.
SINGLE LIFE TERM INSURANCE RIDER
This rider provides a benefit upon the death of one of the primary insured
people under your policy. You may choose to add a single life term insurance
rider for just one insured person. Alternatively, you may add two single life
term insurance riders: one for each insured person. You may add this rider to
your policy at any time if both insured people are alive and the insured person
is insurable according to our rules.
We will issue the single life term insurance rider on an insured person who is
between the ages of 15 and 85. Coverage may continue until the earlier of when:
o the insured person covered by this rider reaches age 100;
o the continuation of coverage provision becomes effective;
o use of the guaranteed minimum death benefit terminates this rider;
o the insured person covered by this rider dies;
o the grace period expires; or
o the policy is surrendered.
SEE CONTINUATION OF COVERAGE, PAGE 27 AND GUARANTEED MINIMUM DEATH BENEFIT, PAGE
23.
The minimum amount of coverage for a single life term insurance rider is $1,000.
The maximum coverage under this rider is subject to our underwriting
determinations. At issue, you may schedule the rider's death benefit to increase
or decrease.
Your request for an increase or decrease in rider coverage is effective on the
next monthly processing date after we approve your request. There may be
underwriting or other requirements which must be met before we approve your
request. A requested change in your coverage must be for at least $1,000. If you
schedule or request an increase after issue, the person insured under this rider
will be subject again to our underwriting requirements.
The charge for this rider is based on the age, gender, premium class and
underwriting characteristics of the insured person. The charge for this rider is
deducted on each monthly processing date as a cost per each $1,000 of the net
amount at risk under the rider. See the policy schedule pages for information on
your actual cost. There are no surrender charges for decreases in the amount of
coverage under the single life term rider.
SPECIAL FEATURES
DESIGNATED DEDUCTION INVESTMENT OPTION
You may designate an investment option from which we will deduct your monthly
charges. You may make this designation at any time. You may not use the loan
division as your designated deduction option.
You may elect not to choose a designated deduction option or the amount in your
designated deduction option may not be enough to cover the monthly deductions.
If so, these charges are taken from the variable and guaranteed interest
divisions in the same proportion that your account value in each has to your
total net account value on the monthly processing date.
If you change your designated deduction investment option, we consider this a
premium allocation change for which there may be a charge. SEE POLICY
TRANSACTION FEES, PAGE 45.
POLICY SPLIT OPTION
Under certain circumstances, you may exchange your policy for two single life
insurance policies: one on each of the two insured people. The policy split
option has its own insurability requirements which may be met at or before the
time your policy is split. Evidence of insurability is required for a new single
life policy where coverage is greater than 50% of your original policy death
benefit or for an insured person who is subject to certain underwriting ratings.
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Variable Survivorship 26
<PAGE>
On the effective date of the policy split, the available death benefit under
your policy will be divided between the two new single life insurance policies.
You may take less than the maximum death benefit amount available.
Unless law requires otherwise, you may use the policy split option if:
a) three months following the effective date of a final divorce decree
regarding the marriage of the two insured people;
b) there is a change to the federal estate tax law which results in
either;
i) removal of the unlimited marital deduction provision; or
ii) a reduction in the current maximum federal estate tax of at least
50% after your policy date; or
c) there is a dissolution of business conducted or owned by the two
insured people.
You must send us written notice of your election to use the policy split option
within 180 days of the occurrence of eligible event. You must provide
satisfactory evidence that the event has occurred.
The effective date of the policy split is the first monthly processing date
after we approve it. The insurance coverage under the two individual life
insurance policies will start on the effective date of the policy split only if
both insured people are alive on that date. If either insured person is not
alive on that date, your exchange is void.
All terms and conditions of the new policies apply once your policy is split and
they may differ from those of this policy. Consult your new single life
insurance policies.
The premiums for each new policy will be based on each insured person's age,
gender and premium class at the time of the split of your policy. Premiums will
be due for each new policy under the terms of the new policy. The account value
of the old policy will be allocated to the new policies an the effective date in
the same proportion that the face amount was divided between the two single life
insurance policies, unless we agree to a different allocation. If this
allocation causes an increase in the face amount of either of the new single
life policies, we may limit the account value you may apply to each new policy.
Any remaining account value will be paid to you in cash and may be taxable.
If you have an outstanding policy loan it will be divided and transferred to
each new single life insurance policy in the same proportion as your account
value is allocated. Any remaining loan balance must be paid before the effective
date of the policy split. Any person or entity to which you have assigned your
policy must agree to the policy split. An assignment of your policy generally
will apply to each new single life insurance policy.
If you have a single life term insurance rider on your policy at the date of the
policy split, you may have a term insurance rider insuring the same insured
person if that rider is available on the new policy. Other riders may or may not
be available on the new policies and may be subject to new proof of
insurability.
Exercising the policy split option may be treated as a taxable transaction.
Moreover, the two single life insurance policies could be treated as modified
endowment contracts. SEE TAX CONSIDERATIONS, PAGE 47.
You may not split your policy into two single life insurance policies if any of
the following has happened:
a) the continuation of coverage period has begun;
b) one of the insured people has died;
c) your policy grace period has ended; or
d) your policy has been terminated or surrendered.
You should consult a tax adviser before exercising the policy split option.
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. We transfer the amount you have in the variable division to the
guaranteed interest division. We allocate all of your future net premium only to
the guaranteed interest division. We do not allow future payments or transfers
to the variable investment options after you exercise this right.
We do not charge for the transfer to make this exchange. SEE GUARANTEED INTEREST
DIVISION, PAGE 14.
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Variable Survivorship 27
<PAGE>
POLICY MATURITY
You may surrender your policy at any time. At the policy anniversary nearest the
younger insured person's 100th birthday if you do not want the continuation of
coverage feature, the policy matures. You may then surrender the policy for the
net account value and end coverage. Part of this payment may be taxable. You
should consult your tax adviser.
At policy maturity, if you have an adjustable term insurance rider, the target
death benefit becomes the stated death benefit. The adjustable term insurance
rider then terminates. If you have no adjustable term insurance rider, your
stated death benefit is unchanged.
CONTINUATION OF COVERAGE
The continuation of coverage feature allows your insurance coverage to continue
in force beyond policy maturity. If on the policy anniversary nearest the
younger insured person's 100th birthday to allow the continuation of coverage
feature to become effective, we:
o convert target death benefit to stated death benefit;
o terminate all riders;
o convert death benefit option 2 to death benefit option 1, if
applicable;
o deduct a one-time $400 administrative fee to cover future expenses;
o transfer your net account value (excluding the amount in the loan
division) into the guaranteed interest division; and
o terminate dollar cost averaging and automatic rebalancing.
Your insurance coverage continues in force until the second death of the insured
people, unless the policy lapses or is surrendered. However:
o you may make no further premium payments;
o we deduct no further cost of insurance charges;
o your monthly deductions cease; and
o your net account value may not be transferred into the variable
investment options. SEE CONTINUATION OF COVERAGE ADMINISTRATIVE FEE,
PAGE 45.
During the continuation of coverage period, you may take policy loans or partial
withdrawals from your policy. If we pay a persistency refund on the guaranteed
interest division, it will be credited to your policy. SEE PERSISTENCY REFUND,
PAGE 45.
If you have an outstanding policy loan, interest continues to accrue. If you
fail to make sufficient loan or loan interest payments, it is possible that the
loan balance plus accrued interest may become greater than your account value
and cause your policy to lapse. To avoid this lapse, you may make loan and loan
interest payments during the continuation of coverage period.
If you wish to stop coverage during the continuation of coverage period, you may
surrender your policy and receive the net account value. There is no surrender
charge during the continuation of coverage period . All normal consequences of
surrender apply. SEE SURRENDER, PAGE 36 AND SURRENDER CHARGE, PAGE 46.
The continuation of coverage feature may not be available in all states. If a
state has approved this feature, it is an automatic feature and you do not need
to take any action to activate it.
The tax consequences of coverage continuing beyond the younger insured's
person's 100th birthday 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 applied;
o charges deducted;
o partial withdrawals taken;
o investment performance of the variable investment options;
o interest earned on the guaranteed interest division; and
o interest earned on the loan division.
NET ACCOUNT VALUE
Your policy's net account value is your account value minus the amount of your
outstanding policy loan and accrued loan interest, if any.
CASH SURRENDER VALUE
Your cash surrender value is your account value minus any surrender charge due.
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Variable Survivorship 28
<PAGE>
NET CASH SURRENDER VALUE
Your net cash surrender value is your cash surrender value minus the amount of
your outstanding policy loan and accrued loan interest, if any.
DETERMINING VALUES IN THE VARIABLE DIVISION
The amounts in the variable division are measured by accumulation units and
accumulation unit values. The value of each variable investment option is the
accumulation unit value for that option multiplied by the number of accumulation
units you own in that option. Each variable investment option has a different
accumulation unit value.
We purchase accumulation units for you when you allocate premium or make
transfers to a variable investment option, including transfers from the loan
division.
A valuation date is one on which the net asset value of the investment portfolio
shares and unit values of the variable investment options are determined. A
valuation date is each day the New York Stock Exchange and the company's
customer service center are open for business, except for days on which an
investment portfolio does not value its shares or any other day as required by
state law. Each valuation date ends at 4:00 p.m. Eastern time.
We sell accumulation units for you:
o when amounts are transferred from a variable investment option
(including transfers to the loan division);
o for your policy's monthly deductions from your account value;
o for policy transaction charges;
o when you take a partial withdrawal;
o when you surrender your policy; and
o to pay the death proceeds.
We calculate the number of accumulation units purchased or sold 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 for that variable investment option.
The accumulation unit value is the value of one accumulation unit determined on
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 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 29.
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. 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 on 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 options goes up or
down depending on investment performance of the underlying investment portfolio.
FOR AMOUNTS IN THE VARIABLE INVESTMENT OPTIONS, THERE IS NO GUARANTEED MINIMUM
CASH SURRENDER VALUE.
HOW WE CALCULATE ACCUMULATION UNIT VALUES
We determine accumulation unit values an 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 first date, the
accumulation unit value on any valuation date is:
1. the accumulation unit value for the preceding valuation date
multiplied by
2. the variable investment option's accumulation experience factor 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.
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Variable Survivorship 29
<PAGE>
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 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.
3. We divide the resulting amount by the value of the shares in the
underlying investment portfolio at the close of business on the
previous valuation date.
4. We then subtract the mortality and expense risk charge under your
policy. The daily charge is .002055% (.75% annually) of the
accumulation unit value. If the previous day was not a valuation date,
the charge is multiplied by the number of days since the last
valuation date.
TRANSFERS OF ACCOUNT VALUE
You may make twelve free transfers among the variable investment options or the
guaranteed interest division in each policy year, with a $25 fee per transaction
after that. If your state requires a refund of premium during the free look
period, you may not make transfers until after your free look period ends. We do
not limit the number of transfers you may make. Transfers for automatic
rebalancing or dollar cost averaging do not count toward your twelve free
transfers. You may not make transfers during the continuation of coverage
period. SEE POLICY TRANSACTION FEES, PAGE 45 AND CONTINUATION OF COVERAGE, PAGE
27.
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 investment option or be
transferred to one investment option as long as the total amount you transfer is
at least $100. However, if the amount remaining in an investment option is less
than $100 and you make a transfer request from that investment option, we
transfer the entire amount.
EXCESSIVE TRADING
Excessive trading activity can disrupt investment portfolio management
strategies and increase portfolio expenses through:
o increased trading and transaction costs;
o disruption of planned investment strategies;
o forced and unplanned portfolio turnover;
o lost opportunity costs; and
o large asset swings that decrease the portfolio's 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 market timing
services. 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 amounts 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 will be processed on your policy anniversary. A request
received by us within 30 days after your policy anniversary is effective on 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.
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Variable Survivorship 30
<PAGE>
DOLLAR COST AVERAGING
If your policy has at least $10,000 invested in either qualifying source
investment portfolio, you may elect dollar cost averaging. The qualifying source
investment portfolios are the Fidelity VIP Money Market Portfolio or the
Neuberger Berman AMT Limited Maturity Bond Portfolio. 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 is intended to reduce the risk of investing too little when the price
of an investment portfolio's shares is low. Since you transfer the same dollar
amount to other investment options each period, you purchase more units in an
investment option when the unit value is low and you purchase fewer units if the
unit value is high.
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 add dollar cost averaging to your policy at any time. The first dollar
cost averaging date must be at least one day after we receive your dollar cost
averaging request. If your state requires refund of all premiums we receive
during the free look period dollar cost averaging cannot begin until your free
look period has ended.
With dollar cost averaging, you designate either a dollar amount or a percentage
of your account value for automatic transfer from a qualifying source investment
portfolio. Each period we automatically transfer the amount you select from your
chosen source investment portfolio to one or more other variable investment
options. You may not use the guaranteed interest division or the loan division
in dollar cost averaging.
The minimum percentage you may transfer to any one investment option is 1% of
the total amount you transfer. You must transfer at least $100 on each dollar
cost averaging transfer date.
Dollar cost averaging may occur on the same day of the month on a monthly,
quarterly, semi-annual or annual basis. Unless you tell us otherwise, dollar
cost averaging automatically takes place monthly on the monthly processing date.
You may have both dollar cost averaging and automatic rebalancing at the same
time. However, the dollar cost averaging source investment portfolio 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 change the program by telephoning our
customer service center. SEE TELEPHONE PRIVILEGES, PAGE 39.
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 one day before the next
dollar cost averaging date.
Dollar cost averaging will terminate when:
1. you specify a termination date; or
2. your balance in the source investment portfolio reaches a dollar
amount you set; or
3. the amount in the source investment portfolio is equal to or less than
the amount to be transferred on a dollar cost averaging date. We will
transfer the remaining amount and dollar cost averaging ends.
AUTOMATIC REBALANCING
Automatic rebalancing is a method of maintaining a consistent approach to
investing account values over time and simplifying the process of asset
allocation among your chosen investment options.
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.
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Variable Survivorship 31
<PAGE>
After the transfer, the ratio of your account value in each investment option to
your total account value for all investment options included in automatic
rebalancing matches the automatic rebalancing allocation percentage you set for
that investment option. This action rebalances the amounts in the investment
options that do not match your set allocation. This mismatch can happen if an
investment option outperforms the 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 on a monthly, quarterly, semi-annual or annual basis. If
you do not specify a frequency, automatic rebalancing will occur quarterly.
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 we receive during the free look period).
If you elect this feature after your policy date, we process the first
transaction on the date you request. If you do not request a date, processing is
on the last valuation date of the calendar quarter we receive your request.
When you choose automatic rebalancing allocations, you may choose up to eighteen
total investment options. SEE MAXIMUM NUMBER OF INVESTMENT OPTIONS, PAGE 15.
You may have both automatic rebalancing and dollar cost averaging at the same
time. However, the source investment portfolio for your dollar cost averaging
cannot be included in your automatic rebalancing program. You may not include
the loan division in your automatic rebalancing program.
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 30.
If you have automatic rebalancing and the guaranteed minimum death benefit and
you ask for an allocation which does not meet the guaranteed minimum death
benefit diversification requirements, we will notify you that the allocation
needs to be changed and ask you for revised instructions. SEE GUARANTEED MINIMUM
DEATH BENEFIT, PAGE 23.
TERMINATING AUTOMATIC REBALANCING
You may terminate automatic rebalancing at any time, as long as we receive your
notice of termination at least one day before the next automatic rebalancing
date. If you have the guaranteed minimum death benefit and you terminate the
automatic rebalancing feature, you still must meet the diversification
requirements of your net account value for the guarantee period to continue. SEE
GUARANTEED MINIMUM DEATH BENEFIT, PAGE 23.
POLICY LOANS
The loan division is part of our general account specifically designed to hold
money used as collateral for loans and loan interest.
You may borrow from 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
state 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. policy loan interest that is capitalized when due; minus
3. policy loan or interest repayments you make.
Unless state law requires differently, new policy loan must be at least $100.
The maximum amount you can borrow on any valuation date, unless required
differently by state law, is your net cash surrender 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 of less than
$25,000 by telephoning our customer service center.
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Variable Survivorship 32
<PAGE>
SEE TELEPHONE PRIVILEGES, PAGE 39.
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, including the
guaranteed interest division.
Loan interest charges on your policy loan accrue daily at an annual interest
rate of 3.75%. 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.
When you take a policy loan, we transfer an amount equal to your policy loan 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%. After your tenth policy year, the loan division is credited with a
persistency refund. SEE PERSISTENCY REFUND, PAGE 45.
If you request an additional loan, we add the new loan amount to your existing
policy loan. This way, there is only one loan outstanding on your policy at any
time.
LOAN REPAYMENT
You may repay your policy loan at any time while your policy is in force. We
assume that payments you make, other than scheduled premiums, are policy loan
repayments. You must tell us if you want payments to be premium payments.
When you make a loan payment, we transfer an amount equal to your payment from
the loan division to the variable investment options and the guaranteed interest
division in the same proportion as your current premium allocation, unless you
tell us otherwise.
EFFECTS OF A POLICY LOAN ON YOUR POLICY
Taking a loan decreases the amount you have in the investment options. 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
proceeds payable or the cash surrender value payable on surrender.
Failure to repay your loan may affect the length of time your policy remains in
force. If you do not make loan payments your policy could lapse. Policy loans
may cause your policy to lapse if your net cash surrender value is not enough to
pay your deductions each month. SEE LAPSE, PAGE 34.
Policy loans may have tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH
BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 49, AND DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS,
PAGE 49.
If you use the continuation of coverage feature and you have a policy loan, loan
interest continues to accrue.
PARTIAL WITHDRAWALS
You may request a partial withdrawal to be processed 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 cash surrender
value. If your request is by telephone, it must be for 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 39.
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 cash surrender value. If you request a
withdrawal of more than this maximum, we require you to surrender your policy or
reduce the withdrawal.
When you take a partial withdrawal, we deduct your withdrawal amount plus a
service fee from your account value. If applicable, we deduct a surrender charge
from your account value if your partial withdrawal causes a reduction in your
stated death benefit. SEE CHARGES, DEDUCTIONS AND REFUNDS, PAGE 42.
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Variable Survivorship 33
<PAGE>
Unless you tell us otherwise, we will make a partial withdrawal from the
guaranteed interest division and the variable investment options in the same
proportion that each has to your net account value immediately before your
withdrawal. You may select one investment option from which your partial
withdrawal will be taken. If you select the guaranteed interest division,
however, the amount withdrawn from it 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.
Partial withdrawals may have adverse tax consequences. SEE DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 49 AND DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS, PAGE 49.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1
If you selected death benefit option 1, no more than fifteen years have passed
since your policy date and the joint equivalent age of the insured people 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 your
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 or target death benefit. However because your account value
is reduced, we reduce the total death benefit by at least the partial withdrawal
amount.
STATED DEATH BENEFIT AND TARGET DEATH BENEFIT
REDUCTIONS
Regardless of your chosen death benefit option, partial withdrawals do not
reduce your stated death benefit if:
o your base death benefit has been increased to qualify your policy as
life insurance under the federal income tax laws; and
o 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 48.
We require a minimum stated death benefit and a minimum target death benefit to
issue your policy. You may not take a partial withdrawal if it reduces your
stated death benefit or target death benefit below this minimum. SEE POLICY
ISSUANCE, PAGE 16.
We will send a new policy schedule page 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
49, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT
MODIFIED ENDOWMENT CONTRACTS, PAGE 49.
LAPSE
Your insurance coverage continues as long as your net cash surrender value is
enough to pay all deductions each month. Lapse does not apply if either the
guaranteed minimum death benefit or the special continuation period is in effect
and you have met all requirements. SEE SPECIAL CONTINUATION PERIOD, PAGE 17 AND
GUARANTEED MINIMUM DEATH BENEFIT, PAGE 23.
If the continuation of coverage feature is active, your policy could still lapse
if there are outstanding policy loan amounts even though there are no further
monthly deductions.
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Variable Survivorship 34
<PAGE>
GRACE PERIOD
Your policy enters a 61-day lapse grace period if, on a monthly processing date:
1. your net cash surrender value is zero (or less); and
2. the five-year special continuation period has expired, or you have not
paid the required special continuation period premium; and
3. you do not have the guaranteed minimum death benefit rider or it has
expired or terminated.
We notify you that your policy is in a grace period at least 30 days before it
ends. We send this notice to you (or a person to whom you have assigned your
policy) at your last known address in our records. We notify you of the premium
payment necessary to prevent your policy from lapsing. This amount is generally
the past due charges, plus your estimated monthly policy and rider deductions
for the next two months. If the second death of the insured people occurs during
the grace period we do pay death proceeds to your beneficiary(ies), but with
reductions for any policy loan balance, accrued loan interest and monthly
deductions owed. We will send you a lapse notice if the guaranteed minimum death
benefit is going to lapse.
If we receive your 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 deduct the overdue amounts from your account balance.
If you do not pay the full amount within the 61-day grace period, your policy
and its riders lapse without value. We withdraw your remaining account balance
from the variable and guaranteed interest divisions. We deduct amounts you owe
us including surrender charges and inform you that your policy has ended.
IF YOU HAVE THE GUARANTEED MINIMUM DEATH BENEFIT IN EFFECT
After the special continuation period has ended and if the guaranteed minimum
death benefit is in effect, your policy's stated death benefit will not lapse
during the guarantee period. This is true even if your net cash surrender value
is not enough to cover all of the deductions from your account value on any
monthly processing date. SEE GUARANTEED MINIMUM DEATH BENEFIT, PAGE 23.
LAPSE SUMMARY
<TABLE>
SPECIAL CONTINUATION PERIOD GUARANTEED MINIMUM DEATH BENEFIT
=========================================================== ==========================================================
IF YOU MEET THE IF YOU DO NOT MEET THE IF YOU MEET THE IF YOU DO NOT MEET THE
REQUIREMENTS REQUIREMENTS OR IT IS NO REQUIREMENTS REQUIREMENTS OR IT IS NO
LONGER IN EFFECT LONGER IN EFFECT
<S> <C> <C> <C>
Your policy does not lapse Your policy enters the Your policy does not lapse Your policy enters the
if you do not have enough grace period if your net if you do not have enough grace period if your net
net cash surrender value to cash surrender value is not net cash surrender value to cash surrender value is not
pay the monthly charges. enough to pay the monthly pay the monthly charges. enough to pay the monthly
The charges are deducted charges, or if your loan However, if you have any charges, or if your loan
and may cause a negative plus accrued loan interest riders, they lapse after the plus accrued loan interest
account value until the is more than your cash grace period and only your is more than your cash
earlier of: 1) the date you surrender value. If you do base coverage remains in surrender value. If you do
have enough net account not pay enough premium force. Charges for your not pay enough premium
value, or 2) until the end to cover the past due base coverage are then to cover the past due
of the special continuation monthly charges and deducted each month to monthly charges and
period. interest due plus the the extent that there is interest due plus the
monthly charges and sufficient net account monthly charges and
interest due through the value to pay these charges. interest due through the
end of the grace period, If there is not sufficient end of the grace period,
your policy lapses. net account value to pay a your policy lapses.
charge, it is permanently
waived.
</TABLE>
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Variable Survivorship 35
<PAGE>
REINSTATEMENT
If you do not pay enough premium before the end of the grace period, your policy
lapses. You may still reinstate your policy and its riders (other than the
guaranteed minimum death benefit) within five years of the end of the grace
period if you still own the policy and one of the insured people is still
living.
Unless state law requires differently, we will reinstate your policy and riders
if:
1. you have not surrendered your policy;
2. you provide satisfactory evidence to us that both insured people are
alive and that each is still insurable according to our normal rules
of underwriting; and
3. we receive enough premium from you to keep your policy and its riders
in force from the beginning to the end of the grace period and for two
months after the reinstatement date.
When your policy lapses, we will not reinstate your policy if one insured person
has died or become uninsurable since your policy date. If one insured person was
uninsurable at the issue of your policy and remains uninsurable, we will review
underwriting requirements applicable to each insured person at the time you
request reinstatement to determine whether or not your policy may be reinstated.
Reinstatement is effective on the monthly processing date following our approval
of your reinstatement application. When we reinstate your policy, we also
reinstate the surrender charges for the amount and time remaining when your
policy lapsed. 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
at the time of reinstatement are adjusted to reflect the time since the lapse.
We apply net premiums received after reinstatement according to your most recent
instructions which may be the premium allocation instructions in effect at the
start of the grace period.
SURRENDER
You may surrender your policy for its net cash surrender value any time before
the second death of the insured people. You may take your net cash surrender
value in other than one payment. We compute your net cash surrender value as of
the valuation date we receive your written 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 28 AND SETTLEMENT
PROVISIONS, PAGE 40.
We do not pro-rate or add back charges and expenses to your account value before
the date your surrender is effective.
If you surrender your policy during the first nine policy or segment years, we
deduct a surrender charge from your net account value. If you surrender your
policy during the early years, you may have little or no net cash surrender
value. SEE SURRENDER CHARGE, PAGE 46.
A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 49, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 49.
GENERAL POLICY PROVISIONS
FREE LOOK PERIOD
You have the right to examine your policy. The right to examine your policy,
often called the free look period, starts on the date you receive your policy
and is a length of time specified by state law. If for any reason you do not
want it, you may return your policy to us, your agent/registered representative
within the period shown on the policy's face page. If you return your policy to
us within that time period, 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 under state law. Generally, there are two types of free
look refunds:
o some states require a return of all premiums we receive;
o other states require payment of account value plus a refund of all
charges deducted.
Your policy will specify what type of free look refund applies in your state.
The type of free look
- --------------------------------------------------------------------------------
Variable Survivorship 36
<PAGE>
refund allowed in your state will affect when the net premium we receive before
the end of the free look period is invested into the variable investment
options. SEE ALLOCATION OF NET PREMIUMS, PAGE 18.
YOUR POLICY
The entire contract between you and us is the combination of:
o your policy;
o a copy of your original application and any applications for benefit
increases or decreases;
o all of your riders;
o endorsements;
o policy 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 policy schedules. If you send your policy to us, 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
The age stated in your policy schedule is the joint equivalent age of the
insured people we use to issue your policy. The joint equivalent age is the sum
of both insured people's ages adjusted for the difference in ages and gender,
divided by two and rounded down.
The insured people must each be no more than 90 years of age at policy issue.
The minimum joint equivalent age must be no less than 15. The maximum joint
equivalent age must be no more than 85. There is no limit on the difference in
the insured people's ages. Age is measured as the age of the insured person on
the birthday nearest the policy anniversary.
Generally, we use the joint equivalent age to calculate rates, charges and
values. We determine the joint equivalent age at any given time by adding the
number of completed policy years to the age calculated at issue and shown in the
schedule.
The younger insured person's 100th birthday is the 100th anniversary of the
younger insured person's birth regardless if he/she has survived. The policy
anniversary nearest to this date is the date used for policy maturity and
continuation of coverage.
OWNERSHIP
The original owner is the person named as the owner in the policy application.
The owner can exercise all rights and receive benefits until the second death of
the insured people. This includes the right to change the owner,
beneficiary(ies), or the method designated to pay death 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 both of the insured people 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 both insured people, they share the death proceeds
equally, unless you have told us otherwise. If none of your policy beneficiaries
has survived both insured people, 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 beneficiary(ies) any time before the second death of
the insured people. We pay the death proceeds to the beneficiary(ies) whom you
have most recently named according to our records. We do not make payments to
multiple sets of beneficiaries.
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Variable Survivorship 37
<PAGE>
COLLATERAL ASSIGNMENT
You may assign your policy 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) were 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
If your policy has been in force and both insured people are alive for two years
from your policy date, we will not question the validity of the statements in
your application. If your policy has been in force and both insured people are
alive for two years from the effective date of a new segment or from the
effective date of an increase in any other benefit, with respect to the insured
people (such as in increase in stated death benefit) we will not contest the
statements in your application for the new segment or other increase.
If this policy has been in force and both insured people are alive for two years
from the effective date of reinstatement, we will not contest the statements in
your application for reinstatement.
MISSTATEMENTS OF AGE OR GENDER
If an insured person's age or gender has been misstated, we adjust the death
benefit. We adjust the death benefit to the amount which would have been
purchased for each 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 second death of the insured
people, 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 either 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 proceeds payable in one sum to:
1. the total of all premiums we receive to the time of death; minus
2. outstanding policy loan amounts and accrued loan interest; minus
3. partial withdrawals you have taken.
We make a limited payment to the beneficiary(ies) for a new segment or other
increase if the second death of the insured people is due to suicide, while that
insured person is 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 net cash surrender value upon surrender;
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 investment options or to determine the
value of an investment option'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.
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 date of the second death of the insured
people. The death proceeds are not affected by changes in the value of the
variable investment options after that date. We pay interest at our stated rate
(or at a higher rate if required by law) from the date of the second death of
the insured people 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.
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Variable Survivorship 38
<PAGE>
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 calendar
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 policy change and at the time of surrender.
If an insured person dies while your policy is in force, please let us or your
agent/registered representative know as soon as possible. We will immediately
send you instructions on how to make a claim at the second death of the insured
people or at either insured person's death if you have a single life term
insurance rider. As proof of the insured person's death, we may require you to
provide proof of the deceased insured person's age and a certified copy of the
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/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 with 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., 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 licensed insurance agents who are registered
representatives of other broker-dealers including, but not limited to:
1. VESTAX Securities Corporation, an indirect affiliate of Security Life
of Denver Insurance Company;
2. Locust Street Securities, Inc., an indirect affiliate of Security Life
of Denver Insurance Company;
3. Multi-Financial Securities, Corp., an indirect affiliate of Security
Life of Denver Insurance Company; and
4. IFG Network Securities, Inc., an indirect affiliate of Security Life
of Denver Insurance Company.
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Variable Survivorship 39
<PAGE>
All broker-dealers who sell this policy have entered into selling agreements
with us. Under these selling agreements, we pay a distribution allowance to
broker-dealers, who then pay commissions to the agent/registered representative
who sells this policy. The distribution allowance is 90% of the first year's
target premium that we receive. For premium that we receive over that premium,
the distribution allowance is 5% in policy years one through five and 2% after
the fifth policy year.
Broker-dealers may receive annual renewal payments of up to 0.20% of the average
net account value in policy years five through twenty.
Compensation arrangements vary among broker-dealers and depend on particular
circumstances. In addition to the distribution allowances, we may pay:
o override payments;
o expense allowances;
o special marketing fees; and
o wholesaler fees and marketing allowances, bonuses and training
allowances.
We pay all allowances from our resources which include sales charges deducted
from premiums and surrender charges.
ADVERTISING PRACTICES AND SALES LITERATURE
We may use advertisements and sales literature to promote this product,
including:
o indices or rankings of investment securities;
o articles on variable life insurance and other information published in
business or financial publications; and
o comparisons with other investment vehicles, including tax
considerations.
We may use information regarding the past performance of the variable investment
options. However, 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, investment performance and 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 before the second
death of the insured people. If you have not made this election, the
beneficiary(ies) may do so within 60 days after we receive proof of the second
death of the insured people.
You may take your net cash surrender value in other than one payment.
The investment performance of the variable investment options 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
Option II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD
Option III: HOLD AT INTEREST
Option IV: PAYOUTS OF A DESIGNATED AMOUNT
Option V: OTHER OPTIONS WE OFFER AT THE TIME WE PAY THE BENEFIT
ADMINISTRATIVE INFORMATION ABOUT
THE POLICY
VOTING PRIVILEGES
We invest the variable investment options' 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.
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Variable Survivorship 40
<PAGE>
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:
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 variable investment options 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 variable investment option that we attribute to your
policy by dividing your account value allocated to that variable investment
option 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 investment options. We cast votes
credited to amounts in the variable investment options, 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 variable investment options which will invest in
portfolios we find appropriate for policies we issue.
3. Eliminate variable investment options.
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Variable Survivorship 41
<PAGE>
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
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 variable investment options 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 investment
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 net cash surrender value;
o information about the variable investment options; and
o your account transactions during the previous year showing net
premiums, transfers, deductions, loan amounts 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, DEDUCTIONS
AND REFUNDS
The amount of a charge may not correspond to the cost incurred by us to provide
the service or benefits associated with the particular policy. For example, the
sales charge 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 to cover such expenses.
DEDUCTIONS FROM PREMIUMS
SALES CHARGE
We deduct a percentage from each premium payment to compensate us for the costs
we incur in selling the policies. The sales charge helps cover the costs of
distribution, preparing our sales literature, promotional expense and other
direct and indirect expenses.
We base the percentage on the time expired since your policy date or addition of
a segment and on your premium payments up to and above a target
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Variable Survivorship 42
<PAGE>
premium. The sales charge deducted from your premium payments after an increase
in stated death benefit is based on each segment's target premium and the length
of time that the segment has been in effect.
Your policy schedule page shows the target premium for your policy.
Sales Charge Percentage
Up to Policy Above Policy
Policy or or Segment or Segment
Segment Target Target
Year Premium Premium
1 - 5 5.5% 2%
6 + 2% 2%
For example, if this policy is issued to insure a male, age 85 who is
uninsurable, and a female, age 85 who is insurable but in a substandard
underwriting rating class, the target premium for sales charge purposes is $66
for each $1,000 of stated death benefit. We believe this amount represents the
maximum target premium and that most policies will have a much lower target
premium. SEE SURRENDER CHARGE, PAGE 46 AND ILLUSTRATIONS OF DEATH BENEFITS,
ACCOUNT VALUES, SURRENDER VALUES AND ACCUMULATED PREMIUMS, PAGE 52.
We may reduce or waive the sales charge for certain group or sponsored
arrangements or for corporate purchasers. SEE GROUP OR SPONSORED ARRANGEMENTS
AND CORPORATE PURCHASES, PAGE 47.
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 0.5% to 5% with some states
not imposing these types of taxes. We deduct 2.5% of each premium payment to
cover these taxes. This rate approximates the average tax rate we expect to pay
in all states.
We also deduct 1.5% of each premium payment 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.
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 investment option for our federal income taxes.
If the tax law changes and we have federal income tax chargeable to the variable
investment options, we may make such a charge in the future.
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct 0.002055% per day (0.75% annually) of the amount you have in the
variable investment options for the mortality and expense risks we assume. This
charge is deducted as part of the calculation of the daily unit values for the
variable investment options and does not appear as a separate charge on your
statement or confirmation.
The mortality risk is that insured people, as a group, may live less time than
we estimated. The expense risk is that the costs of issuing and administering
the policies and in operating the variable division are greater than the amount
we estimated.
The mortality and expense risk charge does not apply to your account value in
the guaranteed interest division or the loan division.
MONTHLY DEDUCTIONS FROM ACCOUNT VALUE
We deduct charges from your account value on each monthly processing date.
POLICY CHARGE
The initial policy charge is $15 per month for the ten years of your policy.
After the first ten years
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Variable Survivorship 43
<PAGE>
of your policy, the policy charge is $9 per month. This charge compensates us
for such costs as:
o application processing;
o medical examinations;
o establishment of policy records; and
o insurance underwriting costs.
MONTHLY ADMINISTRATIVE CHARGE
For this policy, we charge a per month administrative charge of no less than
$0.07 to $0.095 per $1,000 for the first ten policy years for the greater of the
stated death benefit or target death benefit. We charge $0.023 per $1,000 for
each policy year after the tenth for the greater of the stated death benefit or
the target death benefit. Currently, we limit this charge, based on the insured
people's joint equivalent age, from $175 to $237.50 per month for the first ten
policy years. This charge is limited to $57.50 monthly for each policy year
thereafter. This charge applies to the first $250,000 of death benefit.
This 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 may be more than your account value at the second death of the
insured people.
The cost of insurance charge is equal to our current monthly cost of insurance
rate multiplied by 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 your account value after we deduct your policy and rider
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 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 people. We allocate the net amount at
risk to 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 base your cost of insurance rates on the insured people's ages, genders,
ratings and premium classes on the policy for each segment 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 and benefit
programs.
Separate cost of insurance rates apply to:
o each segment of the base death benefit;
o your adjustable term insurance rider; and
o single life term insurance riders.
We may make changes in the cost of insurance or rider charges 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.
These rates are never more than the guaranteed maximum rates shown in your
policy. The guaranteed maximum rates are based on the 1980 Commissioner's
Standard Ordinary Sex Distinct Mortality Table.
The maximum rates for the initial and any new segment will be printed in the
policy schedule which we will provide to you.
There are no cost of insurance charges during the continuation of coverage
period.
GUARANTEED MINIMUM DEATH BENEFIT CHARGE
If you choose the guaranteed minimum death benefit feature, we charge $0.005 per
$1,000 of stated death benefit each month during the guarantee period. We
guarantee the charge not to exceed this rate.
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Variable Survivorship 44
<PAGE>
RIDER CHARGES
On each monthly processing date, we deduct the cost of benefits under your
riders, including the single life term insurance rider. Rider charges do not
include the adjustable term insurance rider. SEE RIDERS, PAGE 24.
POLICY TRANSACTION FEES
We also charge fees for certain transactions under your policy. We take these
fees from the variable and guaranteed interest divisions pro rata to the account
value in each investment option.
PARTIAL WITHDRAWALS
We deduct the lesser of a $25 service fee or 2% of the requested partial
withdrawal from your account value for each partial withdrawal you take to cover
our costs. We may also deduct a surrender charge from your account value. SEE
PARTIAL WITHDRAWALS, PAGE 33.
TRANSFERS
There is a $25 fee to cover our costs for each transfer over twelve free
transfers per policy year. If you include multiple transfers in one transfer
request, it counts as one transfer. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 30.
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 illustration.
PREMIUM ALLOCATION CHANGE
You may make twelve free premium allocation changes per policy year. After the
twelve free changes, we charge $25 for each additional premium allocation change
in that policy year. If you change your designated deduction investment option,
we consider it a premium allocation change. SEE MONTHLY DEDUCTIONS FROM ACCOUNT
VALUE, PAGE 43.
CONTINUATION OF COVERAGE ADMINISTRATIVE FEE
At the policy anniversary nearest the younger insured person's 100th birthday,
if your policy has not been surrendered, the continuation of coverage period
begins. We will charge a one-time administrative fee of $400. This charge
compensates us for maintaining and servicing your policy until the second death
of the insured people. We then no longer charge your policy a monthly
administrative fee or cost of insurance charge.
DIVISIONS FROM
WHICH WE DEDUCT CHARGES
<TABLE>
MONTHLY CHARGES: COST OF LOANS AND
INSURANCE CHARGES, RIDER CHARGES, TRANSACTION FEES PARTIAL WITHDRAWALS
ADMINISTRATIVE FEES
- --------- ----------------------------------------- -------------------------- --------------------------------
<S> <C> <C> <C>
Choice May choose a designated deduction Proportionally among May choose any
investment option, including guaranteed variable and guaranteed investment option or
interest division interest divisions combination of investment
options
Default Proportionally among variable and Proportionally among Proportionally among
guaranteed interest divisions variable and guaranteed variable and guaranteed
interest divisions interest divisions
</TABLE>
PERSISTENCY REFUND
Where state law allows us, we pay long-term policy owners a persistency refund.
Each month your policy remains in force after your tenth policy anniversary, we
credit your account value with a
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Variable Survivorship 45
<PAGE>
refund of 0.05% of account value. This refund is 0.6% of your account value on
an annual basis.
We do not guarantee that we will pay a persistency refund on the guaranteed
interest division. If we pay a persistency refund on the guaranteed interest
division, we will pay it even if your policy is in the continuation of coverage
period.
If applicable, we add the persistency refund to the variable and guaranteed
interest divisions, but not the loan division, in the same proportion that your
account value in each investment option has to your net account value as of the
monthly processing date.
Here are two examples of how the persistency refund may affect your account
value:
EXAMPLE 1: YOUR POLICY HAS NO LOAN:
o account value = $10,000 (all in the variable division)
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Value Before Value After
Persistency Persistency
Refund Refund
Variable
Division $10,000.00 $10,005.00
EXAMPLE 2: YOUR POLICY DOES HAVE A LOAN:
o account value = $10,000
o account value in the variable division = $6,000
o account value in the loan division = $4,000
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Value Before Value After
Persistency Persistency
Refund Refund
Variable
Division $6,000.00 $6,005.00
Loan $4,000.00 $4,000.00
SURRENDER CHARGE
We may deduct a surrender charge from your account value during the first nine
years of your policy or coverage segment if you:
o surrender your policy;
o reduce your stated death benefit;
o allow your policy to lapse; or
o take a partial withdrawal which decreases your stated death benefit.
The surrender charge compensates us for issuing and distributing policies. We
deduct surrender charges pro rata based on your account value in each investment
division.
For purposes of the surrender charge, we determine a surrender target premium
for each policy based on the insured people's issue ages, genders and your
stated death benefit. The surrender target premium does not vary based on
ratings. Your policy schedule page shows the surrender charge for your policy.
