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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1996
FILE NO. 33-61599
FILE NO. 811-7337
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-6 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
POST-EFFECTIVE AMENDMENT NO. 1
------------------------
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Exact Name of Trust)
PROTECTIVE LIFE INSURANCE COMPANY
(Name of Depositor)
2801 Highway 280 South
Birmingham, Alabama 35223
(Address of Depositor's Principal Executive Offices)
COPY TO:
Lizabeth R. Nichols, Esquire Stephen E. Roth, Esquire
2801 Highway 280 South Sutherland, Asbill & Brennan
Birmingham, Alabama 35223 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent Washington, D.C. 20004-2404
for Service of Process)
It is proposed that this filing become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b) of Rule 485;
/X/ on May 1, 1996 pursuant to paragraph (b) of Rule 485;
/ / 60 days after filing pursuant to paragraph (a) of Rule 485;
/ / on (date) pursuant to paragraph (a)(i) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(ii) of Rule 485;
/ / on date pursuant to paragraph (a)(ii) of Rule 485.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
registrant has previously registered an indefinite amount of securities under
the Securities Act of 1933. The Registrant will file a Rule 24f-2 Notice for the
year ended December 31, 1996 on or about February 28, 1997.
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PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
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<S> <C>
1 Cover Page
2 Cover Page
3 Inapplicable
4 Sale of the Policies
5 Protective Variable Life Separate Account
6 Protective Variable Life Separate Account
7 Inapplicable
8 Inapplicable
9 Legal Matters
10(a) The Policy
10(b) The Policy
10(c) Surrender Privilege; Withdrawal Privilege; Policy Loans; Payment Options
10(d) Cancellation Privilege; Special Transfer Privilege; Exchange Privilege; Withdrawal
Privilege; Policy Loans; Payment Options
10(e) Policy Lapse and Reinstatement
10(f) Voting Rights
10(g),(h) Other Investors in the Funds; Addition, Deletion and Substitution of Investments; Voting
Rights; Purchasing a Policy; Changes in the Policy or Benefits
10(i) Other Policy Benefits and Provisions; Death Benefit Proceeds; Payment Options; The Fixed
Account; Maturity Benefits; Limits on the Right to Contest the Policy; Suspension or Delay
of Payments; Arbitration; Supplemental Benefits and/or Riders; Tax Considerations
11 The Funds
12 The Funds
13 Charges and Deductions; Sale of the Policies; Illustrations of Policy Values, Surrender
Values, Death Benefits and Accumulated Premiums
14 Purchasing a Policy; Cancellation Privilege; Premium Payments; Net Premium Allocations;
15 Purchasing a Policy; Cancellation Privilege; Premium Payments; Net Premium Allocations;
16 The Funds
17 Captions referenced under Items 10(c), (d), and (e) above
18 Protective Variable Life Separate Account; The Funds; Calculation of Policy Values; Tax
Considerations
19 Voting Rights; Reports to Policy Owners; Sale of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Policy Loans
22 Protective Variable Life Separate Account; Financial Statements
</TABLE>
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<TABLE>
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
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23 Inapplicable
24 Protective Life Directors and Executive Officers; State Regulation
25 Protective Life Insurance Company
26 Charges and Deductions
27 Protective Life Insurance Company
28 Protective Life Directors and Executive Officers
29 Protective Life Insurance Company
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Sale of the Policies
35 Protective Life Insurance Company
36 Inapplicable
37 Inapplicable
38 Sale of the Policies
39 Sale of the Policies
40 Sale of the Policies
41(a) Sale of the Policies
42 Inapplicable
43 Inapplicable
44(a) Calculation of Policy Values; Premium Payments; Charges and Deductions
44(b) Charges and Deductions
44(c) Charges and Deductions
45 Inapplicable
46 Calculation of Policy Values; Surrender Privilege; Withdrawal Privilege; Charges and
Deductions; Illustrations of Policy Values, Surrender Values, Death Benefits and
Accumulated Premiums
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Summary and Diagram of the Policy; The Policy; Policy Benefits
52 Addition, Deletion and Substitution of Investments
53 Tax Considerations
54 Inapplicable
55 Inapplicable
56 Inapplicable
57 Inapplicable
58 Inapplicable
59 Financial Statements
</TABLE>
<PAGE>
PROSPECTUS
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICY
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Issued by: PROTECTIVE LIFE INSURANCE COMPANY
2801 Highway 280 South
Birmingham, Alabama 35223
Telephone (800) 866-3555
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This prospectus describes an individual flexible premium variable and fixed
life insurance policy (the "Policy") offered by Protective Life Insurance
Company ("Protective Life"). The Policy is designed to provide insurance
protection on the life of the Insured named in the Policy, and at the same time
provide the Owner with the flexibility to vary the amount and timing of premium
payments and, within certain limits, to change the amount of death benefits
payable under the Policy. This flexibility permits the Owner to provide for
changing insurance needs with a single insurance policy. This Policy may not be
available in all jurisdictions.
The Owner may, within limits, allocate Net Premium payments and Policy Value
to one or more Sub-Accounts of the Protective Variable Life Separate Account
(the "Variable Account") and Protective Life's general account (the "Fixed
Account"). Discussions of values under the Policy in this prospectus generally
relate only to the values allocated to the Variable Account. The assets of each
Sub-Account of the Variable Account are invested in a corresponding investment
portfolio (each, a "Fund") of Protective Investment Company. These Funds are:
<TABLE>
<S> <C>
Protective Growth and Income Fund Protective Select Equity Fund
Protective International Equity Fund Protective Small Cap Equity Fund
Protective Global Income Fund Protective Money Market Fund
Protective Capital Growth Fund
</TABLE>
The Prospectus for the Funds describes the investment objective(s) and risks
of investing in the Sub-Account corresponding to each. The Owner bears the
entire investment risk for Policy Value allocated to a Sub-Account.
Consequently, except as to Policy Value allocated to the Fixed Account, the
Policy has no guaranteed minimum Surrender Value.
It may not be advantageous to replace existing insurance with this Policy.
Within certain limits, you may return the Policy, or convert it to a Policy that
provides benefits that do not vary with the investment results of a separate
account by exercising the Special Transfer Right.
POLICIES (EXCEPT FOR POLICIES ISSUED IN CERTAIN STATES) INCLUDE AN
ARBITRATION PROVISION THAT MANDATES RESOLUTION OF ALL DISPUTES ARISING UNDER THE
POLICY THROUGH BINDING ARBITRATION. THIS PROVISION IS INTENDED TO RESTRICT AN
OWNER'S ABILITY TO LITIGATE SUCH DISPUTES. SEE "ARBITRATION".
Please read this Prospectus and the prospectus for the Funds carefully and
retain both for future reference. This Prospectus must be accompanied or
preceded by the current prospectus for the Funds.
AN INVESTMENT IN THE POLICY IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, NOR IS THE POLICY FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE POLICY INVOLVES CERTAIN RISKS, INCLUDING THE LOSS OF PREMIUM PAYMENTS
(PRINCIPAL).
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.
May 1, 1996
<PAGE>
PROSPECTUS CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DEFINITIONS OF TERMS....................................................................................... 6
SUMMARY AND DIAGRAM OF THE POLICY.......................................................................... 8
GENERAL INFORMATION ABOUT PROTECTIVE LIFE, THE VARIABLE ACCOUNT AND THE FUNDS.............................. 11
Protective Life Insurance Company........................................................................ 11
Protective Variable Life Separate Account................................................................ 11
The Funds................................................................................................ 11
Other Investors in the Funds............................................................................. 12
Addition, Deletion or Substitution of Investments........................................................ 13
Voting Rights............................................................................................ 13
THE POLICY................................................................................................. 14
Purchasing a Policy...................................................................................... 14
Cancellation Privilege................................................................................... 15
Premium Payments......................................................................................... 15
- Minimum Initial Premium Payment...................................................................... 15
- Planned Periodic Premium Payments.................................................................... 15
- Unscheduled Premium Payments......................................................................... 15
- Premium Payment Limitations.......................................................................... 15
- No-Lapse Guarantee................................................................................... 16
- Premium Payments Upon Increase in Face Amount........................................................ 16
Net Premium Allocations.................................................................................. 16
Policy Lapse and Reinstatement........................................................................... 17
- Lapse................................................................................................ 17
- Reinstatement........................................................................................ 17
Special Transfer Privilege............................................................................... 17
CALCULATION OF POLICY VALUES............................................................................... 17
Variable Account Value................................................................................... 17
- Determination of Units............................................................................... 18
- Determination of Unit Value.......................................................................... 18
- Net Investment Factor................................................................................ 18
Fixed Account Value...................................................................................... 18
POLICY BENEFITS............................................................................................ 18
Transfers of Policy Values............................................................................... 18
- General.............................................................................................. 18
- Telephone Transfers.................................................................................. 19
- Reservation of Rights................................................................................ 19
- Dollar Cost Averaging................................................................................ 19
Surrender Privilege...................................................................................... 19
Withdrawal Privilege..................................................................................... 20
Policy Loans............................................................................................. 20
- General.............................................................................................. 20
- Loan Collateral...................................................................................... 20
- Loan Repayment....................................................................................... 20
- Interest............................................................................................. 21
- Non-Payment of Policy Loan........................................................................... 21
- Effect of a Policy Loan.............................................................................. 21
Maturity Benefits........................................................................................ 21
Death Benefit Proceeds................................................................................... 22
- Calculation of Death Benefit Proceeds................................................................ 22
- Death Benefit Options................................................................................ 22
- Changing the Death Benefit Option.................................................................... 22
</TABLE>
3
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
- Changing the Face Amount............................................................................. 23
Payment Options.......................................................................................... 23
- Minimum Amounts...................................................................................... 24
- Other Requirements................................................................................... 24
THE FIXED ACCOUNT.......................................................................................... 24
The Fixed Account........................................................................................ 24
Interest Credited on Fixed Account Value................................................................. 25
Payments from the Fixed Account.......................................................................... 25
CHARGES AND DEDUCTIONS..................................................................................... 25
Premium Expense Charges.................................................................................. 25
- Sales Charge......................................................................................... 25
- Federal Tax Charge................................................................................... 25
- Other Taxes.......................................................................................... 25
- Premium Tax Charge................................................................................... 26
Monthly Deduction........................................................................................ 26
- Cost of Insurance Charge............................................................................. 26
- Legal Considerations Relating to Sex -- Distinct Premium Payments and Benefits....................... 27
- Monthly Administration Fee........................................................................... 27
- Supplemental Benefit and/or Rider Charges............................................................ 28
- Mortality and Expense Risk Charge.................................................................... 28
Transfer Fee............................................................................................. 28
Surrender Charge (Contingent Deferred Sales Charges)..................................................... 28
Withdrawal Charge........................................................................................ 29
Fund Expenses............................................................................................ 29
EXCHANGE PRIVILEGE......................................................................................... 30
Effect of the Exchange Offer............................................................................. 32
- Tax Considerations................................................................................... 32
- Sales Commissions.................................................................................... 32
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES, DEATH BENEFITS AND ACCUMULATED
PREMIUMS.................................................................................................. 32
OTHER POLICY BENEFITS AND PROVISIONS....................................................................... 42
Limits on Rights to Contest the Policy................................................................... 42
- Incontestability..................................................................................... 42
- Suicide Exclusion.................................................................................... 42
Changes in the Policy or Benefits........................................................................ 42
- Misstatement of Age or Sex........................................................................... 42
- Other Changes........................................................................................ 42
Suspension or Delay of Payments.......................................................................... 42
Reports to Policy Owners................................................................................. 42
Assignment............................................................................................... 42
Arbitration.............................................................................................. 43
Supplemental Benefits and/or Riders...................................................................... 43
- Children's Term Life Insurance Rider................................................................. 43
- Accidental Death Benefit Rider....................................................................... 43
- Disability Benefit Rider............................................................................. 43
- Guaranteed Insurability Rider........................................................................ 43
- Protected Insurability Benefit Rider................................................................. 43
Reinsurance.............................................................................................. 43
USES OF THE POLICY......................................................................................... 44
TAX CONSIDERATIONS......................................................................................... 44
Introduction............................................................................................. 44
</TABLE>
4
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Tax Status of Protective Life............................................................................ 44
Taxation of Life Insurance Policies...................................................................... 45
- Tax Status of the Policy............................................................................. 45
-- Diversification Requirements....................................................................... 45
-- Ownership Treatment................................................................................ 45
- Tax Treatment of Life Insurance Death Benefit Proceeds............................................... 46
- Tax Deferral During Accumulation Period.............................................................. 46
Policies Which Are Not MEC's............................................................................. 46
-- Tax Treatment of Withdrawals Generally............................................................. 46
-- Certain Distributions Required by the Tax Law in the First 15 Policy Years......................... 46
-- Tax Treatment of Loans............................................................................. 46
Policies Which Are MEC's................................................................................. 47
-- Characterization of a Policy as a MEC.............................................................. 47
-- Tax Treatment of Withdrawals, Loans, Assignments and Pledges under MECs............................ 47
-- Penalty Tax........................................................................................ 47
-- Aggregation of Policies............................................................................ 47
- Treatment of Maturity Benefits and Extension of Maturity Date........................................ 48
- Actions to Ensure Compliance with the Tax Law........................................................ 48
- Other Considerations................................................................................. 48
Federal Income Tax Withholding........................................................................... 48
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE................................................... 48
Sale of the Policies..................................................................................... 48
Protective Life Directors and Executive Officers......................................................... 49
State Regulation......................................................................................... 50
Additional Information................................................................................... 50
Experts.................................................................................................. 50
Legal Matters............................................................................................ 50
Financial Statements..................................................................................... 51
APPENDICES
A-Examples of Death Benefit Options...................................................................... A-1
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, THE PROSPECTUS OF THE FUNDS, OR THE STATEMENT OF ADDITIONAL
INFORMATION OF THE FUNDS.
5
<PAGE>
DEFINITIONS OF TERMS
ATTAINED AGE -- The Insured's age as of the nearest birthday on the Policy
Effective Date, plus the number of complete Policy Years since the Policy
Effective Date.
BENEFICIARY -- The person to whom the Death Benefit Proceeds are paid upon the
death of the Insured. Primary, contingent, and irrevocable Beneficiaries may be
named.
CANCELLATION PERIOD -- Period shown in the Policy during which the Owner may
exercise the cancellation privilege and return the Policy for a refund.
CASH VALUE -- Policy Value minus any applicable Surrender Charge.
CODE -- The Internal Revenue Code of 1986, as amended.
DEATH BENEFIT -- The amount payable to the Beneficiary under a Death Benefit
Option before adjustments if the Insured dies while the Policy is in force.
DEATH BENEFIT OPTION -- One of two options that an Owner may select for the
computation of Death Benefit Proceeds. Face Amount (Option 1), or Face Amount
Plus Policy Value (Option 2).
DEATH BENEFIT PROCEEDS -- The amount payable to the Beneficiary if the Insured
dies while the Policy is in force and is equal to the Death Benefit plus any
death benefit under any rider to the Policy less any Policy Debt less unpaid
monthly deductions if the Insured dies during a
grace period.
FACE AMOUNT -- A dollar amount selected by the Owner and shown in the Policy.
FIXED ACCOUNT -- Part of Protective Life's General Account to which Policy Value
may be transferred or Net Premiums allocated under a Policy.
FIXED ACCOUNT VALUE -- The Policy Value in the Fixed Account.
FUND -- An investment portfolio of Protective Investment Company or any other
open-end management investment company or unit investment trust in which a
Sub-Account invests.
GENERAL ACCOUNT -- Protective Life's assets other than those allocated to the
Variable Account or another separate account.
HOME OFFICE -- 2801 Highway 280 South, Birmingham, Alabama 35223.
INITIAL FACE AMOUNT -- The Face Amount on the Policy Effective Date.
INSURED -- The person whose life is covered by the Policy.
ISSUE AGE -- The Insured's age as of the nearest birthday on the Policy
Effective Date.
ISSUE DATE -- The date the Policy is issued. The Issue Date may be a later date
than the Policy Effective Date if the initial premium payment is received at the
Home Office before the Issue Date.
LAPSE -- Termination of the Policy at the expiration of the grace period while
the Insured is still living.
LOAN ACCOUNT -- An account within Protective Life's general account to which
Fixed Account Value and/or Variable Account Value is transferred as collateral
for Policy loans.
LOAN ACCOUNT VALUE -- The Policy Value in the Loan Account.
MATURITY DATE -- The date shown in the Policy on which the Owner(s) will be paid
the Surrender Value, if any, provided the Insured is still living. It is the
Policy Anniversary nearest the Insured's 95th birthday. The Maturity Date may be
changed provided it is not less than 20 years from the Policy Effective Date.
MINIMUM MONTHLY PREMIUM -- For Policies issued on Insured's Issue Age below 70,
the minimum amount of premium payments that must be paid in order for the
No-Lapse Guarantee to remain in effect.
MONTHLY ANNIVERSARY DAY -- The same day as the Policy Effective Date.
NET AMOUNT AT RISK -- As of any Monthly Anniversary Day, the Death Benefit under
the Policy (discounted for the upcoming Policy month) less the Policy Value
(before deduction of the
6
<PAGE>
monthly administration fee and monthly supplemental and/or rider benefit charges
on that day).
NET ASSET VALUE PER SHARE -- The value per share of any Fund as computed on any
Valuation Day.
NET PREMIUM -- A premium payment minus the applicable Premium expense charges.
OWNER, YOU, YOUR -- The person(s) who owns a Policy.
PLANNED PERIODIC PREMIUM PAYMENT -- The premium determined by the Owner as a
level amount that he or she (or they) plan to pay at fixed intervals over a
specified period of time.
POLICY ANNIVERSARY -- The same day in each Policy Year as the Policy Effective
Date.
POLICY DEBT -- The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE -- The date shown in the Policy as of which coverage under
the Policy begins. Policy Years are measured from the Policy Effective Date. The
Policy Effective Date is never the 29th, 30th, or 31st of a month.
POLICY VALUE -- The sum of the Variable Account Value, the Fixed Account Value,
and the Loan Account Value.
POLICY YEAR -- Each period of twelve months commencing with the Policy Effective
Date and each Policy Anniversary thereafter.
PREMIUM PAYMENT(S) OR PREMIUMS -- Payments made by the Owner(s) to purchase the
Policy.
PROTECTIVE LIFE, WE, US, OUR, COMPANY -- Protective Life Insurance Company.
SUB-ACCOUNT -- A separate division of the Variable Account established to invest
in a particular Fund.
SUB-ACCOUNT VALUE -- The Policy Value in a Sub-Account.
SURRENDER VALUE -- The Cash Value minus any outstanding Policy Debt.
UNIT -- A unit of measurement used to calculate Sub-Account Values.
UNSCHEDULED PREMIUM PAYMENT -- Any Premium Payment other than a Planned Periodic
Premium Payment.
VALUATION DAY -- Each day the New York Stock Exchange is open for business
except federal and other holidays and days when Protective Life is not open for
business.
VALUATION PERIOD -- The period commencing with the close of regular trading on
the New York Stock Exchange on any valuation day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT -- Protective Variable Life Separate Account, a separate
investment account of Protective Life into which Net Premiums may be allocated.
VARIABLE ACCOUNT VALUE -- The sum of all Sub-Account Values.
WITHDRAWAL -- A withdrawal by the Owner of an amount of Cash Value that is less
than the Surrender Value.
WRITTEN NOTICE -- A written notice or request that is received by Protective
Life at the Home Office.
7
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
THE FOLLOWING SUMMARY OF PROSPECTUS INFORMATION AND DIAGRAM OF THE POLICY
SHOULD BE READ IN CONJUNCTION WITH THE DETAILED INFORMATION APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE DESCRIPTION OF THE POLICY IN
THIS PROSPECTUS ASSUMES THAT THE POLICY IS IN FORCE AND THERE IS NO OUTSTANDING
POLICY DEBT.
The Policy is similar in many ways to fixed-benefit life insurance. As with
fixed-benefit life insurance, the Owner of a Policy makes premium payments for
insurance coverage on the person insured. Also, like many fixed-benefit life
insurance policies, the Policy provides for accumulation of Net Premiums and a
Surrender Value which is payable if the Policy is surrendered during the
Insured's lifetime. As with fixed-benefit life insurance, the Surrender Value
during the early Policy Years is likely to be substantially lower than the
aggregate Premium Payments made.
However, the Policy differs from fixed-benefit life insurance in several
important respects. Unlike fixed-benefit life insurance, the Death Benefit may
and the Policy Value will increase or decrease to reflect the investment
performance of any Sub-Accounts to which Policy Value is allocated. Also, unless
the entire Policy Value is allocated to the Fixed Account, there is no
guaranteed minimum Surrender Value. If Policy Value is insufficient to pay
charges due, then, after a grace period, the Policy will lapse without value.
See "Policy Lapse and Reinstatement". However, Protective Life guarantees that
the Policy will remain in force during the first ten Policy Years (for Insureds
Issue Age 0 through 64) or the first five Policy Years (for Insureds Issue Age
65 through 69) as long as certain requirements related to the Minimum Monthly
Premium have been met. See "Premium Payments -- No-Lapse Guarantee," and "Policy
Loans". If a Policy lapses while loans are outstanding, certain amounts may
become subject to income tax and a 10% penalty tax. See "Tax Considerations".
The most important features of the Policy, such as charges, cash benefits,
death benefits, and calculation of Policy values, are summarized in the diagram
on the following pages.
PURPOSE OF THE POLICY. The Policy is designed to be a long-term investment
providing insurance benefits. A prospective Owner should evaluate the Policy in
conjunction with other insurance policies he or she may own, as well as their
need for insurance and the Policy's long-term investment potential. It may not
be advantageous to replace existing insurance coverage with the Policy. In
particular, replacement should be carefully considered if the decision to
replace existing coverage is based solely on a comparison of Policy
illustrations (see below).
POLICY BENEFITS. Two Death Benefit options are available under the Policy:
a level death benefit ("Option 1") and a variable death benefit ("Option 2").
Protective Life guarantees that the Death Benefit Proceeds will never be less
than the Face Amount of insurance (less any outstanding Policy Debt and past due
charges) as long as sufficient premiums are paid to keep the Policy in force.
The Policy provides for a Surrender Value that can be obtained by surrendering
the Policy. The Policy also permits loans and withdrawals, within limits.
ILLUSTRATIONS. Illustrations in this prospectus or used in connection with
the purchase of a Policy are based on HYPOTHETICAL rates of return. THESE RATES
ARE NOT GUARANTEED. They are illustrative only and SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE. Actual rates of return may be
higher or lower than those reflected in Policy illustrations, and therefore,
actual Policy values will be different from those illustrated.
TAX CONSIDERATIONS. Protective Life intends for the Policy to satisfy the
definition of a life insurance contract under Section 7702 of the Internal
Revenue Code of 1986, as amended. A Policy may be a "modified endowment
contract" under federal tax law depending upon the amount of Premium Payments
made in relation to the Death Benefit provided under the Policy. Protective Life
will monitor Policies and will attempt to notify you on a timely basis if your
Policy is in jeopardy of becoming a modified endowment contract. For further
discussion of the tax status of a Policy and the tax consequences of being
treated as a life insurance contract or a modified endowment contract,
see "Tax Considerations".
8
<PAGE>
CANCELLATION PRIVILEGE AND SPECIAL TRANSFER RIGHT. For a limited time after
the Policy is issued, you have the right to cancel your Policy and receive a
refund. (See "Cancellation Privilege"). In certain states, until the end of this
"Cancellation Period," Protective Life reserves the right to allocate Net
Premium payments to the Sub-Account investing in the Protective Money Market
Fund. (See "Net Premium Allocations"). At any time within 24 Policy months after
the Issue Date, you may transfer the entire Variable Account Value to the Fixed
Account without payment of any transfer fee and without the transfer counting as
one of the 12 transfers per Policy Year that may be made without incurring a
transfer fee. Such a transfer will result in future Net Premium Payments being
allocated to the Fixed Account and effectively "converts" the Policy into a
policy that provides fixed (non-variable) benefits. See "Special Transfer
Privilege".
OWNER INQUIRIES. If you have any questions, you may write or call
Protective Life's Home Office at 2801 Highway 280 South, Birmingham, Alabama
35223, 1-800-866-3555.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
- You select a payment plan but are not required to pay premium payments
according to the plan. You can vary the amount and frequency and can skip
planned premium payments. See page 15 for rules and limits.
- The Policy's minimum initial premium payment and planned premium payment
depend on the Insured's age, sex and underwriting class, Face Amount
selected, and any supplemental benefits and/or riders.
- Unscheduled premium payments may be made, within limits. See page 15.
DEDUCTIONS FROM PREMIUM PAYMENTS
- For sales charge (2.75% of each premium payment in Policy Years 1 through
10; 0.75% of each premium payment in Policy Years 11 and thereafter). See
page 25.
- For federal taxes (1.25% of each premium payment in all Policy Years). See
page 25.
- For state and local premium taxes (2.25% of each premium payment). See pages
25 and 26.
NET PREMIUM PAYMENTS
- You direct the allocation of Net Premium payments among seven Sub-Accounts
and the Fixed Account. See page 16 for rules and limits on Net Premium
payment allocations.
- The Sub-Accounts invest in corresponding Funds. See page 11. Funds available
are:
Protective Growth and Income Fund Protective Select Equity Fund
Protective International Equity Fund Protective Small Cap Equity Fund
Protective Global Income Fund Protective Money Market Fund
Protective Capital Growth Fund
- Interest is credited on amounts allocated to the Fixed Account at a minimum
guaranteed rate of 4%. See page 24 for rules and limits on Fixed Account
allocations.
9
<PAGE>
DEDUCTIONS FROM POLICY VALUE
- Monthly Deduction for cost of insurance, administration fees, mortality and
expense risk charges and charges for any supplemental and/or rider benefits.
Administration fees are currently $31.00 per month the first Policy Year and
$6.00 per month thereafter, plus for the 12 Policy months following an
increase in Face Amount, a charge based on the increase. Monthly Mortality
and Expense Risk Charges are currently equal to .075% multiplied by the
Variable Account Value, which is equivalent to an annual rate of 0.90% of
such amount during Policy Years 1 through 10; and in Policy Years 11 and
thereafter monthly Mortality and Expense Risk Charge is currently equal to
.021% multiplied by the Variable Account Value, which is equivalent to an
annual rate of .25% of such amount. This charge is not deducted from Fixed
Account Value. See pages 26 through 28.
DEDUCTIONS FROM ASSETS
- Investment advisory fees and fund operating expenses are also deducted from
the assets of each Fund. See page 29.
POLICY VALUE
- Is equal to Net Premiums, as adjusted each Valuation Day to reflect
Sub-Account investment experience, interest credited on Fixed Account Value,
charges deducted and other Policy transactions (such as transfers and
withdrawals). See page 17.
- Varies from day to day. There is no minimum guaranteed Policy Value. The
Policy may lapse if the Policy Value is insufficient to cover a Monthly
Deduction due. See pages 16 and 17.
- Can be transferred between and among the Sub-Accounts and the Fixed Account.
A transfer fee may apply if more than 12 transfers are made in a Policy
Year. See page 18 for rules and limits. Policy loans reduce the amount
available for allocations and transfers.
- Is the starting point for calculating certain values under a Policy, such as
the Cash Value, Surrender Value, and the Death Benefit used to determine
Death Benefit Proceeds.
CASH BENEFITS
- - Loans may be taken for amounts up to 90% of Surrender Value, at an
effective annual interest rate of 6.0% during the first 10 Policy Years
and 4.0% thereafter. See page 20 for rules and limits.
- - Withdrawals generally can be made provided there is sufficient remaining
Surrender Value. A withdrawal charge of the lesser of $25 or 2% of the
withdrawal amount requested will apply. See page 20 for rules and limits.
- - The Policy may be surrendered in full at any time for its Surrender
Value. A declining deferred sales charge of up to 27% of premium payments
made in the first Policy Year (or 27% of a "SEC guideline annual
premium," if less) is assessed on surrenders during the first 14 Policy
Years. See page 28.
- - Payment options are available. See page 24.
DEATH BENEFITS
- - Available as lump sum or under a variety of payment options.
- - For most Policies, the minimum Face Amount of $50,000.
- - Two Death Benefit options available: Option 1, equal to the Face Amount,
and Option 2, equal to the Face Amount plus Policy Value. See page 22.
- - Flexibility to change the Death Benefit option and Face Amount. See page
22 for rules and limits.
- - Supplemental benefits and/or riders may be available. See page 43.
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GENERAL INFORMATION ABOUT PROTECTIVE LIFE,
THE VARIABLE ACCOUNT AND THE FUNDS
PROTECTIVE LIFE INSURANCE COMPANY
Protective Life is a Tennessee stock life insurance company. Founded in
1907, Protective Life offers individual life and health insurance, annuities,
group life and health insurance, and guaranteed investment contracts. Protective
Life is currently licensed to transact life insurance business in 49 states and
the District of Columbia. As of December 31, 1995, Protective Life had total
assets of approximately $7.2 billion. Protective Life is the principal operating
subsidiary of Protective Life Corporation ("PLC"), an insurance holding company
whose stock is traded on the New York Stock Exchange. PLC, a Delaware
corporation, had consolidated assets of approximately $7.2 billion at
December 31, 1995.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
Protective Variable Life Separate Account is a separate investment account
of Protective Life established under Tennessee law by the board of directors of
Protective Life on February 22, 1995. The Variable Account is registered with
the Securities and Exchange Commission ("SEC") as a unit investment trust under
the Investment Company Act of 1940 (the "1940 Act") and is a "separate account"
within the meaning of the federal securities laws. This registration does not
involve supervision by the SEC of the management or investment policies of
practices or the Variable Account.
Protective Life owns the assets of the Variable Account. These assets are
held separate from other assets and are not part of Protective Life's General
Account. Assets of the Variable Account equal to the reserves or other contract
liabilities of the Variable Account will not be charged with liabilities that
arise from any other business that Protective Life conducts. Protective Life may
transfer to its General Account any assets of the Variable Account which exceed
the reserves and other contract liabilities of the Variable Account (which
always are at least equal to the aggregate Surrender Values under the Policies).
Protective Life may accumulate in the Variable Account the charge for mortality
and expense risks and investment results applicable to those assets that are in
excess of the reserves and other contract liabilities related to the Policies.
Protective Life is obligated to pay all benefits provided under the Policies.
The Variable Account is divided into Sub-Accounts. The income, gains or
losses, whether or not realized, from the assets of each Sub-Account are
credited to or charged against that Sub-Account without regard to any other
income, gains or losses of Protective Life. The Variable Account currently has
seven Sub-Accounts: Growth and Income Sub-Account, International Equity
Sub-Account, Global Income Sub-Account, Select Equity Sub-Account, Small Cap
Equity Sub-Account, Money Market Sub-Account and Capital Growth Sub-Account. The
assets of each Sub-Account are invested exclusively in shares of a corresponding
Fund. In the future, the Variable Account may include other Sub-Accounts that
are not available under the Policies and are not otherwise discussed in this
Prospectus.
THE FUNDS
Each Sub-Account invests in shares of Protective Investment Company ("PIC"),
a "series" type of investment company registered with the SEC as an open-end
management investment company. PIC currently issues seven classes or "series" of
stock, each of which represents an interest in a separate investment portfolio
or Fund. New Funds, which may or may not be available as investments under the
Policies, may be established in the future. Each Fund has its own investment
objective(s) and the income and losses of each are determined separately. The
investment objective(s) of the Funds are briefly summarized below.
PROTECTIVE GROWTH AND INCOME FUND. This Fund seeks long-term growth of
capital and growth of income. This Fund will pursue its objectives by
investing, under normal circumstances, at least 65% of its total assets in
equity securities having favorable prospects of capital appreciation and/ or
dividend paying ability.
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PROTECTIVE INTERNATIONAL EQUITY FUND. This Fund seeks long-term capital
appreciation. This Fund will pursue its objective by investing, primarily in
equity and equity-related securities of companies that are organized outside
the United States or whose securities are primarily traded outside the
United States.
PROTECTIVE GLOBAL INCOME FUND. This Fund seeks high total return,
emphasizing current income and, to a lesser extent, providing opportunities
for capital appreciation. This Fund will pursue its objectives by investing
primarily in high quality fixed-income securities of U.S. and foreign
issuers and through foreign currency transactions.
PROTECTIVE SELECT EQUITY FUND. This Fund seeks a total return
consisting of capital appreciation plus dividend income. This Fund will
pursue its objective by investing, under normal circumstances, at least 90%
of its total assets in equity securities selected using both fundamental
research and a variety of quantitative techniques that seek to maximize the
Fund's reward to risk ratio.
PROTECTIVE SMALL CAP EQUITY FUND. This Fund seeks long-term capital
growth. This Fund will pursue its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities of
companies with public stock market capitalizations of $1 billion or less at
the time of investment.
PROTECTIVE MONEY MARKET FUND. This Fund seeks to maximize current
income to the extent consistent with the preservation of capital and
maintenance of liquidity. This Fund will pursue its objective by investing
exclusively in high quality money market instruments. AN INVESTMENT IN THE
MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT
AND THE FUND CANNOT ASSURE THAT IT WILL BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1 PER SHARE.
PROTECTIVE CAPITAL GROWTH FUND. This Fund seeks long-term capital
growth. The Fund will pursue its objective by investing, under normal
circumstances, at least 65% of its total assets in equity securities having
long-term capital appreciation potential.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND POLICIES OF ANY OF THE
FUNDS WILL
BE ACHIEVED.
MORE DETAILED INFORMATION CONCERNING THE INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS OF THE FUNDS, THE EXPENSES OF THE FUNDS, THE RISKS ATTENDANT TO
INVESTING IN THE FUNDS AND OTHER ASPECTS OF THEIR OPERATIONS CAN BE FOUND IN THE
CURRENT PROSPECTUS FOR THE FUNDS WHICH ACCOMPANIES THIS PROSPECTUS AND THE
CURRENT STATEMENT OF ADDITIONAL INFORMATION FOR THE FUNDS. THE FUNDS' PROSPECTUS
SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION
OF NET PREMIUMS OR TRANSFERS AMONG THE SUB-ACCOUNTS.
OTHER INVESTORS IN THE FUNDS
PIC currently sells shares only to the Variable Account, Protective Variable
Annuity Separate Account, and directly to Protective Life. PIC may in the future
sell shares to other separate accounts of Protective Life or its life insurance
company affiliates supporting other variable annuity contracts or variable life
insurance contracts. In addition, upon obtaining regulatory approval, PIC may
sell shares to certain retirement plans qualifying under Section 401 of the
Code. Protective Life currently does not foresee any disadvantages to Owners
that would arise from the sale of shares to separate accounts supporting its
variable annuity contracts or those of its affiliates, or from the possible sale
of shares to separate accounts of its affiliates supporting variable life
insurance contracts or from the possible sale of shares to retirement plans.
However, the board of directors of PIC will monitor events in order to identify
any material irreconcilable conflicts that might arise from the sale of shares
to separate accounts supporting variable annuity contracts or that might
possibly arise if such shares were also offered to support variable life
insurance contracts of its affiliates or to retirement plans. In event of such a
conflict, the board of directors of PIC would determine what action, if any,
should be taken in response to the conflict. In addition, if Protective Life
believes that the PIC's response to any
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such conflicts insufficiently protects Owners, it will take appropriate action
on its own, including withdrawing the Variable Account's investment in the
Funds. (See the prospectus for the Funds for more detail.)
Investment Distributors Advisory Services, Inc. ("IDASI") serves as the
investment manager of the Funds. IDASI, in turn, has retained Goldman Sachs
Asset Management as the investment adviser of Protective Money Market Fund,
Protective Select Equity Fund, Protective Capital Growth Fund, Protective Small
Cap Equity Fund, and Protective Growth and Income Fund. IDASI has retained
Goldman Sachs Asset Management International as the investment adviser of
Protective International Equity Fund and Protective Global Income Fund. Goldman
Sachs Asset Management is a separate operating division of Goldman, Sachs & Co.
and Goldman Sachs Asset Management International is an affiliate of Goldman,
Sachs & Co.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Protective Life reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares that are held in
the Variable Account or that the Variable Account may purchase. If the shares of
a Fund are no longer available for investment or if in Protective Life's
judgment further investment in any Fund should become inappropriate in view of
the purposes of the Variable Account, Protective Life may redeem the shares, if
any, of that Fund and substitute shares of another Fund. Protective Life will
not substitute any shares attributable to a Policy's interest in the Variable
Account without notice and prior approval of the SEC and state insurance
authorities, to the extent required by the 1940 Act or other applicable law.
Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Ac-count, each of which would invest in shares corresponding to
a one of the Funds or another Fund. Subject to applicable law and any required
SEC approval, Protective Life may, in its sole discretion, establish new
Sub-Accounts or eliminate one or more Sub-Accounts if marketing needs, tax
considerations or investment conditions warrant. Any new Sub-Accounts may be
made available to existing Owner(s) on a basis to be determined by Protective
Life.
If any of these substitutions or changes are made, Protective Life may by
appropriate endorsement change the Policy to reflect the substitution or other
change. If Protective Life deems it to be in the best interest of Owner(s), and
subject to any approvals that may be required under applicable law, the Variable
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, or
it may be combined with other Protective Life separate accounts. Protective Life
reserves the right to make any changes to the Variable Account required by the
1940 Act or other applicable law or regulation.
VOTING RIGHTS
Protective Life is the legal owner of Fund shares held by the Sub-Accounts
and as such has the right to vote on all matters submitted to shareholders of
the Funds. However, in accordance with applicable law, Protective Life will vote
shares held in the Sub-Accounts at meetings of shareholders of PIC or the Funds
in accordance with instructions received from Owners with Policy Value in the
Sub-Accounts. Should the 1940 Act or any regulation thereunder be amended, or
should the current interpretation thereof change, or Protective Life determines
that it is permitted to vote such shares in its own right, it may elect to do
so.
Protective Life will send Owners voting instruction forms and other voting
materials (such as Fund proxy statements, reports and other proxy materials)
prior to shareholders meetings. The number of votes as to which an Owner may
give instructions is calculated separately for each Sub-Account and may include
fractional votes.
The number of votes attributable to a Sub-Account for an Owner is determined
by applying the Owner's percentage interest, if any, in a particular Sub-Account
to the total number of votes attributable to that Sub-Account. An Owner holds a
voting interest in each Sub-Account to which Variable Policy Value is allocated
under his or her Policy. Owners only have voting interests while the Insured is
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alive. The number of votes for which an Owner may give instructions is
determined as of the date coincident with the date established by PIC for
determining shareholders eligible to vote at the relevant meeting of each Fund.
Shares as to which no timely instructions are received and shares held
directly by Protective Life are voted by Protective Life in proportion to the
voting instructions that are received with respect to all Policies participating
in a Sub-Account. Voting instructions to abstain on any item are applied to
reduce the votes eligible to be cast on that item.
Protective Life may, if required by state insurance officials, disregard
Owner voting instructions if such instructions would require shares to be voted
so as to cause a change in sub-classification or investment objectives of one or
more of the Funds, or to approve or disapprove the investment management
agreement or an investment advisory agreement. In addition, Protective Life may
under certain circumstances disregard voting instructions that would require
changes in the investment management agreement, investment manager, an
investment advisory agreement or an investment adviser of one or more of the
Funds, provided that Protective Life reasonably disapproves of such changes in
accordance with applicable regulations under the 1940 Act. If Protective Life
ever disregards voting instructions, Owners will be advised of that action and
of the reasons for such action in the next semiannual report.
THE POLICY
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed
application (which We must approve) and an initial Premium Payment through a
licensed representative of Protective Life who is also a registered
representative of a broker-dealer having a distribution agreement with
Investment Distributors, Inc. ("IDI"). The initial Premium Payment must be an
amount at least equal to the minimum required. See "Premium Payments," below.
Protective Life requires satisfactory evidence of the Insured's insurability,
which may include a medical examination of the Insured. Generally, Protective
Life will issue a Policy covering an Insured up to age 75 if evidence of
insurability satisfies Protective Life's underwriting rules. Acceptance of an
application depends on Protective Life's underwriting rules, and Protective Life
reserves the right to reject an application for any reason. With the consent of
the Owner, a Policy may be issued on a basis other than that applied for (I.E.,
on the basis of a revised application). A POLICY IS ISSUED AFTER PROTECTIVE LIFE
APPROVES THE APPLICATION AND RECEIVES THE MINIMUM INITIAL PREMIUM PAYMENT.
Insurance coverage under a Policy begins on the Policy Effective Date which
generally is also the Issue Date. If however, the initial Premium Payment is
submitted with the application and the Policy is issued as applied for in the
application, the Policy Effective Date is the later of the date that the
application is signed or any required medical examination is completed.
Temporary life insurance coverage also may be provided under the terms of a
temporary insurance agreement. In accordance with the terms of the temporary
life insurance agreement, temporary life insurance coverage may not exceed
$250,000 and may not be in effect for more than 90 days.
In order to obtain a more favorable Issue Age, Protective Life may permit
the Owner to "backdate" a Policy by electing a Policy Effective Date up to six
months prior to the date of the original application. Charges for the Monthly
Deduction for the backdated period are deducted as of the new Policy Effective
Date.
The Owner of the Policy may exercise all rights provided under the Policy.
The Insured is the Owner, unless a different person is named as Owner in the
application. By Written Notice while the Insured is living, the Owner may name a
Contingent Owner or a new Owner. If the application names more than one person
as Owner, they are joint Owners. In this event, the exercise of any right under
the Policy (such as transfers of Policy Values) requires the authorization of
all Owners. Unless the Owner provides otherwise, in the event of one joint
Owner's death, ownership passes to any surviving
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joint Owner(s). Unless a contingent Owner has been named, ownership of the
Policy passes to the estate of the last surviving Owner upon his or her death. A
change in Owner may have tax consequences. See "Tax Considerations".
CANCELLATION PRIVILEGE
You may cancel your Policy for a refund during the Cancellation Period by
returning it to Our Home Office or to the sales representative who sold it along
with a written cancellation request. The Cancellation Period is determined by
the law of the state in which the application is signed and is shown in your
Policy. In most states it expires at the latest of (1) ten days after you
receive your Policy, (2) 45 days after you sign your application, or (3) 10 days
after Protective Life mails or delivers a Notice of Right of Withdrawal. Return
of the Policy by mail is effective upon receipt by Us. We will treat the Policy
as if it had never been issued. Within seven calendar days after receiving the
returned Policy, Protective Life will refund (i) the difference between premiums
paid and amounts allocated to the Fixed Account or the Variable Account, plus
(ii) Fixed Account Value determined as of the date the returned Policy is
received, plus (iii) Variable Account Value determined as of the date the
returned Policy is received. This amount may be more or less than the aggregate
Premium Payments. In states where required, Protective Life will refund Premium
Payments.
PREMIUM PAYMENTS
MINIMUM INITIAL PREMIUM PAYMENT. The minimum initial Premium Payment
required depends on a number of factors, including the age, sex and rate class
of the proposed Insured, the Initial Face Amount requested by the applicant, any
supplemental benefits and/or riders requested by the applicant and the Planned
Periodic Premium Payments that the applicant selects. See "Planned Periodic
Premium Payments," below. Consult your sales representative for information
about the Initial Premium required for the coverage you desire.
PLANNED PERIODIC PREMIUMS PAYMENTS. In the application the Owner selects a
plan for paying level Premium Payments at specified intervals (e.g., quarterly,
semi-annually or annually) until the Maturity Date. At the Owner's election,
Protective Life will also arrange for payment of Planned Periodic Premiums on a
monthly basis (on any day except the 29th, 30th, or 31st of a month) under a
pre-authorized payment arrangement. You are not required to pay Premium Payments
in accordance with these plans; rather, you can pay more or less than planned or
skip a Planned Periodic Premium Payment entirely. (See, however, "Policy Lapse
and Reinstatement"). Subject to the limits described below, you can change the
amount and frequency of Planned Periodic Premium Payments whenever you want by
Written Notice to Us.
Unless you have arranged to pay Planned Periodic Premium Payments by
pre-authorized payment arrangement or have otherwise requested, you will be sent
reminder notices for Planned Periodic Premium Payments.
UNSCHEDULED PREMIUM PAYMENTS. Subject to the limitations described below,
additional Unscheduled Premium Payments may be paid in any amount and at any
time. By Written Notice, the Owner may specify that all Unscheduled Premium
Payments are to be applied as repayments of Policy Debt, if any.
PREMIUM PAYMENT LIMITATIONS. Premium Payments may be made by any method
acceptable to Us. If by check, the check must be from an Owner (or the Owner's
designee other than a sales representative), payable to Protective Life
Insurance Company, and be dated prior to its receipt at the Home Office. No
Premium Payments are accepted after a Policy's Maturity Date.
Additional limitations apply to Premium Payments. Premium Payments must be
at least $150 ($50 if paid monthly by a pre-authorized payment arrangement) and
must be remitted to the Home Office. See "Net Premium Allocations. Protective
Life also reserves the right to limit the amount of any Premium Payment. In
addition, at any point in time aggregate Premium Payments made under a Policy
may not exceed guideline premium payment limitations for life insurance policies
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set forth in the Code. Protective Life will immediately refund any portion of
any Premium Payment that is determined to be in excess of the limits established
by law to qualify a Policy as a contract for life insurance. Protective Life
will monitor Policies and will attempt to notify the Owner on a timely basis if
his or her Policy is in jeopardy of becoming a modified endowment contract under
the Code. See "Tax Considerations".
"NO-LAPSE" GUARANTEE. In return for paying the Minimum Monthly Premium or
an amount equivalent thereto by the Monthly Anniversary Day, Protective Life
guarantees that a Policy will remain in force during the first ten Policy Years
(if the Insured's Issue Age is 0 through 64) or during the first five Policy
Years (if the Insured's Issue Age is 65 through 69), regardless of the Policy
Value, if, for each month that the Policy has been in force since the Policy
Effective Date, the total premiums paid less any withdrawals and Policy Debt is
greater than or equal to the Minimum Monthly Premium (shown in the Policy)
multiplied by the number of complete policy months since the Policy Effective
Date, including the current policy month. The Minimum Monthly Premium payment is
calculated for each Policy based on the age, sex and rate class of the Insured,
the requested Face Amount and any supplemental benefits and/or riders. The
"No-Lapse" Guarantee does not apply to Policies covering Insureds with an Issue
Age of 70 or above. The Company will not notify you in the event the No-Lapse
Guarantee is no longer in effect.
If you increase your Policy's Face Amount while the "No-Lapse" Guarantee is
in effect, Protective Life will NOT EXTEND the period of this guarantee. The
guarantee period is based on the initial Face Amount. However, upon an increase
in Face Amount, Protective Life will recalculate the Minimum Monthly Premium,
which will generally also increase. Protective Life will notify you of any
increase in the Minimum Monthly Premium and will amend your Policy to reflect
the change.
PREMIUM PAYMENTS UPON INCREASE IN FACE AMOUNT. Depending on the Policy
Value at the time of an increase in the Face Amount and the amount of the
increase requested, an additional Premium Payment may be necessary or a change
in the amount of Planned Periodic Premium Payments may be advisable. See "Death
Benefit Proceeds". You will be notified if a premium payment is necessary or a
change appropriate.
NET PREMIUM ALLOCATIONS
Owners must indicate in the application how Net Premium Payments are to be
allocated to the Sub-Accounts and/or to the Fixed Account. These allocation
instructions apply to both initial and subsequent Net Premium Payments. Owners
may change the allocation instructions in effect at any time by Written Notice.
Whole percentages must be used. The minimum percentage that may be allocated to
any Sub-Account or to the Fixed Account is 10% of Net Premium Payments and the
sum of allocations must add up to 100%.
For Policies issued in states where, upon cancellation during the
Cancellation Period, We return at least your Premium Payments, we reserve the
right to allocate your initial Net Premium Payment (and any subsequent Net
Premium Payments made during the Cancellation Period) to the Money Market
Sub-Account until the expiration of the number of days in the Cancellation
Period plus 6 days starting from the date that the Policy is mailed from the
Home Office. Thereafter, the Policy Value in the Money Market Sub-Account and
all Net Premium Payments will be allocated according to your allocation
instructions then in effect.
