Versatile Life ® - Policy Provisions

The only direct cost the client pays for the Versatile Life plan is the policy fee. The Single Premium plan has a one time policy fee. All other plans have an annual $35 policy fee ($20 for insureds under age 20). The annual fee is paid out of the Insurance Fund every year. There are some indirect expenses included in the Insurance Benefit term rates. A policyholder who surrenders his policy prior to the 16th year pays a surrender charge as set forth in the policy on page 6. This forces the policyholder who cancels early to pay his own expenses and does not penalize the persistent policyowners.

The policy cash value is defined as the Insurance Fund accumulation less the Surrender Charge.

The Insurance Fund Interest Rate is declared by the Company. The current (since 04/01/02) interest rate is 4.75% with a bonus .25% added in year 15 for the life of the plan. The computer illustrations and values always reflect the current rate.

This product complies with all provisions of new laws and regulations. The death benefit corridor will always be maintained as required by law.

The published Monthly Interest Average for the Calendar Month ending to month before the date on which the rate is determined;

The policy cash value is available as a policy loan. Where provided by law, the Company will credit the current interest rates to the policy and charge the policyowner 1% above that rate in advance for loan interest. For example, if the current rate being credited to the Insurance Fund is 4.75%, the policy loan will carry a 6.0% interest rate.

This policy is designed to keep up-to-date with the times, so the policyowner receives the maximum benefit. The Versatile Life policyowner benefits because the Insurance Fund interest rate remains at competitive levels during the lifetime of the policy and the cost of the Insurance Benefit reflects the current mortality at each policy anniversary. The two most severe things that could happen to any interest-sensitive policy would be for interest rates to drop drastically and mortality to worsen dramatically. The policyowner is guaranteed 4% on this plan even if the interest rates in our country decreased to 4% or lower. If mortality costs increased significantly, the policyowner has a guaranteed maximum Insurance Benefit cost. Versatile Life is designed to stay current with the times over the insured's lifetime while providing the necessary guarantees for peace of mind.

The guarantees provided by Versatile Life assume very adverse circumstances. To the extent that these adverse circumstances don't occur or happen at a later time, the guaranteed values will be correspondingly more favorable. The 2001 Commissioner's Standard Ordinary Mortality Table and 4% interest are used to calculate the policy reserves and cash values. To establish these guarantees, we also assume the change is made from current policy assumptions to the guaranteed assumption in one calendar year.

When examining a policy or illustration, you will notice that Guaranteed Death Benefits and premiums are guaranteed equal to Current Death Benefits and premiums for an initial period, usually ten years. Future interest rates in excess of 4% are used to lengthen the initial guarantee period. As interest rates stay at current levels, each year the policy will have a longer guarantee period.

If the economic conditions change so only guaranteed assumptions prevail, current benefits cannot be provided without additional premiums. The guaranteed premium schedule sets forth what the premiums are for the guaranteed death benefit. The policyholder has the right to continue his current level of death benefit by increasing his premiums.

Versatile Life is guaranteed to continue at the current death benefit levels which are shown. The premiums needed to maintain the current death benefit depend on future credits made to the policy.

If underwriting reveals a less than standard life expectancy, extra premiums will be charged. These extra premiums will be reflected in higher cash values. Thus, if the ratings can be removed at a later time, the extra premiums have not necessarily been lost.

The exchange option permits the roll-in of additional money at the beginning of the first policy year to reduce the premiums. For example, the owner may have another policy the assets of which he wants to transfer into the new Versatile Life policy on a tax free transfer basis. The assets can be used to reduce current premiums or even eliminate them altogether. However, the roll-in of funds cannot be used to shorten the payment period of a given plan. The available options are:

North Coast will not take action to surrender the former policy until the new policy has had underwriting approval. Since North Coast does not know the exact value of the rollover until the surrender proceeds are received, the new policy will not be issued until the money is received from the former policy. To do otherwise could create a taxable event for the policyholder. Since the former policy is assigned to North Coast, death benefits will be provided under the new plan with North Coast Life retaining the cash surrender proceeds of the former policy.

The policy can be used to accumulate additional money for retirement on a tax deferred basis at the current interest rate. Premiums can be continued rather than limiting them and a cash "drop-in" rider can be included with all Versatile Life plans. Both features result in sizable accumulations. Payment of premiums past the limited payments is optional. Premiums can be scheduled to establish a target cash value at a chosen age.

When the Insurance Fund has excess monies over that required to provide the policy benefits (face amount) and the policy is beyond the premium paying period, the excess funds can be withdrawn subject to the following conditions.