<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998
FILE NO. 333-
FILE NO. 811-7337
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-6
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
PRE-EFFECTIVE AMENDMENT NO. / /
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 4 /X/
------------------------
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:
<TABLE>
<S> <C>
NANCY KANE, 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)
</TABLE>
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
TITLE OF SECURITIES BEING REGISTERED:
Interests in a separate account issued through variable life insurance policies.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), SHALL
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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
- ----------------- ------------------------------------------------------------------------------------------------
<C> <S>
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; Settlement Options
10(d) Cancellation Privilege; Exchange Privilege; Withdrawal Privilege; Policy Loans; Settlement
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; Settlement Options; The Guaranteed
Account; Limits on the Right to Contest the Policy; Suspension or Delay of Payments;
Arbitration; Supplemental 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; Premium Allocations;
15 Purchasing a Policy; Cancellation Privilege; Premium Payments; 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
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
</TABLE>
<PAGE>
PROTECTIVE VARIABLE LIFE SEPARATE ACCOUNT
REGISTRATION STATEMENT ON FORM S-6 (CONTINUED)
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- ----------------- ------------------------------------------------------------------------------------------------
<C> <S>
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 MODIFIED SINGLE PREMIUM VARIABLE AND FIXED LIFE INSURANCE POLICY
- --------------------------------------------------------------------------------
ISSUED BY: PROTECTIVE LIFE INSURANCE COMPANY
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
TELEPHONE (800) 866-3555
- --------------------------------------------------------------------------------
This prospectus describes an individual modified single 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, by allowing the Owner
to pay a single premium, and, subject to certain restrictions, additional
premiums and 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 Policy is a modified endowment contract for federal income tax purposes,
except in certain cases described under "Tax Considerations". A loan,
distribution, or other amount received from a modified endowment contract during
the life of the Insured will be taxed to the extent of any accumulated income in
the contract. Amounts that are taxable withdrawals will be subject to a 10%
additional tax, with certain exceptions.
Generally, the minimum initial premium accepted by Protective Life is
$10,000. Protective Life reserves the right to allocate the initial premium to
the PIC Money Market Fund or to the Fixed Account during the Cancellation
Period. At the end of the Cancellation Period, the amount so allocated will be
transferred to the Funds specified in the Owner's application.
The Owner may, within limits, allocate 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 "Guaranteed
Accounts"). 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, Oppenheimer
Variable Account Funds, MFS-Registered Trademark- Variable Insurance Trust and
Calvert Variable Series, Inc.
The prospectuses for the Funds describe 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 Accounts, 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.
POLICIES (EXCEPT FOR POLICIES ISSUED IN CERTAIN STATES) INCLUDE AN
ARBITRATION PROVISION THAT MANDATES RESOLUTION OF ALL DISPUTES ARISING UNDER THE
POLICY OTHER THAN THOSE ARISING UNDER THE FEDERAL SECURITIES LAWS 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 EACH OF THE FUNDS
CAREFULLY AND RETAIN COPIES FOR FUTURE REFERENCE. THIS PROSPECTUS MUST BE
ACCOMPANIED OR PRECEDED BY THE CURRENT PROSPECTUS FOR EACH OF 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
May , 1998
<PAGE>
DEFINITIONS OF TERMS
ALLOCATION OPTION--Any account within the Guaranteed Account or any Sub-Account
to which Purchase Payments may be allocated or Policy Value transfered under
this policy.
ANNUAL WITHDRAWAL AMOUNT--The annual amount you may withdraw during a Policy
Year, and not incur a surrender charge or premium tax recovery charge.
ATTAINED AGE--The Insured's age as of the last birthday on the Policy Effective
Date, plus the number of complete Policy Years since the Policy Effective Date.
BENEFICIARY--The person entitled to receive the Death Benefit Proceeds 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 and premium tax
recovery charge.
CODE--The Internal Revenue Code of 1986, as amended.
DCA FIXED ACCOUNT--Part of Protective Life's General Account. Only Premium
Payments may be allocated to this account, which is available only in connection
with dollar cost averaging. No transfers may be made to the DCA Fixed Account
from other Allocation Options.
DEATH BENEFIT--The greater of (i) the Face Amount on the Insured's date of death
or (ii) a specified percentage of the Policy Value on the date of the Insured's
death.
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 and any liens
for payments made under an accelerated death benefit rider less unpaid Monthly
Deductions if the Insured dies during a grace period.
EFFECTIVE DATE--The date as of which the Initial Premium Payments are credited
under the Policy and the date the policy takes effect. The effective date is on
the specifications page of the Policy.
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 Premiums allocated under a Policy.
GUARANTEED ACCOUNT VALUE--The Policy Value in the Fixed Account and the DCA
Fixed Account.
FUND--An open-ended management investment company or a separate investment
portfolio thereof, or unit investment trust or series thereof, in which a
Sub-Account invests.
GUARANTEED ACCOUNT--The Fixed Account, the DCA Fixed Acount and any other
account that the Company may offer with interest rates guarantees.
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.
INITIAL PREMIUM--The initial Premium Payment made by the Owner equal to 100% of
the Code Section 7702 Guideline Single Premium for the Face Amount given the
Insured's age, sex and underwriting class.
INSURED--The person whose life is covered by the Policy.
ISSUE AGE--The Insured's age as of the last 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
Guaranteed Account Value and/or Variable Account Value is transferred as
collateral for Policy loans.
LOAN ACCOUNT VALUE--The Policy Value in the Loan Account.
MONTHLY ANNIVERSARY DAY--The same day in each month as the Policy Effective
Date.
4
<PAGE>
MONTHLY DEDUCTIONS--The fees and charges deducted monthly based on the Policy
Value and/ or Variable Account Value.
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 the Monthly Deductions).
NET ASSET VALUE PER SHARE--The value per share of any Fund as computed on any
Valuation Day.
OWNER, YOU, YOUR--The person(s) who own the Policy and are entitled to exercise
all rights and privileges provided in the Policy.
PIC--Protective Investment Company.
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--At any time, the sum of the Variable Account Value, the Guaranteed
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.
PREFERRED LOAN--That portion of the Loan Account up to the amount by which
Surrender Value exceeds total Premium Payments made.
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.
SETTLEMENT OPTION--Alternatives to a lump sum for payment by the Company under
the Death Benefit or surrender provisions of the Policy.
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 and any liens
made under an accelerated death benefit rider.
UNIT--A unit of measurement used to calculate Sub-Account Values.
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 to which Policy Value may be transferred
or Premiums allocated under a Policy.
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.
5
<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 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 and/or the DCA 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". 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. A level Death Benefit is available under the Policy.
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 the Policy Value is sufficient to pay the Monthly Deduction
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. Except in certain cases described under "Tax
Considerations" a Policy will be a "modified endowment contract" for federal tax
law. 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".
CANCELLATION PRIVILEGE. 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 Premium payments to the
Sub-Account investing in the PIC Money Market Fund or to the Fixed Account. (See
"Premium Allocations").
6
<PAGE>
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, 1-800-265-1545.
DIAGRAM OF POLICY
PREMIUM PAYMENTS
- The Policy permits you to pay a large single premium and, subject to certain
restrictions, additional premium. See page 19 for rules and limits.
- The Policy's minimum Initial Premium Payment is $10,000 subject to the
Insured's age, sex and underwriting class, Face Amount selected, and any
riders.
- You direct the allocation of Premium payments among seventeen Sub-Accounts,
the Fixed Account and the DCA Fixed Account. See page 19 for rules and
limits on Premium Payment allocations.
- The Sub-Accounts invest in corresponding Funds. See pages 13 through 15.
Funds available are the PIC Funds, the Oppenheimer Funds, the MFS Funds and
the Calvert Variable Series (as defined below).
- Interest is credited on amounts allocated to the Fixed Account and the DCA
Fixed Account at a minimum guaranteed rate of 4%. See page 19 for rules and
limits on Fixed Account and the DCA Fixed Account allocations.
DEDUCTIONS FROM POLICY VALUE
- Monthly Deduction for cost of insurance, policy expense charges, mortality
and expense risk charges and charges for any rider benefits. The monthly
cost of insurance charges are currently equal to the lesser of (i) .054%
multiplied by the Policy Value during Policy Years 1 through 10 and .046%
multiplied by the Policy Value in Policy Years 11 and thereafter, which is
equivalent to an annual rate of .65% and .55%, respectively or (ii) the
Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 of the Net
Amount at Risk based on age, sex and underwriting class as identified on the
Policy Specification Page. The Company reserves the right to charge the
Guaranteed Maximum Monthly Cost of Insurance Rates in the future. Monthly
policy expense charges are equal to .058% multiplied by the Policy Value,
which is equivalent to an annual rate of 0.70% of such amount. The maximum
monthly mortality and expense risk charges are 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. The current mortality and expense
risk charge during Policy Years 1 through 10 is equal to .075% multiplied by
the Variable Account Value. In Policy Years 11 and thereafter the monthly
mortality and expense risk charge is currently equal to .042% multiplied by
the Variable Account Value, which is equivalent to an annual rate of .50% of
such amount. This charge is not deducted from Fixed Account Value. See pages
29 through 31.
- A policy fee of $35.00 will be deducted from the Policy Value on each Policy
Anniversary. The Company currently waives this fee if the Policy Value is
equal to or greater than $50,000 as of the Policy Anniversary.
DEDUCTIONS FROM ASSETS
- Investment advisory fees and fund operating expenses are also deducted from
the assets of each Fund. See pages 9 through 11.
7
<PAGE>
POLICY VALUE
- Is equal to Premiums, as adjusted each Valuation Day to reflect Sub-Account
investment experience, interest credited on Guaranteed Account Value,
charges deducted and other Policy transactions (such as transfers and
withdrawals). See page 21.
- Varies from day to day. There is no minimum guaranteed Policy Value. The
Policy may lapse if the Policy Value is insufficient to cover the Monthly
Deductions due. See pages 20 and 29 through 31 and .
- Can be transferred from the DCA Fixed Account to the Sub-Accounts and the
Fixed Account subject to certain restrictions and 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 22 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 (for loans other than Preferred Loans) of
6.0%. The portion of a loan equal to the amount, if any, by which the
Surrender Value exceeds total Premium Payments made will be considered a
preferred loan and will be charged an interest rate not to exceed 4.5%.
See page 25 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 9% and a declining
premium tax recovery charge of up to 2.5% of a Premium Payment made is
assessed on surrenders during the first 9 Policy Years following each
Premium Payment. See page 23.
- - An Owner may request a Withdrawal of the Surrender Value subject to
certain restrictions. A declining deferred sales charge of up to 9% and a
declining premium tax recovery charge up to 2.5% of a Premium Payment
will be assessed on amounts withdrawn in excess of the Annual Withdrawal
Amount. See page 24.
- - Settlement Options are available. See page 27.
DEATH BENEFITS
- - Available as lump sum or under a variety of Settlement Options.
- - For most Policies, the minimum Face Amount of $10,000.
- - Death Benefit equal to the Face Amount. See page 26.
- - Flexibility to increase the Face Amount. See page 27 for rules and
limits.
- - Supplemental riders may be available. See page 41.
8
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Policy Value is
Variable Account Value.
ANNUAL FUND EXPENSES (AS PERCENTAGE OF AVERAGE NET ASSETS)
PIC FUNDS (1)
<TABLE>
<CAPTION>
MONEY MARKET
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.60%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.60%
<CAPTION>
CORE U.S.
EQUITY FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.80%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.80%
<CAPTION>
CAPITAL
GROWTH
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.80%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.80%
<CAPTION>
SMALL CAP
EQUITY FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.80%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.80%
<CAPTION>
INTERNATIONAL
EQUITY FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 1.10%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 1.10%
<CAPTION>
GROWTH AND
INCOME FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.80%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.80%
<CAPTION>
GLOBAL
INCOME
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 1.10%
Other Expenses After Reimbursement.............................................. 0.00%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 1.10%
</TABLE>
9
<PAGE>
OPPENHEIMER FUNDS (2)
<TABLE>
<CAPTION>
OPPENHEIMER
AGGRESSIVE
GROWTH
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.72%
Other Expenses After Reimbursement.............................................. 0.03%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.75%
<CAPTION>
OPPENHEIMER
GROWTH
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement.............................................. 0.04%
------------
Total Annual Fund Expenses(2).................................................
(after reimbursements) 0.79%
<CAPTION>
OPPENHEIMER
GROWTH &
INCOME
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement.............................................. 0.25%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 1.00%
<CAPTION>
OPPENHEIMER
STRATEGIC
BOND
FUND
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement.............................................. 0.10%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) 0.85%
</TABLE>
MFS FUNDS
<TABLE>
<CAPTION>
MFS EMERGING
GROWTH
SERIES
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement (3)(4)....................................... 0.25%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (4) 1.00%
<CAPTION>
MFS RESEARCH
SERIES
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement (3)(4)....................................... 0.25%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (4) 1.00%
<CAPTION>
MFS GROWTH
WITH INCOME
SERIES
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.75%
Other Expenses After Reimbursement (3)(4)....................................... 0.25%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (4) 1.00%
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
MFS TOTAL
RETURN
SERIES
------------
Management (Advisory) Fees...................................................... 0.75%
<S> <C>
Other Expenses After Reimbursement (3)(4)....................................... 0.25%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (4) 1.00%
</TABLE>
CALVERT VARIABLE SERIES (5)
<TABLE>
<CAPTION>
CALVERT
SOCIAL
SMALL-CAP
GROWTH
PORTFOLIO
------------
<S> <C>
Management (Advisory) Fees...................................................... . %
Other Expenses After Reimbursement.............................................. . %
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (5) . %
<CAPTION>
CALVERT
SOCIAL
BALANCED
PORTFOLIO
------------
<S> <C>
Management (Advisory) Fees...................................................... 0.71%
Other Expenses After Reimbursement.............................................. 0.10%
------------
Total Annual Fund Expenses....................................................
(after reimbursements) (6) 0.81%
</TABLE>
- ------------------------
* Protective Life reserves the right to charge a Transfer Fee in the future.
(See "Charges and Deductions".)
(1) The annual expenses listed for all of the PIC Funds are net of certain
reimbursements by PIC's investment manager. (See "The Funds".) Absent the
reimbursements, total expenses for the period ended December 31, 1996 were:
Money Market Fund 1.27%, CORE U.S. Equity Fund 0.91%, Small Cap Equity Fund
0.94%, International Equity Fund 1.38%, Growth and Income Fund 0.88%,
Capital Growth Fund 1.02%, and Global Income Fund 1.42%. PIC's investment
manager has voluntarily agreed to reimburse certain of each Fund's expenses
in excess of its management fees. Although this reimbursement may be ended
on 120 days notice to PIC, the investment manager has no present intention
of doing so.
(2) Oppenheimer Growth Fund expenses are net of a voluntary, one-time
reimbursement by the investment manager. Absent that reimbursement, the
Oppenheimer Growth Fund's total expenses for the period ended December 31,
1996 would have been 0.81%.
(3) Each Series has an expense offset arrangement which reduces the Series'
custodian based fee based on the amount of cash maintained by the Series
with its custodian and dividend disbursing agent, and may enter into other
such arrangements and directed brokerage arrangements (which would also have
the effect of reducing the Series' expenses). Any such fee reductions are
not reflected under "Other Expenses."
(4) The investment advisor has agreed to bear expenses for each Series, subject
to reimbursement by each Series, such that each Series' "Other Expenses"
shall not exceed 0.25% of the average daily net assets of the Series during
the current fiscal year. See the Fund prospectus "Information Concerning
Shares of Each Series--Expenses." Otherwise, "Other Expenses" for the
Emerging Growth Series, Research Series, Growth With Income Series and Total
Return Series would be 0.41%, 0.73%, 1.32% and 1.35%, respectively, and
"Total Operating Expenses" would be 1.16%, 1.48%, 2.07% and 2.10%,
respectively, for these Series.
11
<PAGE>
(5) [The figures listed for the Calvert funds Social Small Cap Growth Portfolio
are reflective of an expense agreement effective on October 1, 1997.
Additionally, the "Other Expenses" item reflects a reduction of 0.25% for
fees paid by another entity. Without this reduction, "Total Annual Fund
Expenses" would have been 1.59% for this Portfolio.]
(6) [The figures listed for the Calvert Funds Social Balanced Portfolio are
based on expenses for fiscal year 1996 and have been restated to reflect an
increase in transfer agency expenses of 0.03% expected to be incurred in
1997. "Management (Advisory) Fees" include a performance adjustment which,
depending upon performance, could cause the fee to be as high as 0.85% or as
low as 0.55%. The "Other Expenses" item reflects a reduction of 0.03% for
fees paid by another entity. Without this reduction the "Total Annual Fund
Expenses" would have been 0.84% for this Portfolio.]
The above tables are intended to assist the owner in understanding the costs
and expenses that he or she will bear directly or indirectly. The tables reflect
the expenses for the Account and reflect the investment management fees and
other expenses and total expenses for each Fund for the period January 1, 1997
to December 31, 1997. For a more complete description of the various costs and
expenses see "Charges and Deductions" and the prospectuses for each of the
Funds, which accompany this prospectus. In addition to the expenses listed
above, premium taxes varying from 0 to 3.5% may be applicable in certain states.
12
<PAGE>
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, 1997, Protective Life had total
assets of approximately $ 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 $ billion at December
31, 1997.
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 or
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
and other variable life insurance policies issued by Protective Life).
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. Each Sub-Account invests exclusively
in shares of a corresponding Fund. Therefore, the investment experience of your
Policy depends on the experience of the Sub-Accounts you select. 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 Variable Account has seventeen Sub-Accounts: PIC Money Market; PIC CORE
U.S. Equity; PIC Capital Growth; PIC Small Cap Equity; PIC International Equity;
PIC Growth and Income; and PIC Global Income. Oppenheimer Aggressive Growth;
Oppenheimer Growth; Oppenheimer Growth & Income; Oppenheimer Strategic Bond; MFS
Emerging Growth; MFS Research; MFS Growth With Income; MFS Total Return; Calvert
Social Small-Cap Growth; and Calvert Social Balanced.