Planned Periodic Premium payments and unscheduled premium payments not
requiring additional underwriting will be credited to the Policy and the Net
Premium payments will be invested as requested on the Valuation Date they are
received by the Home Office. However, any premium payment in connection with an
increase in face amount will be allocated to the Money Market Sub-Account until
underwriting has been completed. When approved, the Policy Value in the Money
Market Sub-Account attributable to the resulting Net Premium payment will be
credited to the Policy and allocated in accordance to your allocation
instructions then in effect. If an additional premium payment is rejected,
Protective Life will return the premium payment immediately, without any
adjustment for investment experience.
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Unless designated by the Owner as a loan repayment, payments received from
Owners (other than Planned Periodic Premium Payments) are treated as Unscheduled
Premium Payments.
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, failure to make Planned
Periodic Premium Payments will not necessarily cause a Policy to lapse.
Conversely, making all Planned Periodic Premium Payments will not necessarily
prevent a Policy from lapsing. Rather, except when the "No-Lapse" Guarantee is
in effect, whether a Policy lapses depends on whether its Policy Value is
sufficient to cover the Monthly Deduction (See "Monthly Deduction") on the
Monthly Anniversary Day.
If the Policy Value on a Monthly Anniversary Day is less than the amount of
the Monthly Deduction due on that date and the "No-Lapse" Guarantee is not in
effect, the Policy will be in default and a grace period will begin. This could
happen if investment experience has been sufficiently unfavorable that it has
resulted in a decrease in Policy Value or the Policy Value has decreased because
you have not paid sufficient Net Premium Payments to offset prior Monthly
Deductions.
In the event of a Policy default, the Owner has a 61-day grace period to
make a Net Premium Payment sufficient to cover the current and past-due Monthly
Deductions. Protective Life will send to the Owner, at the last known address
and the last known address of any assignee of record, notice of the Premium
Payment required to prevent lapse. The grace period will begin when the notice
is sent. A Policy will remain in effect during the grace period. If the Insured
should die during the grace period, the Death Benefit proceeds payable to the
Beneficiary will reflect a reduction for the Monthly Deductions due on or before
the date of the Insured's death as well as any unpaid Policy Debt. See "Death
Benefit Proceeds". Unless the Premium Payment stated in the notice is paid
before the grace period ends, the Policy will lapse.
REINSTATEMENT. An Owner may reinstate a Policy within 5 years of its lapse
provided that: (1) a request for reinstatement is made by Written Notice, (2)
the Insured is still living, (3) the Maturity Date has not been reached, (4) the
Owner pays Net Premiums equal to (a) all Monthly Deductions that were due but
unpaid during the grace period, and (b) which are at least sufficient to keep
the reinstated Policy in force for three months, (5) the Insured provides
Protective Life with satisfactory evidence of insurability, (6) the Owner repays
or reinstates any Policy Debt which existed at the end of the grace period; and
(7) the Policy has not been surrendered. The "Approval Date" of a reinstated
Policy is the date that Protective Life approves the Owner's request for
reinstatement and requirements 1-7 above have been met.
SPECIAL TRANSFER PRIVILEGE
During the first 24 policy months following the Policy Effective Date, the
Owner may exercise a one-time Special Transfer Privilege by requesting that all
Variable Account Value be transferred to the Fixed Account. Exercise of the
Special Transfer Privilege does not count toward the 12 transfers that are
permitted each Policy Year without imposition of a transfer fee, and is not
subject to a transfer fee. Unless the Owner specifies otherwise, all subsequent
Net Premium Payments are allocated to the Fixed Account after the exercise of
the Special Transfer Privilege. Owners may, however, change this allocation by
Subsequent Written Notice.
CALCULATION OF POLICY VALUES
VARIABLE ACCOUNT VALUE
THE VARIABLE ACCOUNT VALUE REFLECTS THE INVESTMENT EXPERIENCE OF THE
SUB-ACCOUNTS TO WHICH IT IS ALLOCATED, ANY PREMIUM PAYMENTS ALLOCATED TO THE
SUB-ACCOUNTS, TRANSFERS IN OR OUT OF THE SUB-ACCOUNTS, OR ANY WITHDRAWALS OF
VARIABLE ACCOUNT VALUE. THERE IS NO GUARANTEED MINIMUM VARIABLE ACCOUNT VALUE. A
POLICY'S VARIABLE ACCOUNT VALUE THEREFORE DEPENDS UPON A NUMBER OF FACTORS. THE
VARIABLE ACCOUNT VALUE FOR A POLICY AT ANY TIME IS THE SUM OF THE SUB-ACCOUNT
VALUES FOR THE POLICY ON THE VALUATION DAY MOST RECENTLY COMPLETED.
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DETERMINATION OF UNITS. For each Sub-Account, the Net Premium Payment(s) or
Policy Value transferred are converted into Units. The number of Units credited
is determined by dividing the dollar amount directed to each Sub-Account by the
value of the Unit for that Sub-Account for the Valuation Day on which the Net
Premium Payment(s) or transferred amount is invested in the Sub-Account.
Therefore, Net Premium Payments allocated to or amounts transferred to a
Sub-Account under a Policy increase the number of Units of that Sub-Account
credited to the Policy.
DETERMINATION OF UNIT VALUE. The Unit value for each Sub-Account was
arbitrarily set at $10 when the Sub-Account began operations. Thereafter, the
Unit value at the end of every Valuation Day is the Unit value at the end of the
previous Valuation Day times the net investment factor, as described below. The
Sub-Account Value for a Policy is determined on any day by multiplying the
number of Units attributable to the Policy in that Sub-Account by the Unit value
for that Sub-Account on that day.
NET INVESTMENT FACTOR. The net investment factor is an index applied to
measure the investment performance of a Sub-Account from one Valuation Period to
the next. Each Sub-Account has a net investment factor for each Valuation Period
which may be greater or less than one. Therefore, the value of a Unit may
increase or decrease. The net investment factor for any Sub-Account for any
Valuation Period is determined by dividing (1) by (2), where:
(1) is the result of:
a. the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund to the Sub-Account, if the "ex-dividend" date occurs during
the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by Protective Life to have resulted from the operations of the
Sub-Account.
(2) is the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
FIXED ACCOUNT VALUE
The Fixed Account Value under a Policy at any time is equal to: (1) the Net
Premium Payment(s) allocated to the Fixed Account, plus (2) amounts transferred
to the Fixed Account, plus (3) interest credited to the Fixed Account, less (4)
transfers from the Fixed Account (including any transfer fees deducted), less
(5) withdrawals from the Fixed Account (including any withdrawal charges
deducted), less (6) surrender charges deducted in the event of a decrease in
Face Amount, less (7) monthly deductions. See "The Fixed Account," for a
discussion of how interest is credited to the Fixed Account.
POLICY BENEFITS
TRANSFERS OF POLICY VALUES
GENERAL. Upon receipt of Written Notice at any time on or after the later
of the following: (1) thirty days after the Policy Effective Date, or (2) six
days after the expiration of the Cancellation Period, you may transfer the Fixed
Account Value or any Policy Value in a Sub-Account to other Sub-Accounts or the
Fixed Account, subject to certain restrictions. Transfers (including telephone
transfers -- described below) are processed as of the date a request is received
at the Home Office. Protective Life may, however defer transfers under the same
conditions that payment of Death Benefit Proceeds, withdrawals and surrenders
may be delayed. See "Suspension or Delay of Payments". The minimum amount that
may be transferred is the lesser of $100 or the entire Policy Value in any
Sub-Account or the Fixed Account from which the transfer is made. If, after the
transfer, the Policy Value remaining in a Sub-Account(s) or the Fixed Account
would be less than $100, Protective Life reserves the right to transfer the
entire amount instead of the requested amount. The maximum
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amount which may be transferred from the Fixed Account in any Policy Year is the
greater of (1) $2500, or (2) 25% of the Fixed Account Value. We reserve the
right to limit transfers to 12 per Policy Year. For each additional transfer
over 12 in any Policy Year, We reserve the right to charge a transfer fee. The
transfer fee, if any, is deducted from the amount being transferred. See
"Transfer Fee".
TELEPHONE TRANSFERS. Transfers may be made upon instructions given by
telephone, provided the appropriate election has been made on the application or
written authorization is provided.
We will send you a confirmation of all instructions communicated by
telephone to determine if they are genuine. For telephone transfers we require a
form of personal identification prior to acting on instructions received by
telephone. We also make a tape-recording of the instructions given by telephone.
If we follow these procedures we are not liable for any losses due to
unauthorized or fraudulent instructions. We reserve the right to suspend
telephone transfer privileges at any time for any class of Policies.
RESERVATION OF RIGHTS. We reserve the right without prior notice to modify,
restrict, suspend or eliminate the transfer privileges (including telephone
transfers) at any time, for any class of Policies, for any reason. In
particular, we reserve the right not to honor transfer requests by a third party
holding a power of attorney from an Owner where that third party requests
simultaneous transfers on behalf of the Owners of two or more Policies.
DOLLAR-COST AVERAGING. If you elect at the time of application or at any
time thereafter by written notice to Protective Life, you may systematically and
automatically transfer, on a monthly or quarterly basis, specified dollar
amounts from or to the Fixed Account or any of the Sub-Account(s). This is known
as the dollar-cost averaging method of investment. By transferring on a
regularly scheduled basis as opposed to allocating the total amount at one
particular time, an Owner may be less susceptible to the impact of market
fluctuations in Sub-Account Unit Values. Protective Life, however, makes no
guarantee that the dollar-cost averaging method will result in a profit or
protect against loss.
To elect dollar-cost averaging, Fixed Account Value must be at least $5,000
at the time of election. Automatic transfers for dollar-cost averaging are
subject to all transfer restrictions other than the maximum transfer amount from
the Fixed Account restriction. You may elect dollar cost averaging for periods
of at least 12 months but no longer than 48 months. At least $100 must be
transferred each month or $300 each quarter. Dollar-cost averaging transfers may
commence on any day of the month that you request following six days after the
end of the Cancellation Period, except the 29th, 30th, or 31st.
Once elected, Protective Life will continue to process dollar-cost averaging
transfers until the earlier of the following: (1) the number of designated
transfers has been completed, or (2) the Fixed Account Value is depleted, (3)
the Owner, by Written Notice, instructs Protective Life to cease the automatic
transfers, (4) a grace period begins under the Policy, or (5) the maximum amount
of Policy Value has been transferred under a dollar-cost averaging election.
Automatic transfers made to facilitate dollar-cost averaging will not count
toward the 12 transfers permitted each Policy Year if Protective Life elects to
limit the number of transfers or impose the transfer fee. Protective Life
reserves the right to discontinue offering automatic dollar-cost averaging
transfers upon 30 days' written notice to the Owner.
SURRENDER PRIVILEGE
At any time prior to the Maturity Date while the Insured is still living,
You may surrender your Policy for its Surrender Value. Surrender Value is
determined as of the Valuation Day on or next following the day Written Notice
requesting the surrender, the Policy and any other required documents are
received by Protective Life. A Surrender Charge may apply. See "Surrender
Charges". The Surrender Value is paid in a lump sum unless the Owner requests
payment under a payment option.
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See "Payment Options". Payment is generally made within seven calendar days. See
"Suspension or Delay of Payments", and "Payments from the Fixed Account". A
Policy terminates upon surrender if payments are taken in one lump sum and
cannot later be reinstated.
WITHDRAWAL PRIVILEGE
At any time after the first Policy Year, an Owner, by Written Notice, may
make a withdrawal of Surrender Value in minimum amounts of $500. Protective Life
will withdraw the amount requested, plus a withdrawal charge, from Policy Value
as of the Valuation Day we receive the request. See "Withdrawal Charge".
The Owner may specify the amount of the withdrawal to be made from any
Sub-Account or the Fixed Account. If the Owner does not so specify, or if the
Sub-Account Value or Fixed Account Value is insufficient to carry out the
request, the withdrawal from each Sub-Account and the Fixed Account is based on
the proportion that such Sub-Account Value(s) and Fixed Account Value bears to
the Policy Value on the Valuation Day immediately prior to the withdrawal.
Payment is generally made within seven calendar days. See "Suspension or Delay
of Payments", and "Payments from the Fixed Account".
If Death Benefit Option 1 is in effect, Protective Life reserves the right
to reduce the Face Amount by the withdrawn amount (exclusive of withdrawal
charge). Protective Life may reject a withdrawal request if the withdrawal would
reduce the Face Amount below the minimum amount for which the Policy would be
issued under Protective Life's then-current rules, or if the withdrawal would
cause the Policy to fail to qualify as a life insurance contract under
applicable tax laws, as interpreted by Protective Life. If the Face Amount at
the time of the withdrawal includes increases from the Initial Face Amount and
the withdrawal requires a decrease of Face Amount, the reduction is made first
from the most recent increase, then from prior increases, if any, in reverse
order of their being made and finally from the Initial Face Amount.
POLICY LOANS
GENERAL. After the first Policy Anniversary and while the Insured is still
living, an Owner may borrow $500 or more from Protective Life using the Policy
as the security for the loan. Policy Loans must be requested by Written Notice
and the maximum amount that an Owner may borrow is an amount equal to 90% of the
Policy's Surrender Value on the date that the loan request is received.
Outstanding Policy Loans therefore reduce the amount available for new Policy
Loans. Loan proceeds generally are mailed within seven calendar days of the Loan
being approved. See "Suspension or Delay of Payments", and "Payments from the
Fixed Account".
LOAN COLLATERAL. When a Policy Loan is made, an amount equal to the Loan is
transferred out of the Sub-Accounts and the Fixed Account and into a Loan
Account established for the Policy. Like the Fixed Account, a Policy's Loan
Account is part of Protective Life's General Account and amounts therein earn
interest as credited by Protective Life from time to time. Because Loan Account
values are part of Policy Value, a loan will have no immediate effect on the
Policy Value. In contrast, Surrender Value (including, as applicable, Variable
Account Value and Fixed Account Value) under a Policy is reduced immediately by
the amount transferred to the Loan Account. The Owner(s) can specify the
Sub-Accounts and the Fixed Account from which collateral is transferred to the
Loan Account. If no allocation is specified, collateral is transferred from each
Sub-Account and from the Fixed Account in the same proportion that the Cash
Value in each Sub-Account and the Fixed Account bears to the total Cash Value on
the date that the loan is made.
On each Policy Anniversary, an amount of Policy Value equal to any due and
unpaid loan interest (explained below), is also transferred to the Loan Account.
Such interest is transferred from each Sub-Account and the Fixed Account in the
same proportion that each Sub-Account Value and the Fixed Account Value bears to
the total unloaned Policy Value.
LOAN REPAYMENT. You may repay all or part of your Policy Debt (the amount
borrowed plus unpaid interest) at any time while the Insured is living and the
Policy is in force. Loan repayments must be
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sent to the Home Office and are credited as of the date received. The Owner may
specify in writing that any Unscheduled Premium Payments made while a loan is
outstanding be applied as loan repayments. (Loan repayments, unlike Unscheduled
Premium Payments, are not subject to Premium Expense Charges.) When a loan
repayment is made, Policy Value in the Loan Account in an amount equal to the
repayment is transferred from the Loan Account to the Sub-Accounts and the Fixed
Account. Thus, a loan repayment will have no immediate effect on the Policy
Value, but the Surrender Value (including, as applicable, Variable Account Value
and Fixed Account Value) under a Policy is increased immediately by the amount
transferred from the Loan Account. Unless specified otherwise by the Owner(s),
amounts are transferred to the Sub-Accounts and the Fixed Account in the same
manner as loan collateral is transferred to the Loan Account.
INTEREST. During the first ten Policy Years, Protective Life will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and thereafter, Protective Life will charge interest
daily on any outstanding loan at an effective annual rate of 4.0%. Interest is
due and payable at the end of each Policy Year while a loan is outstanding. We
will notify You of the amount due. If interest is not paid when due, the amount
of the interest is added to the loan and becomes part of the Policy Debt.
The Loan Account is credited with interest at an effective annual rate of
not less than 4%. Thus, the maximum net cost of a loan is 2.0% per year during
Policy Years 1 through 10, and 0% thereafter (the difference between the rate of
interest charged on Policy loans and the amount credited on the equivalent
amount held in the Loan Account). Protective Life determines the rate of
interest to be credited to the Loan Account in advance of each calendar year.
The rate, once determined, is applied to the calendar year which follows the
date of determination. On each Policy Anniversary, the interest earned on the
Loan Account since the previous Policy Anniversary is transferred to the
Sub-Accounts and to the Fixed Account. Unless specified in writing by the Owner,
interest is transferred and allocated to the Sub-Accounts and the Fixed Account
in the same manner as collateral is transferred to the Loan Account.
NON-PAYMENT OF POLICY LOAN. If the Insured dies while a loan is
outstanding, the Policy Debt is deducted from the Death Benefit in calculating
the Death Benefit proceeds.
If the Loan Account Value exceeds the Cash Value (I.E., the Surrender Value
becomes zero) on any Valuation Date, the Policy may be in default. If this
occurs, You, and any assignee of record, will be sent notice of the default. You
will have a 31-day grace period to submit a sufficient payment to avoid a lapse
(I.E., termination) of the Policy. The notice will specify the amount that must
be repaid to prevent lapse.
EFFECT OF A POLICY LOAN. A loan, whether or not repaid, has a permanent
effect on the Death Benefit and Policy values because the investment results of
the Sub-Accounts and current interest rates credited on Fixed Account Value do
not apply to Policy Value in the Loan Account. The larger the loan and longer
the loan is outstanding, the greater will be the effect of Policy Value being
held as collateral in the Loan Account. See "No Lapse Guarantee". Depending on
the investment results of the Sub-Accounts or credited interest rates for the
Fixed Account while the loan is outstanding, the effect could be favorable or
unfavorable. Policy loans also may increase the potential for lapse if
investment results of the Sub-Accounts to which Surrender Value is allocated is
unfavorable. If a Policy lapses with loans outstanding, certain amounts may be
subject to income tax and a 10% penalty tax. See "Tax Considerations," for a
discussion of the tax treatment of policy loans. In addition, if your Policy is
a "modified endowment contract," loans may be currently taxable and subject to a
10% penalty tax.
MATURITY BENEFITS
The Maturity Date is the Policy Anniversary nearest the Insured's 95th
birthday. If the Policy is still in force on the Maturity Date, the Maturity
Benefit will be paid to the Owner. The Maturity
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Benefit is equal to the Surrender Value on the Maturity Date. You may request a
change in Maturity Date, subject to Protective Life's approval. To elect or not
elect a change in Maturity Date will have income tax consequences. See "Tax
Considerations".
DEATH BENEFIT PROCEEDS
As long as the Policy remains in force, Protective Life will pay the Death
Benefit Proceeds upon receipt at the Home Office of satisfactory proof of the
Insured's death. Protective Life may require return of the Policy. The Death
Benefit Proceeds are paid to the primary Beneficiary or a contingent
Beneficiary. The Owner may name one or more primary or contingent Beneficiaries
and change such Beneficiaries, as provided for in the Policy. If no Beneficiary
survives the Insured, the Death Benefit Proceeds are paid to the Owner or the
Owner's estate. Death Benefit Proceeds are paid in a lump sum or under a payment
option (see "Payment Options").
CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit proceeds are equal
to the Death Benefit under the Death Benefit option selected calculated as of
the date of the Insured's death, plus any supplemental and/or rider benefits,
minus any Policy Debt on that date and, if the Insured died during a grace
period, minus any past due Monthly Deductions. Under certain circumstances, the
amount of the Death Benefit may be further adjusted. See "Limits on Rights to
Contest the Policy" and "Misstatement of Age or Sex".
If part or all of the Death Benefit is paid in one sum, Protective Life will
pay interest on this sum as required by applicable state law from the date of
receipt of due proof of the Insured's death to the date of payment.
DEATH BENEFIT OPTIONS. The Policy Owner may choose one of two Death Benefit
options for use in determining the Death Benefit. Under Death Benefit Option 1,
the Death Benefit is the greater of: (1) the Face Amount under the Policy on the
date of the Insured's death, or (2) a specified percentage of Policy Value on
the date of the Insured's death. Under Death Benefit Option 2, the Death Benefit
is the greater of: (1) the Face Amount under the Policy plus the Policy Value on
the date of the Insured's death, or (2) the same specified percentage of the
Policy Value on the date of the Insured's death.
The specified percentage is 250% when the Insured has reached an "Attained
Age" of 40 or less by date of death, and decreases each year thereafter to 100%
when the Insured has reached an "Attained Age" of 95 at death. A table showing
these percentages for Attained Ages 0 to 95 and examples of Death Benefit
calculations for both Death Benefit Options are found in Appendix A.
Under Death Benefit Option 1, the Death Benefit remains level at the Face
Amount unless the Policy Value multiplied by the specified percentage exceeds
that Face Amount, in which event the Death Benefit will vary as the Policy Value
varies. Owners who are satisfied with the amount of their insurance coverage
under the Policy and who prefer to have favorable investment performance and
additional Premium Payments reflected in higher Policy Value, rather than
increased Death Benefits, generally should select Option 1. Under Death Benefit
Option 2, the Death Benefit always varies as the Policy Value varies (although
it is never less than the Face Amount). Owners who prefer to have favorable
investment performance and additional Premium Payments reflected in increased
Death Benefits generally should select Option 2.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, you may change the Death Benefit option on your Policy subject to
the following rules. After any change, the Face Amount must be at least $50,000
(standard smoker or standard nonsmoker class) or $100,000 (preferred nonsmoker
class). The effective date of the change will be the Monthly Anniversary Day
that coincides with or next follows the day that Protective Life receives and
accepts the request. Protective Life may require satisfactory evidence of
insurability.
When a change from Option 1 to Option 2 is made, the Face Amount after the
change is effected will be equal to the Face Amount before the change less the
Policy Value on the effective date of the
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change. When a change from Option 2 to Option 1 is made, the Face Amount after
the change will be equal to the Face Amount before the change is effected plus
the Policy Value on the effective date of the change.
CHANGING THE FACE AMOUNT. On or after the first Policy Anniversary, you may
request a change in the Face Amount. If a change in the Face Amount would result
in total premiums paid exceeding the premium limitations prescribed under
current tax law to qualify your Policy as a life insurance contract, Protective
Life will immediately return to you the amount of such excess above the premium
limitations.
Protective Life reserves the right to decline a requested decrease in the
Face Amount if compliance with the guideline premium limitations under current
tax law resulting from such a decrease would result in immediate termination of
the Policy, or if to effect the requested decrease, payments to the Owner would
have to be made from Policy Value for compliance with the guideline premium
limitations, and the amount of such payments would exceed the Surrender Value
under the Policy.
Any increase in the Face Amount must be at least $10,000 and an application
must be submitted. Protective Life reserves the right to require satisfactory
evidence of insurability. In addition, the Insured's Attained Age must be less
than the current maximum Issue Age for the Policies, as determined by Protective
Life from time to time. A change in Planned Periodic Premium Payments may be
advisable. See "Premium Payments Upon Increase in Face Amount". The increase in
Face Amount will become effective on the Monthly Anniversary Day on or next
following the date the request for the increase is received and approved, and
the Policy Value will be adjusted to the extent necessary to reflect a monthly
deduction as of the effective date based on the increase in Face Amount. When
the "No-Lapse" Guarantee is in effect, the Policy's Minimum Monthly Premium
amount is also generally increased. See "No-Lapse Guarantee," and "Premium
Payments Upon Increase in Face Amount".
An increase in Face Amount may be cancelled by the Owner in accordance with
the Policy's cancellation privilege provisions, which also apply to increases in
Face Amount. In such case, the amount refunded will be calculated in accordance
with such provisions described above, except that if no additional Premium
Payments are required in connection with the Face Amount increase, then the
amount refunded is limited to that portion of the first monthly deduction
following the increase that is attributable to cost of insurance charges for the
increase and the monthly administration fee for the increase. See "Cancellation
Privilege".
The Face Amount after any decrease must be at least $50,000 (standard smoker
or standard nonsmoker class), or $100,000 (preferred nonsmoker class).
Protective Life reserves the right to prohibit any decrease in Face Amount (i)
for three years following an increase in Face Amount; and (ii) for one Policy
Year following the last decrease in Face Amount. If the Initial Face Amount of
the Policy has been increased prior to the requested decrease, then the decrease
will first be applied against any previous increases in Face Amount in the
reverse order in which they occurred. The decrease will then be applied to the
Initial Face Amount. A decrease in Face Amount will become effective on the
Monthly Anniversary Day that coincides with or next follows receipt and
acceptance of a request at the Home Office.
Decreasing the Face Amount of the Policy may have the effect of decreasing
monthly cost of insurance charges. However, if the Face Amount is decreased
during the first fourteen Policy Years, a Surrender Charge will apply. See
"Surrender Charge".
PAYMENT OPTIONS
The Policy offers a variety of ways of receiving proceeds payable under the
Policy, such as on surrender, death or maturity, other than in a lump sum. These
payment options are summarized below. Any sales representative authorized to
sell this Policy can further explain these options upon
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request. All of these options are forms of fixed-benefit annuities (except
Option 3) which do not vary with the investment performance of a separate
account. Under each payment option (other than Option 3), no surrender or
withdrawal may be made once payments have begun.
The following payment options may be elected.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period of up to 30 years. The amount of each payment depends on the
total amount applied, the period selected and the monthly payment rates
Protective Life is using when the first payment is due.
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named annuitant. Payments will
continue for the lifetime of the annuitant with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
OPTION 3 -- INTEREST INCOME. Protective Life will hold any amount applied
under this option. Interest on the unpaid balance will be paid each month at a
rate determined by Protective Life. This rate will not be less than the
equivalent of 3% per year.
OPTION 4 -- PAYMENTS FOR A FIXED AMOUNT. Equal monthly payments will be
made of an agreed fixed amount. The amount of each payment may not be less than
$10 for each $1,000 applied. Interest will be credited each month on the unpaid
balance and added to it. This interest will be at a rate set by us, but not less
than an effective rate of 3% per year. Payments continue until the amount
Protective Life holds runs out. The last payment will be for the balance only.
MINIMUM AMOUNTS. Protective Life reserves the right to pay the total amount
of the Policy in one lump sum, if less than $5,000. If monthly payments are less
than $50, payments may be made quarterly, semi-annually, or annually at
Protective Life's option.
OTHER REQUIREMENTS. Payment options must be elected by Written Notice. The
Owner may elect payment options during the Insured's lifetime; Beneficiaries may
elect payment options thereafter if Death Benefit Proceeds are payable in a lump
sum. The effective date of an option applied to Death Benefit Proceeds is the
date of the Insured's death. The effective date of an option applied to
Surrender Value is the date as of which the withdrawal or surrender is executed.
If Protective Life has available at the time a payment option is elected
options or rates on a more favorable basis than those guaranteed, the higher
benefits will apply.
THE FIXED ACCOUNT
BECAUSE OF EXEMPTIVE AND EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR HAS THE
FIXED ACCOUNT BEEN REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT
COMPANY ACT OF 1940. ACCORDINGLY, NEITHER THE FIXED ACCOUNT NOR ANY INTERESTS
THEREIN ARE SUBJECT TO THE PROVISIONS OF THESE ACTS AND, AS A RESULT, THE STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION HAS NOT REVIEWED THE DISCLOSURE IN
THIS PROSPECTUS RELATING TO THE FIXED ACCOUNT. THE DISCLOSURE REGARDING THE
FIXED ACCOUNT MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
THE FIXED ACCOUNT
The Fixed Account consists of assets owned by Protective Life with respect
to the Policies, other than those in the Variable Account. It is part of
Protective Life's general account assets. Protective Life's general account
assets are used to support its insurance and annuity obligations other than
those funded by separate accounts, and are subject to the claims of Protective
Life's general creditors. Subject to applicable law, Protective Life has sole
discretion over the investment of the assets of the
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Fixed Account. The Loan Account is part of the Fixed Account. Guarantees of Net
Premiums allocated to the Fixed Account, and interest credited thereto, are
backed by Protective Life. The Fixed Account Value is calculated daily. See
"Fixed Account Value".
INTEREST CREDITED ON FIXED ACCOUNT VALUE
Protective Life guarantees that the interest credited during the first
Policy Year to the initial Net Premium Payment allocated to the Fixed Account
will not be less than the rate shown in the Policy. The interest rate credited
to subsequent Net Premium Payments allocated to or amounts transferred to the
Fixed Account will be the annual effective interest rate in effect on the date
that the Net Premium Payment(s) is received by Us or the date that the transfer
is made. The interest rate is guaranteed to apply to such amounts for a twelve
month period which begins on the date that the Net Premium Payment(s) is
allocated or the date that the transfer is made.
After an interest rate guarantee expires as to a Net Premium Payment or
amount transferred, (I.E., 12 months after the Premium Payment(s) or transfer is
placed in the Fixed Account) we will credit interest on the Fixed Account Value
at the current interest rate in effect. New current interest rates are effective
for Fixed Account Value for 12 months from the time that they are first applied.
We, in Our sole discretion, may declare a new current interest rate from time to
time but in no event more frequently than once per year. The initial annual
effective interest rate and the current interest rates that We will credit are
annual effective interest rates of not less than 4.00%. For purposes of
crediting interest, amounts deducted, transferred or withdrawn from the Fixed
Account are accounted for on a "first-in-first-out" (FIFO) basis.
PAYMENTS FROM THE FIXED ACCOUNT
Payments from the Fixed Account for a withdrawal, surrender or loan request
may be deferred for up to six months from the date Protective Life receives the
written request. If a payment from the Fixed Account is deferred for 30 days or
more, it will bear interest at a rate of 4% per year (or an alternative rate if
required by applicable state insurance law), compounded annually while payment
is deferred.
CHARGES AND DEDUCTIONS
PREMIUM EXPENSE CHARGES
Premium Expense Charges currently consist of a sales charge, a charge for
federal taxes and a premium tax charge.
SALES CHARGE. Protective Life deducts a sales charge from each Premium
Payment. This charge is 2.75% of each Premium Payment in Policy Years 1 through
10, and 0.75% of each Premium Payment in Policy Years 11 and thereafter. The
Sales Charge is deducted from a Premium Payment before allocating the Net
Premium Payment to the Policy Value. An additional sales charge is deducted on
surrender of a Policy during the first fifteen Policy Years. See "Surrender
Charge". The Sales Charges partially compensate Protective Life for the expenses
of selling and distributing the Policies, including paying sales commissions,
printing prospectuses, preparing sales literature and paying for other
promotional activities.
FEDERAL TAX CHARGE. Protective Life also deducts a charge for federal taxes
from each Premium Payment. This charge is 1.25% of all Premium Payments in all
Policy Years and compensates Protective Life for its federal income tax
liability resulting from Section 848 of the Code. The amount of this charge,
which may be increased or decreased, is reasonable in relation to Protective
Life's increased federal tax burden under Section 848 resulting from the receipt
of Premium Payments under the Policies.
OTHER TAXES. Currently a charge for federal income taxes is not deducted
from the Variable Account or the Policy's Cash Value. The Company reserves the
right in the future to make a charge to
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the Variable Account or the Policy's Cash Value for any federal, state or local
income taxes that the Company incurs that it determines to be properly
attributable to the Variable Account or the Policies. We will notify You
promptly of any such charge.
PREMIUM TAX CHARGE. A 2.25% charge for state and local premium taxes is
also deducted from each Premium Payment. The state and local premium tax charge
reimburses Protective Life for premium taxes associated with the Policies.
Protective Life expects to pay an average state and local premium tax rate of
approximately 2.25% of Premium Payments for all states.
MONTHLY DEDUCTION
On the Issue Date, Protective Life will deduct the monthly deduction from
the Policy Value. Subsequent monthly deductions will be made on each Monthly
Anniversary Day thereafter. The Monthly Deduction consists of (1) cost of
insurance charges ("cost of insurance charge"), (2) administration charges (the
"monthly administration fee"), (3) mortality and expense risk charge (the
"Mortality and Expense Risk Charge") and (4) any charges for supplemental
benefits and/or riders ("supplemental charges"), as described below. The monthly
deduction is deducted from the Sub-Accounts and the Fixed Account pro-rata on
the basis of the relative Policy Value in each.
COST OF INSURANCE CHARGE. This charge compensates Protective Life for the
expense of underwriting the Death Benefit. The charge depends on a number of
variables and therefore will vary from Policy to Policy and from Monthly
Anniversary Day to Monthly Anniversary Day. For any Policy, the cost of
insurance on a Monthly Anniversary Day is calculated by multiplying the current
cost of insurance rate for the Insured by the Net Amount at Risk under the
Policy for that Monthly Anniversary Day.
The cost of insurance rate for a Policy is based on and varies with the
Issue Age, duration, sex and rate class of the Insured and on the number of
years that a Policy has been in force. Protective Life currently places Insureds
in the following rate classes, based on underwriting: Standard Smoker (ages
15-75) or Standard Nonsmoker (ages 0-75), or Preferred Nonsmoker (ages 18-75),
and substandard rate classes, which involve a higher mortality risk than the
Standard Smoker or Standard Nonsmoker classes.
Protective Life will determine a cost of insurance rate for increments of
Face Amount above the Initial Face Amount based on the Issue Age, duration, sex
and rate class of the Insured at the time of the request for an increase. The
following rules will apply for purposes of determining the Net Amount at Risk
for each rate.
Protective Life places the Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to the Initial Face Amount. When an increase in Face
Amount is requested, Protective Life conducts underwriting before approving the
increase (except as noted below) to determine whether a different rate class
will apply to the increase. If the rate class for the increase has lower cost of
insurance rates than the original rate class, the rate class for the increase
also will be applied to the Initial Face Amount. If the rate class for the
increase has a higher cost of insurance rate than the original rate class, the
rate class for the increase will apply only to the increase in Face Amount, and
the original rate class will continue to apply to the Initial Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of a conversion from a term contract or on
exercise of a guaranteed option to increase the Face Amount without
underwriting. See "Supplemental Benefits and/or Riders".
26
<PAGE>
In the case of a term conversion, the rate class that applies to the increase is
the same rate class that applied to the term contract. In the case of a
guaranteed option, the Insured's rate class for an increase will be the class in
effect when the guaranteed option rider was issued.
Where, as in Death Benefit Option 1, the Net Amount at Risk is equal to the
Death Benefit less Policy Value, the entire Policy Value is applied first to
offset the Death Benefit derived from the Initial Face Amount. Only if the
Policy Value exceeds the Initial Face Amount is the excess applied to offset the
portion of the Death Benefit derived from increases in Face Amount in the order
of the increases. If there is the decrease in Face Amount after an increase, the
decrease is applied first to decrease any prior increases in Face Amount,
starting with the most recent increase and then each prior increase.
Protective Life guarantees that the cost of insurance rates used to
calculate the monthly cost of insurance charge will not exceed the maximum cost
of insurance rates set forth in the Policies. The guaranteed rates for standard
classes are based on the 1980 Commissioners' Standard Ordinary Mortality Tables,
Male or Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO Tables"). The
guaranteed rates for substandard classes are based on multiples of or additions
to the 1980 CSO Tables.
Protective Life's current cost of insurance rates may be less than the
guaranteed rates that are set forth in the Policy. Current cost of insurance
rates will be determined based on Protective Life's expectations as to future
mortality, investment earnings, expenses, taxes, and persistency experience.
These rates may change from time to time. The cost of insurance rates are
currently less for Policies that have a Face Amount in excess of $99,999.00.
However, guaranteed rates do not change if the Face Amount exceeds $99,999.00.
Cost of insurance rates (whether guaranteed or current) for an Insured in a
nonsmoker standard class are lower than guaranteed rates for an Insured of the
same age and sex in a smoker standard class. Cost of insurance rates (whether
guaranteed or current) for an Insured in a nonsmoker or smoker standard class
are generally lower than guaranteed rates for an Insured of the same age and sex
and smoking status in a substandard class.
LEGAL CONSIDERATIONS RELATING TO SEX -- DISTINCT PREMIUM PAYMENTS AND
BENEFITS. Mortality tables for the Policies generally distinguish between males
and females. Thus, Premium Payments and benefits under Policies covering males
and females of the same age will generally differ.
Protective Life does, however, also offer Policies based on unisex mortality
tables if required by state law. Employers and employee organizations
considering purchase of a Policy should consult with their legal advisors to
determine whether purchase of a Policy based on sex-distinct actuarial tables is
consistent with Title VII of the Civil Rights Act of 1964 or other applicable
law. Upon request, Protective Life may offer Policies with unisex mortality
tables to such prospective purchasers.
MONTHLY ADMINISTRATION FEE. This charge compensates Protective Life for
administration expenses associated with the Policies and the Variable Account.
These expenses relate to premium payment billing and collection, recordkeeping,
processing death benefit claims, Policy loans, Policy changes, reporting and
overhead costs, processing applications and establishing Policy records. The
monthly administration fee is a flat charge of $31 per month during the first
Policy Year (guaranteed not to exceed $33 per month), and $6 per month during
each Policy Year thereafter (guaranteed not to exceed $8 per month). In
addition, for the first twelve months following the effective date of an
increase in Face Amount, the monthly administration fee will also include an
administration charge for the
27
<PAGE>
increase, based on the amount of the increase. The administration charge for an
increase is equal to a fee per $1,000 of increase in face amount, and is set
forth in your Policy. Representative administration charges per $1,000 of
increase are set forth below for Insureds at each specified Issue Age:
<TABLE>
<CAPTION>
ADMINISTRATIVE CHARGE
ISSUE AGE PER $1,000 INCREASE
- -------------- -----------------------
<S> <C>
35 0.11
40 0.14
45 0.16
50 0.20
55 0.24
60 0.29
65 0.35
70 0.43
75+ 0.45
</TABLE>
Protective Life does not anticipate making any profit on the monthly
administration fee.
SUPPLEMENTAL BENEFIT AND/OR RIDER CHARGES. See "Supplemental Benefits
and/or Riders".
MORTALITY AND EXPENSE RISK CHARGE. This charge compensates Protective Life
for the mortality risk it assumes which is that the Insureds on the Policies may
die sooner than anticipated and therefore Protective Life will pay an aggregate
amount of death benefits greater than anticipated. The expense risk Protective
Life assumes is that expenses incurred in issuing and administering the Policies
and the Variable Account will exceed the amounts realized from the
administrative charges assessed against the Policies.
Protective Life deducts a monthly charge from assets in the Sub-Accounts
attributable to the Policies. This charge does not apply to Fixed Account assets
attributable to the Policies. The maximum monthly Mortality and Expense Risk
Charge to be deducted is equal to .075% multiplied by the Variable Account
Value, which is equivalent to an annual rate of 0.90% of such amount. In Policy
Years 11 and thereafter, the monthly Mortality and Expense Risk Charge is equal
to .021% multiplied by the Variable Account Value, which is equivalent to an
annual rate of .25% of such amount. Protective Life reserves the right to charge
less than the maximum charge. Protective Life may realize a profit from this
charge.
TRANSFER FEE
Protective Life reserves the right to impose a $25 transfer fee on any
transfer of Policy Value between or among the Sub-Accounts or the Fixed Account
in excess of the 12 free transfers permitted each Policy Year. If the fee is
imposed, it will be deducted from the amount requested to be transferred. If an
amount is being transferred from more than one Sub-Account or the Fixed Account,
the transfer fee will be deducted proportionately from the amount being
transferred from each. This fee, if imposed, will reimburse Protective Life for
administrative expenses incurred in effecting transfers. Protective Life does
not anticipate making any profit on this fee.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
If the Policy is surrendered, or if the Initial Face Amount is reduced,
through the first fourteen Policy Years, a Surrender Charge will be deducted for
the Initial Face Amount (or the reduction thereof). The Surrender Charge, which
is a contingent deferred sales charge, will be deducted before any Surrender
Value is paid.
The Surrender Charge for the Initial Face Amount is equal to the Surrender
Charge Percentage for the Policy Year in which the surrender or reduction in
Initial Face Amount occurs, multiplied by the aggregate amount of Premium
Payments made in Policy Year 1, including Premium Payments for
28
<PAGE>
any riders. The Surrender Charge Percentage in Policy Years 1 through 6 is equal
to 27%, as shown below. After the sixth completed Policy Year, the Surrender
Charge Percentage decreases by 3% each Policy Year in accordance with the
following table.
<TABLE>
<CAPTION>
SURRENDER DURING SURRENDER CHARGE
POLICY YEAR PERCENTAGE
<S> <C>
- ------------------------------------------
1 - 6 27%
----------------------------------
7 24%
----------------------------------
8 21%
----------------------------------
9 18%
----------------------------------
10 15%
----------------------------------
11 12%
----------------------------------
12 9%
----------------------------------
13 6%
----------------------------------
14 3%
----------------------------------
15 0%
</TABLE>
After the 14th Policy Year, there is no Surrender Charge for the Initial
Face Amount.
In no event will the Surrender Charge exceed the Maximum Surrender Charge
(expressed in dollars), which is set forth in the Policy. The Maximum Surrender
Charge is equal to 27% of a "SEC guideline annual premium," as defined in
applicable SEC regulations. A "SEC guideline annual premium" is a hypothetical
level amount that would be payable through the Maturity Date for the benefits
provided under the Policy, assuming cost of insurance rates equal to those
guaranteed in the Policy, net investment earnings under the Policy at an
effective annual rate of 5%, and sales and other charges imposed under the
Policy.
If the Initial Face Amount is decreased during the first fourteen Policy
Years, the Surrender Charge imposed will equal the portion of the total
Surrender Charge that corresponds to the percentage by which the Initial Face
Amount is decreased. In the event of a decrease in the Initial Face Amount, the
pro-rated Surrender Charge will be allocated to each Sub-Account and to the
Fixed Account based on the proportion of Policy Value in each Sub-Account and in
the Fixed Account. A Surrender Charge imposed in connection with a reduction in
the Initial Face Amount reduces the remaining Surrender Charge that may be
imposed in connection with a surrender of the Policy.
The purpose of the Surrender Charge is to reimburse Protective Life for some
of the expenses incurred in the distribution of the Policies. Protective Life
also deducts a sales charge from each premium payment. See "Premium Expense
Charges". The Surrender Charge, together with the sales charge imposed on
Premium Payments, may be insufficient to recover distribution expenses related
to the sale of the Policies. Unrecovered expenses are borne by Protective Life's
general assets which may include profits, if any, from the mortality and expense
risk charge and mortality gains from cost of insurance charges. See "Mortality
and Expense Risk Charge," and "Cost of Insurance Charge".
WITHDRAWAL CHARGE
Protective Life will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This charge will be
deducted from the Policy Value in addition to the amount requested to be
withdrawn and will be considered to be part of the withdrawn amount. See
"Withdrawal Privilege" for rules for allocating the deduction. Protective Life
does not anticipate making a profit on this charge.
FUND EXPENSES
The value of the net assets of each Sub-Account reflects the investment
advisory fees and other expenses incurred by the corresponding Fund in which the
Sub-Account invests. See the prospectus for the Funds.
29
<PAGE>
EXCHANGE PRIVILEGE
The Company is offering, where allowed by law, to owners of certain existing
life policies (the "Existing Life Policy" and/or "Existing Life Policies")
issued by it the opportunity to exchange such a life policy for this Policy. The
Company reserves the right to modify, amend, terminate or suspend the Exchange
Privilege at any time or from time to time. Owners of Existing Life Policies
may, exchange their Existing Life Policies for this Policy. Owners of Existing
Life Policies may also make a partial or full surrender from their Existing Life
Policies and use the proceeds to purchase this Policy. All charges and
deductions described in this prospectus are equally applicable to Policies
purchased in an exchange. All charges and deductions may not be assessed under
an Existing Life Policy in connection with an exchange, surrender, or partial
surrender of an Existing Life Policy.
The Policy differs from the Existing Life Policies in many significant
respects. Most importantly, the Policy Value under this Policy may consist,
entirely or in part, of Variable Account Value which fluctuates in response to
the net investment return of the Variable Account. In contrast, the policy
values under the Existing Life Policies always reflect interest credited by the
Company. While a minimum rate of interest (typically 4 or 4 1/2 percent) is
guaranteed, the Company in the past has credited interest at higher rates.
Accordingly, policy values under the Existing Life Policies reflect changing
current interest rates and do not vary with the investment performance of a
Variable Account.
Other significant differences between the Policy and the Existing Life
Policies include: (1) additional charges applicable under the Policy not found
in the Existing Life Policies; (2) different surrender charges; (3) different
death benefits; and (4) differences in federal and state laws and regulations
applicable to each of the types of policies.
30
<PAGE>
A table which generally summarizes the different charges under the
respective policies is as follows. For more complete details owners of Existing
Life Policies should refer to their policy forms for a complete description.
<TABLE>
<CAPTION>
<S> <C> <C>
EXISTING LIFE POLICY POLICY
State and Local Premium None 2.25% of each premium payment.
Tax
Federal Tax Charge None 1.25% of each premium payment in
all policy years.
Sales Charges/Premium Ranges from 0% to 12% of premium 2.75% of each Premium payment in
Expense Charge payments in all policy years. policy years 1 through 10;
The premium expense charge can 0.75% of each premium payment
vary by age. in policy year 11 and
thereafter.
Administrative Fees Ranges from $4 to $5 monthly. $31 per month the first policy
year and $6 per month
thereafter.
Mortality and Expense None A monthly charge equal to .075%
Charges multiplied by the Variable
Account Value, which is
equivalent to annual rate of
.90% of such amount during
Policy Years 1-10; in all
Policy Years thereafter is
equal to .021% multiplied by
the Variable Account Value,
which is equivalent to an
annual rate of .25% of such
amount.
Withdrawal Charges $25 The lesser of $25 or 2% of the
withdrawal amount requested.
Monthly Deductions A monthly deduction consisting A monthly deduction consisting
of: (1) cost of insurance of: (1) cost of insurance
charges (2) administrative fees charges (2) administrative fees
(see above) and (3) any charges (see above) and (3) any charges
for supplemental benefits for supplemental benefits
and/or riders. (applies to and/or riders.
Existing Life Policies which
are universal life plans)
Surrender Charges Surrender charges vary by policy A declining deferred sales
type and are incurred during a charge of up to 27% of premium
surrender charge period which payments made in the first
ranges from 0 years up to 19 policy year (or 27% of a "SEC
years. guideline annual premium if
less) is assessed on surrender
charges during the first 14
policy years.
Guaranteed Interest Rate Ranges from 4% to 5%. Fixed account only 4%.
</TABLE>
31
<PAGE>
EFFECT OF THE EXCHANGE OFFER
1. This Policy will be issued to Existing Life Policy Owners. Evidence of
insurability may be required.
2. If an Existing Life Policy owner is within current issue age limits, the
Owner may carry over existing Riders and/or Supplement Benefits if available
with the Policy. Evidence of insurability may be required. An increase or
addition of Riders &/or Supplemental Benefits will require full evidence of
insurability.
3. The Contestable and Suicide provisions in the Policy will begin again as
of the effective date of the exchange, if evidence of insurability is required.
If evidence of insurability is not required on the exchange, the Contestable and
Suicide provisions will not begin again.
TAX CONSIDERATIONS. Owners of Existing Life Policies should carefully
consider whether it will be advantageous to replace an Existing Life Policy with
a Policy. IT MAY NOT BE ADVANTAGEOUS TO EXCHANGE AN EXISTING LIFE POLICY FOR A
POLICY (OR TO SURRENDER IN FULL OR IN PART AN EXISTING LIFE POLICY AND USE THE
SURRENDER OR PARTIAL SURRENDER PROCEEDS TO PURCHASE A POLICY.)
The Company believes that an exchange of an Existing Life Policy for a
Policy generally should be treated as a nontaxable exchange within the meaning
of Section 1035 of the Code. A Policy purchased in exchange will generally be
treated as a newly issued contract as of the effective date of the Policy. This
could have various tax consequences. (See "Federal Tax Matters".)
IF YOU SURRENDER YOUR EXISTING LIFE POLICY IN WHOLE OR IN PART AND AFTER
RECEIPT OF THE PROCEEDS YOU USE THE SURRENDER PROCEEDS OR PARTIAL SURRENDER
PROCEEDS TO PURCHASE A POLICY IT WILL NOT BE TREATED AS A NON-TAXABLE EXCHANGE.
THE SURRENDER PROCEEDS WILL GENERALLY BE INCLUDIBLE IN INCOME.
Owners of Existing Life Policies should consult their tax advisers before
exchanging an Existing Life Policy for this Policy, or before surrendering in
whole or in part their Existing Life Policy and using the proceeds to purchase
this Policy.
