EXHIBIT 1.A(5)(a)(iv)
Security Life of Denver
Insurance Company
INSURED: XXXX XXX
POLICY DATE: January 1, 1998
POLICY NUMBER: 65000001
INITIAL STATED DEATH BENEFIT: $100,000.00
WE AGREE TO PAY the death benefit to the beneficiary upon the death of the
insured while this policy is in force.
WE AGREE TO PAY your Net Account Value to you as of the Maturity Date if the
insured is living on that date.
WE ALSO AGREE to provide the other rights and benefits of the policy. These
agreements are subject to the provisions of the policy.
RIGHT TO EXAMINE PERIOD. You have the right to examine and return this policy
within 10 days after receipt.
The policy may be returned by delivering or mailing it to us at our Customer
Service Center. Immediately upon return it will be deemed void as of the policy
date. Upon return of the policy to us, we will refund all premiums paid.
In this policy "you" and "your" refer to the owner of the policy. "We", "us"
and "our" refer to Security Life of Denver Insurance Company.
[ILLEGIBLE SIGNATURE APPEARS HERE] [ILLEGIBLE SIGNATURE APPEARS HERE]
Secretary President
This policy is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
Death benefits and other values provided by this contract, when based on the
investment experience of a separate account, are variable. These values may
increase or decrease based on investment experience and are not guaranteed as to
fixed dollar amount. Death benefits are payable by us upon the death of the
insured prior to the Maturity Date. Your Net Account Value, if any, is payable
by us if the insured is living as of the Maturity Date. Flexible premiums are
payable by you during the lifetime of the insured until the Maturity Date.
SECURITY LIFE OF DENVER INSURANCE COMPANY
A Stock Company
Customer Service Center
0000 Xxxxxxxx; Xxxxxx, Xxxxxxxx 00000
Toll Free Number: 0(000)000-0000
FORM NO. 2501 (VUL)-7/97
TABLE OF CONTENTS
SCHEDULE ......................................................................5
DEFINITION OF TERMS ...........................................................6
INSURANCE COVERAGE PROVISIONS .................................................7
EFFECTIVE DATE OF COVERAGE ..................................................7
BASE DEATH BENEFIT ..........................................................7
CHANGE IN REQUESTED INSURANCE COVERAGE ......................................7
Requested Increases in Coverage ............................................8
Requested Decreases in Coverage ............................................8
Death Benefit Option Changes ...............................................8
PAYOUT OF PROCEEDS ..........................................................8
PREMIUM PROVISIONS ............................................................9
INITIAL PREMIUM ALLOCATION ..................................................9
SUBSEQUENT PREMIUM ALLOCATIONS ..............................................9
CHANGES TO PREMIUM ALLOCATIONS ..............................................9
SCHEDULED PREMIUMS .........................................................10
UNSCHEDULED PREMIUMS .......................................................10
NET PREMIUM ................................................................10
PREMIUM LIMITATION .........................................................10
VARIABLE ACCOUNT PROVISION ...................................................10
THE VARIABLE ACCOUNT .......................................................10
VARIABLE ACCOUNT DIVISIONS .................................................11
CHANGES WITHIN THE VARIABLE ACCOUNT ........................................11
GENERAL ACCOUNT PROVISIONS ...................................................12
THE GENERAL ACCOUNT ........................................................12
GUARANTEED INTEREST DIVISION ...............................................12
LOAN DIVISION ..............................................................12
Page 2
TRANSFER PROVISIONS ..........................................................12
ACCOUNT VALUE PROVISIONS .....................................................12
ACCOUNT VALUES ON THE INVESTMENT DATE ......................................12
ACCUMULATION UNIT VALUE ....................................................13
ACCUMULATION EXPERIENCE FACTOR .............................................13
ACCOUNT VALUE OF THE DIVISIONS OF THE VARIABLE ACCOUNT .....................13
ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION ..........................14
ACCOUNT VALUE OF THE LOAN DIVISION .........................................14
MONTHLY DEDUCTION AND REFUND .................................................14
MONTHLY DEDUCTION ..........................................................14
COST OF INSURANCE ..........................................................15
PERSISTENCY REFUND .........................................................15
LOAN PROVISIONS ..............................................................15
POLICY LOANS ...............................................................15
LOAN INTEREST ..............................................................16
LOAN DIVISION ..............................................................16
PARTIAL WITHDRAWAL PROVISIONS ................................................16
SURRENDER PROVISIONS .........................................................17
SURRENDER VALUE ............................................................17
BASIS OF COMPUTATIONS ......................................................17
FULL SURRENDERS ............................................................17
GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS .......................18
GRACE PERIOD ...............................................................18
THREE YEAR CONTINUATION PERIOD .............................................18
GUARANTEE PERIOD ...........................................................18
TERMINATION ................................................................19
REINSTATEMENT ..............................................................19
DEFERRAL OF PAYMENT ........................................................20
Page 3
GENERAL POLICY PROVISIONS ....................................................20
THE POLICY .................................................................20
AGE ........................................................................20
PROCEDURES .................................................................20
OWNERSHIP ..................................................................21
BENEFICIARIES ..............................................................21
EXCHANGE RIGHT .............................................................21
COLLATERAL ASSIGNMENT ......................................................21
INCONTESTABILITY ...........................................................21
MISSTATEMENT OF AGE OR SEX .................................................22
SUICIDE EXCLUSION ..........................................................22
PERIODIC REPORTS ...........................................................22
ILLUSTRATION OF BENEFITS AND VALUES ........................................22
NONPARTICIPATING ...........................................................22
CUSTOMER SERVICE CENTER ....................................................22
PAYOUTS OTHER THAN AS ONE SUM ................................................23
ELECTION ...................................................................23
PAYOUT OPTIONS .............................................................23
CHANGE AND WITHDRAWAL ......................................................23
EXCESS INTEREST ............................................................24
MINIMUM AMOUNTS ............................................................24
SUPPLEMENTARY POLICY .......................................................24
INCOME PROTECTION ..........................................................24
DEATH OF PRIMARY PAYEE .....................................................24
PAYMENTS OTHER THAN MONTHLY ................................................24
SETTLEMENT OPTION TABLES .....................................................25
Additional benefits or riders, if any, will be listed in the schedule. The
additional provisions will be inserted in the policy.
Page 4
SCHEDULE
(Effective Date: January 1, 1998)
POLICY INFORMATION
Policy Number 65000001 Initial Stated Death Benefit $100,000.00
Adjustable Term Rider Amount $
Initial Target Death Benefit $
Insured XXXX XXX
Death Benefit Option OPTION 1
Age And Sex 35, Male Minimum Annual Premium $597.12
Premium Class Non-Smoker
Policy Date January 1, 1998 Initial Scheduled Premium $1,300.00, Annually
Maturity Date January 1, 2063
Definition of Life Insurance Test Guideline Premium/Cash Value Corridor Test
[Guarantee Period Annual Premium Guarantee Period Expiration Date ]
CUSTOMER SERVICE CENTER: 0000 Xxxxxxxx, Xxxxxx, Xxxxxxxx 00000
Coverage will expire prior to the Maturity Date if premiums are insufficient to
continue coverage and the Guarantee Period has expired. Coverage will also be
affected by Partial Withdrawals, Policy Loans, changes in the current cost of
insurance rates, the actual credited interest rate for the Guaranteed Interest
division and the investment experience of the Variable Account.
Page 5
SCHEDULE (Continued)
BENEFIT PROFILE
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SEGMENT AGE AT GUIDELINE SEGMENT
BENEFIT ISSUE MATURITY EFFECTIVE ANNUAL TARGET
DESCRIPTION AMOUNT AGE DATE DATE PREMIUM PREMIUM
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STATED DEATH BENEFIT (SEGMENT #1) $100,000.00 35 100 JANUARY 1, 1998 $1,335.36 $3,680.00
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Page 5A
SCHEDULE (Continued)
EXPENSE CHARGES
A. Premium Expense Charges (As a Percent of all premiums) - Premium expense
charges will equal the sum of the following:
1. Sales Load:
Premiums Paid Premiums Paid in
Up to Segment Target Premium Excess of Segment Target Premium
Years 1-5 8% 3%
Years 6+ 3% 3%
2. State and Local Taxes: 2.5%
3. Federal Deferred Acquisition Cost Tax: 1.5%
We reserve the right to increase or decrease the premium expense charges
for taxes due to any change in tax law. We further reserve the right to
increase or decrease the premium expense charges for federal deferred
acquisition cost taxes due to any change in the cost to us.
B. Monthly Expense Charges - Monthly expense charges will equal the sum of the
following:
Initial Policy Charge: $10 per month for the first 5 policy
years
Monthly Administrative Charge: $5 per month plus $0.0125 per thousand
of Stated Death Benefit (or
Target Death Benefit, if
greater), for all years. The per
thousand charge is limited to
$15.00 per policy month.
[GUARANTEED MINIMUM DEATH BENEFIT CHARGE]
[$0.01 per thousand dollars of Stated Death Benefit per policy month
during the guarantee period, subject to the conditions set forth in the
policy.]