THE FUNDS
Each Sub-Account invests in a corresponding Fund. Each Fund is an investment
portfolio of one of the following investment companies: PIC (the "PIC Funds")
managed by Investment Distributions Advisory Services, Inc. and subadvised by
Goldman Sachs Asset Management or Goldman Sachs Asset Management International;
Oppenheimer Variable Account Funds (the "Oppenheimer Funds") managed
13
<PAGE>
by OppenheimerFunds, Inc.; MFS Variable Insurance Trust (the "MFS Funds")
managed by Massachusetts Financial Services Company; or Calvert Variable Series,
Inc. (the "Calvert Variable Series") managed by Calvert Asset Management
Company, Inc. Shares of these Funds are offered only to: (1) the Variable
Account, (2) other separate accounts of Protective Life supporting variable
annuity contracts or variable life insurance policies, (3) separate accounts of
other life insurance companies supporting variable annuity contracts or variable
life insurance policies, and (4) certain qualified retirement plans. Such shares
are not offered directly to investors but are available only through the
purchase of such contracts or policies or through such plans. See the prospectus
for each Fund for details about that Fund.
There is no guarantee that any Fund will meet its investment objectives.
Please refer to the prospectus for each of the Funds you are considering for
more information.
THE PIC FUNDS
PIC 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.
PIC 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.
PIC 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.
PIC CORE U.S. 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.
PIC SMALL CAP VALUE 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.
PIC 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.
PIC 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.
THE OPPENHEIMER FUNDS
OPPENHEIMER AGGRESSIVE GROWTH FUND. This Fund seeks to achieve capital
appreciation by investing in "growth-type" companies.
OPPENHEIMER GROWTH FUND. This Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies.
14
<PAGE>
OPPENHEIMER GROWTH & INCOME FUND. This Fund seeks a high total return
(which includes growth in the value of its shares as well as current income)
from equity and debt securities. From time to time this Fund may focus on small
to medium capitalization common stocks, bonds and convertible securities.
OPPENHEIMER STRATEGIC BOND FUND. This Fund seeks a high level of current
income principally derived from interest on debt securities and seeks to enhance
such income by writing covered call options on debt securities.
THE MFS FUNDS
EMERGING GROWTH SERIES. This Fund seeks to provide long-term growth of
capital.
RESEARCH SERIES. This Fund seeks to provide long-term growth of capital and
future income.
GROWTH WITH INCOME SERIES. This Fund seeks to provide reasonable current
income and long-term growth of capital and income.
TOTAL RETURN SERIES. This Fund seeks primarily to provide above-average
income (compared to a portfolio invested entirely in equity securities)
consistent with the prudent employment of capital and secondarily to provide a
reasonable opportunity for growth of capital and income.
THE CALVERT VARIABLE SERIES
CALVERT SOCIAL SMALL-CAP GROWTH PORTFOLIO. This Fund seeks to achieve
long-term capital appreciation by investing primarily in the equity securities
of small companies that publicly trade in the United States. In seeking capital
appreciation, the Fund invests primarily in the equity securities of small
capitalized growth companies (including American Depository Receipts ("ADRs")
that have historically exhibited exceptional growth characteristics and that, in
the Fund advisor's opinion, have strong earnings potential relative to the U.S.
market as a whole. The Fund will take reasonable risks in seeking to achieve its
investment objective.
CALVERT SOCIAL BALANCED PORTFOLIO. This Fund seeks to achieve a total
return above the rate of inflation through an actively managed, non-diversified
portfolio of common and preferred stocks, bonds, and money market instruments
that offer income and capital growth opportunity and that satisfy the social
concern criteria established for the Fund.
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 PROSPECTUSES FOR THE FUNDS, WHICH ACCOMPANY THIS PROSPECTUS, AND THE
CURRENT STATEMENT OF ADDITIONAL INFORMATION FOR EACH OF THE FUNDS. THE FUNDS'
PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE
ALLOCATION OF NET PREMIUMS OR TRANSFERS AMONG THE SUB-ACCOUNTS.
Each Fund sells its shares to the Variable Account in accordance with the
terms of a participation agreement between the appropriate investment company
and Protective Life. The termination provisions of these agreements vary. Should
a participation agreement relating to a Fund terminate, the Variable Account
would not be able to purchase additional shares of that Fund. In that event,
Owners would no longer be able to allocate Variable Account Value or Premium
Payments to Sub-Accounts investing in that Fund. In certain circumstances, it is
also possible that a Fund may refuse to sell its shares to the Variable Account
despite the fact that the participation agreement relating to that Fund has not
been terminated. Should a Fund decide to discontinue selling its shares to the
Variable Account, Protective Life would not be able to honor requests from
Owners to allocate Premium Payments or transfer Account Value to the Sub-Account
investing in shares of that Fund.
15
<PAGE>
Protective Life has entered into agreements with the investment managers or
advisers of several of the Funds pursuant to which each such investment manager
or adviser pays Protective Life a servicing fee based upon an annual percentage
of the average daily net assets invested by the Variable Account (and other
separate accounts of Protective Life) in the Funds managed by that manager or
adviser. These fees are in consideration for administrative services provided to
the Funds by Protective Life. Payments of fees under these agreements by
managers or advisers do not increase the fees or expenses paid by the Funds or
their shareholders.
OTHER INVESTORS IN THE FUNDS
PIC currently sells shares of its Funds only to Protective Life as the
underlying investment for the Variable Account as well as for variable annuity
contracts issued through Protective Life. PIC may in the future sell shares of
its Funds 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 possible sale of shares to support its variable
annuity contracts or those of its affiliates or from the possible sale of shares
to such retirement plans. However, the board of directors of PIC will monitor
events in order to identify any material irreconcilable conflicts that might
possibly arise if such shares were also offered to support variable life
insurance contracts other than the Policies or variable annuity contracts or to
retirement plans. In event of such a conflict, the board of directors 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 such
conflicts insufficiently protects Owners, it will take appropriate action on its
own, including withdrawing the Account's investment in the Fund. (See the PIC
Prospectus for more detail.)
Shares of the Oppenheimer Funds, MFS Funds and Calvert Variable Series are
sold to separate accounts of insurance companies, which may or may not be
affiliated with Protective Life or each other, a practice known as "shared
funding." They may also be sold to separate accounts to serve as the underlying
investment for both variable annuity contracts and variable life insurance
policies, a practice known as "mixed funding." As a result, there is a
possibility that a material conflict may arise between the interests of Owners
of Protective Life's Policies whose Policy Values are allocated to the Variable
Account and of owners of other contracts whose contract values are allocated to
one or more other separate accounts investing in any one of the Funds. Shares of
some of these Funds may also be sold to certain qualified pension and retirement
plans. As a result, there is a possibility that a material conflict may arise
between the interests of Policy Owners generally or certain classes of Policy
Owners, and such retirement plans or participants in such retirement plans. In
the event of any such material conflicts, Protective Life will consider what
action may be appropriate, including removing the Fund from the Variable Account
or replacing the Fund with another fund. As is the case with PIC, the board of
directors (or trustees) of each of the OppenheimerFunds, MFS Funds and Calvert
Variable Series monitors events related to their Funds to identify possible
material irreconcilable conflicts among and between the interests of the Fund's
various investors. There are certain risks associated with mixed and shared
funding and with the sale of shares to qualified pension and retirement plans,
as disclosed in each Fund's prospectus.
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 any necessary approval of the SEC and state insurance
authorities.
16
<PAGE>
Protective Life also reserves the right to establish additional Sub-Accounts
of the Variable Account, each of which would invest in shares corresponding to a
new 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 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
alive. The number of votes for which an Owner may give instructions is
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of that 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.
17
<PAGE>
THE POLICY
PURCHASING A POLICY
To purchase a Policy, a prospective Owner must submit a completed
application (which Protective Life 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 85 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. If an application
for a Policy is rejected, any Initial Premium will be returned to the applicant.
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 REQUIRED INITIAL
PREMIUM PAYMENT.
[Insurance coverage under a Policy begins on the Policy Effective Date which
generally is also the Issue Date. If however (subject to certain limitations),
the Initial Premium Payment is submitted with the application and the Policy is
issued as applied for in the application a conditional receipt may be issued.
The Policy Effective Date of insurance issued based on the application in which
a conditional receipt is given is the later of the date that the application is
signed, the date requested in the application, or the date any required medical
examination is completed. In accordance with the terms of the conditional
receipt agreement, the total amount of insurance which may become effective
prior to delivery of the Policy to the Owner may not exceed $250,000 (including
the amount of any life insurance and accidental death benefits then in force or
applied for with the Company) 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 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 Protective Life's 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) 10 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 Protective
Life. 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
18
<PAGE>
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 riders requested by the applicant. Consult your sales
representative for information about the Initial Premium Payment required for
the coverage you desire.
ADDITIONAL PREMIUM PAYMENTS. After the first Policy Anniversary, The
Company will accept, subject to the limitations described below, additional
Premium Payments. The Company reserves the right to apply all additional Premium
Payments as repayments of Policy Debt, if any.
PREMIUM PAYMENT LIMITATIONS. Premium Payments may be made by any method
acceptable to Protective Life. 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.
Unless otherwise determined by Protective Life, additional Premium Payments
must be at least $10,000 and must be received at the Home Office. See "Premium
Allocations". Protective Life also reserves the right to limit the amount of any
Premium Payment. Any additional Premium Payments made will generally require an
increase in the Face Amount of the Policy and therefor will be subject to
evidence of insurability. 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 set forth in the Code. Protective Life
will immediately refund any portion of any Premium Payment that exceeds such
limitations.
PREMIUM ALLOCATIONS
Owners must indicate in the application how Premium Payments are to be
allocated to the Sub-Accounts, the Fixed Account and/or the DCA Fixed Account.
These allocation instructions apply to both initial and subsequent 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 Premium
Payments and the sum of allocations must add up to 100%.
For Policies issued in states where, upon cancellation during the
Cancellation Period, Protective Life returns at least your Premium Payments,
Protective Life reserves the right to allocate your Initial Premium Payment to
the PIC Money Market Sub-Account or the Fixed 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 PIC Money Market Sub-Account or the Fixed Account and all Premium Payments
will be allocated according to your allocation instructions then in effect.
Additional Premium Payments not requiring additional underwriting will be
credited to the Policy and the 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 may be allocated to the
PIC Money Market Sub-Account or the Fixed Account until underwriting has been
completed. When approved, the Policy Value in the PIC Money Market Sub-Account
or the Fixed Account attributable to the resulting 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.
19
<PAGE>
POLICY LAPSE AND REINSTATEMENT
LAPSE. Unlike a conventional life insurance policy, whether a Policy lapses
depends on whether its Policy Value is sufficient to cover the Monthly
Deductions (See "Monthly Deductions"). If the Policy Value on a Monthly
Anniversary Day is less than the amount of the Monthly Deduction due on that
date, 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.
In the event of a Policy default, the Owner has a 61-day grace period to
make a 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 Owner pays Premiums equal to (a) all
Monthly Deductions that were due but unpaid during the grace period with
interest at a rate not to exceed an effective annual rate of 6%, if required by
the Company, and (b) which are at least sufficient to keep the reinstated Policy
in force for three months, (4) the Insured provides Protective Life with
satisfactory evidence of insurability, (5) the Owner repays or reinstates any
Policy Debt which existed at the end of the grace period; and (6) 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 1-6 above have been met.
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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 AND MONTHLY DEDUCTIONS FROM 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.
DETERMINATION OF UNITS. For each Sub-Account, the 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
Premium Payment(s) or transferred amount is invested in the Sub-Account.
Therefore, 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 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.
GUARANTEED ACCOUNT VALUE
The Guaranteed Account Value under a Policy at any time is equal to: (1)
that part of the Premium Payment(s) allocated to either the Fixed Account or the
DCA Fixed Account, plus (2) amounts transferred to the Fixed Account, plus (3)
interest credited to the Fixed Account or the DCA Fixed Account, less (4)
transfers from the Fixed Account or the DCA Fixed Account (including any
transfer fees deducted), less (5) withdrawals from the Fixed Account or the DCA
Fixed Account, less (6) surrender charges and premium tax recovery charges
deducted, less (7) certain Monthly Deductions. See "The Fixed Accounts," for a
discussion of how interest is credited to the Fixed Account and the DCA Fixed
Account.
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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 amounts
in a Sub-Account to other Sub-Accounts and/or the Fixed Account or subject to
certain restrictions, amounts from the Fixed Account and the DCA Fixed Account
to a SubAccount. No transfers may be made to the DCA Fixed Account. 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 or the DCA Fixed
Account from which the transfer is made. If, after the transfer, the Policy
Value remaining in a Sub-Account(s), the Fixed Account and/or the DCA Fixed
Account would be less than $100, Protective Life reserves the right to transfer
the entire amount instead of the requested amount. Protective Life reserves the
right to limit transfers to 12 per Policy Year. For each additional transfer
over 12 in any Policy Year, Protective Life reserves 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.
Protective Life will send you a confirmation of all instructions
communicated by telephone to determine if they are genuine. For telephone
transfers the Company requires a form of personal identification prior to acting
on instructions received by telephone. The Company also makes a tape-recording
of the instructions given by telephone. If the Company follows these procedures
it is not liable for any losses due to unauthorized or fraudulent instructions.
Protective Life reserves the right to suspend telephone transfer privileges at
any time for any class of Policies.
RESERVATION OF RIGHTS. Protective Life reserves 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, the Company reserves 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 (other
than in connection with the DCA Fixed Account) at any time thereafter by Written
Notice, you may systematically and automatically transfer, on a monthly or
quarterly basis, specified dollar amounts from the DCA Fixed Account or any
other Allocation Option to any Allocation Option, except that no transfers may
be made to the DCA Fixed Account. This is known as the dollar-cost averaging
method of investment. By transferring equal amounts of Policy Value on a
regularly scheduled basis, as opposed to allocating a larger 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.
You may elect dollar cost averaging for periods of at least 12 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. If no day is selected, transfers will occur on the Monthly
Anniversary Day.
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 value in the source
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Fund 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. Any time dollar cost averaging transfers end, all Policy
Value remaining in the DCA Fixed Account will be transferred to the Fixed
Account.
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 or place restrictions on automatic
dollar-cost averaging transfers upon 30 days' written notice to the Owner.
PORTFOLIO REBALANCING. At the time of application or at any time thereafter
by written notice to Protective Life, you may instruct Protective Life to
automatically transfer, on a quarterly, semi-annual or annual basis, your
Variable Account Value among specified Sub-Accounts to achieve a particular
percentage allocation of Variable Account Value among such Sub-Accounts
("Portfolio Rebalancing"). Such percentage allocations must be in whole numbers
and must allocate amounts only among the Sub-Accounts. No amounts will be
transferred to the Fixed Account or the DCA Fixed Account as part of Portfolio
Rebalancing. A minimum Variable Account Value of $100 is required for Portfolio
Rebalancing. Unless you instruct otherwise when electing rebalancing, the
percentage allocation of your Variable Account Value for Portfolio Rebalancing
will be based on your Purchase Payment allocation instructions in effect at the
time of rebalancing. Any allocation instructions that you give us that differ
from your then current Purchase Payment allocation instructions will be deemed
to be a request to change your Purchase Payment allocation. Portfolio
Rebalancing 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. If
no day is selected, rebalancing will occur on the Monthly Anniversary Day.
Once elected, Portfolio Rebalancing begins on the first quarterly,
semi-annual or annual anniversary following election. You may change or
terminate Portfolio Rebalancing by written instruction to Protective Life, or by
telephone if you have previously authorized us to take telephone instructions.
Portfolio Rebalancing transfers do not count as one of the 12 free transfers
available during any Contract Year. Protective Life reserves the right to assess
a processing fee for this service or to discontinue Portfolio Rebalancing upon
30 days written notice to the Owner.
SURRENDER PRIVILEGE
At any time while the Policy is in force and while the Insured is still
living, the Owner may surrender the 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 and premium tax recovery charge
may apply. See "Surrender Charge and Premium Tax Recovery Charge". The Surrender
Value is paid in a lump sum unless the Owner requests payment under a Settlement
Option. See "Settlement Options". Payment is generally made within seven
calendar days. See "Suspension or Delay of Payments" and "Payments from the
Guaranteed Account". A Policy terminates upon surrender. A surrender will have
tax consequences. See "Tax Considerations."
WITHDRAWAL PRIVILEGE
At any time while the Policy is in force and prior to the Insured's death,
an Owner, by Written Notice, may request a Withdrawal of Surrender Value subject
to certain restrictions described below. Protective Life will withdraw the
amount requested, plus any applicable surrender charges and premium tax recovery
charges, from Policy Value as of the Valuation Day we receive the Written
Notice. A Withdrawal will have tax consequences. See "Tax Considerations."
The Owner may specify the amount of the Withdrawal to be made from any
Sub-Account or the Fixed Account and/or the DCA Fixed Account. Withdrawals will
result in the cancellation of Units from each
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applicable Sub-Account and/or the reduction in the Guaranteed Account Value. If
the Owner does not so specify, or if the amount in the designated account(s) is
insufficient to carry out the request, the Withdrawal will be made from each
Sub-Account, the Fixed Account and the DCA Fixed Account based on the proportion
that such Sub-Account Value(s) and Guaranteed Account Value bears to the
unloaned 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 Guaranteed Account". The Company reserves
the right to decline to process a Withdrawal if, after the Withdrawal, the
Policy Value would be less than ten percent of the current Face Amount.
WITHDRAWALS. At any time prior to the Insured's death and while this Policy
is in force, the Owner(s) may make a written request for a Withdrawal of the
Policy Value. In order to request a Withdrawal during the first Policy Year, the
Owner must have made an Initial Premium Payment of at least $10,000. On or after
the first Policy Anniversary, in order to request a Withdrawal the Policy Value
must be at least $10,000 as of the date that We receive the request. The Company
will withdraw the amount requested from the Policy Value as of the business day
on or next following the day the written request is received. A surrender charge
and premium tax recovery charge may apply if the cumulative amount of the
Withdrawals exceeds the Annual Withdrawal Amount or the amount by which your
Policy Value exceeds Premium Payments made.
