Supplement dated May 1, 2011 to the Prospectus dated May 1, 2011 for
M’s Versatile Product IX Flexible Premium Variable Universal Life Insurance Policy
Issued by Pacific Life Insurance Company

 

 

In this supplement, you and your mean the Policyholder or Owner. Pacific Life, we, us, and our refer to Pacific Life Insurance Company. You’ll find an explanation of what terms used in this supplement mean, as well as a detailed description of the Policy, in the accompanying variable life insurance policy. Except as described below, all features and procedures of each Policy described in its prospectus remain intact.

 

This supplement describes the Indexed Fixed Account, an additional Investment Option under the Policy. Currently, there is one Investment Option in the Indexed Fixed Account (an Indexed Account), the 1 Year Indexed Option. We reserve the right to add additional Indexed Fixed Accounts or to cease offering one or more of the Indexed Fixed Accounts at any time. We will notify you of any change at your address on file with us.

You may allocate all or part of your Net Premium and your Accumulated Value to the Indexed Fixed Account if certain conditions are met. All such allocations are transferred from the Fixed Account into the Indexed Fixed Account on a Segment Start Date (currently, the 15th of each month).

 

We create a Segment for each allocation to an Indexed Account. We credit interest two ways to each Segment: One way, is that at the end of a one-year period (the Segment Maturity), we credit interest based in part on any positive change in the S&P 500^® Index.¹ This positive change, however, is limited by the Growth Cap (as discussed below, the Growth Cap includes the Cumulative Segment Guaranteed Interest Rate). The other way, is that every day we credit interest on Accumulated Value in the Segment based on a minimum interest rate, 1% annually for the 1 Year Indexed Account (the Segment Guaranteed Interest Rate, as shown in the Policy Specifications). We refer to the total interest we credit to a Segment as the Total Interest Credited.

 

The prospectus is amended as described below.

 

I. The Investment Options subsection of the BENEFITS AND RISKS OF M’S VERSATILE PRODUCT VIII – Benefits of your Policy section is amended by adding the following at the end of the first paragraph: You may also invest in the Indexed Fixed Account.

 

II. The Investment Options subsection of the BENEFITS AND RISKS OF M’S VERSATILE PRODUCT VIII – Benefits of your Policy section also is amended by adding the following at the end of the second paragraph: If you allocate your Net Premiums or Accumulated Value to the Indexed Fixed Account, you will not be able to transfer that Indexed Fixed Accumulated Value until the end of a Segment Term.

 

III. The Investment Performance subsection of the BENEFITS AND RISKS OF M’S VERSATILE PRODUCT VIII – Risks of your Policy section is amended by adding the following: The value in the Indexed Account is based on the two ways we credit interest to a Segment. Segment Indexed Interest in part is based on any positive change in an external index. There is no guarantee that Segment Indexed Interest will be greater than zero. However, Segment Guaranteed Interest is credited daily to a Segment and is guaranteed.

 

In addition, we assess an asset charge on Indexed Fixed Accumulated Value.

 

IV. If you allocate all or any of your Net Premiums and/or Accumulated Value to the Indexed Account, there are additional risk factors that you should consider. Therefore, the BENEFITS AND RISKS OF M’S VERSATILE PRODUCT VIII – Risks of your Policy section is amended by adding the following after Tax Consequences of Withdrawals, Surrenders and Loans:

 

 

 

 

 

 

 

 

V. FEE TABLES is amended by adding the following:

 

The following table describes the fees and expenses that you will pay if you allocate all or a portion of your Policy’s Accumulated Value to the Indexed Fixed Account:

VI. We use certain terms to describe the Indexed Fixed Account. To define those terms, TERMS USED IN THIS PROSPECTUS is amended as follows:

 

Accumulated Value – the total amount of your Policy’s Variable Accumulated Value, Fixed Accumulated Value, Indexed Fixed Accumulated Value and the Loan Accumulated Value, on any Business Day.

 

Closing Value – the value of the Index as of the close of the New York Stock Exchange, which is usually 4:00 p.m. Eastern time. If no closing value is published for a given day, we will use the closing value for the next day for which closing value is published.

 

Cumulative Segment Guaranteed Interest Rate – the Segment Guaranteed Interest Rate compounded annually for the number of years in the Segment Term.

 

Cutoff Date – two Business Days before the Segment Start Date.

 

Designated Amount – the amount you instruct us to allocate to Indexed Fixed Account. We will only transfer the Designated Amount (or such lesser amount if Policy charges have been deducted, or if you have taken a withdrawal or loan) to the Indexed Fixed Account on a Segment Start Date. Any interest earned on the Designated Amount while it is allocated to the Fixed Account will not be transferred to the Indexed Fixed Account on a Segment Start Date.

 

Growth Cap – the maximum total interest rate for a Segment over the Segment Term, as shown in your Policy Specifications, including both Cumulative Segment Guaranteed Interest Rate and the Segment Indexed Interest Rate.

 

Index – The Standard & Poor’s 500^® Composite Stock Price Index, excluding dividends (“S&P 500^®”).

Indexed Fixed Account – a Policy account, which is held in our General Account. We credit interest on the Indexed Fixed Account, in part, based on any positive change in an Index. There are Investment Options within the Indexed Fixed Account.

 

Indexed Account – an Investment Option within the Indexed Fixed Account. Currently, there is one Indexed Account – the 1 Year Indexed Account.

 

Indexed Fixed Account Value – the sum of the Segment Values for all Segments in the Indexed Fixed Account.

 

Indexed Fixed Accumulated Value – the total amount of your Policy’s Accumulated Value allocated to the Indexed Fixed Account.

 

Index Growth Rate – (b ¸ a) – 1, where:

 

 

Investment Option – a Variable Investment Option, Fixed Option or Indexed Fixed Account Option.

 

Lockout Period – a 12-month period of time during which you may not make any transfers into the Indexed Fixed Account. A Lockout Period begins any time a deduction is taken from the Indexed Fixed Account as a result of a loan or withdrawal that is not part of a Systematic Distribution Program.

 

Participation Rate – the percentage of the Index Growth Rate used to calculate the Segment Indexed Interest Rate.

 

Segment – a portion of your Accumulated Value in the Indexed Fixed Account. We create a Segment when Accumulated Value is transferred from the Fixed Account to the Indexed Fixed Account.

 

Segment Guaranteed Interest – the interest we credit daily to each Segment in the 1 Year Indexed Account from the Segment Start Date to the Segment Maturity at an annual rate equal to 1% for the 1 Year Indexed Account.

 

Segment Indexed Interest – the amount credited to the Segment at Segment Maturity, equal to the Segment Indexed Interest Rate multiplied by the average of all Segment Monthly Balances over the Segment Term.

 

Segment Indexed Interest Rate – The Index Growth Rate, multiplied by the Participation Rate, subject to the Growth Cap, that exceeds the Cumulative Segment Guaranteed Interest Rate. It is equal to [the lesser of (a × b) and c] – d, but not less than zero where:

 

 

Segment Maturity – the end of the Segment Term and the date we calculate any Segment Indexed Interest and credit it to the Segment.

