Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0001
(515) 247-5111

In consideration of the payment made by, or at the direction of,

Principal Life Income Fundings Trust 2007-128

(the “Agreement Holder”)

of the Net Deposit, as described below, Principal Life Insurance Company (“Principal Life”) agrees to make payments to the person or persons entitled to them, subject to the provisions of this funding agreement (this “Agreement”).

This Agreement is delivered in and subject to the laws of the State of Iowa.

This Agreement is issued and accepted subject to all the terms set out in it.

This Agreement is executed by Principal Life at its Corporate Center to take effect as of the 27th day of December, 200 7 , which is referred to as the Effective Date, subject to the receipt by Principal Life or its designee of the Net Deposit (as set forth in Section 1).

Senior Vice President and		President and
Corporate Secretary		Chief Operating Officer

		/s/ Bret Taber
		Registrar
		December 27, 2007
		Date

FUNDING AGREEMENT NO. 6-14896

RESTRICTIONS REGARDING THE TRANSFER OR SALE OF
THIS FUNDING AGREEMENT OR ANY INTEREST HEREIN ARE SET FORTH HEREIN

GPA 5999

FUNDING AGREEMENT		No. 6-14896

          This Agreement is issued in connection with the issuance by the Trust (specified in the Annex) of secured medium-term notes (the “Notes”) which comprise a Series of Notes which are identified in the annex hereto (the “Annex”) and which are being issued by the Trust pursuant to the Prospectus dated November 21, 2007, the Prospectus Supplement dated November 21, 2007, as from time to time amended or supplemented, and the Pricing Supplement applicable to such Notes (the “Pricing Supplement”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Notes. Where used in this Agreement, the term “Notes” and “Series of Notes” shall mean the Notes and the Series of Notes secured by this Agreement as the same exist on the Effective Date, without giving effect to any amendments or modifications to said Notes or Series of Notes effected or made after any such Effective Date unless such amendments or modifications to said Notes or Series of Notes have been consented to in writing by Principal Life.

1.		Deposit
		Principal Life agrees to accept, and the Agreement Holder agrees to pay or cause to be paid to Principal Life, for value on the Effective Date, the Net Deposit (as specified in the Annex). All funds received by Principal Life under this Agreement shall become the exclusive property of Principal Life and remain a part of Principal Life’s general account without any duty or requirement of segregation or separate investment.
		This Agreement shall become effective only upon the receipt by Principal Life or its designee of the Net Deposit.
2.		Fund
		Upon receipt of the Net Deposit, Principal Life will establish, under this Agreement, a bookkeeping account in the name of the Agreement Holder, which will evidence Principal Life’s obligations under this Agreement.
		The Deposit deemed received (as specified in the Annex), (i) less any withdrawals to make payments hereunder (other than Additional Amounts (as defined in the Annex), if applicable) and (ii) plus any interest accrued and premium, if any, pursuant to Section 7, will be referred to as the “Fund”.
		Principal Life is neither a trustee nor a fiduciary with respect to the Fund.
3.		Purchase of Notes By Principal Life
		Principal Life may purchase some or all of the Notes in the open market or otherwise at any time, and from time to time. Simultaneously, upon such purchase, (1) the purchased Notes shall, by their terms become mandatorily redeemable by the Trust as specified in the related Pricing Supplement, Prospectus Supplement and/or Prospectus and (2) the Fund under this Agreement shall be permanently reduced by the same percentage as the principal amount of the Notes so redeemed bears to the sum of (i) the aggregate principal amount of all Notes issued and outstanding immediately prior to such redemption and

		the principal amount of the Trust Beneficial Interest related to such series of Notes. If Principal Life, in its sole discretion, engages in such open market or other purchases, then the Trust, the Indenture Trustee in respect of such Notes, and Principal Life shall take such actions (including, in the case of Principal Life, making the payment(s) necessary to effect the Trust’s redemption of such Notes) as may be necessary or desirable to effect the cancellation of such Notes by the Trust.
4.		Entire Agreement
		This Agreement and the Annex attached hereto constitute the entire Agreement.
5.		Representations

(a)

Each party hereto represents and warrants to the other that as of the date hereof:

	(i)		it has the power to enter into this Agreement and to consummate the transactions contemplated hereby;
	(ii)		this Agreement has been duly authorized, executed and delivered, this Agreement constitutes a legal, valid and binding obligation of each party hereto, and this Agreement is enforceable in accordance with the terms hereof, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights, and subject as to enforceability to general principles of equity, regardless of whether enforcement is sought in a proceeding in equity or at law; and
	(iii)		the execution and delivery of this Agreement and the performance of obligations hereunder do not and will not constitute or result in a default, breach or violation of the terms or provisions of its certificate, articles or charter of incorporation, declaration of trust, by-laws or any agreement, instrument, mortgage, judgment, injunction or order applicable to it or any of its property.

(b)

The Trust further represents and warrants to Principal Life that:

	(i)		it is a person other than a natural person and is purchasing this Agreement for the purpose of providing collateral security for securities registered with the United States Securities and Exchange Commission;
	(ii)		it has been informed and understands that transfer is restricted by the terms of this Agreement; and
	(iii)		it (a) is solely responsible for determining whether this Agreement is suitable for the purpose intended; (b) has carefully read this Agreement (including the Annex) before signing this Agreement; (c) has ha