ANNUAL WITHDRAWAL AMOUNTS. The Annual Withdrawal Amount is the annual
amount the Owner may withdraw during a Policy Year, and not incur a surrender
charge or premium tax recovery charge. The Annual Withdrawal amount is:
(a) an amount equal to ten percent of the Initial Premium Payments
made if the Withdrawal request is received during the first Policy Year,
or
(b) the amount equal to ten percent of cumulative Premium Payments
made as of the last Policy Anniversary, net of all Premium Payments
withdrawn, if the Withdrawal is received after the first Policy Year.
DECREASING THE FACE AMOUNT. In the event a Withdrawal is requested
Protective Life will reduce the Face Amount proportionately by the requested
Withdrawal amount (plus any surrender charges and premium tax recovery charges).
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.
The proportionate face amount decrease will be determined by the following
formula:
F X (P - W)/P
<TABLE>
<S> <C> <C>
Where: F = Current Face Amount
P = Policy Value
W = Withdrawal Amount (including any applicable charges)
</TABLE>
POLICY LOANS
GENERAL. At any time while the Policy is in force 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
Guaranteed Account".
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LOAN COLLATERAL. When a Policy loan is made, an amount equal to the loan is
transferred out of the Sub-Accounts and the Guaranteed Account and into a Loan
Account established for the Policy. Like the Guaranteed 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 Guaranteed 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 and/or the DCA 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 and DCA Fixed Account in the same proportion that the value of each of
the Sub-Account(s) and the Fixed Account and DCA Fixed Account bears to the
total unloaned Policy 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 and/or
DCA Fixed Account in the same proportion that each Sub-Account Value and the
Fixed Account Value and/or DCA Fixed Account 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 sent to the Home Office and are
credited as of the date received. The Owner may specify in writing that any
additional Premium Payments made while a loan is outstanding be applied as loan
repayments. 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 and/or the DCA 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 Guaranteed 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 and/or the DCA Fixed
Account in the same manner as Premium Payments are allocated.
INTEREST. Except in the case of a Preferred Loan, Protective Life will
charge interest daily on any outstanding loan at an effective annual rate of
6.0%. Interest is due and payable at the end of each Policy Year while a loan is
outstanding. Protective Life will notify the Owner 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. If the Surrender Value exceeds the total of
all Premium Payments made, a Preferred Loan will be available. The amount of
such Preferred Loan is the amount by which the Surrender Value exceeds total
Premium Payments made. The Preferred Loan portion of the outstanding Policy Debt
will be charged interest at a rate not to exceed 4.5%. The portion of loan that
qualifies as a Preferred Loan is determined as of the date a request for a loan
is received and on each Policy Anniversary.
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 for the
non-preferred portion, and 0.5% for the preferred portion of the loan, if any
(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 and/or
the DCA Fixed Account in the same manner as Premium Payments are allocated.
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.
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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, the Owner, and any assignee of record, will be sent notice of the
default. The Owner 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 Proceeds and Policy values because the investment
results of the Sub-Accounts and current interest rates credited on Guaranteed
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. Depending on the
investment results of the Sub-Accounts or credited interest rates for the Fixed
Account and/or the DCA 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. In addition, if your
Policy is a "modified endowment contract," loans may be currently taxable and
subject to a 10% penalty tax. See "Tax Considerations," for a discussion of the
tax treatment of policy loans.
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 "Settlement Options").
CALCULATION OF DEATH BENEFIT PROCEEDS. The Death Benefit Proceeds are equal
to the Death Benefit (as described below), plus any supplemental rider benefits,
minus any Policy Debt on that date and any liens for payments made under an
accelerated death benefit rider and, if the Insured died during a grace period,
minus any past due Monthly Deductions. Under certain circumstances, the amount
of the Death Benefit Proceeds 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 Proceeds are 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. 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.
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. 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. A table showing these percentages for
Attained Ages 0 to 95 and an example of Death Benefit calculations are found in
Appendix A.
INCREASING THE FACE AMOUNT. On or after the first Policy Anniversary, the
Owner may request an increase in the Face Amount.
For any increase in the Face Amount the additional Premium Payment must be
at least $10,000 and an application must be submitted. Protective Life reserves
the right to require satisfactory evidence of
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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. 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 additional required minimum Premium Payment is received. 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. See "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. See "Cancellation Privilege".
SETTLEMENT OPTIONS
The Policy offers a variety of ways of receiving proceeds payable under the
Death Benefit and surrender provisions of a Policy, other than in a lump sum.
These alternative settlement options are summarized below. Any sales
representative authorized to sell this Policy can further explain these options
upon 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 settlement option (other than Option 3), no surrender or
Withdrawal may be made once payments have begun.
The following settlement 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.
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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. Settlement Options must be elected by Written Notice.
The Owner may elect payment options during the Insured's lifetime; Beneficiaries
may elect Settlement 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 Settlement Option is elected
options or rates on a more favorable basis than those guaranteed, the higher
benefits will apply.
THE GUARANTEED ACCOUNT
THE INTERESTS IN THE GUARANTEED ACCOUNT HAVE NOT BEEN, AND ARE NOT REQUIRED
TO BE, REGISTERED UNDER THE SECURITIES ACT OF 1933 AND NEITHER THE GUARANTEED
ACCOUNT NOR OTHER COMPONENTS OF THE COMPANY'S GENERAL ACCOUNT HAVE BEEN
REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940.
ACCORDINGLY, NEITHER THE GUARANTEED ACCOUNT, THE COMPANY'S GENERAL 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 GUARANTEED ACCOUNT. THE DISCLOSURE
REGARDING THE GUARANTEED 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 GUARANTEED ACCOUNT
The Guaranteed Account is comprised of the Fixed Account and the DCA Fixed
Account which consist of assets owned by Protective Life with respect to the
Policies, other than those in the Variable Account. Both are 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 Fixed Account and the DCA Fixed Account.
Guarantees of Premium Payments allocated to the Fixed Account and the DCA Fixed
Account, and interest credited thereto, are backed by Protective Life. The
Guaranteed Account Value is calculated daily. See "Guaranteed Account Value".
INTEREST CREDITED ON GUARANTEED ACCOUNT
Protective Life guarantees that the interest credited during the first
Policy Year to the initial Premium Payment allocated to the Fixed Account or the
DCA Fixed Account will not be less than the rate shown in the Policy. The
interest rate credited to subsequent Premium Payments allocated to the Fixed
Account or the DCA Fixed Account or amounts transferred to the Fixed Account
will be the annual effective interest rate in effect on the date that the
Premium Payment(s) is received by Protective Life 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 Premium Payment(s) is allocated
or the date that the transfer is made.
After an interest rate guarantee expires as to a Premium Payment or amount
transferred, (I.E., 12 months after the Premium Payment(s) or transfer is placed
in the Guaranteed Account) we will credit
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interest on the Guaranteed Account Value attributable to such Premium Payment or
transferred amount remaining in the Fixed Account or the DCA Fixed Account at
the current interest rate in effect. New current interest rates are effective
for such Guaranteed Account Value for 12 months from the time that they are
first applied. Protective Life, in its sole discretion, may declare a new
current interest rate from time to time. The initial annual effective interest
rate and the current interest rates that Protective Life will credit are annual
effective interest rates of not less than 4.00%. Because Protective Life
anticipates changing the current interest rates for accounts within the
Guaranteed Account from time to time, allocations to accounts within the
Guaranteed Account may be credited with different current interest rates. For
purposes of crediting interest, amounts deducted, transferred or withdrawn from
the Guaranteed Account are accounted for on a "first-in-first-out" (FIFO) basis
independently applied to the Fixed Account and the DCA Fixed Account.
GUARANTEED ACCOUNT VALUE
The Guaranteed Account Value at any time is equal to: (1) that part of the
Premium Payment(s) allocated to the Fixed Account and the DCA Fixed Account;
plus (2) amounts transferred to the Fixed Account; plus (3) interest credited to
the Fixed Account and the DCA Fixed Account; less (4) transfers from the Fixed
Account or the DCA Fixed Account (including any transfer fees deducted) less (5)
withdrawals from the Fixed Account or the DCA Fixed Account, less (6) surrender
charges and premium tax recovery charges less (7) certain Monthly Deductions.
Because Protective Life, at its sole discretion, anticipates changing the
current interest rate from time to time, different allocations to the Fixed
Account and the DCA Fixed Account and transfers to the Fixed Account will be
credited with different current interest rates.
PAYMENTS FROM THE GUARANTEED ACCOUNT
Payments from the Fixed Account and/or the DCA 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 and/or the DCA 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
MONTHLY DEDUCTIONS
As of the Policy Effective Date, Protective Life will deduct the Monthly
Deductions from the Policy Value. Subsequent Monthly Deductions will be made on
each Monthly Anniversary Day thereafter. The Monthly Deductions consist of (1)
cost of insurance charges ("cost of insurance charge"), (2) policy expense
charge (the "policy expense charge"), (3) mortality and expense risk charge (the
"Mortality and Expense Risk Charge") and (4) any charges for supplemental
riders, as described below. The Monthly Deductions are 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 maximum cost of
insurance on a Monthly Anniversary Day is calculated by multiplying the monthly
cost of insurance rate for the Insured by the Policy Value under the Policy for
that Monthly Anniversary Day.
The current monthly cost of insurance charge is the lesser of (1) .054%
multiplied by the Policy Value during Policy Years 1 through 10 and .046%
multiplied by the Policy Value during Policy Year 11 and thereafter or (2) the
Guaranteed Maximum Monthly Cost of Insurance rates (as specified in the policy)
per $1,000 times the Net Amount at Risk.
29
<PAGE>
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 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,
Age Last Birthdate, 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.
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 POLICY EXPENSE CHARGE. This charge compensates Protective Life for
sales and administrative expenses associated with the Policies and the Variable
Account. These expenses relate to recordkeeping, processing death benefit
claims, Policy loans, Policy changes, reporting and overhead costs, processing
applications, establishing Policy records and reports and other communication to
Policy Owners. The monthly policy expense charge is equal to .058% multiplied by
the Policy Value, which is equivalent to an annual rate of 0.70% of such amount.
SUPPLEMENTAL RIDER CHARGES. See "Supplemental Riders and Endorsements".
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 Guaranteed Account
assets attributable to the Policies. The maximum monthly Mortality and Expense
Risk Charge to be deducted in all Policy Years is equal to .075% multiplied by
the Variable Account Value, which is equivalent to an annual rate of 0.90% 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 Charge is .075% and in Policy Years 11 and thereafter, the monthly
Mortality and Expense Risk Charge is equal to .042% multiplied by the Variable
Account Value, which is equivalent to an annual rate of .50% of such amount.
30
<PAGE>
ANNUAL MAINTENANCE FEE
Protective Life deducts a $35.00 annual maintenance fee from the Policy
Value on each Policy Anniversary. Currently, the Company will waive the fee as
of a Policy Anniversary, if the Policy Value equals or exceeds $50,000.
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.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE) AND PREMIUM TAX RECOVERY
CHARGE
If the Policy is surrendered, or if the Policy lapses, or if a Withdrawal of
an amount greater than the Annual Withdrawal Amount (or the amount by which your
Policy Value exceeds the aggregate of Premium Payments made) is requested by the
Owner, through the first nine Policy Years following each Premium Payment, a
Surrender Charge and a Premium Tax Recovery Charge will be deducted. The
Surrender Charge, which is a contingent deferred sales charge, and Premium Tax
Recovery Charge, is deducted before any Surrender Value or Withdrawal is paid.
See "Withdrawal Privilege" for rules for allocating the deduction.
The Surrender Charge and Premium Tax Recovery Charge for each Premium
Payment is equal to the Surrender Charge Percentage and Premium Tax Charge
Percentage for the Policy Year in which the surrender, lapse or Withdrawal of
such Premium Payment occurs, multiplied by the amount of such Premium Payment.
The Surrender Charge and Premium Tax Recovery Charge are separately
calculated and applied to each Premium Payment at any time that the Premium
Payment is withdrawn or surrendered or the Policy lapses. Withdrawals within a
given Policy Year are deemed to count first towards the Annual Withdrawal
Amount. Once the aggregate Withdrawals in a Policy Year exceed the Annual
Withdrawal Amount, the additional amount that may be withdrawn that Policy Year
without incurring a Surrender Charge and Premium Tax Recovery Charge is equal to
the remaining Policy Value that exceeds Premium Payments made. This
determination will be made as of the date the Withdrawal request is received at
our Home Office. The Surrender Charge and the Premium Tax Recovery Charge are
calculated using the assumptions that all Policy Value in excess of aggregate
Premium Payments is withdrawn or surrendered before any Premium Payments and
that Premium Payments are withdrawn or surrendered on a first-in-first-out
basis.
<TABLE>
<CAPTION>
POLICY YEAR SURRENDER CHARGE POLICY YEAR PREMIUM TAX RECOVERY CHARGE
FOLLOWING AS A PERCENTAGE OF EACH FOLLOWING AS A PERCENTAGE OF EACH
PREMIUM PAYMENT PREMIUM PAYMENT WITHDRAWN PREMIUM PAYMENT PREMIUM PAYMENT WITHDRAWN
- --------------------- --------------------------------- --------------------- -------------------------------
<S> <C> <C> <C>
1 9% 1 2.50%
2 8% 2 2.25%
3 7% 3 2.00%
4 6% 4 1.75%
5 5% 5 1.50%
6 4% 6 1.25%
7 3% 7 1.00%
8 2% 8 .75%
9 1% 9 .50%
10+ 0% 10+ 0
</TABLE>
31
<PAGE>
After the 10th Policy Year after each Premium Payment, there is no Surrender
Charge or Premium Tax Recovery Charge for such Premium Payment.
The purpose of the Surrender Charge and Premium Tax Recovery Charge is to
reimburse Protective Life for some of the expenses incurred in the distribution
of the Policies and the premium tax paid by Protective Life on each Premium
Payment.
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.
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.
32
<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>
EXISTING LIFE POLICY POLICY
<S> <C> <C>
State and Local Premium Tax None None
Federal Tax Charge None None
Sales Charges/Premium Expense Ranges from 0% to 12% of premium None
Charge payments in all policy years.
The premium expense charge can
vary by age.
Administrative Fees Ranges from $4 to $5 monthly. None
Withdrawal Charges $25 None
Monthly Deductions A monthly deduction consisting A monthly deduction consisting
of: (1) cost of insurance of: (1) cost of insurance
charges (2) administrative fees currently equal to the lesser of
(3) any charges for supplemental (x) .054 multiplied by the
benefits and/or riders. (applies Policy Value in Policy Years 1
to Existing Life Policies which through 10 and .046 multiplied
are universal life plans) by the Policy Value in Policy
Year 11 and thereafter or (y)
the maximum monthly cost of
insurance charges guaranteed in
the Policy, (2) policy expense
charges equal to .058%
multiplied by the Policy Value,
which is the equivalent of an
annual rate of .70%, (3)
mortality and expense charges
equal to .075% 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 this charge is
currently equal to .042%
multiplied by the Variable
Account Value, which is
equivalent to an annual rate of
.50% of such amount and (4) any
charges for supplemental riders.
Annual Maintenance Fee None $35 deducted from the Policy
Value on each Policy Anniversary
(currently waived if Policy
Value is equal to or greater
than $50,000)
Surrender Charges Surrender charges vary by policy A declining deferred sales
type and are incurred during a charge of up to 9% and a
surrender charge period which declining premium tax recovery
ranges from 0 years up to 19 charge of up to 2.50% of each
years. premium payment is assessed on
surrender charges during the
first 9 Policy Years following
each Premium Payment.
Guaranteed Interest Rate Ranges from 4% to 5%. Guaranteed account only 4%.
</TABLE>
33
<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")
34
<PAGE>
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 a single Premium Payment were made with
the application 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
Initial Premium 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 the Initial Premium is allocated equally among the
Sub-Accounts available under the Policy, and that no amounts are allocated to
the Fixed Account or the DCA 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 [0.92%] of
the average daily net assets of the Funds available under the Policies. This
average annual expense ratio is based on the expense ratios of each of the Funds
for the last fiscal year, adjusted, as appropriate, for any material changes in
expenses effective for the current fiscal year of a Fund. For information on
Fund expenses, see the prospectus for each of 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 .042% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .50% 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 -1.82%, 4.18% and 10.18%, respectively.
The illustrations also reflect the deduction of the monthly policy expense
charge, annual maintenance fee and the monthly cost of insurance charge for the
hypothetical Insured. The surrender charge and premium tax recovery charge are
reflected in the column "Cash 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 rider
benefits.
The illustrations are based on Protective Life's sex distinct rates for
non-smokers. 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.