ANNUAL MORTALITY AND EXPENSE RISK CHARGE (Based on the percentage of assets in
each Variable Account Division)
Mortality And Expense Risk Charge: 0.75%
Page 5B
SCHEDULE (Continued)
POLICYHOLDER TRANSACTION CHARGES
Requests for Sales Illustrations: First illustration each year is free of
charge; thereafter $25 for each illustration
requested.
Premium Allocation Changes: First five changes each policy year are free
of charge; thereafter $25 for each change.
Partial Withdrawal Service Fee: See below
Other Policy Transaction Charges: The charges for transfers between divisions
of the Variable Account or between the
Guaranteed Interest Division and the
Variable Account Divisions; and charges for
other Variable Account management functions
are governed by the Prospectus in effect at
the time of the transaction.
POLICY LOANS
Policy Loan Interest Rate: 3.75% per year
Guaranteed Interest Rate Credited to Loan Division: 3.00% per year
Minimum Loan Amount: $100
Maximum Loan Amount: Refer to the Loan
Provisions section
PARTIAL WITHDRAWALS
Minimum Partial Withdrawal Amount: $100
Maximum Partial Withdrawal Amount: Amount which will leave
$500 as the Net Account
Value
Partial Withdrawal Service Fee: The lesser of $25 or 2% of
the amount withdrawn
Limit on Partial Withdrawals: One per policy year
GUARANTEED INTEREST DIVISION
Guaranteed Interest Rate For Guaranteed Interest Division: 3.00% per year
Page 5C
SCHEDULE (Continued)
To comply with the Definition of Life Insurance Test you have elected the
policy's Base Death Benefit at any time will be at least equal to the Account
Value times the appropriate factor from this table.
DEFINITION OF LIFE INSURANCE DEATH BENEFIT FACTORS BASED ON
GUIDELINE PREMIUM / CASH VALUE CORRIDOR TEST
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ATTAINED FACTOR ATTAINED FACTOR ATTAINED FACTOR ATTAINED FACTOR
AGE AGE AGE AGE
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0 2.50 25 2.50 50 1.85 75 1.05
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1 2.50 26 2.50 51 1.78 76 1.05
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2 2.50 27 2.50 52 1.71 77 1.05
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3 2.50 28 2.50 53 1.64 78 1.05
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4 2.50 29 2.50 54 1.57 79 1.05
----------------------------------------------------------------------------------------
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5 2.50 30 2.50 55 1.50 80 1.05
----------------------------------------------------------------------------------------
6 2.50 31 2.50 56 1.46 81 1.05
----------------------------------------------------------------------------------------
7 2.50 32 2.50 57 1.42 82 1.05
----------------------------------------------------------------------------------------
8 2.50 33 2.50 58 1.38 83 1.05
----------------------------------------------------------------------------------------
9 2.50 34 2.50 59 1.34 84 1.05
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
10 2.50 35 2.50 60 1.30 85 1.05
----------------------------------------------------------------------------------------
11 2.50 36 2.50 61 1.28 86 1.05
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12 2.50 37 2.50 62 1.26 87 1.05
----------------------------------------------------------------------------------------
13 2.50 38 2.50 63 1.24 88 1.05
----------------------------------------------------------------------------------------
14 2.50 39 2.50 64 1.22 89 1.05
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
15 2.50 40 2.50 65 1.20 90 1.05
----------------------------------------------------------------------------------------
16 2.50 41 2.43 66 1.19 91 1.04
----------------------------------------------------------------------------------------
17 2.50 42 2.36 67 1.18 92 1.03
----------------------------------------------------------------------------------------
18 2.50 43 2.29 68 1.17 93 1.02
----------------------------------------------------------------------------------------
19 2.50 44 2.22 69 1.16 94 1.01
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
20 2.50 45 2.15 70 1.15 95 1.00
----------------------------------------------------------------------------------------
21 2.50 46 2.09 71 1.13 96 1.00
----------------------------------------------------------------------------------------
22 2.50 47 2.03 72 1.11 97 1.00
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23 2.50 48 1.97 73 1.09 98 1.00
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24 2.50 49 1.91 74 1.07 99 1.00
----------------------------------------------------------------------------------------
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100 1.00
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Page 5D
SCHEDULE (Continued)
TABLE OF GUARANTEED RATES
Guaranteed Maximum Cost of Insurance Rates Per $1000
(Basic)
-----------------------------------------------------------------------------------------------------------------------------
Attained Monthly Cost of Attained Monthly Cost of Attained Monthly Cost of Attained Monthly Cost of
Age Insurance Rate Age Insurance Rate Age Insurance Rate Age Insurance Rate
-----------------------------------------------------------------------------------------------------------------------------
0 0.34900 25 0.12675 50 0.41009 75 5.03724
-----------------------------------------------------------------------------------------------------------------------------
1 0.08921 26 0.12342 51 0.44693 76 5.59039
-----------------------------------------------------------------------------------------------------------------------------
2 0.08254 27 0.12175 52 0.48965 77 6.17549
-----------------------------------------------------------------------------------------------------------------------------
3 0.08170 28 0.12008 53 0.53742 78 6.78686
-----------------------------------------------------------------------------------------------------------------------------
4 0.07920 29 0.12008 54 0.59276 79 7.44038
-----------------------------------------------------------------------------------------------------------------------------
5 0.07503 30 0.12008 55 0.65401 80 8.16249
-----------------------------------------------------------------------------------------------------------------------------
6 0.07169 31 0.12258 56 0.72203 81 8.97320
-----------------------------------------------------------------------------------------------------------------------------
7 0.06669 32 0.12509 57 0.79429 82 9.89813
-----------------------------------------------------------------------------------------------------------------------------
8 0.06336 33 0.12926 58 0.87251 83 10.95204
-----------------------------------------------------------------------------------------------------------------------------
9 0.06169 34 0.13427 59 0.96090 84 12.11846
-----------------------------------------------------------------------------------------------------------------------------
10 0.06085 35 0.14094 60 1.05949 85 13.37460
-----------------------------------------------------------------------------------------------------------------------------
11 0.06419 36 0.14762 61 1.16916 86 14.69860
-----------------------------------------------------------------------------------------------------------------------------
12 0.07086 37 0.15680 62 1.29417 87 16.08129
-----------------------------------------------------------------------------------------------------------------------------
13 0.08254 38 0.16682 63 1.43714 88 17.49682
-----------------------------------------------------------------------------------------------------------------------------
14 0.09588 39 0.17851 64 1.59899 89 18.96601
-----------------------------------------------------------------------------------------------------------------------------
15 0.10756 40 0.19103 65 1.77812 90 20.51212
-----------------------------------------------------------------------------------------------------------------------------
16 0.11924 41 0.20607 66 1.97123 91 22.16549
-----------------------------------------------------------------------------------------------------------------------------
17 0.12842 42 0.22110 67 2.18097 92 23.98724
-----------------------------------------------------------------------------------------------------------------------------
18 0.13343 43 0.23865 68 2.40660 93 26.06643
-----------------------------------------------------------------------------------------------------------------------------
19 0.13844 44 0.25619 69 2.65338 94 28.78427
-----------------------------------------------------------------------------------------------------------------------------
20 0.14011 45 0.27709 70 2.93268 95 32.81758
-----------------------------------------------------------------------------------------------------------------------------
21 0.13927 46 0.29966 71 3.30181 96 39.64294
-----------------------------------------------------------------------------------------------------------------------------
22 0.13677 47 0.32391 72 3.61779 97 53.06605
-----------------------------------------------------------------------------------------------------------------------------
23 0.13427 48 0.34984 73 4.04199 98 83.33333
-----------------------------------------------------------------------------------------------------------------------------
24 0.13093 49 0.37912 74 4.52073 99 83.33333
-----------------------------------------------------------------------------------------------------------------------------
The rates shown are for a standard rate class. If the policy is based on a
special rate class (other than standard), the maximum cost of insurance rates
will be adjusted using the rating factor shown in the Benefit Profile of the
Schedule for the special class. If the special rate class is a stated
percentage increase, the maximum cost of insurance rates will be determined by
multiplying the rates for a standard rate class shown above by the rating factor
shown in the Benefit Profile of the Schedule. If the special rate class is a
flat amount per $1,000, the maximum cost of insurance rates will be determined
by adding the flat amount per $1,000 shown in the Benefit Profile of the
Schedule to the rate per $1,000 for the standard rate class shown above. The
rates shown above are based on the 1980 Commissioners' Standard Ordinary
Mortality Table, age nearest birthday.
Page 5E
DEFINITION OF TERMS
Account Value - The sum of the amounts allocated to the Divisions of the
Variable Account and to the Guaranteed Interest Division, as well as any amount
set aside in the Loan Division to secure a Policy Loan.
Accumulation Unit Value - The value of the Accumulation Units of each Division
of the Variable Account. The Accumulation Unit Value is determined as of each
Valuation Date.
Base Death Benefit - Initially, this is the Stated Death Benefit under the
policy. The Base Death Benefit may be greater than the Stated Death Benefit
depending on which death benefit option and which test for the Internal Revenue
Code definition of life insurance you choose.
Cash Surrender Value - The amount of your Account Value plus any refund of sales
load due.
Customer Service Center - Our administrative office at 0000 Xxxxxxxx; Xxxxxx, XX
00000.
Division(s) of the Variable Account - The investment options available, each of
which invests in shares of one of the portfolios.