SALES COMMISSIONS. Sales representatives offering the Policies to Existing
Life Policies Owners will receive a sales commission. In most cases, this sales
commission will be somewhat less than that paid in connection with sales of the
Policies to other purchasers. A standard sales commission will be paid. (See
"Sale of Policies")
ILLUSTRATIONS OF POLICY VALUES, SURRENDER VALUES,
DEATH BENEFITS AND ACCUMULATED PREMIUM PAYMENTS
The following tables have been prepared to illustrate hypothetically how
certain values under a Policy change with investment performance over an
extended period of time. The tables illustrate how Policy Values, Surrender
Values and Death Benefits under a Policy covering an Insured of a given age on
the Issue Date, would vary over time if planned premium payments were paid
annually and the return on the assets in each of the Funds were an assumed
uniform gross annual rate of 0%, 6% and 12%. The values would be different from
those shown if the returns averaged 0%, 6% or 12% but fluctuated over and under
those averages throughout the years shown. The tables also show Planned Periodic
Premiums accumulated at 5% interest compounded annually. THE HYPOTHETICAL
INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. Actual rates of
return for a particular Policy may be more or less than the hypothetical
investment rates of return and will depend on a number of factors including the
investment allocations made by an Owner and prevailing rates. These
illustrations assume that Net Premiums are allocated equally among the seven
Sub-Accounts available under the Policy, and that no amounts are allocated to
the Fixed Account.
The illustrations reflect the fact that the net investment return on the
assets held in the Sub-Accounts is lower than the gross after tax return of the
selected Funds. The tables assume an average annual expense ratio of 0.86% of
the average daily net assets of the Funds available under the Policies.
32
<PAGE>
This average annual expense ratio is based on the expense ratios of each of the
Funds for the last fiscal year (except the Protective Capital Growth Fund),
adjusted, as appropriate, for any material changes in expenses effective for the
current fiscal year of a Fund. Expenses for the Protective Capital Growth Fund
are based on the estimated average annual expense ratio for this Fund's first
year of operations. For information on Fund expenses, see the prospectus for the
Funds accompanying this prospectus.
In addition, the illustrations reflect the monthly charge to the Variable
Account for assuming mortality and expense risks, which is equal to .075%
multiplied by the Variable Account Value, which is equivalent to a effective
annual charge of 0.90% of such amount during Policies Years 1-10; and in Policy
Years 11+ is equal to .021% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .25% of such amount. After deduction of Fund
expenses and the mortality and expense risk charge, the illustrated gross annual
investment rates of return of 0%, 6% and 12% would correspond to approximate net
annual rates of 1.76%, 4.24% and 10.24%, respectively.
The illustrations also reflect the deduction of the Premium Expense Charges,
the Monthly Expense Charge and the monthly cost of insurance charge for the
hypothetical Insured. The Surrender Charge is reflected in the column "Surrender
Value". Protective Life's current cost of insurance charges, and the guaranteed
maximum cost of insurance charges that Protective Life has the contractual right
to charge, are reflected in separate illustrations on each of the following
pages. All the illustrations reflect the fact that no charges for federal or
state income taxes are currently made against the Variable Account and assume no
Policy Debt or charges for supplemental and/or rider benefits.
The illustrations are based on Protective Life's sex distinct rates for
nonsmokers. Upon request, Owner(s) will be furnished with a comparable
illustration based upon the proposed Insured's individual circumstances. Such
illustrations may assume different hypothetical rates of return in addition to
those illustrated in the following tables.
33
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$1,800 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,890 966 494 100,000 1,045 573 100,000 1,124 652 100,000
2 3,875 2,190 1,717 100,000 2,418 1,946 100,000 2,656 2,184 100,000
3 5,958 3,368 2,896 100,000 3,826 3,354 100,000 4,322 3,850 100,000
4 8,146 4,502 4,030 100,000 5,269 4,797 100,000 6,136 5,663 100,000
5 10,443 5,587 5,115 100,000 6,747 6,275 100,000 8,109 7,637 100,000
6 12,856 6,624 6,152 100,000 8,260 7,788 100,000 10,259 9,787 100,000
7 15,388 7,608 7,189 100,000 9,804 9,384 100,000 12,600 12,181 100,000
8 18,048 8,534 8,167 100,000 11,376 11,009 100,000 15,149 14,782 100,000
9 20,840 9,398 9,083 100,000 12,973 12,659 100,000 17,926 17,612 100,000
10 23,772 10,194 9,931 100,000 14,592 14,329 100,000 20,952 20,689 100,000
11 26,851 11,200 10,990 100,000 16,538 16,328 100,000 24,596 24,386 100,000
12 30,083 12,284 12,126 100,000 18,671 18,514 100,000 28,734 28,577 100,000
13 33,478 13,280 13,175 100,000 20,844 20,739 100,000 33,277 33,172 100,000
14 37,041 14,191 14,138 100,000 23,061 23,008 100,000 38,282 38,229 100,000
15 40,783 15,005 15,005 100,000 25,316 25,316 100,000 43,800 43,800 100,000
16 44,713 15,683 15,683 100,000 27,582 27,582 100,000 49,880 49,880 100,000
17 48,838 16,265 16,265 100,000 29,898 29,898 100,000 56,630 56,630 100,000
18 53,170 16,740 16,740 100,000 32,263 32,263 100,000 64,142 64,142 100,000
19 57,719 17,101 17,101 100,000 34,679 34,679 100,000 72,526 72,526 100,000
20 62,495 17,337 17,337 100,000 37,147 37,147 100,000 81,911 81,911 100,000
21 67,509 17,435 17,435 100,000 39,667 39,667 100,000 92,360 92,360 109,909
22 72,775 17,378 17,378 100,000 42,241 42,241 100,000 103,888 103,888 122,588
23 78,304 17,147 17,147 100,000 44,869 44,869 100,000 116,604 116,604 136,427
24 84,109 16,720 16,720 100,000 47,555 47,555 100,000 130,627 130,627 151,527
25 90,204 16,070 16,070 100,000 50,300 50,300 100,000 146,088 146,088 168,002
26 96,604 15,167 15,167 100,000 53,112 53,112 100,000 163,134 163,134 184,342
27 103,325 13,978 13,978 100,000 56,000 56,000 100,000 181,985 181,985 202,003
28 110,381 12,469 12,469 100,000 58,979 58,979 100,000 202,854 202,854 221,111
29 117,790 10,630 10,630 100,000 62,081 62,081 100,000 225,997 225,997 241,817
30 125,569 8,365 8,365 100,000 65,310 65,310 100,000 251,693 251,693 264,278
31 133,738 5,600 5,600 100,000 68,690 68,690 100,000 280,276 280,276 294,290
32 142,315 2,239 2,239 100,000 72,253 72,253 100,000 311,818 311,818 327,409
33 151,321 * * * 76,058 76,058 100,000 346,614 346,614 363,945
34 160,777 * * * 80,146 80,146 100,000 384,969 384,969 404,217
35 170,705 * * * 84,607 84,607 100,000 427,233 427,233 448,595
36 181,131 * * * 89,530 89,530 100,000 473,760 473,760 497,448
37 192,077 * * * 95,049 95,049 100,000 524,941 524,941 551,188
38 203,571 * * * 100,959 100,959 106,007 581,228 581,228 610,290
39 215,640 * * * 107,080 107,080 112,434 643,057 643,057 675,210
40 228,312 * * * 113,416 113,416 119,086 710,943 710,943 746,490
41 241,617 * * * 119,956 119,956 125,954 785,359 785,359 824,627
42 255,588 * * * 126,701 126,701 133,036 866,873 866,873 910,216
43 270,257 * * * 133,644 133,644 140,326 956,057 956,057 1,003,860
44 285,660 * * * 140,778 140,778 147,817 1,053,516 1,053,516 1,106,192
45 301,833 * * * 148,095 148,095 155,500 1,159,890 1,159,890 1,217,885
46 318,815 * * * 155,586 155,586 161,810 1,275,867 1,275,867 1,326,902
47 336,646 * * * 163,584 163,584 168,492 1,405,100 1,405,100 1,447,253
48 355,368 * * * 172,178 172,178 175,622 1,549,700 1,549,700 1,580,694
49 375,026 * * * 181,475 181,475 183,290 1,712,218 1,712,218 1,729,340
50 395,668 * * * 191,601 191,601 191,601 1,895,739 1,895,739 1,895,739
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges, current cost of
insurance rates, a monthly administrative charge of $31.00 per month in
Policy Year 1 and $6.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate of 0.90% of such amount during Policy
Years 1-10; and in Policy Years 11+ is equal to .021% multiplied by the
Variable Account Value, which is equivalent to an annual rate of .25% of
such amount.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
34
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$1,800 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,890 942 470 100,000 1,020 548 100,000 1,099 626 100,000
2 3,875 2,142 1,670 100,000 2,368 1,895 100,000 2,603 2,131 100,000
3 5,958 3,298 2,826 100,000 3,749 3,276 100,000 4,238 3,766 100,000
4 8,146 4,408 3,936 100,000 5,164 4,692 100,000 6,017 5,545 100,000
5 10,443 5,471 4,999 100,000 6,612 6,140 100,000 7,952 7,480 100,000
6 12,856 6,486 6,014 100,000 8,094 7,622 100,000 10,060 9,588 100,000
7 15,388 7,448 7,028 100,000 9,605 9,186 100,000 12,354 11,934 100,000
8 18,048 8,352 7,984 100,000 11,143 10,776 100,000 14,851 14,484 100,000
9 20,840 9,194 8,879 100,000 12,704 12,390 100,000 17,570 17,255 100,000
10 23,772 9,968 9,706 100,000 14,285 14,023 100,000 20,531 20,268 100,000
11 26,851 10,705 10,495 100,000 15,919 15,709 100,000 23,798 23,589 100,000
12 30,083 11,364 11,207 100,000 17,567 17,410 100,000 27,366 27,209 100,000
13 33,478 11,943 11,838 100,000 19,230 19,125 100,000 31,270 31,165 100,000
14 37,041 12,437 12,384 100,000 20,903 20,851 100,000 35,550 35,497 100,000
15 40,783 12,837 12,837 100,000 22,583 22,583 100,000 40,249 40,249 100,000
16 44,713 13,134 13,134 100,000 24,263 24,263 100,000 45,420 45,420 100,000
17 48,838 13,319 13,319 100,000 25,938 25,938 100,000 51,122 51,122 100,000
18 53,170 13,376 13,376 100,000 27,599 27,599 100,000 57,426 57,426 100,000
19 57,719 13,290 13,290 100,000 29,234 29,234 100,000 64,415 64,415 100,000
20 62,495 13,039 13,039 100,000 30,832 30,832 100,000 72,190 72,190 100,000
21 67,509 12,607 12,607 100,000 32,382 32,382 100,000 80,874 80,874 100,000
22 72,775 11,976 11,976 100,000 33,879 33,879 100,000 90,546 90,546 106,845
23 78,304 11,126 11,126 100,000 35,312 35,312 100,000 101,145 101,145 118,340
24 84,109 10,036 10,036 100,000 36,673 36,673 100,000 112,754 112,754 130,795
25 90,204 8,673 8,673 100,000 37,948 37,948 100,000 125,467 125,467 144,287
26 96,604 6,994 6,994 100,000 39,115 39,115 100,000 139,388 139,388 157,508
27 103,325 4,885 4,885 100,000 40,109 40,109 100,000 154,675 154,675 171,689
28 110,381 2,378 2,378 100,000 40,964 40,964 100,000 171,507 171,507 186,943
29 117,790 * * * 41,600 41,600 100,000 190,054 190,054 203,358
30 125,569 * * * 41,966 41,966 100,000 210,532 210,532 221,059
31 133,738 * * * 42,015 42,015 100,000 233,201 233,201 244,861
32 142,315 * * * 41,691 41,691 100,000 258,037 258,037 270,939
33 151,321 * * * 40,928 40,928 100,000 285,232 285,232 299,494
34 160,777 * * * 39,647 39,647 100,000 314,996 314,996 330,746
35 170,705 * * * 37,735 37,735 100,000 347,551 347,551 364,929
36 181,131 * * * 35,029 35,029 100,000 383,132 383,132 402,289
37 192,077 * * * 31,303 31,303 100,000 421,983 421,983 443,082
38 203,571 * * * 26,237 26,237 100,000 464,356 464,356 487,574
39 215,640 * * * 19,389 19,389 100,000 510,511 510,511 536,037
40 228,312 * * * 10,169 10,169 100,000 560,725 560,725 588,761
41 241,617 * * * * * * 615,290 615,290 646,054
42 255,588 * * * * * * 674,521 674,521 708,247
43 270,257 * * * * * * 738,752 738,752 775,690
44 285,660 * * * * * * 808,344 808,344 848,761
45 301,833 * * * * * * 883,666 883,666 927,850
46 318,815 * * * * * * 965,098 965,098 1,003,702
47 336,646 * * * * * * 1,055,546 1,055,546 1,087,212
48 355,368 * * * * * * 1,156,467 1,156,467 1,179,596
49 375,026 * * * * * * 1,269,632 1,269,632 1,282,329
50 395,668 * * * * * * 1,397,214 1,397,214 1,397,214
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense Charges, guaranteed
cost of insurance rates, a monthly administrative charge of $33.00 per month
in Policy Year 1 and $8.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate 0.90% of such amount during all Policy
Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
35
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$4,000 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 2,988 2,516 102,988 3,190 2,718 103,190 3,393 2,920 103,393
2 8,610 6,193 5,721 106,193 6,794 6,322 106,794 7,421 6,948 107,421
3 13,241 9,314 8,842 109,314 10,522 10,050 110,522 11,831 11,358 111,831
4 18,103 12,349 11,877 112,349 14,376 13,904 114,376 16,659 16,187 116,659
5 23,208 15,296 14,824 115,296 18,358 17,886 118,358 21,946 21,474 121,946
6 28,568 18,154 17,682 118,154 22,471 21,999 122,471 27,735 27,263 127,735
7 34,196 20,919 20,499 120,919 26,714 26,294 126,714 34,070 33,651 134,070
8 40,106 23,585 23,218 123,585 31,084 30,717 131,084 41,001 40,634 141,001
9 46,312 26,147 25,833 126,147 35,582 35,267 135,582 48,581 48,267 148,581
10 52,827 28,600 28,337 128,600 40,202 39,940 140,202 56,868 56,606 156,868
11 59,669 31,417 31,207 131,417 45,511 45,302 145,511 66,613 66,404 166,613
12 66,852 34,298 34,140 134,298 51,178 51,021 151,178 77,521 77,364 177,521
13 74,395 37,053 36,948 137,053 57,026 56,921 157,026 89,517 89,412 189,517
14 82,314 39,685 39,632 139,685 63,063 63,010 163,063 102,720 102,667 202,720
15 90,630 42,177 42,177 142,177 69,281 69,281 169,281 117,243 117,243 217,243
16 99,361 44,483 44,483 144,483 75,640 75,640 175,640 133,180 133,180 233,180
17 108,530 46,649 46,649 146,649 82,192 82,192 182,192 150,730 150,730 250,730
18 118,156 48,664 48,664 148,664 88,933 88,933 188,933 170,055 170,055 270,055
19 128,264 50,517 50,517 150,517 95,860 95,860 195,860 191,338 191,338 291,338
20 138,877 52,197 52,197 152,197 102,967 102,967 202,967 214,774 214,774 314,774
21 150,021 53,689 53,689 153,689 110,247 110,247 210,247 240,583 240,583 340,583
22 161,722 54,975 54,975 154,975 117,689 117,689 217,689 269,002 269,002 369,002
23 174,008 56,036 56,036 156,036 125,276 125,276 225,276 300,291 300,291 400,291
24 186,908 56,852 56,852 156,852 132,993 132,993 232,993 334,738 334,738 434,738
25 200,454 57,397 57,397 157,397 140,818 140,818 240,818 372,659 372,659 472,659
26 214,677 57,648 57,648 157,648 148,727 148,727 248,727 414,402 414,402 514,402
27 229,610 57,580 57,580 157,580 156,697 156,697 256,697 460,355 460,355 560,355
28 245,291 57,173 57,173 157,173 164,706 164,706 264,706 510,950 510,950 610,950
29 261,755 56,439 56,439 156,439 172,764 172,764 272,764 566,702 566,702 666,702
30 279,043 55,303 55,303 155,303 180,793 180,793 280,793 628,089 628,089 728,089
31 297,195 53,723 53,723 153,723 188,742 188,742 288,742 695,674 695,674 795,674
32 316,255 51,650 51,650 151,650 196,554 196,554 296,554 770,077 770,077 870,077
33 336,268 49,092 49,092 149,092 204,223 204,223 304,223 852,041 852,041 952,041
34 357,281 45,939 45,939 145,939 211,623 211,623 311,623 942,268 942,268 1,042,268
35 379,345 42,209 42,209 142,209 218,754 218,754 318,754 1,041,669 1,041,669 1,141,669
36 402,513 37,777 37,777 137,777 225,465 225,465 325,465 1,151,103 1,151,103 1,251,103
37 426,838 32,587 32,587 132,587 231,671 231,671 331,671 1,271,594 1,271,594 1,371,594
38 452,380 26,685 26,685 126,685 237,386 237,386 337,386 1,404,390 1,404,390 1,504,390
39 479,199 19,925 19,925 119,925 242,427 242,427 342,427 1,550,663 1,550,663 1,650,663
40 507,359 12,332 12,332 112,332 246,777 246,777 346,777 1,711,897 1,711,897 1,811,897
41 536,927 3,700 3,700 103,700 250,179 250,179 350,179 1,889,496 1,889,496 1,989,496
42 567,973 * * * 252,562 252,562 352,562 2,085,110 2,085,110 2,189,365
43 600,572 * * * 253,774 253,774 353,774 2,299,387 2,299,387 2,414,356
44 634,801 * * * 253,657 253,657 353,657 2,533,542 2,533,542 2,660,219
45 670,741 * * * 252,060 252,060 352,060 2,789,117 2,789,117 2,928,573
46 708,478 * * * 248,852 248,852 348,852 3,067,761 3,067,761 3,190,471
47 748,102 * * * 243,977 243,977 343,977 3,378,255 3,378,255 3,479,603
48 789,707 * * * 237,306 237,306 337,306 3,725,676 3,725,676 3,825,676
49 833,392 * * * 228,700 228,700 328,700 4,110,673 4,110,673 4,210,673
50 879,262 * * * 218,015 218,015 318,015 4,535,885 4,535,885 4,635,885
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense Charges, guaranteed
cost of insurance rates, a monthly administrative charge of $33.00 per month
in Policy Year 1 and $8.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate of 0.90% of such amount during Policy
Years 1-10; and in Policy Years 11+ is equal to .021% multiplied by the
Variable Account Value, which is equivalent to an annual rate of .25% of
such amount.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
36
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$4,000 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 4,200 2,964 2,492 102,964 3,165 2,693 103,165 3,367 2,895 103,367
2 8,610 6,146 5,674 106,146 6,744 6,272 106,744 7,367 6,895 107,367
3 13,241 9,244 8,772 109,244 10,445 9,973 110,445 11,747 11,274 111,747
4 18,103 12,256 11,784 112,256 14,272 13,800 114,272 16,542 16,069 116,542
5 23,208 15,181 14,709 115,181 18,225 17,753 118,225 21,791 21,319 121,791
6 28,568 18,018 17,546 118,018 22,308 21,835 122,308 27,539 27,066 127,539
7 34,196 20,761 20,342 120,761 26,519 26,099 126,519 33,829 33,409 133,829
8 40,106 23,406 23,039 123,406 30,856 30,489 130,856 40,709 40,342 140,709
9 46,312 25,948 25,633 125,948 35,319 35,004 135,319 48,234 47,919 148,234
10 52,827 28,380 28,118 128,380 39,904 39,642 139,904 56,460 56,198 156,460
11 59,669 30,775 30,566 130,775 44,693 44,483 144,693 65,540 65,331 165,540
12 66,852 33,049 32,891 133,049 49,601 49,444 149,601 75,465 75,307 175,465
13 74,395 35,197 35,092 135,197 54,631 54,526 154,631 86,315 86,210 186,315
14 82,314 37,215 37,163 137,215 59,778 59,725 159,778 98,178 98,126 198,178
15 90,630 39,095 39,095 139,095 65,036 65,036 165,036 111,146 111,146 211,146
16 99,361 40,825 40,825 140,825 70,398 70,398 170,398 125,318 125,318 225,318
17 108,530 42,396 42,396 142,396 75,854 75,854 175,854 140,805 140,805 240,805
18 118,156 43,793 43,793 143,793 81,391 81,391 181,391 157,721 157,721 257,721
19 128,264 44,998 44,998 144,998 86,989 86,989 186,989 176,192 176,192 276,192
20 138,877 45,993 45,993 145,993 92,629 92,629 192,629 196,352 196,352 296,352
21 150,021 46,762 46,762 146,762 98,293 98,293 198,293 218,355 218,355 318,355
22 161,722 47,292 47,292 147,292 103,965 103,965 203,965 242,370 242,370 342,370
23 174,008 47,568 47,568 147,568 109,625 109,625 209,625 268,586 268,586 368,586
24 186,908 47,579 47,579 147,579 115,255 115,255 215,255 297,207 297,207 397,207
25 200,454 47,303 47,303 147,303 120,828 120,828 220,828 328,455 328,455 428,455
26 214,677 46,709 46,709 146,709 126,305 126,305 226,305 362,559 362,559 462,559
27 229,610 45,701 45,701 145,701 131,575 131,575 231,575 399,703 399,703 499,703
28 245,291 44,348 44,348 144,348 136,694 136,694 236,694 440,263 440,263 540,263
29 261,755 42,533 42,533 142,533 141,528 141,528 241,528 484,461 484,461 584,461
30 279,043 40,204 40,204 140,204 146,004 146,004 246,004 532,603 532,603 632,603
31 297,195 37,331 37,331 137,331 150,065 150,065 250,065 585,051 585,051 685,051
32 316,255 33,883 33,883 133,883 153,653 153,653 253,653 642,205 642,205 742,205
33 336,268 29,840 29,840 129,840 156,714 156,714 256,714 704,512 704,512 804,512
34 357,281 25,184 25,184 125,184 159,201 159,201 259,201 772,473 772,473 872,473
35 379,345 19,885 19,885 119,885 161,043 161,043 261,043 846,619 846,619 946,619
36 402,513 13,883 13,883 113,883 162,141 162,141 262,141 927,510 927,510 1,027,510
37 426,838 7,098 7,098 107,098 162,368 162,368 262,368 1,015,739 1,015,739 1,115,739
38 452,380 * * * 161,567 161,567 261,567 1,111,932 1,111,932 1,211,932
39 479,199 * * * 159,560 159,560 259,560 1,216,767 1,216,767 1,316,767
40 507,359 * * * 156,184 156,184 256,184 1,331,013 1,331,013 1,431,013
41 536,927 * * * 151,299 151,299 251,299 1,455,549 1,455,549 1,555,549
42 567,973 * * * 144,782 144,782 244,782 1,591,369 1,591,369 1,691,369
43 600,572 * * * 136,523 136,523 236,523 1,739,585 1,739,585 1,839,585
44 634,801 * * * 126,430 126,430 226,430 1,901,450 1,901,450 2,001,450
45 670,741 * * * 114,391 114,391 214,391 2,078,176 2,078,176 2,182,085
46 708,478 * * * 100,268 100,268 200,268 2,269,577 2,269,577 2,369,577
47 748,102 * * * 83,888 83,888 183,888 2,480,815 2,480,815 2,580,815
48 789,707 * * * 65,018 65,018 165,018 2,711,832 2,711,832 2,811,832
49 833,392 * * * 43,335 43,335 143,335 2,964,430 2,964,430 3,064,430
50 879,262 * * * 18,164 18,164 118,164 3,240,246 3,240,246 3,340,246
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges, current cost of
insurance rates, a monthly administrative charge of $31.00 per month in
Policy Year 1 and $6.00 thereafter, and a monthly mortality and expense risk
charge equal to .075% multiplied by the Variable Account Value, which is
equivalent to an annual rate of 0.90% of such amount during all Policy
Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
37
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$3,000 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,150 2,099 1,706 102,099 2,246 1,854 102,246 2,394 2,001 102,394
2 6,458 4,439 4,046 104,439 4,874 4,482 104,874 5,328 4,935 105,328
3 9,930 6,716 6,323 106,716 7,591 7,199 107,591 8,540 8,147 108,540
4 13,577 8,929 8,536 108,929 10,399 10,006 110,399 12,055 11,662 112,055
5 17,406 11,078 10,686 111,078 13,301 12,908 113,301 15,904 15,511 115,904
6 21,426 13,161 12,768 113,161 16,295 15,902 116,295 20,116 19,724 120,116
7 25,647 15,177 14,828 115,177 19,385 19,036 119,385 24,728 24,378 124,728
8 30,080 17,123 16,817 117,123 22,571 22,265 122,571 29,774 29,469 129,774
9 34,734 19,149 18,887 119,149 26,010 25,749 126,010 35,461 35,199 135,461
10 39,620 21,188 20,969 121,188 29,645 29,426 129,645 41,779 41,561 141,779
11 44,751 23,365 23,190 123,365 33,665 33,491 133,665 49,059 48,884 149,059
12 50,139 25,479 25,348 125,479 37,842 37,711 137,842 57,089 56,958 157,089
13 55,796 27,522 27,435 127,522 42,174 42,087 142,174 65,944 65,857 165,944
14 61,736 29,471 29,427 129,471 46,644 46,601 146,644 75,686 75,643 175,686
15 67,972 31,345 31,345 131,345 51,277 51,277 151,277 86,433 86,433 186,433
16 74,521 33,099 33,099 133,099 56,035 56,035 156,035 98,244 98,244 198,244
17 81,397 34,769 34,769 134,769 60,959 60,959 160,959 111,273 111,273 211,273
18 88,617 36,350 36,350 136,350 66,051 66,051 166,051 125,647 125,647 225,647
19 96,198 37,848 37,848 137,848 71,324 71,324 171,324 141,515 141,515 241,515
20 104,158 39,247 39,247 139,247 76,770 76,770 176,770 159,024 159,024 259,024
21 112,516 40,541 40,541 140,541 82,390 82,390 182,390 178,345 178,345 278,345
22 121,291 41,721 41,721 141,721 88,182 88,182 188,182 199,663 199,663 299,663
23 130,506 42,791 42,791 142,791 94,157 94,157 194,157 223,200 223,200 323,200
24 140,181 43,729 43,729 143,729 100,300 100,300 200,300 249,172 249,172 349,172
25 150,340 44,537 44,537 144,537 106,621 106,621 206,621 277,846 277,846 377,846
26 161,007 45,187 45,187 145,187 113,095 113,095 213,095 309,482 309,482 409,482
27 172,208 45,675 45,675 145,675 119,727 119,727 219,727 344,400 344,400 444,400
28 183,968 45,957 45,957 145,957 126,477 126,477 226,477 382,907 382,907 482,907
29 196,317 46,026 46,026 146,026 133,340 133,340 233,340 425,383 425,383 525,383
30 209,282 45,823 45,823 145,823 140,258 140,258 240,258 472,197 472,197 572,197
31 222,896 45,335 45,335 145,335 147,217 147,217 247,217 523,802 523,802 623,802
32 237,191 44,518 44,518 144,518 154,173 154,173 254,173 580,672 580,672 680,672
33 252,201 43,327 43,327 143,327 161,072 161,072 261,072 643,326 643,326 743,326
34 267,961 41,668 41,668 141,668 167,813 167,813 267,813 712,293 712,293 812,293
35 284,509 39,529 39,529 139,529 174,368 174,368 274,368 788,239 788,239 888,239
36 301,884 36,858 36,858 136,858 180,669 180,669 280,669 871,863 871,863 971,863
37 320,129 33,603 33,603 133,603 186,646 186,646 286,646 963,941 963,941 1,063,941
38 339,285 29,716 29,716 129,716 192,224 192,224 292,224 1,065,335 1,065,335 1,165,335
39 359,399 25,074 25,074 125,074 197,251 197,251 297,251 1,176,921 1,176,921 1,276,921
40 380,519 19,693 19,693 119,693 201,708 201,708 301,708 1,299,818 1,299,818 1,399,818
41 402,695 13,522 13,522 113,522 205,507 205,507 305,507 1,435,194 1,435,194 1,535,194
42 425,980 6,494 6,494 106,494 208,534 208,534 308,534 1,584,327 1,584,327 1,684,327
43 450,429 * * * 210,690 210,690 310,690 1,748,648 1,748,648 1,848,648
44 476,100 * * * 211,864 211,864 311,864 1,929,745 1,929,745 2,029,745
45 503,055 * * * 211,946 211,946 311,946 2,129,138 2,129,138 2,235,595
46 531,358 * * * 210,813 210,813 310,813 2,347,537 2,347,537 2,447,537
47 561,076 * * * 208,372 208,372 308,372 2,590,039 2,590,039 2,690,039
48 592,280 * * * 204,496 204,496 304,496 2,857,672 2,857,672 2,957,672
49 625,044 * * * 199,052 199,052 299,052 3,153,030 3,153,030 3,253,030
50 659,446 * * * 191,900 191,900 291,900 3,479,066 3,479,066 3,579,066
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges, current cost of
insurance rates, a monthly administrative charge of $31.00 per month in
Policy Year 1 and $6.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate of 0.90% of such amount during Policy
Years 1-10; and in Policy Years 11+ is equal to .021% multiplied by the
Variable Account Value, which is equivalent to an annual rate of .25% of
such amount.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
38
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$3,000 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 2
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,150 2,076 1,683 102,076 2,222 1,829 102,222 2,368 1,976 102,368
2 6,458 4,392 3,999 104,392 4,824 4,431 104,824 5,275 4,882 105,275
3 9,930 6,646 6,253 106,646 7,515 7,122 107,515 8,456 8,063 108,456
4 13,577 8,836 8,444 108,836 10,295 9,902 110,295 11,937 11,544 111,937
5 17,406 10,964 10,571 110,964 13,167 12,774 113,167 15,749 15,356 115,749
6 21,426 13,025 12,632 113,025 16,132 15,739 116,132 19,920 19,527 119,920
7 25,647 15,019 14,670 115,019 19,190 18,841 119,190 24,486 24,137 124,486
8 30,080 16,944 16,638 116,944 22,343 22,037 122,343 29,482 29,177 129,482
9 34,734 18,794 18,532 118,794 25,587 25,325 125,587 34,947 34,685 134,947
10 39,620 20,570 20,352 120,570 28,926 28,708 128,926 40,928 40,710 140,928
11 44,751 22,329 22,155 122,329 32,424 32,249 132,424 47,540 47,365 147,540
12 50,139 24,012 23,881 124,012 36,022 35,891 136,022 54,780 54,649 154,780
13 55,796 25,620 25,533 125,620 39,727 39,639 139,727 62,713 62,626 162,713
14 61,736 27,156 27,113 127,156 43,543 43,499 143,543 71,413 71,369 171,413
15 67,972 28,619 28,619 128,619 47,473 47,473 147,473 80,954 80,954 180,954
16 74,521 30,001 30,001 130,001 51,514 51,514 151,514 91,413 91,413 191,413
17 81,397 31,295 31,295 131,295 55,660 55,660 155,660 102,876 102,876 202,876
18 88,617 32,485 32,485 132,485 59,898 59,898 159,898 115,426 115,426 215,426
19 96,198 33,553 33,553 133,553 64,210 64,210 164,210 129,153 129,153 229,153
20 104,158 34,480 34,480 134,480 68,580 68,580 168,580 144,156 144,156 244,156
21 112,516 35,261 35,261 135,261 73,001 73,001 173,001 160,557 160,557 260,557
22 121,291 35,888 35,888 135,888 77,465 77,465 177,465 178,488 178,488 278,488
23 130,506 36,361 36,361 136,361 81,970 81,970 181,970 198,104 198,104 298,104
24 140,181 36,682 36,682 136,682 86,518 86,518 186,518 219,575 219,575 319,575
25 150,340 36,844 36,844 136,844 91,101 91,101 191,101 243,081 243,081 343,081
26 161,007 36,826 36,826 136,826 95,694 95,694 195,694 268,805 268,805 368,805
27 172,208 36,596 36,596 136,596 100,264 100,264 200,264 296,938 296,938 396,938
28 183,968 36,107 36,107 136,107 104,756 104,756 204,756 327,672 327,672 427,672
29 196,317 35,307 35,307 135,307 109,107 109,107 209,107 361,212 361,212 461,212
30 209,282 34,144 34,144 134,144 113,254 113,254 213,254 397,786 397,786 497,786
31 222,896 32,574 32,574 132,574 117,135 117,135 217,135 437,649 437,649 537,649
32 237,191 30,563 30,563 130,563 120,697 120,697 220,697 481,095 481,095 581,095
33 252,201 28,083 28,083 128,083 123,889 123,889 223,889 528,453 528,453 628,453
34 267,961 25,107 25,107 125,107 126,659 126,659 226,659 580,086 580,086 680,086
35 284,509 21,593 21,593 121,593 128,938 128,938 228,938 636,378 636,378 736,378
36 301,884 17,476 17,476 117,476 130,626 130,626 230,626 697,726 697,726 797,726
37 320,129 12,669 12,669 112,669 131,597 131,597 231,597 764,544 764,544 864,544
38 339,285 7,063 7,063 107,063 131,698 131,698 231,698 837,263 837,263 937,263
39 359,399 537 537 100,537 130,752 130,752 230,752 916,345 916,345 1,016,345
40 380,519 * * * 128,597 128,597 228,597 1,002,320 1,002,320 1,102,320
41 402,695 * * * 125,069 125,069 225,069 1,095,777 1,095,777 1,195,777
42 425,980 * * * 120,017 120,017 220,017 1,197,387 1,197,387 1,297,387
43 450,429 * * * 113,278 113,278 213,278 1,307,883 1,307,883 1,407,883
44 476,100 * * * 104,695 104,695 204,695 1,428,088 1,428,088 1,528,088
45 503,055 * * * 94,082 94,082 194,082 1,558,883 1,558,883 1,658,883
46 531,358 * * * 81,244 81,244 181,244 1,701,242 1,701,242 1,801,242
47 561,076 * * * 65,944 65,944 165,944 1,856,202 1,856,202 1,956,202
48 592,280 * * * 47,878 47,878 147,878 2,024,846 2,024,846 2,124,846
49 625,044 * * * 26,626 26,626 126,626 2,208,263 2,208,263 2,308,263
50 659,446 * * * 1,498 1,498 101,498 2,407,395 2,407,395 2,507,395
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense Charges, guaranteed
cost of insurance rates, a monthly administrative charge of $33.00 per month
in Policy Year 1 and $8.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate of 0.90% of such amount during all
Policy Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
39
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$1,500 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 721 328 100,000 784 391 100,000 847 454 100,000
2 3,229 1,710 1,317 100,000 1,891 1,498 100,000 2,080 1,687 100,000
3 4,965 2,663 2,270 100,000 3,027 2,634 100,000 3,421 3,029 100,000
4 6,788 3,580 3,187 100,000 4,191 3,798 100,000 4,881 4,488 100,000
5 8,703 4,460 4,067 100,000 5,385 4,992 100,000 6,471 6,078 100,000
6 10,713 5,301 4,908 100,000 6,607 6,214 100,000 8,203 7,810 100,000
7 12,824 6,102 5,753 100,000 7,857 7,508 100,000 10,091 9,742 100,000
8 15,040 6,861 6,555 100,000 9,134 8,828 100,000 12,149 11,843 100,000
9 17,367 7,716 7,454 100,000 10,577 10,316 100,000 14,534 14,272 100,000
10 19,810 8,602 8,384 100,000 12,131 11,913 100,000 17,216 16,997 100,000
11 22,376 9,534 9,359 100,000 13,839 13,665 100,000 20,301 20,127 100,000
12 25,069 10,424 10,293 100,000 15,603 15,472 100,000 23,703 23,572 100,000
13 27,898 11,265 11,178 100,000 17,421 17,333 100,000 27,453 27,366 100,000
14 30,868 12,038 11,995 100,000 19,275 19,231 100,000 31,576 31,533 100,000
15 33,986 12,760 12,760 100,000 21,187 21,187 100,000 36,135 36,135 100,000
16 37,261 13,393 13,393 100,000 23,124 23,124 100,000 41,156 41,156 100,000
17 40,699 13,967 13,967 100,000 25,120 25,120 100,000 46,722 46,722 100,000
18 44,309 14,479 14,479 100,000 27,176 27,176 100,000 52,903 52,903 100,000
19 48,099 14,934 14,934 100,000 29,302 29,302 100,000 59,783 59,783 100,000
20 52,079 15,319 15,319 100,000 31,492 31,492 100,000 67,448 67,448 100,000
21 56,258 15,628 15,628 100,000 33,750 33,750 100,000 76,002 76,002 100,000
22 60,646 15,852 15,852 100,000 36,077 36,077 100,000 85,567 85,567 100,969
23 65,253 15,996 15,996 100,000 38,483 38,483 100,000 96,186 96,186 112,538
24 70,091 16,039 16,039 100,000 40,965 40,965 100,000 107,926 107,926 125,195
25 75,170 15,984 15,984 100,000 43,533 43,533 100,000 120,908 120,908 139,045
26 80,504 15,802 15,802 100,000 46,183 46,183 100,000 135,260 135,260 152,843
27 86,104 15,489 15,489 100,000 48,925 48,925 100,000 151,153 151,153 167,780
28 91,984 15,005 15,005 100,000 51,752 51,752 100,000 168,760 168,760 183,949
29 98,158 14,337 14,337 100,000 54,675 54,675 100,000 188,281 188,281 201,461
30 104,641 13,429 13,429 100,000 57,689 57,689 100,000 209,937 209,937 220,434
31 111,448 12,256 12,256 100,000 60,810 60,810 100,000 233,992 233,992 245,691
32 118,596 10,769 10,769 100,000 64,046 64,046 100,000 260,585 260,585 273,615
33 126,100 8,903 8,903 100,000 67,414 67,414 100,000 289,973 289,973 304,472
34 133,980 6,548 6,548 100,000 70,921 70,921 100,000 322,427 322,427 338,549
35 142,254 3,646 3,646 100,000 74,610 74,610 100,000 358,254 358,254 376,166
36 150,942 93 93 100,000 78,524 78,524 100,000 397,782 397,782 417,671
37 160,064 * * * 82,722 82,722 100,000 441,368 441,368 463,437
38 169,643 * * * 87,280 87,280 100,000 489,400 489,400 513,870
39 179,700 * * * 92,293 92,293 100,000 542,277 542,277 569,390
40 190,260 * * * 97,831 97,831 102,722 600,464 600,464 630,487
41 201,348 * * * 103,592 103,592 108,771 664,449 664,449 697,671
42 212,990 * * * 109,557 109,557 115,034 734,749 734,749 771,486
43 225,215 * * * 115,725 115,725 121,512 811,923 811,923 852,519
44 238,050 * * * 122,097 122,097 128,201 896,570 896,570 941,398
45 251,528 * * * 128,668 128,668 135,101 989,329 989,329 1,038,796
46 265,679 * * * 135,436 135,436 140,854 1,090,882 1,090,882 1,134,517
47 280,538 * * * 142,616 142,616 146,895 1,203,809 1,203,809 1,239,924
48 296,140 * * * 150,274 150,274 153,279 1,329,793 1,329,793 1,356,389
49 312,522 * * * 158,486 158,486 160,070 1,470,844 1,470,844 1,485,553
50 329,723 * * * 167,344 167,344 167,344 1,629,385 1,629,385 1,629,385
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Current values reflect applicable Premium Expense Charges, current cost of
insurance rates, a monthly administrative charge of $31.00 per month in
Policy Year 1 and $6.00 thereafter, and a monthly mortality and expense risk
charge equal to .075% multiplied by the Variable Account Value, which is
equivalent to an annual rate of 0.90% of such amount during Policy Years
1-10; and in Policy Years 11+ is equal to .021% multiplied by the Variable
Account Value, which is equivalent to an annual rate of .25% of such amount.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
40
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
FEMALE ISSUE AGE: 45 NON-SMOKER
$1,500 ANNUAL PLANNED PREMIUM
$100,000 FACE AMOUNT
DEATH BENEFIT OPTION 1
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
END OF AT --------------------------------- --------------------------------- ---------------------------------
POLICY 5% INTEREST POLICY SURRENDER DEATH POLICY SURRENDER DEATH POLICY SURRENDER DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- ----------- ------------- --------- ----------- --------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1,575 697 304 100,000 759 367 100,000 822 429 100,000
2 3,229 1,662 1,270 100,000 1,841 1,448 100,000 2,027 1,634 100,000
3 4,965 2,592 2,200 100,000 2,949 2,557 100,000 3,337 2,944 100,000
4 6,788 3,486 3,094 100,000 4,086 3,693 100,000 4,762 4,369 100,000
5 8,703 4,344 3,951 100,000 5,250 4,858 100,000 6,314 5,922 100,000
6 10,713 5,163 4,770 100,000 6,442 6,049 100,000 8,004 7,611 100,000
7 12,824 5,942 5,593 100,000 7,659 7,310 100,000 9,845 9,496 100,000
8 15,040 6,679 6,373 100,000 8,902 8,596 100,000 11,851 11,546 100,000
9 17,367 7,369 7,107 100,000 10,165 9,903 100,000 14,036 13,774 100,000
10 19,810 8,012 7,794 100,000 11,452 11,233 100,000 16,420 16,202 100,000
11 22,376 8,637 8,462 100,000 12,791 12,617 100,000 19,058 18,883 100,000
12 25,069 9,213 9,082 100,000 14,156 14,025 100,000 21,945 21,814 100,000
13 27,898 9,742 9,654 100,000 15,549 15,461 100,000 25,113 25,025 100,000
14 30,868 10,226 10,182 100,000 16,973 16,929 100,000 28,596 28,552 100,000
15 33,986 10,664 10,664 100,000 18,430 18,430 100,000 32,430 32,430 100,000
16 37,261 11,049 11,049 100,000 19,915 19,915 100,000 36,653 36,653 100,000
17 40,699 11,374 11,374 100,000 21,424 21,424 100,000 41,306 41,306 100,000
18 44,309 11,625 11,625 100,000 22,947 22,947 100,000 46,435 46,435 100,000
19 48,099 11,785 11,785 100,000 24,471 24.471 100,000 52,092 52,092 100,000
20 52,079 11,837 11,837 100,000 25,984 25,984 100,000 58,340 58,340 100,000
21 56,258 11,775 11,775 100,000 27,483 27,483 100,000 65,260 65,260 100,000
22 60,646 11,589 11,589 100,000 28,963 28,963 100,000 72,947 72,947 100,000
23 65,253 11,277 11,277 100,000 30,426 30,426 100,000 81,515 81,515 100,000
24 70,091 10,839 10,839 100,000 31,874 31,874 100,000 91,058 91,058 105,627
25 75,170 10,263 10,263 100,000 33,305 33,305 100,000 101,549 101,549 116,781
26 80,504 9,527 9,527 100,000 34,705 34,705 100,000 113,070 113,070 127,769
27 86,104 8,596 8,596 100,000 36,055 36,055 100,000 125,748 125,748 139,581
28 91,984 7,417 7,417 100,000 37,324 37,324 100,000 139,707 139,707 152,281
29 98,158 5,928 5,928 100,000 38,477 38,477 100,000 155,087 155,087 165,943
30 104,641 4,063 4,063 100,000 39,477 39,477 100,000 172,052 172,052 180,655
31 111,448 1,752 1,752 100,000 40,289 40,289 100,000 190,796 190,796 200,336
32 118,596 * * * 40,879 40,879 100,000 211,371 211,371 221,939
33 126,100 * * * 41,213 41,213 100,000 233,945 233,945 245,642
34 133,980 * * * 41,248 41,248 100,000 258,702 258,702 271,637
35 142,254 * * * 40,925 40,925 100,000 285,837 285,837 300,128
36 150,942 * * * 40,155 40,155 100,000 315,557 315,557 331,335
37 160,064 * * * 38,815 38,815 100,000 348,079 348,079 365,483
38 169,643 * * * 36,736 36,736 100,000 383,631 383,631 402,812
39 179,700 * * * 33,687 33,687 100,000 422,445 422,445 443,567
40 190,260 * * * 29,383 29,383 100,000 464,771 464,771 488,010
41 201,348 * * * 23,434 23,434 100,000 510,870 510,870 536,414
42 212,990 * * * 15,323 15,323 100,000 561,019 561,019 589,069
43 225,215 * * * 4,316 4,316 100,000 615,501 615,501 646,276
44 238,050 * * * * * * 674,618 674,618 708,349
45 251,528 * * * * * * 738,668 738,668 775,602
46 265,679 * * * * * * 807,959 807,959 840,277
47 280,538 * * * * * * 884,655 884,655 911,194
48 296,140 * * * * * * 969,941 969,941 989,340
49 312,522 * * * * * * 1,065,277 1,065,277 1,075,930
50 329,723 * * * * * * 1,172,496 1,172,496 1,172,496
</TABLE>
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* In the absence of an additional premium, the Policy would lapse.
(1) Assumes that no Policy loans have been made.
(2) Guaranteed values reflect applicable Premium Expense Charges, guaranteed
cost of insurance rates, a monthly administrative charge of $33.00 per month
in Policy Year 1 and $8.00 per month thereafter, and a monthly mortality and
expense risk charge equal to .075% multiplied by the Variable Account Value,
which is equivalent to an annual rate 0.90% of such amount during all Policy
Years.
(3) Net investment returns are calculated as the hypothetical gross investment
returns less all charges and deductions shown in the prospectus.
(4) Assumes that the planned premium is paid at the beginning of each Policy
Year. Values would be different if the premiums are paid with a different
frequency or in different amounts.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN
THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION
OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND POLICY VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL
POLICY YEARS. NO REPRESENTATION CAN BE MADE BY THE COMPANY OR THE FUNDS THAT
THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED
OVER ANY PERIOD OF TIME.
41
<PAGE>
OTHER POLICY BENEFITS AND PROVISIONS
LIMITS ON RIGHTS TO CONTEST THE POLICY
INCONTESTABILITY. Protective Life will not contest the Policy, or any
supplemental benefit and/or rider, after the Policy or rider has been in force
during the Insured's lifetime for two years from the Policy Effective Date or
the effective date of the rider, unless fraud is involved. Any increase in the
Face Amount will be incontestable with respect to statements made in the
evidence of insurability for that increase after the increase has been in force
during the life of the Insured for two years after the effective date of the
increase.
SUICIDE EXCLUSION. If the Insured dies by suicide, while sane or insane,
within two years after the Policy Effective Date, the Death Benefit will be
limited to the premium payments made before death, less any Policy Debt and any
withdrawals. If the Insured dies by suicide within two years after an increase
in Face Amount, the Death Benefit with respect to the increase will be limited
to the sum of the monthly cost of insurance charges made for that increase.
CHANGES IN THE POLICY OR BENEFITS
MISSTATEMENT OF AGE OR SEX. If the Insured's age or sex has been misstated
in the application for the Policy or in any application for supplemental
benefits and/or riders, the Death Benefit under the Policy or such supplemental
benefits and/or riders is the amount which would have been provided by the most
recent cost of insurance charge, and the cost of such supplemental benefits
and/or riders, at the correct age and sex.
OTHER CHANGES. At any time Protective Life may make such changes in the
Policy as are necessary to assure compliance with any applicable laws,
regulations or rulings issued by a government agency. This includes, but is not
limited to, changes necessary to comply at all times with the definition of life
insurance prescribed by the Code. Any such changes will apply uniformly to all
affected Policies and Owners will receive notification of such changes.
SUSPENSION OR DELAY IN PAYMENTS
Protective Life will ordinarily pay any Death Benefit proceeds, Policy
loans, withdrawals, or surrenders within seven calendar days after receipt at
the Home Office of all the documents required for such a payment. Other than the
Death Benefit, which is determined as of the date of death, the amount will be
determined as of the date of receipt of all required documents. However,
Protective Life may delay making a payment or processing a transfer request if
(1) the New York Stock Exchange is closed for other than a regular holiday or
weekend, trading on the Exchange is restricted by the SEC, or the SEC declares
that an emergency exists as a result of which the disposal or valuation of
Variable Account assets is not reasonably practicable; or (2) the SEC by order
permits postponement of payment to protect Owners. See also "Payments from the
Fixed Account".