35
<PAGE>
ILLUSTRATION OF POLICY VALUES
PROTECTIVE LIFE INSURANCE COMPANY
MALE ISSUE AGE: 45 NON-SMOKER
$100,000 FACE AMOUNT
INITIAL PREMIUM 24,208.14
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
12% HYPOTHETICAL
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL GROSS INVESTMENT
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
END OF AT 5% ----------------------------------- --------------------------------- --------------------
POLICY INTEREST POLICY CASH DEATH POLICY CASH DEATH POLICY CASH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
------ ------------- ----------- --------- ----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 25,418.55 23,420 20,636 100,000 24,838 22,054 100,000 26,257 23,473
2 26,689.47 22,657 20,176 100,000 25,486 23,005 100,000 28,482 26,001
3 28,023.95 21,918 19,739 100,000 26,152 23,973 100,000 30,900 28,721
4 29,425.15 21,201 19,325 100,000 26,836 24,960 100,000 33,525 31,649
5 30,896.40 20,507 18,934 100,000 27,539 25,966 100,000 36,378 34,804
6 32,441.22 19,835 18,564 100,000 28,262 26,991 100,000 39,476 38,205
7 34,063.28 19,183 18,215 100,000 29,004 28,036 100,000 42,841 41,872
8 35,766.45 18,552 17,886 100,000 29,767 29,101 100,000 46,496 45,830
9 37,554.77 17,940 17,577 100,000 30,550 30,187 100,000 50,466 50,103
10 39,432.51 17,348 17,348 100,000 31,356 31,356 100,000 54,820 54,820
11 41,404.13 16,857 16,857 100,000 32,343 32,343 100,000 59,842 59,842
12 43,474.34 16,379 16,379 100,000 33,362 33,362 100,000 65,335 65,335
13 45,648.06 15,914 15,914 100,000 34,415 34,415 100,000 71,380 71,380
14 47,930.46 15,461 15,461 100,000 35,502 35,502 100,000 78,021 78,021
15 50,326.98 15,020 15,020 100,000 36,625 36,625 100,000 85,288 85,288
16 52,843.33 14,590 14,590 100,000 37,784 37,784 100,000 93,241 93,241
17 55,485.50 14,172 14,172 100,000 38,981 38,981 100,000 101,924 101,924
18 58,259.78 13,765 13,765 100,000 40,217 40,217 100,000 111,402 111,402
19 61,172.76 13,368 13,368 100,000 41,494 41,494 100,000 121,748 121,748
20 64,231.40 12,982 12,982 100,000 42,812 42,812 100,000 133,044 133,044
21 67,442.97 12,606 12,606 100,000 44,173 44,173 100,000 145,383 145,383
22 70,815.12 12,240 12,240 100,000 45,579 45,579 100,000 158,830 158,830
23 74,355.88 11,884 11,884 100,000 47,031 47,031 100,000 173,484 173,484
24 78,073.67 11,537 11,537 100,000 48,529 48,529 100,000 189,452 189,452
25 81,977.35 11,199 11,199 100,000 50,077 50,077 100,000 206,850 206,850
26 86,076.22 10,870 10,870 100,000 51,712 51,712 100,000 225,798 225,798
27 90,380.03 10,550 10,550 100,000 53,400 53,400 100,000 246,530 246,530
28 94,899.04 10,238 10,238 100,000 55,143 55,143 100,000 269,258 269,258
29 99,643.99 9,935 9,935 100,000 56,942 56,942 100,000 294,210 294,210
30 104,626.19 9,639 9,639 100,000 58,801 58,801 100,000 321,667 321,667
31 109,857.50 9,351 9,351 100,000 60,720 60,720 100,000 351,974 351,974
32 115,350.37 9,071 9,071 100,000 62,702 62,702 100,000 385,011 385,011
33 121,117.89 8,798 8,798 100,000 64,749 64,749 100,000 421,008 421,008
34 127,173.78 8,532 8,532 100,000 66,862 66,862 100,000 460,206 460,206
35 133,532.47 8,273 8,273 100,000 69,045 69,045 100,000 502,861 502,861
36 140,209.10 8,021 8,021 100,000 71,298 71,298 100,000 549,237 549,237
37 147,219.55 7,776 7,776 100,000 73,626 73,626 100,000 599,605 599,605
38 154,580.53 7,537 7,537 100,000 76,029 76,029 100,000 654,530 654,530
39 162,309.55 7,305 7,305 100,000 78,510 78,510 100,000 714,487 714,487
40 170,425.03 7,078 7,078 100,000 81,073 81,073 100,000 779,936 779,936
41 178,946.28 6,858 6,858 100,000 83,719 83,719 100,000 851,381 851,381
42 187,893.60 6,643 6,643 100,000 86,452 86,452 100,000 929,370 929,370
43 197,288.28 6,434 6,434 100,000 89,273 89,273 100,000 1,014,503 1,014,503
44 207,152.69 6,231 6,231 100,000 92,187 92,187 100,000 1,107,434 1,107,434
45 217,510.33 6,033 6,033 100,000 95,196 95,196 100,000 1,208,879 1,208,879
46 228,385.84 5,840 5,840 100,000 98,303 98,303 102,236 1,319,615 1,319,615
47 239,805.14 5,652 5,652 100,000 101,512 101,512 104,557 1,440,496 1,440,496
48 251,795.39 5,469 5,469 100,000 104,825 104,825 106,922 1,572,450 1,572,450
49 264,385.16 5,291 5,291 100,000 108,247 108,247 109,329 1,716,491 1,716,491
50 277,604.42 5,117 5,117 100,000 112,040 112,040 112,040 1,878,077 1,878,077
51 291,484.64 4,948 4,948 100,000 116,334 116,334 116,334 2,061,406 2,061,406
52 306,058.87 4,784 4,784 100,000 120,793 120,793 120,793 2,262,632 2,262,632
53 321,361.82 4,624 4,624 100,000 125,422 125,422 125,422 2,483,499 2,483,499
54 337,429.91 4,468 4,468 100,000 130,230 130,230 130,230 2,725,927 2,725,927
55 354,301.40 4,316 4,316 100,000 135,221 135,221 135,221 2,992,020 2,992,020
<CAPTION>
END OF
POLICY DEATH
YEAR BENEFIT
------ ---------
<S> <C>
1 100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
11 100,000
12 100,000
13 100,000
14 104,549
15 110,874
16 119,349
17 128,424
18 138,138
19 148,532
20 159,653
21 173,006
22 187,419
23 202,976
24 219,764
25 237,878
26 255,152
27 273,649
28 293,492
29 314,804
30 337,751
31 369,573
32 404,262
33 442,058
34 483,216
35 528,004
36 576,699
37 629,585
38 687,257
39 750,212
40 818,933
41 893,950
42 975,838
43 1,065,228
44 1,162,806
45 1,269,323
46 1,372,400
47 1,483,711
48 1,603,899
49 1,733,656
50 1,878,077
51 2,061,406
52 2,262,632
53 2,483,499
54 2,725,927
55 2,992,020
</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 monthly policy expense charges equal to
.058% multiplied by the Policy Value which is equivalent to an annual rate
of 0.70% of such amount, annual maintenance fees, current cost of insurance
rates, 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 .042% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .50% 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 only the Initial Premium is paid. Values would be different if
additional Premiums are paid.
(5) Assumes no riders are in effect.
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
$100,000 FACE AMOUNT
INITIAL PREMIUM 24,208.14
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
12% HYPOTHETICAL
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL GROSS INVESTMENT
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
END OF AT 5% ----------------------------------- ----------------------------------- --------------------
POLICY INTEREST POLICY CASH DEATH POLICY CASH DEATH POLICY CASH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
------ ------------- ----------- --------- ----------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 25,418.55 23,314 20,530 100,000 24,735 21,951 100,000 26,157 23,373
2 26,689.47 22,418 19,937 100,000 25,261 22,780 100,000 28,274 25,793
3 28,023.95 21,518 19,339 100,000 25,785 23,606 100,000 30,575 28,396
4 29,425.15 20,611 18,735 100,000 26,304 24,427 100,000 33,077 31,201
5 30,896.40 19,694 18,121 100,000 26,816 25,242 100,000 35,799 34,226
6 32,441.22 18,763 17,493 100,000 27,317 26,046 100,000 38,763 37,492
7 34,063.28 17,813 16,845 100,000 27,804 26,835 100,000 41,990 41,022
8 35,766.45 16,837 16,172 100,000 28,270 27,604 100,000 45,507 44,841
9 37,554.77 15,828 15,485 100,000 28,710 28,347 100,000 49,340 48,977
10 39,432.51 14,780 14,780 100,000 29,119 29,119 100,000 53,525 53,525
11 41,404.13 13,648 13,648 100,000 29,422 29,422 100,000 58,024 58,024
12 43,474.34 12,467 12,467 100,000 29,676 29,676 100,000 62,940 62,940
13 45,648.06 11,229 11,229 100,000 29,878 29,878 100,000 68,321 68,321
14 47,930.46 9,926 9,926 100,000 30,018 30,018 100,000 74,217 74,217
15 50,326.98 8,545 8,545 100,000 30,084 30,084 100,000 80,655 80,655
16 52,843.33 7,072 7,072 100,000 30,065 30,065 100,000 87,660 87,660
17 55,485.50 5,492 5,492 100,000 29,946 29,946 100,000 95,262 95,262
18 58,259.78 3,783 3,783 100,000 29,707 29,707 100,000 103,511 103,511
19 61,172.76 1,919 1,919 100,000 29,326 29,326 100,000 112,462 112,462
20 64,231.40 0 0 0 28,781 28,781 100,000 122,178 122,178
21 67,442.97 0 0 0 28,046 28,046 100,000 132,728 132,728
22 70,815.12 0 0 0 27,095 27,095 100,000 144,156 144,156
23 74,355.88 0 0 0 25,896 25,896 100,000 156,535 156,535
24 78,073.67 0 0 0 24,412 24,412 100,000 169,942 169,942
25 81,977.35 0 0 0 22,592 22,592 100,000 184,463 184,463
26 86,076.22 0 0 0 20,347 20,347 100,000 200,178 200,178
27 90,380.03 0 0 0 17,609 17,609 100,000 217,279 217,279
28 94,899.04 0 0 0 14,296 14,296 100,000 235,921 235,921
29 99,643.99 0 0 0 10,247 10,247 100,000 256,275 256,275
30 104,626.19 0 0 0 5,308 5,308 100,000 278,553 278,553
31 109,857.50 0 0 0 0 0 0 303,014 303,014
32 115,350.37 0 0 0 0 0 0 329,516 329,516
33 121,117.89 0 0 0 0 0 0 358,215 358,215
34 127,173.78 0 0 0 0 0 0 389,276 389,276
35 133,532.47 0 0 0 0 0 0 422,868 422,868
36 140,209.10 0 0 0 0 0 0 459,164 459,164
37 147,219.55 0 0 0 0 0 0 498,338 498,338
38 154,580.53 0 0 0 0 0 0 540,564 540,564
39 162,309.55 0 0 0 0 0 0 586,017 586,017
40 170,425.03 0 0 0 0 0 0 634,883 634,883
41 178,946.28 0 0 0 0 0 0 687,356 687,356
42 187,893.60 0 0 0 0 0 0 743,642 743,642
43 197,288.28 0 0 0 0 0 0 803,960 803,960
44 207,152.69 0 0 0 0 0 0 868,535 868,535
45 217,510.33 0 0 0 0 0 0 937,591 937,591
46 228,385.84 0 0 0 0 0 0 1,011,343 1,011,343
47 239,805.14 0 0 0 0 0 0 1,092,688 1,092,688
48 251,795.39 0 0 0 0 0 0 1,182,853 1,182,853
49 264,385.16 0 0 0 0 0 0 1,283,309 1,283,309
50 277,604.42 0 0 0 0 0 0 1,395,900 1,395,900
51 291,484.64 0 0 0 0 0 0 1,523,196 1,523,196
52 306,058.87 0 0 0 0 0 0 1,662,100 1,662,100
53 321,361.82 0 0 0 0 0 0 1,813,672 1,813,672
54 337,429.91 0 0 0 0 0 0 1,979,065 1,979,065
55 354,301.40 0 0 0 0 0 0 2,159,541 2,159,541
<CAPTION>
END OF
POLICY DEATH
YEAR BENEFIT
------ ---------
<S> <C>
1 100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
11 100,000
12 100,000
13 100,000
14 100,000
15 104,851
16 112,205
17 120,030
18 128,354
19 137,204
20 146,614
21 157,946
22 170,104
23 183,146
24 197,133
25 212,133
26 226,201
27 241,179
28 257,154
29 274,214
30 292,481
31 318,164
32 345,992
33 376,126
34 408,740
35 444,011
36 482,122
37 523,255
38 567,592
39 615,318
40 666,627
41 721,724
42 780,825
43 844,158
44 911,961
45 984,470
46 1,051,796
47 1,125,469
48 1,206,510
49 1,296,142
50 1,395,900
51 1,523,196
52 1,662,100
53 1,813,672
54 1,979,065
55 2,159,541
</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 monthly policy expense charges, equal
to .058% multiplied by the Policy Value, which is equivalent to an annual
rate of 0.70% of such amount, annual maintenance fees, guaranteed cost of
insurance rates, 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 only the Initial Premium is paid. Values would be different if
additional Premiums are paid.
(5) Assumes no riders are in effect.
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
$100,000 FACE AMOUNT
INITIAL PREMIUM 20,943.63
USING CURRENT COST OF INSURANCE RATES
<TABLE>
<CAPTION>
12% HYPOTHETICAL
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL GROSS INVESTMENT
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
END OF AT ----------------------------------- --------------------------------- --------------------
POLICY 5% INTEREST POLICY CASH DEATH POLICY CASH DEATH POLICY CASH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
------ ------------- ----------- --------- ----------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,990.81 20,257 17,849 100,000 21.484 19,075 100,000 22,711 20,302
2 23,090.35 19,592 17,446 100,000 22,039 19,893 100,000 24,630 22,484
3 24,244.87 18,949 17,064 100,000 22,610 20,725 100,000 26,716 24,831
4 25,457.11 18,325 16,701 100,000 23,197 21,574 100,000 28,981 27,358
5 26,729.97 17,720 16,359 100,000 23,800 22,439 100,000 31,441 30,080
6 28,066.47 17,134 16,035 100,000 24,419 23,320 100,000 34,114 33,014
7 29,469.79 16,567 15,729 100,000 25,056 24,218 100,000 37,017 36,179
8 30,943.28 16,017 15,441 100,000 25,710 25,134 100,000 40,170 39,594
9 32,490.44 15,485 15,170 100,000 26,382 26,068 100,000 43,595 43,281
10 34,114.97 14,968 14,968 100,000 27,072 27,072 100,000 47,315 47,315
11 35,820.71 14,540 14,540 100,000 27,920 27,920 100,000 51,611 51,611
12 37,611.75 14,123 14,123 100,000 28,795 28,795 100,000 56,340 56,340
13 39,492.34 13,718 13,718 100,000 29,698 29,698 100,000 61,526 61,526
14 41,466.95 13,322 13,322 100,000 30,632 30,632 100,000 67,242 67,242
15 43,540.30 12,937 12,937 100,000 31,595 31,595 100,000 73,549 73,549
16 45,717.32 12,563 12,563 100,000 32,590 32,590 100,000 80,504 80,504
17 48,003.18 12,198 12,198 100,000 33,618 33,618 100,000 88,127 88,127
18 50,403.34 11,843 11,843 100,000 34,679 34,679 100,000 96,466 96,466
19 52,923.51 11,497 11,497 100,000 35,775 35,775 100,000 105,588 105,588
20 55,569.69 11,160 11,160 100,000 36,906 36,906 100,000 115,568 115,568
21 58,348.17 10,832 10,832 100,000 38,075 38,075 100,000 126,488 126,488
22 61,265.58 10,513 10,513 100,000 39,281 39,281 100,000 136,423 136,423
23 64,328.86 10,202 10,202 100,000 40,527 40,527 100,000 151,467 151,467
24 67,545.30 9,899 9,899 100,000 41,814 41,814 100,000 165,728 165,728
25 70,922.56 9,605 9,605 100,000 43,142 43,142 100,000 181,316 208,513
26 74,468.69 9,318 9,318 100,000 44,514 44,514 100,000 198,352 198,352
27 78,192.13 9,038 9,038 100,000 45,931 45,931 100,000 217,017 217,017
28 82,101.73 8,766 8,766 100,000 47,394 47,394 100,000 237,480 237,480
29 86,206.82 8,501 8,501 100,000 48,905 48,905 100,000 259,933 259,933
30 90,517.16 8,243 8,243 100,000 50,465 50,465 100,000 284,605 284,605
31 95,043.02 7,992 7,992 100,000 52,112 52,112 100,000 311,768 311,768
32 99,795.17 7,748 7,748 100,000 53,813 53,813 100,000 341,439 341,439
33 104,784.93 7,510 7,510 100,000 55,570 55,570 100,000 373,836 373,836
34 110,024.18 7,278 7,278 100,000 57,383 57,383 100,000 409,190 409,190
35 115,525.38 7,052 7.052 100,000 59,256 59,256 100,000 447,747 447,747
36 121,301.65 6,832 6,832 100,000 61,191 61,191 100,000 489,759 489,759
37 127,366.74 6,618 6,618 100,000 63,188 63,188 100,000 535,493 535,493
38 133,735.07 6,410 6,410 100,000 65,250 65,250 100,000 585,217 585,217
39 140,421.83 6,207 6,207 100,000 67,380 67,380 100,000 639,212 639,212
40 147,442.92 6,010 6,010 100,000 69,579 69,579 100,000 697,774 697,774
41 154,815.06 5,817 5,817 100,000 71,850 71,850 100,000 761,692 761,692
42 162,555.82 5,630 5,630 100,000 74,196 74,196 100,000 831,465 831,465
43 170,683.61 5,448 5,448 100,000 76,617 76,617 100,000 907,630 907,630
44 179,217.79 5,270 5,270 100,000 79,118 79,118 100,000 990,771 990,771
45 188,178.68 5,097 5,097 100,000 81,701 81,701 100,000 1,081,529 1,081,529
46 197,587.61 4,929 4,929 100,000 84,367 84,367 100,000 1,180,600 1,180,600
47 207,466.99 4,765 4,765 100,000 87,121 87,121 100,000 1,288,747 1,288,747
48 217,840.34 4,605 4,605 100,000 89,965 89,965 100,000 1,406,800 4,406,800
49 228,732.36 4,450 4,450 100,000 92,901 92,901 100,000 1,535,849 1,535,849
50 240,168.98 4,299 4,299 100,000 95,933 95,933 100,000 1,680,688 1,680,688
51 252,177.43 4,151 4,151 100,000 99,101 99,101 100,000 1,844,749 1,844,749
52 264,786.30 4,008 4,008 100,000 102,868 102,868 102,868 2,024,825 2,024,825
53 278,025.61 3,868 3,868 100,000 106,810 106,810 106,810 2,222,479 2,222,479
54 291,926.89 3,732 3,732 100,000 110,904 110,904 110,904 2,439,428 2,439,428
55 306,523.24 3,600 3,600 100,000 115,155 115,155 115,155 2,677,553 2,677,553
<CAPTION>
END OF
POLICY DEATH
YEAR BENEFIT
------ ---------
<S> <C>
1 100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
11 100,000
12 100,000
13 100,000
14 100,000
15 100,000
16 103,046
17 111,040
18 119,618
19 128,818
20 138,681
21 150,521
22 163,339
23 177,217
24 192,244
25 208,513
26 224,137
27 240,889
28 258,853
29 278,128
30 298,836
31 327,356
32 358,511
33 392,528
34 429,650
35 470,134
36 514,247
37 562,267
38 614,478
39 671,173
40 732,662
41 799,777
42 873,038
43 953,011
44 1,040,310
45 1,135,605
46 1,227,824
47 1,327,409
48 1,434,936
49 1,551,207
50 1,680,688
51 1,844,749
52 2,024,825
53 2,222,479
54 2,439,428
55 2,677,553
</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 monthly Policy expense charges equal to
.058% multiplied by the Policy Value, which is equivalent to an annual rate
of 0.70% of such amount, annual maintenance fees, guaranteed cost of
insurance rates, 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 .042% multiplied by the Variable Account Value, which
is equivalent to an annual rate of .50% 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 only the Initial Premium is paid. Values would be different if
additional Premiums are paid.
