LIFE SERIES FUND - First Investors

therefore invest in a Contract only if Youhave a long-term investment horizon.Taxation of Surrenders A partial or totalsurrender of a Contract is taxed for federalincome tax purposes as ordinary income tothe extent that the Accumulation Valueexceeds Your Investment in the Contract(i.e., on an “income first” basis).Taxation of Death Benefits Under currenttax laws the death benefit paid to theBeneficiary of a Contract is taxed asordinary income to the Beneficiary at theBeneficiary’s tax rate to the extent that thedeath benefit exceeds the Contractowner’sInvestment in the Contract. Thus, if Yourprimary objective is to pass wealth on toYour heirs, a life insurance policy may bemore appropriate for You for federalincome tax purposes. The amount of thedeath benefit on a life insurance policypasses income-tax free (though notnecessarily estate tax free) to theBeneficiary; an annuity death benefit doesnot.General Account Risk The assets of theGeneral Account support Our insuranceobligations and are subject to generalliabilities from Our business operations andto claims by Our general creditors.Amounts allocated to the Fixed Account,and any guarantees under Your Contractthat exceed Your Contract Value (such asthose that may be associated with the deathbenefit), are paid from the GeneralAccount. Any such amounts that We areobligated to pay in excess of Your ContractValue are subject to Our financial strengthand claims-paying ability.HOW THE CONTRACT WORKSThe Contract has two phases: anAccumulation Phase and an annuity incomeperiod. During the Accumulation Phase,earnings on Your investment accumulate ona tax-deferred basis. The annuity incomeperiod begins when You convert from theAccumulation Phase by agreeing that thePayee will start receiving regular annuitypayments after the Accumulation Value hasbeen applied to one of the annuity optionsin accordance with the annuity rates in theContract. You can select one of severalannuity income payment options.The Contract is a “variable” annuitybecause Your Subaccount AccumulationValues during the Accumulation Phase andthe amount of Your Variable AnnuityPayments during the annuity income periodfluctuate based on the performance of theFunds underlying the Subaccounts You haveselected. As a result, the SubaccountAccumulation Values in Your Contract andYour Variable Annuity Payments mayincrease or decrease. You are permitted toallocate Your Purchase Payments to 12available Subaccounts We offer under theContract, as long as each allocation is atleast 1% of the Purchase Payment. You alsomay allocate Purchase Payments to theFixed Account, as described below. Subjectto certain limitations, You may reallocateYour Accumulation Value or, after thecommencement of Variable AnnuityPayments, the value allocated to theSubaccounts upon which the amount of theVariable Annuity Payments are based.The Contract provides a guaranteed deathbenefit that is payable to the Beneficiary ifthe Annuitant dies during the AccumulationPhase. The Contract guarantees that theBeneficiary will receive upon the death ofthe Annuitant the greater of (i) the total ofall Purchase Payments reducedproportionately by any surrenders, or (ii)the Accumulation Value. Upon the death ofa Contractowner who is not also theAnnuitant, We will pay only theAccumulation Value to the Beneficiary. Wepay the death benefit when We receive bothproof of death and appropriate instructionsfor payment. The death benefit is reducedby the amount of any surrenders, see “TheAccumulation Phase: Death Benefits BeforeCommencement of Annuity Payments” fordetails. You may surrender a portion or allof the Accumulation Value during theAccumulation Phase.7