 

Segment Maturity Value – the value of the Segment at Segment Maturity, including any Segment Indexed Interest.

 

Segment Start Dates – the dates on which transfers into the Indexed Fixed Account may occur, as shown in your Policy Specifications. We use a Segment Start Date to determine Segment months and Segment years.

 

Segment Term – a one-year period beginning on the Segment Start Date and ending on the Segment Maturity date.

 

Segment Value – the amount transferred to the Indexed Fixed Account from the Fixed Account on the Segment Start Date. After the Segment Start Date, the Segment Value equals a + b – c + d where:

 

 

Systematic Distribution Program – a program of periodic distribution that we designate, which includes periodic distribution of the Policy’s Accumulated Value through Policy loans and withdrawals.

 

Total Interest Credited – the sum of Segment Indexed Interest plus Segment Guaranteed Interest that we credit to a Segment.

 

Variable Accumulated Value – the total amount of your Policy’s Accumulated Value allocated to the Variable Accounts.

 

VII. Your Free Look Right subsection of the M’S VERSATILE PRODUCT VIII BASICS section is amended by adding a new bullet to the fifth paragraph:

 

VIII. Your Free Look Right – Your Free Look Right California insureds age 60 and over subsection of the M’S VERSATILE PRODUCT VIII BASICS section is amended by adding a bullet to the last paragraph:

 

 

IX. Timing of Payments, Forms and Requests – When we make payments and transfers subsection of the M’S VERSATILE PRODUCT VIII BASICS section is amended as follows:

 

We may delay transfers and payments from the Fixed Options and the Indexed Fixed Account, including the proceeds from withdrawals, surrenders and loans, for up to six months. We’ll pay interest at an annual rate of at least 2.5% on any withdrawals or surrender proceeds from the Fixed Options or the Indexed Fixed Account that we delay for 10 days or more.

 

X. HOW PREMIUMS WORK section is amended as follows:

 

We deduct a premium load from each premium payment, and then allocate your Net Premium to the Investment Options you’ve chosen. However, if you’ve chosen the Indexed Fixed Account, your Net Premium will first be allocated to the Fixed Account and transferred from the Fixed Account to the Indexed Fixed Account on the Segment Start Date. The Accumulated Value transferred from the Fixed Account to the Indexed Fixed Account may be less than the Net Premium or the Accumulated Value you transferred to the Fixed Account because there may have been deductions from the Fixed Account, such as those due to Monthly Deductions, withdrawals or policy loans.

 

There is other information you should know about allocating all or part of a Net Premium to the Indexed Fixed Account. You can only allocate a Net Premium to the Indexed Fixed Account if your Policy is not in a Lockout Period. In addition, you must notify us of your allocation to the Indexed Fixed Account by the Cutoff Date (two business days before a Segment Start Date) of a particular Segment Start Date in order for Accumulated Value to be transferred from the Fixed Account to the Indexed Fixed Account on that Segment Start Date. See YOUR INVESTMENT OPTIONS – Indexed Fixed Account. Otherwise, your Accumulated Value will be transferred to the Indexed Fixed Account on the Segment Start Date.

 

We do not count the allocation from the Fixed Account to the Indexed Fixed Account towards the number of transfers you may make in Policy Year. In addition, we do not count such transfer towards the number of transfers you may make in a Policy Year without a transfer fee.

 

XI. Monthly Deductions subsection of YOUR POLICY’S ACCUMULATED VALUE section is amended by adding the following:

 

Indexed Account Charge

 

We assess an additional charge every month for amounts in the Indexed Fixed Account. The charge is added to the Monthly Deduction assessed against the Policy’s Accumulated Value. The charge is calculated by multiplying the Indexed Account Charge Rate, as shown in your Policy Specifications (guaranteed maximum annual rate of 0.30% (0.025% monthly)), to the value of the Indexed Account as of the Monthly Payment Date.

See Indexed Fixed Account – Segment Value Changes.

 

XII.  YOUR INVESTMENT OPTIONS section is amended by adding the following after the Fixed Options subsection:

 

Amounts allocated to the Fixed Options and the Indexed Fixed Account are held in our General Account.

Indexed Fixed Account

 

You may also allocate Accumulated Value to the Indexed Fixed Account if certain conditions are met. Accumulated Value in the Indexed Account is divided into Segments. Each Segment represents Accumulated Value transferred from the Fixed Account to the Indexed Account on a Segment Start Date.

 

We credit interest two ways on Accumulated Value in the Indexed Account. We credit interest on each Segment daily with interest at a guaranteed minimum annual rate of 1% (the Segment Guaranteed Interest). In addition, we credit interest at Segment Maturity based in part on any positive change in the S&P 500 (the Segment Indexed Interest). However, Segment Indexed Interest is subject to a Growth Cap, which is the highest percentage that will be credited for a one-year period even if the change in the S&P 500 Index is higher. The current Growth Cap percentage is 11% (the Growth Cap includes the Segment Guaranteed Interest Rate). The Growth Cap is subject to change at our discretion, but the guaranteed Growth Cap percentage cannot be lower than 3%. We will declare any change in the current Growth Cap at the start of a Segment Term; the current Growth Cap will remain in effect for that Segment Term. The guaranteed Participation Rate is 100%.

Here’s how it works.

 

Important Considerations:

 

 

The way we calculate interest on Accumulated Value allocated to the Indexed Fixed Account is different from the way Accumulated Value allocated to a Variable Account, such as the Equity Index Variable Account, is calculated. The Equity Index Variable Account invests in the Pacific Select Fund Equity Index Portfolio, whose investment strategy is to invest at least 80% of its assets in equity securities of companies that are included in the S&P 500 Index. Accumulated Value allocated to the Equity Index Variable Account is valued daily based on the net asset value of the underlying Equity Index Fund. The Equity Index Variable Account reflects the change in the underlying Equity Index Fund’s net asset value.

 

Conversely, the Indexed Fixed Account is part of Pacific Life’s General Account. Investment of General Account assets is at Pacific Life’s sole discretion, subject to applicable law and regulation. The Segment Indexed Interest credited to Segments of the Indexed Account is based in part on any positive change in the S&P 500 Index (without dividends). It is a one-year point-to-point interest crediting strategy that will credit interest based on the one-year performance of the S&P 500 (without dividends) between two points in time, with an annual floor and Growth Cap, as described above. The Segment Guaranteed Interest credited to Segments is based on a predetermined annual interest rate that does not fluctuate during a Segment Term.

 

Below is an example that shows how we credit interest to a Segment.

 

Assumptions:

 

Deductions from the Indexed Fixed Account Accumulated Value may be taken for monthly Policy charges, withdrawals or loans. We calculate Segment Indexed Interest based on the average Segment Balance over the course of a Segment Term. This means that a proportionate Segment Indexed Interest will be applied to all amounts that are deducted from the Indexed Account over the Segment Term.

 

Here’s an example of how a deduction from the Policy affects Segment Indexed Interest.