(5) Assumes no riders are in effect.
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
$100,000 FACE AMOUNT
INITIAL PREMIUM 20,943.63
USING GUARANTEED COST OF INSURANCE RATES
<TABLE>
<CAPTION>
12% HYPOTHETICAL
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL GROSS INVESTMENT
ACCUMULATED GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN RETURN
END OF AT 5% ----------------------------------- ----------------------------------- --------------------
POLICY INTEREST POLICY CASH DEATH POLICY CASH DEATH POLICY CASH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE
------ ------------- ----------- --------- ----------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,990.81 20,148 17,739 100,000 21,376 18,968 100,000 22,605 20,197
2 23,090.35 19,353 17,206 100,000 21,809 19,662 100,000 24,411 22,264
3 24,244.87 18,557 16,672 100,000 22,239 20,354 100,000 26,373 24,489
4 25,457.11 17,758 16,135 100,000 22,667 21,044 100,000 28,509 26,885
5 26,729.97 16,955 15,593 100,000 23,090 21,729 100,000 30,832 29,470
6 28,066.47 16,143 15,044 100,000 23,506 22,407 100,000 33,360 32,261
7 29,469.79 15,321 14,483 100,000 23,912 23,075 100,000 36,114 35,277
8 30,943.28 14,483 13,907 100,000 24,305 23,729 100,000 39,114 38,538
9 32,490.44 13,627 13,313 100,000 24,681 24,367 100,000 42,385 42,070
10 34,114.97 12,750 12,750 100,000 25,039 25,039 100,000 45,954 45,954
11 35,820.71 11,819 11,819 100,000 25,319 25,319 100,000 49,759 49,759
12 37,611.75 10,867 10,867 100,000 25,575 25,575 100,000 53,914 53,914
13 39,492.34 9,895 9,895 100,000 25,807 25,807 100,000 58,497 58,497
14 41,466.95 8,902 8,902 100,000 26,013 26,013 100,000 63,516 63,516
15 43,540.30 7,883 7,883 100,000 26,190 26,190 100,000 69,016 69,016
16 45,717.32 6,829 6,829 100,000 26,329 26,329 100,000 75,051 75,051
17 48,003.18 5,726 5,726 100,000 26,418 26,418 100,000 81,666 81,666
18 50,403.34 4,557 4,557 100,000 26,441 26,441 100,000 88,871 88,871
19 52,923.51 3,300 3,300 100,000 26,381 26,381 100,000 96,705 96,705
20 55,569.69 1,941 1,941 100,000 26,222 26,222 100,000 105,226 105,226
21 58,348.17 468 468 100,000 25,953 25,953 100,000 114,495 114,495
22 61,265.58 0 0 0 25,563 25,563 100,000 124,564 124,564
23 64,328.86 0 0 0 25,044 25,044 100,000 135,506 135,506
24 67,545.30 0 0 0 24,383 24,383 100,000 147,396 147.396
25 70,922.56 0 0 0 23,558 23,558 100,000 160,316 160,316
26 74,468.69 0 0 0 22,534 22,534 100,000 174,352 174,352
27 78,192.13 0 0 0 21,262 21,262 100,000 189,643 189,643
28 82,101.73 0 0 0 19,676 19,676 100,000 206,311 206,311
29 86,206.82 0 0 0 17,700 17,700 100,000 224,495 224,495
30 90,517.16 0 0 0 15,248 15,248 100,000 244,365 244,365
31 95,043.02 0 0 0 12,224 12,224 100,000 266,121 266,121
32 99,795.17 0 0 0 8,522 8,522 100,000 289,743 289,743
33 104,784.93 0 0 0 4,018 4,018 100,000 315,378 315,378
34 110,024.18 0 0 0 0 0 0 343,184 343,184
35 115,525.38 0 0 0 0 0 0 373,323 373,323
36 121,301.65 0 0 0 0 0 0 405,964 405,964
37 127,366.74 0 0 0 0 0 0 441,275 441,275
38 133,735.07 0 0 0 0 0 0 479,428 479,428
39 140,421.83 0 0 0 0 0 0 520,599 520,599
40 147,442.92 0 0 0 0 0 0 564,968 564,968
41 154,815.06 0 0 0 0 0 0 612,722 612,722
42 162,555.82 0 0 0 0 0 0 664,052 664,052
43 170,683.61 0 0 0 0 0 0 719,152 719,512
44 179,217.79 0 0 0 0 0 0 778,214 778,214
45 188,178.68 0 0 0 0 0 0 841,423 841,423
46 197,587.61 0 0 0 0 0 0 908,951 908,951
47 207,466.99 0 0 0 0 0 0 983,110 983,110
48 217,840.34 0 0 0 0 0 0 1,064,974 1,064,974
49 228,732.36 0 0 0 0 0 0 1,155,864 1,155,864
50 240,168.98 0 0 0 0 0 0 1,257,466 1,257,466
51 252,177.43 0 0 0 0 0 0 1,372,138 1,372,138
52 264,786.30 0 0 0 0 0 0 1,497,267 1,497,267
53 278,025.61 0 0 0 0 0 0 1,633,807 1,633,807
54 291,926.89 0 0 0 0 0 0 1,782,798 1,782,798
55 306,523.24 0 0 0 0 0 0 1,945,376 1,945,376
<CAPTION>
END OF
POLICY DEATH
YEAR BENEFIT
------ ---------
<S> <C>
1 100,000
2 100,000
3 100,000
4 100,000
5 100,000
6 100,000
7 100,000
8 100,000
9 100,000
10 100,000
11 100,000
12 100,000
13 100,000
14 100,000
15 100,000
16 100,000
17 102,899
18 110,200
19 117,980
20 126,271
21 136,249
22 146,986
23 158,542
24 170,979
25 184,363
26 197,018
27 210,504
28 224,879
29 240,210
30 256,584
31 279,427
32 304,230
33 331,147
34 360,343
35 391,990
36 426,262
37 463,339
38 503,399
39 546,629
40 593,216
41 643,358
42 697,255
43 755,110
44 817,125
45 883,494
46 945,309
47 1,012,604
48 1,086,274
49 1,167,422
50 1,257,466
51 1,372,138
52 1,497,267
53 1,633,807
54 1,782,798
55 1,945,376
</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 monthly policy expense charges equal to
.058% multiplied by the Policy Value, which is equivalent to an annual rate
of 0.70%, of such amount, annual maintenance fees, guaranteed cost of
insurance rates, 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 only the Initial Premium is paid. Values would be different if
additional Premiums are paid.
(5) Assumes no riders are in effect.
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>
OTHER POLICY BENEFITS AND PROVISIONS
LIMITS ON RIGHTS TO CONTEST THE POLICY
INCONTESTABILITY. Protective Life will not contest the Policy, or any
supplemental rider or reinstated benefit, after the Policy or rider or
reinstated benefit has been in force during the Insured's lifetime for two years
from the Policy Effective Date or the effective date of the rider or the date
Protective Life approves the reinstatement application, 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
riders is the amount which would have been provided at the Policy Effective
Date, 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 Proceeds, 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 Accounts".
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;
Guaranteed 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
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
40
<PAGE>
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 (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, other than causes of action arising under Federal Securities laws,
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 RIDERS AND ENDORSEMENTS]
SUPPLEMENTAL RIDERS
[The following supplemental riders are available and may be added to your
Policy provided that they are authorized for use in your state. Monthly charges
for these riders will be deducted from your Policy Value as part of the monthly
deduction (see "Monthly Deduction"). The supplemental riders available with the
Policies provide fixed benefits that do not vary with the investment experience
of the Variable Account.
CONFINED CARE ACCELERATED DEATH BENEFIT RIDER. Provides the right to
request an acceleration of a portion of the Death Benefit of the Policy in
monthly payments if the Insured is confined to a nursing home facility.
COMMUNITY CARE ACCELERATED DEATH BENEFIT RIDER. Provides the right to
request an acceleration of a portion of the Death Benefit of the Policy in
monthly payments if the Insured is receiving Community Care (as defined in the
rider).
ENDORSEMENTS. The Company has also issued as part of the Policy two
endorsements for which there are no charges. The Waiver of Surrender Charge
Endorsement provides for a waiver of surrender charges after the first Policy
Year in the event the Owner is first diagnosed as having a terminal illness or
enters a nursing home (for a period of ninety days or more). Under the
Accelerated Death Benefit Endorsement the Owner may request an acceleration of a
portion of the Death Benefit of the Policy if the Insured is diagnosed (while
covered by the Policy), with a terminal illness or injury and has a life
expectancy of 6 months or less.
Additional rules and limits apply to these supplemental riders and
endorsements. Not all such benefits may be available at any time, and
supplemental 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.
41
<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 Sub-Accounts 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. (The tax implications of using this Policy with these
applications can be complex and generally are not addressed in the discussion of
"Tax Considerations" below.) 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.
42
<PAGE>
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.
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 Value 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 earnings 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 tax purposes
and the Owner would generally be taxed currently on the income on the contract
(as defined in the tax law). 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 owner's 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
43
<PAGE>
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 in
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 Funds 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 and THUS SUBJECT TO
CURRENT TAXATION ON THE INCOME AND GAINS FROM THOSE ASSETS. 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.
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 under 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, payments generally 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 are 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 Cash Value over the "investment in the contract" generally will be
includible in the Owner's income. The "investment in the contract" generally is
the sum of Premium Payments less the aggregate amount previously received under
the Policy 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 MECS
CHARACTERIZATION OF A POLICY AS A MEC. Generally, a life insurance contract
will be considered a MEC for federal income tax purposes if (1) the life
insurance contract is received in exchange for a life insurance contract that
was a MEC, or (2) the life insurance contract is entered into after June 21,
1988 and
44
<PAGE>
premiums are paid into the life insurance contract more rapidly than the rate
defined by a "7-Pay Test." The Code generally provides that a life insurance
contract will fail this test (and thus be considered a MEC) if the accumulated
amount paid under the life insurance contract at any time during the 1st 7 years
exceeds the cumulative sum of the net level premiums which would have been paid
to that time if the life insurance contract provided for paid-up future benefits
after the payment of 7 level annual premiums.
This Policy GENERALLY WILL BE A MEC unless (1) it was received in exchange
for another life insurance policy which was not a MEC and (2) no premium
payments or other consideration (other than the exchanged contract) are paid
into the Policy during the 1st 7 Policy Years. In addition, even if the Policy
initially is not a MEC, it may, in certain circumstances, become a MEC. These
circumstances would include a later increase in benefits, any other "material
change" of the Policy (within the meaning of the tax law), and a Withdrawal or
reduction in the Death Benefit during the 1st 7 Policy Years.
TAX TREATMENT OF WITHDRAWALS, LOANS, ASSIGNMENTS AND PLEDGES UNDER MECS. If
the Policy is a MEC, Withdrawals from the Policy will be treated 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 loan (and any interest thereon)
will be treated as a Withdrawal for tax purposes. In addition, the discussion of
lapses (and surrenders) 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 any assignment, pledge, or loan,
although 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 Withdrawal, including
any deemed Withdrawals such as loans) 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 amount of a Withdrawal (or a deemed Withdrawal) that is taxable
and the amount which might be subject to the 10% penalty tax described above.
POLICIES WHICH ARE NOT MECS
TAX TREATMENT OF WITHDRAWALS GENERALLY. If the Policy is not a MEC, the
amount of any Withdrawal from the Policy generally will be treated first as
non-taxable recovery of premium and then as income from the Policy. Thus, a
Withdrawal from a Policy that is not a MEC generally will not be includible in
income except to the extent the Withdrawal exceeds the investment in the
contract immediately before the Withdrawal.
CERTAIN DISTRIBUTIONS REQUIRED BY THE TAX LAW IN THE FIRST 15 POLICY
YEARS. As stated above, section 7702 of the Code places limitations on the
amount of premiums that may be paid and the Policy Value 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),
45
<PAGE>
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, if Withdrawals are made, and in
certain other instances. In particular, an Owner electing Withdrawals on a
regular basis should consider that such Withdrawals (like all other Withdrawals)
will reduce the death benefit and thus may result in some amounts being included
in income even though the Withdrawals are less than the investment in the
contract.
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 such a Policy will constitute
income to the Owner so long as the Policy remains in force. If a Policy lapses
(or is surrendered) when a loan is outstanding, the amount of the loan
outstanding will be treated as surrender proceeds for purposes of determining
whether any amounts are includible in the owner's income.
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 with interest to the
extent required by law. 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, and other changes under the
Policy may have tax consequences (other than those discussed herein) depending
on the circumstances of such change or Withdrawal.
DISALLOWANCE OF INTEREST DEDUCTIONS
The Policy generally will be characterized as a single premium life
insurance contract under section 264 of the Code and, as a result, interest paid
on any loans under the Policy will not be tax deductible, irrespective of
whether the owner is an individual or a non-natural entity, such as a
corporation or a trust. In addition, in the case of Policies issued to a
non-natural taxpayer, or held for the benefit of such an entity, a portion of
the taxpayer's otherwise deductible interest expenses may not be deductible as a
result of ownership of a Policy even if no loans are taken under the Policy. An
exception to the latter rule is provided for certain life insurance contracts
which cover the life of an individual who is a 20-percent owner, or an officer,
director, or employee, of a trade or business. Entities that are considering
purchasing the Policy, or entities that will be beneficiaries under a Policy,
should consult a tax advisor.
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.
46
<PAGE>
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. 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 ProEquities,
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 7.25% first year
premium payment and .35% on unloaned Policy Value. 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.
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.................. 57 Chairman of the Board and a Director
John D. Johns....................... 45 President and a Director
R. Stephen Briggs................... 48 Executive Vice President and a Director
Jim E. Massengale................... 54 Executive Vice President, Acquisitions and a
Director
A.S. Williams III................... 61 Executive Vice President, Investments,
Treasurer and a Director
Danny L. Bentley.................... 39 Senior Vice President, Group and a Director
Richard J. Bielen................... 36 Senior Vice President, Investments and a
Director
Carolyn King........................ 47 Senior Vice President, Investment Products
and a Director
Deborah J. Long..................... 44 Senior Vice President, General Counsel,
Secretary and a Director
Steven A. Schultz................... 43 Senior Vice President, Financial
Institutions and a Director
Wayne E. Stuenkel................... 44 Senior Vice President and Chief Actuary and
a Director
Judy Wilson......................... 39 Senior Vice President, Guaranteed Investment
Contracts
Jerry W. DeFoor..................... 45 Vice President and Controller, and Chief
Accounting Officer
</TABLE>
Mr. Nabers has been Chairman of the Board and a Director of Protective Life
since August 1996. Mr. Nabers has been Chairman of the Board and Chief Executive
Officer of PLC and a Director since August 1996. From May 1994 to August 1996,
Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and
a Director of PLC. From May 1992 to May 1994, he was President and Chief
Executive Officer and a Director of PLC. Mr. Nabers was President and Chief
Operating Officer and a
47
<PAGE>
Director of PLC from August 1982 until May 1992. From July 1981 to August 1982,
he was Senior Vice President of PLC. From August 1982 to August 1996, he was
President of Protective Life and had been its Senior Vice President from
September 1981 to August 1982. From February 1980 to September 1981, he served
as Senior Vice President, Operations of Protective Life. From 1979 to February
1980, he was Senior Vice President, Operations and General Counsel of Protective
Life. From February 1980 to March 1983, he served as President of Empire General
Life Insurance Company, a subsidiary, and from March 1983 to December 31, 1984,
he was Chairman of the Executive Committee of Empire General. He is also a
director of Energen Corporation, National Bank of Commerce of Birmingham, and
Alabama National Bancorporation.
Mr. Johns has been President and Chief Operating Officer of PLC since August
1996 and President of Protective Life since August 1996. He was Executive Vice
President and Chief Financial Officer of PLC and of Protective Life from October
1993 to August 1996. 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 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. Massengale has been Executive Vice President, Acquisitions of Protective
and PLC since August 1996. From May 1992 to August 1996 he served as Senior Vice
President of Protective and PLC. 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. Williams has been Executive Vice President, Investments and Treasurer of
Protective and PLC since August 1996. From July 1981 to August 1996 he was
Senior Vice President, Investments and Treasurer of PLC and Protective. Mr.
Williams has been employed by Protective since November 1964.
Mr. Danny L. Bentley has been Senior Vice President, Group of Protective and
PLC since August 1996. From May 1989 to August 1996, he was Vice President,
Group Marketing of Protective.
Mr. Bielen has been Senior Vice President, Investments of PLC and Protective
since August 1996. From August 1991 to August 1996, he was Vice President,
Investments of Protective.
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 and of its parent company, 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 of America.
Ms. Long has been Senior VP, Secretary and General Counsel of PLC since
November 1996 and of Protective since September 1996. Ms. Long was Senior Vice
President and General Counsel of PLC from February 1994 to November 1996 and of
Protective from February 1994 to September 1996. 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.
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
48
<PAGE>
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. Mr. Stuenkel is a Fellow in the Society of Actuaries
and has been employed by Protective since September 1978.
Ms. Wilson has been Senior Vice President, Guaranteed Investment Contracts
of Protective and PLC since January 1995. From July 1991 to December 31, 1994,
she served as Vice President, Guaranteed Investment Contracts of Protective.