A change to your death benefit option may decrease your stated death benefit.
Under these circumstances, we do not deduct a surrender charge and we do not
reduce future surrender charges.
Or a change to your death benefit option, may increase the stated death benefit.
We do not increase your surrender charge in this case. However, all other
increases in your stated death benefit create a new segment which will be
subject to its own nine year surrender charge period.
If your surrender charge changes, we send you a new policy schedule showing the
change.
The surrender charge remains level for the first five years of each coverage
segment and then decreases through the ninth year. Thereafter, there is no
surrender charge. For purposes of calculating surrender charges, target premium
is premium attributable to base death benefit coverage.
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Variable Survivorship 46
<PAGE>
For example, if this policy is issued to insure a male, age 85, and a female,
age 85, the target premium for surrender charge purposes is $61 for each $1,000
of stated death benefit. We believe this amount represents the maximum surrender
charge target premium and that most policies will have a much lower surrender
charge target premium. SEE SALES CHARGE, PAGE 42 AND ILLUSTRATIONS OF DEATH
BENEFITS, ACCOUNT VALUES, SURRENDER VALUES AND ACCUMULATED PREMIUMS, PAGE 52.
SURRENDER CHARGES AS A PERCENTAGE OF SURRENDER CHARGE TARGET PREMIUM
JOINT EQUIVALENT AGE YEARS 1 - 5 YEAR 6 YEAR 7 YEAR 8 YEAR 9
- -------------------- ----------- ------ ------ ------ ------
15 - 78 100% 80% 60% 40% 20%
79 93% 80% 60% 40% 20%
80 85% 70% 55% 40% 20%
81 78% 65% 50% 35% 20%
82 72% 60% 45% 30% 20%
83 65% 50% 40% 30% 20%
84 60% 45% 35% 25% 15%
85 54% 40% 30% 20% 10%
You should review the surrender charge table in your policy schedule pages for
your specific surrender charge amount each year.
GROUP OR SPONSORED ARRANGEMENTS
AND CORPORATE PURCHASERS
Individuals, corporations or other institutions may purchase this policy. For
group or sponsored arrangements (including employees and certain family members
of employees of Security Life, its affiliates and appointed sales agents),
corporate purchasers or special exchange programs which we may offer from time
to time, we may reduce or waive the:
o surrender charge, including the surrender charge on partial
withdrawals;
o length of time a surrender charge applies;
o administrative charge;
o minimum stated death benefit;
o minimum target death benefit;
o minimum annual premium;
o target premium;
o sales charge;
o cost of insurance charges; or
o other charges normally assessed.
We can reduce or waive these charges based on expected economies. Group
arrangements include those in which there is a trustee, an employer or an
association. The group may purchase multiple policies covering 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. We take all these factors into
account when we reduce charges. A group or sponsored arrangement must meet
certain requirements to qualify for reduced 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.
Sponsored arrangements or corporations may have different group premium payments
and premium requirements.
We will not be unfairly discriminatory in any variation in the surrender charge,
administrative charge, or other charges, fees and privileges. These variations
are based on differences in costs or services.
- --------------------------------------------------------------------------------
Variable Survivorship 47
<PAGE>
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 the Internal
Revenue Code. Specifically, the policy must meet the requirements of the
"guideline premium/cash value corridor test," as specified in Code section 7702.
The guideline premium/cash value corridor test provides for a maximum premium in
relation to the death benefit, and a minimum "corridor" of death benefit in
relation to account value. SEE APPENDIX A, PAGE 60 FOR A TABLE OF THE GUIDELINE
PREMIUM/CASH VALUE CORRIDOR TEST FACTORS.
There is very little guidance with respect to policies issued on a last survivor
basis as to how these requirements are to be applied. 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.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the Code Section 7702 guideline premium/cash corridor
test, Code Section 817(h) requires separate account investments, such as our
separate 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 investment option
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 investment options' 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 separate 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 separate 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.
- --------------------------------------------------------------------------------
Variable Survivorship 48
<PAGE>
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 account value
until there is a distribution. When distributions from a policy occur, or when
loan amounts 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 we receive 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 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. Loan amounts 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.
- --------------------------------------------------------------------------------
Variable Survivorship 49
<PAGE>
Loan amounts from or secured by a policy that is not a modified endowment
contract are generally not treated as distributions. Finally, neither
distributions from, nor loan amounts 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. Moreover, the tax
consequences associated with a low-cost loan such as the loan available in the
policy are uncertain. 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 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.
The tax law limits the amount we can charge for mortality costs and other
expenses used to calculate whether your policy qualifies as life insurance for
federal income tax purposes. We must base these calculations on reasonable
mortality charges and other charges reasonably 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 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
- --------------------------------------------------------------------------------
Variable Survivorship 50
<PAGE>
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.
- --------------------------------------------------------------------------------
Variable Survivorship 51
<PAGE>
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES,
CASH SURRENDER VALUES AND ACCUMULATED
PREMIUMS
The following tables are intended to show how the policy works, including how
benefits and values can vary over time. Each table compares these values with
total premiums we receive with interest. The policy illustrated uses the
following assumptions:
Definition
Death of Life Stated Target
Smoker Benefit Insurance Death Death
Gender Age Status* Option Test Benefit Premium Benefit
- ------ --- ------ ------ ---- ------- ------- -------
Male 50 Non-smoker 1 GP 1,000,000 $13,000 1,000,000
Preferred
Female 50 Non-smoker
Preferred
- -------------------
* "Smoker" includes the use of cigarettes, cigars, pipes, chewing tobacco,
nicotine chewing gum or patch, snuff or any other tobacco or nicotine-based
product.
The target premium for the illustrated policy is $7,995.92 (approximately $8 per
$1,000 of stated death benefit). For surrender charge purposes, the target
premium for the illustrated policy is $8,885.29 (approximately $9 per $1,000 of
stated death benefit).
The tables show how death benefits, account values and net cash surrender values
of a hypothetical policy could vary over an extended period of time, assuming
the variable division 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 two
females or two males.
These illustrations assume there is no policy loan.
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 difference between the account value and the cash surrender value in the
first nine years of the policy shows the effect of the surrender charge.
The net investment return on your policy is lower than the gross investment
return on the variable division as a result of the mortality and expense risk
charge, the portfolio management fees and portfolio expenses. We show the effect
of the net investment return in the amounts for death benefits, account values
and cash surrender values.
The tables reflect annual investment management fees of X.XX% 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, 1999. We assume other portfolio expenses at the rate of
X.XX% of the portfolios' average daily net assets. This is an average of all the
portfolios' other expenses for the year ending
- --------------------------------------------------------------------------------
Variable Survivorship 52
<PAGE>
December 31, 1999 after any expense reimbursement or waivers by investment
portfolio managers has been made. The average of all portfolios' total expenses
is X.XX%.
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 expense reimbursement or
waivers, 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 (X.XX%, X.XX% and X.XX%, 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 result in a net rate of return of:
o (X.XX)% on a 0% gross rate of return;
o X.XX% on a 6% gross rate of return; and
o X.XX% on a 12% gross rate of return.
The tables assume that charges have been deducted including deductions for
premiums, cost of insurance rider charges, monthly deductions mortality and
expense risk charge, administrative and sales charges. The tables show charges
at our current rates which includes a persistency refund. The tables also show
charges at the maximum rates we guarantee in our policies. SEE MONTHLY
DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 43. 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
cash surrender values.
If we are asked to do so, we will give you a comparable personal illustration
based on:
o the insured people's ages and genders;
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.
At issue, we deliver an individualized illustration showing the scheduled
premium you chose and the insured people's actual risk classes. After we issue
the policy, if you ask us to, we will give you an illustration of future policy
benefits. We base these hypothetical future benefits on both guaranteed and
current cost factor assumptions and actual account value.
[TO BE UPDATED BY AMENDMENT]
- --------------------------------------------------------------------------------
Variable Survivorship 53
<PAGE>
PROSPECT: INSURED PERSON NO. 1'S NAME
MALE 50 NON-SMOKER PREFERRED PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-SMOKER PREFERRED
SECURITY LIFE
VARIABLE SURVIVORSHIP UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING GUARANTEED CHARGES
Assuming Hypothetical Gross Investment Return of:
<TABLE>
-----------0.00%-------- ---------12.00%--------- -----------6.00%----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1 13000 13650 10651 1766 1000000 12003 3118 1000000 11327 2442 1000000
2 13000 27983 21053 12167 1000000 25159 16274 1000000 23065 14180 1000000
3 13000 43032 31193 22307 1000000 39571 30686 1000000 35216 26331 1000000
4 13000 58833 41057 32172 1000000 55348 46463 1000000 47780 38895 1000000
5 13000 75425 50630 41744 1000000 72611 63726 1000000 60753 51868 1000000
6 13000 92846 60166 53058 1000000 91799 84691 1000000 74423 67314 1000000
7 13000 111138 69368 64037 1000000 112781 107449 1000000 88502 83171 1000000
8 13000 130345 78215 74660 1000000 135722 132168 1000000 102988 99434 1000000
9 13000 150513 86687 84910 1000000 160807 159030 1000000 117875 116098 1000000
10 13000 171688 94758 94758 1000000 188239 188239 1000000 133153 133153 1000000
15 13000 294547 134217 134217 1000000 384197 384197 1000000 224292 224292 1000000
20 13000 451350 153589 153589 1000000 704980 704980 1000000 323952 323952 1000000
25 13000 651475 133167 133167 1000000 1251143 1251143 1338723 422763 422763 1000000
30 13000 906890 15157 15157 1000000 2162731 2162731 2270867 495073 495073 1000000
AGE 65 13000 322925 140097 140097 1000000 436085 436085 1000000 243737 243737 1000000
</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 variable
investment options of the separate account and the guaranteed interest division
and the investment experience of the investment options. 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.
- --------------------------------------------------------------------------------
Variable Survivorship 54
<PAGE>
PROSPECT: INSURED PERSON NO. 1'S NAME
MALE 50 NON-SMOKER PREFERRED PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-SMOKER PREFERRED
SECURITY LIFE
VARIABLE SURVIVORSHIP UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
SUMMARY PAGE
ASSUMING CURRENT CHARGES
Assuming Hypothetical Gross Investment Return of:
<TABLE>
-----------0.00%-------- ---------12.00%--------- -----------6.00%----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
1 13000 13650 10651 1766 1000000 12003 3118 1000000 11327 2442 1000000
2 13000 27983 21053 12167 1000000 25159 16274 1000000 23065 14180 1000000
3 13000 43032 31193 22307 1000000 39571 30686 1000000 35216 26331 1000000
4 13000 58833 41138 32253 1000000 55433 46548 1000000 47864 38978 1000000
5 13000 75425 50916 42030 1000000 72920 64035 1000000 61051 52166 1000000
6 13000 92846 60800 53692 1000000 92505 85397 1000000 75093 67984 1000000
7 13000 111138 70512 65181 1000000 114091 108760 1000000 89729 84398 1000000
8 13000 130345 80049 76495 1000000 137880 134326 1000000 104983 101429 1000000
9 13000 150513 89408 87631 1000000 164094 162317 1000000 120874 119097 1000000
10 13000 171688 98586 98586 1000000 192977 192977 1000000 137425 137425 1000000
15 13000 294547 148683 148683 1000000 403485 403485 1000000 241139 241139 1000000
20 13000 451350 193392 193392 1000000 755907 755907 1000000 370654 370654 1000000
25 13000 651475 227919 227919 1000000 1348180 1348180 1442552 529977 529977 1000000
30 13000 906890 242278 242278 1000000 2340256 2340256 2457269 725721 725721 1000000
AGE 65 13000 322925 158180 158180 1000000 460228 460228 1000000 264872 264872 1000000
</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 variable investment options of the separate account and the guaranteed
interest division and the investment experience of the investment options. 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.
- --------------------------------------------------------------------------------
Variable Survivorship 55
<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 President, ING Reinsurance International
Michael W. Cunningham* Director, Executive Vice President
Mark A. Tullis* Director
P. Randall Lowery* Director
Jess A. Skriletz Director, 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 Operating Officer
James L. Livingston, Jr. Executive Vice President and Chief Actuary
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
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
Jeffery W. Seel* Senior Vice President, Chief Investment Officer
Mark A. Smith Senior Vice President, Insurance Services
Lawrence D. Taylor Senior Vice President, Product Management
William D. Tyler* Senior Vice President, Chief Information Officer
Gary W. Waggoner Vice President, General Counsel and Corporate
Secretary
- --------------------------------------------------------------------------------
Variable Survivorship 56
<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 separate 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
[TO BE UPDATED BY AMENDMENT]
Actuarial matters in this prospectus have been examined by James L. Livingston,
Jr., F.S.A., M.A.A.A., who is Executive 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.
REGISTRATION STATEMENT
We have filed a Registration Statement relating to the separate 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.
- --------------------------------------------------------------------------------
Variable Survivorship 57
<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.......................................7
Accumulation unit..................................29
Accumulation unit value............................29
Adjustable term insurance rider....................19
Age................................................37
Base death benefit.................................20
Beneficiary(ies)...................................20
Cash surrender value...............................28
Customer service center.............................2
Continuation of coverage...........................27
Death proceeds.....................................20
Free look period...................................36
General account....................................14
Guarantee period...................................23
Guarantee period annual premium....................23
Guaranteed interest division.......................14
Guaranteed minimum death benefit...................23
Initial premium....................................18
Insured............................................15
Investment date....................................18
Investment division................................15
Joint equivalent age...............................37
Loan division......................................33
Minimum annual premium.............................17
Monthly processing date.............................?
Net account value..................................28
Net amount at risk.................................22
Net cash surrender value...........................28
Net premium.....................................4, 18
Owner...........................................4, 37
Partial withdrawal.................................18
Policy..............................................4
Policy date........................................16
Policy loan........................................32
Portfolios.........................................11
Rider..............................................24
Scheduled premium..................................16
Segment............................................22
Special continuation period........................17
Stated death benefit...............................15
Surrender charge...................................46
Surrender target premium...........................46
Target death benefit...............................24
Target premium.....................................46
Total death benefit................................25
Transaction date...................................29
Valuation date.....................................29
Valuation period...................................29
Variable account...................................10
Variable division(s)................................?
Younger insured person's 100th birthday............37
- --------------------------------------------------------------------------------
Variable Survivorship 58
<PAGE>
FINANCIAL STATEMENTS
The consolidated financial statements of Security Life of Denver Insurance
Company and Subsidiaries ("Security Life and Subsidiaries") at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
are prepared in accordance with generally accepted accounting principles and
start on page ?.
The financial statements included for the Security Life Separate Account L1 at
December 31, 1999 and for each of the three years in the period ended December
31, 1999, are prepared in accordance with generally accepted accounting
principles and represent those divisions that had commenced operations by that
date.
The consolidated financial statements of Security Life and Subsidiaries, as well
as the financial statements included for the Security Life Separate Account L1
referred to above have been audited by Ernst & Young LLP. The consolidated
financial statements of Security Life and Subsidiaries should be distinguished
from the financial statements of the Security Life Separate Account L1 and
should be considered only as bearing upon the ability of Security Life and
Subsidiaries to meet its obligations under the policies. They should not be
considered as bearing upon the investment experience of the divisions of
Security Life Separate Account L1.
[TO BE FILED BY AMENDMENT.]
- --------------------------------------------------------------------------------
Variable Survivorship 59
<PAGE>
APPENDIX A
FACTORS FOR THE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Attained Attained Attained Attained
Age of Younger Factor Age of Younger Age of Younger Age of Younger
Insured Insured Factor Insured Factor Insured Factor
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.05
5 2.50 30 2.50 55 1.50 80 1.05
6 2.50 31 2.50 56 1.46 81 1.05
7 2.50 32 2.50 57 1.42 82 1.05
8 2.50 33 2.50 58 1.38 83 1.05
9 2.50 34 2.50 59 1.34 84 1.05
10 2.50 35 2.50 60 1.30 85 1.05
11 2.50 36 2.50 61 1.28 86 1.05
12 2.50 37 2.50 62 1.26 87 1.05
13 2.50 38 2.50 63 1.24 88 1.05
14 2.50 39 2.50 64 1.22 89 1.05
15 2.50 40 2.50 65 1.20 90 1.05
16 2.50 41 2.43 66 1.19 91 1.04
17 2.50 42 2.36 67 1.18 92 1.03
18 2.50 43 2.29 68 1.17 93 1.02
19 2.50 44 2.22 69 1.16 94 1.01
20 2.50 45 2.15 70 1.15 95 1.00
21 2.50 46 2.09 71 1.13 96 1.00
22 2.50 47 2.03 72 1.11 97 1.00
23 2.50 48 1.97 73 1.09 98 1.00
24 2.50 49 1.91 74 1.07 99 1.00
100 1.00
</TABLE>
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.
- --------------------------------------------------------------------------------
Variable Survivorship 60
<PAGE>
APPENDIX B
ENHANCED DEATH BENEFIT CORRIDOR
FACTORS FOR THE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Attained Attained Attained Attained
Age of Younger Factor Age of Younger Age of Younger Age of Younger
Insured Insured Factor Insured Factor Insured Factor
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.09
5 2.50 30 2.50 55 1.50 80 1.14
6 2.50 31 2.50 56 1.46 81 1.18
7 2.50 32 2.50 57 1.42 82 1.22
8 2.50 33 2.50 58 1.38 83 1.26
9 2.50 34 2.50 59 1.34 84 1.31
10 2.50 35 2.50 60 1.30 85 1.35
11 2.50 36 2.50 61 1.28 86 1.33
12 2.50 37 2.50 62 1.26 87 1.31
13 2.50 38 2.50 63 1.24 88 1.29
14 2.50 39 2.50 64 1.22 89 1.27
15 2.50 40 2.50 65 1.20 90 1.26
16 2.50 41 2.43 66 1.19 91 1.24
17 2.50 42 2.36 67 1.18 92 1.22
18 2.50 43 2.29 68 1.17 93 1.19
19 2.50 44 2.22 69 1.16 94 1.16
20 2.50 45 2.15 70 1.15 95 1.12
21 2.50 46 2.09 71 1.13 96 1.11
22 2.50 47 2.03 72 1.11 97 1.09
23 2.50 48 1.97 73 1.09 98 1.06
24 2.50 49 1.91 74 1.07 99 1.03
100 1.00
</TABLE>
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.
- --------------------------------------------------------------------------------
Variable Survivorship 61
<PAGE>
APPENDIX C
PERFORMANCE INFORMATION
POLICY PERFORMANCE
[TO BE UPDATED BY AMENDMENT]
- --------------------------------------------------------------------------------
Variable Survivorship 62
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
[TO BE UPDATED BY AMENDMENT]
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
AIM V.I. GOVERNMENT SECURITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
ALGER AMERICAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
* 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.
- --------------------------------------------------------------------------------
Variable Survivorship 63
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
FIDELITY VIP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
* 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.
- --------------------------------------------------------------------------------
Variable Survivorship 64
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
FIDELITY VIP OVERSEAS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
* 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.
- --------------------------------------------------------------------------------
Variable Survivorship 65
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
FIDELITY VIP II INDEX 500 PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
INVESCO VIF-EQUITY INCOME FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
INVESCO VIF-HIGH YIELD FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
INVESCO VIF-SMALL COMPANY GROWTH FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 1,000,000
INVESCO VIF-TOTAL RETURN FUND
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
* 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.
- --------------------------------------------------------------------------------
Variable Survivorship 66
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
INVESCO VIF-UTILITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
NEUBERGER BERMAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 1,000,000
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
NEUBERGER BERMAN PARTNERS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
* 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.
- --------------------------------------------------------------------------------
Variable Survivorship 67
<PAGE>
HYPOTHETICAL ILLUSTRATION (CONTINUED)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
VAN ECK WORLDWIDE BOND FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 1,000,000
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
VAN ECK WORLDWIDE EMERGING MARKETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
VAN ECK WORLDWIDE HARD ASSETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/91 1,000,000
12/31/92 1,000,000
12/31/93 1,000,000
12/31/94 1,000,000
12/31/95 1,000,000
12/31/96 1,000,000
12/31/97 1,000,000
12/31/98 1,000,000
VAN ECK WORLDWIDE REAL ESTATE FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 1,000,000
The assumptions underlying these values are described in Performance
Information, page 62.
*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.
- --------------------------------------------------------------------------------
Variable Survivorship 68
<PAGE>
This information is subject to completion or change. An amended registration
statement for these securities has been filed with the Securities and Exchange
Commission. These securities may not be sold and offers to buy may not be
accepted prior to the amended registration statement becoming effective. This
prospectus is not an offer to sell and is not a solicitation of an offer to buy.
There will be no sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the laws of the state.
Prospectus
ESTATE DESIGNER
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, deductions, and refunds beginning on page
41 in this prospectus.
You should read this prospectus and keep it for future reference. A prospectus
for each underlying investment 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.
We offer other products to insure the lives of two people which may or may not
better match your needs and interests.
Replacing your existing life insurance policy(ies) with this policy may not be
beneficial to you.
YOUR POLICY
o is a flexible premium variable joint and survivor universal life
insurance policy;
o is issued on two lives on whom insurance coverage may continue, in
whole or in part, until both have died;
o is issued by Security Life of Denver Insurance Company;
o is guaranteed not to lapse during the first five policy years if you
meet certain requirements; and
o is returnable by you during the free look period if you are not
satisfied.
YOUR 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; and
o can be invested in as many as eighteen investment options over the
policy's lifetime.
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 surrender value under the variable
division. The value varies with the value of the underlying
investment portfolio;
o has a minimum guaranteed rate of return for amounts in the guaranteed
interest division; and
o is subject to specified expenses and charges.
DEATH PROCEEDS
o are paid if the policy is still in force at the second death of the
two insured people;
o are equal to the death benefit minus an outstanding policy loan,
accrued loan interest and unpaid charges incurred before the second
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 we
receive 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 GOVERNMENT AGENCY.
DATE OF PRELIMINARY PROSPECTUS FEBRUARY 29, 2000
Form V-123-00
<PAGE>
ISSUED BY: Security Life of Denver UNDERWRITTEN BY: ING America Equities, Inc.
Insurance Company 1290 Broadway
ING 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
P.O. Box 173888
Denver, CO 80217-3888
(800) 848-6362
- --------------------------------------------------------------------------------
Estate Designer 2
<PAGE>
TABLE OF CONTENTS
POLICY SUMMARY.................................................................4
Your Policy..............................................................4
Free Look Period.........................................................4
Premium Payments.........................................................4
Charges and Deductions...................................................4
Guaranteed Interest Division.............................................6
Policy Values............................................................7
Transfers of Account Value...............................................7
Special Policy Features..................................................7
Policy Modification, Termination and Continuation Features...............8
Death Benefits...........................................................8
Tax Considerations.......................................................8
SECURITY LIFE, THE SEPARATE ACCOUNT
AND THE INVESTMENT OPTIONS..............................................11
Security Life of Denver Insurance Company...............................11
Security Life Separate Account L1.......................................11
Investment Portfolio Objectives.........................................12
Guaranteed Interest Division............................................15
Maximum Number of Investment Options....................................15
DETAILED INFORMATION ABOUT THE
ESTATE DESIGNER POLICY..................................................16
Applying for a Policy...................................................16
Temporary Insurance.....................................................16
Premiums................................................................17
Premium Payments Affect Your Coverage...................................19
Death Benefits..........................................................20
Riders..................................................................24
Special Features........................................................26
Policy Values...........................................................28
Transfers of Account Value..............................................29
Dollar Cost Averaging...................................................30
Automatic Rebalancing...................................................31
Policy Loans............................................................32
Partial Withdrawals.....................................................33
Lapse...................................................................34
Reinstatement...........................................................35
Surrender...............................................................35
General Policy Provisions...............................................35
Free Look Period...................................................35
Your Policy........................................................36
Age ..............................................................36
Ownership..........................................................36
Beneficiary(ies)...................................................36
Collateral Assignment..............................................37
Incontestability...................................................37
Misstatements of Age or Gender.....................................37
Suicide............................................................37
Transaction Processing.............................................37
Notification and Claims Procedures.................................38
Telephone Privileges...............................................38
Non-participation..................................................38
Distribution of the Policies.......................................38
Advertising Practices and Sales Literature.........................39
Settlement Provisions..............................................39
Administrative Information About the Policy.............................40
CHARGES, DEDUCTIONS AND REFUNDS...............................................41
Deductions from Premiums................................................42
Other Charges...........................................................42
Daily Deductions from the Separate Account..............................42
Monthly Deductions from Account Value...................................43
Policy Transaction Fees.................................................44
Persistency Refund......................................................45
Group or Sponsored Arrangements or Corporate Purchasers.................45
TAX CONSIDERATIONS............................................................46
Tax Status of the Policy................................................46
Diversification Requirements............................................46
Tax Treatment of Policy Death Benefits..................................47
Modified Endowment Contracts............................................47
Multiple Policies.......................................................47
Distributions Other than Death Benefits from
Modified Endowment Contracts.......................................47
Distributions Other than Death Benefits from Policies That Are Not
Modified Endowment Contracts.......................................48
Investment in the Policy................................................48
Policy Loans............................................................48
Section 1035 Exchanges..................................................48
Tax-exempt Policy Owners................................................48
Possible Tax Law Changes................................................48
Changes to Comply with the Law..........................................48
Other...................................................................49
ILLUSTRATIONS.................................................................50
ADDITIONAL INFORMATION........................................................54
Directors and Officers..................................................54
Regulation..............................................................55
Legal Matters...........................................................55
Legal Proceedings.......................................................55
Experts.................................................................55
Registration Statement..................................................55
INDEX OF SPECIAL TERMS........................................................56
FINANCIAL STATEMENTS..........................................................57
APPENDIX A....................................................................58
APPENDIX B....................................................................59
APPENDIX C....................................................................60
- --------------------------------------------------------------------------------
Estate Designer 3
<PAGE>
POLICY SUMMARY
YOUR POLICY
Your policy provides life insurance protection on the lives of two insured
people and insurance coverage may continue until both have died. The policy
includes the basic policy, applications, and any riders or endorsements. As long
as the policy remains in force, we pay a death benefit after the second death of
the insured people. While your policy is in force, you may access a portion of
your policy value by taking loans or partial withdrawals. You may surrender your
policy for its net cash surrender value. At the policy anniversary nearest the
younger insured person's 100th birthday you may elect to continue the policy
under the continuation of coverage option. SEE CONTINUATION OF COVERAGE, PAGE
27.
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
Within limits as specified by state law, you have the right to examine your
policy and return it for a refund of all premium payments we have received from
you or the account value, if you are not satisfied for any reason. The policy is
then void. SEE FREE LOOK PERIOD, PAGE 35.
PREMIUM PAYMENTS
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;
o sufficient to keep your policy in force; and
o as necessary to continue certain benefits.
The amount of premium you pay affects the length of time your policy stays in
force. SEE PREMIUMS, PAGE 17.
ALLOCATION OF NET PREMIUMS
This policy has premium-based charges which are subtracted from your payments.
We add the balance, or net premium, to your policy based on your investment
instructions. You may allocate the net premium among one or more variable
investment options and the guaranteed interest division. SEE ALLOCATION OF NET
PREMIUMS, PAGE 18.
CHARGES AND DEDUCTIONS
DEDUCTIONS FROM PREMIUMS
SALES CHARGE -- We deduct a percentage of each premium to cover a portion of our
expenses in selling your policy. This charge is based on the length of time
since your policy or a segment became effective.
Sales Charge Percentage
Policy or Up To Policy or Above Policy or
Segment Segment Segment
Year Target Premium Target Premium
---- -------------- --------------
1 8% 4%
2 - 7 8% 1.5%
8 + 1.5% 1.5%
SEE DEDUCTIONS FROM PREMIUMS, PAGE 42.
- --------
This summary highlights some important points about your policy. The policy is
more fully described in the attached, complete prospectus. Please read it
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
people's lifetimes.
State variations are covered in a special policy form used in that state. This
prospectus provides a general description of the policy. Your actual policy and
any riders are the controlling documents. If you would like to review a copy of
the policy and riders, contact our customer service center, your agent or
registered representative.
- --------------------------------------------------------------------------------
Estate Designer 4
<PAGE>
We take these deductions:
CHARGES
Other Than Investment Portfolio Annual Expenses and Sales Charge
(SEE CHARGES, DEDUCTION AND REFUNDS, PAGE 41)
<TABLE>
<CAPTION>
CHARGE WHEN CHARGE IS DEDUCTED AMOUNT DEDUCTED
<S> <C> <C>
Tax Charges Each premium payment received 2.5% for state and local taxes; 1.5%
for estimated federal income tax
treatment of deferred acquisition
costs.
Mortality & Expense Risk Daily, included in unit value 0.002055% daily (0.75% annually)
Charge
Policy Charge Monthly from account value $15 per month for first ten policy
years and $9 per month thereafter.
Monthly Administrative Charge Monthly from account value $0.06-$0.15 per $1,000 death benefit
for the first ten policy years, $0.01-
$0.025 per $1,000 death benefit for
each policy year thereafter. See your
policy schedule pages.
Cost of Insurance Charge Monthly from account value Varies based on current cost of
insurance rates and net amount at risk
on the lives of the insured people.
See your policy schedule pages.
Rider Charges Monthly from account value Varies depending on the rider benefit
you choose, except the adjustable term
insurance rider.
Partial Withdrawal Fee Transaction date from account Up to $25
value
Transfer Fee Transaction date from account Twelve free transfers per policy year,
value then $25 per transfer.
Illustrations Transaction date from account One free illustration per policy year,
value then a $25 fee may apply.
Premium Allocation Change Transaction date from account Twelve free premium allocation
value changes per policy year, then $25 per
change.
Continuation of Coverage Policy anniversary nearest One-time $400 administrative fee.
younger insured person's 100th
birthday from account value
</TABLE>
VARIABLE DIVISION
If you invest in any of the variable investment options under the variable
division, you may make or lose money depending on market conditions. The
variable investment options are described in the prospectuses for the underlying
investment portfolios. Each investment portfolio has its own investment
objective. SEE OBJECTIVES OF THE INVESTMENT PORTFOLIOS, PAGE 12.
FEES AND EXPENSES OF THE INVESTMENT PORTFOLIOS
[TO BE UPDATED BY AMENDMENT.]
The separate account purchases shares of the underlying investment portfolios,
or series, at net asset value. This price reflects investment management fees
and other expenses that are deducted from the portfolio assets. This table
describes these fees and expenses in gross amounts and in net amounts after any
expenses or fees have
- --------------------------------------------------------------------------------
Estate Designer 5
<PAGE>
been waived or reimbursed by the investment portfolio advisers.
[TO BE UPDATED BY AMENDMENT]
INVESTMENT PORTFOLIO ANNUAL EXPENSES (AS A PERCENTAGE OF PORTFOLIO AVERAGE NET
ASSETS)
<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 % % % NA %
AIM V.I. Government Securities Fund % % % NA %
THE ALGER AMERICAN FUND
Alger American Growth Portfolio % % % NA %
Alger American Leveraged AllCap Portfolio % % % NA %
Alger American MidCap Growth Portfolio % % % NA %
Alger American Small Capitalization Portfolio % % % NA %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Growth Portfolio % % % NA %
VIP Money Market Portfolio % % % NA %
VIP Overseas Portfolio % % % NA %
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio % % % NA %
VIP II Index 500 Portfolio % % % % %
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF-Equity Income Fund
(formerly VIF-Industrial Income Portfolio) % % % % %
INVESCO VIF-High Yield Fund % % % NA %
INVESCO VIF-Small Company Growth Fund % % % % %
INVESCO VIF-Total Return Fund % % % % %
INVESCO VIF-Utilities Fund % % % % %
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Growth Portfolio % % % NA %
Limited Maturity Bond Portfolio % % % NA %
Partners Portfolio % % % NA %
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund % % % NA %
Worldwide Emerging Markets Fund % % % % %
Worldwide Hard Assets Fund % % % NA %
Worldwide Real Estate Fund % % % % %
</TABLE>
GUARANTEED INTEREST DIVISION
The guaranteed interest division guarantees principal and is part of our general
account. Any amount you direct into the guaranteed interest division is credited
with interest at a fixed rate. SEE GUARANTEED INTEREST DIVISION, PAGE 15.
- --------------------------------------------------------------------------------
Estate Designer 6
<PAGE>
POLICY VALUES
Your policy 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. SEE POLICY VALUES, PAGE 28 AND PARTIAL WITHDRAWALS, PAGE 33.
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 one unit of a variable investment option
on a valuation date. Each variable investment option has a different
accumulation unit value. SEE DETERMINING THE VALUE IN THE VARIABLE DIVISION,
PAGE 28.
The accumulation unit value for each variable investment option reflects the
investment performance of the underlying investment portfolio during the
valuation period. Each accumulation unit value reflects asset-based charges
under the policy and the expenses of the investment portfolios. SEE DETERMINING
THE VALUE IN THE VARIABLE DIVISION, PAGE 28 AND HOW WE CALCULATE ACCUMULATION
UNIT VALUES, PAGE 29.
TRANSFERS OF ACCOUNT VALUE
With some limitations, you may make twelve free transfers among the variable
investment options or to the guaranteed interest division each policy year. We
charge $25 for each transfer over twelve in a policy year. SEE TRANSFERS OF
ACCOUNT VALUE, PAGE 29 AND POLICY TRANSACTION FEES, PAGE 44.
SPECIAL POLICY FEATURES
DESIGNATED DEDUCTION OPTION
You may designate one investment option from which we will deduct all of your
monthly deductions. SEE DESIGNATED DEDUCTION INVESTMENT OPTION, PAGE 26.
RIDERS
You may attach additional benefits to your policy by rider. In most cases, we
deduct a monthly charge from your account value for these benefits. SEE RIDERS,
PAGE 24.
DOLLAR COST AVERAGING
Dollar cost averaging is a systematic plan of transferring account values to
selected 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 30.
AUTOMATIC REBALANCING
Automatic rebalancing periodically reallocates your net account value among your
selected investment options to maintain your specified distribution of account
value among those investment options. Automatic rebalancing is free. SEE
AUTOMATIC REBALANCING, PAGE 31.
LOANS
You may take loans against your policy's net account value. We charge an annual
loan interest rate of 3.75%. We credit an annual interest rate of 3% on amounts
held in the loan division as collateral for your loan. Beginning in your
eleventh policy year, where permitted by state law, we may include amounts in
the loan division for calculation of your policy's persistency refund. SEE
POLICY LOANS, PAGE 32.
PARTIAL WITHDRAWALS
You may withdraw part of your net account value any time after your first policy
anniversary. You may make only one partial withdrawal per policy year. Partial
withdrawals may reduce your policy's death benefit and will reduce your account
value. SEE PARTIAL WITHDRAWALS, PAGE 33.
PERSISTENCY REFUND
After your tenth policy anniversary, where permitted by state law, we add a
persistency refund to your account value. SEE PERSISTENCY REFUND, PAGE 45.
REFUND OF SALES CHARGE
We guarantee that if you surrender your policy within the first two policy years
and it has not lapsed, we will refund some of the sales charge we
- --------------------------------------------------------------------------------
Estate Designer 7
<PAGE>
previously deducted from the premiums we received in your first policy year. SEE
REFUND OF SALES CHARGE, PAGE 45.
POLICY MODIFICATION, TERMINATION AND CONTINUATION FEATURES
RIGHT TO EXCHANGE POLICY
For 24 months after the policy date you may exchange your policy for a
guaranteed policy, unless state law requires differently. The transfer to make
this exchange is free. SEE RIGHT TO EXCHANGE POLICY, PAGE 27.
POLICY SPLIT OPTION
Under certain circumstances, you may split your policy into two separate life
insurance policies each insuring the life of one insured person. This split may
occur upon divorce between the two insured people, business dissolution, or a
possible adverse future change in the tax law, unless state law requires
otherwise. The policy split option is free. SEE POLICY SPLIT OPTION, PAGE 26.
SURRENDER
You may surrender your policy for its net cash surrender value at any time
before the second death of the insured people. All insurance coverage ends on
the date we receive your request. SEE SURRENDER, PAGE 35.
LAPSE
In general, insurance coverage continues as long as your net account value is
enough to pay the monthly deductions. However, your policy and its riders are
guaranteed not to lapse during the first five years of your policy if the
conditions of the special continuation period have been met. SEE LAPSE, PAGE 34
AND SPECIAL CONTINUATION PERIOD, PAGE 18.
REINSTATEMENT
You may reinstate your policy and its riders within five years of its lapse if
you still own the policy and the insured people meet our underwriting
requirements.
You will need to give proof of insurability as at policy issue. You will also
need to pay required reinstatement premiums.
If you had a policy loan existing when coverage ended, we will reinstate it with
accrued loan interest to the date of the lapse. SEE REINSTATEMENT, PAGE 35.
POLICY MATURITY
If at least one of the insured people is still living on the maturity date of
the policy anniversary nearest the younger insured person's 100th birthday and
you do not choose the continuation of coverage feature, you must surrender your
policy. We will pay the net account value. Your policy then ends. SEE POLICY
MATURITY, PAGE 27.
CONTINUATION OF COVERAGE
At the policy anniversary nearest the younger insured person's 100th birthday,
you may choose to let the continuation of coverage feature become effective. If
you do so, we will deduct a one-time administrative fee of $400 and keep your
policy in force. SEE CONTINUATION OF COVERAGE, PAGE 27.
DEATH BENEFITS
After the second death of the two insured people, we pay death proceeds to the
beneficiary(ies) if your policy is still in force. Based on the death benefit
option you have chosen, the base death benefit varies.
We generally require a minimum target death benefit of $500,000 to issue your
policy. If you have an adjustable term insurance rider, the minimum base
coverage required is $1,000 so long as the target death benefit is $500,000. SEE
APPLYING FOR A POLICY, PAGE 16 AND DEATH BENEFITS, PAGE 20.
You may change your death benefit amount while your policy is in force, subject
to certain restrictions. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 23.
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 46.
- --------------------------------------------------------------------------------
Estate Designer 8
<PAGE>
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, if your policy is a modified endowment contract, a loan 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 47.
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.
You should consult a qualified legal or tax adviser before you purchase your
policy.
- --------------------------------------------------------------------------------
Estate Designer 9
<PAGE>
How the Policy Works
<TABLE>
<S> <C> <C>
YOUR PREMIUM Premium Deductions
You make a premium ---------------------------->
payment
o sales charge
o tax charges
<----------------------------
NET PREMIUM
We allocate the net
premium to the investment
options you choose
|
|
-----------------------------------------
| |
\/ \/
GUARANTEED VARIABLE INVESTMENT INVESTMENT PORTFOLIOS The investment
INTEREST DIVISION OPTIONS The variable investment manager deducts
Amounts you allocate Amounts you allocate are <-- options invest in investment
are held in our general account held in our separate account --> investment portfolios ------> management fees
| | and other
----------------------------------------- portfolio expenses
|
|
o persistency refund |
o refund of sales Refunds |
charge (if ------------>| Monthly Deductions o policy charge
surrendered in years | ---------------------> o cost of insurance
1 - 3) | | charge
| | o monthly administrative
\/ | charge
ACCUMULATED VALUE | o rider charges
The total value of your --|
policy |
| | Separate Account
| | Deductions
| |---------------------> o mortality and expense
\/ | risk charge
LOAN DIVISION |
Amount set aside to |
secure a policy loan |
|
| Transaction Fees o partial withdrawal fee
---------------------> o transfer fee
o illustration fee
o premium allocation
change charge
o continuation of
coverage fee
</TABLE>
- --------------------------------------------------------------------------------
Estate Designer 10
<PAGE>
SECURITY LIFE, THE SEPARATE ACCOUNT AND THE INVESTMENT OPTIONS
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 1999, the company and its consolidated subsidiaries had
over $XXX.X billion of life insurance in force. As of December 31, 1999, our
total assets were over $XX.X billion, and our shareholder's equity was over $XXX
million.
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 $XXX.X billion on a Dutch (modified U.S.) generally
accepted accounting principles basis, as of December 31, 1999.
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 registered as a broker-dealer with the SEC and the NASD.
ING America Equities, Inc. is located at 1290 Broadway, Denver, Colorado
80203-5699.
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 separate account is used to support our variable life insurance policies and
for other purposes allowed by law and regulation. We keep the separate account
assets separate from our general account and other separate accounts. We may
offer other variable life insurance contracts with different benefits and
charges that invest in the separate account. We do not discuss these contracts
in this prospectus. The separate account may invest in other securities not
available for the policy described in this prospectus.
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 if we ever become insolvent, the separate account assets will be used first
to pay separate account policy claims. Only if separate account assets remain
after these claims have been satisfied can these assets be used to pay other
policy owners and 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.