General Account - The account which contains all of our assets other than those
held in the variable account or our other separate accounts.
General Interest Division - Part of our General Account to which a portion of
the Account Value may be allocated and which provides guarantees of principal
and interest.
Guideline Annual Premium - The premium used to calculate how Net Premium is
allocated to each segment of Stated Death Benefit and to determine any
persistency refund.
Initial Period - The Initial Period ends on the earlier of: a) the date this
policy was delivered to you plus the Right to Examine Period, so long as we
receive notice of the delivery date at our Customer Service Center before the
date defined in (b), or (b) the date this policy is mailed from our Customer
Service Center plus the deemed mailing time and the Right to Examine Period. The
deemed mailing time is five days.
Investment Date - The date we allocate funds to your policy. We will allocate
the initial Net Premium to your policy on the Valuation Date immediately
following the latest of the date we receive at least one quarter of the Minimum
annual premium as shown in the Schedule attached to your policy, we have
approved the policy for issue, and all issue requirements have been met and
received in our Customer Service Center.
Loan Division - Part of our General Account in which funds are set aside to
secure any outstanding Policy Loan and accrued loan interest when due.
Maturity Date - The date the policy matures. This is the policy anniversary on
which the insured's age is 100.
Monthly Processing Date - The date each month on which the monthly deductions
from the Account Value are due. The first Monthly Processing Date will be the
policy date or the Investment Date, if later. Subsequent Monthly Processing
Dates will be the same date as the policy date each month thereafter unless this
is not a Valuation Date, in which case the Monthly Processing Date occurs on the
next Valuation Date.
Net Account Value - The amount of the Account Value minus any Policy Loan and
accrued loan interest.
Net Cash Surrender Value - The amount of the Cash Surrender Value minus any
Policy Loan and accrued loan interest.
Net Premium - The Net Premium equals the premium paid minus the premium expense
charges shown in the Schedule. These charges are deducted from the premiums
before the premium is applied to your Account Value.
Page 6
Partial Withdrawal - The withdrawal of a portion of your Net Account Value from
the policy. The Partial Withdrawal may reduce the amount of Base Death Benefit
in force.
Policy Loan - The sum of amounts you have borrowed from your policy, increased
by any Policy Loan interest capitalized when due, and reduced by any Policy Loan
repayments.
Right to Examine Period - The period of time within which the owner may examine
the policy and return it for a refund.
Scheduled Premium - The premium amount which you specify on the application as
the amount you intend to pay at fixed intervals over a specified period of time.
premiums may be paid on a quarterly, semiannual, or annual basis, as you
determine; you need not pay the Scheduled Premium, and you may change it at any
time. Also, within limits, you may pay less or more than the Scheduled Premium.
Segment - The Stated Death Benefit shown on the Benefit Profile of the Schedule
is the initial Segment, or Segment 1. Each increase in the Stated Death Benefit
(other than an option change) is a new Segment. Each new Segment will be shown
separately on the Benefit Profile of the Schedule. The first year for a Segment
begins on the effective date of the Segment and ends one year later. Each
subsequent year begins at the end of the prior Segment year. Each new Segment
may be subject to new expense charges, guaranteed minimum death benefit charges,
cost of insurance charges and incontestability and suicide exclusion periods.
Stated Death Benefit - The sum of the Segments under the policy. The Stated
Death Benefit changes when there is an increase or a decrease or when a
transaction on the policy causes it to change (for example, a partial withdrawal
under an Option 1 Base Death Benefit may cause the Stated Death Benefit to
change).
Target Death Benefit - The Target Death Benefit for your policy is defined in
the Adjustable Term Rider, if any, attached to the policy.
Valuation Date - A Valuation Date is any day:
(a) The New York Stock Exchange ("NYSE") is open for trading and on which
Security Life's Customer Service Center is open for business; or
(b) as may be required by law.
Valuation Period - The period which begins at 4:00 p.m. Eastern Time on
Valuation Date and ends at 4:00 p.m. Eastern Time on the next succeeding
Valuation Date.
Page 6a
INSURANCE COVERAGE PROVISIONS
EFFECTIVE DATE OF COVERAGE
The policy date shown in the Schedule is the effective date for all coverage
provided in the original application. The effective date is subject to the
payment of at least one quarter of the minimum annual premium and the acceptance
of the policy by you during the continued insurability of all persons insured by
this policy and any riders attached. The policy date is the date from which we
measure policy years and determine the Monthly Processing Date. The first
Monthly Processing Date is the Investment Date. Future Monthly Processing Dates
are the same calendar day of each month as the policy date unless this is not a
Valuation Date in which case the Monthly Processing Date occurs on the next
Valuation Date. A policy anniversary occurs each year on the same month and day
as the policy date unless this is not a Valuation Date in which case the policy
anniversary occurs on the next Valuation Date. If the policy date is February
29th, the policy anniversary will be February 28th in years in which there is
not a February 29th. The effective date for new Segments and additional benefits
is shown in the Schedule.
BASE DEATH BENEFIT
The Base Death Benefit will be, at any time, determined as follows:
Option 1: Under Option 1, the Base Death Benefit is the greater of:
(a) the Stated Death Benefit; or
(b) your Account Value multiplied by the appropriate factor from
the Definition of Life Insurance Factors shown in the
schedule.
Option 2: Under Option 2, the Base Death benefit is the greater of:
(a) the Stated Death Benefit plus the Account Value, or
(b) your Account Value multiplied by the appropriate factor from
the Definition of Life Insurance Factors shown in the
schedule.
The Stated Death Benefit and the death benefit option are shown in the Schedule
pages.
This policy is designed to qualify as a life insurance contract under the
Internal Revenue Code. All terms and provisions of the policy shall be construed
in a manner consistent with that design. The Base Death Benefit in force at any
time shall not be less than the amount of insurance necessary to achieve such
qualification under the applicable provisions of the Internal Revenue Code in
existence at the time the policy is issued. We reserve the right to amend the
policy or adjust the amount of insurance when required. We will send you a copy
of any policy amendment.
CHANGE IN REQUESTED INSURANCE COVERAGE
You may request that the insurance coverage be increased or decreased. Decreases
are not allowed before the first policy anniversary. The change in coverage may
not be for an amount less than $1,000. The effective date of the change will be
the monthly anniversary immediately following the date your written application
is approved by us. After any change to the Stated Death Benefit, you will
receive an amended Schedule reflecting the change, the benefit under any riders,
if applicable, the guaranteed cost of insurance rates, the Guideline Annual
Premium, and the new target premium.
Page 7
Requested Increases in Coverage
Subject to our limits, you may request an increase in the Stated Death Benefit.
An increase will become effective as of the monthly anniversary after we have
approved your application for increase. You must provide evidence satisfactory
to us that the insured is insurable according to our normal rules of
underwriting for this type of policy. This evidence will include an application
and may include required medical information. An increase will consist of a new
Segment of Stated Death Benefit. Each new Segment will result in a new sales
load which will be deducted from the premium allocated to the new Segment. The
new Segment may also be subject to new monthly expense charges, guaranteed
minimum death benefit charges, cost of insurance charges and incontestability
and suicide exclusion periods.
Requested Decreases in Coverage
After the first policy anniversary, you may request a decrease in the Stated
Death Benefit. A decrease will be effective as of the monthly anniversary
immediately following the date your written application is approved by us. A
decrease will first reduce Adjustable Term Insurance Rider coverage, if any is
attached to your policy, and will then reduce each of the Stated Death Benefit
Segments in the same proportion as the Stated Death Benefit is reduced.
The Stated Death Benefit after any change may not be less than $50,000.
Death Benefit Option Changes
At least 30 days prior to a policy anniversary, you may request a change to the
death benefit option. This change will be effective as of the policy
anniversary. A death benefit option change applies to the entire Stated Death
Benefit. For us to approve a change to the death benefit option from Option 1 to
Option 2, you must submit evidence to us that the insured is insurable according
to our normal rules of underwriting for this type of policy. This evidence will
include an application and may include required medical information. We may not
allow any change if it would reduce the Stated Death Benefit below the minimum
we require to issue this policy at the time of reduction. After the effective
date of the change, the Stated Death Benefit will be changed according to the
following table:
OPTION CHANGE
FROM TO STATED DEATH BENEFIT FOLLOWING CHANGE EQUALS:
Option 1 Option 2 Stated Death Benefit prior to such change
minus your Account Value as of the
effective date of the change.
Option 2 Option 1 Stated Death Benefit prior to such change
plus your Account Value as of the effective
date of the change.
For purposes of death benefit option changes, your Account Value will be
allocated to each Segment in the same proportion that the Segment bears to the
Stated Death Benefit as of the effective date of the change.
PAYOUT OF PROCEEDS
The proceeds is the amount we will pay:
a) as of the Maturity Date,
b) upon surrender of the policy before the Maturity Date, or
Page 8
c) upon the death of the insured before the Maturity Date.
