IL ANNUITY & INSURANCE CO SEPARATE ACCOUNT 1, 485APOS, 1996-10-23

IL ANNUITY & INSURANCE CO SEPARATE ACCOUNT 1
485APOS, 1996-10-23

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<PAGE> 1

As filed with the Securities and Exchange Commission on October 23, 1996
Registration Nos. 33-89028
811-8964
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /

Pre-Effective Amendment No. / /
-----

Post-Effective Amendment No. 2 /X/
-----
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /

Amendment No. 3 /X/
----

IL ANNUITY AND INSURANCE CO.
----------------------------
SEPARATE ACCOUNT 1
------------------
(Exact Name of Registrant)

IL ANNUITY AND INSURANCE COMPANY
--------------------------------
(Name of Depositor)

2960 North Meridian Street, Indianapolis, Indiana 46208
-------------------------------------------------------
(Address of Depositor's Principal Executive Offices)

Depositor's Telephone Number, including Area Code:
(317) 927-6500

<TABLE>
<S> <C>
Name and Address of Agent for Service: Copy to:

Margaret M. McKinney, Esq. Stephen E. Roth, Esquire
Vice President, General Counsel and Secretary Sutherland, Asbill & Brennan, L.L.P.
Indianapolis Life Insurance Company 1275 Pennsylvania Avenue, N.W.
2960 North Meridian Street Washington, D.C. 20004-2404
Indianapolis, Indiana 46208
</TABLE>

Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.

DECLARATION PURSUANT TO RULE 24F-2
An indefinite amount of securities has been registered under the Securities Act
of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940 in
connection with the separate account. The Rule 24f-2 Notice for the fiscal
year ending December 31, 1995 was filed with the Commission on February 23,
1996.

-------------------

It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on _____________ pursuant to paragraph (b) of Rule 485
/X/ 60 days after filing pursuant to paragraph (a) of Rule 485
/ / on _____________ pursuant to paragraph (a) of the Rule 485
<PAGE> 2
CROSS REFERENCE SHEET
Pursuant to Rule 495

Showing location in Part A (Prospectus) and Part B (Statement
of Additional Information) of Registration Statement of information required by
Form N-4.

PART A

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION

<S> <C> <C>
1. Cover Page . . . . . . . . . . . . . . . . . . . . Cover Page

2. Definitions . . . . . . . . . . . . . . . . . . . . Definitions

3. Synopsis . . . . . . . . . . . . . . . . . . . . Fee Table; Summary

4. Condensed Financial
Information . . . . . . . . . . . . . . . . . . . . Appendix I: Condensed Financial
Information; How to Review Investment
Performance of the Variable Accounts

5. General Description of Registrant,
Depositor and Portfolio Companies

(a) Depositor . . . . . . . . . . . . . . . . . . . . About IL Annuity and Insurance Company
(b) Registrant . . . . . . . . . . . . . . . . . . . . IL Annuity and Insurance Co. Separate
Account 1
(c) Portfolio Company . . . . . . . . . . . . . . . . . . The Portfolios
(d) Fund Prospectus . . . . . . . . . . . . . . . . . . . The Portfolios
(e) Voting Rights . . . . . . . . . . . . . . . . . . . . Voting Rights
(f) Administrators . . . . . . . . . . . . . . . . . . . . N/A

6. Deductions and Expenses

(a) General . . . . . . . . . . . . . . . . . . . . Fees and Charges; Summary
(b) Sales Load . . . . . . . . . . . . . . . . . . . . Fees and Charges; Summary
(c) Special Purchase Plan . . . . . . . . . . . . . . . . Fees and Charges
(d) Commissions . . . . . . . . . . . . . . . . . . . . Other Information
(e) Expenses - Registrant . . . . . . . . . . . . . . . . Fees and Charges; Summary
(f) Fund Expenses . . . . . . . . . . . . . . . . . . . . Fees and Charges
(g) Organizational Expenses . . . . . . . . . . . . . . . N/A

7. Contracts

(a) Persons with Rights . . . . . . . . . . . . . . . . . Summary; The Portfolios; The Pay-In Period, Payout
Period; Voting Rights; Death
Benefit
(b) (i) Allocation of
Premium Payments . . . . . . . . . . . . . . . Summary; Pay-In Period; Other Information
(ii) Transfers . . . . . . . . . . . . . . . . . Summary; Transfers
(iii) Exchanges . . . . . . . . . . . . . . . . . Transfers

(c) Changes . . . . . . . . . . . . . . . . . The Portfolios; Other Information
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- ---------------- ------------------

<S> <C> <C>
(d) Inquiries . . . . . . . . . . . . . . . . . Cover page; Other Information

8. Annuity Period . . . . . . . . . . . . . . . . . Summary; Payout Period

9. Death Benefit . . . . . . . . . . . . . . . . . Death Benefits

10. Purchases and Contract Value

(a) Purchases . . . . . . . . . . . . . . . . . Summary; Transfers; Pay-In Period
(b) Valuation . . . . . . . . . . . . . . . . . Definitions; Pay-In Period
(c) Daily Calculation . . . . . . . . . . . . . . . . . Definitions; Pay-In Period
(d) Underwriter . . . . . . . . . . . . . . . . . Other Information

11. Redemptions

(a) - By Owners . . . . . . . . . . . . . . . . . Summary; Transfers; Withdrawals; Payout
. . . . . . . . . . . . . . . . . Period; Federal Tax Matters
- By Annuitant . . . . . . . . . . . . . . . . . Summary; Transfers; Withdrawals; Payout
. . . . . . . . . . . . . . . . . Period; Federal Tax Matters
(b) Texas ORP . . . . . . . . . . . . . . . . . N/A
(c) Check Delay . . . . . . . . . . . . . . . . . Other Information
(d) Lapse . . . . . . . . . . . . . . . . . Contract Loans
(e) Free Look . . . . . . . . . . . . . . . . . Summary; Pay-In Period

12. Taxes . . . . . . . . . . . . . . . . . . . . . Summary; Federal Tax Matters

13. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Legal Proceedings

14. Table of Contents for the
Statement of Additional Information . . . . . . . . . . . . . Statement of Additional Information Table of
Contents
</TABLE>
<PAGE> 4
PART B

<TABLE>
<CAPTION>
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION

<S> <C> <C>
15. Cover Page . . . . . . . . . . . . . . . . . . . . . Cover Page

16. Table of Contents . . . . . . . . . . . . . . . . . . . . . Table of Contents

17. General Information and
History . . . . . . . . . . . . . . . . . . . . . About IL Annuity and Insurance Company; IL
Annuity and Insurance Co. Separate
Account 1; the Portfolios (Prospectus)
18. Services

(a) Fees and Expenses of
Registrant . . . . . . . . . . . . . . . . . . . . . . Fees and Charges (Prospectus)
(b) Management Contracts . . . . . . . . . . . . . . . . . Termination of Participation Agreements
(c) Custodian . . . . . . . . . . . . . . . . . . . . . Safekeeping of Account Assets
Independent
Auditors . . . . . . . . . . . . . . . . . . . . . Experts
(d) Assets of Registrant . . . . . . . . . . . . . . . . . About IL Annuity and Insurance Co. Separate
. . . . . . . . . . . . . . . . . . . . . Account 1 (Prospectus)
(e) Affiliated Persons . . . . . . . . . . . . . . . . . . About IL Annuity and Insurance Company
(Prospectus)
(f) Principal Underwriter . . . . . . . . . . . . . . . . Distribution of the Contracts

19. Purchase of Securities
Being Offered . . . . . . . . . . . . . . . . . . . . Distribution of the Contracts
Offering Sales Load . . . . . . . . . . . . . . . . . N/A

20. Underwriters . . . . . . . . . . . . . . . . . . . . . Distribution of the Contracts

21. Calculation of Performance
Data . . . . . . . . . . . . . . . . . . . . . Calculation of Historical Performance Data;
How to Review Investment Performance of
the Variable Accounts (Prospectus)

22. Annuity Payments . . . . . . . . . . . . . . . . . . . . . Variable Annuity Payments; Payout Period
(Prospectus)

23. Financial Statements . . . . . . . . . . . . . . . . . . . . . Financial Statements
</TABLE>
<PAGE> 5
PART C -- OTHER INFORMATION

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION

<S> <C> <C>
24. Financial Statements
and Exhibits . . . . . . . . . . . . . . . . . . . . . Financial Statements and Exhibits

(a) Financial Statements . . . . . . . . . . . . . . . . . (a) Financial Statements
(b) Exhibits . . . . . . . . . . . . . . . . . . . . . (b) Exhibits

25. Directors and Officers
of the Depositor . . . . . . . . . . . . . . . . . . . . . Directors and Officers of IL Annuity and
Insurance Company

26. Persons Controlled By or
Under Common Control with
the Depositor or Registrant . . . . . . . . . . . . . . . . . Persons Controlled By or Under Common
Control with the Depositor or Registrant

27. Number of Contractowners . . . . . . . . . . . . . . . . . . . Number of owners

28. Indemnification . . . . . . . . . . . . . . . . . . . . . Indemnification

29. Principal Underwriters . . . . . . . . . . . . . . . . . . . . Principal Underwriter

30. Location of Accounts
and Records . . . . . . . . . . . . . . . . . . . . . Location of Books and Records

31. Management Services . . . . . . . . . . . . . . . . . . . . . Management Services

32. Undertakings . . . . . . . . . . . . . . . . . . . . . Undertakings and Representations

Signature Page Signatures
</TABLE>
<PAGE> 6

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

PROSPECTUS DATED MAY 1, 1996

This document is incorporated by reference to the Prospectus
filed with Post-Effective Amendment No. 1 to the Registration
Statement on Form N-4 of IL Annuity and Insurance Co. Separate
Account 1, File No. 33-89028 (April 26, 1996).
<PAGE> 7
SUPPLEMENT DATED JULY 2, 1996 TO
PROSPECTUS DATED MAY 1, 1996

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

This supplement is intended to be used with the prospectus dated May
1, 1996. This supplement, together with the prospectus and any supplements
previously furnished to you, constitute a current prospectus for the Visionary
Variable Annuity.

The Dollar Cost Averaging Service and the Automatic Account Balancing
Service are now available on a monthly, as well as quarterly, basis.

--------------------------

The following sentence replaces the first sentence in the section on
page 25 of the Prospectus entitled "Dollar-Cost Averaging":

If elected at the time of the application or at any time
thereafter before the Annuity Commencement Date by Written Request, an
Owner may systematically or automatically transfer (on a monthly or
quarterly basis) specified dollar amounts from one or more Variable
Accounts or the Fixed Account to one or more other Variable Accounts.

--------------------------

The following sentence replaces the first sentence in the section on
page 33 of the Prospectus entitled "Dollar-Cost Averaging":

An Owner may elect to automatically transfer (on a monthly or
quarterly basis) specified dollar amounts from the Fixed Account (as
well as one or more Variable Accounts) to one or more Variable
Accounts.

--------------------------

The following sentence replaces the first sentence in the section on
page 25 of the Prospectus entitled "Automatic Account Balancing Service":

If elected at the time of the application or requested at any
time thereafter before the Annuity Commencement Date by Written
Request, an Owner may instruct the Company to automatically transfer
(on a monthly or quarterly basis) Contract Value among specified
Variable Accounts in order to match the Owner's currently effective
Premium Payment allocation schedule.
<PAGE> 8
SUPPLEMENT DATED JULY 2, 1996 TO
PROSPECTUS DATED MAY 1, 1996

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

For Residents of the State of Maryland

The following information supplements footnote 1 of the Expense Table
on page 8 of the Prospectus, as well as the second paragraph of the section on
page 13 of the Prospectus entitled "Withdrawal Charge (Contingent Deferred
Sales Charge)":

For Maryland Owners 58 years of age and older on the date the Contract
is issued, the maximum withdrawal charge is 7% of the amount withdrawn
during the first two Contract Years, declining to 6.5% for withdrawals
made during the third Contract Year, and 6% during the fourth Contract
Year. Thereafter, the Withdrawal Charges decreases by 1% for each
subsequent Contract Year until it is zero in year ten.

--------------------------

The following chart replaces the chart on page 34 of the Prospectus in
the section entitled "Charge for Partial or Full Withdrawal":

<TABLE>
<CAPTION>
==============================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ----------------------------------------------------------------------------------------------
Contract Charge as % of Contract Charge as % Contract Charge as %
Year Withdrawal Year of Withdrawal Year of Withdrawal
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7% 7 3%
7 6% 3 6.5% 8 2%
8 4% 4 6% 9 1%
9 2% 5 5% 10 0%
10 0% 6 4%
==============================================================================================
</TABLE>
<PAGE> 9
SUPPLEMENT DATED SEPTEMBER 18, 1996 TO
PROSPECTUS DATED MAY 1, 1996

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

For Residents of the State of Texas

For Texas Owners 58 years of age and older on the date the Contract is
issued, the maximum withdrawal charge is 7% of the amount withdrawn
during the first two Contract Years, declining to 6.5% for withdrawals
made during the third Contract Year, and 6% during the fourth Contract
Year. Thereafter, the Withdrawal Charges decreases by 1% for each
subsequent Contract Year until it is zero in year ten.

--------------------------

The following chart replaces the chart on page 34 of the Prospectus in
the section entitled "Charge for Partial or Full Withdrawal":

<TABLE>
<CAPTION>
==============================================================================================
Age 57 or under Age 58 or older
--------------- ---------------
- ----------------------------------------------------------------------------------------------
Contract Charge as % of Contract Charge as % Contract Charge as %
Year Withdrawal Year of Withdrawal Year of Withdrawal
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-6 7% 1-2 7% 7 3%
7 6% 3 6.5% 8 2%
8 4% 4 6% 9 1%
9 2% 5 5% 10 0%
10 0% 6 4%
==============================================================================================
</TABLE>
<PAGE> 10
SUPPLEMENT DATED JULY 19, 1996 TO
PROSPECTUS DATED MAY 1, 1996

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

--------------------------

The following paragraph is added as the sixth paragraph in the section
on page 26 of the prospectus entitled "FULL AND PARTIAL WITHDRAWALS":

Systematic Withdrawal Program. The Systematic Withdrawal
Program provides an automatic monthly or quarterly payment to you, the
Owner, from the amounts you have accumulated in the Variable Accounts
and/or the Fixed Account. The minimum amount you may withdraw is
$100. To use the program, you must maintain a $1,000 balance in your
Contract. You may elect to participate in the Systematic Withdrawal
Program at any time before the Annuity Commencement Date by sending a
Written Request to the Annuity Service Center of IL Annuity (we or
us). Once you elect the program, it remains in effect unless the
balance in your Contract drops below $1,000. You may cancel the
program at any time by sending us a Written Request or by calling us
by telephone if we have your telephone authorization form on file.

We will assess a Withdrawal Charge on each withdrawal made
during the first nine Contract Years, unless the amount you withdraw
under the Systematic Withdrawal Program qualifies as a Free Withdrawal
Amount. (See "Withdrawal Charge -- Free Withdrawal Amount.") We do
not deduct any other charges for this program.

All Systematic Withdrawals will be paid to you on the same day
each month, provided that day is a Valuation Day. If it is not, then
payment will be made on the next Valuation Day. Systematic
withdrawals may be taxable, subject to withholding, and subject to a
10% penalty tax. (See "Federal Tax Matters.") We reserve the right
to discontinue offering the Systematic Withdrawal Program at any time
and for any reason.
<PAGE> 11

SUPPLEMENT DATED OCTOBER 18, 1996 TO
PROSPECTUS DATED MAY 1, 1996

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
VISIONARY VARIABLE ANNUITY

This supplement applies only to Contracts sold on or after October
18, 1996 and may not be available in all states.

--------------------------

The following definitions replace the definitions of "Eligible
Variable Account" and "Maturity Benefit" on pages 3 and 4 of the Prospectus.

ELIGIBLE PREMIUM PAYMENT -- That part of a Premium Payment
that the Owner initially allocated to a particular Eligible
Variable Account at the time of payment, provided payment was
made at least ten (10) years prior to the Maturity Benefit
Date. (See "Maturity Benefit.")

ELIGIBLE VARIABLE ACCOUNT -- Currently all Variable Accounts
except the Van Eck Gold and Natural Resources Variable
Account. (See "Maturity Benefit.")

MATURITY BENEFIT -- If the Contract is in the accumulation
phase on the Maturity Benefit Date, the Maturity Benefit for a
particular Eligible Variable Account is equal to: (a) the sum
of the Eligible Premium Payments for that particular Eligible
Variable Account; MINUS (b) a percentage of any transfer or
withdrawal from that Eligible Variable Account; and MINUS (c)
the value of that Eligible Variable Account on the Maturity
Benefit Date. (See "Maturity Benefit.")

--------------------------

The following sentence replaces the second sentence in the section
entitled "Transfers" on page 11 of the Prospectus:

If the Owner transfers Contract Value from an Eligible
Variable Account, the transfer will reduce the amount of the Eligible
Premium Payments on which the Maturity Benefit is based.

--------------------------

The following replaces the section on pages 12 and 13 of the
Prospectus entitled "Maturity Benefit":

If the Contract is in the accumulation phase on the Maturity
Benefit Date, IL Annuity will calculate the Maturity Benefit for each
Eligible Variable Account in which the Owner has value as of that
date. The Maturity Benefit
<PAGE> 12
will be credited to the Contract Value of an Eligible Variable Account
only if the value of the Eligible Variable Account on the Maturity
Benefit Date is less than: (a) the sum of the Eligible Premium
Payments for such Eligible Variable Account, MINUS (b) a percentage of
all prior withdrawals and transfers from such Eligible Variable
Account.

Eligible Premium Payments are those Premium Payments that
initially were allocated to a particular Eligible Variable Account at
the time of payment, provided the payment was made at least ten (10)
years prior to the Maturity Benefit Date.

On the Maturity Benefit Date, the Maturity Benefit to be
credited to each Eligible Variable Account is equal to: (a) the sum
of the Eligible Premium Payments for that particular Eligible Variable
Account; MINUS (b) a percentage of all prior withdrawals and transfers
from that Eligible Variable Account; MINUS (c) the value of that
Eligible Variable Account as of the Maturity Benefit Date.

The Maturity Benefit Date is the later of the Annuitant's age
70 and 10 years after the Date of Issue. If the Contract is owned by
Joint Owners who are spouses at the time one Joint Owner dies, the
Maturity Benefit Date will become the date the surviving spouse
attains age 70. If the Contract is owned by Joint Owners who are not
spouses and one of them dies before the Maturity Benefit Date, the
Maturity Benefit is not available to the sole surviving Owner. The
Eligible Variable Accounts currently include all Variable Accounts
except the Van Eck Gold and Natural Resources Variable Account.

The Maturity Benefit will not be credited to Contract Value if
the Owner chooses an Annuity Commencement Date that is earlier than
the Maturity Benefit Date.

Transfers and withdrawals from an Eligible Variable Account
will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")

--------------------------

The second full paragraph on page 21 of the Prospectus is replaced
with the following paragraph:

The Company will continue to pay a Maturity Benefit on Premium
Payments allocated to an Eligible Variable Account if: (a) the
Portfolio underlying an Eligible Variable Account changes its
investment objective; (b) the Company determines that an investment in
the Portfolio underlying an Eligible Variable Account is no longer
appropriate in light of the purposes of the Separate Account; or (c)
shares of a Portfolio underlying an Eligible

- 2 -
<PAGE> 13
Variable Account are no longer available for investment by the
Separate Account and IL Annuity is forced to redeem all shares of the
Portfolio held by the Eligible Variable Account.

--------------------------

The second full paragraph in the section on page 24 of the Prospectus
entitled "TRANSFER PRIVILEGES" is replaced with the following paragraph:

If the Owner transfers Contract Value from an Eligible
Variable Account, the transfer will reduce the amount of the Eligible
Premium Payments on which the Maturity Benefit is based. (See
"Maturity Benefit.")

--------------------------

The following sentence is added at the end of section on page 25 of
the Prospectus entitled "Dollar-Cost Averaging":

Dollar-Cost Averaging from an Eligible Variable Account will
reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")

--------------------------

The following sentence is added at the end of section on page 25 of
the Prospectus entitled "Automatic Account Balancing Service":

Automatic Account Balancing from an Eligible Variable Account
will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")

--------------------------

The third full paragraph in the section on page 26 of the Prospectus
entitled "Partial Withdrawals" is replaced with the following paragraph:

If the Owner withdraws Contract Value from an Eligible
Variable Account, the withdrawal will reduce the amount of the
Eligible Premium Payments on which the Maturity Benefit is based.
(See "Maturity Benefit.")

--------------------------

- 3 -
<PAGE> 14
The following replaces the section on pages 29 and 30 of the
Prospectus entitled "Maturity Benefit":

If the Contract is in the accumulation phase on the Maturity
Benefit Date, IL Annuity will calculate the Maturity Benefit for each
Eligible Variable Account in which the Owner has value. The Maturity
Benefit will be credited to the Contract Value of an Eligible Variable
Account only if the value of the Eligible Variable Account on the
Maturity Benefit Date is less than: (a) the sum of the Eligible
Premium Payments for such Eligible Variable Account, MINUS (b) a
percentage of all prior withdrawals and transfers from the Eligible
Variable Account.

The Maturity Benefit to be credited to each Eligible Variable
Account on the Maturity Benefit Date is equal to: (a) the sum of the
Eligible Premium Payments for that particular Eligible Variable
Account; MINUS (b) a percentage of all prior withdrawals and transfers
from that Eligible Variable Account; MINUS (c) the value of that
Eligible Variable Account on the Maturity Benefit Date.

The Maturity Benefit Date is the later of the Annuitant's age
70 and 10 years after the Date of Issue. If the Contract is owned by
Joint Owners who are spouses at the time one Joint Owner dies, the
Maturity Benefit Date will become the date the surviving spouse
attains age 70. If the Contract is owned by Joint Owners who are not
spouses and one of the Joint Owners dies before the Maturity Benefit
Date, the Maturity Benefit is not available to the sole surviving
Owner. Eligible Variable Accounts are those Variable Accounts shown
on the specifications page of the Contract which invest in Funds
which, in turn, invest primarily in stocks, equity securities, bonds
or money market instruments. Currently, all Variable Accounts, except
the Van Eck Gold and Natural Resources Variable Account, are Eligible
Variable Accounts.

The Maturity Benefit will not be credited to Contract Value if
the Owner chooses an Annuity Commencement Date that is earlier than
the Maturity Benefit Date.

A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF
AN ELIGIBLE VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE
PREMIUM PAYMENTS HELD IN THE ELIGIBLE VARIABLE ACCOUNT IN THE SAME
PROPORTION AS THE TRANSFER OR WITHDRAWAL REDUCED THE VALUE OF THE
ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3, 4 AND 6 BELOW ILLUSTRATE HOW
THIS FEATURE OF THE MATURITY BENEFIT WORKS.

- 4 -
<PAGE> 15
For purposes of calculating the value of an Eligible Variable
Account, the Company deems all transfers and withdrawals to be first a
withdrawal of Premium Payments, then of earnings. Transfers out of an
Eligible Variable Account include transfers resulting from Dollar Cost
Averaging or Automatic Account Balancing; withdrawals out of an
Eligible Variable Account include withdrawals resulting from the
Systematic Withdrawal Payments.

The following examples illustrate how the Maturity Benefit works:

Example #1:

Suppose an Owner buys a Contract with a single Premium Payment
of $50,000 at age 55 and immediately allocates the $50,000 to an
Eligible Variable Account. The Owner does not withdraw or transfer
any amounts from the Eligible Variable Account. As of the Maturity
Benefit Date (which is fifteen years later when the Owner is age 70),
the $50,000 qualifies as an Eligible Premium Payment because it was
made fifteen years prior to the Maturity Benefit Date and so it meets
the requirement that payment be made ten years prior to the Maturity
Benefit Date.

On the Maturity Benefit Date (Owner's age 70), IL Annuity will
calculate the Maturity Benefit for the Eligible Variable Account. IL
Annuity will total the value of all Eligible Premium Payments in the
Eligible Variable Account -- in this case $50,000. If the value of
the Eligible Variable Account on the Maturity Benefit Date is less
than $50,000, IL Annuity will automatically credit the difference to
Contract Value.

Example #2:

Assume the same facts as in Example #1, except that the Owner
specifies an Annuity Commencement Date of age 65 and begins to receive
payments under one of the payout options available under the Contract.
At age 70 (the Maturity Benefit Date), IL Annuity does not calculate
the Maturity Benefit and does not credit a Maturity Benefit to
Contract Value. By selecting an Annuity Commencement Date (age 65)
that is earlier than the Maturity Benefit Date (age 70), the Owner
forfeited all eligibility for the Maturity Benefit.

Example #3:

- 5 -
<PAGE> 16
the Eligible Premium Payments is $50,000 and is reduced by 40% to take
into account the transfer at age 69 ($50,000 X .40 = $20,000), leaving
$30,000 ($50,000 - $20,000 = $30,000). If on the Maturity Benefit
Date the value of the Eligible Variable Account is less than $30,000,
IL Annuity will automatically credit the difference to Contract Value.

Example #4:

Assume the same facts as in Example #1, except that at age 65
the Owner deposits (or transfers) an additional $50,000 Premium
Payment into the Eligible Variable Account. At age 69, when the value
of the Eligible Variable Account is $150,000, the Owner withdraws
$40,000. The withdrawal reduced the value of the Eligible Variable
Account by 26.667% ($40,000/$150,000 = .26667). No additional
transfers or withdrawals are made before the Maturity Benefit Date.
On the Maturity Benefit Date, the sum of Eligible Premium Payments is
$50,000. (The second Premium Payment of $50,000 does not qualify as
an Eligible Premium Payment because it was made only five years prior
to the Maturity Benefit Date and does not meet the requirement that
payment be made ten years prior to the Maturity Benefit Date.) This
sum is then reduced by 26.667% to take into account the transfer at
age 69 ($50,000 X .26667 = $13,333.33), leaving $36,666.67 ($50,000 -
$13,333.33 = $36,666.67). If on the Maturity Benefit Date the value
of the Eligible Variable Account is less than $36,666.67, IL Annuity
will automatically credit the difference to Contract Value.

Example #5:

Assume the Owner deposits Premium Payments of $5,000 per year
into the same Eligible Variable Account beginning at age 55 until the
Maturity Benefit Date. By age 70, the Owner had paid $75,000 in
Premium Payments and had taken no withdrawals or transfers. The sum
of the Eligible Premium Payments on the Maturity Benefit Date (age 70)
is $25,000 because only the five Premium Payments made prior to age 60
($5,000 X 5 = $25,000) meet the requirement that payment be made ten
years prior to the Maturity Benefit Date. If on the Maturity Benefit
Date the value of the Eligible Variable Account is less than $25,000,
IL Annuity will automatically credit the difference to Contract Value.

Example #6:

- 6 -
<PAGE> 17
Account by 10% ($9,000/$90,000 = .10). No additional transfers or
withdrawals are made prior to the Maturity Benefit Date. On the
Maturity Benefit Date the sum of the Eligible Premium Payments
($25,000) is reduced by 20% to take into account both the 10% transfer
at age 68 and the 10% withdrawal at age 69 ($25,000 x .20 = $5,000),
leaving $20,000 ($25,000 - $5,000 = $20,000). If on the Maturity
Benefit Date the value of the Eligible Variable Account is less than
$20,000, IL Annuity will automatically credit the difference to
Contract Value.

Example #7:

Spousal Joint Owners: If the Contract is owned by Joint
Owners who are spouses at the time one of the Joint Owners dies, the
surviving spouse may continue the Contract. The Maturity Benefit Date
will become the date the surviving spouse attains age 70. On that
date, IL Annuity will calculate the Maturity Benefit for each Eligible
Variable Account with value.

Example #8:

If the Contract is owned by Joint Owners who are not spouses
and one of the Joint Owners dies, the Maturity Benefit is not
available to the sole surviving Owner.

The Company will continue to pay a Maturity Benefit on Premium
Payments allocated to an Eligible Variable Account if: (a) the Portfolio
underlying an Eligible Variable Account changes its investment objective; (b)
the Company determines that an investment in the Portfolio underlying an
Eligible Variable Account is no longer appropriate in light of the purposes of
the Separate Account; or (c) shares of a Portfolio underlying an Eligible
Variable Account are no longer available for investment by the Separate Account
and IL Annuity is forced to redeem all shares of the Portfolio held by the
Eligible Variable Account.

- 7 -
<PAGE> 18

PROSPECTUS FOR THE
VISIONARY CHOICE

FLEXIBLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
ALSO KNOWN AS
MODIFIED SINGLE PREMIUM INDIVIDUAL DEFERRED VARIABLE ANNUITY CONTRACT
Issued by
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208
Telephone: (317) 927-6500
(800) XXX-XXXX

This prospectus describes the VISIONARY CHOICE variable annuity, an
individual deferred variable annuity contract (the "Contract") being offered by
IL Annuity and Insurance Company (the "Company," "we," "us," or "our"). Under
the terms of the Contract, we promise to pay the Annuitant a series of income
payments in the form of annuity payments starting on the Annuity Start Date you
choose. (You will be the Annuitant unless you state otherwise.) Until the
Annuity Start Date, the Contract is in the Pay-in Period and allows you to
accumulate assets on a tax-deferred basis for retirement and other long-term
purposes. VISIONARY CHOICE may be available to you when you participate in a
retirement plan that qualifies for deferral of federal income taxes.
Non-Qualified Contracts are also available.

You may direct your Premium Payments, as well as any value accumulated
under your Contract, to one or more of 15 Variable Accounts of the IL Annuity
and Insurance Co. Separate Account 1 (the "Separate Account") and/or to the
Fixed Account. The money you place in the Fixed Account will earn interest at a
rate guaranteed by the Company to equal or exceed 3% annually. The money you
place in a Variable Account will be invested solely in an investment portfolio
("Portfolio") of a mutual fund ("Fund"). The value of the assets you place in
the Variable Accounts will vary according to the investment performance of the
Portfolios. Currently you may choose among 15 Portfolios of 7 Funds:

The Alger American Fund:
MidCap Growth Portfolio and Small Capitalization Portfolio

Fidelity Variable Insurance Products ("VIP") Fund and Fidelity VIP
Fund II:
Equity-Income Portfolio, Growth Portfolio, Money Market Portfolio,
Asset Manager Portfolio, Contrafund Portfolio, Index 500 Portfolio
and Investment Grade Bond Portfolio

OCC Accumulation Trust:
Managed Portfolio and Small Cap Portfolio

T. Rowe Price Fixed Income Series, Inc.:
Limited-Term Bond Portfolio

T. Rowe Price International Series, Inc.:
International Stock Portfolio

Van Eck Worldwide Insurance Trust:
Gold and Natural Resources Portfolio and Worldwide Balanced Portfolio

You bear the entire investment risk on the assets you place in the Variable
Accounts. This means that, depending on market conditions, you may increase or
lose the principal you have invested in any of these Portfolios.

With the VISIONARY CHOICE, you choose one of two withdrawal charge options
at the time you complete your application. You also choose, at no additional
charge, either an enhanced death benefit option or a maturity benefit option.
And, if your initial Premium Payment is $100,000 or more, you may choose one of
two free withdrawal options on your application. Once you choose your option,
you may not change it.
<PAGE> 19

THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUNDS.

This prospectus contains important information about the Contract and the
Separate Account that you should know before investing. Additional information
about the Contract and the Separate Account is contained in the Statement of
Additional Information ("SAI") that has been filed with the Securities and
Exchange Commission. The SAI has the same date as this prospectus and is legally
a part of this prospectus. The table of contents for the SAI is on page of this
prospectus. You may obtain a free copy of the SAI by writing to us at the
address shown above or by calling [1-800-XXX-XXXX].

PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

The Contract is not available in all states.

Unlike bank and credit union accounts, Contract Value invested in the
Separate Account is not insured. Investment of Contract Value in the Separate
Account involves certain risks including possible loss of Premium Payments.
Separate Account Value is not deposited in or guaranteed by any bank or credit
union and is not guaranteed by any government agency.

The date of this prospectus is , 1997

ii
<PAGE> 20

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEFINITIONS........................................................................... 2
FEE TABLE............................................................................. 5
SUMMARY OF THE VISIONARY CHOICE CONTRACT.............................................. 13
ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT............................................. 17
THE PORTFOLIOS........................................................................ 18
THE PAY-IN PERIOD..................................................................... 21
TRANSFERS BETWEEN INVESTMENT OPTIONS.................................................. 24
FEES AND CHARGES...................................................................... 25
THE PAYOUT PERIOD..................................................................... 29
WITHDRAWAL OF CONTRACT VALUE.......................................................... 31
CONTRACT LOANS........................................................................ 32
DEATH BENEFITS........................................................................ 33
THE MATURITY BENEFIT.................................................................. 35
THE FIXED ACCOUNT..................................................................... 37
HOW TO REVIEW INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS......................... 39
VOTING RIGHTS......................................................................... 41
FEDERAL TAX MATTERS................................................................... 41
OTHER INFORMATION..................................................................... 46
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.......................... 49
APPENDIX I: CONDENSED FINANCIAL INFORMATION........................................... A-1
</TABLE>

1
<PAGE> 21

DEFINITIONS

ACCUMULATION UNIT -- An accounting measure we use to calculate the value of a
Variable Account during the Pay-in Period.

ANNUITANT -- You are the Annuitant, unless you state otherwise in your
application. The Annuitant is the person or persons whose life (or lives)
determines the dollar amount of the annuity payments that will be paid under the
Contract. If the Annuitant dies before the Annuity Start Date, we will pay a
death benefit. The maximum number of joint annuitants is two. Provisions
referring to the death of an Annuitant mean the death of the last surviving
Annuitant. The Annuitant named in the application may not be changed.

ANNUITY START DATE -- The date when the Annuitant will begin to receive annuity
payments. (You are the Annuitant, unless you tell us otherwise at the time of
your application.) If you own a Non-Qualified Contract, we will ask you to
select an Annuity Start Date. If you do not select a date, the Annuity Start
Date is either the Annuitant's age 70 or 10 years after the Date of Issue,
whichever is later. If you own a Qualified Contract, the Annuity Start Date is
fixed at the Annuitant's age 70 1/2.

ANNUITY UNIT -- An accounting measure we use to calculate the value of your
annuity payments if you choose to receive annuity payments from the Variable
Accounts.

BENEFICIARY -- The person you name to receive the death benefit if the Owner or
Annuitant dies before the Annuity Start Date.

BUSINESS DAY -- Each day on which the New York Stock Exchange is open for
business, except for the holidays listed in this prospectus under "Holidays" and
except for any day on which the Portfolio in which a Variable Account invests
does not value its shares.

THE CODE -- The Internal Revenue Code of 1986, as amended.

THE COMPANY ("WE," "US," "OUR") -- IL Annuity and Insurance Company, a
Massachusetts stock life insurance company.

CONTRACT ANNIVERSARY -- The same month and day as the Date of Issue in each
calendar year during which the Contract is in force.

CONTRACT FEE -- During the Pay-in Period, we will deduct this charge from your
Contract Value at the end of each contract quarter and on the date you fully
withdraw all value from the Contract. We use the Contract Fee to cover our cost
of providing certain administrative services related to the Contracts and the
Separate Account.

CONTRACT VALUE -- The total amount you have accumulated under the Contract. It
is the sum of the Separate Account Value and the Fixed Account Value.

CONTRACT YEAR -- A twelve-month period that we measure from the anniversary of
the Date of Issue. The first Contract Year begins on the Date of Issue.

DATE OF ISSUE -- The date we issue your Contract. It is shown on the
specifications page of the Contract and is the date on which the first Contract
Year begins.

DEATH BENEFIT ANNIVERSARY -- Every third Contract Anniversary beginning on the
Date of Issue.

DUE PROOF OF DEATH -- Proof of death that is satisfactory to us. Such proof may
consist of the following if acceptable to us: (a) a certified copy of the death
record; (b) a certified copy of a court decree reciting a finding of death; (c)
any other proof satisfactory to us.

ELIGIBLE PREMIUM PAYMENT -- That part of a Premium Payment that you initially
allocated to a particular Eligible Variable Account at the time of payment,
provided you made the payment at least ten (10) years prior to the Maturity
Benefit Date. (See "Maturity Benefit.")

ELIGIBLE VARIABLE ACCOUNT -- Currently all Variable Accounts except the Van Eck
Gold and Natural Resources Variable Account. (See "Maturity Benefit.")

2
<PAGE> 22

ENHANCED DEATH BENEFIT -- If you elect the three-year stepped-up Enhanced Death
Benefit option at the time of purchase, the Enhanced Death Benefit will equal
the greater of: (a) the Contract Value as of the date we receive due proof of
the deceased's death and payment instructions; or (b) the highest Contract Value
on any Death Benefit Anniversary preceding the date the death benefit is
determined, plus any Premium Payments and minus any withdrawals and charges
incurred between such Death Benefit Anniversary and the date the death benefit
is determined.

FIXED ACCOUNT -- Part of our General Account to which you may apportion Net
Premium Payments and to which you may transfer assets under the Contract. The
Fixed Account provides guarantees of principal and interest. Special limits
apply to transfers of Contract Value to and from the Fixed Account. (See "Fixed
Account.")

FIXED ACCOUNT CURRENT RATE -- The interest rate contained in a schedule of rates
we set from time to time. The rate of interest we will credit to the initial
Premium Payment, if allocated to the Fixed Account, is shown on the
specifications page of the Contract.

FIXED ACCOUNT VALUE -- The value of your Contract in the Fixed Account before
the Annuity Start Date.

FUNDS -- Each of (i) The Alger American Fund; (ii) Fidelity VIP Fund; (iii)
Fidelity VIP Fund II; (iv) OCC Accumulation Trust; (v) T. Rowe Price Fixed
Income Series, Inc.; (vi) T. Rowe Price International Series, Inc.; and (vii)
Van Eck Worldwide Insurance Trust. Each Variable Account invests in a separate
investment portfolio ("Portfolio") of a Fund. Each Fund is either an open-end
management investment company or a unit investment trust.

GENERAL ACCOUNT -- The account that contains all of our assets other than those
held in the separate accounts.

MATURITY BENEFIT -- If you elect the Maturity Benefit option at the time of
purchase and if the Contract is in the Pay-in Period on the Maturity Benefit
Date, the Maturity Benefit for a particular Eligible Variable Account is equal
to: (a) the sum of the Eligible Premium Payments for that particular Eligible
Variable Account; MINUS (b) a percentage of any transfer or withdrawal from that
Eligible Variable Account; and MINUS (c) the value of that Eligible Variable
Account on the Maturity Benefit Date. (See "Maturity Benefit.")