INVESTMENT OPTIONS
Investment options include the variable and the guaranteed interest divisions,
but not the loan division. The separate account has several variable investment
options which invest in shares of underlying investment portfolios. This means
that the investment performance of a policy depends on the performance of the
investment portfolios you choose. Each investment portfolio has its own
- --------------------------------------------------------------------------------
Estate Designer 11
<PAGE>
investment objective. These investment portfolios are not available directly to
individual investors. They are available only as 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.
INVESTMENT PORTFOLIO OBJECTIVES
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. 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 or less than others.
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION INVESTMENT COMPANY/ INVESTMENT OBJECTIVE
ADVISER/ MANAGER/ SUB-
ADVISER
<S> <C> <C>
V.I. Capital Appreciation Fund AIM Variable Insurance Seeks growth of capital through investment in common
Funds, Inc./ AIM Advisors, stocks, with emphasis on medium- and small-sized
Inc. growth companies.
V.I. Government Securities AIM Variable Insurance Seeks to achieve high current income consistent with
Fund Funds, Inc./ AIM Advisors, reasonable concern for safety of principal by investing in
Inc. debt securities issued, guaranteed or otherwise backed
by the United States Government.
</TABLE>
- --------------------------------------------------------------------------------
Estate Designer 12
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION INVESTMENT COMPANY/ INVESTMENT OBJECTIVE
ADVISER/ MANAGER/ SUB-
ADVISER
<S> <C> <C>
American Growth Portfolio The Alger American Fund Seeks long-term capital appreciation by focusing on
growing companies that generally have broad product
lines, markets, financial resources and depth of
management.
American Leveraged AllCap The Alger American Fund Seeks long-term capital appreciation by investing in the
Portfolio equity securities of companies of any size which
demonstrate promising growth potential.
American MidCap Growth The Alger American Fund Seeks long-term capital appreciation by focusing on
Portfolio midsize companies with promising growth potential.
American Small Capitalization The Alger American Fund Seeks long-term capital appreciation by focusing on
Portfolio small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace.
VIP Growth Portfolio Fidelity Variable Insurance Seeks capital appreciation by investing in common
Products Fund and Variable stocks of companies that it believes have above-average growth
Insurance Products Fund II/ potential, either domestic or foreign issuers.
Fidelity Management &
Research Company
VIP Money Market Portfolio Fidelity Variable Insurance Seeks as high a level of current income as is consistent
Products Fund and Variable with the preservation of capital and liquidity by investing
Insurance Products Fund II/ in U.S. dollar-denominated money market securities,
Fidelity Management & including U.S. Government securities and repurchase
Research Company agreements, and entering into reverse repurchase
agreements.
VIP Overseas Portfolio Fidelity Variable Insurance Seeks long-term growth of capital by investing at least
Products Fund and Variable 65% of total assets in foreign securities.
Insurance Products Fund II/
Fidelity Management &
Research Company
VIP II Asset Manager Portfolio Fidelity Variable Insurance Seeks high total return with reduced risk over the long
Products Fund and Variable term by allocating its assets among stocks, bonds, and
Insurance Products Fund II/ short-term instruments.
Fidelity Management &
Research Company
VIP II Index 500 Portfolio Fidelity Variable Insurance Seeks investment results that correspond to the total
Products Fund and Variable return of common stocks publicly traded in the United
Insurance Products Fund II/ States as represented by the S&P(R)500.
Fidelity Management
Research Company/ Bankers
Trust Company
</TABLE>
- --------------------------------------------------------------------------------
Estate Designer 13
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION INVESTMENT COMPANY/ INVESTMENT OBJECTIVE
ADVISER/ MANAGER/ SUB-
ADVISER
<S> <C> <C>
VIF-Equity Income Fund INVESCO Variable Seeks high current income, with growth of capital as a
Investment Funds, Inc./ secondary objective by investing at least 65% of its
INVESCO Funds Group, assets in dividend-paying common and preferred stocks.
Inc. The rest of the fund's assets are invested in debt
securities, and lower-grade debt securities.
VIF-High Yield Fund INVESCO Variable Seeks to provide a high level of current income by
Investment Funds, Inc./ investing substantially all of its assets in lower-rated debt
INVESCO Funds Group, securities and preferred stock, including securities issued
Inc. by foreign companies.
VIF-Small Company Growth INVESCO Variable Seeks investment growth over the long term by investing
Fund Investment Funds, Inc./ at least 80% of its assets in equity securities of
INVESCO Funds Group, companies with market capitalizations of $1 billion or
Inc. less. 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.
VIF-Total Return Fund INVESCO Variable Seeks to provide high total return through both growth
Investment Funds, Inc./ and current income by investing at least 30% of its assets
INVESCO Capital in common stocks of companies with a strong history of
Management, Inc. paying regular dividends and 30% of its assets in debt
securities. 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.
VIF-Utilities Fund INVESCO Variable Seeks capital appreciation and income by investing at
Investment Funds, Inc./ least 80% of its assets in companies doing business in
INVESCO Capital the utilities economic sector. The remainder of the
Management, Inc. fund's assets are not required to be invested in the
utilities economic sector.
Growth Portfolio Neuberger Berman Advisers Seeks growth of capital by investing mainly in common
Management Trust/ mid-capitalization companies.
Neuberger Berman
Management Inc./ Neuberger
Berman, LLC
Limited Maturity Bond Neuberger Berman Advisers Seeks the highest available current income consistent
Portfolio Management Trust/ with liquidity and low risk to principal by investing
Neuberger Berman mainly in investment-grade bonds and other debt
Management Inc./ Neuberger securities from U.S. Government and corporate issuers.
Berman, LLC
Partners Portfolio Neuberger Berman Advisers Seeks growth of capital by investing mainly in common
Management Trust/ stocks of mid- to large-capitalization companies.
Neuberger Berman
Management Inc./ Neuberger
Berman, LLC
</TABLE>
- --------------------------------------------------------------------------------
Estate Designer 14
<PAGE>
INVESTMENT PORTFOLIO OBJECTIVES
<TABLE>
<CAPTION>
VARIABLE INVESTMENT OPTION INVESTMENT COMPANY/ INVESTMENT OBJECTIVE
ADVISER/ MANAGER/ SUB-
ADVISER
<S> <C> <C>
Worldwide Bond Fund Van Eck Worldwide Seeks high total return--income plus capital
Insurance Trust/ Van Eck appreciation--by investing globally, primarily in a
Associates Corporation variety of debt securities
Worldwide Emerging Markets Van Eck Worldwide Seeks long term capital appreciation by investing in
Fund Insurance Trust/ Van Eck equity securities in emerging markets around the world.
Associates Corporation
Worldwide Hard Assets Fund Van Eck Worldwide Seeks long term capital appreciation by investing
Insurance Trust/ Van Eck primarily in "hard asset securities." Hard assets include
Associates Corporation precious metals, natural resources, real estate and
commodities. Income is a secondary consideration.
Worldwide Real Estate Fund Van Eck Worldwide Seeks high total return by investing in equity securities
Insurance Trust/Van Eck of companies that own significant real estate or that
Associates Corporation principally do business in real estate.
</TABLE>
GUARANTEED INTEREST DIVISION
You may allocate all or a part of your net premium and transfer your net account
value into the guaranteed interest division. The guaranteed interest division
guarantees principal and is part of our general account. It pays interest at a
fixed rate that we declare.
The general account contains all of our assets other than those held in the
separate account (variable investment options) or other separate accounts.
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 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.
The amount you have in the guaranteed interest division is all of the net
premium you allocate to that division, plus transfers you make 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. This interest rate is never less than the minimum guaranteed
interest rate of 3% and will be in effect for 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.
MAXIMUM NUMBER OF INVESTMENT OPTIONS
There are three divisions: the variable division, the
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Estate Designer 15
<PAGE>
guaranteed interest division and the loan division. Under the variable division,
there are numerous variable investment options. SEE SECURITY LIFE SEPARATE
ACCOUNT L1, PAGE 11 AND INVESTMENT PORTFOLIO OBJECTIVES , PAGE 12.
You may invest in a total of eighteen investment options over the life of your
policy. Investment options include the variable and the guaranteed interest
divisions, but not the loan division.
As an example, if you have had funds in seventeen variable investment options
and the guaranteed interest division, these are the only investment options to
which you may later add or transfer funds. However, you could still take a
policy loan and access the loan division.
You may want to use fewer investment options in the early years of your policy,
so that you can invest in others in the future. If you invest in eighteen
variable investment options, you will not be able to invest in the guaranteed
interest division.
DETAILED INFORMATION ABOUT THE ESTATE DESIGNER POLICY
This prospectus describes our standard Estate Designer 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 50 show how the policies work.
We offer other products to insure the lives of two people which may or may not
better match your needs and interests.
APPLYING FOR A POLICY
You purchase this variable universal life policy by submitting an application to
us. On the policy date, the joint equivalent age of the two insured people must
be no less than 15 and no more than age 85. The individual age of each insured
person must be no more than 90 years of age on the policy date. There is no
maximum age difference between the two insured people.
The insured people are the two people on whose lives we issue the policy. The
insured people share some relationship and commonly include, among others:
husband and wife; business partners; parent and child; grandparent and
grandchild; and siblings. Upon the second death of the insured people we pay the
death proceeds. SEE AGE, PAGE 36.
You may request that we back-date the policy up to six months to allow either or
both of the insured people to give proof of a younger age for the purposes of
your policy.
We may reduce the minimum death benefit for group or sponsored arrangements or
corporate purchasers. Our underwriting and reinsurance procedures in effect at
the time you apply limit the maximum death benefit.
TEMPORARY INSURANCE
If you apply and qualify, we may issue temporary insurance in an amount equal to
the face amount of the permanent insurance for which you applied. The maximum
amount of temporary insurance for binding limited life insurance coverage is $3
million, which includes any other in-force coverage you have with us.
Temporary 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 complete.
Temporary life insurance coverage ends on the earliest of:
o the date we return your premium payments;
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 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:
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Estate Designer 16
<PAGE>
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.
POLICY ISSUANCE
Before we issue a policy, we require satisfactory evidence of insurability of
both insured people and payment of your initial premium. This evidence may
include a medical examination and completion of all underwriting and issue
requirements.
The policy date 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 date we receive your
initial premium.
The policy date is determined one of three ways:
1. the date you designate on your application, subject to our approval;
or
2. the back-date of the policy to save age, subject to our approval and
state law.
3. if there is no designated date or back-date, the policy date is:
o the date all underwriting and administrative requirements have
been met if we receive your initial premium before we issue your
policy; or
o the date we receive your initial premium if it is after we
approve your policy for issue.
DEFINITION OF LIFE INSURANCE
We apply a test to make sure that your policy meets the federal tax definition
of life insurance. The guideline premium/cash value corridor test applies to
your policy. We may limit premium payments relative to your policy death benefit
under this test. SEE TAX STATUS OF THE POLICY, PAGE 46.
PREMIUMS
You may choose the amount and frequency of premium payments, within limits. You
cannot make premium payments after the second death of the insured people or
after the continuation of coverage period begins. SEE CONTINUATION OF COVERAGE,
PAGE 27.
We consider any payment we receive to be a premium if you do not have an
outstanding loan and your policy is not in the continuation of coverage period.
After we deduct certain expenses from your premium payment, we add the remaining
net premium to your account value.
SCHEDULED PREMIUMS
Your premiums are flexible. You may select your scheduled 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 quarterly,
semiannual or annual basis. You are not required to pay the scheduled premium.
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 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. During the special continuation period, your scheduled premium should
not be less than the minimum annual premium shown in your policy.
UNSCHEDULED PREMIUM PAYMENTS
Generally speaking, you may make unscheduled
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Estate Designer 17
<PAGE>
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 people are 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 at least one 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 have
acknowledged in writing the new modified endowment contract status
for your policy.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 47 AND CHANGES TO COMPLY WITH THE LAW,
PAGE 48.
If you have an outstanding policy loan and you make an unscheduled payment, we
will consider it a loan repayment, unless you tell us otherwise. If your payment
is a loan repayment, we do not take tax or sales charges which apply to premium
payments.
TARGET PREMIUM
Target premiums are not based on the scheduled premium. Target premiums are
actuarially determined based on the age, gender, ratings and premium classes of
the insured people. The target premium is used in determining your sales charge
and the sales compensation we pay our agents/registered representatives. It may
or may not be enough to keep your policy in force. You are not required to pay
the target premium and there is no penalty for paying more or less. The target
premium for your policy and any segments added since the policy date are listed
in the policy schedule we provide to you. SEE PREMIUMS, PAGE 17.
MINIMUM ANNUAL PREMIUM
To qualify for the special continuation period, you must pay a minimum annual
premium during each of your first five policy years.
Your minimum annual premium is based on:
o each insured person's age, gender, premium class and rating;
o the stated death benefit of your policy; and
o riders on your policy.
Your minimum annual premium is shown in the schedule pages of your policy. We
may reduce the minimum annual premium for group, or sponsored arrangements or
for corporate purchasers.
SPECIAL CONTINUATION PERIOD
The special continuation period is the first five policy years. Under the
special continuation period, we guarantee that your policy will not lapse,
regardless of its net account value, if on a monthly processing date:
o the sum of all premiums you have paid, minus partial withdrawals that
you have taken, minus policy loans that you have taken, including
accrued loan interest is greater than or equal to;
o the minimum monthly premiums for each policy month, from the first
month of your policy through the current policy monthly processing
date.
The minimum monthly premium is one-twelfth of the minimum annual premium.
During the first five years of your policy if there is not enough net account
value to pay the monthly deductions and you have satisfied our requirements, we
do not allow your policy to lapse. We do not permanently waive policy charges.
Instead, we continue to deduct these charges which may result in a negative net
account value, unless you pay enough premium to prevent this. The negative
balance is your unpaid monthly deductions owing. At the end of the special
continuation period to avoid lapse of your policy you must pay enough premium to
bring the net account value to zero plus the amount that covers your estimated
monthly deductions for the following two months. SEE LAPSE, PAGE 34.
INVESTMENT DATE AND ALLOCATION OF NET PREMIUMS
The net premium is the balance remaining after we take premium-based charges
from your premium payment.
Your initial premium is the premium we must receive
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Estate Designer 18
<PAGE>
before coverage can begin. The initial premium is the first premium we receive
and apply to your policy. It must be at least equal to the sum of the scheduled
premiums which are due from your policy date through your investment date.
The investment date is the first date we apply the net premium we have received
to your policy. If we receive your initial premium after we approve your policy
for issue, the investment date is the date we receive your initial premium.
We apply net premiums we have received from you 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) we approve your policy for issue.
Amounts you designate for the guaranteed interest division will be allocated to
that division on the investment date. If your state requires the return of your
premium during the free look period, we initially invest amounts you have
designated for the variable division in the Fidelity VIP Money Market Portfolio.
We later transfer these amounts from the Money Market Portfolio to your selected
variable investment options, based on your most recent premium allocation
instructions, at the earlier of the following dates:
o five days after we mailed your policy and your state free look period
has ended; or
o you have actually received your policy, we have received your
delivery receipt and your state free look period has ended.
If your state provides for return of account value during the free look period
or no free look period, we invest amounts you designated for the variable
division directly into your selected variable investment options.
We allocate all later premium payments to your policy on the valuation date of
receipt. We use your most recent premium allocation instructions specified in
whole numbers totaling 100% and using up to eighteen investment options over the
life of your policy. SEE MAXIMUM NUMBER OF INVESTMENT OPTIONS, PAGE 15.
You may make twelve free premium allocation changes per year, after which a
transaction fee applies. If you change your designated deduction investment
option from which monthly deductions are taken, we consider this a premium
allocation change for which there may be a charge. SEE DESIGNATED DEDUCTION
INVESTMENT OPTION, PAGE 26 AND POLICY TRANSACTION FEES, PAGE 44.
PREMIUM PAYMENTS AFFECT YOUR COVERAGE
Unless your policy is in the special continuation period, 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 you do not meet these conditions, your policy will enter the 61-
day grace period and you must make a premium payment to avoid lapse. SEE LAPSE,
PAGE 34, AND GRACE PERIOD, PAGE 34.
If you pay your minimum premium each year during the first five policy years and
take no policy loan, we guarantee your policy and riders will not lapse during
the special continuation period, regardless of your net account value. SEE
SPECIAL CONTINUATION PERIOD, PAGE 18.
MODIFIED ENDOWMENT CONTRACTS
There are special federal income tax rules for distributions from life insurance
policies which are modified endowment contracts. These rules apply to policy
loans, surrenders and partial withdrawals Whether or not these rules apply
depends upon whether or not the premiums we receive are greater than the
"seven-pay" limit.
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.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
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Estate Designer 19
<PAGE>
DEATH BENEFITS
As a joint and survivor universal life insurance policy, your policy has a joint
nature to the death benefit. We do not pay death proceeds until the second death
of the insured people. Your death benefit is calculated as of the date of the
second death of the insured people.
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 with your one policy.
We generally require a minimum target death benefit of $500,000 to issue a
policy. If you have an adjustable term insurance rider, the minimum base
coverage to issue a policy is $1,000, as long as your target death benefit is at
least $500,000. SEE CHANGES IN DEATH BENEFIT AMOUNTS, PAGE 23. When we issue
your policy, we base the initial insurance coverage on the instructions in your
application. The death benefit at issue may vary from the stated death benefit
plus adjustable term insurance coverage for some 1035 exchanges. The stated
death benefit is the permanent element of your policy. The adjustable term
insurance rider is the term insurance element of your policy. SEE ADJUSTABLE
TERM INSURANCE RIDER, PAGE 24.
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 people. Use of the adjustable term insurance rider may
reduce sales compensation, but may increase the monthly cost of insurance. SEE
ADJUSTABLE TERM INSURANCE RIDER, PAGE 24.
DEATH BENEFIT SUMMARY
THIS CHART ASSUMES NO DEATH BENEFIT OPTION CHANGES AND NO REQUESTED OR SCHEDULED
INCREASES OR DECREASES IN STATED OR TARGET DEATH BENEFIT AND THAT PARTIAL
WITHDRAWALS ARE LESS THAN THE PREMIUM WE RECEIVE.
<TABLE>
<CAPTION>
OPTION 1 OPTION 2 OPTION 3
===================== ===================================== =================================== ===============================
<S> <C> <C> <C>
STATED DEATH The amount of policy death The amount of policy death The amount of policy death
BENEFIT benefit at issue, not including benefit at issue, not including benefit at issue, not including
rider coverage. This amount rider coverage. This amount rider coverage. This amount
stays level throughout the stays level throughout the stays level throughout the life
life of the contract. life of the contract. of the contract.
BASE DEATH The greater of the stated The greater of the stated The greater of the stated death
BENEFIT death benefit or the account death benefit plus the benefit plus the sum of all
value multiplied by the account value or the account premiums we receive minus
appropriate factor from the value multiplied by the partial withdrawals you have
definition of life insurance appropriate factor from the taken, or the account value
factors. definition of life insurance multiplied by the appropriate
factors. factor from the definition of
life insurance factors.
TARGET DEATH Stated death benefit plus Stated death benefit plus Stated death benefit plus
BENEFIT adjustable term insurance adjustable term insurance adjustable term insurance
rider benefit. Assuming no rider benefit. Assuming no rider benefit. Assuming no
schedule changes, this schedule changes, this schedule changes, this amount
amount remains level amount remains level remains level throughout the
throughout the life of the throughout the life of the life of the policy.
policy. policy.
</TABLE>
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Estate Designer 20
<PAGE>
<TABLE>
<CAPTION>
OPTION 1 OPTION 2 OPTION 3
===================== ===================================== =================================== ===============================
<S> <C> <C> <C>
TOTAL DEATH This is the total death This is the total death This is the total death
BENEFIT proceeds. It is the greater of proceeds. It is the greater of proceeds. It is the greater of
the target death benefit or the the target death benefit plus the target death benefit plus
base death benefit. the account value or the base the sum of all premiums we
death benefit. receive minus partial
withdrawals you have taken,
or the base death benefit.
ADJUSTABLE The adjustable term The adjustable term The adjustable term insurance
TERM insurance rider benefit is the insurance rider benefit is the rider benefit is the total death
INSURANCE total death benefit minus total death benefit minus the benefit minus the base death
RIDER BENEFIT base death benefit, but it will base death benefit, but it will benefit, but it will not be less
not be less than zero. If the not be less than zero. If the than zero. If the account
account value multiplied by account value multiplied by value multiplied by the death
the death benefit corridor the death benefit corridor benefit corridor factor is
factor is greater than the factor is greater than the greater than the stated death
stated death benefit, the stated death benefit plus the benefit plus the sum of all
adjustable term insurance account value, the adjustable premiums we receive minus
benefit will be decreased. It term insurance rider benefit partial withdrawals you have
will be decreased so that the will be decreased. It will be taken, the adjustable term
sum of the base death benefit decreased so that the sum of insurance rider benefit will be
and the adjustable term the base death benefit and decreased. It will be
insurance rider benefit is not the adjustable term insurance decreased so that the sum of
greater than the target death rider benefit is not greater the base death benefit and the
benefit. If the base death than the target death benefit adjustable term insurance
benefit becomes greater than plus the account value. If the rider benefit is not greater
the target death benefit, then base death benefit becomes than the target death benefit
the adjustable term insurance greater than the target death plus the sum of all premiums
rider benefit is zero. benefit plus the account we receive minus partial
value, then the adjustable withdrawals you have taken.
term insurance rider benefit If the base death benefit
is zero. becomes greater than the
target death benefit plus the
sum of all premiums we receive
minus partial withdrawals you
have taken, then the adjustable
term insurance rider benefit is
zero.
</TABLE>
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 increases or decreases in the stated death benefit; or
o a change in your death benefit option.
As long as your policy is in force, we will pay the death proceeds to your
beneficiary(ies) calculated at the date of the second death of the insured
people. 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 rider benefits; minus
o your outstanding policy loan with accrued loan interest; minus
o outstanding policy charges incurred before the second death of the
insured people.
There could be outstanding policy charges if the date of the second death of the
insured people happens while your policy is in the grace period or in the five-
year special continuation period.
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Estate Designer 21
<PAGE>
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 (but not to option 3 or from option 3 to option 2) after the first policy
anniversary and before the continuation of coverage feature begins. SEE CHANGES
IN DEATH BENEFIT OPTIONS, PAGE 22 AND CONTINUATION OF COVERAGE, PAGE 27.
If you choose death benefit option 1, your base death benefit is the greater of:
1. your stated death benefit on the date of the second death of the
insured people; or
2. your account value on the date of the second death of the insured
people multiplied by the appropriate factor from the definition of
life insurance factors shown in Appendix A.
Under option 1, positive investment performance generally reduces your net
amount at risk, which lowers your policy's cost of insurance charge. Option 1
offers insurance coverage that is a set amount with potentially lower cost of
insurance charges over time.
If you choose 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
second death of the insured people; or
2. your account value on the date of the second death of the insured
people multiplied by the appropriate factor from the definition of
life insurance factors shown in Appendix A.
Under option 2, investment performance is reflected in your insurance coverage.
If you choose death benefit option 3, the base death benefit is the greater of:
1. your stated death benefit plus the sum of all premiums we have
received minus partial withdrawals you have taken under your policy;
or
2. your account value on the date of the second death of the insured
people multiplied by the appropriate factor from the definition of
life insurance factors shown in Appendix A.
Under option 3, the base death benefit generally will increase as you pay
premiums and decrease if 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 younger insured person's age;
o the insured people's genders; and
o the guideline premium/cash value corridor test for the federal income
tax law definition of life insurance. SEE APPENDIX A, PAGE 58.
Death benefit options 2 and 3 are not available during the continuation of
coverage period. If you select option 2 or 3 on your policy, it automatically
converts to death benefit option 1 when the continuation of coverage period
begins. SEE CONTINUATION OF COVERAGE, PAGE 27.
CHANGES IN DEATH BENEFIT OPTIONS
You may request a change in your death benefit option at any time after your
policy date and before the continuation of coverage feature begins.
Your requested 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 one day remains before your monthly processing date. If fewer than one day
remains before your monthly processing date, your death benefit option change
will be effective on the second following monthly processing date.
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, from option 2
to option 1 or from option 3 to option 1. YOU MAY NOT CHANGE FROM DEATH BENEFIT
OPTION 1 OR 2 TO OPTION 3, OR OPTION 3 TO OPTION 2.
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 make this change for you.
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Estate Designer 22
<PAGE>
We may not approve a death benefit option change if it reduces the target or
stated death benefit below the minimum we require to issue your policy.
On the effective date of your option change, your stated death benefit changes
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 the
sum of the premiums we
have received, minus partial
withdrawals you have taken
as of the effective date of the
change.
We increase or decrease your stated death benefit on the date of your death
benefit option change to keep the net amount at risk the same. 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.
Changing your death benefit option may reduce or increase your target death
benefit, as well as your stated death benefit.
CHANGES IN DEATH BENEFIT AMOUNTS
You may want to increase your policy's target or stated death benefit. You may
do so while your policy is in force and before the policy anniversary when the
joint equivalent age of the insured people is 85.
Contact your agent/registered representative or our customer service center to
request a change in your policy's death benefit. The request is effective on the
next monthly processing date after we receive and approve your request. There
may be underwriting or other requirements which must be met before your request
can be approved. Your requested change must be for at least $1,000.
After we approve your request, we will send you a new policy schedule page which
includes the:
o stated death benefit;
o benefits under applicable riders;
o guaranteed cost of insurance rates of each segment; and
o target death benefit schedule.
Keep the new schedule with your policy. We may ask you to send your policy to us
so that we can make the change for you.
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 46.
Requested reductions in the death benefit will be applied first 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 decreases in stated death benefit among your benefit
segments pro rata unless state law requires differently.
There may be tax consequences as a result of a decrease in your death benefit.
SEE TAX STATUS OF THE POLICY, PAGE 46 AND MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
You cannot decrease the stated death benefit below $1,000.
You must provide satisfactory evidence that the insured people are still
insurable to increase your death benefit. Unless you tell us differently, we
assume your request for an increase in your target death benefit is also a
request for an increase to your
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Estate Designer 23
<PAGE>
stated death benefit. Thus, the amount of your adjustable term insurance rider
will not change.
You may change your target death benefit once in a policy year.
The initial death benefit segment, or first segment, is the stated death benefit
on your policy's effective date. A requested increase in stated death benefit
will cause a new segment to be created. Once we create a new segment, it is
permanent unless state law requires differently. The segment year runs from the
segment effective date to its anniversary.
Each new segment may have:
o a new minimum annual premium during the special continuation period;
o a new sales charge;
o new cost of insurance charges;
o a new incontestability period;
o a new suicide exclusion period; and
o a new target premium.
We allocate the net amount at risk among segments in the same proportion that
each segment bears to the total stated death benefit. Premiums we receive after
an increase are applied to your policy segments in the same proportion as the
target premium for each segment bears to the total target premium for all
segments. Sales charges are deducted from each segment's premium based on the
length of time that segment has been effective.
You may not reduce your death benefit in the first policy year. Requested
reductions in the death benefit will be applied first 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 decreases in stated death benefit among your benefit segments
pro rata unless state law requires differently.
There may be tax consequences as a result of a decrease in your death benefit.
SEE TAX STATUS OF THE POLICY, PAGE 46 AND MODIFIED ENDOWMENT CONTRACTS, PAGE 47.
If a death benefit 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.
RIDERS
Your policy may include benefits, which we attach by use of a rider. A rider
adds an additional cost to your policy. If applicable, we deduct a monthly
charge from your account value for each rider you choose. You may cancel these
rider benefits at any time.
Periodically we may offer other riders than those listed here. You should
contact your agent/registered representative for a complete list of the riders
now available.
SEE MODIFIED ENDOWMENT CONTRACTS, PAGE 47, FOR INFORMATION ON THE POSSIBLE TAX
EFFECTS OF ADDING OR CANCELING THESE BENEFITS.
ADJUSTABLE TERM INSURANCE RIDER
We generally require a minimum target death benefit of $500,000 to issue a
policy. If you have an adjustable term insurance rider, the minimum base
coverage to issue a policy is $1,000, as long as your target death benefit is at
least $500,000.
You may increase your death proceeds by adding an adjustable term insurance
rider. This rider allows you to schedule the pattern of death benefits
appropriate for anticipated needs. The amount we pay is the term death benefit
in force at the time of the second death of the two people. As the name
suggests, the adjustable term insurance rider adjusts over time to maintain your
desired level of coverage.
You specify a target death benefit when you apply for this rider. The target
death benefit can be level for the life of your policy or can be scheduled to
change at the beginning of a selected policy year(s). SEE DEATH BENEFITS, PAGE
20.
The adjustable term insurance rider death benefit is the difference between your
target death benefit and your base death benefit, but not less than zero. The
rider's death benefit automatically adjusts daily as your base death benefit
changes. Your death benefits depend 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
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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
we have received 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 benefits equal to your target death benefit in each
year:
Base Death Target Death Adjustable Term
Benefit Benefit Insurance Rider Amount
------- ------- ----------------------
$501,500 $550,000 $48,500
502,500 550,000 47,500
502,250 550,000 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 $550,000 or more, the adjustable term
insurance would be 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 drops below your target death benefit, the adjustable term
insurance rider amount reappears to maintain your desired 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 23.
We may deny 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 your target death benefit. SEE PARTIAL WITHDRAWALS, PAGE 33
AND CHANGES IN DEATH BENEFIT OPTIONS, PAGE 22.
There is no defined premium for a given amount of adjustable term insurance
coverage. Instead, we deduct a separate 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 at the monthly processing date. The cost
of insurance rates are determined by us from time to time. They are based on the
issue ages, genders, ratings and premium classes of the insured people, as well
as your policy date.
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 classes even though
satisfactory new evidence of insurability is required for the increased
schedule. The monthly guaranteed maximum cost of insurance rates for this rider
will be stated in the policy. SEE COST OF INSURANCE CHARGE, PAGE 43.
At policy maturity, if you have an adjustable term insurance rider, the target
death benefit becomes the stated death benefit. The adjustable term insurance
rider then terminates. If you have no adjustable term insurance rider, your
stated death benefit is unchanged.
The only charge for this rider is the cost of insurance charge. There is no
sales charge for this rider. The total charges that you pay may be less if you
have greater coverage under an adjustable term insurance rider rather than as
base death benefit.
However, not all policy features apply to the adjustable term insurance rider.
The adjustable term insurance rider does not contribute to the policy account
value and there is no surrender value. It does not affect investment performance
and cannot be used toward a policy loan. The adjustable term insurance
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rider provides benefits only at the second death of the insured people.
SINGLE LIFE TERM INSURANCE RIDER
This rider provides a benefit upon the death of one of the primary insured
people under your policy. You may choose to add a single life term insurance
rider for just one insured person. Alternatively, you may add two single life
term insurance riders: one for each insured person. You may add this rider to
your policy at any time if both insured people are alive and insurable according
to our rules.
We will issue the single life term insurance rider on an insured person who is
between the ages of 15 and 85. Coverage may continue until the earlier of when:
o the insured person covered by this rider reaches age 100;
o the continuation of coverage provision becomes effective; or
o the insured person covered by this rider dies;
o the grace period expires; or
o the policy is surrendered.
SEE CONTINUATION OF COVERAGE, PAGE 27.
The minimum amount of coverage for a single life term insurance rider is $1,000.
The maximum coverage under this rider is subject to our underwriting
determinations. At issue, you may schedule the rider's death benefit to increase
or decrease.
Your request for an increase or decrease in rider coverage is effective on the
next monthly processing date after we approve your request. There may be
underwriting or other requirements which must be met before we approve your
request. A requested change in your coverage must be for at least $1,000. If you
schedule or request an increase after issue, the person insured under this rider
will be subject again to our underwriting requirements.
The charge for this rider is based on the age, gender, premium class and
underwriting characteristics of the insured person. The charge for this rider is
deducted on each monthly processing date as a cost per each $1,000 of the net
amount at risk under the rider. See the policy schedule pages for information on
your actual cost.
SPECIAL FEATURES
DESIGNATED DEDUCTION INVESTMENT OPTION
You may designate an investment option from which we will deduct your monthly
charges. You may make this designation at any time. You may not use the loan
division as your designated deduction option.
You may elect not to choose a designated deduction investment option or the
amount in your designated deduction investment option may not be enough to cover
the monthly deductions. If so, these charges are taken from the variable and
guaranteed interest divisions in the same proportion that your account value in
each has to your total net account value on the monthly processing date.
If you change your designated deduction investment option, we consider this a
premium allocation change for which there may be a charge. SEE POLICY
TRANSACTION FEES, PAGE 44.
POLICY SPLIT OPTION
Under certain circumstances, you may exchange your policy for two single life
insurance policies: one on each of the two insured people. The policy split
option has its own insurability requirements which may be met at or before the
time your policy is split. Evidence of insurability is required for a new single
life policy where coverage is greater than 50% of your original policy death
benefit or for an insured person who is subject to certain underwriting ratings.
On the effective date of the policy split, the available death benefit under
your policy will be divided between the two new single life insurance policies.
You may take less than the maximum death benefit amount available.
Unless law requires otherwise, you may use the policy split option if:
a) three months following the effective date of a final divorce decree
regarding the marriage of the two insured people;
b) there is a change to the federal estate tax law which results in
either:
i) removal of the unlimited marital deduction provision; or
ii) a reduction in the current maximum federal estate tax of at
least 50% after your policy date; or
c) there is a dissolution of business conducted or owned by the two
insured people.
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You must send us written notice of your election to use the policy split option
within 180 days of the occurrence of an eligible event. You must provide
satisfactory evidence that the event has occurred.
The effective date of the policy split is the first monthly processing date
after we approve it. The insurance coverage under the two individual life
insurance policies will start on the effective date of the policy split only if
both insured people are alive on that date. If either insured person is not
alive on that date, your exchange is void.
All terms and conditions of the new policies apply once your policy is split and
they may differ from those of this policy. Consult your new single life
insurance policies.
The premiums for each new policy will be based on each insured person's age,
gender and premium class at the time of the split of your policy. Premiums will
be due for each new policy under the terms of the new policy. The account value
of the old policy will be allocated to the new policies on the effective date in
the same proportion that the face amount was divided between the two single life
insurance policies, unless we agree to a different allocation. If this
allocation causes an increase in the face amount of either of the new single
life policies, we may limit the account value you may apply to each new policy.
Any remaining account value will be paid to you in cash and may be taxable. The
refund of sales charge does not apply on a policy split.
If you have an outstanding policy loan it will be divided and transferred to
each new single life insurance policy in the same proportion as your account
value is allocated. Any remaining loan balance must be paid before the effective
date of the policy split. Any person or entity to which you have assigned your
policy must agree to the policy split. An assignment of your policy generally
will apply to each new single life insurance policy.
If you have a single life term insurance rider on your policy at the date of the
policy split, you may have a term insurance rider insuring the same insured
person if that rider is available on the new policy. Other riders may or may not
be available on the new policies and may be subject to new proof of
insurability.
Exercising the policy split option may be treated as a taxable transaction.
Moreover, the two single life insurance policies could be treated as modified
endowment contracts. SEE TAX CONSIDERATIONS, PAGE 46.
You may not split your policy into two single life insurance policies if any of
the following has happened:
a) the continuation of coverage period has begun;
b) one of the insured people has died;
c) your policy grace period has ended; or
d) your policy has been terminated or surrendered.
You should consult a tax adviser before exercising the policy split option.
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. We transfer the amount you have in the variable division to the
guaranteed interest division. We allocate all of your future net premiums only
to the guaranteed interest division. We do not allow future payments or
transfers to the variable investment options after you exercise this right.
We do not charge for the transfer to make this exchange. SEE GUARANTEED INTEREST
DIVISION, PAGE 15.
POLICY MATURITY
You can surrender your policy at any time. At the policy anniversary nearest the
younger insured person's 100th birthday if you do not want the continuation of
coverage feature, the policy matures. You may then surrender the policy for the
net account value and end coverage. Part of this payment may be taxable. You
should consult your tax adviser.
CONTINUATION OF COVERAGE
The continuation of coverage feature allows your insurance coverage to continue
in force beyond policy maturity. If on the policy anniversary nearest the
younger insured person's 100th birthday you allow the continuation of coverage
feature to become effective, we:
o convert target death benefit to stated death benefit;
o terminate all riders;
o convert death benefit option 2 or 3 to death benefit option 1, if
applicable;
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o deduct a one-time $400 administrative fee to cover future expenses;
o transfer your net account value (excluding the amount in the loan
division) into the guaranteed interest division; and
o terminate dollar cost averaging and automatic rebalancing.
Your insurance coverage continues in force until the second death of the insured
people, unless the policy lapses or is surrendered. However:
o you may make no further premium payments;
o we deduct no further cost of insurance charges;
o your monthly deductions cease; and
o your net account value may not be transferred into the variable
investment options.
During the continuation of coverage period, you may take policy loans or partial
withdrawals from your policy. If we pay a persistency refund on the guaranteed
interest division, it will be credited to your policy. SEE PERSISTENCY REFUND,
PAGE 45.
If you have an outstanding policy loan, interest continues to accrue. If you
fail to make sufficient loan or loan interest payments, it is possible that the
loan balance plus accrued interest may become greater than your account value
and cause your policy to lapse. To avoid this lapse, you may make loan and loan
interest payments during the continuation of coverage period.
If you wish to stop coverage during the continuation of coverage period, you may
surrender your policy and receive the net account value. All normal consequences
of surrender apply. SEE SURRENDER, PAGE 35.
The continuation of coverage feature may not be available in all states. If a
state has approved this feature, it is an automatic feature and you do not need
to take any action to activate it.
The tax consequences of coverage continuing beyond the younger insured's
person's 100th birthday 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 applied;
o charges deducted;
o partial withdrawals taken;
o investment performance of the variable investment options;
o interest earned on the guaranteed interest division; and
o interest earned on the loan division.
NET ACCOUNT VALUE
Your policy's net account value is your account value minus the amount of your
outstanding policy loan and accrued loan interest, if any.
CASH SURRENDER VALUE
Your cash surrender value is your account value plus any refund of sales charge
due.
NET CASH SURRENDER VALUE
Your net cash surrender value is your cash surrender value minus the amount of
your outstanding policy loan and accrued loan interest, if any.
DETERMINING VALUES IN THE VARIABLE DIVISION
The amounts in the variable division are measured by accumulation units and
accumulation unit values. The value of each variable investment option is the
accumulation unit value for that option multiplied by the number of accumulation
units you own in that option. Each variable investment option has a different
accumulation unit value.
We purchase accumulation units for you when you allocate premium or make
transfers to a variable investment option, including transfers from the loan
division.
A valuation date is one on which the net asset value of the investment portfolio
shares and unit values of the variable investment options are determined. A
valuation date is each day the New York Stock Exchange and the company's
customer service center are open for business, except for days on which an
investment portfolio does not value its shares or any other day as required by
law. Each valuation date ends at 4:00 p.m. Eastern time.
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We sell accumulation units for you:
o when amounts are transferred from a variable investment option
(including transfers to the loan division);
o for your policy's monthly deductions from your account value;
o for policy transaction charges;
o when you take a partial withdrawal;
o when you surrender your policy; and
o to pay the death proceeds.
We calculate the number of accumulation units purchased or sold by:
1. dividing the dollar amount of your transaction by:
2. the accumulation unit value for that variable investment option
calculated at the close of business on the valuation date of the
transaction.
The accumulation unit value is the value of one accumulation unit determined on
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 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 29.
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. 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 on 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 options goes up or
down depending on investment performance of the underlying investment portfolio.
FOR AMOUNTS IN THE VARIABLE INVESTMENT OPTIONS, THERE IS NO GUARANTEED MINIMUM
CASH SURRENDER 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 first date, the
accumulation unit value on any valuation date is:
1. the accumulation unit value for the preceding valuation date
multiplied by
2. the variable investment option's accumulation experience factor 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 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.
3. We divide the resulting amount by the value of the shares in the
underlying investment portfolio at the close of business on the
previous valuation date.
4. We then subtract the mortality and expense risk charge under your
policy. The daily charge is .002055% (.75% annually) of the
accumulation unit value. If the previous day was not a valuation
date, the charge is multiplied by the number of days since the last
valuation date.
TRANSFERS OF ACCOUNT VALUE
You may make twelve free transfers among the variable investment options or the
guaranteed interest
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division in each policy year, with a $25 fee per transaction after that. If your
state requires a refund of premium during the free look period, you may not make
transfers until after your free look period ends. We do not limit the number of
transfers you may make. Transfers for automatic rebalancing or dollar cost
averaging do not count toward your twelve free transfers. You may not make
transfers during the continuation of coverage period. SEE POLICY TRANSACTION
FEES, PAGE 44 AND CONTINUATION OF COVERAGE, PAGE 27.