 

End of Segment Month				Segment Monthly Balance
	2/14/2010				$1,000
	3/14/2010				$1,000
	4/14/2010				$1,000
	5/14/2010				$1,000
	6/14/2010				$1,000
	7/14/2010				$1,000
	8/14/2010				$700
	9/14/2010				$700
	10/14/2010				$700
	11/14/2010				$700
	12/14/2010				$700
	1/14/2015				$700

 

The average monthly Segment Balance is $850 (6 months × $1,000 + 6 months × $700, divided by 12).

 

The Segment Indexed Interest credited at Segment Maturity is $85 ($850 × 10% = $85.00). Upon Segment Maturity, the final Segment Accumulated Value is $785 (the $700 remaining Segment Balance plus the $85 Segment Indexed Interest).

 

How surrenders affect Segment Indexed Interest.

 

Using the example above, if you surrender the Policy on 7/15/2010 instead of taking a withdrawal, you will forfeit the Segment Indexed Interest we would otherwise have credited, and the $1,000 Accumulated Value in the Segment is included in the Policy’s Net Cash Surrender Value.

Segment Creation:

Segments can be funded by premium payments, transfers from the Variable Accounts or the Fixed Accounts, or from reallocated amounts from prior Segments following Segment Maturity. A new Segment is created when amounts are transferred from the Fixed Account to the Indexed Account. Accumulated Value held in the Fixed Account will earn interest at the Fixed Account rate until it is transferred.

In order for us to create a Segment on a particular Segment Start Date, we must receive your instructions by the Cutoff Date for that Segment Start Date. It is important to remember the Accumulated Value we transfer from the Fixed Account at the Segment Start Date may be less than your Designated Amount if we deducted Policy charges, or if you took a withdrawal or loan, from the Fixed Account before the Segment Start Date.

 

Once a Segment is created, you may not transfer Accumulated Value out of an Indexed Account to any other Investment Option before the end of the Segment Term.

 

The value in the Fixed Account can come from several sources:

 

 

Any persistency credits or loan interest credits earned on Accumulated Value will not be allocated into the Indexed Account.

 

Transfers from the Fixed Account to an Indexed Account may not be made during the Lockout Period.

 

The date of the transfer is called the Segment Start Date. Segment months and Segment years are measured from this date. Each Segment has its own Growth Cap and Participation Rate. The Growth Cap and Participation Rate for a Segment are those in effect on the Segment Start Date. The Growth Cap and Participation Rate in effect as of the Policy Date are shown in the Policy Specifications. We will notify you in the Annual Report or other written notice if they change.

 

Segment Start Dates are the dates when transfers into the Indexed Account may occur, and are shown in your Policy Specifications. We reserve the right to change the Segment Start Dates and to limit transfers into the Indexed Account, but in any event you will be allowed to make transfers at least once per calendar quarter. We will notify you in the Annual Report or other written notice if we change the Segment Start Dates.

 

There are two ways to make transfers to the Indexed Account:

 

 

Transfers to the Indexed Account will be based on your latest instructions on file with us. There are two types of instructions for transfers to the Indexed Account.

 

 

An example:

 

We receive and apply a premium payment of $10,000 on January 2, which corresponds to a Net Premium of $9,305. Based upon your payment instructions, 100% of the Net Premium is applied to the Indexed Fixed Account and the Designated Amount = $9,305.

 

On January 2, the Designated Amount is applied to the Fixed Account and the Fixed Account balance is $9,305. The Policy earns interest and charges are deducted, and on January 15 (the Segment Start Date), the Fixed Account balance is equal to $9,300.

 

On January 15, the Segment Start Date, the Fixed Account balance is $9,300, which is less than the Designated Amount. This amount will be transferred to the Indexed Account and the Fixed Account balance will be zero.

 

Another example:

 

Using the same examples as above, but assuming that the Fixed Account Value is $9,500 on the Segment Start Date:

 

On January 15, the Segment Start Date, the Designated Amount of $9,305 will be transferred to the Indexed Account. The Fixed Account value will be $195.

 

You may also make transfers to the Indexed Account by Written Request. We must receive your request before the Cutoff Date. If you want to transfer Accumulated Value from other Investment Options into the Indexed Account, your Accumulated Value will first be transferred from the Investment Options to the Fixed Account, according to the Transfer provisions in your Policy, and then transferred from the Fixed Account to the Indexed Account. See Transferring Among Investment Options and Market-timing Restrictions.

 

Any reallocation of Segment Maturity Value from the Indexed Account to the Fixed Options will occur before any other transfer.

Segment Value Changes:

We credit interest daily to each Segment from the Segment Date to Segment Maturity at an annual rate equal to the Segment Guaranteed Interest Rate shown in your Policy Specifications.

 

Deductions from your Policy’s Accumulated Value for Monthly Deductions, policy loans and withdrawals are taken first from the Policy’s Fixed Accumulated Value and Variable Accumulated Value. If there is no Fixed Accumulated Value or Variable Accumulated Value, we will take deductions from the Indexed Fixed Accumulated Value. Deductions are made for all Segments within each Indexed Account proportionate to Segment Value For each Segment, deductions are taken first from the Segment Monthly Balance (defined below under Segment Maturity) and then from the Segment Guaranteed Interest. If a withdrawal or loan is taken from the Policy that results in a deduction from the Indexed Fixed Account, and the withdrawal or loan is not taken pursuant to a Systematic Distribution Program, then a Lockout Period will begin. During the Lockout Period you may not allocate all or a portion of a Net Premium, loan repayments or otherwise transfer Accumulated Value from the Fixed Account into the Indexed Fixed Account. Segment reallocations for any maturing Segment will be made according to your reallocation instructions.

Segment Maturity:

We calculate Segment Indexed Interest, if any, and credit it to the Segment at Segment Maturity. We will never credit negative interest to the Indexed Fixed Account. The Segment ends at Segment Maturity and we allocate the Segment Maturity Value to the Investment Options according to your reallocation instructions on file with us. If you have not given us reallocation instructions, we will reallocate the Segment Maturity Value to a new Segment in the Indexed Account. However, if the Segment Maturity Value consists only of the Segment Guaranteed Interest and the Segment Indexed Interest, we will transfer such value into the Fixed Account.

 

The Segment Indexed Interest is the average of all Segment Monthly Balances over the entire Segment Term multiplied by the Segment Indexed Interest Rate.

 

The Segment Monthly Balance is, as of the end of any Segment Month, the amount initially transferred to the Segment minus all Segment Deductions, excluding any interest that may have been credited to the Segment. We calculate the Segment Monthly Balance as of the end of each Segment Month, and average these amounts for determining the Segment Indexed Interest.

 

The Segment Indexed Interest Rate reflects the Index Growth Rate, and is equal to [the lesser of (a x b) and c] – d, such result being not less than zero, where:

 

XIII. The Transferring Among Investment Options and Market-Timing Restrictions subsection of the YOUR INVESTMENT OPTIONS section is amended as follows:

 

We do not count the transfer from the Fixed Account to an Indexed Account towards the number of transfers you may make in Policy Year. Further, we do not count such transfer towards the number of transfers you may make in a Policy Year without a transfer fee.

 

You may not transfer from an Indexed Account until Segment Maturity. In addition, you may not allocate all or a portion of a Net Premium or Accumulated Value to the Indexed Account if your Policy is in a Lockout Period.