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 audited statement of net assets of the Variable Account (comprised of
seventeen Sub-Accounts) as of December 31, 1996 and December 31, 1997 and the
related statements of operations and changes in net assets for the period from
June 19, 1996 (date of inception) through December 31, 1996 and for the year
ended December 31, 1997 and included in this Prospectus, have been included
herein in reliance on the report of Coopers and Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated balance sheets of Protective Life as of December 31, 1997
and 1996 and the consolidated statements of income, stockholder's equity and
cash flows for each of the three years in the period ended December 31, 1997 and
the related financial statement schedules included in this Prospectus, have been
included herein in reliance on the report 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 Stephen
Peeples whose opinion is filed as an exhibit to the registration statement.
49
<PAGE>
LEGAL MATTERS
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice
on certain matters relating to the federal securities laws.
FINANCIAL STATEMENTS
The audited statement of net assets of the Protective Variable Life Separate
Account as of December 31, 1996 and December 31, 1997 and the related statements
of operations and changes in net assets for the period from June 19, 1996 (date
of inception) through December 31, 1996 and for the year ended December 31, 1997
as well as the Report of Independent Accountants are contained herein.
The audited consolidated balance sheets for Protective Life as of December
31, 1997 and 1996 and the related consolidated statements of income,
stockholder's equity, and cash flows for the years ended December 31, 1997, 1996
and 1995 as well as the Report of Independent Accountants are contained herein.
[Financial Statements to be filed by amendment]
50
<PAGE>
APPENDIX A
EXAMPLE OF DEATH BENEFIT COMPUTATIONS
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. 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).
TABLE OF FACE AMOUNT PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED
AGE PERCENTAGE AGE PERCENTAGE 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-1
<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 will, unless in the opinion of its
II-1
<PAGE>
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 SECTION 26(E) OF THE INVESTMENT COMPANY ACT OF
1940 SECTION 26(E) OF THE INVESTMENT COMPANY ACT OF 1940
Protective Life hereby represents that the fees and charges deducted under
the variable life insurance policies described herein are, in the aggregate,
reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by it under such policies.
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 Section 26(e) of the Investment Company Act
of 1940.
The signatures.
Written consents of the following persons:
Nancy Kane, Esq.
Stephen Peeples
Sutherland, Asbill & Brennan LLP
Coopers & Lybrand, L.L.P.
II-2
<PAGE>
The following exhibits:
<TABLE>
<C> <S> <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 (the "Underwriting Agreement").**
(3)(a)(1) Amendment I to the Underwriting Agreement.****
(3)(b) Form of Distribution Agreement between Investment Distributors, Inc. and
selling broker-dealers.**
(4) None.
(5)(a) Form of Contract.
(5)(b) Form of Community Care Accelerated Death Benefit Rider.****
(5)(c) Form of Confined Care Accelerated Death Benefit Rider.****
(5)(d) Form of Waiver of Surrender Charge for Nursing Home Confinement
Endorsement.****
(5)(e) Form of Accelerated Death Benefit Endorsement.****
(6)(a) Charter of Protective Life Insurance Company.*
(6)(b) By-Laws of Protective Life Insurance Company.*
(7) None
(8) None
(9)(a) Participation/Distribution Agreement (Protective Investment Company).**
(9)(a)(1) Amendment I to the Participation/Distribution Agreement.****
(9)(b) Participation Agreement (Oppenheimer Variable Account Funds).***
(9)(c) Participation Agreement (MFS Variable Insurance Trust).***
(9)(d) Participation Agreement (Acacia Capital Corporation).***
(10) Contract Application.****
2. Opinion and consent of Nancy Kane, Esq.****
3. Not applicable.
4. Not applicable.
5. See Exhibit 27.
6. Not applicable.
7. Opinion and consent of Stephen Peeples.****
8. Consent of Sutherland, Asbill & Brennan LLP****
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.
27. Financial Data Schedules.****
</TABLE>
- ------------------------
* Incorporated herein by reference to the initial filing of the Form S-6
Registration Statement for Protective Life's Flexible Premium Variable and
Fixed Life Insurance Policy, (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.
*** Incorporated herein by reference to Post-Effective Amendment No. 5 to the
Form N-4 Registration Statement (File No. 33-70984) as filed with the
Commission on April 30, 1997.
****To be filed by amendment.
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
-----
<C> <C> <S> <C>
1.A. (5)(a) Form of Contract.
10. Memorandum pursuant to Rule 6e-3(T)(b)(12)(iii) describing issue, transfer and
redemption procedures.
11. Powers of Attorney.
</TABLE>
<PAGE>
EXHIBIT 1A (5)(A)
[LOGO]
PROTECTIVE LIFE INSURANCE COMPANY / P. O. BOX 2606 / BIRMINGHAM, ALABAMA 35202
A STOCK COMPANY (205-879-9230)
- --------------------------------------------------------------------------------
VARIABLE LIFE INSURANCE POLICY
JOHN Q. DOE
Policy Number: SPECIMEN
This is a Modified Single Premium Variable 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 ANY AGENT
OF THE COMPANY, WITH A WRITTEN REQUEST FOR CANCELLATION WITHIN (A) 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, WHICHEVER IS LATER. 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 (AFTER DEDUCTION OF ANY POLICY FEES AND OR OTHER CHARGES) 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 THIS 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 THIS 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).
President Secretary
THE POLICY VALUES, THE AMOUNT OF THE DEATH BENEFIT PROVIDED IN THIS CONTRACT, OR
THE DURATION OF THE INSURANCE COVERAGE, MAY BE FIXED OR VARIABLE WHEN BASED ON
THE INVESTMENT EXPERIENCE OF THE VARIABLE ACCOUNT, 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. PLEASE REFER TO PAGE 11 OF THIS POLICY
FOR MORE INFORMATION REGARDING THE VARIABLE ACCOUNT. PLEASE REFER TO PAGE 13 FOR
A DESCRIPTION OF THE DEATH BENEFIT.
READ YOUR CONTRACT CAREFULLY
THIS POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY
MODIFIED SINGLE PREMIUM VARIABLE
LIFE INSURANCE POLICY
NON-PARTICIPATING
<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...... 5
Misstatement of Age or Sex........ 6
Non-Participating................. 6
Suicide Exclusion................. 6
Termination....................... 6
Representations and
Contestability.................. 6
Reports........................... 6
Arbitration....................... 7
CONTROL PROVISIONS.................... 7
The Parties Involved.............. 7
Rights of Owner................... 7
Contingent Owner.................. 7
Beneficiary....................... 8
Changing the Owner................ 8
Assignment........................ 8
Protection of Proceeds............ 8
Suspension or Delay in Payment.... 8
Tax Considerations................ 8
Changes in Policy Cost Factors.... 9
Coverage Limitations.............. 9
PREMIUMS.............................. 9
Premium Payment(s)................ 9
Allocation of Premium
Payment(s)...................... 9
Grace Period...................... 9
Reinstatement..................... 9
Minimum Values.................... 10
DEDUCTIONS FROM POLICY VALUE.......... 10
Monthly Deductions................ 10
Policy Expense Charge............. 10
Cost of Insurance Charge.......... 10
Mortality and Expense Risk
Charge.......................... 10
OTHER DEDUCTIONS...................... 10
Annual Maintainance Fee........... 11
Transfer Fee...................... 11
Surrender Charge and Premium Tax
Recovery Charge................. 11
BASIS OF COMPUTATIONS FOR COST OF
INSURANCE CHARGE.................... 11
FIXED ACCOUNT......................... 11
Calculation of the Fixed Account
Value........................... 11
Interest Credited................. 11
VARIABLE ACCOUNT...................... 11
General Description............... 11
Sub-Accounts of the Variable
Account......................... 12
Valuation of Assets............... 12
Calculation of Sub-Account
Values.......................... 12
Net Investment Factor............. 13
DEATH BENEFIT......................... 13
Death Benefit Proceeds............ 13
Amount of Death Benefit
Proceeds........................ 13
Payment of Death Benefit
Proceeds........................ 13
Suspension of Payment............. 14
Creditor Claims................... 14
TRANSFERS............................. 14
Transfer Rights................... 14
SURRENDERS AND WITHDRAWALS............ 14
Surrenders........................ 14
Surrender Charge and Premium Tax
Recovery Charge................. 14
Withdrawals....................... 15
Annual Withdrawal Amount.......... 15
Decreasing the Face Amount........ 16
POLICY LOANS.......................... 16
Right to Make Loans, Policy
Debt............................ 16
Maximum Loan...................... 16
Interest.......................... 16
Preferred Loan.................... 16
Collateral........................ 16
Repaying Policy Debt.............. 17
CHANGING THIS POLICY.................. 17
Change Approval................... 17
Increasing the Face Amount........ 17
SETTLEMENT OPTIONS.................... 17
Availability of Options........... 17
Minimum Amounts................... 17
Electing a Settlement Option...... 18
Effective Date and Payment Date... 18
Description of Options............ 18
</TABLE>
2
<PAGE>
POLICY SPECIFICATIONS
<TABLE>
<S> <C>
POLICY NUMBER: SPECIMEN
POLICY ISSUE DATE: OCTOBER 1, 1997 POLICY EFFECTIVE DATE: OCTOBER 1, 1997
INSURED: JOHN Q. DOE ISSUE AGE: 35 SEX: MALE
INITIAL FACE AMOUNT: $100,000 MINIMUM FACE AMOUNT: $10,000
INITIAL PREMIUM PAYMENT: $16,107.21 MONTHLY ANNIVERSARY DAY: 1
OWNER: JOHN Q. DOE RATE CLASS: NON-SMOKING
</TABLE>
<TABLE>
<CAPTION>
MONTHLY CHARGE
RIDER NUMBER SCHEDULE OF BENEFITS DURING FIRST YEAR
- ---------------------- -------------------------------------------- --------------------------------------------
<S> <C> <C>
*******************************************************************************************
</TABLE>
GUARANTEED INTEREST RATE FOR FIXED ACCOUNT 4% ANNUALLY (.3274% MONTHLY)
PREFERRED LOAN INTEREST RATE: 4.50% ANNUALLY (.3675% MONTHLY)
INITIAL ANNUAL EFFECTIVE INTEREST RATE FOR FIXED ACCOUNT DURING THE FIRST POLICY
YEAR 5.0%
THIS POLICY PROVIDES LIFE INSURANCE COVERAGE ON THE INSURED UNTIL TERMINATION,
PROVIDED THAT THE POLICY VALUE IS SUFFICIENT TO COVER THE DEDUCTIONS FOR THE
COST OF THE BENEFITS OF THIS POLICY. THERE MAY BE LITTLE OR NO SURRENDER VALUE
PAYABLE ON CONTRACT TERMINATION.
MONTHLY DEDUCTIONS
The following charges and fees will be deducted monthly on each Monthly
Anniversary Day based on the Policy Value and the Variable Account Value as
applicable. These Monthly Deductions are:
POLICY EXPENSE CHARGE: .058% per month of the Policy Value as of the Valuation
Day which coincides with each Monthly Anniversary Day will be deducted from the
Variable Account and Fixed Account Value in all Policy Years. This is equivalent
to an annual rate of .70% of such amount.
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 0.42% multiplied by the Variable Account Value, which is
equivalent to an annual rate of .50% of such amount.
COST OF INSURANCE CHARGE: The current monthly charge is the lesser of: (1) .054%
multiplied by the Policy Value during Policy Years 1 through 10 and .046%
multiplied by the Policy Value in Policy Years 11 and thereafter; or (2) the
Guaranteed Maximum Monthly Cost of Insurance as calculated using the table
below. The Company reserves the right to charge the Guaranteed Maximum Monthly
Cost of Insurance.
To calculate the monthly cost of insurance based on the table below, the Company
will: (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 any monthly fees and charges) at the beginning of the policy
month; (3) multiply the difference by the Cost of Insurance Rate shown below;
divided by 1,000.
3
<PAGE>
POLICY SPECIFICATIONS (CONTINUED)
GUARANTEED MAXIMUM MONTHLY COST OF INSURANCE RATES
PER $1,000 OF NET AMOUNT AT RISK
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED ATTAINED
AGE RATE AGE RATE AGE RATE AGE RATE AGE
- --------------- --------- --------------- --------- --------------- ---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 20 40 $ .19837 60 $ 1.10872 80
1 21 41 .21337 61 1.22399 81
2 22 42 .22921 62 1.35683 82
3 23 43 .24672 63 1.50726 83
4 24 44 .26590 64 1.67446 84
5 25 45 .28758 65 1.85761 85
6 26 46 .31092 66 2.05588 86
7 27 47 .33594 67 2.26846 87
8 28 48 .36346 68 2.49956 88
9 29 49 .39348 69 2.75590 89
10 30 50 .42768 70 3.07023 90
11 31 51 .46688 71 3.40320 91
12 32 52 .51192 72 3.75991 92
13 33 53 .56365 73 4.19334 93
14 34 54 .62121 74 4.67004 94
15 35 $ .14418 55 .68546 75 5.18002 95
16 36 .15168 56 .75557 76 5.71918 96
17 37 .16169 57 .82985 77 6.28340 97
18 38 .17252 58 .91249 78 6.87612 98
19 39 .18420 59 1.00517 79 7.51606 99
<CAPTION>
ATTAINED
AGE RATE
- --------------- -----------
<S> <C>
0 $ 8.22374
1 9.01809
2 9.91568
3 10.91280
4 11.99039
5 13.12417
6 14.29993
7 15.49991
8 16.71909
9 17.97489
10 19.28573
11 20.68242
12 22.21790
13 24.04369
14 26.50346
15 30.20739
16 36.35803
17 47.21179
18 66.20701
19 83.33333
</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.
OTHER DEDUCTIONS
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.
ANNUAL MAINTENANCE FEE: $35.00 will be deducted from the Policy Value on each
Policy Anniversary. Currently, the Company will waive this fee on a Policy
Anniversary if the Policy Value on such date equals or exceeds $50,000.
CHARGES FOR BENEFITS UNDER RIDERS: Every month the Company deducts a charge for
any riders.
SURRENDER CHARGE AND PREMIUM TAX RECOVERY CHARGE. If this Policy is surrendered,
or if this Policy lapses, or if an amount greater than the Annual Withdrawal
Amount is requested by the Owner, during the first nine Policy Years following
each Premium Payment, we will deduct a Surrender Charge and Premium Tax Recovery
Charge from the amount surrendered as set forth below. After the ninth Policy
Year following each Premium Payment no Surrender Charge or Premium Tax Recovery
Charge will be assessed.
The Surrender Charge and Premium Tax Recovery Charge are applied to and
calculated separately for each Premium Payment. Surrender Charges and Premium
Tax Recovery Charges shall not apply to the amount by which your Policy Value
exceeds cumulative Premium Payments made as of the date the withdrawal request
is received at our Home Office.
ANNUAL WITHDRAWAL AMOUNT is the amount you may withdraw during a Polcy Year and
not incur a Surrender Charge or Premium Tax Recovery Charge. The Annual
Withdrawal Amount is (i) an amount equal to 10% of the initial Premium Payment
made if the Withdrawal request is received during the first Policy Year or
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POLICY SPECIFICATIONS (CONTINUED)
(ii) an amount equal to 10% of all Premium Payments made as of the last Policy
Anniversary, net of all Premium Payment withdrawn if the Withdrawal is received
after the first Policy Year. If the aggregate Withdrawals in a Policy Year
exceed this Annual Withdrawal Amount, the additional amount that may be
withdrawn that Policy Year without incurring a Surrender Charge or Premium Tax
Recovery Charge is equal to the remaining Policy Value that exceeds Premium
Payments made. This determination will be made as of the date the Withdrawal
request is received at our Home Office.
<TABLE>
<CAPTION>
DURING SURRENDER CHARGE YEARS PREMIUM TAX RECOVERY CHARGE
POLICY AS A PERCENTAGE OF EACH DURING AS A PERCENTAGE OF EACH
YEARS PREMIUM PAYMENT WITHDRAWN POLICY PREMIUM PAYMENT WITHDRAWN
<S> <C> <C> <C>
1 9% 1 2.50%
2 8% 2 2.25%
3 7% 3 2.00%
4 6% 4 1.75%
5 5% 5 1.60%
6 4% 6 1.25%
7 3% 7 1.00%
8 2% 8 .75%
9 1% 9 .50%
10+ 0% 10+ 0
</TABLE>
<TABLE>
<S> <C>
ALLOCATION OF PREMIUM PAYMENTS:
Protective Variable Life Separate Account
Sub-Accounts:
Goldman Sachs/PIC Growth & Income 10.00%
Goldman Sachs/PIC Global 10.00%
Goldman Sachs/CORE U.S. Equity 10.00%
Calvert CRI Strategic Growth 10.00%
Calvert CRI Balanced 10.00%
MFS Emerging Growth 10.00%
MFS Growth with Income 10.00%
Oppenheimer Aggressive Growth 10.00%
Oppenheimer Strategic Bond 10.00%
Protective Life General Account:
Fixed Account 10.00%
</TABLE>
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<PAGE>
DEFINITIONS
ANNUAL WITHDRAWAL AMOUNT. Is the annual amount you may withdraw during a Policy
Year and not incur a Surrender Charge or a Premium Tax Recovery Charge as shown
on the Policy Specifications Page.
ATTAINED AGE. The Insured's age as of the last 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, or if no Beneficiary
has been designated, 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. Is equal to the Policy Value minus any applicable Surrender Charge
and Premium Tax Recovery Charge.
DEATH BENEFIT. The greater of the Face Amount of insurance on the Insured's
date of death or a specified percentage of the Policy Value on the date of the
Insured's Death (see page 13).
DEATH BENEFIT PROCEEDS. The amount payable to the Beneficiary if the Insured
dies while the Policy is in force which is equal to the Death Benefit less any
Policy Debt and unpaid Monthly Deductions if the Insured dies during a grace
period.
FACE AMOUNT. Initially the Face Amount is shown on the Policy Specifications
Page. Thereafter, the Face Amount may be increased in accordance with the terms
of this Policy or may change in accordance with the Death Benefit and Withdrawal
provisions.