MATURITY BENEFIT DATE -- The Annuitant's age 70 or 10 years after the Date of
Issue, whichever is later. If the Contract is owned by Joint Owners who are
spouses at the time one Joint Owner dies, the Maturity Benefit Date will become
the date the surviving spouse attains age 70.

NET PREMIUM PAYMENT -- A Premium Payment minus any applicable premium tax.

NON-QUALIFIED CONTRACT -- A Contract that is not a "Qualified Contract."

OWNER ("YOU" OR "YOUR") -- The person(s) who owns the Contract and who is
entitled to exercise all rights and privileges provided in the Contract. The
term also includes any person designated as a Joint Owner. The maximum number of
Joint Owners is two. Joint Owners are not permitted under Qualified Contracts.

PAYEE -- The person or persons entitled to receive annuity payments. You may
name a "Successor Payee" to receive any guaranteed annuity payments after the
death of the sole surviving Payee.

PAY-IN PERIOD -- The period of time that begins when your Contract is issued and
continues until the date you begin to receive annuity payments on the Annuity
Start Date. The Pay-in Period will also end if you fully withdraw your Contract
before the Annuity Start Date.

PAYOUT PERIOD -- The period of time during which you will receive in a steady
stream of annuity payments the money you have accumulated under your Contract.
It begins on the Annuity Start Date.

PAYOUT OPTION -- The arrangement under which annuity payments are made to you.
You may choose to have your annuity payments made on a fixed, a variable, or a
combination payout basis.

PORTFOLIO -- The separate investment portfolios of the Funds. The Portfolios
currently offered through the Contract are listed on the front cover of this
prospectus.

3
<PAGE> 23

PREMIUM PAYMENT YEAR -- The twelve-month period beginning on the date we receive
any Premium Payment. It is used to calculate the Withdrawal Charge if you choose
the Date of Premium Payment Withdrawal Charge Option.

QUALIFIED CONTRACT -- A Contract issued in connection with retirement plans that
qualify for special federal income tax treatment under Sections 401, 403(b), or
408 of the Code.

SEC -- U.S. Securities and Exchange Commission.

SEPARATE ACCOUNT -- IL Annuity and Insurance Co. Separate Account 1. It is not
part of our General Account. The Separate Account is divided into Variable
Accounts, each of which invests solely in shares of a Portfolio of a Fund.

SEPARATE ACCOUNT VALUE -- The value of the Contract in the Separate Account
before the Annuity Start Date.

SERVICE CENTER -- The office of , an administrator that
provides administrative service for the Contracts. The mailing address for the
Service Center is .

SURRENDER VALUE -- The Contract Value MINUS (1) any applicable Withdrawal
Charges; MINUS (2) any premium taxes not previously deducted; and MINUS (3) the
Contract Fee. For a 403(b) Qualified Contract, the outstanding loan amount, if
any, is also deducted from Contract Value.

VARIABLE ACCOUNT -- A subdivision of the Separate Account. A Variable Account
invests solely in the shares of a designated Portfolio of a Fund.

WRITTEN REQUEST -- A written notice or request in a form satisfactory to us that
is signed by you and received at the Service Center.

4
<PAGE> 24

FEE TABLE

The following expense information assumes that you have invested your
entire Contract Value in the Separate Account.

CONTRACT OWNER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Withdrawal Charge (as a percentage of Premium Payments withdrawn(1)............ 7.0%
Transfer Fee(2) (No charge for first 12 transfers in a Contract Year; thereafter, $25
fee per transfer).................................................................... $ 0
Contract Fee ($7.50 per quarter, annualized)(3)........................................ $30
</TABLE>

SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of Separate Account Value)

<TABLE>
<S> <C>
Mortality and Expense Risk Charge..................................................... 1.25%
Administrative Expense Charge......................................................... 0.15%
Total Separate Account Annual Expenses........................................... 1.40%
</TABLE>

INVESTMENT PORTFOLIO ANNUAL EXPENSES
(as a percentage of average daily net assets of a Portfolio after expense
cap or reimbursement)

<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES TOTAL ANNUAL
(INVESTMENT (AFTER EXPENSES (AFTER
NAME OF PORTFOLIO ADVISORY FEES) REIMBURSEMENT) REIMBURSEMENT)
- --------------------------------------------------- --------------- -------------- ---------------
<S> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio.......................... 0.80% 0.10% 0.90%
Small Capitalization Portfolio................... 0.85% 0.07% 0.92%
Fidelity VIP Fund
Equity Income Portfolio.......................... 0.51% 0.10% 0.61%
Growth Portfolio................................. 0.61% 0.09% 0.70%
Money Market Portfolio........................... 0.24% 0.09% 0.33%
Fidelity VIP Fund II
Asset Manager Portfolio(4)....................... 0.71% 0.10% 0.81%
Contrafund Portfolio(4).......................... 0.61% 0.12% 0.73%
Index 500 Portfolio(5)........................... 0.00% 0.28% 0.28%
Investment Grade Bond Portfolio.................. 0.45% 0.14% 0.59%
OCC Accumulation Trust
Managed Portfolio(6)............................. 0.80% 0.14% 0.94%
Small Cap Portfolio(6)........................... 0.80% 0.20% 1.00%
T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio(7)................... 0.70% 0.00% 0.70%
T. Rowe Price International Series, Inc.
International Stock Portfolio(7)................. 1.05% 0.00% 1.05%
Van Eck Worldwide Insurance Trust
Gold and Natural Resources Portfolio............. 1.00% 0.21% 1.21%
Worldwide Balanced Portfolio(8).................. 0.00% 0.00% 0.00%
</TABLE>

Premium taxes are not shown here, but may be charged by some states. (See
"Premium Taxes".)

The purpose of the fee table is to assist you in understanding the costs
and expenses that you will pay directly or indirectly when you invest in the
Contract. The table reflects the actual charges and expenses for the Separate
Account and the Portfolios for the year ended December 31, 1995. For a more
complete description of these charges and expenses, see "Fees and Charges" in
this prospectus and the prospectus for each Portfolio that is attached to this
prospectus.

(1) In any Contract Year, you may withdraw a portion of your Contract Value
without incurring a Withdrawal Charge. This amount is called the Free
Withdrawal Amount. If your initial Premium Payment is less than

5
<PAGE> 25

$100,000, the Free Withdrawal Amount is 10% of Contract Value each year, as
determined at the beginning of the Contract Year. If you do not withdraw the
full 10% in any Contract Year, the remaining amount does not roll over to
the next Contract Year. If your initial Premium Payment is $100,000 or more,
the Free Withdrawal Amount will depend on the Free Withdrawal Option you
choose at the time you purchase your Contract. If you choose the CUMULATIVE
10% OPTION, you may withdraw up to 10% of your Contract Value as of the
beginning of each Contract Year and we will not charge you a Withdrawal
Charge on that amount. If you do not withdraw the full 10% in any one
Contract Year, the remaining percentage may be rolled over to the next
Contract Year, up to a maximum of 50% after 5 years, as determined as of the
beginning of each Contract Year. If you choose the EARNINGS OPTION, you may
withdraw all your Contract earnings at any time without incurring a
Withdrawal Charge. (See "Fees and Charges -- Withdrawal Charge.")

The Contract also gives you a choice between two Withdrawal Charge options. If
you choose the DATE OF ISSUE WITHDRAWAL CHARGE OPTION, we will calculate the
Withdrawal Charge from the Date of Issue. Under this option, we will deduct
the Withdrawal Charge from all withdrawals of Premium Payments that occur
during the first nine Contract Years and that are greater than the Free
Withdrawal Amount. No Withdrawal Charge is deducted from full or partial
withdrawals that occur in Contract Years ten and later. For the first six
Contract Years, the Withdrawal Charge is 7% of the amount withdrawn,
decreasing to 6% in the seventh Contract Year, and declining by 2% for each
subsequent Contract Year until it is zero in Contract Year ten.

If you choose the DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION, we will
calculate the Withdrawal Charge from the date you make a Premium Payment.
Under this option, we will deduct a Withdrawal Charge from all withdrawals of
Premium Payments that we have held for less than seven years and that are
greater than the Free Withdrawal Amount. Premium Payments withdrawn during the
first year after receipt by us are subject to a 7% Withdrawal Charge,
decreasing by 1% annually until it is zero in Premium Payment Year eight. (See
"Fees and Charges -- Withdrawal Charge.")

(2) We will not charge you a transfer fee on the first twelve transfers in a
Contract Year. We will charge a $25 fee for each transfer you make after the
twelfth during a Contract Year.

(3) We will not charge a Qualified Contract for the Contract Fee. We also
currently will not charge a Non-Qualified Contract for the Contract Fee once
the total Premium Payments you have paid equals $100,000.

(4) A portion of the brokerage commissions paid by the Asset Manager and
Contrafund Portfolios was used to reduce Portfolio expenses, so that Total
Annual Portfolio Expenses in 1995 after the reduction were 0.79% for Asset
Manager and 0.72% for Contrafund.

(5) The expenses for the Fidelity Index 500 Portfolio were voluntarily reduced
by the Fund's investment adviser. Absent reimbursements, Management Fee,
Other Expenses and Total Annual Portfolio Expenses would have been 0.28%,
0.19% and 0.47%, respectively.

(6) The Total Annual Portfolio Expenses of the OCC Accumulation Trust Portfolios
as of December 31, 1995 have been restated to reflect new Management Fee and
expense limitation arrangements in effect as of May 1, 1996. Effective May
1, 1996, the Total Annual Portfolio Expenses of the Managed and Small Cap
Portfolios of the OCC Accumulation Trust are contractually limited by OpCap
Advisors so that their respective annualized operating expenses do not
exceed 1.25% of their respective average daily net assets. Furthermore,
through April 30, 1997, the annualized operating expenses of the Managed and
Small Cap Portfolios will be voluntarily limited by OpCap Advisors so that
annualized operating expenses of these Portfolios do not exceed 1.00% of
their respective average daily net assets. Without such voluntary expense
limitations, and taking into account the revised contractual provisions
effective May 1, 1996 concerning management fees and expense limitations,
the Management Fees, Other Expenses and Total Annual Portfolio Expenses
incurred for the fiscal year ended December 31, 1995 would have been: .80%,
.14% and .94%, respectively, for the Managed Portfolio; and .80%, .39% and
1.19%, respectively, for the Small Cap Portfolio.

(7) The Limited-Term Bond Portfolio pays T. Rowe Price an annual all-inclusive
fee of 0.70% based on its average daily net assets. The International Stock
Portfolio pays Rowe Price-Fleming International, Inc.

6
<PAGE> 26

("Price-Fleming") an annual all-inclusive fee of 1.05% based on its average
daily net assets. These fees pay for investment management services and
other operating costs of the Portfolios.

(8) The Worldwide Balanced Portfolio's expenses were voluntarily reduced by the
Portfolio's investment adviser. Absent such reimbursement, Management Fees,
Other Expenses, and Total Annual Portfolio Expenses would have been 0.75%,
0.60%, and 1.35%, respectively. Other Expenses of 0.60% are based on a net
asset estimation of $30 million.

EXAMPLES

(NOTE: The examples shown below are entirely hypothetical. They are not
representations of past or future performance or expenses. Actual performance
and/or expenses may be more or less than shown.)

Examples 1 through 3 show expenses for Contracts with a DATE OF ISSUE
WITHDRAWAL CHARGE OPTION.

Examples: You would pay the following expenses on a $1,000
investment, assuming a 5% annual return on assets and the changes and
expenses listed on the Fee Table above.

1. If you fully withdraw all Contract Value at the end of the
stated time period:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS
--------------------------------------------------- ------ -------
<S> <C> <C>
Alger American Fund
MidCap Growth Portfolio............................ $88.01 $139.49
Small Capitalization Portfolio..................... $88.22 $140.12
Fidelity VIP Fund
Equity-Income Portfolio............................ $84.96 $130.29
Growth Portfolio................................... $85.91 $133.15
Money Market Portfolio............................. $82.03 $121.35
Fidelity VIP Fund II
Asset Manager Portfolio............................ $87.06 $136.64
Contrafund Portfolio............................... $86.22 $134.10
Index 500 Portfolio................................ $81.50 $119.74
Investment Grade Bond Portfolio.................... $84.76 $129.65
OCC Accumulation Trust
Managed Portfolio.................................. $88.43 $140.76
Small Cap Portfolio................................ $89.06 $142.65
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio........................ $85.91 $133.15
T. Rowe Price International Series
International Stock Portfolio...................... $89.58 $144.23
Van Eck Worldwide Insurance Trust
Gold and Natural Resources Portfolio............... $91.26 $149.27
Worldwide Balanced Portfolio....................... $78.57 $110.74
</TABLE>

7
<PAGE> 27

2. If you do not fully withdraw all Contract Value and do not
annuitize the Contract:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS
---------------------------------------------------- ------ -------
<S> <C> <C>
Alger American Fund
MidCap Growth Portfolio............................. $25.01 $ 76.85
Small Capitalization Portfolio...................... $25.22 $ 77.48
Fidelity VIP Fund
Equity-Income Portfolio............................. $21.96 $ 67.69
Growth Portfolio.................................... $22.91 $ 70.53
Money Market Portfolio.............................. $19.03 $ 58.79
Fidelity VIP Fund II
Asset Manager Portfolio............................. $24.06 $ 74.01
Contrafund Portfolio................................ $23.22 $ 71.48
Index 500 Portfolio................................. $18.50 $ 57.19
Investment Grade Bond Portfolio..................... $21.76 $ 67.05
OCC Accumulation Trust
Managed Portfolio................................... $25.43 $ 78.11
Small Cap Portfolio................................. $26.06 $ 79.99
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio......................... $22.91 $ 70.53
T. Rowe Price International Series
International Stock Portfolio....................... $26.58 $ 81.56
Van Eck Worldwide Insurance Trust
Gold and Natural Resources Portfolio................ $28.26 $ 86.58
Worldwide Balanced Portfolio........................ $48.23 $ 48.23
</TABLE>

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<PAGE> 28

3. If you elect to annuitize the Contract at the end of the stated
period under a payout plan with at least 10 years of guaranteed payments
or with a life contingency:

9
<PAGE> 29

Examples 4-6 show examples for Contracts with the DATE OF PREMIUM PAYMENT
WITHDRAWAL OPTION.

Examples: You would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets and the charges and expenses listed on the
Fee Table above:

4. If you fully withdraw all Contract Value at the end of the stated time
period:

<TABLE>
<CAPTION>
NAME OF PORTFOLIO 1 YEAR 3 YEARS
--------------------------------------------------- ------ -------
<S> <C> <C>
Alger American Fund
MidCap Growth Portfolio............................ $88.01 $121.59
Small Capitalization Portfolio..................... $88.22 $122.23
Fidelity VIP Fund
Equity-Income Portfolio............................ $84.96 $112.40
Growth Portfolio................................... $85.91 $115.26
Money Market Portfolio............................. $82.03 $103.47
Fidelity VIP Fund II
Asset Manager Portfolio............................ $87.06 $118.75
Contrafund Portfolio............................... $86.22 $116.21
Index 500 Portfolio................................ $81.50 $101.87
Investment Grade Bond Portfolio.................... $84.76 $111.76
OCC Accumulation Trust
Managed Portfolio.................................. $88.43 $122.86
Small Cap Portfolio................................ $89.06 $124.75
T. Rowe Price Fixed Income Series
Limited-Term Bond Portfolio........................ $85.91 $115.26
T. Rowe Price International Series
International Stock Portfolio...................... $89.58 $126.33
Van Eck Worldwide Insurance Trust
Gold and Natural Resources Portfolio............... $91.26 $131.36
Worldwide Balanced Portfolio....................... $78.57 $ 92.88
</TABLE>

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<PAGE> 30

5. If you do not fully withdraw all Contract Value and do not
annuitize the Contract:

11
<PAGE> 31

6. If you elect to annuitize the Contract at the end of the stated
period under a payout plan with at least 10 years of guaranteed payments
or with a life contingency:

The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples reflect the annualized Contract Fee of
$30 assessed on an average Contract Value of $34,179. This translates the
Contract Fee into a .09% charge for the purposes of the examples based on a
$1,000 investment.

THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED
5% ANNUAL RATE OF RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THIS ASSUMED RATE.

There is a table of Condensed Financial Information that contains the
accumulated unit value history of the Separate Account. That table is found in
Appendix A -- Condensed Financial Information.

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<PAGE> 32

SUMMARY OF THE VISIONARY CHOICE CONTRACT

Purchasing Your Contract. The VISIONARY CHOICE Contract is an individual
deferred variable annuity issued by IL Annuity and Insurance Company. You may
purchase this Contract with $1,000 or more under most circumstances. We will not
issue a Contract if you are older than 85 on the Date of Issue.

The Contract provides a means for investing on a tax-deferred basis. This
means that you will not be taxed on earnings or appreciation in your Contract
until you withdraw your money. The Contract may be sold in connection with
retirement plans, some of which may qualify for special federal tax treatment
under the Code. (See "The Pay-In Period -- Issuing Your Contract.")

Cancellation -- The 10 Day Free-Look Period. You have the right to cancel
the Contract for any reason within 10 days after you receive it (or within 20
days if the Contract is replacing another annuity contract or insurance policy).
The Contract must be returned to our Service Center. Your Written Request to
cancel the Contract must accompany the Contract. The returned Contract will be
treated as if it were never issued. In certain states you may have more than 10
days to return the Contract for a refund. The amount that we refund will vary
according to state requirements. If we are required by state law to refund your
original Premium Payment, we will allocate your initial Premium Payment to the
Money Market Variable Account during the Free-Look Period. (See "The Pay-In
Period -- Cancellation -- The 10-Day Free-Look Period.")

Premium Payments. A Premium Payment is the money you pay us to buy the
Visionary Choice Contract. The Contract generally gives you the flexibility to
make Premium Payments as often as you like, although you may choose to make only
a single Premium Payment. After you buy the Contract, you may send us Premium
Payments of $1,000 or more at any time during the Pay-in Period, so long as they
do not exceed two times the amount of your initial Premium Payment in any year.
We generally will not accept total Premium Payments in excess of $250,000. We
reserve the right to waive these limitations. (See "Premium Payments.")

Designating Your Investment Options. When you purchase your Contract, we
will ask you to provide us with written instructions telling us how to allocate
your Premium Payments among the Portfolios of the Variable Accounts and the
Fixed Account. You may place your Premium Payments in one or more Variable
Accounts and/or the Fixed Account, subject to certain restrictions. (See "The
Pay-In Period.")

Transfers. During the Pay-in Period, you may transfer your Contract Value
from the Variable Accounts and the Fixed Account to other Variable Account(s)
and the Fixed Account, subject to certain restrictions. (See "Transfers Between
Investment Options.") If you transfer Contract Value from an Eligible Variable
Account, the transfer will reduce the amount of the Eligible Premium Payments on
which the Maturity Benefit is based. (See "Maturity Benefit.")

Transfers to the Fixed Account must be at least $1,000. During the Pay-in
Period, you may transfer up to 20% of the Fixed Account Value from the Fixed
Account to one or more of the Variable Accounts in any Contract Year. No fee is
charged for transfers from the Fixed Account to one or more Variable Accounts
and such transfers are not considered a transfer for purposes of assessing a
transfer charge. (See "Transfers Between Investment Options.")

Once you begin to receive annuity payments, you may make one transfer
between the Variable Accounts each Contract Year. (See "The Payout Period.")

Partial Withdrawals. During the Pay-in Period, you may withdraw part of
your Contract Value by sending a Written Request or making a telephone request
to the Service Center. The amount of your request must be at least $250. If the
Contract Value remaining after your partial withdrawal is less than $1,000, we
reserve the right to pay you the Surrender Value in a lump sum. Amounts
withdrawn may be subject to a Withdrawal Charge, depending the Withdrawal Charge
Option you chose at the time of purchase. In any Contract Year, you may withdraw
a portion of your Contract Value without incurring a Withdrawal Charge, called
the Free Withdrawal Amount. (See "Fees and Charges -- Withdrawal Charge.")

Withdrawals from an Eligible Variable Account will reduce the amount of the
Eligible Premium Payments on which the Maturity Benefit is based. (See "Maturity
Benefit.")

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<PAGE> 33

The Federal tax laws may impose income taxes and tax penalties upon, and in
some cases prohibit, certain premature withdrawals from the Contract before or
after the Annuity Start Date. (See "Federal Tax Matters.")

Full Withdrawal. During the Pay-in Period, you may cancel the Contract and
receive its Surrender Value by sending us a Written Request. (See "Withdrawal of
Contract Value.") As with partial withdrawals, Federal tax laws may impose
income taxes and tax penalties upon, and in some cases prohibit, certain
premature withdrawals from the Contract before or after the Annuity Start Date.
(See "Federal Tax Matters.")

Death Benefit. If the Annuitant dies before the Annuity Start Date, the
Beneficiary will receive a Death Benefit. If you do not choose the Enhanced
Death Benefit option at the time of purchase, the Death Benefit will be
determined as of the date we receive due proof of the deceased's death and
payment instructions. The Death Benefit will equal the greater of:

(1) the sum of all Premium Payments made under the Contract, LESS
partial withdrawals as of the date the Death Benefit is determined;
or

(2) the Contract Value as of the date the Death Benefit is determined;

LESS any applicable premium taxes not previously deducted.

If you elect the three year stepped-up Enhanced Death Benefit option at the
time of purchase, the Enhanced Death Benefit payable upon the death of the
Annuitant before the Annuity Start Date will be determined as of the date we
receive due proof of the deceased's death and payment instructions. The Enhanced
Death Benefit will be the greater of:

(1) the Contract Value as of the date the Enhanced Death Benefit is
determined; or

(2) the highest Contract Value on any Death Benefit Anniversary
preceding the date the Enhanced Death Benefit is determined,
adjusted for any Premium Payments received, withdrawals taken and
charges incurred between such Death Benefit Anniversary and the date
the Enhanced Death Benefit is determined. This value is initially
set on the first Death Benefit Anniversary and equals the greater
of: (a) the sum of Premium Payments, MINUS partial withdrawals; or
(b) Contract Value, on that date. This value will be reset on every
future Death Benefit Anniversary (that is, every third year) to
equal Contract Value on that date only if Contract Value on that
Death Benefit Anniversary is greater than the Enhanced Death Benefit
Value on any previous Death Benefit Anniversary. Once reset, this
value will never decrease unless partial withdrawals are made;

LESS any applicable premium taxes not previously deducted.

Age Limitation on Death Benefit Provision: If the Annuitant dies at or
after age 75 (or ten years after the Date of Issue, whichever is later) but
before the Annuity Start Date, the Death Benefit under either Death Benefit
option will equal Contract Value LESS any applicable premium taxes not yet
deducted, as of the date we receive due proof of death and payment instructions.
(See "Death Benefits.")

Maturity Benefit. If you elect the Maturity Benefit option at the time of
purchase and the Contract is in the Paying Period on the Maturity Benefit Date,
IL Annuity will calculate the Maturity Benefit for each Eligible Variable
Account in which you have value as of that date. The Maturity Benefit will be
credited to the Contract Value of an Eligible Variable Account only if the value
of the Eligible Variable Account on the Maturity Benefit Date is less than: (a)
the sum of the Eligible Premium Payments for such Eligible Variable Account,
MINUS (b) a percentage of all prior withdrawals and transfers from such Eligible
Variable Account.

Eligible Premium Payments are those Premium Payments you initially
allocated to a particular Eligible Variable Account at the time of payment,
provided you made the payment at least ten (10) years prior to the Maturity
Benefit Date.

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<PAGE> 34

On the Maturity Benefit Date, the Maturity Benefit that will be credited to
each Eligible Variable Account will be equal to: (a) the sum of the Eligible
Premium Payments for that particular Eligible Variable Account; MINUS (b) a
percentage of all prior withdrawals and transfers from that Eligible Variable
Account; MINUS (c) the value of that Eligible Variable Account as of the
Maturity Benefit Date.

The Maturity Benefit Date is the later of the Annuitant's age 70 and 10
years after the Date of Issue. If the Contract is owned by two persons who are
spouses at the time one dies, the Maturity Benefit Date will become the date the
surviving spouse attains age 70. If the Contract is owned by two persons who are
not spouses and one of them dies before the Maturity Benefit Date, the Maturity
Benefit is not available to the sole survivor. The Eligible Variable Accounts
currently include all Variable Accounts except the Van Eck Gold and Natural
Resources Variable Account.

The Maturity Benefit will not be credited to Contract Value if you have
elected to begin receiving annuity payments before the Maturity Benefit Date.
(See "Maturity Benefit.")

Transfers and withdrawals from an Eligible Variable Account will reduce the
amount of the Eligible Premium Payments on which the Maturity Benefit is based.
(See "Maturity Benefit.")

FEES AND CHARGES

The following charges and deductions are assessed under the Contract:

Withdrawal Charge. We will deduct a Withdrawal Charge if you withdraw all
or part of your Contract Value during certain time periods. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and Free Withdrawal
Option you choose at the time you purchase the Contract. We do not assess a
Withdrawal Charge in the event the Contract terminates due to your death or the
death of the Annuitant or if you decide to begin to receive annuity payments
under an annuity payout plan with a life contingency or an annuity payout plan
with at least 10 years of guaranteed payments.

The Contract gives you a choice between two Withdrawal Charge Options. If
you choose the DATE OF ISSUE WITHDRAWAL CHARGE OPTION, we will calculate the
Withdrawal Charge from the Date of Issue. We will deduct the Withdrawal Charge
from all withdrawals of Premium Payments that: (1) are greater than the Free
Withdrawal Amount, and (2) that occur during the first nine Contract Years.
Under this option, no Withdrawal Charge is deducted from full or partial
withdrawals that occur in Contract Years ten and later. For the first six
Contract Years, the Withdrawal Charge is 7% of the amount withdrawn that exceeds
the Free Withdrawal Amount, decreasing to 6% in the seventh Contract Year, and
declining by 2% for each subsequent Contract Year until it is zero in Contract
Year ten.

If you choose the DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION, we will
calculate the Withdrawal Charge from the date you make a Premium Payment and
deduct a Withdrawal Charge from all withdrawals of Premium Payments that we have
held for less than seven years and that are greater than the Free Withdrawal
Amount. Premium Payments in excess of the Free Withdrawal Amount that are
withdrawn during the first year after payment are subject to a 7% Withdrawal
Charge, decreasing by 1% annually, until it is zero in Premium Payment Year 8.

Under either option, for purposes of calculating the Withdrawal Charge, a
withdrawal is deemed to come first from Premium Payments and then from earnings.
In addition, the money that has been held the longest in the Contract will be
deemed to be the first money withdrawn. This is called the "first in, first out"
method of accounting or "FIFO." (See "Fees and Charges.")

In any Contract Year, you may withdraw a portion of your Contract Value
without incurring a Withdrawal Charge. This amount is called the Free Withdrawal
Amount. If your initial Premium Payment is less than $100,000, the Free
Withdrawal Amount is 10% of Contract Value each year, as determined at the
beginning of the Contract Year. If you do not withdraw the full 10% in any
Contract Year, the remaining amount does NOT roll over to the next Contract
Year. If your initial Premium Payment is $100,000 or more, the value of the Free
Withdrawal Amount depends on the Free Withdrawal Option you choose at the time
you purchase your Contract. If you choose the CUMULATIVE 10% OPTION, you may
withdraw up to 10% of your

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<PAGE> 35

Contract Value as of the beginning of each Contract Year and we will not charge
you a Withdrawal Charge on that amount. If you do not withdraw the full 10% in
any one Contract Year, the remaining percentage may be rolled over to the next
Contract Year, up to a maximum of 50% after 5 years as determined as of the
beginning of each Contract Year. If you choose the EARNINGS OPTION, you may
withdraw all your Contract earnings at any time without incurring a Withdrawal
Charge. (See "Fees and Charges -- Withdrawal Charge.")

The Withdrawal Charge also may be waived in cases of extended
hospitalization, long-term care, terminal illness, or to pay for post secondary
education, as provided in the Contract. (See "Fees and Charges -- Withdrawal
Charge.")

Contract Fee. At the end of each Contract quarter (and on the date of full
withdrawal from the Contract) during the Pay-in Period, we will deduct a
quarterly Contract Fee of $7.50 from the Contract Value. Currently we waive the
Contract Fee for Qualified Contracts. We also do not charge the Contract Fee if
the Contract is a Non-Qualified Contract whose cumulative Premium Payments on
the date the Contract Fee is charged are equal to or greater than $100,000. We
reserve the right to modify this waiver upon 30 days written notice to you. We
do not charge a Contract Fee after annuity payments have begun. (See "Fees and
Charges -- Contract Fee.")

Transfer Fee. During the Pay-in Period, you may make 12 transfers each
Contract Year at no charge. We will impose a transfer fee of $25 for the
thirteenth and each subsequent transfer you make during a Contract Year before
the Annuity Start Date. (See "Fees and Charges -- Transfer Fee.")

Mortality and Expense Risk Charge. We will deduct a daily mortality and
expense risk charge as compensation for our assuming certain mortality and
expense risks. The charge is deducted from the assets of the Separate Account at
a rate of 0.003404% per day. This is equal to an annual rate of 1.25%
(approximately 0.90% for mortality risk and 0.35% for expense risks). This
charge will continue to be assessed after the Annuity Start Date if annuity
payments are made on a variable basis. (See "Fees and Charges -- Mortality and
Expense Risk Charge.")

Asset-Based Administrative Charge. We will deduct a daily administrative
charge as compensation for certain expenses we incur in administrating the
Contract. The charge is deducted from the assets of each Variable Account at an
annual rate of 0.15%. This charge will continue to be assessed after you begin
to receive annuity payments if you choose to receive annuity payments on a
variable basis. (See "Fees and Charges -- Asset-Based Administrative Charge.")

Premium Taxes. Various states and other governmental entities charge a
premium tax on annuity contracts issued by insurance companies. Premium tax
rates currently range up to 3.5%, depending on the state. Tax rates are subject
to change from time to time by legislative and other governmental action. In
addition, other governmental units within a state may levy such taxes. We are
responsible for the payment of these taxes and, if necessary, we will make a
deduction from the value of your Contract either: (a) from Premium Payments as
we receive them, (b) from Contract Value upon partial or full withdrawal, (c)
when annuity payments begin, or (d) upon payment of a Death Benefit. (See "Fees
and Charges -- Premium Taxes.")

Investment Advisory Fees and Other Expenses of the Funds. Each Portfolio
pays investment management charges to its investment adviser based on a
percentage of the Portfolio's average daily net assets. These advisory fees and
other Portfolio charges and expenses are fully described in the attached
prospectuses for the Funds. These charges are indirectly passed on to you.

ANNUITY PROVISIONS

Payout Options. Under the Contract, you may choose to receive regular
annuity payments under one of several available payout plans. You may also
choose the month and year on which those payments are to begin. (This is the
Annuity Start Date.) On the Annuity Start Date, the Contract Value (adjusted as
described below) will be used to calculate the amount of your annuity payments
under the payment plan you choose, unless you choose to receive the Surrender
Value in a lump sum. Adjusted Contract Value is Contract Value, LESS applicable
premium tax not yet deducted, LESS the quarterly Contract Fee, and, for an
installment

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<PAGE> 36

income annuity payout plan with a payout period of less than 10 years, less any
applicable Withdrawal Charge. (See "Payout Period.")

FEDERAL TAX STATUS

Generally, a distribution (including a full or partial withdrawal or Death
Benefit payment) may result in taxable income. In certain circumstances, a 10%
penalty tax may apply. For a further discussion of the federal tax status of
variable annuity contracts, see "Federal Tax Status."

ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT

IL ANNUITY AND INSURANCE COMPANY

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, is a stock life insurance company organized under the laws of
the Commonwealth of Massachusetts on December 21, 1965 and incorporated on March
9, 1966. We changed our name to "IL Annuity and Insurance Company" on January
17, 1995.

Effective October 31, 1994, we entered into an assumption reinsurance
agreement with Sentry Life Insurance Company ("Sentry") whereby Sentry assumed
all of our existing insurance in-force and related assets and liabilities.

On November 1, 1994, we became a wholly-owned subsidiary of the
Indianapolis Life Group of Companies, Inc., which is a wholly-owned subsidiary
of Indianapolis Life Insurance Company. Indianapolis Life Insurance Company is a
mutual life insurance company chartered under Indiana law in 1905 with assets as
of December 31, 1995 which exceeded $1.48 billion.

We are subject to regulation by the Insurance Department of the State of
Massachusetts as well as by the insurance departments of all other states and
jurisdictions in which we do business. We submit annual statements on our
operations and finances to insurance officials in such states and jurisdictions.
The forms for the Contract described in this prospectus are filed with and
(where required) approved by insurance officials in each state and jurisdiction
in which Contracts are sold.

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1

We established the IL Annuity and Insurance Co. Separate Account I (the
"Separate Account") as a separate account under Massachusetts insurance law on
November 1, 1994. The Separate Account will receive and invest Net Premium
Payments made under the Contracts. In addition, the Separate Account may receive
and invest Premium Payments for certain other variable annuity contracts we may
issue in the future.

Although the assets in the Separate Account are our property, the portion
of the assets in the Separate Account equal to the reserves and other contract
liabilities of the Separate Account are not chargeable with the liabilities
arising out of any other business that we may conduct and that has no specific
relation to or dependence upon the Separate Account. The assets of the Separate
Account are available to cover our general liabilities only to the extent that
the Separate Account's assets exceed its liabilities arising under the Contracts
and any other contracts supported by the Separate Account. We have the right to
transfer to the general account any assets of the Separate Account which are in
excess of reserves and other contract liabilities. All obligations arising under
the Contracts are our general corporate obligations. 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 other
income, gains or losses of any other separate account or of the Company.

The Separate Account currently is divided into fifteen Variable Accounts
but may, in the future, include additional Variable Accounts. Each Variable
Account invests exclusively in shares of a single corresponding fund. The
income, gains and losses, whether or not realized, from the assets allocated to
each Variable

17
<PAGE> 37

Account are credited to or charged against that Variable Account without regard
to income, gains or losses from any other Variable Account.

The Separate Account has been registered with the SEC as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of a separate account under the federal securities laws. Registration
with the SEC does not involve supervision of the management or investment
practices or policies of the Separate Account or the Company by the SEC. The
Separate Account is also subject to the laws of the State of Massachusetts which
regulate the operations of insurance companies domiciled in Massachusetts.

THE PORTFOLIOS

Each Variable Account of the Separate Account invests exclusively in shares
of a designated Portfolio of a series-type mutual fund ("Fund"). Shares of each
Portfolio are purchased and redeemed at net asset value, without a sales charge.
Each Fund currently available under the Contract is registered with the SEC
under the Investment Company Act of 1940 (the "1940 Act") as an open-end,
management investment company. Such registration does not involve supervision of
the management or investment practices or policies of the companies or their
funds by the SEC.

The assets of each Portfolio of each Fund are separate from the assets of
that Fund's other Portfolios, and each Portfolio has separate investment
objectives and policies. As a result, each Portfolio operates as a separate
investment Portfolio and the income or losses of one Portfolio has no effect on
the investment performance of any other Portfolio.

Each of the Funds is managed by an investment adviser registered with the
SEC under the Investment Advisers Act of 1940, as amended. Each investment
adviser is responsible for the selection of the investments of the Portfolio.
These investments must be consistent with the investment objective, policies and
restrictions of that Portfolio.

The investment objective of each Portfolio is summarized below. THERE IS NO
ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES. More detailed
information, including a description of risks, fees and expenses of each
Portfolio, may be found in the prospectuses for the Funds which are attached to
this prospectus.

CERTAIN PORTFOLIOS HAVE SIMILAR INVESTMENT OBJECTIVES AND/OR POLICIES. YOU
SHOULD READ THE PROSPECTUSES FOR THE PORTFOLIOS CAREFULLY BEFORE YOU INVEST.

THE ALGER AMERICAN FUND

The MidCap Growth Portfolio and the Small Capitalization Portfolio of The
Alger American Fund ("The Alger Fund") are available for investment under the
Contract. The investment objective of each Portfolio is:

MIDCAP GROWTH PORTFOLIO -- The investment objective of the Portfolio
is long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in equity
securities of companies that, at the time of purchase of the securities,
have total market capitalization within the range of companies included in
the S&P MidCap 400 Index, updated quarterly. The S&P MidCap 400 Index is
designed to track the performance of medium capitalization companies. At
the date of this prospectus, the range of market capitalization of these
companies was $153 million to $8.9 billion. The Portfolio may invest up to
35% of its total assets in equity securities of companies that, at the time
of purchase, have total market capitalization outside the range of
companies included in the S&P MidCap 400 Index and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.

SMALL CAPITALIZATION PORTFOLIO -- The investment objective of the Portfolio
is long-term capital appreciation. Except during temporary defensive periods,
the Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within

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<PAGE> 38

the range of companies included in the Russell 2000 Growth Index, updated
quarterly. The Russell 2000 Growth Index is designed to track the performance of
small capitalization companies. At the date of this prospectus, the range of
market capitalization of these companies was $20 million to $3.0 billion. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization
outside the range of companies included in the Russell 2000 Growth Index and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods.

Fred Alger Management, Inc. ("Alger Management") serves as investment
adviser for the MidCap Growth and Small Capitalization Portfolios of The Alger
American Fund. Fred Alger & Company, Incorporated, an affiliate of Alger
Management, will serve as the Portfolios' broker in effecting substantially all
of the portfolio transactions on security exchanges.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II

The Equity-Income Portfolio, the Growth Portfolio and the Money Market
Portfolio of Fidelity's Variable Insurance Products Fund ("VIP Fund"), as well
as the Asset Manager Portfolio, the Contrafund Portfolio, the Index 500
Portfolio and the Investment Grade Bond Portfolio of the Variable Insurance
Products Fund II ("VIP Fund II") are available for investment under the
Contract. The investment objective of each Portfolio is:

EQUITY-INCOME PORTFOLIO -- seeks reasonable income by investing
primarily in income-producing equity securities.

GROWTH PORTFOLIO -- seeks to achieve capital appreciation by investing
in common stocks and securities convertible into common stock of companies
that the adviser believes have above-average growth potential. The
Portfolio, however, is not restricted to any one type of security and may
pursue capital appreciation through the purchase of bonds and preferred
stocks.

MONEY MARKET PORTFOLIO -- seeks to earn a high level of current income
while maintaining a stable $1.00 share price by investing in high-quality,
short-term money market securities of different types.

