FORM OF EXPENSE AND INDEMNITY AGREEMENT

Exhibit 10.4

EXPENSE AND INDEMNITY AGREEMENT

     This Expense and Indemnity Agreement (this “Agreement”) is entered into as of                     , 2007, by and between Principal Life Insurance Company, an Iowa life insurance company (“Principal Life”), and Bankers Trust Company, N.A., as custodian (the “Custodian”).

     WHEREAS, in consideration of the Custodian providing services to each Trust created in connection with the Program and pursuant to the Program Documents, Principal Life hereby agrees to the following compensation arrangements and terms of indemnity.

     NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party hereby agrees as follows:

ARTICLE I
DEFINITIONS

          Section 1.01. Definitions. All capitalized terms not otherwise defined herein will have the meanings set forth in the Standard Indenture Terms attached as Exhibit 4.1 to Registration Statement on Form S-3 (File Nos.                      and 333-                    ) filed with the Securities and Exchange Commission by Principal Life and Principal Financial Group, Inc. on                     , 2007, as may be amended. The following terms, as used herein, have the following meanings:

     “Excluded Amounts” means (i) any obligation of any Trust to make any payment to any Holder in accordance with the terms of the applicable Indenture or such Trust’s Notes, (ii) any obligation or expense of any Trust to the extent that such obligation or expense has actually been paid utilizing funds available to such Trust from payments under the applicable Funding Agreement or the Guarantee, (iii) any cost, loss, damage, claim, action, suit, expense, disbursement, tax, penalty or liability of any kind or nature whatsoever resulting from or relating to any insurance regulatory or other governmental authority asserting that: (a) any Trust’s Notes are, or are deemed to be, (1) participations in the applicable Funding Agreement or (2) contracts of insurance, or (b) the offer, purchase, sale and/or transfer of any Trust’s Notes and/or the pledge and collateral assignment of the applicable Funding Agreement by any Trust to the Indenture Trustee on behalf of the Holders of such Trust’s Notes (1) constitutes the conduct of the business of insurance or reinsurance in any jurisdiction or (2) requires such Trust or any Holder of such Trust’s Notes to be licensed as an insurer, insurance agent or broker in any jurisdiction, (iv) any cost, loss, damage, claim, action, suit, expense, disbursement, tax, penalty or liability of any kind or nature whatsoever imposed on the Custodian that results from the bad faith, misconduct or negligence of the Custodian, (v) any costs and expenses attributable solely to the Custodian’s administrative overhead unrelated to the Program, (vi) any tax imposed on fees paid to the Custodian, (vii) any withholding taxes imposed on or with respect of payments made under the applicable Funding Agreement, the applicable Indenture or a Trust’s Note and (viii) any Additional Amounts paid to any Holder.

     “Fees” means the fees agreed to between Principal Life and the Custodian as set forth in the fee schedule attached as Exhibit A to this Agreement.

     “Obligation” means any and all (i) costs and expenses reasonably incurred (including the reasonable fees and expenses of counsel), relating to the offering, sale and issuance of the Notes by each Trust under the Program and (ii) costs, expenses and taxes of each Trust; provided, however, that Obligations do not include Excluded Amounts.

ARTICLE II
SERVICES AND FEES

     Section 2.01 Fees. Principal Life hereby agrees to pay the Custodian its Fees.

     Section 2.02 Payment of Obligations. (a) In the event that the Custodian delivers written notice and evidence, reasonably satisfactory to Principal Life, of any Obligation of the Custodian, Principal Life shall, upon receipt of such notice, promptly pay such Obligation. Notice of any Obligation (including any invoices) should be sent to Principal Life at its address set forth in Section 4.04, or at such other address as such party shall hereafter furnish in writing.

     (b) The Custodian will (i) from time to time execute all such instruments and other agreements and take all such other actions as may be necessary or desirable, or that Principal Life may reasonably request, to protect any interest of Principal Life with respect to any Obligation or to enable Principal Life to exercise or enforce any right, interest or remedy it may have with respect to any such Obligation, and (ii) release to Principal Life any amount received from Principal Life relating to any Obligation or any portion of any Obligation, immediately after any such amount relating to such Obligation, or any portion of any such Obligation, is otherwise received by the Custodian from a party other than Principal Life.

     (c) Principal Life and the Custodian hereby agree that all payments due under this Agreement in respect of any Obligation shall be effected, and any responsibility of Principal Life to pay such Obligation pursuant to this Agreement shall be discharged, by the payment by Principal Life to the account of the person to whom such Obligation is owed.

ARTICLE III
INDEMNIFICATION

     Section 3.01 Subject to the remaining sections of this Article III, Principal Life covenants to fully indemnify and defend the Custodian and its officers, directors and employees (each, an “Indemnified Person”) for, and to hold them harmless against, any and all loss, liability, claim, damage or reasonable expense (including the reasonable compensation, expenses and disbursements of its counsel) arising out of the acceptance by the Custodian, in its capacity as Custodian, of the performance of its duties and/or the exercise of its respective rights under the applicable Trust Agreement, including the costs and expenses of defending itself against or investigating any claim of liability in the premises, except to the extent such loss, liability, claim, damage or expense arises out of or is related to the bad faith, misconduct or negligence of the Custodian. Notwithstanding anything to the contrary, Principal Life shall have no obligation to indemnify or defend the Custodian for any loss, liability, claim, damage or expense relating to (i) any costs and expenses attributable solely to the Custodian’s administrative overhead unrelated to the Program or (ii) any tax imposed on the Fees paid to the Custodian.

     Section 3.02 The indemnification provided for herein supersedes in all respects any indemnification provision contai