The proceeds as of the Maturity Date will be your Net Account Value. The
proceeds upon surrender of this policy prior to the Maturity Date will be the
Net Cash Surrender Value. The Maturity Date is the policy anniversary on which
the insured's age is 100. The insured's age is the age listed in the Schedule
increased by the number of completed policy years since the policy date. The
amount of proceeds payable upon the death of the insured will be the Base Death
Benefit in effect on the date of the insured's death; plus any amounts payable
from any additional benefits provided by rider; minus any outstanding Policy
Loan including accrued but unpaid interest; minus any unpaid monthly deductions
incurred prior to the date of the insured's death, plus any premiums received
after the date of the insured's death. The calculation of the death benefit will
be computed as of the date of the insured's death.
We will determine the amount of proceeds payable upon the death of the insured
when we have received due proof of death and any other information which is
necessary to process the claim. Any proceeds we pay are subject to adjustments
as provided in the Misstatement of Age or Sex, Suicide Exclusion and
Incontestability provisions.
We will pay proceeds in one sum unless you request an alternate form of payment.
There are many possible methods of payment. The available payout options are
described in the Payouts Other Than As One Sum provision. Contact us or your
registered representative for additional information. Interest will be paid on
the one sum death proceeds from the date of the insured's death to the date of
payment, or until a payout option is selected. Interest will be at the rate we
declare, or at any higher rate required by law.
PREMIUM PROVISIONS
INITIAL PREMIUM ALLOCATION
If the Initial Period has not ended on the Investment Date, Net Premium amounts
designated for allocation to divisions of the Variable Account will be allocated
to the Fidelity Investments Money Market Division and any Net Premium amount
designated for allocation to the Guaranteed Interest Division will be allocated
to that division. On the Valuation Date immediately following the end of the
Initial Period, the balance of the Fidelity Investments Money Market Division
will be transferred to the other divisions of the Variable Account according to
the allocations shown in your latest instructions received at our Customer
Service Center. The amounts allocated to the Guaranteed Interest Division will
remain in that division.
If the Initial Period has ended on the Investment Date, Net Premium amounts will
be allocated to divisions of the Variable Account and/or Guaranteed Interest
Division in accordance with the allocation shown in your latest instructions
received at our Customer Service Center.
SUBSEQUENT PREMIUM ALLOCATIONS
After the initial premium allocation, all future scheduled and unscheduled
premiums will be allocated to the Investment Divisions in accordance with the
allocation shown in the latest instructions received at our Customer Service
Center (unless you otherwise specify in writing) on the Valuation date
immediately following our receipt of the premium at our Customer Service Center.
CHANGES TO PREMIUM ALLOCATIONS
Page 9
Your original allocation instructions are in your application. You may change
the allocation for subsequent premium in accordance with the instructions
included in your annual policy prospectus. If you change your premium allocation
more than 5 times per policy year, we will deduct a charge from the divisions of
the Variable Account and the Guaranteed Interest Division in the same proportion
that your Account Value of each Division bears to your Net Account Value. The
amount of this charge is shown in the Schedule.
SCHEDULED PREMIUMS
The Scheduled Premium as shown in the Schedule may be paid while this policy is
in force during the insured's lifetime. You may increase or decrease the amount
of the Scheduled Premium, subject to limits we may set and provisions in the
Premium Limitation Section. Under conditions provided in the Grace Period
provision and the guarantee period, you may be required to make premium payments
to keep the policy in force. You may pay premiums on a monthly basis through an
automated payment facility. All payment modes are subject to our minimum
requirements for the payment mode selected.
UNSCHEDULED PREMIUMS
You may make unscheduled premium payments at any time the policy is in force
during the insured's lifetime, subject to the Premium Limitation section. Unless
you tell us otherwise, these premium payments will first be applied to reduce or
pay off any existing Policy Loan and, as such, premium expense charges will not
be deducted. We may limit the amount of such unscheduled premium payments if the
payment would result in an increase in the Base Death Benefit. If the net amount
at risk is increased as a result of an unscheduled premium, we may require
evidence of insurability satisfactory to us that the insured is insurable
according to our normal rules of underwriting for this type of policy. This
evidence will include an application and may include required medical
information. The net amount at risk is the difference between the Base Death
Benefit and your Account Value.
NET PREMIUM
The Net Premium equals the premium paid minus the premium expense charges shown
in the Schedule. Premiums allocated to a new Segment will be subject to a new
sales load. Premiums are allocated in the same proportion that the Guideline
Annual Premium of each Segment bears to the sum of the Guideline Annual Premiums
of all Segments. The Guideline Annual Premium for each Segment is shown in the
Schedule. The target premium for each Segment is also shown in the Schedule.
PREMIUM LIMITATION
If the Definition of Life Insurance test used for your policy is the Guideline
Premium/Cash Value Corridor Test, we will not accept any premium that causes
your policy not to qualify as a life insurance policy under the Internal Revenue
Code.
VARIABLE ACCOUNT PROVISION
THE VARIABLE ACCOUNT
The Variable Account is an account established by us, pursuant to the laws of
the State of Colorado, to separate the assets funding the benefits for the class
of policies to which this policy belongs from the other assets of Security Life
of Denver Insurance Company.
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The Variable Account is registered as a unit investment trust under the
Investment Company Act of 1940. All income, gains and losses, whether or not
realized, from assets allocated to the Variable Account are credited to or
charged against the Variable Account without regard to income, gains or losses
of our General Account. The assets of the Variable Account are our property but
are separate from our General Account and our other Variable Accounts. That
portion of the assets of the Variable Account which is equal to the reserves and
other policy liabilities with respect to the Variable Account is not subject to
creditor claims against us.
VARIABLE ACCOUNT DIVISIONS
The Variable Account is divided into divisions, each of which invests in a
series fund portfolio designed to meet the objectives of the division. The
current eligible divisions are shown in your annual policy prospectus. We may,
from time to time, add additional divisions. If we do, you may be permitted to
select from these other divisions subject to the terms and conditions we may
impose on those allocations.
We reserve the right to limit the number of divisions in which you may invest
over the life of the policy. This limit, if any, will be listed in the updated
policy prospectus provided to you each year.
CHANGES WITHIN THE VARIABLE ACCOUNT
When permitted by law, and subject to any required notice to you and approval of
the Securities and Exchange Commission ("SEC"), state regulatory authorities or
policy owners, we may from time to time make the following changes to the
Variable Account:
. Make additional divisions available. These divisions will invest in
investment portfolios we find suitable for the policy.
. Eliminate divisions from the Variable Account, combine 2 or more
divisions, or substitute a new portfolio for the portfolio in which a
division invests. A substitution may become necessary if, in our
judgment, a portfolio no longer suits the purposes of the policy. This
may happen due to a change in laws or regulations, or a change in a
portfolio's investment objectives or restrictions. This may also happen
if the portfolio is no longer available for investment, or for some
other reason, such as a declining asset base.
. Transfer assets of the Variable Account, which we determine to be
associated with the class of policies to which your policy belongs, to
another Variable Account.
. Withdraw the Variable Account from registration under the Investment
Company Act of 1940.
. Operate the Variable Account as a management investment company under
the Investment Company Act of 1940.
. Cause one or more divisions to invest in a mutual fund other than or in
addition to the portfolios.
. Discontinue the sale of policies.
. Terminate any employer or plan trustee agreement with us pursuant to
its terms.
. Restrict or eliminate any voting rights as to the Variable Account.
. Make any changes required by the Investment Company Act of 1940 or the
rules or regulations thereunder.
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GENERAL ACCOUNT PROVISIONS
THE GENERAL ACCOUNT
The General Account holds all of our assets other than those held in the
Variable Account or our other separate accounts. The Guaranteed Interest
Division is a part of our General Account.
GUARANTEED INTEREST DIVISION
The Guaranteed Interest Division is another division to which you may allocate
premium or make transfers. The Account Value of the Guaranteed Interest Division
is equal to the Net Premium allocated to this division plus any earned interest
minus deductions taken from this division. Interest is credited at the
guaranteed rate shown in the schedule or may be credited at a higher rate. Any
higher rate is guaranteed to be in effect for at least 12 months.
LOAN DIVISION
The Loan Division is the account which is set aside to secure the Policy Loan,
if any. See the Loan Provision section for information.
TRANSFER PROVISIONS
After the Right to Examine Period, your Account Value in each division may be
transferred to any other division of the Variable Account or to the Guaranteed
Interest Division upon your request. One transfer from the Guaranteed Interest
division into the Variable divisions may be made during the first 30 days of
each policy year. Additional limitations, requirements and charges for transfers
will be listed in and governed by your annual policy prospectus in effect at the
time of the transfer. We reserve the right to modify these limitations,
requirements, and charges from time to time.
ACCOUNT VALUE PROVISIONS
The Account Value is the sum of the current amounts allocated to the divisions
of the divisions of the Variable Account and to the Guaranteed Interest Division
plus your balance in the Loan Division.
The Account Value is based on the amount and number of premiums paid, policy and
rider charges assessed, loans and withdrawals taken, monthly deductions, premium
expense charges, transaction charges, and the investment experience or credited
interest of the division to which your Account Value is allocated.
Your Net Account Value is equal to your Account Value minus any Policy Loan and
accrued but unpaid loan interest.
ACCOUNT VALUES ON THE INVESTMENT DATE
The Account Value of each division of the Variable Account and the Guaranteed
Interest Division as of the Investment Date is equal to:
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a) The allocation to that division of the first Net Premium paid (as
determined by you); minus
b) The portion of any monthly deductions due on the Investment Date
allocated to that division.