 

XIV. The General Account section of ABOUT PACIFIC LIFE is amended as follows:

 

The Fixed Options and the Indexed Fixed Account are part of our General Account, which we may invest as we wish according to any laws that apply.

 

M’s Versatile Product IX is a flexible premium variable life insurance policy issued by Pacific Life Insurance Company.

 

 

This prospectus provides information that you should know before buying a Policy. It is accompanied by the current prospectuses for the Funds that provide the underlying portfolios for the Variable Investment Options offered under the Policy. The Variable Investment Options are funded by the Pacific Select Exec Separate Account of Pacific Life. Please read these prospectuses carefully and keep them for future reference.

 

Here’s a list of the Investment Options available under your Policy:

 

VARIABLE INVESTMENT OPTIONS

Pacific Select Fund

 

FIXED OPTIONS

Fixed Account

Fixed LT Account

 

The Policy is described in detail in this prospectus and its Statement of Additional Information (SAI). Each Fund is described in its prospectus and in its SAI. No one has the right to describe the Policy or any Fund any differently than they have been described in these documents.

You should be aware that the Securities and Exchange Commission (SEC) has not reviewed the Policy for its investment merit, and does not guarantee that the information in this prospectus is accurate or complete. It is a criminal offense to say otherwise.

YOUR GUIDE TO THIS PROSPECTUS

 

Benefits of your policy

 Flexibility

 

The Policy is designed to be flexible to meet your specific life insurance needs. Within certain limits, you can:

 Death Benefit

 

The Death Benefit will always be the greater of the Death Benefit under the Option you choose or the Minimum Death Benefit. The Minimum Death Benefit is the lowest Death Benefit that we must pay to ensure that your Policy qualifies as life insurance.

 

You may choose one of three Death Benefit Options:

 

You may choose between two ways to calculate the Minimum Death Benefit:

 

The test you choose will generally depend on the amount of premiums you want to pay relative to your desired Death Benefit.

 Accumulated Value

 

Accumulated Value is the value of your Policy on any Business Day. It is not guaranteed – it depends on the performance of the Investment Options you have chosen, the timing and amount of premium payments you have made, Policy charges, and how much you have borrowed or withdrawn from the Policy.

 

You can access your Accumulated Value in several ways:

 Investment Options

 

You can choose to allocate your net premiums and Accumulated Value among a selection of Variable Investment Options, each of which invests in a corresponding portfolio of various underlying Funds. The Policy also offers two Fixed Options, both of which provide a guaranteed minimum rate of interest.

 

You can transfer among the Investment Options during the life of your Policy without paying any current income tax. There is currently no charge for transfers.

 Tax Benefits

 

Your Beneficiary generally will not have to pay federal income tax on Death Benefit Proceeds. You will also generally not be taxed on any or all of your Policy’s Accumulated Value unless you receive a cash distribution.

Risks of your policy

 Long-term Financial Planning

 

This Policy is designed to provide a Death Benefit for family members or others or to help meet other long-term financial objectives. It is not suitable as a short-term savings vehicle. It may not be the right kind of policy if you plan to withdraw money or surrender your Policy for short-term needs. Taking a withdrawal or surrendering your Policy may incur charges. See the Fee Tables and your Policy for charges assessed when withdrawing from or surrendering your Policy.

 

Please discuss your insurance needs and financial objectives with your insurance professional.

 Premium Payments

 

Federal tax law puts limits on the premium payments you can make in relation to your Policy’s Death Benefit. We may refuse all or part of a premium payment you make, or remove all or part of a premium from your Policy and return it to you under certain circumstances.

 Lapse

 

Your Policy stays In Force as long as you have sufficient Accumulated Value to cover your monthly deductions of Policy charges. Insufficient premium payments, poor investment performance, withdrawals, and unpaid loans or loan interest may cause your Policy to lapse – which means you will no longer have any insurance coverage. There are costs associated with reinstating a lapsed Policy.

 

There is no guarantee that your Policy will not lapse even if you pay your planned periodic premium. You should consider a periodic review of your coverage with your insurance professional.

 Investment Performance

 

Each Variable Investment Option invests in a corresponding portfolio of an underlying Fund, as detailed in Your Investment Options. The value of each portfolio fluctuates with the value of the investments it holds. Returns are not guaranteed. You bear the investment risk of any Variable Investment Option you choose.

 

See each Fund’s prospectus for more information on the underlying portfolios and their individual risks.

 Withdrawals and Loans

 

Making a withdrawal or taking out a loan may:

 

Be sure to plan carefully before using these Policy benefits.

 

Your Policy’s withdrawal feature is not available until your first Policy Anniversary.

 General Account

 

Unlike the assets in our Separate Account, the assets in our General Account are subject to liabilities arising from any of our other business. Our ability to pay General Account guarantees is backed by our financial strength and claims paying ability. We may be unable to meet our obligations with regard to the General Account interest guarantee.

 Tax Consequences of Withdrawals, Surrenders and Loans

 

You may be subject to income tax if you take any withdrawals or surrender the Policy, or if your Policy lapses and you have not repaid any outstanding Policy Debt.

 

If your Policy is a Modified Endowment Contract, all distributions you receive during the life of the Policy may be subject to tax and a 10% penalty.

 

There are other tax issues to consider when you own a life insurance policy. These are described in more detail in Variable Life Insurance and Your Taxes.

Transaction fees

 

Periodic charges other than Fund operating expenses

 

FEE TABLES

 

 

FEE TABLES

 

Total annual Fund operating expenses

 

This table shows the minimum and maximum total annual operating expenses paid by the portfolios that you pay indirectly during the time you own the Policy. This table shows the range (minimum and maximum) of fees and expenses (including management fees, shareholder servicing or distribution (12b-1) fees, and other expenses) charged by any of the portfolios, expressed as an annual percentage of average daily net assets. The amounts are based on expenses paid in the year ended December 31, 2010, adjusted to reflect anticipated changes in fees and expenses, or, for new portfolios, are based on estimates for the current fiscal year.

 

Each Variable Account of the Separate Account purchases shares of the corresponding Fund portfolio at net asset value. The net asset value reflects the investment advisory fees and other expenses that are deducted from the assets of the portfolio. The advisory fees and other expenses are not fixed or specified under the terms of the Policy, and they may vary from year to year. These fees and expenses are described in each Fund’s prospectus.

 

 

 

To help limit Fund expenses, Fund advisers have contractually agreed to reduce investment advisory fees or otherwise reimburse certain portfolios of their respective Funds which may reduce the portfolio’s expenses. The range of expenses in the first row above does not include the effect of any waiver and/or expense reimbursement arrangement. The range of expenses in the second row includes the effect of waiver and/or expense reimbursement arrangements that will remain in effect at least through April 30, [     ]. There can be no assurance that expense waivers or reimbursements will be extended beyond their current terms, and they may not cover certain expenses such as extraordinary expenses. See each Fund’s prospectus for complete information regarding annual operating expenses of that Fund.