FIXED ACCOUNT. Part of our General Account to which Policy Value may be
transferred or Premium Payments 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. Insured. The
person whose life is insured by this Policy.
ISSUE AGE. The Insured's age as of the last birthday on the Policy Effective
Date.
ISSUE DATE. The date this 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 this 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.
6
<PAGE>
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.
MONTHLY DEDUCTIONS. The fees and charges deducted monthly based on the Policy
Value and/or Variable Account Value as described 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 the Monthly Deductions as shown on the Policy Specifications Page).
NET ASSET VALUE PER SHARE. The value per share of any Fund as computed on any
Valuation Day as described in the Fund prospectus.
OWNER. The person(s) who own this Policy. Herein referred to as "you" or
"your".
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 decrease or other changes to coverage, the effective date shall be
the Monthly Anniversary Day on or next following the date the change 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 and maintain
this Policy.
PROTECTIVE LIFE INSURANCE COMPANY. Herein referred to as "We", "Us", "Our" and
"Company".
SETTLEMENT OPTION. Alternative to a lump sum for payment by Us under the Death
Benefit and surrender provisions of this Policy.
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 as defined on Page 12.
SURRENDER VALUE. The Cash Value minus any outstanding Policy Debt.
UNIT. A unit of measurement used to calculate the Sub-Account Values.
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 to which Policy Value may be transferred or
Premium Payments 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.
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<PAGE>
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.
This Policy is issued in consideration of payment of the initial Premium Payment
shown on the Policy Specifications Page.
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 the President, Secretary
or a Vice President 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
have been purchased at the Policy Effective Date, at the correct age and sex.
The Cash Value will be recalculated by recreating this Policy from Policy
Effective Date to the present date with the revised amount of insurance.
NON-PARTICIPATING. This Policy does not share in our surplus or profits and
does not pay dividends.
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 Premium Payments made 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 charge 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 lapses, as described in the sub-section entitled "Grace
Period" under "Premiums" and the sub-section entitled "Collateral" under
"Policy Loans".
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 this 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 Issue Date,
or benefits added by a supplemental Policy Specifications Page, the Company
cannot contest the validity of any benefits so added after the benefits have
been in force during the lifetime of the Insured for two years from the
effective date of the addition of the benefits unless fraud is involved.
8
<PAGE>
The Company cannot contest the validity of any reinstated benefits after the
reinstated benefits have been in force during the lifetime of the Insured for
two years from the date the Company approves the reinstatement application
unless fraud is involved.
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) Premium Payments
made 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.
In addition, the Company will provide a Report for this Policy at any time upon
the Owner's written request. If the Owner(s) requests this information more
frequently than annually, the Company may charge a fee which shall not exceed
$50.
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, other
than causes of action arising under Federal securities law, 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.
Judgment 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.
9
<PAGE>
RIGHTS OF OWNER. While the Insured is living, the Owner(s) may exercise all
rights and benefits contained in this 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 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 Death
Benefit proceeds for up to two months and any withdrawal, surrender or the
making of a policy loan for up to six months after We receive a written request.
10
<PAGE>
If We delay payment of surrender benefits under this Policy, We will pay the
Owner interest at the rate specified under applicable state law as required, if
any, at the time of the surrender 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 and (b) process a Withdrawal if the Premium Payment or
Withdrawal would cause this Policy to fail to qualify as a life insurance
contract. The Company also reserves the right to refund a Premium Payment if
such refund is necessary and prevents this Policy from failing 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 and mortality and expense risk charges 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 this Policy is delivered to the Owner(s) is the same as that
indicated in the application, the Company reserves the right to cancel this
Policy or re-underwrite this Policy and make appropriate adjustments to the
monthly cost of insurance charge.
PREMIUMS
PREMIUM PAYMENT(S). Premium Payment(s) are payable at our Home Office or to any
Agent of the Company. Premium Payment(s) must be made by check payable to
Protective Life Insurance Company or by any other method which the Company deems
acceptable. Upon request, a receipt for Premium Payment(s) will be sent. The
Initial Premium Payment is shown on Page 3. After the first Policy Anniversary,
the Company will accept, subject to the terms of this Policy, additional Premium
Payments. Any subsequent Premium Payments made will generally require an
increase in the Face Amount of this Policy which will be subject to evidence of
insurability. Refer to the section "Changing This Policy" for provisions
outlining Increases in Face Amount. The Company reserves the right to apply all
subsequent Premium Payments first to Policy Debt, if any, as a loan repayment
before application to the Sub-Accounts and/or the Fixed Account.
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
this 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 this 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 this Policy is delivered.
ALLOCATION OF PREMIUM PAYMENT(S). Premium Payments, net of initial charges,
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 Premium Payments, and the sum of allocations must add up to 100%.
If the Contract is issued in a state where, upon cancellation and within the
cancellation period, the Company returns the Premium Payment(s) made, the
Company reserves the right to allocate the initial
11
<PAGE>
Premium Payment and any additional Premium Payments made during cancellation
period to the Fixed Account or Money Market Sub-Account. Thereafter, allocations
will be made as shown in the Policy Specifications Page in accordance with the
selections made by the Owner(s).
GRACE PERIOD. If the Surrender 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 Premium Payments 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
Premium Payments due to the Owner's last known address. The Company will also
mail a notice of such Premium Payments due to the address of any assignee of
record at least 30 days prior to the end of the Grace Period. 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 this 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 this Policy if the Company
receives:
(1) the Owner's written request within five years after the end of the Grace
Period,
(2) evidence of insurability satisfactory to the Company,
(3) payment of Premium Payments equal to all Monthly Deductions that were
due and unpaid during the Grace Period with interest at a rate not to
exceed 6% per annum compounded annually, if required by the Company, and
payment of Premium Payments at least sufficient to keep this Policy in
force for three months (We may accept Premium Payments 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.
MINIMUM VALUES. The values and benefits of this Policy shall not be less than
the minimum benefits required by the statutes of the state in which this Policy
was delivered.
DEDUCTIONS FROM POLICY VALUE
MONTHLY DEDUCTIONS. The Monthly Deductions are charges made as of the Policy
Effective Date and on each Monthly Anniversary thereafter. Monthly Deductions
will reduce the Sub-Account Value(s) and/or Fixed Account Value in proportion
that the Fixed Account Value and each Sub-Account Value bears to the Policy
Value. Beginning as of the Policy Effective Date, We will deduct Monthly
Deductions described in the Policy Specifications Page.
POLICY EXPENSE CHARGE. We will deduct a monthly charge from the Variable
Account and the Fixed Account Values equal to the percentage of the Policy Value
shown on the Policy Specifications Page.
COST OF INSURANCE CHARGE. The monthly Cost of Insurance Charge, which is
described on the Policy Specifications Page, is determined at the beginning of
each policy month by the Company. The Cost of Insurance Charge is deducted from
the Variable Account and Fixed Account Values.
CHARGES FOR BENEFITS UNDER RIDERS. We will deduct a monthly charge for each
rider to the Policy as shown on the Policy Specifications Page.
MORTALITY AND EXPENSE RISK CHARGE. We will deduct a Mortality and Expense Risk
Charge equal, on a monthly basis, to the percentage shown on the Policy
Specifications Page of the daily net asset value of
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<PAGE>
each Sub-Account in the Variable Account. This deduction is made to compensate
the Company for assuming the mortality and expense risks under this Policy. The
Mortality and Expense Risk Charge is deducted only from the Variable Account.
OTHER DEDUCTIONS
We also make the following other deductions as they occur:
(1) Annual Maintenance fee, if applicable, on each Policy Anniversary and on
any day this Policy is surrendered if the surrender occurs on any day
other than the Policy Anniversary.
(2) Transfer fee for certain transfers of the Policy Value.
(3) Surrender Charge and Premium Tax Recovery Charge, if applicable.
ANNUAL MAINTENANCE FEE. The Annual Maintenance Fee is shown on the Policy
Specifications Page and is deducted from the Policy Value on each Policy
Anniversary. The Annual Maintenance Fee will be deducted from each Sub-Account's
Value and the Fixed Account's Value in the same proportion that such values have
to the unloaned Policy Value.
TRANSFER FEE. The Transfer Fee is described on the Policy Specification Page.
SURRENDER CHARGE AND PREMIUM TAX RECOVERY CHARGE. The Surrender Charge and
Premium Tax Recovery Charge are shown on the Policy Specifications Page and are
deducted if you surrender this Policy, or if an amount greater than the Annual
Withdrawal Amount is requested, or if this Policy lapses at the end of a Grace
Period.
BASIS OF COMPUTATIONS FOR COST OF INSURANCE CHARGES
Minimum Surrender Values are based on the maximum cost of insurance rates and
the guaranteed interest rate shown on the Policy Specification Pages. The
maximum cost of insurance rates are based on the Commissioner's 1980 Standard
Ordinary Smoker or Non-Smoker, Male or Female Mortality Table (age last
birthday) and the rate class of the Insured. Surrender Values are at least equal
to those required by law.
FIXED ACCOUNT
CALCULATION OF THE FIXED ACCOUNT VALUE. The value of the Fixed Acunt at any
time is equal to:
(a) the Premium Payments, net of the initial charges, 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 or transfers from the Fixed Account, including any
Transfer Fees deducted from the Fixed Account; less
(e) any Surrender Charges and Premium Tax Recovery Charge deducted;less
(f) any Annual Maintenance Fees; less
(g) Monthly Deductions other than the Mortality and Expense Risk Charge.
INTEREST CREDITED. The Company guarantees that the interest credited during the
first Policy Year to the initial 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.
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<PAGE>
For subsequent Premium Payments 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 Premium Payment 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 Premium Payment is allocated or the date the transfer is made.
After the guaranteed interest rate expires, (i.e., 12 months after the Premium
Payment or transfer is placed in the Fixed Account) We will credit interest on
the Fixed Account Value attributable to such Premium Payments 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%.
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.
The Company reserves the right to apply different interest rate guarantees to
amounts credited to the Fixed Account.
VARIABLE ACCOUNT
GENERAL DESCRIPTION. The variable benefits under this Policy are provided
through the Protective Variable Life Separate Account which is a separate
investment account of the Company. 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. The assets of the Variable Account are available to cover the
liabilities of the General Account of the Company only to the extent that the
assets of the Variable Account exceed the liabilities of the Variable Account
arising under the policies supported by the Variable Account.
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 Per Share.
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.
14
<PAGE>
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 Premium Payments allocated or Policy
Value transferred to the Sub-Accounts.
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
Owners(s) received for each of 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 Premium Payments, net of the initial charges,
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 Premium Payments 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 Funds held in the SubAccount, 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.
DEATH BENEFIT
DEATH BENEFIT PROCEEDS. 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), minus (2), minus
(3), where:
(1) is the Death Benefit;
(2) is any Policy Debt; and
(3) is any unpaid Monthly Deductions, if the Insured dies during a grace period.
15
<PAGE>
The death benefit will be the greater of the Face Amount of insurance on the
Insured's date of death; or a specified percentage of the Policy Value on the
date of the Insured's death as indicated on the Table of Percentages below.
TABLE OF PERCENTAGES
<TABLE>
<CAPTION>
ATTAINED ATTAINED ATTAINED ATTAINED
AGE PERCENTAGE AGE PERCENTAGE 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>
The Table of Percentages are determined to comply with Section 7702 of the
Internal Revenue Code, as amended.
PAYMENT OF DEATH BENEFITS PROCEEDS. We will pay the Death Benefit Proceeds to
the Beneficiary in a lump sum, unless a Settlement Option has been selected.
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.
TRANSFERS
TRANSFER RIGHTS. On or after the later of : (1) thirty days after the Policy
Effective Date; or (2) six days after the ten-day cancellation period, or such
other period as required by law, 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 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.
16
<PAGE>
SURRENDERS AND WITHDRAWALS
SURRENDERS. Prior to the Insured's death, and while this 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 this Policy. Once the surrender is effective, all
benefits provided by this Policy cease and this Policy cannot be reinstated.
SURRENDER CHARGE AND PREMIUM TAX RECOVERY CHARGE. Full surrenders and certain
Withdrawals will be subject to a Surrender Charge and Premium Tax Recovery
Charge. The Surrender Value is equal to the Policy Value minus any applicable
Surrender Charge, Premium Tax Recovery Charge, and Policy Debt. A Surrender
Charge and Premium Tax Recovery Charge will not apply to the Annual Withdrawal
Amount or the payment of the Death Benefit.
The Surrender Charge and Premium Tax Recovery Charge are described on the Policy
Specifications Page. The Surrender Charge and Premium Tax Recovery Charge apply
to and are calculated separately for each Premium Payment. The Company assumes
that Premium Payments are withdrawn on a "first-in, first-out" (FIFO) basis, and
that any Policy Value in excess of Premium Payments made is withdrawn first
before any Premium Payment(s). A Surrender Charge will not apply to any earnings
on Premium Payment(s). Surrenders will result in the cancellation of Units from
each applicable Sub-Account and/or in a reduction of the Fixed Account Value.
WITHDRAWALS. At any time prior to the Insured's death, and while this Policy is
in force, the Owner(s) may make a written request for a Withdrawal of the
Surrender Value. In order to request a Withdrawal during the first Policy Year,
the Owner must have made an Initial Premium Payment of at least $10,000. In
order to request a Withdrawal on or after the first Policy Anniversary, the
Policy Value must be at least $10,000 as of the date we receive the request. The
Company will withdraw the amount requested from the Policy Value as of the
business day on or next following the day the written request is received. A
Surrender Charge and Premium Tax Recovery Charge may apply if the cumulative
amount of the withdrawal exceeds the Annual Withdrawal Amount. We reserve the
right to decline to process a Withdrawal request if, after the Face Amount is
decreased as provided below, the remaining Face Amount would be below the
Minimum Face Amount on the Policy Specifications Page; 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.
Withdrawals and any applicable Surrender Charge and Premium Tax Recovery Charge
will result in the cancellation of Units from each applicable Sub-Account and/or
a reduction in the Fixed Account Value. The Owner(s) may specify the amount of
the Withdrawal to be made from any Sub-Account and/or the Fixed Account. If the
Owner does not so specify, and/or if the amount in the designated Sub-Accounts
or the Fixed Account is insufficient to comply with the request, the Withdrawal
will be made from each Sub-Account and the Fixed Account based on the proportion
that such Sub-Account Value and/or Fixed Account Value bears to the total
unloaned Policy Value on the Valuation Day immediately prior to the Withdrawal.
The Company reserves the right to refuse a withdrawal request, if after the
withdrawal, the Policy Value would be less than ten percent of the current Face
Amount.
ANNUAL WITHDRAWAL AMOUNT. The Annual Withdrawal Amount is the annual amount you
may withdraw during a Policy Year and not incur a Surrender Charge or Premium
Tax Recovery Charge. The Annual Withdrawal amount is shown on the Policy
Specifications Page.
DECREASING THE FACE AMOUNT. In the event a Withdrawal is requested, We will
reduce the Face Amount of this Policy. Any decrease in Face Amount will go into
effect on the date that the Withdrawal is processed.
17
<PAGE>
The decrease in Face Amount will be made on a proportionate basis in accordance
with the following formula:
Decreased Face Amount = F times (P minus W) divided by P
<TABLE>
<C> <C> <S>
F = Current Face Amount
P = Policy Value
W = Withdrawal Amount and any applicable charges
</TABLE>
POLICY LOANS
RIGHT TO MAKE LOANS, POLICY DEBT. At any time prior to the Insured's death, and
while this Policy is in force, the Owner(s) may make a written request for a
loan on this Policy provided it has Surrender Value greater than zero. However,
this 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 this Policy on the date the policy loan request is
received.
INTEREST. Except as described below, the interest charged on any policy loan is
at an effective annual rate of 6%, compounded yearly on the Policy Anniversary.
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. Interest, as it accrues
from day to day, is considered part of the policy debt.
PREFERRED LOAN. If the Surrender Value exceeds the total of all Premium
Payments made since issue, a preferred loan is available. The amount available
for a preferred loan is the amount by which the Surrender Value exceeds total
Premium Payments made. The preferred loan portion of the Loan Account will be
charged interest at a rate not to exceed the Preferred Loan Interest Rate shown
on the Policy Specifications Page. The amount of loan that qualifies as a
preferred loan is determined as of the date a request for a loan is received and
on each Policy Anniversary.
COLLATERAL. When a policy loan is made, an amount 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
amount 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
amount will be allocated in the same proportion that the value of your Fixed
Account and the value of your Sub-Account(s) bear to the total unloaned Policy
Value on the date We make the policy loan. An amount equal to any unpaid policy
loan interest will also be transferred on each Policy Anniversary to the Loan
Account. 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 the Guaranteed Interest Rate for the Fixed Account. 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. The interest will be
transferred to the Sub-Account(s) and the Fixed Account in the same proportion
that Premium Payments are allocated.
If the Loan Account Value exceeds the Cash Value 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 this Policy will
lapse. We will send the notice to you and to any assignee of record.
18
<PAGE>
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 certain changes subject to certain conditions. The
Owner's request must be received in writing at the Company's Home Office.
CHANGE APPROVAL. 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, regulations or rulings issued by a governmental agency. No
agent has the authority to make any changes or waive any of the terms of this
Policy.
INCREASING THE FACE AMOUNT. 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
(i) satisfactory proof of insurability in connection with evaluating any
requested increase in Face Amount; and
(ii) a minimum additional Premium Payment of $10,000 for such increase.
The Insured's current Attained Age must be less than the maximum issue age. Any
increase approved by the Company will be effective on the Monthly Anniversary
Day that falls on or next following the date the Company approves the request
for increase. The effective date of any increase will be shown on the
supplemental Policy Specifications Page which will be issued and attached to
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
Proceeds or Surrender Value may be applied under any Settlement 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 Settlement Option.
MINIMUM AMOUNTS. If the amount to be applied under any Settlement 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 SETTLEMENT OPTION. To elect any Settlement Option, the Company
requires that a written request, satisfactory to it, be received at its Home
Office. The Owner(s) may elect a Settlement Option during the Insured's
lifetime. If the Death Benefit Proceeds are payable in one sum when the Insured
dies, the Beneficiary may elect a Settlement Option with the Company's consent.