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 investment option or be
transferred to one investment option as long as the total amount you transfer is
at least $100. However, if the amount remaining in an investment option is less
than $100 and you make a transfer request from that investment option, we
transfer the entire amount.
EXCESSIVE TRADING
Excessive trading activity can disrupt investment portfolio management
strategies and increase portfolio expenses through:
o increased trading and transaction costs;
o forced and unplanned portfolio turnover;
o lost opportunity costs; and
o large asset swings that decrease the investment portfolio's 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 market timing
services. 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 amounts 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 will be processed on your policy anniversary. A request
received by us within 30 days after your policy anniversary is effective on 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 qualifying source
investment portfolio, you may elect dollar cost averaging. The qualifying source
investment portfolios are the Fidelity VIP Money Market Portfolio or the
Neuberger Berman AMT Limited Maturity Bond Portfolio. 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 is intended to reduce the risk of investing too little when the price
of an investment portfolio's shares is low. Since you transfer the same dollar
amount to other investment options each period, you purchase more units in an
investment option when the unit value is low and you purchase fewer units if the
unit value is high.
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 add dollar cost averaging to your policy at any time. The first dollar
cost averaging date must be at least one day after we receive your dollar cost
averaging request. If your state requires refund of all premiums we receive
during the free look period,
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dollar cost averaging cannot begin until your free look period has ended.
With dollar cost averaging, you designate either a dollar amount or a percentage
of your account value for automatic transfer from a qualifying source investment
portfolio. Each period we automatically transfer the amount you select from your
chosen source investment portfolio to one or more other variable investment
options. You may not use the guaranteed interest division or the loan division
in dollar cost averaging.
The minimum percentage you may transfer to any one investment option is 1% of
the total amount you transfer. You must transfer at least $100 on each dollar
cost averaging transfer date.
Dollar cost averaging may occur on the same day of the month on a monthly,
quarterly, semi-annual or annual basis. Unless you tell us otherwise, dollar
cost averaging automatically takes place monthly on the monthly processing date.
You may have both dollar cost averaging and automatic rebalancing at the same
time. However, the dollar cost averaging source investment portfolio 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 change the program by telephoning our
customer service center. SEE TELEPHONE PRIVILEGES, PAGE 38.
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 one day before the next
dollar cost averaging date.
Dollar cost averaging will terminate when:
1. you specify a termination date; or
2. your balance in the source investment portfolio reaches a dollar
amount you set; or
3. the amount in the source investment portfolio is equal to or less
than the amount to be transferred on a dollar cost averaging date. We
will transfer the remaining amount and dollar cost averaging ends.
AUTOMATIC REBALANCING
Automatic rebalancing is a method of maintaining a consistent approach to
investing account values over time and simplifying the process of asset
allocation among your chosen investment options.
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.
After the transfer, the ratio of your account value in each investment option to
your total account value for all investment options included in automatic
rebalancing matches the automatic rebalancing allocation percentage you set for
that investment option. This action rebalances the amounts in the investment
options that do not match your set allocation. This mismatch can happen if an
investment option outperforms the 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 on a monthly, quarterly, semi-annual or annual basis. If
you do not specify a frequency, automatic rebalancing will occur quarterly.
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 we receive during the free look period).
If you elect this feature after your policy date, we process the first
transaction on the date you request. If you do not request a date, processing is
on the last valuation date of the calendar quarter we receive your request.
When you choose automatic rebalancing allocations, you may choose up to eighteen
total investment options. SEE MAXIMUM NUMBER OF INVESTMENT OPTIONS, PAGE 15.
You may have both automatic rebalancing and dollar cost averaging at the same
time. However, the source investment portfolio for your dollar cost averaging
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cannot be included in your automatic rebalancing program. You may not include
the loan division in your automatic rebalancing program.
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 one day before the next automatic rebalancing
date.
POLICY LOANS
The loan division is part of our general account specifically designed to hold
money used as collateral for loans and loan interest.
You may borrow from 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
state 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. policy loan interest that is capitalized when due; minus
3. policy loan or interest repayments you make.
Unless state law requires differently, a new policy loan must be at least $100.
The maximum amount you may 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 of less than
$25,000 by telephoning our customer service center. SEE TELEPHONE PRIVILEGES,
PAGE 38.
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, including the
guaranteed interest division.
Loan interest charges on your policy loan accrue daily at an annual interest
rate of 3.75%. 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.
When you take a policy loan, we transfer an amount equal to your policy loan 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%. After your tenth policy year, the loan division is credited with a
persistency refund. SEE PERSISTENCY REFUND, PAGE 45.
If you request an additional loan, we add the new loan amount to your existing
policy loan. This way, there is only one loan outstanding on your policy at any
time.
LOAN REPAYMENT
You may repay your policy loan at any time while your policy is in force. We
assume that payments you make, other than scheduled premiums, are policy loan
repayments. You must tell us if you want payments to be premium payments.
When you make a loan payment, we transfer an amount equal to your payment from
the loan division to the variable investment options and the guaranteed interest
division in the same proportion as your current premium allocation, unless you
tell us otherwise.
EFFECTS OF A POLICY LOAN ON YOUR POLICY
Taking a loan decreases the amount you have in the investment options. 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.
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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
proceeds payable or the cash surrender value payable on surrender.
Failure to repay your loan may affect the length of time your policy remains in
force. If you do not make loan payments your policy could lapse. Policy loans
may cause your policy to lapse if your net account value is not enough to pay
your deductions each month. SEE LAPSE, PAGE 34.
Policy loans may have tax consequences. SEE DISTRIBUTIONS OTHER THAN DEATH
BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 47, AND DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS,
PAGE 48.
If you use the continuation of coverage feature and you have a policy loan, loan
interest continues to accrue.
PARTIAL WITHDRAWALS
You may request a partial withdrawal to be processed 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, it must be for 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 38.
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 or
reduce the withdrawal.
When you take a partial withdrawal, we deduct your withdrawal amount plus a
service fee from your account value. SEE CHARGES, DEDUCTIONS AND REFUNDS, PAGE
41.
Unless you tell us otherwise, we will make a partial withdrawal from the
guaranteed interest division and the variable investment options in the same
proportion that each has to your net account value immediately before your
withdrawal. You may select one investment option from which your partial
withdrawal will be taken. If you select the guaranteed interest division
however, the amount withdrawn from it 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.
Partial withdrawals may have adverse tax consequences. SEE DISTRIBUTIONS OTHER
THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 47 AND DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED ENDOWMENT
CONTRACTS, PAGE 48.
PARTIAL WITHDRAWALS UNDER DEATH BENEFIT OPTION 1
If you selected death benefit option 1, no more than fifteen years have passed
since your policy date and the joint equivalent age of the insured people 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 your
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 or target death benefit. However because your account value
is reduced, we reduce the total death benefit by at least the partial withdrawal
amount.
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 we have received minus the total of your partial
withdrawals, then your stated death benefit will not be reduced. However because
your account value is reduced, your total death benefit will be reduced.
If your partial withdrawal is more than the amount of
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premiums we have received minus the total of your prior partial withdrawals, a
two step process is used:
1. Your withdrawal of the amount that makes premiums paid minus all
partial withdrawals equal to zero is taken; then
2. The excess withdrawal amount you requested will reduce your stated
death benefit if:
o the excess amount is greater than 10% of your account value
after step "1" above; or
o the excess amount is greater than 5% of your stated death
benefit.
Regardless of your chosen death benefit option, partial withdrawals do not
reduce your stated death benefit if:
o your base death benefit has been increased to qualify your policy as
life insurance under the federal income tax laws; and
o 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
46.
We require a minimum stated death benefit and a minimum target death benefit to
issue your policy. You may not take a partial withdrawal if it reduces your
stated death benefit or target death benefit below this minimum. SEE POLICY
ISSUANCE, PAGE 45.
We will send a new policy 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. In order 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 47, AND DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM
POLICIES THAT ARE NOT MODIFIED ENDOWMENT CONTRACTS, PAGE 48.
LAPSE
Your insurance coverage continues as long as your net account value is enough to
pay your deductions each month. Lapse does not apply if the special continuation
period is in effect and you have met all requirements. SEE SPECIAL CONTINUATION
PERIOD, PAGE 18.
If the continuation of coverage feature is active, your policy could still lapse
if there is an outstanding policy loan even though there are no further monthly
deductions.
GRACE PERIOD
Your policy enters a 61-day lapse grace period if, on a monthly processing date:
1. your net account value is zero (or less); and
2. the five-year special continuation period has expired, or you have
not paid the required special continuation period premium.
We notify you that your policy is in a grace period at least 30 days before it
ends. We send this notice to you (or a person to whom you have assigned your
policy) at your last known address in our records. We notify you of the premium
payment necessary to prevent your policy from lapsing. This amount is generally
the past due charges, plus your estimated monthly policy and rider deductions
for the next two months. If the second death of the insured people occurs during
the grace period we do pay death proceeds to your beneficiary(ies), but with
reductions for your policy loan balance, accrued loan interest and monthly
deductions owed.
If we receive your 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 deduct the overdue amounts from your account balance.
If you do not pay the full amount within the 61-day grace period, your policy
and its riders lapse without value. We withdraw your remaining account balance
from the variable and guaranteed interest divisions. We deduct amounts you owe
us and inform you that your policy coverage has ended.
LAPSE SUMMARY
SPECIAL CONTINUATION PERIOD
================================================================
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IF YOU MEET THE IF YOU DO NOT MEET THE
REQUIREMENTS REQUIREMENTS OR IT IS
NO LONGER IN EFFECT
------------ ---------------------
Your policy does not Your policy enters a
lapse if you do not grace period if your net
have enough net account value is not
account value to pay enough to pay the
the monthly charges. monthly charges, or if
The charges are your loan plus accrued
deducted and may loan interest is more
cause a negative than your account
account value until the value. If you do not
earlier of: 1) the date pay enough premium to
you have enough net cover the past due
account value, or 2) monthly charges and
until the end of the interest due, plus the
special continuation monthly charges and
period. interest due through the
end of the grace period,
your policy lapses.
REINSTATEMENT
If you do not pay enough premium before the end of the grace period, your policy
lapses. You may still reinstate your policy and its riders within five years of
the end of the grace period if you still own the policy and both of the insured
people are still living.
Unless state law requires differently, we will reinstate your policy and riders
if:
1. you have not surrendered your policy;
2. you provide satisfactory evidence to us that both insured people are
alive and that each is still insurable according to our normal rules
of underwriting; and
3. we receive enough premium from you to keep your policy and its riders
in force from the beginning to the end of the grace period and for
two months after the reinstatement date.
When your policy lapses, we will not reinstate your policy if one insured person
has died or become uninsurable since your policy date. If one insured person was
uninsurable at the issue of your policy and remains uninsurable, we will review
the underwriting requirements applicable to each insured person at the time you
request reinstatement to determine whether or not your policy may be reinstated.
Reinstatement is effective on 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 at the time of reinstatement are adjusted to reflect the time
since the lapse.
We apply net premiums received after reinstatement according to your most recent
instructions which may be the premium allocation instructions in effect at the
start of the grace period.
SURRENDER
You may surrender your policy for its net cash surrender value any time before
the second death of the insured people. You may take your net cash surrender
value in other than one payment. We compute your net cash surrender value as of
the valuation date we receive your written 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 28 AND SETTLEMENT
PROVISIONS, PAGE 39.
We do not pro-rate or add back charges and expenses to your account value before
the date your surrender is effective. A refund of sales charge may apply. SEE
REFUND OF SALES CHARGE, PAGE 45.
A surrender of your policy may have adverse tax consequences. SEE DISTRIBUTIONS
OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT CONTRACTS, PAGE 47, AND
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS, PAGE 48.
GENERAL POLICY PROVISIONS
FREE LOOK PERIOD
You have the right to examine your policy. The right to examine your policy,
often called the free look period, starts on the date you receive your policy
and is a length of time specified by state law. If for any reason you do not
want it, you may return your policy to us, your agent/registered representative
within the
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period shown on the policy's face page. If you return your policy to us within
that time period, 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 under state law. Generally, there are two types of free
look refunds:
o some states require a return of all premiums we receive;
o other states require payment of account value plus a refund of all
charges deducted.
Your policy will specify what type of free look refund applies in your state.
The type of free look refund allowed in your state will affect when the net
premium we receive before the end of the free look period is invested into the
variable investment options. SEE ALLOCATION OF NET PREMIUMS, PAGE 18.
YOUR POLICY
The entire contract between you and us is the combination of:
o your policy;
o a copy of your original application and any applications for benefit
increases or decreases;
o all of your riders;
o endorsements;
o policy 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 policy schedules. If you send your policy to us, 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
The age stated in your policy schedule is the joint equivalent age of the
insured people we use to issue your policy. The joint equivalent age is the sum
of both insured people's ages adjusted for the difference in ages and gender,
divided by two and rounded down.
The insured people must each be no more than 90 years of age at policy issue.
The minimum joint equivalent age must be no less than 15. The maximum joint
equivalent age must be no more than 85. There is no limit on the difference in
the insured people's ages. Age is measured as the age of the insured person on
the birthday nearest the policy anniversary.
Generally, we use the joint equivalent age to calculate rates, charges and
values. We determine the joint equivalent age at any given time by adding the
number of completed policy years to the age calculated at issue and shown in the
schedule.
The younger insured person's 100th birthday is the 100th anniversary of the
younger insured person's birth regardless if he/she has survived. The policy
anniversary nearest to this date is the date used for policy maturity and
continuation of coverage.
OWNERSHIP
The original owner is the person named as the owner in the policy application.
The owner can exercise all rights and receive benefits until the second death of
the insured people. This includes the right to change the owner,
beneficiary(ies) or the method designated to pay death 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 both of the insured people receives the
death proceeds. Other surviving beneficiary(ies) receive death proceeds only if
there is no surviving primary beneficiary(ies). If more than one
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<PAGE>
beneficiary(ies) survives both insured people, they share the death proceeds
equally, unless you have told us otherwise. If none of your policy beneficiaries
has survived both insured people, 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 beneficiary(ies) any time before the second death of
the insured people. We pay the death proceeds to the beneficiary(ies) whom you
have most recently named according to our records. We do not make payments to
multiple sets of beneficiaries.
COLLATERAL ASSIGNMENT
You may assign your policy 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
If your policy has been in force and both insured people are alive for two years
from your policy date, we will not question the validity of the statements in
your application. If your policy has been in force and both insured people are
alive for two years from the effective date of a new segment or from the
effective date of an increase in any other benefit, with respect to the insured
people (such as an increase in stated death benefit) we will not contest the
statements in your application for the new segment or other increase.
If this policy has been in force and both insured people are alive for two years
from the effective date of reinstatement, we will not contest the statements in
your application for reinstatement.
MISSTATEMENTS OF AGE OR GENDER
If an insured person's age or gender has been misstated, we adjust the death
benefit to the amount which would have been purchased for each 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 second death of the insured people, 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 either 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 proceeds payable in one sum to:
1. the total of all premiums we receive to the time of death; minus
2. outstanding policy loan amounts and accrued loan interest; minus
3. partial withdrawals you have taken.
We make a limited payment to the beneficiary(ies) for a new segment or other
increase if the second death of the insured people is due to suicide (while that
insured person is 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 net cash surrender value upon surrender;
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 investment options or to determine the
value of an investment option'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.
We execute transfers among the variable investment options as of the valuation
date of our receipt of your request at our customer service center.
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<PAGE>
We determine the death benefit as of the date of the second death of the insured
people. The death proceeds are not affected by changes in the value of the
variable investment options after that date. We pay interest at our stated rate
(or at a higher rate if required by law) from the date of the second death of
the insured people 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 calendar
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 policy changes and at the time of surrender.
If an insured person dies while your policy is in force, please let us or your
agent/registered representative know as soon as possible. We will immediately
send you instructions on how to make a claim at the second death of the insured
people or at either insured person's death if you have a single life term
insurance rider. As proof of the insured person's death, we may require you to
provide proof of the deceased insured person's age and a certified copy of the
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/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 with 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., 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 licensed insurance agents who are registered
representatives of other broker-dealers including, but not limited to:
1. VESTAX Securities Corporation, an indirect affiliate of Security Life
of Denver Insurance Company;
2. Locust Street Securities, Inc., an indirect affiliate of Security
Life of Denver Insurance Company;
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Estate Designer 38
<PAGE>
3. Multi-Financial Securities, Corp., an indirect affiliate of Security
Life of Denver Insurance Company; and
4. IFG Network Securities, Inc., an indirect affiliate of Security Life
of Denver Insurance Company.
All broker-dealers who sell this policy have entered into selling agreements
with us. Under these selling agreements, we pay a distribution allowance to
broker-dealers, who then pay commissions to the agent/registered representative
who sells this policy.
At the time of application for your policy, the selling agent/registered
representative will select either a levelized or a modified compensation
structure. If no selection is made, compensation will be on the levelized scale.
Under the levelized structure, the distribution allowance in policy years one
through seven is 12% of the premium we receive up to target premium and 4% of
premium we receive in excess of target premium. In policy year eight and
thereafter, the distribution allowance is 2% of all premium we receive.
Under the modified structure, the distribution allowance in policy year one is
30% of premium we receive up to target premium and 2% of premium in excess of
target premium. In policy years two through seven it is 7.5% of premium up to
target premium and 4% of premium we receive in excess of target premium. In
policy year eight and thereafter, it is 2% of all premium we receive.
Broker-dealers may receive annual renewal payments of up to 0.2% of the average
net account value for the first ten policy years; 0.15% of average net account
value for policy years eleven through twenty and 0.10% of average net account
value each policy year thereafter. If both insured people die before the seventh
policy anniversary and your policy is in force, we make a one-time additional
compensation payment for the initial sale of your policy.
Compensation arrangements may vary and depend on particular circumstances. In
addition to the distribution allowances, we may pay:
o override payments;
o expense allowances;
o special marketing fees; and
o wholesaler fees and marketing allowances, bonuses and training
allowances.
We pay all allowances from our resources which include sales charges deducted
from premiums.
ADVERTISING PRACTICES AND SALES LITERATURE
We may use advertisements and sales literature to promote this product,
including:
o indices or rankings of investment securities;
o articles on variable life insurance and other information published
in business or financial publications; and
o comparisons with other investment vehicles, including tax
considerations.
We may use information regarding the past performance of the variable investment
options. However, 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, investment performance and 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 before the second
death of the insured people. If you have not made this election, the
beneficiary(ies) may do so within 60 days after we receive proof of the second
death of the insured people.
You may take your net cash surrender value in other than one payment.
The investment performance of the variable investment options 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
OPTION II: LIFE INCOME WITH PAYOUTS GUARANTEED FOR A DESIGNATED PERIOD
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OPTION III: HOLD AT INTEREST
OPTION IV: PAYOUTS OF A DESIGNATED AMOUNT
OPTION V: OTHER OPTIONS WE OFFER AT THE TIME WE PAY THE BENEFIT
ADMINISTRATIVE INFORMATION ABOUT THE POLICY
VOTING PRIVILEGES
We invest the variable investment options' 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:
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 variable investment options 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 variable investment option that we attribute to your
policy by dividing your account value allocated to that variable investment
option 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,
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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 investment options. We cast votes
credited to amounts in the variable investment options, 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 variable 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
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 variable investment options 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 investment
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 net cash surrender value;
o information about the variable investment options; and
o your account transactions during the previous year showing net
premiums, transfers, deductions, loan amounts 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, DEDUCTIONS AND REFUNDS
The amount of a charge may not correspond to the
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cost incurred by us to provide the service or benefits associated with the
particular policy. For example, the sales charge 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 to cover such expenses.
DEDUCTIONS FROM PREMIUMS
We consider any payment we receive to be a premium if you do not have an
outstanding loan and your policy is not in the continuation of coverage period.
After we deduct certain expenses from your premium payment, we add the remaining
net premium to your account value.
SALES CHARGE
We deduct a percentage from each premium payment to compensate us for the costs
we incur in selling the policies. The sales charge helps cover the costs of
distribution, preparing our sales literature, promotional expenses and other
direct and indirect expenses.
We base the percentage on the time expired since your policy date, or addition
of a segment and on your premium payments up to and above a target premium. The
sales charge deducted from your premium payments after an increase in stated
death benefit is based on each segment's target premium and the length of time
that the segment has been in effect.
Your policy schedule page shows the target premium for your policy.
Sales Charge Percentage
Policy or Up to Policy or Above Policy or
Segment Segment Segment
Year Target Premium Target Premium
---- -------------- --------------
1 8% 4%
2 - 7 8% 1.5%
8 + 1.5% 1.5%
For example, if this policy is issued to insure a male, age 85 who is
uninsurable, and a female, age 85 who is insurable but in a substandard
underwriting rating class, the target premium for sales charge purposes is $590
for each $1,000 of stated death benefit. We believe this amount represents the
maximum target premium and that most policies will have a much lower target
premium. SEE TARGET PREMIUM, PAGE 18 AND ILLUSTRATIONS OF DEATH BENEFITS,
ACCOUNT VALUES, SURRENDER VALUES AND ACCUMULATED PREMIUMS, PAGE 50.
We may reduce or waive the sales charge for certain group or sponsored
arrangements or for corporate purchasers. SEE GROUP OR SPONSORED ARRANGEMENTS OR
CORPORATE PURCHASERS, PAGE 45.
SEE REFUND OF SALES CHARGE, PAGE 45.
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 0.5% to 5% with some states
not imposing these types of taxes. We deduct 2.5% of each premium payment to
cover these taxes. This rate approximates the average tax rate we expect to pay
in all states.
We also deduct 1.5% of each premium payment 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.
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 investment option for our federal income taxes.
If the tax law changes and we have federal income tax chargeable to the variable
investment options, we may make such a charge in the future.
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE
We deduct 0.002055% per day (0.75% annually) of
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<PAGE>
the amount you have in the variable investment options for the mortality and
expense risks we assume. This charge is deducted as part of the calculation of
the daily unit values for the variable investment options and does not appear as
a separate charge on your statement or confirmation.
The mortality risk is that insured people, as a group, may live less time than
we estimated. The expense risk is that the costs of issuing and administering
the policies and in operating the variable division are greater than the amount
we estimated.
The mortality and expense risk charge does not apply to your account value in
the guaranteed interest division or the loan division.
MONTHLY DEDUCTIONS FROM ACCOUNT VALUE
We deduct charges from your account value on each monthly processing date.
POLICY CHARGE
The initial policy charge is $15 per month for the first ten years of your
policy. After the first ten years of your policy, the policy charge is $9 per
month.
This charge compensates us for such costs as:
o application processing;
o medical examinations;
o establishment of policy records; and
o insurance underwriting costs.
MONTHLY ADMINISTRATIVE CHARGE
For this policy, we charge a per month administrative charge of $0.06 to $0.15
per $1,000 for the first ten policy years for the lesser of target or $2,500,000
death benefit. We charge $0.01 to $0.025 per $1,000 for each policy year after
the tenth for the lesser of target or $2,500,000 death benefit. Currently, we
limit this charge to $150 per month for the first ten policy years and $25 per
month for each policy year thereafter.
This 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 may be more than your account value at the second death of the
insured people.
The cost of insurance charge is equal to our current monthly cost of insurance
rate multiplied by 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 your account value after we deduct your policy and rider
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 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 people. We allocate the net amount at
risk to 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 base your cost of insurance rates on the insured people's ages, genders,
ratings and premium classes on the policy and each segment 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:
o each segment of the base death benefit;
o your adjustable term insurance rider; and
o single life term insurance riders.
We may make changes in the cost of insurance or
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<PAGE>
rider charges 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.
These rates are never more than the guaranteed maximum rates shown in your
policy. The guaranteed maximum rates are based on the 1980 Commissioner's
Standard Ordinary Sex Distinct Mortality Table.
The maximum rates for the initial and any new segment will be printed in the
policy schedule pages which we will provide to you.
There are no cost of insurance charges during the continuation of coverage
period.
RIDER CHARGES
On each monthly processing date, we deduct the cost of benefits under your
riders including the single life term insurance rider. Rider charges do not
include the adjustable term insurance rider. SEE RIDERS, PAGE 24.
POLICY TRANSACTION FEES
We also charge fees for certain transactions under your policy. We take these
fees from the variable and guaranteed interest divisions pro rata to the account
value in each investment option.
PARTIAL WITHDRAWALS
We deduct the lesser of a $25 service fee or 2% of the requested partial
withdrawal from your account value for each partial withdrawal you take to cover
our costs. SEE PARTIAL WITHDRAWALS, PAGE 33.
TRANSFERS
There is a $25 fee to cover our costs for each transfer over twelve free
transfers per policy year. If you include multiple transfers in one transfer
request, it counts as one transfer. SEE TRANSFERS OF ACCOUNT VALUE, PAGE 29.
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 illustration.
PREMIUM ALLOCATION CHANGE
You may make twelve free premium allocation changes per policy year. After the
twelve free changes, we charge $25 for each additional premium allocation change
in that policy year. If you change your designated deduction investment option,
we consider it a premium allocation change. SEE MONTHLY DEDUCTIONS FROM ACCOUNT
VALUE, PAGE 43.
CONTINUATION OF COVERAGE ADMINISTRATIVE FEE
At the policy anniversary nearest the younger insured person's 100th birthday,
if your policy has not been surrendered, the continuation of coverage period
begins.
We will charge a one-time administrative fee of $400. This charge compensates us
for maintaining and servicing your policy until the second death of the insured
people. We then no longer charge your policy a monthly administrative fee or
cost of insurance charge.
DIVISIONS FROM
WHICH WE DEDUCT CHARGES, LOANS
AND PARTIAL WITHDRAWALS
<TABLE>
<CAPTION>
MONTHLY CHARGES: COST OF LOANS AND
INSURANCE CHARGES, RIDER TRANSACTION FEES PARTIAL WITHDRAWALS
CHARGES, ADMINISTRATIVE FEES
- ------------- --------------------------------------------- -------------------------------- ---------------------------------
<S> <C> <C> <C>
Choice May choose a designated deduction Proportionally among May choose any investment
investment option, including variable and guaranteed option or combination of
guaranteed interest division interest divisions investment options
Default Proportionally among variable and Proportionally among Proportionally among variable
guaranteed interest divisions variable and guaranteed and guaranteed interest divisions
interest divisions
</TABLE>
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Estate Designer 44
<PAGE>
PERSISTENCY REFUND
Where state law allows us, we pay long-term policy owners a persistency refund.
Each month your policy remains in force after your tenth policy anniversary, we
credit your account value with a refund of 0.05% of account value. This refund
is 0.6% of your account value on an annual basis.
We do not guarantee that we will pay a persistency refund on the guaranteed
interest division. If we pay a persistency refund on the guaranteed interest
division, we will pay it even if your policy is in the continuation of coverage
period.
If applicable, we add the persistency refund to the variable and guaranteed
interest divisions, but not the loan division, in the same proportion that your
account value in each investment option has to your net account value as of the
monthly processing date.
Here are two examples of how the persistency refund may affect your account
value:
EXAMPLE 1: YOUR POLICY HAS NO LOAN:
o account value = $10,000 (all in the variable division)
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Value Before Value After
Persistency Persistency
Refund Refund
------ ------
Variable
Division $10,000.00 $10,005.00
EXAMPLE 2: YOUR POLICY DOES HAVE A LOAN:
o account value = $10,000
o account value in the variable division = $6,000
o account value in the loan division = $4,000
o monthly persistency refund rate = .0005
o persistency refund = 10,000 x .0005 = $5.00
Value Before Value After
Persistency Persistency
Refund Refund
------ ------
Variable
Division $6,000.00 $6,005.00
Loan $4,000.00 $4,000.00
REFUND OF SALES CHARGE
If you surrender your policy within the first two policy years (guaranteed) and
it has not lapsed, we will refund a portion of the sales charge previously
deducted from your premium payments. We base the refund on premium payments we
receive in your first policy year. The refund of sales charge is not available
if your policy was purchased with the proceeds of a policy issued by us or one
of our affiliates.
REFUND OF SALES CHARGE AS A PERCENTAGE OF
FIRST POLICY YEAR PREMIUM
-----------------------------------------------------------------
We Currently Pay
We Guarantee a --------------------------------------------
Policy Year Minimum of Up to Target Premium Above Target Premium
- ------------ ----------------- ---------------------- --------------------
1 5% 10% 8%
2 2.5% 10% 4%
3 N/A 10% N/A
4+ N/A N/A N/A
GROUP OR SPONSORED ARRANGEMENTS OR CORPORATE PURCHASERS
Individuals, corporations or other institutions may purchase this policy. For
group or sponsored arrangements (including employees and certain family members
of employees of Security Life, its
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Estate Designer 45
<PAGE>
affiliates and appointed sales agents), corporate purchasers or special exchange
programs which we may offer from time to time, we may reduce or waive the:
o administrative charge;
o minimum stated death benefit;
o minimum target death benefit;
o minimum annual premium;
o target premium;
o sales charge;
o cost of insurance charges; or
o other charges normally assessed.
We can reduce or waive these items based on expected economies. Group
arrangements include those in which there is a trustee, an employer or an
association. The group may purchase multiple policies covering 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. We take all these factors into
account when we reduce charges. A group or sponsored arrangement must meet
certain requirements to qualify for reduced 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.
Each sponsored arrangement or corporation may have different group premium
payments and premium requirements.
We will not be unfairly discriminatory in any variation in the administrative
charge, or other charges, fees and privileges. These variations are based on
differences in costs or services.
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 the Internal
Revenue Code. Specifically, the policy must meet the requirements of the
"guideline premium/cash value corridor test," as specified in Code section 7702.
The guideline premium/cash value corridor test provides for a maximum premium in
relation to the death benefit, and a minimum "corridor" of death benefit in
relation to account value. SEE APPENDIX A, PAGE 59 FOR A TABLE OF THE GUIDELINE
PREMIUM/CASH VALUE CORRIDOR TEST FACTORS.
There is very little guidance with respect to policies issued on a last survivor
basis as to how these requirements are to be applied. 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.
DIVERSIFICATION REQUIREMENTS
In addition to meeting the Code Section 7702 guideline premium/cash corridor
test, Code Section 817(h) requires separate account investments, such as our
separate 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 investment option
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 investment
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<PAGE>
options' 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 separate 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 separate 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 account value
until there is a distribution. When distributions from a policy occur, or when
loan amounts 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 we receive 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
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<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. Loan amounts 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.
Loan amounts from or secured by a policy that is not a modified endowment
contract are generally not treated as distributions. Finally, neither
distributions from, nor loan amounts 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. Moreover, the tax
consequences associated with a low cost loan such as the loan available in the
policy are uncertain. 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
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<PAGE>
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 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.
The tax law limits the amount we can charge for mortality costs and other
expenses used to calculate whether your policy qualifies as life insurance for
federal income tax purposes. We must base these calculations on reasonable
mortality charges and other charges reasonably 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 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.
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<PAGE>
ILLUSTRATIONS OF DEATH BENEFITS, ACCOUNT VALUES, CASH SURRENDER VALUES AND
ACCUMULATED PREMIUMS
The following tables are intended to show how the policy works including how
benefits and values can vary over time. Each table compares these values with
total premiums we receive with interest. The policy illustrated uses the
following assumptions:
Definition
Death of Life Stated Target
Smoker Benefit Insurance Death Death
Gender Age Status* Option Test Benefit Premium Benefit
- ------ --- ------ ------ ---- ------- ------- -------
Male 50 Non-smoker 1 GP 1,000,000 $13,000 1,000,000
Preferred
Female 50 Non-smoker
Preferred
- -------------------
* "Smoker" includes the use of cigarettes, cigars, pipes, chewing tobacco,
nicotine chewing gum or patch, snuff or any other tobacco or nicotine-based
product.
The target premium for the illustrated policy is $15,906.14 (approximately $16
per $1,000 of stated death benefit).
The tables show how death benefits, account values and net cash surrender values
of a hypothetical policy could vary over an extended period of time, assuming
the variable division 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 two females, two males
or smoker rates.
These illustrations assume there is no policy loan.
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 investment options as a result of the mortality and
expense risk charge, the portfolio management fees and portfolio expenses. We
show the effect of the net investment return in the amounts for death benefits,
account values and cash surrender values.
The tables reflect annual investment management fees of X.XX% 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, 1999. We assume other portfolio expenses at the rate of
X.XX% of the portfolios' average daily net assets. This is an average of all the
portfolios' other expenses for the year ending December 31, 1999 after any
expense reimbursements or waivers by investment portfolio managers has been
made. The average of all portfolios' total expenses is X.XX%.
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 expense reimbursements or
waivers, the total average investment management fees, average other portfolio
expenses and the average of all
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Estate Designer 50
<PAGE>
portfolios' total expenses used in the illustrations would have been higher
(X.XX%, X.XX% and X.XX%, respectively). The tables assume that the current
expense reimbursement arrangements will continue. However, they may not continue
through 2000.
The effect of these portfolio charges and expenses, and mortality and expense
risk charges result in a net rate of return of:
o (X.XX )% on a 0% gross rate of return;
o X.XX% on a 6% gross rate of return; and
o XX.XX% on a 12% gross rate of return.
The tables assume that charges have been deducted including deductions for
premiums, cost of insurance rider charges, monthly deductions, mortality and
expense risk charge, administrative and sales charges. The tables show charges
at our current rates which includes a persistency refund. The tables also show
charges at the maximum rates we guarantee in our policies. SEE MONTHLY
DEDUCTIONS FROM YOUR ACCOUNT VALUE, PAGE 43. 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
cash surrender values.
If we are asked to do so, we will give you a comparable personal illustration
based on:
o the insured people's ages and genders;
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.
At issue, we deliver an individualized illustration showing the scheduled
premium you chose and the insured people's actual risk classes. After we issue
the policy, if you ask us to, we will give you an illustration of future policy
benefits. We base these hypothetical future benefits on both guaranteed and
current cost factor assumptions and actual account value.
[TO BE UPDATED BY AMENDMENT.]
- --------------------------------------------------------------------------------
Estate Designer 51
<PAGE>
PROSPECT: INSURED PERSON NO. 1'S NAME
MALE 50 NON-SMOKER PREFERRED PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-SMOKER PREFERRED
SECURITY LIFE
ESTATE DESIGNER VARIABLE UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
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 13000 13650 10651 1766 1000000 12003 3118 1000000 11327 2442 1000000
2 13000 27983 21053 12167 1000000 25159 16274 1000000 23065 14180 1000000
3 13000 43032 31193 22307 1000000 39571 30686 1000000 35216 26331 1000000
4 13000 58833 41057 32172 1000000 55348 46463 1000000 47780 38895 1000000
5 13000 75425 50630 41744 1000000 72611 63726 1000000 60753 51868 1000000
6 13000 92846 60166 53058 1000000 91799 84691 1000000 74423 67314 1000000
7 13000 111138 69368 64037 1000000 112781 107449 1000000 88502 83171 1000000
8 13000 130345 78215 74660 1000000 135722 132168 1000000 102988 99434 1000000
9 13000 150513 86687 84910 1000000 160807 159030 1000000 117875 116098 1000000
10 13000 171688 94758 94758 1000000 188239 188239 1000000 133153 133153 1000000
15 13000 294547 134217 134217 1000000 384197 384197 1000000 224292 224292 1000000
20 13000 451350 153589 153589 1000000 704980 704980 1000000 323952 323952 1000000
25 13000 651475 133167 133167 1000000 1251143 1251143 1338723 422763 422763 1000000
30 13000 906890 15157 15157 1000000 2162731 2162731 2270867 495073 495073 1000000
AGE 65 13000 322925 140097 140097 1000000 436085 436085 1000000 243737 243737 1000000
</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 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 variable investment options of the separate account and the guaranteed
interest division and the investment experience of the investment options. 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.
- --------------------------------------------------------------------------------
Estate Designer 52
<PAGE>
PROSPECT: INSURED PERSON NO. 1'S NAME
MALE 50 NON-SMOKER PREFERRED PRESENTED BY:
INSURED PERSON NO. 2'S NAME
FEMALE 50 NON-SMOKER PREFERRED
SECURITY LIFE
ESTATE DESIGNER VARIABLE UNIVERSAL LIFE
STATED DEATH BENEFIT: $1,000,000 DEATH BENEFIT OPTION 1
ANNUAL PREMIUM: $13,000.00
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 13000 13650 10651 1766 1000000 12003 3118 1000000 11327 2442 1000000
2 13000 27983 21053 12167 1000000 25159 16274 1000000 23065 14180 1000000
3 13000 43032 31193 22307 1000000 39571 30686 1000000 35216 26331 1000000
4 13000 58833 41138 32253 1000000 55433 46548 1000000 47864 38978 1000000
5 13000 75425 50916 42030 1000000 72920 64035 1000000 61051 52166 1000000
6 13000 92846 60800 53692 1000000 92505 85397 1000000 75093 67984 1000000
7 13000 111138 70512 65181 1000000 114091 108760 1000000 89729 84398 1000000
8 13000 130345 80049 76495 1000000 137880 134326 1000000 104983 101429 1000000
9 13000 150513 89408 87631 1000000 164094 162317 1000000 120874 119097 1000000
10 13000 171688 98586 98586 1000000 192977 192977 1000000 137425 137425 1000000
15 13000 294547 148683 148683 1000000 403485 403485 1000000 241139 241139 1000000
20 13000 451350 193392 193392 1000000 755907 755907 1000000 370654 370654 1000000
25 13000 651475 227919 227919 1000000 1348180 1348180 1442552 529977 529977 1000000
30 13000 906890 242278 242278 1000000 2340256 2340256 2457269 725721 725721 1000000
AGE 65 13000 322925 158180 158180 1000000 460228 460228 1000000 264872 264872 1000000
</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 variable investment options of the separate account and the guaranteed
interest division and the investment experience of the investment options. 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.
- --------------------------------------------------------------------------------
Estate Designer 53
<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
Jess A. Skriletz Director, Chief Executive Officer and General
Manager, ING Reinsurance and ING
Institutional Markets
Michael W. Cunningham* Director, Executive Vice President
Mark A. Tullis* Director
P. Randall Lowery* Director
Thomas F. Conroy President, ING Reinsurance International
Gregory G. McGreevey President, ING Institutional Markets
Jerome J. Cwiok* Executive Vice President and Chief Operating
Officer
James L. Livingston, Jr. Executive Vice President and Chief Actuary
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
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
Jeffery W. Seel* Senior Vice President, Chief Investment Officer
Mark A. Smith Senior Vice President, Insurance Services
Lawrence D. Taylor Senior Vice President, Product Management
William D. Tyler* Senior Vice President, Chief Information Officer
Gary W. Waggoner Vice President, General Counsel and Corporate
Secretary
- --------------------------------------------------------------------------------
Estate Designer 54
<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 separate 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
[TO BE UPDATED BY AMENDMENT.]
REGISTRATION STATEMENT
We have filed a Registration Statement relating to the separate 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.
- --------------------------------------------------------------------------------
Estate Designer 55
<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..............................................7
Accumulation unit.........................................28
Accumulation unit value...................................29
Adjustable term insurance rider...........................20
Base death benefit........................................21
Beneficiary(ies)..........................................21
Cash surrender value......................................28
Continuation of coverage..................................27
Death proceeds............................................21
Divisions.................................................11
Free look period..........................................35
General account...........................................15
Guaranteed interest division..............................15
Initial premium...........................................19
Investment date...........................................19
Investment options........................................11
Joint equivalent age......................................36
Loan division.............................................32
Minimum annual premium....................................18
Monthly processing date...................................56
Net account value.........................................28
Net amount at risk........................................43
Net cash surrender value..................................28
Net premium............................................4, 18
Partial withdrawal........................................18
Policy.....................................................4
Policy date...............................................17
Policy loan...............................................32
Portfolios................................................11
Scheduled premium.........................................17
Segment...................................................24
Separate account..........................................11
Special continuation period...............................18
Stated death benefit......................................16
Target death benefit......................................24
Target premium............................................42
Total death benefit.......................................24
Transaction date..........................................29
Valuation date............................................28
Valuation period..........................................29
Variable division.........................................11
Variable investment option................................11
Younger insured person's 100th birthday...................36
- --------------------------------------------------------------------------------
Estate Designer 56
<PAGE>
FINANCIAL STATEMENTS
The consolidated financial statements of Security Life of Denver Insurance
Company and Subsidiaries ("Security Life and Subsidiaries") at December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
are prepared in accordance with generally accepted accounting principles and
start on page ?.
The financial statements included for the Security Life Separate Account L1 at
December 31, 1999 and for each of the three years in the period ended December
31, 1999, are prepared in accordance with generally accepted accounting
principles and represent those divisions that had commenced operations by that
date.