ACCUMULATION UNIT VALUE
The investment experience of a division of the Variable Account is determined as
of each Valuation Date. We use an Accumulation Unit Value to measure the
experience of each of the Variable Account Divisions during a Valuation Period.
We set the Accumulation Unit Value at $10 on the Valuation Date when the first
investments in each division of the Variable Account are made. The Accumulation
Unit Value for a Valuation Period equals the Accumulation Unit Value for the
preceding Valuation Period multiplied by the Accumulation Experience Factor
defined below for the Valuation Period.
The number of units for a given transaction related to a division of the
Variable Account as of a Valuation Date is determined by dividing the dollar
value of that transaction by that division's Accumulation Unit Value for that
date.
ACCUMULATION EXPERIENCE FACTOR
For each division of the Variable Account, the Accumulation Experience Factor
reflects the investment experience of the portfolio in which that division
invests and the charges assessed against that division for a Valuation Period.
The Accumulation Experience Factor is calculated as follows:
a) The net asset value of the portfolio in which that division invests
as of the end of the current Valuation Period; plus
b) The amount of any dividend or capital gains distribution declared and
reinvested in the portfolio in which that division invests during the
current Valuation Period; minus
c) A charge for taxes, if any.
d) The result of (a), (b) and (c) divided by the net asset value of the
portfolio in which that division invests as of the end of the
preceding Valuation Period; minus
e) The daily equivalent of the annual mortality and expense risk charge
shown in the Schedule for each day in the current Valuation Period.
ACCOUNT VALUE OF THE DIVISIONS OF THE VARIABLE ACCOUNT
On subsequent Valuation Dates after the Investment Date, your Account Value of
each division of the Variable Account is calculated as follows:
a) The number of Accumulation Units in that division as of the beginning
of the current Valuation Period multiplied by that division's
Accumulation Unit Value for the current Valuation Period; plus
b) Any additional Net Premiums allocated to that division during the
current Valuation Period; plus
c) Any Account Value transferred to or minus any Account Value
transferred from the Variable Division during the current Valuation
Period (including the applicable portion of any transfer fee); minus
d) Any Partial Withdrawals allocated to that division and any applicable
withdrawal service fees which are allocated to the Variable division
during the current Valuation Period; plus
e) Any amounts released from the Loan Division as a result of a loan or
loan interest payment, or minus amounts transferred to the Loan
Division as a result of any loans which are allocated to the Variable
Division during the current Valuation Period; minus
f) The portion of the monthly deduction allocated to the Variable
Division, if a Monthly Processing Date occurs during the current
Valuation Period.
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ACCOUNT VALUE OF THE GUARANTEED INTEREST DIVISION
On Valuation Dates after the Investment Date, your Account Value of the
Guaranteed Interest Division is calculated as follows:
a) The Account Value of the Guaranteed Interest Division at the end of
the preceding Valuation Period plus interest at the declared rate
credited during the current Valuation Period; plus
b) Any additional Net Premiums allocated to the Guaranteed Interest
Division plus interest credited to these premiums during the current
Valuation Period; plus
c) Any account Value transferred to or minus any Account Value
transferred from the Guaranteed Interest Division during the current
Valuation Period (including the applicable portion of any transfer
fee); minus
d) Any Partial Withdrawals taken and any applicable withdrawal service
fees which are allocated to the Guaranteed Interest Division during
the current Valuation Period; plus
e) Any amounts released from the Loan Division as a result of a loan or
loan interest payment, or minus amounts transferred to the Loan
division as a result of any loans which are allocated to the
Guaranteed Interest Division during the current Valuation Period;
minus
f) The portion of the monthly deduction allocated to the division, if a
Monthly Processing Date occurs during the current Valuation Period.
ACCOUNT VALUE OF THE LOAN DIVISION
On Valuation Dates after the Investment Date, your Account Value of the Loan
Division is equal to:
a) The Account Value of the Loan Division on the prior Valuation Date;
plus
b) Any interest credited to the Loan Division during the Valuation
Period; plus
c) An amount equal to any additional loans since the prior Valuation
Date; minus
d) Any loan repayments, including payment of loan interest in cash;
plus
e) The amount of accrued loan interest if the Valuation Date is a
policy anniversary; minus
f) The amount of interest credited to the Loan Division during the year
if the Valuation Date is a policy anniversary.
On policy anniversaries, any amount of interest credited to the Loan Division
during the year is transferred from the Loan Division to the Variable Account
and Guaranteed Interest Divisions according to your premium allocation then in
effect.
MONTHLY DEDUCTION AND REFUND
MONTHLY DEDUCTION
The monthly deduction is equal to:
a) the cost of insurance charges for this policy; plus
b) the monthly charges for any other additional benefits provided by
rider; plus
c) the monthly expense charges shown in the Schedule.
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The monthly deductions are allocated to the divisions of the Variable Account
and Guaranteed Interest Division in the same proportion that your Account Value
in the division bears to your Net Account Value as of the Monthly Processing
Date. This deduction is taken from your Account Value as of the Monthly
Processing Date.
COST OF INSURANCE
The cost of insurance is determined on a monthly basis for each Segment. Such
cost is the monthly cost of insurance rate for the insured's premium class for
each Segment multiplied by the net amount at risk. The net amount at risk is
(a) minus (b) where:
a) is the Base Death Benefit for all Segments as of the Monthly
Processing Date after the monthly deductions (other than cost of
insurance charges for the Base Death Benefit, any Adjustable Term
Insurance Rider and any Waiver of Monthly Deductions Rider), divided
by 1 plus the monthly equivalent of the guaranteed interest rate for
the Guaranteed Interest Division as shown in the Schedule; and
b) is your Account Value as of the Monthly Processing Date after the
monthly deductions (other than the cost of insurance for the Base
Death Benefit, any Adjustable Term Insurance Rider and any Waiver of
Monthly Deduction Rider).
The cost of insurance rates will be determined by us from time to time. They
will be based on the sex and age as of the effective date of coverage, the
duration since the coverage began and the premium class. Any change in rates
will apply to all individuals of the same premium class and whose policies have
been in effect for the same length of time. The rates will never exceed those
rates shown in the Table of Guaranteed Rates in the Schedule as adjusted for any
special premium class.
Each time there is a new Segment, the net amount at risk will be allocated to
each Segment in the same proportion that Segment bears to the Stated Death
Benefit. Different rates will apply to each Segment depending upon the premium
class, the age as of the effective date of the increase and the duration since
the effective date of the increase.
PERSISTENCY REFUND
Each month your policy or a Segment of Stated Death Benefit remains in force
after its tenth policy anniversary, we will credit your Account Value with a
refund equivalent to 0.5% of your Account Value on an annual basis for that
Segment. The percentage of Account Value which is eligible for this refund is
based on the Guideline Annual Premium for each Segment and the number of years
each Segment has been in force.
The persistency refund will be added to the divisions of the Variable Account
and the Guaranteed Interest Division in the same proportion that your Account
Value in each division bears to your Net Account Value as of the Monthly
Processing Date.
LOAN PROVISIONS
POLICY LOANS
You may obtain a policy loan after the first policy anniversary. The maximum
amount you may borrow at any time equals the Net Account Value on the date of
the loan request less all monthly deductions to the next policy anniversary. The
policy loan is a first lien on your policy. The minimum amount you may borrow
is shown in the Schedule. The outstanding policy loan amount is equal to the
loan amount as of the beginning of the policy year plus new loans and minus loan
repayments, plus accrued interest.
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LOAN INTEREST
The annual policy loan interest rate is shown in the Schedule. If a loan is
made, interest is due and payable at the end of the policy year. Thereafter,
interest on the loan amount is due annually at the end of each policy year until
the loan is repaid. If interest is not paid when due, it is added to the Policy
Loan.
If the Policy Loan amount plus any accrued interest equals or exceeds the
Account Value, a premium sufficient to keep this policy in force must be paid as
provided in the Grace Period provision.
LOAN DIVISION
When a Policy Loan is taken or when interest is not paid in cash when due, an
amount equal to the loan (or unpaid loan interest, respectively) is transferred
from the divisions of the Variable Account and the Guaranteed Interest Division
to the Loan Division to secure the loan. This amount will be deducted from the
divisions of the Variable Account and the Guaranteed Interest Division in the
same proportion that your Account Value in each division bears to your Net
Account Value as of the date the transfer is effective unless otherwise
specified in your instructions to us. Your Account Value in the Loan Division
will be credited with interest at the interest rate for the Loan Division shown
in the Schedule.
When a loan repayment is made an amount equal to the repayment is transferred
from the Loan Division to the Guaranteed Interest Division and the divisions of
the Variable Account in the same proportion as your current premium allocation
unless you request a different allocation.
PARTIAL WITHDRAWAL PROVISIONS
You may apply for a partial withdrawal of your Account Value on any Monthly
Processing Date after the first policy anniversary by writing to us at our
Customer Service Center. The minimum and maximum partial withdrawal amounts are
shown in the Schedule. When a partial withdrawal is made, the amount of the
withdrawal plus a service fee is deducted from your Account Value. The amount
of the service fee is shown in the Schedule. We limit the number of partial
withdrawals in a policy year and this number is shown in the Schedule.
