PROCEDURES MEMORANDUM
(PURSUANT TO RULE 6E-3(T)(B)(12)(iii))
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
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Variable Universal Life Insurance
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Revised 04/21/04
TABLE OF CONTENTS
ISSUANCE AND RELATED TRANSACTIONS 3
1. ISSUANCE 3
A. Applications and Policy Issuance 3
B. Effective Date of Contract and Interest Calculation 3
C. Contract Amendments 4
2. FREE LOOK 4
A. Free Look Period 4
B. Delivery Date Assumptions 4
3. MINIMUM ISSUE LIMIT 5
4. ALLOCATION TO THE VARIABLE ACCOUNT 5
A. Timing of the Allocation to the Variable Account 5
5. REINSTATEMENT 5
REDEMPTIONS, TRANSFERS, AND LOANS 5
6. LOANS 5
A. Loans at Issue 5
B. Loan at Issue Rates 5
C. Preferred Loans 5
D. Loan Payments 6
E. Loan Repayments 6
F. Source of Loans 6
7. WITHDRAWALS 6
A. Minimum Amount Remaining After Partial Withdrawal 6
B. Tax Withholding 7
8. TRANSFERS 7
A. Transfer Privilege 7
B. Minimum Transfer Amounts and Timing 7
C. Telephone Transfers 8
D. Confirmations of Transfer Requests 8
E. Asset Rebalancing 8
F. Asset Allocation Models 9
G. Dollar Cost Averaging 10
PAYMENTS 11
9. SUBSEQUENT PREMIUM 11
A. Underwriting Subsequent Payments 11
B. Allocation of Subsequent Payments 11
C. Payment Not Honored By Bank 11
DEATH 11
10. DEATH BENEFIT 11
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A. Definition of Due Proof of Death 11
B. Death Benefit Calculation 12
EXHIBIT 1 13
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON
Memorandum Regarding Issuance, Face Amount Increases,
Redemption and Transfer Procedures
This memorandum sets forth the information called for by Rule
6e-3(T)(b)(12)(iii) under the Investment Company Act of 1940 (the "1940 Act")
with respect to procedures for issuance, face amount increases, redemptions and
transfers under the modified single payment variable life insurance Contract
forms SPV-9890 and SPV-9891, or state-specific variations of such contract forms
("Contracts") offered through
LLAC Variable Account (the "Variable Account") of
the Liberty Life Assurance Company of Boston ("Liberty Life"). That rule
provides an exemption for separate accounts, their investment advisors,
principal underwriters and sponsoring insurance companies from Sections 2(c),
22(d), 22(e), and 27(c)(1) of the 1940 Act and Rule 22c-1 thereunder for
issuance, face amount increase, transfer and redemption procedures under
flexible premium variable life insurance policies to the extent necessary to
comply with Rule 6e-3(T), state insurance law and regulations, and established
administrative procedures of the life insurance company. In order to qualify for
the exemption, procedures must be reasonable, fair and not discriminatory and
they must be disclosed in the registration statement filed by a separate
account. In certain states the Contracts may be offered as group contracts with
individual ownership represented by Certificates. The discussion of Contracts in
this document applies equally to Certificates under group contracts, unless the
context specifies otherwise.
Liberty Life believes its procedures meet the requirements of Rule 6e-3 (T) (b)
(12) (iii) and states the following:
1. Because of the insurance nature of the contract and due to the
requirements of state insurance laws, the procedures necessarily differ in
significant respects from procedures for mutual funds and contractual
plans for which the 1940 Act was designed.
2. Many of the procedures used by Liberty Life have been adopted from
established procedures for variable universal life insurance contracts of
other companies and from Liberty Life's established procedures for its
universal life insurance contracts and modified single premium whole life
insurance contract.
3. In structuring its procedures to comply with Rule 6e-3(T), state insurance
laws and established administrative procedures, Liberty Life has attempted
to comply with the intent of the 1940 Act.
4. In general, state insurance laws require that Liberty Life procedures be
reasonable, fair and not discriminatory.
5. Because of the nature of the insurance product, it is often difficult to
determine precisely when Liberty Life procedures deviate from those
required under Sections 22(d), 22(e) or 27 (c) (1) of the 1940 Act or Rule
22c-1 thereunder. Accordingly, set out below is a summary of the principal
Contract provisions and procedures not otherwise described in the
prospectus which may be deemed to constitute, either directly or
indirectly, such a deviation. The summary, while comprehensive, does not
attempt to treat each and every procedure or variation which might occur
and includes certain procedural steps which do not constitute deviations
from the above-cited sections or rule.