 

Some Investment Options available to you are “fund of funds”. A fund of funds portfolio is a fund that invests in other funds in addition to other investments that the portfolio may make. Some funds of funds may have fees higher than other available Investment Options. The fees for the funds of funds Investment Options available under your Policy are in the range of total portfolio operating expenses disclosed above. For more information on these portfolios, please see the prospectuses for the Funds.

 

 

Accumulated Value – the total amount of your Policy’s value allocated to the Variable Investment Options and any available Fixed Options, plus the amount in the Loan Account, on any Business Day.

 

Age – at issue, the Insured’s Age on his/her birthday nearest the Policy Date. We add one year to this Age on each Policy Anniversary.

 

Basic Coverage – insurance coverage on the Insured under the Policy as shown in the Policy Specifications.

 

Basic Coverage Layer – a layer of insurance coverage on the Insured under the policy. There may be one or more Basic Coverage Layers. Each increase in Basic Face Amount will comprise a new Basic Coverage Layer. Each Basic Coverage Layer has its own Face Amount, Risk Class, Coverage Layer Date, and set of charges. The Face Amount, Risk Class, Coverage Layer Date and set of charges for the initial Basic Coverage Layer are shown in the Policy Specifications. We will send you a Supplemental Schedule of Coverage that will show the Face Amount, Risk Class, Coverage Layer Date and set of charges for any Basic Coverage Layer you add.

 

Basic Face Amount – the sum of the Face Amounts of all Basic Coverage Layers. The Face Amount of the initial Basic Coverage is shown in the Policy Specifications.

 

Beneficiary – the person, people, entity or entities you name to receive the Death Benefit Proceeds.

 

Business Day – any day that the New York Stock Exchange and our Life Insurance Operations Center are open. It usually ends at 4:00 p.m. Eastern time. A Business Day is called a valuation day in your Policy.

 

Cash Surrender Value – the Policy’s Accumulated Value less any surrender charge.

 

Cash Value Accumulation Test – one of two Death Benefit Qualification Tests available under the Policy, and defined in Section 7702(b) of the Tax Code.

 

Class – a subgroup of Insureds determined by a number of factors, including, but not limited to, the Death Benefit, Basic Face Amount, Total Face Amount, Coverage Layer, Policy Date, policy duration, the Insured’s Age and Risk Class, requested or scheduled additions of Coverage Layers, and any optional riders and benefits.

 

Coverage – insurance coverage on the Insured as provided by the Policy or other attached Riders.

 

Coverage Layer – is a Basic Coverage Layer or a layer of insurance coverage on the Insured under an optional rider.

 

Coverage Layer Date – is the effective date of a particular Coverage Layer and is the date used to determine Coverage Layer months, years and anniversaries. The Coverage Layer Date for the initial Coverage Layer is the Policy Date as shown in the Policy Specifications.

 

Death Benefit – the amount which is payable on the date of the Insured’s death.

 

Death Benefit Proceeds – the amount which is payable to the Beneficiary on the date of the Insured’s death, adjusted as provided in the Policy.

 

Death Benefit Qualification Test – either the Cash Value Accumulation Test or the Guideline Premium Test. This test determines what the lowest Minimum Death Benefit should be in relation to a Policy’s Accumulated Value. Each test available under the Policy is defined in Section 7702 of the Tax Code.

 

Face Amount – is the specified amount of insurance coverage on the Insured for each Coverage Layer as shown in the Policy Specifications.

 

Fixed Accumulated Value – the total amount of your Policy’s value allocated to the Fixed Accounts.

Fixed Options – the Fixed Account and Fixed LT Account, which are part of our General Account.

 

Free Look Right – your right to cancel (or refuse) your Policy and return it for a refund.

 

Free Look Transfer Date – for Policies issued in states that require return of premium if the Free Look Right is exercised, the day we transfer Accumulated Value from the Cash Management Investment Option to the Investment Options you chose.

 

Fund – Pacific Select Fund, BlackRock Variable Series Funds, Inc., Fidelity Variable Insurance Products Funds, Franklin Templeton Variable Insurance Products Trust, GE Investments Funds, Inc., Janus Aspen Series, Lazard Retirement Series, Inc., Legg Mason Partners Variable Equity Trust, Lord Abbett Series Fund, Inc., MFS Variable Insurance Trust, PIMCO Variable Insurance Trust, Royce Capital Fund, T. Rowe Price Equity Series, Inc., Van Eck VIP Trust.

 

General Account – includes all of our assets, except for those held in the Separate Account, or any of our other separate accounts.

 

Guideline Premium Limit – the maximum amount of premium or premiums that can be paid for any given Face Amount in order to qualify the Policy as life insurance for tax purposes as specified in the Guideline Premium Test.

 

Guideline Premium Test – one of two Death Benefit Qualification Tests available under the Policy, and defined in Section 7702(a)(2) of the Tax Code.

 

Illustration – a display of Policy benefits based upon the assumed Age and Risk Class of an Insured, Face Amount of the Policy, Death Benefit, premium payments, and historical or hypothetical gross rate of return.

 

In Force – the status of a Policy when all requirements are met to provide a Death Benefit upon the death of the Insured.

 

Insured – the person on whose life the Policy is issued.

 

Investment Option – a Variable Investment Option or Fixed Option.

 

Loan Account – an account which holds amounts transferred from the Investment Options as collateral for Policy loans.

 

Loan Accumulated Value – the total amount of your Policy’s Accumulated Value allocated to the Loan Account.

 

Minimum Death Benefit – the lowest Death Benefit needed for the Policy to qualify as life insurance under Section 7702 of the Tax Code.

 

Modified Endowment Contract – a type of life insurance policy as described in Section 7702A of the Tax Code, which receives less favorable tax treatment on distributions of cash value than conventional life insurance policies. Classification of a Policy as a Modified Endowment Contract is generally dependent on the amount of premium paid during the first seven Policy Years, or after a material change has been made to the Policy.

 

Monthly Payment Date – the day we deduct monthly charges from your Policy’s Accumulated Value. The first Monthly Payment Date is your Policy Date, and it is the same day each month thereafter.

 

Monthly Deduction End Date – the Policy Anniversary on and after which we do not deduct a monthly charge. The Monthly Deduction End Date for your Policy is shown in the Policy Specifications and does not change for the life of the Insured.

 

Net Amount At Risk – the difference between the Death Benefit payable if the Insured died and the Accumulated Value of your Policy. We use a Net Amount At Risk to calculate the Cost of Insurance Charge. For Cost of Insurance Charge purposes, the Net Amount At Risk is equal to the Death Benefit as of the most recent Monthly Payment Date divided by 1.0020598, reduced by the Accumulated Value of your Policy.

 

Net Cash Surrender Value – the Cash Surrender Value less any Policy Debt.

 

Net Premium – premium paid less any premium load deducted.

 

Net Single Premium – the amount of premium needed to fund future benefits under the Policy as specified in the Cash Value Accumulation Test.

 

Owner – the person named on the application who makes the decisions about the Policy and its benefits while it is In Force. Two or more Owners are called Joint Owners.

 

Policy Anniversary – the same day as your Policy Date every year after we issue your Policy.

 

Policy Date – the date used to determine the Monthly Payment Date, Policy months, Policy Years, and Policy monthly, quarterly, semi-annual and annual anniversaries. The term “Issue Date” is substituted for Policy Date for Policies issued in Massachusetts.