REPORTS TO POLICY OWNERS
Each year you will be sent a report at your last known address showing, as
of the end of the current report period: the Death Benefit; Policy Value; Fixed
Account Value; Variable Account Value; Loan Account Value; Sub-Account Values;
premiums paid since the last report; withdrawals since the last report; any
Policy loans and accrued interest; Surrender Value; current Net Premium
allocations; charges deducted since the last report; and any other information
required by law. You will also be sent an annual and a semi-annual report for
each Fund underlying a Sub-Account to which you have allocated Policy Value,
including a list of the securities held in each Fund, as required by the 1940
Act. In addition, when you pay Premium Payments or request any other financial
transaction under your Policy you will receive a written confirmation of these
transactions.
ASSIGNMENT
The Policy may be assigned in accordance with its terms. In order for any
assignment to be binding upon Protective Life, it must be in writing and filed
at the Home Office. Once Protective Life has received a signed copy of the
assignment, the Owner's rights and the interest of any Beneficiary
42
<PAGE>
(or any other person) will be subject to the assignment. Protective Life assumes
no responsibility for the validity or sufficiency of any assignment. An
assignment is subject to any Policy Debt. An assignment may result in certain
amounts being subject to income tax and a 10% penalty tax. See "Tax
Considerations".
ARBITRATION
The Policy provides that any controversy, dispute or claim by any Owner(s),
Insured, or Beneficiary (a "claimant") arising out of insurance provided under
the Policy will be submitted to binding arbitration pursuant to the Federal
Arbitration Act. Arbitration will be binding upon any claimant as well as
Protective Life and may not be set aside in later litigation except upon the
limited circumstances set forth in the Federal Arbitration Act. Arbitration
expenses will be borne by the losing party or in such proportion as the
arbitrator(s) shall decide. Consult the Policy for additional information. This
provision does not apply to Policies issued in certain states.
SUPPLEMENTAL BENEFITS AND/OR RIDERS
The following supplemental benefits and/or riders are available and may be
added to your Policy. Monthly charges for these benefits and/or riders will be
deducted from your Policy Value as part of the monthly deduction (see "Monthly
Deduction"). The supplemental benefits and/or riders available with the Policies
provide fixed benefits that do not vary with the investment experience of the
Variable Account.
CHILDREN'S TERM LIFE INSURANCE RIDER. Provides a death benefit payable on
the death of a covered child. More than one child can be covered. There is no
cash value for this benefit.
ACCIDENTAL DEATH BENEFIT RIDER. Provides an additional death benefit
payable if the Insured's death results from certain accidental causes. There is
no cash value for this benefit.
DISABILITY BENEFIT RIDER. Provides for the crediting of a specific Premium
Payment to a Policy on each Monthly Anniversary during the total disability of
the Insured. After the Insured has been totally disabled (as defined in the
rider) for six months, the Company will credit Premium Payments to the Policy
equal to the disability benefit amount shown in the Policy multiplied by the
number of Monthly Anniversary Days that have occurred since the onset of total
disability. Monthly Anniversary Days that occur more than one calendar year
prior to the date that We receive a claim under a rider are not included for the
purpose of this calculation. Subsequent to the time that the Insured has been
totally disabled for six months, We will credit a Premium Payment equal to the
disability benefit amount on each Monthly Anniversary Day. The Owner may change
the disability benefit amount by Written Notice at any time before the Insured
becomes totally disabled.
GUARANTEED INSURABILITY RIDER. Provides the right to increase the Face
Amount of your Policy under two options. The Option exercise date depends on the
rider selected: Variable Option or Survivor's Choice. Under the Variable Option
you can increase the Face Amount at designated future points in time (selected
at issue) without evidence of insurability. Under the Survivor's Choice Option,
you specify (at issue) a designated life (other than the Insured). When the
designated person dies, the Owner has the option to increase the Face Amount
without evidence of insurability. See "Changing the Face Amount".
PROTECTED INSURABILITY BENEFIT RIDER. Provides the right to increase the
Face Amount of your Policy at designated option dates at age 25, 28, 31, 34, 37
and 40 without evidence of insurability.
Additional rules and limits apply to these supplemental benefits and/or
riders. Not all such benefits may be available at any time, and supplemental
benefits and/or riders in addition to those listed above may be made available.
Please ask your Protective Life agent for further information, or contact the
Home Office.
REINSURANCE
The Company may reinsure a portion of the risks assumed under the Policies.
43
<PAGE>
USES OF THE POLICY
Life insurance, including variable life insurance, can be used to provide
for many individual and business needs, in addition to providing a death
benefit. Possible applications of a variable life insurance policy, such as this
Policy include: (1) serving as vehicle for accumulating funds for a college
education, (2) estate planning, (3) serving as an investment vehicle on various
types of deferred compensation arrangements, (4) buy-sell arrangements, (5)
split dollar arrangements, and (6) a supplement to other retirement plans.
As with any investment, using this Policy under these or other applications
entails certain risks. For example, if investment performance of subaccounts to
which Policy Value is allocated is poorer than expected or if sufficient
premiums are not paid, the Policy may lapse or may not accumulate Cash Value or
Surrender Value sufficient to adequately fund the application for which the
Policy was purchased. Similarly, certain transactions under a Policy entail
risks in connection with the application for which the Policy is purchased.
Withdrawals, policy loans and interest paid on policy loans may significantly
affect current and future Policy Value, Cash Value, Surrender Value or Death
Benefit Proceeds. If, for example, a policy loan is taken but not repaid prior
to the death of the Insured, the Policy Debt is subtracted from the Death
Benefit in computing the Death Benefit Proceeds to be paid to a Beneficiary.
Prior to utilizing this Policy or the above applications you should consider
whether the anticipated duration of the Policy is appropriate for the
application for which you intend to purchase it.
In addition, you need to consider the tax implications of using the Policy
with these applications. Loans and withdrawals will affect the Policy Value and
Death Benefit. There may be penalties and taxes if the policy is withdrawn,
surrendered, lapses or matures. BECAUSE OF THESE RISKS, YOU NEED TO CAREFULLY
CONSIDER HOW YOU USE THIS POLICY. THIS POLICY MAY NOT BE SUITABLE FOR ALL
PERSONS, UNDER ANY OF THESE APPLICATIONS.
TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the Policy
is not exhaustive, does not purport to cover all situations, and is not intended
as tax advice. The federal income tax treatment of the Policy is unclear in
certain circumstances, and a qualified tax adviser should always be consulted
with regard to the application of law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Department regulations, and interpretations existing on the
date of this Prospectus. These authorities, however, are subject to change by
Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or local tax consequences associated
with the purchase of the Policy. In addition, PROTECTIVE LIFE MAKES NO GUARANTEE
REGARDING ANY TAX TREATMENT -- FEDERAL, STATE OR LOCAL -- OF ANY POLICY OR OF
ANY TRANSACTION INVOLVING A POLICY.
TAX STATUS OF PROTECTIVE LIFE
Protective Life is taxed as a life insurance company under the Code. Since
the operations of the Variable Account are a part of, and are taxed with, the
operations of Protective Life, the Variable Account is not separately taxed as a
"regulated investment company" under the Code. Under existing federal income tax
laws, Protective Life is not taxed on investment income and realized capital
gains of the Variable Account, although Protective Life's federal taxes are
increased in respect of the Policies because of the federal tax law's treatment
of deferred acquisition costs. Currently, a charge for federal income taxes is
not deducted from the Sub-Accounts or the Policy's Cash Value. However,
Protective Life does deduct a charge of 1.25% of each Premium Payment in all
Policy Years to compensate it for the federal tax treatment of deferred
acquisition costs. Protective Life reserves the right in the future
44
<PAGE>
to make a charge against the Variable Account or the Cash Values of a Policy for
any federal, state, or local income taxes that it incurs and determines to be
properly attributable to the Variable Account or the Policy. Protective Life
will promptly notify You of any such charge.
TAXATION OF LIFE INSURANCE POLICIES
TAX STATUS OF THE POLICY. Section 7702 of the Code establishes a statutory
definition of life insurance for federal tax purposes. Protective Life believes
that the Policy will meet the current statutory definition of life insurance,
which places limitations on the amount of premiums that may be paid and the
Policy Values that can accumulate relative to the Death Benefit. As a result,
the Death Benefit payable under the Policy will generally be excludable from the
Beneficiary's gross income, and interest and other income credited under the
Policy will not be taxable unless certain withdrawals are made (or are deemed to
be made) from the Policy prior to the Insured's death, as discussed below. This
tax treatment will only apply, however, if (1) the investments of the Variable
Account are "adequately diversified" in accordance with Treasury Department
regulations, and (2) Protective Life, rather than the Owner, is considered the
owner of the assets of the Variable Account for federal income tax purposes.
DIVERSIFICATION REQUIREMENTS. The Code and Treasury Department
regulations prescribe the manner in which the investments of a segregated
asset account, such as the Variable Account, are to be "adequately
diversified". If the Variable Account fails to comply with these
diversification standards, the Policy will not be treated as a life
insurance contract for federal income tax purposes and the Owner would
generally be taxable currently on the income on the contract (as defined in
the tax law) beginning with the period of non-diversification. Protective
Life expects that the Variable Account, through the Funds, will comply with
the diversification requirements prescribed by the Code and Treasury
Department regulations.
OWNERSHIP TREATMENT. In certain circumstances, variable life insurance
contract owners may be considered the owners, for federal income tax
purposes, of the assets of a segregated asset account, such as the Variable
Account, used to support their contracts. In those circumstances, income and
gains from the segregated asset account would be includible in the contract
owners' gross income. The Internal Revenue Service (the "IRS") has stated in
published rulings that a variable contract owner will be considered the
owner of the assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. In addition, the Treasury Department
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, rather than the insurance
company, to be treated as the owner of the assets in the account". This
announcement also stated that guidance would be issued by way of regulations
or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts [of a segregated asset account]
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 Policy 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 the assets of a
segregated asset account. For example, the Owner of this Policy has the
choice of more investment options to which to allocate premium payments and
Variable Account values, and may be able to transfer among investment
options more frequently, than in such rulings. These differences could
result in the Policy Owner being treated as the owner of a portion of the
assets of the Variable Account. In addition, Protective Life does not know
what standards will be set forth in the regulations or rulings which the
Treasury Department has stated it expects to issue. Protective Life
therefore reserves the right to modify the Policy as necessary to attempt to
prevent Owners from being considered the owners of the assets of the
Variable Account. However, there is no assurance that such efforts would be
successful.
45
<PAGE>
The remainder of this discussion assumes that the Policy will be treated as
a life insurance contract for federal tax purposes.
TAX TREATMENT OF LIFE INSURANCE DEATH BENEFIT PROCEEDS. In general, the
amount of the Death Benefit Proceeds payable from a Policy by reason of the
death of the Insured is excludable from gross income under Section 101 of the
Code. Certain transfers of the Policy for valuable consideration, however, may
result in a portion of the Death Benefit Proceeds being taxable.
If the Death Benefit Proceeds is not received in a lump sum and is, instead,
applied under either settlement Options 1, 2, or 4, generally payments will be
prorated between amounts attributable to the Death Benefit which will be
excludable from the Beneficiary's income and amounts attributable to interest
(accruing after the Insured's death) which will be includible in the
Beneficiary's income. If the Death Benefit Proceeds is applied under Option 3
(Interest Income), the interest payments will be includible in the Beneficiary's
income.
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions of the
Code, except as described below, any increase in an Owner's Policy Value is
generally not taxable to the Owner unless amounts are received (or are deemed to
be received) from the Policy prior to the Insured's death. If there is a
surrender of the Policy, an amount equal to the excess of the Surrender Value
over the "investment in the contract" will be includible in the Owner's income.
The "investment in the contract" generally is the aggregate Premiums Payments
less the aggregate amount received under the Policy previously to the extent
such amounts received were excludable from gross income. Whether withdrawals (or
other amounts deemed to be distributed) from the Policy constitute income to the
Owner depends, in part, upon whether the Policy is considered a "modified
endowment contract" ("MEC") for federal income tax purposes.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC
(described below), the amount of any withdrawal from the Policy generally
will be considered first as non-taxable recovery of premium and then income
from the Policy. Thus, a withdrawal under a Policy that is not a MEC
generally will not be includible in income except to the extent it exceeds
the investment in the contract immediately before the withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As indicated above, section 7702 places limitations on the amount of
premiums that may be paid and the Policy Values that can accumulate relative
to the Death Benefit. Where cash distributions are required under section
7702 in connection with a reduction in benefits during the first 15 years
after the Policy is issued (or if withdrawals are made in anticipation of a
reduction in benefits, within the meaning of the tax law, during this
period), some or all of such amounts may be includible in income
notwithstanding the general rule described in the preceding paragraph. A
reduction in benefits may result upon a decrease in the face amount, a
change from an Increasing Death Benefit to a Level Death Benefit, if
withdrawals are made, and in certain other instances.
TAX TREATMENT OF LOANS. If a Policy is not classified as a MEC, a loan
received under the Policy generally will be treated as indebtedness of the
Owner. As a result, no part of any loan under a Policy will constitute
income to the Owner so long as the Policy remains in force. However, in
those situations where the interest rate credited to the Loan Account equals
the interest rate charged for the loan, it is possible that some or all of
the loan proceeds may be includible in income. If a Policy lapses when a
loan is outstanding, the amount of the loan outstanding will be treated as
the proceeds of a surrender for purposes of determining whether any amounts
are includable in the Owner's income.
Generally, interest paid on any loans under this Policy will not be tax
deductible unless paid in connection with a taxpayer's trade or business. In
the case of interest paid in connection with a loan with respect to a Policy
covering the life of any individual who is an officer or employee or is
financially interested in the trade or business, interest is deductible
under current law only to the
46
<PAGE>
extent that the aggregate amount of loans under one or more life insurance
policies does not exceed $50,000. Further, even as to such loans up to
$50,000, interest would not be deductible if the Policy were deemed for
federal tax purposes to be a single premium life insurance policy or, in
certain circumstances, if the loans were treated as "systematic borrowing"
within the meaning of the tax law. Moreover, as of the date of this
prospectus, Congress is considering legislation which would disallow the
deduction of such interest even where the amount of the loan is less than
$50,000. (It is possible that if the interest paid deduction on such loans
is repealed, a narrow exception may be retained for senior employees.) This
legislation would be effective generally for interest paid or accrued on or
after January 1, 1996. Owners should consult a tax advisor regarding the
deductibility of interest incurred in connection with this Policy.
POLICIES WHICH ARE MECS
CHARACTERIZATION OF A POLICY AS A MEC. In general, a Policy will be
considered a MEC for federal income tax purposes if (1) the Policy is
received in exchange for a life insurance contract that was a MEC, or (2)
the Policy is entered into after June 21, 1988 and premiums are paid into
the Policy more rapidly than the rate defined by a "7-Pay Test". This test
generally provides that a Policy will fail this test (and thus be considered
a MEC) if the accumulated amount paid under the Policy at any time during
the 1st 7 Policy Years exceeds the cumulative sum of the net level premiums
which would have been paid to that time if the Policy provided for paid-up
future benefits after the payment of 7 level annual premiums. A material
change of the Policy (as defined in the tax law) will generally result in a
re-application of the 7-Pay Test. In addition, any reduction in benefits
during the 7-Pay period will affect the application of this test. Protective
Life will monitor the Policies and will attempt to notify Owners on a timely
basis if a Policy is in jeopardy of becoming a MEC.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER
MECS. If the Policy is a MEC, withdrawals from the Policy will be
considered first as withdrawals of income and then as a recovery of premiums
paid. Thus, withdrawals will be includible in income to the extent the
Policy Value exceeds the investment in the contract. The amount of any
Policy Debt will be treated as a withdrawal for tax purposes. In addition,
the discussion of interest on loans and of lapses while loans are
outstanding under the caption "Policies Which Are Not MECs" also applies to
Policies which are MECs.
If the Owner assigns or pledges any portion of the Policy Value (or
agrees to assign or pledge any portion), such portion will be treated as a
withdrawal for tax purposes. The Owner's investment in the contract is
increased by the amount includible in income with respect to such
assignment, pledge, or loan, though it is not affected by any other aspect
of the assignment, pledge, or loan (including its release or repayment).
Before assigning, pledging, or requesting a loan under a Policy treated as a
MEC, an Owner should consult a qualified tax advisor.
PENALTY TAX. Generally, proceeds of a surrender or a withdrawals (or
the amount of any deemed withdrawal) from a MEC are subject to a penalty tax
equal to 10% of the portion of the proceeds that is includible in income,
unless the surrender or withdrawal is made (1) after the Owner attains age
59 1/2, (2) because the Owner has become disabled (as defined in the tax
law), or (3) as substantially equal periodic payments over the life or life
expectancy of the Owner (or the joint lives or life expectancies of the
Owner and his or her beneficiary, as defined in the tax law).
AGGREGATION OF POLICIES. All life insurance contracts which are treated
as MECs and which are purchased by the same person from Protective Life or
any of its affiliates within the same calendar year will be aggregated and
treated as one contract for purposes of determining the tax on withdrawals
(including deemed withdrawals). The effects of such aggregation are not
clear; however, it could affect the time when income is taxable and the
amount which might be subject to the 10% penalty tax described above.
47
<PAGE>
TREATMENT OF MATURITY BENEFITS AND EXTENSION OF MATURITY DATE. At the
Maturity Date, the Surrender Value will be paid to the Owner. This payment will
be taxable in the same manner as a surrender of the Policy. If the Owner elects
to extend the Maturity Date (which must be done prior to the Maturity Date) and
such extension is approved, it is possible that the IRS could treat the Owner as
being in constructive receipt of the Cash Value when the insured reaches age 95.
If this were the case, an amount equal to the excess of the Cash Value over the
investment in the contract could be includible in the Owner's income at that
time.
ACTIONS TO ENSURE COMPLIANCE WITH THE TAX LAW. Protective Life believes
that the maximum amount of premiums it has determined for the Policies will
comply with the federal tax definition of life insurance. Protective Life will
monitor the amount of premiums paid, and, if the premiums paid exceed those
permitted by the tax definition of life insurance, Protective Life will
immediately refund the excess premiums. Protective Life also reserves the right
to increase the Death Benefit (which may result in larger charges under a
Policy) or to take any other action deemed necessary to ensure the compliance of
the Policy with the federal tax definition of life insurance.
OTHER CONSIDERATIONS. Changing the Owner, exchanging the Policy, changing
from one Death Benefit option to another, and other changes under the Policy may
have tax consequences (other than those discussed herein) depending on the
circumstances of such change or withdrawal.
FEDERAL INCOME TAX WITHHOLDING
Protective Life will withhold and remit to the federal government a part of
the taxable portion of a surrender and withdrawal made under a Policy unless the
Owner notifies Protective Life in writing at or before the time of the surrender
or withdrawal that he or she elects not to have any amounts withheld. Regardless
of whether the Owner requests that no taxes be withheld or whether Protective
Life withholds a sufficient amount of taxes, the Owner will be responsible for
the payment of any taxes including any penalty tax that may be due on the
amounts received. The Owner may also be required to pay penalties under the
estimated tax rules, if the Owner's withholding and estimated tax payments are
insufficient to satisfy the Owner's total tax liability.
OTHER INFORMATION ABOUT THE POLICIES AND PROTECTIVE LIFE
SALE OF THE POLICIES
Investment Distributors, Inc. ("IDI"), a wholly-owned subsidiary of
Protective Life Corporation, acts as a principal underwriter of the Policies.
IDI also acts as principal underwriter of variable annuity contracts issued
through Protective Variable Annuity Separate Account, and of the Fund. IDI is a
registered broker-dealer under the Securities Exchange Act of 1934 and a member
of the National Association of Securities Dealers, Inc. The Policies are sold by
certain registered representatives of broker-dealers (including Pro Equities,
Inc., an affiliate of Protective Life and IDI) that have entered into selling
agreements with IDI, who are also appointed and licensed as insurance agents of
Protective Life. Registered representatives may be paid commissions on Policies
they sell based on Premium Payments paid in amounts up to 50% of a targeted
first year premium payment. A targeted first year premium payment is
approximately equal to your minimum initial premium on an annual basis. For
Premium Payments paid in the first policy year which exceed this targeted
amount, registered representatives may receive up to 5% on Premium Payments in
excess of target. For Premium Payments received during policy years two through
ten, the registered representatives may be paid up to 5% on Premium Payments,
and .025% on unloaned Policy Value after the first ten Policy Years. Other
allowances and overrides, and non-cash compensation, also may be paid.
Registered representatives who meet certain productivity and profitability
standards may be eligible for additional compensation.
48
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PROTECTIVE LIFE DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age, address and principal
occupations during the past five years of each of Protective Life's directors
and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PROTECTIVE LIFE
- -------------------- --- -------------------------------------------------------------------
<S> <C> <C>
Drayton Nabers, Jr. 55 President and a Director
R. Stephen Briggs 46 Executive Vice President and a Director
John D. Johns 43 Executive Vice President and Chief Financial Officer and a Director
Ormond L. Bentley 60 Senior Vice President, Group and a Director
Deborah J. Long 42 Senior Vice President and General Counsel and a Director
Jim E. Massengale 53 Senior Vice President and a Director
Steven A. Schultz 42 Senior Vice President, Financial Institutions and a Director
Wayne E. Stuenkel 42 Senior Vice President and Chief Actuary and a Director
A. S. Williams III 59 Senior Vice President, Investments and Treasurer and a Director
Judy Wilson 37 Senior Vice President, Guaranteed Investment Contracts
Carolyn King 46 Senior Vice President, Investment Products and a Director
Jerry W. DeFoor 43 Vice President and Controller, and Chief Accounting Officer
</TABLE>
Mr. Nabers has been Chairman of the Board, President and Chief Executive
Officer and a Director of PLC since May 1994. From May 1992 to May 1994, he was
President and Chief Executive Officer and a Director of PLC. Mr. Nabers had been
President of Protective and PLC since August 1982, and had been Senior Vice
President of each from September 1981 to August 1982. From February 1980 to
September 1981, he served as Senior Vice President, Operations of Protective.
From 1979 to February 1980, he was Senior Vice President, Operations and General
Counsel of Protective. He is a director of Energen Corporation, and National
Bank of Commerce of Birmingham, and Alabama National Bancorporation.
Mr. Briggs has been Executive Vice President of PLC and Protective since
October 1993. From January 1993 to October 1993 he was Senior Vice President,
Life Insurance and Investment Products of Protective and PLC. Mr. Briggs had
been Senior Vice President, Ordinary Marketing of PLC since August 1988 and of
Protective since April 1986. From July 1983 to April 1986, he was President of
First Protective Insurance Group, Inc.
Mr. Johns has been Executive Vice President and Chief Financial Officer of
PLC and Protective since October 1993. From August 1988 to October 1993, he
served as Vice President and General Counsel of Sonat, Inc. He is a director of
National Bank of Commerce of Birmingham, Alabama National Bancorporation, and
Parisian Services, Inc.
Mr. Bentley has been Senior Vice President, Group of Protective since
December 1978. He has also served as Senior Vice President, Group of PLC since
August 1988. Mr. Bentley has been employed by Protective since October 1965.
Ms. King has been Senior Vice President, Investment Products Division of PLC
and of Protective since April 1995. From August 1994 to March 1995, she served
as Senior Vice President and Chief Investment Officer of Provident Life and
Accident Insurance Company of America. She served as President of Provident
National Assurance Company from November 1987 to March 1995. From November 1986
to August 1994, she served as Vice President of Provident Life and Accident
Insurance Company and of its parent company, Provident Life and Accident
Insurance Company of America. Since 1975, Ms. King served in a number of
capacities with Provident National Assurance Company.
Ms. Long has been Senior Vice President and General Counsel of PLC and
Protective since February 1994. From August 1993 to January 1994, Ms. Long
served as General Counsel of PLC and from February 1984 to January 1994 she
practiced law with the law firm of Maynard, Cooper & Gale, P.C.
49
<PAGE>
Mr. Massengale has been Senior Vice President of Protective and PLC since
May 1992. From May 1989 to May 1992 Mr. Massengale was Senior Vice President,
Operations and Systems of Protective and PLC. From January 1983 to May 1989, he
was Senior Vice President, Corporate Systems of Protective and PLC.
Mr. Schultz has been Senior Vice President, Financial Institutions of
Protective and PLC since March 1993. Mr. Schultz served as Vice President,
Financial Institutions of Protective from February 1989 to March 1993 and of PLC
from February 1993 to March 1993. From June 1977 through January 1989, he was
employed by and served in a number of capacities with The Minnesota Mutual Life
Insurance Company, finally serving as Director, Group Sales.
Mr. Stuenkel has been Senior Vice President and Chief Actuary of Protective
and PLC since March 1987. From June 1986 to March 1987. From January 1982 to
June 1986, he served as Vice President and Ordinary Actuary of Protective. Mr.
Stuenkel is a Fellow in the Society of Actuaries and has been employed by
Protective since September 1978.
Mr. Williams has been Senior Vice President, Investments and Treasurer of
PLC since July 1981. Mr. Williams also serves as Senior Vice President,
Investments and Treasurer of Protective. Mr. Williams has been employed by
Protective since November 1964.
Ms. Wilson has been Senior Vice President, Guaranteed Investment Contracts
since January 1995. From July 1991 to December 31, 1994, she served as Vice
President, Guaranteed Investment Contracts. From October 1989 to July 1991, Ms.
Wilson was employed by an affiliated insurer.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting
Officer of Protective and PLC since April 1989. Mr. DeFoor is a certified public
accountant and has been employed by Protective since August 1982.
STATE REGULATION
Protective Life is subject to regulation by the Department of Insurance of
the State of Tennessee, which periodically examines the financial condition and
operations of Protective Life. Protective Life is also subject to the insurance
laws and regulations of all jurisdictions where it does business. The Policy
described in this prospectus has been filed with and, where required, approved
by, insurance officials in those jurisdictions where it is sold.
Protective Life is required to submit annual statements of operations,
including financial statements, to the insurance departments of the various
jurisdictions where it does business to determine solvency and compliance with
applicable insurance laws and regulations.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed
with the SEC relating to the offering described in this prospectus. This
prospectus does not include all the information set forth in the registration
statement. The omitted information may be obtained at the SEC's principal office
in Washington, D.C. by paying the SEC's prescribed fees.
EXPERTS
The consolidated balance sheets of Protective Life as of December 31, 1995
and 1994 and the consolidated statements of income, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1995 and
the related financial statement schedules included in this Prospectus, have been
included herein in reliance on the report, which includes an explanatory
paragraph with respect to changes in the Company's methods of accounting for
certain investments in debt and equity securities in 1993, of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
Actuarial matters included in this Prospectus have been examined by Milliman
& Robertson whose opinion is filed as an exhibit to the registration statement.
50
<PAGE>
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on
certain matters relating to the federal securities laws.
FINANCIAL STATEMENTS
No financial statements of the Variable Account are included herein because,
as of the date of this Prospectus, the Variable Account had not yet commenced
operations, had no assets, and had incurred no liabilities. The financial
statements of Protective Life appear on the following pages. The financial
statements of Protective Life should be distinguished from financial statements
of the Variable Account and should be considered only as bearing upon Protective
Life's ability to meet its obligations under the Policies.
51
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants............................................... F-2
Consolidated Statements of Income for the years ended December 31, 1995, 1994,
and 1993....................................................................... F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994.................... F-4
Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1995, 1994, and 1993.............................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1995,
1994, and 1993................................................................. F-6
F-7 -
Notes to Consolidated Financial Statements...................................... F-25
Financial Statement Schedules:
Schedule III -- Supplementary Insurance Information........................... S-1
Schedule IV -- Reinsurance.................................................... S-2
</TABLE>
All other schedules to the consolidated financial statements required by
Article 7 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholder
Protective Life Insurance Company
Birmingham, Alabama
We have audited the consolidated financial statements and the financial
statement schedules of Protective Life Insurance Company and Subsidiaries listed
in the index on page F-1 of this registration statement on Form S-6. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Protective Life
Insurance Company and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
As discussed in Note A to the Consolidated Financial Statements, the Company
changed its method of accounting for certain investments in debt and equity
securities in 1993.
/s/ COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
February 12, 1996
F-2
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Premiums and policy fees (net of reinsurance ceded: 1995 - $333,173; 1994
- $172,575; 1993 - $126,912)............................................ $ 369,888 $ 402,772 $ 351,423
Net investment income.................................................... 458,433 408,933 354,165
Realized investment gains (losses)....................................... 1,951 6,298 5,054
Other income............................................................. 3,543 11,977 4,756
----------- ----------- -----------
833,815 829,980 715,398
----------- ----------- -----------
BENEFITS AND EXPENSES
Benefits and settlement expenses (net of reinsurance ceded: 1995 -
$247,224; 1994 - $112,922; 1993 - $84,949).............................. 509,506 517,110 461,636
Amortization of deferred policy acquisition costs........................ 84,500 88,089 73,335
Other operating expenses (net of reinsurance ceded: 1995 - $84,855; 1994
- $14,326; 1993 - $10,759).............................................. 122,076 119,203 94,315
----------- ----------- -----------
716,082 724,402 629,286
----------- ----------- -----------
INCOME BEFORE INCOME TAX................................................... 117,733 105,578 86,112
INCOME TAX EXPENSE
Current.................................................................. 47,009 37,586 33,039
Deferred................................................................. (6,972) (4,731) (3,082)
----------- ----------- -----------
40,037 32,855 29,957
----------- ----------- -----------
NET INCOME................................................................. $ 77,696 $ 72,723 $ 56,155
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, at market (amortized cost: 1995-$3,798,868;
1994-$3,698,370)............................................................. $3,891,932 $3,493,646
Equity securities, at market (cost: 1995-$35,498;1994-$45,958)................ 38,711 45,005
Mortgage loans on real estate................................................. 1,835,057 1,488,495
Investment real estate, net of accumulated depreciation (1995-$1,032;
1994-$695)................................................................... 20,788 20,170
Policy loans.................................................................. 143,372 147,608
Other long-term investments................................................... 43,875 50,751
Short-term investments........................................................ 46,891 54,683
---------- ----------
Total investments........................................................... 6,020,626 5,300,358
Cash............................................................................ 6,198
Accrued investment income....................................................... 61,004 55,630
Accounts and premiums receivable, net of allowance for uncollectible
amounts (1995-$2,342; 1994-$2,464)............................................. 35,492 28,928
Reinsurance receivables......................................................... 271,018 122,175
Deferred policy acquisition costs............................................... 410,183 434,200
Property and equipment, net..................................................... 34,211 33,185
Receivables from related parties................................................ 1,961 281
Other assets.................................................................... 13,096 11,802
Assets related to separate accounts............................................. 324,904 124,145
---------- ----------
$7,178,693 $6,110,704
---------- ----------
---------- ----------
LIABILITIES
Policy liabilities and accruals:
Future policy benefits and claims............................................. $1,928,154 $1,694,295
Unearned premiums............................................................. 193,767 103,479
---------- ----------
2,121,921 1,797,774
Guaranteed investment contract deposits......................................... 2,451,693 2,281,673
Annuity deposits................................................................ 1,280,069 1,251,318
Other policyholders' funds...................................................... 134,380 144,461
Other liabilities............................................................... 109,538 94,181
Accrued income taxes............................................................ 838 (4,699)
Deferred income taxes........................................................... 67,420 (14,667)
Indebtedness to related parties................................................. 34,693 39,443
Liabilities related to separate accounts........................................ 324,904 124,145
---------- ----------
Total liabilities......................................................... 6,525,456 5,713,629
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES -- NOTE G
REDEEMABLE PREFERRED STOCK, $1.00 par value, at redemption value
Shares authorized and issued: 2,000............................................ 2,000 2,000
---------- ----------
STOCKHOLDER'S EQUITY
Common Stock, $1.00 par value................................................... 5,000 5,000
Shares authorized and issued: 5,000,000
Additional paid-in capital...................................................... 144,494 126,494
Net unrealized gains on investments (Net of income tax: 1995-$31,157;
1994-$(57,902))................................................................ 57,863 (107,532)
Retained earnings............................................................... 449,645 377,049
Note receivable from PLC Employee Stock Ownership Plan.......................... (5,765) (5,936)
---------- ----------
Total stockholder's equity................................................ 651,237 395,075
---------- ----------
$7,178,693 $6,110,704
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NET NOTE
ADDITIONAL UNREALIZED RECEIVABLE TOTAL
COMMON PAID-IN GAINS (LOSSES) RETAINED FROM PLC STOCKHOLDER'S
STOCK CAPITAL ON INVESTMENTS EARNINGS ESOP EQUITY
------ ---------- --------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992................... $5,000 $ 85,494 $ 3,156 $247,986 $ (6,120) $ 335,516
Net income for 1993........................ 56,155 56,155
Preferred dividends ($750 per share)....... (1,500) (1,500)
Transfer of Southeast Health Plan, Inc.
common stock to PLC....................... 2,535 2,535
Increase in net unrealized gains on
investments............................... 36,128 36,128
Capital contribution from PLC.............. 41,000 41,000
Decrease in note receivable from PLC
ESOP...................................... 156 156
------ ---------- --------------- -------- ---------- -------------
Balance, December 31, 1993................... 5,000 126,494 39,284 305,176 (5,964) 469,990
Net income for 1994........................ 72,723 72,723
Preferred dividends ($425 per share)....... (850) (850)
Decrease in net unrealized gains on
investments............................... (146,816) (146,816)
Decrease in note receivable from PLC
ESOP...................................... 28 28
------ ---------- --------------- -------- ---------- -------------
Balance, December 31, 1994................... 5,000 126,494 (107,532) 377,049 (5,936) 395,075
Net income for 1995........................ 77,696 77,696
Common dividends ($1.00 per share)......... (5,000) (5,000)
Preferred dividends ($50 per share)........ (100) (100)
Increase in net unrealized gains on
investments............................... 165,395 165,395
Capital contribution from PLC.............. 18,000 18,000
Decrease in note receivable form PLC
ESOP...................................... 171 171
------ ---------- --------------- -------- ---------- -------------
Balance, December 31, 1995................... $5,000 $ 144,494 $ 57,863 $449,645 $ (5,765) $ 651,237
------ ---------- --------------- -------- ---------- -------------
------ ---------- --------------- -------- ---------- -------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................................... $ 77,696 $ 72,723 $ 56,155
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization of deferred policy acquisition costs........................... 84,501 88,089 73,335
Capitalization of deferred policy acquisition costs......................... (89,266) (127,566) (92,935)
Depreciation expense........................................................ 4,317 4,280 2,660
Deferred income taxes....................................................... (6,971) (4,731) 16,987
Accrued income taxes........................................................ 5,537 (12,182) 5,040
Interest credited to universal life and investment products................. 286,710 260,081 220,772
Policy fees assessed on universal life and investment products.............. (100,840) (85,532) (67,314)
Change in accrued investment income and other receivables................... (161,924) (32,242) (91,864)
Change in policy liabilities and other policyholder funds of traditional
life and health products................................................... 201,353 61,322 47,212
Change in other liabilities................................................. (3,270) 18,564 11,970
Other (net)................................................................. (6,634) (1,475) 10,517
----------- ----------- -----------
Net cash provided by operating activities....................................... 291,209 241,331 192,535
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities and principal reductions of investments:
Investments available for sale.............................................. 2,014,060 386,498
Other....................................................................... 78,568 153,945 1,319,590
Sale of investments:
Investment available for sale............................................... 1,523,454 630,095
Other....................................................................... 141,184 59,550 244,683
Cost of investments acquired:
Investments available for sale.............................................. (3,626,877) (1,807,658)
Other....................................................................... (540,648) (220,839) (2,320,628)
Acquisitions and bulk reinsurance assumptions................................. 106,435 14,170
Principal payments on subordinated debenture of PLC...........................
Purchase of property and equipment............................................ (5,629) (4,889) (3,451)
Sale of property and equipment................................................ 286 470 1,817
----------- ----------- -----------
Net cash used in investing activities........................................... (415,602) (696,393) (743,819)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing under line of credit arrangements and long-term
debt......................................................................... 1,162,700 572,586 574,423
Proceeds from surplus note to PLC............................................. 35,000
Capital contribution from PLC................................................. 18,000 41,000
Principal payments on line of credit arrangements and long-term debt.......... (1,162,700) (572,704) (577,767)
Principal payment on surplus note to PLC...................................... (4,750) (9,500) (22,500)
Dividends to stockholder...................................................... (5,100) (850) (1,500)
Investment product deposits and change in universal life deposits............. 908,063 1,417,980 1,198,263
Investment product withdrawals................................................ (785,622) (976,401) (683,251)
----------- ----------- -----------
Net cash provided by financing activities....................................... 130,591 431,111 563,668
----------- ----------- -----------
INCREASE(DECREASE) IN CASH...................................................... 6,198 (23,951) 12,384
CASH AT BEGINNING OF YEAR....................................................... 0 23,951 11,567
----------- ----------- -----------
CASH AT END OF YEAR............................................................. $ 6,198 $ 0 $ 23,951
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year:
Interest on debt............................................................ $ 6,029 $ 5,029 $ 3,803
Income taxes................................................................ $ 41,397 $ 49,765 $ 27,432
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Minority interest in consolidated subsidiary.................................. $ (1,311)
Reduction of principal on note from ESOP...................................... $ 171 $ 28 $ 156
Acquisitions and bulk reinsurance assumptions
Assets acquired............................................................. $ 613 $ 117,349 $ 423,140
Liabilities assumed......................................................... (21,800) (166,595) (429,580)
----------- ----------- -----------
Net......................................................................... $ (21,187) $ (49,246) $ (6,440)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements of Protective Life
Insurance Company and subsidiaries ("Protective") are prepared on the basis of
generally accepted accounting principles. Such accounting principles differ from
statutory reporting practices used by insurance companies in reporting to state
regulatory authorities. (See also Note B.)
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make various estimates
that affect the reported amounts of assets and liabilities, disclosures of
contingent assets and liabilities, as well as the reported amounts of revenues
and expenses.
ENTITIES INCLUDED
The consolidated financial statements include the accounts, after
intercompany eliminations, of Protective Life Insurance Company and its wholly-
owned subsidiaries including Wisconsin National Life Insurance Company
("Wisconsin National") and American Foundation Life Insurance Company ("American
Foundation"). Protective is a wholly-owned subsidiary of Protective Life
Corporation ("PLC"), an insurance holding company.
NATURE OF OPERATIONS
Protective markets individual life insurance; group life, health, dental,
and cancer insurance; annuities and investment products; credit life and
disability insurance; and guaranteed investment contracts. Its products are
distributed nationally through independent agents and brokers; through
broker-dealers and financial institutions to their customers; through full-time
sales representatives; and through other insurance companies. Protective also
seeks to acquire blocks of insurance policies from other insurers.
The operating results of companies in the insurance industry have
historically been subject to significant fluctuations due to competition,
economic conditions, interest rates, investment performance, maintenance of
insurance ratings, and other factors.
RECENTLY ISSUED ACCOUNTING STANDARDS
Protective adopted Statement of Financial Accounting Standards (SFAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities," at
December 31, 1993, which requires Protective to carry its investment in fixed
maturities and certain other securities at market value instead of amortized
cost.
In 1995 Protective adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan -- Income Recognition and Disclosures." Under these new standards, a
loan is considered impaired, based on current information and events, if it is
probable that Protective will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the present
value of expected future cash flows discounted at the historical effective
interest rate, except that all collateral-dependent loans are measured for
impairment based on the fair value of the collateral.
Since Protective's mortgage loans are collateralized by real estate, any
assessment of impairment is based upon the estimated fair value of the real
estate. Based on Protective's evaluation of its mortgage loan portfolio,
Protective does not expect any material losses on its mortgage loans, and
therefore no allowance for losses is required under SFAS No. 114 at December 31,
1995.
F-7
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In 1995 PLC adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
which changes the way stock-based compensation expense is measured and requires
additional disclosures relating to PLC's stock-based compensation plans. The
adoption of this accounting standard did not have a material effect on PLC's or
Protective's financial statements.
In 1995 the Financial Accounting Standards Board issued: SFAS No. 120,
"Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance
Enterprises for Certain Long-Duration Participating Contracts;" SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of;" and SFAS No. 122, "Accounting for Mortgage Servicing Rights."
Protective anticipates that the impact of adopting these three accounting
standards will be immaterial to its financial condition.
INVESTMENTS
Protective has classified all of its investments in fixed maturities, equity
securities, and short-term investments as "available for sale."
Investments are reported on the following bases less allowances for
uncollectible amounts on investments, if applicable:
- Fixed maturities (bonds, bank loan participations, and
redeemable preferred stocks) -- at current market value.
- Equity securities (common and nonredeemable preferred stocks)
-- at current market value.
- Mortgage loans on real estate -- at unpaid balances, adjusted
for loan origination costs, net of fees, and amortization of
premium or discount.
- Investment real estate -- at cost, less allowances for
depreciation computed on the straight-line method. With respect
to real estate acquired through foreclosure, cost is the lesser
of the loan balance plus foreclosure costs or appraised value.
- Policy loans -- at unpaid balances.
- Other long-term investments -- at a variety of methods similar
to those listed above, as deemed appropriate for the specific
investment.
- Short-term investments -- at cost, which approximates current
market value.
Substantially all short-term investments have maturities of three months or
less at the time of acquisition and include approximately $5.2 million in bank
deposits voluntarily restricted as to withdrawal.
As prescribed by SFAS No. 115, certain investments are recorded at their
market values with the resulting unrealized gains and losses reduced by a
related adjustment to deferred policy acquisition costs, net of income tax,
reported as a component of stockholder's equity. The market values of fixed
maturities increase or decrease as interest rates fall or rise. Therefore,
although the adoption of SFAS No. 115 does not affect Protective's operations,
its reported stockholder's equity will fluctuate significantly as interest rates
change.
F-8
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Protective's balance sheets at December 31, prepared on the basis of
reporting investments at amortized cost rather than at market values, are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Total investments............................................... $ 5,915,357 $ 5,499,511
Deferred policy acquisition costs............................... 426,432 400,480
All other assets................................................ 747,884 376,146
------------- -------------
$ 7,089,673 $ 6,276,137
------------- -------------
------------- -------------
Deferred income taxes........................................... $ 36,263 $ 43,235
All other liabilities........................................... 6,458,036 5,728,296
------------- -------------
6,494,299 5,771,531
Redeemable preferred stock...................................... 2,000 2,000
Stockholder's equity............................................ 593,374 502,606
------------- -------------
$ 7,089,673 $ 6,276,137
------------- -------------
------------- -------------
</TABLE>
Realized gains and losses on sales of investments are recognized in net
income using the specific identification basis.
DERIVATIVE FINANCIAL INSTRUMENTS
Protective does not use derivative financial instruments for trading
purposes. Combinations of futures contracts and options on treasury notes are
currently being used as hedges for asset/liability management of certain
investments, primarily mortgage loans on real estate, and liabilities arising
from interest-sensitive products such as guaranteed investment contracts and
individual annuities. Realized investment gains and losses on such contracts are
deferred and amortized over the life of the hedged asset. Net realized losses of
$15.2 million were deferred in 1995 and net realized gains of $7.9 million were
deferred in 1994. At December 31, 1995 and 1994, open futures contracts with
notional amounts of $25.0 million and $137.5 million, respectively, had net
unrealized losses of $0.6 million and $0.4 million respectively.
Protective uses interest rate swap contracts to convert certain investments
from a variable to a fixed rate of interest. At December 31, 1995, related open
interest rate swap contracts with a notional amount of $170.3 million were in a
$1.3 million net unrealized gain position. At December 31, 1994, related open
interest rate swap contracts with a notional amount of $230.0 million were in an
$8.9 million net unrealized loss position.
CASH
Cash includes all demand deposits reduced by the amount of outstanding
checks and drafts.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost. Protective uses both
accelerated and straight-line methods of depreciation based upon the estimated
useful lives of the assets. Major repairs or improvements are capitalized and
depreciated over the estimated useful lives of the assets. Other repairs are
expensed as incurred. The cost and related accumulated depreciation of property
and equipment sold or retired are removed from the accounts, and resulting gains
or losses are included in income.
F-9
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Home office building................................................... $ 35,284 $ 35,321
Other, principally furniture and equipment............................. 30,356 25,687
--------- ---------
65,640 61,008
Accumulated depreciation............................................... 31,429 27,823
--------- ---------
$ 34,211 $ 33,185
--------- ---------
--------- ---------
</TABLE>
SEPARATE ACCOUNTS
Protective operates separate accounts, some in which Protective bears the
investment risk and others in which the investments risk rests with the
contractholder. The assets and liabilities related to separate accounts in which
Protective does not bear the investment risk are valued at market and reported
separately as assets and liabilities related to separate accounts in the
accompanying consolidated financial statements.
REVENUES, BENEFITS, CLAIMS, AND EXPENSES
- Traditional Life and Health Insurance Products -- Traditional
life insurance products consist principally of those products
with fixed and guaranteed premiums and benefits and include
whole life insurance policies, term life insurance policies,
limited-payment life insurance policies, and certain annuities
with life contingencies. Life insurance and immediate annuity
premiums are recognized as revenue when due. Health insurance
premiums are recognized as revenue over the terms of the
policies. Benefits and expenses are associated with earned
premiums so that profits are recognized over the life of the
contracts. This is accomplished by means of the provision for
liabilities for future policy benefits and the amortization of
deferred policy acquisition costs.
Liabilities for future policy benefits on traditional life
insurance products have been computed using a net level method
including assumptions as to investment yields, mortality,
persistency, and other assumptions based on Protective's
experience modified as necessary to reflect anticipated trends
and to include provisions for possible adverse deviation.
Reserve investment yield assumptions are graded and range from
2.5% to 7.0%. The liability for future policy benefits and
claims on traditional life and health insurance products
includes estimated unpaid claims that have been reported to
Protective and claims incurred but not yet reported. Policy
claims are charged to expense in the period that the claims are
incurred.
F-10
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Activity in the liability for unpaid claims is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance beginning of year.............................. $ 79,462 $ 77,191 $ 68,203
Less reinsurance..................................... 5,024 3,973 3,809
----------- ----------- -----------
Net balance beginning of year.......................... 74,438 73,218 64,394
----------- ----------- -----------
Incurred related to:
Current year........................................... 217,366 203,453 194,394
Prior year............................................. (8,337) (6,683) (5,123)
----------- ----------- -----------
Total incurred..................................... 209,029 196,770 189,271
----------- ----------- -----------
Paid related to:
Current year........................................... 164,321 148,548 141,361
Prior year............................................. 48,834 47,002 39,086
----------- ----------- -----------
Total paid......................................... 213,155 195,550 180,447
----------- ----------- -----------
Net balance end of year................................ 70,312 74,438 73,218
Plus reinsurance..................................... 3,330 5,024 3,973
----------- ----------- -----------
Balance end of year.................................... $ 73,642 $ 79,462 $ 77,191
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- Universal Life and Investment Products -- Universal life and
investment products include universal life insurance,
guaranteed investment contracts, deferred annuities, and
annuities without life contingencies. Revenues for universal
life and investment products consist of policy fees that have
been assessed against policy account balances for the costs of
insurance, policy administration, and surrenders. That is,
universal life and investment product deposits are not
considered revenues in accordance with generally accepted
accounting principles. Benefit reserves for universal life and
investment products represent policy account balances before
applicable surrender charges plus certain deferred policy
initiation fees that are recognized in income over the term of
the policies. Policy benefits and claims that are charged to
expense include benefit claims incurred in the period in excess
of related policy account balances and interest credited to
policy account balances. Interest credit rates for universal
life and investment products ranged from 3.0% to 9.4% in 1995.
At December 31, 1995, Protective estimates the fair value of
its guaranteed investment contracts to be $2,660.0 million
using discounted cash flows. The surrender value of
Protective's annuities which approximates fair value was
$1,296.7 million.
- Policy Acquisition Costs -- Commissions and other costs of acquiring
traditional life and health insurance, universal life insurance, and
investment products that vary with and are primarily related to the
production of new business have been deferred. Traditional life and health
insurance acquisition costs are amortized over the premium-payment period
of the related policies in proportion to the ratio of annual premium
income to total anticipated premium income. Acquisition costs for
universal life and investment products are being amortized over the lives
of the policies in relation to the present value of estimated gross
profits from surrender charges and investment, mortality, and expense
margins. Under SFAS No. 97, "Accounting and Reporting by Insurance
Enterprises for Certain Long-Duration Contracts and for Realized
F-11
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Gains and Losses from the Sale of Investments," Protective makes certain
assumptions regarding the mortality, persistency, expenses, and interest
rates it expects to experience in future periods. These assumptions are to
be best estimates and are to be periodically updated whenever actual
experience and/or expectations for the future change from initial
assumptions. Additionally, relating to SFAS No. 115, these costs have been
adjusted by an amount equal to the amortization that would have been
recorded if unrealized gains or losses on investments associated with
Protective's universal life and investment products had been realized.