EFFECTIVE DATE AND PAYMENT DATE. The effective date of a Settlement Option is
the date the amount is applied under that option. For Death Benefit Proceeds,
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.
19
<PAGE>
A later date for the first payment may be requested in the Settlement 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 Settlement Options are described below.
Any other Settlement Option agreed to by the Company may be elected. The
Settlement 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 the 1983 Individual Annuity Mortality Table A projected
13 years with interest at 3% per annum. One year will be deducted from the
Attained Age of the named person for every completed three years beyond the year
1996. The Age of the payee is the age at the birthday nearest to the effective
date of the Option.
20
<PAGE>
OPTION 2 TABLE
<TABLE>
<CAPTION>
MALE FEMALE MALE FEMALE
GUARANTEED PERIOD GUARANTEED PERIOD GUARANTEED PERIOD GUARANTEED PERIOD
AGE OF ------------------------ ------------------------ AGE OF ------------------------ ------------------------
PAYEE 10 YRS 20 YRS 10 YRS 20 YRS PAYEE 10 YRS 20 YRS 10 YRS 20 YRS
- ----------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-30 3.08 3.07 2.95 2.95 56 4.33 4.16 3.93 3.86
31 3.10 3.09 2.97 2.96 57 4.42 4.22 4.00 3.92
32 3.13 3.12 2.99 2.98 58 4.51 4.29 4.08 3.98
33 3.16 3.15 3.01 3.00 59 4.61 4.36 4.16 4.04
34 3.19 3.17 3.03 3.03 60 4.71 4.43 4.24 4.11
35 3.22 3.20 3.06 3.05 61 4.82 4.49 4.33 4.18
36 3.25 3.23 3.08 3.07 62 4.94 4.57 4.42 4.25
37 3.28 3.26 3.11 3.10 63 5.06 4.64 4.52 4.32
38 3.32 3.29 3.13 3.12 64 5.19 4.71 4.63 4.40
39 3.35 3.33 3.16 3.15 65 5.32 4.77 4.74 4.47
40 3.39 3.36 3.19 3.18 66 5.46 4.84 4.86 4.55
41 3.43 3.40 3.22 3.21 67 5.61 4.91 4.98 4.63
42 3.48 3.44 3.25 3.24 68 5.76 4.97 5.12 4.70
43 3.52 3.48 3.29 3.27 69 5.91 5.03 5.26 4.78
44 3.57 3.52 3.32 3.31 70 6.08 5.09 5.41 4.86
45 3.61 3.56 3.36 3.34 71 6.25 5.15 5.56 4.93
46 3.67 3.61 3.40 3.38 72 6.42 5.20 5.73 5.00
47 3.72 3.66 3.44 3.42 73 6.59 5.24 5.90 5.06
48 3.77 3.70 3.49 3.48 74 6.77 5.29 6.08 5.13
49 3.83 3.75 3.53 3.50 75 6.96 5.33 6.27 5.18
50 3.89 3.81 3.58 3.55 76 7.14 5.36 6.46 5.23
51 3.96 3.86 3.63 3.59 77 7.32 5.39 6.66 5.28
52 4.02 3.92 3.69 3.64 78 7.51 5.42 6.87 5.32
53 4.10 3.97 3.74 3.69 79 7.69 5.44 7.08 5.36
54 4.17 4.03 3.80 3.74 80 7.87 5.46 7.29 5.39
55 4.25 4.10 3.87 3.80 & 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.
21
<PAGE>
EXHIBIT 10
PROTECTIVE LIFE INSURANCE COMPANY
DESCRIPTION OF ISSUANCE, TRANSFER, AND REDEMPTION PROCEDURES FOR
INDIVIDUAL MODIFIED SINGLE 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 Modified Single Premium Variable and
Fixed Life Insurance Policy (the "Policy"), the transfer of assets held
thereunder, and the redemption by owner(s) of the Policy ("Owner") 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." If, an initial 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. Conditional life insurance
coverage may be provided under the terms of the Conditional Receipt provisions
stated in the application form. In accordance with the terms of the Conditional
Receipt, the total amount of insurance coverage with the Company which may
become effective prior to delivery of the Policy to the Owner shall not exceed
$250,000.
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 $10,000.
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 premium payment to the
Protective Money Market sub-account or the fixed 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 Company's home office.
<PAGE>
Upon expiration of this period, the Policy value in the Protective
Investment Company Money Market sub-account or the fixed account and any
additional premium payments will be allocated according to the Owner's
allocation instructions then in effect. In all other states, the Company will
allocate the initial premium payment in accordance with the Owner's
instructions.
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 and any supplemental riders.
A policy will remain in force while the cash surrender value is sufficient
to pay the monthly deduction. 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.
The total of all premiums paid in any Policy year may not 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.
Protective Life places the insured in a rate class when the Policy is
issued, based on Protective's Life's underwriting of the application. This
original rate class applies to the initial face amount of the Policy.
C. REINSTATEMENT PROCEDURES
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 (with
interest at a rate not to exceed 6%, if required by the Company) 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
minus any applicable surrender charges and premium tax recovery charges. A full
monthly deduction will be charged for the month of reinstatement.
II. REDEMPTION PROCEDURES: MONTHLY DEDUCTIONS, SURRENDER AND RELATED
TRANSLATIONS
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 for mutual funds and contractual plans.
A. MONTHLY CHARGES AND DEDUCTIONS FROM POLICY VALUE
On each Policy monthly anniversary day and Policy anniversary, the Company
will deduct charges and fees from the Policy value. The monthly and annual
deductions from Policy value include:
1. 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 rates for the Insured by the Policy value for that monthly
anniversary day. The current monthly charges are the lesser
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of: (a) .054% multiplied by the Policy value during years 1-10 and .046%
multiplied by the Policy value during years 11 and thereafter; or (b) the
Guaranteed Maximum Monthly Cost of Insurance Rates per $1,000 of Net Amount of
Risk. The Company reserves the right to charge the Guaranteed Maximum Monthly
Cost of Insurance.
The guaranteed maximum rates for standard classes are based on the 1980
Commissioners' Standard Ordinary Mortality Tables, Male or Female, Smoker or
Non-Smoker Mortality Rates ("1980 CSO Tables"). The guaranteed rates for
substandard classes are based on multiples of or additions to the 1980 CSO
Tables.
The guaranteed 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: Smoker
class (ages 15-85) or Non-Smoker (ages 0-85), and substandard rate classes,
which involve a higher mortality risk than the Smoker or Non-Smoker classes.
2. Monthly Policy Expense Charge--This charge compensates Protective Life
for sales and administive expenses associated with the Policies and the Variable
Account. These expenses relate to record keeping, processing death benefit
claims, Policy loans, Policy changes, reporting, and overhead costs, processing
applications and establishing Policy records and reports and other
communications to Policy Owners. The current monthly policy expense charge is
equal to .058% multiplied by the Policy value, which is equivalent to an annual
rate of 0.70% of such amounts.
3. Mortality and Expense Risk Charge--This monthly charge compensates
Protective Life for the mortality risk it assumes if the Insured on the Policies
die sooner than anticipated. The expense risk assumed is that expenses could
exceed the amounts realized from charges assessed for issuing and administering
the Policies and the Variable Account. This charge is deducted from assets in
the sub-accounts attributable to the Policies. The maximum monthly mortality and
expense charge is equal to .075% multiplied by the Variable Account Value which
is equivalent to an annual rate of 0.90% of such amounts for all years.
Currently in Policy years 11 and thereafter, this charge is equal to .042%
multiplied by the Variable Account Value which is equivalent to an annual rate
of 0.50% of such amounts.
4. Annual Maintainance Fee--The Company reserves the right to deduct a
$35.00 fee from the Policy value on each Policy anniversary. Currently the
Company will waive this fee at each Policy anniversary if the Policy value
equals or exceeds $50,000.
5. Charges for Benefits under Riders--The Company will deduct a monthly
charge for each rider to the Policy.
B. SURRENDERS AND PARTIAL WITHDRAWALS
An Owner of a Policy may submit a written request to the Company to
surrender the Policy or 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, unless the Owner elects an available alternative settlement
option 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 and premium tax
recovery charges. Coverage under a Policy will end as of the date of surrender.
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Through the first nine Policy years following each premium payment, a
surrender charge ("contingent deferred sales charge") and premium tax recovery
charge will be deducted from the Policy value if a Policy is surrendered, if a
withdrawal is taken in excess of the "Annual Withdrawal Amount," or if a Policy
lapses. These charges will be deducted before any surrender or withdrawal value
is paid.
The Annual Withdrawal Amount is the annual amount the Owner may withdraw
during a Policy year and not incur a surrender charge or premium tax recovery
charge. The Annual Withdrawal Amount is (i) an amount equal to ten percent of
all premium payments made if the withdrawal request is received during the first
policy year or (ii) is an amount equal to 10% of all premium payments made as of
the last policy anniversary, net of all premium payments withdrawn, if the
withdrawal request is received after the first policy year.
The surrender charge and premium tax recovery charge for each premium
payment is equal to the surrender charge percentage or premium tax charge
percentage for the Policy year in which the surrender, withdrawal, or lapse of
such premium payment occurs, multiplied by the aggregate amount of premium
payments. The surrender charge in the first Policy year is 9% grading down to 0%
in the 10th Policy year. The premium tax recovery charge in the first Policy
year is 2.50% grading down to 0% in the 10th Policy year.
The Policy Owner may request withdrawal of the Policy value by sending a
written request to the Company. The Company will withdraw the amount requested
plus any applicable surrender charges and premium tax recovery charge, as of the
date the request is received in the Company's home office. The Owner may elect
to deduct the amount of the withdrawal from any sub-account or fixed account. If
the Owner does not specify an allocation, or if the sub-account value or
guaranteed 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.
The death benefit will be affected by withdrawals. For each amount
withdrawn, there will be a proportionate decrease in face amount inclusive of
surrender and premium tax recovery charges. In order to request a withdrawal
during the first Policy Year the Owner must have made an initial premium payment
of at least $10,000. In order to request a withdrawal on or after the first
policy anniversary the Policy value as of the date the Company receives the
request must be at least $10,000.
In the event a withdrawal is requested by the Owner, the Company will reduce
the face amount proportionately by the withdrawn amount plus any applicable
surrender charges and premium tax recovery charges. The Company will refuse to
process a withdrawal request if the effect of the withdrawal would reduce the
face amount below the minimum amount in effect for Policies issued under
then-current rules or if the withdrawal would cause the Policy to be
disqualified as a life insurance contract under applicable tax laws, as
interpreted by Protective Life.
The decrease in the face amount will be in effect on the date the withdrawal
is processed. The formula used to determine the proportionate decrease in face
amount is as follows:
Decreased Face Amount = F times (P minus W) divided by P
where F = Current Face Amount
P = Policy Value
W = Withdrawal Amount and any applicable charges
C. INCREASING THE FACE AMOUNT
An Owner may increase the face amount of the Policy after the first policy
anniversary by submitting a written request to the Company. Any increase in face
amount must be at least $10,000. The Company reserves the right to require
satisfactory evidence of insurability. An increase in face amount will not be
accepted unless the insured's attained age is less than the current maximum
issue age for the Policy.
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D. DEATH BENEFIT CLAIMS
While the Policy remains in force, the Company will pay the death benefit
proceeds to the named beneficiary as elected by the Owner. The Company will pay
the death benefit proceeds within seven calendar days after receipt in its home
office of all necessary proof of death of the insured. Payment of a death
benefit proceeds 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 described below; plus
2. any additional benefits due under any supplemental riders attached to
this Policy; less
3. any policy debt or lien; less
4. any unpaid monthly deductions if the insured dies during the grace
period.
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.
E. POLICY LOANS
At any time, while the insured is still living, an Owner(s) may borrow not
more than 90% of the Policy surrender value on the date the loan request is
received by the Company. Any policy loan must be for at least $500. 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 accounts and into the Policy's loan account.
The Owner can specify the sub-accounts and fixed accounts from which collateral
is transferred to the loan account. If no allocation is specified, collateral is
transferred from each sub-account and guaranteed account in the same proportion
that the cash value in each sub-account and guaranteed account bears to the
total unloaned policy value on the date that the loan is made.
Like the guaranteed account, a Policy's loan account is part of Protective
Life's general account. Except as described below, the Company will charge
interest daily on any outstanding loan at an effective annual rate of 6.0%.
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 interest is added to the loan
principal and becomes part of the Policy debt. An amount equal to any Policy
loan interest will be deducted from the sub-accounts and guaranteed account in
the same proportion that each sub-account value and guaranteed account value
bear to the total unloaned Policy value.
The loan account is credited with interest at an effective annual rate of
not less than the guaranteed interest rate for the guaranteed account. On each
Policy anniversary, the interest earned on the loan account will be transferred
to the sub-account(s) and the guaranteed account in the same proportion that
premium payments are allocated. 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.
The Owner may request a preferred loan of that portion of the Policy
surrender value that exceeds the total of all premium payments made since issue.
The amount of a loan that qualifies as a preferred loan is calculated as of the
date a request for a loan is received and on each policy anniversary. The
Company will charge interest on the preferred loan at a rate not to exceed the
rate specified in the Policy at issue.
If the Insured dies while a loan is outstanding, the Policy debt is deducted
from the death benefit in calculating the death benefit proceeds.
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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 Company's 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 accounts in accordance with current premium payment allocations unless
the owner specifies otherwise. Amounts paid while a Policy loan is outstanding
will be treated as repayment of indebtedness.
III. TRANSFERS
A Policy's policy 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 follows: (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 guaranteed account
from which the transfer is made. If, after the transfer, the Policy value
remaining in a sub-account or guaranteed 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 imposed, the fee will be deducted from the sub-accounts and
guaranteed account on a proportionate basis. If an amount is being transferred
from more than one sub-account or guaranteed account, the transfer fee will be
deducted proportionately from the amount being transferred from each.
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. Protective Life requires 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 or 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 guaranteed account or any sub-account(s). (However, amounts may not be
transferred to a dollar cost averaging segment of the guaranteed account.) 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.
The Owner may elect dollar cost averaging for periods of at least 12 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.
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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 account value in the source fund 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.
The Owner may direct the Company to systematically and automatically
transfer on a quarterly, semiannual, or annual basis, account value among
specified sub-accounts. This is known as the portfolio rebalancing method of
investment and is done to achieve a particular percentage allocation among such
sub-accounts. 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 fixed account
value will not be considered in the automatic transfer process. The Company
makes no guarantee that the portfolio rebalancing 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 portfolio
rebalancing upon 30 days written notice.
The Applicant/Owner can elect portfolio rebalancing at the time of
application or any time thereafter by submitting a written request to the
Company. This feature is available on a quarterly, semiannual, and annual basis
and may commence on any day of the month that the Owner requests, except the
29th, 30th or 31st. Once elected, portfolio rebalancing will begin on the first
modal anniversary following the election unless otherwise directed by the Owner.
The Company will continue to process these automatic transfers until the
earlier of the following:
(1) sub-account values are depleted;
(2) the Owner requests the Company to cease the automatic transfers, by
written notice. This can also be requested by telephone if the Owner previously
authorized us to take telephone instructions.
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 states, it expires at the latest of: (1) 10 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) guaranteed 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.
B. 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
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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.
C. REPRESENTATIONS AND CONTESTABILITY
The Company cannot bring any legal action to contest the validity of this
Policy or a supplemental rider after it has been in force during the lifetime of
the Insured for the Policy or any supplemental rider 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 after the benefits have been in force during
the lifetime of the Insured for two years from the effective date of the
addition of the benefit or from the date the Company approves the reinstatement
application unless fraud is involved.
D. 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 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 at issue (or, in the case of an increase in face amount, at the
effective date of such increase) at the correct age and sex.
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EXHIBIT 11
DIRECTORS' POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors of
Protective Life Insurance Company, a Tennessee corporation, ("Company") by his
execution hereof or upon an identical counterpart hereof, does hereby constitute
and appoint John D. Johns, Nancy Kane or Jerry W. DeFoor, and each or any of
them, his true and lawful attorney-in-fact and agent, for him and in his name,
place and stead, to execute and sign the Registration Statement on Form S-6 to
be filed by the Company with respect to variable life products with the
Securities and Exchange Commission, pursuant to the provisions of the Securities
Exchange Act of 1933 and the Investment Company Act of 1940 and, further, to
execute and sign any and all pre-effective and post-effective amendments to such
Registration Statement, and to file same, with all exhibits and schedules
thereto and all other documents in connection therewith, with the Securities and
Exchange Commission and with such state securities authorities as may be
appropriate, granting unto said attorney-in-fact and agent, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes of the undersigned might or could do in person, hereby
ratifying and confirming all the acts of said attorney-in-fact and agent or any
of them which they may lawfully do in the premises or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand and
seal this 29th day of January, 1998.
WITNESS TO ALL SIGNATURES:
/s/ DANNY L. BENTLEY
-------------------------------------------
Danny L. Bentley
/s/ RICHARD J. BIELEN
-------------------------------------------
Richard J. Bielen
/s/ R. STEPHEN BRIGGS
-------------------------------------------
R. Stephen Briggs
/s/ JERRY W. DEFOOR
-------------------------------------------
Jerry W. DeFoor
/s/ JOHN D. JOHNS
-------------------------------------------
John D. Johns
/s/ CAROLYN KING
-------------------------------------------
Carolyn King
/s/ DEBORAH J. LONG
-------------------------------------------
Deborah J. Long
/s/ JIM E. MASSENGALE
-------------------------------------------
Jim E. Massengale
/s/ DRAYTON NABERS, JR.
-------------------------------------------
Drayton Nabers, Jr.
/s/ STEVEN A. SCHULTZ
-------------------------------------------
Steven A. Schultz
/s/ WAYNE E. STUENKEL
-------------------------------------------
Wayne E. Stuenkel
/s/ A. S. WILLIAMS III
-------------------------------------------
A. S. Williams III