The consolidated financial statements of Security Life and Subsidiaries, as well
as the financial statements included for the Security Life Separate Account L1
referred to above have been audited by Ernst & Young LLP. The consolidated
financial statements of Security Life and Subsidiaries should be distinguished
from the financial statements of the Security Life Separate Account L1 and
should be considered only as bearing upon the ability of Security Life and
Subsidiaries to meet its obligations under the policies. They should not be
considered as bearing upon the investment experience of the divisions of
Security Life Separate Account L1.
[TO BE FILED BY AMENDMENT]
- --------------------------------------------------------------------------------
Estate Designer 57
<PAGE>
APPENDIX A
FACTORS FOR THE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
<TABLE>
<CAPTION>
Attained Attained Attained Attained
Age of Younger Age of Younger Age of Younger Age of Younger
Insured Factor Insured Factor Insured Factor Insured Factor
<S> <C> <C> <C> <C> <C> <C> <C>
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.05
5 2.50 30 2.50 55 1.50 80 1.05
6 2.50 31 2.50 56 1.46 81 1.05
7 2.50 32 2.50 57 1.42 82 1.05
8 2.50 33 2.50 58 1.38 83 1.05
9 2.50 34 2.50 59 1.34 84 1.05
10 2.50 35 2.50 60 1.30 85 1.05
11 2.50 36 2.50 61 1.28 86 1.05
12 2.50 37 2.50 62 1.26 87 1.05
13 2.50 38 2.50 63 1.24 88 1.05
14 2.50 39 2.50 64 1.22 89 1.05
15 2.50 40 2.50 65 1.20 90 1.05
16 2.50 41 2.43 66 1.19 91 1.04
17 2.50 42 2.36 67 1.18 92 1.03
18 2.50 43 2.29 68 1.17 93 1.02
19 2.50 44 2.22 69 1.16 94 1.01
20 2.50 45 2.15 70 1.15 95 1.00
21 2.50 46 2.09 71 1.13 96 1.00
22 2.50 47 2.03 72 1.11 97 1.00
23 2.50 48 1.97 73 1.09 98 1.00
24 2.50 49 1.91 74 1.07 99 1.00
100 1.00
</TABLE>
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.
- --------------------------------------------------------------------------------
Estate Designer 58
<PAGE>
APPENDIX B
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
FOR A LIFE INSURANCE POLICY
<TABLE>
<CAPTION>
Attained Attained Attained Attained
Age of Younger Age of Younger Age of Younger Age of Younger
Insured Factor Insured Factor Insured Factor Insured Factor
<S> <C> <C> <C> <C> <C> <C> <C>
0 2.50 25 2.50 50 1.85 75 1.05
1 2.50 26 2.50 51 1.78 76 1.05
2 2.50 27 2.50 52 1.71 77 1.05
3 2.50 28 2.50 53 1.64 78 1.05
4 2.50 29 2.50 54 1.57 79 1.09
5 2.50 30 2.50 55 1.50 80 1.14
6 2.50 31 2.50 56 1.46 81 1.18
7 2.50 32 2.50 57 1.42 82 1.22
8 2.50 33 2.50 58 1.38 83 1.26
9 2.50 34 2.50 59 1.34 84 1.31
10 2.50 35 2.50 60 1.30 85 1.35
11 2.50 36 2.50 61 1.28 86 1.33
12 2.50 37 2.50 62 1.26 87 1.31
13 2.50 38 2.50 63 1.24 88 1.29
14 2.50 39 2.50 64 1.22 89 1.27
15 2.50 40 2.50 65 1.20 90 1.26
16 2.50 41 2.43 66 1.19 91 1.24
17 2.50 42 2.36 67 1.18 92 1.22
18 2.50 43 2.29 68 1.17 93 1.19
19 2.50 44 2.22 69 1.16 94 1.16
20 2.50 45 2.15 70 1.15 95 1.12
21 2.50 46 2.09 71 1.13 96 1.11
22 2.50 47 2.03 72 1.11 97 1.09
23 2.50 48 1.97 73 1.09 98 1.06
24 2.50 49 1.91 74 1.07 99 1.03
100 1.00
</TABLE>
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.
- --------------------------------------------------------------------------------
Estate Designer 59
<PAGE>
APPENDIX C
PERFORMANCE INFORMATION
POLICY PERFORMANCE
The following hypothetical illustrations demonstrate how the actual investment
experience of each variable investment option of the separate 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 net portfolio's management
fees after any voluntary waiver and other operating expenses but do not reflect
the policy level or separate 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 $13,000 annual premium, paid at
the beginning of each year, for a hypothetical policy with a $1,000,000 face
amount, the guideline premium test, death benefit option 1, issued to a
preferred, non-smoker male, age 50 and a preferred, non-smoker female, age 50.
It is assumed that all premiums are allocated to the variable 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 separate account
for mortality and expense risks, and each portfolio's charges and expenses. SEE
CHARGES, DEDUCTIONS AND REFUNDS, PAGE 41. This prospectus also contains
illustrations based on assumed rates of return. SEE ILLUSTRATIONS OF DEATH
BENEFITS, ACCOUNT VALUES, CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS, PAGE
50.
[TO BE UPDATED BY AMENDMENT.]
- --------------------------------------------------------------------------------
Estate Designer 60
<PAGE>
[TO BE UPDATED BY AMENDMENT.]
HYPOTHETICAL ILLUSTRATIONS
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
AIM V.I. GOVERNMENT SECURITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
ALGER AMERICAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 61
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
FIDELITY VIP GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 62
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
FIDELITY VIP MONEY MARKET PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
FIDELITY VIP OVERSEAS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 63
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
FIDELITY VIP II INDEX 500 PORTFOLIO
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
INVESCO VIF-EQUITY INCOME FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
INVESCO VIF-HIGH YIELD FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
INVESCO VIF-SMALL COMPANY GROWTH FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 % 1,000,000
INVESCO VIF-TOTAL RETURN FUND
Year Annual Total Cash Surrender Account Benefit
Ended Return * Value Value Death
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 64
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
INVESCO VIF-UTILITIES FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
NEUBERGER BERMAN GROWTH PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
NEUBERGER BERMAN LIMITED MATURITY BOND PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/89 % 1,000,000
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
NEUBERGER BERMAN PARTNERS PORTFOLIO
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
* These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 65
<PAGE>
HYPOTHETICAL ILLUSTRATION (Continued)
Non-smoker Male Age 50 Preferred Risk Class
Non-smoker Female Age 50 Preferred Risk Class Death Benefit Option 1
Stated Death Benefit $1,000,000 Annual Premium $13,000
- --------------------------------------------------------------------------------
VAN ECK WORLDWIDE BOND FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/90 % 1,000,000
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
VAN ECK WORLDWIDE EMERGING MARKETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
VAN ECK WORLDWIDE HARD ASSETS FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/91 % 1,000,000
12/31/92 % 1,000,000
12/31/93 % 1,000,000
12/31/94 % 1,000,000
12/31/95 % 1,000,000
12/31/96 % 1,000,000
12/31/97 % 1,000,000
12/31/98 % 1,000,000
%
VAN ECK WORLDWIDE REAL ESTATE FUND
Year Annual Total Cash Surrender Account Death
Ended: Return* Value Value Benefit
12/31/98 % 1,000,000
The assumptions underlying these values are described in Performance
Information, page 60.
*These Annual Total Return figures reflect the Portfolio's management fees and
other operating expenses but do not reflect the Policy level or Separate Account
asset-based charges and deductions which, if reflected, would result in lower
total return figures than those shown.
- --------------------------------------------------------------------------------
Estate Designer 66
<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
I.A(6)(b-g) and the By-Laws listed as Exhibits I.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.
- --------------------------------------------------------------------------------
Variable Survivorship II - 1
<PAGE>
Cross-Reference table.
The prospectuses.
Variable Survivorship
Estate Designer
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:
James L. Livingston, Jr.
(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/
(i) Amendment to Security Life of Denver Insurance
Company Distribution Agreement./8/
(ii) Amendment to Security Life of Denver Insurance
Company Distribution Agreement.
(b) Specimen Amendment to Broker/Dealer Supervisory and
Selling Agreement for Variable Contracts with
Compensation Schedule./5/ (Variable Survivorship)
(i) Specimen Amendment to Broker/Dealer Supervisory
and Selling Agreement for Variable Contracts
with Compensation Schedule. (Estate Designer)
(c) Commission Schedule for Policies./5/ (Variable
Survivorship)
(i) Commission Schedule for Policies. (Estate
Designer)
(4) Not Applicable.
(5)
(a) Specimen Variable Survivorship Universal Life Insurance
Policy (Form No.2504 (JTVUL)- 8/99).
(i) Specimen Estate Designer Universal Life
Insurance Policy (Form No.2506(JTVUL)- 5/00).
(b) Adjustable Term Insurance Rider (Form No. R2003-8/99)./4/
(i) Adjustable Term Insurance Rider (Form No.
R2007-5/00).
(c) Single Life Term Insurance Rider (Insured #1) (Form No.
R2004-8/99)./4/
(d) Single Life Term Insurance Rider (Insured #2) (Form No.
R2005-8/99)./4/
(e) Aviation Exclusion Rider (Form No. S-9622)./5/
(6)
(a) Security Life of Denver's Restated Articles of
Incorporation./1/
(b-g) Amendments to Articles of Incorporation through June 12,
1987./1/
- --------------------------------------------------------------------------------
Variable Survivorship II - 2
<PAGE>
(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/
(viii) Specimen Participation Agreement among Security
Life of Denver Insurance Company, The GCG Trust
and Directed Services, Inc.
(b)
(i) First Amendment to Fund Participation Agreement
between Security Life of Denver, Van Eck
Investment Trust and Van Eck Associates
Corporation./3/
(ii) Second Amendment to Fund Participation Agreement
between Security *Life of Denver, Van Eck
Worldwide Insurance Trust and Van Eck Associates
Corporation./3/
(iii) Assignment and Modification Agreement between
Neuberger & Berman Advisers Management Trust,
Neuberger & Berman Management Incorporated,
Neuberger & Berman Advisers Management Trust,
Advisers Managers Trust and Security Life of
Denver Insurance Company./3/
(iv) First Amendment to Participation Agreement by
and among The Alger American Fund, Fred Alger
Management, Inc., Security Life of Denver
Insurance Company./1/
(v) First Amendment to Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./1/
(vi) Second Amendment to Participation Agreement
among Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./1/
(vii) First Amendment to Participation Agreement among
Variable Insurance Products Fund II, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./1/
(viii) Second Amendment to Participation Agreement
among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Security
Life of Denver Insurance Company./1/
(ix) First Amendment to Participation Agreement among
Security Life of Denver Insurance Company,
INVESCO Variable Investment Funds, Inc. and
INVESCO Funds Group, Inc./1/
- --------------------------------------------------------------------------------
Variable Survivorship II - 3
<PAGE>
(x) Third Amendment to Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./8/
(xi) Third Amendment to Participation Agreement among
Security Life of Denver Insurance Company,
INVESCO Variable Investment Funds, Inc. and
INVESCO Funds Group, Inc./8/
(xii) Fourth Amendment to Participation Agreement
among Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Company./8/
(xiii) Fourth Amendment to Participation Agreement
among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and Security
Life of Denver Insurance Company./8/
(xiv) Amendment No. 2 to Participation Agreement among
AIM Variable Insurance Funds, Inc., Security
Life of Denver Insurance Company and ING America
Equities, Inc./8/
(xv) Fourth Amendment to Participation Agreement
among Security Life of Denver Insurance Company,
INVESCO Variable Investment Funds, Inc. and
INVESCO Funds Group, Inc./9/
(xvi) Amendment No. 3 to Participation Agreement among
AIM Variable Insurance Funds, Inc., Security
Life of Denver Insurance Company and ING America
Equities, Inc./9/
(xvii) Fifth Amendment to Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./9/
(xviii) Fifth Amendment to Participation Agreement among
Variable Insurance Products Fund II, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company./9/
(xix) Amendment No. 4 to Participation Agreement among
AIM Variable Insurance Funds, Inc., Security
Life of Denver Insurance Company and ING America
Equities, Inc.
(xx) Sixth Amendment to Participation Agreement among
Variable Insurance Products Fund, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company.
(xxi) Sixth Amendment to Participation Agreement among
Variable Insurance Prodjcts Fund II, Fidelity
Distributors Corporation and Security Life of
Denver Insurance Company.
(xxii) Fifth Amendment to Participation Agreement among
Security Life of Denver Insurance Company,
INVESCO Variable Investment Funds, Inc. and
INVESCO Funds Group, Inc.
(c)
(i) Service Agreement between Fred Alger Management,
Inc. and Security Life of Denver Insurance
Company./6/
(ii) Expense Allocation Agreement Between A I M
Advisors, Inc., AIM Distributors, Inc. and
Security Life of Denver./7/
(iii) Service Agreement between INVESCO Funds Group,
Inc. and Security Life of Denver Insurance
Company./7/
(iv) Service Agreement between Neuberger & Berman
Management Incorporated and Security Life of
Denver Insurance Company./7/
(v) Service Agreement between Fidellity Investments
Institutional Operations Company, Inc. and
Security Life of Denver Insurance Company./7/
(vi) Side Letter between Van Eck Worldwide Insurance
Trust and Security Life of Denver./7/
(9) Not Applicable.
- --------------------------------------------------------------------------------
Variable Survivorship II - 4
<PAGE>
(10) Specimen Variable Survivorship Life Insurance Application with
Binding Limited Life Insurance Coverage Form (Form No.
Q2006-9/97).
2. Included as Exhibit l.A(5) above.
3.
A. Opinion and consent of Gary W. Waggoner as to securities being
registered./5/
4. Not Applicable.
5. Not Applicable.
6.
A. Opinion and consent of James L. Livingston, Jr. [TO BE FILED BY
AMENDMENT]
7.
B. Consent of Ernst & Young L.L.P. (TO BE FILED BY AMENDMENT]
C. Consent of Sutherland Asbill & Brennan LLP. [TO BE FILED BY AMENDMENT]
8. Not Applicable.
11. Issuance, Transfer and Redemption Procedures Memorandum.
- -------------
/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 Ll, 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 Ll, 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 Ll, filed with the
Securities and Exchange Commission on March 2, 1998 (File No. 33-74190).
/4/ Incorporated herein by reference to the Initial Registration to the Form
S-6 Registration Statement of Security Life of Denver Insurance Company and
its Security Life Separate Account Ll, filed with the Securities and
Exchange Commission on February 22, 1999 (File No. 333-72753).
/5/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form. S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account Ll, filed with the
Securities and Exchange Commission on March 30, 1999 (File Nc. 333-72753).
/6/ Incorporated herein by reference to Post-Effective Amendment 140. 7 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account Ll, filed with the
Securities and Exchange Commission on April 27, 1998 (File No. 33-74190).
/7/ Incorporated herein by reference to Post-Effective Amendment No. 10 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account Ll, filed with the
Securities and Exchange Commission on April 23, 1999 (File No. 33-74190).
/8/ Incorporated herein by reference to 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 Ll, filed with the
Securities and Exchange Commission on May 10, 1999 (File No. 333-72753).
/9/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Form S-6 Registration Statement of Security Life of Denver Insurance
Company and its Security Life Separate Account Ll, filed with the
Securities and Exchange Commission on December 3, 1999 (File No.
333-90577).
- --------------------------------------------------------------------------------
Variable Survivorship II - 5
<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 Ll,
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
28th day of February, 2000.
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 Ll
(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
- --------------------------------------------------------------------------------
Variable Survivorship II - 6
<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 - Controller
DIRECTORS:
/s/ Jess A. Skriletz
- ---------------------------
Jess A. Skriletz
/s/ Michael W. Cunningham
- ---------------------------
Michael W. Cunningham
- --------------------------------------------------------------------------------
Variable Survivorship II - 7
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
I.A(3)(a)(ii) Amendment to Security Life of Denver Insurance Company
Distribution Agreement.
1.A(3)(b)(i) Specimen Amendment to Broker/Dealer Supervisory and Selling
Agreement for Variable Contracts with Compensation Schedule.
(Estate Designer)
1.A(3)(c)(i) Commission Schedule for Policies. (Estate Designer)
1.A(5)(a)(i) Specimen Estate Designer Universal Life Insurance Policy (Form
No.2506 (JTVUL)- 5/00).
1.A(5)(b)(i) Adjustable Term Insurance Rider (Form No. R2007-5/00).
l.A(8)(b)(xix) Amendment No. 4 to Participation Agreement among AIM Variable
Insurance Funds, Inc., Security Life of Denver Insurance
Company and ING America Equities, Inc.
I.A(8)(b)(xx) Sixth Amendment to Participation Agreement among Variable
Insurance Products Fund, Fidelity Distributors Corporation and
Security Life of Denver Insurance Company.
l.A(8)(b)(xxi) Sixth Amendment to Participation Agreement among Variable
Insurance Products Fund II, Fidelity Distributors Corporation
and Security Life of Denver Insurance Company.
I.A(8)(b)(xxii) Fifth Amendment to Participation Agreement among Security Life
of Denver Insurance Company, INVESCO Variable Investment Funds,
Inc. and INVESCO Funds Group, Inc.
l.A(10) Specimen Variable Survivorship/Estate Designer Life Insurance
Application with Binding Limited Life Insurance Coverage Form
(Form No. Q-2006-9/97).
11. Issuance, Transfer and Redemption Procedures Memorandum.
- --------------------------------------------------------------------------------
Variable Survivorship II - 8
EXHIBIT 1.A(3)(a)(ii)
AMENDMENT TO SECURITY LIFE OF DENVER INSURANCE COMPANY
DISTRIBUTION AGREEMENT
WHEREAS, Security Life and ING America Equities, Inc. (formerly known as
SLD Equities Inc.) entered into a Distribution Agreement dated September 22,
1994;
WHEREAS, the parties now desire to modify the list of products issued by
Security Life and distributed by ING America Equities, Inc.;
NOW THEREFORE, in consideration of mutual promises and covenants, the
parties agree as follows:
1. Schedule "A", Compensation Schedule is hereby deleted and replaced with
the new Schedule "A" attached hereto.
Effective this 28th day of February, 2000.
By:/s/ Gary W. Waggoner By:/s/ James L. Livingston, Jr.
- ----------------------------------- ----------------------------------
Gary W. Waggoner, Secretary James L. Livingston, Jr., President
SECURITY LIFE OF DENVER ING AMERICA EQUITIES, INC.
INSURANCE COMPANY
<PAGE>
SCHEDULE "A"
COMPENSATION SCHEDULE
This Schedule "A" to the Distribution Agreement between Security Life of Denver
Insurance Company ("Security Life") and ING America Equities, Inc. ("INGAE")
dated September 22, 1994, sets forth the compensation to be paid to INGAE for
its services as underwriter and distributor of the following products.
1. EXCHEQUER ANNUITY (no longer being sold or issued)
A Flexible Premium Deferred Combination Fixed & Variable Annuity
Contract
Total Gross Dealer Concessions earned in the first year by Selling
Broker-Dealer pursuant to its Selling Agreement with Security Life and
INGAE (pursuant to the Selling Broker-Dealer's election, this will be
either 5% or 6% of funds actually received and accepted by Security Life
during the first year of the contract), plus an additional 1% of funds
actually received and accepted by Security Life during the first year of
the contract.
After the first year, all Trail Commissions calculated by Security Life
to be due and payable to the Selling Broker-Dealers under the Selling
Agreements.
2. FIRSTLINE
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
Additional payments as are due for override payments, expense
allowances, bonuses, wholesale fees and other expenses.
3. FIRSTLINE II
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
Additional payments as are due for override payments, expense
allowances, bonuses, wholesale fees and other expenses.
1
<PAGE>
4. STRATEGIC ADVANTAGE (no longer being sold or issued)
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
5. STRATEGIC ADVANTAGE II
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
Additional payments as are due for override payments, expense
allowances, bonuses, wholesale fees and other expenses.
6. VARIABLE SURVIVORSHIP UNIVERSAL LIFE
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
Additional payments as are due for override payments, expense
allowances, bonuses, wholesale fees and other expenses.
7. CORPORATE BENEFITS VARIABLE UNIVERSAL LIFE
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
2
<PAGE>
8. ESTATE DESIGNER VARIABLE UNIVERSAL LIFE
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
Additional payments as are due for override payments, expense
allowances, bonuses, wholesale fees and other expenses.
9. STRATEGIC BENEFIT VARIABLE UNIVERSAL LIFE
A Flexible Premium Variable Universal Life Policy
Total Gross Dealer Concessions earned by Selling Broker-Dealer pursuant
to its Selling Agreement with Security Life and INGAE.
All Trail Commissions, including Renewal and Ultimate Commissions,
calculated by Security Life to be due and payable to the Selling
Broker-Dealers under the Selling Agreements.
All commissions shall be paid only on an earned basis, as calculated in
the next commission cycle.
3
EXHIBIT 1.A.(3)(b)(i)
AMENDMENT TO THE
BROKER-DEALER SUPERVISORY AND SELLING AGREEMENT
FOR VARIABLE CONTRACTS
This Amendment is made by and among ING Security Life of Denver Insurance
Company ("ING Security Life"), ING America Equities, Inc. ("INGAE") and Selling
Broker-Dealer and Agency, collectively know as the Parties.
WHEREAS, the Parties have executed a Broker-Dealer Supervisory and Selling
Agreement for Variable Contracts (the "Agreement") which provides that Selling
Broker-Dealer and Agency will enable and supervise its registered
representatives to solicit and sell the Contracts issued by ING Security Life
and distributed by INGAE.
WHEREAS, the Agreement also provides for certain compensation to be paid to
Selling Broker-Dealer or Agency for the sales of such Contracts, the Agreement
is modified as follows:
1. The Schedule J, "Compensation Schedule to Selling Agreement for ING
Security Life Estate Designer Variable Universal Life" is hereby added.
This Amendment is effective March 1, 2000, and shall be deemed to be
accepted by Broker-Dealer and Agency by ING Security Life and INGAE by
submission of an application for the Estate Designer Variable Universal Life
product by Selling Broker-Dealer or Agency on or after that date.
<PAGE>
SCHEDULE J
COMPENSATION SCHEDULE
TO SELLING AGREEMENT FOR SECURITY LIFE
ESTATE DESIGNER
JOINT SURVIVOR VARIABLE UNIVERSAL LIFE
This Schedule is an attachment to the ING America Equities, Inc. ("ING AMERICA
EQUITIES") Selling Agreement by and among the parties pursuant to paragraph 17
of that Selling Agreement, effective as of May 1, 2000, or the date that Selling
Broker-Dealer submits an application for this product, whichever is later. The
provisions of this Schedule shall apply only to Security Life ESTATE DESIGNER
policies solicited and issued while this Schedule is in effect. All compensation
payable under this Schedule shall be subject to the terms and conditions
contained herein at the time of issue of the policy by Security Life of Denver
Insurance Company ("SECURITY LIFE").
1. Commission Structure - Option L (Levelized):
-------------------------------------------
PCA SCA RCA Trail
- ----------- ----------- -------- ---------------------------------------
Years 1 - 7 Years 1 - 7 Years 8+ Years Years Years 21+
1 - 10 11 - 20
12% 4% 2% 0.20% net 0.15% net 0.10% net
account account account
value value value
PCA (PRIMARY COMMISSIONABLE AMOUNT) is equal to the first year's target premium
(shown on policy schedule pages and illustrations). Gross premiums paid up to
the PCA in any year are commissioned at the full PCA rate. If the gross premium
paid in one year is less than the PCA, that difference is carried over to the
next year. A new PCA is generated any time a new base coverage segment is
created. Note that a death benefit option change does not create a new PCA.
Premium dollars are allocated first to PCA, then to SCA, and then to RCA.
SCA (SECONDARY COMMISSIONABLE AMOUNT) is equal to the difference between the
gross premium received in each segment year in years one through seven and the
corresponding PCA for that year.
RCA (RENEWABLE COMMISSIONABLE AMOUNT) equals the gross premium received per
segment year in years 8 and thereafter.
Schedule J (02/22/00) Page 1 of 4
<PAGE>
2. Commission Structure - Option M (Modified):
PCA SCA RCA Trail
- -------------- ---------------- ----- -------------------------------
Year 1 Years Year 1 Years Years Years Years Years
2 - 7 2 - 7 8+ 1 - 10 11 - 20 21+
30% 7.5% 2% 4% 2% 0.20% 0.15% 0.10%
net net net
account account account
value value value
PCA (PRIMARY COMMISSIONABLE AMOUNT) is equal to the first year's target premium
(shown on policy schedule pages and illustrations). A new PCA is generated any
time a new base coverage segment is created. Note that a death benefit option
change does not create a new PCA. Premium dollars are allocated first to PCA,
then to SCA, and then to RCA.
SCA (SECONDARY COMMISSIONABLE AMOUNT) is equal to the difference between the
gross premium received in each segment year in years one through seven and the
corresponding PCA for that year.
RCA (RENEWABLE COMMISSIONABLE AMOUNT) equals the gross premium received per
segment year in years 8 and thereafter.
3. Premium Receipt: Premium received within 15 days prior to a policy
anniversary will result in the agent receiving commissions at the same
rate as if the premium was paid on the anniversary date.
4. Selection of Commission Structure: is made at the time of policy
application and cannot be changed once the application is received by
Security Life. If no commission structure is requested on the application,
Option L will apply.
5. Trail Commissions: are payable at each policy (not segment) anniversary
based on the policy's average net account value at the end of each of the
prior twelve months. The trail commission is payable annually at the end
of a policy year provided the policy is in force, and not subject to grace
period provisions, on that date.
6. Riders: Commissionable riders will have a separate target premium which is
set at issue and is level thereafter. The Adjustable Term Insurance Rider
has no target premium associated with it.
7. Commission Calculation: Commissions shall be calculated only on premium
actually received an accepted by SECURITY LIFE. Commissions shall be paid
only on an earned basis. Outstanding loan amounts carried over as part of
a 1035 exchange are not considered commissionable premium.
Schedule J (02/22/00) Page 2 of 4
<PAGE>
8. Premium Allocation: If the Stated Death Benefit has been increased since
the policy date, premiums received are allocated to the coverage segments
in the same proportion that the commission target premium for each segment
bears to the total commission target premium of the policy.
9. Death Benefit Increases: If a premium payment accompanies a request for a
Stated Death Benefit increase or is received while a request is pending,
the payment will be applied to the policy but commissions shall not be
payable until the increase is effective. The commission shall then be
payable based on the premium being allocated among all segments as it
would normally and the new target premium after the increase.
10. Compensation Payments: Compensation on initial premiums shall be due to
the SELLING BROKER-DEALER at the time of the issuance of the policy.
Thereafter, it shall be payable at the time of the receipt and acceptance
of premium by SECURITY LIFE, except that the amount, and the time of
payment of compensation on stated death benefit increases, replacements,
reissues, changes, conversions, exchanges, term renewals, term
conversions, premiums paid in advance, policies issued on a "guaranteed
issue" basis, policies requiring facultative reinsurance arrangements, and
other special cases and programs shall be governed by SECURITY LIFE'S
underwriting and administrative rules then in effect. The Compensation
shall be payable to the SELLING BROKER-DEALER in accordance with the
Schedule J in effect at the time of issue of the policy.
11. Commission Chargeback: In the event that a policy (for which a commission
has been paid) is lapsed or surrendered by the Policy Owner during the
first six months, or is returned to SECURITY LIFE for refund of premium
during the Free Look Period as described in the policy, SECURITY LIFE and
ING AMERICA EQUITIES shall require reimbursement from SELLING
BROKER-DEALER equal to 100% of the commissions paid. If a premium payment
for which a commission has been paid is refunded by SECURITY LIFE, a
reimbursement of the commission paid on the amount refunded will be due
from the SELLING BROKER-DEALER.
Chargebacks are based on premiums received in the applicable segment year and
are as follows:
OPTION L OPTION M
Premiums
Received in PCA RCA & SCA PCA RCA & SCA
- ----------- --- --------- --- ---------
Months
1 - 6 12% 4% 30% 2%
Months
7 - 12 N/A N/A 30% 2%
Years
2 & 3 N/A N/A 7.5% 4%
Schedule J (02/22/00) Page 3 of 4
<PAGE>
The reimbursement may be deducted by ING AMERICA EQUITIES from the next, or any
subsequent, commission payment to SELLING BROKER-DEALER. If the amount to be
reimbursed exceeds compensation otherwise due, SELLING BROKER-DEALER shall
promptly reimburse ING AMERICA EQUITIES before the next commission cycle.
12. Internal Exchanges: Commissions on the exchange of any policy issued by
SECURITY LIFE or any other ING affiliate for an ESTATE DESIGNER policy, if
any, will be paid in accordance with the internal exchange procedures in
effect at SECURITY LIFE on the date the exchange is completed. The
commission rates and/or target premiums may be adjusted in accordance with
the rules in effect at the time of the exchange. If the Representative
responsible for the exchange is not the producer of the original policy,
and the original producer is still active with SECURITY LIFE, no
commission will be payable to the Representative or the SELLING
BROKER-DEALER.
13. Commission Payment for Early Second Death: In the event that the death of
both insured persons under a policy occurs in the first seven policy
years, SELLING BROKER/DEALER shall be entitled to compensation on the
policy subject to the following rules:
o The policy when sold was a commissionable policy (i.e., not an
internal exchange as defined in section 12 above)
o The policy must be in active status with SECURITY LIFE and some
premium must have been paid into the policy during the 12 months
prior to the death of the second insured person
o The payment due if these conditions are met is the present value
of the remaining premium-based commissions from the policy month
in which the second death occurred through the end of policy year
seven, as calculated by SECURITY LIFE at 10.5%.
o The calculation shall use the premium stream, payment mode and
commission structure as reflected on the "as sold" illustration
on file at SECURITY LIFE
o This payment is due to SELLING BROKER/DEALER only after payment
of the death benefit under the policy has been determined and
made by SECURITY LIFE to policy beneficiaries
o Trail commissions are excluded from the calculation for this
payment and are not payable after termination of the policy
whether terminated by death or otherwise.
Schedule J (02/22/00) Page 4 of 4
Exhibit 1.A(3)(c)(i)
Estate Designer Commission Structure:
PCA (PRIMARY COMMISSIONABLE AMOUNT) is equal to the first year's target premium
(shown on policy schedule pages and illustrations). Gross premiums paid up to
the PCA in any year are commissioned at the full PCA rate. A new PCA is
generated any time a new base coverage segment is created. Note that a death
benefit option change does not create a new PCA. Premium dollars are allocated
first to PCA, then to SCA, and then to RCA. Under Option L only, if the gross
premium paid in one year is less than the PCA, that difference is carried over
to the next year.
SCA (SECONDARY COMMISSIONABLE AMOUNT) is equal to the difference between the
gross premium received in each segment year in years one through seven and the
corresponding PCA for that year.
RCA (RENEWABLE COMMISSIONABLE AMOUNT) equals the gross premium received per
segment year in years 8 and thereafter.
1. Commission Structure - Option L (Levelized):
PCA SCA RCA Trail
- ----------- ----------- -------- --------------------------------------
Years 1 - 7 Years 1 - 7 Years 8+ Years Years Years 21+
1 - 10 11 - 20
12% 4% 2% 0.20% net 0.15% net 0.10% net
account account account
value value value
2. Commission Structure - Option M (Modified):
PCA SCA RCA Trail
- -------------- -------------- -------- -----------------------------
Year 1 Years Year 1 Years Years 8+ Years Years Years
2 - 7 2 - 7 1 - 10 11 - 20 21+
30% 7.5% 2% 4% 2% 0.20% 0.15% 0.10%
net net net
account account account
value value value
3. Commission Chargeback: In the event that a policy (for which a commission
has been paid) is lapsed or surrendered by the Policy Owner during the
first six months, or is returned to SECURITY LIFE for refund of premium
during the Free Look Period as described in the policy, SECURITY LIFE and
ING AMERICA EQUITIES shall require reimbursement from SELLING BROKER-DEALER
equal to 100% of the commissions paid. If a premium payment for which a
commission has been paid is refunded by SECURITY LIFE, a reimbursement of
the commission paid on the amount refunded will be due from the SELLING
BROKER-DEALER.
<PAGE>
Chargebacks are based on premiums received in the applicable policy year and are
as follows:
OPTION L OPTION M
Premiums
Received in PCA RCA & SCA PCA RCA & SCA
- ----------- ---- --------- --- ---------
Months
1 - 6 12% 4% 30% 2%
Months
7 - 12 N/A N/A 30% 2%
Years
2 & 3 N/A N/A 7.5% 4%
4. Commission Payment for Early Second Death: If the deaths of both insured
persons occur in the first seven policy years, the present value of the
remaining premium-based commissions, as calculated by SECURITY LIFE from
the time of the second death through policy year seven shall be payable if
the policy meets the applicable standards for an "active" Policy.
EXHIBIT 1.A(5)(a)(i)
SECURITY LIFE OF DENVER
INSURANCE COMPANY
INSURED (1): JOHN DOE
INSURED (2): MARY DOE
POLICY DATE: MAY 1, 2000
POLICY NUMBER: 670000001
WE AGREE TO PAY the death benefit to the beneficiary upon the second death of
the two insureds 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 10 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 LAST SURVIVOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
THIS POLICY INCLUDES A PERSISTENCY BONUS. 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 SECOND DEATH OF
THE TWO INSUREDS. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY
YOU DURING THE LIFETIME OF EITHER INSURED UNTIL THE POLICY ANNIVERSARY NEAREST
THE YOUNGER INSURED'S 100TH BIRTH DATE.
The death benefit is payable following the second death. However, you should
give us notice of the first death at the time it occurs.
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 2506 (JTVUL)-5/00
<PAGE>
TABLE OF CONTENTS
SCHEDULE.......................................................................5
DEFINITION OF TERMS............................................................6
INSURANCE COVERAGE PROVISIONS..................................................7
EFFECTIVE DATE..........................................................7
BASE DEATH BENEFIT......................................................7
CHANGE IN REQUESTED INSURANCE COVERAGE..................................7
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 ALLOCATIONS.........................................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 2506 (JTVUL)-5/00
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
MONTHLY DEDUCTION AND REFUND..................................................17
MONTHLY DEDUCTION......................................................17
COST OF INSURANCE......................................................18
PERSISTENCY REFUND.....................................................18
LOAN PROVISIONS...............................................................19
POLICY LOANS...........................................................19
LOAN INTEREST..........................................................19
LOAN DIVISION..........................................................19
PARTIAL WITHDRAWAL PROVISIONS.................................................19
SURRENDER PROVISIONS..........................................................21
SURRENDER VALUE........................................................21
BASIS OF COMPUTATIONS..................................................21
FULL SURRENDERS........................................................21
GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS........................21
GRACE PERIOD...........................................................21
SPECIAL CONTINUATION PERIOD............................................22
TERMINATION............................................................22
REINSTATEMENT..........................................................22
DEFERRAL OF PAYMENT....................................................23
Form 2506 (JTVUL)-5/00
Page 3
<PAGE>
GENERAL POLICY PROVISIONS.....................................................23
THE POLICY.............................................................23
CONTRACT CHANGES.......................................................24
PROCEDURES.............................................................24
OWNERSHIP..............................................................24
BENEFICIARIES..........................................................24
EXCHANGE RIGHT.........................................................25
POLICY SPLIT...........................................................25
COLLATERAL ASSIGNMENT..................................................26
INCONTESTABILITY.......................................................26
MISSTATEMENT OF AGE OR GENDER..........................................27
SUICIDE EXCLUSION......................................................27
PERIODIC REPORTS.......................................................27
ILLUSTRATION OF BENEFITS AND VALUES....................................27
NONPARTICIPATING.......................................................27
CUSTOMER SERVICE CENTER................................................28
PAYOUTS OTHER THAN AS ONE SUM.................................................28
ELECTION...............................................................28
PAYOUT OPTIONS.........................................................28
CHANGE AND WITHDRAWAL..................................................29
EXCESS INTEREST........................................................29
MINIMUM AMOUNTS........................................................29
SUPPLEMENTARY POLICY...................................................29
INCOME PROTECTION......................................................29
DEATH OF PRIMARY PAYEE.................................................30
PAYMENTS OTHER THAN MONTHLY............................................30
SETTLEMENT OPTION TABLES......................................................31
ADDITIONAL BENEFITS OR RIDERS, IF ANY, WILL BE LISTED IN THE SCHEDULE. THE
ADDITIONAL PROVISIONS WILL BE INSERTED IN THE POLICY.
Form 2506 (JTVUL)-5/00
Page 4
<PAGE>
SCHEDULE
(Schedule Effective Date: May 1,2000)
POLICY INFORMATION
<TABLE>
<S> <C> <C> <C>
Policy Number 670000001 Initial Stated Death Benefit $500,000.00
Policy Date MAY 1, 2000
INSURED (1) JOHN DOE
Issue Age and Gender 35, Male
INSURED (2) MARY DOE
Issue Age and Gender 35, Female
Death Benefit Option OPTION 1
Joint Equivalent Issue Age 35 Minimum Annual Premium $626.76
Scheduled Premium $4,000.00, Annually
Definition of Life Insurance Test: Guideline Premium Test/Cash Value Corridor Test
</TABLE>
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.
CUSTOMER SERVICE CENTER: P.O. BOX 173888, DENVER, COLORADO 80217
TOLL FREE NUMBER 1(800) 848-6362
Form 2506 (JTVUL)-5/00
Page 5
<PAGE>
SCHEDULE (CONTINUED)
SEGMENT BENEFIT PROFILE
(SCHEDULE EFFECTIVE DATE: MAY 1, 2000)
<TABLE>
<S> <C> <C> <C> <C> <C>
Segment Stated Segment Segment Segment
Death Benefit Effective Target Premium Premium Class
Segment Date Insured #1 Insured #2
(Segment #1) $500,000.00 MAY 1, 2000 $4,149.22 Std NonSmkr Std NonSmkr
</TABLE>
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 2506 (JTVUL)-5/00
Page 5A
<PAGE>
SCHEDULE (CONTINUED)
EXPENSE CHARGES
A. PREMIUM EXPENSE CHARGE. This charge will equal the sum of a sales charge
plus a tax charge. See Net Premium provision for details.
1. SALES CHARGE:
<TABLE>
<S> <C> <C>
Segment Year in Which Segment Premium Paid up to Segment Premium Paid in Excess
Premium Received Segment Target Premium of Segment Target Premium
Segment Year 1 8.0% 4.0%
Segment Years 2-7 8.0% 1.5%
Segment Years 8+ 1.5% 1.5%
</TABLE>
2. 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 charges will equal the sum of
the following two charges:
PER POLICY CHARGE: $15 per month for the first 120 months
(10 policy years).
$ 9 per month thereafter.
MONTHLY ADMINISTRATIVE CHARGE: $[0.06] per unit per month for the
first 120 policy months (10 policy
years).
$0.01 per unit for each policy month
thereafter.
Unit is the greater of stated death benefit or target death benefit then in
force for the policy, divided by 1000.
ANNUAL MORTALITY AND EXPENSE RISK CHARGE
ANNUAL MORTALITY AND EXPENSE RISK CHARGE: 0.75% (0.002055% per day)
Form 2506 (JTVUL)-5/00
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
investment options of the Separate
Account or between the Guaranteed
Interest Division and the Separate
Account investment options; 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: 3.75% 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: The lesser of $25 or 2% of the amount
of the requested partial withdrawal.