 

Policy Debt – the amount in the Loan Account, plus any interest you owe.

 

Policy Specifications – summarize information specific to your Policy at the time the Policy is issued. We will send you updated Policy Specification pages if you change your Policy’s Face Amount or any of the Policy’s other benefits.

Policy Year – starts on your Policy Date and each Policy Anniversary, and ends on the day before the next Policy Anniversary.

 

Riders – provide extra benefits, some at additional cost. Any optional Rider which offers additional insurance coverage on the Insured will have an initial face amount and any increase is also referred to as a “Coverage Layer”.

 

Risk Class – is based on an Insured’s gender, health, and tobacco use and is used to calculate certain Policy charges.

 

Separate Account – the Pacific Select Exec Separate Account, a separate account of ours registered as a unit investment trust under the Investment Company Act of 1940.

 

Tax Code – the Internal Revenue Code.

 

Total Face Amount – is the sum of all Coverage Layer Face Amounts. The Total Face Amount is comprised of Face Amounts of all Basic Coverage Layers and the Face Amounts of any Rider Coverage. The Total Face Amount is used to determine the Policy’s Death Benefit.

 

Variable Account – a subaccount of the Separate Account which invests in shares of a corresponding portfolio of an underlying Fund.

 

Variable Investment Option – a Variable Account or Variable Option.

 

Written Request – your signed request in writing, which may be required on a form we provide, and received by us.

 

 

Your insurance professional will assist you in completing your application for the Policy. Your insurance professional’s broker-dealer firm has up to 7 business days to review the application before it is sent to us. When we approve your signed application, we will issue your Policy. If your application does not meet our underwriting and administrative requirements, we can reject it or ask you for more information. Your Policy will be sent to your insurance professional for delivery to you. You will be asked to sign a policy delivery receipt. For Policy delivery status, check with your insurance professional.

 

Our obligations to you under the Policy begin when it is In Force. We consider your Policy In Force when the following requirements are met:

 

If there are any outstanding contractual or administrative requirements that prevent your Policy from being placed In Force, your insurance professional will review them with you no later than when the Policy is delivered. See How Premiums Work: Your initial premium for more information.

 

Your Policy will be In Force until one of the following happens:

 

If your Policy is not In Force when the Insured dies, we are not obligated to pay the Death Benefit Proceeds to your Beneficiary.

 

Owners

You can own a Policy by yourself or with someone else. You need the signatures of all Owners for all Policy transactions.

 

If one of the Joint Owners dies, the surviving Owners will hold all rights under the Policy. If the Owner or the last Joint Owner dies, his or her estate will own the Policy unless you have given us other instructions.

 

You can change the Owner of your Policy by completing a Change of Owner Form. Please contact us or your insurance professional for a Change of Owner Form. Once we receive and record your request, the change will be effective as of the day you signed the Change of Owner Form. You should consult your financial advisor or a lawyer about designating ownership interests.

The Insured

This Policy insures the life of one person who is Age 90 or younger at the time you apply for your Policy, and who has given us satisfactory evidence of insurability. The Policy pays Death Benefit Proceeds after the Insured has died.

 

The Insured is assigned an underwriting or insurance Risk Class which we use to calculate cost of insurance and other charges. Most insurance companies use similar risk classification criteria. We normally use the medical or paramedical underwriting method to assign underwriting or insurance Risk Classes, which may require a medical examination. We may, however, use other forms of underwriting if we think it is appropriate.

 

When we use a person’s Age in Policy calculations, we generally use his or her Age as of the nearest Policy Date, and we add one year to this Age on each Policy Anniversary. For example, when we talk about someone “reaching Age 100”, we are referring to the Policy Anniversary closest to that person’s 100^th birthday, not to the day when he or she actually turns 100.

Beneficiaries

Here are some things you need to know about naming Beneficiaries:

 

If no Beneficiary is living when the Death Benefit Proceeds are payable, you, as the Policy Owner, will receive the Death Benefit Proceeds. If you are no longer living, the Death Benefit Proceeds will go to your estate.

 

You can change your Beneficiary at any time while the Insured is alive, and while the Policy is In Force. If you would like to change your Policy’s Beneficiary, please contact us or your insurance professional for a Change of Beneficiary Form. Once we receive and record your request, the change will be effective as of the day you signed the Change of Beneficiary Form.

 

Your Policy Date

This is usually the later of the day we approve your Policy application or when we receive all administrative requirements needed to issue the Policy. It is also the beginning of your first Policy Year. Your Policy’s monthly, quarterly, semi-annual and annual anniversary dates are based on your Policy Date.

 

The Policy Date is set so that it never falls on the 29^th, 30^th or 31^st of any month.

 

You or your insurance professional may request that multiple applications have the same Policy Date and be placed In Force on a common date. For multilife or employer sponsored cases, please contact your insurance professional for additional details.

Backdating your Policy

You can have your Policy backdated up to 6 months, as long as we approve it. In Ohio, your Policy can be backdated only three months.

 

Backdating in some cases may lower your cost of insurance rates since these rates are based on the Age of the Insured. Your first premium payment must cover the premium load and monthly charges for the period between the backdated Policy Date and the day your Policy is issued.

Re-dating your Policy

Once your Policy is issued, you may request us to re-date your Policy. This means your Policy will have a new Policy Date. Re-dating will only be allowed back to the date money is received on your Policy, and can be the earlier of:

 

If your delivery date is the 29^th, 30^th or 31^st of any month, the Policy will be dated the 28^th of that month.

 

If the Policy is re-dated, no Policy charges will be deducted for any period during which coverage was not provided under the terms of the Policy and all Policy charges will be calculated from the new Policy Date. There will be no coverage before the new Policy Date.

 

It may be disadvantageous to request that the Policy be re-dated. A new Policy Date may cause an Insured’s Age for insurance purposes to change and the cost of insurance rates to increase. It will also affect events based on time elapsed since Policy Date, such as suicide and contestable clauses and surrender charge periods.

 

We will not re-date Policies that are issued with a temporary insurance premium. Policies with the Policy Date pre-determined under an employer or corporate sponsored plan may not be eligible to re-date.

 

Your Policy provides a free look period once the Policy is delivered to you and you sign the Policy delivery receipt. During the free look period, you have the Free Look Right to cancel (or refuse) your Policy and return it to us or your insurance professional for a refund.

There are special rules for the free look period in certain states. You will find a complete description of the free look period that applies to your Policy on the Policy’s cover sheet, or on a notice that accompanied your Policy. Generally, the free look period ends 10 days after you receive your Policy.

 

Some states may have a different free look period if you are replacing another life insurance policy. Please call us or your insurance professional if you have questions about your Free Look Right.

 

The amount of your refund may be more or less than the premium payments you have made, depending on the state where you signed your application. We will always deduct any Policy Debt from the amount we refund to you.