The Stated Death Benefit is not reduced by a partial withdrawal taken when the
Base Death Benefit has been increased to qualify your policy as life insurance
under the Internal Revenue Code and the amount withdrawn is no greater than that
which reduces your Account Value to the level which no longer requires the Base
Death Benefit to be increased for Internal Revenue Code purposes.
For a policy under an Option 1 death benefit, the Stated Death Benefit is not
reduced by a partial withdrawal in the circumstances described above. In
addition, if no more than 15 years have elapsed since the policy date and the
insured is not yet age 81, a partial withdrawal of an amount up to 10% of your
Account Value or, if greater, 5% of the Stated Death Benefit, calculated
immediately before the partial withdrawal is taken will not reduce the Stated
Death Benefit. Any additional amount withdrawn reduces your Stated Death
Benefit by that additional amount.
For a policy under an Option 2 death benefit, a partial withdrawal does not
reduce your Stated Death Benefit.
Any reduction in death benefit or Account Value will occur as of the date the
partial withdrawal occurs. No partial withdrawal will be allowed if the Stated
Death Benefit remaining in force after any such partial withdrawal would be
reduced below the minimum Stated Death Benefit shown in the Schedule.
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For a policy under an Option 2 death benefit, a partial withdrawal generally
reduces the Base Death Benefit by the amount of the withdrawal. Under any death
benefit option, if the Base Death Benefit has been increased in order to qualify
your policy as a life insurance contract under the Internal Revenue Code, the
partial withdrawal reduces the Base Death Benefit by an amount greater than the
withdrawal.
You may specify how much of the withdrawal you wish taken from each division of
the Variable Account or from the Guaranteed Interest Division. You may not
withdraw from the Guaranteed Interest division more than the total withdrawal
times the ratio of your Account Value in the Guaranteed Interest Division to
your Net Account Value immediately prior to the withdrawal. Unless you indicate
otherwise, we will make the withdrawal from the amounts in the Guaranteed
Interest Division and the divisions of the Variable Account in the same
proportion that your Account Value in each division bears to your Net Account
Value immediately prior to the withdrawal. The withdrawal service fee is
deducted from each Variable Division and the Guaranteed Interest Division in the
same proportion that your Account Value of each division bears to your Net
Account Value immediately after the withdrawal.
We may send you a new Schedule to reflect the effect of the withdrawal if there
is any change to the Stated Death Benefit. We may ask you to return your policy
to our Customer Service Center to make this change. The withdrawal and the
reductions in death benefits will be effective as of the Valuation Date after we
received your request.
SURRENDER PROVISIONS
SURRENDER VALUE
The Net Cash Surrender Value on any date will be your Account Value plus any
refund of sales load due and minus any Policy Loan including accrued but unpaid
loan interest.
BASIS OF COMPUTATIONS
The Cash Surrender Value under the policy is not less than the minimum required
as of the policy date by the state in which your policy was delivered. A
detailed statement of the method of computation of policy values under the
policy has been filed with the insurance department of the state in which the
policy was delivered, if required.
FULL SURRENDERS
You may surrender your policy after the Right to Examine Period or at any time
during the lifetime of the insured and receive the net Cash Surrender Value. We
will compute the Net Cash Surrender Value as of the next Valuation Date after we
receive both your request and the policy at our Customer Service Center. This
policy will be canceled as of the date we receive your request, and there will
be no further benefits under this policy.
If you surrender your policy within the first two policy years but after the
Right to Examine Policy Period has ended, the Net Cash Surrender Value will
include a refund of a portion of the sales load which was previously deducted
from your premiums paid. In the first policy year, the refund is equal to 5% of
the premium paid. In the second year, the refund is equal to 2.5% of the
premium paid in the first policy year.
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GRACE PERIOD, TERMINATION AND REINSTATEMENT PROVISIONS
GRACE PERIOD
If the following three conditions occur on a Monthly Processing Date, the policy
will enter into the 61 day grace period:
a) The Net Account Value is zero or less; and
b) The three year continuation period described below has expired or the
required premium for the three year continuation period has not been paid;
and
c) The guarantee period shown in the Schedule and described below has expired
or been terminated
We will give you a 61 day grace period from this Monthly Processing Date to make
the required premium payment. The required premium payment then due must be
paid to keep the policy in force. If this amount is not received in full by the
end of the grace period, the policy will lapse without value. The required
premium payment will be equal to past due charges plus an amount we expect to be
sufficient to keep the policy and any riders in force for 2 months following the
receipt of the required premium payment. If we receive at least the required
premium payment during the grace period we will make deductions from the Net
Premium payment for the past due amounts and apply any remaining amount as
premium to the policy.
Notice of the amount of the required premium payment will be mailed to you or
any assignee at the last known address at least 30 days before the end of the
grace period. If the insured dies during the grace period, we will deduct any
overdue monthly deductions from the death proceeds of the policy.
THREE YEAR CONTINUATION PERIOD
Your policy will remain in force regardless of the Net Account Value, if, at any
time during the first 3 policy years, the sum of your premiums paid minus the
sum of your partial withdrawals, policy loans and accrued but unpaid policy loan
interest is not less than the sum of the applicable minimum monthly premiums for
each policy month starting with the first policy month to and including the
policy month which begins on the current Monthly Processing Date. Each minimum
monthly premium equals 1/12 of the minimum annual premium. The minimum annual
premium is shown in the Schedule. We use this premium for each policy month
until the effective date of a change in the Stated Death Benefit. If there is a
change, the new Schedule will show the applicable minimum annual premium for
subsequent policy years.
GUARANTEE PERIOD
The policy will not terminate during the guarantee period even if the Net
Account Value is zero except as provided below.
The guarantee period will expire on the date shown in the Schedule. Each
monthly guarantee premium equals 1/12 of the guarantee premium. The guarantee
annual premium is shown in the Schedule. We use this premium for each policy
year until the effective date of a change in the Stated Death Benefit. If there
is a change, a new Schedule will show the applicable minimum guarantee annual
premium for subsequent policy years.
The guarantee period will terminate prior to the guarantee period expiration
date if, on any Monthly Processing Date:
a) the actual premiums paid, minus the amount of any partial withdrawals and
any policy loan including accrued but unpaid interest are less than
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b) the sum of the guarantee monthly premiums for each policy month starting
with the first policy month to and including the policy month that begins on
the current Monthly Processing Date.
The guarantee period will also terminate if your Account Value on any Monthly
Processing Date is not diversified according to the following rules:
a) No more than 35% of your Net Account Value may be invested in any one
division; and
b) Your Net Account Value must be invested in at least 5 divisions.
You will satisfy these diversification requirements if: (i) you are
participating in the automatic rebalancing feature defined in and governed by
the policy prospectus in effect at the time you elect the guarantee period and
your automatic rebalancing allocations comply with the diversifications
specified above; or (ii) you elect dollar cost averaging and direct the
resulting transfers into at least four other divisions with no more than 35% of
any transfer being to any one division.
TERMINATION
All coverage provided by this policy will end as of the earliest of:
a) The date the policy is surrendered;
b) The date of death of the insured;
c) The Maturity Date of the policy; or
d) The date the grace period ends without payment of the required
premium.
REINSTATEMENT
The policy may be reinstated within five years after the beginning of the grace
period. The reinstatement will be effective as of the Monthly Processing Date
on or next following the date we approve your written application.
We will reinstate the policy and any riders if the following conditions are met:
a) You have not surrendered the policy for its Net Cash Surrender
Value;
b) You submit evidence satisfactory to us that the insured and those
insured under any riders are still insurable according to our normal
rules of underwriting for this type of policy; and
c) We receive payment of the amount of premium sufficient to keep the
policy and any riders in force from the beginning of the grace
period to the end of the expired grace period and for 2 months after
the date of reinstatement. We will let you know, at the time you
request reinstatement, the amount of premium needed for this
purpose.
We will reinstate any policy loan, with accrued loan interest to the end of the
grace period, which existed when coverage ended.
Upon reinstatement, the Net Premium received minus past due amounts will be
allocated to the Divisions of the Variable Account and the Guaranteed Interest
Division according to the premium allocation percentages in effect at the start
of the grace period or as directed by you in writing at the time of
reinstatement.
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DEFERRAL OF PAYMENT
Requests for transfers, withdrawals, payment of proceeds on the Maturity Date or
a full surrender will be processed within 7 days of receipt of the request in a
form acceptable to us. However, we may postpone the processing of any such
Variable Account transactions for any of the following reasons:
a) The NYSE is closed, other than customary weekend and holiday
closings.
b) Trading on the NYSE is restricted by the SEC.
c) The SEC declares that an emergency exists as a result of which
disposal of securities in the Variable Account is not reasonably
practicable to determine your Account Value in the divisions.
d) A governmental body having jurisdiction over the Variable Account by
order permits such suspension.
Rules and regulations of the SEC, if any, are applicable and will govern as to
whether conditions described in (b), (c), or (d) exist.
Death proceeds will be paid within 7 days of determination of the proceeds and
are not subject to deferment. We may defer for up to 6 months payment of any
surrender proceeds, withdrawal or loan amounts from the Guaranteed Interest
Division.