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Issuance and Related Transactions
1. Issuance
A. Applications and Policy Issuance
An applicant may apply to purchase a Contract by submitting a written
application to Liberty Life through one of our authorized agents. We will
not issue Contracts to insure people who are older than age 85. Upon
receipt of a completed application, Liberty Life will follow certain
insurance underwriting (e.g. evaluation of risks) procedures designed to
determine whether the applicant is insurable. This process may involve
such verification procedures as medical examinations and blood testing,
and may require that further information be provided by the proposed
insured before a determination can be made. A Contract will not be issued
until the underwriting procedure has been completed. Acceptance of an
application is subject to Liberty Life's insurance underwriting rules.
B. Effective Date of Contract and Interest Calculation
The Contract Date is the effective date of insurance coverage under the
Contract. Liberty Life uses the Contract Date to determine Contract
Anniversaries, Contract Years and Monthly Dates. If an application is
taken by an authorized agent of Liberty Life, and is approved through
simplified underwriting by Liberty Life, the Contract Date will be the
date of application, provided the initial Payment is submitted with the
application. The authorized agent of Liberty Life is instructed to forward
the initial Payment and application to the Liberty Life Service Center
("Service Center"). If the initial Payment is received at the Service
Center within ten business days of the application date, Liberty Life will
assign the application date as the Contract Date and interest will begin
to be credited and charges accrued as of this date. If Liberty Life does
not receive the initial Payment within ten business days of the
application date, or if the initial Payment is dated later than the
application date, Liberty Life reserves the right to amend the Contract
Date to the date that Payment is received in the Service Center. If the
Contract Date is amended, Liberty Life will begin crediting interest and
deducting monthly charges as of the amended Contract Date. Liberty Life
will honor the initial Contract Date if the application and initial
Payment are lost in the mail and the envelope in which they are received
is postmarked within ten days of the application date. If the application
and initial Payment are received more than thirty days from the
application date, Liberty Life reserves the right to return the initial
Payment, and request that a new application and any applicable
underwriting requirements be submitted.
If the application requires normal underwriting and is approved, the
Contract Date will be the date the authorized agent of Liberty Life takes
the initial Payment. Interest will be credited at the Fixed Account
interest rate, beginning on the Contract Date. Any Contract charges will
be deducted as of the Contract Date. If the application requires normal
underwriting, and the application is submitted without the initial
Payment, when an authorized agent of Liberty Life delivers your Contract
Liberty Life will require sufficient Payment to place insurance in force.
The Contract Date will be the date an authorized agent of Liberty Life
receives the initial Payment.
If an application requires normal underwriting, and an initial Payment has
been accepted by an authorized agent of Liberty Life, Liberty Life will
issue a Temporary Insuring Agreement.
Temporary insurance is subject to the terms and maximums stated in the
Temporary Insuring Agreement.
If the application is declined by Liberty Life, or issued other than
applied for and declined by the proposed Insured, the initial Payment will
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be refunded to the proposed Owner without interest. If the proposed
Insured refuses a Contract, which is offered as applied for, the initial
Payment will be refunded to the proposed Owner without interest.
C. Contract Amendments
A Contract Amendment is a change to certain information shown on the
Contract application (see Exhibit 1). If there is a change to this certain
Contract information, Liberty Life will send out a Contract Amendment for
signature. The Contract date will remain the same. Liberty Life will not
allocate the initial Payment to the Variable Account until the Contract
Amendment is received at the Service Center. Once the signed Contract
Amendment is received at the Service Center, the Free Look Period will
begin as of the date the Amendment is signed. If the Contract Amendment is
outstanding for thirty days, Liberty Life will cancel the Contract and
return the Payment to the Contract Owner without interest.
2. Free Look
A. Free Look Period
The Contract Owner may cancel the Contract by returning it to us within
the Free Look period as provided by state law. The following table sets
out the Free Look period for each state on non-replacement business:
10 Day Free Look Period
AL, AK, AZ, AR, CA, CT, DC, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA,
ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NY, NC, OH, OK, OR,
PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI, WY
15 Day Free Look Period
CO
20 Day Free Look Period
ND
If the Contract Owner returns the Contract during the Free Look Period,
coverage terminates and Liberty Life will pay the Contract Owner an amount
equal to their initial Payment or Account Value, as required by state law.