The cost to acquire blocks of insurance representing the present value of
future profits from such blocks of insurance is also included in deferred
policy acquisition costs, discounted at interest rates averaging 15%. For
acquisitions occurring after 1988, Protective amortizes the present value
of future profits over the premium payment period including accrued
interest at 8%. The unamortized present value of future profits for such
acquisitions was approximately $102.5 million and $84.4 million at
December 31, 1995 and 1994, respectively. During 1995 $26.5 million of
present value of future profits on acquisitions made during the year was
capitalized, and $3.2 million was amortized. The unamortized present value
of future profits for all acquisitions was $123.9 million at December 31,
1995 and $110.3 million at December 31, 1994.
PARTICIPATING POLICIES
Participating business comprises approximately 1% of the individual life
insurance in force and 2% of the individual life insurance premium income.
Policyholder dividends totaled $2.6 million in 1995, 1994, and 1993.
INCOME TAXES
Protective uses the asset and liability method of accounting for income
taxes. Income tax provisions are generally based on income reported for
financial statement purposes. Deferred federal income taxes arise from the
recognition of temporary differences between the bases of assets and liabilities
determined for financial reporting purposes and the bases determined for income
tax purposes. Such temporary differences are principally related to the deferral
of policy acquisition costs and the provision for future policy benefits and
expenses.
RECLASSIFICATIONS
Certain reclassifications have been made in the previously reported
financial statements and accompanying notes to make the prior year amounts
comparable to those of the current year. Such reclassifications had no effect on
net income, total assets, or stockholder's equity.
NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES
Financial statements prepared in conformity with generally accepted
accounting principals ("GAAP") differ in some respects from the statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. The most significant differences are: (a) acquisition costs of
obtaining new business are deferred and amortized over the approximate life of
the policies rather than charged to operations as incurred, (b) benefit
liabilities are computed using a net level method and are based on realistic
estimates of expected mortality, interest, and withdrawals as adjusted to
provide for possible unfavorable deviation from such assumptions, (c) deferred
income taxes are provided for temporary differences between financial and
taxable earnings, (d) the Asset Valuation Reserve and Interest Maintenance
Reserve are restored to stockholder's equity, (e) furniture and equipment,
agents' debit balances, and prepaid expenses are reported as assets rather than
being charged directly
F-12
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE B -- RECONCILIATION WITH STATUTORY REPORTING PRACTICES (CONTINUED)
to surplus (referred to as nonadmitted items), (f) certain items of interest
income, principally accrual of mortgage and bond discounts are amortized
differently, and (g) bonds are stated at market instead of amortized cost.
The reconciliations of net income and stockholder's equity prepared in
conformity with statutory reporting practices to that reported in the
accompanying consolidated financial statements are as follows:
<TABLE>
<CAPTION>
NET INCOME STOCKHOLDER'S EQUITY
--------------------------------- -----------------------------------
1995 1994 1993 1995 1994 1993
----------- --------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
In conformity with statutory reporting
practices:
Protective Life Insurance Company...... $ 105,744 $ 54,812 $ 41,471 $ 322,416 $ 304,858 $ 263,075
Wisconsin National Life Insurance
Company............................... 10,954 10,132 9,591 62,529 57,268 50,885
American Foundation Life Insurance
Company............................... 3,330 3,072 1,415 18,781 20,327 18,290
Capital Investors Life Insurance
Company............................... 182 170 207 1,315 1,125 824
Empire General Life Assurance
Corporation........................... 1,003 690 408 20,685 21,270 10,588
Protective Life Insurance Corporation
of Alabama............................ 546 69 16 2,675 2,133 2,064
Consolidation elimination.............. (6,500) 30 (103,985) (100,123) (80,651)
----------- --------- --------- ----------- ---------- ----------
115,259 68,945 53,138 324,416 306,858 265,075
Additions (deductions) by adjustment:
Deferred policy acquisition costs, net
of amortization....................... (765) 41,718 25,686 410,183 434,200 299,307
Policy liabilities and accruals........ (48,330) (34,632) (15,586) (186,512) (140,298) (69,844)
Deferred income tax.................... 6,972 4,731 3,081 (67,420) 14,667 (69,118)
Asset Valuation Reserve................ 105,769 24,925 43,398
Interest Maintenance Reserve........... (1,235) (1,716) (1,432) 14,412 3,583 10,489
Nonadmitted items...................... 20,603 21,445 7,742
Timing and valuation differences on
mortgage loans on real estate and
fixed maturity investments............ (619) (961) 1,645 25,060 6,877 7,350
Net unrealized gains and losses on
investments........................... 57,863 (107,532) 39,284
Realized investment gains (losses)..... 6,781 (6,664) (7,860)
Noninsurance affiliates................ (22) (12) 9 31
Consolidation elimination.............. 2,515 (4,415) (2,107) (46,222) (162,835) (65,620)
Other adjustments, net................. (2,860) 5,717 (398) (4,924) (4,815) 1,896
----------- --------- --------- ----------- ---------- ----------
In conformity with generally accepted
accounting principles................... $ 77,696 $ 72,723 $ 56,155 $ 653,237 $ 397,075 $ 469,990
----------- --------- --------- ----------- ---------- ----------
----------- --------- --------- ----------- ---------- ----------
</TABLE>
F-13
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS
Major categories of net investment income for the years ended December 31
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Fixed maturities....................................... $ 272,942 $ 237,264 $ 211,566
Equity securities...................................... 1,338 2,435 1,519
Mortgage loans on real estate.......................... 162,135 141,751 130,262
Investment real estate................................. 1,855 1,950 2,119
Policy loans........................................... 8,958 8,397 7,558
Other, principally short-term investments.............. 40,348 35,062 18,779
----------- ----------- -----------
487,576 426,859 371,803
Investment expenses.................................... 29,143 17,926 17,638
----------- ----------- -----------
$ 458,433 $ 408,933 $ 354,165
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Realized investment gains (losses) for the years ended December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Fixed maturities........................................ $ 6,118 $ (8,646) $ 10,508
Equity securities....................................... 44 7,735 2,230
Mortgage loans and other investments.................... (4,211) 7,209 (7,684)
---------- ---------- ----------
$ 1,951 $ 6,298 $ 5,054
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Protective has established an allowance for uncollectible amounts on
investments. The allowance totaled $32.7 million at December 31, 1995 and $35.2
million at December 31, 1994. Additions to the allowance are included in
realized investment gains (losses). Without such additions/reductions,
Protective had realized investment losses of $0.5 million in 1995 and realized
investment gains of $6.3 million and $13.8 million in 1994 and 1993,
respectively.
In 1995, gross gains on the sale of investments available for sale (fixed
maturities, equity securities and short-term investments) were $18.0 million and
gross losses were $11.8 million. In 1994, gross gains were $15.2 million and
gross losses were $16.4 million. In 1993, gross gains on the sale of fixed
maturities were $8.3 million and gross losses were $0.4 million.
F-14
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
The amortized cost and estimated market values of Protective's investments
classified as available for sale at December 31 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
1995 COST GAINS LOSSES MARKET VALUES
- -------------------------------------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
Mortgage-backed securities........ $ 2,006,858 $ 46,934 $ 4,017 $ 2,049,775
United States Government and
authorities...................... 105,388 2,290 101 107,577
States, municipalities, and
political subdivisions........... 10,888 702 0 11,590
Public utilities.................. 322,110 5,904 770 327,244
Convertibles and bonds with
warrants......................... 638 0 145 493
All other corporate bonds......... 1,126,318 50,103 7,573 1,168,848
Bank loan participations............ 220,811 0 0 220,811
Redeemable preferred stocks......... 5,857 61 324 5,594
------------- ----------- ----------- -------------
3,798,868 105,994 12,930 3,891,932
Equity securities..................... 35,448 6,438 3,175 38,711
Short-term investments................ 46,891 0 0 46,891
------------- ----------- ----------- -------------
$ 3,881,207 $ 112,432 $ 16,105 $ 3,977,534
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
1994 COST GAINS LOSSES MARKET VALUES
- -------------------------------------- ------------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
Bonds:
Mortgage-backed securities........ $ 2,002,842 $ 7,538 $ 112,059 $ 1,898,321
United States Government and
authorities...................... 90,468 290 8,877 81,881
States, municipalities, and
political subdivisions........... 10,902 5 1,230 9,677
Public utilities.................. 414,011 1,091 36,982 378,120
Convertibles and bonds with
warrants......................... 687 0 302 385
All other corporate bonds......... 927,779 3,437 56,788 874,428
Bank loan participations............ 244,881 0 0 244,881
Redeemable preferred stocks......... 6,800 37 884 5,953
------------- ---------- ---------- -------------
3,698,370 12,398 217,122 3,493,646
Equity securities..................... 45,958 3,994 4,947 45,005
Short-term investments................ 54,683 0 0 54,683
------------- ---------- ---------- -------------
$ 3,799,011 $ 16,392 $ 222,069 $ 3,593,334
------------- ---------- ---------- -------------
------------- ---------- ---------- -------------
</TABLE>
F-15
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(ALL DOLLAR AMOUNTS IN TABLES ARE IN THOUSANDS)
NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
The amortized cost and estimated market values of fixed maturities at
December 31, by expected maturity, are shown below. Expected maturities are
derived from rates of prepayment that may differ from actual rates of
prepayment.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST MARKET VALUES
------------- -------------
<S> <C> <C>
1995
- ---------------------------------------------------------------------
Due in one year or less............................................ $ 410,489 $ 411,839
Due after one year through five years.............................. 1,090,323 1,101,226
Due after five years through ten years............................. 1,481,248 1,524,555
Due after ten years................................................ 816,808 854,312
------------- -------------
$ 3,798,868 $ 3,891,932
------------- -------------
------------- -------------
1994
- ---------------------------------------------------------------------
Due in one year or less............................................ $ 577,146 $ 540,223
Due after one year through five years.............................. 1,351,435 1,299,248
Due after five years through ten years............................. 994,994 929,764
Due after ten years................................................ 774,795 724,411
------------- -------------
$ 3,698,370 $ 3,493,646
------------- -------------
------------- -------------
</TABLE>
The approximate percentage distribution of Protective's fixed maturity
investments by quality rating at December 31 is as follows:
<TABLE>
<CAPTION>
RATING 1995 1994
- ------------------------------------------------------------ ------ ------
<S> <C> <C>
AAA......................................................... 56.1% 57.6%
AA.......................................................... 4.5 5.5
A........................................................... 12.6 12.5
BBB
Bonds..................................................... 19.0 14.9
Bank loan participations.................................. 0.4 1.4
BB or Less
Bonds..................................................... 2.0 2.3
Bank loan participations.................................. 5.3 5.6
Redeemable preferred stocks................................. 0.1 0.2
------ ------
100.0% 100.0%
------ ------
------ ------
</TABLE>
At December 31, 1995 and 1994, Protective had bonds which were rated less
than investment grade of $75.7 million and $82.5 million, respectively, having
an amortized cost of $82.2 million and $89.4 million, respectively.
Additionally, Protective had bank loan participations which were rated less than
investment grade of $206.0 million and $195.1 million, respectively, having an
amortized cost of $206.0 million and $195.1 million, respectively.
F-16
<PAGE>
NOTE C -- INVESTMENT OPERATIONS (CONTINUED)
The change in unrealized gains (losses), net of income tax, on fixed
maturity and equity securities for the years ended December 31 is summarized as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ------------ ---------
<S> <C> <C> <C>
Fixed maturities......................................... $ 193,562 $ (175,723) $ 1,198
Equity securities........................................ $ 2,740 $ (5,342) $ 1,565
</TABLE>
At December 31, 1995, all of Protective's mortgage loans were commercial
loans of which 81% were retail, 7% were warehouses, and 6% were office
buildings. Protective specializes in making mortgage loans on either
credit-oriented or credit-anchored commercial properties, most of which are
strip shopping centers in smaller towns and cities. No single tenant's leased
space represents more than 4% of mortgage loans. Approximately 82% of the
mortgage loans are on properties located in the following states listed in
decreasing order of significance: South Carolina, Georgia, Alabama, Tennessee,
Texas, Florida, North Carolina, Virginia, California, Mississippi, Colorado,
Ohio, Kentucky, Louisiana, Indiana, and Illinois.
Many of the mortgage loans have call provisions after five to seven years.
Assuming the loans are called at their next call dates, approximately $174.3
million would become due in 1996, $497.3 million in 1997 to 2000, and $275.7
million in 2001 to 2005.
At December 31, 1994, the average mortgage loan was $1.6 million, and the
weighted average interest rate was 9.3%. The largest single mortgage loan was
$13.1 million. While Protective's mortgage loans do not have quoted market
values, at December 31, 1995 and 1994, Protective estimates the market value of
its mortgage loans to be $2,001.1 million and $1,535.3 million, respectively,
using discounted cash flows from the next call date.
At December 31, 1995 and 1994, Protective's problem mortgage loans and
foreclosed properties totaled $26.1 million and $24.0 million, respectively.
Protective expects no significant loss of principal.
Certain investments, principally real estate, with a carrying value of $9.5
million were nonincome producing for the twelve months ended December 31, 1995.
Mortgage loans to affiliates of both Fletcher Bright and Edens & Avant
totaled $95.4 million and $69.1 million, respectively, at December 31, 1995.
Most of such loans were not made to, or in reliance on the credit of, Mr. Bright
or Edens & Avant.
Protective believes it is not practicable to determine the fair value of its
policy loans since there is no stated maturity, and policy loans are often
repaid by reductions to policy benefits. Policy loan interest rates generally
range from 4.5% to 8.0%. The fair values of Protective's other long-term
investments approximate cost.
NOTE D -- FEDERAL INCOME TAXES
Protective's effective income tax rate varied from the maximum federal
income tax rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Statutory federal income tax rate applied to pretax
income..................................................... 35.0% 35.0% 35.0%
Dividends received deduction and tax-exempt interest........ (0.5) (0.4) (0.5)
Low-income housing credit................................... (0.7) (0.7)
Tax benefits arising from prior acquisitions and other
adjustments................................................ 0.2 (2.8) (1.1)
--- --- ---
Effective income tax rate................................... 34.0% 31.1% 33.4%
--- --- ---
--- --- ---
</TABLE>
F-17
<PAGE>
NOTE D -- FEDERAL INCOME TAXES (CONTINUED)
The provision for federal income tax differs from amounts currently payable
due to certain items reported for financial statement purposes in periods which
differ from those in which they are reported for income tax purposes.
Details of the deferred income tax provision for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Deferred policy acquisition costs....................... $ (11,606) $ 34,561 $ 8,861
Benefit and other policy liability changes.............. 52,496 (52,288) (10,416)
Temporary differences of investment income.............. (34,175) 15,524
Other items............................................. (13,687) (2,528) (1,527)
---------- ---------- ----------
$ (6,972) $ (4,731) $ (3,082)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The components of Protective's net deferred income tax liability as of
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Policy and policyholder liability reserves........................ $ 63,830 $ 116,326
Unrealized loss on investments.................................... 23,485
Other............................................................. 2,303
----------- -----------
66,133 139,811
----------- -----------
Deferred income tax liabilities:
Deferred policy acquisition costs................................. 102,154 113,760
Unrealized gain on investments.................................... 31,399
Other............................................................. 11,384
----------- -----------
133,553 125,144
----------- -----------
Net deferred income tax liability................................. $ 67,420 $ (14,667)
----------- -----------
----------- -----------
</TABLE>
Under pre-1984 life insurance company income tax laws, a portion of
Protective's gain from operations which was not subject to current income
taxation was accumulated for income tax purposes in a memorandum account
designated as Policyholders' Surplus. The aggregate accumulation in this account
at December 31, 1995 was approximately $50.7 million. Should the accumulation in
the Policyholders' Surplus account exceed certain stated maximums, or should
distributions including cash dividends be made to PLC in excess of approximately
$322 million, such excess would be subject to federal income taxes at rates then
effective. Deferred income taxes have not been provided on amounts designated as
Policyholders' Surplus. Protective does not anticipate involuntarily paying
income tax on amounts in the Policyholders' Surplus accounts.
At December 31, 1995 Protective has an unused capital loss carryforward of
$5.7 million which will expire in 2000.
Protective's income tax returns are included in the consolidated income tax
returns of PLC. The allocation of income tax liabilities among affiliates is
based upon separate income tax return calculations.
NOTE E -- DEBT
At December 31, 1995, PLC had borrowed under a term note that contains,
among other provisions, requirements for maintaining certain financial ratios,
and restrictions on indebtedness incurred by PLC's subsidiaries including
Protective. Additionally, PLC, on a consolidated basis, cannot incur debt in
excess of 50% of its total capital.
F-18
<PAGE>
NOTE E -- DEBT (CONTINUED)
Included in indebtedness to related parties are three surplus debentures
issued by Protective to PLC. At December 31, 1995, the balance of the three
surplus debentures combined was $34.7 million. Future maturities of these
debentures are $14.7 million in 1996 and $20.0 million in 2003.
Interest expense totaled $6.0 million, $5.0 million, and $5.0 million, in
1995, 1994, and 1993, respectively.
NOTE F -- ACQUISITIONS
In April 1994 Protective acquired through coinsurance a block of payroll
deduction policies. In October 1994, Protective acquired through coinsurance a
block of individual life insurance policies. In June 1995 Protective acquired
through coinsurance a block of term life insurance policies.
These transactions have been accounted for as purchases, and the results of
the transactions have been included in the accompanying financial statements
since the effective dates of the agreements.
NOTE G -- COMMITMENTS AND CONTINGENT LIABILITIES
Under insurance guaranty fund laws, in most states, insurance companies
doing business therein can be assessed up to prescribed limits for policyholder
losses incurred by insolvent companies. Protective does not believe such
assessments will be materially different from amounts already provided for in
the financial statements. Most of these laws do provide, however, that an
assessment may be excused or deferred if it would threaten an insurer's own
financial strength.
A number of civil jury verdicts have been returned against life and health
insurers in the jurisdictions in which Protective does business involving the
insurers' sales practices, alleged agent misconduct, failure to properly
supervise agents, and other matters. Some of the lawsuits have resulted in the
award of substantial judgments against the insurer, including material amounts
of punitive damages. In some states, juries have substantial discretion in
awarding punitive damages in these circumstances. Protective and its
subsidiaries, like other life and health insurers, from time to time are
involved in such litigation. To date, no such lawsuit has resulted in the award
of any significant amount of damages against Protective. Although the outcome of
any litigation cannot be predicted with certainty, Protective is not aware of
any litigation that will have a material adverse effect on the financial
position of Protective.
NOTE H -- STOCKHOLDER'S EQUITY AND RESTRICTIONS
At December 31, 1995, approximately $329 million of consolidated
stockholder's equity excluding net unrealized gains and losses represented net
assets of Protective that cannot be transferred in the form of dividends, loans,
or advances to PLC. In general, dividends up to specified levels are considered
ordinary and may be paid thirty days after written notice to the insurance
commissioner of the state of domicile unless such commissioner objects to the
dividend prior to the expiration of such period. Dividends in larger amounts are
considered extraordinary and are subject to affirmative prior approval by such
commissioner. The maximum amount that would qualify as ordinary dividends to PLC
by Protective in 1996 is estimated to be $129 million.
NOTE I -- REDEEMABLE PREFERRED STOCK
PLC owns all of the 2,000 shares of redeemable preferred stock issued by
Protective's subsidiary, American Foundation. The entire issue was reissued in
1991 and will be redeemed September 30, 1996 for $1 thousand per share, or $2
million. The stock pays, when and if declared, annual minimum cumulative
dividends of $50 per share, and noncumulative participating dividends to the
extent American Foundation's statutory earnings for the immediately preceding
fiscal year exceed $1 million. Dividends of $0.1 million, $0.9 million, and $1.5
million were paid to PLC in 1995, 1994, and 1993, respectively.
F-19
<PAGE>
NOTE J -- RELATED PARTY MATTERS
Receivables from related parties consisted of receivables from affiliates
under control of PLC in the amounts of $2.0 million and $0.3 million at December
31, 1995 and 1994, respectively. Protective routinely receives from or pays to
affiliates under the control of PLC reimbursements for expenses incurred on one
another's behalf. Receivables and payables among affiliates are generally
settled monthly.
On August 6, 1990, PLC announced that its Board of Directors approved the
formation of an Employee Stock Ownership Plan ("ESOP"). On December 1, 1990,
Protective transferred to the ESOP 520,000 shares of PLC's common stock held by
it in exchange for a note. The outstanding balance of the note, $5.8 million at
December 31, 1995, is accounted for as a reduction to stockholder's equity. The
stock will be used to match employee contributions to PLC's existing 401(k)
Plan. The ESOP shares are dividend paying. Dividends on the shares are used to
pay the ESOP's note to Protective.
Protective leases furnished office space and computers to affiliates. Lease
revenues were $3.1 million in 1995, $2.8 million in 1994, and $2.8 million in
1993. Protective purchases data processing, legal, investment and management
services from affiliates. The costs of such services were $38.1 million, $29.8
million, and $20.4 million in 1995, 1994, and 1993, respectively. Commissions
paid to affiliated marketing organizations of $10.9 million, $10.1 million, and
$5.8 million in 1995, 1994, and 1993, respectively, were included in deferred
policy acquisition costs.
Certain corporations with which PLC's directors were affiliated paid
Protective premiums and policy fees for various types of group insurance. Such
premiums and policy fees amounted to $21.2 million, $21.1 million, and $10.3
million in 1995, 1994, and 1993, respectively. Protective and/or PLC paid
commissions, interest, and service fees to these same corporations totaling $5.3
million, $4.9 million, and $6.1 million, in 1995, 1994, and 1993, respectively.
For a discussion of indebtedness to related parties, see Note E.
NOTE K -- BUSINESS SEGMENTS
Protective operates predominantly in the life and accident and health
insurance industry. The following table sets forth total revenues, income before
income tax, and identifiable assets of Protective's business segments. The
primary components of revenues are premiums and policy fees, net investment
income, and realized investment gains and losses. Premiums and policy fees are
attributed directly to each business segment. Net investment income is allocated
based on directly related assets required for transacting that segment of
business.
Realized investment gains (losses) and expenses are allocated to the
segments in a manner which most appropriately reflects the operations of that
segment. Unallocated realized investment gains (losses) are deemed not to be
associated with any specific segment.
Assets are allocated based on policy liabilities and deferred policy
acquisition costs directly attributable to each segment.
There are no significant intersegment transactions.
F-20
<PAGE>
NOTE K -- BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
TOTAL REVENUES
Acquisitions............................................... $ 193,544 $ 170,659 $ 123,855
Financial Institutions..................................... 33,152 107,194 96,443
Group...................................................... 159,263 148,313 143,423
Guaranteed Investment Contracts............................ 199,468 183,591 167,233
Individual Life............................................ 139,424 122,248 111,497
Investment Products........................................ 104,984 79,773 69,550
Corporate and Other........................................ 3,059 12,936 1,521
Unallocated Realized Investment Gains (Losses)............. 921 5,266 1,876
------------- ------------- -------------
$ 833,815 $ 829,980 $ 715,398
------------- ------------- -------------
------------- ------------- -------------
Acquisitions............................................... 23.2% 20.6% 17.3%
Financial Institutions..................................... 4.0 12.9 13.5
Group...................................................... 19.1 17.9 20.0
Guaranteed Investment Contracts............................ 23.9 22.1 23.4
Individual Life............................................ 16.7 14.7 15.6
Investment Products........................................ 12.6 9.6 9.7
Corporate and Other........................................ 0.4 1.6 0.2
Unallocated Realized Investment Gains (Losses)............. 0.1 0.6 0.3
------------- ------------- -------------
100.0% 100.0% 100.0%
------------- ------------- -------------
------------- ------------- -------------
INCOME BEFORE INCOME TAX
Acquisitions............................................... $ 52,136 $ 39,176 $ 29,845
Financial Institutions..................................... 8,212 8,176 7,220
Group...................................................... 10,502 11,169 10,435
Guaranteed Investment Contracts............................ 30,555 33,197 27,218
Individual Life............................................ 17,713 17,223 20,324
Investment Products........................................ 11,951 107 3,402
Corporate and Other........................................ (14,257) (8,736) (14,208)
Unallocated Realized Investment Gains (Losses)............. 921 5,266 1,876
------------- ------------- -------------
$ 117,733 $ 105,578 $ 86,112
------------- ------------- -------------
------------- ------------- -------------
Acquisitions............................................... 44.3% 37.1% 34.6%
Financial Institutions..................................... 7.0 7.7 8.4
Group...................................................... 8.9 10.6 12.1
Guaranteed Investment Contracts............................ 26.0 31.5 31.6
Individual Life............................................ 15.0 16.3 23.6
Investment Products........................................ 10.1 0.1 4.0
Corporate and Other........................................ (12.1) (8.3) (16.5)
Unallocated Realized Investment Gains (Losses)............. 0.8 5.0 2.2
------------- ------------- -------------
100.0% 100.0% 100.0%
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
F-21
<PAGE>
NOTE K -- BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Acquisitions............................................... $ 1,255,542 $ 1,204,883 $ 1,076,182
Financial Institutions..................................... 265,132 211,652 189,943
Group...................................................... 240,222 215,904 208,790
Guaranteed Investment Contracts............................ 2,536,939 2,211,079 2,041,463
Individual Life............................................ 887,927 752,168 641,992
Investment Products........................................ 1,578,789 1,284,186 876,691
Corporate and Other........................................ 414,142 230,832 272,788
------------- ------------- -------------
$ 7,178,693 $ 6,110,704 $ 5,307,849
------------- ------------- -------------
------------- ------------- -------------
Acquisitions............................................... 17.5% 19.7% 20.3%
Financial Institutions..................................... 3.7 3.5 3.6
Group...................................................... 3.3 3.5 3.9
Guaranteed Investment Contracts............................ 35.3 36.2 38.5
Individual Life............................................ 12.4 12.3 12.1
Investment Products........................................ 22.0 21.0 16.5
Corporate and Other........................................ 5.8 3.8 5.1
------------- ------------- -------------
100.0% 100.0% 100.0%
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
NOTE L -- EMPLOYEE BENEFIT PLANS
PLC has a defined benefit pension plan covering substantially all of its
employees. The plan is not separable by affiliates participating in the plan.
However, approximately 80% of the participants in the plan are employees of
Protective. The benefits are based on years of service and the employee's
highest thirty-six consecutive months of compensation. PLC's funding policy is
to contribute amounts to the plan sufficient to meet the minimum funding
requirements of ERISA plus such additional amounts as PLC may determine to be
appropriate from time to time. Contributions are intended to provide not only
for benefits attributed to service to date but also for those expected to be
earned in the future.
The actuarial present value of benefit obligations and the funded status of
the plan taken as a whole at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accumulated benefit obligation, including vested benefits of $16,676 in 1995 and
$11,992 in 1994................................................................. $ 17,415 $ 12,348
--------- ---------
Projected benefit obligation for service rendered to date........................ $ 24,877 $ 20,302
Plan assets at fair value (group annuity contract with Protective)............... 18,254 15,679
--------- ---------
Plan assets less than the projected benefit obligation........................... (6,623) (4,623)
Unrecognized net loss from past experience different from that assumed........... 4,882 2,400
Unrecognized prior service cost.................................................. 805 905
Unrecognized net transition asset................................................ (84) (101)
--------- ---------
Net pension liability recognized in balance sheet................................ $ (1,020) $ (1,419)
--------- ---------
--------- ---------
</TABLE>
F-22
<PAGE>
NOTE L -- EMPLOYEE BENEFIT PLANS (CONTINUED)
Net pension cost includes the following components for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned during the year.............. $ 1,540 $ 1,433 $ 1,191
Interest cost on projected benefit obligation................ 1,636 1,520 1,396
Actual return on plan assets................................. (1,358) (1,333) (1,270)
Net amortization and deferral................................ 114 210 704
--------- --------- ---------
Net pension cost............................................. $ 1,932 $ 1,830 $ 2,021
--------- --------- ---------
--------- --------- ---------
</TABLE>
Protective's share of the net pension cost was $1.2 million, $1.2 million,
and $1.5 million, in 1995, 1994, and 1993, respectively.
Assumptions used to determine the benefit obligations as of December 31 were
as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate................................... 7.25% 8.00% 7.50%
Rates of increase in compensation level.......................... 5.25% 6.00% 5.50%
Expected long-term rate of return on assets...................... 8.50% 8.50% 8.50%
</TABLE>
Assets of the pension plan are included in the general assets of Protective.
Upon retirement, the amount of pension plan assets vested in the retiree is used
to purchase a single premium annuity from Protective in the retiree's name.
Therefore, amounts presented above as plan assets exclude assets relating to
retirees.
PLC also sponsors an unfunded Excess Benefits Plan, which is a nonqualified
plan that provides defined pension benefits in excess of limits imposed by
federal income tax law. At December 31, 1995, the projected benefit obligation
of this plan totaled $5.7 million.
In addition to pension benefits, PLC provides limited healthcare benefits to
eligible retired employees until age 65. The postretirement benefit is provided
by an unfunded plan. At December 31, 1995, the liability for such benefits
totaled $1.5 million. The expense recorded by PLC was $0.2 million in 1995,
1994, and 1993. PLC's obligation is not materially affected by a 1% change in
the healthcare cost trend assumptions used in the calculation of the obligation.
Life insurance benefits for retirees are provided through the purchase of
life insurance policies upon retirement equal to the employees' annual
compensation. This plan is partially funded at a maximum of $50,000 face amount
of insurance.
PLC sponsors a defined contribution plan which covers substantially all
employees. Employee contributions are made on a before-tax basis as provided by
Section 401(k) of the Internal Revenue Code. In 1990, PLC established an
Employee Stock Ownership Plan to match employee contributions to PLC's 401(k)
Plan. In 1994, a stock bonus was added to the 401(k) Plan for employees who are
not otherwise under a bonus plan. Expense related to the ESOP consists of the
cost of the shares allocated to participating employees plus the interest
expense on the ESOP's note payable to Protective less dividends on shares held
by the ESOP. At December 31, 1995, PLC had committed 70,088 shares to be
released to fund employee benefits. The expense recorded by PLC for this
employee benefit was $0.7 million, $0.6 million and $0.2 million in 1995, 1994,
and 1993, respectively.
NOTE M -- REINSURANCE
Protective assumes risks from and reinsures certain parts of its risks with
other insurers under yearly renewable term, coinsurance, and modified
coinsurance agreements. Yearly renewable term and coinsurance agreements are
accounted for by passing a portion of the risk to the reinsurer. Generally, the
reinsurer receives a proportionate part of the premiums less commissions and is
liable for a corresponding part of all benefit payments. Modified coinsurance is
accounted for similarly to coinsurance except that the liability for future
policy benefits is held by the original company, and
F-23
<PAGE>
NOTE M -- REINSURANCE (CONTINUED)
settlements are made on a net basis between the companies. While the amount
retained on an individual life will vary based upon age and mortality prospects
of the risk, Protective, generally, will not carry more than $500,000 individual
life insurance on a single risk.
Protective has reinsured approximately $17.5 billion, $8.6 billion, and $7.5
billion, in face amount of life insurance risks with other insurers representing
$116.1 million, $46.0 million, and $37.9 million of premium income for 1995,
1994, and 1993, respectively. Protective has also reinsured accident and health
risks representing $217.1 million, $126.5 million and $88.9 million, of premium
income for 1995, 1994, and 1993, respectively. In 1995 and 1994, policy and
claim reserves relating to insurance ceded of $232.3 million and $120.0 million
respectively are included in reinsurance receivables. Should any of the
reinsurers be unable to meet its obligation at the time of the claim, obligation
to pay such claim would remain with Protective. At December 31, 1995 and 1994,
Protective had paid $4.1 million and $5.4 million, respectively, of ceded
benefits which are recoverable from reinsurers.
During 1995 the Company entered into a reinsurance agreement whereby all of
the Company's new credit insurance sales are being ceded to a reinsurer.
Included in the preceding paragraph are credit life and credit accident and
health insurance premiums of $68.2 million and $57.6 million respectively, and
reserves totaling $100.8 million which were ceded during 1995.
NOTE N -- ESTIMATED MARKET VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated market values of Protective's financial
instruments at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
ESTIMATED ESTIMATED
CARRYING MARKET CARRYING MARKET
AMOUNT VALUES AMOUNT VALUES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets (see Notes A and C):
Investments:
Fixed maturities................................... $ 3,891,932 $ 3,891,932 $ 3,493,646 $ 3,493,646
Equity securities.................................. 38,711 38,711 45,005 45,005
Mortgage loans on real estate...................... 1,835,057 2,001,100 1,488,495 1,535,300
Short-term investments............................. 46,891 46,891 54,683 54,683
Cash................................................. 6,198 6,198
Other (see Note A):
Futures contracts.................................... (633) (416)
Interest rate swaps.................................. 1,299 (8,952)
</TABLE>
F-24
<PAGE>
SCHEDULE III -- SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- --------------------------------------------------------------------------------------------------
GIC AND
FUTURE ANNUITY
DEFERRED POLICY DEPOSITS PREMIUMS
POLICY BENEFITS AND OTHER AND
ACQUISITION AND UNEARNED POLICYHOLDERS' POLICY
SEGMENT COSTS CLAIMS PREMIUMS FUNDS FEES
- ----------------------------------- ----------- ---------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1995:
Acquisitions..................... $123,889 $ 851,994 $ 590 $ 250,550 $98,501
Financial Institutions........... 36,283 84,162 189,973 1,495 23,875
Group............................ 24,974 123,279 2,806 85,925 142,483
Guaranteed Investment
Contracts....................... 993 68,704 0 2,451,693 0
Individual Life.................. 186,496 672,569 336 14,709 99,018
Investment Products.............. 37,534 127,104 0 1,061,507 4,566
Corporate and Other.............. 14 342 62 263 1,445
Unallocated Realized Investment
Gains (Losses).................. 0 0 0 0 0
----------- ---------- -------- -------------- --------
TOTAL.......................... $410,183 $1,928,154 $193,767 $3,866,142 $369,888
----------- ---------- -------- -------------- --------
----------- ---------- -------- -------------- --------
Year Ended
December 31, 1994:
Acquisitions..................... $110,203 $ 856,889 $ 381 $ 266,828 $86,376
Financial Institutions........... 68,060 43,198 99,798 2,758 98,027
Group............................ 22,685 116,324 2,905 84,689 131,096
Guaranteed Investment
Contracts....................... 996 0 0 2,281,674 0
Individual Life.................. 162,186 571,070 320 13,713 84,925
Investment Products.............. 70,053 102,705 0 1,027,527 1,635
Corporate and Other.............. 17 4,109 75 263 713
Unallocated Realized Investment
Gains (Losses).................. 0 0 0 0 0
----------- ---------- -------- -------------- --------
TOTAL.......................... $434,200 $1,694,295 $103,479 $3,677,452 $402,772
----------- ---------- -------- -------------- --------
----------- ---------- -------- -------------- --------
Year Ended
December 31, 1993:
Acquisitions..................... $ 69,942 $ 705,487 $ 501 $ 259,513 $58,562
Financial Institutions........... 59,163 39,508 85,042 2,913 87,355
Group............................ 20,520 99,412 2,786 83,522 126,027
Guaranteed Investment
Contracts....................... 1,464 0 0 2,015,075 0
Individual Life.................. 129,265 483,604 368 11,762 77,338
Investment Products.............. 18,934 52,516 0 789,668 856
Corporate and Other.............. 19 318 88 339 1,285
Unallocated Realized Investment
Gains (Losses).................. 0 0 0 0 0
----------- ---------- -------- -------------- --------
TOTAL.......................... $299,307 $1,380,845 $88,785 $3,162,792 $351,423
----------- ---------- -------- -------------- --------
----------- ---------- -------- -------------- --------
<CAPTION>
- ----------------------------------- ------------------------------------------------------------------
COL. A COL. G COL. H COL. I COL. J
- -----------------------------------
------------------------------------------------------------------
AMORTIZATION
REALIZED BENEFITS OF DEFERRED OTHER
NET INVESTMENT AND POLICY OPERATING
INVESTMENT GAINS SETTLEMENT ACQUISITION EXPENSES
SEGMENT INCOME (1) (LOSSES) EXPENSES COSTS (1)
- ----------------------------------- ---------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1995:
Acquisitions..................... $ 95,018 $ 0 $100,016 $20,601 $ 20,791
Financial Institutions........... 9,276 0 (19,574) 28,609 15,905
Group............................ 14,329 0 109,447 3,052 36,262
Guaranteed Investment
Contracts....................... 203,376 (3,908) 165,963 386 2,564
Individual Life.................. 40,237 0 80,067 20,403 21,241
Investment Products.............. 95,661 4,938 72,111 11,446 9,476
Corporate and Other.............. 536 0 1,476 3 15,837
Unallocated Realized Investment
Gains (Losses).................. 0 921 0 0 0
---------- ----------- ---------- ------------ -----------
TOTAL.......................... $458,433 $ 1,951 $509,506 $84,500 $122,076
---------- ----------- ---------- ------------ -----------
---------- ----------- ---------- ------------ -----------
Year Ended
December 31, 1994:
Acquisitions..................... $ 83,750 $ 532 $ 97,649 $14,460 $ 19,374
Financial Institutions........... 9,164 46,360 36,592 16,065
Group............................ 14,381 98,930 2,724 35,490
Guaranteed Investment
Contracts....................... 180,591 3,000 147,383 892 2,119
Individual Life.................. 37,319 67,451 18,771 18,803
Investment Products.............. 80,759 (2,500) 58,424 14,647 6,595
Corporate and Other.............. 2,969 913 3 20,757
Unallocated Realized Investment
Gains (Losses).................. 0 5,266 0 0 0
---------- ----------- ---------- ------------ -----------
TOTAL.......................... $408,933 $ 6,298 $517,110 $88,089 $119,203
---------- ----------- ---------- ------------ -----------
---------- ----------- ---------- ------------ -----------
Year Ended
December 31, 1993:
Acquisitions..................... $ 65,290 $ 73,463 $ 7,831 $ 12,715
Financial Institutions........... 8,921 42,840 31,202 15,181
Group............................ 14,522 101,266 2,272 29,450
Guaranteed Investment
Contracts....................... 166,058 $ 1,175 137,380 1,170 1,466
Individual Life.................. 34,153 55,972 18,069 17,133
Investment Products.............. 66,691 2,003 49,569 12,788 3,790
Corporate and Other.............. (1,470) 1,146 3 14,580
Unallocated Realized Investment
Gains (Losses).................. 0 1,876 0 0 0
---------- ----------- ---------- ------------ -----------
TOTAL.......................... $354,165 $ 5,054 $461,636 $73,335 $ 94,315
---------- ----------- ---------- ------------ -----------
---------- ----------- ---------- ------------ -----------
<FN>
- ------------------------------
(1) Allocations of Net Investment Income and Other Operating Expenses are based
on a number of assumptions and estimates and results would change if
different methods were applied.
</TABLE>
S-1
<PAGE>
SCHEDULE IV -- REINSURANCE
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------------------------------------------------------------------------------------------------------
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
AMOUNT COMPANIES COMPANIES AMOUNT TO NET
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995:
Life insurance in force........... $ 50,346,719 $ 17,524,366 $ 11,537,144 $ 44,359,497 26.0%
-------------- -------------- -------------- -------------- ---
-------------- -------------- -------------- -------------- ---
Premiums and policy fees:
Life insurance.................. $ 287,526 $ 116,091 $ 66,565 $ 238,000 28.0%
Accident/health insurance....... 335,387 217,082 13,583 131,888 10.3%
-------------- -------------- -------------- --------------
TOTAL......................... $ 622,913 $ 333,173 $ 80,148 $ 369,888
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Year Ended December 31, 1994:
Life insurance in force........... $ 40,909,454 $ 8,639,272 $ 8,968,166 $ 41,238,348 21.7%
-------------- -------------- -------------- -------------- ---
-------------- -------------- -------------- -------------- ---
Premiums and policy fees:
Life insurance.................. $ 256,840 $ 46,029 $ 31,032 $ 241,843 12.8%
Accident/health insurance....... 283,883 126,545 3,591 160,929 2.2%
-------------- -------------- -------------- --------------
TOTAL......................... $ 540,723 $ 172,574 $ 34,623 $ 402,772
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Year Ended December 31, 1993:
Life insurance in force........... $ 40,149,017 $ 7,484,566 $ 2,301,577 $ 34,966,028 6.6%
-------------- -------------- -------------- -------------- ---
-------------- -------------- -------------- -------------- ---
Premiums and policy fees:
Life insurance.................. $ 230,706 $ 37,995 $ 8,329 $ 201,040 4.1%
Accident/health insurance....... 254,672 88,917 3,963 169,718 2.3%
-------------- -------------- -------------- --------------
TOTAL......................... $ 485,378 $ 126,912 $ 12,292 $ 370,758
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
S-2
<PAGE>
APPENDIX A
EXAMPLES OF DEATH BENEFIT COMPUTATIONS UNDER OPTIONS 1 AND 2
OPTION 1 EXAMPLE. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Policy Debt.
Under Option 1, a Policy with a $50,000 Face Amount will generally pay $50,000
in Death Benefits. However, because the Death Benefit must be equal to or be
greater than 250% of the Policy Value, any time that the Policy Value exceeds
$20,000, the Death Benefit will exceed the $50,000 Face Amount. Each additional
dollar added to Policy Value above $20,000 will increase the Death Benefit by
$2.50. A Policy with a $50,000 Face Amount and a Policy Value of $30,000 will
provide Death Benefit of $75,000 ($30,000 x 250%); a Policy Value of $40,000
will provide a Death Benefit of $100,000 ($40,000 x 250%); a Policy Value of
$50,000 will provide a Death Benefit of $125,000 ($50,000 x 250%).
Similarly, so long as Policy Value exceeds $20,000, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $25,000 to $20,000 because of partial surrenders, charges,
or negative investment performance, the Death Benefit will be reduced from
$62,500 to $50,000. If at any time, however, the Policy Value multiplied by the
Face Amount percentage is less than the Face Amount, the Death Benefit will
equal the current Face Amount of the Policy.
The Face Amount percentage becomes lower as the Insured's Attained Age
increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than between 0 and 40), the specified amount factor would be
185%. The Death Benefit would not exceed the $50,000 Face Amount unless the
Policy Value exceeded approximately $27,028 (rather than $20,000), and each
dollar then added to or taken from the Policy Value would change the life
insurance proceeds by $1.85 (rather than $2.50).
OPTION 2 EXAMPLE. For purposes of this example, assume that the Insured's
Attained Age is between 0 and 40 and that there is no outstanding Policy Debt.
Under Option 2, a Policy with a Face Amount of $50,000 will generally provide a
Death Benefit of $50,000 plus Policy Value. Thus, for example, a Policy with a
Policy Value of $5,000 will have a Death Benefit of $55,000 ($50,000 + $5,000);
a Policy Value of $10,000 will provide a Death Benefit of $60,000 ($50,000 +
$10,000). The Death Benefit, however, must be at least 250% of the Policy Value.
As a result, if the Policy Value exceeds $33,333, the Death Benefit will be
greater than the Face Amount plus Policy Value. Each additional dollar of Policy
Value above $33,333 will increase the Death Benefit by $2.50. A Policy with a
Face Amount of $50,000 and a Policy Value of $40,000 will provide a Death
Benefit of $100,000 ($40,000 x 250%); a Policy Value of $60,000 will provide a
Death Benefit of $150,000 ($60,000 X 250%).
Similarly, any time Policy Value exceeds $33,333, each dollar taken out of
Policy Value will reduce the Death Benefit by $2.50. If, for example, the Policy
Value is reduced from $40,000 to $35,000 because of partial surrenders, charges,
or negative investment performance, the Death Benefit will be reduced from
$100,000 to $87,500. If at any time, however, Policy Value multiplied by the
Face Amount percentage is less than the Face Amount plus the Policy Value, then
the Death Benefit will be the current Face Amount plus Policy Value of the
Policy.
The Face Amount percentage becomes lower as the Insured's Attained Age
increases. If the Attained Age of the Insured in the example above were, for
example, 50 (rather than under 40), the Face Amount factor would be 185%. The
amount of the Death Benefit would be the sum of the Policy Value plus $50,000
unless the Policy Value exceeded $58,824 (rather than $33,333), and each dollar
then added to or taken from the Policy Value would change the Death Benefit by
$1.85 (rather than $2.50).
A-1
<PAGE>
TABLE OF FACE AMOUNT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED
AGE PERCENTAGE ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
0-40 250% 50 185% 60 130% 70 115%
41 243% 51 178% 61 128% 71 113%
42 236% 52 171% 62 126% 72 111%
43 229% 53 164% 63 124% 73 109%
44 222% 54 157% 64 122% 74 107%
45 215% 55 150% 65 120% 75-90 105%
46 209% 56 146% 66 119% 91 104%
47 203% 57 142% 67 118% 92 103%
48 197% 58 138% 68 117% 93 102%
49 191% 59 134% 69 116% 94 101%
95+ 100%
</TABLE>
A-2
<PAGE>
PART II -- OTHER INFORMATION
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Article XI of the By-laws of Protective Life provides, in substance, that
any of Protective Life's directors and officers, who is a party or is threatened
to be made a party to any action, suit or proceeding, other than an action by or
in the right of Protective Life, by reason of the fact that he is or was an
officer or director, shall be indemnified by Protective Life against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such claim,
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Protective
Life and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. If the claim, action or suit is or
was by or in the right of Protective Life to procure a judgment in its favor,
such person shall be indemnified by Protective Life against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
Protective Life, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to Protective
Life unless and only to the extent that the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper. To the extent that a director or officer has been successful on the
merits or otherwise in defense of any such action, suit or proceeding, or in
defense of any claim, issue or matter therein, he shall be indemnified by
Protective Life against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith, not withstanding that he has
not been successful on any other claim issue or matter in any such action, suit
or proceeding. Unless ordered by a court, indemnification shall be made by
Protective Life only as authorized in the specific case upon a determination
that indemnification of the officer or director is proper in the circumstances
because he has met the applicable standard of conduct. Such determination shall
be made (a) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to, or who have been successful on the merits
or otherwise with respect to, such claim action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion or (c) by the shareholders.
In addition, the executive officers and directors are insured by PLC's
Directors' and Officers' Liability Insurance Policy including Company
Reimbursement and are indemnified by a written contract with PLC which
supplements such coverage.
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 may be against public policy as expressed in the Act and
may be, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than 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
II-1
<PAGE>
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.
REPRESENTATIONS PURSUANT TO RULE 6e-3(T)
This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940.
Registrant elects to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
Investment Company Act of 1940 with respect to the Contracts described in the
Prospectus.
Registrant makes the following representations:
(1) Section 6e-3(T)(b)(13)(iii)(F) has been relied upon.
(2) The level of the mortality and expense risk charge is within the range
of industry practice for comparable flexible premium variable life
insurance contracts.
(3) Registrant has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the Separate Account will benefit
the Separate Account and contract owners and will keep and make available
to the Commission on request a memorandum setting forth the basis for
this representation.
(4) The Separate Account will invest only in management investment companies
which have undertaken to have a board of directors, a majority of whom
are not interested persons of the company, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
The methodology used to support the representation made in paragraph (2)
above is based on an analysis of the mortality and expense risk charge contained
in other flexible premium variable life insurance contracts. Registrant
undertakes to keep and make available to the Commission on request the documents
used to support the representation in paragraph (2) above.
II-2
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This registration statement consists of the following papers and documents:
The facing sheet.
A reconciliation and tie of the information shown in the prospectus with the
items of Form N-8B-2.
The prospectus consisting of 50 pages.
The undertaking to file reports.
The Rule 484 undertaking.
Representations pursuant to Rule 6e-3(T).
The signatures.
Written consents of the following persons:
Lizabeth R. Nichols, Esq.
Milliman & Robertson
Sutherland, Asbill & Brennan
Coopers & Lybrand L.L.P.
The following exhibits:
<TABLE>
<S> <C> <C>
1.A. (1) Certified resolutions of the board of directors of Protective Life Insurance Company establishing
Protective Variable Life Separate Account.*
(2) None.
(3)(a) Form of Underwriting Agreement among Protective Life Insurance Company, Investment Distributors,
Inc. and Protective Variable Life Separate Account.**
(b) Form of Distribution Agreement between Investment Distributors, Inc. and selling broker-dealers.**
(4) None.