 

If you exercise your Free Look Right, the amount we refund to you depends on the requirements of the state in which your application is signed. One such requirement may be whether your policy is issued as a replacement of existing insurance or not. Your initial Net Premium is first allocated to the Cash Management Variable Account, then once all requirements to place your policy in force have been satisfied, we transfer the Accumulated Value in the Cash Management Account to the Investment Options you have chosen, provided that if we are required to refund your premium if you exercise your Free Look Right, such transfer will be delayed until 15 days after we issue your Policy.

 

If we are not required to refund your premium if you exercise your Free Look Right, the amount we refund to you will be

California insureds age 60 and over

For Policies issued in the state of California, if an Insured is Age 60 or older as of the Policy effective date, the Policy’s free look period is 30 days from date of delivery. During the 30-day free look period, we will hold the Net Premiums in the Cash Management Investment Option. On the day following the end of the 30-day free look period, we will automatically transfer the Accumulated Value in the Cash Management Investment Option to the Investment Options you chose. This automatic transfer to your Investment Option allocation choices is excluded from the transfer limitations described later in this prospectus.

 

If you exercise your Free Look Right during the 30-day free look period, we will refund the premium payments you have made, less any Policy Debt.

 

You may specifically direct that, during the 30-day free look period, all Net Premiums received by us be immediately allocated to the Investment Options according to your most recent allocation instructions. You may do this:

 

If you specifically request your Net Premiums be immediately allocated to the Investment Options, and you exercise your Free Look Right during the 30-day free look period, the amount of your refund may be more or less than the premium payments you have made. Your refund will be calculated as of the day we or your insurance professional receive your request and the Policy. The refund will be:

 

Effective date

Once your Policy is In Force, the effective date of payments, forms and requests you send us is usually determined by the day and time we receive the item in proper form at the appropriate mailing address. See Where To Go For More Information: How To Contact Us on the back cover of this prospectus. Sending any application, premium payment, form, request or other correspondence to any other address may result in a processing delay.

 

Premium payments, loan requests, transfer requests, loan payments or withdrawal or surrender requests that we receive in proper form on a Business Day before the time of the close of the New York Stock Exchange, which is usually 4:00 p.m. Eastern time, will normally be effective as of the end of that day, unless the transaction is scheduled to occur on another Business Day. If we receive your payment or request at or after the time of the close of the New York Stock Exchange on a Business Day, your payment or

request will be effective as of the end of the next Business Day. If a scheduled transaction falls on a day that is not a Business Day, we will process it as of the end of the next Business Day.

 

Other forms, notices and requests are normally effective as of the next Business Day after we receive them in proper form, unless the transaction is scheduled to occur on another Business Day. Change of Owner and Beneficiary Forms are effective as of the day you sign the change form, once we receive them in proper form.

Proper form

We will process your requests once we receive all letters, forms or other necessary documents, completed to our satisfaction. Proper form may require, among other things, a signature guarantee or some other proof of authenticity. We do not generally require a signature guarantee, but we may ask for one if it appears that your signature has changed, if the signature does not appear to be yours, if we have not received a properly completed application or confirmation of an application, or for other reasons to protect you and us. Call us or contact your insurance professional if you have questions about the proper form required for a request.

When we make payments and transfers

We will normally send the proceeds of withdrawals, loans, surrenders, exchanges and Death Benefit payments, and process transfer requests, within seven days after the effective date of the request in proper form. We may delay payments and transfers, or the calculation of payments and transfers based on the value in the Variable Investment Options under unusual circumstances, for example, if:

 

We may delay transfers and payments from the Fixed Options, including the proceeds from withdrawals, surrenders and loans, for up to six months. We will pay interest at an annual rate of at least 2.5% on any withdrawals or surrender proceeds from the Fixed Options that we delay for 10 days or more.

 

Death Benefit Proceeds paid are subject to the conditions and adjustments defined in other policy provisions, such as General Provisions, Withdrawals, Policy Loans, and Timing of Payments. We will pay interest on the Death Benefit Proceeds from the date of death at a rate not less than the rate payable for funds left on deposit. If payment of Death Benefit Proceeds is delayed more than 31 calendar days after we receive the above requirements needed to pay the claim, we will pay additional interest at a rate of 10% annually beginning with the 31^st calendar day. Death Benefit Proceeds are paid as a lump sum unless you choose another payment method, as described in the Income Benefits section.

 

We send the following statements and reports to policy owners:

 

If you identify an error on a confirmation, quarterly or annual statement, you must notify us in writing as soon as possible to ensure proper accounting to your policy. We assume transactions are accurate unless you notify us in writing within 90 days from the date of the transaction confirmation on which the error occurred or if the transaction is first confirmed on the quarterly statement, within 90 days after the quarterly statement date. All transactions are deemed final and may not be changed after the applicable 90 day period. When you write us, include your name, policy number and description of the identified error.

 

Mail will be sent to you at the mailing address you have provided. If mail is returned to us as undeliverable multiple times, we will discontinue mailing to your last known address. We will, however, regularly attempt to locate your new mailing address, and will

resume mailing your policy related materials to you upon confirmation of your new address. You can access documents online by visiting www.PacificLife.com, or receive copies of documents from us upon request.

Prospectus and Fund Report Format Authorization

Subject to availability, you may request us to deliver prospectuses, statements, and other information (“Documents”) electronically. You may also elect to receive prospectus and Fund reports on CD-ROM, via US mail service. If you wish to receive Documents electronically or via CD-ROM, you authorize us to do so by indicating this preference on the application, via telephone, or by sending us a Written Request to receive such Documents electronically. We do not charge for this service.

 

For electronic delivery, you must provide us with a current and active e-mail address and have Internet access to use this service. While we impose no additional charge for this service, there may be potential costs associated with electronic delivery, such as on-line charges. Documents will be available on our Internet website. You may access and print all Documents provided through this service. As Documents become available, we will notify you of this by sending you an e-mail message that will include instructions on how to retrieve the Document. You are responsible for any e-mail filters that may prevent you from receiving e-mail notifications and for notifying us promptly in the event that your e-mail address changes. You may revoke your consent for electronic delivery at any time, provided that we are properly notified, and we will then start providing you with a paper copy of all required Documents. We will provide you with paper copies at any time upon request. Such a request will not constitute revocation of your consent to receive required Documents electronically.

 

Unless you elect otherwise your signature on the application authorizes us to accept telephone and electronic instructions for the following transactions:

 

If you apply for your Policy in Florida, or, in most states, if you applied for your Policy prior to November 1, 2006, you must elect to authorize us to accept telephone and electronic instructions by completing the appropriate section on your application.

 

If you do not authorize us to accept telephone or electronic instructions on your application, you can later instruct us to accept telephone or electronic instructions as long as you complete and file a Telephone and Electronic Authorization Form with us.

 

Certain insurance professionals are able to give us instructions electronically if authorized by you. You may appoint your insurance professional to give us instructions on your behalf by completing and filing a Telephone and Electronic Authorization Form with us.

 

Here are some things you need to know about telephone and electronic transactions:

 

We will send you a written confirmation of each telephone and electronic transaction.

 

Sometimes, you may not be able to make loans or transfers by telephone or electronically, for example, if our telephone lines or our website are busy because of unusual market activity or a significant economic or market change, or our telephone lines or the Internet are out of service during severe storms or other emergencies. In these cases, you can send your request to us in writing, or call us the next Business Day or when service has resumed.