B. Delivery Date Assumptions
If the Contract Date is the same as the date the application is approved,
Liberty Life will begin the Free Look Period on the Contract Date and move
the Payment from the Fixed Account to the Variable Account at the end of
the Free Look Period plus five days. If the approval date of the
application is later than the Contract Date, the Free Look Period will
begin five days after the policy has been issued and mailed from the
Service Center or its authorized agent and the Payment will be moved from
the Fixed Account to the Variable Account at the end of the Free Look
period plus five days. If the application is submitted without the initial
Payment, and Liberty Life approves the Contract, the Free Look Period will
begin on the day an authorized agent of Liberty Life has delivered the
Contract and collected the initial Payment. In states that require a
delivery notice (California, Colorado and West Virginia) Liberty Life will
begin the Free Look period as of the date the delivery notice or the
Contract Amendment is signed.
If a Contract is issued with a Contract Amendment, Liberty Life will not
consider a Contract to be delivered until any and all outstanding Contract
Amendments have been signed and received. Liberty Life will begin the Free
Look Period for Contracts with Amendments on the date the Amendment is
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signed. If an outstanding Amendment is not signed and returned to the
Service Center, Liberty Life reserves the right to withdraw the offer of
coverage, and return any Payment without interest.
3. Minimum Issue Limit
The initial Payment purchases a Death Benefit initially equal to the
Contract's initial Death Benefit. The minimum initial Payment is $10,000.
In the case of 1035 exchange, which at the time of sale was estimated to
be worth $10,000, Liberty Life will accept the actual payment received as
the initial Payment, waiving the $10,000 minimum.
4. Allocation to the Variable Account
▇. ▇▇▇▇▇▇ of the Allocation to the Variable Account
When administering a Modified Single Payment Variable Life Insurance
Contract, Liberty Life allocates the initial Payment to the Fixed Account
as of the Contract Date. Liberty Life generally will then reallocate that
amount (including any interest) among the Variable Account and the Fixed
Account, in accordance with instructions from the Contract Owner, five
days after the end of the Free Look Period (see Free Look Period, 2A.).
Allocation of the initial Payment into the Variable Account will be
delayed if Contract Amendments are needed. Once all outstanding Contract
Amendments are received, Liberty Life will begin the Free Look Period
based on the latest dates the Contract Amendments were signed and allocate
the Payment plus interest to the Separate Account five days after the end
of the Free Look Period.
5. Reinstatement
If a Contract lapses because of insufficient Surrender Value to cover the
Monthly Deductions, and it has not been surrendered, it may be reinstated
at any time within five years from the end of the Grace Period and before
the Maturity Date. Reinstatement is subject to:
A. Receipt of evidence of insurability satisfactory to Liberty Life;
B. Payment of the next three Monthly Deductions from the date of
reinstatement, plus any outstanding interest on Indebtedness and any
outstanding fees that had accrued prior to lapse. (Note: Interest
does not accrue during the lapse period).
C. Reinstatement of any Indebtedness against the Contract. If
outstanding Indebtedness is repaid in full during the reinstatement
period, it will always be sufficient to reinstate a Modified Single
Payment Variable Life Insurance Contract even if the Indebtedness is
less than the amount otherwise necessary to reinstate the
Contract.
The effective date of reinstatement of a Contract will be the date that
Liberty Life approves the reinstatement request. Suicide and
incontestability provisions will apply from the effective date of
reinstatement.
Redemptions, Transfers, and Loans
6. Loans
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A. Loans at Issue
Loans at Issue are permissible by Liberty Life only in the case of a 1035
Exchange. Liberty Life will accept outstanding loans that are not greater
than 50 percent of the total Account Value exchanged. Liberty Life
reserves the right to change Loan at Issue limits at its discretion.
Changes will be applied uniformly to all applicants.
B. Loans at Issue Rates
Loans at Issue will be charged at a rate of 4.25%. Liberty Life will
credit interest on the outstanding loan balance at a rate of 3.5%.
C. Preferred Loans
Liberty Life will determine the amount available for a preferred loan by
determining the earnings of the Contract since its inception. Earnings
equal: (A)minus (B)minus (C)minus (D)plus (E); where
(A) is the Account Value
(B) is total Payments made
(C) is the preferred loan balance
(D) is accrued loan interest; and
(E) is all prior partial withdrawals in excess of
earnings.
D. Loan Payments
Once a Contract loan is requested and approved by Liberty Life, the
payment will be sent out within seven days. All requirements must be
satisfied in order for Liberty Life to process a loan. Loan requests must
be submitted in writing to the Service Center.