(5)(a) Form of Contract.
(b) Children's term life rider.*
(c) Accidental death benefit rider.*
(d) Disability benefit rider.*
(e) Guaranteed insurability rider.*
(f) Protected insurability benefit rider.*
(6)(a) Charter of Protective Life Insurance Company.*
(b) By-Laws of Protective Life Insurance Company.*
(7) None
(8) None
(9) Participation/Distribution Agreement.**
(10) Contract Application.
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form
S-6 Registration Statement, (File No. 33-61599) as filed with the Commission
on December 22, 1995.
II-3
<PAGE>
<TABLE>
<S> <C> <C>
2. Opinion and consent of Lizabeth R. Nichols, Esq.*
3. Not applicable.
4. Not applicable.
5. Financial data schedule. (Not Applicable)
6. Notice of Withdrawal Right. (Not Applicable)
7. Opinion and consent of Milliman & Robertson.
8. Consent of Sutherland, Asbill & Brennan.
9(a). Consent of Coopers & Lybrand L.L.P.
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and redemption
procedures.
11. Powers of attorney.*
</TABLE>
- ------------------------
*Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement, (File No. 33-61599) as filed with the Commission on
August 4, 1995.
**Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form
S-6 Registration Statement, (File No. 33-61599) as filed with the Commission
on December 22, 1995.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Protective Variable Life
Separate Account, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Registration Statement and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Birmingham, State of Alabama on April
8, 1996.
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
(Registrant)
By: /s/ DRAYTON NABERS, JR.
------------------------------------------
Drayton Nabers, Jr., President
PROTECTIVE LIFE INSURANCE COMPANY
PROTECTIVE LIFE INSURANCE COMPANY
(Depositor)
By: /s/ DRAYTON NABERS, JR.
------------------------------------------
Drayton Nabers, Jr., President
As required by the Securities Act of 1933, this Post-Effective Amendment No.
1 to the Form S-6 registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------- ---------------
<C> <S> <C>
President
/s/ DRAYTON NABERS, JR. (Principal
------------------------------------------- Executive April 8, 1996
Drayton Nabers, Jr. Officer)
Executive Vice
/s/ JOHN D. JOHNS President
------------------------------------------- (Principal April 8, 1996
John D. Johns Financial
Officer)
Vice President
/s/ JERRY W. DEFOOR (Principal
------------------------------------------- Accounting April 8, 1996
Jerry W. DeFoor Officer)
/s/ DRAYTON NABERS, JR.
------------------------------------------- Director April 8, 1996
Drayton Nabers, Jr.
/s/ JOHN D. JOHNS
------------------------------------------- Director April 8, 1996
John D. Johns
*
------------------------------------------- Director April 8, 1996
Ormond L. Bentley
*
------------------------------------------- Director April 8, 1996
R. Stephen Briggs
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------- ---------------
<C> <S> <C>
*
------------------------------------------- Director April 8, 1996
Jim E. Massengale
*
------------------------------------------- Director April 8, 1996
Wayne E. Stuenkel
*
------------------------------------------- Director April 8, 1996
A. S. Williams III
*
------------------------------------------- Director April 8, 1996
Steven A. Schultz
*
------------------------------------------- Director April 8, 1996
Deborah A. Long
*
------------------------------------------- Director April 8, 1996
Carolyn King
*By: /s/ LIZABETH R. NICHOLS
--------------------------------------
Lizabeth R. Nichols
Attorney-in-Fact April 8, 1996
</TABLE>
<PAGE>
EXHIBIT 1.A.(5)(a)
<PAGE>
[PROTECTIVE LIFE LETTERHEAD]
VARIABLE LIFE INSURANCE POLICY
@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@
POLICY NUMBER ##########
This is an Individual Flexible Premium Variable and Fixed Life Insurance
Policy ("Policy") which has been issued to the Owner(s). This Policy provides a
death benefit.
THE OWNER(S) HAVE THE RIGHT TO RETURN THIS POLICY. The Owner(s) may cancel this
Policy after receipt by returning the Policy to our Home Office, or to the Agent
who sold the policy, with a written request for cancellation dated no later than
(a) ten (10) days after receipt; or (b) 45 days after the Application was
signed; or (c) 10 days after we mail or deliver a Notice of Right of Withdrawal.
Return of this Policy by mail is effective on receipt by us. The returned Policy
will be treated as if we had never issued it. In states where permitted, we will
promptly refund an amount equal to the sum of: (a) the difference between the
premiums paid (including any policy fees and or other charges deducted) and the
amounts allocated to the Fixed Account or the Sub-Accounts, plus (b) the value
of the amounts allocated to the Fixed Account, including any interest credited
on such amounts accumulated to the date that the Policy is returned to us, plus
(c) the value of the amounts allocated to the Sub-Accounts, adjusted to reflect
the net investment experience of such Sub-Accounts, to the date that the Policy
is returned to us. This amount may be more or less than the premium payment(s).
In states where required, we will promptly refund the premium payment(s).
The amount of the death benefit or the duration of the insurance coverage,
or both, may be variable or fixed.
This is a legal contract. Please read your Policy carefully.
<TABLE>
<S> <C>
President Secretary
</TABLE>
THE VALUES PROVIDED IN THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A VARIABLE ACCOUNT, ARE VARIABLE, MAY INCREASE OR DECREASE IN
ACCORDANCE WITH THE FLUCTUATIONS IN THE NET INVESTMENT FACTOR, AND ARE NOT
GUARANTEED AS TO DOLLAR AMOUNTS. THERE IS NO GUARANTEED MINIMUM FOR THE PORTION
OF YOUR POLICY VALUE IN THE SUB-ACCOUNTS.
READ YOUR CONTRACT CAREFULLY
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
1
<PAGE>
INDEX
<TABLE>
<S> <C>
POLICY SPECIFICATIONS PAGES............................................................ 3
TABLE OF GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES............................ 3
</TABLE>
<TABLE>
<S> <C>
DEFINITIONS............................ 4
GENERAL PROVISIONS..................... 5
Entire Contract...................... 5
Modification of the Contract......... 6
Misstatement of Age or Sex........... 6
Suicide Exclusion.................... 6
Termination.......................... 6
Representations and Contestability... 6
Reports.............................. 6
Arbitration.......................... 7
CONTROL PROVISIONS..................... 10
The Parties Involved................. 10
Rights of Owner...................... 10
Contingent Owner..................... 10
Beneficiary.......................... 11
Changing the Owner................... 11
Assignment........................... 11
Protection of Proceeds............... 11
Suspension or Delay in Payment....... 11
Tax Considerations................... 11
Changes in Policy Cost Factors....... 12
Coverage Limitations................. 12
PREMIUMS............................... 12
Premium Payment(s)................... 12
Planned Premiums..................... 12
Unscheduled Premium Payments......... 12
Minimum Monthly Premium Guarantee.... 12
Premium Expense Charge............... 13
Allocation of Net Premium
Payment(s).......................... 13
Grace Period......................... 13
Reinstatement........................ 13
DEDUCTIONS FROM POLICY VALUE........... 14
Monthly Deductions................... 14
Monthly Cost of Insurance Charge..... 14
Cost of Insurance Rates.............. 14
Mortality and Expense Risk Charges... 14
Cost of Riders....................... 14
Other Deductions..................... 14
Basis of Computations................ 14
FIXED ACCOUNT.......................... 14
Calculation of the Fixed Account
Value............................... 14
Interest Credited.................... 15
VARIABLE ACCOUNT....................... 15
General Description.................. 15
Sub-Accounts of the Variable
Account............................. 15
Valuation of Assets.................. 16
Calculation of Sub-Account Values.... 16
Net Investment Factor................ 16
Transfers............................ 17
Special Transfer Right............... 17
DEATH BENEFIT.......................... 17
Amount of Death Benefit.............. 17
Payment of Death Benefits............ 18
Suspension of Payment................ 18
Creditor Claims...................... 18
SURRENDERS AND WITHDRAWALS............. 18
Surrenders........................... 18
Withdrawals.......................... 18
POLICY LOANS........................... 18
Right to Make Loans, Policy Debt..... 18
Maximum Loan......................... 19
Interest............................. 19
Collateral........................... 19
Repaying Policy Debt................. 19
CHANGING THIS POLICY................... 19
Increasing the Face Amount........... 19
Premium Payments Required for a Face
Amount Increase..................... 20
Cancellation of an Increase of Face
Amount.............................. 20
Decreasing the Face Amount........... 20
Changing the Death Benefit Option.... 20
Changing the Maturity Date........... 20
Change Approval...................... 20
SETTLEMENT OPTIONS..................... 20
Availability of Options.............. 20
Minimum Amounts...................... 21
Electing a Payment Option............ 21
Effective Date and Payment Date...... 21
Description of Options............... 21
</TABLE>
2
<PAGE>
POLICY SPECIFICATIONS
POLICY NUMBER: SPECIMEN
POLICY ISSUE DATE: MARCH 1, 1995
INSURED: JOHN Q. DOE
INITIAL FACE AMOUNT: $100,000
INITIAL PREMIUM PAYMENT: $665.00
MINIMUM MONTHLY PREMIUM PAYMENT
FIRST POLICY YEAR: $55.41
POLICY YEARS 2 AND AFTER: $50.00
PLANNED PREMIUM: $665.00 PAYABLE ANNUALLY
OWNER: JOHN Q. DOE
POLICY EFFECTIVE DATE: MARCH 1, 1995
MATURITY DATE: MARCH 1, 2055
ISSUE AGE: 35 SEX: MALE
MINIMUM FACE AMOUNT: $100,000
MONTHLY ANNIVERSARY DAY: 1
DEATH BENEFIT OPTION: INCREASING
RATE CLASS: PREFERRED NON-SMOKER
<TABLE>
<CAPTION>
RIDER MONTHLY CHARGE DURING
NUMBER SCHEDULE OF ADDITIONAL BENEFITS FIRST YEAR
- --------- ------------------------------------------------------------------------------- ---------------------
<C> <S> <C>
None
</TABLE>
...............................................................................
MONTHLY GUARANTEED INTEREST RATE FOR FIXED ACCOUNT 4% ANNUALLY (.3274% MONTHLY)
INITIAL ANNUAL EFFECTIVE INTEREST RATE FOR FIXED ACCOUNT 6%
THIS POLICY PROVIDES LIFE INSURANCE COVERAGE ON THE INSURED UNTIL THE
MATURITY DATE, PROVIDED THAT THE POLICY VALUE IS SUFFICIENT TO COVER THE
DEDUCTIONS TO THAT DATE FOR THE COST OF THE BENEFITS OF THIS POLICY AND OF ANY
RIDERS. YOU MAY HAVE TO PAY MORE THAN THE PLANNED PREMIUMS SHOWN ABOVE TO KEEP
THIS POLICY AND ANY ADDITIONAL RIDERS IN FORCE TO THAT DATE.
3
<PAGE>
ALLOCATION OF PREMIUM PAYMENTS:
Protective Variable Life Separate Account
<TABLE>
<CAPTION>
SUB-ACCOUNTS:
- -------------------------------------------------------------------------------------
<S> <C>
Growth and Income Sub-Account........................................................ %
International Equity Sub-Account..................................................... %
Global Income Sub-Account............................................................ %
Select Equity Sub-Account............................................................ %
Small Cap Equity Sub-Account......................................................... %
Money Market Sub-Account............................................................. %
Capital Growth Sub-Account........................................................... %
Fixed Account...................................................................... %
</TABLE>
CHARGES
PREMIUM EXPENSE CHARGES. Consist of the following:
1. A Premium Tax Charge of 2.25% which will be deducted from each Premium
Payment for state and local premium taxes. We reserve the right to change this
percentage if premium tax rates change or the Insured's residence changes.
2. A Sales Charge, which equals 2.75%, will be deducted from each Premium
Payment during the first ten (10) Policy Years. In Policy Years 11 and greater,
a Sales Charge of .75% will be deducted from each Premium Payment.
3. A charge for federal taxes for deferred acquisition costs equal to 1.25%
will be deducted from each Premium Payment during all years.
Currently, a charge for federal income tax is not deducted from the
Sub-Accounts or the Policy's Cash Value. The Company reserves the right in the
future to make a charge to the Sub-Accounts or the Cash Value for any Federal,
state or local taxes that the Company incurs that it determines to be properly
attributable to the Sub-Accounts or the policies. We will notify you promptly of
any such charge.
MONTHLY DEDUCTIONS
ADMINISTRATION FEE. During the first Policy Year, the maximum
Administration Fee to be deducted monthly from the Policy Value is $33. During
other Policy Years, the maximum Administration Fee to be deducted monthly from
the Policy Value is $8.
We reserve the right to decrease these Administration Fees. Accordingly the
Administration Fee in the first Policy Year will be $31 per month and the
Administration Fees in other Policy Years will be $6 per month.
ADMINISTRATION CHARGE FOR INCREASE IN FACE AMOUNT. An administration charge
of $0.11 per every $1,000 of increase in additional face amount is deducted from
the Policy Value monthly in connection with an increase in face amount during
the twelve month period following the effective date of the increase.
CHARGE FOR BENEFITS UNDER RIDERS. Every month the Company deducts a charge
for any Riders.
COST OF INSURANCE CHARGE. Every month the Company deducts a charge for the
Cost of Insurance, which varies and is calculated in accordance with the policy
provisions.
MORTALITY AND EXPENSE RISK CHARGE. Every month the Company deducts a
Mortality and Expense Risk Charge. The maximum monthly Mortality and Expense
Risk Charge to be deducted is equal to .075% multiplied by the Variable Account
Value, which is equivalent to an annual rate of .90% of such amount. The Company
reserves the right to charge less than the maximum charge. Accordingly, during
Policy Years 1 through 10, the monthly Mortality and Expense Risk Charge is
.075% multiplied by the Variable Account Value, which is equivalent to an annual
rate of .90% of such amount. In Policy Years 11 and thereafter, the Monthly
Mortality and Expense Risk Charge is .021% multiplied by the Variable Account
Value, which is equivalent to an annual rate of .25% of such amount.
OTHER DEDUCTIONS
WITHDRAWAL CHARGE. A Withdrawal Charge equal to the lesser of: (a) 2% of
the amount withdrawn; or (b) $25 is deducted from the Policy Value whenever you
make a withdrawal.
TRANSFER FEE. A $25 charge may be deducted from the Policy Value being
transferred for each transfer request in excess of 12 during a Policy Year.
3a
<PAGE>
SURRENDER CHARGES
If this Policy is surrendered or you reduce the initial face amount during
the first fourteen Policy Years, we will deduct a Surrender Charge from the
Policy Value.
The Surrender Charge for the initial Face Amount is equal to the Surrender
Charge Percentage indicated in the table for the Policy Year in which the
surrender or reduction in initial Face Amount occurs, multiplied by the
aggregate amount of premium payments made in Policy Year 1 (including premium
payments for any riders). The Maximum Surrender Charge for any Policy Year is
$283.64.
<TABLE>
<CAPTION>
SURRENDER CHARGE
POLICY YEARS PERCENTAGE
- ------------- -------------------
<S> <C>
1 27%
2 27%
3 27%
4 27%
5 27%
6 27%
7 24%
8 21%
<CAPTION>
SURRENDER CHARGE
POLICY YEARS PERCENTAGE
- ------------- -------------------
<S> <C>
9 18%
10 15%
11 12%
12 9%
13 6%
14 3%
15+ 0%
</TABLE>
If the initial face amount of this Policy is decreased during the first
fourteen Policy Years, the Surrender Charge imposed will equal the portion of
the total Surrender Charge that corresponds to the percentage by which the
initial Face Amount is reduced. In the event of a Face Amount decrease, we will
allocate the Surrender Charge to each Sub-Account and the Fixed Account based on
the proportion that the value of the Fixed Account and the value of the
Sub-Account(s) bear to the total unloaned Policy Value in each Sub-Account and
the Fixed Account.
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED AGE RATE
- --------------- ------------
<S> <C>
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
<CAPTION>
ATTAINED AGE RATE
- --------------- ------------
<S> <C>
24
25
26
27
28
29
30
31
32
33
34
35 $ .14085
36 .14752
37 .15669
38 .16669
39 .17836
40 .19086
41 .20587
42 .22088
43 .23839
44 .25589
45 .27674
46 .29925
47 .32343
<CAPTION>
ATTAINED AGE RATE
- --------------- ------------
<S> <C>
48 $ .34928
49 .37847
50 .40933
51 .44603
52 .48857
53 .53612
54 .59118
55 .65209
56 .71968
57 .79145
58 .86908
59 .95674
60 1.05444
61 1.16301
62 1.28665
63 1.42786
64 1.58751
65 1.76393
66 1.95380
67 2.15965
68 2.38065
69 2.62185
70 2.89418
71 3.25304
<CAPTION>
ATTAINED AGE RATE
- --------------- ------------
<S> <C>
72 $ 3.55929
73 3.96902
74 4.42953
75 4.92412
76 5.45122
77 6.00585
78 6.58220
79 7.19472
80 7.86724
81 8.61695
82 9.46542
83 10.42335
84 11.47262
85 12.58986
86 13.75325
87 14.95279
88 16.16463
89 17.40526
90 18.69215
91 20.04733
92 21.51567
93 23.16008
94 25.25983
</TABLE>
GUARANTEED MAXIMUM COST OF INSURANCE RATES FOR THE RATE CLASS SHOWN ON PAGE
3 ARE EQUAL TO THE ABOVE RATES INCREASED BY $0.000 EACH MONTH.
3b
<PAGE>
DEFINITIONS
ATTAINED AGE. The Insured's age as of the nearest birthday on the Policy
Effective Date plus the number of complete Policy Years since the Policy
Effective Date.
BENEFICIARY. The Beneficiary is the person entitled to receive the Death
Benefit proceeds upon the death of the Insured.
PRIMARY. Where a Primary Beneficiary is living, such person is the
Beneficiary. The Primary Beneficiary is the person named as the "Primary
Beneficiary" in the Application, unless changed.
CONTINGENT. Where no Primary Beneficiary is living, the "Contingent
Beneficiary", as named in the Application, is the Beneficiary, unless
changed. If the Contingent Beneficiary is not living, we will pay the
Owner(s) or Owner's estate.
IRREVOCABLE. An Irrevocable Beneficiary is one whose consent is
necessary to change the Beneficiary or exercise certain other rights.
CASH VALUE. It is equal to the Policy Value minus any applicable Surrender
Charge.
FIXED ACCOUNT. Part of our General Account to which Policy Value may be
transferred or Net Premiums allocated under a Policy.
FIXED ACCOUNT VALUE. The Policy Value in the Fixed Account.
FUND. An investment portfolio of Protective Investment Company or any other
open-end management investment company or unit investment trust in which a
Sub-Account invests.
GENERAL ACCOUNT. The assets of the Company other than those allocated to
the Variable Account or another separate account.
HOME OFFICE. 2801 Highway 280 South, Birmingham, Alabama 35223.
INITIAL FACE AMOUNT. The Face Amount on the Policy Effective Date.
INSURED. The person whose life is covered by the Policy.
ISSUE AGE. The Insured's age as of the nearest birthday on the Policy
Effective Date.
ISSUE DATE. The date the Policy is issued. The Issue Date may be a later
date than the Policy Effective Date if the initial premium payment is received
at the Home Office before the Issue Date.
LAPSE. Termination of the Policy at the expiration of the Grace Period
while the Insured is still living.
LOAN ACCOUNT. An account within the Company's General Account to which the
Fixed Account Value and/or Variable Account Value is transferred as collateral
for policy loans.
LOAN ACCOUNT VALUE. The Policy Value in the Loan Account.
MATURITY DATE. The date shown on the Policy Specifications Page. It is the
date on which we will pay the Owner(s) the Surrender Value, if any, provided the
insured is still living. It is the Policy Anniversary nearest the Insured's 95th
birthday. The Maturity Date may be changed provided it is not less than 20 years
from the Policy Effective Date.
MINIMUM MONTHLY PREMIUM. For policies issued on Insured's Issue Age below
70, the minimum amount of premium payments that must be paid in order for the
No-Lapse Guarantee to remain in effect.
MONTHLY ANNIVERSARY DAY. The same day of the month as the Policy Effective
Date. The Monthly Anniversary Day is shown on the Policy Specifications Page.
NET AMOUNT AT RISK. As of any Monthly Anniversary Day, the Death Benefit
under this Policy (discounted for the upcoming Policy Month) less the Policy
Value (before deduction of the monthly Administration Fee and monthly rider
charges on that day).
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NET ASSET VALUE PER SHARE. The value per share of any Fund as computed on
any Valuation Day as described in the Fund Prospectus.
NET PREMIUM. The premium payment after deduction of the Premium Expense
Charges.
OWNER. The person(s) who own the Policy. Herein referred to as "you" or
"your".
PLANNED PERIODIC PREMIUM PAYMENT. The premium determined by the Owner as a
level amount that he or she (or they) plan to pay at fixed intervals over a
specified period of time.
POLICY ANNIVERSARY. The same day in each Policy Year as the Policy
Effective Date.
POLICY DEBT. The sum of all outstanding policy loans plus accrued interest.
POLICY EFFECTIVE DATE. The date shown on the Policy Specifications Page and
on which coverage takes effect. Policy Years are measured from the Policy
Effective Date. For any increase, decrease, additions, or changes to coverage,
the effective date shall be the monthly anniversary day on or next following the
date the supplemental application is approved by the Company. The Policy
Effective Date will never be the 29th, 30th, or the 31st of a month.
POLICY VALUE. The sum of the Variable Account Value, the Fixed Account
Value and the Loan Account Value.
POLICY YEAR. Each period of 12 months commencing with the Policy Effective
Date.
PREMIUM PAYMENT(S). The amount(s) paid by the Owner(s) to purchase this
Policy.
PROTECTIVE LIFE INSURANCE COMPANY. Herein referred to as "We", "Us", "Our"
and "Company".
SETTLEMENT. Any payment by us under this Policy which is payable from our
Home Office.
SUB-ACCOUNT. A separate division of the Variable Account. Each Sub-Account
invests in a corresponding Fund.
SUB-ACCOUNT VALUE. The Policy Value in a Sub-Account.
SURRENDER VALUE. The Cash Value minus any outstanding Policy Debt.
UNIT. A unit of measurement used to calculate the Sub-Account Values.
UNSCHEDULED PREMIUM PAYMENT. Any Premium Payment other than a Planned
Periodic Premium Payment.
VALUATION DAY. Each day the New York Stock Exchange is open for business
except Federal and other holidays and days when the Company is not otherwise
open for business.
VALUATION PERIOD. The period commencing at the close of regular trading on
the New York Stock Exchange on any Valuation Day and ending at the close of
regular trading on the New York Stock Exchange on the next succeeding Valuation
Day.
VARIABLE ACCOUNT. The Protective Variable Life Separate Account, a separate
investment account of the Company into which Net Premiums may be allocated.
VARIABLE ACCOUNT VALUE. The sum of all Sub-Account Values.
WITHDRAWAL. A withdrawal by the Owner(s) of an amount of Cash Value that is
less than the Surrender Value.
WRITTEN NOTICE. A written notice or request that is received by the Company
at the Home Office.
GENERAL PROVISIONS
ENTIRE CONTRACT. This Policy, any riders and/or endorsements attached
hereto, and the Application, a copy of which is attached, and all subsequent
applications, constitute the entire contract. Any application for reinstatement
becomes part of this Policy if the reinstatement is approved by the Company. The
Policy is issued in consideration of payment of the Initial Premium shown on the
Policy Specifications Page.
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MODIFICATION OF THE CONTRACT. No change or waiver of the terms of this
Policy is valid unless made by us, in writing, and approved by an Officer of the
Company. We reserve the right to change the provisions of this Policy to conform
to any applicable laws, or applicable regulations or rulings issued by a
government agency.
MISSTATEMENT OF AGE OR SEX. Questions in the Application concern the
Insured's date of birth and sex. If the date of birth or sex given in the
Application or any Application for Riders is not correct, the Death Benefit and
any benefits provided under any Riders to this Policy will be adjusted to those
which would be purchased by the most recent deduction for the cost of insurance
and the cost of any benefits provided by such riders, at the correct age and
sex.
SUICIDE EXCLUSION. If the Insured commits suicide, while sane or insane,
within two years from the Policy Effective Date, the Company's total liability
shall be limited to the premiums paid before death, less any Policy Debt and
less any withdrawals. If the Insured commits suicide, while sane or insane,
within two years from the effective date of any increase in the face amount, the
Company's total liability with respect to such increase shall be limited to the
sum of the monthly cost of insurance charges deducted for such increase.
TERMINATION. All coverage under this Policy shall terminate when any one of
the following events occurs:
(1) The Owner(s) requests a full surrender. A surrender will require a
return of this Policy.
(2) The Insured dies.
(3) The Policy reaches its Maturity Date.
(4) The Grace Period ends without payment of premiums as described in "Grace
Period".
REPRESENTATIONS AND CONTESTABILITY. In issuing this Policy, the Company
relies on all statements made by or for the Insured in the Application or in a
supplemental application. Legally, these statements are considered to be
representations and not warranties, unless fraud is involved. The Company can
contest the validity of this Policy or resist a claim for any material
misrepresentation of a fact made on the Application or in a supplemental
application for this Policy. We also have the right to contest the validity of
any policy change based on material misstatements made in any application for
that change. To do so, however, the representation must have been made in the
Application, or in a supplemental application. Also, a copy of such application
must have been attached to this Policy when issued or made a part of the policy
when changes in coverage became effective.
The Company cannot bring any legal action to contest the validity of this
Policy after it has been in force during the lifetime of the Insured for two
years from the Policy Effective Date unless fraud is involved.
If there was a rider or endorsement added to this Policy after the Policy
Effective Date, or benefits added by a supplemental Policy Specifications Page,
the Company can contest the validity of any benefits so added within two years
during the lifetime of the Insured after they were added. The Company can
contest the validity of any reinstated benefits within two years during the
lifetime of the Insured after the reinstatement has been approved.
REPORTS. At least once a year we will send to you at your last known
address, a report for this Policy. The report will show as of the end of the
report period: (1) the current Death Benefit; (2) the current Policy Value; (3)
the current Fixed Account Value; (4) the current Variable Account Value; (5) the
current Loan Account Value; (6) the current Sub-Account Values; (7) premiums
paid since the last report; (8) any withdrawals since the last report; (9) any
policy loans and accrued interest; (10) the current Surrender Value; (11) your
current premium allocations; (12) charges deducted since the last report; and
(13) any other information required by law.
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ARBITRATION. The parties hereby acknowledge that the provision of insurance
pursuant to this Policy takes place in and substantially affects interstate
commerce and that the Federal Arbitration Act permits and promotes the use of
arbitration as a means of dispute resolution in matters arising from interstate
commerce.
Any controversy, dispute or claim by any Owner(s), Insured or Beneficiary,
or their respective assigns (each referred to herein as "Claimant"), arising out
of or relating in any way to this Policy or the solicitation or sale thereof
shall be submitted to binding arbitration pursuant to the provisions of the
Federal Arbitration Act, 9 U.S.C. Section 1, et seq. Absent consolidation of
arbitration as provided for below, such arbitration shall be governed by the
rules and provisions of the Dispute Resolution Program for Insurance Claims of
the American Arbitration Association ("AAA"). The arbitration panel shall
consist of three (3) arbitrators, one (1) selected by the Company, one (1)
selected by the Claimant and one (1) selected by the arbitrators previously
selected.
If a Claimant, the Company or a third-party have any dispute between or
among them or any of them that is directly or indirectly related to any dispute
governed by this arbitration provision, the Claimant and the Company consent to
the consolidation of the dispute governed by this arbitration provision with
such other dispute; if such other dispute is governed by an arbitration
agreement that selects the forum and rules of the National Association of
Securities Dealers, Inc. or the New York Stock Exchange, Inc., the Claimant and
the Company shall be deemed to have consented to the jurisdiction of such other
forum to the extent allowed by law and will abide by the rules, provisions and
interpretations thereof, including those for selection of arbitrators.
It is understood and agreed that the arbitration shall be binding upon the
parties, that the parties are waiving their right to seek remedies in court,
including the right to jury trial; and that an arbitration award may not be set
aside in later litigation except upon the limited circumstances set forth in the
Federal Arbitration Act.
Judgement upon the award rendered by the arbitrator(s) may be entered in any
Court having jurisdiction thereof. The arbitration expenses shall be borne by
the losing party or in such proportion as the arbitrator(s) shall decide.
CONTROL PROVISIONS
THE PARTIES INVOLVED. The Owner(s) is the person(s) who owns this Policy as
shown on the Policy Specifications Page, on an endorsement or on an amendment to
the Application. The Owner is the Insured unless someone else is named as the
Insured. The Insured is the person whose life this Policy insures.
RIGHTS OF OWNER. While the Insured is living, the Owner(s) may exercise all
rights and benefits contained in the Policy or allowed by the Company. These
rights include assigning this Policy, changing beneficiaries, changing
ownership, enjoying all benefits and exercising all policy provisions. The use
of these rights may be subject to the consent of any assignee or irrevocable
Beneficiary.
If a Partnership has any rights under this Policy, such rights shall belong
to the Partnership as it exists when the right is exercised.
CONTINGENT OWNER. If the Owner is not the Insured, the Owner(s) may name a
Contingent Owner provided such request is made in writing on a form acceptable
to us. The Contingent Owner will become the Owner if the Owner(s) die. If there
is not a Contingent Owner named when the Owner(s) die, the estate of the last
Owner to die will become the Owner.
BENEFICIARY. A Beneficiary is any person named by the Owner(s) on the
Company's records to receive the Death Benefit proceeds on the Insured's death.
There may be different classes of Beneficiaries such as primary and contingent.
These classes set the order of payment of the Death Benefit. The Owner(s) may
change the Beneficiary at any time prior to the Insured's death. To make a
change, we must receive a written request satisfactory to us at our Home Office.
If an irrevocable Beneficiary has been designated however, such designation
cannot be changed or revoked without the irrevocable
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Beneficiary's written consent. Any change of Beneficiaries is effective on the
date the request was signed. Provided, however, we will not be liable for any
payment we make before such request has been received and acknowledged at our
Home Office.
CHANGING THE OWNER. The Owner(s) may be changed at any time prior to the
Insured's death. To make a change, we must receive from the Owner(s) a written
request satisfactory to us at our Home Office. Any such change will be effective
on the date the request was signed. Provided, however, we will not be liable for
any payment we make before such request has been received and acknowledged at
our Home Office.
ASSIGNMENT. Upon notice to us, the Owner(s) may assign his or her rights
under this Policy. However, for this assignment to be binding on the Company, it
must be in writing and filed at the Home Office. We assume no responsibility for
the validity of any assignment. Any claim under any assignment shall be subject
to proof of interest and the extent of assignment. Once the Company receives a
signed copy of the assignment, the Owner's rights and the interest of any
Beneficiary or any other person will be subject to the assignment. An assignment
is subject to any Policy Debt.
PROTECTION OF PROCEEDS. To the extent permitted by law, any payment of
Death Benefit proceeds, surrender value or any withdrawal shall be free from
legal process from the claim of any creditor of the person entitled to them.
SUSPENSION OR DELAY IN PAYMENT. The Company has the right to suspend or
delay the date of payment of a withdrawal, loan, surrender, or the Death Benefit
proceeds for any period:
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 determined by the Securities & Exchange
Commission) as a result of which (a) the disposal of securities in the
Variable Account is not reasonably practicable; or (b) it is not
reasonably practicable to determine fairly the value of the net assets of
the Variable Account; or
4) when the Securities & Exchange Commission, by order, so permits for the
protection of security holders.
As to amounts allocated to the Fixed Account, we may defer payment of any
withdrawal, surrender or the making of a policy loan for up to six months after
we receive a written request.
TAX CONSIDERATIONS. In order to receive the tax treatment afforded to life
insurance contracts under federal tax laws, this Policy must qualify and
continue to qualify as a life insurance contract under the Internal Revenue Code
of 1986, as amended. The Company reserves the right to decline to: (a) accept a
Premium Payment; or (b) change the Death Benefit Option; or (c) process a
withdrawal; or (d) refund a Premium Payment if the change or request would cause
this Policy to fail to qualify as a life insurance contract.
We also reserve the right to make changes to this Policy or to any riders or
to make distributions from this Policy to the extent we consider necessary for
this Policy to continue to qualify as a life insurance contract. Such changes
will apply uniformly to all affected policies. You will receive advance written
notification of such changes.
CHANGES IN POLICY COST FACTORS. Changes in credited rates, cost of
insurance charges, mortality and expense risk charges, and Administration Fees
will be by class and will be based upon changes in future expectations of such
factors as investment earnings, mortality, persistency, expenses, and taxes.
COVERAGE LIMITATIONS. Unless the health and other conditions of the Insured
on the date that the Policy is delivered to the Owner(s) is the same as that
indicated in the application, the Company reserves the right to cancel the
Policy or re-underwrite the Policy and make appropriate adjustments to the
monthly cost of insurance charge.
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PREMIUMS
PREMIUM PAYMENT(S). Premium Payment(s) are payable at our Home Office.
Premium Payment(s) must be made by check payable to Protective Life Insurance
Company or by any other method which the Company deems acceptable. The minimum
monthly Premium Payment(s) that we will accept is: (1) $50 if paid by a
pre-authorized payment arrangement; or (2) $150 for any other mode of payment
accepted by the Company.
The Company has the right not to accept any Premium Payment in the event
that it is determined in the Company's discretion that the Premium Payment will
cause the Policy to fail to qualify as a life insurance contract under federal
tax laws. The Company will immediately return the amount of any such Premium
Payment that would cause the Policy to fail to so qualify.
No insurance will take effect until the Initial Premium Payment is paid and
the health and other conditions of the Insured are determined to be the same as
that described in the Application on the date the Policy is delivered.
PLANNED PREMIUMS. The amounts and frequency of the Planned Premium payments
in effect on the Policy Effective Date are shown on the Policy Specifications
Page. You do not have to pay the Planned Premium. Subject to the limits
described above, you may change the frequency and amount of the Planned Premium
Payments at any time.
The Company will send Planned Premium reminder notices to you unless
otherwise requested. You can choose to have them sent at 12, 6, or 3 month
intervals. If desired, the Company will also arrange for payment of Planned
Premiums on a monthly basis under a pre-authorized payment arrangement.
UNSCHEDULED PREMIUM PAYMENTS. Subject to the limits described above, while
this Policy is in force, Premium Payment(s) other than the Planned Premiums will
be accepted by the Company at any time prior to the Maturity Date. The Owner(s)
may specify in writing, that all Unscheduled Premium Payments are to be applied
against Policy Debt, if any, as a loan repayment.
MINIMUM MONTHLY PREMIUM GUARANTEE. In return for paying the Minimum Monthly
Premium shown on the Policy Specifications Page or an amount equivalent thereto
by the Monthly Anniversary Day, the Company guarantees, to the extent outlined
herein, that the Policy will not Lapse.
If the Insured's Issue Age is 0 through 64, this Policy will not terminate
during the first ten Policy Years if for each month that the Policy has been in
force (a) equals or exceeds (b).
If the Insured's Issue Age is 65 through 69, this Policy will not terminate
during the first five Policy Years, if for each month that the Policy has been
in force (a) equals or exceeds (b).
For purposes of the Minimum Monthly Premium Guarantee:
(a) is the total Premiums paid less any Withdrawals and Policy Debt
(b) is the Minimum Monthly Premium as shown on the Policy Specifications
Page multiplied by the number of complete policy months since the Policy
Effective Date, including the current month.
The Minimum Monthly Premium Guarantee does not apply to Insureds with an
issue age of 70 and greater.
PREMIUM EXPENSE CHARGE. The Premium Expense Charges are shown on the Policy
Specifications Page.
ALLOCATION OF NET PREMIUM PAYMENT(S). Net Premiums will be allocated to the
Sub-Accounts and the Fixed Account on the date we receive them according to the
instructions of the Owner(s) in the Application or subsequent written notice.
Owner(s) may change the allocations in effect at any time by Written Notice.
Allocations must be made in whole percentages. The minimum amount that can be
allocated to any Sub-Account or the Fixed Account is 10% of any Net Premiums,
and the sum of allocations must add up to 100%.
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If the Contract is issued in a state where, upon cancellation during the
ten-day cancellation period, we return the Premium Payment(s) made, we reserve
the right to allocate the Initial Premium Payment and any additional Premium
Payments made during the ten-day cancellation period to the Money Market
Sub-Account until the expiration of ten days from the date the Policy is mailed
from the Home Office. Thereafter, allocations will be made as shown in the
Policy Specifications Page in accordance with the selections made by the
Owner(s).
GRACE PERIOD. Unless this Policy is otherwise continued under the Minimum
Monthly Premium Guarantee, if the Policy Value on a Monthly Anniversary Day is
insufficient to cover the monthly deductions due on that Monthly Anniversary
Day, this Policy will stay in force for 61 days. This 61 day period is called
the Grace Period.
If the Owner(s) does not pay sufficient premiums (less Premium Expense
Charges) to cover the current and past due monthly deductions by the end of the
Grace Period, this Policy will terminate without value and all coverage under
this Policy will terminate. At the beginning of the Grace Period, the Company
will mail a notice of such premiums due to the Owner's last known address and to
the address of any assignee of record. Coverage continues during the Grace
Period. The Company will deduct unpaid Monthly Deductions and Policy Debt from
any Death Benefit payable if death occurs during the Grace Period.
REINSTATEMENT. Prior to the Insured's death if this Policy has lapsed, it
can be reinstated. Reinstatement means to restore the Policy when the Policy has
terminated at the end of the Grace Period. We will not reinstate this Policy if
it has been surrendered. The Company will reinstate the Policy if the Company
receives:
(1) the Owner's written request within five years after the end of the Grace
Period and before the Maturity Date
(2) evidence of insurability satisfactory to the Company,
(3) payment of Net Premiums equal to all Monthly Deductions that were due
and unpaid during the Grace Period, payment of Premiums at least
sufficient to keep the Policy in force for three months (we may accept
premiums larger than this amount), and
(4) payment of or reinstatement of any Policy Debt which existed at the end
of the Grace Period.
The effective date of a reinstated policy will be the day the Company
approves the reinstatement and all of the above requirements have been received.
DEDUCTIONS FROM POLICY VALUE
MONTHLY DEDUCTIONS. The monthly deduction is a charge made as of the Policy
Effective Date and on each Monthly Anniversary Day thereafter. Monthly
deductions will reduce the Sub-Account Value(s) and/or Fixed Account Value in
the proportion that each Sub-Account Value and the Fixed Account Value bears to
the Policy Value. Beginning as of the Policy Effective Date, we will deduct the
monthly deductions described on the Policy Specifications Page.
MONTHLY COST OF INSURANCE CHARGE. The monthly cost of insurance charge is
determined at the end of each policy month. The monthly cost of insurance charge
is computed as follows:
(1) divide the Death Benefit at the beginning of the policy month by the sum
of 1 plus the monthly guaranteed interest rate which is shown on the
Policy Specifications page.
(2) reduce the result by the amount of the Policy Value (prior to deducting
the monthly deductions) at the beginning of the policy month;
(3) multiply the difference by the cost of insurance rate as described
below.
The Monthly Cost of Insurance Charge is computed separately for the initial
face amount and for each increase in face amount.
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COST OF INSURANCE RATES. The monthly cost of insurance rate is based on the
sex, issue age, duration and rate class of the Insured and on the number of
years that a Policy has been in force. For each face amount increase, we will
use the issue age, sex, rate class and duration of this policy at the time of
the request. Monthly cost of insurance rates will be determined by the Company,
based on its expectations as to future mortality experience, investment
earnings, mortality, persistency, expenses and taxes.
Any change in the monthly cost of insurance rates will be on a uniform basis
for insureds of the same class such as age, sex, rate class, and policy year.
However, the cost of insurance rates will never be greater than those shown in
the Table of Maximum Monthly Cost of Insurance Rates.
MORTALITY AND EXPENSE RISK CHARGE. Every month the Company deducts a
Mortality and Expense Risk Charge. This charge is described on the Policy
Specifications Pages.
COST OF RIDERS. The cost of additional benefits provided by riders will be
determined as provided in such riders.
OTHER DEDUCTIONS. We also make the following other deductions as they
occur:
(1) Withdrawal Charge for withdrawals;
(2) Surrender Charge if you surrender this Policy, decrease its initial face
amount, or if this Policy lapses at the end of a Grace Period;
(3) Transfer fee for certain transfers of the Policy Value.
BASIS OF COMPUTATIONS. Minimum Surrender Values and maximum cost of
insurance rates are based on the Commissioner's 1980 Standard Ordinary Smoker or
Non-Smoker, Male or Female Mortality Table (age nearest birthday) and the rate
class of the Insured. Surrender Values are at least equal to those required by
law. Reserves are computed by the Commissioner's Reserve Valuation Method.
FIXED ACCOUNT
CALCULATION OF THE FIXED ACCOUNT VALUE. The value of the Fixed Account at
any time is equal to:
(a) the Net Premiums allocated to the Fixed Account; plus
(b) Policy Value transferred to the Fixed Account; plus
(c) interest credited to the Fixed Account; less
(d) any withdrawals including any Withdrawal Charges deducted or transfers
from the Fixed Account including any Transfer Fees deducted from the
Fixed Account; less
(e) any Surrender Charges deducted in the event of a decrease of Face
Amount; less
(f) Monthly Deductions.
INTEREST CREDITED. The Company guarantees that the interest credited during
the first Policy Year to the Initial Net Premium Payment allocated to the Fixed
Account will be at a rate not less than the Initial Annual Effective Interest
Rate for the Fixed Account shown on the Policy Specifications Page.
For subsequent Net Premiums allocated to or Policy Value transferred to the
Fixed Account, the guaranteed interest rate applicable will be the annual
effective interest rate in effect on the date the subsequent Net Premium is
received by us or the date the transfer is made. Such guaranteed interest rate
will apply to such amounts for a twelve month period which begins on the date
the Net Premium is allocated or the date the transfer is made.
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After the guaranteed interest rate expires, (i.e., 12 months after the Net
Premium or transfer is placed in the Fixed Account) we will credit interest on
the Fixed Account Value attributable to such Net Premiums and transfers at the
current interest rate in effect. New current interest rates are effective for
such Fixed Account Value for 12 months from the time they are first applied. The
Initial Annual Effective Interest Rate and the current interest rates the
Company will credit are annual effective interest rates of not less than 4.00%.
We may declare a new current interest rate from time to time but in no event
more frequently than once per year. For purposes of crediting interest, amounts
deducted, transferred or withdrawn from the Fixed Account will be accounted for
on a "first-in, first-out" (FIFO) basis.
VARIABLE ACCOUNT
GENERAL DESCRIPTION. The variable benefits under the Policy are provided
through the Variable Account. The Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. The portion of the assets of the Variable
Account equal to the reserves and other contract liabilities of the Variable
Account are not chargeable with the liabilities arising out of any other
business we may conduct. We have the right to transfer to our General Account
any assets of the Variable Account which are in excess of such reserves and
other liabilities.
SUB-ACCOUNTS OF THE VARIABLE ACCOUNT. The assets of the Variable Account
are divided into a series of Sub-Accounts that are listed on the Policy
Specifications Page and in the current Prospectus you received. Each Sub-Account
invests exclusively in shares of a corresponding Fund. Any amounts of income,
dividends, and gains distributed from the shares of a Fund will be reinvested in
additional shares of that Fund at its net asset value.
When permitted by law, we may:
(1) create new variable accounts;
(2) combine variable accounts, including the Variable Account;
(3) add new Sub-Accounts to or remove existing Sub-Accounts from the
Variable Account or combine Sub-Accounts;
(4) make new Sub-Accounts or other Sub-Accounts available to such classes of
the Policies as we may determine;
(5) add new Funds or remove existing Funds;
(6) 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 Variable Account, substitute a different Fund for any
existing Fund;
(7) deregister the Variable Account under the Investment Company Act of 1940
if such registration is no longer required;
(8) operate the Variable Account as a management investment company under
the Investment Company Act of 1940 or in any other form permitted by law;
and
(9) make any changes to the Variable Account or its operations as may be
required by the Investment Company Act of 1940 or other applicable law or
regulations.
The investment policy of the Variable Account will not be changed without
approval pursuant to the insurance laws of the State of Tennessee. If required,
approval of or change of investment policy will be filed with the insurance
department of the state where this Policy is delivered.
The values and benefits of this Policy provided by the Variable Account
depend on the investment performance of the Funds in which your selected
Sub-Accounts are invested. We do not guarantee the investment performance of the
Funds. The Owner(s) bear the full investment risk for Net Premiums allocated or
Policy Value transferred to the Sub-Accounts.
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VALUATION OF ASSETS. Assets of Funds held by each Sub-Account will be
valued at their Net Asset Value per share on each Valuation Day. The Prospectus
the Owner(s) received for the Funds defines the Net Asset Value per share of the
Funds and describes each Fund.
CALCULATION OF SUB-ACCOUNT VALUES. The Sub-Account Value for any
Sub-Account is equal to the number of Units this Policy then has in that
Sub-Account, multiplied by the value of such units at that time. Amounts
allocated, transferred or added to a Sub-Account are used to purchase Units of
that Sub-Account. Units are redeemed when amounts are deducted, transferred, or
withdrawn. The number of Units in a Sub-Account at any time is equal to the
number of Units purchased minus the number of Units redeemed up to such time.
For each Sub-Account, the Net Premiums allocated to or Policy Value
transferred to the Sub-Account are converted into Units. The number of Units
credited is determined by dividing the dollar amount directed to each
Sub-Account by the value of the Unit for that Sub-Account for the Valuation Day
on which the Net Premiums allocated to or Policy Value transferred are credited
to the Sub-Account. The Unit value at the end of every Valuation Day is the Unit
value at the end of the previous Valuation Day times the Net Investment Factor,
as described below.
NET INVESTMENT FACTOR. The Unit value for each Sub-Account for any
Valuation Period is determined by the Net Investment Factor. The Net Investment
Factor is an index applied to measure the investment performance of a
Sub-Account from one Valuation Period to the next. The Net Investment Factor for
a Sub-Account for any Valuation Period is determined by dividing (1) by (2)
where
(1) is the result of:
a. the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the current Valuation Period; plus
b. the per share amount of any dividend or capital gain distributions
made by the Fund to the Sub-Account, if the "ex-dividend" date occurs
during the current Valuation Period; plus or minus
c. a per share charge or credit for any taxes reserved for, which is
determined by the Company to have resulted from the operations of the
Sub-Account.
(2) is the Net Asset Value per share of the Fund held in the Sub-Account,
determined at the end of the last prior Valuation Period.
TRANSFERS. On or after the later of thirty days after the Policy Effective
Date or six days after the ten-day cancellation period, upon receipt of Written
Notice the Owner(s) may transfer the Fixed Account Value or any Sub-Account
Value to other Sub-Accounts and/or the Fixed Account. The transfer will be
effected as of the date we receive Written Notice from the Owner(s).
The amount transferred must be at least $100 or, if less, the entire amount
in the Fixed Account or the Sub-Account(s) each time a transfer is made. If,
after the transfer, the amount remaining in the Fixed Account or Sub-Account(s)
from which the transfer is made is less than $100, we reserve the right to
transfer the entire amount instead of the requested amount. The maximum amount
which may be transferred from the Fixed Account is the greater of (1) $2,500 or
(2) 25% of the Fixed Account Value in any Policy Year.
The Policy Value on the effective date of the transfer will not be affected
except to the extent of the Transfer Fee. We reserve the right to limit transfer
requests to no more than 12 per year. For each additional transfer request over
12 during each Policy Year, we reserve the right to charge a Transfer Fee which
is indicated on the Policy Specifications Page. The Transfer Fee, if any, will
be deducted from the amount being transferred.
We reserve the right, at any time and without prior notice, to terminate,
suspend or modify the transfer privileges described above.
13
<PAGE>
SPECIAL TRANSFER RIGHT. The Owner(s) have the right once during the first
two Policy Years following the Policy Effective Date, to request one transfer of
the Variable Account Value to the Fixed Account. This request will not count
towards the twelve free transfer requests in a Policy Year and is not subject to
a Transfer Fee.
DEATH BENEFIT
DEATH BENEFIT. On the Insured's death, provided this Policy is in force, we
will pay the Death Benefit proceeds when we receive satisfactory proof of death
of the Insured.