GENERAL POLICY PROVISIONS
THE POLICY
The policy, including the original application and applications for an increase,
riders, endorsements, any Schedule pages, and any reinstatement applications
make up the entire contract between you and us. A copy of the original
application will be attached to the policy at issue. A copy of any application
as well as a new Schedule will be attached or furnished to you for attachment to
the policy at the time of any change in coverage. In the absence of fraud, all
statements made in any application will be considered representations and not
warranties. No statement will be used to deny a claim unless it is in an
application.
AGE
The policy is issued at the age shown in the Schedule. This is the insured's
age nearest birthday on the policy date. The insured's age at any time is the
age shown in the Schedule increased by the number of completed policy years.
PROCEDURES
We must receive any election, designation, assignment or any other change
request you make in writing, except those specified on the application. It must
be in a form acceptable to us. We may require a return of the policy for any
change or for a full surrender. We are not liable for any action we take before
we receive and record the written request at our Customer Service Center.
In the event of the death of the insured before the Maturity Date, please let us
or our agent know as soon as possible. Claim procedure instructions will be
sent to the beneficiary immediately. We may require proof of age and a
certified copy of the death certificate. We may require the beneficiary and
next of kin to sign authorizations as part of due proof. These authorization
forms allow us to obtain information about the insured, including, but not
limited to, medical records of physicians and hospitals used by the insured.
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OWNERSHIP
The original owner is the person named as the owner in the application. You, as
the owner, can exercise all rights and receive the benefits during the insured's
life before the Maturity Date. This includes the right to change the owner,
beneficiaries, and methods for the payment of proceeds. All rights of the owner
are subject to the rights of any assignee and any irrevocable beneficiary.
You may name a new owner by sending written notice to us. The effective date of
the change to the new owner will be the date you sign the notice. The change
will not affect any payment made or action taken by us before recording the
change at our Customer Service Center.
BENEFICIARIES
The primary beneficiary surviving the insured will receive any death proceeds
which become payable. Surviving contingent beneficiaries are paid death
proceeds only if no primary beneficiary has survived the insured. If more than
one beneficiary in a class survives the insured, they will share the death
proceeds equally, unless your designation provides otherwise. If there is no
designated beneficiary surviving, you or your estate will be paid the death
proceeds. The beneficiary designation will be on file with us or at a location
designated by us. While you are living, you may name a new beneficiary. The
effective date of the change will be the date the request was signed. We will
pay proceeds to the most recent beneficiary designation on file. We will not be
subject to multiple payments.
EXCHANGE RIGHT
If, for any reason within the first 2 policy years or within 2 years of the
effective date of an increase, you want to exchange this policy for a policy in
which values do not vary with the investment experience of the Variable Account,
we will exchange this policy. This transfer will not be subject to the excess
transfer charge. The exchange will be implemented by transferring your Account
Value in all the Divisions of the Variable Account to the Guaranteed Interest
Division and removing your future right to choose to allocate funds to the
divisions of the Variable Account. We will require a return of this policy
before this change will be processed.
COLLATERAL ASSIGNMENT
You may assign this policy as collateral security by written notice to us. Once
it is recorded with us, the rights of the owner and beneficiary are subject to
the assignment. It is your responsibility to make sure the assignment is valid.
INCONTESTABILITY
After this policy has been in force during the insured's life for 2 years from
the policy date, we will not contest the statements in the application attached
at issue.
Page 21
After this policy has been in force during the insured's life for 2 years from
the effective date of any new Segment or of an increase in any other benefit
with respect to the insured, we will not contest the statements in the
application for the new Segment or other increase.
After this policy has been in force during the insured's life for 2 years from
the effective date of any reinstatement, we will not contest the statements in
the application for such reinstatement.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the insured has been misstated, the death benefit will be
adjusted. The death benefit will be that which the cost of insurance which was
deducted from your Account Value on the last Monthly Processing Date prior to
the death of the insured would have purchased for the insured's correct age and
sex.
SUICIDE EXCLUSION
If the insured commits suicide, while sane or insane, within 2 years of the
policy date, we will make a limited payment to the beneficiary. We will pay in
one sum the amount of all premiums paid to us during that time, minus any
outstanding policy loan (including accrued but unpaid interest) and partial
withdrawals. If the insured commits suicide, while sane or insane, within 2
years of the effective date of a new Segment or of an increase in any other
benefit, we will make a limited payment to the beneficiary for the new Segment
or other increase. This payment will equal the cost of insurance and any
applicable monthly expense charges deducted for such increase.
PERIODIC REPORTS
We will send you at least once each year a report which shows the current
Account Value, Cash Surrender Value and premium paid since the last report. The
report will also show the allocation of your Account Value as of the date of the
report and the amounts added to or deducted from your Account Value of each
division since the last report. The report will include any other information
that may be currently required by the Insurance supervisory official of the
jurisdiction in which this policy is delivered.
ILLUSTRATION OF BENEFITS AND VALUES
We will send you, upon written request, a hypothetical illustration of future
death benefits and Account Values. This illustration will include the
information as required by the laws or regulations where this policy is
delivered. If you request more than one illustration during a policy year, we
will charge a reasonable fee for each additional illustration. The maximum
amount of this fee is shown in the Schedule.
NONPARTICIPATING
The policy does not participate in our surplus earnings.
CUSTOMER SERVICE CENTER
Our Customer Service Center is at the address shown in the Schedule. Unless you
are otherwise notified:
a) All requests and payments should be sent to us at our Customer Service
Center; and
b) All transactions are effective as of the Valuation Date the required
information is received at our Customer Service Center.
Page 22
PAYOUTS OTHER THAN AS ONE SUM
ELECTION
During the insured's lifetime, you may elect that the beneficiary receive the
proceeds upon death of the insured other than in one sum. If you have not made
an election, the beneficiary may do so within 60 days after the insured's death.
You may also elect to take the Net Cash Surrender Value of the policy upon its
surrender other than in one sum. Satisfactory written request must be received
at our Customer Service Center before payment can be made. A payee that is not
a natural person may not be named without our consent. The various methods of
settlement are shown below.
PAYOUT OPTIONS
OPTION I. Payouts for a Designated Period. Payouts will be made in 1, 2, 4, or
12 installments per year as elected for a designated period, which may be 5 to
30 years. The installment dollar amounts will be equal except for any excess
interest as described below. The amount of the first monthly payout for each
$1,000 of Account Value applied is shown in Settlement Option Table I.
OPTION II. Life Income With Payouts for Designated Period. Payouts will be
made in 1, 2, 4, or 12 installments per year throughout the payee's lifetime, or
if longer, for a period of 5, 10, 15 or 20 years as elected. The installment
dollar amounts will be equal except for any excess interest, as described below.
The amount of the first monthly payout for each $1,000 of Account Value applied
is shown in Settlement Option Table II. This option is not available for ages
not shown in the Table.
OPTION III. Hold at Interest. Amounts may be left on deposit with us to be
paid upon the death of the payee or at any earlier date elected. Interest on
any unpaid balance will be at the rate declared by us or at any higher rate
required by law. Interest may be accumulated or paid in 1, 2, 4, or 12
installments per year, as elected. Money may not be left on deposit for more
than 30 years.
OPTION IV. Payouts of a Designated Amount. Payouts will be made until
proceeds, together with interest, which will be at the rate declared by us or at
any higher rate required by law, are exhausted. Payouts will be made in 1, 2,
4, or 12 equal installments per year, as elected.
OPTION V. Other. Settlement may be made in any other manner as agreed upon in
writing between you (or the beneficiary) and us.
CHANGE AND WITHDRAWAL
You may change an election at any time before the death of the insured or
maturity of the policy. If you have given the beneficiary the right to make
changes or withdrawals, or if the beneficiary has elected the option, the
beneficiary (as primary payee) may take the actions below.
a) Changes may be made from Payout Options I, III, and IV to another
option.
b) Full withdrawals may be made under Payout Option III or IV. Partial
Withdrawals of not less than $300 may be made under Payout Option
III.
c) Remaining installments under Payout Option I may be commuted at 3
1/2% interest and received in one sum.
d) Changes in any contingent payee designation may be made.
A written request must be sent to our Customer Service Center in writing to make
a change or withdrawal. We also may require that you send in the Supplemental
Policy. We may defer payment of commuted and withdrawable amounts for a period
up to 6 months.
Page 23
EXCESS INTEREST
If we declare that payout options are to be credited with an interest rate above
that guaranteed, it will apply to Payout Options I, II, III, and IV. The
crediting of excess interest for one period does not guarantee the higher rate
for other periods. Any declared interest rate will be in effect for at least 12
months.
MINIMUM AMOUNTS
The minimum amount which may be applied under any option is $2,000. If the
payments to the payee are ever less than $20, we may change the frequency of
payments so as to result in payments of at least that amount.
SUPPLEMENTARY POLICY
When an option becomes effective, the policy will be surrendered in exchange for
a Supplementary Policy. It will provide for the manner of settlement and rights
of the payees. The Supplementary Policy's effective date will be the date of the
insured's death or the date of other settlement. The first payment under Options
I, II, and IV will be payable as of the effective date. The first interest
payment under Option III will be made as of the end of the interest payment
period elected. Subsequent payments will be made in accordance with the
frequency of payment elected. The Supplementary Policy may not be assigned or
payments made to another without our consent.