Liberty Life Service Center
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
E. Loan Repayments
Contract Owners may repay a loan in full or make a partial repayment on
any Contract loan while the Contract is still in effect. Liberty Life will
treat any payment we receive from a Contract Owner as a loan repayment,
unless otherwise instructed in writing. Any portion of a payment in excess
of the loan repayment will be treated as additional Payment to the
Contract. Liberty Life will deduct an amount equal to the loan repayment
from the Loan Account and allocate the Payment proportionately among the
Sub-Accounts and the Fixed Account on the same basis as additional
Payments are allocated, unless instructed otherwise.
If a specific loan is not selected for Loan Repayment, the last loan taken
will be the first loan repaid. Loan repayments, unless the Contract Owner
directs otherwise in writing, will be repaid in the following order:
- Non Preferred
- Preferred
- Loan at Issue
D. Source of Loans
The Contract Owner can specify the source of the loan (the accounts he or
she would like the money removed from), but cannot direct that more than a
pro rata share of the loan be made from the Fixed Account. If the Contract
Owner does not specify the source of the loan, the loan will be made from
the Sub-Accounts and Fixed Account based on the proportionate Account
Value in each account.
7. Withdrawals
A. Minimum Amount Remaining After Partial Withdrawal
Partial withdrawals are permitted after the first Contract Year. A
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Contract Owner may make a partial withdrawal under this Contract.
Partial withdrawals must be at least $250. If in any Contract Year more
than one partial withdrawal is taken, Liberty Life may charge a
transaction fee of the lesser of $25 or 2% of the amount of the
subsequent partial withdrawal(s). The Contract Owner may select the
Sub-Accounts from which to deduct the amount of the partial withdrawal.
If the Contract Owner does not indicate which Sub-Accounts the
withdrawal will be deducted from, the amount of the partial withdrawal
will be deducted on a pro rata basis from the Sub-Accounts and the
Fixed Account. The Contract Owner cannot direct more than a pro rata
share be removed from the Fixed Account. The Initial Death Benefit is
reduced on the date of the partial withdrawal proportionately to the
Account Value reduction. If a partial withdrawal less any applicable
withdrawal charge reduces the Account Value to below Liberty Life's
current minimum of $10,000, the withdrawal request will not be
processed, unless the Contract Owner instructs Liberty Life to treat
the request as a full surrender of the Contract. Liberty Life will not
process a full surrender without written consent from the Contract
Owner.
Example of proportionate reduction in initial Death Benefit:
1. Account Value before withdrawal: $ 50,000
2. Initial Death Benefit before withdrawal: $ 100,000
3. 7702 Corridor Percentage (assume age 35): 250%
4. Death Benefit before withdrawal (1) x (3): $ 125,000
5. Withdrawal: $ 10,000
6. Account Value after withdrawal: $ 40,000
7. Revised initial Death Benefit after withdrawal
(2) x (6) / (1): $ 80,000
8. New Death Benefit after withdrawal (6) x (3): $ 100,000
B. Tax Withholding
When a partial withdrawal or full surrender is requested, Liberty Life
will not withhold taxes, unless instructed to do so. If no tax withholding
instructions are included with the request, Liberty Life will process the
request for the total amount requested and will not withhold taxes, unless
otherwise required by law.
8. Transfers
A. Transfer Privileges
Liberty Life imposes the following limits and restrictions on the number,
timing, and processing requirements of transfer requests:
(1) Up to 20 transfers each calendar year are allowed via telephone, fax
or mail;
(2) Transfers above the 20 limit are accepted only if they are in a form
acceptable to us, as described below, and are sent to us by mail;
(3) Transfers above the 20 limit will be rejected if requested via
telephone or fax.
Currently, we do not accept electronic transfer requests.
Additional restrictions may be imposed on Contract Owners effecting
frequent transfers, or identified patterns of short-term trading activity
which, in Liberty Life's judgment, are potentially detrimental to other
Contract Owners, even if the number of transfers submitted is below 20 per
year. Such restrictions may include limiting, delaying or refusing
additional transfer instructions. Written notification will be provided if
a transfer request is rejected, or if special restrictions are being
imposed.