AMOUNT OF DEATH BENEFIT PROCEEDS. The Death Benefit proceeds will be
determined as of the date of the Insured's death and will be equal to:
(1) the Death Benefit under the Death Benefit option selected; plus
(2) any additional benefits due under any riders attached to this Policy;
less
(3) any Policy Debt; less
(4) any unpaid monthly deductions if the Insured dies during the Grace
Period.
The Death Benefit proceeds shall be determined under the Level Death Benefit
or Increasing Death Benefit, whichever is chosen by the Owner(s) and indicated
on the Policy Specifications Page, or any supplemental Policy Specifications
Page.
Level Death Benefit --
The death benefit will be the greater of:
(a) The face amount of insurance on the Insured's date of death; or
(b) a specified percentage of the Policy Value on the date of the Insured's
death as indicated on the Table of Percentages below.
Increasing Death Benefit --
The death benefit will be the greater of:
(a) the face amount of insurance on the Insured's date of death plus the
Policy Value on the Insured's date of death; or
(b) a specified percentage of the Policy Value on the Insured's date of
death as indicated on the Table of Percentages below.
TABLE OF PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED
AGE PERCENTAGE ATTAINED AGE PERCENTAGE ATTAINED AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
0-40 250% 50 185% 60 130% 70 115%
41 243% 51 178% 61 128% 71 113%
42 236% 52 171% 62 126% 72 111%
43 229% 53 164% 63 124% 73 109%
44 222% 54 157% 64 122% 74 107%
45 215% 55 150% 65 120% 75-90 105%
46 209% 56 146% 66 119% 91 104%
47 203% 57 142% 67 118% 92 103%
48 197% 58 138% 68 117% 93 102%
49 191% 59 134% 69 116% 94 101%
95+ 100%
</TABLE>
PAYMENT OF DEATH BENEFITS. We will pay the Death Benefit proceeds to the
Beneficiary in a lump sum, unless a Payment Option has been selected.
14
<PAGE>
SUSPENSION OF PAYMENT. Payment of Death Benefit proceeds may be suspended
or delayed under the circumstances described herein for suspension or delay of
payment of surrenders or withdrawals.
CREDITOR CLAIMS. To the extent permitted by applicable laws, no right or
benefit under this Policy shall be subject to claims of creditors, except as may
be provided by an assignment.
SURRENDERS AND WITHDRAWALS
SURRENDERS. Prior to the Insured's death, and while the Policy is in force,
this Policy may be surrendered for its Surrender Value. The surrender will be
effective as of the Valuation Day on which we receive a Written Notice
requesting surrender of the Policy. If the Policy is surrendered during the
first fifteen Policy Years, the applicable Surrender Charge will be imposed.
Once the surrender is effective, all benefits provided by the Policy cease and
the Policy cannot be reinstated.
WITHDRAWALS. After the first Policy Year, the Owner(s) may make a written
request for a withdrawal of the Surrender Value, subject to certain
restrictions. The minimum withdrawal request is $500. As of the date we receive
Written Notice from the Owner(s), we will reduce the Policy Value by the amount
withdrawn (including the withdrawal charge). If a Level Death Benefit is in
effect, we reserve the right to reduce the face amount of the Policy by the
amount of the withdrawal (exclusive of the withdrawal charge). Face amount
reductions will be effective as provided in the provision "Decreasing the Face
Amount". The Owner(s) may specify how the Withdrawal and Withdrawal Charge are
to be deducted from the Policy Value. In the event an allocation is not
specified, we will allocate the Withdrawal and Withdrawal Charge based on the
proportion that the value in the Fixed Account and the value in the Sub-Accounts
bear to the Policy Value.
We reserve the right to decline a withdrawal request if the remaining face
amount would be below the minimum amount for which we would then issue the
Policy under our rules; or we determine that the withdrawal would cause this
Policy to fail to qualify as a life insurance contract under applicable tax
laws, as interpreted by us.
POLICY LOANS
RIGHT TO MAKE LOANS, POLICY DEBT. After the first Policy Anniversary and
before the Insured's death, loans can be made on this Policy provided it has
Surrender Value greater than zero. However, the Policy must be properly assigned
to the Company before any policy loan is made. No other collateral is needed.
Any policy loan must be for at least a minimum loan amount of $500. The Company
may delay making any policy loan from the Fixed Account for up to six months.
MAXIMUM LOAN. The most the Owner(s) can borrow is an amount that equals 90%
of the Surrender Value of the Policy on the date the policy loan request is
received.
INTEREST. The interest charged on any policy loan during the first ten
Policy Years is at an effective annual rate of 6%, compounded yearly on the
Policy Anniversary Date. The interest charged on any policy loan during Policy
Years 11 and greater will be at an effective annual rate of 4% compounded yearly
on the Policy Anniversary Date. Interest payments are due for the prior Policy
Year on each Policy Anniversary. If interest is not paid when due, it will be
added to the amount of the policy loan and will bear interest at the rate
payable on the policy loan. Interest is charged in arrears from the date of the
policy loan.
15
<PAGE>
COLLATERAL. When a policy loan is made, an amount of Cash Value sufficient
to secure the policy loan is transferred out of the Sub-Account(s) and the Fixed
Account and into the Policy's Loan Account. The Owner(s) can specify how to
allocate the Cash Value to be transferred to the Loan Account as collateral from
among the Sub-Account(s) and the Fixed Account. If an allocation is not
specified, the Cash Value will be allocated in the same proportion that the
policy's Cash Value in the Fixed Account and each Sub-Account bear to the total
Cash Value on the date we make the policy loan. An amount of Cash Value equal to
any policy loan interest will also be transferred on each Policy Anniversary if
the interest is not paid when due. We will allocate the unpaid interest based on
the proportion that the value of your Fixed Account and the value of your
Sub-Account(s) bear to the total unloaned Policy Value. The Loan Account Value
will be recalculated: (1) when policy interest is added to the amount of the
loan; (2) when a loan repayment is made; or (3) when a new policy loan is made.
We will credit the Loan Account with interest at an effective annual rate of
not less than 4%. We will determine such rate in advance of each calendar year.
This rate will apply to the calendar year which follows the date of
determination. On each Policy Anniversary, the interest earned on the Loan
Account since the preceding Policy Anniversary will be transferred to the
Sub-Account(s) and the Fixed Account. Unless you tell us otherwise, the interest
will be transferred to the Sub-Account(s) and the Fixed Account in the same
manner as collateral is transferred to the Loan Account.
If the Loan Account Value exceeds the Cash Value on any Valuation Day the
Owner(s) must pay the excess. We will send you a notice of the amount the
Owner(s) must pay. This amount must be paid within 31 days after we send the
notice, or the Policy will lapse. We will send the notice to you and to any
assignee of record.
REPAYING POLICY DEBT. Policy Debt can be repaid in part or in full any time
during the Insured's life while this Policy is in force. When a loan repayment
is made, Policy Value in the Loan Account in an amount equal to that payment
will be transferred to the Sub-Account(s) and the Fixed Account. The Owner(s)
may tell us how to allocate this transfer among the Sub-Account(s) and the Fixed
Account. If no allocation is specified, we will allocate that amount among the
Sub-Account(s) and the Fixed Account in the same proportion that Premium
Payments are allocated.
CHANGING THIS POLICY
The Owner(s) can request any one of the following changes subject to certain
conditions. The Owner's request must be received in writing at the Company's
Home Office.
INCREASING THE FACE AMOUNT. On or after the first Policy Anniversary, the
Owner(s) may submit a supplemental application for an increase in face amount.
The Company reserves the right to require satisfactory proof of insurability in
connection with evaluating any requested increase in face amount. The Insured's
current Attained Age must be less than the maximum issue age. The amount of any
increase must be at least $10,000. Any increase approved by the Company will be
effective on the effective date shown on the supplemental Policy Specifications
Page which will be issued and attached to the Policy and will be subject to
monthly cost of insurance deductions for the increase from the Policy Value of
this Policy.
PREMIUM PAYMENTS REQUIRED FOR A FACE AMOUNT INCREASE. Additional premium
payments may be required in connection with an increase in Face Amount. We will
notify the Owner(s) if additional premiums are required and specify the premium
payments required on the supplemental policy specifications page.
CANCELLATION OF AN INCREASE OF FACE AMOUNT. The cancellation provision on
the cover of this Policy applies equally to any increase in face amount except
that where no additional premium payments are required in order to increase the
face amount, only the first monthly cost of insurance deduction and the
Administration Fee for increases in face amount will be refunded if the increase
is cancelled.
16
<PAGE>
DECREASING THE FACE AMOUNT. On or after the first Policy Anniversary, you
can request in writing a decrease in face amount subject to the following rules.
After any change the Face Amount must be at least $50,000 (standard smoker or
standard non-smoker class) or $100,000 (preferred non-smoker class). Any
decrease will go into effect on the monthly anniversary day that falls on or
next following the date the Company receives and accepts the request for change.
The decrease will first be applied against increases in face amount in the
reverse order in which they occurred. It will then be applied against the
initial face amount. The Company reserves the right to prohibit any decrease:
(1) for the three years following an increase in face amount; and (2) for one
Policy Year following the last decrease in face amount.
The face amount remaining in effect after any decrease cannot be less than
the Minimum Face Amount shown on the Policy Specifications Page. Decreasing the
face amount may result in lower monthly deductions. Decreasing the initial face
amount may result in a Surrender Charge.
CHANGING THE DEATH BENEFIT OPTION. On or after the first Policy
Anniversary, the Owner(s) may request in writing a change in the Death Benefit
option. The change will go into effect on the monthly anniversary day that falls
on or next following the date the Company receives and accepts the request for
change. If the Owner(s) requests a change from Increasing Death Benefit to Level
Death Benefit, the face amount will be increased to equal the Death Benefit on
the effective date of change. If the Owner(s) requests a change from Level Death
Benefit to Increasing Death Benefit, the face amount will be decreased so that
it equals the Death Benefit less the Policy Value on the date of the change. The
Company reserves the right to require satisfactory proof of insurability before
permitting a change in Death Benefit options.
CHANGING THE MATURITY DATE. You may request a change in the Maturity Date,
subject to the approval of the Company.
CHANGE APPROVAL. All changes must be approved by the Home Office. No agent
has the authority to make any changes or waive any of the terms of this Policy.
SETTLEMENT OPTIONS
Optional Methods of Settlement provide alternative ways in which payment can
be made. Payment under these Optional Methods of Settlement will not be affected
by the investment experience of any Sub-Account after the proceeds are applied
under such option.
AVAILABILITY OF OPTIONS. Upon written request, all or part of the Death
Benefit or Surrender Value may be applied under any payment option we offer on
the option date. The option date is any date this Policy terminates under the
termination provision. If this Policy is assigned, either before or after the
choice of an option, any amount due to the assignee will be paid in one sum. The
balance, if any, may be applied under any payment option.
MINIMUM AMOUNTS. If the amount to be applied under any payment option for
any one person is less than $5,000, the Company may pay that amount in one sum
instead. If the payments under any option come to less than $50 each, the
Company has the right to make payments at less frequent intervals.
ELECTING A PAYMENT OPTION. To elect any payment option, the Company
requires that a written request, satisfactory to it, be received at its Home
Office. The Owner(s) may elect a payment option during the Insured's lifetime.
If the Death Benefit is payable in one sum when the Insured dies, the
Beneficiary may elect a payment option with the Company's consent.
17
<PAGE>
EFFECTIVE DATE AND PAYMENT DATE. The effective date of a payment option is
the date the amount is applied under that option. For a Death Benefit, this is
the date that due proof of the Insured's death is received at the Company's Home
Office. For the Surrender Value, it is the effective date of surrender.
A later date for the first payment may be requested in the payment option
election. All payment dates will fall on the same day of the month as the first
one. No payment will become due until a payment date. No partial payment will be
made for any period shorter than the time between payment dates.
If the Surrender Value is applied under any option, the Company may delay
payment of any withdrawal for up to six months. Interest at the rate in effect
for Option 3 during this period will be paid on the amount withdrawn.
DESCRIPTION OF OPTIONS. The Company's payment options are described below.
Any other payment option agreed to by the Company may be elected. The payment
options are described in terms of monthly payments.
OPTION 1 -- PAYMENT FOR A FIXED PERIOD. Equal monthly payments will be made
for any period selected up to 30 years. The amount of each payment depends on
the total amount applied, the period selected and the monthly payment rates the
Company is using when the first payment is due. The rate of any payment for each
$1,000 of proceeds applied will not be less than shown in the Option 1 Table.
The payments shown in this table are based on an interest rate of 3% per year.
OPTION 1 TABLE
MINIMUM MONTHLY PAYMENT RATES FOR EACH $1,000 APPLIED
<TABLE>
<CAPTION>
MONTHLY MONTHLY MONTHLY
YEARS PAYMENT YEARS PAYMENT YEARS PAYMENT
<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>
OPTION 2 -- LIFE INCOME WITH PAYMENTS FOR A GUARANTEED PERIOD. Equal
monthly payments are based on the life of the named person. Payments will
continue for the lifetime of that person with payments guaranteed for 10 or 20
years. Payments stop at the end of the selected guaranteed period or when the
named person dies, whichever is later.
The Option 2 Table shows the minimum monthly payment for each $1,000
applied. The actual payments will be based on the monthly payment rates the
Company is using when the first payment is due. They will not be less than shown
in the Table, which is based on an interest rate of 3% per year. The age of the
payee is the age at the birthday nearest to the effective date of the option.
18
<PAGE>
<TABLE>
<CAPTION>
GUARANTEED PERIOD
AGE OF PAYEE
- ---------------------------- ------------------------
MALE FEMALE 10 YRS 20 YRS
- ------------- ------------- ----------- -----------
<S> <C> <C> <C>
0-30 0-34 3.32 3.31
31 35 3.35 3.34
32 36 3.39 3.37
33 37 3.43 3.41
34 38 3.46 3.44
35 39 3.50 3.48
36 40 3.55 3.52
37 41 3.59 3.56
38 42 3.64 3.60
39 43 3.69 3.65
40 44 3.74 3.69
41 45 3.79 3.74
42 46 3.85 3.79
43 47 3.90 3.84
44 48 3.97 3.89
45 49 4.03 3.95
46 50 4.10 4.00
47 51 4.17 4.06
48 52 4.25 4.12
49 53 4.33 4.18
50 54 4.41 4.25
51 55 4.50 4.31
52 56 4.59 4.38
53 57 4.69 4.44
54 58 4.79 4.51
55 59 4.90 4.58
56 60 5.01 4.65
<CAPTION>
GUARANTEED PERIOD
AGE OF PAYEE
- ---------------------------- ------------------------
MALE FEMALE 10 YRS 20 YRS
- ------------- ------------- ----------- -----------
<S> <C> <C> <C>
57 61 5.13 4.72
58 62 5.25 4.79
59 63 5.39 4.85
60 64 5.52 4.92
61 65 5.67 4.99
62 66 5.82 5.05
63 67 5.97 5.11
64 68 6.13 5.16
65 69 6.30 5.21
66 70 6.48 5.26
67 71 6.66 5.31
68 72 6.84 5.34
69 73 7.03 5.38
70 74 7.22 5.41
71 75 7.41 5.43
72 76 7.60 5.45
73 77 7.79 5.47
74 78 7.98 5.48
75 79 8.17 5.49
76 80 8.35 5.50
77 & Over 8.52 5.50
78 8.68 5.51
79 8.83 5.51
80 8.96 5.51
& Over
</TABLE>
OPTION 3 -- INTEREST INCOME. The Company will hold any amount applied under
this option. Interest on the unpaid balance will be paid each month at a rate
determined by it. This rate will be not less than the equivalent of 3% per year.
OPTION 4 -- PAYMENTS OF A FIXED AMOUNT. Equal monthly payments will be for
an agreed fixed amount. The amount of each payment may not be less than $10 for
each $1,000 applied. Interest will be credited each month on the unpaid balance
and added to it. This interest will be at a rate set by us, but not less than an
effective interest rate of 3% per year. Payments continue until the amount we
hold runs out. The last payment will be for the balance only.
DEATH OF PAYEE. If the payee dies while there are any unpaid installments
under Option 1 or before the end of the guaranteed period under Option 2, the
Company will pay the commuted value of the remaining payments in a lump sum. The
commuted value or any balance held under Option 3 or Option 4 will be paid to
the payee's executors or administrators unless the written election of the
Option directed the Company differently. Any commuted value will be calculated
using 3% interest per year.
19
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
20
<PAGE>
INDIVIDUAL FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
21
<PAGE>
EXHIBIT 1.A.(10)
PART 1 APPLICATION FOR VARIABLE LIFE INSURANCE TO
No. PROTECTIVE LIFE INSURANCE COMPANY
P.O. BOX XXXXXX
BIRMINGHAM, AL XXXXX-XXXX
/ / New Policy / / Protective Policy Change
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
1. PROPOSED INSURED 1 Name Birth Date Birthplace Social Sec. No. Driv. Lic. No.
- ---------------------------------------------------------------------------------------------------------------------------------
Sex Marital Status Occupation (Job Title) Home Phone No. Work Phone No.
- ---------------------------------------------------------------------------------------------------------------------------------
( ) ( )
- ---------------------------------------------------------------------------------------------------------------------------------
Home Address (indicate actual city of residence) City, State, Zip Resided
- ---------------------------------------------------------------------------------------------------------------------------------
Yrs.
- ---------------------------------------------------------------------------------------------------------------------------------
Employer's Name and Address City, State, Zip Employed
- ---------------------------------------------------------------------------------------------------------------------------------
Yrs.
- ---------------------------------------------------------------------------------------------------------------------------------
2. / / APPLICANT (OWNER(S)) IF OTHER THAN A PROPOSED INSURED (Owner(s) must sign Page 4) Social Sec. No.
/ / Payor (If other than Owner(s) - furnish information in Remarks on Page 4) Relationship or Tax I.D. No.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Owner's Date of Birth:
- ---------------------------------------------------------------------------------------------------------------------------------
Address (indicate actual city of residence) City, State, Zip Home Phone No. Work Phone No.
- ---------------------------------------------------------------------------------------------------------------------------------
( ) ( )
- ---------------------------------------------------------------------------------------------------------------------------------
All notices and reports will be sent to the Owner(s), unless otherwise specified in Remarks.
- ---------------------------------------------------------------------------------------------------------------------------------
3. DEPENDENT CHILDREN (Complete only if coverage on children living in same household as Proposed Insured is desired)
- ---------------------------------------------------------------------------------------------------------------------------------
Name(s) Sex Age Birth Date Birthplace Height Weight
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
4. PRIMARY BENEFICIARY Relationship & % Share CONTINGENT BENEFICIARY Relationship & % Share
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
5. Plan of Insurance Initial Specified Amount / / Preferred Rate Class, if available, otherwise Standard
$ Rate Class.
- ---------------------------------------------------------------------------------------------------------------------------------
a. / / Level Death Benefit / / Increasing Death Benefit 7. Guaranteed Insurability Rider(s) (Maximum of six)
Maturity Age if other than 95: ______________________ / / GIR - Variable Option(s) - List below
Amount Option Date
- --------------------------------------------------------------
b. Include additional benefits checked below:
/ / Disability Benefit - Amt. of Mo. Benefit $___________ / / GIR - Survivor's Choice - List below
/ / Accidental Death Benefit $_______________ Amount Designated Life Relationship
/ / Children's Rider __________ Units
/ / Protected Insurability Rider $___________________ Other (Please specify):
- ---------------------------------------------------------------------------------------------------------------------------------
6. Premium Allocation 8. Initial Premium $_____________________________________________
Select your investment portfolio either by allocating your Planned Periodic Premium $____________________________________
funds among the funds in section 6a, or choosing a Model Premium Mode: / / Ann. / / S/A / / Qtr. / / PAC
Portfolio in section 6b (not both). Unless otherwise / / Other (Please specify): __________________________________
specified, additional investments will be allocated __________________________________________________________
according to this election. (A MINIMUM OF 10% MUST BE Cash With Application $
ALLOCATED TO AN INVESTMENT CHOICE.) --------------------------------------------------------------
9. Dollar Cost Averaging
a. / / Allocate My Investment As Follows:* Please transfer the amounts indicated below (minimum of $100
MONTHLY/$300 QUARTERLY) from the Fixed Account* into:
(Enter the appropriate percentage in each box: zero can be $_____Growth & Income Fund $_____Select Equity Fund
indicated by leaving a box blank.) $_____International Equity Fund $_____Small Cap Equity Fund
____% Growth & Income Fund $_____Global Income Fund $_____Money Market Fund
____% International Equity Fund $_____Capital Growth Fund
____% Global Income Fund Please transfer these funds over the following period:
____% Select Equity Fund / / 1 yr. / / 2 yrs. / / 3 yrs. / / 4 yrs.
____% Small Cap Equity Fund / / Other ______ months (MINIMUM 12 MOS. - MAXIMUM 48 MOS.)
____% Money Market Fund Frequency / / Monthly / / Quarterly
____% Capital Growth Fund *MINIMUM OF $5,000 MUST BE ACCUMULATED IN FIXED ACCOUNT
____% Fixed Account BEFORE DOLLAR COST AVERAGING CAN COMMENCE.
100 % Total (MUST EQUAL 100%)
----
b. / / Allocate My Investment To One Of The ------------------------------------------------------------
Following Model Portfolios:
__________ Growth ___________ Balanced [BAR CODE]
* IF NO ALLOCATION IS SPECIFIED, ALL PROCEEDS WILL BE %U572 01
ALLOCATED TO THE MONEY MARKET FUND.
- --------------------------------------------------------------
U-572-VUL-R
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
10. TELEPHONE TRANSFERS
/ / By checking this box, I authorize the Company to honor telephone instructions from any Owner to transfer Sub-account
values among Sub-accounts, subject to the conditions of the prospectus.
/ / By checking this box, I authorize the Registered Representative who signs this application to transfer Sub-account values
among Sub-accounts, subject to the conditions of the prospectus.
Mother's Maiden Name ________________________________________
PROTECTIVE LIFE WILL NOT BE HELD LIABLE FOR ANY LOSS, COST OR EXPENSE FOR ACTING ON TELEPHONE INSTRUCTIONS.
- ---------------------------------------------------------------------------------------------------------------------------------
11. LIFE INSURANCE IN FORCE (INCLUDING BUSINESS): Replace or Life Accidental Year
Company Person Change? Amount Death Issued
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
REGARDING ALL PERSONS PROPOSED FOR INSURANCE: (If any "yes", explain and give name of every company.
Use Remarks, Page 4 if additional space is needed.) Yes No
(a) Is the Policy applied for to replace or change any existing insurance or annuities in this or any
other Company?......................................................................................... / / / /
(If "yes", check which policy and complete comparison statement, if required.)
(b) Has any person proposed for insurance an application pending in another company?....................... / / / /
(If "yes", give Person, Company and Amount)__________________________________________________________
(c) Has any person proposed for insurance ever applied for Life or Health insurance without receiving it / / / /
exactly as requested? (If "yes", give Person, Company and Dates)_____________________________________
_______________________________________________________________________________________________________
(d) Amount of business insurance included above: (PI 1)______________________________
- ---------------------------------------------------------------------------------------------------------------------------------
12. WITHIN THE LAST TWELVE MONTHS, HAS ANY PERSON PROPOSED FOR INSURANCE: Yes No
(a) Smoked a cigarette?................................................................................ / / / /
(b) Used tobacco in any other form?.................................................................... / / / /
(c) If (a) or (b) answered yes, identify which Proposed insured:
- ---------------------------------------------------------------------------------------------------------------------------------
13. Has any Person Proposed for Insurance: Yes No
(a) Flown as a Student, Private, Commercial or Military pilot or Crew Member within two years?......... / / / /
(If so, complete Aviation Questionnaire, Page 12.)
(b) Are any such flights planned in the future?............................................................ / / / /
(c) Engaged in any form of racing or underwater diving in the past two years?.............................. / / / /
(If "yes", complete appropriate questionnaire on Page 12.)
(d) Engaged in sky diving or other hazardous activity in the past two years?............................... / / / /
(If "yes" give details in Remarks, Page 4.)
(e) Intend to travel or reside outside the United States or Canada within the next year?................... / / / /
(If "yes" give details in Remarks, Page 4.)
- ---------------------------------------------------------------------------------------------------------------------------------
14. HAS ANY PERSON PROPOSED FOR INSURANCE: (If any "yes", give full details in Remarks, Page 4) Yes No
(a) Had any motor vehicle accidents, DUIs, DWIs, speeding tickets, or other traffic violations in the
past 5 years?...................................................................................... / / / /
(b) Ever had their driver's license suspended or revoked?.................................................. / / / /
(c) Been convicted of a felony in the past 10 years?....................................................... / / / /
- ---------------------------------------------------------------------------------------------------------------------------------
15. HAS ANY PERSON PROPOSED FOR INSURANCE ever been diagnosed by a member of the medical profession as Yes No
having Acquired Immune Deficiency Syndrome (AIDS)?..................................................... / / / /
(If answered "yes", give details in Remarks, Page 4.)
- ---------------------------------------------------------------------------------------------------------------------------------
16. (a) Have you participated regularly in an exercise program consisting of at least 20 minutes of aerobic Yes No
activity 3 times per week for at least the last 1 year?............................................ / / / /
(b) Do you receive regular preventive healthcare services from your doctor including examinations, tests,
and immunizations that are appropriate for your age and your personal and family medical history?.. / / / /
(c) Have you within the past 2 years had a graded exercise (treadmill) test performed, in which you
achieved your target heart rate, that was completely normal?....................................... / / / /
(d) Have you never smoked cigarettes or stopped more than 20 years ago?................................ / / / /
(e) Are both your natural parents living? What are their ages? (Father ______ Mother ______)......... / / / /
- ---------------------------------------------------------------------------------------------------------------------------------
U-572-VUL-R
</TABLE>
<PAGE>
3
PART 1A NON-MEDICAL DECLARATIONS
<TABLE>
<S> <C>
1. Proposed Insured: Height____________ Weight___________ / / Gain / / Loss in past year?__________
- ---------------------------------------------------------------------------------------------------------------------------------
EACH PERSON TO BE INSURED
--------------------------
2. To the best of your knowledge have you or has any other proposed insured had or been Prop. Ins. Dependents
told by a physician that he or she had: (Circle conditions to which "yes" answer --------------------------
applies and give details in number 4 below.)
a. Dizziness, fainting, convulsions, chronic headache, nervous breakdown, epilepsy, Yes No Yes No
stroke, or disorder of the brain or nervous system?.......................................... / / / / / / / /
b. Asthma, bronchitis, allergies, tuberculosis, pleurisy, emphysema, blood spitting, persistent
cough, or disorder of the lungs or respiratory system?....................................... / / / / / / / /
c. High blood pressure, chest pain, palpitations, heart murmur, heart attack, or disorder of
the heart or blood vessels?.................................................................. / / / / / / / /
d. Ulcer, recurrent indigestion, intestinal bleeding, colitis, jaundice, hemorrhoids, hernia,
or disorder of the stomach, intestines, rectum, gallbladder, liver or pancreas?.............. / / / / / / / /
e. Sugar, albumin, pus or blood in the urine, nephritis, kidney stone, or disorder of the
kidneys or bladder?.......................................................................... / / / / / / / /
f. Diabetes, cancer, tumor, gout, venereal disease, or disorder of the prostate or reproductive
organs?...................................................................................... / / / / / / / /
g. Backache, rheumatic fever, rheumatism, arthritis, paralysis, or disorder of the muscles
or bones, including joints and spine?........................................................ / / / / / / / /
h. Recurrent infections, thyroid disorder, enlarged lymph glands, anemia, excess fatigue,
or disorder of the glands, blood or immune system?........................................... / / / / / / / /
i. Disorder of eyes, ears, nose, throat, or skin (including skin lesions)?...................... / / / / / / / /
- ---------------------------------------------------------------------------------------------------------------------------------
3. To the best of your knowledge have you or has any other proposed insured: (Circle
conditions to which "yes" answer applies and give details in number 4 below.) Yes No Yes No
a. Other than above, had examination, treatment or consultation with a physician during the
past 5 years?................................................................................ / / / / / / / /
b. Been on, or are now on any medication or prescribed diet?.................................... / / / / / / / /
c. Sought advice or treatment, or been arrested for the use of drugs or alcohol?................ / / / / / / / /
d. Ever used narcotics, sedatives, depressants, stimulants or hallucinogens, other than under
a doctor's prescription and direction?....................................................... / / / / / / / /
e. Ever used marijuana or cocaine, or been arrested for the possession of drugs?................ / / / / / / / /
f. Ever been or are you currently a member of any alcohol or drug rehabilitation program?....... / / / / / / / /
g. Been rejected, discharged, or retired by an employer or the military for medical or physical
disability reason(s)?........................................................................ / / / / / / / /
h. Been advised to have any diagnostic test, hospitalization or surgery which has not been
completed?................................................................................... / / / / / / / /
i. Had a parent, brother, or sister who had cancer, diabetes, stroke, heart or kidney disease,
or who committed suicide? (Please show age at onset and/or date of death).................... / / / / / / / /
- ---------------------------------------------------------------------------------------------------------------------------------
4. Question Full Name and Complete Address of
Person's Name Number Date Details or Reason Duration Attending Physician or Hospital
- ---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
[BAR CODE]
%U572 02
- -----------------------------------------------------------------------
U-572-VUL-R
</TABLE>
<PAGE>
4
REMARKS:
- --------------------------------------------------------------------------------
HOME OFFICE ENDORSEMENTS (NOT TO BE USED IN MARYLAND, WEST VIRGINIA, OR
MINNESOTA)
- --------------------------------------------------------------------------------
YES NO
1. DO YOU BELIEVE THAT THIS POLICY WILL MEET YOUR INSURANCE NEEDS AND
FINANCIAL OBJECTIVES? .............................................. / / / /
2. DID YOU RECEIVE THE PROSPECTUS AND THE FUND PROSPECTUS FOR THE POLICY
APPLIED FOR?........................................................ / / / /
(IF "YES", GIVE DATES OF PROSPECTUSES: S.A.________ FUND__________,
- --------------------------------------------------------------------------------
DECLARATIONS
I represent that all statements and answers made in all parts of this
application are full, complete and true to the best of my knowledge and
belief. It is agreed that:
(a) All such statements and answers shall be the basis of any insurance
issued.
(b) No registered representative or medical examiner can make, alter or
discharge any contract, accept risks, or waive the Company's rights or
requirements.
(c) No insurance shall take effect unless: (1) a policy is delivered to the
Owner(s): (2) the full first premium is paid while the proposed insured is
alive; and (3) there has been no change in health and insurability from that
described in this application. However, if the premium is paid as set forth
in the attached Agreement(s) and the Agreement(s) are delivered to the
Owner(s), the terms of the Agreement(s) shall apply.
(d) Acceptance of a policy by the Owner(s) shall constitute ratification of
any changes made by the Company under "Home Office Endorsements." In those
states where it is required, changes as to plan, amount, age at issue,
classification or benefits will be made only with the Owner(s) written
consent.
DO YOU UNDERSTAND THAT THE POLICY VALUES AND/OR THE AMOUNT OF THE DEATH
BENEFIT MAY INCREASE OR DECREASE, DEPENDING ON THE INVESTMENT EXPERIENCE OF
THE SUB-ACCOUNTS IN THE SEPARATE ACCOUNT? / / YES / / NO
YOUR POLICY IS SUBJECT TO A BINDING ARBITRATION PROVISION.
SEE YOUR POLICY FOR COMPLETE DETAILS.
Signed At (X)
------------------------------ -----------------------------------
(City and State) Proposed Insured (Sign Name in Full)
Date (X)
----------------------------------- -----------------------------------
Signature of Parent or Guardian
(X) (X)
------------------------------------ -----------------------------------
Witness to All Signatures *Applicant/Owner(s) (Listed on
Page 1, question 2)
(X)
-----------------------------------
*Applicant/Owner(s) (Listed on
Page 1, question 2)
*If Owner is Corporation, Partnership or Trust, a Corporate Officer, Partner
or the Trustee must sign and state title. If joint Owner(s), both Owner(s)
must sign.
PLEASE BE SURE QUESTION 2 IS COMPLETE
U-572-VUL-R
<PAGE>
5
PROTECTIVE LIFE INSURANCE COMPANY
P.O. BOX XXXXXX
BIRMINGHAM, AL XXXXX-XXXX
AUTHORIZATION TO OBTAIN AND DISCLOSE INFORMATION
I authorize Protective Life to obtain medical and other information on me.
This is true for its reinsurers also. This includes information about drugs,
alcohol and mental illness. This information may be used to evaluate an
application for life insurance. It may also be used to evaluate a claim for
benefits.
This information can be released by my doctors. This includes medical
practitioners and pharmacists. It can also be released by medical and related
facilities. This includes hospitals, clinics, and facilities run by the
Veteran's Administration. Information can also be released by the sources
listed below.
(1) Insurers; (2) reinsurers; (3) Medical Information Bureau, Inc. (MIB);
(4) employers; and (5) consumer reporting agencies (CRA).
All of the sources mentioned above can give this information to a CRA
acting for Protective Life. This is not true for MIB.
Protective Life can give this information to reinsurers. It can give it to
the MIB. It can also give it to other insurers. This is true only if I have
applied or apply to them for insurance. Protective Life can also give it to
persons doing services for it. This is true only if it is in connection with
my application or claim.
I also hereby authorize Protective Life Insurance Company to draw and test
my blood and urine as may be necessary to underwrite my application for
insurance coverage. These tests to be performed, may include, but are not
limited to, tests for cholesterol and related blood lipids, diabetes, liver
or kidney disorders, immune disorders, the presence of drugs, nicotine, or
their metabolites, and the presence of antibodies to the Human
Immunodeficiency Virus (HIV), (if permitted by law). This is the virus that
has been associated with Acquired Immune Deficiency Syndrome (AIDS).
This authorization shall be valid for 24 months from the date shown below.
I will be given a copy of this if I ask for it. A copy of this shall be as
valid as the original.
I have been given a copy of the Description of Information Practices.
Without a court order, state or federal law to the contrary, or a written
authorization from me, these results will be held in the strictest confidence
and made known only to Protective Life Insurance Company, its reinsurers, and
The MIB, Inc. These organizations, as well as the laboratory performing the
tests, will be the only ones maintaining this information in any type of file
or data bank except as required by law.
/ / I would like to be interviewed if an investigative consumer report will
be made.
/ / If performed, I would like a copy(s) of my blood profile test results.
Date:
----------------------------------- -----------------------------------
When applicable print name(s) of minor(s) Proposed Insured
below
- ----------------------------------------
- ----------------------------------------
- ---------------------------------------- -----------------------------------
Parent or legal guardian
THIS AUTHORIZATION MUST BE SIGNED BEFORE THE
APPLICATION CAN BE PROCESSED, PLEASE RETURN THIS
AUTHORIZATION WITH THE APPLICATION.
U-572-VUL-R
<PAGE>
6
<PAGE>
7
REGISTERED REPRESENTATIVE'S REPORT
<TABLE>
<S> <C>
1. Did you personally interview Proposed Insured(s) and complete 8. Your estimate of Proposed Insured's income & net worth:
application in his and/or her presence? / / Yes / / No (Check applicable boxes)
If "no", please explain. Income Net Worth
/ / $0 - $25,000 / / $0 - $30,000
/ / $25,001 - $50,000 / / $30,001 - $100,000
- ------------------------------------------------------------------- / / $50,001 - $100,000 / / $100,001 - $150,000
2. Have you issued the "Description of Information Practices"? (It / / $100,001 - $200,000 / / $150,001 - $200,000
must always be detached and given to proposed insured) / / Over $200,000 / / Over $200,000
/ / Yes / / No
- ------------------------------------------------------------------- ------------------------------------------------------------
3. Will the policy applied for replace or change any existing 9. Are you related to the Proposed Insured(s)? / / Yes / / No
insurance or annuity? / / Yes / / No Have you represented the Proposed Insured(s) on prior
- ------------------------------------------------------------------- insurance applications to other life insurance companies?
4. If replacement of existing insurance is involved, have you / / Yes / / No
complied with all relevant state requirements, including any 10. Please list (in separate note) any known history of
"Disclosure and Comparison Statements"? / / Yes / / No excessive use of alcohol, use of drugs, D.U.I.'s, medical
If "no", please explain. history or any other facts which would assist us in
evaluating this risk properly. Include details of prior
- ------------------------------------------------------------------- insurance transactions which resulted in tentative or
5. Has medical examination been ordered? / / Yes / / No firm substandard offers, postponements or decline
Date of examination ____________________________________________ actions.
Name of examiner _______________________________________________ / / List Attached / / Not Applicable
- ------------------------------------------------------------------- -------------------------------------------------------------
6. Is the Proposed Insured(s) a United States Citizen? 11. Did you give a sales proposal to the Proposed Insured?
/ / Yes / / No / / Yes / / No - If no, explain in Special Requests.
- ------------------------------------------------------------------- If yes, please attach a copy of the proposal.
7. To your knowledge, has anyone proposed for insurance smoked a -------------------------------------------------------------
cigarette within the past year? / / Yes / / No 12. How long have you known Proposed Insured(s)?
_________________________________________________________
How well?
- ----------------------------------------------------------------------------------------------------------------------------------
13. For military business only: Home of record address _____________________________________________________________
14. Home Office Inspection Report (Please complete on all applications)
Convenient Time To Call: Time ________ DAY (CIRCLE): M T W T F TIME ZONE (CIRCLE) Eastern Central Mountain Pacific
- ----------------------------------------------------------------------------------------------------------------------------------
15. IS ANY PERSON PROPOSED FOR INSURANCE SUBMITTING AN APPLICATION FOR DISABILITY INCOME OR ANY OTHER TYPE OF HEALTH INSURANCE
TO PROTECTIVE LIFE? / / Yes / / No
- ----------------------------------------------------------------------------------------------------------------------------------
SPECIAL REQUESTS:
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE COMPLETE THE FOLLOWING SECTIONS I & II FOR ALL CASES
I. MARKET DATA -- Check all that apply:
GENERAL USE OF POLICY: SOURCE OF LEAD:
___ Personal/Family ___ Existing Client
___ Business ___ Referral
___ Estate ___ Cold Call
___ Charity ___ Seminar
___ Other ______________________ ___ Other _______________________________
SPECIAL MARKET: / / EPPD / / MAP / / ACT / / OTHER ____________________________________
PERSONAL: BUSINESS: ESTATE/CHARITY:
___ Income Replacement ___ Key Employee ___Tax Funding
___ Survivor Needs ___ Buy-Sell Funding ___Liquidity
___ Debt Payoff ___ Deferred compensation ___Equalization
___ Final Expenses ___ Split Dollar ___Wealth Replacement
___ College Funding ___ Executive Bonus ___Charitable Gift
___ Retirement Planning ___ Group Carve Out ___Other _________________________
___ Pension Maximization ___ Reverse Split Dollar
___ Other ___________________ ___ Other __________________
[BAR CODE]
%U572 03
U-572-VUL-R
<PAGE>
8
II. SALES DATA
Did you use any other presentation materials? / / Yes / / No
If so, please check all that apply: ___ InsMark ___JOURNEY ___LIFESIGN Visuals ___Solutions
___Brochure(s)-Form No's.: ___ ___ ___ ___ ___ ___ ___ ___ ___
___Other*
______________________________________________________________________________________________________________________________
______________________________________________________________________________________________________________________________
*Must be approved by Protective Life's Legal Department
- ---------------------------------------------------------------------------------------------------------------------------------
I hereby certify that all statements and answers made in this Registered Representative's Report are full, complete and true to
the best of my knowledge and belief and that I know nothing affecting the insurability of the Proposed Insured(s) which is not
fully set forth in these papers.
Signed at ________________________________________________________ Date ____________________________________
(City and State)
______________________________________________________ __________________ __________________________________________________
Soliciting Registered Representative's PRINTED Name Percentage Soliciting Registered Representative's Signature
______________________________________________________ __________/_______ __________________________________________________
Address Phone No./Fax No. Soliciting Registered Representative's Number
______________________________________________________ __________________ __________________________________________________
Soliciting Registered Representative's PRINTED Name Percentage Soliciting Registered Representative's Signature
______________________________________________________ __________/_______ __________________________________________________
Address Phone No./Fax No. Soliciting Registered Representative's Number
- ----------------------------------------------------------------------------------------------------------------------------------
PREFERRED CHECK LIST
- --------------------
I would like you to consider giving my client Preferred rates. I believe my client: ____________________________________
(Proposed Insured)
/ / has not used any form of tobacco in the last 12 months
/ / has not had any natural parents or siblings die from heart, stroke or diabetic causes prior to age 60
/ / has no history of blood pressure treatment, drug or alcohol abuse
/ / has no felony convictions in the last 10 years
/ / is a permanent resident of the U.S., Puerto Rico or Canada
/ / does not participate in hazardous sports (racing, scuba diving, etc.) and is not a student or private pilot
/ / does not exceed the weight limit on the build chart for preferred class
/ / if any, has had (circle one): 0 1 2 3+ moving violations in the last 3 years (DL #____________________ State___________)
/ / has not had their driver's license revoked or suspended in the last 3 years or been convicted of reckless driving, DUI or
DWI in the last 5 years
/ / is a standard risk with no history of or current significant impairments (such as cancer, diabetes, stroke, heart disease or
hazardous occupation)
I understand that blood pressure and laboratory results must be within Protective's limits, and will schedule an exam with blood
profile and specimen. I also understand that my client may not be eligible if there have been more than 2 moving violations in
the past 3 years.
________________________ ____________________________________ ___________________________
Date Registered Representative's Initials Proposed Insured's Initials
- -----------------------------------------------------------------------------------------------------------------------------
BUILD CHART FOR PREFERRED CLASS
- -----------------------------------------------------------------------------------------------------------------------------
HEIGHT WEIGHT HEIGHT WEIGHT HEIGHT WEIGHT HEIGHT WEIGHT HEIGHT WEIGHT HEIGHT WEIGHT
4'10" 127 5'2" 146 5'6" 172 5'10" 191 6'2" 213 6'6" 237
4'11" 132 5'3" 152 5'7" 177 5'11" 197 6'3" 219 6'7" 243
5'0" 136 5'4" 157 5'8" 181 6'0" 202 6'4" 224 6'8" 250
5'1" 141 5'5" 162 5'9" 187 6'1" 208 6'5" 230
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
9
TEMPORARY LIFE INSURANCE RECEIPT
<TABLE>
<S> <C>
THIS RECEIPT PROVIDES A LIMITED AMOUNT OF LIFE INSURANCE COVERAGE, FOR A LIMITED PERIOD OF TIME, SUBJECT TO THE TERMS OF THIS
RECEIPT.
Premium payment in the amount of $__________ in connection with Application No. _______________ is made for Variable Universal
Life Insurance on each person proposed for insurance.
QUALIFYING SCREENING QUESTIONS
1. Has any person proposed for insurance in the above referenced application: Yes No
a. within the past 90 days been admitted to a hospital or other medical facility, been advised to be admitted,
or had surgery performed or recommended?..................................................................... / / / /
b. within the past 2 years, been treated for heart trouble, stroke, or cancer, or had such treatment recommended
by a physician or other practitioner?.......................................................................... / / / /
c. within the past 5 years, been rated or declined for insurance?................................................. / / / /
2. Is any person proposed for insurance in the above-referenced application under 15 days or age or over the age of
70 years (nearest birthday)?...................................................................................... / / / /
IF ANY OF THE ABOVE QUESTIONS, INCLUDING ANY SUBPART THEREOF, IS ANSWERED YES OR LEFT BLANK, NO REPRESENTATIVE OF PROTECTIVE LIFE
INSURANCE COMPANY IS AUTHORIZED TO ACCEPT A PREMIUM, AND NO COVERAGE WILL TAKE EFFECT UNDER THIS RECEIPT. NO ONE IS AUTHORIZED TO
ACCEPT A PREMIUM ON PROPOSED INSURED UNDER 15 DAYS OF AGE OR OVER AGE 70 AND NO COVERAGE WILL TAKE EFFECT UNDER THIS RECEIPT.
TERMS AND CONDITIONS
AMOUNT OF COVERAGE -- $250,000 OVERALL MAXIMUM FOR ALL POLICIES, APPLICATIONS, AND RECEIPTS.
If a premium has been accepted by Protective Life Insurance Company for an application for Variable Universal Life Insurance and
any person proposed for Insurance in such application dies while this temporary life receipt is in effect, Protective Life will
pay, subject to the the conditions and limitations contained herein, to the beneficiary designated in the above-numbered
application a death benefit equal to the LESSER of:
a. the amount of life insurance applied for under the above-numbered application, or
b. the greater of (i) $250,000 less the amount of death benefits due and payable by virtue of the insured's death under any other
Protective Life policy, application, temporary receipt or the like, or (ii) $50,000.
IN NO EVENT SHALL PROTECTIVE LIFE'S LIABILITY UNDER THIS RECEIPT EXCEED $250,000. (INITIAL TO INDICATE UNDERSTANDING) / /
DATE COVERAGE BEGINS
Temporary Life Insurance under this Receipt will begin on the date this Receipt is executed and the application has been
completed.
DATE COVERAGE TERMINATES (INITIAL TO INDICATE UNDERSTANDING) / /
Temporary Life Insurance under this Receipt will terminate automatically on the EARLIEST of:
a. the date that Protective Life mails notice of termination of coverage and refund of the advance premium payment to the
Applicant at the address designated in the above-numbered application, or
b. the date that Protective Life approves for issue the policy applied for at the rate class and for the amount indicated in the
above-numbered application. In no event shall coverage be provided under this Receipt if the policy applied for has been issued.
LIMITATIONS
This receipt does not provide benefits for disability. If Temporary Life Insurance is terminated in accordance with (a) above,
Protective Life's liability under this Receipt is limited to a refund of the premium payment made. If any person proposed for
insurance dies by suicide, Protective Life's liability under this Receipt is limited to a refund of the payment made. There is no
coverage under this Receipt if the check submitted as payment is not honored by the bank on first presentation. No one is
authorized to waive or modify any of the provisions of this Receipt. COVERAGE UNDER THIS RECEIPT SHALL BE VOID IF THERE IS FRAUD
OR A MATERIAL MISREPRESENTATION IN THE ABOVE-NUMBERED APPLICATION OR IN ANY ANSWER TO THE QUALIFYING SCREENING QUESTIONS OF THIS
RECEIPT.
I (WE) HAVE RECEIVED A COPY OF AND HAVE READ THIS TEMPORARY LIFE INSURANCE RECEIPT AND DECLARE THAT THE ANSWERS ARE TRUE TO THE
BEST OF MY (OUR) KNOWLEDGE AND BELIEF. I (WE) UNDERSTAND AND AGREE TO ALL ITS TERMS.
Signed At (X)
---------------------------------------------- ----------------------------------------------
Proposed Insured (Sign Name in Full)
Date (X)
------------------------------------------------- ----------------------------------------------
Signature of Parent or Guardian, if Minor
(X) (X)
---------------------------------------------------- ----------------------------------------------
Witnessed by Registered Representative) *Applicant/Owner(s), if other than Proposed
Insured
(X)
----------------------------------------------
*Applicant/Owner(s), if other than Proposed
Insured
*If Owner is Corporation, Partnership or Trust, a Corporate Officer, Partner or
the Trustee must sign and state title. If joint Owner(s), both Owner(s) must sign.
NOTICE TO APPLICANT:
You should retain the copy of this Agreement. The original will be retained by Protective Life. If you do not hear from us
regarding the insurance applied for within 100 days from the date of this Agreement, notify us at Protective Life Insurance
Company, 2801 Highway 280 South, Birmingham, Alabama 35223, Attention: Vice President, Underwriting Services.
HOME OFFICE COPY
U-572-VUL-R
</TABLE>
<PAGE>
10
TEMPORARY LIFE INSURANCE RECEIPT
<TABLE>
<S> <C>
THIS RECEIPT PROVIDES A LIMITED AMOUNT OF LIFE INSURANCE COVERAGE, FOR A LIMITED PERIOD OF TIME, SUBJECT TO THE TERMS OF THIS
RECEIPT.
Premium payment in the amount of $__________ in connection with Application No. _______________ is made for Variable Universal
Life Insurance on each person proposed for insurance.