INCOME PROTECTION
Unless otherwise provided in the election, a payee does not have the right to
commute, transfer or encumber amounts held or installments to become payable. To
the extent provided by law, the proceeds, amount retained, and installments are
not subject to any payee's debts, policies, or engagements.
DEATH OF PRIMARY PAYEE
Upon the primary payee's death, any payments certain under Option I or II,
interest payments under Option III, or payments under Option IV will be
continued to the contingent payee. Or, amounts may be released in one sum if
permitted by the policy. The final payee will be the estate of the last to die
of the primary payee and any contingent payee.
PAYMENTS OTHER THAN MONTHLY
The tables which follow show monthly installments for Options I and II. To
arrive at annual, semiannual, or quarterly payments, multiply the appropriate
figures by 11.813, 5.957 or 2.991 respectively. Factors for other periods
certain or for other options which may be provided by mutual agreement will be
provided upon reasonable request.
Page 24
SETTLEMENT OPTION TABLES
SETTLEMENT OPTION TABLE I
(Per $1,000 of Net Proceeds)
----------------------------------------------------------------------------
No. of Monthly No. of Monthly
Years Payable Installments Years Payable Installments
----------------------------------------------------------------------------
1 $84.65 16 6.76
----------------------------------------------------------------------------
2 43.05 17 6.47
----------------------------------------------------------------------------
3 29.19 18 6.20
----------------------------------------------------------------------------
4 22.27 19 5.97
----------------------------------------------------------------------------
5 18.12 20 5.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
6 15.35 21 5.56
----------------------------------------------------------------------------
7 13.38 22 5.39
----------------------------------------------------------------------------
8 11.90 23 5.24
----------------------------------------------------------------------------
9 10.75 24 5.09
----------------------------------------------------------------------------
10 9.83 25 4.96
----------------------------------------------------------------------------
----------------------------------------------------------------------------
11 9.09 26 4.84
----------------------------------------------------------------------------
12 8.46 27 4.73
----------------------------------------------------------------------------
13 7.94 28 4.63
----------------------------------------------------------------------------
14 7.49 29 4.53
----------------------------------------------------------------------------
15 7.10 30 4.45
----------------------------------------------------------------------------
Page 25
SETTLEMENT OPTION TABLE II
----------------------------------------------------------------------------------------------------------------
(Per $1,000 of Net Proceeds)
----------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birthday When First Installment Birthday When First Installments
Installment is Payable Installment is Payable
----------------------------------------------------------------------------------------------------------------
5 Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Male Female Certain Certain Certain Certain Male Female Certain Certain Certain Certain
----------------------------------------------------------------------------------------------------------------
15 20 3.31 3.31 3.31 3.31 33 38 3.77 3.77 3.75 3.74
----------------------------------------------------------------------------------------------------------------
16 21 3.33 3.33 3.33 3.32 34 39 3.81 3.80 3.79 3.77
----------------------------------------------------------------------------------------------------------------
17 22 3.35 3.35 3.34 3.34 35 40 3.85 3.84 3.83 3.81
----------------------------------------------------------------------------------------------------------------
18 23 3.37 3.37 3.36 3.36 36 41 3.89 3.88 3.87 3.84
----------------------------------------------------------------------------------------------------------------
19 24 3.39 3.38 3.38 3.38 37 42 3.94 3.93 3.91 3.88
----------------------------------------------------------------------------------------------------------------
20 25 3.41 3.40 3.40 3.40 38 43 3.99 3.97 3.95 3.92
----------------------------------------------------------------------------------------------------------------
21 26 3.43 3.43 3.42 3.42 39 44 4.03 4.02 4.00 3.96
----------------------------------------------------------------------------------------------------------------
22 27 3.45 3.45 3.44 3.44 40 45 4.09 4.07 4.05 4.00
----------------------------------------------------------------------------------------------------------------
23 28 3.47 3.47 3.47 3.46 41 46 4.14 4.13 4.09 4.05
----------------------------------------------------------------------------------------------------------------
24 29 3.50 3.49 3.49 3.48 42 47 4.20 4.18 4.14 4.09
----------------------------------------------------------------------------------------------------------------
25 30 3.52 3.52 3.57 3.51 43 48 4.26 4.24 4.20 4.14
----------------------------------------------------------------------------------------------------------------
26 31 3.55 3.54 3.54 3.53 44 49 4.32 4.30 4.25 4.18
----------------------------------------------------------------------------------------------------------------
27 32 3.58 3.57 3.57 3.56 45 50 4.39 4.36 4.31 4.23
----------------------------------------------------------------------------------------------------------------
28 33 3.60 3.60 3.59 3.58 46 51 4.46 4.43 4.37 4.28
----------------------------------------------------------------------------------------------------------------
29 34 3.64 3.63 3.60 3.61 47 52 4.53 4.49 4.43 4.34
----------------------------------------------------------------------------------------------------------------
30 35 3.67 3.66 3.65 3.64 48 53 4.61 4.56 4.49 4.39
----------------------------------------------------------------------------------------------------------------
31 36 3.70 3.70 3.69 3.67 49 54 4.69 4.64 4.55 4.44
----------------------------------------------------------------------------------------------------------------
32 37 3.74 3.73 3.72 3.70 50 55 4.77 4.71 4.62 4.50
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Page 26
SETTLEMENT OPTION TABLE II
(Continued)
----------------------------------------------------------------------------------------------------------------
(Per $1,000 of Net Proceeds)
----------------------------------------------------------------------------------------------------------------
Age of Payee Nearest Monthly Age of Payee Nearest Monthly
Birthday When First Installment Birthday When First Installment
Installment is Payable Installment is Payable
----------------------------------------------------------------------------------------------------------------
5-Years 10 Years 15 Years 20 Years 5 Years 10 Years 15 Years 20 Years
Male Female Certain Certain Certain Certain Male Female Certain Certain Certain Certain
----------------------------------------------------------------------------------------------------------------
51 56 4.85 4.79 4.69 4.55 69 74 7.52 7.00 6.29 5.56
----------------------------------------------------------------------------------------------------------------
52 57 4.94 4.87 4.76 4.61 70 75 7.77 7.17 6.38 5.60
----------------------------------------------------------------------------------------------------------------
53 58 5.04 4.96 4.84 4.67 71 76 8.04 7.35 6.47 5.63
----------------------------------------------------------------------------------------------------------------
54 59 5.14 5.05 4.91 4.73 72 77 8.32 7.53 6.55 5.66
----------------------------------------------------------------------------------------------------------------
55 60 5.24 5.14 4.99 4.79 73 78 8.62 7.71 6.63 5.68
----------------------------------------------------------------------------------------------------------------
56 61 5.35 5.24 5.07 4.85 74 79 8.94 7.89 6.71 5.70
----------------------------------------------------------------------------------------------------------------
57 62 5.47 5.34 5.15 4.91 75 80 9.28 8.07 6.78 5.72
----------------------------------------------------------------------------------------------------------------
58 63 5.59 5.45 5.24 4.97 76 81 9.63 8.25 6.84 5.73
----------------------------------------------------------------------------------------------------------------
59 64 5.71 5.56 5.33 5.03 77 82 10.00 8.43 6.89 5.74
----------------------------------------------------------------------------------------------------------------
60 65 5.85 5.68 5.42 5.10 78 83 10.39 8.60 6.94 5.74
----------------------------------------------------------------------------------------------------------------
61 66 5.99 5.80 5.51 5.16 79 84 10.80 8.77 6.98 5.75
----------------------------------------------------------------------------------------------------------------
62 67 6.15 5.93 5.61 5.21 80 85 11.22 8.93 7.01 5.75
----------------------------------------------------------------------------------------------------------------
63 68 6.31 6.07 5.70 5.27 81 11.66 9.08 7.04 5.75
----------------------------------------------------------------------------------------------------------------
64 69 6.48 6.21 5.80 5.33 82 12.12 9.21 7.06 5.75
----------------------------------------------------------------------------------------------------------------
65 70 6.66 6.35 5.90 5.38 83 12.60 9.34 7.07 5.75
----------------------------------------------------------------------------------------------------------------
66 71 6.86 6.50 6.00 5.43 84 13.09 9.44 7.08 5.75
----------------------------------------------------------------------------------------------------------------
67 72 7.07 6.66 6.10 5.48 85 13.59 9.54 7.09 5.75
----------------------------------------------------------------------------------------------------------------
68 73 7.29 6.83 6.19 5.52
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Page 27
This policy is a FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
Death benefits and other values provided by this contract, when based on the
investment experience of a separate account, are variable. These values may
increase or decrease based on investment experience and are not guaranteed as to
fixed dollar amount. Death benefits are payable by us upon the death of the
insured prior to the Maturity Date. Your Net Account Value, if any, is payable
by us if the insured is living as of the Maturity Date. Flexible premiums are
payable by you during the lifetime of the insured until the Maturity Date.
SECURITY LIFE OF DENVER INSURANCE COMPANY
A Stock Company
Customer Service Center
0000 Xxxxxxxx Xxxxxx, Xxxxxxxx 00000
Toll Free Number: 0(000)000-0000