Limit on Partial Withdrawals: One per policy year
GUARANTEED INTEREST DIVISION
Guaranteed Interest Rate For
Guaranteed Interest Division: 3.00% per year
PERSISTENCY REFUND FACTOR
Persistency Refund Factor: .0005 monthly
Form 2506 (JTVUL)-5/00
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
GUIDELINE PREMIUM TEST/CASH VALUE CORRIDOR TEST
DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
Younger Factor Younger Factor Younger Factor Younger Factor
Insured's Insured's Insured's Insured's
Attained Age Attained Age Attained Age Attained Age
<S> <C> <C> <C> <C> <C> <C> <C>
0-40 2.50
41 2.43 56 1.46 71 1.13 86 1.05
42 2.36 57 1.42 72 1.11 87 1.05
43 2.29 58 1.38 73 1.09 88 1.05
44 2.22 59 1.34 74 1.07 89 1.05
45 2.15
60 1.30 75 1.05 90 1.05
46 2.09 61 1.28 76 1.05 91 1.04
47 2.03 62 1.26 77 1.05 92 1.03
48 1.97 63 1.24 78 1.05 93 1.02
49 1.91 64 1.22 79 1.05 94 1.01
50 1.85
65 1.20 80 1.05 95 1.00
51 1.78 66 1.19 81 1.05 96 1.00
52 1.71 67 1.18 82 1.05 97 1.00
53 1.64 68 1.17 83 1.05 98 1.00
54 1.57 69 1.16 84 1.05 99 1.00
55 1.50 70 1.15 85 1.05 100 and older 1.00
</TABLE>
Form 2506 (JTVUL)-5/00
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>
Segment Monthly Cost of Segment Monthly Cost of Segment Monthly Cost of Segment Monthly Cost of
Year Insurance Rate Year Insurance Rate Year Insurance Rate Year Insurance Rate
<S> <C> <C> <C> <C> <C> <C> <C>
1 0.00029 26 0.24032 51 9.37750 76
2 0.00094 27 0.27881 52 10.56782 77
3 0.00174 28 0.32514 53 11.82596 78
4 0.00270 29 0.38176 54 13.14547 79
5 0.00390 30 0.44922 55 14.52703 80
6 0.00537 31 0.52778 56 15.97964 81
7 0.00720 32 0.61724 57 17.52244 82
8 0.00937 33 0.71747 58 19.19650 83
9 0.01195 34 0.82806 59 21.07894 84
10 0.01498 35 0.95316 60 23.37773 85
11 0.01858 36 1.09872 61 26.51949 86
12 0.02272 37 1.27190 62 31.35742
13 0.02754 38 1.48191 63 39.59830
14 0.03315 39 1.73698 64 54.65492
15 0.03974 40 2.04020 65 83.33333
16 0.04741 41 2.39109 66
17 0.05649 42 2.78822 67
18 0.06725 43 3.22853 68
19 0.08016 44 3.71109 69
20 0.09527 45 4.24541 70
21 0.11272 46 4.84859 71
22 0.13268 47 5.53770 72
23 0.15492 48 6.33237 73
24 0.17972 49 7.24554 74
25 0.20783 50 8.26516 75
</TABLE>
The above Table of Guaranteed Rates is based on the 1980 U.S. Commissioners
Standard Ordinary Sex Distinct Mortality Table. These rates include substandard
rates, if applicable.
Form 2506 (JTVUL)-5/00
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 Division of the Separate Account.
ACCUMULATION UNIT VALUE - The value of an accumulation unit of each Division of
the Separate Account. The accumulation unit value is determined as of each
valuation date.
AGE/JOINT EQUIVALENT ISSUE AGE/YOUNGER INSURED'S BIRTH DATE -
AGE - The policy is issued at the ages shown in the Schedule. Each issue
age is the age nearest birthday on the policy date.
JOINT EQUIVALENT ISSUE AGE - This age is determined on the policy date.
The attained joint equivalent age is the joint equivalent issue age on the
policy date increased by the number of completed policy years.
YOUNGER INSURED'S BIRTH DATE - The younger insured's 100th birth date is
the date on which the younger of the two insureds reaches attained age 100
or the date the younger insured would have reached attained age 100 if
that insured dies before actually reaching that date. Any other birth date
of the younger insured is determined in the same manner.
The younger insured's attained age is the issue age of the younger of the
two insureds as shown in the Schedule, increased by the number of
completed policy years.
BASE DEATH BENEFIT - The base death benefit is defined in the Base Death Benefit
provision of the policy.
CASH SURRENDER VALUE - The amount of your account value plus any refund of sales
charge due.
CUSTOMER SERVICE CENTER - Our administrative office whose address is P. O. Box
173888, Denver, CO 80217-3888.
FIRST DEATH - The first death is the death of the first to die of the two
insureds.
GENERAL ACCOUNT - The account which 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.
INITIAL PERIOD - The initial period ends on the earlier of : a) the date this
policy was delivered to you plus the Right to Examine Period, so long as we
receive notice of the delivery date at our Customer Service Center before the
date defined in (b), or (b) the date this policy is mailed from our Customer
Service Center plus five days plus the Right to Examine Period.
INVESTMENT DATE -The first date we apply your net premium payment 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 for policy issuance: 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.
INVESTMENT OPTIONS OF THE SEPARATE ACCOUNT - The investment options available,
each of which invests in shares of one of the portfolios.
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 occurs on the next valuation
date.
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NET ACCOUNT VALUE - The amount of the account value minus any policy loan and
accrued loan interest.
NET CASH SURRENDER VALUE - The amount of the cash surrender value minus any
policy loan and accrued loan interest.
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 - See the cover page of your policy for a description of
your right to examine period.
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. Also, within limits, you may pay less or more than the scheduled
premium.
SECOND DEATH - The second death is the death of the second to die of the two
insureds.
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 minimum annual premium, new sales
charge, new cost of insurance charges and new incontestability and suicide
exclusion periods.
SEGMENT PREMIUM - The actual premium received allocated to existing segments.
Premium is allocated in the same proportion that the segment target premium
bears to the sum of all segment target premiums. If there is only one segment
target premium, the entire premium is allocated to the segment. Segment target
premium is shown in the Schedule. As each segment has unique segment years, each
segment premium is associated with a segment year.
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 investment options are determined.
Except for days that a variable investment option'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.
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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.
Death benefit option 3 may be elected only at issue.
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.
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
Form 2506 (JTVUL)-5/00
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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 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 joint equivalent age 85. 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 insureds are 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 charge which will be deducted from the premium allocated to the
new segment. The new segment may also be subject to a new minimum annual
premium, new per thousand of stated death benefit 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) The stated death benefit is at least $500,000 if there is no
adjustable term insurance on the policy.
b) If there is adjustable term insurance on the policy, the stated death
benefit is at least $1,000 and the target death benefit is at least
$500,000.
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 younger insured's 100th birth date, you may request to
change the death benefit option. This change will be effective as of the next
monthly processing date 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 stated 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:
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OPTION CHANGE
FROM TO STATED DEATH BENEFIT FOLLOWING THE OPTION CHANGE EQUALS:
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.
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 younger
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 younger
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 investment options
of 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 I 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 younger 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 $400 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 net cash
surrender value is zero or less.
If you do not want coverage to continue past the policy anniversary nearest the
younger insured's 100th birth date, the policy may be surrendered at that time,
or earlier.
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PAYOUT OF PROCEEDS
Proceeds refer to the amount we will pay:
a) Upon surrender of the policy; or
b) Upon the second death of the two insureds.
The proceeds upon surrender of this policy will be the net cash surrender value.
The amount of proceeds payable upon the second death will be the base death
benefit in effect on the date of the second death, plus any amounts payable from
any additional benefits provided by rider, minus any outstanding policy loan
including accrued but unpaid interest, and minus any unpaid monthly deductions
incurred prior to the date of the second death. The calculation of the death
proceeds will be computed as of the date of the second death. The second death
is the death of the second to die of the two insureds.
We will determine the amount of proceeds payable upon the second death when we
have received due proof of both deaths 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 second 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 initial period has 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 initial 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 initial
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 initial 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 2506 (JTVUL)-5/00
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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 and
to the Guaranteed Interest Division 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 younger 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 younger 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 charge plus the tax
charge. The tax charge is the applicable tax percentage times the premium.
To determine the sales charge, we multiply the applicable percentage sales
charge times the premium allocated to the segment. There is a different
percentage sales charge for the allocated premium that is below the segment
target premium than for the allocated premium that is above that segment target
premium. The applicable percentage sales charge 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 charge; and (3) the tax charge percentage.
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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 second death. No premium may be paid after the policy anniversary nearest
the younger insured's 100th birth date.
FAILURE TO PAY PREMIUM
If you stop paying premiums prior to the policy anniversary nearest the younger
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 investment options subject
to the terms and conditions we may impose on those allocations.
Form 2506 (JTVUL)-5/00
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We reserve the right to limit the number of investment options 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 investment 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 division
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 options 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 2506 (JTVUL)-5/00
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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 younger insured's 100th birth date, your account value in each investment
option may be transferred to any other investment options of the Separate
Account or to the Guaranteed Interest Division upon your request. One transfer
from the Guaranteed Interest Division into the investment options of the
Separate Account 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 younger
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.
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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 investment options or division 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 each investment option of the Separate Account and
to the Guaranteed Interest Division of the first net premium paid;
minus
b) The portion of any monthly deductions allocated to each investment
option of the Separate Account and to the Guaranteed Interest 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 investment option'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 2506 (JTVUL)-5/00
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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 option of the Separate Account is calculated as follows:
a) The number of accumulation units in that investment option as of the
beginning of the current valuation period multiplied by that
investment 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 investment option 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
investment option 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
investment option during the current valuation period; minus
f) The portion of the monthly deduction allocated to the investment
option, if a monthly processing date occurs during the current
valuation period.
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.
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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.
MONTHLY DEDUCTION AND REFUND
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 investment options 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 be shown in
periodic reports that we send you at least once per policy year. After the
policy anniversary nearest the younger insured's 100th birth date no further
monthly deductions will be made, except policy transaction charges incurred
after this date.
Form 2506 (JTVUL)-5/00
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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, any Adjustable Term
Insurance Rider and any Single Life 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, any Adjustable Term Insurance Rider and any Single
Life 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
gender and age of each of the insureds as of the effective date of segment
coverage, the duration since the coverage began and the segment premium classes.
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.
These tables are in the Schedule.
PERSISTENCY REFUND
We will calculate a monthly persistency refund by multiplying the monthly
persistency refund factor times the account value allocated to the Loan Division
and investment options of the Separate Account. The persistency refund factor is
shown in the Schedule. We may increase this persistency refund by an amount
based on the amount in the Guaranteed Interest Division.
Each month after the policy is in force for 120 months, we will credit the net
account value held in the investment options of the Separate Account and in the
Guaranteed Interest Division with a persistency refund. The monthly persistency
refund will be allocated to the investment options of the Separate Account and
to the Guaranteed Interest Division in the same proportion that your account
value in each investment option or division, as applicable, bears to your net
account value as of the monthly processing date.
Form 2506 (JTVUL)-5/00
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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.
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 division 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 contacting 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.
Form 2506 (JTVUL)-5/00
Page 19
<PAGE>
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 death benefit Option 1, 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 joint equivalent age 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 death benefit Option 2, a partial withdrawal does not
reduce your stated death benefit.
For a policy under death benefit Option 3, 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:
a) The stated death benefit is at least $500,000 if there is no
adjustable term insurance on the policy.
b) If there is adjustable term insurance on the policy, the stated death
benefit is at least $1,000 and the target death benefit is at least
$500,000.
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 or
division bears to your net account value immediately prior to the withdrawal.
The withdrawal service fee deducted from your account value is deducted from
each investment option and from 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.
Form 2506 (JTVUL)-5/00
Page 20
<PAGE>
SURRENDER PROVISIONS
SURRENDER VALUE
The net cash surrender value on any date will be your account value plus any
refund of sales charge due and minus any policy loan including accrued but
unpaid loan interest.
BASIS OF COMPUTATIONS
The cash surrender value under the policy is not less than the minimums 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
before the second death and receive the net cash surrender value. We will
compute the net cash 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.
If you surrender your policy within the first two policy years, the net cash
surrender value will include a refund of a portion of the sales charge that was
previously deducted from your premiums paid. If surrendered in the first policy
year, the refund will be at least 5% of the premium paid. If surrendered in the
second policy year, the refund will be at least 2.5% of the premium paid in the
first policy year.
GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS
GRACE PERIOD
If the following conditions occur on a monthly processing date, the policy will
enter into a 61-day grace period:
a) The net account value is zero or less; and
b) The special continuation period described below has expired or the
required premium for the special continuation period has not been
paid.
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
Form 2506 (JTVUL)-5/00
Page 21
<PAGE>
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 second death occurs during the grace period, we will deduct
any overdue monthly charges from the death proceeds of the policy.
SPECIAL CONTINUATION PERIOD
During the first 5 policy years your policy will remain in force regardless of
the net account value if, on any monthly processing date, the sum of your
premiums paid minus the sum of your partial withdrawals, policy loans and
accrued but unpaid policy loan interest is not less than the sum of the
applicable minimum monthly premiums for each policy month starting with the
first policy month to and including the policy month which begins on the current
monthly processing date. Each minimum monthly premium equals 1/12 of the minimum
annual premium. The minimum annual premium is shown in the Schedule. We use this
premium for each policy month until the effective date of a change in the stated
death benefit. If there is a change, the new Schedule will show the applicable
minimum annual premium that applies to subsequent policy months during the
remainder of the 5-year period.
If the policy is kept in force under this provision, the charges are not
permanently waived. Instead, the charges continue to be deducted. This will
result in a negative net account value unless sufficient premium is received.
This negative balance is your unpaid monthly deductions. At the end of the
special continuation period, sufficient premium to bring your net account value
to zero will be due.
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 second death; or
c) The date the grace period ends without payment of the required
premium.
REINSTATEMENT
The policy and its riders may be reinstated within 5 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 net cash surrender value;
b) You submit evidence satisfactory to us that the insureds 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
Form 2506 (JTVUL)-5/00
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<PAGE>
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.
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 investment options.
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.
Form 2506 (JTVUL)-5/00
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<PAGE>
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.
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 an insured, please let us or our agent know as soon
as possible. This includes the first and second death. 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 authorization forms 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 second death. 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 second death will receive any death
proceeds which become payable. Surviving contingent beneficiaries are paid death
proceeds only if no primary beneficiary has survived the second death. If more
than one beneficiary in a class survives the second death, 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 second death, 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.
Form 2506 (JTVUL)-5/00
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<PAGE>
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 investment options of
the Separate Account to the Guaranteed Interest Division and removing your
future right to choose to allocate funds to the investment options 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.
POLICY SPLIT
This benefit is available unless any segment rating on either insured is higher
than 3.0 times the standard premium class. Any rating is shown on the Segment
Benefit Profile page of the Schedule. If this benefit is available, you may
exchange this policy for two individual policies, upon the occurrence of at
least one of the contingent events listed below. The exchange must be to two
single whole life or flexible premium universal life policies of the kind made
available by us for exchange. One policy will be on Insured #1 and the other
policy will be on Insured #2. No evidence of insurability will be required.
On the effective date of the exchange, you must split the available death
benefit provided by this policy between the two single life policies. The
maximum you may allocate to each single life policy is 50% of the available
death benefit. The sum of the face amounts of two single life policies cannot
exceed the available death benefit; however, there is no requirement that the
maximum available amount on each life be used. The available death benefit is
the amount of base death benefit plus any term insurance provided by the
Adjustable Term Insurance Rider on the effective date of the exchange.
The policy split may be exercised upon the occurrence of any of the following
contingent events:
a) Three months following the effective date of a final divorce decree
with respect to the marriage of the two insureds.
b) The effective date of a change to Federal Estate Tax Law which results
in either:
1) Removal of the unlimited marital deduction provision; or
2) A reduction in the current maximum Federal Estate Tax of at least
50% after the policy effective date.
c) The effective date of a dissolution of any business which is being
conducted or owned by the two insureds covered under this policy at
the time this policy is issued.
You must send us written notice of your election to split the policy within 180
days following the occurrence of any contingent event. Your notice must provide
satisfactory evidence to us that the contingent event has occurred. The
insurance under the two individual policies will start on the effective date of
the exchange only if both insureds are alive on the effective date of the
exchange. The new policies will not provide any insurance until such time. If
either insured is not alive on that date, the exchange shall be void.
Form 2506 (JTVUL)-5/00
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<PAGE>
The effective date of the exchange will be the first monthly processing date
after we have approved the exchange.
The premiums under each new policy will be based on each insured's attained age,
gender and premium class at the time of the split. Premiums will be due for each
new policy in accordance with the terms of the new policy as of the effective
date of the exchange. The account value of the old policy will be allocated to
the new policies in the same proportion that the face amount was divided between
the two policies unless we agree to a different allocation. Such allocation will
be made to each new policy on the effective date of the exchange. If such
allocation would cause an increase in the face amount of the new policy, we
reserve the right to limit the amount of account value that may be applied to
the new policies. Any remaining account value will be paid to you in cash. The
refund of sales charge is not applicable upon policy split.
Any loan on the policy will be divided and transferred to each new policy in the
same proportion as the account value is apportioned. Any remaining outstanding
loan balance must be paid in cash prior to the effective date of the exchange.
Any assignee must agree to the exchange. Any assignment of the policy will apply
to each new policy.
If there is a Single Life Term Insurance Rider on the original policy on the
date of the exchange, you may have a term insurance rider insuring that life on
the new policy if such a rider is available on the new policy. The amount of the
insurance cannot be more than the amount under the Single Life Term Insurance
Rider on that life under the original policy. Any other riders on the new
policies are subject to availability and satisfactory evidence of insurability.
This policy provision ends on the earliest of:
a) The policy anniversary nearest the younger insured's 100th birth
date; or
b) The death of the first of the two insureds; or
c) The expiration of the grace period of the policy; or
d) The termination or surrender of the policy.
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.
INCONTESTABILITY
After this policy has been in force while both insureds are alive for 2 years
from the policy date, we will not contest the statements in the application
attached at issue.
After this policy has been in force while both insureds are alive for 2 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 the
application for the new segment or other increase.
Form 2506 (JTVUL)-5/00
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<PAGE>
After this policy has been in force while both insureds are 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 either 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 second death of the two insureds, would have purchased for the insured's
correct age and gender. If the death benefit adjustment is made prior to the
second 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 either 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 either 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.
NONPARTICIPATING
The policy does not participate in our surplus earnings.
Form 2506 (JTVUL)-5/00
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<PAGE>
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
Before the second death, 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 second 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.
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.
Form 2506 (JTVUL)-5/00
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<PAGE>
CHANGE AND WITHDRAWAL
You may change an election at any time before the second death. 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 the second 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.
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.
Form 2506 (JTVUL)-5/00
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<PAGE>
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 2506(JTVUL)-5/00
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<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 2506 (JTVUL)-5/00
Page 31
<PAGE>
SETTLEMENT OPTION TABLE II
FEMALE
( Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
Age of Payee Age of Payee
Nearest Birth Nearest Birth
Date When First Date When First
Installment is Monthly Installment is Monthly
Payable Installments Payable Installments
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 2506 (JTVUL)-5/00
Page 32
<PAGE>
SETTLEMENT OPTION TABLE II/FEMALE
(Continued)
(Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
Age of Payee Age of Payee
Nearest Birth Nearest Birth
Date When First Date When First
Installment is Monthly Installment is Monthly
Payable Installments Payable Installments
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 2506 (JTVUL)-5/00
Page 33
<PAGE>
SETTLEMENT OPTION TABLE II
MALE
( Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
Age of Payee Age of Payee
Nearest Birth Nearest Birth
Date When First Date When First
Installment is Monthly Installment is Monthly
Payable Installments Payable Installments
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 2506 (JTVUL)-5/00
Page 34
<PAGE>
SETTLEMENT OPTION TABLE II/MALE
(Continued)
(Per $1,000 of Net Proceeds)
<TABLE>
<CAPTION>
Age of Payee Age of Payee
Nearest Birth Nearest Birth
Date When First Date When First
Installment is Monthly Installment is Monthly
Payable Installments Payable Installments
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 2506 (JTVUL)-5/00
Page 35
<PAGE>
THIS IS A NON-PARTICIPATING POLICY
THIS POLICY IS A LAST SURVIVOR FLEXIBLE PREMIUM
VARIABLE LIFE INSURANCE POLICY THIS POLICY
INCLUDES A PERSISTENCY BONUS.
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 SECOND DEATH OF
THE TWO INSUREDS. THERE IS NO MATURITY DATE. FLEXIBLE PREMIUMS ARE PAYABLE BY
YOU DURING THE LIFETIME OF EITHER INSURED UNTIL THE POLICY ANNIVERSARY NEAREST
THE YOUNGER 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 2506 (JTVUL)-5/00
Exhibit 1.A(5)(b)(i)
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 insureds under this
rider are Insured #1 and Insured #2 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 second death of the two insureds. 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 insureds are still insurable according to our normal rules of underwriting
for their current premium classes.
R2007-5/00
<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 ages, genders and premium classes of the insureds 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 both insureds are
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 both insureds are 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 both insureds are 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 either 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 either 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 either 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 second death would have purchased for the
insured's correct age or gender. If the death benefit adjustment is made prior
to the second death, 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 joint equivalent age 85. 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.
R2007-5/00
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 insureds are still insurable according to our normal rules of
underwriting for their current premium classes 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 target 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 younger 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
R2007-5/00
Page 3
Exhibit 1.A(8)(b)(xix)
AMENDMENT NO. 4
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>
<S> <C> <C>
FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE
POLICIES UTILIZING THE FUNDS ACCOUNTS
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 BENEFITS VARIABLE
UNIVERSAL LIFE
o ESTATE DESIGNER VARIABLE
UNIVERSAL LIFE
o STRATEGIC BENEFIT VARIABLE
UNIVERSAL LIFE
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: February _____, 2000
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(8)(b)(xx)
SIXTH 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 (the "Insurance Company"), Variable Insurance Products Fund, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), and Fidelity Distributors Corporation, a
Massachusetts corporation (the "Underwriter") (collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated August 10,
1994 (the "Participation Agreement"), governing how shares of the Fund'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 A 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 Fund and the Underwriter agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule A an amended Schedule A in the form attached hereto which adds
the Estate Designer Variable Universal Life and the Strategic Benefit Variable
Universal Life policies to the list of Contracts funded by the Separate
Accounts.
Executed this day of February, 2000.
----------
Security Life of Denver Insurance Variable Insurance Products Fund
Company
BY:/s/ Gary W. Waggoner BY:/s/ Robert C. Pozen
------------------------------- -----------------------------
Gary W. Waggoner Robert C. Pozen
Vice President, General Counsel Senior Vice President
and Corporate Secretary
Fidelity Distributors Corporation
BY:/s/ Kevin J. Kelly
-----------------------------
Kevin J. Kelly
Vice President
-1-
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Security Life Separate Account Al o The Exchequer Variable Annuity
(November 3, 1993) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
Security Life Separate Account Ll o First Line (Flexible Premium
(November 3, 1993) Variable Life Insurance Policy)
o Strategic Advantage Variable
Universal Life (Flexible Premium
Variable Universal Life Insurance
Policy)
o FirstLine II Variable Universal
Life (Flexible Premium Variable
Life Insurance Policy)
o Strategic Advantage II Variable
Universal Life (Flexible Premium
Variable Life Insurance)
o Variable Survivorship Universal
Life (Flexible Premium Variable
Life Insurance)
o Corporate Benefits Variable
Universal Life (Flexible Premium
Variable Life Insurance)
o Estate Designer Variable Universal
Life (Flexible Premium Variable
Life Insurance)
o Strategic Benefit Variable
Universal Life (Flexible Premium
Variable Universal Life Insurance
Policy)
-2-
Exhibit 1.A(8)(b)(xxi)
SIXTH 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"), Variable Insurance Products Fund II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (the "Fund"), and Fidelity Distributors Corporation, a
Massachusetts corporation (the "Underwriter") (collectively, the "Parties").
WHEREAS, the Parties executed a participation agreement dated August 10,
1994 (the "Participation Agreement"), governing how shares of Fund's portfolios
are to be made available to certain variable life insurance and/or variable
annuity contracts (the "Contracts") offered by Insurance Company through certain
separate accounts (the "Separate Accounts").
WHEREAS, the various Contracts for which shares are purchased are listed in
Schedule A 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, Insurance
Company, Fund, and Underwriter agree as follows:
1. The Participation Agreement is hereby amended by substituting for the
original Schedule A an amended Schedule A in the form attached hereto which adds
the Estate Designer Variable Universal Life and the Strategic Benefit Variable
Universal Life policies to the list of Contracts funded by the Separate
Accounts.
Executed this day of February, 2000.
---------
Security Life of Denver Insurance Variable Insurance Products Fund
Company
BY:/s/ Gary W. Waggoner BY:/s/ Robert C. Pozen
------------------------------- -----------------------------
Gary W. Waggoner Robert C. Pozen
Vice President, General Counsel Senior Vice President
and Corporate Secretary
Fidelity Distributors Corporation
BY:/s/ Kevin J. Kelly
-----------------------------
Kevin J. Kelly
Vice President
-1-
<PAGE>
Schedule A
Separate Accounts and Associated Contracts
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Security Life Separate Account Al o The Exchequer Variable Annuity
(November 3, 1993) (Flexible Premium Deferred
Combination Fixed and Variable
Annuity Contract)
Security Life Separate Account Ll o First Line (Flexible Premium
Variable (November 3, 1993) Life
Insurance Policy)
o Strategic Advantage Variable
Universal Life (Flexible Premium
Variable Universal Life Insurance
Policy)
o FirstLine II Variable Universal
Life (Flexible Premium Variable
Life Insurance Policy)
o Strategic Advantage II Variable
Universal Life (Flexible Premium
Variable Life Insurance)
o Variable Survivorship Universal
Life (Flexible Premium Variable
Life Insurance)
o Corporate Benefits Variable
Universal Life (Flexible Premium
Variable Life Insurance)
o Estate Designer Variable Universal
Life (Flexible Premium Variable
Life Insurance)
o Strategic Benefit Variable
Universal Life (Flexible Premium
Variable Universal
Life Insurance Policy)
-2-
Exhibit 1.A(8)(b)(xxii)
FIFTH 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 Estate Designer Variable Universal Life and the Strategic Benefit Variable
Universal Life Policies to the list of Contracts funded by the Separate
Accounts.
Executed this day of February, 2000
--------
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
-----------------------------
Gary W. Waggoner
Vice President
ATTEST: INVESCO Funds Group, Inc.
BY:/s/ Ronald L. Grooms
-----------------------------
Ronald L. Grooms
Senior Vice President
-1-
<PAGE>
SCHEDULE B
Contracts
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 Benefits Variable Universal Life (Flexible Premium Variable
Universal Life Insurance
Policy)
8. Estate Designer Variable Universal Life (Flexible Premium Variable
Universal Life Insurance
Policy)
9. Strategic Benefit Variable Universal Life (Flexible Premium Variable
Universal Life Insurance
Policy)
-2-
EXHIBIT 1.A(10)
FLEXIBLE
PREMIUM
VARIABLE
LIFE
INSURANCE
APPLICATION
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[Logo of Security Life appears here]
Q2006-9/97
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE APPLICATION
INSTRUCTIONS
FOR ALL APPLICATIONS
o Use the application approved for the state in which the applicant owner
will sign the application.
o Use dark ink to complete the application.
o Print LEGIBLY to avoid issue errors.
o Attach a complete illustration and all schedules associated with this
application to expedite policy issue process and ensure that the policy is
issued accordingly.
o Incomplete applications may require an amendment to be signed upon
delivery, or may be returned, which will delay the issue process.
o The issue state and appropriate application form will be determined by the
state in which the application was signed by the owner-applicant.
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SIGNATURES REQUIRED, PAGE 10:
o The signature of all proposed insureds (parent or guardian of the proposed
insured if below age 15).
o The signature(s) of the owner. If a corporation is the owner, one officer,
other than the proposed insured, should sign and indicate name of
corporation and title of signing officer.
o The signature of all agent/registered representative(s) included in the
sale. (Page 10 and Registered Representative's Report.)
APPLICATION -- PART I
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SECTION A:
A-3: Exercise Right to Change Insured Rider -- complete this box to identify
policy to be exchanged and return the policy along with the application and
medical information on the new proposed insured.
A-4: If the application is employer sponsored, and the policy will be
CORPORATE owned, this question should be answered "No."
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SECTION B: PROPOSED INSURED INFORMATION
B-1: The legal name of the insured will appear on the policy as indicated in
this space.
B-4 Insurance age is calculated as age nearest birthday.
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SECTION C AND SECTION D: OWNER AND BENEFICIARY DESIGNATIONS
o If you are designating more than one owner and/or beneficiary, use
Special Instructions, Section O, and indicate the second owner's name
and/or percentage of the beneficiary split. For example:
John Doe, Husband, 70%
Mary Doe, Mother, 30%
NOTE: The amount must be stated in percentages. A dollar amount may not be
specified.
o If you are designating a trust as the owner and/or beneficiary, include
the name of the Trustee, the name of the Trust and the date of the
Trust. For example:
John Doe, Trustee, of the Revocable Life Insurance Trust of
James Doe, dated November 1, 1991.
o When you are designating more than one owner, include the social security
number or tax identification number for each respective owner in Special
Instructions, Section O.
o If you have children as owners or beneficiaries, please refer to the
brochure entitled "Your Minor Child."
- --------------------------------------------------------------------------------
SECTION F: SPECIAL DATING REQUESTED
o This section provides an option for indicating a specific age and date on
which the policy applied for will be issued. This date is the POLICY
DATE only, and may differ from the INVESTMENT DATE.
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SECTION J: PREMIUM INFORMATION
J-1: Consult your Service Guide for List Bill and EFT guidelines.
J-2: Electronic Funds Transfer (EFT) is a premium payment method which the
payor may elect. If selected, the scheduled premium will automatically be
drafted from the payor's checking account.
J-3: If any Authorized Withdrawal/EFT is collected with this application, the
required premium amount as outlined in the prospectus must be collected in
order to put the policy inforce.
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SECTION K: SUITABILITY
o Must be completed or application will be returned.
o The prospectus date should reflect the date printed on the cover of the
prospectus provided at the time of solicitation.
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SECTION L: 1035 EXCHANGE INFORMATION
L-4: For purposes of 1035 Exchanges, this information is required to carry over
the correct cost basis and loan amount.
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SECTION O: SPECIAL INSTRUCTIONS
o Used for any additional information (for example, billing and mailing
instructions) and continuing your answers for owner and beneficiary
designations.
o If you are requesting child rider(s) and need to request beneficiary(ies)
other than shown in Section D, please indicate here. Include name(s)of
beneficiary(ies) and relationship.
o May be used to continue answers to question L-12, if necessary.
o Payor, accepting rating on formal application only.
APPLICATION -- PART II
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MEDICAL INFORMATION
This part of the application must be completed for each person proposed for
coverage unless the person is medically examined.
ATTACHMENTS
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VARIABLE LIFE SERVICE REQUEST FORM
This form communicates to us the owner's instructions regarding the
financial administration of the policy, with respect to Dollar Cost
Averaging, Automatic Rebalancing and Telephone Privileges/Pin Number. This
form must be returned to us if the policyowner desires any of these
features. Instructions for this form can be found on the page preceding the
form.
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TEAR OFF AND DELIVER TO APPLICANT
State and Federal law require the Fair Credit Summary of Rights and Notice
of Information Procedures be given to the owner/ applicant at the time of
application. Detach the last two pages of the application and leave with
the owner/applicant BEFORE submitting the application to us.
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<PAGE>
[Logo of Security Life appears here] Security Life of Denver Insurance Company
Variable Life Customer Service Center
P.O. Box 173888
Denver, CO 80217-3885
1-800-848-6362
APPLICATION FOR FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE TO SECURITY LIFE OF
DENVER INSURANCE COMPANY
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PART I
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Please Print All Information Using Dark Ink
- --------------------------------------------------------------------------------
SECTION A -- GENERAL INFORMATION (Complete for all cases)
A-1 [ ] Check here if insurance is for PENSION or similar tax qualified ERISA
plan.
A-2 If above statement checked, list plan type________________________________
(Example: Profit-Sharing; Defined Contribution; etc.)
<TABLE>
<CAPTION>
A-3 [ ] Exercise Right of Exchange Rider A-4 Employer Sponsored Plans check one:
<S> <C> <C> <C> <C>
Name of Insured under Policy to be Exchanged Policy Number Employee Owned? [ ] Yes [ ] No
____________________________________________ _______________
</TABLE>
- --------------------------------------------------------------------------------
SECTION B -- PROPOSED INSURED (Complete for all cases. To apply for additional
insureds complete Section G)
B-1 Name (Print full name, include suffix)
(First, Middle, Last, Suffix)
___________________________________________________________________________
B-2 Sex B-3 Birthdate B-4 Insurance Age B-5 Birthplace
[ ] Male Month Day Year (Age Nearest Birthday) (State)
[ ] Female [ | ] [ | ] [ | | | ] [ | ] __________
B-6 Social Security Number B-7 Telephone Number B-8 Height ________
[ | | ]-[ | ]-[ | | | ] [ | | ]-[ | | ]-[ | | | ] B-9 Weight ________
B-10 Address
(Street, Apt. No.)
___________________________________________________________________________
(City) (State) (Zip Code)
________________________________________ _____ [ | | | | ]-[ | | | ]
B-11 Occupation B-12 Describe duties
_______________________________ ____________________________________
B-13 Employer Name Month Year
_____________________________________ B-14 Employment date: [ | ] [ | ]
- --------------------------------------------------------------------------------
SECTION C -- OWNER (Complete only if other than Proposed Insured)
C-1 Owner Name (Print full name, include suffix - if name to appear differently
on policy, indicate in Section O)
(First, Middle, Last, Suffix)
---------------------------------------------------------------------------
C-2 Relationship to Proposed Insured C-3 Social Security Number or Tax I.D. No.
(Include any hyphens)
-------------------------------- [ | | | | | | | | | | ]
C-4 Owner Address
(Street, Apt. No.)
___________________________________________________________________________
(City) (State) (Zip Code)
________________________________________ _____ [ | | | | ]-[ | | | ]
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SECTION D -- BENEFICIARIES (Complete for all cases)
<TABLE>
<CAPTION>
D-1
<S> <C> <C>
Primary Beneficiary(ies) (Print Full Names) Relationship to Proposed Insured Birth date
_______________________________________________ ____________________________________ _____________
Contingent Beneficiary(ies) (Print Full Names) Relationship to Proposed Insured Birth date
_______________________________________________ ____________________________________ _____________
</TABLE>
Q2006-9/97 1
<PAGE>
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SECTION E -- PLAN INFORMATION (Complete for all cases)
E-1 FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
a. Product Name ___________________________________________
b. Stated Death Benefit $ ________________
c. Adjustable Term Rider [ ] Yes [ ] No
If Yes: Initial Target Death Benefit $ _______________
(Attach Schedule from Illustration for subsequent Target Death
Benefit changes.)
d. Scheduled Periodic Premium $ ________________
(If premium varies from year to year attach schedule)
e. [ ] Option 1 (Stated Death Benefit. If no option selected, Option 1
will apply.)
[ ] Option 2 (Stated Death Benefit plus Account Value.)
[ ] Option 3 (Stated Death Benefit plus Premiums Paid less
Withdrawals.)
f. [ ] Guideline Premium Cash Value Corridor Test
[ ] Cash Value Accumulation Test
g. First Year Pour-In (if any) $ _______________
h. Additional Riders
[ ] Accidental Death $ ________________
[ ] Additional Insured $ _______________(Complete section G)
[ ] Waiver of Cost of Insurance
[ ] Waiver of Specified Premium $ ______________
[ ] Child's Insurance Rider (# of Units) ______ (Complete section H)
[ ] Guaranteed Insurability Rider _________________
[ ] Other _____________________________________________________________
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SECTION F -- SPECIAL DATING REQUESTED
(If neither box checked below, policy will be issued at age nearest birthday as
of issue date.)
<TABLE>
<CAPTION>
Mo Day Year
<S> <C> <C> <C> <C> <C> <C>
F-1 [ ] Date to Save Age Specify Requested Age ____ F-2 [ ] Specific Date [ | ] [ | ] [ | | | ]
</TABLE>
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SECTION G -- ADDITIONAL INSURED RIDER
G-1 Name of Proposed Additional Insured (If more than one additional insured,
specify details in special instructions, Section O)
(First, Middle, Last, Suffix)
___________________________________________________________________________
G-2 Relationship to proposed insured _________________________________________
<TABLE>
<CAPTION>
Month Day Year
<S> <C> <C> <C>
G-3 Birthdate [ | ] [ | ] [ | | | ] G-4 Social Security Number [ | | ]-[ | ]-[ | | | ]
</TABLE>
G-5 Height _____ G-6 Weight _____ G-7 Insurance Age (Age nearest birthday)[ | ]
G-8 Show beneficiary for additional insured if different from beneficiary named
in Section D.
Name: __________________ Relationship: ______________ Birth date: _______
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SECTION H -- CHILD RIDER
Birthdate Mo/Day/Yr Height Weight
H-1 Child ____________________________|_____/______/________|_________|________
H-2 Child ____________________________|_____/______/________|_________|________
H-3 Child ____________________________|_____/______/________|_________|________
H-4 Child ____________________________|_____/______/________|_________|________
2
<PAGE>
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SECTION I -- GUARANTEED MINIMUM DEATH BENEFIT OPTION
<TABLE>
<CAPTION>
I-1 GUARANTEE PERIOD (SELECT ONE, IF OPTION DESIRED; OTHERWISE THERE WILL BE NO GUARANTEED PERIOD)
<S> <C>
[ ] Later of ten years or proposed insured's age 65 [ ] Lifetime of proposed insured
</TABLE>
Note: The Guarantee Period will terminate if:
1. You fail to pay the required Guarantee Period Annual premium defined in
your prospectus; or
2. Your Account Value on any Monthly Processing date is not diversified
according to the following rules:
a. No more than 35% of your Net Account Value may be invested in any
one division; and
b. 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.
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SECTION J -- PREMIUM INFORMATION
J-1 PREMIUM MODE (If no option selected - Premium mode will be quarterly)
[ ] Annual
[ ] Quarterly
[ ] Semi-Annual
[ ] Monthly (only available for List Bill and Authorized Withdrawal/EFT)
J-2 PAYMENT METHOD (If no option selected - Payment Method will be Direct Bill
for Annual, Semi-Annual or Quarterly Premium Mode or EFT for Monthly Mode)
[ ] Direct Bill (not available for monthly)
[ ] Single Premium
[ ] List Bill Existing List Bill Number _________________________
[ ] Authorized Withdrawal (Complete Authorized Withdrawal/EFT Form)
J-3 PREMIUM COLLECTED WITH APPLICATION
The agent is not authorized to collect any premium before delivering a
policy unless the Binding Limited Life Insurance Coverage form has been
completed and signed by the agent, applicant and proposed insured and a
copy given to the applicant. THERE IS NO COVERAGE BEFORE DELIVERY OF THE
POLICY EXCEPT AS PROVIDED BY THAT FORM.
Yes No
[ ] [ ] a. Has agent collected any premium (including any Authorized
Withdrawal/EFT Form) with this application? If yes, total
premium (including any pour-in) collected $ _____________
[ ] [ ] b. If answer to (a) is "Yes," has agent complied with the
Binding Limited Life Insurance Coverage requirements?
[ ] [ ] c. Has the applicant signed and received a Binding Limited
Life Insurance Coverage form in connection with this
application? Attach signed copy of Binding Limited Life
Insurance Coverage form.
NOTE: If any Authorized Withdrawal/EFT is collected with this application, the
required premium amount as outlined in the prospectus must be collected in order
to put the policy inforce.
3
<PAGE>
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SECTION J -- PREMIUM INFORMATION (continued)
J-4 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 Hard Assets
____% V.I. Capital Appreciation ____% High Yield ____% Worldwide Emerging Markets
____% Utilities ____% Worldwide Bond
Alger American ____% Total Return ____% Worldwide Real Estate
____% Small Capitalization ____% VIF Small Company Growth
____% MidCap Growth
____% Growth Neuberger & Berman
____% Leveraged AllCap ____% Limited Maturity Bond
____% Growth Portfolio
Fidelity Investments ____% Partners Portfolio
____% Asset Manager
____% Growth Portfolio
____% Money Market
____% Index 500
</TABLE>
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SECTION K -- SUITABILITY
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
4
<PAGE>
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SECTION L -- PERSONAL INFORMATION
L-1 List life insurance policies on all persons proposed for coverage (1) now
in force or (2) applied for within the last 12 months, or (3) pending now.
If NONE, Check this box [ ]
<TABLE>
<CAPTION>
Name of Year A.D. Business or Indicate if Inforce,
Proposed Insured Company Issued Amount Amount Personal Applied for, or Pending
<S> <C> <C> <C> <C> <C> <C>
--------------------|---------------------|-----------|-----------|---------|-------------|-----------------------------|
--------------------|---------------------|-----------|-----------|---------|-------------|-----------------------------|
--------------------|---------------------|-----------|-----------|---------|-------------|-----------------------------|
</TABLE>
<TABLE>
<CAPTION>
Yes No
<S> <C> <C> <C>
L-2 Has any proposed insured ever been declined for insurance (or reinstatement)
or been offered insurance with restricted benefits or at other than
standard rates? (If "Yes" give details in section L-12) [ ] [ ]
L-3 Is this insurance to replace, or will it cause any change in, any insurance or
annuity on any person proposed for coverage? (If "Yes" submit a completed replacement form
with this application.) [ ] [ ]
L-4 a. Is this insurance intended to be a tax free exchange - 1035 Exchange?