In certain circumstances, some of the Portfolios in which the Sub-Accounts
of the Variable Account invest reserve the right to delay transfer
requests, either on the purchase or redemption side of the transaction,
and some Portfolios may refuse transfer requests for purchase
transactions. If this happens, Liberty Life may not be able to effect some
transfer requests. Under our contractual agreements with the Portfolios,
we may impose limitations or restrictions on transfers, to the extent
required or permitted under applicable law. Written notification will be
provided if
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Liberty Life is not able to process a requested transfer or if a
restriction or limitation on transfer activity is imposed on a Contract.
B. Minimum Transfer Amounts and Timing
Transfer amounts will be based on the Accumulation Unit Value next
determined following receipt of valid, complete transfer instructions by
Liberty Life. Transfer requests must be in a form acceptable to Liberty
Life. Subject to limitations described above, written requests signed by
the Contract Owner on a form that we provide for requesting transfers are
acceptable. Other legible written requests with the appropriate Contract
number and complete instructions can be accepted unless limitations on
transfer activity have been imposed by Liberty Life. Requests can also be
made by telephone as authorized by Liberty Life. Transfer requests
received at the Service Center after the close of the New York Stock
Exchange ("NYSE") (normally 4:00 p.m. Eastern Time), will be priced on the
next business day after received. Transfer requests received at the
Service Center in writing before the close of the NYSE (normally 4:00 p.m.
Eastern Time), on any day that the NYSE and Liberty Life is open will be
priced as of the day received, unless Liberty Life is closed in the case
of an emergency. If Liberty Life is closed, transfer requests will be
priced as of the day Liberty Life and the NYSE are next open. The minimum
partial transfer amount is $250 from a single Sub-Account or Fixed
Account, unless the amount requested is the entire balance in the
Sub-Account or Fixed Account. If less than $500 would remain in a
Sub-Account or Fixed Account after a transfer, Liberty Life requires a
transfer of the entire balance.
C. Telephone Transfers
Transfers will be accepted by telephone, unless the Contract Owner elected
not to allow such transfers at the time of application, or if limitations
or special restrictions are in effect. Telephone Privileges will be
automatically granted in all available states unless the Contract Owner
elects "No Telephone Privileges" on the application at issue. If a state
does not allow Telephone Privileges to be automatically granted, Liberty
Life may allow telephone transfers upon receipt of the Contract Owner's
written consent to process telephone transfers. Telephone Privileges may
be cancelled after Contract issuance by submitting the request in writing
to the Liberty Life Service Center. The cut off time for telephone
transfer requests to be effective on the same day received is normally
4:00 p.m. Eastern Time each day that the NYSE and Liberty Life are open.
Transfer requests received over the telephone before and up until 4:00
p.m. Eastern Time will be processed on that day at that day's price.
Transfers received after the close of the New York Stock Exchange
(normally 4:00 p.m. Eastern Time), will be processed on the next business
day and priced as of the next business day. Transfer requests received
after the official closing of the NYSE will be priced the next business
day that the NYSE and Liberty Life are open. If Liberty Life is closed due
to an emergency, transfer requests will be honored as of the business day
that Liberty Life received the request or, if the NYSE is not open, on the
next business day that the NYSE is open.
If a Contract Owner calls in to make a transfer prior to the NYSE close,
and then calls back to cancel the transfer, we will cancel it only if the
request to cancel is received prior to the close of the NYSE. Any requests
to cancel a transfer after the close of the NYSE will not be honored.
Written notification will be provided if a transfer request cannot be
processed because the 20 transfer per calendar year limit on telephone
transfer requests has been reached, or if a special restriction is imposed
due to frequent transfer activity or identified patterns of short-term
trading.
D. Confirmations of Transfer Requests
Written acknowledgment of transfers between Sub-Accounts will be provided
at three points in time: (1) a confirmation notice will be sent to the
Contract Owner within five days of receipt of the request, (2) the
quarterly statement will reflect transfers, and (3) the annual statement
will reflect transfers.
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The transfer provisions may be suspended, modified or terminated at any
time by Liberty Life.
E. Asset Rebalancing
A Contract Owner may elect to have transfers made automatically among the
Sub-Accounts of the Variable Account on an annual, semi-annual, quarterly
or monthly basis, so that Account Value is reallocated to match the
percentage allocations in the Contract Owner's premium allocation
elections. Asset Rebalancing will occur on the 25th day of the month in
which the rebalancing is scheduled to occur. The Contract Owner may choose
a day other than the 25th. Asset Rebalancing is not available until the
end of the Free Look Period. If the Contract Owner chooses a date prior to
the end of the Free Look Period, we will schedule Asset Rebalancing to be
on the 25th of the month in which the Free Look Period ends. Liberty Life
will require the administrative form five business days prior to the 25th
day of the month, or five business days prior to the selected date of the
automatic Asset Rebalancing. Automatic transfers into or out of the Fixed
Account are not permissible. Transfers under this program will not be
subject to the $250 minimum transfer amounts. An election to participate
in the automatic Asset Rebalancing program must be in writing on the form
prescribed by and returned to Liberty Life at its Service Center.
Currently, automatic transfers through the Asset Rebalancing program do
not count towards the limit of 20 transfers described above. In the
future, we may count such transfers toward the limit. In the event of such
a change, written notification will be provided to affected Contract
Owners in advance of the effective date of the change.
F. Asset Allocation Models
Standard & Poor's Inc. ("S&P") has developed several asset allocation
models for use with the Contract.
If a Contract Owner decides to use a model, Liberty Life will
automatically enroll the Contract in the Asset Rebalancing Program and
allocate Payments in accordance with the percentages specified in one of
the S&P models. Only one model may be used at a time. If Contract Owners
wish to allocate a portion of Payments or Account Value to the Fixed
Account, they must instruct us specifically, because none of the models
includes the Fixed Account. Liberty Life will rebalance the total
Sub-Account Values in accordance with the chosen model on a quarterly
basis.
If a model is chosen at the time of application, the first time the
Sub-Account values will be rebalanced is the 25th day of the month
following the Free Look Period. If a model is chosen after the Contract
has been issued, the first time the Sub-Account values will be rebalanced
is the 25th day of the last month in the calendar quarter in which use of
the model was requested. The Contract Owner may choose a day other than
the 25th. If the Contract Owner wishes, they may instruct us, in writing,
to rebalance their Sub-Account values monthly, semi-annually, or annually
instead of quarterly. Written instructions must be mailed to the Service
Center. Liberty Life will require the instructions to be received five
business days prior to the selected date of the next scheduled automatic
Asset Rebalancing.
Contract Owners may choose to use an S&P asset allocation model at any
time. Contract Owners may also discontinue use of the models at any time.
Liberty Life will automatically discontinue use of a model if the Contract
Owner (a) discontinues the Asset Rebalancing program or (b) gives us
instructions to change the allocations of Payments or Account Value among
the Sub-Accounts. Instructions to discontinue use of the asset allocation
model must be received five business days prior to the date Asset
Rebalancing is scheduled to occur.
Periodically, S&P will review the models. If Liberty Life decides to
change the percentage allocations under a model, Contract Owners using
that model will be notified before we implement the change. If the change
to a model involves the addition of a Sub-Account that was not previously
available to the Contract Owner, Liberty Life will require current
Contract Owners using
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the asset allocation model to give their consent to have their Account
Value allocated according to the revised model allocations. Consent may be
given by sending written instructions to the Liberty Life Service Center
or by calling the Service Center, if the Contract Owner did not refuse
Telephone Privileges on the application. If Liberty does not receive
consent from a Contract Owner to change to the revised model or an
election of another available model, the Contract Owner will cease to
participate in the model program as of the effective date of the change in
the model. Allocations of the non-responsive Contract Owners' existing
Account Value and future Payments will remain unchanged until contrary
instructions are received, and the Asset Rebalancing program will continue
to apply. If the changes to the model involve only Sub-Accounts that were
already available to the Contract Owner for allocation of Account Value,
Contract Owners will be given a reasonable time to instruct Liberty Life
not to reallocate according to the new percentages. If the Contract Owner
does not respond within the specified time, we will apply the revised
model to the Contract. If a Contract Owner is not enrolled in a model at
the time S&P decides to make a percentage change to the allocations, they
will not be notified of the changes.
G. Dollar Cost Averaging
Before the end of the Free Look Period, a Contract Owner may designate a
portion of the Account Value attributable to the Fixed Account, or any
Sub-Account, to be automatically transferred, on a monthly basis, to one
or more of the Sub-Accounts, or the Fixed Account. The Dollar Cost
Averaging process will not take place until the end of the Free Look
Period. If the Contract Owner chooses a date prior to the end of the Free
Look Period, we will begin Dollar Cost Averaging on the 1st (or any other
day elected) of the month immediately following the end of the Free Look
Period. If no election is made as a source account, Liberty Life will not
process the request and will contact the Contract Owner to obtain the
necessary information. After the end of the Free Look Period, a Contract
Owner may designate a portion of the Account Value attributable to the
Sub-Accounts to be automatically transferred, on a monthly basis, to one
or more of the Sub-Accounts or the Fixed Account. If no election is made
as a source account, Liberty Life will not process the request and will
contact the Contract Owner to obtain the necessary information. Dollar
Cost Averaging from the Fixed Account cannot be elected after the end of
the Free Look Period. A Contract Owner may enroll in this program at the
time the Contract is issued or anytime, thereafter, by properly completing
the administrative form and returning it to Liberty Life at its Service
Center at least five business days prior to the 1st day of a month, which,
unless otherwise elected, is the date that all Dollar Cost Averaging
transfers will be made. If a Contract Owner enrolls in the Dollar Cost
Averaging program after the Contract has been issued, the Fixed Account is
not an available option to be designated as the source account. If a
Contract Owner wishes to choose a day other than the 1st of the month,
Liberty Life will require the form five business days prior to that date.
If Dollar Cost Averaging is not elected at issue then the Fixed Account
cannot be used as the source account.
The Contract Owner may choose to Dollar Cost Average a fixed amount until
a specified date, or until the funds are exhausted. The Contract Owner may
choose to transfer all values over a specified period of time. The
Contract Owner may make the election in percentages or in whole dollar
amounts. Dollar Cost Averaging will terminate when (1) the number of
designated monthly transfers has been completed, (2) the Account Value
attributable to the DCA Account is insufficient to complete the next
transfer, (3) the Owner requests termination in writing and such writing
is received by the Service Center at least five business days prior to the
next transfer date in order to cancel the transfer scheduled to take
effect on such date, or (4) the Policy is surrendered.
A Contract Owner may initiate or reinstate Dollar Cost Averaging or change
existing Dollar Cost Averaging terms by properly completing the new
enrollment form and returning it to the Service Center at least 5 business
days prior to the next transfer date on which such transfer is to be made.
If the Contract Owner wishes to discontinue Dollar Cost Averaging from the
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Fixed Account, the Contract Owner will have 60 days to transfer the
remaining balance from the Fixed Account to the Sub-Accounts. After the
60th day, if money remains in the Fixed Account, it cannot be moved until
the first 60 days following the next anniversary of the Contract. If
Liberty Life receives a request to transfer money out of the Fixed Account
that is post-marked within 60 days following the Contract Anniversary, the
request will be accepted and Liberty Life will process the transfer out of
the Fixed Account.
Currently, automatic transfers through the Dollar Cost Averaging program
do not count towards the limit of 20 transfers described above. In the
future, we may count such transfers toward the limit. In the event of such
a change, written notification will be provided to affected Contract
Owners in advance of the effective date of the change.
Payments
9. Subsequent Premium
A. Underwriting Subsequent Payments
A Contract Owner may choose to make additional Payments of at least $1,000
each ($10,000 for Contracts issued in New York). We may require evidence
of insurability if an increase in the Death Benefit would result from an
additional Payment. During the underwriting period, the subsequent Payment
may not be applied to the Contract. The Payment will be applied to a
non-interest bearing Suspense Account. Upon underwriting approval from the
Service Center, the subsequent Payment will be applied to the Fixed
Account and the Sub-Accounts, according to the current Payment allocation,
unless otherwise elected. Interest will not be credited on the subsequent
Payments during the underwriting period. Liberty Life will refuse to
accept any additional Payments that would cause the Contract to lose its
status as a life insurance contract under the Internal Revenue Code.
Additional Payments in excess of guideline premium limitations will result
in an increase in Initial Death Benefit, subject to underwriting approval.
If the acceptance of a subsequent Payment requires an increase in the
Initial Death Benefit to maintain the Contract's qualification as life
insurance under the Internal Revenue Code, the Initial Death Benefit will
be increased by the minimum amount required to maintain such
qualification.
B. Allocation of Subsequent Payments
In the application, the Contract Owner must choose an initial allocation
of Payment. Additional Payments received, subsequent to the initial
Payment will continue to be allocated in accordance with the Owner's
instructions in the application unless contrary written instructions are
received or the Contract Owner calls the Service Center or Integrated
Voice Response Unit and gives contrary instructions. Once a change in
allocation is made, all future Payments will be allocated in accordance
with the new allocation, unless contrary written instructions are
received.
C. Payment Not Honored By Bank
If a Payment or portion of a Payment due on a Contract is not honored by
the Contract Owner's bank, Liberty Life's bank will resubmit the check to
the bank for payment. If the Payment does not clear, Liberty Life will not
resubmit the check a third time. If payment is not honored within ten days
of the first attempt to deposit the Payment, the Contract will be
cancelled. Any charges incurred by the bank are the responsibility of the
Contract Owner.