ASSET MANAGER PORTFOLIO -- seeks to obtain high total return with
reduced risk over the long-term by allocating its assets among stocks,
bonds, short-term and other instruments of U.S. and foreign issuers.

CONTRAFUND PORTFOLIO -- seeks capital appreciation by investing in
companies that the adviser believes to be undervalued due to an overly
pessimistic appraisal by the public.

INDEX 500 PORTFOLIO -- seeks to match the total return of the S&P 500
while keeping expenses low. The adviser normally invests at least 80% (65%
if Portfolio assets are below $20 million) of the Portfolio's assets in
equity securities of companies that compose the S&P 500.

INVESTMENT GRADE BOND PORTFOLIO -- seeks high current income by
investing in fixed-income obligations of all types.

The Portfolios of the VIP Fund and the VIP Fund II are managed by Fidelity
Management & Research Company ("FMR"). On behalf of the Money Market Portfolio,
FMR has entered in a subadvisory agreement with FMR Texas, Inc., pursuant to
which FMR Texas, Inc. has primary responsibility for providing investment
management services to the Portfolio. On behalf of the Asset Manager Portfolio
and the Contrafund Portfolio, FMR has entered into subadvisory agreements with
Fidelity Investment Management and Research (U.K.) Inc. ("FMR (U.K.)") and
Fidelity Management and Research (Far East) Inc. ("FMR Far East"), pursuant to
which those entities provide research and investment recommendations with
respect to companies based outside the United States. FMR (U.K.) focuses
primarily on companies based in Europe, while FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin.

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<PAGE> 39

OCC ACCUMULATION TRUST

The Managed Portfolio and the Small Cap Portfolio of the OCC Accumulation
Trust ("OCC Trust") (formerly known as the Quest for Value Accumulation Trust)
are available for investment under the Contract. The investment objective of
each Portfolio is:

MANAGED PORTFOLIO -- seeks growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on management's
assessments of relative investment values.

SMALL CAP PORTFOLIO -- seeks capital appreciation through investment
in a diversified portfolio of equity securities of companies with market
capitalizations of under $1 billion.

The OCC Trust receives investment advice with respect to each of its
Portfolios from OpCap Advisors, a subsidiary of Oppenheimer Capital which is a
subsidiary of Oppenheimer Financial Corp.

T. ROWE PRICE FIXED INCOME SERIES, INC.

The Limited-Term Bond Portfolio of the T. Rowe Price Fixed Income Series,
Inc. is available for investment under the Contract and has the following
investment objective:

LIMITED-TERM BOND PORTFOLIO -- seeks a high level of income consistent
with modest price fluctuations by investing primarily in short- and
intermediate-term investment-grade debt securities.

T. Rowe Price Associates, Inc. is responsible for the selection and
management of the portfolio investments of T. Rowe Price Limited-Term Bond
Portfolio and receives a single, all-inclusive fee based on the Portfolio's
average daily net assets to cover investment management and operating expenses.

T. ROWE PRICE INTERNATIONAL SERIES, INC.

The International Stock Portfolio of the T. Rowe Price International
Series, Inc. is available for investment under the Contract and has the
following investment objective:

INTERNATIONAL STOCK PORTFOLIO -- seeks long-term growth of capital
through investments primarily in common stocks of established non-U.S.
companies.

Rowe Price-Fleming International, Inc. ("Price-Fleming") is responsible for
the selection and management of the Portfolio's investments. Incorporated in
1979 as a joint venture between T. Rowe Price Associates, Inc. ("T. Rowe Price")
and Robert Fleming Holdings Limited ("Fleming"), Price-Fleming receives a
single, all-inclusive fee based on the Portfolio's average daily net assets to
cover investment management and operating expenses.

VAN ECK WORLDWIDE INSURANCE TRUST

The Worldwide Balanced Portfolio and the Gold and Natural Resources
Portfolio of the Van Eck Worldwide Insurance Trust (the "Van Eck Trust") are
available for investment under the Contract. The investment objective of each
Portfolio is:

GOLD AND NATURAL RESOURCES PORTFOLIO -- seeks long-term capital
appreciation by investing in equity and debt securities of companies
engaged in the exploration, development, production and distribution of
gold and other natural resources, such as strategic and other metals,
minerals, forest products, oil, natural gas and coal. Current income is not
an investment objective.

WORLDWIDE BALANCED PORTFOLIO -- seeks long-term capital appreciation
together with current income by investing in equity securities, fixed
income securities and short-term instruments.

Van Eck Associates Corporation serves as investment adviser and manager to
the Van Eck Gold and Natural Resources Portfolio pursuant to an Advisory
Agreement with the Van Eck Trust. Fiduciary International, Inc. serves as
sub-investment adviser to the Van Eck Worldwide Balanced Portfolio pursuant to a
Sub-Investment Advisory Agreement with the Van Eck Trust.

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<PAGE> 40

An investment in a Portfolio, including the Money Market Portfolio, is not
insured or guaranteed by the U.S. Government and there can be no assurance that
the Money Market Portfolio will be able to maintain a stable net asset value per
share.

IL Annuity has entered into agreements with the investment adviser of
several of the Funds pursuant to which each such investment adviser will pay IL
Annuity a servicing fee based upon an annual percentage of the average aggregate
net assets invested by IL Annuity on behalf of the Separate Account. These
agreements reflect administrative services provided to the Funds by IL Annuity.
Payments of such amounts by the Funds will not increase the fees paid by the
Funds or their shareholders.

AVAILABILITY OF THE FUNDS

We cannot guarantee that each Portfolio will always be available for
investment through the Contracts, but in the unlikely event that a Portfolio is
not available, we will do everything reasonably practicable to secure the
availability of a comparable portfolio. The Separate Account purchases shares of
each Portfolio in accordance with a participation agreement we have entered into
with each Fund. If a participation agreement terminates, the Separate Account
may not be able to purchase additional shares of the Portfolios of that Fund. In
such case, you will no longer be able to allocate Premium Payments or transfer
Contract Value to the Variable Account investing in that Portfolio.

We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a Portfolio that are held in
the Separate Account. If the shares of a Portfolio are no longer available for
investment or if, in our judgment, further investment in any Portfolio should
become inappropriate, we may redeem the shares of that Portfolio and substitute
shares of another portfolio. We will not substitute any shares without notice
and prior approval of the SEC and state insurance authorities, to the extent
required by the 1940 Act or other applicable law.

We also reserve the right in our sole discretion to establish additional
Variable Accounts, or eliminate or combine one or more Variable Accounts, if
marketing needs, tax considerations or investment conditions warrant. We will
determine if new or substituted Variable Accounts will be available to existing
Contract Owners. Subject to obtaining any approvals or consents required by law,
the assets of one or more Variable Accounts may also be transferred to any other
Variable Account if, in our sole discretion, marketing, tax, or investment
conditions warrant. Additional information regarding termination of
participation agreements, substitutions of investments and resolving conflicts
among Funds may be found in the Statement of Additional Information.

THE PAY-IN PERIOD

The Pay-in Period begins when your first Premium Payment is made and
continues until you begin to receive annuity payments during the Payout Period.
The Pay-in Period may also end when you fully withdraw all of your Contract
Value before the Payout Period.

PURCHASING A CONTRACT

You may purchase a Contract with a Premium Payment of $1,000 or more. The
maximum first Premium Payment is $250,000. To purchase a Contract, you must make
an application to us either through one of our licensed representatives who is
also a registered representative of IL Securities, Inc., or a broker-dealer
having a selling agreement with IL Securities, Inc. Contracts may be sold to or
in connection with retirement plans that do not qualify for special tax
treatment as well as retirement plans that qualify for special tax treatment
under the Code. We will not issue you a Contract if you are older than 85 on the
Date of Issue.

PREMIUM PAYMENTS

Premium Payments must be at least $1,000. You may make Premium Payments at
any time until the earliest of: (a) the Annuity Start Date; (b) the date you
fully withdraw all Contract Value; or (c) the date you reach age 85 (age 70 1/2
for Qualified Contracts). In any one Contract Year, we will not accept Premium

21
<PAGE> 41

Payments that total more than two times your first Premium Payment. We will not
accept total Premium Payments in excess of $250,000. However, we reserve the
right to waive these limitations.

Under the Automatic Premium Payment Plan, you may select an annual or
semi-annual payment schedule under which we will automatically deduct Premium
Payments from a bank or credit union account or other source. The minimum amount
of such payment is $1,000.

CANCELLATION -- THE 10 DAY FREE-LOOK PERIOD

You have the right to cancel the Contract for any reason within 10 days
after you receive it (or within 20 days of receipt if the Contract is replacing
another annuity contract or insurance policy). In some jurisdictions, this
period may be longer than 10 days. To cancel the Contract, you must send a
Written Request for cancellation and the returned Contract to the Service Center
before the end of the Free-Look Period.

The amount that we will refund to you will vary according to state
requirements. In most states, we will refund to you an amount equal to the sum
of: (i) the difference between the Premium Payments paid and the amounts
allocated to the Variable Accounts and the Fixed Account under the Contract; and
(ii) the Contract Value as of the date the Contract and the Written Request for
cancellation are received at the Service Center. You bear the investment risk
for Premium Payments allocated to the Variable Accounts during the free-look
period.

A few states require us to return Premium Payments upon cancellation. If
state law requires that Premium Payments be returned, the amount of the refund
will be the greater of: (i) the Premium Payments made under the Contract; and
(ii) the Contract Value (without the deduction of a Withdrawal Charge) on the
date the Contract and the Written Request for cancellation is received at our
Service Center, plus any amount that may have been deducted for premium taxes.
In those states where Premium Payments must be returned, we will place any
portion of the initial Net Premium Payments allocated to a Variable Account into
the Money Market Variable Account for a 15-day period following the date on
which we credit the initial Premium Payment to your Contract. At the end of that
period, the amount in the Money Market Variable Account will be allocated to the
Variable Accounts you selected on your application based on the allocation
percentages you specified.

DESIGNATING YOUR INVESTMENT OPTIONS

When you fill out your application, you will give us instructions on how to
allocate your first Net Premium Payment among the Variable Accounts and the
Fixed Account. The amount you direct to a particular Variable Account and/or to
the Fixed Account must equal at least 1% of the Premium Payment and be in whole
percentages.

Once we receive your Premium Payment and your completed application at the
Service Center, we will issue your Contract and direct your first Net Premium
Payment within two (2) Business Days to the Variable Accounts and/or the Fixed
Account in accordance with your instructions, subject to the limitations set
forth above under "Cancellation -- The 10-Day Free Look Period."

If you did not give us all the information we need, we will contact you. If
we cannot complete the application within five (5) Business Days, we will either
send back your money immediately or obtain your permission to keep your money
until we receive all the necessary information. Once the application is
complete, we will direct your first Net Premium Payment to the Variable Accounts
and/or the Fixed Account according to your instructions within two Business
Days.

We will credit any additional Premium Payments you make to your Contract as
of the same Business Day we receive them. Our Business Day closes when the New
York Stock Exchange closes, usually at 4 p.m. Eastern Time. If we receive your
Premium Payments after the close of our Business Day, we will calculate and
credit them the next Business Day. We will direct your Premium Payment to the
Variable Accounts and/or the Fixed Account according to your written
instructions in effect at the time we receive it. However, you may direct
individual Premium Payments to a specific Variable Account or to the Fixed
Account (or any

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<PAGE> 42

combination thereof) without changing your instructions. You may change your
instructions directing your investments at any time by sending us a Written
Request or by telephone authorization. Changing such instructions will not
change the way existing Contract Value is apportioned among the Variable
Accounts or the Fixed Account.

THE CONTRACT VALUE ALLOCATED TO A VARIABLE ACCOUNT WILL VARY WITH THE INVESTMENT
EXPERIENCE OF THAT VARIABLE ACCOUNT. YOU BEAR THE ENTIRE INVESTMENT RISK FOR
AMOUNTS YOU ALLOCATE TO THE VARIABLE ACCOUNTS. YOU SHOULD PERIODICALLY REVIEW
YOUR PREMIUM PAYMENT ALLOCATION INSTRUCTIONS IN LIGHT OF MARKET CONDITIONS AND
YOUR OVERALL FINANCIAL OBJECTIVES.

SEPARATE ACCOUNT VALUE

The value of your investment in the Separate Account will go up or down
depending on the investment experience of the Portfolios underlying the Variable
Accounts you select for investment. Separate Account Value will be decreased by
any partial withdrawals, transfers and Separate Account charges. There is no
guaranteed minimum Separate Account Value. Because the value in the Separate
Account of your Contract on any future date depends upon market conditions, it
cannot be predetermined.

Calculating Separate Account Value. The Separate Account Value is
determined at the end of each Business Day. It is the sum of the assets you have
in each of the Variable Accounts. To measure the value of each Variable Account,
we use a unit of measure called an Accumulation Unit.

Determining the Number of Accumulation Units. Any money you allocate or
transfer to a Variable Account will be converted into Accumulation Units and
will increase the number of Accumulation Units credited to the Variable Account.
We determine the number of Accumulation Units to be credited to the Variable
Account by dividing the dollar amount of the payment or transfer by the
Accumulation Unit value for that Variable Account as of the end of that Business
Day. (See "Determining Accumulation Unit Value" below.)

Any amounts transferred, withdrawn or deducted from a Variable Account will
be processed by cancelling or liquidating Accumulation Units. The number of
Accumulation Units to be cancelled is determined by dividing the dollar amount
being removed from a Variable Account by the value of an Accumulation Unit for
that Variable Account as of the end of the Business Day during which the amount
was removed. The number of Accumulation Units in any Variable Account will be
decreased at the end of each Business Day by:

(a) any amounts transferred (and any applicable Transfer Fee) from that
Variable Account to another Variable Account or to the Fixed
Account,

(b) any amounts withdrawn during that Business Day,

(d) the quarterly Contract Fee, if assessed on that Business Day.

Determining Accumulation Unit Value. On the first day of operation for
each Variable Account, the value of an Accumulation Unit for that Variable
Account is set at $10. We recalculate the value of an Accumulation Unit for each
Variable Account at the end of each Business Day. Accumulation Unit Value is
calculated by multiplying the value of an Accumulation Unit at the end of the
immediately preceding Business Day by the Variable Account's Net Investment
Factor for the current Business Day. The Net Investment Factor for each Variable
Account reflects the investment performance and capital gains and losses
(whether realized or unrealized) of the underlying Portfolio and certain
Separate Account charges for that Business Day. The formula for computing the
Net Investment Factor may be found in the Statement of Additional Information.

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<PAGE> 43

TRANSFERS BETWEEN INVESTMENT OPTIONS

General. Before the Annuity Start Date and subject to the restrictions
described below, you may transfer all or part of the amount in a Variable
Account or the Fixed Account to another Variable Account or the Fixed Account.

If you have chosen the Maturity Benefit option and you transfer Contract
Value from an Eligible Variable Account, you will reduce the amount of the
Eligible Premium Payments on which your Maturity Benefit is based. (See
"Maturity Benefit.") IT IS IMPORTANT THAT YOU READ THE SECTION ON "MATURITY
BENEFIT" SO THAT YOU MAY BETTER UNDERSTAND HOW THIS FEATURE OF THE CONTRACT
WORKS.

Transfers to the Fixed Account must be at least $1,000. Before the Annuity
Start Date, you may transfer up to 20% of the Fixed Account Value from the Fixed
Account to one or more of the Variable Accounts in any Contract Year. We measure
a Contract Year from the anniversary of the day we issued your Contract. We do
not charge a Transfer Fee for transfers from the Fixed Account to one or more
Variable Accounts and such a transfer is not considered a transfer for purposes
of assessing a transfer charge.

Transfers will be made as of the Business Day on which we receive your
Written Request or telephone authorization to transfer, provided we receive it
before the close of our Business Day, usually 4:00 p.m. Eastern Time. If we
receive your request after the close of our Business Day, we will make the
transfer as of the next Business Day. There currently is no limit on the number
of transfers that you can make before the Annuity Start Date among or between
Variable Accounts or to the Fixed Account.

Telephone Transfers. We will make a transfer based upon instructions you
give us over the telephone, provided we have on file a currently valid telephone
transfer authorization that you have signed. If you have not completed such an
authorization on your application, you must send a telephone transfer
authorization form to our Service Center. Your authorization is valid until you
revoke it in writing or until the Service Center receives a subsequently dated
form that you have signed. You may use your telephone to authorize a transfer
from one Variable Account or the Fixed Account to another Variable Account or
the Fixed Account, to change the allocation instructions for future investments,
to change Dollar-Cost Averaging, interest sweep and Automatic Account Balancing
options and/or to request a partial withdrawal.

We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures we will not
be liable for any losses due to unauthorized or fraudulent instructions. We may
be liable for such losses if we do not follow those reasonable procedures. The
procedures that we may follow for telephone transfers include providing you with
a written confirmation of all transfers made according to telephone
instructions, requiring a form of personal identification prior to acting on
instructions received by telephone, and tape recording instructions received by
telephone.

We reserve the right to modify, restrict, suspend or eliminate the transfer
privileges (including the telephone transfer facility) at any time, for any
class of Contracts, for any reason. In particular, we reserve the right not to
honor transfers requested by a third party holding a power of attorney from you
where that third party requests simultaneous transfers on your behalf of two or
more Contracts.

Transfer Fee. We will impose a transfer fee of $25 for the thirteenth and
each subsequent transfer request you make. There is currently no limit on the
number of transfers you can make of Contract Value from one or more Variable
Accounts to another one or more of the Variable Accounts or the Fixed Account
during a single Contract Year before the Annuity Start Date. (See "Charges and
Deductions.")

Dollar-Cost Averaging. The Dollar-Cost Averaging Program permits you to
systematically transfer (on a monthly or quarterly basis) a set dollar amount
from one or more Variable Accounts or the Fixed Account to any other Variable
Accounts. The fixed dollar amount will purchase more Accumulation Units of a
Variable Account when their value is lower and fewer units when their value is
higher. Over time, the cost per unit averages out to be less than if all
purchases of units had been made at the highest value and greater than if all
purchases had been made at the lowest value. The dollar-cost averaging method of
investment reduces the risk of making purchases only when the price of
Accumulation Units is high. It does not assure a profit or protect against a
loss in declining markets.

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<PAGE> 44

You may elect to participate in the Dollar-Cost Averaging program when you
complete your application, or at any other time before the Annuity Start Date,
by sending us a Written Request. To use the Dollar-Cost Averaging program, you
must transfer at least $100 to each Variable Account. Once you elect the
program, it remains in effect for the life of the Contract until the value of
the Variable Account from which transfers are being made is depleted, and/or the
value of the Fixed Account is expended, or until you cancel the program by
Written Request or by telephone request if we have your telephone authorization
on file. There is no additional charge for dollar-cost averaging, and a transfer
under this program is not considered a transfer for purposes of assessing a
transfer change. We reserve the right to discontinue offering the dollar-cost
averaging facility at any time and for any reason.

Dollar-Cost Averaging from an Eligible Variable Account will reduce the
amount of the Eligible Premium Payments on which the Maturity Benefit is based.
(See "Maturity Benefit.")

Interest Sweep. Before the Annuity Start Date, you may elect to have any
interest credited to the Fixed Account automatically transferred on a quarterly
basis to one or more Variable Accounts. There is no charge for interest sweep
transfers and an interest sweep transfer is not considered a transfer for
purposes of assessing a transfer charge. Amounts transferred out of the Fixed
Account due to an interest sweep transfer are counted toward the 20% of Fixed
Account Value that may be transferred out of the Fixed Account during any
Contract Year.

Automatic Account Balancing Service. Once your money has been allocated
among the Variable Accounts, the performance of each Variable Account may cause
your allocation to shift. You may instruct us to automatically rebalance (on a
monthly or quarterly basis) your Contract Value to return to the percentages
specified in your allocation instructions. You may elect to participate in the
Automatic Account Balancing Service when you complete your application or at any
other time before the Annuity Start Date by sending us a Written Request. Your
percentage allocations must be in whole percentages and be at least 1% per
allocation. You may start and stop Automatic Account Balancing at any time by
sending us a Written Request or by telephone request, if we have your telephone
authorization on file. There is no additional charge for using Automatic Account
Balancing, and an account balancing transfer is not considered a transfer for
purposes of assessing a transfer charge. We reserve the right to discontinue
offering the automatic account balancing service at any time and for any reason.

Automatic Account Balancing from an Eligible Variable Account will reduce
the amount of the Eligible Premium Payments on which the Maturity Benefit is
based. (See "Maturity Benefit.")

FEES AND CHARGES

WITHDRAWAL CHARGE

General. We do not deduct a charge for sales expenses from Premium
Payments at the time Premium Payments are paid to us. However, we do deduct a
Withdrawal Charge if you fully or partially withdraw Contract Value before the
Annuity Start Date. We do not assess a Withdrawal Charge on withdrawals made in
the event the Contract terminates due to your death or the death of the
Annuitant, or if you decide to begin to receive annuity payments and you choose
an annuity payout plan with a life contingency or an annuity payout plan with a
period certain of at least 10 years.

The amount of the Withdrawal Charge you may incur depends on the Withdrawal
Charge Option you choose at the time you purchase your Contract. ONCE YOU CHOOSE
YOUR WITHDRAWAL CHARGE OPTION, YOU CANNOT CHANGE IT. If your initial Premium
Payment is $100,000 or more, you may choose one of two Free Withdrawal Options
at the time you complete your application.

Withdrawal Charge Options. When you purchase your Contract, you must
choose between two Withdrawal Charge Options.

The DATE OF ISSUE WITHDRAWAL CHARGE OPTION is designed for the owner who
wishes to make additional Premium Payments periodically over the life of the
Contract. The charge expires after the ninth Contract

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<PAGE> 45

Year, benefiting those owners who intend to continue to make Premium Payments
after the ninth Contract Year.

The PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION is more suitable for the owner
who currently intends to make only a single Premium Payments or several Premium
Payments close in time to the date the Contract is issued. This charge option is
not designed for the owner who intends to make additional Premium Payments over
an extended period of time because each time you make another Premium Payment,
the seven-year period for paying the Withdrawal Charge begins again.

The Withdrawal Charge is separately calculated for each withdrawal you
make. For purposes of calculating the Withdrawal Charge, the money that has been
held the longest in the Contract will be deemed to be the first money withdrawn.
In addition, amounts subject to the Withdrawal Charge will be deemed to be first
from Premium Payments, and then from earnings. This means that we will not
deduct a Withdrawal Charge on withdrawals of that portion of your Contract Value
that exceeds the sum total of your Premium Payments.

IF YOU CHOOSE THE DATE OF ISSUE WITHDRAWAL CHARGE OPTION: We will impose a
Withdrawal Charge on all partial or full withdrawals of Premium Payments that
you make during the first nine Contract Years if the amount of the withdrawal
exceeds the Free Withdrawal Amount. The Withdrawal Charge is calculated as a
percentage of the amount you withdraw based on the number of years between the
date we receive your Written Request for withdrawal and the Date of Issue. The
rate of the Withdrawal Charge is listed in the table below. Under this option,
no Withdrawal Charge is deducted from full or partial withdrawals that you make
in Contract Years ten and later.

<TABLE>
<CAPTION>
CHARGE AS PERCENTAGE
CONTRACT YEAR OF PREMIUM PAYMENTS
------------------------------------------------------- --------------------
<S> <C>
1-6............................................... 7.0%
7................................................. 6.0
8................................................. 4.0
9................................................. 2.0
10+............................................... 0
</TABLE>

IF YOU CHOOSE THE DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION: We
will calculate the Withdrawal Charge by determining the length of time between
the date we receive your Written Request for a withdrawal and the date you made
the Premium Payment being withdrawn. We will deduct a Withdrawal Charge if you
withdraw a Premium Payment that we have held for less than seven Premium Payment
Years if it is greater than the Free Withdrawal Amount.

<TABLE>
<CAPTION>
CHARGE AS PERCENTAGE
PREMIUM PAYMENT YEAR OF PREMIUM PAYMENTS
------------------------------------------------------- --------------------
<S> <C>
1................................................. 7.0%
2................................................. 6.0
3................................................. 5.0
4................................................. 4.0
5................................................. 3.0
6................................................. 2.0
7................................................. 1.0
8+................................................ 0
</TABLE>

Any applicable Withdrawal Charge is deducted pro-rata from the remaining
value in the Variable Accounts or Fixed Account from which the withdrawal is
being made. If such remaining Separate Account Value or Fixed Account Value is
insufficient for this purpose, the Withdrawal Charge is deducted pro-rata

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<PAGE> 46

from all Variable Accounts and the Fixed Account in which the Contract is
invested based on the remaining Contract Value in each Variable Account and the
Fixed Account.

Free Withdrawal Amount. In any Contract Year after the first, you may
withdraw a portion of your Contract Value without incurring a Withdrawal Charge.
This amount is called the Free Withdrawal Amount. If your initial Premium
Payment is less than $100,000, the Free Withdrawal Amount is 10% of Contract
Value each year, as determined at the beginning of the Contract Year. If you do
not withdraw the full 10% in any Contract Year, the remaining amount does not
roll over to the next Contract Year.

If your initial Premium Payment is $100,000 or more, the Free Withdrawal
Amount depends on the Free Withdrawal Option you choose at the time you purchase
your Contract. Once you choose an option, you cannot change it.

IF YOU CHOOSE THE CUMULATIVE 10% OPTION: After the first Contract Year,
you may withdraw up to 10% of your Contract Value as of the beginning of each
Contract Year and we will not charge you a Withdrawal Charge on that amount. If
you do not withdraw the full 10% in any one Contract Year, the remaining
percentage may be rolled over to the next Contract Year, up to a maximum of 50%
of Contract Value measured as of the beginning of each Contract Year.

IF YOU CHOOSE THE EARNINGS OPTION: After the first Contract Year, you may
withdraw part or all of your earnings under the Contract at any time without
incurring a Withdrawal Charge. Earnings are equal to your Contract Value minus
Premium Payments, transfers and partial withdrawals.

Any amounts withdrawn in excess of the Free Withdrawal Amount will be
assessed a Withdrawal Charge, depending on the Withdrawal Charge Option you
choose. (See "Withdrawal Charge.") Free withdrawals remain subject to the 10%
federal penalty tax if made before you reach age 59 1/2.

Waiver of Withdrawal Charge. If state law permits, we will waive the
Withdrawal Charge if the Annuitant or the Annuitant's spouse is confined for a
specified period to a hospital (as described in the Contract) or a long term
care facility (as described in the Contract). If the Annuitant becomes
terminally ill (as described in the Contract) before the Annuity Start Date and
if permitted by state law, we will waive the Withdrawal Charge on any full
withdrawal or any partial withdrawal, provided the partial withdrawal is at
least $500 and a $5,000 balance remains in the Accounts after the withdrawal. We
must receive your Written Request to waive the charge before the Annuity Start
Date.

Under the terms of the Post-Secondary Education Rider, if you, your spouse,
your child or the Annuitant is enrolled in a college, university, vocational,
technical, trade or business school, we will waive the Withdrawal Charge on one
withdrawal of up to 20% of Contract Value in each Contract Year before the
Annuity Start Date while the Annuitant is alive, so long as this waiver is
permitted by state law. The maximum withdrawal permitted under the
Post-Secondary Education Rider, when combined with the Free Withdrawal Amount,
is 20% of Contract Value. Before the withdrawal, we must receive at our Home
Office written proof of enrollment to our satisfaction within one (1) year of
the date of enrollment. (See "Free Withdrawal Amount" and the Statement of
Additional Information.)

Employee and Agent Purchases. If state law permits, we will waive the
Withdrawal Charge on any full or partial withdrawals from Contracts sold to
agents or employees of Indianapolis Life Insurance Company (or its affiliates
and subsidiaries).

If the Withdrawal Charges are not sufficient to cover our sales expenses,
we will bear the loss. But if the Withdrawal Charges are more than enough to
cover sales expenses, we will retain the excess. We do not expect that the
Withdrawal Charges will cover our costs of distributing the Contracts. Any
shortfall will be made up from our general assets which may include amounts we
receive from the mortality and expense risk charge.

CONTRACT FEE

At the end of each Contract quarter (or on the date of full withdrawal of
Contract Value) before the Annuity Start Date, we will deduct from the Contract
Value a quarterly contract fee of $7.50 as

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<PAGE> 47

reimbursement for our administrative expenses relating to the Contract. The fee
will be deducted from each Variable Account and the Fixed Account based on the
proportion that the value in each such Variable Account and the Fixed Account
bears to the total Contract Value. We do not expect to make a profit on this
fee. We will not charge the Contract Fee after an annuity payout plan has begun.
Deduction of the Contract Fee is currently waived for all Qualified Contracts.
We also currently waive deduction of the Contract Fee for Non-Qualified
Contracts whose cumulative Premium Payments on the date the Contract Fee is
assessed are equal to or greater than $100,000. We reserve the right to modify
this waiver upon 30 days written notice to you.

ASSET-BASED ADMINISTRATIVE CHARGE

We will deduct a daily administrative charge as compensation for certain
expenses we incur in the administration of the Contract. The charge is deducted
from the assets of the Separate Account at an annual rate of 0.15%. We will
continue to assess this charge after annuitization if annuity payments are made
on a variable basis. We do not expect to make a profit from this charge. There
is no necessary relationship between the amount of this administrative charge
and the amount of expenses that may be attributable to a particular Contract.

TRANSFER FEE

A transfer fee of $25 will be imposed for the 13th and each subsequent
transfer during a Contract Year. For the purpose of assessing the Transfer Fee,
each Written Request would be considered to be one transfer, regardless of the
number of Variable Accounts affected by the transfer. The transfer fee will be
deducted from the Variable Account from which the transfer is made. If a
transfer is made from more than one Variable Account at the same time, the
transfer fee would be deducted pro-rata from the remaining Separate Account
Value in such Variable Account(s). We reserve the right to waive the transfer
fee.

MORTALITY AND EXPENSE RISK CHARGE

As compensation for assuming mortality and expense risks, we will deduct a
daily mortality and expense risk charge from the assets of the Separate Account.
The charge is at a daily rate of 0.003404%. If applied on an annual basis this
rate would be 1.25% (approximately 0.90% for mortality risk and 0.35% for
expense risk). This charge will continue to be assessed if annuity payments are
made on a variable basis either before or after the Annuity Start Date.

The mortality risk we assume is that Annuitants may live for a longer
period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Annuitant is assured that
longevity will not have an adverse effect on the annuity payments received. The
mortality risk that we assume also includes a guarantee to pay a Death Benefit
if the Annuitant dies before the Annuity Start Date. The expense risk that we
assume is the risk that the administrative fees and transfer fees (if imposed)
may be insufficient to cover actual future expenses.

If the mortality and expense risk charge is not sufficient to cover the
actual cost of the mortality and expense risks, we will bear the loss. The
mortality and expense risk charge cannot be increased. We may use any profits
from this charge to pay the costs of distributing the Contracts.

FUND EXPENSES

Because the Separate Account purchases shares or units of the various
Funds, the net assets of the Separate Account will be reduced by the investment
advisory fees and other operating expenses incurred by such Funds. See the
attached prospectuses for the Funds.

PREMIUM TAXES

Various states and other governmental entities charge a premium tax on
annuity contracts issued by insurance companies. Premium tax rates currently
range up to 3.5%, depending on the state. Tax rates are

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subject to change from time to time by legislative and other governmental
action. In addition, other governmental units within a state may levy such
taxes. We are responsible for the payment of these taxes and, if necessary, we
will make a deduction from the value of your Contract either: (a) from Premium
Payments as we receive them, (b) from Contract Value upon partial or full
withdrawal, (c) when annuity payments begin, or (d) upon payment of a Death
Benefit. We, however, reserve the right to deduct premium taxes at the time such
taxes are paid to the taxing authority.

OTHER TAXES

Currently, no charge is made against the Separate Account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the Separate Account or the Contracts. We may, however, make
such a charge in the future from Surrender Value, Death Benefits or annuity
payments, as appropriate. Such taxes may include taxes (levied by any government
entity) which we determine to have resulted from: (1) the establishment or
maintenance of the Separate Account, (2) receipt by us of Premium Payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.

THE PAYOUT PERIOD

The Payout Period is that period of time during which you will receive in a
steady stream of annuity payments the money you have accumulated under your
Contract. It begins on the Annuity Start Date. You may choose to have your
annuity payments made on a fixed, a variable, or a combination payout basis.
When you choose to have your Payout Option on a variable basis, you may keep the
same Variable Accounts to which your Premium Payments were allocated, or
transfer to different ones.

THE ANNUITY START DATE. If you own a Non-Qualified Contract, you may
select the Annuity Start Date on which you will begin to receive annuity
payments. If you do not specify a date, the Annuity Start Date is the later of
the Annuitant's age 70 or 10 years after the Date of Issue. For Non-Qualified
Contracts, the Annuity Start Date may be no later than the contract anniversary
following the Annuitant's 85th birthday. For Qualified Contracts, the Annuity
Start Date must be no later than the Annuitant's age 70 1/2 or any other date
meeting the requirements of the Code.

If you have chosen the Maturity Benefit option at the time you purchase the
Contract and you select an Annuity Start Date that is earlier than the Maturity
Benefit Date (i.e., the later of the Annuitant's age 70 or 10 years after the
Date of Issue), you will lose your eligibility for the Maturity Benefit. (See
"Maturity Benefit.")

You may change your Annuity Start Date if: (1) we receive your Written
Request at the Service Center at least 31 days before the current Annuity Start
Date, and (2) the Annuity Start Date you request is a Contract Anniversary or it
is the date on which you fully withdraw the Surrender Value.

ANNUITY PAYOUT OPTIONS. You may elect, revoke, or change your annuity
payout plan at any time before the Annuity Start Date while the Annuitant is
living by sending us a Written Request signed by you and/or your beneficiary, as
appropriate. You may choose one of the payout plans described below or any other
plan being offered by us as of the Annuity Start Date. The payout plans we
currently offer provide either variable annuity payments or fixed annuity
payments or a combination of both.

You may select to receive annuity payments on a monthly, quarterly,
semi-annual or annual basis. The first payment under any payout plan will be
made on the fifteenth day of the month immediately following the Annuity Start
Date. Subsequent payments shall be made on the fifteenth of the month.

If you do not select an annuity payout plan by the Annuity Start Date, we
will apply the adjusted Contract Value under Option 3, One Life Income with
payments guaranteed for 10 years, as described below.

Anytime before the Annuity Start Date, you may have the entire Surrender
Value paid to you as an annuity under one of the payout plans. A beneficiary may
have the Death Benefit paid as an annuity under one of the payout plans.

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We reserve the right to pay you the adjusted Contract Value in a lump sum
and not as an annuity if your adjusted Contract Value after the Annuity Start
Date would be less than $2,500, or the amount of annuity payments would be less
than $25.

DETERMINING THE AMOUNT OF THE ANNUITY PAYMENT. On the Annuity Start Date,
the adjusted Contract Value will be used to calculate your annuity payments
under the payout plan you select, unless you choose to receive the Surrender
Value in a lump sum. In certain states, we must use the Surrender Value of your
Contract to calculate your annuity payments under the payout plan you choose,
rather than the adjusted Contract Value.

The adjusted Contract Value is the Contract Value on the Annuity Start
Date:

(1) MINUS the quarterly Contract Fee;

(2) MINUS any applicable premium taxes not yet deducted; and

(3) for an installment income annuity payout plan with a payout period
of less than 10 years, MINUS any applicable Withdrawal Charge.

For Qualified Contracts, the amount of any outstanding loan is also
deducted, and distributions must satisfy certain requirements specified in the
Code.

We do not assess a Withdrawal Charge if you choose an annuity payout plan
with a life contingency or an installment payout plan with a period certain of
at least 10 years.

FIXED ANNUITY PAYMENTS

Fixed annuity payments are periodic payments that we make to the Annuitant.
The amount of the fixed annuity payment is fixed and guaranteed by us. The
amount of each payment depends only on the form and duration of the payout plan
you choose, the age of the Annuitant, the sex of the Annuitant (if applicable),
the amount of your Contract Value and the applicable annuity purchase rates in
the Contract. The annuity purchase rates in the Contract are based on a minimum
guaranteed interest rate of 3.0%. We may, in our sole discretion, make annuity
payments in an amount based on a higher interest rate.

VARIABLE ANNUITY PAYMENTS

As with fixed annuity payments, variable annuity payout plans guarantee
income either for life or the number of years that you have chosen. The amount
of your variable annuity payments will depend on the current value of the
underlying investments, which varies over time. Your contract will contain
annuity tables which demonstrate how the initial annuity payment rate is
derived. This rate is different for each payout plan, and varies by age and sex
of the annuitant. The contract will also permit you to choose a benchmark rate
of return for the Payout Period. You may choose a benchmark rate of 3.0%, 4.0%
or 5.0% annually. If the net investment performance is greater than this
benchmark rate, your payments will increase. If the performance falls below this
benchmark, your payments will decline. Therefore, if you choose a 5.0% benchmark
rate, you assume more risk that your income check may occasionally decline than
if you choose a 3.0% benchmark rate. For further details on Variable Annuity
Payments, see the Statement of Additional Information.

Transfers. After the Annuity Start Date, an Annuitant may change the
Variable Account(s) in which the annuity payout plan is invested once per
Contract Year by sending us a Written Request. No charge is assessed for this
transfer. We will make the transfer by exchanging annuity units of one Variable
Account for another Variable Account on an equivalent dollar value basis. See
the Statement of Additional Information for examples of annuity unit value
calculations and variable annuity payment calculations.

DESCRIPTION OF ANNUITY PAYOUT OPTIONS

Option 1 -- Installment Income For a Fixed Period. Under this option, we
will make equal monthly annuity payments for a fixed number of years between 1
and 30 years. The amount of the payment is not guaranteed if a variable payout
plan is selected. If a fixed payout plan is selected, the payments for each
$1,000

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of Contract Value will not be less than those shown in the Fixed Period Table in
Section 13 of the Contract. In the event of the Payee's death, a Successor Payee
may receive the payments or may elect to receive the present value of the
remaining payments in a lump sum. If there is no Successor Payee, the present
value of the remaining payments will be paid to the estate of the last surviving
Payee.

Option 2 -- Installment Income In a Fixed Amount. Under this option, we
will make equal monthly payments of $5.00 or more for each $1,000 of Contract
Value used to purchase the option until the full amount is paid out. The number
of payments is not guaranteed if a variable payout plan is selected. If a fixed
payout plan is selected, payments will be made until the full amount applied
with compound interest at an annual rate of not less than 3% is paid out. In the
event of the Payee's death, a Successor Payee may receive the payments or may
elect to receive the present value of the remaining payments in a lump sum. If
there is no Successor Payee, the present value of the remaining payments will be
paid to the estate of the last surviving Payee.