(If "Yes" indicate Company in section L-12) [ ] [ ]
b. If "Yes" will any policy loan be carried over? [ ] [ ]
L-5 Has any person proposed for coverage:
a. ever smoked cigarettes? (If "Yes," give name and details in section L-12) [ ] [ ]
b. ever used tobacco in any form other than cigarettes? (If "Yes" give name and
details in section L-12) [ ] [ ]
c. ever stopped smoking cigarettes? (If "Yes" give name and date last smoked in
section L-12) [ ] [ ]
d. ever stopped using tobacco in any form other than cigarettes. (If "Yes" give
name, type and date last used in section L-12) [ ] [ ]
L-6 Within the last 3 years or within the next 12 months, has any person proposed
for coverage:
a. flown (or planned to fly) other than as a passenger on a regularly scheduled
airline?
(If "Yes" complete Aviation Supplement.) [ ] [ ]
b. had a drivers license denied, revoked, or suspended; had three or more moving
violations; been convicted of an alcohol or drug related driving offense; been
involved in two or more auto accidents?
(If "Yes" give details in section L-12) [ ] [ ]
c. participated in (or intend to participate in) vehicle racing (on land or water),
ballooning, bobsledding, hang gliding, ultralight aviation, horse racing,
mountaineering, rodeo, scuba/skin diving, skydiving/parachuting, or bungee cord
jumping? (If "Yes" complete Avocation Supplement) [ ] [ ]
L-7 List Driver's License No. here [ | | | | | | | | | | | ] State _____
L-8 Does any person proposed for coverage contemplate traveling or residing outside the U.S.A.
or Canada within the next 12 months? (If "Yes" give details in section L-12) [ ] [ ]
L-9 Has any person proposed for coverage been convicted of a felony within the last
5 years? (If "Yes" give details in section L-12) [ ] [ ]
L-10 Has any person proposed for coverage:
a. ever had, or now have, any type of heart disease, cancer, leukemia, or
malignant tumor? (If "Yes" give details in section L-12) [ ] [ ]
b. ever been diagnosed by a licensed member of the medical profession as having
Acquired Immune Deficiency Syndrome (AIDS) or any immune deficiency or disorder?
(DO NOT ANSWER THIS QUESTION IF YOU RESIDE IN NEVADA.) (If "Yes" give details in
section L-12) [ ] [ ]
L-11 Does any person proposed for coverage now participate in any regular physical
exercise program? [ ] [ ]
</TABLE>
L-12 Details of "YES" Answers to Questions L-2 through L-11
5
<PAGE>
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SECTION M -- MEDICAL EXAM CERTIFICATE (Complete when submitting medical
examination of another insurance company.)
M-1 The attached examination is on the life of: _______________________________
M-2 Name of insurance company for which examination was made and date of
examination:
Company Date of Examination
________________________________________________ _________________________
M-3 To the best of the proposed insured's knowledge and belief, are the
statements in the examination true as of today? [ ] Yes [ ] No
(If "No," explain in "Remarks")
M-4 Has the proposed insured consulted a doctor or other practitioner or
received medical or surgical advice since the date of the examination?
[ ] Yes [ ] No
(If "Yes," explain in "Remarks")
Remarks to No. M-3 and M-4
- --------------------------------------------------------------------------------
SECTION N -- FINANCIAL INFORMATION Must be completed where the face amount
exceeds (1) $200,000 for business insurance, (2) $300,000 for an insured 65 and
under, or (3)$100,000 for an insured over 65.
N-1 What is the purpose of the insurance applied for? _________________________
If the insurance applied for is personal, what is the proposed insured's:
Annual Earned Income $ __________ Total Assets $ ___________
Annual Interest & Other Income $ __________ Total Liabilities $ ___________
Total Net Worth $ ___________
N-2 If Business Insurance: Last Year 2 Years Ago
a. Annual net profit
(before taxes, past two years) $ _______________ $ ________________
b. Business reason for insurance (check at least one box and furnish
details)
[ ]Key Person [ ]Stock Redemption/Buy and Sell [ ]Other _____________
c. If Key Person insurance:
(1) Are all partners or key people to be covered? [ ] Yes [ ] No
(If "No," explain)
(2) Does proposed insured have an ownership interest in the business?
[ ] Yes [ ] No
If "Yes," what is proposed insured's percent of ownership? ______%
(3) What is proposed insured's annual income? $ _______________
6
<PAGE>
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SECTION N -- FINANCIAL INFORMATION (Continued) Must be completed where the
face amount exceeds (1) $200,000 for business insurance, (2) $300,000 for an
insured 65 and under, or (3)$100,000 for an insured over 65.
d. If to fund stock redemption, is there a written agreement?
[ ] Yes [ ] No
(1) What is the book value of the business? $ ____________________
(2) What is the market value of the business? $ _____________________
(3) How was the value determined? ____________________________________
N-3 Is this insurance to guarantee a loan? [ ] Yes [ ] No
a. If "Yes," is the lender requiring this insurance? [ ] Yes [ ] No
b. Is the loan finalized? [ ] Yes [ ] No
c. What is the term of the loan? (Months) _____________
d. Name of lender: ______________________________________________________
e. Amount of loan: ______________________________________________________
f. Purpose of loan: ______________________________________________________
g. Are others being insured for the same purpose? [ ] Yes [ ] No
If Yes, who and for what amount?
________________________________________ Amount $ ____________________
________________________________________ Amount $_____________________
N-4 Additional remarks about purpose of the insurance and how the amount of
insurance was determined.
Remarks to Section N
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SECTION O -- SPECIAL INSTRUCTIONS
7
<PAGE>
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PART II
- --------------------------------------------------------------------------------
Please Print All Information Using Dark Ink
Part II MUST be completed for EACH person proposed for coverage unless the
person is medically examined.
- --------------------------------------------------------------------------------
SECTION A -- PERSONAL PHYSICIANS
A-1 For each person proposed for coverage, give the name and address of the
personal physicians and the date and reason the physician was last seen.
IF NONE, CHECK HERE [ ]
<TABLE>
<CAPTION>
Proposed Insured's Name Name and Address of Physician Date and Reason Last Seen
<S> <C> <C>
|---------------------------------------|-------------------------------
|---------------------------------------|-------------------------------
- -------------------------|---------------------------------------|-------------------------------
|---------------------------------------|-------------------------------
|---------------------------------------|-------------------------------
- -------------------------|---------------------------------------|-------------------------------
|---------------------------------------|-------------------------------
|---------------------------------------|-------------------------------
- -------------------------|---------------------------------------|-------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SECTION B -- MEDICAL INFORMATION (Complete for each person proposed for
coverage.) (For all of Section B, circle each specific condition and give
details of all "Yes" answers in the Details Section following question B-11.
Give name of disease, symptoms, etc.; the date of onset; the duration; number of
attacks; and name and addresses of medical professional or hospital providing
services.)
B-1 Has any person proposed for coverage ever been treated for, or been told by
a member of the medical profession that the person has:
<TABLE>
<CAPTION>
Yes No
<S> <C> <C>
a. pain, pressure, or discomfort in the chest or arms; high blood pressure; heart murmur; irregular
heartbeat; or any other disease or disorder of the heart? [ ] [ ]
b. anemia; leukemia; or any other disorder of the blood, veins or arteries? [ ] [ ]
c. asthma; bronchitis; pneumonia; tuberculosis; emphysema; shortness of breath; chronic cough,
or any other disorder of the lungs or respiratory system? [ ] [ ]
d. mental or emotional disorder, nervous breakdown; epilepsy; convulsions; chronic fatigue;
fainting spells; paralysis; stroke; or any other disorder of the brain or nervous system? [ ] [ ]
e. significant weight loss; ulcer; colitis; diverticulitis; hepatitis; cirrhosis; persistent diarrhea;
or other disease of the liver, gall bladder, pancreas, stomach or intestines? [ ] [ ]
f. diabetes; thyroid; recurrent enlarged glands; or other glandular disease or disorder? [ ] [ ]
g. arthritis; gout; or any bone, joint, muscle, or skin disorder? [ ] [ ]
h. polyp, tumor, or cancer? [ ] [ ]
i. disorder of the urinary tract or kidneys; urethritis; cystitis; sugar, albumin, or blood in the
urine? [ ] [ ]
j. prostate or testicular disease; venereal disease; herpes; or disease of the uterus, ovaries or
breasts? [ ] [ ]
k. any disorder of the eyes; ears; nose; or throat? [ ] [ ]
l. any other health impairment or medically or surgically treated condition within the last 5 years
not mentioned above? [ ] [ ]
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Yes No
<S> <C> <C> <C>
B-2 Has any person proposed for coverage ever been treated for or been told by a licensed member
of the medical profession that the person has Acquired Immune Deficiency Syndrome (AIDS) or
any disorder or deficiency of the Immune System? (DO NOT ANSWER THIS QUESTION IF YOU RESIDE
IN NEVADA.) [ ] [ ]
B-3 Within the past 10 years, has any person proposed for coverage:
a. tested positive in a test to detect antibodies to the AIDSvirus (Human T-Cell Lymphotrophic
virus type III; HTLV-III, Human Immunodeficiency Virus [HIV])? (DO NOT ANSWER
THIS QUESTION IF YOU RESIDE IN CONNECTICUT OR MAINE.) [ ] [ ]
b. had a blood transfusion? [ ] [ ]
B-4 Within the past 5 years, has any person proposed for coverage been a patient in or had treatment
at a hospital, clinic, sanitarium or other medical facility? [ ] [ ]
B-5 Is any person proposed for coverage now under regular medical observation by, or taking
treatment from, a member of the medical profession? [ ] [ ]
B-6 Other than as stated in the answers above, has any person proposed for coverage, within the
last 5 years:
a. had a checkup or consultation with a member of the medical profession? [ ] [ ]
b. had an electrocardiogram, x-ray, blood test or other test? [ ] [ ]
c. been advised by a member of the medical profession to have any diagnostic test,
hospitalization, or surgery which was not completed? [ ] [ ]
B-7 Does any person proposed for coverage have a deformity or an amputation? [ ] [ ]
B-8 Does any person proposed for coverage now take any medicine prescribed by a member
of the medical profession? [ ] [ ]
B-9 Except as legally prescribed by a physician, has any person proposed for coverage ever
used narcotics, cocaine, marijuana, or any hallucinatory or mind altering substances in the
past 10 years? [ ] [ ]
B-10 In the last 5 years, has any person proposed for coverage received treatment for or joined an
organization because of the alcoholism or drug addiction of that person? [ ] [ ]
B-11 Has any parent, brother, or sister of any person proposed for coverage ever
had cancer; diabetes; high blood pressure; heart or kidney disease; nervous
or mental disorder; tuberculosis; or hereditary disorder? [ ] [ ]
</TABLE>
<TABLE>
<CAPTION>
Details of "Yes" answers to questions B-1 through B-11
Ques. Name of
No. Proposed Insured Complete Details (including, if any, name of physician noted in Section A-1)
<S> <C> <C>
- ------|--------------------|-----------------------------------------------------------------------------------------------
- ------|--------------------|-----------------------------------------------------------------------------------------------
- ------|--------------------|-----------------------------------------------------------------------------------------------
- ------|--------------------|-----------------------------------------------------------------------------------------------
- ------|--------------------|-----------------------------------------------------------------------------------------------
- ------|--------------------|-----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
SECTION C -- FAMILY HISTORY
Living Deceased
Family Member Age State of Health Age at Death/Cause
- ------------- --- --------------- ------------------
Father
Mother
Brothers
Sisters
9
<PAGE>
AGREEMENTS
All statements and answers in this application (which includes Part I, Part II,
and 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 MAINE, MISSOURI, OREGON, SOUTH CAROLINA, AND SOUTH DAKOTA.)
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.
In those states, including Maryland, where change in amount,
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 PROVIDED IN ANY
BINDING LIMITED LIFE INSURANCE COVERAGE, 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. Binding Limited Life Insurance Coverage - Any pre-delivery insurance
coverage is provided in the Binding Limited Life Insurance Coverage form.
That coverage is available only if: a premium is accepted by the agent; the
agent has authority to accept premium as set out in that form; and the form
is completed and signed by the agent, applicant, and proposed insured.
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.
8. 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.
AUTHORIZATION TO OBTAIN AND DISCLOSE INFORMATION
Security Life of Denver Insurance Company ("Security Life") may obtain
information about me or my minor children from: any physicians; medical
practitioner; hospital, clinic or other medical facility; employer; other
insurance companies or institutions; consumer reporting agency; or Medical
Information Bureau, Inc. (MIB, Inc.). The purpose is to evaluate my application
for insurance or benefits. Security Life may obtain an investigative consumer
report and any records or other information available as to diagnosis, treatment
and prognosis of any physical or mental condition.
Security Life may obtain any drug, physical and mental health, and
alcohol-related information which may be protected by federal or state laws and
regulations. As it pertains to alcohol and drug information covered by federal
regulation, this authorization may be revoked at any time by written notice to
Security Life. But any action taken before my written revocation is received by
Security Life will not be affected.
Security Life may make a brief report about me or my children to MIB, Inc.
Security Life may disclose information to: its reinsurers; those who perform
services for Security Life on my application for insurance or benefits: or those
companies to which I have applied or may apply for life or health insurance or
benefits. Disclosure may be made when required or permitted by law.
This is valid for two and one-half years from the date below. An original or
copy may be used by Security Life or its authorized representatives to obtain
information. I have read and received a copy of this authorization. I also have
a copy of the Notice of Information Procedures. It includes the MIB, Inc.
and Fair Credit Reporting Notices.
NOTICE: 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.
Signature of
Proposed Insured ________________________________________ Date ________________
(If below age 15, signature of parent or guardian)
Signature of Owner (If other than proposed insured)
OR (IF APPLICABLE) Corporate Owner Signature ___________________________________
(If a firm or corporation is to be owner, the signature and
title of an officer other than the proposed insured is required.)
Signed by Owner at (State) _______________
Signature of Spouse _________________________________
Signature of Additional Insured(s)
(If proposed for coverage) _____________________________________________
<TABLE>
<CAPTION>
Except for any medical exam form, I certify that I have asked and recorded completely and accurately the answers to all questions
on this application. I know of nothing else affecting the risk.
<S> <C> <C>
Signature of Agent/Registered Rep. ______________________________________ Reg.Rep. Number ________________________
Signature of Agent/Registered Rep. ______________________________________ Reg.Rep. Number ________________________
Signature of Agent/Registered Rep. ______________________________________ Reg.Rep. Number ________________________
</TABLE>
_______________________________________ ______________________________________
Name of Broker/Dealer/Branch/OSJ Address of Broker/Dealer/Branch/OSJ
HOME OFFICE
CORRECTIONS
(FOR HOME OFFICE
USE ONLY)
(Not applicable in West Virginia)
10
<PAGE>
REGISTERED REPRESENTATIVE'S REPORT
(Must be completed and signed for every application)
<TABLE>
<CAPTION>
Yes No Yes No
<S> <C> <C> <C> <C> <C> <C>
1) Do you have knowledge or reason to 5) What is the amount of insurance in force
believe that replacement of existing on the spouse of the proposed insured?
insurance or annuity may be involved? [ ] [ ] $_______________________
If Yes, explain:_________________________ 6) If any proposed insured is a minor, what
2) How long have you known the proposed is the amount of insurance on:
insured? ______ Years
Are you related? [ ] [ ] Father $___________ Mother $__________
If so, how? ____________________________ Brothers $___________ Sisters $__________
3) Does the proposed insured speak English? [ ] [ ]
7) Will the applicant accept this policy if it
Was the application interpreted for and is a "Modified Endowment" at issue? [ ] [ ]
understood by the proposed insured? [ ] [ ] 8) If a medical exam is required, has it been
ordered? [ ] [ ]
Are all persons proposed for coverage 9) What is the source of the first premium payment:
U.S. citizens? [ ] [ ] [ ] Applicant check
If not, how long in U.S.? _____Mos. _____Yrs. [ ] Other (specify):________________________
4) Did proposed insured approach you for
this insurance? [ ] [ ]
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
10) Writing Registered Representative (Print) ______________________________________ Production Credit Split
Variable
Writing Registered Representative (Sign) Agent Number Percent
_______________ _______
Date _________________________ Registered Representative Number: [ | | | | | ] _______________ _______
_______________ _______
</TABLE>
- --------------------------------------------------------------------------------
11) What was the PRIMARY purpose of the insurance?
PERSONAL PLANNING Business Planning
A [ ] Estate/Death Tax J [ ] Executive Bonus
B [ ] Family Protection K [ ] Qualified Plan
C [ ] Mortgage Protection L [ ] Deferred Compensation
D [ ] College Funding M [ ] Buy-Sell
E [ ] Gift/Charitable N [ ] Key Executive
F [ ] Retirement Maximizer O [ ] Employee Benefit
G [ ] IRP/PPP/PRO P [ ] Other ______________________
H [ ] Savings
I [ ] Other _________________________
- --------------------------------------------------------------------------------
12) Who was the PRIMARY decision-maker involved?
<TABLE>
<CAPTION>
PERSONAL PLANNING BUSINESS PLANNING
<S> <C> <C> <C>
A [ ] Insured D [ ] Grandparent G [ ] Businessowner J [ ] Board of Directors
B [ ] Insured and Spouse E [ ] Child(ren) H [ ] Attorney K [ ] Trustee
C [ ] Parent F [ ] Other ______________ I [ ] Accountant L [ ] Other __________________
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
13) Did the Home Office or Regional Staff assist you? [ ]Yes [ ]No (If yes, check all that apply.)
<S> <C> <C> <C>
A [ ] Illustration D [ ] Template design G [ ] Family Asset Review J [ ] Other __________________
B [ ] Case design E [ ] Estate Analysis H [ ] Competition Services
C [ ] Sample Documents F [ ] Business Analysis I [ ] Legal Consultation
</TABLE>
11
<PAGE>
INSTRUCTIONS FOR COMPLETING VARIABLE LIFE SERVICE REQUESTS FORM
SECTION 1 -- SECTIONS TO BE COMPLETED
- -------------------------------------------------------------
> Complete each of the sections indicated for each option.
> Obtain signatures and date in Section 9.
SECTION 2 -- POLICY INFORMATION:
- -------------------------------------------------------------
> New Policies. If the service request is in connection with a new policy
application please enter the name of the proposed insured, the proposed
policyowner, the policy face amount and the date the application was signed
in Section 2A.
> Existing Policies. If the service request is for an existing policy, please
enter the policy number in Section 2B.
SECTION 3 -- PREMIUM PAYMENT ALLOCATION CHANGE REQUEST
- -------------------------------------------------------------
o Enter your future premium allocation.
o Premium allocations must be made only in whole percentages.
o The sum of all premium allocations must equal 100%.
SECTION 4 -- TELEPHONE PRIVILEGE AUTHORIZATION OR REVOCATION:
- -------------------------------------------------------------
> You may give each policyowner and your Registered Representative the
authority to transfer policy values among the divisions or to request a
partial withdrawal by telephone. If you elect telephone privileges, you must
also have a PIN number. If you wish to use a specific PIN number, please
indicate that number on the request form in Section 6.
o Mark the boxes indicating the individuals for whom telephone
authority is granted.
o To revoke telephone privileges for a specific individual, mark the box next
to the persons for whom privileges are to be revoked.
o If you are revoking telephone privileges for your registered
representative, the PIN number will be changed.
SECTION 5 -- AUTOMATIC REBALANCING OPTION:
- -------------------------------------------------------------
> GENERAL
o The total of all automatic rebalancing allocations must equal 100%.
o Automatic rebalancing may be done at the same time as dollar cost
averaging. If you do these simultaneously, exclude the division from which
the dollar cost averaging transfers will be taken.
o Automatic rebalancing percentages may be different from the premium
allocation percentages.
> TO INITIATE AUTOMATIC REBALANCING OPTION:
o Enter the percentage for each Division you wish to include in
automatic rebalancing. The total of all percentages must equal 100%.
[IMPORTANT REMINDER: If you also have elected the Guaranteed Minimum
Death Benefit, you must invest your funds in at least 5 Divisions with no
more than 35% in any one Division.]
o Indicate the frequency and date with which you wish automatic rebalancing
to occur.
> TO CHANGE YOUR AUTOMATIC REBALANCING PERCENTAGES OR FREQUENCY:
o Enter the percentage for each division you wish to include in
automatic rebalancing. The total of all percentages must equal 100%.
o Indicate the frequency and date with which you wish automatic
rebalancing to occur.
SECTION 6 -- PIN NUMBER CHANGE:
- -------------------------------------------------------------
o You must have a PIN number if you elect the telephone privilege option.
o If you wish to use a specific PIN number, please indicate that number in
this section.
SECTION 7 -- DOLLAR COST AVERAGING OPTION:
- -------------------------------------------------------------
> TO INITIATE OR CHANGE DOLLAR COST AVERAGING:
o Changes to Dollar Cost Averaging allocations are allowed once each policy
year.
o Enter the total percentage/dollar amount you wish to have transferred from
either the Money Market or the Bond Division into the Divisions of the
Variable Account.
o Enter the percentage/dollar amount you wish to have transferred into
each selected Division of the Variable Account.
[IMPORTANT NOTE: When transferring funds from one Division to
another, you may:
-- transfer dollar amounts to dollar amounts
-- transfer dollar amounts to percentages
-- transfer percentages to percentages
You may not transfer percentages to dollar amounts.]
o Percentages must add up to 100%.
o Dollar amounts must add up to the total dollar amount to be
transferred.
o Indicate the frequency and date with which you wish dollar cost averaging
to occur.
o You may specify a date for Dollar Cost Averaging to terminate. You may also
specify a dollar amount so that when the Accumulation value reaches this
dollar amount, Dollar Cost Averaging will terminate.
SECTION 8 -- DIVISION TRANSFER REQUEST:
- -------------------------------------------------------------
> Fund Transfers Among Divisions
o Enter the dollar/percentage you wish to transfer in the "Transfer
From" column. Enter the dollar/percentage you wish to transfer into a
Division in the "Transfer To" column.
[IMPORTANT NOTE: When transferring funds from one Division to
another, you may:
-- transfer dollar amounts to dollar amounts
-- transfer dollar amounts to percentages
-- transfer percentages to percentages
You may not transfer percentages to dollar amounts.]
o A minimum of $100 must be transferred. This minimum need not come
from any one Division or be transferred to any one Division as long as the
total amount requested to be transferred equals at least $100.
o The total dollar amount shown in the "Transfer To" column must equal the
total dollar amount shown in the "Transfer From" column.
o The total percentages shown in the "Transfer To" column must equal 100%.
o Transfers to or from the Guaranteed Interest Division have specific time
and amount limitations. Please refer to your policy or prospectus for
additional information.
<PAGE>
<TABLE>
<S> <C>
VARIABLE LIFE SECURITY LIFE OF DENVER INSURANCE COMPANY [Logo of Security Life appears here]
SERVICE REQUESTS FORM Variable Life Customer Service Center
FOR NEW AND EXISTING VARIABLE LIFE POLICIES P. O. Box 173888, Denver, CO 80217-3885
1-800-848-6362
</TABLE>
- --------------------------------------------------------------------------------
SECTION 1: SECTIONS TO BE COMPLETED
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
For Automatic Rebalancing Option-- Complete Sections 2, 5 & 9 For Division Transfer Requests-- Complete Sections 2, 8 & 9
For Dollar Cost Averaging Option-- Complete Sections 2, 7 & 9 For Telephone Transfer Authorization/Revocation -
Complete Sections 2, 4 & 9
For Premium Allocation Change Requests-- Complete Sections 2, 3 & 9 For PIN Number Changes-- Complete Sections 2, 6 & 9
</TABLE>
- --------------------------------------------------------------------------------
SECTION 2: POLICY INFORMATION
- --------------------------------------------------------------------------------
A. [ ] FOR NEW POLICIES:
Proposed Policyowner Name:___________________________
Proposed Insured's Name:___________________________
Policy Face Amount:___________________________
Policy Application Date:___________________________
B. [ ] FOR EXISTING POLICIES:
Policyowner Name:___________________________
Policy No.:___________________________
- --------------------------------------------------------------------------------
SECTION 3: PREMIUM ALLOCATION CHANGE REQUEST
- --------------------------------------------------------------------------------
NEUBERGER & BERMAN ALGER AMERICAN
_____% Limited Maturity Bond _____% Small Capitalization
_____% Growth Portfolio _____% MidCap Growth
_____% Partners Portfolio _____% Growth
VAN ECK _____% Leveraged AllCap
_____% Worldwide Hard Assets FIDELITY INVESTMENTS
_____% Worldwide Real Estate _____% Growth Portfolio
_____% Worldwide Bond Fund _____% Overseas
_____% Worldwide Emerging _____% Money Market
Markets _____% Index 500
INVESCO _____% Asset Manager
_____% Industrial Income AIM
_____% High Yield _____% V.I. Government
_____% Utilities Securities
_____% Total Return _____% V.I. Capital
_____% Small Company Growth Appreciation
_____% GUARANTEED INTEREST DIVISION
- --------------------------------------------------------------------------------
SECTION 4: TELEPHONE PRIVILEGE AUTHORIZATION OR REVOCATION
- --------------------------------------------------------------------------------
[ ] TELEPHONE PRIVILEGE AUTHORIZATION: I/We authorize Security Life of
Denver to accept telephone instructions from the Owners/ Registered
Representative of the policy listed above:
[ ] Owners Only [ ] Owner and Registered Representative
[ ] REVOCATION OF TELEPHONE PRIVILEGE AUTHORIZATION: I/We revoke all
telephone privilege authorization in place on the policy listed above for
the following persons:
[ ] Owners and Registered Representative
[ ] Registered Representative Only
By signing this form, I/we agree to hold harmless and indemnify Security Life
for any losses arising from such authorization/revocation instructions. We
further authorize Security Life to record telephone conversations with any
person utilizing telephone privileges on the policy listed in Section 2. I/We
understand that Security Life reserves the right to discontinue the telephone
privilege at any time.
- --------------------------------------------------------------------------------
SECTION 5: AUTOMATIC REBALANCING OPTION
- --------------------------------------------------------------------------------
[ ] INITIATE AUTOMATIC REBALANCING (complete below)
[ ] CHANGE AUTOMATIC REBALANCING (complete below)
AUTOMATIC REBALANCING ALLOCATION
NEUBERGER & BERMAN ALGER AMERICAN
_____% Limited Maturity Bond _____% Small Capitalization
_____% Growth Portfolio _____% MidCap Growth
_____% Partners Portfolio _____% Growth
VAN ECK _____% Leveraged AllCap
_____% Worldwide Hard Assets FIDELITY INVESTMENTS
_____% Worldwide Real Estate _____% Growth Portfolio
_____% Worldwide Bond Fund _____% Overseas
_____% Worldwide Emerging _____% Money Market
Markets _____% Index 500
INVESCO _____% Asset Manager
_____% Industrial Income AIM
_____% High Yield _____% V.I. Government
_____% Utilities Securities
_____% Total Return _____% V.I. Capital
_____% Small Company Growth Appreciation
_____% GUARANTEED INTEREST DIVISION
FREQUENCY AND DATE OF AUTOMATIC REBALANCING:
(If no options are marked, frequency will be quarterly and/or date will be last
valuation date of calendar period.)
FREQUENCY:
[ ] Monthly [ ] Quarterly [ ] Semi-annually [ ] Annually
DATE:
[ ] Policy Processing Date - Date on which processing will occur based on
frequency selected beginning______________________________
(Month/Date)
[ ] Last Valuation Date of Calendar Period
[ ] Specific Date each Period beginning_______________________
(Specify Date)
- --------------------------------------------------------------------------------
SECTION 6: PIN NUMBER CHANGE
- --------------------------------------------------------------------------------
[ ] Please issue a new Personal Identification Number (PIN #) for the policy
listed above.
[ ] Use the following specific number ____________________
I/We understand that only individuals with telephone privilege authority will be
notified of the PIN Number change.
FOR HOME OFFICE USE ONLY.
<PAGE>
- --------------------------------------------------------------------------------
SECTION 7: DOLLAR COST AVERAGING OPTION
- --------------------------------------------------------------------------------
[ ] INITIATE DOLLAR COST AVERAGING (complete below)
[ ] CHANGE DOLLAR COST AVERAGING (complete below)
Please transfer $_________ or _________% from:
(check one only)
[ ] Fidelity Investment Money Market Division
[ ] Neuberger & Berman Limited Maturity Bond Division
into: the Variable Account Division(s) selected below.
DOLLAR COST AVERAGING ALLOCATION
NEUBERGER & BERMAN
$________or________% Limited Maturity
$________or________% Growth
$________or________% Partners
ALGER AMERICAN
$________or________% Small Capitalization
$________or________% Midcap Growth
$________or________% Growth
$________or________% Leveraged AllCap
FIDELITY INVESTMENTS
$________or________% Asset Manager
$________or________% Growth Portfolio
$________or________% Overseas
$________or________% Money Market
$________or________% Index 500
INVESCO
$________or________% Industrial Income
$________or________% High Yield
$________or________% Utilities
$________or________% Total Return
$________or________% Small Company Growth
VAN ECK
$________or________% Worldwide Hard Assets
$________or________% Worldwide Emerging Markets
$________or________% Worldwide Real Estate
$________or________% Worldwide Bond
AIM
$________or________% V.I. Government Securities
$________or________% V.I. Capital Appreciation
$________or________% GUARANTEED INTEREST DIVISION
FREQUENCY AND DATE OF DOLLAR COST AVERAGING:
(If no options are marked, frequency will be monthly and/or date will be policy
processing date.)
FREQUENCY:
[ ] Monthly [ ] Quarterly [ ] Semi-annually [ ] Annually
DATE:
[ ] Policy Processing Date - Date on which processing will occur based on
frequency selected beginning_________________________
(Month/Date)
[ ] Specific Date each Period beginning__________________
(Specify Date)
TERMINATE:
[ ] Terminate Dollar Cost Averaging on (date)___________________
[ ] Terminate Dollar Cost Averaging when Division from which money is being
transferred reaches $______________________
- --------------------------------------------------------------------------------
SECTION 8: DIVISION TRANSFER REQUEST
- --------------------------------------------------------------------------------
[ ] CHANGE PREMIUM PAYMENT ALLOCATION
[ ] TRANSFER BETWEEN DIVISIONS
TRANSFER FROM DIVISION TRANSFER TO
NEUBERGER & BERMAN
$_______or_______% Limited Maturity $_______or_______%
$_______or_______% Growth $_______or_______%
$_______or_______% Government Income
$_______or_______% Partners $_______or_______%
ALGER AMERICAN
$_______or_______% Small Capitalization $_______or_______%
$_______or_______% Midcap Growth $_______or_______%
$_______or_______% Growth $_______or_______%
$_______or_______% Leveraged AllCap $_______or_______%
FIDELITY INVESTMENTS
$_______or_______% Asset Manager $_______or_______%
$_______or_______% Growth Portfolio $_______or_______%
$_______or_______% Overseas $_______or_______%
$_______or_______% Money Market $_______or_______%
$_______or_______% Index 500 $_______or_______%
INVESCO
$_______or_______% Industrial Income $_______or_______%
$_______or_______% High Yield $_______or_______%
$_______or_______% Utilities $_______or_______%
$_______or_______% Total Return $_______or_______%
$_______or_______% Small Company Growth $_______or_______%
VAN ECK
$_______or_______% Worldwide Balanced
$_______or_______% Worldwide Hard Assets $_______or_______%
$_______or_______% Worldwide Emerging Markets $_______or_______%
$_______or_______% Worldwide Real Estate $_______or_______%
$_______or_______% Worldwide Bond $_______or_______%
AIM
$_______or_______% V.I. Government Securities $_______or_______%
$_______or_______% V.I. Capital Appreciation $_______or_______%
$_______or_______% GUARANTEED INTEREST $_______or_______%
DIVISION
- --------------------------------------------------------------------------------
SECTION 9: SIGNATURES
- --------------------------------------------------------------------------------
I/We acknowledge that we have read and understand:
1. the terms and conditions listed in the instructions to this form, the
Prospectus and the Policy for each of the options or changes requested.
2. I/we can cancel or change any elections requested in Sections 5 and 7 above
by sending written notice to the Customer Service Center at least 7 days
before the next transfer date.
3. that dollar cost averaging and automatic rebalancing will begin on the date
specified only if Security Life has received this signed form at least 7
days before the date specified.
Signature of Owner(s):
________________________________________ Date_________________________
________________________________________ Date_________________________
________________________________________ Date_________________________
Daytime Phone Number:___________________________________
<PAGE>
- - - - - - - - - - - - - - - Detach and Give to Applicant - - - - - - - - - - -
[Logo of Security Life appears here] Security Life of Denver
Insurance Company
P.O. Box 173888
Denver, CO 80217-3885
SUMMARY OF YOUR RIGHTS UNDER THE FAIR CREDIT REPORTING ACT
The Fair Credit Reporting Act (FCRA) is designed to promote accuracy, fairness,
and privacy of information in the files of every "Consumer Reporting Agency"
(CRA). Most CRAs are credit bureaus that gather and sell information about
you--such as if you pay your bills on time or have filed bankruptcy--to
creditors, employers, landlords, and other businesses. You can find the complete
text of the FCRA, 15 U.S.C. 1681-1681u, at the Federal Trade Commission's
website (HTTP://WWW.FTC.GOV). The FCRA gives you specific rights as outlined
below. You may have additional rights under state law. You may contact a state
or local consumer protection agency or a state attorney general to learn those
rights.
o YOU MUST BE TOLD IF INFORMATION IN YOUR FILE HAS BEEN USED AGAINST YOU.
Anyone who uses information from a CRA to take action against you--such as
denying an application for credit, insurance, or employment--must give you
the name, address, and phone number of the CRA that provided the report.
o YOU CAN FIND OUT WHAT IS IN YOUR FILE. At your request, a CRA must give you
the information in your file, and a list of everyone who has requested it
recently. There is no charge for the report if a company/person has taken
action against you because of information supplied by the CRA, if you
request the report within 60 days of receiving the notice of action. You
are also entitled to one free report every twelve months upon request if
you certify that (1) you are unemployed and plan to seek employment within
60 days, (2) you are on welfare, or (3) your report is inaccurate due to
fraud. Otherwise, a CRA may charge you a fee of up to eight dollars.
o YOU CAN DISPUTE INACCURATE INFORMATION WITH THE CRA. If you tell a CRA that
your file contains inaccurate information, the CRA must reinvestigate the
items (usually within 30 days) by presenting to its information source all
relevant evidence you submit, unless your dispute is frivolous. The source
must review your evidence and report its findings to the CRA. (The source
also must advise national CRAs--to which it has provided the data--of any
error.) The CRA must give you a written report of the investigation, and a
copy of your report if the investigation results in any changes. If the
CRAs investigation does not resolve the dispute, you may add a brief
statement to your file. The CRA must normally include a summary of your
statement in future reports. If an item is deleted or a dispute statement
is filed, you may ask that anyone who has recently received your report be
notified of the change.
o INACCURATE INFORMATION MUST BE CORRECTED OR DELETED. A CRA must remove or
correct inaccurate or unverified information from its files, usually within
30 days after you dispute it. HOWEVER, THE CRA IS NOT REQUIRED TO REMOVE
DATA FROM YOUR FILE THAT IS ACCURATE UNLESS IT IS OUTDATED (AS DESCRIBED
BELOW) OR CANNOT BE VERIFIED. If your dispute results in any change to your
report, the CRA cannot reinsert into your file a disputed item unless the
information source verifies its accuracy and completeness. In addition, the
CRA must give you a written notice telling you it has reinstated the item.
The notice must include the name, address, and phone number of the
information source.
o YOU CAN DISPUTE INACCURATE ITEMS WITH THE SOURCE OF THE INFORMATION. If you
tell anyone--such as a creditor who reports to a CRA--that you dispute an
item, they may not then report the information to a CRA without including a
notice of your dispute. In addition, once you've notified the source of the
error in writing, it may not continue to report it if it is, in fact, an
error.
o OUTDATED INFORMATION MAY NOT BE REPORTED. In most cases, a CRA may not
report negative information that is more than seven years old; ten years
for bankruptcies.
o ACCESS TO YOUR FILE IS LIMITED. A CRA may provide information about you
only to those who have a need recognized by the FCRA--usually to consider
an application you have submitted to a creditor, insurer, employer,
landlord, or other business.
o YOUR CONSENT IS REQUIRED FOR REPORTS THAT ARE PROVIDED TO EMPLOYERS, OR
REPORTS THAT CONTAIN MEDICAL INFORMATION. A CRA may not report to your
employer, or prospective employer, about you without your written consent.
A CRA may not divulge medical information about you without your consent.
o YOU MAY CHOOSE TO EXCLUDE YOUR NAME FROM CRA LISTS FOR UNSOLICITED CREDIT
AND INSURANCE OFFERS. Creditors and insurers may use file information as
the basis for sending you unsolicited offers of credit or insurance. Such
offers must include a toll-free number for you to call if you want your
name and address removed from future lists. If you call, you must be kept
off the lists for two years. If you request, complete, and return the CRA
form provided for this purpose, you must be taken off the lists
indefinitely.
o YOU MAY SEEK DAMAGES FROM VIOLATORS. You may sue a CRA or other party in
state or federal court for violations of the FCRA.
S-5044A-97
<PAGE>
<TABLE>
<CAPTION>
THE FCRA GIVES SEVERAL DIFFERENT FEDERAL AGENCIES AUTHORITY TO ENFORCE ITS PROVISIONS:
- --------------------------------------------------------------------------------
For Questions or Concerns Regarding: Please Contact:
- --------------------------------------------------------------------------------
<S> <C>
CRAs, creditors, and others not listed below Federal Trade Commission
Consumer Response Center - FCRA
Washington, DC 20580
Phone: 202-326-3761
- --------------------------------------------------------------------------------
National banks, federal branches/agencies of Office of the Comptroller of the Currency
foreign banks (word "National" or initials "N.A." Compliance Management, Mail Stop 6-8
appear in or after bank's name) Washington, DC 20219
Phone: 800-613-7643
- --------------------------------------------------------------------------------
Federal Reserve System member banks Federal Reserve Board
(except national banks, and federal Division of Consumer & Community Affairs
branches/agencies of foreign banks) Washington, DC 20551
Phone: 202-452-3693
- --------------------------------------------------------------------------------
Savings associations and federally chartered Office of Thrift Supervision
savings banks (word "Federal" or initials "F.S.B." Consumer Programs
appear in federal institution's name) Washington, DC 20552
Phone: 800-842-6929
- --------------------------------------------------------------------------------
Federal credit unions (words "Federal Credit National Credit Union Administration
Union" appear in institution's name) 1775 Duke Street
Alexandria, VA 22314
Phone: 703-518-6360
- --------------------------------------------------------------------------------
State-chartered banks that are not members Federal Deposit Insurance Corporation
of the Federal Reserve System Division of Compliance & Consumer Affairs
Washington, DC 20429
Phone: 800-934-FDIC
- --------------------------------------------------------------------------------
Air, surface, or rail common carriers regulated Department of Transportation
by former Civil Aeronautics Board or Office of Financial Management Interstate
Commerce Commission Washington, DC 20590
Phone: 202-366-1306
- --------------------------------------------------------------------------------
Activities subject to the Packers and Stockyards Department of Agriculture
Act, 1921 Office of Deputy Administrator - GIPSA
Washington, DC 20250
Phone: 202-720-7051
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
- - - - - - - - - - - - - - DETACH AND GIVE TO APPLICANT - - - - - - - - - - - - -
AGREEMENTS
All statements and answers in this application (which includes Part I, Part II,
and 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 MAINE, MISSOURI, OREGON, SOUTH CAROLINA, AND SOUTH DAKOTA.)
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.
In those states, including Maryland, where change in amount,
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 PROVIDED IN ANY
BINDING LIMITED LIFE INSURANCE COVERAGE, 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. Binding Limited Life Insurance Coverage - Any pre-delivery insurance
coverage is provided in the Binding Limited Life Insurance Coverage form.
That coverage is available only if: a premium is accepted by the agent; the
agent has authority to accept premium as set out in that form; and the form
is completed and signed by the agent, applicant, and proposed insured.
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.
8. 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.
NOTICE OF INFORMATION PROCEDURES
OUR UNDERWRITING PROCESS
This process is an evaluation of information about you. It is to see if you
qualify for the insurance requested. The information we review may vary with the
insurance applied for. We look at information about you such as: your age;
occupation; health; mode of living; avocation; and other personal information.
Answers on the application are the principal source of information. We may
contact other people or institutions personally, by phone, or by letter. The
purpose is to confirm or add to information you have provided. For example, we
may obtain information from your doctor, clinic, hospital, or other insurers. In
some cases, your Security Life agent may obtain information on our behalf. A
medical examination or laboratory tests may be requested.
NOTICE
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.
MIB, INC.
Medical Information Bureau, Inc. ("MIB, Inc.") may provide Security Life with
a brief report about you. This is a nonprofit organization of life insurance
companies which has an information exchange for its members. Information that
is sent to MIB, Inc. by one member may be given to their member companies who
have a business need for it.
Upon your written request, MIB, Inc. will arrange for disclosure of any
information it may have in your file. If you question the accuracy of MIB's
information, you may request a correction according to the procedures in the
Federal Fair Credit Reporting Act. MIB's address is: P.O. Box 105, Essex
Station, Boston, Massachusetts 02112, telephone 617/426-3660.
CONSUMER REPORTS
In some cases, a Security Life representative may prepare a consumer report or
investigative consumer report about you or, Security Life may ask an independent
agency to prepare a consumer report or an investigative consumer report about
you. These reports may include information on your character; general
reputation; personal characteristics such as health, finances, and job, and mode
of living except as may be related directly or indirectly to your sexual
orientation. Any information obtained by the agency may be kept in its file and
later given to others who have a business need for it
If an investigative consumer report is ordered by Security Life, the report will
include information obtained through interviews with your neighbors, friends, or
others you know. You may request a personal interview. The agency will make a
reasonable attempt to talk to you. It will include that information in its
report. The Federal Fair Credit Reporting Act gives you the right to make a
written request within a reasonable period of time, to receive additional
information from Security Life about the nature and scope of an investigation,
if one is made. We will provide the name, address, and phone number of any
agency we ask to prepare such a report. You may contact the agency directly to
learn about the contents of the report.
DISCLOSURE OF INFORMATION
Information we obtain about you is confidential. As permitted by law, we may
disclose information without further authorization to others such as: consumer
reporting agencies hired to prepare investigative reports; insurance companies
to which you have applied for coverage or benefits; those providing services for
us; those conducting bona fide actuarial, marketing, or scientific studies or
audits; and your attending doctor.
Upon written request, we will give you more information about these procedures.
YOUR RIGHT TO REVIEW INFORMATION
These are procedures by which you can make a written request to review personal
information in our policy file. However, Security Life will not disclose
information to you that was prepared for any anticipated claim or any civil or
criminal proceeding. We also have procedures by which you may request
correction, amendment, or deletion of any information in our files which you
believe to be inaccurate or irrelevant. Upon written request, we will provide
you with further information about these procedures.
We hope this notice helps explain our underwriting process. If you have any
additional questions, discuss them with your agent or contact us directly.
Security Life of Denver Insurance Company
P.O. Box 173888
Denver, CO 80217-3885
1-800-848-6362
<PAGE>
[Logo of Security Life appears here]
P.O. Box 173888
Denver, CO 80217-3885
<PAGE>
SECURITY LIFE OF DENVER INSURANCE COMPANY
IMPORTANT INFORMATION
INSTRUCTIONS FOR SUBMITTING APPLICATIONS
FOR VARIABLE SURVIVORSHIP UNIVERSAL LIFE INSURANCE
o Two individual variable universal life applications are required - one for
each insured. They must be submitted at the same time. IF NOT RECEIVED AT
THE SAME TIME, WE WILL DELAY UNDERWRITING AND PROCESSING UNTIL THE SECOND
APPLICATION IS RECEIVED.
o Each application should reference the other application. Sample wording
could be, "This application is taken in conjunction with John Doe, SSN
#123-45-6789."
o Each proposed insured must sign his/her respective application and the
owner must sign BOTH applications.
o If a trust is the owner and/or beneficiary, be sure to name the trustee
and give the date of the trust.
o The first insured's application must be completed in full. On the
SECOND INSURED'S APPLICATION, you only need to complete the following
sections:
o Part I
o Sections A, B and C
o Section L
o Section M, if applicable
o Part II
o Sections A, B and C
o Signatures
o Available riders are Adjustable Term Insurance and Single Life Term
Insurance.
SINGLE LIFE TERM INSURANCE RIDER. In SECTION E, ITEM H "ADDITIONAL RIDERS",
indicate whether Single Life Term Insurance is requested. Check the box titled
"Other" and write in language similar to the following: "Single Life Term
Insurance Rider on John Doe in the amount of $300,000."
DESIGNATED WITHDRAWAL INVESTMENT DIVISION. You can designate a specific
investment division from which your monthly charges will be deducted. This
feature will be available on or before November 1, 1999. Please indicate the
name of the division in "Special Instructions."
NOTE: SECTION J - PREMIUM INFORMATION (CONTINUED). FUND NAME CHANGE: INVESCO'S
INDUSTRIAL INCOME FUND HAS BEEN RENAMED EQUITY INCOME FUND.
- --------------------------------------------------------------------------------
THE INFORMATION BELOW AND SIGNATURES MUST BE PROVIDED WHEN EITHER THE ENHANCED
DEATH BENEFIT CORRIDOR OPTION OR THE GUARANTEED MINIMUM DEATH BENEFIT ARE
ELECTED. YOU MAY WRITE THIS INFORMATION IN "SPECIAL INSTRUCTIONS" ON THE
APPLICATION IF YOU PREFER.
PROPOSED INSUREDS' NAMES ______________________________________________________
I. ENHANCED DEATH BENEFIT CORRIDOR OPTION. THIS OPTION IS AVAILABLE ONLY
AT ISSUE. IF YOU DO NOT INDICATE THAT YOU WANT THE ENHANCED DEATH
BENEFIT CORRIDOR OPTION, WE WILL ISSUE THE POLICY WITH THE REGULAR
FACTORS.
[ ] ENHANCED DEATH BENEFIT CORRIDOR OPTION
II. GUARANTEED MINIMUM DEATH BENEFIT (GMDB) OPTION. THIS OPTION IS
AVAILABLE ONLY AT ISSUE. IF GMDB IS NOT INDICATED, THE POLICY WILL BE
ISSUED WITHOUT THIS BENEFIT. IF ELECTED, GMDB WILL CONTINUE UNTIL THE
YOUNGER INSURED'S AGE 100. THERE IS A MONTHLY CHARGE FOR THIS OPTION.
[ ] GMDB TO YOUNGER INSURED'S AGE 100.
SIGNATURE OF OWNER:
_________________________________________________________DATE:__________________
<PAGE>
[Logo of Security Life appears here] Security Life of Denver Insurance Company
1290 Broadway
Denver, CO 80203-5699
BINDING LIMITED LIFE INSURANCE COVERAGE FORM
For premium(s) received in connection with the Application(s) listed below,
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 (the "policy"). This coverage is subject to the terms and conditions
set out below.
<TABLE>
<S> <C> <C>
(For second to die coverage, use two
Application # ____________ Proposed Insured ________________________________________ applications and show both application
Application # ____________ Proposed Insured ________________________________________ numbers and name both insureds.)
</TABLE>
<TABLE>
<CAPTION>
I. REPRESENTATIONS -- Applicable to each Proposed Insured named above
<S> <C> <C> <C>
1. Has the Proposed Insured(s): Yes No
a. had unintentional weight loss, or any symptoms of a disease or an impairment for which the Proposed Insured(s)
has not consulted a physician? [ ] [ ]
b. ever had, or now have, any type of heart disease, stroke, or other vascular disease? [ ] [ ]
c. ever had, or now have, any type of cancer, leukemia, malignant tumor, or disorder of the immune system? [ ] [ ]
d. attained age 70? [ ] [ ]
2. For each Proposed Insured, is the initial amount of life insurance applied for on all applications pending with
Security Life plus the current amount of all existing life insurance with Security Life and Midwestern United Life
Insurance Company more than $3,000,000? [ ] [ ]
3. For each Proposed Insured, does existing life insurance with all insurers
plus amount applied for in pending application(s) with all insurers exceed
$10,000,000? [ ] [ ]
(For #2 and #3 amount of insurance calculations, include all policies, term riders, and accidental death coverage
and second to die coverage for each Proposed Insured.)
</TABLE>
If any of the above questions are answered YES or LEFT BLANK, the agent is not
authorized to accept a premium, and there will be NO COVERAGE. Premium is either
cash, check or authorized withdrawal. Make all checks payable to Security Life,
not the agent.
II. TERMS AND CONDITIONS
AMOUNT OF COVERAGE
If the Proposed Insured(s) dies while this coverage is in effect, Security Life
will pay to the beneficiary named in the Application the lesser of: (a) the
amount of death benefit, if any, which would be payable under the policy and any
riders if issued as applied for under the Application; or (b) $3,000,000. This
coverage is subject to any limits or exclusions which would be part of the
issued coverage. If for any reason Security Life is liable for any coverage as a
result of any other pending applications or Binding Limited Insurance Coverage
on the lives of Proposed Insured(s), Security Life's total liability shall not
exceed $3,000,000; and the $3,000,000 will be prorated among the respective
coverages. There is no premium waiver coverage, or coverage for the death of any
person other than the Proposed Insured(s). No death benefit is payable for a
second to die or last survivorship policy unless both Proposed Insureds die
while this coverage is in effect.
GENERAL
Premium(s) will be returned if no policy is delivered and no benefit is paid
under this coverage. If a policy is delivered, premium(s) will be applied to the
first policy premium.
All the above representations are true and complete to the best of my knowledge
and belief. I agree that they are to be relied on for this coverage.
No agent can waive or modify this coverage in any way.
Agreed to on _____________________________________________, 199__
Signature of Proposed Insured(s) ________________________________
_________________________________________________________________
(If below age 15, signature of parent or guardian required)
Agent/Witness ___________________________________________________
DATE COVERAGE BEGINS
Coverage under this Agreement starts when: Part I of the Application is
completed; a premium has been accepted; and this form has been completed and
signed.
DATE COVERAGE ENDS
This coverage will end automatically on the EARLIEST of the date:
o Premium(s) are returned.
o Five days after a notice of termination is mailed to the owner's address
on the application.
o Coverage starts under any policy resulting from the Application.
o A policy resulting from the Application is refused.
o 90 days after the date this form is signed.
Security Life may send a notice or return premium terminating this coverage any
time before delivery of the policy.
NO COVERAGE
There is no insurance coverage if:
o There is a material misrepresentation in the answers to the questions above
or any question or statement in the Application.
o A Proposed Insured dies by suicide or intentional self-inflicted injury.
o The premium check or authorized withdrawal is not honored.
Signed at _______________________________________________________
Applicant-Owner _________________________________________________
(If not signing as Proposed Insured)
_________________________________________________________________
If a firm or corporation is owner, print company name and have corporate officer
sign.
Q-1134
1/98
Exhibit 11
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES
FOR POLICIES PURSUANT TO RULE 6E-3(T)(B)(l2)(III)
This document sets forth the administrative procedures that will be followed by
Security Life of Denver ("Security Life") in connection with the issuance of its
joint and survivor flexible premium variable universal life insurance policies
(the "policies") issued through Security Life Separate Account Ll (the "Separate
Account"), the transfer of assets held under the policies, and the redemption of
interests in policies.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF THE POLICIES
A. Offering of the Policy
The policy is offered on two lives to persons or entities who satisfy
certain suitability standards ("owners"). The policy may be purchased
to acquire insurance on the lives of two individuals (joint "insureds")
in whom the owner has an insurable interest. Security Life requires
satisfactory evidence of each of the insured's insurability, which may
include a medical examination. The available issue ages are 0 through
90. Age is determined on the insured's age as of the birthday nearest
the policy date. The joint equivalent age of the insured individuals is
based on the sum of both insured's ages divided by two. It cannot
exceed age 85 at time of issue, and must be at least 15.
The minimum stated death benefit is $250,000 for Variable Survivorship
Universal Life ("VSUL"). For Estate Designer ("ED"), the minimum stated
death benefit is $1,000; however, the required minimum total death
benefit is $500,000. The total death benefit includes stated death
benefit plus coverage provided under a term rider.
Acceptance of an application depends on Security Life's underwriting
rules. Security Life reserves the right to reject an application for
any reason.
If a policy has more than one owner (joint owners), then transactions
under the policy except telephone transfers of account value require
the authorization of all owners.
B. Cost of Insurance Charges Structure, Payments and Underwriting
Standards
Security Life places the joint insureds in a premium class when the
policy is issued, based on underwriting. This original premium class
applies to the initial stated death benefit.
The current cost of insurance charge rate for a policy is based on the
age at issue, sex, and premium class of the insured, and on the policy
year, and therefore varies from time to time. Security Life currently
places insureds in the following premium classes, based on
underwriting: Standard Tobacco (ages 15-90); Standard Nontobacco (ages
15-90), or Preferred
Variable Survivorship/Estate Designer February 28, 2000
1
<PAGE>
(ages 15-90). Or, insureds may be placed in a substandard rate class,
with a higher mortality risk that the standard tobacco or standard
nontobacco classes.
Additionally, an uninsurable rating may be assessed to an individual
that is rated higher than table P. The uninsurable rating will be
handled in the unideath calculation the same way a table rating is
except the percentage will be higher. The uninsurable rating is capped
at the later of age 65 or 15 years from issue.
Security Life guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the
maximum cost of insurance premiums set forth in the policies. The
guaranteed cost of insurance rate for standard classes are based on the
1980 Commissioners' Standard ordinary mortality Tables, Male or Female,
Smoker or Nonsmoker Mortality Premiums (1980 CSO Tables). The
guaranteed cost of insurance rates for substandard classes are based on
multiples of or additives to the 1980 CSO Tables.
Security Life's current cost of insurance may be less than the
guaranteed cost of insurance that is set forth in the policy. Current
cost of insurance rates will be determined based on Security Life's
expectations as to future mortality, investment earnings, expenses,
taxes, and persistency experience. These rates may change from time to
time.
Cost of insurance rates (whether guaranteed or current) for an insured
in a standard nontobacco class are equal to or lower than guaranteed
cost of insurance for an insured of the same age and sex in a standard
tobacco class. Cost of insurance rates (whether guaranteed or current)
for an insured in a standard nontobacco or tobacco class are generally
lower than guaranteed cost of insurance for an insured of the same age
and sex and tobacco status in a substandard class.
The cost of insurance for the policy will not be the same for all
owners. Insurance is based on the principle of pooling and distribution
of mortality risks which assumes that each owner is charged a cost of
insurance commensurate with the insured's mortality risk as actually
determined, reflecting factors such as age, sex, health, and
underwriting method. A uniform cost of insurance charge for all
insureds would discriminate unfairly in favor of those insureds
representing higher risks. Although there will be no uniform cost of
insurance charges for ail insureds for a given stated death benefit
there will be a uniform cost of insurance charge for all insureds of
the same issue age, sex, policy duration and underwriting
classification
If the insured's age or sex has been misstated in the application for
the policy or in any application for supplemental and/or rider
benefits, and if the misstatement becomes known during the lifetime of
the insured, then policy values will be adjusted to those based on the
correct monthly deductions (reflecting the correct age or sex) since
the policy date. If the policy's values are insufficient to cover the
monthly deduction on the prior monthly date, the grace period will be
deemed to have begun on such date, and notification will be sent to the
owner at least 61 days prior to the end of the grace period. See
"Policy Termination and Grace Period," below.
Variable Survivorship/Estate Designer February 28, 2000
2
<PAGE>
The policy provides coverage on joint insureds named under the policy
and a Death Benefit payable upon the death of the second insured. The
policy will remain in force as long as the policy's cash surrender
value is sufficient to cover the charges due. Security Life guarantees
that a policy will remain in force during the special continuation
period, regardless of the sufficiency of the cash surrender value, if
the sum of the premiums paid to date, less any partial cash surrenders
and policy debt equals or exceeds the minimum monthly premium (shown in
the policy) multiplied by the number of complete policy months since
the policy date, including the current policy month. The special
continuation period is five years following the policy date.
An extended minimum guaranteed period may be available under a
Guaranteed Minimum Death Benefit Rider for VSUL policies. This feature
is not offered on ED policies.
The minimum monthly premium is calculated for each policy based on the
joint equivalent age, sex and premium class of each insured, the
requested stated death benefit and supplemental or rider benefits. The
minimum monthly premium may change as a result of changes to the stated
death benefit, the death benefit option, ratings, and supplemental or
rider benefits. Security Life will notify the owner of any change in
the minimum monthly premium.
On or after one year from the policy date, the owner may request a
reduction in the stated death benefit, by notice to Security Life,
subject to the following rules. If a change in the stated death benefit
would result in total premiums paid exceeding the premium limitations
prescribed under current tax law to qualify the policy as a life
insurance contract, Security Life will refund promptly to the owner the
excess above the premium limitations.
The minimum amount of a decrease in stated death benefit is $1,000. The
decrease in stated death benefit will become effective on the next
monthly processing date following the date that the decrease is
approved by Security Life. Security Life reserves the right to decline
a requested decrease in the stated death benefit if compliance with the
guideline premium limitations under current tax law resulting from this
decrease would result in immediate termination of the policy, or if to
effect the requested decrease, payments to the owner would have to be
made from the accumulated value for compliance with the guideline
premium limitations, and the amount of such payments would exceed the
cash surrender value under the policy.
At any time after issue the owner may request an increase in the stated
death benefit. An increase in the stated death benefit must be at least
$1,000 (unless the increase is effected pursuant to a rider providing
for automatic, scheduled increases in stated death benefit), and an
application must be submitted. An increase requires satisfactory
evidence of insurability and must meet Security Life's underwriting
rules. The increase in stated death benefit will become effective on
the next monthly processing date following the date the request is
approved. The account value will reflect a monthly deduction (as of the
effective date) based on the increased stated death benefit.
Variable Survivorship/Estate Designer February 28, 2000
3
<PAGE>
Security Life will determine a cost of insurance rate for each increase
in coverage based on the joint equivalent age of the insureds at the
time of the increase. The following rules will apply for purposes of
determining the risk amount for each rate.
When an increase in stated death benefit is requested, Company conducts
underwriting before approving the increase (except as noted below) to
determine whether a different premium class will apply to the increase.
If the premium class for the increase has lower cost of insurance rates
than the original premium class, then the premium class for the
increase will also be applied to the initial stated death benefit. If
the premium class for the increase has higher cost of insurance rates
than the original premium class, the premium class for the increase
will apply only to the increase in stated death benefit, and the
original premium class will continue to apply to the initial stated
death benefit.
For the purposes of determining the risk amount associated with a
stated death benefit, Security Life will attribute the account value
solely to the initial stated death benefit unless the account value
exceeds the initial stated death benefit. If the account value exceeds
the initial stated death benefit, the excess will be considered
attributable to the increases in stated death benefit in the order of
the increases. If there is a decrease in stated death benefit after an
increase, a decrease is applied first to decrease prior increases in
stated death benefit, starting with the most recent increase.
The policy will be offered and sold pursuant to an established
mortality structure and underwriting standards in accordance with state
insurance laws. Where state insurance laws prohibit the use of
actuarial tables that distinguish between men and women in determining
premiums and policy benefits for their insured resident, Security Life
will comply.
C. Application and Payment Processing
To purchase a policy, an application must be completed and submitted
through an authorized Security Life agent. The initial premium payment
must be at least equal to the scheduled premiums from the policy date
through the investment date. The Policy Date is used to determine the
monthly processing date, coverage effective date and policy
anniversaries. The policy coverage is effective on the policy date. The
policy date is:
1) the date specified on the application;
2) the back-date of the policy to save age;
or, if neither 1) or 2) apply, it is the date all underwriting and
administrative requirements are met if the initial premium has been
received. Otherwise it is the date the initial premium is received by
Security Life.
The Investment Date is the date that Security Life allocates funds to
the Policy. It is the next valuation date following the date that we
have received the initial premium, approved the policy for issue and
have received all issue requirements. It generally is the same as the
policy date.
Variable Survivorship/Estate Designer February 28, 2000
4
<PAGE>
As provided for under state insurance law, the owner, to preserve
insurance age, may be permitted to backdate the policy. In no case may
the policy date be more than six months prior to the date the
application was completed. Charges for the monthly deductions for the
backdated period are deducted on the policy date. Temporary life
insurance coverage may be provided prior to the policy date under the
terms of a temporary insurance agreement. In accordance with Security
Life's underwriting rules, temporary life insurance coverage may not
exceed $3,000,000 and will not remain in effect for more than ninety
(90) days.
Planned periodic premiums and unscheduled premiums that are not
underwritten will be credited to the policy and the net premium
invested on the valuation date they are received by the home office. If
an additional premium payment is rejected, Security Life will return
the premium payment promptly, without adjustment.
The policy date is the date from which policy months, years, and
anniversaries are measured. A policy month is a one-month period
beginning with a monthly date and ending with the day immediately
preceding the next following monthly processing date. The monthly
processing date is the same day as the policy date for each succeeding
month. The monthly deduction is deducted on each monthly processing
date.
A policy year is a period of twelve months commencing with the policy
date and ending with the day immediately preceding the next annual
date. The annual date is the same day in each policy year as the policy
date.
The issue date, if the same as the policy date, is the date from which
the suicide and contestable periods start. It is shown in the policy.
D. Allocation of Net Premiums
On the investment date, the account value is equal to the initial net
premium credited (initial premium payment less the premium expense
charges), less monthly deductions made as the policy date (up to six
months for backdated policies). On each investment date thereafter, the
account value is the sum of the variable account, the guaranteed
interest division, and the loan account. The account value will vary to
reflect the performance of the subdivisions to which amounts have been
allocated, interest credited on amounts allocated to the guaranteed
interest division, interest credited on amounts in the loan account,
charges, transfers, partial cash surrenders, loans and loan repayments.
The net account value is account value minus outstanding policy debt.
Cash surrender value is account value minus the applicable surrender
charge on VSUL; or account value plus the applicable refund of sales
charge on ED. Net cash surrender value is the cash surrender value
minus outstanding policy debt.
When applying for a policy, the owner selects a plan for paying level
premium payments at specified intervals, e.g., quarterly, semiannually
or annually, until the maturity date. If the owner elects, Security
Life will arrange for payment of planned period premiums on a monthly
basis under a pre-authorized bank draft. The owner is not required to
pay premium payments in accordance with these plans; rather, the owner
can pay more or less than planned or skip a
Variable Survivorship/Estate Designer February 28, 2000
5
<PAGE>
planned periodic premium entirely. Currently, there is no minimum
amount for each premium. Security Life may establish a minimum amount
90 days after Security Life sends the owner a written notice of such
increase. Subject to certain limits (described below), the owner can
change the amount and frequency of planned periodic premiums whenever
the owner wishes by sending notice to the home office. However,
Security Life reserves the right to limit the amount of a premium
payment or the total premium payments paid.
In the application, the owner specifies the percentage of net premium
to be allocated to each variable investment option and to the
guaranteed interest division. Net premiums will generally be invested
on the valuation date that Security Life receives them and in
accordance with the allocations specified in the most recent
instructions received from the owner.
State guidelines regarding free look periods vary. Some states mandate
that if an owner exercises his/her free look right he/she is entitled
to a full premium refund. Other states mandate that should the owner
exercise his/her free look option he/she is entitled to receive the
value of the fund allocations plus the policy charges previously
deducted.
Amounts you designate for the guaranteed interest division will be
invested into that division on the investment date. If the owner's
state requires return of premium during the free look period, amounts
designated for the variable division are initially invested into the
Fidelity VIP Money Market Portfolio. Later these amounts are
transferred from the Money Market Portfolio to the selected variable
investment options, at the earlier of:
1) five days after we mailed your policy and your state free look
period has ended; or
2) you have actually received your policy, we have received your
delivery receipt and your state free look period has ended.
If the owner's state provides for return of account value during the
free look period or no free look period, amounts designated for the
variable division are invested directly into the selected variable
investment options.
The net premium allocation percentages specified in the application
will apply to subsequent premium payments until the owner instructs
otherwise. The minimum allocation percentage that may be specified for
investment option, including the guaranteed account is 1%, and all
allocation percentages must be whole numbers. The sum of allocations
must equal 100%. Security Life reserves the right to limit the number
of investment options (18) to which account value may be allocated. An
owner can change the allocation percentages at any time, by sending
notice to the home office or if telephone privileges are in effect, the
request can be received by phone. The change will apply to all premium
payments received with or after receipt of the owner's notice.
E. Additional Payment
Additional unscheduled premium payments can be made at any time while
the policy is in force. Premium payments after the initial premium
payment must be made to the home office.
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Security Life has the right to limit the number and amount of such
premium payments. Total premium payments paid in a policy year may not
exceed guideline premium payment limitations for life insurance set
forth in the Internal Revenue Code. Security Life will promptly refund
the portion of any premium payment that is determined to be in excess
of the premium payment limit established by law to qualify a policy as
a contract for life insurance.
Security Life reserves the right to reject a requested increase in
planned periodic premiums, or unscheduled premium. Security Life also
reserves the right to require satisfactory evidence of insurability
prior to accepting a premium which increases the risk amount of the
policy. No premium payment will be accepted after the maturity date.
The owner may specify that a specific unscheduled payment is to be
applied as a repayment of policy debt.
The payment of premiums may cause a policy to be a modified endowment
contract under the Internal Revenue Code. If acceptance of a premium
paid would, in Security Life's view, cause the policy to become a
Modified Endowment Contract, then to the extent feasible Security Life
will not accept that portion of the premium that would cause the policy
to become a Modified Endowment Contract unless the owner confirms in
writing that it is his/her intent to convert the policy to a Modified
Endowment Contract. Security Life may return that portion of the
payment pending receipt of instructions from the owner.
F. Policy Termination and Grace Period
The policy terminates at the earliest of the end of the grace period,
the surrender of the policy by the owner or the fulfillment of Security
Life's obligations under the policy (i.e., payment of the death benefit
proceeds).
If the cash surrender value on a monthly processing date is less than
the amount of the monthly deduction to be deducted and the special
continuation period is not in effect, the policy will be in default. In
addition, if on a monthly processing date the cash value less policy
debt exceeds the amount of the monthly deduction due for the following
policy month, the policy will be in default whether or not the special
continuation period is in effect. An owner, and any assignee of record,
will be sent notice of the default.
The special continuation period is the first five policy years. If the
special continuation period is in effect, Security Life guarantees that
the client's policy will not lapse, regardless of its net cash
surrender value, if on a monthly processing date the sum of all
premiums received minus partial withdrawals and loans taken is greater
than or equal to the sum of minimum monthly premiums from the inception
of the policy to the current date. At the end of the special
continuation period the client must pay enough premium to bring the net
cash surrender value to zero plus the amount needed to pay the
following two months' monthly deductions. If sufficient payment is not
made, the policy will lapse.
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If a policy goes into default, the owner will be allowed a 61-day grace
period to pay a premium payment sufficient to cover the monthly
deductions due during the grace period and for a period of two
additional months or a sufficient amount to avoid termination of the
policy due to excessive loans. Security Life will send notice of the
amount required to be paid during the grace period ("grace period
premium payment") to the owner's last known address and the address of
the assignee of record. The grace period will begin when the notice is
sent. An owner's policy will remain in effect during the grace period.
If the second insured person should die during the grace period, the
death benefit proceeds will still be payable to the beneficiary,
although the amount paid will reflect a reduction for the monthly
deductions due on or before the date of the insured's death and for
outstanding policy debt. If the grace period premium payment is not
paid before the grace period ends, the policy will lapse. It will have
no value and no benefits will be payable.
G. Reinstatement of a Policy Terminated for Insufficient Values
The policy may be reinstated within five years after lapse and before
the maturity date, subject to compliance with certain conditions,
including a necessary premium payment and submission of satisfactory
evidence of insurability.
H. Repayment of a Loan
An owner may repay all or part of his/her policy debt at any time while
at least one insured person is living and the policy is in force. Loan
repayments must be sent to the home office and will be credited as of
the date received. The owner may give Security Life notice that a
specific unscheduled payment made while a loan is outstanding is to be
applied as a loan repayment. When a loan repayment is made, account
value in the loan division, in an amount equivalent to the repayment,
is transferred from the loan division to the investment options in
accordance with the owner's current net premium allocation
instructions.
I. Policy Riders
Supplemental or rider benefits may be available to be added to the
policy. Monthly charges for these benefits or riders, if any, will be
deducted from the account value as part of the monthly deduction. The
following rider benefits may be available: Adjustable Term Insurance
Rider, Single Life Term Rider, Enhanced Death Benefit Corridor Option
(VSUL only), and Guaranteed minimum Death Benefit (VSUL only).
Additional rules and limits apply to these supplemental or rider
benefits, and are set forth in the applicable endorsement or rider.
II. TRANSFERS AMONG INVESTMENT DIVISIONS
Several investment options under the Separate Account are available for
allocation of Net Premiums paid under the policy, subject to certain
limitations set forth in the policy. Each
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investment option invests in shares or units of an underlying portfolio,
Available investment options of the Separate Account invest in portfolios
of AIM Variable Insurance Funds, Inc., The Alger American Fund, Fidelity
Variable Insurance Products Fund and Variable Insurance Products Fund II,
INVESCO Variable Investment Funds, Inc., Neuberger Berman Advisors
Management Trust, Van Eck Worldwide Insurance Trust. All Funds are
registered under the Investment Company Act of 1940 as an open-end
management investment company. Additional funds may be available in the
future.
After the free-look period and prior to the maturity date, the owner may
transfer all or part of the account value from investment options investing
in one portfolio to other investment options, including the guaranteed
interest division. An amount may be transferred from the guaranteed
interest to the variable investment options. Subject to some restrictions,
the minimum transfer amount is the lesser of $100 or the entire amount in
that investment option. A transfer request that would reduce the amount in
an investment option below $100 will be treated as a transfer request for
the entire amount. Transfers from the guaranteed interest division are
permitted only within the firs 30 days of a policy year. Transfer requests
received within 30 days prior to a policy anniversary will be processed on
the policy anniversary. Such transfers are limited in amount to the
greatest of: 25% of the balance in the guaranteed interest division on the
policy anniversary; the total withdrawn in the prior policy year; or $100.
With the exception of the right to exchange (described below), Security
Life reserves the right to limit the number or frequency of transfers
permitted in the future.
Security Life will make the transfer as of the end of the valuation period
during which such transfer is received by Security Life. Currently, there
is a limit (12) on the number of free transfers that can be made between
investment options in a policy year. Currently, Security Life assesses an
excess transfer charge of $25 for each transfer during a policy year in
excess of the first twelve transfers. The excess transfer charge will be
deducted from the investment option from which the requested transfer is
being made, on a pro-rata basis.
Telephone transfers will be accepted by telephone, provided the appropriate
election has been provided to Security Life. Security Life reserves the
right to suspend telephone transfer privileges at any time, for any reason,
if Security Life deems such suspension to be in the best interests of
owners.
During the first twenty-four policy months following the policy date, and
within sixty days of the later of notification of a change in the
investment policy of the separate account or the effective date of such
change, the owner may exercise a one-time Right to Exchange the policy by
requesting that all of the variable account value be transferred to the
guaranteed interest division. Exercise of the Right to Exchange is not
subject to the excess transfer charge. Following the exercise of the Right
to Exchange, net premiums may not be allocated to, and transfers of account
value to the variable account will not be permitted. The other terms and
conditions of the policy will continue to apply.
Transfers may also be effected pursuant to a Dollar Cost Averaging Plan or
Auto Rebalancing Plan elected by the owner as described in the current
prospectus for the policies.
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III. REDEMPTION PROCEDURES, SURRENDER AND RELATED TRANSACTIONS
A. Surrender for Cash Surrender Value
An owner may surrender the policy at any time for its net cash
surrender value by submitting notice to the home office. Security Life
may require return of the policy. A surrender charge may apply (VSUL
only). A surrender request will be processed as of the valuation date
the surrender notice and all required documents are received. Payment
generally will be made within seven calendar days. An owner's policy
will terminate and cease to be in force if it is surrendered. It cannot
later be reinstated.
Security Life will make the payment out of its general account and, at
the same time, transfer assets from the Separate Account in an amount
equal to the sum of account value (applicable to the policy) held in
each variable investment option.
B. Death Claims
The death benefit proceeds are equal to the sum of the base death
benefit for each coverage segment under the death benefit option
selected, calculated on the date of the second insured's death, plus
supplemental or rider benefits, minus outstanding policy debt including
accrued but unpaid interest, minus unpaid monthly deductions incurred
prior to the date of death. If an insured's age or sex has been
misstated in the application for the policy or in an application for
supplemental or rider benefits, and if the misstatement becomes known
after the death of the second insured person, then the death benefit
under the policy or such supplemental or rider benefits will be that
which the cost of insurance charge which was deducted from the account
value on the last monthly processing date prior to the death of the
second insured would have purchased for the correct sex and age.
Security Life will pay interest at the rate declared by us or at a
higher rate required by law.
Security Life will usually pay the death benefit proceeds to the
beneficiary within seven days after receipt at its Home Office of due
proof of death of the second insured and all other requirements
necessary to make payment. If the payment of the death benefit of a
policy is contested, payment of proceeds may be delayed.
The death benefit payable depends on the death benefit option in effect
on the date of death. Subject to certain conditions, owners may change
the death benefit option. Under Option 1 (VSUL and ED), the base death
benefit is the greater of the specified amount or the applicable
percentage of account value on the date of the second insured's death.
Under Option 2 (VSUL and ED), the base death benefit is the greater of
the specified amount plus the account value, or the applicable
percentage of the account value on the date of the second insured's
death. Under Option 3 (ED only), the base death benefit is the greater
of the specified amount plus the sum of all premiums received, minus
partial withdrawals or the applicable percentage of the account value
on the date of the second insured's death.
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The "Applicable Percentage" is the appropriate factor from the
Definition of Life Insurance factors shown in the policy's appendix A
or B. A table showing the applicable percentages for attained ages 0 to
100 is set forth in the policy.
On or after one year from the policy date, the owner may change the
death benefit option on the policy, by notice to Security Life, subject
to the following rules. A change in the Death Benefit Option may be
requested at least one day prior to a policy anniversary. After the
change, the specified death benefit amount must still comply with the
minimums set to issue a policy. The effective date of the change will
be the next monthly processing date following the day that Security
life approves the request for change. Security Life may require
satisfactory evidence of insurability for some changes.
An owner may change from death benefit option 1 to option 2, from
option 2 to option 1 or (on ED only) from option 3 to option 1. On ED
policies, NO change from death benefit option 1 or 2 to option 3, or
option 3 to option 2 is permitted.
When a change from Option 1 to Option 2 is made, the specified death
benefit amount after the change is effected will be the specified death
benefit before the change minus the account value on the effective date
of the change. When a change from Option 2 to Option 1 is made,
specified death benefit amount after the change will be the specified
death benefit before the change plus the account value on the effective
date of the change. When a change from Option 3 to Option 1 is made,
the specified death benefit after the change is effected will be the
specified death benefit before the change plus the sum of premiums
received, minus partial withdrawals taken as of the effective date of
the change.
Security Life will make payment of the death benefit proceeds from its
general account and, at the same time, will transfer the account value
applicable to the policy out of the separate account to the general
account.
C. Policy Loan
After the first monthly processing date and while at least one insured
is living, provided the policy is not in the grace period, the owner
may borrow against the policy by submitting a request to the home
office. The minimum amount of a loan is $100. The maximum loan amount
is the net cash surrender value less monthly deductions to the next
policy anniversary or 13 monthly deductions if the loan request is
received within 30 days prior to a policy anniversary. Maximum loan
amounts may be different if required by state law.
An outstanding loan reduces the amount available for a new loan. A loan
is processed as of the date the loan notice is approved. Loan proceeds
generally will be sent to the owner within seven calendar days.
When a policy loan is made, an amount sufficient to secure the loan is
transferred out of the investment options and into the policy's loan
division. Thus, a loan will have no immediate effect on the account
value, but other policy values, such as the cash surrender value and
the
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death benefit proceeds, will be reduced immediately by the amount
borrowed. This transfer is made from the-account value in each
investment option in proportion to the account value in each on the
date of the loan, unless the owner specifies that transfers be made
from a specific investment option. An amount equal to due and unpaid
loan interest which exceeds interest credited to the loan account will
be transferred to the loan account on each policy anniversary. Such
interest will be transferred from each investment option in the same
proportion that account value in bears to the total unloaned account
value.
The loan account will be credited with interest at an effective annual
rate of not less than the annual loan interest rate of 3%. Loan
interest accrues daily at a compound annual interest rate of 3.75%.
Interest is due in arrears on each policy anniversary. Outstanding
loans (including unpaid interest added to the loan) plus accrued
interest not yet due equals the policy debt.
D. Partial Withdrawals
An owner may make partial cash surrenders (known as partial
withdrawals) from the policy at any time after the first policy
anniversary. An owner must submit a request to the home office. Each
partial withdrawal must be at least $100. The maximum partial
withdrawal is the amount which will leave $SOO as the net cash
surrender value. When a partial withdrawal is taken, the amount of the
withdrawal plus a service fee is deducted from the account value. This
service fee is 2% of the amount of the withdrawal up to a maximum fee
of $25, As of the date Security Life processes the partial withdrawal
request, the cash value will be reduced by the partial withdrawal
amount.
Unless the owner requests that a partial cash surrender be deducted
from specified investment options, it will be deducted from the
investment options pro-rata in proportion to the account value in each.
If death benefit Option 1 is in effect, Security life may reduce the
specified death benefit amount. Security Life may reject a partial
withdrawal request if it would reduce the specified death benefit
amount below the amount required to issue the policy, or if the partial
withdrawal would cause the policy to fail to qualify as a life
insurance contract under applicable tax laws, as interpreted by
Security Life.
Partial withdrawals will be processed as of the valuation date the
request is received by Security Life, and generally will be paid within
seven calendar days.
E. Monthly Charges
On each monthly processing date, Security Life will deduct from the
account value the monthly deductions due, commencing as of the policy
date. An owner's policy date is the date used to determine the
applicable monthly processing date. The monthly deduction consists of
(1) cost of insurance charges, (2) the monthly administrative charge,
and (3) charges for supplemental or rider benefits. The monthly
deduction is deducted from the investment options, including
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the guaranteed interest division pro rata based on the account value in
each, unless the owner has selected a designated deduction investment
option for the policy.
F. Continuation of Coverage
The maturity date is generally the insured's 100th birthday, and is
shown in the policy.
At the policy's maturity date, the owner may surrender the policy for
its net cash surrender value. Or, he/she may allow insurance coverage
to continue under the continuation of coverage feature. if the policy
is in effect and surrendered, the target death benefit, which includes
term rider coverage, becomes the specified death benefit amount. All
riders are terminated. Policies with death benefit options 2 or 3
become policies with death benefit option 1. A one-time fee of $400 is
deducted to cover all future costs of the policy and the account value
is transferred into the Guaranteed Interest Division. No further
premium payments can be made, however, loan and interest payments are
accepted. All variable investment features terminate. Loans and partial
withdrawals may be taken. The policy will continue until the death of
the second insured person so long as it does not lapse.
G. Settlement Options
During the insured's lifetime, the owner may elect that the Beneficiary
receive the death proceeds other than in one sum. If this election has
not been made, the Beneficiary may do so within 60 days after the
second insured person's death. The owner may also elect to take the net
cash surrender value under one of these options.
Option I: Payouts for a Designated Period: Payouts will be made in
1, 2, 4 or 12 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. The amount of the first monthly payout
for each $1,000 of Account Value applied is shown in
Settlement Option Table I in the Policy.
Option II: Life Income with Payouts Guaranteed for a Designated
Period: Payouts will be made in 1, 2, 4 or 12 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. The amount of the first monthly payout
for each $1,000 of Account Value applied is shown in
Settlement Option Table II in the Policy. This option is
available only for ages shown in this Table.
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.
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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 1, 2, 4, or 12
equal installments per year, as elected.
Option V: Other: The Owner may ask us to apply the money under any
other option that we make available at the time the
benefit is paid.
Payments under these options are not affected by the investment
experience of any Division of our Variable Account. Instead, interest
accrues pursuant to the options chosen. Payment options will also be
subject to our rules at the time of selection. These alternate payment
options are only available if the proceeds applied are $2000 or more
and a periodic payment will be at least $20.
The Beneficiary or any other person who is entitled to receive payment
may name a successor to receive any amount that we would otherwise pay
to that person's estate if that person died. The person who is entitled
to receive payment may change the successor at any time.
We must approve any arrangements that involve a payee who is not a
natural person (for example, a corporation), or a payee who is a
fiduciary. Also, the details of all arrangements will be subject to our
rules at the time the arrangements take effect. This includes rules on
the minimum amount we will pay under an option, minimum amounts for
installment payments, withdrawal or commutation rights (i.e., the
rights to receive payments over time, for which we may offer a lump sum
payment), the naming of people who are entitled to receive payment and
their successors, and the ways of proving Age and survival.
Variable Survivorship/Estate Designer February 28, 2000
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