QUALIFYING SCREENING QUESTIONS
1. Has any person proposed for insurance in the above referenced application: Yes No
a. within the past 90 days been admitted to a hospital or other medical facility, been advised to be admitted,
or had surgery performed or recommended?..................................................................... / / / /
b. within the past 2 years, been treated for heart trouble, stroke, or cancer, or had such treatment recommended
by a physician or other practitioner?.......................................................................... / / / /
c. within the past 5 years, been rated or declined for insurance?................................................. / / / /
2. Is any person proposed for insurance in the above-referenced application under 15 days or age or over the age of
70 years (nearest birthday)?...................................................................................... / / / /
IF ANY OF THE ABOVE QUESTIONS, INCLUDING ANY SUBPART THEREOF, IS ANSWERED YES OR LEFT BLANK, NO REPRESENTATIVE OF PROTECTIVE LIFE
INSURANCE COMPANY IS AUTHORIZED TO ACCEPT A PREMIUM, AND NO COVERAGE WILL TAKE EFFECT UNDER THIS RECEIPT. NO ONE IS AUTHORIZED TO
ACCEPT A PREMIUM ON PROPOSED INSUREDS UNDER 15 DAYS OF AGE OR OVER AGE 70 AND NO COVERAGE WILL TAKE EFFECT UNDER THIS RECEIPT.
TERMS AND CONDITIONS
AMOUNT OF COVERAGE -- $250,000 OVERALL MAXIMUM FOR ALL POLICIES, APPLICATIONS, AND RECEIPTS
If a premium has been accepted by Protective Life Insurance Company for an application for Variable Universal Life Insurance and
any person proposed for Insurance in such application dies while this temporary life receipt is in effect, Protective Life will
pay, subject to the conditions and limitations contained herein, to the beneficiary designated in the above-numbered
application a death benefit equal to the LESSER of:
a. the amount of life insurance applied for under the above-numbered application, or
b. the greater of (i) $250,000 less the amount of death benefits due and payable by virtue of the insured's death under any other
Protective Life policy, application, temporary receipt or the like, or (ii) $50,000.
IN NO EVENT SHALL PROTECTIVE LIFE'S LIABILITY UNDER THIS RECEIPT EXCEED $250,000. (INITIAL TO INDICATE UNDERSTANDING) / /
DATE COVERAGE BEGINS
Temporary Life Insurance under this Receipt will begin on the date this Receipt is executed and the application has been
completed.
DATE COVERAGE TERMINATES (INITIAL TO INDICATE UNDERSTANDING) / /
Temporary Life Insurance under this Receipt will terminate automatically on the EARLIEST of:
a. the date that Protective Life mails notice of termination of coverage and refund of the advance premium payment to the
Applicant at the address designated in the above-numbered application, or
b. the date that Protective Life approves for issue the policy applied for at the rate class and for the amount indicated in the
above-numbered application. In no event shall coverage be provided under this Receipt if the policy applied for has been issued.
LIMITATIONS
This receipt does not provide benefits for disability. If Temporary Life Insurance is terminated in accordance with (a) above,
Protective Life's liability under this Receipt is limited to a refund of the premium payment made. If any person proposed for
insurance dies by suicide, Protective Life's liability under this Receipt is limited to a refund of the payment made. There is no
coverage under this Receipt if the check submitted as payment is not honored by the bank on first presentation. No one is
authorized to waive or modify any of the provisions of this Receipt. COVERAGE UNDER THIS RECEIPT SHALL BE VOID IF THERE IS FRAUD
OR A MATERIAL MISREPRESENTATION IN THE ABOVE-NUMBERED APPLICATION OR IN ANY ANSWER TO THE QUALIFYING SCREENING QUESTIONS OF THIS
RECEIPT.
I (WE) HAVE RECEIVED A COPY OF AND HAVE READ THIS TEMPORARY LIFE INSURANCE RECEIPT AND DECLARE THAT THE ANSWERS ARE TRUE TO THE
BEST OF MY (OUR) KNOWLEDGE AND BELIEF. I (WE) UNDERSTAND AND AGREE TO ALL ITS TERMS.
Signed At (X)
---------------------------------------------- ----------------------------------------------
Proposed Insured (Sign Name in Full)
Date (X)
------------------------------------------------- ----------------------------------------------
Signature of Parent or Guardian, if Minor
(X) (X)
---------------------------------------------------- ----------------------------------------------
(Witnessed by Registered Representative) *Applicant/Owner(s), if other than Proposed
Insured
(X)
----------------------------------------------
*Applicant/Owner(s), if other than Proposed
Insured
*If Owner is Corporation, Partnership or Trust, a Corporate Officer, Partner or
the Trustee must sign and state title. If joint Owner(s), both Owner(s) must sign.
NOTICE TO APPLICANT:
You should retain the copy of this Agreement. The original will be retained by Protective Life. If you do not hear from us
regarding the insurance applied for within 100 days from the date of this Agreement, notify us at Protective Life Insurance
Company, 2801 Highway 280 South, Birmingham, Alabama 35223, Attention: Vice President, Underwriting Services.
APPLICANT'S COPY
</TABLE>
U-572-VUL-R
<PAGE>
11
<TABLE>
<S> <C>
PROTECTIVE LIFE INSURANCE COMPANY, P.O. BOX XXXXXX, BIRMINGHAM, ALABAMA XXXXX-XXXX
CONFIDENTIAL PERSONAL FINANCIAL STATEMENT
THIS FORM SHOULD BE COMPLETED ON ANY APPLICATION WHEN THE AMOUNT APPLIED FOR OR IN-FORCE WITH PROTECTIVE LIFE EXCEEDS $500,000;
OR IF IT WILL HELP EXPEDITE THIS APPLICATION.
- ------------------------------------------------------------------------------------
ASSETS LIABILITIES
- ------------------------------------------------------------------------------------
Cash Mortgages - home $
$ - other $
- ------------------------------------------------------------------------------------
Real Estate - home $ Secured loans $
- other $
- ------------------------------------------------------------------------------------
Business Equity $ Personal loans $
- ------------------------------------------------------------------------------------
Business(es) considered $ Accounts payable $
as investment(s)
- ------------------------------------------------------------------------------------
Stocks and bonds $ Taxes payable $
- ------------------------------------------------------------------------------------
Personal Other loans $
(give details)
- ------------------------------------------------------------------------------------
Notes Receivable $ Total liabilities $
- ------------------------------------------------------------------------------------
Cash Surrender Value- Net worth $
Life Insurance $
- ------------------------------------------------------------------------------------
Vested Balances -
Retirement Accounts $
- ------------------------------------------------------------------------------------
Total Assets $
- ------------------------------------------------------------------------------------
EARNED INCOME -- (Income, before taxes, including salaries, fees, commissions, bonuses, and wages which are received as a result
of active employment).
LAST YEAR PRIOR YEAR
Salary or draw $__________________ $________________
Bonus(es) $__________________ $________________
Share of profits left in business $__________________ $________________
Other earned income (give details) $__________________ $________________
$__________________ $________________
Total $__________________ $________________
- ----------------------------------------------------------------------------------------------------------------------------------
UNEARNED INCOME -- (Income, before taxes, such as rental, investment or other income that will continue despite a period of
disability.)
LAST YEAR PRIOR YEAR
Dividend and interest income $__________________ $________________
Net real estate income $__________________ $________________
Income from business(es) considered
as investment(s) $__________________ $________________
Other investment income (give details) $__________________ $________________
Total $__________________ $________________
- ----------------------------------------------------------------------------------------------------------------------------------
There are no suits pending nor judgments against me at this time except:_____________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
Have you executed a will?__________
Have you personally guaranteed a debt owed by another party? / / Yes / / No Details if "Yes"____________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
The above financial disclosures are made for the purposes of establishing insurability in connection with my pending Insurance
Application.
They are furnished as a true and accurate statement of my financial
condition as of ________________________________, 19_______
- ------------------ -------------------------------- [BAR CODE]
Date Signature of Proposed Insured %U572 04
U-572-VUL-R
</TABLE>
<PAGE>
12
<TABLE>
<S> <C>
PROTECTIVE LIFE INSURANCE COMPANY, P.O. BOX XXXXXX, BIRMINGHAM, ALABAMA XXXXX-XXXX
Name of Proposed Insured (Please Print):________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
AVIATION QUESTIONNAIRE
- ----------------------------------------------------------------------------------------------------------------------------------
1. As a pilot or student pilot indicate:
(a) the number of hours flown in command: _____ hours (b) date of last flight: ____________, 19____
(c) type of license currently held: / / Student / / Private / / Commercial / / Senior Commercial / / ATR
(d) do you hold a valid instrument rating? / / Yes / / No
- ----------------------------------------------------------------------------------------------------------------------------------
2. Number of hours flown in the last 12 months: _____ hours and last 12-24 months: _____ hours
- ----------------------------------------------------------------------------------------------------------------------------------
3. Number of flying hours contemplated in next 12 months: _____ hours
- ----------------------------------------------------------------------------------------------------------------------------------
4. Purpose of present and future flying: / / Pleasure / / Commercial / / Military / / Personal Business / / Other (specify)
- ----------------------------------------------------------------------------------------------------------------------------------
5. Indicate category, class and type of aircraft flown:
- ----------------------------------------------------------------------------------------------------------------------------------
6. Do you engage or expect to engage in student instruction, charter flying, freight carrying, sightseeing, photography, crop
dusting, prospecting, test or inspection flying? / / Yes / / No If "Yes" state which:
- ----------------------------------------------------------------------------------------------------------------------------------
7. If aviation requires an extra premium or exclusive rider, which would you prefer? / / Extra Premium
/ / Exclusion Rider
- ----------------------------------------------------------------------------------------------------------------------------------
SCUBA DIVING QUESTIONNAIRE
- ----------------------------------------------------------------------------------------------------------------------------------
1. Do you dive for pleasure? / / Yes / / No or commercial purposes? / / Yes / / No
- ----------------------------------------------------------------------------------------------------------------------------------
2. Do you engage in: / / ice / / cave or / / night diving? / / search or / / rescue work? / / salvage?
- ----------------------------------------------------------------------------------------------------------------------------------
3. (a) What are the locations of your diving activities? / / Lakes / / Rivers / / Pools / / Ocean Beaches / / Deep Sea
/ / Other (Specify)______________________________________________
(b) How long have you been diving?___________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
4. Diving History Last 12 Months Next 12 Months 5. Do you dive alone? / / Yes / / No
No. of Average No. of Average If "Yes", how often?______________________
Dives Time Dives Time -------------------------------------------------------
- -------------------------------------------------------------------- 6. (a) Are you a certified diver? / / Yes / / No
Less than 50 feet (b) Are you a member of an
- -------------------------------------------------------------------- organized club? / / Yes / / No
50-75 feet
- -------------------------------------------------------------------- If "Yes," give details_____________________________
76-100 feet
- --------------------------------------------------------------------
101-150 feet
- --------------------------------------------------------------------
151 & over
- ----------------------------------------------------------------------------------------------------------------------------------
RACING QUESTIONNAIRE
- ----------------------------------------------------------------------------------------------------------------------------------
1. Type of racing: / / automobile / / motorcycle / / snowmobile / / boat
Type of vehicle used in races:______________________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
2. How many races did you enter in the last 12 months?______________ Last 12-24 months?__________________
and contemplate in the next 12 months?_______________
- ----------------------------------------------------------------------------------------------------------------------------------
3. What is the maximum speed attained?________________ and average speed?________________
- ----------------------------------------------------------------------------------------------------------------------------------
4. What types of racing or competition do you engage in?_______________________
Examples: Automobile-midget, sports car, stock car, championship, drag, sprint, etc.
Motorcycle-hill climbing, cross country, drag, track, etc.
- ----------------------------------------------------------------------------------------------------------------------------------
5. Class:________________________ / / IMSA / / SCCA
- ----------------------------------------------------------------------------------------------------------------------------------
6. Purposes of racing: / / Professional / / Amateur / / Both
(Give Details)____________________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------
All statements and answers to the above questions have been correctly recorded. They are complete and true to the best of my
knowledge and belief.
Signed at Date:
------------------------------------------------ --------------------------------
(City & State)
Witness
------------------------------------------------ ---------------------------------------
(Signature of Proposed Insured)
U-572-VUL-R
</TABLE>
<PAGE>
13
<TABLE>
<S> <C>
PRE-AUTHORIZED WITHDRAWAL PLAN AGREEMENT
(This agreement must be executed by the person paying the premium, and if such person is not the Owner(s) of each policy it must
also be executed by the Insured, or the Owner(s) if the Insured is not the Owner)
Name of Bank______________________________________________________________________________________________________________
Street Address or P.O. Box________________________________________________________________________________________________
City___________________________________ State_____________________________________________ Zip Code_____________________
Protective Life Insurance Company is hereby requested and authorized by the undersigned Premium Payor to draw against the account
indicated below to pay premiums under the policies listed.
Policy No. Name of Insured Policy No. Name of Insured
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
You are authorized to make withdrawal on the ______ of each month. For the purposes of this Agreement "Policy" shall mean each
above numbered Policy, and shall mean "Policies" where the use of the plural is appropriate, and "Insured" shall mean the owner(s)
of the Policy if the Insured is not the Owner.
Nothing herein contained shall have the effect of altering the anniversary date of the Policy.
The undersigned Premium Payer (or the undersigned Insured if other than the Premium Payer) warrants that he is the Owner of each
said Policy and that same is in his possession.
- -------------------------------------------------- --------------------------------------------------
Date Premium Payer-Depositor (Please Print)
- -------------------------------------------------- --------------------------------------------------
Signature of the Insured or Owner Signature
(if other than the Depositor)
- -------------------------------------------------- --------------------------------------------------
Address of Insured or Owner Account Number
- ----------------------------------------------------------------------------------------------------------------------------------
PLEASE ATTACH A VOIDED CHECK
DO NOT DETACH
PRE-AUTHORIZED WITHDRAWAL PLAN AGREEMENT
PROTECTIVE LIFE INSURANCE COMPANY
P.O BOX XXXXX - BIRMINGHAM, AL XXXXX-XXXX
Name of Bank___________________________________________________________________
Street Address or P.O. Box_____________________________________________________
City______________________________ State_________________ Zip Code_____________
As a convenience to me, I hereby request and authorize you to pay and charge
to my checking account checks, drafts or other paper instruments drawn and/or
electronic debits initiated by and payable to the order of Protective Life
Insurance Company. I agree that your treatment of and rights in respect to
each such charge shall be the same as if each check, draft or other paper
instrument were signed or electronic debit were initiated by me personally.
This Agreement is to remain in effect until revoked by me in writing and
until you actually receive such notice of revocation. I agree that you shall
be fully protected in honoring any such charge.
You are also authorized (but not required) to initiate any electronic or
paper debit or credit entries necessary to correct any incorrect charges made
hereunder. I further agree that if any such check, draft or other paper
instrument or electronic debit be dishonored, whether with or without cause,
you shall be under no liability whatsoever even though such dishonor results
in the forfeiture of insurance.
I also authorize you to furnish Protective Life with any new mailing address
at which I may be reached.
- -------------------------------------------------- --------------------------------------------------
Date Premium Payer-Depositor Signature
- ----------------------------------------------------------------------------------------------------------------------------------
Account Number
[BAR CODE]
U-572-VUL-R %U572 05
</TABLE>
<PAGE>
14
If notice of any premium due under the Policy is required by law, such
notice is hereby expressly waived by the insured for the period that this
Agreement remains in affect.
If and when you draw the first check and/or initiate the first electronic
debit entry on said bank account and mail to the Insured a Rider setting
forth the provisions hereof and the amount and due date of the monthly
premium, this Agreement will be accepted by you and the terms of said Rider
will be a mutual agreement between us constituting a part of the Policy and
modifying same as therein provided, and the Insured agree(s) to attach said
Rider to the Policy immediately upon its receipt.
The Premium Payer has authorized said bank to pay and charge to his
account checks drawn and/or electronic debits initiated by you each month,
and payment thereof by the bank to you in cash or solvent credits within the
days of grace shall constitute payment of the premium.
Failure to pay any monthly premium when due, or within one month (not less
than 31 days) thereafter, whether or not such failure is due to the dishonor
by said bank of any check or electronic debit as provided herein, shall cause
the Policy to terminate except as otherwise provided in the Policy.
If while the Policy is in force the Insured (or either of them if more
than one) shall (a) give to you at your Home Office written notice
terminating this Agreement, or (b) revoke the Agreement to said bank to
pay such checks or electronic debits this Agreement and said Rider shall
terminate and the method of paying premiums shall revert to the method of
payment in effect prior to the execution of this Agreement, provided,
however, that monthly premiums will continue to be payable until the premium
payable in such other manner is due, and provided that you shall incur no
liability from the drawing of any check or initiation of an electronic debit
on said account after the revocation of the Agreement given to you or to said
bank which is done before you receive at your Home Office written notice of
such revocation.
INDEMNIFICATION AGREEMENT
TO: The Bank named on the reverse side.
So that you may comply with your depositor's request Protective Life
Insurance Company, hereinafter call "Company," agrees:
1. To indemnify and save harmless you, your successors and assigns
from and against any and all liability, loss, damage, expenses, suits,
judgments, executions, attorney's fees and cost which may or shall arise or
be incurred by you, by reason of the payment by you of any check drawn or
electronic debit initiated by and payable to Company, provided that Company
be promptly notified of any claim against you with respect to the same, and
provided that you will not settle or pay or agree to settle or pay any such
claim without the written permission of the Company.
2. In the event that any such check or electronic debit shall be dishonored by
you whether with or without cause, and whether intentionally or
inadvertently, to indemnify you for any loss even though dishonor
results in a forfeiture of the insurance, provided that Company is
given notice of claim and opportunity to defend as herein provided.
3. To refund to you any amount erroneously paid by you to Company on any such
check or electronic debit if claim for the amount of such erroneous payment
is made by you within thirty-six months from the date on which such erroneous
payment was made.
4. To defend at our own cost and expense any action which might be brought by
any depositor or any other person because of your actions taken pursuant to
the foregoing requests, or in any manner arising by reason of your
participation in the foregoing plan of premium collections, provided that the
Company shall be promptly notified of any such litigation, which it may
defend in your name, if deemed by the Company to be necessary or desirable.
PROTECTIVE LIFE INSURANCE COMPANY
/s/ JOHN K. WRIGHT
Secretary
Authorized in a resolution adopted
by the Executive Committee of the
Board of Directors of Protective Life
Insurance Company
U-572-VUL-R
<PAGE>
15
PROTECTIVE LIFE INSURANCE COMPANY
P.O. BOX XXXXXX
BIRMINGHAM, ALABAMA XXXXX-XXXX
DESCRIPTION OF INFORMATION PRACTICES
(including Medical Information Bureau Notice
and Fair Credit Reporting Act Notice)
In considering your application for insurance, information from various
sources must be considered. These include the results of your physical
examination, if required, and any reports Protective Life may receive from
doctors and hospitals who have attended you.
Information regarding your insurability will be treated as confidential.
Protective Life, or its reinsurers, may, however, make a brief report thereon
to the Medical Information Bureau, a non-profit membership organization of
life insurance companies, which operates an information exchange on behalf of
its members. If you apply to another Bureau member company for life or health
insurance coverage, or a claim for benefits is submitted to such company, the
Bureau upon request, will supply such company with the information it may
have in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of
any information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau's information office is Post
Office Box 105, Essex Station, Boston, Massachusetts 02112, their telephone
number is (617) 426-3660.
Protective Life, or its reinsurers, may also release information in its
file to other life insurance companies to whom you may apply for life or
health insurance, or to whom a claim for benefits may be submitted.
Furthermore, as part of our procedures for processing your insurance
application, an investigative consumer report may be prepared by one or more
of the commercial agencies offering this service whereby information is
obtained through personal interviews with your neighbors, friends, or others
with whom you are acquainted. This inquiry includes information as to your
character, general reputation, personal characteristics and mode of living
except as may be related directly or indirectly to your sexual orientation.
You have the right to receive a copy of the report, and by making a written
request to Protective LIfe within a reasonable period of time to receive
additional detailed information about the nature and scope of this
investigation.
As a general practice, we will not disclose personal or privileged
information about you to anyone else without your consent, unless a
legitimate business need exists or disclosure is required or permitted by
law. You are entitled, upon request, to receive a more detailed statement of
our information practices. You also have the right to ask about personal
information which we may have in our files and the right to seek a correction
of information you think is wrong.
Ask your registered representative for assistance, or call or write us at
Protective Life Insurance Company, Attention: Vice President-Underwriting,
P.O. Box XXXXXX, Birmingham, Alabama XXXXX-XXXX. Telephone (XXX) XXX-XXXX.
THIS NOTICE MUST BE GIVEN TO PROPOSED INSURED
[BAR CODE]
U-572-VUL-R %U572 06
<PAGE>
EXHIBIT 7
<PAGE>
[MILLIMAN & ROBERTSON, INC. LETTERHEAD]
STATEMENT OF OPINION REGARDING ASPECTS OF
PROTECTIVE LIFE INSURANCE COMPANY FILING OF AN INDIVIDUAL
FLEXIBLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICY
(FILE NUMBERS 33-61599 AND 811-7337)
In my capacity as Consulting Actuary for Protective Life Insurance Company, I
have provided actuarial advice concerning (a) the Registration Statement
describing the offer and sale of the above captioned flexible premium variable
life insurance policies ("Policies") and (b) policy forms for the Policies.
It is my professional opinion that:
(1) The sales load, as defined in paragraph (c)(4) of Rule 6e-3(T) under the
Investment Company Act of 1940, will not exceed 9% of the sum of the
guideline annual premiums that would be paid during the period equal to
the lesserof 20 years or the life expectancy based on the appropriate
1980 Commissioners Standard Ordinary Mortality Table.
(2) The illustrations of policy values, surrender values, death benefits and
accumulated premiums in the prospectus contained in the Registration
Statement are based on the assumptions stated in the illustrations, and
are consistent with the provisions of the Policies. The rate structure of
the policies have not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear to
be more favorable to prospective non-smoker purchasers of Policies at age
45 than to prospective purchasers of Policies, for males or females,
smokers or non-smokers, at other issue ages.
(3) The information contained in the examples set forth in Appendix A of the
prospectus covering death benefit calculations is based on the
assumptions stated in the examples, and is consistent with the provisions
of the Policies.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 1 to the Registration Statement and to the use of my name under
the heading "Experts" in the prospectus.
--------------------------------------
Timothy C. Pfeifer, F.S.A., M.A.A.A.
Consulting Actuary
Milliman & Robertson, Inc.
April 9, 1996
<PAGE>
EXHIBIT 8
<PAGE>
[SUTHERLAND, ASBILL & BRENNAN LETTERHEAD]
April 9, 1996
Board of Directors
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama 35223
Directors:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the statement of additional information filed as part of
post-effective amendment number 1 to the Registration Statement on Form S-6
filed by Protective Life Insurance Company and Protective Variable Life Account
with the Securities and Exchange Commission. In giving this consent, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By:
--------------------------------------
Stephen E. Roth
<PAGE>
EXHIBIT 9(A)
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-6 (File No.
33-61599) of our report dated February 12, 1996, which includes an explanatory
paragraph with respect to changes in the Company's methods of accounting for
certain investments in debt and equity securities in 1993, on our audits of the
consolidated financial statements and financial statement schedules of
Protective Life Insurance Company and subsidiaries. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
April 8, 1996
<PAGE>
EXHIBIT 10
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR FLEXIBLE
PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICIES
PURSUANT TO RULE *6E-3(T)(B)(12)(III)
This document sets forth the administrative procedures that will be followed by
Protective Life Insurance Company ("Protective Life" or the "Company")
concerning the issuance of an individual Flexible Premium Variable and Fixed
Life Insurance Policy (the "Policy"), the transfer of assets held thereunder,
and the redemption by Owners of their interests in such Policy.
I. PROCEDURES RELATING TO ISSUANCE AND PURCHASE OF POLICIES
A. APPLICATION AND UNDERWRITING
Upon receipt of a completed application, the Company will follow
underwriting (e.g., evaluation of risks) procedures designed to determine
whether the applicant is insurable. The underwriting policies of the Company are
established by management. The Company uses information from the application
and, in some cases, inspection reports, attending physician statements, or
medical examinations to determine whether a Policy should be issued as applied
for, rated, or rejected. Medical examinations of applicants are required for
Policies in excess of certain prescribed amounts and for most insurance applied
for by applicants over age 50. Medical examinations are requested of any
applicant, regardless of age and amount of requested coverage, if an examination
is deemed necessary to underwrite the risk. Substandard risks may be referred to
reinsurers for full or partial reinsurance of the substandard risk.
The Company requires blood samples to be drawn with applications for
coverage over $100,000 (ages 16-50) or $150,000 (age 51 and over). Blood samples
are tested for a wide range of chemical values and are screened for antibodies
to the HIV virus. Applications also contain questions permitted by law regarding
the HIV virus which must be answered by the proposed insureds. The Company will
not issue a Policy until the underwriting procedures have been completed.
Insurance coverage under a Policy will begin as of the Policy Effective
Date, which is generally the Issue Date. If, an initial minimum premium is
received with an application, the Policy Effective Date will be the later of the
date that the application is signed or any required medical examination is
completed. Temporary life insurance coverage may be provided under the terms of
the temporary life insurance agreement. In accordance with the terms of the
temporary life insurance agreement, temporary life insurance coverage may not
exceed $250,000 and may not be in effect for more than 90 days.
In order to obtain a more favorable Issue Age, the Company may permit Owners
to "backdate" a Policy by electing a Policy Effective Date which is up to six
months prior to the date of the original application. Charges will be deducted
as of the new Policy Effective Date for the backdated period for Monthly
Deductions.
B. INITIAL PREMIUM PROCESSING AND PREMIUM PAYMENTS
Premiums for the Policies will not be the same for all Owners. The Company
requires that the initial premium payment for a Policy be at least equal to the
minimum required for the mode of premium selected. For example, the initial
premium payment can never be less than $150 quarterly. Owners who request to pay
premiums on a preauthorized checking withdrawal basis are required to pay an
amount equal to two months premiums upon issuance of their Policy. Premiums paid
on a preauthorized checking withdrawal basis can never be less than $50 per
month.
For Policies issued in states where, upon cancellation during the
Cancellation Period, the Company returns at least the Owner's premium payments,
the Company reserves the right to allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) to the
Money Market Sub-Account until the expiration of the number of days in the
Cancellation Period plus six days starting from the date the Policy is mailed
from the Home Office. Upon expiration of this period, the Policy Value in the
Money Market Sub-Account and all Net Premium Payments will be allocated
according to the Owner's allocation instructions then in effect. In
<PAGE>
all other states, the Company will allocate the initial Net Premium Payment (and
any subsequent Net Premium Payments made during the Cancellation Period) in
accordance with the Owner's instructions.
Following the initial premium, the Owner may pay planned premiums in any
amount on a quarterly, semi-annual, and annual basis. For the first Policy Year,
the amount of the planned premiums can be no less than the minimum initial
premium payment calculated on an annual basis. The minimum initial premium
payment required depends on a number of factors, including the age, sex and rate
class of the proposed insured, the initial face amount, any supplemental
benefits and/or riders and the Plan, Periodic Premiums Selected. If the Owner
fails to pay the planned premiums, this will not cause the Policy to lapse.
An Owner may make unscheduled premium payments, at any time, in any amount.
A Policy will remain in force while the cash surrender value is sufficient to
pay the monthly deduction unless the Policy is otherwise protected by the No
Lapse Guarantee provision. The amount of premium, if any, which must be paid to
keep the Policy in force depends upon the cash surrender value of the Policy,
which in turn depends on such factors as the investment experience and the
amount of monthly deductions which includes cost of insurance. While not every
insured is subject to the same cost of insurance rate, there will be a single
"rate" for every Insured in a given actuarial category.
The cost of insurance rate for a Policy is based on and varies with the
Issue Age, duration, sex and rate class of the Insured and on the number of
years that a Policy has been in force. Protective Life currently places Insureds
in the following rate classes, based on underwriting: Standard Smoker (ages
15-75) or Standard Nonsmoker (ages 0-75), or Preferred Nonsmoker (ages 18-75),
and substandard rate classes, which involve a higher mortality risk than the
Standard Smoker or Standard Nonsmoker classes.
Protective Life will determine a cost of insurance rate for increments of
Face Amount above the Initial Face Amount based on the Issue Age, duration, sex
and rate class of the Insured at the time of the request for an increase. The
following rules will apply for purposes of determining the Net Amount at Risk
for each rate.
Protective Life places the Insured in a rate class when the Policy is
issued, based on Protective Life's underwriting of the application. This
original rate class applies to the Initial Face Amount. When an increase in Face
Amount is requested, Protective Life conducts underwriting before approving the
increase to determine whether a different rate class will apply to the increase.
If the rate class for the increase has lower cost of insurance rates than the
original rate class, the rate class for the increase also will be applied to the
Initial Face Amount. If the rate class for the increase has a higher cost of
insurance rate than the original rate class, the rate class for the increase
will apply only to the increase in Face Amount, and the original rate class will
continue to apply to the Initial Face Amount.
Protective Life does not conduct underwriting for an increase in Face Amount
if the increase is requested as part of a conversion from a term contract or on
exercise of a guaranteed option to increase the Face Amount without
underwriting.
However, in no event may the total of all premiums paid in any Policy year
exceed the current maximum premium limitations for that year established by
Federal tax laws or by the Company. If the Owner pays a premium that would
result in total premiums exceeding the current maximum premium limitations, the
Company will only accept that portion of the premium that will make total
premiums equal the maximum. Any premium in excess of that amount will be
returned or applied as otherwise agreed and no further premiums will be accepted
until allowed by the current maximum premium limitations prescribed by Federal
tax law.
If any premium payment would cause an increase in the Policy's death benefit
exceeding the premium received, the Company may require additional evidence of
insurability before accepting any premium payment.
2
<PAGE>
C. LAPSE AND REINSTATEMENT PROCEDURES
The Company offers a "No Lapse Guarantee" to all Owners of Policies for a
specified period of time from the policy effective date. The specified period
for this "Guarantee" is established based on the age of the insured as of the
Policy Effective Date. This guarantee offers continued life insurance coverage
for the requested initial face amount provided the Owner of the Policy continues
to pay minimum monthly premiums equivalent to one twelfth of the minimum first
year annual premium, and after that, pays premiums equivalent to a minimum
monthly guarantee premium throughout the Guarantee period. The minimum monthly
guarantee premium in the second year and later is equal to the minimum renewal
annual premium divided by 12 and multiplied by the number of months left in the
Guarantee period.
The Policy's No Lapse Guarantee Provision will be threatened if the Company
does not receive an amount equal to the minimum monthly guarantee premium
specified in the Policy.
Before the maturity date, the Policy may be reinstated within five years
after lapse and while the Insured is still living unless the Policy has been
surrendered. A Policy will be reinstated upon receipt by the Company of: (1) a
written application for reinstatement; (2) evidence of insurability satisfactory
to the Company; (3) payment of net premiums equal to (a) all monthly deductions
due upon lapse and (b) which are at least sufficient to keep the Reinstated
Policy in force for three months; and (4) the Owner repays or reinstates any
outstanding policy debt as of the date of lapse.
The amount of cash value in the Policy on the date the Policy is approved
for reinstatement will be equal to the amount of any Policy Debt reinstated or
repaid at the time of reinstatement plus the Net Premiums paid at reinstatement.
The effective date of reinstatement will be the date the Company approves the
application for reinstatement. A full monthly deduction will be charged for the
month of reinstatement.
II. REDEMPTION PROCEDURES: SURRENDER AND RELATED TRANSACTIONS
The principal policy provisions and administrative procedures regarding
"redemption" transactions are summarized below. Due to the insurance nature of
the Policies, the procedures that will be followed may be different from the
redemption procedures for mutual funds and contractual plans.
A. SURRENDERS AND PARTIAL WITHDRAWALS
An Owner of a Policy may submit a written request to the Company to
surrender the Policy at any time prior to the maturity date while the insured is
living and while the Policy is in effect. The amount available for surrender is
the surrender value as of the valuation day on or next following the date the
written surrender request, the Policy and any other required documents are
submitted and received by the Company. If the Policy itself isn't returned to
the Company the request must be accompanied by completed affidavit of lost
policy. Amounts payable from the Variable Account upon surrender or a partial
withdrawal will be paid within seven calendar days of receipt of the written
request.
Upon surrender, the Company will pay in a lump sum the surrender value that
is equal to the cash value as of the valuation day less any outstanding Policy
Debt which includes accrued interest less any applicable surrender charges.
Coverage under a Policy will end as of the date of surrender.
The surrender charge ("Contingent Deferred Sales Charge") for the initial
face amount is equal to the Surrender Charge Percentage for the Policy Year in
which the surrender or reduction in initial face amount occurs, multiplied by
the aggregate amount of premium payments made in Policy Year 1, including
premium payments for any riders. The Surrender Charge Percentage in Policy Years
1 through 6 is equal to 27%. After the six completed policy year the Surrender
Charge Percentage decreases by 3% each Policy Year. After the 14th Policy Year,
there is no Surrender Charge for the initial face amount. There are no
additional surrender charges calculated for increases in face amount. If the
initial face amount is decreased at any time during the first fourteen Policy
Years, a Contingent Deferred Sales Charge will be imposed which will be equal to
the portion of the total Contingent Deferred Sales Charge that corresponds to
the percentage by which the initial face amount is decreased. In the event of a
decrease in the Initial Face Amount, the pro-rated Surrender Charge will be
3
<PAGE>
allocated to each Sub-Account and to the Fixed Account based on the proportion
of Policy Value in each Sub-Account and in the Fixed Account. A Surrender Charge
imposed in connection with a reduction in the initial Face Amount reduces the
remaining Surrender Charge that may be imposed in connection with a surrender of
the Policy.
After the first Policy Year, the Owner may also request a partial withdrawal
by sending a written request to the Company. An Owner may make a partial
withdrawal of an amount equal to or greater than $500. The request must be
submitted in writing to the Company. The Company will withdraw the amount
requested, plus a withdrawal charge, as of the date the request is received in
the Home Office. The Owner may elect to deduct the amount of the withdrawal from
any Sub-Account or the Fixed Account. If the Owner does not specify an
allocation, or if the sub-account value or fixed account value is insufficient
to carry out the request, the withdrawal will be based on the proportion that
such sub-account value(s) and fixed account value, bear to the Policy Value less
the cash value in the loan account on the valuation day immediately prior to the
withdrawal. No withdrawal amounts will be processed if the withdrawal would
result in there being insufficient cash value to pay any surrender charges
applicable upon a full surrender.
The Company will deduct an administrative charge upon a withdrawal. This
charge is the lesser of 2% of the amount withdrawn or $25. This withdrawal
charge will be deducted from the Policy Value in addition to the amount
requested to be withdrawn and will be considered to be part of the withdrawal
amount. The withdrawal charge will be allocated in the manner described above
for the requested amount.
The death benefit will be affected by withdrawals. If death benefit option 1
is in effect, then the Company reserves the right to reduce the face amount by
the amount withdrawn (inclusive of withdrawal charge). If the Owner requests
that the initial face amount be retained, the Company will honor this request
provided the amount of withdrawal does not exceed $2,000. If the request for
withdrawal exceeds $2,000, then the Company will request that satisfactory
evidence of insurability be provided with the withdrawal request. If death
benefit option 2 is in effect, then the Company will not reduce the face amount.
The face amount after a partial withdrawal may not be less than the minimum
amount for which the Policy would be issued under the Company's current rules.
If the withdrawal causes the Policy to fail to qualify as a life insurance
contract under applicable tax laws, as interpreted by the Company it will not be
processed. If the Face Amount at the time of withdrawal requires a decrease of
Face Amount, the reduction is made first from the most recent increase, then
from prior increases, if any in reverse order of their being made and finally
from the initial Face Amount.
B. CHANGES IN FACE AMOUNT
An Owner may increase or decrease the face amount of the Policy after the
first Policy Anniversary by submitting a written request to the Company. A
supplemental application is required for an increase in face amount. The Company
reserves the right to require satisfactory evidence of insurability for the
requested increase portion. Face Amount increases and decreases are subject to
the following rules:
1. For increases in face amount, the insured's attained age must be less
than the maximum current issue age for the Policies, as determined by the
Company from time to time.
2. The amount of the requested increase must be at least $10,000.
3. Any increase in face amount will be effective on the monthly anniversary
day on or next following the date the request for the increase is
received and approved by the Company.
4. If the No-Lapse Guarantee provision is in effect, the minimum monthly
premium amount required to keep the Policy in force will generally
increase and additional premium payments may be required.
4
<PAGE>
5. The monthly cost of insurance charge will be adjusted as of the next
monthly anniversary day following the date of the written request.
6. There will be an administrative charge assessed based on a rate per
$1,000 of increased coverage. This administrative charge will be deducted
from the Policy Value monthly during the twelve month period following
the effective date of the increase. This administrative charge is based
on the original issue age, duration, sex , and rate class of the insured.
7. A decrease in face amount will not be accepted by the Company, if the
amount requested would decrease the face amount below $50,000 (standard
smoker or standard nonsmoker class), or $100,000 (preferred nonsmoker
class).
8. A proportionate Contingent Deferred Sales Charge will be imposed for
decreases in face amount (please note previous section on "Surrenders and
Partial Withdrawals").
The Company reserves the right to not process any decrease in Face Amount if
compliance with guideline premium limitations under current tax law resulting
from such a decrease would result in immediate termination of the Policy, or if
to effect the requested decrease payments to the Owner would have to be made
from Policy Value for compliance with the guideline premium limitations, and the
amount of such payments would exceed the Surrender Value of the Policy. In
addition, the Company reserves the right to prohibit any decrease in Face Amount
(i) for three years following an increase in Face Amount and (ii) for One Policy
Year following the last decrease in Face Amount.
C. CHANGE IN DEATH BENEFIT OPTION
On or after the first Policy Anniversary, the Owner may request in writing a
change in the death benefit option. Any change will go into effect on the
monthly anniversary day that coincides with or next follows the date the Company
receives and accepts the request for change. If the Owner requests a change from
the Option 1 to Option 2, the face amount will be increased to equal the face
amount on the effective date of change. If the Owner requests a change from a
Option 2 to Option 1, the face amount will be decreased so that it equals the
death benefit less the policy value on the date of the change. The Company
reserves the right to require satisfactory proof of insurability before allowing
a change in death benefit options.
D. DEATH BENEFIT CLAIMS
While the Policy remains in force, the Company will pay a death benefit to
the named beneficiary in accordance with the death benefit option elected by the
Owner. The Company will pay the death benefit within seven calendar days after
receipt in its home office of all necessary proof of death of the insured.
Payment of a death benefit may be postponed under certain circumstances, such as
the New York Stock Exchange being closed for reasons other than customary
weekend and holiday closings. The death benefit proceeds will be determined as
of the date of the insured's death and will be equal to:
1. the death benefit under the option elected; plus
2. any additional benefits due under any supplemental and/or riders
benefits attached to this Policy; less
3. any policy debt; less
4. any unpaid monthly deductions if the insured dies during the grace
period.
The death benefit proceeds will be determined based on the death benefit
option elected by the Owner on the application for insurance or any request for
change in death benefits. If Death Benefit Option 1 is chosen, the death benefit
will be the greater of (a) the face amount of insurance on the insured's date of
death; or (b) a specified percentage of the policy value on the date of the
insured's death as indicated on the table of percentages included in the Policy.
If Death Benefit Option 2 is chosen, the death benefit will be the greater of
(a) the face amount of insurance on the insured's date of death plus the policy
value on the insured's date of death: or (b) a specified percentage of the
policy value on the insured's date of death as indicated on the Table of
Percentages included in the Policy.
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The specified percentage is 250% when the Insured has reached an "Attained Age"
of 40 or less by date of death, and decreases each year thereafter to 100% when
the Insured has reached an "Attained Age" of 95 at death.
E. POLICY LOANS
After the first Policy Anniversary and while the insured is still living, an
Owner may borrow from the Company no less than $500 and not more than 90% of the
Surrender Value on the date the loan is received. The Owner must submit a
written request for a Policy loan. Any amount due an Owner under a loan will
generally be paid within seven calendar days after the Company receives a loan
request.
When a Policy loan is made, an amount equal to the loan is transferred out
of the sub-account(s) and the fixed account and into the Policy's loan account.
The Owner can specify the Sub-Accounts and Fixed Account from which collateral
is transferred to the loan account. If no allocation is specified, collateral is
transferred from each sub-account and from the fixed account in the same
proportion that the cash value in each sub-account and the fixed account bears
to the total cash value on the date that the loan is made.
Like the fixed account, a Policy's loan account is part of Protective Life's
General Account. During the first ten Policy years, the Company will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
During Policy Years 11 and after, the Company will charge interest daily on any
outstanding loan at an effective annual rate of 4.0%. Interest is due and
payable at the end of each Policy Year while a loan is outstanding. If interest
is not paid when due, the amount of the interest is added to the loan and
becomes part of the Policy Debt.
The loan account is credited with interest at an effective annual rate of
not less than 4.0%. The maximum net cost of a loan is 2.0% per year during
Policy Years 1 through 10, and 0% thereafter. During the first ten Policy years
and on each Policy anniversary, the net difference between interest earned and
interest charged will be transferred to the loan account and deducted from the
sub-account(s) and the fixed account in the same proportion that each
sub-account value and the fixed account value bears to the total unloaned Policy
value. The Company determines the rate of interest to be credited to the loan
account in advance of each calendar year. The rate, once determined, is applied
to the calendar year that follows the date of determination.
If the Insured dies while a loan is outstanding, the Policy debt is deducted
from the death benefit in calculating the death benefit proceeds.
A Policy loan may be repaid in whole or in part at any time while the
insured is living and the Policy is in force. Loan repayments will be credited
as of the date they are received in the Home Office. When a loan repayment is
made, Policy value in the loan account in an amount equal to the repayment will
be transferred from the loan account to the sub-accounts and/or the fixed
account in the same manner as loan collateral is transferred to the loan
account. Amounts paid while a Policy loan is outstanding will be treated as
premiums unless the Owner requests in writing that these payments be treated as
repayment of indebtedness.
III. TRANSFERS
A Policy's cash value, except amounts credited to the loan account, may be
transferred among the Sub-Accounts and between the fixed account which is a part
of the Company's General Account and the Sub-Accounts.
Upon receipt of written notice or a telephone request from the Owner, the
Company will accept transfer requests subject to the limitations described
below. Transfer requests will be accepted at any time on or after the later of
the following: (1) thirty days after the Policy effective date, or (2) six days
after the expiration of the cancellation period. Transfers (including telephone
transfers) are processed as of the date the request is received by the Company.
The minimum amount of Policy value that may be transferred is the lesser of: (1)
$100; or (2) the entire Policy Value in any Sub-Account or the Fixed
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Account from which the transfer is made. If, after the transfer, the Policy
Value remaining in a Sub-Account(s) or the Fixed Account is less than $100, the
Company reserves the right to transfer the entire amount instead of the
requested amount. The Company also reserves the right to limit transfers to 12
per Policy year and to charge a transfer fee for each additional transfer over
12 in any Policy year. If the fee is imposed, it will be deducted from the
amount requested to be transferred. If an amount is being transferred from more
than one Sub-Account or the Fixed Account, the transfer fee will be deducted
proportionately from the amount be transferred from each.
The maximum amount that may be transferred from the Fixed Account in any
Policy Year is the greater of: (1) $2,500; or (2) 25% of the fixed account
value.
Telephone transfers may be made upon instructions given by telephone,
provided the appropriate election has been made on the application or written
authorization is provided. We require a form of personal identification before
acting on these telephone instructions. All transfer requests made by telephone
instruction will be recorded as a method of documenting authenticity. A
confirmation of all instructions received by telephone will be mailed to the
Owner to determine if they are genuine.
The Company currently intends to allow transfers for the foreseeable future,
Although the Prospectus provides that the Company may at any time, for any class
of Policies, modify, restrict, suspend, or eliminate the transfer privilege
(including telephone transfers). In particular, we reserve the right not to
honor transfer requests by a third party holding a power of attorney from an
Owner where that third party requests simultaneous transfers on behalf of the
Owners of two or more Policies.
The Owner may direct the Company to systematically and automatically
transfer, on a monthly or quarterly basis, specified dollar amounts from or to
the fixed account or from or to any sub-account(s). This is known as the dollar
cost averaging method of investment. By transferring on a regularly scheduled
basis as opposed to allocating the total amount at one time, an Owner may be
less susceptible to the impact of market fluctuations in sub-account unit
values. The Company makes no guarantee that the dollar cost averaging method
will result in a profit or protect against loss. The Company reserves the right
to assess a processing fee for this service. The Company reserves the right to
stop offering dollar cost averaging upon 30 days written notice.
To elect dollar-cost averaging, the fixed account value must be at least
$5,000 at the time of election. The Owner may elect dollar cost averaging for
periods of at least 12 months but no longer than 48 months. At least $100 must
be transferred on a monthly basis and a minimum of $300 on a quarterly basis.
Dollar-cost averaging transfers may commence on any day of the month that the
Owner requests, except the 29th, 30th, or 31st.
The Company will continue to process dollar cost averaging transfers until
the earlier of the following:
(1) the designated number of transfers has been completed;
(2) the fixed account value is depleted;
(3) the Owner, by written notice, instructs the Company to cease the
automatic transfers;
(4) a grace period begins under the Policy; or
(5) the maximum amount of Policy value has been transferred under a dollar
cost averaging election.
IV. REFUNDS
The right to examine and cancel the policy is as defined in the Policy. The
Owner may cancel a Policy for a refund during the cancellation period by
returning it to the Company's home office or to the sales representative who
sold it along with a written request. The cancellation Period is determined by
the law of the state in which the application is signed and is shown in the
Policy. In most
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states, it expires at the latest of: (1) ten days after the Owner receives the
Policy; (2) 45 days after the Owner signs the application; or (3) 10 days after
the Company mails or delivers a Notice of Right of Withdrawal. Return of the
Policy by mail is effective when it is received at the home office.
Within seven calendar days after receiving the returned Policy, the Company
will refund (i) the difference between premiums paid and amounts allocated to
the fixed account or the variable account, plus (ii) fixed account value
determined as of the date the returned Policy is received, plus (iii) variable
account value determined as of the date the returned Policy is received. This
amount may be more or less than the aggregate Premium Payments. In states where
required, the Company will refund Premium Payments to the Owner of the Policy.
An increase in Face Amount may also be cancelled by the Owner in accordance
with the Policy's cancellation period provisions. The amount refunded will be
calculated in accordance with the provisions described above. If no additional
Premium Payments are required in connection with the Face Amount increase, the
amount refunded is limited to that portion of the first monthly deduction
following the increase and will be reallocated to the sub-account(s) and the
fixed account in the same proportion that each sub-account value and the fixed
account value bears to the total unloaned Policy Value as of the effective date
of the cancellation. The effective date of this cancellation will be equal to
the effective date of the face increase.
B. SPECIAL TRANSFER PRIVILEGE
During the first 24 Policy months following the Policy Effective Date, the
Owner may exercise a one-time special transfer privilege by requesting that all
the variable account value be transferred to the fixed account. Exercise of the
special transfer privilege does not count toward the 12 transfers that are
permitted each Policy year without imposition of a transfer fee, and is not
subject to a transfer fee. Unless the Owner specifies otherwise, all subsequent
Net Premium Payments are allocated to the fixed account after the exercise of
the special transfer privilege. Owners may, however, change this allocation by
subsequent written notice.
C. SUICIDE
If the insured commits suicide, while sane or insane, within two years from
the Policy Effective Date, the death benefit will be limited to the premiums
paid before death, less any Policy debt and less any withdrawals. If the insured
commits suicide, while sane or insane, within two years after an increase in
face amount, the death benefit with respect to such increase shall be limited to
the sum of the monthly cost of insurance charges deducted for such increase.
D. REPRESENTATIONS AND CONTESTABILITY
The Company can not contest the Policy or any supplemental benefit and/or
rider after the Policy or rider has been in force during the Insured's lifetime
for two years from the Policy Effective Date or the effective date of the rider,
unless fraud is involved. The Company also has the right to contest the validity
of any policy change based on material misstatements made in any application for
that change and any reinstatement of benefits within two years during the
lifetime of the insured after the reinstatement has been approved.
E. MISSTATEMENT OF AGE OR SEX
Questions in the application concern the insured's date of birth and sex. If
the date of birth or sex given in the application or any application for
supplemental benefits and/or riders is not correct, the death benefit and any
benefits provided under any riders to this Policy will be adjusted to those that
would have been purchased by the most recent cost of insurance change and the
cost of any such supplemental benefits provided by such riders, at the correct
age and sex.
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