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SUPPLEMENT DATED OCTOBER 18, 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.
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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.")
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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.
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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
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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.")
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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
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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.
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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.")
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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.")
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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.")
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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.")
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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.
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.
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.
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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:
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
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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:
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
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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.
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