Death
10. Death Benefit
A. Definition of Due Proof of Death
Due Proof of Death is defined as the date on which Liberty Life is
satisfied that the Insured is deceased. Typically, the receipt of the
original Death Certificate or a notarized copy of the Death Certificate
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and the death claim form satisfies Liberty Life's criteria. Payment of
Death Benefit proceeds is subject to the Contract provisions regarding
suicide, incontestability and misrepresentation and misstatement of age or
sex. In addition, payment of Death Benefit proceeds is subject to proof of
date of death, satisfactory to Liberty Life and receipt of all other
requirements deemed necessary by Liberty Life, including state law
requirements. However, in addition to the reasons for delaying payment
stated in the Contract, Liberty Life may delay payment if Due Proof of
Death is not met. Some instances where Due Proof of Death may not be met
include: (1) additional investigation is needed to determine the cause of
death, (2) Liberty life has reason to suspect fraud on the part of the
Applicant, Insured or claimant, (3) death occurs within the Contract's
contestable period, (4) the designated Beneficiary cannot be located, is
not competent to receive the Death Benefit proceeds, or may be precluded
from receiving the Death Benefit proceeds, 5) different parties have
presented conflicting claims to the same Death Benefit proceeds, (6)
additional information is required to identify the Beneficiary, or (7) a
governmental entity or agency or court has placed a lien or other form of
attachment on the Death Benefit proceeds. Provision of a death certificate
is not necessarily Due Proof of Death. Liberty Life may decide that the
circumstances of certain claims raise questions of whether the insured has
died and require additional investigation to establish Due Proof of Death.
Liberty Life will pay Death Benefit proceeds out of its General Account
and will transfer the Account Value from the Sub-Accounts to the General
Account. The excess, if any, of the Death Benefit over the amount
transferred will be paid out of the General Account.
B. Death Benefit Calculation
When Liberty Life receives Due Proof of Death, the Death Benefit will be
calculated as of the actual date of death. Accumulation Units in the
Variable Account will be sold on the date Due Proof of Death is received
by the Service Center. The proceeds will be placed into a suspense
account. Interest will be credited at the rate established by Liberty Life
or in accordance with state laws, if greater. Liberty Life will typically
pay Death Benefit proceeds within seven days after Liberty Life receives
Due Proof of Death.
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Exhibit 1
Subjects of Required Amendments for the Modified Single Payment Variable Life
Insurance Contract
A. Incomplete Applications
We can require an amendment if the following questions on the application
initially were left blank or corrected, but not initialed by the client.
1. Plan of Insurance
2. Initial Payment
3-4. Insured Name
6. Owner Name
7. Beneficiary name
8b. 1st Year Fixed Account Guaranteed Interest Rate
9-10. All medical questions (underwriting information)
Contract Date
Note: If a Contract amendment becomes necessary, we will use the amendment to
correct any other area of the application as needed.
B. Other Circumstances Requiring Special Handling
2. Initial Death Benefit: We will require an amendment if we alter a
Contract whose initial Death Benefit is less than originally shown
on the initial application. If the Death Benefit is higher than
originally shown, we will use an acknowledgement to inform the
Contract Owner of the change.
3a-4a. Birth Date/Age: The initial Death Benefit may be incorrect if the
Insured's birth date is wrong on the original application. If as a
result of an incorrect birth date, the initial Death Benefit is less
than originally shown on the application, we will amend the initial
Death Benefit, and the Insured's birth date/age. If the initial
Death Benefit is higher than originally shown or has not changed, we
will use an acknowledgement to correct the initial Death Benefit,
and the Insured's birth date/age.
7. Beneficiary relationship- amendment required if name and
relationship blank or changed.
Class determination: We will require an amendment if the class
determination at issue is less favorable than the rating class
originally applied for.
11. Tobacco Use question: If the answer on the application is blank or
changed, we will amend if the question is answered NO. An amendment
will not be required if the question is answered YES. With exam
requirements, we will use an acknowledgement if the tobacco use
question is left blank and the exam is negative for tobacco use. An
amendment is required if this question is answered NO or blank on
the application and the exam results indicate tobacco use.
Contract Date: When an initial Payment is collected at the time the
Contract is delivered, the Contract Date will be amended. The
Contract Date will be assigned the same date that the amendment is
signed.
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