Option 3 -- One Life Income. Under this option, we will make an annuity
payment each month so long as the Payee is alive,* or for a guaranteed 10 or 20
year period. If when the Payee dies, we have made annuity payments for less than
the selected guaranteed period, we will continue to make annuity payments for
the rest of the guaranteed period. The amount of each payment is not guaranteed
if a variable payout plan is selected. If a fixed payout plan is selected, the
payment for each $1,000 of Contract Value used to purchase the option will not
be less than that shown in the One Life Table in Section 12 of the Contract.
Payments guaranteed for 10 or 20 years certain may be commuted. Payments
guaranteed only for the life of the Payee may not be commuted.

Option 4 -- Joint and Survivor Life Income. Under this option, we will
make annuity payments each month so long as two Payees are alive, or if one
Payee dies to the surviving Payee.* If one Payee dies before the due date of the
first payment, the surviving Payee will receive payments under Option 3 -- One
Life Income with payments guaranteed for 10 years. The payments may not be
commuted.

The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the Annuitant's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.

WITHDRAWAL OF CONTRACT VALUE

Full Withdrawals. At any time before the Annuity Start Date, you may
withdraw fully from the Contract for its Surrender Value. The Surrender Value is
equal to the Contract Value MINUS (1) any applicable Withdrawal Charges; MINUS
(2) any premium taxes not previously deducted; and MINUS (3) the Contract Fee.
For Qualified Contracts, any outstanding loan balance is also deducted. The
Surrender Value will be determined as of the Business Day that we receive your
Written Request requesting full withdrawal and your Contract at our Service
Center. The Surrender Value will be paid in a lump sum unless you request
payment under a payout plan. (See "The Payout Period.") A full withdrawal may
have adverse federal income tax consequences, including a penalty tax. (See
"Federal Tax Matters.")

Partial Withdrawals. At any time before the Annuity Start Date, you may
send a Written Request or a telephone request to us to withdraw part of your
Contract Value. You must withdraw at least $250. We will withdraw the amount you
request from the Contract Value as of the Business Day on which we receive your
Written Request or telephone request for the partial withdrawal. We will then
reduce the amount remaining in the Contract by any applicable Withdrawal Charge.
Your Contract Value after a partial withdrawal must be at least $1,000. If your
Contract Value after a partial withdrawal is less than $1,000, we reserve the
right to pay you the Surrender Value in a lump sum. (See "Fees and
Charges -- Withdrawal Charge.")

You may specify how much you wish to withdraw from each Variable Account
and/or the Fixed Account. If you do not specify, or if you do not have
sufficient assets in the Variable Accounts or Fixed Account you specified to
comply with your request, we will make the partial withdrawal on a pro rata
basis

- ---------------
* IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR TO
RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE
DUE DATE OF THE THIRD PAYMENT, AND SO ON.

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from the Fixed Account and those Variable Accounts in which you have invested.
We will base the pro rata reduction on the ratio that the value in each Variable
Account and the Fixed Account has to the entire Contract Value before the
partial withdrawal.

If you have elected the Maturity Benefit option and you withdraw Contract
Value from an Eligible Variable Account, you will reduce the amount of the
Eligible Premium Payments on which your Maturity Benefit is based. IT IS
IMPORTANT THAT YOU READ THE SECTION ON "MATURITY BENEFIT" SO THAT YOU MAY BETTER
UNDERSTAND HOW THIS FEATURE OF THE CONTRACT WORKS.

INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE. (See "Federal Tax Matters.")

Systematic Withdrawal Program. The Systematic Withdrawal Program provides
an automatic monthly or quarterly payment to you, the Owner, from the amounts
you have accumulated in the Variable Accounts and/or the Fixed Account. The
minimum amount you may withdraw is $100. To use the program, you must maintain a
$1,000 balance in your Contract. You may elect to participate in the Systematic
Withdrawal Program at any time before the Annuity Start Date by sending a
Written Request to our Service Center. Once you elect the program, it remains in
effect unless the balance in your Contract drops below $1,000. You may cancel
the program at any time by sending us a Written Request or by calling us by
telephone if we have your telephone authorization on file.

We will assess a Withdrawal Charge on these withdrawals, unless the amount
you withdraw under the Systematic Withdrawal Program qualifies as a Free
Withdrawal Amount or unless Withdrawal Charges no longer apply to the amounts
withdrawn. (See "Fees and Charges -- Withdrawal Charge.") We do not deduct any
other charges for this program.

All Systematic Withdrawals will be paid to you on the same day each month,
provided that day is a Business Day. If it is not, then payment will be made on
the next Business Day. Systematic withdrawals may be taxable, subject to
withholding, and subject to a 10% penalty tax. (See "Federal Tax Matters.") We
reserve the right to discontinue offering the Systematic Withdrawal Program at
any time and for any reason.

Systematic Withdrawals from an Eligible Variable Account will reduce the
amount of the Eligible Premium Payments on which the Maturity Benefit is based.
(See "Maturity Benefit.")

Full and Partial Withdrawal Restrictions. Your right to make full and
partial withdrawals is subject to any restrictions imposed by applicable law or
employee benefit plan.

Restrictions on Distributions from Certain Types of Contracts. There are
certain restrictions on full and partial withdrawals from Contracts used as
funding vehicles for Code Section 403(b) retirement programs. Section 403(b)(11)
of the Code restricts the distribution under Section 403(b) annuity contracts
of: (i) elective contributions made in years beginning after December 31, 1988;
(ii) earnings on those contributions; and (iii) earnings in such years on
amounts held as of the last year beginning before January 1, 1989. Distributions
of those amounts may only occur upon the death of the employee, attainment of
age 59 1/2, separation from service, disability, or financial hardship. In
addition, income attributable to elective contributions may not be distributed
in the case of hardship.

CONTRACT LOANS

If your Contract is issued to you in connection with retirement programs
meeting the requirements of Section 403(b) of the Code (other than those
programs subject to Title I of the Employee Retirement Income Security Act of
1974), you may borrow from us using your Contract as collateral. Loans such as
these are subject to the provisions of any applicable retirement program and to
the Code. You should, therefore, consult your tax and retirement plan advisers
before taking a contract loan.

At any time, you may borrow the lesser of (1) the maximum loan amount
permitted under the Code, and (2) 90% of the Surrender Value of your Contract
less any existing loan amount. Loans in excess of the maximum amount permitted
under the Code may be treated as a taxable distribution rather than a loan. The

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minimum loan amount is $1,000. We will only make contract loans after approving
your written application. The written consent of all assignees and irrevocable
beneficiaries must be obtained before a loan will be given.

When a loan is made, we will transfer an amount equal to the amount
borrowed from Separate Account Value or Fixed Account Value to the loan account.
The loan account is part of our general account, and Contract Value in the loan
account does not participate in the investment experience of any Variable
Account or Fixed Account. You must indicate in the loan application from which
Variable Accounts or Fixed Account, and in what amounts, Contract Value is to be
transferred to the loan account. In the absence of any such instructions from
you, the transfer(s) are made pro-rata on a last-in, first out ("LIFO") basis
from all Variable Accounts having Separate Account Value and from the Fixed
Account. Loans may be repaid by you at any time before the Annuity Start Date.
Upon the repayment of any portion of a loan, an amount equal to the repayment
will be transferred from the loan account to the Variable Account(s) or Fixed
Account as designated by you or according to your current Premium Payment
allocation instructions.

We charge interest on contract loans at an effective annual rate of 6.0%.
We pay interest on the Contract Value in the loan account at rates we determine
from time to time but never less than an effective annual rate of 3.0%.
Consequently, the net cost of a loan is the difference between 6.0% and the rate
being paid from time to time on the Contract Value in the loan account. We may
declare from time to time higher current interest rates. Different current
interest rates may be applied to the loan account than the rest of the Fixed
Account. If not repaid, loans will automatically reduce the amount of any Death
Benefit, the amount payable upon a partial or full withdrawal of Contract Value
and the amount applied on the Annuity Start Date to provide annuity payments.

If at any time, the loan amount of a Contract exceeds the Surrender Value,
the Contract will be in default. In this event, we will send you a written
notice of default stating the amount of loan repayment needed to reinstate the
Contract, and you will have 60 days, from the day the notice is mailed, to pay
the stated amount. If we do not receive the required loan repayment within 60
days, we will terminate the Contract without value. In addition, in order to
comply with the requirements of the Code, loans must be repaid in substantially
equal installments, at least quarterly, over a period of no longer than five
years (which can be longer for certain home loans). If these requirements are
not satisfied, or if the Contract terminates while a loan is outstanding, the
loan balance will be treated as a taxable distribution and may be subject to
penalty tax, and the treatment of the Contract under Section 403(b) of the Code
may be adversely affected.

Any loan amount outstanding at the time of your death or the death of the
Annuitant is deducted from any Death Benefit paid. In addition, a contract loan,
whether or not repaid, will have a permanent effect on the Contract Value
because the investment experience of the Separate Account and the interest rates
applicable to the Fixed Account do not apply to the portion of Contract Value
transferred to the loan account. The longer the loan remains outstanding, the
greater this effect is likely to be.

DEATH BENEFITS

DEATH BENEFITS BEFORE THE ANNUITY START DATE

Death Benefit. If the Annuitant dies before the Annuity Start Date, the
Beneficiary will receive a Death Benefit. If you do not choose the Enhanced
Death Benefit option, the Death Benefit will be equal to the greater of:

(1) the sum of all Premium Payments made under the Contract, LESS
partial withdrawals, as of the date we receive due proof of the
deceased's death and payment instructions; or

(2) the Contract Value as of the date we receive due proof of the
deceased's death and payment instructions;

LESS any applicable premium taxes not previously deducted.

Enhanced Death Benefit. If you elect the three year stepped-up Enhanced
Death Benefit option at the time of purchase, the minimum Enhanced Death Benefit
payable upon the death of the Annuitant before the

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<PAGE> 53

Annuity Start Date will be reset every third year on the Death Benefit
Anniversary if the Contract Value on such Death Benefit Anniversary is greater
than the Contract Value on the previous Death Benefit Anniversary. The Enhanced
Death Benefit will equal the greater of:

(1) the Contract Value as of the date we receive due proof of the
deceased's death and payment instructions; or

(2) the highest Contract Value as of any Death Benefit Anniversary
preceding the date the Enhanced Death Benefit is determined, plus
any Premium Payments, and minus any withdrawals and charges,
incurred between such Death Benefit Anniversary and the date the
Enhanced Death Benefit is determined. This value is initially set on
the first Death Benefit Anniversary and equals the greater of: (a)
the sum of Premium Payments, MINUS partial withdrawals; or (b)
Contract Value, on that date. This value will be reset on every
future Death Benefit Anniversary (that is, every third year) to
equal Contract Value on that date only if Contract Value on that
Death Benefit Anniversary is greater than the Enhanced Death Benefit
Value on any previous Death Benefit Anniversary. Once reset, this
value will never decrease unless partial withdrawals are made;

LESS any applicable premium taxes not previously deducted.

Age Limitation Under Either Death Benefit Option. If the Annuitant dies at
or after age 75 (or ten years after the Date of Issue, whichever is later) but
before the Annuity Start Date, the Death Benefit will equal Contract Value, LESS
any applicable premium taxes not yet deducted, as of the date we receive due
proof of death and payment instructions.

Loans. If the Contract is a Qualified Contract, any outstanding loan
amount on the date the Death Benefit is paid will also be deducted from the
Death Benefit.

Distribution Upon the Owner's Death. If you own the Contract with another
person, and one of you dies before the Annuity Start Date, the survivor becomes
the sole Beneficiary regardless of your designation. If there is no surviving
Owner, your named Beneficiary will become the Beneficiary upon your death. (You
may name primary and contingent beneficiaries.) If you have named two or more
primary Beneficiaries, they will share equally in the death benefit (described
below) unless you have specified otherwise. If there are no living primary
Beneficiaries at the time of your death, payments will be made to those
contingent Beneficiaries who are living when payment of the death benefit is
due. If all the Beneficiaries have predeceased you, we will pay the death
benefit to your estate. If you or a Joint Owner who is the Annuitant dies before
the Annuity Start Date, then the provisions relating to the death of an
Annuitant (described below) will govern.

If you are not the Annuitant and you die before the Annuitant and before
the Annuity Start Date, then the following options are available to your
Beneficiary:

(1) If such Beneficiary is the spouse of the deceased Owner, the spouse
may continue the Contract as the new Owner.

(2) If such Beneficiary is not the spouse of the deceased Owner:

(a) such Beneficiary may elect to receive the Contract Value, LESS
any premium taxes not yet deducted, in a single sum within 5
years of the deceased Owner's death; or

(b) such Beneficiary may elect to receive the Contract Value paid out
under one of the approved payout plans, provided that
distributions begin within one year of the deceased Owner's death
and the distribution period under the payout plan is for the life
of, or for a period not exceeding the life expectancy of, the
Beneficiary.

If such Beneficiary does not elect one of the above options, we will
pay the Contract Value, LESS any premium taxes not yet deducted, within five
years from the date of the deceased Owner's death.

Under any of the distribution options in this section, "Distribution Upon the
Owner's Death," the Beneficiary may exercise all ownership rights and privileges
from the date of the deceased Owner's death until the date

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<PAGE> 54

that the Contract Value is paid. Similar rules apply to Qualified Contracts. The
above distribution requirements will apply only upon the death of the first
Joint Owner.

Distribution Upon the Death of the Annuitant. If the Annuitant (including
an Owner who is the Annuitant) dies before the Annuity Start Date, we will pay
the Death Benefit described above in "Death Benefits Before the Annuity Start
Date" in a lump sum to your named Beneficiaries within five years after the date
of the Annuitant's death. (You may name primary and contingent beneficiaries.)
If you have named two or more primary Beneficiaries, they will share equally in
the Death Benefit unless you have specified otherwise. If there are no living
primary Beneficiaries at the time of the Annuitant's death, payments will be
made to those contingent Beneficiaries who are living when payment of the Death
Benefit is due. If all the Beneficiaries have predeceased the Annuitant, we will
pay the Death Benefit to you, if living, or the Annuitant's estate. In lieu of a
lump sum payment, the Beneficiary may elect, within 60 days of the date we
receive due proof of the Annuitant's death, to apply the Death Benefit to a
payout plan. (See "Payout Options.")

If you are also the Annuitant and you die, the provisions described
immediately above apply, except that the Beneficiary may only apply the Death
Benefit payment to a payout plan if:

(1) payments under the option begin within one (1) year of the
Annuitant's death; and

(2) payments under the option are payable over the Beneficiary's life or
over a period not greater than the Beneficiary's life expectancy.

DEATH OF PAYEE AFTER THE ANNUITY START DATE

If the Payee dies after the Annuity Start Date, any Joint Payee becomes the
sole Payee. If there is no Joint Payee, the Successor Payee becomes the sole
Payee. If there is no Successor Payee, the remaining benefits are paid to the
estate of the last surviving Payee. The death of the Payee after the Annuity
Start Date will have the effect stated in the payout plan pursuant to which
annuity payments are being made. If any Owner dies on or after the Annuity Start
Date, any payments that remain must be made at least as rapidly as under the
payout plan in effect on the date of the your death.

THE MATURITY BENEFIT

If you elect the Maturity Benefit option at the time you purchase the
Contract and if, on the Maturity Benefit Date, you have not begun to receive
annuity payments, IL Annuity will calculate the Maturity Benefit for each
Eligible Variable Account in which you have value. The Maturity Benefit will be
credited to the Contract Value of an Eligible Variable Account only if the value
of the Eligible Variable Account on the Maturity Benefit Date is less than: (a)
the sum of the Eligible Premium Payments for such Eligible Variable Account,
MINUS (b) a percentage of all prior withdrawals and transfers from the Eligible
Variable Account.

Eligible Premium Payments are those Premium Payments that you initially
allocated to a particular Eligible Variable Account at the time of payment,
provided you made the payment at least ten (10) years prior to the Maturity
Benefit Date.

The Maturity Benefit that will be credited to each Eligible Variable
Account on the Maturity Benefit Date is equal to: (a) the sum of the Eligible
Premium Payments for that particular Eligible Variable Account; MINUS (b) a
percentage of all prior withdrawals and transfers from that Eligible Variable
Account; MINUS (c) the value of that Eligible Variable Account on the Maturity
Benefit Date.

The Maturity Benefit Date is the later of the Annuitant's age 70 and 10
years after the Date of Issue. If you purchase a Contract at age 60 or older,
only your initial Premium Payment will be an Eligible Premium Payment for
purposes of calculating the Maturity Benefit. (See Example #5 below)

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Benefit is not available to the sole surviving Owner. Eligible Variable Accounts
are those Variable Accounts shown on the specifications page of the Contract
which invest in Funds which, in turn, invest primarily in stocks, equity
securities, bonds or money market instruments. Currently, all Variable Accounts,
except the Van Eck Gold and Natural Resources Variable Account, are Eligible
Variable Accounts.

The Maturity Benefit will not be credited to Contract Value if you choose
an Annuity Start Date that is earlier than the Maturity Benefit Date.

A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN ELIGIBLE
VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE PREMIUM PAYMENTS HELD IN THE
ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR WITHDRAWAL
REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3, 4 AND 6 BELOW
ILLUSTRATE HOW THIS FEATURE OF THE MATURITY BENEFIT WORKS.

For purposes of calculating the value of an Eligible Variable Account, we
deem all transfers and withdrawals to be first a withdrawal of Premium Payments,
then of earnings. Transfers out of an Eligible Variable Account include
transfers resulting from Dollar Cost Averaging or Automatic Account Balancing;
withdrawals out of an Eligible Variable Account include withdrawals resulting
from the Systematic Withdrawal Payments.

The following examples illustrate how the Maturity Benefit works:

Example #1:

Suppose an Owner buys a Contract with a single Premium Payment of
$50,000 at age 55 and immediately allocates the $50,000 to an Eligible
Variable Account. The Owner does not withdraw or transfer any amounts from
the Eligible Variable Account. As of the Maturity Benefit Date (which is
fifteen years later when the Owner is age 70), the $50,000 qualifies as an
Eligible Premium Payment because it was made fifteen years prior to the
Maturity Benefit Date and so it meets the requirement that payment be made
ten years prior to the Maturity Benefit Date.

On the Maturity Benefit Date (Owner's age 70), IL Annuity will
calculate the Maturity Benefit for the Eligible Variable Account. IL
Annuity will total the value of all Eligible Premium Payments in the
Eligible Variable Account -- in this case $50,000. If the value of the
Eligible Variable Account on the Maturity Benefit Date is less than
$50,000, IL Annuity will automatically credit the difference to Contract
Value.

Example #2:

Assume the same facts as in Example #1, except that the Owner
specifies an Annuity Start Date of age 65 and begins to receive payments
under one of the payout options available under the Contract. At age 70
(the Maturity Benefit Date), IL Annuity does not calculate the Maturity
Benefit and does not credit a Maturity Benefit to Contract Value. By
selecting an Annuity Start Date (age 65) that is earlier than the Maturity
Benefit Date (age 70), the Owner forfeited all eligibility for the Maturity
Benefit.

Example #3:

Assume the same facts as in Example #1, except that the Owner
transfers $40,000 from the Eligible Variable Account at age 69. At that
time, the total value of the Eligible Variable Account is $100,000. The
transfer of $40,000 reduced the value of the Eligible Variable Account by
40% ($40,000/$100,000 = .40). No additional transfers or withdrawals are
made prior to the Maturity Benefit Date. On the Maturity Benefit Date, the
sum of the Eligible Premium Payments is $50,000 and is reduced by 40% to
take into account the transfer at age 69 ($50,000 X .40 = $20,000), leaving
$30,000 ($50,000 -- $20,000 = $30,000). If on the Maturity Benefit Date the
value of the Eligible Variable Account is less than $30,000, IL Annuity
will automatically credit the difference to Contract Value.

Example #4:

Assume the same facts as in Example #1, except that at age 65 the
Owner deposits (or transfers) an additional $50,000 Premium Payment into
the Eligible Variable Account. At age 69, when the value of

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the Eligible Variable Account is $150,000, the Owner withdraws $40,000. The
withdrawal reduced the value of the Eligible Variable Account by 26.667%
($40,000/$150,000 = .26667). No additional transfers or withdrawals are
made before the Maturity Benefit Date. On the Maturity Benefit Date, the
sum of Eligible Premium Payments is $50,000. (The second Premium Payment of
$50,000 does not qualify as an Eligible Premium Payment because it was made
only five years prior to the Maturity Benefit Date and does not meet the
requirement that payment be made ten years prior to the Maturity Benefit
Date.) This sum is then reduced by 26.667% to take into account the
transfer at age 69 ($50,000 X .26667 = $13,333.33), leaving $36,666.67
($50,000 -- $13,333.33 = $36,666.67). If on the Maturity Benefit Date the
value of the Eligible Variable Account is less than $36,666.67, IL Annuity
will automatically credit the difference to Contract Value.

Example #5:

Assume the Owner deposits Premium Payments of $5,000 per year into the
same Eligible Variable Account beginning at age 55 until the Maturity
Benefit Date. By age 70, the Owner had paid $75,000 in Premium Payments and
had taken no withdrawals or transfers. The sum of the Eligible Premium
Payments on the Maturity Benefit Date (age 70) is $25,000 because only the
five Premium Payments made prior to age 60 ($5,000 X 5 = $25,000) meet the
requirement that payment be made ten years prior to the Maturity Benefit
Date. If on the Maturity Benefit Date the value of the Eligible Variable
Account is less than $25,000, IL Annuity will automatically credit the
difference to Contract Value.

Example #6:

Assume the same facts as in Example #5, except that the Owner
transfers $10,000 out of the Eligible Variable Account at age 68 when the
value of the Eligible Variable Account is $100,000. The transfer reduced
the value of the Eligible Variable Account by 10% ($10,000/$100,000 = .10).
The next year, the Owner withdraws $9,000 when the value of the Eligible
Variable Account is $90,000. The withdrawal reduced the value of the
Eligible Variable Account by 10% ($9,000/$90,000 = .10). No additional
transfers or withdrawals are made prior to the Maturity Benefit Date. On
the Maturity Benefit Date the sum of the Eligible Premium Payments
($25,000) is reduced by 20% to take into account both the 10% transfer at
age 68 and the 10% withdrawal at age 69 ($25,000 x .20 = $5,000), leaving
$20,000 ($25,000 -- $5,000 = $20,000). If on the Maturity Benefit Date the
value of the Eligible Variable Account is less than $20,000, IL Annuity
will automatically credit the difference to Contract Value.

Example #7:

Spousal Joint Owners: If the Contract is owned by Joint Owners who are
spouses at the time one of the Joint Owners dies, the surviving spouse may
continue the Contract. The Maturity Benefit Date will become the date the
surviving spouse attains age 70. On that date, IL Annuity will calculate
the Maturity Benefit for each Eligible Variable Account with value.

Example #8:

If the Contract is owned by Joint Owners who are not spouses and one
of the Joint Owners dies, the Maturity Benefit is not available to the sole
surviving Owner.

We will continue to pay a Maturity Benefit on Premium Payments allocated to
an Eligible Variable Account if: (a) the Portfolio underlying an Eligible
Variable Account changes its investment objective; (b) we determine that an
investment in the Portfolio underlying an Eligible Variable Account is no longer
appropriate in light of the purposes of the Separate Account; or (c) shares of a
Portfolio underlying an Eligible Variable Account are no longer available for
investment by the Separate Account and IL Annuity is forced to redeem all shares
of the Portfolio held by the Eligible Variable Account.

THE FIXED ACCOUNT

You may allocate some or all of your Net Premium Payments and transfer some
or all of your Contract Value to the Fixed Account. The Fixed Account offers a
guarantee of principal (after deductions for fees and

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expenses) as well as interest guaranteed by IL Annuity to be not less than 3%
per year. The Fixed Account is part of our general account. Our general account
supports our insurance and annuity obligations. Since the Fixed Account is part
of the general account, we assume the risk of investment gain or loss on this
amount. All assets in the general account are subject to our general liabilities
from business operations. The Fixed Account may not be available in all states.

The Fixed Account has not been, and is not required to be, registered with
the SEC under the Securities Act of 1933, and neither the Fixed Account nor our
general account have been registered as an investment company under the 1940
Act. Therefore, neither our general account, the Fixed Account, nor any
interests therein are generally subject to regulation under the 1933 Act or the
1940 Act. The disclosures relating to the Fixed Account which are included in
this prospectus are for your information and have not been reviewed by the SEC.
However, such disclosures may be subject to certain generally applicable
provisions of federal securities laws relating to the accuracy and completeness
of statements made in prospectuses.

FIXED ACCOUNT VALUE

The Fixed Account Value is equal to: (1) Net Premium Payments allocated to
the Fixed Account, PLUS (2) amounts transferred to the Fixed Account, PLUS (3)
interest credited to the Fixed Account, MINUS (4) any partial withdrawals or
transfers from the Fixed Account, and MINUS (5) any Withdrawal Charges, contract
fees or premium taxes deducted from the Fixed Account.

We intend to credit the Fixed Account with interest at current rates in
excess of the minimum guaranteed rate of 3%, but we are not obligated to do so.
Current interest rates are influenced by, but do not necessarily correspond to,
prevailing general market interest rates. Because we, in our sole discretion,
anticipate changing the current interest rate from time to time, different
allocations you make to the Fixed Account will be credited with different
current interest rates. The interest rate we credit to amounts allocated or
transferred to the Fixed Account will apply to the end of the calendar year in
which we receive the amount. At the end of the calendar year, we will determine
a new current interest rate on such amount and accrued interest thereon (which
may be a different current interest rate from the current interest rate on new
allocations to the Fixed Account on that date). We will guarantee the rate of
interest we declare on such amount and accrued interest for the following
calendar year. We will determine, in our sole discretion, any interest to be
credited on amounts in the Fixed Account in excess of the minimum guaranteed
effective rate of 3% per year. You therefore assume the risk that interest
credited to amounts in the Fixed Account may not exceed the minimum 3%
guaranteed rate.

For purposes of making withdrawals, transfers or deductions of fees and
charges from the Fixed Account, we will consider such withdrawals to have come
from the last money into the contract, that is, on a last-in, first-out ("LIFO")
basis.

We reserve the right to change the method of crediting interest from time
to time, provided that such changes do not reduce the guaranteed rate of
interest below 3% per year or shorten the period for which the interest rate
applies to less than one calendar year (except for the year in which such amount
is received or transferred).

TRANSFER PRIVILEGES

General. Transfers to the Fixed Account must be at least $1,000. A
transfer charge of $25 may be imposed for the thirteenth and each subsequent
request you make to transfer Contract Value from one or more Variable Accounts
to the Fixed Account (or to one or more Variable Accounts) during a single
Contract Year before the Annuity Start Date.

Before the Annuity Start Date, you may transfer up to 20% of the Fixed
Account Value from the Fixed Account to one or more of the Variable Accounts in
any Contract Year. No fee is charged for transfers from the Fixed Account to one
or more Variable Accounts and such a transfer is not considered a transfer for
purposes of assessing a transfer charge.

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Dollar-Cost Averaging. You may elect to participate in the Dollar-Cost
Averaging Program at the time of your application, or at any time thereafter
before the Annuity Start Date by sending us a Written Request. The Dollar-Cost
Averaging Program permits you to systematically transfer (on a monthly or
quarterly basis) a set dollar amount from the Fixed Account to any other
Variable Accounts. The minimum amount that may be transferred under the
Dollar-Cost Averaging Program is $100 to each Variable Account. Once elected,
dollar-cost averaging from the Fixed Account remains in effect for the life of
the Contract until the value of the Fixed Account is depleted or until you
cancel your participation by Written Request or by telephone if we have your
telephone authorization on file. There is no additional charge for dollar-cost
averaging, and a transfer under this program is not considered a transfer for
purposes of assessing a transfer change. We reserve the right to discontinue
offering the dollar-cost averaging facility at any time and for any reason. (See
"Transfer Privileges -- Dollar Cost Averaging.")

PAYMENT DEFERRAL

We have the right to defer payment of any full or partial withdrawal or
transfer from the Fixed Account for up to six months from the date we receive
your Written Request for such a withdrawal or transfer at our Service Center. If
we do not give you a payment within 30 days after we receive all necessary
documentation, or such shorter period required by a particular jurisdiction, we
will credit interest at 3%, or such higher rate as is required for a particular
jurisdiction, to the amount to be paid from the date we received the
documentation.

HOW TO REVIEW INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS

From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the Variable Accounts. These figures are
based on historical earnings and do not indicate or project future performance.
We also may, from time to time, advertise or include in sales literature
Variable Account performance relative to certain performance rankings and
indices compiled by independent organizations. More detailed information as to
the calculation of performance, as well as comparisons with unmanaged market
indices, appears in the Statement of Additional Information.

Effective yields and total returns for the Variable Accounts are based on
the investment performance of the corresponding Fund. The performance of a Fund
in part reflects its expenses. (See the attached prospectuses for the Funds.)

The yield of the Money Market Variable Account refers to the annualized
income generated by an investment in the Variable Account over a specified
seven-day period. The yield is calculated by assuming that the income generated
for that seven-day period is generated each seven-day period over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
the Variable Account is assumed to be reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.

The yield of a Variable Account (except the Money Market Variable Account)
refers to the annualized income generated by an investment in the Variable
Account over a specified 30-day or one-month period. The yield is calculated by
assuming that the income generated by the investment during that 30-day or
one-month period is generated each period over a 12-month period and is shown as
a percentage of the investment.

Yield quotations do not reflect the Withdrawal Charge.

The total return of a Variable Account refers to return quotations assuming
an investment under a Contract has been held in the Variable Account for various
periods of time. For periods prior to the date the Separate Account commenced
operations, performance information will be calculated based on the performance
of the various Funds and the assumption that the Variable Accounts were in
existence for the same periods as those indicated for the Funds, with the level
of Contract charges that were in effect at the inception of the Variable
Accounts for the Contracts (this is referred to as "hypothetical" performance
data). When a Variable Account or Fund has been in operation for one, five, and
ten years, respectively, the total return for these periods will be provided.

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The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided. Average
annual total return information shows the average annual percentage change in
the value of an investment in the Variable Account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less all
charges and deductions applied against the Variable Account (including any
Withdrawal Charge that would apply if you terminated the Contract at the end of
each period indicated, but excluding any deductions for premium taxes).

In addition to the standard version described above, total return
performance information computed on different non-standard bases may be used in
advertisements or sales literature. Average annual total return information may
be presented, computed on the same basis as described above, except deductions
will not include the Withdrawal Charge. In addition, we may from time to time
disclose average annual total return in non-standard formats and cumulative
total return for Contracts funded by the Variable Accounts.

We may also disclose yield, standard total returns, and non-standard total
returns for the Portfolios of the Funds, including such disclosures for periods
before the date the Variable Account commenced operations.

Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.

In advertising and sales literature, the performance of each Variable
Account may be compared with the performance of other variable annuity issuers
in general or to the performance of particular types of variable annuities
investing in mutual funds, or investment Portfolios of mutual funds with
investment objectives similar to the Variable Account. Lipper Analytical
Services, Inc. ("Lipper"), Variable Annuity Research Data Service ("VARDS") and
Morningstar, Inc. ("Morningstar") are independent services which monitor and
rank the performance of variable annuity issuers in each of the major categories
of investment objectives on an industry-wide basis.

Lipper's and Morningstar's rankings include variable life insurance issuers
as well as variable annuity issuers. VARDS rankings compare only variable
annuity issuers. The performance analyses prepared by Lipper, VARDS and
Morningstar each rank such issuers on the basis of total return, assuming
reinvestment of distributions, but do not take sales charges, redemption fees,
or certain expense deductions at the separate account level into consideration.
In addition, VARDS prepares risk rankings, which consider the effects of market
risk on total return performance. This type of ranking provides data as to which
funds provide the highest total return within various categories of funds
defined by the degree of risk inherent in their investment objectives.

Advertising and sales literature may also compare the performance of each
Variable Account to the Standard & Poor's Index of 500 Common Stocks, a widely
used measure of stock performance. This unmanaged index assumes the reinvestment
of dividends but does not reflect any "deduction" for the expense of operating
or managing an investment Portfolio. Other independent ranking services and
indices may also be used as a source of performance comparison.

We may also report other information including the effect of tax-deferred
compounding on a Variable Account's investment returns, or returns in general,
which may be illustrated by tables, graphs, or charts. All income and capital
gains derived from Variable Account investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the Variable Account
investment experience is positive.

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VOTING RIGHTS

We are the legal owner of the Portfolio shares held in the Variable
Accounts. However, when a Portfolio is required to solicit the votes of its
shareholders through the use of proxies, we believe that current law requires us
to solicit you and other Contract Owners as to how we should vote the Portfolio
shares held in the Variable Accounts. If we determine that we no longer are
required to solicit your votes, we may vote the shares in our own right.

When we solicit your vote, the number of votes you have will be calculated
separately for each Variable Account in which you have an investment. The number
of your votes is based on the net asset value per share of the Portfolio in
which the Variable Account invests. It may include fractional shares. Before the
Annuity Start Date, you hold a voting interest in each Variable Account to which
the Contract Value is allocated. After the Annuity Start Date, the Annuitant has
a voting interest in each Variable Account from which variable annuity payments
are made. If you have a voting interest in a Variable Account, you will receive
proxy materials and reports relating to any meeting of shareholders of the
Portfolio in which that Variable Account invests.

If we do not receive timely voting instructions for Portfolio shares or if
we own the shares, we will vote those shares in proportion to the voting
instructions we receive. Instructions we receive to abstain on any item will
reduce the total number of votes being cast on a matter. For further details as
to how we determine the number of your votes, see the Statement of Additional
Information.

FEDERAL TAX MATTERS

THE FOLLOWING DISCUSSION IS GENERAL AND
IS NOT INTENDED AS TAX ADVICE

INTRODUCTION

This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may receive a
distribution under the annuity contract issued by us. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction. This discussion is based upon our understanding of the present
federal income tax laws, as they are currently interpreted by the Internal
Revenue Service ("IRS"). No representation is made as to the likelihood of the
continuation of the present federal income tax laws or of the current
interpretation by the IRS. Moreover, no attempt has been made to consider any
applicable state or other tax laws.

The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose Premium Payments are
comprised solely of proceeds from and/or contributions under retirement plans
which are intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), or 408 of the Code. The ultimate effect of
federal income taxes on the amounts held under a Contract, or annuity payments,
and on the economic benefit to you, the Annuitant, or the beneficiary depends on
the type of retirement plan, on the tax and employment status of the individual
concerned, and on our tax status. In addition, certain requirements must be
satisfied in purchasing a Qualified Contract with proceeds from a tax-qualified
plan and receiving distributions from a Qualified Contract in order to continue
receiving favorable tax treatment. Some retirement plans are subject to
distribution and other requirements that are not incorporated into our Contract
administration procedures. Owners, participants and beneficiaries are
responsible for determining that contributions, distributions and other
transactions with respect to the Contracts comply with applicable law.
Therefore, purchasers of Qualified Contracts should seek competent legal and tax
advice regarding the suitability of a Contract for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of a
Contract. The following discussion assumes that Qualified Contracts are
purchased with proceeds from and/or contributions under retirement plans that
qualify for the intended special federal income tax treatment.

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TAX STATUS OF THE CONTRACT

Diversification Requirements. Section 817(h) of the Code provides that
separate account investments underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Separate
Account, through each underlying Fund, intends to comply with the
diversification requirements prescribed in regulations under Section 817(h) of
the Code, which affect how the assets in the various Variable Accounts may be
invested. Although we do not have direct control over the Funds in which the
Separate Account invests, we believe that each Fund in which the Separate
Account owns shares will meet the diversification requirements, and therefore,
the Contract will be treated as an annuity contract under the Code.

In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contract owner will be considered the owner of separate account
assets if the contract owner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor (i.e., the
contract owner), rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also states that guidance would
be issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular variable accounts without being
treated as owners of the underlying assets." As of the date of this prospectus,
no such guidance has been issued.

The ownership rights under the Contracts are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of one or more Variable Accounts
in which to allocate Net Premium Payments and Contract Values, and may be able
to transfer among Variable Accounts more frequently than in such rulings. These
differences could result in an Owner being treated as the Owner of a pro rata
share of the assets of the Separate Account. In addition, we do not know what
standards will be set forth, if any, in the regulations or rulings which the
Treasury Department has stated it expects to issue. We, therefore, reserve the
right to modify the Contract as necessary to attempt to prevent you from being
considered the Owner of any portion of the assets of the Separate Account.

Required Distributions. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any Owner dies on or after the
Annuity Start Date but before the entire interest in the Contract has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of that
Owner's death; and (b) if any Owner dies before the Annuity Start Date, the
entire interest in the Contract will be distributed within five years after the
date of your death. These requirements will be considered satisfied as to any
portion of your interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such beneficiary or over
a period not extending beyond the life expectancy of that beneficiary, provided
that such distributions begin within one year of that Owner's death. The Owner's
"designated beneficiary" is the person to whom ownership of the Contract passes
by reason of death. However, if a "designated beneficiary" is the surviving
spouse of a deceased Owner, the Contract may be continued with the surviving
spouse as the new Owner.

The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.

Other rules may apply to Qualified Contracts.

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The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.

TAXATION OF ANNUITIES

In General. Section 72 of the Code governs taxation of annuities in
general. We believe that if you are a natural person you are not taxed on
increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial and full withdrawals) or as
annuity payments under the payment option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the Contract
Value (and in the case of a Qualified Contract, any portion of an interest in
the qualified plan) generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or payment
option) is taxable as ordinary income.

The Owner of any annuity contract who is not a natural person generally
must include in income any increase in the excess of the Contract Value over the
"investment in the contract" during the taxable year. There are some exceptions
to this rule, and a prospective Owner that is not a natural person may wish to
discuss these with a competent tax advisor.

The following discussion generally applies to Contracts owned by natural
persons.

Withdrawals In the case of a partial withdrawal from a Qualified Contract,
under Section 72(e) of the Code, a ratable portion of the amount received is
taxable, generally based on the ratio of the "investment in the contract" to the
participant's total accrued benefit or balance under the retirement plan. The
"investment in the contract" generally equals the portion, if any, of any
Premium Payment paid by or on behalf of the individual under a Contract which
was not excluded from the individual's gross income. For Contracts issued in
connection with qualified plans, the "investment in the contract" can be zero.
Special tax rules may be available for certain distributions from Qualified
Contracts.

In the case of a partial withdrawal from a Non-Qualified Contract, under
Section 72(e), any amounts received are generally first treated as taxable
income to the extent that the Contract Value immediately before the partial
withdrawal exceeds the "investment in the contract" at that time. Any additional
amount withdrawn is not taxable. With respect to a Non-Qualified Contract,
partial withdrawals are generally treated as taxable income to the extent that
the Contract Value immediately before the withdrawal exceeds the "investment in
the contract" at that time. Withdrawals are treated as taxable income to the
extent that the amount received exceeds the investment in the contract.

In the case of a full withdrawal under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."

Section 1035 of the Code generally provides that no gain or loss shall be
recognized on the exchange of one annuity contract for another. If the
surrendered contract was issued before August 14, 1982, the tax rules formerly
providing that the withdrawal was taxable only to the extent the amount received
exceeds your investment in the contract will continue to apply to amounts
allocable to investments in that contract before August 14, 1982. In contrast,
contracts issued after January 19, 1985 in a Code Section 1035 exchange are
treated as new contracts for purposes of the penalty and distribution-at-death
rules. Special rules and procedures apply to Section 1035 transactions. Persons
who may wish to take advantage of Section 1035 should consult their tax adviser.

Annuity Payments. Although tax consequences may vary depending on the
payment option elected under an annuity contract, under Code Section 72(b),
generally (prior to recovery of the investment in the contract) gross income
does not include that part of any amount received as an annuity under an annuity
contract that bears the same ratio to such amount as the investment in the
contract bears to the expected return at the annuity starting date. For variable
annuity payments, the taxable portion is generally determined by an equation
that establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the "investment in the contract" by the
total number of expected periodic payments. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
no tax on the portion of each

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payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term of the
payments; however, the remainder of each annuity payment is taxable until the
recovery of the investment in the contract, and thereafter the full amount of
each annuity payment is taxable. If death occurs before full recovery of the
investment in the contract, the unrecovered amount may be deducted on the
Annuitant's final tax return.

Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of you or the Annuitant. Generally, such amounts
are includible in the income of the recipient as follows: (i) if distributed in
a lump sum, they are taxed in the same manner as a full withdrawal from the
contract or (ii) if distributed under a payment option, they are taxed in the
same way as annuity payments.

Penalty Tax on Certain Withdrawals. In the case of a distribution from a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:

1. made on or after the taxpayer reaches age 59 1/2;

2. made on or after the death of the owner (or if the owner is not an
individual, the death of the primary Annuitant);

3. attributable to the taxpayer's becoming disabled;

4. a part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;

5. made under certain annuities issued in connection with structured
settlement agreements; or

6. made under an annuity contract that is purchased with a single
Premium Payment when the Annuity Start Date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity payment period.

Other tax penalties may apply to certain distributions under a Qualified
Contract.

Possible Changes in Taxation. In past years, legislation has been proposed
that would have adversely modified the federal taxation of certain annuities.
For example, one such proposal would have changed the tax treatment of
non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Although as of the date of this
prospectus Congress is not considering any legislation regarding taxation of
annuities, there is always the possibility that the tax treatment of annuities
could change by legislation or other means (such as IRS regulations, revenue
rulings, judicial decisions, etc.). Moreover, it is also possible that any
change could be retroactive (that is, effective before the date of the change).

TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT

A transfer of Ownership of a Contract, the designation of an Annuitant,
Annuitant or other beneficiary who is not also the Owner, the selection of
certain Annuity Start Dates or the exchange of a Contract may result in certain
tax consequences to you that are not discussed herein. An Owner contemplating
any such transfer, assignment, or exchange of a Contract should contact a
competent tax advisor with respect to the potential tax effects of such a
transaction.

WITHHOLDING

Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Effective January 1, 1994, distributions from certain qualified
plans are generally subject to mandatory withholding. Certain states also
require withholding of state income tax whenever federal income tax is withheld.

44
<PAGE> 64

MULTIPLE CONTRACTS

All non-qualified deferred annuity contracts entered into after October 21,
1988 that are issued by the us (or our affiliates) to you during any calendar
year are treated as one annuity contract for purposes of determining the amount
includible in gross income under Section 72(e). The effects of this rule are not
yet clear; however, it could affect the time when income is taxable and the
amount that might be subject to the 10% penalty tax described above. In
addition, the Treasury Department has specific authority to issue regulations
that prevent the avoidance of Section 72(e) through the serial purchase of
annuity contracts or otherwise. There may also be other situations in which the
Treasury may conclude that it would be appropriate to aggregate two or more
annuity contracts purchased by the same Owner. Accordingly, a Contract Owner
should consult a competent tax advisor before purchasing more than one annuity
contract.

TAXATION OF QUALIFIED PLANS

The Contracts are designed for use with several types of qualified plans.
The tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract Owners, the
Annuitants, and Beneficiaries are cautioned that the rights of any person to any
benefits under these qualified retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and conditions of
the Contract, but we shall not be bound by the terms and conditions of such
plans to the extent such terms contradict the Contract, unless the Company
consents. Brief descriptions follow of the various types of qualified retirement
plans in connection with a Contract. We will amend the Contract as necessary to
conform it to the requirements of such plan.

Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section
401(a) of the Code permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish these plans for themselves and their employees. These retirement plans
may permit the purchase of the Contracts to accumulate retirement savings under
the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Employers intending to use the Contract with such plans should seek
competent advice.

Individual Retirement Annuities. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible, and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Prior to January 1, 1997,
employers may establish Simplified Employee Pension (SEP) Plans to provide IRA
contributions on behalf of their employees. The Internal Revenue Service has not
reviewed the Contract for qualification as an IRA, and has not generally ruled
whether a death benefit provision such as the provision in the Contract comports
with IRA qualification requirements.

Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the Premium Payments paid, within certain limits, on a Contract
that will provide an annuity for the employee's retirement. These Premium
Payments may be subject to FICA (social security) tax.

45
<PAGE> 65

RESTRICTIONS UNDER QUALIFIED CONTRACTS

Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.

POSSIBLE CHARGE FOR THE COMPANY'S TAXES

At the present time, we make no charge to the Variable Accounts for any
Federal, state, or local taxes that we incur which may be attributable to such
Variable Accounts or the Contracts. We, however, reserve the right in the future
to make a charge for any such tax or other economic burden resulting from the
application of the tax laws that it determines to be properly attributable to
the Variable Accounts or to the Contracts.

OTHER TAX CONSEQUENCES

As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this prospectus. Further, the
Federal income tax consequences discussed herein reflect our understanding of
current law, and the law may change. Federal estate and state and local estate,
inheritance and other tax consequences of Ownership or receipt of distributions
under a Contract depend on the individual circumstances of each Owner or
recipient of the distribution. A competent tax advisor should be consulted for
further information.

OTHER INFORMATION

HOLIDAYS

In addition to federal holidays, we are closed on the following days: the
Friday after Thanksgiving, the day before Christmas when Christmas falls on
Tuesday through Saturday, the day after Christmas when Christmas falls on Sunday
or Monday, and the day after New Year's Day when it falls on a Sunday, the
Monday after New Year's Day when New Year's Day falls on a Saturday, and the day
before or after Independence Day when it falls on Saturday or Sunday.

PAYMENTS

We will usually pay you any full or partial withdrawal, Death Benefit
payment, (or for Qualified Contracts only, payment of your loan proceeds) within
seven days after we receive your Written Request, any information or
documentation we reasonably need to process your request, and in the case of a
Death Benefit receipt and filing of due proof of death.

However, we may be required to suspend or postpone payments during any
period when:

1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings;

2. trading on the New York Stock Exchange is restricted as determined by
the SEC;

3. the SEC determines that an emergency exists that would make the
disposal of securities held in the Separate Account or the
determination of the value of the Separate Account's net assets not
reasonably practicable; or

4. the SEC permits, by order, the suspension or postpone of payments for
your protection.

If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.

We have the right to defer payment for a full or partial withdrawal or
transfer from the Fixed Account for up to six months from the date we receive
your Written Request. If we do not make a payment within 30 days after we
receive the documentation we need to complete the transaction (or a shorter
period if required by a

46
<PAGE> 66

particular jurisdiction), we will credit interest to the amount to be paid from
the date we received the necessary documentation at a rate of 3% (or such higher
rate required for a particular jurisdiction).

MODIFICATION

Upon notice to you, we may modify the Contract to:

1. permit the Contract or the Separate Account to comply with any
applicable law or regulation issued by a government agency; or

2. assure continued qualification of the Contract under the Code or
other federal or state laws relating to retirement annuities or
variable annuity contracts; or

3. reflect a change in the operation of the Separate Account; or

4. provide additional investment options.

In the event of most such modifications, we will make appropriate
endorsement to the Contract.

DISTRIBUTION OF THE CONTRACTS

IL Securities, Inc. ("IL Securities"), P.O. Box 1230, 2960 North Meridian
Street, Indianapolis, Indiana 46208, acts as the distributor for the Contracts.
IL Securities is an affiliate of Indianapolis Life Insurance Company.

Sales commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions of up to 7.2% of Premium Payments. Other
commissions of up to 1.25% may also be paid. We may also pay up to 1.00% of
Premium Payments to IL Securities to compensate it for certain distribution
expenses. These broker-dealers are expected to compensate sales representatives
in varying amounts from these commissions. In addition, we may pay other
distribution expenses such as production incentive bonuses, agent's insurance
and pension benefits, and agency expense allowances. These distribution expenses
do not result in any additional charges against the Contracts other than those
described under "Fees and Charges."

LEGAL PROCEEDINGS

There are no legal proceedings to which the Separate Account is a party or
the assets of the Separate Account are subject. We are not involved in any
litigation that is of material importance in relation to our total assets or
that relates to the Separate Account.

REPORTS TO OWNERS

We will mail a report to you at least annually at your last known address
of record. The report will state the Contract Value (including the Contract
Value in each Variable Account and the Fixed Account) of the Contract, Premium
Payments paid and charges deducted since the last report, partial withdrawals
made since the last report and any further information required by any
applicable law or regulation.

INQUIRIES

Inquiries regarding your Contract may be made by writing to us at our
Service Center.

FINANCIAL STATEMENTS

IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, became a wholly-owned subsidiary of the Indianapolis Life
Group of Companies, Inc. on November 1, 1994. Immediately prior thereto, we
entered into an assumption reinsurance agreement with Sentry Life Insurance
Company ("Sentry") whereby Sentry assumed all of the insurance in-force and
related assets and liabilities from us. The effect of the reinsurance agreement
was to transfer all of the insurance related assets and liabilities to Sentry,
leaving only bonds, cash and state insurance department licenses to be acquired
by the Indianapolis Life Group of Companies, Inc. No business was issued by us
through December 31, 1994.

47
<PAGE> 67

The audited statement of net assets of IL Annuity and Insurance Co.
Separate Account 1 as of December 31, 1995 and the related statements of
operations and changes in net assets for the year then ended, as well as the
Report of the Independent Auditors, are included in the Statement of Additional
Information ("SAI"). The audited balance sheets for the Company as of December
31, 1995 and 1994, and the related statements of income, stockholder's equity,
and cash flows for the year ended December 31, 1995 and the two months ended
December 31, 1994, as well as the Report of the Independent Auditors, are
contained in the SAI. The financial statements of the Company should be
considered only as bearing on our ability to meet our obligations under the
Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account.

48
<PAGE> 68

TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION

Additional information about the Contract and the Separate Account is
contained in the Statement of Additional Information (SAI). You may obtain a
free copy of the SAI by writing to us at the address shown on the front cover or
by calling 1-800-XXX-XXXX. The following is the Table of Contents for that
Statement.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL CONTRACT PROVISIONS........................................................
The Contract........................................................................
Incontestability....................................................................
Misstatement of Age or Sex..........................................................
Nonparticipation....................................................................
Options.............................................................................
CALCULATION OF HISTORICAL PERFORMANCE DATA............................................
Money Market Variable Account Yields................................................
Other Variable Account Yields.......................................................
Average Annual Total Returns........................................................
Other Total Returns.................................................................
Effect of the Contract Fee on Performance Data......................................
Other Information...................................................................
NET INVESTMENT FACTOR.................................................................
VARIABLE ANNUITY PAYMENTS.............................................................
Assumed Investment Rate.............................................................
Amount of Variable Annuity Payments.................................................
Annuity Unit Value..................................................................
ADDITION, DELETION AND SUBSTITUTION OF INVESTMENTS....................................
Resolving Material Conflicts........................................................
TERMINATION OF PARTICIPATION AGREEMENTS...............................................
The Alger American Fund.............................................................
Fidelity Variable Insurance Products Fund...........................................
Fidelity Variable Insurance Products Fund II........................................
OCC Accumulation Trust..............................................................
T. Rowe Price Fixed Income Series, Inc..............................................
T. Rowe Price International Series, Inc.............................................
Van Eck Worldwide Insurance Trust...................................................
VOTING RIGHTS.........................................................................
SAFEKEEPING OF ACCOUNT ASSETS.........................................................
DISTRIBUTION OF THE CONTRACTS.........................................................
LEGAL MATTERS.........................................................................
EXPERTS...............................................................................
OTHER INFORMATION.....................................................................
FINANCIAL STATEMENTS..................................................................
</TABLE>

49
<PAGE> 69

APPENDIX I

CONDENSED FINANCIAL INFORMATION

The following condensed information includes Accumulation Unit values for
the periods indicated. This data is obtained from the financial statements of
the Separate Account. The data should be read together with the financial
statements, related notes and other financial information included in the
Statement of Additional Information. (See "Financial Statements" in the
Statement of Additional Information.)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------------------
ALGER ALGER FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH SMALL CAPITALIZATION EQUITY-INCOME GROWTH MONEY MARKET
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- -------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period....... $ 10.00 $ 10.00 $ 10.00 $ 10.00 $10.00
Accumulation Unit Value at
End of Period............. $ 9.786 $ 9.675 $ 10.616 $ 9.604 0
Number of Accumulation Units
Outstanding at End of
Period.................... 2,764 1,709 3,789 2,199 0
</TABLE>

<TABLE>
<CAPTION>
FIDELITY FIDELITY FIDELITY FIDELITY QUEST FOR VALUE
ASSET MANAGER CONTRAFUND INDEX 500 INVESTMENT GRADE BOND MANAGED
VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
---------------- ---------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit Value at
Beginning of Period..... $ 10.00 $ 10.00 $ 10.00 $10.00 $ 10.00
Accumulation Unit Value at
End of Period........... $ 8.224 $ 10.091 $ 10.514 $10.247 $ 10.380
Number of Accumulation
Units Outstanding at End
of Period............... 255 5,731 3,538 1,668 161
</TABLE>

<TABLE>
<CAPTION>
QUEST FOR VALUE
SMALL CAP T.ROWE PRICE T.ROWE PRICE VAN ECK VAN ECK
VARIABLE LIMITED-TERM BOND INTERNATIONAL STOCK GOLD/NAT. RESOURCES WORLDWIDE BALANCED
ACCOUNT(A) VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT VARIABLE ACCOUNT
----------------- ----------------- ------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Accumulation Unit
Value at Beginning
of Period.......... $10.00 $10.00 $10.00 $10.00 $ 10.00
Accumulation Unit
Value at End of
Period............. $10.388 $10.042 $10.487 $10.621 $ 10.010
Number of
Accumulation Units
Outstanding at End
of Period.......... 1,182 1,485 2,530 58 1,201
</TABLE>

- ---------------

(a) Effective May 1, 1996, Quest for Value Accumulation Trust changed its name
to the OCC Accumulation Trust.

A-1
<PAGE> 70

STATEMENT OF ADDITIONAL INFORMATION

for the

FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT

Issued Through

IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1

Offered by

IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208

--------------------

This Statement of Additional Information expands upon subjects
discussed in the current Prospectus for the flexible premium deferred variable
annuity contract (the "Contract") offered by IL Annuity and Insurance Company.
You may obtain a copy of the Prospectus dated __________, ____ by calling
1-800-XXX-XXXX or by writing to the ____________ Service Center: IL Annuity
and Insurance Company,_______________________________________. Terms used in
the current Prospectus for the Contract are incorporated in this Statement.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUSES
FOR THE CONTRACT AND THE FUNDS.

The date of this Statement of Additional Information is
_______, 1997.
<PAGE> 71
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----

<S> <C>
ADDITIONAL CONTRACT PROVISIONS
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonparticipation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF HISTORICAL PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Money Market Variable Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Variable Account Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Annual Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Total Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of the Contract Fee on Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET INVESTMENT FACTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VARIABLE ANNUITY PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount of Variable Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITION, DELETION AND SUBSTITUTION OF INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Resolving Material Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TERMINATION OF PARTICIPATION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Alger American Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fidelity Variable Insurance Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fidelity Variable Insurance Products Fund II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OCC Accumulation Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T. Rowe Price Fixed Income Series, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T. Rowe Price International Series, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Van Eck Worldwide Insurance Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SAFEKEEPING OF ACCOUNT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF THE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 72
ADDITIONAL CONTRACT PROVISIONS

THE CONTRACT

The entire contract is the Contract, the signed application,
the data page, the endorsements, options and all other attached papers. The
statements made in the application are deemed representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.

Any change in the Contract or waiver of its provisions must be
in writing and signed by the Company's President, a Vice President, Secretary
or Assistant Secretary. No other person -- no agent or Registered
Representative -- has authority to change or waive any provision of this
Contract.

Upon notice to the Contract Owner, the Company may modify the
Contract if necessary to permit the Contract or the Separate Account to comply
with any applicable law or regulation issued by a governmental agency; or if
necessary to assure continued qualification of the contract under the Internal
Revenue Code or other federal or state laws relating to retirement annuities or
variable annuity contracts; or if necessary to effect a change in the operation
of the Separate Account or to provide additional investment options.

In the event of such modifications, the Company will make the
appropriate endorsement to the Contract.

INCONTESTABILITY

The Company will not contest the Contract from the Date of
Issue.

MISSTATEMENT OF AGE OR SEX

The Company may require proof of age, sex, and right to
payments before making any life annuity payments. If the age or sex (if
applicable) of the annuitant has been misstated, the Annuity Commencement Date
and the amount of the annuity payments will be determined using the correct age
and sex. If misstatement of age or sex results in annuity payments that are
too large, the overpayments will be charged with compound interest against
subsequent payments. If the Company has made payments that are too small, the
underpayments will be paid with compound interest upon receipt of notice of the
underpayments. Adjustments for overpayments or underpayments will be paid
interest at the rate then in use to determine the rate of payments.

NONPARTICIPATION

The Contract does not participate in the Company's surplus
earnings or profits.

- 1 -
<PAGE> 73
OPTIONS

Except in the limited circumstances described below, the
Company will issue four options automatically upon the issuance of each
Contract. These options provide for the waiver of the Withdrawal Charge in
case of extended hospitalization, long term care, terminal illness, or the post
secondary education of certain family members or the Annuitant, as provided in
the option. There is no additional charge for the issuance of the options,
which are available only at the issuance of the Contract. All options may not
be available in all states.

CALCULATION OF HISTORICAL PERFORMANCE DATA

From time to time, the Company may disclose yields, total
returns, and other performance data pertaining to the Contracts for a Variable
Account. Such performance data will be computed, or accompanied by performance
data computed, in accordance with the standards defined by the SEC.

MONEY MARKET VARIABLE ACCOUNT YIELDS

From time to time, advertisements and sales literature may
quote the current annualized yield of the Money Market Variable Account for a
seven-day period in a manner which does not take into consideration any
realized or unrealized gains or losses on shares of Money Market Portfolio of
the Fidelity Variable Insurance Products Fund or on that Portfolio's portfolio
securities.

This current annualized yield is computed by determining the
net change (exclusive of realized gains and losses on the sale of securities
and unrealized appreciation and depreciation) at the end of the seven-day
period in the value of a hypothetical account under a Contract having a balance
of one unit of the Money Market Variable Account at the beginning of the
period, dividing such net change in account value by the value of the
hypothetical account at the beginning of the period to determine the base
period return, and annualizing this quotient on a 365-day basis. The net
change in account value reflects: 1) net income from the fund attributable to
the hypothetical account; and 2) charges and deductions imposed under the
Contract which are attributable to the hypothetical account. The charges and
deductions include the per unit charges for the hypothetical account for: 1)
the annualized Contract Fee; 2) the mortality and expense risk charge; and 3)
the asset-based administration charge. For purposes of calculating current
yields for a Contract, an average per unit Contract Fee is used based on the
$30 annualized Contract Fee which is deducted in four equal payments at the end
of each Contract Quarter. Current Yield is calculated according to the
following formula:

- 2 -
<PAGE> 74
Current Yield = ((NCS - ES)/UV) X (365/7)

Where:

NCS = the net change in the value of the Money Market
Portfolio (exclusive of realized gains or losses on
the sale of securities and unrealized appreciation
and depreciation) for the seven-day period
attributable to a hypothetical account having a
balance of one Variable Account unit.

ES = per unit expenses attributable to the hypothetical
account for the seven-day period.

UV = the unit value for the first day of the seven-day
period.

365/7
Effective yield = (1 + ((NCS-ES)/UV)) - 1

Where:

ES = per unit expenses attributable to the hypothetical
account for the seven-day period.

UV = the unit value for the first day of the seven-day
period.

Because of the charges and deductions imposed under the Contract, the
yield for the Money Market Variable Account is lower than the yield for the
Money Market Portfolio.

The current and effective yields on amounts held in the Money Market
Variable Account normally fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF
FUTURE YIELDS OR RATES OF RETURN. The Money Market Variable Account's actual
yield is affected by changes in interest rates on money market securities,
average portfolio maturity of the Money Market Portfolio, the types and quality
of portfolio securities held by the Money Market Portfolio and the Money Market
Portfolio's operating expenses. Yields on amounts held in the Money Market
Variable Account may also be presented for periods other than a seven-day
period.

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<PAGE> 75
Yield calculations do not take into account the Withdrawal Charge that
is assessed on certain withdrawals of Contract Value. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and the Free
Withdrawal Option chosen by the Owner at the time of purchase. See "Fees and
Charges" in the prospectus for further description of these options. No
Withdrawal Charge applies to Contract Value in excess of aggregate Premium
Payments.

OTHER VARIABLE ACCOUNT YIELDS

From time to time, sales literature or advertisements may quote the
current annualized yield of one or more of the Variable Accounts (except the
Money Market Variable Account) under the Contract for 30-day or one-month
periods. The annualized yield of a Variable Account refers to income generated
by the Variable Account during a 30-day or one-month period and is assumed to
be generated each period over a 12-month period.

The yield is computed by: 1) dividing the net investment income of
the fund attributable to the Variable Account units less Variable Account
expenses for the period; by 2) the maximum offering price per unit on the last
day of the period times the daily average number of units outstanding for the
period; by 3) compounding that yield for a six-month period; and by 4)
multiplying that result by 2. Expenses attributable to the Variable Account
include the annualized Contract Fee, the asset-based administration charge and
the mortality and expense risk charge. The yield calculation assumes a
Contract Fee of $30 per year per Contract deducted at the end of each Contract
Year. For purposes of calculating the 30-day or one-month yield, an average
Contract Fee based on the average Contract Value in the Variable Account is
used to determine the amount of the charge attributable to the Variable Account
for the 30-day or one-month period. The 30-day or one-month yield is
calculated according to the following formula:

6
Yield = 2 X (((NI - ES)/(U X UV)) + 1) - 1)

Where:

NI = net income of the portfolio for the 30-day or
one-month period attributable to the Variable
Account's units.

ES = expenses of the Variable Account for the 30-day or
one-month period.

U = the average number of units outstanding.

UV = the unit value at the close (highest) of the last
day in the 30-day or one-month period.

Because of the charges and deductions imposed under the Contracts, the
yield for the Variable Account is lower than the yield for the corresponding
fund.

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<PAGE> 76
The yield on the amounts held in the Variable Accounts normally
fluctuates over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD
IS NOT AN INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. A
Variable Account's actual yield is affected by the types and quality of
portfolio securities held by the corresponding fund and that fund's operating
expenses.

Yield calculations do not take into account the Withdrawal
Charge that is assessed on certain withdrawals of Contract Value. The amount
of the Withdrawal Charge depends on the Withdrawal Charge Option and the Free
Withdrawal Option chosen by the Owner at the time of purchase. See "Fees and
Charges" in the prospectus for further description of these options.

AVERAGE ANNUAL TOTAL RETURNS

From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Variable Accounts for
various periods of time.

When a Variable Account or portfolio has been in operation for 1, 5,
and 10 years, respectively, the average annual total return for these periods
will be provided. Average annual total returns for other periods of time may,
from time to time, also be disclosed.

Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract to the redemption value of that investment as of the last day
of each of the periods. The ending date for each period for which total return
quotations are provided will be for the most recent calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.

Standard average annual total returns are calculated using Variable
Account unit values which the Company calculates on each valuation day based on
the performance of the Variable Account's underlying fund, the deductions for
the mortality and expense risk charge, the deductions for the asset-based
administration charge and the annualized Contract Fee. The calculation assumes
that the Contract Fee is $30 per year per Contract deducted at the end of each
Contract year. For purposes of calculating average annual total return, an
average per-dollar per-day Contract Fee attributable to the hypothetical
account for the period is used. The calculation also assumes total withdrawal
of the Contract at the end of the period for the return quotation. The
calculation of total returns will therefore reflect the two Withdrawal Charge
Options under the Contract and will be presented in two different formats. The
total return is calculated according to the following formula:

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<PAGE> 77
1/N
TR = ((ERV/P) ) - 1

Where:

TR = the average annual total return net of Variable
Account recurring charges.

ERV = the ending redeemable value (net of any applicable
Withdrawal Charge) of the hypothetical account at
the end of the period.

P = a hypothetical initial payment of $1,000.

N = the number of years in the period.

From time to time, sales literature or advertisements may quote
average annual total returns for periods prior to the date the Variable
Accounts commenced operations. Such performance information for the Variable
Accounts is calculated based on the performance of the various funds and the
assumption that the Variable Accounts were in existence for the same periods as
those indicated for the funds, with the level of Contract charges that were in
effect at the inception of the Variable Accounts.

OTHER TOTAL RETURNS

From time to time, sales literature or advertisements may also quote
average annual total returns that do not reflect either of the two Withdrawal
Charge Options available under the Contract. Other total returns are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts withdrawn.

The Company may disclose cumulative total returns in conjunction with
the standard formats described above. The cumulative total returns will be
calculated using the following formula:

CTR = (ERV/P) - 1

Where:

CTR = The cumulative total return net of Variable Account recurring
charges for the period.

ERV = The ending redeemable value of the hypothetical investment at
the end of the period.

P = A hypothetical single payment of $1,000.

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<PAGE> 78
EFFECT OF THE CONTRACT FEE ON PERFORMANCE DATA

The Contract provides for a $7.50 Contract Fee to be deducted at the
end of each Contract Quarter from the Fixed and Variable Accounts based on the
proportion that the value of each such Account bears to the total Contract
Value. For purposes of reflecting the Contract Fee in yield and total return
quotations, the Contract Fee is converted into a per-dollar per-day charge
based on the average Contract Value in the Separate Account of all Contracts on
the last day of the period for which quotations are provided. The per-dollar
per-day average charge will then be adjusted to reflect the basis upon which
the particular quotation is calculated.

OTHER INFORMATION

The following is a partial list of those publications which may be
cited in the Funds' advertising shareholder materials which contain articles
describing investment results or other data relative to one or more of the
Variable Accounts. Other publications may also be cited.

Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
Insurance Week Journal of Accountancy
Journal of the American Society of Journal of Commerce
CLU & ChFC
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman

- 7 -
<PAGE> 79
NET INVESTMENT FACTOR

The Net Investment Factor is an index that measures the investment
performance of a Variable Account from one Business Day to the next. Each
Variable Account has its own Net Investment Factor, which may be greater or
less than one. The Net Investment Factor for each Variable Account equals 1
plus the fraction obtained by dividing (a) by (b) where:

(a) is the net result of:

1. the investment income, dividends, and capital gains,
realized or unrealized, credited at the end of the
current Business Day; PLUS

2. the amount credited or released from reserves for
taxes attributed to the operation of the Variable
Account; MINUS

3. the capital losses, realized or unrealized, charged
at the end of the current Business Day, MINUS

4. any amount charged for taxes or any amount set aside
during the Business Day as a reserve for taxes
attributable to the operation or maintenance of the
Variable Account; MINUS

5. the amount charged for mortality and expense risk on
that Business Day; MINUS

6. the amount charged for administration on that
Business Day; and

(b) is the value of the assets in the Variable Account at the
end of the preceding Business Day, adjusted for allocations
and transfers to and withdrawals and transfers from the
Variable Account occurring during that preceding Business
Day.

VARIABLE ANNUITY PAYMENTS

The dollar amount of the first variable annuity payment is determined
in the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a variable payout plan, the dollar amount of the
first variable annuity payment and the first fixed annuity payment (assuming
the fixed payment is based on the minimum guaranteed 3.0% interest rate) will
be the same. Later variable annuity payments, however, will vary to reflect
the net investment performance of the Variable Account(s) selected by you or
the Annuitant.

- 8 -
<PAGE> 80
The net investment performance of a Variable Account is translated
into a variation in the amount of variable annuity payments through the use of
annuity units. The adjusted Contract Value for each Variable Account is used
to purchase annuity units at the annuity unit value for that Variable Account
on the Annuity Start Date. The number of annuity units in each Variable
Account then remains fixed unless an exchange of annuity units is made as
described below. Each Variable Account has a separate annuity unit value that
changes each Business Day in substantially the same way as does the value of an
accumulation unit of a Variable Account.

The dollar value of each variable annuity payment after the first is
determined by multiplying the number of annuity units of a particular Variable
Account by the annuity unit value for that Variable Account on the Business Day
immediately preceding the date of each payment. If the net investment return
of the Variable Account for a payment period is equal to the pro-rated portion
of the 3.0% annual assumed investment rate, the variable annuity payment for
that Variable Account for that period will equal the payment for the prior
period. If the net investment return exceeds an annualized rate of 3.0% for a
payment period, the payment for that period will be greater than the payment
for the prior period. Similarly, if the return for a period falls short of an
annualized rate of 3.0%, the payment for that period will be less than the
payment for the prior period. You may choose an assumed interest rate of 3.0%,
4.0%, or 5.0% at the time a variable payout plan is selected.

ASSUMED INVESTMENT RATE

The discussion concerning the amount of variable annuity payments
which follows this section is based on an assumed investment rate of 3.0% per
year. Under the Contract, the Contract Owner may choose an assumed interest
rate of 3.0%, 4.0% or 5.0% at the time a variable payout plan is selected. The
assumed investment rate is used merely in order to determine the first monthly
payment per thousand dollars of applied value. THIS RATE DOES NOT BEAR ANY
RELATIONSHIP TO THE ACTUAL NET INVESTMENT EXPERIENCE OF THE SEPARATE ACCOUNT OR
OF ANY VARIABLE ACCOUNT.

AMOUNT OF VARIABLE ANNUITY PAYMENTS

The amount of the first variable annuity payment to a payee will
depend on the amount (i.e., the adjusted Contract Value, the Surrender Value,
the death benefit) applied to effect the variable annuity payment as of the
Annuity Commencement Date, the annuity payout plan option selected, and the age
and sex (if applicable) of the annuitant. The Contracts contain tables
indicating the dollar amount of the first annuity payment under each annuity
payment option for each $1,000 applied at various ages. These tables are based
upon the 1983 Table A (promulgated by the Society of Actuaries) and an assumed
investment rate of 3.0% per year.

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<PAGE> 81
The portion of the first monthly variable annuity payment derived from
a Variable Account is divided by the annuity unit value for that Variable
Account (calculated as of the date of the first monthly payment). The number
of such units will remain fixed during the annuity period, assuming the
Annuitant makes no exchanges of annuity units for annuity units of another
Variable Account or to provide a fixed annuity payment.

In any subsequent month, for any Contract, the dollar amount of the
variable annuity payment derived from each Variable Account is determined by
multiplying the number of annuity units of that Variable Account attributable
to that Contract by the value of such annuity unit at the end of the valuation
period immediately preceding the date of such payment.

The annuity unit value will increase or decrease from one payment to
the next in proportion to the net investment return of the Variable Account or
Variable Accounts supporting the variable annuity payments, less an adjustment
to neutralize the 3.0% assumed investment rate referred to above. Therefore,
the dollar amount of annuity payments after the first will vary with the amount
by which the net investment return of the appropriate Variable Accounts is
greater or less than 3.0% per year. For example, for a Contract using only one
Variable Account to generate variable annuity payments, if that Variable
Account has a cumulative net investment return of 5% over a one year period,
the first annuity payment in the next year will be approximately 2% greater
than the payment on the same date in the preceding year. If such net
investment return is 1% over a one year period, the first annuity payment in
the next year will be approximately 2 percentage points less than the payment
on the same date in the preceding year. (See also "Variable Annuity Payments"
in the Prospectus.)

ANNUITY UNIT VALUE

The value of an annuity unit is calculated at the same time that the
value of an accumulation unit is calculated and is based on the same values for
fund shares and other assets and liabilities. (See "Separate Account Value" in
the Prospectus.) The annuity unit value for each Variable Account's first
valuation period was set at $100. The annuity unit value for a Variable
Account is calculated for each subsequent valuation period by dividing (1) by
(2), then multiplying this quotient by (3) and then multiplying the result by
(4), where:

(1) is the accumulation unit value for the current valuation
period;

(2) is the accumulation unit value for the immediately preceding
valuation period;

(3) is the annuity unit value for the immediately preceding
valuation period; and

(4) is a special factor designed to compensate for the assumed
investment rate of 3.0% built into the table used to compute
the first variable annuity payment.

- 10 -
<PAGE> 82
The following illustrations show, by use of hypothetical examples, the
method of determining the annuity unit value and the amount of several variable
annuity payments based on one Variable Account.

ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE

<TABLE>
<S> <C> <C>
1. Accumulation unit value for current
valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.15
2. Accumulation unit value for immediately
preceding valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11.10
3. Annuity unit value for immediately preceding
valuation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105.00
4. Factor to compensate for the assumed
investment rate of 3.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9975
5. Annuity unit value of current valuation
period ((1) / (2)) x (3) x (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105.2093
</TABLE>

ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS

<TABLE>
<S> <C> <C>
1. Number of accumulation units at Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
2. Accumulation unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.1500
3. Adjusted Contract Value (1)x(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $111,500
4. First monthly annuity payment per $1,000
of adj. Contract Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.89
5. First monthly annuity payment (3)x(4) / 1,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $656.74
6. Annuity unit value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.2093
7. Number of annuity units (5)/(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2422
8. Assume annuity unit value for second month equal to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105.3000
9. Second monthly annuity payment (7)x(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $657.30
10. Assume annuity unit value for third month equal to . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $104.9000
11. Third monthly annuity payment (7)x(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $654.81
</TABLE>

ADDITION, DELETION OF SUBSTITUTION OF INVESTMENTS

In the event of any such substitution or change, we may (by
appropriate endorsement, if necessary) change the Contract to reflect the
substitution or change. If we consider it to be in the best interest of Owners
and Annuitants, and subject to any approvals that may be required under
applicable law, the Separate Account may be operated as a management investment
company under the 1940 Act, it may be deregistered under that Act if
registration is no longer required, it may be combined with other of our
separate accounts, or our assets may be transferred to another separate
account. In addition, we may, when permitted by law, restrict or eliminate any
voting rights you have under the Contracts.

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<PAGE> 83
We will continue to pay a Guaranteed Maturity Benefit on Premium Payments
allocated to an Eligible Variable Account if: (a) the Portfolio underlying an
Eligible Variable Account changes its investment objective; (b) we determine
that an investment in the Portfolio underlying an Eligible Variable Account is
no longer appropriate in light of the purposes of the Separate Account; or (c)
shares of a Portfolio underlying an Eligible Variable Account are no longer
available for investment by the Separate Account and we are forced to redeem
all shares of the Portfolio held by the Eligible Variable Account. (See
"Guaranteed Maturity Benefit.")

RESOLVING MATERIAL CONFLICTS

The Funds currently sell shares to registered separate accounts of
insurance companies other than IL Annuity to support other variable annuity
contracts and variable life insurance contracts. In addition, some of the
Funds may in the future be sold to our other separate accounts and may in the
future be sold to separate accounts of other affiliated life insurance
companies to support other variable annuity or variable life insurance
contracts. Moreover, shares of some of the Funds may in the future be sold to
qualified retirement plans. As a result, there is a possibility that an
irreconcilable material conflict may arise between your interests in owning a
Contract whose Contract Value is allocated to the Separate Account and of
persons owning Contracts whose Contract Values are allocated to one or more
other separate accounts investing in any one of the Funds. There is also the
possibility that a material conflict may arise between the interests of
Contract Owners generally, or certain classes of Contract Owners, and
participating qualified retirement plans or participants in such retirement
plans.

We currently do not foresee any disadvantages to you that would arise
from the sale of Fund shares to support variable life insurance contracts or
variable annuity contracts of other companies or to qualified retirement plans.
However, the management of the Funds will each monitor events related to their
Fund in order to identify any material irreconcilable conflicts that might
possibly arise as a result of such Fund offering its shares to (1) support both
variable life insurance contracts and variable annuity contracts, or (2)
support the variable life insurance contracts and/or variable annuity contracts
issued by various unaffiliated insurance companies. In addition, the
management of the Funds will monitor the Funds in order to identify any
material irreconcilable conflicts that might possibly arise as a result of the
sale of its shares to qualified retirement plans, if applicable. In the event
of such a conflict, the management of the appropriate Fund would determine what
action, if any, should be taken in response to the conflict. In addition, if
we believe that the response of the Funds to any such conflict does not
sufficiently protect you, we will take appropriate action on our own, including
withdrawing the Separate Account's investment in such Funds, as appropriate.
(See the individual Fund prospectuses for greater detail.)

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<PAGE> 84
TERMINATION OF PARTICIPATION AGREEMENTS

The participation agreements pursuant to which the Funds sell their
shares to the Variable Account contain varying provisions regarding
termination. The following summarizes those provisions:

THE ALGER AMERICAN FUND. This agreement provides for termination: (1)
on six months' advance written notice by any party; (2) at IL Annuity's option
if shares of any Portfolio are not reasonably available to meet the
requirements of the Contracts or are not registered, issued or sold in
accordance with applicable state and/or federal law; (3) at IL Annuity's option
if any Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or Fred Alger & Company, Inc. (the
"Distributor"), upon a determination that IL Annuity has suffered a material
adverse change in its business, operations, financial condition or prospects or
is the subject of material adverse publicity; (6) by IL Annuity upon a
determination that either the Fund or the Distributor has suffered a material
adverse change in its business, operations, financial condition or prospects or
is the subject of material adverse publicity; (7) by the Fund or the
Distributor if the Contracts cease to qualify as annuity contracts or endowment
contracts under the Code or if the Contracts are not registered, issued or sold
in accordance with state and/or federal law; or (8) on 180 days written notice
upon a determination by any party that a material irreconcilable conflict
exists.

FIDELITY VARIABLE INSURANCE PRODUCTS FUND and FIDELITY VARIABLE
INSURANCE PRODUCTS FUNDS II. These agreements provide for termination: (1) on
six months' advance written notice by any party; (2) at IL Annuity's option if
shares of any Portfolio are not reasonably available to meet the requirements
of the Contracts or are not registered, issued or sold in accordance with
applicable state and/or federal law; (3) at IL Annuity's option if any
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or Fidelity Distributors Corporation
(the "Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; or (7) by the Fund
or the Underwriter if IL Annuity provides written notice of its intent to use
another investment company as a funding vehicle for the Contracts.

OCC ACCUMULATION TRUST. These agreements provide for termination:
(1) on six months' advance written notice by any party; (2) at IL Annuity's
option if shares of any Portfolio are not reasonably available to meet the
requirements of the Contracts; (3) at IL Annuity's option if any Portfolio
ceases to be qualified as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code (the "Code"); (4) at IL Annuity's option if

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<PAGE> 85
any Portfolio fails to meet certain diversification requirements of the Code;
(5) at the option of the Fund upon a determination that IL Annuity has suffered
a material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that the Fund has suffered a material adverse change in
its business, operations, financial condition or prospects or is the subject of
material adverse publicity; (7) by the Fund or IL Annuity if IL Annuity
receives necessary regulatory approvals to substitute shares of another
investment company as a funding vehicle for the Contracts; (8) by the Fund upon
institution of certain proceedings against IL Annuity; (9) at IL Annuity's
option upon institution of certain administrative proceedings against the Fund
or the Underwriter; (10) by the Fund or IL Annuity upon a determination that
certain irreconcilable conflicts exist; or (11) at the option of the Fund or IL
Annuity, upon the other party's material breach of any provision in the
Participation Agreement.

T. ROWE PRICE FIXED INCOME SERIES, INC. AND T. ROWE PRICE
INTERNATIONAL SERIES, INC. These agreements provide for termination: (1) on
six months' advance written notice by any party; (2) at IL Annuity's option if
shares of any Portfolio are not reasonably available to meet the requirements
of the Contracts or are not registered, issued or sold in accordance with
applicable state and/or federal law; (3) at IL Annuity's option if any
Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Fund or T. Rowe Price Investment Services,
Inc. (the "Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (6) by IL Annuity
upon a determination that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity; (7) by the Fund or
the Underwriter if IL Annuity provides written notice of its intent to use
another investment company as a funding vehicle for the Contracts; (8) by the
Fund or the Underwriter upon institution of certain proceedings against IL
Annuity; or (9) at IL Annuity's option upon institution of certain
administrative proceedings against the Fund or the Underwriter.

VAN ECK WORLDWIDE INSURANCE TRUST. This agreement provides for
termination: (1) on six months' advance written notice by any party; (2) at IL
Annuity's option if shares of any Portfolio are not reasonably available to
meet the requirements of the Contracts or are not registered, issued or sold in
accordance with applicable state and/or federal law; (3) at IL Annuity's option
if any Portfolio ceases to be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code (the "Code"); (4) at IL Annuity's
option if any Portfolio fails to meet certain diversification requirements of
the Code; (5) at the option of the Trust or Van Eck Associates Corporation (the
"Adviser") upon a determination that IL Annuity has suffered a material adverse
change in its business, operations, financial condition or prospects or is the
subject of material adverse publicity; (6) by IL Annuity upon a determination
that either the Trust or the Adviser has suffered a material adverse change in
its business, operations, financial condition or prospects or is the subject of
material adverse

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<PAGE> 86
publicity; (7) by IL Annuity, the Adviser or the Trust, upon institution of
certain proceedings against the broker-dealers marketing the Contracts, the
Adviser or the Trust; (8) upon a decision by IL Annuity to substitute the
Trust's shares with the shares of another investment company; or (9) upon
assignment of the Agreement.

VOTING RIGHTS

The number of your votes is determined by dividing the Contract Value
you have in a Variable Account by the net asset value per share of the
Portfolio in which that Variable Account invests. For each Annuitant, the
number of votes attributable to a Variable Account will be determined by
dividing the liability for future variable annuity payments to be paid from
that Variable Account by the net asset value per share of the Portfolio in
which that Variable Account invests. This liability for future payments is
calculated on the basis of the mortality assumptions. The assumed investment
rate you selected is used in determining the number of annuity units of that
Variable Account credited to the Annuitant's Contract and annuity unit value of
that Variable Account on the date that the number of votes is determined. As
variable annuity payments are made to the Annuitant, the liability for future
payments decreases as does the number of votes.

The number of votes available to you or an Annuitant will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of the
Portfolio's shareholders. Voting instructions will be solicited by written
communication prior to such meeting in accordance with procedures established
for the Fund.

SAFEKEEPING OF ACCOUNT ASSETS

The Company holds the title to the assets of the Separate Account.
The assets are kept physically segregated and held separate and apart from the
Company's General Account assets and from the assets in any other separate
account.

Records are maintained of all purchases and redemptions of Portfolio
shares held by each of the Variable Accounts.

The officers and employees of the Company are covered by an insurance
company blanket bond issued by National Union Fire Insurance Company of
Pittsburgh Pennsylvania to Indianapolis Life Insurance Company and its various
subsidiaries in the amount of twenty million dollars. The bond insures against
dishonest and fraudulent acts of officers and employees.

- 15 -
<PAGE> 87
DISTRIBUTION OF THE CONTRACTS

IL Securities, Inc., P.O. Box 1230, 2960 North Meridian Street,
Indianapolis, Indiana 46208, acts as the distributor for the Contracts. IL
Securities, Inc. is wholly-owned by the Indianapolis Life Group of Companies,
Inc., which, in turn, is wholly-owned by Indianapolis Life Insurance Company.
IL Securities, Inc. is registered with the SEC under the Securities Exchange
Act of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc.

We offer the Contracts to the public on a continuous basis. We do not
anticipate discontinuing the offering of the Contracts, but reserve the right
to discontinue the offering. Agents who sell the Contracts are licensed by
applicable state insurance authorities to sell the Contracts and are registered
representatives of IL Securities, Inc. or broker-dealers having selling
agreements with IL Securities, Inc. or broker-dealers having selling agreements
with such broker-dealers.

We may pay sales commissions to broker-dealers up to an amount equal
to 7.2% of the Premium Payments paid under a Contract. In addition,
asset-based trailer commissions of up to 1.25% may be paid. We may also pay up
to 1.00% of Premium Payments to IL Securities to compensate it for certain
distribution expenses. These broker-dealers are expected to compensate sales
representatives in varying amounts from these commissions. We may also pay
other distribution expenses such as production incentive bonuses, agent's
insurance and pension benefits, and agency expense allowances. These
distribution expenses do not result in any additional charges against the
Contracts that are not described under "Fees and Charges."

LEGAL MATTERS

All matters relating to Massachusetts law pertaining to the Contracts,
including the validity of the Contracts and the Company's authority to issue
the Contracts, have been passed upon by Margaret M. McKinney, Vice President,
General Counsel and Secretary of the Company. Sutherland, Asbill & Brennan,
L.L.P. of Washington, D.C. has provided advice on certain matters relating to
the federal securities laws.

EXPERTS

The balance sheets of IL Annuity and Insurance Company as of December
31, 1995 and 1994, and the related statements of income, stockholder's equity,
and cash flows for the year ended December 31, 1995 and the two months ended
December 31, 1994, and the statement of net assets of IL Annuity and Insurance
Co. Separate Account 1 as of December 31, 1995, and the related statements of
operations and changes in net assets for the year then ended, appearing in this
Statement of Additional Information and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports

- 16 -
<PAGE> 88
thereon appearing elsewhere herein, and are included in reliance upon the
authority of such firm as experts in accounting and auditing.

OTHER INFORMATION

A registration statement has been filed with the SEC under the
Securities Act of 1933, as amended, with respect to the Contracts discussed in
this Statement of Additional Information. Not all the information set forth in
the registration statement, amendments and exhibits thereto has been included
in this Statement of Additional Information. Statements contained in this
Statement of Additional Information concerning the content of the Contracts and
other legal instruments are intended to be summaries. For a complete statement
of the terms of these documents, reference should be made to the instruments
filed with the SEC.

FINANCIAL STATEMENTS

- 17 -
<PAGE> 89

Financial Statements

IL Annuity and Insurance Company

Year ended December 31, 1995 and
Two Months Ended December 31, 1994
With Report of Independent Auditors

<PAGE> 90

IL Annuity and Insurance Company

Financial Statements

Year ended December 31, 1995 and Two Months
Ended December 31, 1994

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . 1

Audited Financial Statements

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Stockholder's Equity . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>

<PAGE> 91

[ERNST & YOUNG LLP LETTERHEAD]

Report of Independent Auditors

Board of Directors
IL Annuity and Insurance Company

We have audited the accompanying balance sheets of IL Annuity and Insurance
Company, wholly owned by Indianapolis Life Group of Companies, Inc., (which is
wholly owned by Indianapolis Life Insurance Company), as of December 31, 1995
and 1994, and the related statements of income, stockholder's equity, and cash
flows for the year ended December 31, 1995 and the two months ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IL Annuity and Insurance
Company at December 31, 1995 and 1994, and the results of its operations and
its cash flows for the year ended December 31, 1995 and the two months ended
December 31, 1994 in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

March 22, 1996

1
<PAGE> 92

IL Annuity and Insurance Company

Balance Sheets

<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
-------------------------------
<S> <C> <C>
ASSETS
Fixed maturity securities (Note 2) $6,478,844 $5,165,662
Cash 440,601 140,266
Accrued investment income 81,030 28,875
Prepaid expenses - 100,000
Goodwill, net of accumulated amortization of $127,769
in 1995 and $18,253 in 1994 2,062,550 2,172,066
Separate account assets 287,171 -
------------------------------
Total assets $9,350,196 $7,606,869
==============================

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefit reserves $ 7,500 $ -
Payable to affiliate (Note 5) 89,437
Accounts payable and other liabilities 68,003 171
Federal income taxes (Note 3) - 9,395
Separate account liabilities 287,171 -
------------------------------
Total liabilities 452,111 9,566

Stockholder's equity (Note 4):
Common stock, $250 par value in 1995; $150
par value in 1994:
Authorized and issued--10,000 shares 2,500,000 1,500,000
Additional paid-in capital 6,762,659 6,112,659
Unrealized gains (losses) on investments 206,719 (32,908)
Retained earnings (deficit) (571,293) 17,552
------------------------------
Total stockholder's equity 8,898,085 7,597,303
------------------------------
Total liabilities and stockholder's equity $9,350,196 $7,606,869
==============================
</TABLE>

See accompanying notes.

2
<PAGE> 93

IL Annuity and Insurance Company

Statements of Income

<TABLE>
<CAPTION>
YEAR ENDED TWO MONTHS ENDED
DECEMBER 31 1995 DECEMBER 31 1994
---------------- ----------------
<S> <C> <C>
Revenue:
Investment income $ 402,408 $47,728
Net realized capital gains 936 -
-----------------------------------
403,344 47,728
Expenses:
Commissions 17,044 -
General expenses and other 772,011 1,904
Taxes, licenses and fees 97,527 624
Amortization of goodwill 109,516 18,253
-----------------------------------
996,098 20,781
-----------------------------------
Income (loss) before federal income taxes (592,754) 26,947
Federal income taxes (benefit) (3,909) 9,395
-----------------------------------
Net income (loss) $(588,845) $17,552
===================================
</TABLE>

See accompanying notes.

3
<PAGE> 94

IL Annuity and Insurance Company

Statements of Stockholder's Equity

<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL GAINS RETAINED
COMMON PAID-IN (LOSSES) ON EARNINGS
STOCK CAPITAL INVESTMENTS (DEFICIT) TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at November 1, 1994 $1,500,000 $6,112,659 $ - $ - $7,612,659
Net income - - - 17,552 17,552
Change in unrealized losses - - (32,908) - (32,908)
-------------------------------------------------------------------------
Balance at December 31, 1994 $1,500,000 $6,112,659 $(32,908) $ 17,552 $7,597,303
Net loss - - - (588,845) (588,845)
Capital contribution 1,000,000 650,000 - - 1,650,000
Change in unrealized gains - - 239,627 - 239,627
-------------------------------------------------------------------------
Balance at December 31, 1995 $2,500,000 $6,762,659 $206,719 $ (571,293) $8,898,085
=========================================================================
</TABLE>

See accompanying notes.

4
<PAGE> 95

IL Annuity and Insurance Company

Statements of Cash Flows

<TABLE>
<CAPTION>
YEAR ENDED TWO MONTHS ENDED
DECEMBER 31 1995 DECEMBER 31 1994
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(588,845) $17,552
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Amortization of discount on investments (77,287) (10,386)
Amortization of goodwill 109,516 18,253
Changes in operating assets and liabilities:
Accrued investment income (52,155) 51,376
Prepaid expenses 100,000 (100,000)
Future policy benefit reserves 7,500 -
Accounts payable and accrued liabilities 157,269 171
Federal income taxes (9,395) 9,395
------------------------------------
Net cash used by operating activities (353,397) (13,639)

INVESTING ACTIVITIES
Sales and maturity of investments 5,247,404 -
Purchase of investments (6,243,672) (2,922,685)
------------------------------------
Net cash used for investing activities (996,268) (2,922,685)

FINANCING ACTIVITIES
Capital and surplus contributed by parent 1,650,000 -
------------------------------------

Net increase (decrease) in cash 300,335 (2,936,324)
Cash at beginning of period 140,266 3,076,590
------------------------------------
Cash at end of period $440,601 $140,266
====================================
</TABLE>

See accompanying notes.

5
<PAGE> 96

IL Annuity and Insurance Company

Notes to Financial Statements

December 31, 1995

1. ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

Effective November 1, 1994, Indianapolis Life Group of Companies, Inc. (ILGC),
a wholly owned subsidiary of Indianapolis Life Insurance Company, acquired all
of the outstanding stock of Sentry Investors Life Insurance Company (the
Company), a stock life insurance company wholly owned by the Sentry Life
Insurance Company (Sentry). Prior to the acquisition, Sentry entered into an
assumption reinsurance agreement with the Company whereby Sentry assumed all of
the insurance in-force and related assets and liabilities from the Company. The
effect of the reinsurance agreement was to transfer all of the insurance
related assets and liabilities to Sentry, leaving only bonds, cash and state
insurance department licenses to be acquired by ILGC. No business was issued by
the Company through December 31, 1994. The Company, when acquired by ILGC, was
accounted for using the purchase method of accounting which resulted in a new
basis of accounting for assets and liabilities of the Company using push down
accounting. Accordingly, only operations from the date of acquisition have
been presented for 1994. In January 1995, the name of the Company was changed
to IL Annuity and Insurance Company.

Preparation of the financial statements requires management to make estimates
and assumptions that effect amounts reported in the financial statements and
accompanying notes. Such estimates and assumptions could change in the future
as more information becomes known, which could impact the amounts reported and
disclosed herein.

ACCOUNTING POLICIES

FIXED MATURITY SECURITIES

Fixed maturity securities are classified as "available-for-sale" securities and
are reported at fair value. Fair values are based on quoted market prices. The
unrealized gains or losses on these securities are included as a separate
component of stockholder's equity unless there is deemed to be an other than
temporary decline in value, in which case the loss is charged to income.

6
<PAGE> 97

IL Annuity and Insurance Company

Notes to Financial Statements (continued)

1. ORGANIZATION, BASIS OF PRESENTATION AND ACCOUNTING POLICIES (CONTINUED)

CASH

Cash includes cash on hand and demand deposits.

GOODWILL

Goodwill is amortized over the period of 20 years using the straight-line
method.

FUTURE POLICY BENEFIT RESERVES

Future policy benefit reserves for annuity products represent policy account
balances before applicable surrender charges. Interest was credited on annuity
products at 5.5%. One annuity product was sold in late 1995.

SEPARATE ACCOUNTS

Separate account assets and liabilities represent funds that are separately
administered, principally for variable annuity contracts, and for which the
contractholder, rather than the Company, bears the investment risk. Separate
account contractholders have no claim against the assets of the general account
of the Company. Separate account assets are reported at market value. The
operations of the separate accounts are not included in the accompanying
financial statements.

REVENUE RECOGNITION

Revenue for annuity products will consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges assessed
against policyholder account balances during the period.

FEDERAL INCOME TAXES

The Company files a stand-alone federal income tax return.

7
<PAGE> 98

IL Annuity and Insurance Company

Notes to Financial Statements (continued)

2. FIXED MATURITY SECURITIES

Fixed maturity securities consist of United States government securities at
December 31.

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $6,272,125 $206,719 $ _ $6,478,844
==============================================================

1994 $5,198,570 $ _ $32,908 $5,165,662
==============================================================
</TABLE>

Fixed maturity securities by date of scheduled maturity consist of the
following at December 31, 1995.

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------------------------
<S> <C> <C>
Due in one year or less $3,522,746 $3,527,980
Due after one year through five years 992,125 1,914,891
Due after five years through ten years 1,728,336 1,003,010
Due after ten years 28,918 32,963
----------------------------
$6,272,125 $6,478,844
============================
</TABLE>

3. FEDERAL INCOME TAXES

Significant components of the provision for federal income taxes consist of the
following:

<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------
<S> <C> <C>
Federal income taxes (benefit) at 35% $(207,464) $ 9,431
Effect of net operating loss 203,677 -
Other, net (122) (36)
--------------------------
Federal income taxes (benefit) $ (3,909) $ 9,395
==========================
</TABLE>

8
<PAGE> 99

IL Annuity and Insurance Company

Notes to Financial Statements (continued)

3. FEDERAL INCOME TAXES (CONTINUED)

At December 31, 1995, the financial statements included deferred tax assets of
$219,527, offset by a valuation allowance of $131,326 and deferred tax
liabilities of $88,201. At December 31, 1994, the financial statements
included $3,969 of deferred tax liabilities. The significant components of the
Company's deferred tax assets and liabilities were net operating losses,
amortization of goodwill and bond discount and unrealized investment gains and
losses.

The deferred tax liability related to the net unrealized gains has been offset
by net operating losses for 1995, and the deferred tax asset related to the net
unrealized losses was fully reserved with a valuation allowance at December 31,
1994.

At December 31, 1995, the Company has unused federal tax net operating loss
carryforwards of $218,154, expiring in the year 2010.

4. STOCKHOLDER'S EQUITY

Massachusetts insurance regulations require the Company to maintain a minimum
capital and surplus of $1,200,000. Statutory capital and surplus at December
31, 1995 and 1994 was $6,705,332 and $5,367,711, respectively. Statutory net
income (loss) for 1995 and 1994 was $(489,852) and $601,876, respectively.

Generally, the maximum amount of dividends which can be paid to its stockholder
without prior approval of the Insurance Commissioner of the State of
Massachusetts is 10% of statutory surplus at the prior year end. In 1996, the
Company can pay dividends of $420,533 without prior approval of the Insurance
Commissioner.

5. RELATED PARTY TRANSACTIONS

The Company was allocated expenses of $607,027 from Indianapolis Life Insurance
Company for 1995, in conjunction with expense allocation agreements for various
administrative assistance.

9
<PAGE> 100

Financial Statements

IL Annuity and Insurance Co. Separate Account 1

Year ended December 31, 1995
with Report of Independent Auditors

<PAGE> 101

IL Annuity and Insurance Co. Separate Account 1

Financial Statements

Year ended December 31, 1995

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1

Audited Financial Statements

Statement of Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Changes in Net Assets . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>

<PAGE> 102

[ERNST & YOUNG LLP LETTERHEAD]

Report of Independent Auditors

Board of Directors
IL Annuity and Insurance Co.

We have audited the accompanying statement of net assets of IL Annuity and
Insurance Co. Separate Account 1 (the Account) as of December 31, 1995, and the
related statements of operations and changes in net assets for the year then
ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IL Annuity and Insurance Co.
Separate Account 1 at December 31, 1995, the results of its operations and
changes in its net assets for the year then ended in conformity with generally
accepted accounting principles.

/s/ ERNST & YOUNG LLP

April 9, 1996

1
<PAGE> 103

IL Annuity and Insurance Co. Separate Account 1

Statement of Net Assets

December 31, 1995

<TABLE>
<CAPTION>
VALUE IN
ACCUMULATION UNITS IN
PERCENT OF PERIOD AND ACCUMULATION UNIT
NET ASSETS NET ASSETS PERIOD VALUE
-------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments at net asset value:
Alger American Fund:
Alger American Midcap Growth Fund--1,391.586
shares at $19.44 per share (cost--$26,716) 9.4% $ 27,052 2,764 $ 9.786
Alger Small Capitalization Fund--419.469 shares at
$39.41 per share (cost--$16,297) 5.8 16,531 1,709 9.675

Fidelity Variable Insurance Products Fund and Fund II:
Fidelity Asset Manager Fund--132.658 shares at
$15.79 per share (cost--$2,026) 0.7 2,095 255 8.224
Fidelity Contra Fund--4,196.803 shares at $13.78 per
share (cost--$57,463) 20.1 57,832 5,731 10.091
Fidelity Equity Income Fund--2,087.494 shares at
$19.27 per share (cost--$40,017) 14.0 40,226 3,789 10.616
Fidelity Growth Fund--723.135 shares at $29.20 per
share (cost--$20,983) 7.3 21,116 2,199 9.604
Fidelity Index 500 Fund--491.347 shares at $75.71 per
share (cost--$37,081) 13.0 37,200 3,538 10.514
Fidelity Investment Grade Bond Fund--1,369.377
shares at $12.48 per share (cost--$17,049) 6.0 17,090 1,668 10.247

Quest for Value Accumulation Trust:
Quest Managed Fund--55.472 shares at $30.14 per
share (cost--$1,641) 0.6 1,672 161 10.380
Quest Small Capitalization Fund--616.496 shares at
$19.91 per share (cost--$12,157) 4.3 12,274 1,182 10.388

T. Rowe Price International Series, Inc.:
T. Rowe Price International Stock Fund--2,341.482
shares at $11.33 per share (cost--$26,272) 9.2 26,529 2,530 10.487

T. Rowe Price Fixed Income Series, Inc.:
T. Rowe Price Limited-term Bond Fund--2,953.6
shares at $5.05 per share (cost--$14,915) 5.2 14,916 1,485 10.042

Van Eck Investment Trust:
Van Eck Gold and Natural Resources Fund--42.41
shares at $14.42 per share (cost--$613) 0.2 612 58 10.621
Van Eck Worldwide Balanced Fund--1,203.866 shares
at $9.99 per share (cost--$12,015) 4.2 12,026 1,201 10.010
---------------------------
Total investments and net assets (cost--$285,245) 100.0% $287,171
===========================
</TABLE>

See accompanying notes.

2
<PAGE> 104

IL Annuity and Insurance Co. Separate Account 1

Statement of Operations

Year ended December 31, 1995

<TABLE>
<CAPTION>
ALGER FIDELITY
AMERICAN ALGER SMALL ASSET FIDELITY FIDELITY FIDELITY
MIDCAP GROWTH CAPITALIZATION MANAGER CONTRA EQUITY GROWTH
COMBINED FUND FUND FUND FUND INCOME FUND FUND
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend income $ 9 $ - $ - $ - $ 9 $ - $ -
Mortality and expense
charges (8) (3) (1) - - - -
Net realized gain on
investments 18 - - - 18 - -
Net change in unrealized
appreciation on investments 1,926 336 234 69 369 209 133
------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations $1,945 $333 $233 $ 69 $ 396 $ 209 $ 133
================================================================================================
</TABLE>

3
<PAGE> 105

IL Annuity and Insurance Co. Separate Account 1

Statement of Operations (continued)

<TABLE>
<CAPTION>
FIDELITY T. ROWE PRICE
FIDELITY INDEX INVESTMENT GRADE QUEST MANAGED QUEST SMALL INTERNATIONAL
500 FUND BOND FUND FUND CAPITALIZATION FUND STOCK FUND
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dividend income $ - $ - $ - $ - $ -
Mortality and expense charges - - (1) (1) -
Net realized gain on investments - - - - -
Net change in unrealized
appreciation (depreciation)
on investments 119 41 31 117 257
-------------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations $ 119 $ 41 $ 30 $ 116 $257
=====================================================================================
</TABLE>

See accompanying notes.

4
<PAGE> 106

IL Annuity and Insurance Co. Separate Account 1

Statements of Changes in Net Assets

Year ended December 31, 1995

<TABLE>
<CAPTION>
ALGER AMERICAN ALGER SMALL
MIDCAP GROWTH CAPITALIZATION FIDELITY ASSET FIDELITY CONTRA
COMBINED FUND FUND MANAGER FUND FUND
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Changes from operations:
Dividend income $ 9 $ - $ - $ - $ 9
Mortality and expense charges (8) (3) (1) - -
Net realized gain on investments 18 - - - 18
Net change in unrealized
appreciation (depreciation) on
investments 1,926 336 234 69 369
---------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,945 333 233 69 396
Net increase from contract purchases 285,226 26,719 16,298 2,026 57,435
---------------------------------------------------------------------------------
Total increase (decrease) in net assets 287,171 27,052 16,531 2,095 57,831
---------------------------------------------------------------------------------
Net assets at December 31, 1995 $287,171 $27,052 $16,531 $2,095 $57,831
=================================================================================
</TABLE>

<TABLE>
<CAPTION>
FIDELITY EQUITY FIDELITY
INCOME FUND GROWTH FUND
------------------------------
<S> <C> <C>
Changes from operations:
Dividend income $ - $ -
Mortality and expense charges - -
Net realized gain on investments - -
Net change in unrealized
appreciation (depreciation) on
investments 209 133
------------------------------
Net increase (decrease) in net assets
resulting from operations 209 133
Net increase from contract purchases 40,017 20,983
------------------------------
Total increase (decrease) in net assets 40,226 21,116
------------------------------
Net assets at December 31, 1995 $40,226 $21,116
==============================
</TABLE>

See accompanying notes.

5
<PAGE> 107

IL Annuity and Insurance Co. Separate Account 1

Statements of Changes in Net Assets (continued)

<TABLE>
<CAPTION>
FIDELITY QUEST SMALL T. ROWE PRICE
FIDELITY INDEX INVESTMENT GRADE QUEST MANAGED CAPITALIZATION INTERNATIONAL
500 FUND BOND FUND FUND FUND STOCK FUND
-----------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
Changes from operations:
Dividend income $ - $ - $ - $ - $ -
Mortality and expense charges - - (1) (1) -
Net realized gain on investments - - - - -
Net change in unrealized
appreciation (depreciation) on
investments 119 41 31 117 257
-----------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 119 41 30 116 257
Net increase from contract purchases 37,081 17,049 1,642 12,158 26,272
-----------------------------------------------------------------------------------
Total increase (decrease) in net assets 37,200 17,090 1,672 12,274 26,529
-----------------------------------------------------------------------------------
Net assets at December 31, 1995 $37,200 $17,090 $1,672 $12,274 $26,529
===================================================================================
</TABLE>

<TABLE>
<CAPTION>
T. ROWE PRICE VAN ECK GOLD AND VAN ECK
LIMITED-TERM NATURAL WORLDWIDE
BOND FUND RESOURCES FUND BALANCED FUND
----------------------------------------------------
<S> <C> <C> <C>
Changes from operations:
Dividend income $ - $ - $ -
Mortality and expense charges - - (2)
Net realized gain on investments - - -
Net change in unrealized
appreciation (depreciation) on
investments 1 (1) 11
----------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1 (1) 9
Net increase from contract purchases 14,915 613 12,018
----------------------------------------------------
Total increase (decrease) in net assets 14,916 612 12,027
----------------------------------------------------
Net assets at December 31, 1995 $ 14,916 $ 612 $12,027
====================================================
</TABLE>

See accompanying notes.

6
<PAGE> 108

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements

December 31, 1995

1. ACCOUNTING POLICIES

THE ACCOUNT

IL Annuity and Insurance Co. Separate Account 1 (the Account) is a segregated
investment account of the IL Annuity and Insurance Company (the Company) and is
registered under the Investment Company Act of 1940, as amended, as a unit
investment trust. The Account was established under Massachusetts law on
November 1, 1994 and commenced operations in November, 1995.

INVESTMENTS

The Account invests in the following Funds:

Alger American Fund--Midcap Growth Fund, Small Capitalization Fund

Fidelity Variable Insurance Products Fund and Fund II--Asset Manager Fund,
Contra Fund, Equity Income Fund, Growth Fund, Index 500 Fund, Investment
Grade Bond Fund

Quest for Value Accumulation Trust--Managed Fund, Small Capitalization Fund

T. Rowe Price International Series, Inc.--International Stock Fund

T. Rowe Price Fixed Income Series, Inc.--Limited-term Bond Fund

Van Eck Investment Trust--Gold and Natural Resources Fund, Worldwide
Balanced Fund

Investments in Funds are stated at the closing net asset value per share on
December 31, 1995.

Investment transactions are accounted for on a trade date basis and the cost of
investments sold is determined by the average cost method.

DIVIDENDS

Dividends paid to the Account are automatically reinvested in shares of the
Funds on the payable date.

7
<PAGE> 109

IL Annuity and Insurance Co. Separate Account 1

Notes to Financial Statements (continued)

1. ACCOUNTING POLICIES (CONTINUED)

FEDERAL INCOME TAXES

Operations of the Account form a part of, and are taxed with, operations of the
Company, which is taxed as a "life insurance company" as defined by the
Internal Revenue Code. Using current law, no federal income taxes are payable
with respect to the Account's net investment income and the net realized gain
on investments.

2. MORTALITY AND EXPENSE GUARANTEES AND OTHER TRANSACTIONS WITH AFFILIATE

Amounts are paid to the Company for mortality and expense guarantees at the
rate of 0.003404% of the current value of the Account per day (1.25% on an
annual basis). The Account also pays the Company for other expenses such as
contract fees ($7.50 per contract at the end of each quarter), and asset-based
administration and investment advisory fees (.15% on an annual basis).

Accordingly, the Company is responsible for all sales, general and
administrative expenses applicable to the Account.

3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of investments purchased and sold were as follows:

<TABLE>
<CAPTION>
AGGREGATE COST OF
PURCHASES SALES
--------------------------
<S> <C> <C>
Alger American Midcap Growth Fund $ 28,694 $ 1,978
Alger Small Capitalization Fund 16,298 1
Fidelity Asset Manager Fund 4,030 2,004
Fidelity Contra Fund 59,468 2,005
Fidelity Equity Income Fund 40,017 -
Fidelity Growth Fund 22,984 2,001
Fidelity Index 500 Fund 37,081 -
Fidelity Investment Grade Bond Fund 17,049 -
Quest Managed Fund 1,641 -
Quest Small Capitalization Fund 14,181 2,024
T. Rowe Price International Stock Fund 26,272 -
T. Rowe Price Limited-term Bond Fund 14,915 -
Van Eck Gold and Natural Resources Fund 613 -
Van Eck Worldwide Balanced Fund 13,018 1,003
--------------------------
$296,261 $11,016
==========================
</TABLE>

8
<PAGE> 110

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

All required financial statements are included in Part B of
this Registration Statement.

(b) Exhibits

(1) Certified resolution of the Board of Directors of IL
Annuity and Insurance Company (the "Company")
authorizing establishment of IL Annuity and Insurance
Co. Separate Account 1 (the "Separate Account").1/

(2) Not applicable.

(3) (a) Form of Distribution Agreement among the
Company, the Separate Account and IL
Securities, Inc. ("IL Securities").2/

(b) Form of Sales Agreement among the Company,
IL Securities, Inc. and a broker-dealer.2/

(4) (a) (i) Form of Contract for the Visionary
Flexible Premium Deferred Variable
Annuity.2/

(ii) Form of Contract for the Visionary
Choice Flexible Premium Deferred
Variable Annuity.4/

(b) Form of Qualified Plan Endorsement, IRA
Endorsement, Endorsement for Qualified 403(b)
Annuity, Unisex Rider, Additional Waiver of
Withdrawal Charge Rider - Hospitalization,
Additional Waiver of Withdrawal Charge Rider
- Terminal Illness, Additional Waiver of
Withdrawal Charge Rider - Long Term Care,
Additional Waiver of Withdrawal Charge Rider
- Post Secondary Education.1/

(5) (a) Form of Application for the Visionary
Flexible Premium Deferred Variable Annuity.2/

(b) Form of Application for the Visionary Choice
Flexible Premium Deferred Variable Annuity.4/

(6) (a) Articles of Incorporation of IL Annuity and
Insurance Company.1/

(b) By-Laws of IL Annuity and Insurance
Company.1/

(7) Not Applicable.

C-1
<PAGE> 111
(8) (a) Form of Participation Agreement between
Fidelity Variable Insurance Products Fund and
IL Annuity and Insurance Company.2/

(b) Form of Participation Agreement between
Fidelity Variable Insurance Products Fund II
and IL Annuity and Insurance Company.2/

(d) Form of Participation Agreement between T.
Rowe Price International Series, Inc. and IL
Annuity and Insurance Company.2/

(e) Form of Participation Agreement between T.
Rowe Price Fixed Income Series, Inc. and IL
Annuity and Insurance Company.2/

(f) Form of Participation Agreement between Quest
for Value Accumulation Trust and IL Annuity
and Insurance Company.2/

(g) Form of Participation Agreement between The
Alger American Fund and IL Annuity and
Insurance Company.2/

(h) Form of Services Agreement between Financial
Administration Services, Inc. and IL Annuity
and Insurance Company.2/

(9) Opinion and Consent of Margaret M. McKinney,
Esquire.1/

(10) (a) Consent of Sutherland, Asbill & Brennan,
L.L.P.4/

(b) Consent of Ernst & Young LLP.4/

(11) No financial statements will be omitted from Item 23.

(12) Not applicable.

(13) Not applicable.

(14) Not applicable.

(15) Powers of Attorney.1/ 3/

- ------------------------
1/ Incorporated by reference to the like-numbered exhibit to the
initial filing of this Form N-4 Registration Statement of IL Annuity and
Insurance Co. Separate Account 1, File No. 33-89028 (January 31, 1995).

C-2
<PAGE> 112
2/ Incorporated by reference to the like-numbered exhibit to
Pre-Effective Amendment No. 1 to this Form N-4 Registration Statement of IL
Annuity and Insurance Co. Separate Account 1, File No. 33-89028 (August 29,
1995).

3/ Incorporated by reference to the like-numbered exhibit to
Post-Effective Amendment No. 1 to this Form N-4 Registration Statement of IL
Annuity and Insurance Co. Separate Account 1, File No. 33-89028 (April 26,
1996).

4/ Filed herewith.

ITEM 25. DIRECTORS AND OFFICERS OF IL ANNUITY AND INSURANCE COMPANY

<TABLE>
<CAPTION>
Name and Principal Business Address* Position and Office with Depositor
- ------------------------------------ ----------------------------------

<S> <C>
Larry R. Prible Chairman of the Board and Director
Gregory J. Carney President, Chief Executive Officer and
Director
Margaret M. McKinney Secretary and Director
William L. Boyd Director
John J. Fahrenbach Director
Garrett P. Ryan Director
Gene E. Trueblood Treasurer
Rebecca Rissen Assistant Secretary
</TABLE>

- -----------
* Unless otherwise indicated, the principal business address is 2960 North
Meridian Street, Indianapolis, Indiana 46208.

C-3
<PAGE> 113
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
DEPOSITOR OR REGISTRANT
<TABLE>
<CAPTION>
Percent of Voting
Name Jurisdiction Securities Owned Principal Business
- ---- ------------ ------------------ ------------------

<S> <C> <C> <C>
Indianapolis Life Indiana Mutual Company Life & Health Insurance
Insurance Company*
("Indianapolis Life")

The Indianapolis Life Group Indiana All voting securities Holding Company
of Companies, Inc. owned by Indianapolis
("The Indianapolis Group") Life

IL Securities, Inc.* Indiana All voting securities Broker/Dealer
owned by The
Indianapolis Group

IL Term Insurance Company* Indiana All voting securities Life & Health Insurance
owned by The
Indianapolis Group

Bankers Life Insurance New York All voting securities Life & Health Insurance
Company of New York* owned by The
Indianapolis Group

Western Security Life Arizona All voting securities Life & Health Insurance
Insurance Company* owned by Indianapolis
Life
</TABLE>
- ----------
* File Separate Financial Statements.

ITEM 27. NUMBER OF CONTRACTOWNERS

As of August 1, 1996, there were a total of 264 Visionary
Contracts in force -- 116 non-qualified and 148 qualified. No Visionary Choice
Contracts have been sold.

ITEM 28. INDEMNIFICATION

The By-Laws of IL Annuity and Insurance Company provide, in
Article X, as follows:

ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS

Any director or officer or his legal representative shall be
indemnified by the Company against reasonable expenses
including the cost of any settlement and counsel fees paid or
incurred in connection with any action, suit or proceeding to
which any such director or officer or his legal representative
may be made a party by reason of his being or having been such
director or officer, provided it shall not be determined

C-4
<PAGE> 114
by a final determination thereof on the merits that such
director or officer was in any substantial way derelict in the
performance of his duties, or provided that such action, suit
or proceeding shall be settled without a final determination
on the merits and it shall be determined that such officer or
director had not in any substantial way been derelict in the
performance of his duties as charged therein, such
determination to be made by a majority of the members of the
Board of Directors who were not parties to such action, suit
or proceedings, though less than a quorum, or by any one or
more disinterested persons to whom the question may be
referred by the Board of Directors. The foregoing right of
indemnification shall not be exclusive of any other rights to
which any director or officer may be entitled as a matter of
law or which may be lawfully granted to him.

Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

ITEM 29. PRINCIPAL UNDERWRITER

(a) IL Securities, Inc. is the registrant's principal underwriter.

(b) Officers and Directors of IL Securities, and their addresses,
are as follows:

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* With the Underwriter with Registrant
- ------------------ --------------------- ---------------

<S> <C> <C>
Larry R. Prible Chairman of the Board Chairman of the Board
Gregory J. Carney President, Chief Executive President, Chief Executive
Officer and Director Officer and Director
Margaret M. McKinney Secretary and Director Secretary and Director
William L. Boyd Director Director
John J. Fahrenbach Director Director
Garrett P. Ryan Director Director
Joe C. Lowe Vice-President None
Gene E. Trueblood Treasurer Treasurer
</TABLE>
- ------------
* All of the persons listed above have as their principal business address:
P.O. Box 1230, 2960 North Meridian Street, Indianapolis, Indiana 46208.

C-5
<PAGE> 115
(c)

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ----------- ----------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
IL Securities, Inc. 0 0 0 $2,900.68
</TABLE>

Commissions are paid by the Company directly to agents who are registered
representatives of the principal underwriter, or to broker-dealers that have
entered into a selling agreement with the principal underwriter, or
broker-dealers having selling agreements with such broker-dealers with respect
to the sales of the Visionary Contracts.

ITEM 30. LOCATION OF BOOKS AND RECORDS

All of the accounts, books, records or other documents
required to be kept by Section 31(a) of the Investment Company Act of 1940 and
rules thereunder, are maintained by IL Annuity and Insurance Company at its
home office and by _________________________, Administrator, at
___________________________________.

ITEM 31. MANAGEMENT SERVICES

All management contracts are discussed in Part A or Part B of
this registration statement.

ITEM 32. UNDERTAKINGS AND REPRESENTATIONS

(a) The registrant undertakes that it will file a
post-effective amendment to this registration
statement as frequently as is necessary to ensure
that the audited financial statements in the
registration statement are never more than 16 months
old for as long as purchase payments under the
contracts offered herein are being accepted.

(b) The registrant undertakes that it will include either
(1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant
can check to request a statement of additional
information, or (2) a post card or similar written
communication affixed to or included in the
prospectus that the applicant can remove and send to
IL Annuity and Insurance Company for a statement of
additional information.

(c) The registrant undertakes to deliver any statement of
additional information and any financial statements
required to be made available under this Form N-4
promptly upon written or oral request to the Company
at the address or phone number listed in the
prospectus.

C-6
<PAGE> 116
(d) The Company represents that in connection with its
offering of the contracts as funding vehicles for
retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code of 1986, it is
relying on a no-action letter dated November 28,
1988, to the American Council of Life Insurance (Ref.
No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter
will be complied with.

C-7
<PAGE> 117
As required by the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, IL Annuity and Insurance Co. Separate
Account 1, has caused this Post-Effective Amendment No. 2 to its registration
statement to be signed on its behalf, in the City of Indianapolis, and the
State of Indiana, on this 15th day of October, 1996.

IL ANNUITY AND INSURANCE CO.
SEPARATE ACCOUNT 1 (Registrant)

Attest: /s/ Margaret M. McKinney By: /s/ Gregory J. Carney
------------------------ ---------------------
Margaret M. McKinney Gregory J. Carney
President

By: IL ANNUITY AND INSURANCE
COMPANY (Depositor)

Attest: /s/ Margaret M. McKinney By: /s/ Gregory J. Carney
------------------------ ---------------------
Margaret M. McKinney Gregory J. Carney
President

As required by the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C>
* Chairman of the Board and October 17, 1996
- --------------------------- Director
Larry R. Prible

* President, Chief Executive October 17, 1996
- --------------------------- Officer and Director
Gregory J. Carney

* Treasurer October 17, 1996
- --------------------------- (Principal Financial Officer)
Gene E. Trueblood

* Controller October 17, 1996
- --------------------------- (Chief Accounting Officer)
Richard G. Darragh

* Secretary and Director October 17, 1996
- ---------------------------
Margaret M. McKinney
</TABLE>
<PAGE> 118
<TABLE>
<S> <C>
* Director October 17, 1996
- ---------------------------
William L. Boyd

* Director October 17, 1996
- ---------------------------
John J. Fahrenbach

* Director October 17, 1996
- ---------------------------
Garrett P. Ryan

/s/ Margaret M. McKinney On October 17, 1996, as Attorney-in-Fact pursuant
- -------------------------- to powers of attorney previously filed and filed herewith,
* By Margaret M. McKinney and in her own capacity as Secretary and Director.
</TABLE>
<PAGE> 119
EXHIBIT INDEX

(4) (a) (ii) Form of Contract for the Visionary
Choice Flexible Premium Deferred
Variable Annuity.

(5) (b) Form of Application for the Visionary Choice
Flexible Premium Deferred Variable Annuity.

(10) (a) Consent of Sutherland, Asbill & Brennan,
L.L.P.

(b) Consent of Ernst & Young LLP.

<PAGE> 1
EXHIBIT 4(a)(ii)

IL ANNUITY A Member of the
AND INSURANCE COMPANY Indianapolis Life
Group of Companies

2960 North Meridian Street - Indianapolis, Indiana 46208

THE VISIONARY CHOICE VARIABLE ANNUITY

READ YOUR CONTRACT CAREFULLY

RIGHT TO EXAMINE YOUR CONTRACT. You may return this Contract to Us for any
reason within 10 days after You receive it (20 days if this Contract is
replacing another annuity contract or insurance policy). You may return the
Contract by mailing it to Us at the address of the Service Center shown on page
4. Your Written Request for cancellation must accompany the Contract. We will
refund to You an amount equal to the sum of: (i) the difference between the
Premium Payments paid and the amounts allocated to the Variable Accounts and
the Fixed Account under the Contract; and (ii) the Contract Value as of the
date the Contract and the Written Request for cancellation are received at the
Service Center. We reserve the right to allocate Your Premium Payments to the
Money Market Variable Account for 15 calendar days from the date Your initial
Premium Payment is credited to the Contract.

THIS CONTRACT allows You to choose one of two Withdrawal Charge options at the
time You complete Your application. You also choose, at no additional charge,
either an enhanced death benefit option or a maturity benefit option. And, if
Your initial Premium Payment is $100,000 or more, You may choose one of two
free withdrawal options on Your application. ONCE YOU CHOOSE YOUR OPTION, YOU
MAY NOT CHANGE IT.

THIS CONTRACT is a legal contract between the Owner and the IL Annuity and
Insurance Company. WE AGREE to provide the benefits and rights set out on this
page and the pages that follow which are part of the Contract. They are
provided as consideration for the application and the payment of premium for
the Contract.

THE CONTRACT, the attached application, and any amendments, riders or
endorsements make up the entire contract. The Contract does not take effect
until We have received the initial Premium Payment.

ACCOUNT VALUES AND ANNUITY PAYMENTS TO YOU, WHEN BASED ON INVESTMENT RESULTS OF
THE SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO A FIXED DOLLAR
AMOUNT. THE VARIABLE PROVISIONS ARE DESCRIBED IN SECTION 6.

Signed for Us on the Date of Issue at the Home Office of the Company at 2960
North Meridian Street, Indianapolis, Indiana 46208

/s/ Margaret M. McKinney /s/ Gregory J. Carney
------------------------ -----------------------
Secretary President
<PAGE> 2
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
FLEXIBLE PREMIUM
INCOME PAYABLE AT MATURITY
DEATH BENEFIT PAYABLE IN THE EVENT OF THE ANNUITANT'S DEATH PRIOR TO MATURITY

- 2 -
<PAGE> 3
SECTION 1 - GUIDE TO CONTRACT PROVISIONS

<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1 GUIDE TO CONTRACT PROVISIONS
2 CONTRACT SPECIFICATIONS
3 DEFINITIONS
4 PREMIUM PAYMENTS
5 CONTRACT VALUE
6 SEPARATE ACCOUNT PROVISIONS
7 WITHDRAWAL PROVISIONS
8 OWNERSHIP PROVISIONS
9 DEATH BENEFITS PROVISIONS
10 PAYOUT PLAN PROVISIONS
11 MATURITY BENEFIT PROVISIONS
12 GENERAL PROVISIONS
13 TABLES
</TABLE>
The Application and Any Additional Forms Will Follow Section 13

- 3 -
<PAGE> 4
SECTION 2 - SPECIFICATIONS
<TABLE>
<S> <C> <C> <C>
CONTRACT NUMBER [VA00001] [William P. Ryker] ANNUITANT

DATE OF ISSUE [May 31, 1995] [June 1, 2020] COMMENCEMENT DATE
AGE AT ISSUE [40]
</TABLE>

<TABLE>
<S> <C>
INITIAL PREMIUM
PAYMENT: [$10,000]
PREMIUM PAYMENTS MAY BE CONTINUED TO THE
ANNUITY START DATE

PREMIUM TAX CHARGE [state variable]%

CONTRACT FEE $7.50 PER CONTRACT QUARTER

MORTALITY AND 1.25% PER ANNUM OF THE AVERAGE DAILY VARIABLE ACCOUNT VALUE
EXPENSE RISK CHARGE
.15% PER ANNUM OF THE AVERAGE DAILY VARIABLE ACCOUNT VALUE
ADMINISTRATIVE
CHARGE FIRST 12 REQUESTS PER CONTRACT YEAR - $0
13 OR MORE PER CONTRACT YEAR - $25.00 EACH TRANSFER
VARIABLE ACCOUNT
TRANSFER FEE
FIXED ACCOUNT MINIMUM INTEREST RATE 3.0%

WITHDRAWAL CHARGE [LIST OPTION]
IF YOU WITHDRAW ALL OR PART OF THE CONTRACT
VALUE, WITHDRAWAL CHARGES MAY APPLY. SEE PAGE __.
FREE WITHDRAWAL [APPLIES ONLY IF INITIAL PREMIUM PAYMENT IS $100,000
OPTION OR MORE]
[LIST 50% CUMULATIVE OR EARNINGS OPTION]

SERVICE CENTER IL ANNUITY AND INSURANCE COMPANY
SERVICE OFFICE
[ADDRESS]
1-800-XXX-XXXX
====================================================================================================================================
</TABLE>

List Maturity Benefit or Enhanced Death Benefit Option.

- 4 -
<PAGE> 5
<TABLE>
<S> <C>
PREMIUM ALLOCATIONS THE INITIAL PREMIUM PAYMENT WILL BE ALLOCATED AS SPECIFIED IN YOUR APPLICATION. THE SAME
ALLOCATIONS WILL BE MADE FOR EACH SUBSEQUENT PAYMENT UNLESS YOU CHANGE THE ALLOCATIONS BY WRITTEN
REQUEST OR, AT THE TIME OF A PREMIUM PAYMENT, YOU INSTRUCT US TO ALLOCATE THAT PAYMENT
DIFFERENTLY.

SEPARATE ACCOUNT IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I

VARIABLE ACCOUNT OPTIONS PORTFOLIO FUND IN WHICH VARIABLE ACCOUNT INVESTS:
- ------------------------ -------------------------------------------------
ASSET MANAGER* FIDELITY ASSET MANAGER
CONTRAFUND* FIDELITY CONTRAFUND PORTFOLIO
EQUITY INCOME* FIDELITY EQUITY INCOME FUND
GOLD AND NATURAL RESOURCE VAN ECK GOLD AND NATURAL RESOURCE FUND
GROWTH* FIDELITY GROWTH FUND
INDEX 500* FIDELITY INDEX 500 FUND
INTERNATIONAL STOCK* T. ROWE PRICE INTERNATIONAL STOCK FUND
INVESTMENT GRADE BOND* FIDELITY INVESTMENT GRADE BOND FUND
LIMITED TERM BOND* T. ROWE PRICE LIMITED TERM BOND FUND
MANAGED* OCC ACCUMULATION TRUST MANAGED PORTFOLIO
MIDCAP GROWTH* ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
MONEY MARKET* FIDELITY MONEY MARKET FUND
SMALL CAPITALIZATION* ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SMALL CAP* OCC ACCUMULATION TRUST SMALL CAP PORTFOLIO
WORLDWIDE BALANCED* VAN ECK WORLDWIDE BALANCED FUND
</TABLE>

*ELIGIBLE VARIABLE ACCOUNTS. IF YOU ELECT THE MATURITY BENEFIT OPTION, AND IF
THE CONTRACT IS IN THE PAY-IN PERIOD ON THE MATURITY BENEFIT DATE, WE WILL
CALCULATE THE MATURITY BENEFIT FOR EACH ELIGIBLE VARIABLE ACCOUNT IN WHICH YOU
HAVE VALUE ON THE MATURITY BENEFIT DATE. SEE PAGE __, ("MATURITY BENEFIT").

- 5 -
<PAGE> 6
SECTION 3 - DEFINITIONS

ACCOUNT - Any of the Variable Accounts or the Fixed Account.

ACCUMULATION UNIT - An accounting measure We use to calculate the value of a
Variable Account before annuity payments begin.

AGE - Age on last birthday unless otherwise specified.

ANNUITANT - You are the Annuitant, unless You state otherwise in Your
application. The Annuitant is the person or persons whose life (or lives)
determines the dollar amount of the annuity payments that will be paid under
the Contract. If the Annuitant dies before the Annuity Start Date, We will pay
a death benefit. The maximum number of joint Annuitants is two. Provisions
referring to the death of an Annuitant mean the death of the last surviving
Annuitant. The Annuitant named in the application may not be changed.

ANNUITY START DATE - The date when the Annuitant will begin to receive annuity
payments. (You are the Annuitant, unless You tell Us otherwise at the time of
Your application.) If You own a Non-Qualified Contract, We will ask You to
select an Annuity Start Date. If You do not select a date, the Annuity Start
Date is either the Annuitant's age 70 or 10 years after the Date of Issue,
whichever is later. If You own a Qualified Contract, the Annuity Start Date is
fixed at the Annuitant's age 70 1/2.

ANNUITY UNIT - An accounting unit of measure We use to calculate the amount of
annuity payments under a variable annuity option.

BENEFICIARY - The person(s) You name to receive the death benefit if the Owner
or Annuitant dies before the Annuity Start Date.

BUSINESS DAY - Each day on which the New York Stock Exchange is open for
business, except for the holidays listed in this prospectus under "Holidays"
and except for any day on which the Portfolio in which a Variable Account
invests does not value its shares.

CONTRACT FEE - During the Pay-in Period, We will deduct this charge from Your
Contract Value at the end of each contract quarter and on the date You fully
withdraw all value from the Contract. We use the Contract Fee to cover Our
cost of providing certain administrative services related to the Contracts and
the Separate Account.

CONTRACT PERIODS AND ANNIVERSARIES - Contract Years, contract months and
contract quarters are measured from the Date of Issue. Each contract month
begins on the same day in each calendar month as the Date of Issue. If the end
of a premium period or a Contract Year is indicated by an age, it ends on the
Contract Anniversary immediately following the birthday on which the Annuitant
reaches that age.

- 6 -
<PAGE> 7
CONTRACT VALUE - The total amount You have accumulated under the Contract. It
is the sum of the Separate Account Value and the Fixed Account Value.

CONTRACT YEAR - A twelve-month period beginning on the Date of Issue or on a
Contract Anniversary. The first Contract Year begins on the Date of Issue.

DATE OF ISSUE - The date (shown in Section 2 - Contract Specifications) on
which We issue the Contract. It is the date on which the first Contract Year
begins.

DEATH BENEFIT ANNIVERSARY - Every third Contract Anniversary beginning on the
Date of Issue.

DOLLAR COST AVERAGING - Owner-initiated systematic transfers from one or more
Variable Accounts to any other available Variable Account.

ELIGIBLE PREMIUM PAYMENT - That part of a Premium Payment that You initially
allocated to a particular Eligible Variable Account at the time of payment,
provided You made the payment at least ten (10) years prior to the Maturity
Benefit Date.

ELIGIBLE VARIABLE ACCOUNT - Currently all Variable Accounts except the Van Eck
Gold and Natural Resources Variable Account. (See "Maturity Benefit.")

ENHANCED DEATH BENEFIT - If You elect the three-year stepped-up Enhanced
Death Benefit option at the time of purchase, the Enhanced Death Benefit will
equal the greater of: (a) the Contract Value as of the date We receive due
proof of the deceased's death and payment instructions; or (b) the highest
Contract Value on any Death Benefit Anniversary preceding the date the death
benefit is determined, plus any Premium Payments and minus any withdrawals and
charges incurred between such Death Benefit Anniversary and the date the death
benefit is determined.

FIXED ACCOUNT - Part of the Company's General Account to which all or a portion
of the Contract Value may be allocated.

FIXED ACCOUNT CURRENT RATE - The applicable interest rate contained in a
schedule of rates established by the Company from time to time.

FIXED ACCOUNT VALUE - The value of the Contract in the Fixed Account prior to
the Annuity Start Date.

FREE WITHDRAWAL AMOUNT - The amount of Contract Value that can be withdrawn in
any Contract Year without a Withdrawal Charge.

FUND - Each of (i) The Alger American Fund; (ii) Fidelity VIP Fund; (iii)
Fidelity VIP Fund II; (iv) OCC Accumulation Trust; (v) T. Rowe Price Fixed
Income Series, Inc.; (vi) T. Rowe Price International Series, Inc.; and (vii)
Van Eck Worldwide Insurance Trust. Each Variable Account

- 7 -
<PAGE> 8
invests in a separate investment portfolio ("Portfolio") of a Fund. Each Fund
is either an open-end management investment company or a unit investment trust.

GENERAL ACCOUNT - All assets of the Company other than those allocated to
separate accounts.

MATURITY BENEFIT - If You elect the Maturity Benefit option at the time of
purchase and if the Contract is in the Pay-in Period on the Maturity Benefit
Date, the Maturity Benefit for an Eligible Variable Account is equal to: (a)
the sum of the Eligible Premium Payments for that particular Eligible Variable
Account; MINUS (b) a percentage of any transfer or withdrawal from that
Eligible Variable Account; and MINUS (c) the value of that Eligible Variable
Account on the Maturity Benefit Date. (See "Maturity Benefit.")

MATURITY BENEFIT DATE - The later of the Annuitant's age 70 or 10 years after
the Date of Issue. If the Contract is owned by Joint Owners who are spouses at
the time one Joint Owner dies, the Maturity Benefit Date will become the date
the surviving spouse attains age 70.

NET PREMIUM PAYMENT - The Premium Payment minus any applicable premium tax.

OWNER ("YOU") - The person(s) who own(s) the Contract. "JOINT OWNERS" are two
natural persons who own the Contract equally with the right of survivorship.

PAYEE - The person(s) who receive annuity payments. The "SUCCESSOR PAYEE"
receives any guaranteed annuity payments after the death of the Payee.

PAY-IN PERIOD - The period of time that begins when Your Contract is issued
and continues until the date You begin to receive annuity payments on the
Annuity Start Date. The Pay-in Period will also end if You fully withdraw Your
Contract before the Annuity Start Date.

PAYOUT PLAN - An arrangement under which annuity payments are made under this
Contract.

PORTFOLIO - The separate investment portfolios of the Funds. The Portfolios
currently offered through the Contract are listed on page ___ of this Contract.

PREMIUM PAYMENT YEAR - The twelve-month period beginning on the date We
receive any Premium Payment. It is used to calculate the Withdrawal Charge if
You choose the Date of Premium Payment Withdrawal Charge Option.

PREMIUM TAX - The amount of tax, if any, charged by a federal, state or
municipal entity on Premium Payments or Contract Values.

QUALIFIED CONTRACT - A Contract that is issued in connection with retirement
plans that qualify for special federal income tax treatment under Sections 401,
403(b), or 408 of the Internal Revenue Code.

- 8 -
<PAGE> 9
SEC - The U.S. Securities and Exchange Commission.

SEPARATE ACCOUNT - IL Annuity and Insurance Co. Separate Account 1. It is not
part of Our General Account. The Separate Account is divided into Variable
Accounts, each of which invests solely in shares of a Portfolio of a Fund.

SEPARATE ACCOUNT VALUE - The value of the Contract in the Separate Account
prior to the Annuity Start Date.

SERVICE OFFICE - The office which provides service for the Contract. The
mailing address is __________________________. If the address changes We will
notify You.

SURRENDER VALUE - The Contract Value MINUS (1) any applicable Withdrawal
Charges; MINUS (2) any premium taxes not previously deducted; and MINUS (3) the
Contract Fee.

VARIABLE ACCOUNT - A subdivision of the Separate Account. A Variable Account
invests solely in the shares of a designated Portfolio of a Fund.

WE, US, OUR AND COMPANY - IL Annuity and Insurance Company.

WRITTEN REQUEST - A Written Request or Notice in a form satisfactory to the
Company which is signed by the Owner and received at the Service Office.

YOU, YOUR - The Owner or Joint Owners.

- 9 -
<PAGE> 10
SECTION 4 - PREMIUM PAYMENTS

PREMIUM PAYMENTS

The initial Premium Payment is payable on or before delivery of this Contract.
Any Premium Payments after the initial Premium Payment are payable at Our
Service Office. All Premium Payments are payable in U.S. Dollars. The initial
Premium Payment is shown on Page __. The minimum Premium Payment is $1,000.
We retain the right not to accept additional Premium Payments in any one year
which exceed two times the initial Premium Payment and not to accept total
Premium Payments in excess of $250,000.

You may continue Premium Payments until the earliest of:

(a) the Annuity Start Date;
(b) full withdrawal of Contract Value; or
(c) the date You reach age 85 (age 70 1/2 if this is a Qualified
Contract).

ALLOCATION OF PREMIUM PAYMENTS

This Contract allows You to allocate Net Premium Payments to any Variable
Account of the Separate Account and the Fixed Account subject to any minimum
allocation amounts established by the Company. If allocations are made in
percentages, whole percentages must be used. The initial Premium Payment will
be allocated as specified in Your application. The same allocations will be
made for each subsequent payment unless You change the allocations by Written
Request or, at the time of a Premium Payment, You instruct Us to allocate that
payment differently.

SECTION 5 - CONTRACT VALUE

CONTRACT VALUE

The Contract Value at any time is the sum of the Fixed Account Value and the
Separate Account Value.

Unless You indicate otherwise, amounts withdrawn from the Contract Value by You
and charges described in this Contract will be deducted from the Fixed Account
and the Variable Accounts based on the proportion that the values of the Fixed
Account and the Variable Accounts bear to the Contract Value.

All values and benefits are equal to or more than those required by law. The
official responsible for supervising insurance in the state where the Contract
is delivered has a detailed summary of the method We use to determine values.

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<PAGE> 11
FIXED ACCOUNT VALUE

The Fixed Account Value is equal to:

(1) the Net Premium Payments allocated to the Fixed Account, PLUS
(2) amounts transferred to the Fixed Account, PLUS
(3) interest credited to the Fixed Account, MINUS
(4) any partial withdrawals or transfers from the Fixed Account,
MINUS
(5) any Withdrawal Charges, Contract Fees or premium taxes
deducted from the Fixed Account.

The Company will credit interest to the Fixed Account. The minimum Fixed
Account interest rate is the rate shown on Page __, compounded annually. The
Company, at its discretion, may credit interest rates greater than the minimum
Fixed Account interest rate.

SEPARATE ACCOUNT VALUE

The Separate Account Value is equal to the sum of the values in all the
Variable Accounts of the Separate Account, each of which is, prior to the
Annuity Start Date, equal to:

(1) net Premium Payments allocated to that Variable Account, PLUS
(2) any amount transferred to that Variable Account, PLUS
(3) any interest income, dividends, capital gains, realized or
unrealized, in that Variable Account, MINUS
(4) any partial withdrawals or transfers of amounts from that
Variable Account (including any applicable transfer charges),
MINUS
(5) any Withdrawal Charges, Contract Fees or premium taxes
deducted from that Variable Account, MINUS
(6) realized or unrealized net capital losses in that Variable
Account.

CONTRACT FEE

We charge a fee for establishing and maintaining Our records for this Contract.
The charge is $7.50 per quarter and is deducted from the Contract Value at the
end of each three-month period measured from the Date of Issue or, if earlier,
on the date of a full withdrawal. This charge does not apply after a Payout
Plan has begun.

PREMIUM TAX CHARGES

A charge will be made by Us against the Contract Value of this Contract at the
time any premium taxes not previously deducted are payable.

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<PAGE> 12
TRANSFERS OF CONTRACT VALUES

While this Contract is in force prior to the Annuity Start Date, You may
transfer, by Written Request, Contract Values from one or more of the Variable
Accounts to another one or more of the Variable Accounts or to the Fixed
Account. You may make 12 such transfer requests per Contract Year without
charge. A charge of $25.00 will be imposed for each transfer request in excess
of 12. The transfer fee, if any, will be deducted from the Variable Account(s)
from which the transfer is made. If a transfer is made from more than one
Variable Account at the same time, the transfer fee will be deducted pro-rata
from the remaining Separate Account Values in such Variable Accounts. We
reserve the right to waive the transfer fee.

While this Contract is in force prior to the Annuity Start Date, You may
transfer up to 20% of the Fixed Account Value from the Fixed Account to one or
more of the Variable Accounts in any Contract Year. There is no charge for
transfers from the Fixed Account to one or more of the Variable Accounts.
Amounts transferred under the Interest Sweep provision are included int he
maximum amount which can be transferred from the Fixed Account in any Contract
Year.

After annuity payments have begun, You may exchange annuity units from one or
more of the Variable Accounts for annuity units of one or more of the Variable
Accounts once each Contract Year. There is no charge for this exchange.

If You have chosen the Maturity Benefit option and You transfer Contract Value
from an Eligible Variable Account, You will reduce the amount of the Eligible
Premium Payments on which Your Maturity Benefit is based. (See "Maturity
Benefit.")

The transfer privileges may be suspended or modified by Us at any time.

Amounts deducted from the Fixed Account for charges, withdrawals and transfers
to the Variable Accounts, for the purpose of crediting interest are accounted
for on a last in, first out basis. Amounts deducted from the Variable Accounts
for charges, withdrawals and transfers to the Fixed Account or among the
Variable Accounts, for the purpose of determining the Maturity Benefit are
accounted for on a last in, first out basis.

DOLLAR COST AVERAGING

Before the Annuity Start Date, You may elect to have an amount You specify
automatically transferred from one Variable Account to one or more other
Variable Accounts. Dollar Cost Averaging transfers will be made on a monthly or
quarterly basis. The amount transferred must be at least $100. There is no
charge for dollar cost averaging transfers.

If You have chosen the Maturity Benefit option, Dollar-Cost Averaging from an
Eligible Variable Account will reduce the amount of the Eligible Premium
Payments on which the Maturity Benefit is based. (See "Maturity Benefit.")

- 12 -
<PAGE> 13
INTEREST SWEEP

Before the Annuity Start Date, You may elect to have any interest credited to
the Fixed Account automatically transferred to one or more Variable Accounts at
the beginning of each calendar quarter. There is no charge for interest sweep
transfers and an interest sweep transfer is not considered a transfer for
purposes of assessing a transfer charge.

Amounts transferred out of the Fixed Account due to an interest sweep transfer
are counted toward the 20% of Fixed Account Value that may be transferred out
of the Fixed Account during any Contract Year.

AUTOMATIC ACCOUNT BALANCING

Before the Annuity Start Date, You may elect automatic account balancing. If
You select this option, on the first Business Day of a calendar month or
calendar quarter, We will automatically balance Your Variable Accounts to match
Your premium allocation percentages. There is no charge for automatic account
balancing.

If You have chosen the Maturity Benefit option, the Automatic Account Balancing
from an Eligible Variable Account will reduce the amount of the Eligible
Premium Payments on which the Maturity Benefit is based. (See "Maturity
Benefit.")

SECTION 6 - SEPARATE ACCOUNT PROVISIONS

SEPARATE ACCOUNT

Variable benefit payments under the Contract are provided through the Separate
Account. The Separate Account is registered with the SEC as a unit investment
trust under the Investment Company Act of 1940. The portion of the assets of
the Separate Account equal to the reserves and other Contract liabilities of
the Separate Account are not chargeable with the liabilities arising out of any
other business that We may conduct and which has no specific relation to or
dependence upon the Separate Account. We have the right to transfer to Our
general account any assets of the Separate Account which are in excess of such
reserves and other liabilities. The Company established the Separate Account
to support the operations of this Contract and other variable contracts the
Company may offer.

VARIABLE ACCOUNTS

The assets of the Separate Account are divided into subdivisions called
Variable Accounts that are listed on page __ of this Contract and in the
current prospectus You received. Each Variable Account invests exclusively in
shares of a corresponding Portfolio of a Fund listed on page __ of this
Contract. The income, gains and losses, whether or not realized, from assets
allocated to each Variable Account shall be credited to or charged against such
Variable Account without

- 13 -
<PAGE> 14
regard to other income, gains, or losses of any other Variable Account. Any
amounts of income, dividends and gains distributed from the shares of a Fund
are re-invested in additional shares of that Fund at its net asset value.

The Separate Account supporting benefits of this Contract and the reserves
supporting variable annuity payments under this Contract provided by the
Separate Account depend on the investment performance of the Portfolios in
which Your selected Variable Accounts are invested. We do not guarantee the
investment performance of the Portfolios. You bear the investment risk related
to Separate Account Value and variable annuity payments supported by the
Variable Accounts.

ACCUMULATION UNITS

Net Premium Payments may be allocated among and amounts may be transferred to
the Variable Accounts. Net Premium Payments or transferred amounts are
converted into accumulation units of the Variable Account to which the payment
is allocated or the transfer is made. The number of accumulation units
credited to each Variable Account is determined by dividing the dollar value of
a net Premium Payment allocated or transferred to a Variable Account by the
value of one accumulation unit for the Variable Account as of the end of the
Business Day on which We received the payment. The number of accumulation
units so determined will not be affected by any subsequent change in the value
of such accumulation unit.

ACCUMULATION UNIT VALUE

The accumulation unit value for each Variable Account will vary to reflect the
investment experience of the applicable Portfolio. The accumulation unit value
for a Variable Account will be determined at the end of each Business Day by
multiplying the accumulation unit value of the Variable Account on the
preceding Business Day by the net investment factor for the Variable Account
for the current Business Day. The value of the Variable Account on each
Business Day is then determined by multiplying the number of accumulation units
in that Variable Account by the accumulation unit value on that Business Day.

VALUATION OF ANY VARIABLE ACCOUNT

Allocation of net Premium Payments and transfers to a Variable Account will
increase the number of accumulation units of that Variable Account. Partial
withdrawals and transfers from a Variable Account will result in cancellation
of accumulation units of that Variable Account, as will a full withdrawal and
the deduction of a Contract Fee and any applicable premium taxes. Accumulation
units are cancelled as of the end of the Business Day on which the Company
receives a Written Request or notices regarding the event.

NET INVESTMENT FACTOR

The net investment factor is an index applied to measure the investment
performance of a Variable Account from one Business Day to the next. The net
investment factor may be greater

- 14 -
<PAGE> 15
or less than one; therefore, the value of an accumulation unit may increase or
decrease from day to day.

The Net Investment Factor for each Variable Account equals 1 plus the fraction
obtained by dividing (a) by (b) where:

(a) is the net result of:
1. the investment income, dividends, and capital gains,
realized or unrealized, credited at the end of the
current Business Day; PLUS
2. the amount credited or released from reserves for
taxes attributed to the operation of the Variable
Account; MINUS
3. the capital losses, realized or unrealized, charged
at the end of the current Business Day, MINUS
4. any amount charged for taxes or any amount set aside
during the Business Day as a reserve for taxes
attributable to the operation or maintenance of the
Variable Account; MINUS
5. the amount charged for mortality and expense risk on
that Business Day; MINUS
6. the amount charged for administration on that
Business Day; and

(b) is the value of the assets in the Variable Account at the end
of the preceding Business Day, adjusted for allocations and
transfers to and withdrawals and transfers from the Variable
Account occurring during that preceding Business Day.

ANNUITY UNIT VALUE

The value of an Annuity Unit for each Variable Account will vary to reflect the
investment experience of the applicable Portfolio. The value of an Annuity
Unit for a Variable Account will be determined on each Business Day by
multiplying the Annuity Unit value of the Variable Account on the preceding
Business Day by the product of (a) the net investment factor for that Variable
Account for the Business Day for which the annuity value is being calculated
and (b) an interest factor to neutralize the assumed interest rate.

You may choose an assumed interest rate of 3%, 4% or 5% at the time a variable
payout plan is selected.

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<PAGE> 16
SECTION 7 - WITHDRAWAL PROVISIONS

PARTIAL WITHDRAWALS

You may request, in writing, to withdraw part of the Contract Value in amounts
not less than $250. Your request must be received before the Annuity Start
Date. If the Contract Value is reduced to below $1,000 by a partial
withdrawal, the Company reserves the right to pay the Surrender Value to the
Owner in a lump sum. Such payment will terminate the Contract and all
obligations under the Contract.

You specify the Variable Account(s) or Fixed Account from which the partial
withdrawal is made. If You do not specify from which accounts the withdrawal
is to be made, or if the amount in the designated account is inadequate to
comply with Your request, We will make the withdrawal pro-rata from each
Variable Account and the Fixed Account based on the proportion that Your
Variable Account Values and the Fixed Account Value bear to the Contract Value
prior to the withdrawal.

We will pay You the amount You request in connection with a partial withdrawal
by cancelling Accumulation Units from the appropriate Variable Accounts and/or
reducing the value of the Fixed Account.

If You have elected the Maturity Benefit option, a partial withdrawal from an
Eligible Variable Account will reduce the amount of the Eligible Premium
Payments on which Your Maturity Benefit is based. (See "Maturity Benefit.")

FREE WITHDRAWAL AMOUNT

In any Contract Year after the first, You may withdraw a portion of Your
Contract Value without incurring a Withdrawal Charge. This amount is called
the Free Withdrawal Amount. If Your initial Premium Payment is less than
$100,000, the Free Withdrawal Amount is 10% of Contract Value each year, as
determined at the beginning of the Contract Year. If You do not withdraw the
full 10% in any Contract Year, the remaining amount does not roll over to the
next Contract Year.

If Your initial Premium Payment is $100,000 or more, the value of the Free
Withdrawal Amount depends on the Free Withdrawal Option You choose at the time
You purchase Your Contract. Once You choose an option, You cannot change it.

IF YOU CHOOSE THE CUMULATIVE 10% OPTION: After the first Contract
Year, You may withdraw up to 10% of Your Contract Value as of the beginning of
each Contract Year and We will not charge You a Withdrawal Charge on that
amount. If You do not withdraw the full 10% in any one Contract Year, the
remaining percentage may be rolled over to the next Contract Year,

- 16 -
<PAGE> 17
up to a maximum of 50% after 5 years as determined as of the beginning of each
Contract Year.

IF YOU CHOOSE THE EARNINGS OPTION: After the first Contract Year, You
can withdraw part or all of Your earnings under the Contract at any time
without incurring a Withdrawal Charge. Earnings are equal to Your Contract
Value MINUS Premium Payments, transfers and partial withdrawals.

There will be a Withdrawal Charge on partial withdrawals in excess of the
annual Free Withdrawal Amount.

FULL WITHDRAWAL OF CONTRACT VALUE

You may cancel this Contract by Written Request and receive the Surrender Value
at any time before the Annuity Start Date. The Surrender Value will be the
Contract Value as of the end of the Business Day on which the Company receives
Your Written Request in Our Service Office, less any Withdrawal Charge,
Contract Fee and premium taxes not previously deducted.

WITHDRAWAL CHARGES

Subject to the annual Free Withdrawal Amount, full or partial withdrawals of
Contract Values may be subject to a contingent deferred sales charge known as
the Withdrawal Charge.

When You purchase Your Contract, You must choose between two Withdrawal Charge
Options.

The Withdrawal Charge is separately calculated for each withdrawal You make.
For purposes of calculating the Withdrawal Charge, We treat withdrawals as
coming from the oldest Premium Payment first. Amounts subject to the
Withdrawal Charge will be deemed to be first from Premium Payments, and then
from earnings. This means that We will not deduct a Withdrawal Charge on
withdrawals of that portion of Your Contract Value that exceeds the sum total
of Your Premium Payments.

IF YOU CHOOSE THE DATE OF ISSUE WITHDRAWAL CHARGE OPTION: We will
impose a Withdrawal Charge on all partial or full withdrawals of Premium
Payments that You make during the first nine Contract Years if the amount of
the withdrawal exceeds the Free Withdrawal Amount. The Withdrawal Charge is
calculated as a percentage of the amount You withdraw based on the number of
years between the date We receive Your Written Request for withdrawal and the
Date of Issue. The rate of the Withdrawal Charge is listed in the table below.
Under this option, no Withdrawal Charge is deducted from full or partial
withdrawals that You make in Contract Years ten and later.

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<PAGE> 18
<TABLE>
<CAPTION>
Charge as Percentage
Contract Year of Premium Payments
------------- --------------------
<S> <C>
1-6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0%
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0
8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0
9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0
10+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
</TABLE>

IF YOU CHOOSE THE DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION:
We will calculate the Withdrawal Charge by determining the length of time
between the date We receive Your Written Request for a withdrawal and the date
You made the Premium Payment being withdrawn. We will deduct a Withdrawal
Charge if You withdraw a Premium Payment that We have held for less than seven
Premium Payment Years if it is greater than the Free Withdrawal Amount.

<TABLE>
<CAPTION>
Charge as Percentage
Premium Payment Year of Premium Payments
-------------------- --------------------
<S> <C>
1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0%
2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0
3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0
4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0
5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0
6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0
8+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
</TABLE>

Any applicable Withdrawal Charge will be deducted from the remaining value in
the Variable Account(s) or Fixed Account from which the withdrawal is being
made. If such remaining Variable Account Value(s) or Fixed Account Value is
insufficient for this purpose, the Withdrawal Charge will be deducted pro-rata
from all Variable Account(s) and the Fixed Account based on the remaining
Contract Value in each Variable Account and the Fixed Account.

No Withdrawal Charge will be assessed in the event the Contract terminates due
to the death of the Annuitant or Owner or if Contract Values are applied to a
life annuity or an annuity with a payment period of at least 10 years.

PAYMENT ON WITHDRAWALS

Payment on any request for withdrawal, or for the Death Benefit, will be made
as soon as possible and, with respect to the Contract Values in the Variable
Accounts, no later than seven days after the Written Request is received by the
Company. However, such payment may be postponed for any period:

- 18 -
<PAGE> 19
(1) when the New York Stock Exchange is closed; or
(2) when trading on the New York Stock Exchange is restricted; or
(3) when an emergency exists as a result of which (a) disposal of
securities held in the Variable Accounts is not reasonably
practicable or (b) it is not reasonably practicable to fairly
determine the value of the net assets of the Variable Account;
or
(4) during any other period when the U.S. Securities and Exchange
Commission, by order, so permits for the protection of
security holders.

Rules and regulations of the U.S. Securities and Exchange Commission will
govern as to whether the conditions set forth in 2, 3 and 4 exist.

For payments or transfers from the Fixed Account, We may defer payment for up
to 6 months from the date We receive Your Written Request. We will pay
interest of at least 3% per annum on the amount withdrawn if the payment is
deferred more than 30 days after receipt of documentation necessary to complete
the transaction.

SYSTEMATIC WITHDRAWAL PROGRAM

The Systematic Withdrawal Program provides an automatic monthly or quarterly
payment to You from the amounts You have accumulated in the Variable Accounts
and/or the Fixed Account. The minimum amount You may withdraw is $100. To use
the program, You must maintain a $1,000 balance in Your Contract. You may
elect to participate in the Systematic Withdrawal Program at any time before
the Annuity Start Date by sending a Written Request to Our Service Center.
Once You elect the program, it remains in effect unless the balance in Your
Contract drops below $1,000.

We will assess a Withdrawal Charge on these withdrawals, unless the
amount You withdraw under the Systematic Withdrawal Program qualifies as a Free
Withdrawal Amount or unless Withdrawal Charges no longer apply to the amounts
withdrawn. We do not deduct any other charges for this program. We reserve the
right to discontinue offering the Systematic Withdrawal Program at any time and
for any reason.

If You have chosen the Maturity Benefit option, Systematic Withdrawals
from an Eligible Variable Account will reduce the amount of the Eligible
Premium Payments on which the Maturity Benefit is based. (See "Maturity
Benefit.")

- 19 -
<PAGE> 20
SECTION 8 - OWNERSHIP PROVISIONS

CONTRACT OWNER

The Annuitant is the Owner unless otherwise stated in the application or unless
changed under the Transfer of Ownership Provision. The Owner is entitled to
all Contract rights and benefits while the Annuitant is alive, without the
consent of any other person.

JOINT OWNER

The Contract may be owned by two persons as Joint Owners, with rights of
survivorship. In this case, the Joint Owners must consent to any withdrawals
or changes to the Contract or Beneficiary.

TRANSFER OF OWNERSHIP

You may transfer the ownership of this Contract on forms provided by Us. The
completed forms must be recorded by Us at Our Service Office. The transfer
will be effective as of the date the transfer form is signed. We may require
the return of the Contract for endorsement. The transfer is subject to any
payment made or other actions taken by Us before We received Your Written
Request. We are not responsible for the tax consequences resulting from a
change of ownership.

QUALIFIED PLANS

If and while this Contract is part of a tax-qualified retirement plan under the
U.S. Internal Revenue Code, You may not change the Owner or assign the Contract
or make withdrawals unless permitted by the plan.

BENEFICIARY

The designation of a Beneficiary in the application shall remain in effect
until You change it. You may name a Beneficiary and change any named
Beneficiary during the lifetime of the Annuitant by Written Request
satisfactory to Us. The change will take effect on the date the Written
Request is signed. A change will not apply to any payment We make or any other
action We take before the Written Request is received in Our Service Office.

ASSIGNMENT

You may assign the Contract in writing. The assignment will not bind Us until
We have received a copy. Your rights and those of any Beneficiary will be
subject to assignment. We are not responsible for the validity or tax
consequences of the assignment.

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<PAGE> 21
SECTION 9 - DEATH BENEFIT PROVISIONS

DISTRIBUTION UPON THE DEATH OF THE OWNER

If You own the Contract with another person, and one of You dies before the
Annuity Start Date, the survivor becomes the sole Beneficiary regardless of
Your designation. If there is no surviving Owner, Your named Beneficiary will
become the Beneficiary upon Your death. (You may name primary and contingent
beneficiaries.) If You have named two or more primary Beneficiaries, they will
share equally in the death benefit (described below) unless You have specified
otherwise. If there are no living primary Beneficiaries at the time of Your
death, payments will be made to those contingent Beneficiaries who are living
when payment of the death benefit is due. If all the Beneficiaries have
predeceased You, We will pay the death benefit to Your estate. If You or a
Joint Owner who is the Annuitant dies before the Annuity Start Date, then the
provisions relating to the death of an Annuitant (described below) will govern.

If You are not the Annuitant and You die before the Annuitant and
before the Annuity Start Date, then the following options are available to Your
Beneficiary:

(1) If such Beneficiary is the spouse of the deceased Owner, the
spouse may continue the Contract as the new Owner.

(2) If such Beneficiary is not the spouse of the deceased Owner:

(a) such Beneficiary may elect to receive the Contract
Value, LESS any premium taxes not yet deducted, in a
single sum within 5 years of the deceased Owner's
death; or

(b) such Beneficiary may elect to receive the Contract
Value paid out under one of the approved payout
plans, provided that distributions begin within one
year of the deceased Owner's death and the
distribution period under the payout plan is for the
life of, or for a period not exceeding the life
expectancy of, the Beneficiary.

If such Beneficiary does not elect one of the above options,
We will pay the Contract Value, LESS any premium taxes not yet
deducted, within five years from the date of the deceased
Owner's death.

Under any of the distribution options in this section, "Distribution Upon the
Death of the Owner," the Beneficiary may exercise all ownership rights and
privileges from the date of the deceased Owner's death until the date that the
Contract Value is paid. Similar rules apply to Qualified Contracts. The above
distribution requirements will apply only upon the death of the first Joint
Owner.

- 21 -
<PAGE> 22
DISTRIBUTION UPON THE DEATH OF THE ANNUITANT

If the Annuitant (including an Owner who is the Annuitant) dies before the
Annuity Start Date, We will pay the Death Benefit described below in "Death
Benefits Before the Annuity Start Date" in a lump sum to Your named
Beneficiary(ies) within five years after the date of the Annuitant's death.
(You may name primary and contingent beneficiaries.) If You have named two or
more primary Beneficiaries, they will share equally in the Death Benefit unless
You have specified otherwise. If there are no living primary Beneficiaries at
the time of the Annuitant's death, payments will be made to those contingent
Beneficiaries who are living when payment of the Death Benefit is due. If all
the Beneficiaries have predeceased the Annuitant, We will pay the Death Benefit
to You, if living, or the Annuitant's estate. In lieu of a lump sum payment,
the Beneficiary may elect, within 60 days of the date We receive due proof of
the Annuitant's death, to apply the Death Benefit to a payout plan. (See
"Payout Options.")

If You are also the Annuitant and You die, the provisions described
immediately above apply, except that the Beneficiary may only apply the Death
Benefit payment to a payout plan if:

(1) payments under the option begin within one (1) year of the
Annuitant's death; and

(2) payments under the option are payable over the Beneficiary's
life or over a period not greater than the Beneficiary's life
expectancy.

DEATH BENEFIT BEFORE THE ANNUITY START DATE

If the Annuitant dies before the Annuity Start Date, the Beneficiary will
receive a Death Benefit. If You do not choose the Enhanced Death Benefit
option, the Death Benefit will be equal to the greater of:

(1) the sum of all Premium Payments made under the Contract, LESS
partial withdrawals as of the date We receive due proof of the
deceased's death and payment instructions; or

(2) the Contract Value as of the date We receive due proof of the
deceased's death and payment instructions;

LESS any applicable premium taxes not previously deducted.

ENHANCED DEATH BENEFIT

If You elect the three year stepped-up Enhanced Death Benefit option at the
time of purchase, the minimum Enhanced Death Benefit payable upon the death of
the Annuitant before the Annuity Start Date will be reset every third year on
the Death Benefit Anniversary if the Contract Value on such Death Benefit
Anniversary is greater than the Contract Value on the previous Death Benefit
Anniversary. The Enhanced Death Benefit will equal the greater of:

- 22 -
<PAGE> 23
(1) the Contract Value as of the date We receive due proof of the
deceased's death and payment instructions; or

(2) the highest Contract Value as of any Death Benefit Anniversary
preceding the date the Enhanced Death Benefit is determined,
plus any Premium Payments, and minus any withdrawals and
charges, incurred between such Death Benefit Anniversary and
the date the Enhanced Death Benefit is determined. This value
is initially set on the first Death Benefit Anniversary and
equals the greater of: (a) the sum of Premium Payments, MINUS
partial withdrawals; or (b) Contract Value, on that date.
This value will be reset on every future Death Benefit
Anniversary (that is, every third year) to equal Contract
Value on that date only if Contract Value on that Death
Benefit Anniversary is greater than the Enhanced Death Benefit
Value on any previous Death Benefit Anniversary. Once reset,
this value will never decrease unless partial withdrawals are
made;

LESS any applicable premium taxes not previously deducted.

AGE LIMITATION UNDER EITHER DEATH BENEFIT OPTION

If the Annuitant dies at or after age 75 (or ten years after the Date of Issue,
whichever is later) but before the Annuity Start Date, the Death Benefit will
equal Contract Value, LESS any applicable premium taxes not yet deducted, as of
the date We receive due proof of death and payment instructions.

LOANS

If the Contract is a Qualified Contract, any outstanding loan amount on the
date the Death Benefit is paid will also be deducted from the Death Benefit.

PROOF OF DEATH

Proof of death satisfactory to the Company consists of the death record or a
certified copy of a court decree reciting a finding of death or any other proof
satisfactory to the Company.

REQUIRED DISTRIBUTIONS

An Owner or Beneficiary who is required to begin to receive payments in the
form of a life annuity or annuity for a period certain not exceeding the
recipient's life expectancy may choose a payout plan.

BENEFICIARIES

You may designate the Beneficiaries as primary or contingent to indicate the
order in which they take. If You name two or more Beneficiaries of the same
class they will share equally unless

- 23 -
<PAGE> 24
You state how they are to share. If You identify a relative as a Beneficiary,
We will interpret that to mean a relative of the Annuitant unless You state the
relationship is to another person.

Any Beneficiary who dies within 10 days of the Annuitant's or Owners death will
not be entitled to any benefits unless that Beneficiary is living when We
receive due proof of the Annuitant's or Owner's death.

DEATH OF PAYEE AFTER THE ANNUITY START DATE

If the Payee dies after the Annuity Start Date, any Joint Payee
becomes the sole Payee. If there is no Joint Payee, the Successor Payee
becomes the sole Payee. If there is no Successor Payee, the remaining benefits
are paid to the estate of the last surviving Payee. The death of the Payee
after the Annuity Start Date will have the effect stated in the payout plan
pursuant to which annuity payments are being made. If any Owner on or after the
Annuity Start Date, any payments that remain must be made at least as rapidly
as under the payout plan in effect on the date of the Your death.

SECTION 10 - PAYOUT PLAN PROVISIONS

ANNUITY START DATE

If You own a Non-Qualified Contract, We will ask You to select an Annuity Start
Date. If You do not select a date, the Annuity Start Date is either the
Annuitant's age 70 to 10 years after the Date of Issue, whichever is later. If
You own a Qualified Contract, the Annuity Start Date is fixed at the
Annuitant's age 70 1/2.

We will start annuity payments to the Annuitant on the Annuity Start Date shown
on Page __ unless You request a change in the Annuity Start Date. You can
change the Annuity Start Date to any Contract Anniversary or to any date on
which You withdraw the Contract Value. Your Written Request must be received
in Our Service Office at least 31 days prior to the existing Annuity Start
Date. Annuity payments must commence no later than the Annuitant's 85th
birthday.

If You have chosen the Maturity Benefit option and You change the Annuity Start
Date to a date earlier than the Maturity Benefit Date, You will no longer be
eligible for the Maturity Benefit. (See "Maturity Benefit.")

PAYOUT PLANS

You may apply the Contract Value, less any applicable Contract Fee, Withdrawal
Charges, and premium taxes not yet deducted, under any of the following payout
plans or any other plan then being offered by the Company. Payout Plans may be
fixed or variable or a combination of both.

- 24 -
<PAGE> 25
The amount of the payment is not guaranteed if a variable payout is selected.
If a fixed payout is selected, the payments for each $1,000 applied will not be
less than those shown in the Fixed Period Table in Section 13.

You may request quarterly, semi-annual, or annual annuity payments instead of
monthly payments.

(1) Installment Income Plans

(A) Fixed Period - Paid in monthly payments for the number of
years You select from 1 to 30 years. The amount of the
payment is not guaranteed if a variable payout is selected.
If a fixed payout is selected, the payments for each $1,000
applied will not be less than those shown in the Fixed Period
Table in Section 13. Payments may be commuted.

(B) Fixed Amount - Paid in equal monthly installments of $5.00
or more for each $1,000 applied. The number of payments is
not guaranteed if a variable payout is selected. If a fixed
payout is selected, payments will be made until the full
amount applied with compound interest at not less than 3% is
used up. Payments may be commuted.

(2) Life Income Plans

(A) One Life - Paid monthly during the lifetime of the Payee.
We will guarantee payments for either 10 or 20 years and for
as long as the Payee lives. The amount of the payment is not
guaranteed if a variable payout is selected. If a fixed
payout is selected, the payments for each $1,000 applied will
not be less than those shown in the One Life Table. The
amount paid is based on the Payee's sex and age on the date of
the first annuity payment. Payments guaranteed for 10 or 20
years may be commuted. Payments guaranteed only for the life
of the Payee may not be commuted.

(B) Joint and Survivor - paid in monthly payments jointly to
two Payees and after one dies to the surviving Payee. The
amount paid is based on the Payees' sex and age on the date of
the first payment. If either one dies before the due date of
the first payment, We will pay the survivor under the Life
Income Plan A with payments guaranteed for 10 years. Payments
may not be commuted.

VARIABLE PAYOUT

A variable payout plan is a payout plan with payments increasing or decreasing
in amount in accordance with the Annuity Unit values of one or more of the
Variable Account(s) (as described in the Separate Account Provisions). After
the first monthly payment for a variable payout has been determined in
accordance with the provisions of this Contract, a number of Annuity Units is

- 25 -
<PAGE> 26
determined by dividing that first monthly payment by the appropriate Variable
Account Annuity Unit value on the Annuity Start Date.

Once variable payments begin, the number of Annuity Units remains fixed with
respect to a Variable Account. If the Contract Owner elects by Written Request
to exchange Annuity Units of one Variable Account for those of another Variable
Account, the number will change effective with that election but will remain
fixed in number following such election. The method of calculating the Annuity
Unit value is described under the Separate Account Provisions.

The dollar amount of the second and subsequent variable payments is not
predetermined and may increase or decrease from period to period. The actual
amount of each variable payment after the first is determined by multiplying
the number of Annuity Units by the Annuity Unit values described in the
Separate Account Provisions.

FIXED PAYOUT

We guarantee interest under all fixed payout plans at a minimum rate of 3% a
year. We may increase the interest rate above the minimum. Monthly payments
on Life Income Plans will be based on the interest rate in effect on the due
date of the first payment.

CHOOSING A PAYOUT PLAN

You may choose or change a payout plan any time before the Annuity Start Date.
The choice must be in writing and in a form satisfactory to Us. The minimum
amount which may be applied under a payout plan is $2,500. Any choice
involving more than one payout plan must have Our approval.

If You do not elect a payout plan by the Annuity Start Date, We will apply the
adjusted Contract Value, less any applicable Withdrawal Charges, under Life
Income Plan A with payments guaranteed for 10 years. The Contract Value will
be allocated to a fixed and variable payout in the same proportion that Your
interest in the Fixed and Variable Accounts bears to the total Contract Value.
When a Payee who is entitled to a payment in one sum chooses a payout plan, the
rights of all other Beneficiaries end. Any amount payable when a Payee dies
will be paid in one sum to the Payee's estate unless the Payee has named a
Successor Payee.

Each payment must be at least $25. We may change the number of payments We
make in a year so that each payment is at least $25.

DATE OF PAYMENT

The first payment under any payout plan will be made on the fifteenth day of
the month immediately following Your selection of a plan. Subsequent payments
shall be made on the fifteenth day of each subsequent month in accordance with
the manner of payment selected.

- 26 -
<PAGE> 27
SECTION 11 - MATURITY BENEFIT

MATURITY BENEFIT

If You elect the Maturity Benefit option at the time You purchase the Contract
and if, on the Maturity Benefit Date, You have not begun to receive annuity
payments, IL Annuity will calculate the Maturity Benefit for each Eligible
Variable Account in which You have value. The Maturity Benefit will be
credited to Contract Value of an Eligible Variable Account only if the value of
the Eligible Variable Account on the Maturity Benefit Date is less than: (a)
the sum of the Eligible Premium Payments for such Eligible Variable Account,
MINUS (b) a percentage of all prior withdrawals and transfers from the Eligible
Variable Account.

Eligible Premium Payments are those Premium Payments that You
initially allocated to a particular Eligible Variable Account at the time of
payment, provided You made the payment at least ten (10) years prior to the
Maturity Benefit Date.

The Maturity Benefit that will be credited to each Eligible Variable
Account on the Maturity Benefit Date is equal to: (a) the sum of the Eligible
Premium Payments for that particular in the Eligible Variable Account; MINUS
(b) a percentage of all prior withdrawals and transfers from that Eligible
Variable Account; MINUS (c) the value of that Eligible Variable Account on the
Maturity Benefit Date.

The Maturity Benefit Date is the later of the Annuitant's age 70 and
10 years after the Date of Issue.

If the Contract is owned by persons who are spouses at the time one
Joint Owner dies, the Maturity Benefit Date will become the date the surviving
spouse attains age 70. If the Contract is owned by Joint Owners who are not
spouses and one of the Joint Owners dies before the Maturity Benefit Date, the
Maturity Benefit is not available to the sole surviving Owner. Eligible
Variable Accounts are those Variable Accounts shown on the specifications page
of the Contract which invest in Funds which, in turn, invest primarily in
stocks, equity securities, bonds or money market instruments. Currently, all
Variable Accounts, except the Van Eck Gold and Natural Resources Variable
Account, are Eligible Variable Accounts.

The Maturity Benefit will not be credited to Contract Value if You
choose an Annuity Start Date that is earlier than the Maturity Benefit Date.

A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN
ELIGIBLE VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE PREMIUM PAYMENTS
HELD IN THE ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR
WITHDRAWAL REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT.

- 27 -
<PAGE> 28
For purposes of calculating the value of an Eligible Variable Account,
We deem all transfers and withdrawals to be first a withdrawal of Premium
Payments, then of earnings. Transfers out of an Eligible Variable Account
include transfers resulting from Dollar Cost Averaging or Automatic Account
Balancing; withdrawals out of an Eligible Variable Account include withdrawals
resulting from the Systematic Withdrawal Payments.

SECTION 12 - GENERAL PROVISIONS

CHANGE IN THE OPERATION OF THE SEPARATE ACCOUNT

If required, approval of or change of any investment policy will be filed with
the Insurance Department of the State of Massachusetts and the state where this
Contract is delivered.

When permitted by law, We may create new separate accounts; combine separate
accounts, including the Separate Account; add new Variable Accounts to or
remove existing Variable Accounts from the Separate Account or combine Variable
Accounts; make new Variable Accounts or other Variable Accounts available to
such classes of Contracts as We may determine; add new Funds or remove existing
Funds; if shares of a Fund are no longer available for investment or if We
determine that investment in a Fund is no longer appropriate in light of the
purposes of the Separate Account, substitute a different Fund for any existing
Fund; de-register the Separate Account under the Investment Company Act of 1940
in the event registration is no longer required; operate the Separate Account
as a management investment company under the Investment Company Act of 1940 or
as any other form permitted by law; and make any changes to the Separate
Account or its operations as may be required by the Investment Company Act of
1940 or other applicable law or regulations.

The Company will pay a Maturity Benefit on premium payments allocated to an
Eligible Variable Account if: (a) the Portfolio underlying an Eligible
Variable Account changes its investment objective; (b) the Company determines
that an investment in a Portfolio underlying an Eligible Variable Account is no
longer appropriate in light of the purposes of the Separate Account; or (c)
shares of a Portfolio underlying an Eligible Variable Account are no longer
available for investment by the Separate Account and IL Annuity is forced to
redeem all shares of the Portfolio held by the Eligible Variable Account. .

CREDITOR'S CLAIMS

All payments under the Contract will be exempt from the claims of creditors and
legal process to the extent permitted by law. No payment will be transferred,
assigned or withdrawn before it becomes payable unless We agree.

INCONTESTABILITY

- 28 -
<PAGE> 29
The Contract will be incontestable from the Date of Issue.

INCORRECT AGE OR SEX

If the Annuitant's age or sex has been misstated, the amount of the annuity
payable by the Company shall be that provided by that portion of the amounts
allocated to effect such annuity on the basis of the corrected information
without changing the date of the first payments of such annuity. Any
overpayment We make will be charged with compound interest against subsequent
payments. Any amounts We owe as a result of under-payment will be paid with
compound interest upon receipt of notice of the underpayment. The rate will be
the rate We use to determine the number or amount of the payments.

MODIFICATION OF CONTRACT

Any change in the Contract or waiver of its provisions must be in writing and
signed by Our President, a Vice President, Our Secretary or Assistant
Secretary. No other person can change or waive any of its provisions.

Upon notice to You, the Company may modify the Contract, if necessary, to
permit the Contract or the Separate Account to comply with any applicable law
or regulation issued by a government agency or if necessary to assure continued
qualification of the contract under the Internal Revenue Code or other federal
or state laws relating to retirement annuities or variable annuities contracts;
or if necessary to effect a change in the operation of the Separate Account; or
if the modification provides additional investment options.

In the event of such modifications, the Company will make the appropriate
endorsement to the Contract.

NON-PARTICIPATING

This Contract does not participate in surplus earnings.

PROOF OF FACTS

We may ask any person claiming the right to payments for proof satisfactory to
Us of such person's age, sex and right to payment. Any payments We make
relying on that proof discharge Us from any obligation to make that payment to
another person.

REPORTS TO THE OWNER

We will provide You with a report showing the Contract Values at least once
each year. We will also provide You an annual report of the Separate Account
and any other notice or report required by law to be delivered to Owners. All
reports and notices will be sent to Your last known address.

- 29 -
<PAGE> 30
SUBMISSION OF CONTRACT

We may ask You to relinquish the Contract or send it to Us for endorsement
before We make any payment. Failure to have You surrender the Contract or note
payment on it does not indicate that We have not made payment.

VOTING PRIVILEGES

So long as Federal law requires, We will give You certain voting privileges.
As Contract Owner, if You have voting privileges, We will send a notice to You
telling You the time and place of a shareholder meeting. The notice will also
explain the matter to be voted upon and how many votes You get.

- 30 -
<PAGE> 31
SECTION 13 - TABLES

FIXED PERIOD MINIMUM INCOME TABLE*

MONTHLY PAYMENTS FOR EACH $1,000 APPLIED

<TABLE>
<CAPTION>
=======================================================================================================
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF YEARS INSTALLMENTS OF YEARS INSTALLMENTS OF YEARS INSTALLMENTS
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 84.47 11 8.86 21 5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71

6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.47
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
=======================================================================================================
</TABLE>

*Values are based on compound interest at 3.0% a year. Other rates are
available on request.

- 31 -
<PAGE> 32
ONE LIFE MINIMUM INCOME TABLE*

MONTHLY PAYMENTS FOR EACH $1,000 APPLIED

<TABLE>
<CAPTION>
================================================================================================
Age of Payee Life Only Income Life 10 Years Certain Life 20 Years Certain
Last -----------------------------------------------------------------------------
Birthday Male Female Male Female Male Female
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 4.17 3.82 4.13 3.81 4.01 3.76
51 4.24 3.88 4.20 3.87 4.07 3.81
52 4.32 3.95 4.27 3.93 4.13 3.86
53 4.40 4.01 4.35 3.99 4.19 3.92
54 4.49 4.08 4.43 4.06 4.25 3.97
55 4.58 4.15 4.51 4.13 4.31 4.03
56 4.67 4.23 4.60 4.20 4.37 4.09
57 4.78 4.31 4.70 4.28 4.44 4.15
58 4.88 4.40 4.80 4.36 4.50 4.22
59 5.00 4.49 4.90 4.44 4.57 4.29
60 5.12 4.59 5.01 4.54 4.63 4.35
61 5.26 4.69 5.13 4.63 4.70 4.42
62 5.40 4.80 5.25 4.73 4.77 4.49
63 5.55 4.92 5.37 4.84 4.83 4.57
64 5.71 5.04 5.51 4.95 4.89 4.64
65 5.89 5.18 5.65 5.07 4.95 4.71
66 6.07 5.32 5.79 5.20 5.01 4.78
67 6.27 5.47 5.94 5.33 5.07 4.85
68 6.48 5.64 6.10 5.48 5.12 4.92
69 6.71 5.82 6.26 5.62 5.17 4.99
70 6.95 6.01 6.42 5.78 5.22 5.05
71 7.20 6.22 6.59 5.94 5.26 5.11
72 7.47 6.44 6.76 6.11 5.30 5.17
73 7.76 6.68 6.93 6.29 5.33 5.22
74 8.07 6.94 7.11 6.48 5.36 5.27
75 8.41 7.23 7.29 6.67 5.39 5.31
76 8.76 7.53 7.46 6.86 5.42 5.35
77 9.15 7.86 7.64 7.06 5.44 5.38
78 9.56 8.22 7.81 7.26 5.45 5.40
79 9.99 8.60 7.98 7.46 5.47 5.43
80 10.46 9.02 8.14 7.66 5.48 5.45
81 10.96 9.47 8.29 7.85 5.49 5.46
82 11.49 9.96 8.44 8.04 5.49 5.48
83 12.05 10.49 8.58 8.22 5.50 5.49
84 12.65 11.06 8.71 8.39 5.50 5.49
85 13.29 11.67 8.83 8.55 5.51 5.50
86 13.97 12.34 8.95 8.69 5.51 5.50
87 14.69 13.05 9.05 8.83 5.51 5.51
88 15.46 13.82 9.14 8.95 5.51 5.51
89 16.27 14.62 9.22 9.05 5.51 5.51
90 17.14 15.47 9.30 9.15 5.51 5.51
================================================================================================
</TABLE>

*Values are based on compound interest at 3.0% a year. Other rates are
available on request.

- 32 -
<PAGE> 33
JOINT & SURVIVOR WITH 10 YEAR CERTAIN TABLE* MONTHLY PAYMENTS FOR EACH $1,000
APPLIED

<TABLE>
<CAPTION>
===================================================================================================================================
Number of Years Younger Same Number of Years Older
- ---------------------------------------------------------------------------------------- Age -----------------------------
Female: 7 6 5 4 3 2 1 1 2 3
- -----------------------------------------------------------------------------------------------------------------------------------
Male Age:
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.36 3.38 3.41 3.44 3.46 3.49 3.52 3.55 3.57 3.60 3.63
51 3.39 3.42 3.45 3.48 3.51 3.53 3.56 3.59 3.62 3.65 3.68
52 3.43 3.46 3.49 3.52 3.55 3.58 3.61 3.64 3.67 3.70 3.73
53 3.47 3.50 3.53 3.56 3.60 3.63 3.66 3.69 3.72 3.75 3.79
54 3.51 3.55 3.58 3.61 3.64 3.68 3.71 3.74 3.78 3.81 3.84
55 3.56 3.59 3.63 3.66 3.70 3.73 3.77 3.80 3.84 3.87 3.91
56 3.60 3.64 3.68 3.71 3.75 3.79 3.82 3.86 3.90 3.94 3.97
57 3.65 3.69 3.73 3.77 3.81 3.84 3.88 3.92 3.96 4.00 4.04
58 3.70 3.74 3.78 3.82 3.87 3.91 3.95 3.99 4.03 4.07 4.12
59 3.76 3.80 3.84 3.89 3.93 3.97 4.02 4.06 4.11 4.15 4.19
60 3.82 3.86 3.90 3.95 4.00 4.04 4.09 4.14 4.18 4.23 4.28
61 3.88 3.92 3.97 4.02 4.07 4.12 4.17 4.22 4.27 4.32 4.37
62 3.94 3.99 4.04 4.09 4.14 4.19 4.25 4.30 4.35 4.41 4.46
63 4.01 4.06 4.11 4.17 4.22 4.28 4.33 4.39 4.45 4.50 4.56
64 4.08 4.13 4.19 4.25 4.31 4.37 4.43 4.49 4.55 4.60 4.66
65 4.15 4.21 4.27 4.33 4.40 4.46 4.52 4.59 4.65 4.71 4.78
66 4.23 4.30 4.36 4.43 4.49 4.56 4.63 4.69 4.76 4.83 4.90
67 4.32 4.39 4.45 4.52 4.59 4.66 4.74 4.81 4.88 4.95 5.02
68 4.41 4.48 4.55 4.63 4.70 4.78 4.85 4.93 5.01 5.08 5.16
69 4.50 4.58 4.66 4.74 4.81 4.90 4.98 5.06 5.14 5.22 5.30
70 4.61 4.69 4.77 4.85 4.94 5.02 5.11 5.19 5.28 5.37 5.45
71 4.71 4.80 4.89 4.97 5.06 5.16 5.25 5.34 5.43 5.52 5.61
72 4.83 4.92 5.01 5.11 5.20 5.30 5.40 5.49 5.59 5.69 5.78
73 4.95 5.04 5.14 5.24 5.35 5.45 5.55 5.66 5.76 5.86 5.96
74 5.08 5.18 5.28 5.39 5.50 5.61 5.72 5.83 5.93 6.04 6.14
75 5.21 5.32 5.43 5.55 5.66 5.78 5.89 6.01 6.12 6.23 6.34
===================================================================================================================================
</TABLE>
*Values are based on compound interest at 3.0% a year. Other rates not shown
will be provided on request.

- 33 -
<PAGE> 34
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208

FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
FLEXIBLE PREMIUM
INCOME PAYABLE AT MATURITY
DEATH BENEFIT PAYABLE IN THE EVENT OF THE ANNUITANT'S DEATH PRIOR TO MATURITY

For service or information about Your policy, contact the SERVICE OFFICE,
________________________ or contact Your agent.

- 34 -

<PAGE> 1

Exhibit 5(b)

Application to IL Annuity and Insurance Company
A Member of the Indianapolis Life Group of Companies

(Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance containing any materially false
information or conceals for the purpose of misleading, information concerning
any fact material thereto commits a fraudulent insurance act, which is a
crime.)
CWA: POLICY#

A. ANNUITANT

Last Name First Name Middle or Initial

Residence Address City State Zip County

Billing Address (If Different) City State Zip County

Issue Age Sex Birth Date Soc. Sec. or Tax No. Phone
Number

/ / ( )

B. ANNUITY

Plan Amount Annuity Start Date Annuity Start Age
$ / /
Is the annuity applied for intended to replace or change another annuity or
life insurance policy?
NO YES Company Name Policy #

If required, replacement forms must accompany this
application.
Non-Qualified-Do Not Complete Part C. Qualified- Complete Entire
Application.
Single Premium Immediate Annuity: Life Only Life Yrs.
Certain
Joint & Survivor

C. QUALIFIED RETIREMENT PLANS

PENSION PLAN: Corporate HR-10
TYPE: Defined Benefit Target Benefit Money Purchase
Simplified Employee Pension Profit Sharing 401(K)
Exact Name of Plan Plan Effective Date
/ /
Trustee

Plan Mailing Address City State Zip County
<PAGE> 2
INDIVIDUAL PLAN: Tax Sheltered Annuity (403b) Individual
Retirement
Annuity Other
IRA Rollover
IRA Transfer
VAN-APP-95 R11/95

D. BILLING

PAYOR ( If other than Annuitant)
PREMIUMS PAYABLE: Single Premium Annual Semi-Annual
Premium Amount Quarterly Monthly
BILLING FORM: Check-O- Matic Premium Notice List Bill

E. OWNER/BENEFICIARY

OWNER (If other than Annuitant)
Address City State Zip County

Date of Birth Soc. Sec. or Tax No. Relationship to Annuitant

CONTINGENT OWNER

Soc. Sec or Tax No. Relationship to Annuitant

PRIMARY BENEFICIARY FOR DEATH BENEFIT
(Print full name, date of birth, relationship and date of trust if applicable.)

CONTINGENT BENEFICIARY

F. PREMIUM ALLOCATION (must equal 100%)

IL ANNUITY AND INSURANCE COMPANY
Fixed Account

ALGER AMERICAN FAMILY OF FUNDS
Midcap Growth Portfolio
Small Capitalization Portfolio

FIDELITY FAMILY OF FUNDS
Asset Manager Portfolio
Contrafund Portfolio
Index 500 Portfolio
Investment Grade Bond Portfolio
Equity-Income Portfolio
Growth Portfolio
Money Market Portfolio
<PAGE> 3
OCC ACCUMULATION TRUST FAMILY OF FUNDS
Managed Portfolio
Small Cap Portfolio

T. ROWE PRICE FAMILY OF FUNDS
Limited- Term Bond Portfolio
International Stock Portfolio

VAN ECK WORLDWIDE FAMILY OF FUNDS
Gold and Natural Resources Portfolio
Worldwide Balanced Portfolio

G. CHOICES

1. Withdrawal Charges

Date of Issue Withdrawal Charge Option
Date of Premium Payment Withdrawal Charge
Option

2. If initial Premium Payment is $100,000 or more,
Annual Free Withdrawals:
Cumulative 10% Option
Earnings Option

3. Death/Living Benefits:
Guaranteed Maturity Benefit Option
Enhanced Death Benefit Option

H. DOLLAR COST AVERAGING (VARIABLE ONLY)*

Transfer from: beginning on (Date may not be the 29th, 30th or 31st) to:
Account Amount
Transfer Mode: Monthly Quarterly

I. AUTOMATIC ACCOUNT BALANCING (VARIABLE ONLY)*
YES NO
If yes, automatic account balancing mode: Monthly Quarterly
Allocations are based on the current premium allocation

* DOLLAR COST AVERAGING AND AUTOMATIC ACCOUNT BALANCING WILL REDUCE THE
GUARANTEED MATURITY BENEFIT. SEE THE PROSPECTUS OR CONTRACT FOR DETAILS.

J. INTEREST SWEEP FROM FIXED ACCOUNT (VARIABLE ONLY)
Please transfer interest earned in my Fixed Account to:
Account Percentage
<PAGE> 4
K. TELEPHONE TRANSFER AUTHORIZATION

I (we) hereby authorize and direct IL Annuity and Insurance
Company to accept telephone instructions from me (us) to make
transfers from Variable Account to Variable Account, change
the allocation of future investments, change interest sweep,
automatic account balancing, or dollar cost averaging options
and/or request partial withdrawals. This authorization is
subject to the terms and provisions in the contract and
prospectus. IL Annuity will not be held liable for any loss,
liability, cost or expense for acting on the telephone
instructions. IL Annuity's liability for erroneous transfers,
unless clearly contrary to instructions received, will be
limited to the correction of the allocations on a current
basis. For partial surrenders, IL Annuity's sole
responsibility is to send a check to the Owner's address or
wire the proceeds to the Owner's account at a commercial bank
or to the Owner's account at a member firm of a national
securities exchange.

L. ACKNOWLEDGEMENT

By signing below, the Owner understands that:

A. The annuity value may increase or decrease depending on the contract's
investment results;

B. The minimum cash value of the variable account is not guaranteed;

C. This annuity is a long-term commitment to meet insurance and financial
goals;

D. The variable annuity applied for is not unsuitable for the Owner's insurance
investment objectives, financial situation and needs; and

E. The Owner acknowledges receipt of the most recent prospectus.

NOTICE: The Owner agrees that to the best of his/her knowledge and belief, all
statements and answers in this application are complete and true. It is
further agreed that these statements and answers will become a part of any
contract to be issued. No representative is authorized to modify this
agreement or waive any of IL Annuity's rights or requirements. If IL Annuity
makes a change in the space designated "Do not write in this space" in order to
correct any apparent error or omissions, it will be approved by acceptance of
this contract; however, any material changes must be accepted in writing by the
Owner.

I have read and understand the Acknowledgement and Notice. Please send
Statements of Additional Information.

M. SIGNATURES

Dated at this day of
(X) (X)
<PAGE> 5
Signature of Proposed Annuitant Signature of Joint Owner (If
applicable)
(X) (X)
Signature of Owner (If other than Annuitant) Signature
of Registered Rep/Agent
(X) (X)
Printed Name of Broker-Dealer Printed Name of Registered
Rep/Agent

VAN-APP-95 R11/95

Registered Representative/Agent Certification

By signing above the Registered Representative/Agent certifies that:

a. The questions contained in this application were asked of the Owner and the
answers duly recorded, that this application is complete and true to the best
of my knowledge and belief: and

b. I am an NASD-registered representative and am state-licensed for variable
annuity contracts where this application is written and delivered; and

c. To the best of my knowledge and belief, the annuity applied for does not
involve replacement of life insurance or annuities. If replacement is
involved, submit Replacement Statement(s) if required.

DO NOT WRITE IN THIS SPACE

REGULAR MAIL
IL Annuity and Insurance Company
xxxxxxxxxxxxx
xxxxxxxxxxxxxxxx

OVERNIGHT MAIL
xxxxxxxxxxxxxxxxx
c/o IL Annuity and Insurance Company

xxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxx

A Member of the Indianapolis Life Group of Companies
VAN-APP-95 R11/95

<PAGE> 1

Exhibit 10(a)
Sutherland, Asbill & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20007

October 16, 1996

Board of Directors
IL Annuity and Insurance Company
2960 North Meridian Street
Indianapolis, Indiana 46208

Ladies and Gentlemen:

We hereby consent to the reference to our name under
the caption "Legal Matters" in the Statement of Additional Information filed as
part of the Post-Effective Amendment No. 2 to the registration statement on
Form N-4 for IL Annuity and Insurance Co. Separate Account 1. In giving this
consent, we do not admit that we are in the category of the persons whose
consent is required under Section 7 of the Securities Act of 1933.

Very truly yours,

SUTHERLAND, ASBILL & BRENNAN, L.L.P.

By: /s/ Stephen E. Roth
-----------------------
Stephen E. Roth

<PAGE> 1
Exhibit 10(b)

[ERNST & YOUNG LLP LETTERHEAD]

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 22, 1996 and April 9, 1996, in Post Effective
Amendment No. 2 to the Registration Statement (Form N-4 No. 33-89028) and
related Statement of Additional Information of IL Annuity and Insurance Co.
Separate Account 1 dated October 22, 1996.

/s/ Ernst & Young LLP
---------------------

October 21, 1996