 

When you authorize us to accept your telephone and electronic instructions, you agree that:

 

We will pay Death Benefit Proceeds to your Beneficiary after the Insured dies while the Policy is still In Force. Your Beneficiary generally will not have to pay federal income tax on Death Benefit Proceeds.

 

Your Policy’s Death Benefit depends on three choices you must make:

 

The Policy’s Death Benefit is the higher of:

 

 

The Face Amount of your Policy and any rider providing Coverage on the Insured is used to determine the Death Benefit as well as certain policy charges, including the cost of insurance, Coverage charge and surrender charges.

 

Your Policy’s Face Amount is made up of one or more of the following types of Coverage:

 

 

Your policy must have a Basic Face Amount. You may also select SVER and ART Coverage at Policy issue. These riders are described in Optional Riders and Benefits.

 

Each type of Face Amount you select creates a Coverage Layer. Your Policy’s initial amount of insurance Coverage, which you select in your application, is its initial Face Amount. The Policy’s Total Face Amount is the sum of the Face Amounts of all Coverage Layers. The Coverage Layers you select in your application are effective on the Policy Date. The minimum Total Face Amount when a Policy is issued is usually $50,000, but we may reduce this in some circumstances. You will find your Policy’s Total Face Amount, which includes any increases or decreases, in the Policy Specifications in your Policy.

 

If you request an increase in Face Amount, a new Coverage Layer will be created, with its own Coverage Layer Date and policy charges.

 

You can increase or decrease your Policy’s Face Amount as long as we approve it. If you change the Face Amount, we will send you a supplemental schedule of benefits and premiums.

Requesting an Increase in Face Amount

You may request an increase in the Face Amount under the Policy, SVER rider, or ART rider. Each increase will create a new Coverage Layer.

 

Here are some additional things you should know about increasing the Face Amount under the Policy:

Scheduled Increases in Policy Face Amount under the Scheduled Increase Rider and Annual Renewable Term Rider – Individual

The Scheduled Increase Rider (SIR Rider) is an optional Rider you may purchase at Policy Issue. It provides for increases of either Basic or Annual Renewable Term Face Amount with limited financial underwriting.

 

SIR Rider:

 

For Increases under the SIR Rider:

 

Increases under the SIR Rider may be subject to financial underwriting at issue or at the time of the increase. Any required evidence of financial insurability must be provided at least 15 days before the Scheduled Increase is to take effect. If you fail to provide the required evidence or if we determine that the evidence you provided does not meet our financial underwriting standards, the increase will not take effect. If we do not approve an increase that requires evidence or if we approve an increase for an amount less than the full amount of the Scheduled Increase, any future Scheduled Increases will not be forfeited.

 

The SIR Rider schedule of increases may not be changed after Policy Issue. You may decline any scheduled increase at the time it is to take effect. If you decline any increase, all future scheduled increases are forfeited. If you Decrease any Policy Face Amount coverage, all future SIR Rider scheduled increases are forfeited.

Scheduled Increases Under the Annual Renewable Term Rider

The ART Rider is available for purchase at Policy issue. You may not use this Rider in conjunction with the SIR rider. Under this Rider, you may schedule increases in term insurance Coverage as follows:

 

For Policies subject to full underwriting

 

The Rider is available at all ages for Policies that are not subject to full underwriting.

Scheduled Increases under the ART Rider work as follows:

 

The schedule of increases may not be changed after the Policy has been issued.

Other Increases in Face Amount

The Policy’s Face Amount may increase under the Policy, the SVER Rider or the ART Riders when you request a change in Death Benefit Option. In this case, we will increase the Face Amount of the most recently issued Coverage Layer. If there are Basic and Rider Coverage Layers with the same Coverage Layer Date, we will increase the Rider Face Amount first.

Requesting a Decrease in Total Face Amount

You may request a decrease in the Policy’s Total Face Amount. A decrease in the Total Face Amount is subject to the following limits:

 

Decreasing the total Face Amount may affect your Policy’s tax status. To ensure your Policy continues to qualify as life insurance, we might be required:

 

We can refuse your request if the amount of any distributions would exceed the Net Cash Surrender Value under the policy.

Processing of Decreases

Decreasing the Total Face Amount, whether as a result of your request or as a result of a withdrawal or change in Death Benefit Option, will reduce the Face Amount of the Coverage Layers.

 

We will apply any decrease in the Face Amount to eligible Coverage Layers to the most recent eligible increases your made to the Face Amount first and then to the Initial Face Amount.

 

If more than one Coverage Layer has the same Coverage Layer Date, we will first reduce the Face Amount of any SVER Coverage Layer first , and then the Face Amount of any policy Coverage Layer.

 

The Policy offers three Death Benefit Options, Options A, B, and C. The Death Benefit Option you choose will generally depend on which is more important to you: a larger Death Benefit or building the Accumulated Value of your Policy.

 

Here are some things you need to know about the Death Benefit:

The Death Benefit Options are:

 

Limits on Option C

 

The following limits apply to Option C:

 

You can change your Death Benefit Option while your Policy is In Force, subject to the following:

 

Changing your Death Benefit Option will increase or decrease your Total Face Amount under the Policy. The Total Face Amount of your Policy will change by the amount needed to make the Death Benefit under the new Death Benefit Option equal the Death Benefit under the old Death Benefit Option just before the change.

 

If the change is an increase in the Total Face Amount, we will increase the Face Amount of the most recently issued Coverage Layer. If the change is a decrease in the Total Face Amount, we will process the decrease as described in Processing Decreases in Face Amount.

 

In order for your policy to be qualified as Life Insurance under the Code, it must qualify under one of two Tests, the Cash Value Accumulation Test (CVAT) or the Guideline Premium Test (GPT).

You choose one of these Death Benefit Qualification Tests on your application. Your Death Benefit Qualification Test determines the following:

 

Each test determines what the Minimum Death Benefit should be in relation to your Policy’s Accumulated Value. The Death Benefit determined under either test will be at least equal to the amount required for the Policy to qualify as life insurance under the Tax Code.

Comparing the Death Benefit Qualification Tests

The table below shows a general comparison of how features of your Policy may be affected by your choice of Death Benefit Qualification Test. When choosing between the tests, you should consider:

 

The tables below compare the Death Benefits provided by the Policy’s available Death Benefit Options. The examples are intended only to show differences in Death Benefits and Net Amounts at Risk. Accumulated Value assumptions may not be realistic.

 

These examples show that each Death Benefit Option provides a different level of protection. Keep in mind that cost of insurance charges, which affect your Policy’s Accumulated Value, increase over time. The cost of insurance is charged at a rate based on the Net Amount At Risk. As the Net Amount At Risk increases, your cost of insurance increases. Accumulated Value also varies depending on the performance of the Investment Options in your Policy.

 

The example below assumes the following:

 

If the Death Benefit equals the Minimum Death Benefit, any increase in Accumulated Value will cause an automatic increase in the Death Benefit.

 

Here’s the same example, but with an Accumulated Value of $75,000. Because Accumulated Value has increased, the Minimum Death Benefit is now: